SULO NG BAYAN, INC. vs. ARANETA, INC.

L-31061 / 17 August 1976 / J. Antonio

Appeal from an Order of CFI Bulacan

FACTS
Sulo ng Bayan (Plaintiff), filed an accion de reivindicacion with CFI Bulacan against defendants
to recover the ownership and possession of a large track of land in San Jose del Monte,
Bulacan containing 27,982,250 square meters registered in the name of defendants
predecessors-in-interest.
The complaint alleged that they had pioneered in the clearing of the aforementioned tract of
land, cultivated the same since the Spanish regime and continuously possessed the sad
property openly and publicly under the concept of an owner and the defendants through force
and intimidation, ejected the members of the corporation from their possession of the said
land.
CFI Bulacan issued the decree of registration without notice to the actual possessors of the
land so all subsequent titles derived therefrom is null and void (Araneta and Zaragoza to
Araneta to NAWASA to Hacienda Caretas to Paradise Farms).
Araneta filed a Motion to Dismiss on the grounds that the complaint states no cause of action
and if there is any, it is already barred by prescription or laches.
Trial Court dismissed the complaint on the ground of lack of cause of action and prescription.
Plaintiffs MR: complaint states a sufficient COA because the subject matter of the controversy
is of common interest to the members of the corporation who are so numerous that the
present complaint be treated as a class suit and that the action is not barred by prescription
because the action for the reconveyance registered through fraud does not prescribe.

ISSUE: WON Plaintiff Corporation may institute an action in behalf of its individual members for the
recovery of certain parcels of land allegedly owned by said members. NO.

DISPOSITIVE: INSTANT APPEAL IS DISMISSED.

RATIO:
It appearing clearly that the action has not been filed in the names of the real parties in
interest, the complaint must be dismissed on the ground of lack of cause of action.
In the complaint, the people whose rights were alleged to have been violated by being
deprived and dispossessed of their land are the members of the corporation and NOT the
corporation itself.
The corporation has a separate and distinct personality from its members, and this is not a
mere technicality but a matter of substantive law. There is no allegation that the members
assigned their rights to the corporation or any showing that the corporation has in any way or
manner succeeded to such rights. The corporation evidently did not have any rights violated by
the defendants for which it could seek redress.
The property of the corporation is its property and not that of the stockholders, as owners,
although they have equities in it. Properties registered in the name of the corporation are
owned by it as an entity separate and distinct from its members. Conversely, a corporation
ordinarily has no interest in the individual property of its stockholders unless transferred to the
corporation, even in the case of a one-man corporation.

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STOCK HOLDERS OF F. GUANZON AND SONS, INC. vs. REGISTER OF DEEDS MANILA
GR L-18216 / 30 Oct 1962 / J. Baustista Angelo
Appeal from a decision of the Land Registration Commission

FACTS
Five stockholders of the F. Guanzon and Sons, Inc. executed a certificate of liquidation of the
assets of the corporation reciting, among other things, that by virtue of a resolution of the
stockholders dissolving the corporation, they have distributed among themselves in
proportion to their shareholdings, the assets of the said corporation.
Register of Deeds Manila denied the registration of the certificate of liquidation (they have to
pay P430.50 registration fees and P940.45 documentary stamps)
Commissioner of Land Registration: Sustained RDM. Certificate of Liquidation is a transfer or
conveyance.
o Appellants: Certificate of Liquidation is not a conveyance or transfer but merely a
distribution of the assets of the corporation which has ceased to exist for having been
dissolved (so according to them, they only have to pay P0.30 not P940.45. Plus, it is not
correct to require them to pay P430.5 reg fee).

ISSUE: WON certificate of liquidation and distribution of assets for transfer to stockholders are
considered as transfer or conveyance YES.

DISPOSITIVE: WE AFFIRM THE RESOLUTION APPEALED FROM.

RATIO:
Properties registered in the name of the corporation are owned by it as an entity separate and
distinct from its members.
Where the purpose of the liquidation, as well as the distribution of the assets of the
corporation, is to transfer their title from the corporation to the stockholders in proportion to
their shareholdings, that transfer cannot be effected without the corresponding deed of
conveyance from the corporation to the stockholders, and the certificate should be considered
as one in the nature of a transfer or conveyance.

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CARAM, JR. vs. COURT OF APPEALS and ARELLANO
GR L-18216 / 30 Oct 1962 / J. Cruz
Petition to Review the decision of the CA

FACTS
Respondent, Arellano, was claiming P50,000 for the services he performed for Filipinas Orient
Airways.
He won in the CA decision. The CA decision held the Carams (principal stockholder of
Filipinas Orient Airways) SOLIDARILY liable (together with Filipinas Orient Airways, Barretto,
and Garcia) to pay Arellano P50,000 for the preparation of the project study and for the
technical services that led to the organization of the corporation plus 10,000 attorneys fees.
The Carams argued that this order has no support in fact and law because they had no
contract whatsoever with Arellano regarding the above-mentioned services and that they are
mere private investors in the corporation and that they should not be held solidarily liable with
the company as they are a separate entity and that co-defendants Barretto and Garcia are the
ones who requested the services of respondent.

