ALTER EGO CASES The San Francisco corporation became involved in financial trouble,
and all of its assets were turned over to a "creditors' committee."
G.R. No. L-20214 March 17, 1923
G. C. ARNOLD, plaintiff-appellant, vs. WILLITS & PATTERSON, LTD.,
defendant-appellee.
Arnold, the plaintiff and the firm, Willits & Patterson in San
Francisco entered into a (1st) written contract by which the plaintiff
was employed as the agent of the firm in the Philippine Islands for
the operation of an oil mill for the period of five years at a minimum
salary of $200 per month and travelling expenses. Aside from his
minimum salary, it was also stated in the contract that he will
receive a brokerage fee from all his sales and other profits. Also, if
the business was at a loss, Arnold would receive $400 per month.
When Patterson retired, Willits became the sole owner of its assets.
Willits organized a new corporation by the same name in San
Francisco. The new firm acquired all the assets of the former firm.
He came to Manila and organized a corporation here known as
Willits & Patterson, Ltd., in and to which he again subscribed for all
of the capital stock except the nominal shares necessary to qualify
the directors. In legal effect, the San Francisco corporation took
over and acquired all of the assets and liabilities of the Manila
corporation.
Willits signed a (2nd) new contract in the form of a letter. The
purpose of which was to more clearly define and specify the
compensation which the plaintiff was to receive for his services.
An accounting was done and it showed that the corporation was
due and owing the plaintiff under Exhibit B the sum of P106, 277.50.
Arnold filed a complaint and contended that the signing of the
second contract in the manner and under the conditions in which it
was signed, and through the subsequent acts and conduct of the
parties, was ratified and, in legal effect, became and is now binding
upon the defendant.
Defendant contended that the second contract was signed but
without authority. It also alleged that Arnold owed them some
money.
The Court of First Instance rendered a decision ordering Arnold to
return the money to the corporation.
ISSUE: WON the corporation is bound by the contracts.
HELD: YES.
“Where the stock of a corporation is owned by one person whereby
the corporation functions only for the benefit of such individual
owner, the corporation and the individual should be deemed to be
the same.”
In the case at bar, the corporations are under Willits. When the
second contract was signed, Willits recognized that Arnold’s
services were to be performed by its terms. When the new
corporation was organized and created, it still treated Arnold as its
agent in the same manner as the first one. Hence, the new
corporation was bound by the contract made under the previous
firm.
G.R. No. L-5677 May 25, 1953
LA CAMPANA FACTORY, INC., and TAN TONG doing business under
the trial name "LA CAMPANA GAUGAU PACKING", petitioners, vs.
KAISAHAN NG MGA MANGGAGAWA SA LA CAMPANA (KKM) and
THE COURT OF INDUSTRIAL RELATIONS, respondents.
 Tan Tong has since 1932 been engaged in the business
under the trade name La Campana Gaugau Packing. But on
July 6, 1950, Tan Tong, with himself and members of his
family formed a corporation known as La Campana Factory
with its principal office located in the same place as that of
La Campana Gaugau Packing.
 About a year before the formation of the corporation, Tan
Tong had entered into a CBA with PLOW to which the union
of Tan Tong's employees headed by Manuel E. Sadde was
then affiliated.
 Tan Tong's employees later formed their own organization
known as Kaisahan Ng Mga Manggagawa Sa La Campana,
and applied for registration in the DOLE as an independent
entity.
 On July 19, 1951, Kaisahan, which, as of that date, counted
with 66 members — workers of both La Campana Gaugau
Packing and La Campana Coffee Factory— presented a
demand for higher wages and more privileges, the demand
being addressed to La Campana Starch and Coffee Factory,
by which name they sought to designate the La Campana
Gaugau Packing and the La Campana Coffee Factory Co.,
Inc.
 As the demand was not granted, DOLE certified the dispute
to the CIR.
