ROVELS ENTERPRISE, Inc. vs OCAMPO
Consequently, the issuance of shares of stock to
FACTS:
> Rovels is a domestic corporation engaged in construction work wherein
Tagaytay Taal Tourist Development Corporation (TTTDC) was among its
client.
> In payment for the services rendered by Rovels, the Board of Directors of
TTTDC passed a Resolution on December 29, 1975 providing as follows:
RESOLVED, as it is hereby resolved that payment for professional fees and
services rendered by x x x Rovels Enterprises x x x be made in cash if funds
are available, or its equivalent number of shares of stock of the corporation
at par value, and should said creditors elect the latter mode of payment, it is
further resolved that the President and/or his Secretary be authorized as
they are hereby authorized, to issue the corresponding unissued shares of
stock of the corporation.
> Resolution was signed by three of TTTDCs directors, but the signatures of
the other two (2) TTTDC directors Jose Silva, Jr. and Emmanuel Ocampo do
not appear in the subject Resolution despite their presence in the December
29, 1975 Board meeting.
> On March 1, 1976, the TTTDC Board of Directors passed another
Resolution repealing its Resolution of December 29, 1975, thus:
RESOLVED, as it is hereby resolved, that the Resolution of December 29,
1975 authorizing the payment of creditors with unissued shares of the
corporation be as it is hereby repealed: Resolved further that the matter as
well as the amount of the creditors claims be given adequate study and
consideration by the Board.
> In view of the December 29, 1975 TTTDC Board Resolution transferring to
Rovels the said shares of stock as construction fee, TTTDC Directors Jose
Silva, Jr. and Emmanuel Ocampo filed a complaint with the SEC against
Roberto Roxas, TTTDC President, and Eduardo Santos, Rovels President
allegeing that there was no meeting of the TTTDCs Board of Directors on
December 29, 1975; that they did not authorize the transfer of TTTDCs
shares of stock to Rovels; that they never signed the alleged minutes of the
meeting; and that the signatures of the other two (2) Directors, Victoriano
Leviste and Bienvenido Cruz, Jr., as well as that of TTTDCs Secretary
Francisco Carreon, Jr., were obtained through fraud and misrepresentation.
They also alleged that the TTTDC Board Resolution dated December 29,
1975 was repealed by the March 1, 1976 Resolution. They thus prayed that
the transfer of TTTDCs shares of stock to Rovels pursuant to Resolution
dated December 29, 1975 be annulled.
> Commission finds and so holds that the purported board resolution of
December 29, 1975, not having been properly passed upon at a duly
constituted board meeting, cannot be recognized as valid and hence, without
legal force and effect.
corporate creditors of the Tagaytay Taal Tourist Development Corporation is
null and void.
> Subsequently, TTTDC, Jose Silva, Emmanuel Ocampo, et. al., and
another stockholder of TTTDC, (the SILVA GROUP, now respondents), filed
with the SEC a petition against the SANTOS GROUP who were nominees of
Rovels by virtue of the shares of stock issued pursuant to the December 29,
1975 Resolution, proceeded to act as directors and officers of TTTDC. In
their petition, the SILVA GROUP prayed that they be declared the true and
lawful stockholders and incumbent directors and officers of TTTDC.
> SEC Hearing Officer rendered a Decision in favor of the SILVA GROUP
and the decision became final and executory as no appeal was interposed
by either the SILVA GROUP or the SANTOS GROUP.
> However, Rovels, to whom the TTTDC shares of stock (worth
P108,000.00) were transferred, claimed that it be declared the majority
stockholder of TTTDC as against SILVA GROUP.
ISSUE:
Whether or not ROVELS (corporation) can be bound by the
decision of SEC and the court represented by its corporate officers?