ISSUE: WON the Carams should be held personally liable for the P50,000? NO.

DISPOSITIVE: PETITION IS GRANTED. The petitioners are declared not liable under the challenged
decision, which is hereby modified accordingly.

RATIO:
Filipinas Orient Airways, a bona fide corporation, should alone be liable for its corporate acts
duly authorized by its officers and directors.
The Carams did not contract such services. It was only the results of such services that
Barretto and Garcia presented to them and which persuaded them to invest in the proposed
airline. The most that can be said is that they benefited from such services, but that surely is
no justification to hold them personally liable therefor. Otherwise, all the other stockholders of
the corporation, including those who came in later, and regardless of the amount of their
shareholdings, would be equally and personally liable also with the petitioners for the claims of
the private respondent.

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PALAY, INC. and ONSTOTT vs. CLAVE
L-50076 / 21 September 1983 / J. Melencio-Herrera
Petition to review the decision of the Presidential Executive Assistant

FACTS
Palay, Inc., through its president, Onstott, executed in favor of Dumpit, a Contract to Sell a
parcel of land of the Crestview Heights Subdivision in Antipolo, Rizal for P23,300 with 9%
interest per annum, payable with a downpayment of P4,660.00 and monthly installments of
P246.42 until fully paid. The contract provided for an automatic rescission upon default in
payment of ANY monthly installment after the lapse of 90 days without need of notice and with
forfeiture of all installments paid.
After 6 years, Dumpit wrote Palay Inc. offering to update all his overdue accounts with interest,
and seeking its written consent to the assignment of his rights to a certain Lourdes Dizon.
Palay, Inc. informed Dumpit that the contract has long been rescinded and that the lot has
already been resold.
Dumpit filed a complaint with the National Housing Authority for reconveyance or refund.
NHA ruled that the rescission is VOID in the absence of either judicial or notarial demand and
ordered Palay, Inc and Onstott SOLIDARILY liable to refund Dumpit P13,722.50 with 12%
interest from filing of the complaint.
Petitioners MR was denied.
On appeal to the Office of the President, Presidential Executive Assistant Clave affirmed NHAs
resolution.

ISSUE: WON Onstott, president and controlling stockholder of Palay, Inc., be held personally liable to
[refund] Dumpit? NO.

DISPOSITIVE: RESOLUTION IS HEREBY MODIFIED. Palay, Inc. is directed to refund Dumpit.

RATIO:
It is basic that a corporation is invested by law with a personality separate and distinct from
those of the persons composing it as well as from that of any other legal entity to which it may
be related.
Onstott cannot be made personally liable just because he appears to be the controlling
stockholder. Mere ownership by a single stockholder or by another corporation of all or nearly
all of the capital stock of a corporation is not of itself sufficient ground for disregarding the
separate corporate personality.

NOTE:
Palay. Inc. is still liable to Dumpit because Notice (of rescission) to the defaulting lot buyer is
an indispensable requirement. (An act treating a contract as cancelled should be made known
to the other UP vs. de los Angeles)

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CRUZ vs. DALISAY
31 July 1987 / 152 SCRA 482 / J. Fernan
Administrative Matter in the SC

FACTS
There was an NLRC judgment enjoining Qualitrans Lomousine Service, Inc. to reinstate
discharged employees and to pay them backwages.
However, Sheriff Dalisay attached and/or levied the money belonging to Cruz (owner/president
of said corporation)
So Cruz filed a Malfeasance in Office, Corrupt Practices and Serious Irregularities case
against Dalisay.
Dalisay argued that Cruz is the owner/president of the judgment debtor corporation and the
judgment creditors counsel advised him to serve notices on Philtrust Bank.
Cruz later on executed an affidavit of desistance stating that he is no longer interested in
prosecuting the case against Dalisay.
RTC judge dismissed the case.
But the court imposed a disciplinary action against Dalisay for piercing the veil of corporate
entity.

ISSUE: WON Dalisay can attach/levy Cruzs property to satisfy the NLRC judgment? NO.

DISPOSITIVE: Dalisay NEGLIGENT in the enforcement of the writ of execution in NLRC Case, and a
fine equivalent to three months salary is hereby imposed with a stern warning that the commission of
the same or similar offense in the future will merit a heavier penalty.

RATIO
The tenor of the NLRC judgment and the implementing writ is clear enough. It directed
Qualitrans Limousine Service, Inc. to reinstate the discharged employees and pay them full
backwages. Dalisay, however, chose to "pierce the veil of corporate entity" usurping a power
belonging to the court and assumed improvidently that since the complainant is the
owner/president of Qualitrans Limousine Service, Inc., they are one and the same.
It is a well-settled doctrine both in law and in equity that as a legal entity, a corporation has a
personality distinct and separate from its individual stockholders or members.
The mere fact that one is president of a corporation does not render the property he owns or
possesses the property of the corporation, since the president, as individual, and the
corporation are separate entities.