 La Campana then filed a motion to dismiss alleging amongst others
that the action was directed against two different entities with
distinct personalities.
ISSUE: WON the CIR has jurisdiction over the case.
HELD: YES.
 La Compana Gawgaw and La Campana Factory are operating under
one single management or as one business though with two trade
names. The coffee factory is a corporation and by legal fiction,
 an entity separate and apart from the persons composing it
namely, Tan Tong and his family.
 However, the concept of separate corporate personality cannot be
extended to a point beyond reason and policy when invoked in
support of an end subversive of this policy and will be disregarded
by the courts.
 A subsidiary company which is created merely as an agent for the
latter may sometimes be regarded as identical with the parent
corporation especially if the stockholders or officers of the two
corporations are substantially the same or their systems of
operation unified.
 The facts showed that they had one management, one payroll
prepared by the same person, laborers were interchangeable,
there is only one entity as shown by the signboard ad in trucks,
packages and delivery forms and the same place of business.
 The attempt to make the two factories appear as two separate
businesses when in reality they are but one, is but a device to
defeat the ends of the law and should not be permitted to prevail.
  WHY PIERCE? So that La Campana cannot evade the jurisdiction of It is an elementary and fundamental principle of corporation law
CIR since La Campana Gawgaw has only 14 employees and only 5 that a corporation is an entity separate and distinct from its
are members of Kaisahan.
Yutivo Sons Hardware Co vs CTA
Yutivo is a domestic corporation engaged in importation and sale of
hardware supplies and equipment. After the liberation in 1946,
resumed its business and until 1946 bout a number of cars and
trucks from General Motors (GM), an American corporation doing
business in the Philippines. As importer, GM paid sales tax
prescribed by the Tax Code on the basis of its selling price to Yutivo.
Yutivo paid no further sales tax on its sales to the public.
In June 1946, Southern Motors (SM) organized to engage in the
business of selling cars, trucks and spare parts. One of its major
subscribers is Yu Tiong Yee, a founder of Yutivo. After the
incorporation of SM and until the withdrawal of GM from Phil, the
cars and trucks were purchased by Yutivo from GM then sold by
Yutivo to Sm and then SM sold these to the public.
The same way that GM used to pay taxes on the basis of its sales to
Yutivo, Yutivo paid taxes on the basis of its sales to SM. SM paid no
taxes on its sales to the public.
CIR made an assessment and charged Yutivo 1.8M as deficiency tax
plus surcharge. Petitioner contested before CTA. CTA ruled that SM
is a mere subsidiary or instrumentality of Yutivo, hence, its separate
corporate existence must be disregarded.
Issue: WON Yutivo and SM are two separate entities.
Held: Yes.
stockholders and from other corporation petitions to which it may
be connected. However, "when the notion of legal entity is used to
defeat public convenience, justify wrong, protect fraud, or defend
crime," the law will regard the corporation as an association of
persons, or in the case of two corporations merge them into one.
Another rule is that, when the corporation is the "mere alter ego or
business conduit of a person, it may be disregarded.
However, the Court here held that they are inclined to rule that the
Court of Tax Appeals was not justified in finding that SM was
organized for no other purpose than to defraud the Government of
its lawful revenues. In the first place, this corporation was organized
in June, 1946 when it could not have caused Yutivo any tax savings.
From that date up to June 30, 1947, or a period of more than one
year, GM was the importer of the cars and trucks sold to Yutivo,
which, in turn resold them to SM. During that period, it is not
disputed that GM as importer, was the one solely liable for sales
taxes. Neither Yutivo or SM was subject to the sales taxes on their
sales of cars and trucks. The sales tax liability of Yutivo did not arise
until July 1, 1947 when it became the importer and simply
continued its practice of selling to SM. The decision, therefore, of
the Tax Court that SM was organized purposely as a tax evasion
device runs counter to the fact that there was no tax to evade.