RULING:
YES. A reading of the above petition shows that Rovels prayer to
be declared the majority stockholder of TTTDC is anchored on the
December 29, 1975 TTTDC Board Resolution transferring its shares of stock
to Rovels as construction fee. This Resolution could have vested in Rovels a
right to be declared a stockholder of TTTDC. However, the same petition
concedes that the December 29, 1975 Resolution was repealed by the
March 1, 1976 Resolution. The petition likewise alleges that there were prior
interrelated cases filed with the SEC between the SILVA and SANTOS
GROUPS, namely: (1) SEC Case No. 1322 (wherein the SEC en banc in its
Decision dated September 2, 1982 nullified the TTTDC Board Resolution
dated December 29, 1975, which Decision was affirmed with finality by this
Court in G.R. No. 61863) and (2) SEC Case No. 3806 (wherein the SEC
declared the SILVA GROUP as the legitimate stockholders of TTTDC, not
Rovels nominees [the SANTOS GROUP]). Clearly, on the face of its petition,
Rovels cannot claim to be the majority stockholder of TTTDC.
Relative to the second assigned error, Rovels contends that it is not bound
by the SEC Decision in SEC Case Nos. 1322 and 3806 and in G.R. No.
61863 as it was never a party in any of these cases.
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Contrary to its claim, Rovels is bound by the previous SEC Decisions. It
must be noted that Eduardo Santos, President of Rovels, was one of the
respondents in both SEC Case Nos. 1322 and 3806. Clearly, Rovels and
Eduardo Santos, being its President, share an identity of interests sufficient
to make them privies-in-law, as correctly found by the Court of Appeals in its
assailed Decision.
In the case at bench, there can be no question that the rights claimed by
petitioner and its stockholders/directors/officers who were parties in SEC
Case Nos. 1322 and 3806 are identical in that they are both based on the
December 29, 1975 Resolution. Stated differently, they shared an identity of
interest from which flowed an identity of relief sought, namely, to be declared
owners of the stocks of TTTDC, premised on the same December 29, 1975
Resolution. x x x. This identity of interest is sufficient to make them privies-
in-law, one to the other, and meets the requisite of substantial identity of
parties.
Rovels cannot take refuge in the argument that, as a corporation, it is
imbued with personality separate and distinct from that of the respondents in
SEC Case Nos. 1322 and 3806. The legal fiction of separate corporate
existence is not at all times invincible and the same may be pierced when
employed as a means to perpetrate a fraud, confuse legitimate issues, or
used as a vehicle to promote unfair objectives or to shield an otherwise
blatant violation of the prohibition against forum-shopping. While it is settled
that the piercing of the corporate veil has to be done with caution, this
corporate fiction may be disregarded when necessary in the interest of
justice.
UMALI vs CA
FACTS:
> Plaintiff Santiago Rivera is the nephew of plaintiff Mauricia Meer Vda. de
Castillo. The Castillo family are the owners of a parcel of land was given as
security for a loan from the Development Bank of the Philippines.
> For their failure to pay the amortization, foreclosure of the said property
was about to be initiated. This problem was made known to Santiago Rivera,
who proposed to them the conversion into subdivision of the four (4) parcels
of land adjacent to the mortgaged property to raise the necessary fund. The
Idea was accepted by the Castillo family and to carry out the project, a
Memorandum of Agreement was executed by and between Slobec Realty
and Development, Inc., represented by its President Santiago Rivera and the
Castillo family.
> In this agreement, Santiago Rivera obliged himself to pay the Castillo
family the sum of P70,000.00 immediately after the execution of the
agreement and to pay the additional amount of P400,000.00 after the
property has been converted into a subdivision. Rivera, armed with the
agreement, approached Mr. Modesto Cervantes, President of defendant
Bormaheco, and proposed to purchase from Bormaheco two (2) tractors.
> Slobec, through Rivera, executed in favor of Bormaheco a Chattel
Mortgage over the said equipment as security for the payment of the
aforesaid balance.
> As further security of the aforementioned unpaid balance, Slobec obtained
from Insurance Corporation of the Phil. a Surety Bond, with ICP (Insurance
Corporation of the Phil.) as surety and Slobec as principal, in favor of
Bormaheco.
> The aforesaid surety bond was in turn secured by an Agreement of
Counter-Guaranty with Real Estate Mortgage executed by Rivera as
president of Slobec and the Catillos.
> For violation of the terms and conditions of the Counter-Guaranty
Agreement, the properties of the Castillos were foreclosed by ICP As the
highest bidder.