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INDOPHIL TEXTILE MILL WORKERS UNION vs. CALICA and INDOPHIL TEXTILE MILLS, INC.
GR. 96490 / 3 Feb 1992 / J. Medialdea
Petition for Certiorari to review the award issued by the Voluntary Arbitrator

FACTS
The Union and the respondent corporation entered into a collective bargaining agreement.
Acrylic was formed, registered, and became operational. They hired workers and the workers
unionized and a duly certified collective bargaining agreement was also executed.
A year after the workers of Acrylic Unionized and a CBA executed, Petitioner Union claimed
that:
o the plant facilities set up by Acrylic should be considered as an extension or expansion
of the facilities of the respondent corporation pursuant to the CBA. (or in other words,
Pet Union was claiming that Acrylic is part of the Indophil bargaining agreement).
o They seek to pierce the veil of corporate entity of Acrylic, alleging that the creation of
Acrylic us a devise to evade the application of the CBA between the Pet Union and the
Respondent Corp.
Respondent corporation argued that Acrylic is a separate juridical entity.
Voluntary Arbitrator Calica ruled that Acrylic is NOT an extension of respondent corporation.

ISSUES: WON the operations in Acrylic are an extension or expansion of respondent corporation
NO.

DISPOSITIVE: PETITION IS DENIED and the award of the Voluntary Arbitrator is affirmed.

RATIO:
Doctrine of piercing the veil of corporate entity applies when the corporate fiction is used to
defeat public convenience, justify wrong, protect fraud or defend crime or where a corporation
is the mere alter ego or business conduit of a person.
The fact that the businesses of private respondent and Acrylic are related, that some of the
employees of the private respondent are the same persons manning and providing for
auxilliary services to the units of Acrylic, and that the physical plants, offices and facilities are
situated in the same compound, it is our considered opinion that these facts are not sufficient
to justify the piercing of the corporate veil of Acrylic.

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MOBILIA PRODUCTS, INC. vs UMEZAWA
GR 149357 / March 04, 2005 / J. Callejo, Sr.
Petitions for Review on certiorari of the resolutions of the CA

FACTS
Petitioner is a corporation engaged in the manufacture and export of quality furniture which
caters only to the purchase orders booked and placed through its Mother Company, Mobilia
Japan.
The mother company sent respondent to the Philippines in order to head the petitioner
corporation as President and General manager. He was also a Board Director with one
nominal share of stock.
Umezawa organized another company with his wife and sister (Astem Philippines Corporation)
without the knowledge of the Chairman and Chief Executive Officer and other members of the
Board of Directors of Mobilia.
Astem is engaged in the same business as Mobilia and it also hired the production manager of
Mobilia to be its manager.
Umezawa stole prototype furniture from Mobilia and presented and exhibited the same in the
furniture fair in Singapore. Umezawa also stole P2.9M worth of furniture from Mobilias factory
and stored the same in the truck belonging to Dew Foam. Umezawa also stole a 3-seater sofa
worth P255k. Said stolen pieces of furniture were delivered to Chuas warehouse.
Umezawa ordered and caused the manufacture of pieces of furniture worth 17M using
Mobilias supplies, materials, labor, and machineries for the benefit of Astem.
The Board of Directors of Mobilia authorized the filing of a qualified theft complaint against
Umezawa.
Public Prosecutor filed a QT complaint before the RTC. Trial Court issued a Writ of Preliminary
Attachment on Umezawas properties.
TC dismissed the complaints because the subject of the charges is intra-corporate in nature
and was within the exclusive jurisdiction of the SEC and Umezawa is also a bona fide
stockholder thereof hence, a co-owner of the said properties.
CA nullified the orders of the TC issue of ownership of the properties in dispute is not an
intra-corporate dispute.

ISSUE: WON the dispute is an intra-corporate in nature and hence, within the jurisdiction of the SEC
NO.

DISPOSITIVE: Petition is granted.

RATIO
The fraudulent acts (estafa / qualified theft) are of a criminal nature and hence, cognizable by
regular courts.
There is a distinction between the title of a corporation vs. the interest of its members or
stockholders in the property of the corporation - The property of the corporation is not the
property of the stockholders, or members, or of its officers who are stockholders.