G.R. No. L-9687 June 30, 1961
LIDDELL & CO., INC. vs. CIR
The case is an appeal from the decision of the Court of Tax Appeals
imposing a tax deficiency liability of P1,317,629.61 on Liddell & Co.
From 1946 until November 22, 1948 when the purpose clause of the
Articles of Incorporation of Liddell & Co. Inc., was amended so as to
limit its business activities to importations of automobiles and
trucks, Liddell & Co. was engaged in business as an importer and at
the same time retailer of Oldsmobile and Chevrolet passenger cars
and GMC and Chevrolet trucks.
On December 20, 1948, the Liddell Motors, Inc. was organized and
registered with the SEC with an authorized capital stock of P100,000
of which P20,000 was subscribed and paid for as follows: Irene
Liddell wife of Frank Liddell (19,996 shares) and Messrs. Marcial P.
Lichauco, E. K. Bromwell, V. E. del Rosario and Esmenia Silva, 1 share
each.
Beginning January, 1949, Liddell & Co. stopped retailing cars and
trucks; it conveyed them instead to Liddell Motors, Inc. which in
turn sold the vehicles to the public with a steep mark-up. Since
then, Liddell & Co. paid sales taxes on the basis of its sales to Liddell
Motors Inc. considering said sales as its original sales.
The CIR argued that the Lidell Motors, Inc. was but an alter ego of
Liddell & Co. and concluded that for sales tax purposes, those sales
made by Liddell Motors, Inc. to the public were considered as the
original sales of Liddell & Co. hence the imposition of tax deficiency.
The CTA upheld the position taken by the Collector.
ISSUE: WON Lidell Motors, Inc. is an alter ego of Lidell & Co., making
it liable for the said tax deficiency
Held: YES.
 Liddell & Co. is wholly owned by Frank Liddell. As of the
time of its organization, 98% of the capital stock belonged
to Frank Liddell. The 20% paid-up subscription with which
the company began its business was paid by him. The
subsequent subscriptions to the capital stock were made by
him and paid with his own money.
 As to Liddell Motors, Inc. SC is fully persuaded that Frank
Liddell also owned it. He supplied the original capital funds.
It is not proven that his wife Irene, ostensibly the sole
incorporator of Liddell Motors, Inc. had money of her own
to pay for her P20,000 initial subscription. Her income in the
United States in the years 1943 and 1944 and the savings
therefrom could not be enough to cover the amount of
subscription, much less to operate an expensive trade like
the retail of motor vehicles. The alleged sale of her property
in Oregon might have been true, but the money received
therefrom was never shown to have been saved or
deposited so as to be still available at the time of the
organization of the Liddell Motors, Inc. The evidence at
hand also shows that Irene Liddell had scant participation in
the affairs of Liddell Motors, Inc.
 SC likewise noticed that the bulk of the business of Liddell &
Co. was channeled through Liddell Motors, Inc. On the other
hand, Liddell Motors, Inc. pursued no activities except to
secure cars, trucks, and spare parts from Liddell & Co. and
then sell them to the general public. These sales of vehicles
by Liddell & Co. to Liddell Motors, Inc. for the most part
were shown to have taken place on the same day that
 Liddell Motors, Inc. sold such vehicles to the public. We may
even say that the cars and trucks merely touched the hands
of Liddell Motors, Inc. as a matter of formality.
 During the first six months of 1949, Liddell & Co. issued ten
(10) checks payable to Frank Liddell which were deposited
by Frank Liddell in his personal account with the PNB.
During this time also, he issued in favor of Liddell Motors,
Inc. 6 checks drawn against his personal account with the
same bank. The checks issued by Frank Liddell to the Liddell
Motors, Inc. were significantly for the most part issued on
the same day when Liddell & Co. Inc. issued the checks for
Frank Liddell and for the same amounts.