> Insurance Corporation of the Phil. ICP sold to Phil. Machinery Parts
Manufacturing Co. (PM Parts) the four (4) parcels of land and by virtue of
said conveyance, PM Parts transferred unto itself the titles over the lots in
dispute so that said parcels of land.
> PM Parts, through its President, Mr. Modesto Cervantes, sent a letter
addressed to plaintiff Mrs. Mauricia Meer Castillo requesting her and her
children to vacate the subject property but the Castillo refused to comply with
the demands.
> The heirs of the late Felipe Castillo, particularly plaintiff Buenaflor M.
Castillo Umali as the appointed administratrix of the properties in question
filed an action for annulment of title for being void and entered into in fraud
and without the consent and approval.
> Judgment is hereby rendered in favor of the plaintiffs and against the
defendants, but was reversed by CA.
ISSUE:
Whether or not the veil of corporate entity must be pierced?
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RULING:
NO. Neither will an allegation of fraud prosper in this case where
petitioners failed to show that they were induced to enter into a contract
through the insidious words and machinations of private respondents without
which the former would not have executed such contract. To set aside a
document solemnly executed and voluntarily delivered, the proof of fraud
must be clear and convincing. We are not persuaded that such quantum of
proof exists in the case at bar.
Under the doctrine of piercing the veil of corporate entity, when valid grounds
therefore exist, the legal fiction that a corporation is an entity with a juridical
personality separate and distinct from its members or stockholders may be
disregarded. In such cases, the corporation will be considered as a mere
association of persons. The members or stockholders of the corporation will
be considered as the corporation, that is, liability will attach directly to the
officers and stockholders. The doctrine applies when the 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.
In the case at bar, petitioners seek to pierce the V621 Of corporate entity of
Bormaheco, ICP and PM Parts, alleging that these corporations employed
fraud in causing the foreclosure and subsequent sale of the real properties
belonging to petitioners While we do not discount the possibility of the
existence of fraud in the foreclosure proceeding, neither are we inclined to
apply the doctrine invoked by petitioners in granting the relief sought. It is our
considered opinion that piercing the veil of corporate entity is not the proper
remedy in order that the foreclosure proceeding may be declared a nullity
under the circumstances obtaining in the legal case at bar.
In the first place, the legal corporate entity is disregarded only if it is sought
to hold the officers and stockholders directly liable for a corporate debt or
obligation. In the instant case, petitioners do not seek to impose a claim
against the individual members of the three corporations involved; on the
contrary, it is these corporations which desire to enforce an alleged right
against petitioners. Assuming that petitioners were indeed defrauded by
private respondents in the foreclosure of the mortgaged properties, this fact
alone is not, under the circumstances, sufficient to justify the piercing of the
corporate fiction, since petitioners do not intend to hold the officers and/or
members of respondent corporations personally liable therefor. Petitioners
are merely seeking the declaration of the nullity of the foreclosure sale,
which relief may be obtained without having to disregard the aforesaid
corporate fiction attaching to respondent corporations. Secondly, petitioners
failed to establish by clear and convincing evidence that private respondents
were purposely formed and operated, and thereafter transacted with
petitioners, with the sole intention of defrauding the latter.
The mere fact, therefore, that the businesses of two or more corporations
are interrelated is not a justification for disregarding their separate
personalities, absent sufficient showing that the corporate entity was
purposely used as a shield to defraud creditors and third persons of their
rights.
We have stated earlier that the doctrine of piercing the veil of corporate
fiction is not applicable in this case. However, its inapplicability has no
bearing on the good faith or bad faith of private respondent PM Parts. It must
be noted that Modesto N. Cervantes served as Vice-President of Bormaheco
and, later, as President of PM Parts. On this fact alone, it cannot be said that
PM Parts had no knowledge of the aforesaid several transactions executed
between Bormaheco and petitioners. In addition, Atty. Martin de Guzman,
who is the Executive Vice-President of Bormaheco, was also the legal
counsel of ICP and PM Parts. These facts were admitted without
qualification in the stipulation of facts submitted by the parties before the trial
court. Hence, the defense of good faith may not be resorted to by private
respondent PM Parts which is charged with knowledge of the true relations
existing between Bormaheco, ICP and herein petitioners. Accordingly, the
transfer certificates of title issued in its name, as well as the certificate of
sale, must be declared null and void since they cannot be considered
altogether free of the taint of bad faith.