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CHILD LEARNING CENTER, INC. and LIMON vs TAGORIO
GR No. 150920 / 25 Nov 2005 / J. Azcuna
Petition for review on certiorari of the decision and resolution of the CA

FACTS
Timothy Tagorio was a grade 4 student at Marymouth School, an academic institution operated
and maintained by Pet Corp, was locked inside of the boys comfort room, opened the window
and fell three stories. Timothy suffered serious multiple physical injuries.
The Tagorios filed an action under Art. 2176 of the Civil Code against CLC, members of the
board, and the Administrative Officer of the school.
CLC argued that there was nothing wrong with the locking mechanism of the door and that the
fall of Timothy was not due to its fault or negligence moreover, they argued that they had
exercised the due care and diligence of a good father of a family to ensure the well-being of its
students.
Trial Court ordered CLC and Spouses Limon to solidarily pay the Tagorios a total of P550k.
Trial Court disregarded the Corporate Fiction and held the spouses Limon personally liable
because they were the one who actually managed the affairs of the CLC.
CLC and Spouses Limon appealed. CA affirmed the decision in toto.

ISSUE: WON Spouses Limon should be held personally liable? NO.

DISPOSITIVE: PETITION IS PARTY GRANTED and the DECISION and RESOLUTION of the CA are
MODIFIED in that petitioners Limon are absolved from personal liability.

RATIO:
There was no basis to pierce CLCs separate corporate personality. To disregard the corporate
existence, the plaintiff must prove:
1. Control by the individual owners, not mere majority or complete stock ownership,
resulting in complete domination not only of finances but of policy and business practice
in respect to a transaction 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 a dishonest and
unjust act in contravention of the plaintiffs legal right;
3. the control and breach of duty must proximately cause the injury or unjust loss
complained of.
The absence of these elements prevents piercing the corporate veil. The evidence on record
show that these elements are present, especially given the fact that plaintiffs complaint had
pleaded that CLC is a corporation duly organized and existing under the laws of the
Philippines.

NOTE:
CLC is still liable under the doctrine of Res Ipsa Loquitur. Timothy fell out through the window.
This shows that something was wrong with the door or the knob. CLC is clearly answerable for
failure to see to it that dooes of their school toilets are at all times in working condition. The fact
that a student had to go through the window, instead of the door, shows that something was
wrong with the door.

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YU vs. NLRC, LA Cueto, Tanduay Distillery Inc., Duran, Paliwan, Estoce, Santos
GR 111810-11 / 16 June 1995 / J. Melo
Petition for certiorari to review a decision of the NLRC.

FACTS
Employees of TDI received a Memo terminating their services for reasons of retrenchment.
The 22 employees filed a TRO against their retrenchment. LA issued the TRO. After 20 days,
the retrenchment pushed through and the 22 employees were retrenched.
Twin Ace Holdings bought and took over TDI and assumed the business name Tanduay
Distillers.
The employees filed a motion to implead Yu and Young as respondents in the retrenchment
case.
Yu and Young filed an opposition saying that they are representatives of Tanduay Distillers, an
entity distinct and separate from TDI, the previous owner and that there is no E-E relationship
between Tanduay Distillers and the employees.
Labor Arbiter: declared the retrenchment illegal and ordered Tanduay Distillers to reinstate the
complainants and pay backwages (pay separation pay in the event of change in management).
TDI appealed. NLRC affirmed LA decision. TDIs MR was likewise denied
The employees filed a Motion for Execution. But Yu and Young opposed on the ground that the
issuance of the writ is against Tanduay Distillers is without any basis because Tanduay
Distillers is an entity distinct and separate from TDI. So the employees filed their rejoinder.
TDI agreed to pay the companys liability. However, NLRC issued a Writ of Execution against
Tanduay Distillers, Young, and Yu.
Yu and Young filed a Petition for Certiorari before the NLRC. The NLRC dismissed Yu and
Youngs petition for lack of merit.

ISSUE: WON Yu and Young should be held personally liable to the retrenched employees NO.

WON TDI and Tanduay Distillers are one and the same NO.

DISPOSITIVE: PETITION IS GRANTED. The order of the Labor Arbiter and the decision of the NLRC
are set aside as null and void.

RATIO
The corporation has a personality separate and distinct from those of the persons composing
it.
o It is basic that a corporation is invested by law with a personality separate and distinct
from those of the persons composing it as well as from that of any other legal entity to
which it may be related.
Twin Ace/Tanduay Distillers and TDI are distinct and separate corporations.
o In fine, the fiction of separate and distinct corporate entities cannot, in the instant case,
be disregarded and brushed aside, there being not the least indication that the second
corporation is a dummy or serves as a client of the first corporate entity.
o Employees have not presented any proof as to communality of ownership and
management to support their contention that the two companies are one firm or closely
related. The doctrine of piercing the veil of corporate entity applies when the corporate
fiction is used to defeat public convenience, justify wrong, protect fraud, or defend crime
or where a corporation is the mere alter ego or business conduit of a person. To

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 disregard the separate juridical personality of a corporation, the wrong-doing must be
clearly and convincingly established. It cannot be presumed.