 NOTE: It is of course accepted that the mere fact that one or
more corporations are owned and controlled by a single
stockholder is not of itself sufficient ground for disregarding
separate corporate entities. Authorities support the rule
that it is lawful to obtain a corporation charter, even with a
single substantial stockholder, to engage in a specific
activity, and such activity may co-exist with other private
activities of the stockholder. If the corporation is a
substantial one, conducted lawfully and without fraud on
another, its separate identity is to be respected.
Accordingly, the mere fact that Liddell & Co. and Liddell
Motors, Inc. are corporations owned and controlled by
Frank Liddell directly or indirectly is not by itself sufficient to
justify the disregard of the separate corporate identity of
one from the other. There is, however, in this instant case, a
peculiar consequence of the organization and activities of
Liddell Motors, Inc.
 NOTE: (US SC) "a taxpayer may gain advantage of doing
business thru a corporation if he pleases, but the revenue
officers in proper cases, may disregard the separate
corporate entity where it serves but as a shield for tax
evasion and treat the person who actually may take the
benefits of the transactions as the person accordingly
taxable.
 NOTE: To allow a taxpayer to deny tax liability on the
ground that the sales were made through another and
distinct corporation when it is proved that the latter is
virtually owned by the former or that they are practically
one and the same is to sanction a circumvention of our tax
laws.
 NOTE: Lidell& Co. is declared liable only for the amount of
Php 426, 811.67 with 25% surcharge for late payment and
6% interest thereon from the time the judgment becomes
final. As it appears that, during the pendency of this
litigation, appellant paid under protest the Govt, the total
amount assessed by the Collector, the latter is hereby
required to return the excess to the petitioner.
G.R. No. L-22614 August 29, 1969
RAMIREZ TELEPHONE CORPORATION, petitioner, vs. BANK OF
AMERICA, E.F. HERBOSA, THE SHERIFF OF MANILA and THE COURT
OF APPEALS, respondents.
 Estanislao Herbosa owned a building in Sta Mesa, which he
leased to Ruben Ramirez, the president of the Ramirez
Telco. The building was the workshop of the corporation,
despite the head office being in Escolta.
 The rent however was not paid. As such, HERBOSA filed an
action against RAMIREZ and upon reaching the CFI of
Manila, he was able to obtain a favorable decision. The
Sheriff of Manila, however, served a Garnishment Order
upon the Bank of America, for a sum of 2,400PHP.
 The bank replied that it did not hold any money for Ruben
Ramirez; but upon persistence of the Sheriff, it was found
that the money was in the name of Ramirez Telephone Inc.
The bank was willing to comply with the garnishment order.
 NOTE: MONEY that Ramirez Telco had that day (Oct 17,
1950): 4,789.53 PHP // Minus the garnishment: 2,389.53
PHP
 The following day, Ramirez Telco withdrew 1,500PHP,
leaving a 889 PHP BALANCE
 Ruben Ramirez had also issued a check for 2,320 PHP in
favor of Ray Electronics—said check was presented to Bank
of America who rejected it for insufficiency of funds.
Ramirez Telco’s lawyer contacted Bank of America, who said
that they should obtain a release on the civil case involving
Ruben Ramirez, and that they are merely acting in
accordance with the garnishment order.
 The lawyer for Ramirez Telco initiated an action on its
behalf, stating that the bank should have known that Ruben
Ramirez, defendant in said civil case, has no personal
deposit in Bank of America, and that the Ramirez Telco is an
entirely distinct and separate entity, regardless of the fact
that Ruben Ramirez happened to be its President and
General Manager.
In turn, the bank filed a counterclaim and a complaint against the
Sheriff.
CFI ruled in favour of Ramirez Telco, ordering the Bank of America
to pay Ramirez P3,000.00. It likewise ordered Herbosa to reimburse
Bank of America, any sum or sums which the latter may pay Ramirez
by virtue of the judgement.
The CA reversed such decision. It dismissed the complaint of
Ramirez Telco, and ordered it to pay to Bank of America, the sum of
P500.00 and to Herbosa, the same amount.