INDOPHIL TEXTILE MILL WORKERS UNION-PTGWO
vs CALICA
FACTS:
> Petitioner Indophil Textile Mill Workers Union-PTGWO is a legitimate labor
organization duly registered with the Department of Labor and Employment
and the exclusive bargaining agent of all the rank-and-file employees of
Indophil Textile Mills, Incorporated.
> Respondent Teodorico P. Calica is impleaded in his official capacity as the
Voluntary Arbitrator.
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> Private respondent Indophil Textile Mills, Inc. is a corporation engaged in
the manufacture, sale and export of yarns of various counts and kinds and of
materials of kindred character.
> Petitioner Indophil Textile Mill Workers Union-PTGWO and private
respondent Indophil Textile Mills, Inc. executed a collective bargaining
agreement.
> Indophil Acrylic Manufacturing Corporation was formed and registered with
the SEC, became operational and hired workers according to its own criteria
and standards. The workers of Acrylic unionized and a duly certified
collective bargaining agreement was executed.
> A year after the workers of Acrylic have been unionized and a CBA
executed, the petitioner union claimed that the plant facilities built and set up
by Acrylic should be considered as an extension or expansion of the facilities
of private respondent Company.
> Calica (VA) ruled that CBA do not extend to the employees of Acrylic as an
extension or expansion of Indophil Textile Mills, Inc.
> Petitioner stresses that the articles of incorporation of the two corporations
establish that the two entities are engaged in the same kind of business,
which is the manufacture and sale of yarns of various counts and kinds and
of other materials of kindred character or nature.
ISSUE:
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.
In the case at bar, petitioner seeks to pierce the veil of corporate entity of
Acrylic, alleging that the creation of the corporation is a devise to evade the
application of the CBA between petitioner Union and private respondent
Company. While we do not discount the possibility of the similarities of the
businesses of private respondent and Acrylic, neither are we inclined to
apply the doctrine invoked by petitioner in granting the relief sought. 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 auxiliary 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.
In the same case of Umali, et al. v. Court of Appeals, We already
emphasized that "the legal corporate entity is disregarded only if it is sought
to hold the officers and stockholders directly liable for a corporate debt or
obligation." In the instant case, petitioner does not seek to impose a claim
against the members of the Acrylic.

Whether or not Acrylic is a separate and distinct entity from Indophil

for purposes of union representation? WON the operations in Acrylic are an
extension or expansion of Indophil?

RULING:

NO. Under the doctrine of piercing the veil of corporate entity, when
valid grounds therefore exist, the legal fiction that a corporation is an entity
with a juridical personality separate and distinct from its members or
stockholders may be disregarded. In such cases, the corporation will be
considered as a mere association of persons. The members or stockholders
of the corporation will be considered as the corporation, that is liability will
attach directly to the officers and stockholders. The doctrine applies when
the 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

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ROBLEDO vs NLRC
FACTS:
> Petitioners were former employees of Bacani Security and Protective
Agency (BSPA). They were employed as security guards.
> BSPA was a single proprietorship owned, managed and operated by the
late Felipe Bacani.
> On December 31, 1989, Felipe Bacani retired the business name and
BSPA ceased to operate and at that time, respondent Alicia Bacani,
daughter of Felipe Bacani, was BSPA's Executive Directress.
> Earlier, on October 26, 1989, respondent Bacani Security and Allied
Services Co., Inc. (BASEC) had been organized and registered as a
corporation with the Securities and Exchange Commission with Felipe
Bacani, his daughter.. et.al. as incorporators which primary purpose of the
corporation was to "engage in the business of providing security" to persons
and entities. This was the same line of business that BSPA was engaged in.
Most of the petitioners, after losing their jobs in BSPA, were employed in
BASEC.