LAGUNA TRANSPORTATION vs SSS

GR L-14606 / 28 April 1960 / J. Barrera
Appeal from a Judgement of CFI Laguna

FACTS
SSS required Petitioner to register as a member and to remit the premiums and contributions
due from all the employees.
Bian Transportation Co., sold part of the lines and equipment it operates to Mercado et al.
After the sale, the vendees formed an unregistered partnership under the name of Laguna
Transportation Company which continued to operate the lines and equipment bought from
Bian Transpo in addition to the new lines it was able to secure from Public Service
Commission.
The original partners with 2 new members organized Laguna Transport Company. They
requested to be exempted from coverage by the System on the ground that it started operation
only on June 20, 1956 and registered w the SEC on Nov 11, 1957.
Petitioner filed a petition praying that an order be issued declaring that it is not bound to
register as a member of SSS and therefore, not required to pay the contributions required
under the Social Security Act.
SSS filed an answer praying for its dismissal due to petitioners failure to exhaust
administrative remedies and for a declaration that petitioner is covered by the said act since
the petitioners business has been in operation for at least 2 years prior to Sept 1, 1957.
Trial Court declared that the petitioner was an employer had been in actual operation for at
least 2 years, and hence, subject to compulsory coverage under the law.

ISSUE: WON Petitioner is covered by the SS Law YES.

DISPOSITIVE: Judgment is hereby Affirmed.

RATIO:
Although a corporation once formed is conferred a juridical personality separate and distinct
from the persons composing it, it is but a legal fiction introduced for purposes of convenience
and to subserve the ends of justice. The concept cannot be extended to a point beyond its
reasons and policy, and when invoked in support of an end subversive of this policy, will be
disregarded by the courts.
The weight of authority supports the view that where a corporation was formed by, and
consisted of members of a partnership whose business and property was conveyed and
transferred to the corporation for the purpose of continuing its business, in payment for which
corporate capital stock was issued, such corporation is presumed to have assumed
partnership debts, and is prima facie liable therefor.
The reason for the rule is that the members of the partnership may be said to have simply put
on a new coat, or taken on a corporate cloak, and the corporation is a mere continuation of the
partnership.

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MARVEL BUILDING CORP vs. DAVID
GR No. L-5081 / Feb 24 1954 / J. Labrador
Appeal from a judgment of the CFI Manila

FACTS
The Secretary of Finance recommended the collection of P3.5M from Maria Castro as was
profits taxes and the CIR seized various properties including three buildings that belong to
Marvel Building Corp.
Action was brought by the stockholders of the Marvel Building Corporation to enjoin the
Collector of Internal Revenue from selling at auction various properties registered in the name
of said corporation Maria is the president of said corporation.
CIR argued that the properties belong to Maria evidenced by endorsement in blank of the
shares of stock issued in the name of the other incorporators, and the possession thereof was
with Maria.
CFI ordered the release of said properties and enjoined CIR from selling the same. CIR
appealed

ISSUE: WON Maria is the owner of all the shares of stock of the Marvel Building Corp and the other
stockholders are mere dummies? - YES

DISPOSITIVE: Judgment appealed is reversed and the action filed by plaintiffs is dismissed.

RATIO
The veil of corporate fiction may be pierced when it is used as a shield to further an end
subversive of justice, or for purposes that could not have been intended by law that created it
or to defeat public convenience, justify wrong, protect fraud or defend crime or to perpetuate
fraud or confuse legitimate issues or to circumvent the law or perpetuate deception or as an
alter ego, adjunct or business conduit for the sole benefit of the stockholders.
The fact that certificates in possession of Castro were indorsed in blank, Castro had enormous
profits and had motive to hide them, other subscribers had no incomes, and directors never
met shows that other shareholders may be considered as dummies of Castro. Hence,
corporate veil may be pierced.
other stockholders did not have incomes in such amounts, during the time of the organization
of the corporation in 1947, or immediately thereto, as to enable them to pay in full for their
supposed subscriptions.
Moreover, the failure on the part of the plaintiffs to prove that the shareholders are not
dummies of Maria B. Castro is significant. -The non-production of evidence that would naturally
have been produced by an honest and therefore fearless claimant permits the inference that its
tenor is unfavorable to the party's cause.

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PALACIO vs. FELY TRANSPORTATION COMPANY
GR No. L-15121 / August 31 1962 / J. Regala
Appeal from a decision of CFI Manila

FACTS
The child of the plaintiff was run over by a car that was driven by Alfredo Carillo, the driver of
the defendant company. The child was under treatment for 5 months and the plaintiff
abandoned his shop and was forced to sell his welding equipment.
CFI Quezon City tried the Criminal case against the driver and found the driver guilty of the
crime charged and was sentenced to suffer imprisonment of 2 months and pay the victim
P500. (Isabelo wasnt able to pay because of insolvency)
The jeep was sold to Fely Transportation after the conviction and after the driver served his
sentence.
Plaintiffs filed this action contending that the corporation should be made subsidiarily liable for
damages in the criminal case because the sale of the jeep was merely an attempt on the part
of Isabelo Calingasan, president and GM, to evade his subsidiary liability.
The defendant company filed a MTD on the grounds that 1) there was no cause of action, COA
was barred by prior judgment.
CFI Manila held that the action is barred by the judgment in the criminal case and that under
the RPC, the person subsidiarily liable is Isabel Calingasan, the employer and not the
defendant corporation

ISSUE: WON the corporation may be held subsidiarily liable? YES.