The appellate court gave credence to the testimony of Herbosa who
stated that although it was Ruben Ramirez who was his lessee, the
one who actually occupied the space was Ramirez Telco and that
Ruben Ramirez used to pay rent with checks from the Ramirez Telco
Company. CA ruled that as it can be concluded that Ruben Ramirez
had funds that were deposited in the Bank of America under the
name of Ramirez Telco, which were in fact his own funds as well as
the company’s; as well as the fact that the company paid for the
rent he had acquired personally; and the fact that 75% of the shares
of the company belonged to Ramirez and his wife; all but justify the
conclusion that the seizure of the Ramirez Telco funds was an act of
justice in favor of HERBOSA as creditor.
Ramirez Telco now contend that the CA disregarded its corporate
personality. It maintains that the personality as an entity separate
and distinct from its major stockholders, Ruben R. Ramirez and his
wife, was not to be disregarded even if they did own 75% of the
stock of the corporation. It concludes that its funds as a corporation
cannot be garnished to satisfy the debts of a principal stockholder.
ISSUE: WON Ramirez Telco cannot be garnished to satisfy Reuben
Ramirez’s debts.
HELD: NO.
The SC adopted the decision of the CA in toto. It stressed that while
respect for the corporate personality as such is the general rule,
there are exceptions. In appropriate cases, the veil of corporate
fiction may be pierced.
G.R. No. 100322 March 9, 1994
GUATSON INTERNATIONAL TRAVEL AND TOURS, INC., PHILIPPINE
INTEGRATED LABOR ASSISTANCE CORPORATION, MERCURY
EXPRESS INTERNATIONAL COURIER SERVICES, INC., petitioners, vs.
NATIONAL LABOR RELATIONS COMMISSION AND JOLLY
ALMORADIE, respondents.
Petitioners Guatson Travel and Tours, Inc. (hereinafter referred to
as Guatson Travel), Philippine Integrated Labor Assistance Corp.
(Philac) and Mercury Express International Courier Services, Inc.
(MEREX) assail the Decision, rendered by the National Labor
Relations Commission entitled “Jolly M. Almoradie vs. Guatson’s
Travel Company, Philac and MEREX. In the questioned decision, the
NLRC found that Mr. Henry Ocier’s (Vice-President and General
Manager of petitioner Guatson Travel) actuation of threatening and
forcing private respondent, Jolly M. Almoradie, to resign amounted
to illegal dismissal and thus ordered petitioners to pay private
respondent backwages.
Jolly M. Almoradie was first employed by Mercury Express
International Courier Service, Inc. (MEREX) in October, 1983 as
Messenger. When it closed its operations, Almoradie was absorbed
by MEREX’s sister company Philippine Integrated Labor Assistance
Corp. (Philac), likewise as Messenger.
In September, 1986, Almoradie was transferred to Guatson Travel,
allegedly also a sister company of MEREX and Philac, as Liaison
Officer. Thereafter, he was promoted to the position of Sales
Representative. Almoradie was issued three separate memoranda
asking him to explain the reason why he didn’t want to sell but he
answered that it was not true. He said that he was hampered in his
sales promotion and solicitation of customer, due to financial
constraint considering that the kind and nature of work entails
much expenses for which he shouldered with his personal money.
He also stated that he liked her position as a messenger and
preferred to be returned to his messenger position.
Almoradie was reverted to the position of Messenger, yet sometime
in September, 1988, he was again given the position of Account
Executive, the nature of work of which is similar to that of a sales
representative. Almoradie accepted the transfer with the
understanding that he will solely discharge the duties of an account
executive and will no longer be required to do messengerial work.
