November 29, 1968

G.R. No. L-23145

TESTATE ESTATE OF IDONAH SLADE PERKINS, deceased. RENATO D. TAYAG, ancillary administrator-appellee,
vs.
BENGUET CONSOLIDATED, INC., oppositor-appellant.

Cirilo F. Asperillo, Jr., for ancillary administrator-appellee.

Ross, Salcedo, Del Rosario, Bito and Misa for oppositor-appellant.

Fernando, J.:

Idonah Slade Perkins, who died on March 27, 1960 in New York City, left among others, two stock certificates covering 33,002
shares of appellant, the certificates being in the possession of the County Trust Company of New York, which as noted, is the
domiciliary administrator of the estate of the deceased.2 Then came this portion of the appellant’s brief: “On August 12, 1960,
Prospero Sanidad instituted ancillary administration proceedings in the Court of First Instance of Manila; Lazaro A. Marquez was
appointed ancillary administrator, and on January 22, 1963, he was substituted by the appellee Renato D. Tayag. A dispute arose
between the domiciary administrator in New York and the ancillary administrator in the Philippines as to which of them was
entitled to the possession of the stock certificates in question. On January 27, 1964, the Court of First Instance of Manila ordered
the domiciliary administrator, County Trust Company, to “produce and deposit” them with the ancillary administrator or with the
Clerk of Court. The domiciliary administrator did not comply with the order, and on February 11, 1964, the ancillary
administrator petitioned the court to “issue an order declaring the certificate or certificates of stocks covering the 33,002 shares
issued in the name of Idonah Slade Perkins by Benguet Consolidated, Inc., be declared [or] considered as lost.”3

3. Appellant Benguet Consolidated, Inc. would seek to bolster the above contention by its invoking one of the provisions of its
by-laws which would set forth the procedure to be followed in case of a lost, stolen or destroyed stock certificate; it would stress
that in the event of a contest or the pendency of an action regarding ownership of such certificate or certificates of stock allegedly
lost, stolen or destroyed, the issuance of a new certificate or certificates would await the “final decision by [a] court regarding the
ownership [thereof].”15

Issue: WON County Trust Co. is entitled to the stock certificates.

We start with the undeniable premise that, “a corporation is an artificial being created by operation of law….”16 It owes its life to
the state, its birth being purely dependent on its will. As Berle so aptly stated: “Classically, a corporation was conceived as an
artificial person, owing its existence through creation by a sovereign power.”

The well-known authority Fletcher could summarize the matter thus: “A corporation is not in fact and in reality a person, but the
law treats it as though it were a person by process of fiction, or by regarding it as an artificial person distinct and separate from its
individual stockholders…. It owes its existence to law. It is an artificial person created by law for certain specific purposes, the
extent of whose existence, powers and liberties is fixed by its charter.”

In an opinion by Justice J.B.L. Reyes, we sustained the lower court. Thus: “We are of the opinion that the appeal should be
rejected. The provisions of the U.S. Code, invoked by the appellant, make the decisions of the U.S. Veterans’ Administrator final
and conclusive when made on claims property submitted to him for resolution; but they are not applicable to the present case,
where the Administrator is not acting as a judge but as a litigant. There is a great difference between actions against the
Administrator (which must be filed strictly in accordance with the conditions that are imposed by the Veterans’ Act, including the
exclusive review by United States courts), and those actions where the Veterans’ Administrator seeks a remedy from our courts
and submits to their jurisdiction by filing actions therein. Our attention has not been called to any law or treaty that would make
the findings of the Veterans’ Administrator, in actions where he is a party, conclusive on our courts. That, in effect, would
deprive our tribunals of judicial discretion and render them mere subordinate instrumentalities of the Veterans’ Administrator.”
G.R. No. 182729 September 29, 2010

KUKAN INTERNATIONAL CORPORATION, Petitioner,

vs.
HON. AMOR REYES, in her capacity as Presiding Judge of the Regional Trial Court of Manila, Branch 21, and
ROMEO M. MORALES, doing business under the name and style "RM Morales Trophies and Plaques,"
Respondents.

DECISION

VELASCO, JR., J.:

The Facts

Sometime in March 1998, Kukan, Inc. conducted a bidding for the supply and installation of signages in a building
being constructed in Makati City. Morales tendered the winning bid and was awarded the PhP 5 million contract.
Some of the items in the project award were later excluded resulting in the corresponding reduction of the contract
price to PhP 3,388,502. Despite his compliance with his contractual undertakings, Morales was only paid the amount
of PhP 1,976,371.07, leaving a balance of PhP 1,412,130.93, which Kukan, Inc. refused to pay despite demands.
Shortchanged, Morales filed a Complaint6 with the RTC against Kukan, Inc. for a sum of money, the case docketed
as Civil Case No. 99-93173 and eventually raffled to Branch 17 of the court.