DISPOSITIVE: the decision of the lower court is hereby reversed and defendants Fely Transportation
and Isabelo Galingasan are ordered to pay, jointly and severally, the plaintiffs the amount of P500.00

RATIO
The Court agrees with this contention of the plaintiffs. Isabelo Calingasan and defendant Fely
Transportation may be regarded as one and the same person. It is evident that Isabelo
Calingasan's main purpose in forming the corporation was to evade his subsidiary civil liability
resulting from the conviction of his driver, Alfredo Carillo.
this is one case where the defendant corporation should not be heard to say that it has a
personality separate and distinct from its members when to allow it to do so would be to
sanction the use of the fiction of corporate entity as a shield to further an end subversive of
justice.
while it is true that Isabelo Calingasan is not a party in this case, this Court can substitute him
in place of the defendant corporation as to the real party in interest.

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TAN BOON BEE & CO., INC vs. JARENCIO
GR No. L-41337 / June 30 1988 / J. Paras
Petition for certiorari to review the order of CFI Manila

FACTS
Petitioner was doing business under the name of Anchor Supply Co., sold credit to Graphic
Publishing paper products amounting to P55,214.73.
Graphic made partial payment by check (P24,848.74) and executed a promissory note to
cover the balance. The note stipulated that the amount will be paid on monthly installments
and that failure to pay any installment would make the amount immediately demandable with
an interest of 12% per annum.
Graphic failed to pay the installment so petitioner filed a collection case.
CFI Manila declared graphic in default for failure to file an answer within the reglementary
period so plaintiff was allowed to present evidence ex parte.
CFI Manila ordered Graphic to pay petitioner. A writ of execution was issued but the same
expired without the sheriff finding any property of Graphic so an Alias Writ of Execution was
issued.
Acting on the said alias writ of execution, the sheriff levied on a printing machine found in the
premises of Graphic. Said machine was scheduled for auction sale but the herein Private
Respondent, PADCO Ph American Drug Company, informed the sheriff that the said
machine is its property and not Graphics and advised the latter to cease and desist from
carrying out the scheduled auction.
Sheriff proceeded with the auction and sold the property to the petitioner.
PADCO filed an affidavit of third party claim and a motion to nullify the sale on execution.
The Judge ruled in favor of PADCO. Petitioner filed an MR and it was denied.
Petitioner filed the instant petition contending that the judge gravely abused its discretion when
he refused to pierce Padcos identity despite the abundance of evidence clearly showing that
PADCO was conveniently shielding under the theory of corporate fiction.

ISSUE: WON the veil of corporate fiction may be pierced in this case? YES.

DISPOSITIVE: Order of the CFI Manila is annulled and set aside and the TRO issued is hereby made
permanent.

RATIO
The separate personality of the corporation may be disregarded, or the veil of corporate fiction
pierced, in cases where it used as a cloak or cover for fraud or illegality, or to work an injustice,
or where necessary to achieve equity or when necessary for the protection of creditors.
Corporations are composed of natural persons and the legal fiction of a separate corporate
personality is not a shield for the commission of injustice and inequity. Likewise, this is true
when the corporation is merely an adjunct, business conduit, or alter ego of another
corporation.
The evidence established that PADCO was never engaged in the printing business and that
the Board of Directors of PADCO and GRAPHIC are the same. PADCO also holds 50% of the
shares of stock of Graphic.
The printing machine had been in the possession of Graphic long before PADCO even
acquired title. Hence, PADCOs claim is not only farce and sham but also unbelievable.

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PNB vs RITRATTO GROUP, INC.
GR No. 142616 / July 31, 2001 / J. Kapunan
Petition for review on certiorari of a decision of the CA

FACTS
PNB International Finance, the subsidiary company of PNB, extended a letter of credit in favor
of the respondents secured by a Real Estate Mortgage constituted over four parcels of land in
Makati.
Respondents made repayments of a loan incurred by remitting those amounts to their loan
account with PNB-IFL.
Respondents outstanding obligation stood at almost $1.5M and pursuant to the terms of the
REM, PNB-IFL notified the respondents of the foreclosure of the REM and that the properties
subject thereof were to be sold at auction.
Respondents filed a complaint for injunction with a prayer for TRO before RTC of Makati.
TC issued an order for the issuance of the writ.
Petitioner assailed the issuance of the writ and filed a petition for certiorari.
CA: Dismissed the petition for certiorari.
Petitioner filed this case praying that the TCs orders be set aside and the dismissal of the
complaint in the instant case.
Respondents argue that even assuming arguendo that PNB and PNB-IFL are two separate
entities, PNB is still the party-in-interest in the application of the injunction because it is tasked
to commit acts of foreclosing respondents properties and that the entire credit facility is void as
it contains stipulations in violation of the principle of mutuality of contracts. Respondent also
justified the act of the court in piercing the veil of corporate identity b stating that PNB is an
alter ego of PNB-IFL.