On October 1, 1988, Almoradie was allegedly summoned by Henry
Ocier to his office and was there and then forced by the latter to
resign. Ocier taunted Almoradie with threats that it he will not
resign, he will file charges against him which would adversely affect
his chances of getting employed in the future. Ocier allegedly even
provided the pen and paper on which Almoradie wrote and signed
the resignation letter dictated by Ocier himself. Subsequently,
Almoradie filed a complaint for Illegal Dismissal.
The Labor Arbiter, however Dismissed. Upon Almoradie’s appeal,
the NLRC reversed the decision of the Labor Arbiter on his finding
that complainant was not forced to resign, anchoring its conclusion
to the fact that Almoradie was a permanent employee who has
been working for the Ocier’s for five long years; that he was
receiving a fairly good salary considering that he is single; that he
had no potential employer at the time of his resignation; that there
was no evidence to show that Mr. Henry Ocier was indeed not in
town on October 1, 1988, when he allegedly forced Almoradie to
resign.
ISSUE: WON Jolly Almoradie was indeed illegally dismissed by being
forced to resign.
HELD: YES.
When Almoradie was promoted as Sales Representative he had
caught the ire of management, so much so that he was issued no
less than three memoranda in one day ordering him to answer
certain charges. Why he was again promoted to the position of
Account Executive after he was reverted back to the rank of a
messenger from being a Sales Representative is rather intriguing,
unless it was a scheme of management to really rid him from the
company. Apparently, Almoradie is not cut out for a sales job, and
hence could be dismissed or forced to resign for failing to make
good on his job in sales. On the other hand, it would be difficult to
dismiss him while being a messenger since he is a permanent
employee and there would not be enough basis to make him resign.
Henry Ocier did not only say that he will file charges against
Almoradie and that he has a good lawyer but he even threatened to
block his future employment should the latter not file his
resignation. This threat is not farfetched.
Anent NLRC's grant of separation pay and backwages to private
respondent Jolly M. Almoradie, petitioners argues that the
companies, Guatson Travel Company, Philac Merex have separate
and distinct legal personalities such that the latter companies
should not be held liable; assuming, for the sake of argument that
private respondent was illegally dismissed.
We uphold the NLRC. The three companies are owned by one
family, such that majority of the officers of the companies are the
same. The companies are located in one building and use the same
messengerial service. Moreover, there was no showing that private
respondent was paid separation pay when he was absorbed by
Philac upon closure of Merex; nor was there evidence that he
resigned from Philac when he transferred to Guatson Travel. Under
the doctrine of piercing the veil of corporate fiction, when valid
ground exists, the legal fiction that a corporation is an entity with a
juridical personality separate and distinct from its members or
stockholders may be disregarded.
[G.R. No. 108734. May 29, 1996]
CONCEPT BUILDERS, INC., petitioner, vs. THE NATIONAL LABOR
RELATIONS COMMISSION, (First Division); and Norberto Marabe,
et. al., respondents.
Private respondents herein were employed by Concept Builders,
Inc. as laborers, carpenters and riggers. On November, 1981, they
were served individual notices of termination of employment,
stating inter alia that their contracts of employment had expired
and the project in which they were hired had been completed.
It appears however that at the time of the termination of private
respondents’ employment, the project in which they were hired had
not yet been finished and completed. Concept Builders had to
engage the services of sub-contractors whose workers performed
the functions of private respondents.
Aggrieved, private respondents filed a complaint for illegal
dismissal. LA then ordered Concept Builders to reinstate private
respondents and to pay them backwages in the amount of
P199,800.00.
The judgment debt was partially satisfied through garnishment of
sums from Concept Builder’s debtor MWSA in the amount of
P81,385.34.
The LA subsequently directed the sheriff to collect the sum of
P117,414.76, representing the balance of the judgment award. The
sheriff then issued a report stating that he tried to serve the alias
writ of execution on petitioner through the security guard on duty
but the service was refused on the ground that petitioner no longer
occupied the premises.