In reaction to the third party claim, Morales interposed an Omnibus Motion dated April 30, 2003. In it, Morales prayed,
applying the principle of piercing the veil of corporate fiction, that an order be issued for the satisfaction of the
judgment debt of Kukan, Inc. with the properties under the name or in the possession of KIC, it being alleged that
both corporations are but one and the same entity. KIC opposed Morales’ motion. By Order of May 29, 2003 9 as
reiterated in a subsequent order, the court denied the omnibus motion.

Third Issue: Piercing the

Veil of Corporate Fiction

Under the doctrine of "piercing the veil of corporate fiction," the court looks at the corporation as a mere collection of
individuals or an aggregation of persons undertaking business as a group, disregarding the separate juridical
personality of the corporation unifying the group. Another formulation of this doctrine is that when two business
enterprises are owned, conducted and controlled by the same parties, both law and equity will, when necessary to
protect the rights of third parties, disregard the legal fiction that two corporations are distinct entities and treat them as
identical or as one and the same.

Whether the separate personality of the corporation should be pierced hinges on obtaining facts
appropriately pleaded or proved. However, any piercing of the corporate veil has to be done with caution, albeit the
Court will not hesitate to disregard the corporate veil when it is misused or when necessary in the interest of justice. x
x x (Emphasis supplied.)

The same principle was the subject and discussed in Rivera v. United Laboratories, Inc.:

While a corporation may exist for any lawful purpose, the law will regard it as an association of persons or, in case of
two corporations, merge them into one, when its corporate legal entity is used as a cloak for fraud or illegality. This is
the doctrine of piercing the veil of corporate fiction. The doctrine applies only when such corporate fiction is used to
defeat public convenience, justify wrong, protect fraud, or defend crime, or when it is made as a shield to confuse the
legitimate issues, or where a corporation is the mere alter ego or business conduit of a person, or where the
corporation is so organized and controlled and its affairs are so conducted as to make it merely an instrumentality,
agency, conduit or adjunct of another corporation.

23. Piercing the veil of corporate entity applies to determination of liability not of jurisdiction. x x x
This is so because the doctrine of piercing the veil of corporate fiction comes to play only during the trial of the case
after the court has already acquired jurisdiction over the corporation. Hence, before this doctrine can be applied,
based on the evidence presented, it is imperative that the court must first have jurisdiction over the corporation. 35 x x
x (Emphasis supplied.)

The implication of the above comment is twofold: (1) the court must first acquire jurisdiction over the corporation or
corporations involved before its or their separate personalities are disregarded; and (2) the doctrine of piercing the
veil of corporate entity can only be raised during a full-blown trial over a cause of action duly commenced involving
parties duly brought under the authority of the court by way of service of summons or what passes as such service.

In those instances when the Court pierced the veil of corporate fiction of two corporations, there was a confluence of
the following factors:

1. A first corporation is dissolved;

2. The assets of the first corporation is transferred to a second corporation to avoid a financial
liability of the first corporation; and

3. Both corporations are owned and controlled by the same persons such that the second
corporation should be considered as a continuation and successor of the first corporation.

In the instant case, however, the second and third factors are conspicuously absent. There is, therefore, no
compelling justification for disregarding the fiction of corporate entity separating Kukan, Inc. from KIC. In applying the
principle, both the RTC and the CA miserably failed to identify the presence of the abovementioned factors. Consider:

It bears reiterating that piercing the veil of corporate fiction is frowned upon. Accordingly, those who seek to pierce
the veil must clearly establish that the separate and distinct personalities of the corporations are set up to justify a
wrong, protect fraud, or perpetrate a deception. In the concrete and on the assumption that the RTC has validly
acquired jurisdiction over the party concerned, Morales ought to have proved by convincing evidence that Kukan, Inc.
was collapsed and thereafter KIC purposely formed and operated to defraud him. Morales has not to us discharged
his burden.
G.R. No. 146667 January 23, 2007

JOHN F. McLEOD, Petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION (First Division), FILIPINAS SYNTHETIC FIBER CORPORATION
(FILSYN), FAR EASTERN TEXTILE MILLS, INC., STA. ROSA TEXTILES, INC., (PEGGY MILLS, INC.), PATRICIO
L. LIM, and ERIC HU, Respondents.