ISSUE: WON PNB is an alter ego of PNB-IFL? NO.

DISPOSITIVE: Petition is hereby granted. The decision of the CA is hereby Reversed. Orders of the
RTC of Makati are hereby annulled and set aside.

RATIO:
The mere fact that a corporation owns all of the stocks of another corporation, taken alone is
not sufficient to justify their being treated as one entity.
The courts may in the exercise of judicial discretion step in to prevent the abuses of separate
entity privilege and pierce the veil of corporate entity.
Test in determining applicability of the doctrine of piercing the veil of corporate fiction:
1. Complete Domination 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
3. The aforesaid control and breach of duty must approximately cause the injury or unjust
loss complained of.
Absence of any one of these elements prevents piercing the corporate veil. The
courts are concerned with the reality and not the form with how the corporation
operated and the individual defendants relationship to the operation.

Case Digests - dlpsanty

JARDINE DAVIES, INC. vs. JRB REALTY, INC.
GR No. 151438 / July 15 2005 / J. Callejo, Sr.
Petition for review on certiorari of the decision and resolution of the CA

FACTS
JRB built a nine-storey building named Blanco Center on its parcel of land in Makati. An aircon
system was needed for the Blanco law Firm housed at the 2 nd floor of the building.
Respondents VP accepted the contract of AG Morrison, President of Aircon and Refrigeration
Industries. The (Fedders) aircon was installed however, they could not deliver the desired
cooling temperature so the parties agreed to replace the units but they could not specify a date
when the delivery could be effected.
TempControl Systems undertook the maintenance of the units.
Respondent asked Maxim, the new exclusive licensee of Fedders Air, to honor the obligation of
Aircon but Maxim refused.
Respondent instituted an action for specific performance with damages against Aircon
Industries, Fedders Air Conditioning, Maxim Industrial, and Jardine Davies.
Aircon ceased operations and its corporate life ended. So the court did not acquire jurisdiction
over it.
RTC held that Maxim and Merchandising corp are solidarily liable to deliver and install and
place into operation the two brand new units if Fedders Aircon Units and reimburse plaintiff of
P500k for the unsaved electricity bill and repair costs
Petitioner filed an appeal with the CA alleging that the trial court erred in holding it liable
because it was not a party to the contract between JRB and Aircon and it had a personality
distinct and separate from that of Aircon.

ISSUE: WON Jardine Davis is a party to contract between JRB and Aircon? NO.

DISPOSITIVE: Petition is granted. Assailed decision of the CA affirming RTC is reversed and set
aside.

RATIO
A subsidiary has an independent and separate juridical personality, distinct from that of its
parent company, hence, any claim or suit against the latter does not bind the former and vice
versa.
Although Aircon is a subsidiary of the petitioner, it does not follow that Aircons corporate legal
existence can just be disregarded.
The 3 requisites must be established before the corporate veil may be pierced.

Case Digests - dlpsanty

MC CONNEL vs. CA
GR No. L-10510 / March 17 1961 / J. Reyes
Review by Certiorari of a decision of the CA

FACTS
CA found that the Park Rite Co., leased from Rafael Perez Rosales y Samanillo a vacant lot in
San Juan which it used for parking motor vehicles for a consideration.
It turned out that the corporation occupied and used not only that Samanillo lot it had leased
but also an adjacent lot belonging to the Padillas, without the latters consent and knowledge.
Padillas demanded for payment for the use and occupation of the lot.
Corporation disclaimed liability blaming the original incorporators.
The Padillas filed a forcible entry complaint against the corporation in the Municipal Court of
Manila.
The Municipal Court ordered the corporation to pay but upon execution, the corporation was
found without any assets. The Padillas filed an application for judgment credit, and there was
still a balance left unsatisfied.
The judgment creditors filed a suit against the corporation and its past and present
stockholders to recover from them solidarily the unsatisfied balance of the judgment.
CFI denied recovery but on appeal, CA reversed the CFI decision finding that the corporation
was a mere alter ego or business conduit of the principal stockholders that controlled it for their
own benefit, and adjudged them responsible for the amounts.
The corporations (present and past incorporators) filed this present action

ISSUE: WON the stockholders can be held liable for obligations contracted by the corporation YES.

DISPOSITIVE: Finding no error from the judgment appealed from, the same is hereby affirmed.