Thereafter, the LA issued a second alias writ of execution. But the
said writ had not been enforced considering that all the employees
inside Concept Builders’ premises claimed that they were
employees of Hydro Pipes Philippines, Inc.; and that the sheriff was
prevented by security guards with high-powered guns to remove
the properties he had levied upon.
A certain Dennis Cuyegkeng then filed a third-party claim alleging
that the properties sought to be levied upon by the sheriff were
owned by HPPI of which he is the Vice-President.
Private respondents thus filed a Motion for Issuance of a Break-
Open Order, alleging that HPPI and Concept Builders were owned
by the same incorporators/stockholders. They also alleged that
Concept Builders temporarily suspended its business operations in
order to evade its legal obligations to them.
This motion was opposed by HPPI, contending that it is a
corporation which is separate and distinct from Concept Builders.
HPPI also alleged that the two corporations are engaged in two
different kinds of businesses, i.e., HPPI is a manufacturing firm while
Concept Builders was then engaged in construction.
LA denied the motion. NLRC however set aside such denial, and
issued a break-open order. HPPI’s third-party claim was also
dismissed for lack of merit.
ISSUE: WON the NLRC committed grave abuse of discretion when it
issued a break-open order to the sheriff to be enforced against
personal property found in the premises of petitioner’s sister
company.
HELD: NO.
The corporate mask may be lifted and the corporate veil may be
pierced when a corporation is just but the alter ego of a person or
of another corporation. Where badges of fraud exist; where public
convenience is defeated; where a wrong is sought to be justified
thereby, the corporate fiction or the notion of legal entity should
come to naught. The law in these instances will regard the
corporation as a mere association of persons and, in case of two
corporations, merge them into one.
Thus, where a sister corporation is used as a shield to evade a
corporations subsidiary liability for damages, the corporation may
not be heard to say that it has a personality separate and distinct
from the other corporation. The piercing of the corporate veil
comes into play.
In this case, the NLRC noted that, while Concept Builders claimed
that it ceased its business operations on April 29, 1986, it filed an
Information Sheet with the SEC on May 15, 1987, stating that its
office address is at 355 Maysan Road, Valenzuela, Metro Manila. On
the other hand, HPPI, the third-party claimant, submitted on the
same day, a similar information sheet stating that its office address
is at the same premises. Furthermore, both information sheets
were filed by the same Virgilio O. Casino as the corporate secretary
of both corporations. It would also not be amiss to note that both
corporations had the same president, the same board of directors,
the same corporate officers, and substantially the same subscribers.
NOTE: (Instrumentality rule) Where one corporation is so organized
and controlled and its affairs are conducted so that it is, in fact, a
mere instrumentality or adjunct of the other, the fiction of the
corporate entity of the instrumentality may be disregarded. The
control necessary to invoke the rule is not majority or even
complete stock control but such domination of finances, policies
and practices that the controlled corporation has, so to speak, no
separate mind, will or existence of its own, and is but a conduit for
its principal. It must be kept in mind that the control must be shown
to have been exercised at the time the acts complained of took
place. Moreover, the control and breach of duty must proximately
cause the injury or unjust loss for which the complaint is made.
NOTE: The test in determining the applicability of the doctrine of
piercing the veil of corporate fiction is as follows:
1. Control, not mere majority or complete stock control, but
complete domination, not only of finances but of policy and
business practice in respect to the transaction attacked so that the
corporate entity as to this transaction had at the time no separate
mind, will or existence of its own;
2. Such control must have been used by the defendant to commit
fraud or wrong, to perpetuate the violation of a statutory or other
positive legal duty, or dishonest and unjust act in contravention of
plaintiffs legal rights; and
3. The aforesaid control and breach of duty must proximately cause
the injury or unjust loss complained of.
The absence of any one of these elements prevents piercing the
corporate veil. Iapplying the instrumentality or alter ego doctrine,
the courts are concerned with reality and not form, with how the
corporation operated and the individual defendants relationship to
that operation.