DECISION

CARPIO, J.:

The Facts

The facts, as summarized by the Labor Arbiter and adopted by the NLRC and the Court of Appeals, are as follows:

On February 2, 1995, John F. McLeod filed a complaint for retirement benefits, vacation and sick leave benefits, non-
payment of unused airline tickets, holiday pay, underpayment of salary and 13th month pay, moral and exemplary
damages, attorney’s fees plus interest against Filipinas Synthetic Corporation (Filsyn), Far Eastern Textile Mills, Inc.,
Sta. Rosa Textiles, Inc., Patricio Lim and Eric Hu.

On 3 April 1998, the Labor Arbiter rendered his decision with the following dispositive portion:

WHEREFORE, premises considered, We hold all respondents as jointly and solidarily liable for complainant’s money
claims.

The Issues

3. Whether the private respondents may avoid their financial obligations to the petitioner by
invoking the veil of corporate fiction;

The Court’s Ruling

There was also no merger or consolidation of PMI and SRTI.

Consolidation is the union of two or more existing corporations to form a new corporation called the consolidated
corporation. It is a combination by agreement between two or more corporations by which their rights, franchises, and
property are united and become those of a single, new corporation, composed generally, although not necessarily, of
the stockholders of the original corporations.

Merger, on the other hand, is a union whereby one corporation absorbs one or more existing corporations, and the
absorbing corporation survives and continues the combined business.

However, McLeod claims that "for purposes of determining employer liability, all private respondents are one and the
same employer" because: (1) they have the same address; (2) they are all engaged in the same business; and (3)
they have interlocking directors and officers.35

This assertion is untenable.

A corporation is an artificial being invested by law with a personality separate and distinct from that of its stockholders
and from that of other corporations to which it may be connected.36
While a corporation may exist for any lawful purpose, the law will regard it as an association of persons or, in case of
two corporations, merge them into one, when its corporate legal entity is used as a cloak for fraud or illegality. This is
the doctrine of piercing the veil of corporate fiction. The doctrine applies only when such corporate fiction is used to
defeat public convenience, justify wrong, protect fraud, or defend crime, 37 or when it is made as a shield to confuse
the legitimate issues, or where a corporation is the mere alter ego or business conduit of a person, or where the
corporation is so organized and controlled and its affairs are so conducted as to make it merely an instrumentality,
agency, conduit or adjunct of another corporation.38

To disregard the separate juridical personality of a corporation, the wrongdoing must be established clearly and
convincingly. It cannot be presumed.39

Here, we do not find any of the evils sought to be prevented by the doctrine of piercing the corporate veil.

Respondent corporations may be engaged in the same business as that of PMI, but this fact alone is not enough
reason to pierce the veil of corporate fiction.40
G.R. No. 154975 January 29, 2007

GENERAL CREDIT CORPORATION (now PENTA CAPITAL FINANCE CORPORATION), Petitioner,

vs.
ALSONS DEVELOPMENT and INVESTMENT CORPORATION and CCC EQUITY CORPORATION, Respondents.

DECISION

The facts:

Shortly after its incorporation in 1957 as a finance and investment company, petitioner General Credit Corporation
(GCC, for short), then known as Commercial Credit Corporation (CCC), established CCC franchise companies in
different urban centers of the country.3 In furtherance of its business, GCC had, as early as 1974, applied for and was
able to secure license from the then Central Bank (CB) of the Philippines and the Securities and Exchange
Commission (SEC) to engage also in quasi-banking activities.

In December 1980, ALSONS and the Alcantara family, for a consideration of Two Million (P2,000,000.00) Pesos,
sold their shareholdings – a total of 101,953 shares, more or less – in the CCC franchise companies to EQUITY.[5]
On January 2, 1981, EQUITY issued ALSONS et al., a "bearer" promissory note for P2,000,000.00 with a one-year
maturity date, at 18% interest per annum, with provisions for damages and litigation costs in case of default. 6

Issue: whether there is absolutely no basis for piercing GCC’s veil of corporate identity.

A corporation is an artificial being vested by law with a personality distinct and separate from those of the persons
composing it20 as well as from that of any other entity to which it may be related. 21 The first consequence of the
doctrine of legal entity of the separate personality of the corporation is that a corporation may not be made to answer
for acts and liabilities of its stockholders or those of legal entities to which it may be connected or vice versa. 22

The notion of separate personality, however, may be disregarded under the doctrine – "piercing the veil of corporate
fiction" – as in fact the court will often look at the corporation as a mere collection of individuals or an aggregation of
persons undertaking business as a group, disregarding the separate juridical personality of the corporation unifying
the group. Another formulation of this doctrine is that when two (2) business enterprises are owned, conducted and
controlled by the same parties, both law and equity will, when necessary to protect the rights of third parties,
disregard the legal fiction that two corporations are distinct entities and treat them as identical or one and the same. 23

Whether the separate personality of the corporation should be pierced hinges on obtaining facts, appropriately
pleaded or proved. However, any piercing of the corporate veil has to be done with caution, albeit the Court will not
hesitate to disregard the corporate veil when it is misused or when necessary in the interest of justice. 24 After all, the
concept of corporate entity was not meant to promote unfair objectives.