RATIO:
Whenever the corporate entity is being used as an alter ego or business conduit for the sole
benefit of the stockholders, or to defeat crime, the individual stockholders may be held liable
for the obligations contracted by the corporation.
Evidence shows that these persons completely dominated and controlled the corporation and
that the functions of the corporation were merely for their benefits.
The corporation was a mere extension of their personality is shown by the fact that the office of
Paredes and that of Park Rite Co., Inc. Were located in the same building and in the same
floor and in the same room.
The funds of the corporation were kept in his own name. the corporation itself had no visible
assets.
The operations of the corporation were so merged with those of the stockholders as to be
practically indistinguishable from them.

Case Digests - dlpsanty

LA CAMPANA COFFEE FACTORY, INC. vs. KAISAHAN NG MGA MANGGAGAWA
GR No. L-5677 / May 25, 1953 / J. Reyes
Petition for review by certiorari of a decision of the Court of Industrial Relations

FACTS
Tan Tong, one of the petitioners herein, has been engaged in the business of buying and
selling gaugau under the tradename of La Campana Gaugau Packing with an establishment in
Binondo which was later on transferred in Espaa. But Tan Tong organized a family
corporation known as La Campana Coffee Factory, Inc., with its principal office located in the
same place as that of La Campana Gaugau Packing.
Tan Tong entered into a CBA with PLOW to which the union of Tan Tongs employees headed
was then affiliated. Later on, Tan Tongs employees formed their own organization Sa La
Campana Kaisahan ng Mga Maggagawa.
Sa La Campana Kaisahan ng Mga Maggagawa., one of the respondents herein, applied for
registration in the DOLE as an independent entity. Pending consideration of this application,
DOLE gave the new organization legal standing by issuing it a permit as an affiliate to the
Kalipunan Ng Mga Kaisahang Manggagawa.
Sa La Campana Kaisahan ng Mga Maggagawa, workers from La Campana Gaugau and the
Coffee Factory, presented a demand for higher wages and more privileges, the demand being
addressed to La Campana Gaugau and Coffee FActory,
Demand was not granted by the corporations so DOLE certified the dispute to the court of
industrial relations.
The Secretary of Labor revoked the Kalipinan ng Mga Kaisahang Manggagawas permit as a
labor union because it was dominated by subversive elements.
The corporations and the PLOW filed separate motions for the dismissal of the case
MR Denied

ISSUE: WON the Coffee Factory and the Gaugau Factory are one and the same? YES.

DISPOSITIVE: Petition is denied.

RATIO:
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. Although the coffee factory is a corporation and, by legal fiction, an entity existing
separate and apart from the persons composing it, that is, Tan Tong and his family, it is settled
that this fiction of law, which has been introduced as a matter of convenience and to subserve
the ends of justice cannot be invoked to further an end subversive of that purpose.

Case Digests - dlpsanty

PAMPLONA PLANTATION COMPANY, INC. vs. TINGHIL
GR No. 159121 / Feb 3 2005 / J. Panganiban
Petition for review on certiorari of the decision and resolution of the CA

FACTS
Petitioner corporation was organized for the purpose of taking over the operations of the
coconut and sugar plantations of Hacienda Pamplona. It appears that Hacienda Pamplona
was formerly owned by a certain Mr. Bower who had in his employ several agricultural
workers.
When the company took over the operation of Hacienda Pamplona it did not absorb all the
workers of Hacienda Pamplona.
Pamplona Plantation Leisure Corporation was established for the purpose of engaging in
the business of operating tourists resorts, hotels, and inns, with complementary facilities.
The Union conducted an organizational meeting wherein several respondents who are either
union members or officers participated
The Manager of the company found out about the meeting and did not anymore allow
respondents to work anymore in the plantation.
The respondents filed their respective complaints in the NLRC for unfair labor practice, illegal
dismissal, and underpayment.
One of the respondents amended his complaint to include Pamplona Plantation Leisure
Corporation.
Labor Arbiter found that some of the respondents were entitled to separation pay
NLRC reversed the LA saying that, except Tinghil, they failed to implead Pamplona Plantation
Leisure Corporation, an indispensable party and that there exist no employer-employee
relation between the parties.
CA ruled that the dismissal was illegal and that the employees, although paid by piecework,
are still regular employees because the tasks they performed were necessary and
indispensable to the operation of the company.
Petitioners herein contend that the CA should have dismissed the case for failure of the
respondents to implead the Pamplona Plantation Leisure Company, an indispensable party, for
being the true and real employer

ISSUE
WON the case should be dismissed for failure to implead Pamplona Plantation Leisure
Corporation, true and real employer? NO.

DISPOSITIVE: Petition is denied and the assailed decision is affirmed.

RATIO
The corporations have basically the same incorporators, and directors and are headed by the
same official. Both use only one office and one payroll and are under one management.
The attempt to make the two corporations appear as two separate entities, should be viewed
as a devious but obvious means to defeat the ends of the law.

Case Digests - dlpsanty