Authorities are agreed on at least three (3) basic areas where piercing the veil, with which the law covers and isolates
the corporation from any other legal entity to which it may be related, is allowed.25 These are: 1) defeat of public
convenience,26 as when the corporate fiction is used as vehicle for the evasion of an existing obligation; 27 2) fraud
cases or when the corporate entity is used to justify a wrong, protect fraud, or defend a crime;28 or 3) alter ego cases,
where a corporation is merely a farce since it is a mere alter ego or business conduit of a person, or where the
corporation is so organized and controlled and its affairs are so conducted as to make it merely an instrumentality,
agency, conduit or adjunct of another corporation.29

For a perspective, the following are some relevant excerpts from the trial court’s decision setting forth in some detail
the tipping circumstances adverted to therein:

It must be noted that as characterized by their business relationship, [respondent] EQUITY and [petitioner] GCC had
common directors and/or officers as well as stockholders.

ALSONS has likewise shown …that the bonuses of the officers and directors of … EQUITY was based on its total
financial performance together with all its affiliates… both firms were sharing one and the same office when both
were still operational … and that the directors and executives of … EQUITY never acted independently … but took
their orders from … GCC….
Verily, indeed, as the relationships binding herein [respondent EQUITY and petitioner GCC] have been that of
"parent-subsidiary corporations" the foregoing principles and doctrines find suitable applicability in the case at bar;
and, it having been satisfactorily and indubitably shown that the said relationships had been used to perform certain
functions not characterized with legitimacy, this Court … feels amply justified to "pierce the veil of corporate entity"
and disregard the separate existence of the percent (sic) and subsidiary the latter having been so controlled by the
parent that its separate identity is hardly discernible thus becoming a mere instrumentality or alter ego of the former.
Consequently, as the parent corporation, [petitioner] GCC maybe (sic) held responsible for the acts and contracts of
its subsidiary – [respondent] EQUITY - most especially if the latter (who had anyhow acknowledged its liability to
ALSONS) maybe (sic) without sufficient property with which to settle its obligations. For, after all, GCC was the entity
which initiated and benefited immensely from the fraudulent scheme perpetrated in violation of the law. (Words in
parenthesis in the original; emphasis and bracketed words added).
G.R. No. 80887 September 30, 1994

BLISS DEVELOPMENT CORPORATION EMPLOYEES UNION (BDCEU)-SENTRO NG DEMOKRATIKONG

MANGGAGAWA (SDM), petitioner,
vs.
HON. PURA FERRER CALLEJA and BLISS DEVELOPMENT CORPORATION, respondents.

Capulong, Magpantay, Ladrido, Canilao and Malabanan for private respondent.

KAPUNAN, J.:

On October 10, 1986, petitioner, a duly registered labor union, filed with the Department of Labor, National Capital
Region, a petition for certification election of private respondent Bliss Development Corporation (BDC).

Based on the position papers submitted by the parties, Med-Arbiter Napoleon V. Fernando, in an order dated January
26, 1987, dismissed the petition for lack of jurisdiction stating that the majority of BDC's stocks is owned by the
Human Settlement Development Corporation (HSDC), a wholly-owned government corporation. Therefore, BDC is
subject to Civil Service law, rules and regulations. The pertinent portion of said Order reads:

Petitioner then filed an appeal with the Bureau of Labor Relations.

A corporation is created by operation of law. It acquires a judicial personality either by special law or a general law.
The general law under which a private corporation may be formed or organized is the Corporation Code, the
requirements of which must be complied with by those wishing to incorporate. Only upon such compliance will the
corporation come into being and acquire a juridical personality, thus giving rise to is right to exist and act as a legal
entity. On the other hand, a government corporation is normally created by special law, referred to often as a charter.
9

BDC is a government-owned corporation created under the Corporation Law. It is without a charter, governed by the
Labor Code and not by the Civil Service Law hence, Executive Order No. 180 does not apply to it.
G.R. No. 185280 January 18, 2012

TIMOTEO H. SARONA, Petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION, ROYALE SECURITY AGENCY (FORMERLY SCEPTRE
SECURITY AGENCY) and CESAR S. TAN, Respondents.

DECISION

Factual Antecedents

On June 20, 2003, the petitioner, who was hired by Sceptre as a security guard sometime in April 1976, was asked
by Karen Therese Tan (Karen), Sceptre’s Operation Manager, to submit a resignation letter as the same was
supposedly required for applying for a position at Royale. The petitioner was also asked to fill up Royale’s
employment application form, which was handed to him by Royale’s General Manager, respondent Cesar Antonio
Tan II (Cesar).3

After several weeks of being in floating status, Royale’s Security Officer, Martin Gono (Martin), assigned the petitioner
at Highlight Metal Craft, Inc. (Highlight Metal) from July 29, 2003 to August 8, 2003. Thereafter, the petitioner was
transferred and assigned to Wide Wide World Express, Inc. (WWWE, Inc.). During his assignment at Highlight Metal,
the petitioner used the patches and agency cloths of Sceptre and it was only
when he was posted at WWWE, Inc. that he started using those of Royale.4

On September 17, 2003, the petitioner was informed that his assignment at WWWE, Inc. had been withdrawn
because Royale had allegedly been replaced by another security agency. The petitioner, however, shortly discovered
thereafter that Royale was never replaced as WWWE, Inc.’s security agency. When he placed a call at WWWE, Inc.,
he learned that his fellow security guard was not relieved from his post.5

ISSUES

a. Whether Royale’s corporate fiction should be pierced for the purpose of compelling it to
recognize the petitioner’s length of service with Sceptre and for holding it liable for the benefits that
have accrued to him arising from his employment with Sceptre; and

OUR RULING

Equally well-settled is the principle that the corporate mask may be removed or the corporate veil pierced when the
corporation is just an alter ego of a person or of another corporation. For reasons of public policy and in the interest of
justice, the corporate veil will justifiably be impaled only when it becomes a shield for fraud, illegality or inequity
committed against third persons.46

Hence, any application of the doctrine of piercing the corporate veil should be done with caution. A court should be
mindful of the milieu where it is to be applied. It must be certain that the corporate fiction was misused to such an
extent that injustice, fraud, or crime was committed against another, in disregard of rights. The wrongdoing must be
clearly and convincingly established; it cannot be presumed. Otherwise, an injustice that was never unintended may
result from an erroneous application.47

Whether the separate personality of the corporation should be pierced hinges on obtaining facts appropriately
pleaded or proved. However, any piercing of the corporate veil has to be done with caution, albeit the Court will not
hesitate to disregard the corporate veil when it is misused or when necessary in the interest of justice. After all, the
concept of corporate entity was not meant to promote unfair objectives. 48

The doctrine of piercing the corporate veil applies only in three (3) basic areas, namely: 1) defeat of public
convenience as when the corporate fiction is used as a vehicle for the evasion of an existing obligation; 2) fraud
cases or when the corporate entity is used to justify a wrong, protect fraud, or defend a crime; or 3) alter ego cases,
where a corporation is merely a farce since it is a mere alter ego or business conduit of a person, or where the
corporation is so organized and controlled and its affairs are so conducted as to make it merely an instrumentality,
agency, conduit or adjunct of another corporation.49
In this regard, this Court finds cogent reason to reverse the CA’s findings. Evidence abound showing that Royale is a
mere continuation or successor of Sceptre and fraudulent objectives are behind Royale’s incorporation and the
petitioner’s subsequent employment therein. These are plainly suggested by events that the respondents do not
dispute and which the CA, the NLRC and LA Gutierrez accept as fully substantiated but misappreciated as
insufficient to warrant the use of the equitable weapon of piercing.

As correctly pointed out by the petitioner, it was Aida who exercised control and supervision over the affairs of both
Sceptre and Royale. Contrary to the submissions of the respondents that Roso had been the only one in sole control
of Sceptre’s finances and business affairs, Aida took over as early as 1999 when Roso assigned his license to
operate Sceptre on May 3, 1999.50 As further proof of Aida’s acquisition of the rights as Sceptre’s sole proprietor, she
caused the registration of the business name "Sceptre Security & Detective Agency" under her name with the DTI a
few months after Roso abdicated his rights to Sceptre in her favor. 51 As far as Royale is concerned, the respondents
do not deny that she has a hand in its management and operation and possesses control and supervision of its
employees, including the petitioner. As the petitioner correctly pointed out, that Aida was the one who decided to stop
giving any assignments to the petitioner and summarily dismiss him is an eloquent testament of the power she wields
insofar as Royale’s affairs are concerned. The presence of actual common control coupled with the misuse of the
corporate form to perpetrate oppressive or manipulative conduct or evade performance of legal obligations is patent;
Royale cannot hide behind its corporate fiction.