> some of the petitioners filed a complaint with 
 the DOLE for
underpayment of wages and nonpayment of overtime pay, legal holiday pay,
separation pay and/or retirement/resignation benefits… BSPA and BASEC
were made respondents.
> Labor Arbiter rendered a decision upholding the right of the petitioners.
NLRC reversed.
ISSUE:
Whether or not the corporate fiction must be disregarded in this
case?
RULING:
NO. Petitioners contend that public respondent erred in setting
aside the Labor Arbiter's judgment on the ground that BASEC is the same
entity as BSPA the latter being owned and controlled by one and the same
family, namely the Bacani family. For this reason they urge that the
corporate fiction should be disregarded and BASEC should be held liable for
the obligations of the defunct BSPA.
As correctly found by the NLRC, BASEC is an entity separate and distinct
from that of BSPA. BSPA is a single proprietorship owned and operated by
Felipe Bacani. Hence its debts and obligations were the personal obligations
of its owner. Petitioners' claim which are based on these debts and personal
obligations, did not survive the death of Felipe Bacani on January 15, 1990
and should have been filed instead in the intestate proceedings involving his
estate.
Indeed, the rule is settled that unless expressly assumed labor contracts are
not enforceable against the transferee of an enterprise. The reason for this is
that labor contracts are in personam. Consequently, it has been held that
claims for backwages earned from the former employer cannot be filed
against the new owners of an enterprise. Nor is the new operator of a
business liable for claims for retirement pay of employees.
Petitioners claim, however, that BSPA was intentionally retired in order to
allow expansion of its business and even perhaps an increase in its
capitalization for credit purpose. According to them, the Bacani family merely
continued the operation of BSPA by creating BASEC in order to avoid the
obligations of the former. Petitioners anchor their claim on the fact that
Felipe Bacani, after having ceased to operate BSPA, became an
incorporator of BASEC together with his wife and daughter. Petitioners urge
piercing the veil of corporate entity in order to hold BASEC liable for BSPA's
obligations.
The doctrine of piercing the veil of corporate entity is used whenever a court
finds that the corporate fiction is being used to defeat public convenience,
justify wrong, protect fraud, or defend crime, or to confuse legitimate issues,
or that 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. It is apparent, therefore, that the doctrine has
no application to this case where the purpose is not to hold the individual
stockholders liable for the obligations of the corporation but, on the contrary,
to hold the corporation liable for the obligations of a stockholder or
stockholders. Piercing the veil of corporate entity means looking through the
corporate form to the individual stockholders composing it. Here there is no
reason to pierce the veil of corporate entity because there is no question that
petitioners' claims, assuming them to be valid, are the personal liability of the
late Felipe Bacani. It is immaterial that he was also a stockholder of BASEC.
Indeed, the doctrine is stood on its head when what is sought is to make a
corporation liable for the obligations of a stockholder. But there are several
reasons why BASEC is not liable for the personal obligations of Felipe
Bacani. For one, BASEC came into existence before BSPA was retired as a
business concern. BASEC was incorporated on October 26, 1989 and its
license to operate was released on May 28, 1990, while BSPA ceased to
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operate on December 31, 1989. Before, BSPA was retired, BASEC was
already existing. It is, therefore, not true that BASEC is a mere continuity of
BSPA.
Second, Felipe Bacani was only one of the five (5) incorporators of BASEC.
He owned the least number of shares in BASEC, which included among its
incorporators persons who are not members of his family. That his wife Lydia
and daughter Alicia were also incorporators of the same company is not
sufficient to warrant the conclusion that they hold their shares in his behalf.
Third, there is no evidence to show that the assets of BSPA were transferred
to BASEC. If BASEC was a mere continuation of BSPA, all or at least a
substantial part of the latter's assets should have found their way to BASEC.
Neither can respondent Alicia Bacani be held liable for BSPA's obligations.
Although she was Executive Directress of BSPA, she was merely an
employee of the BSPA, which was a single proprietorship.
Now, the claims of petitioners are actually money claims against the estate
of Felipe Bacani. They must be filed against his estate in accordance with
Sec. 5 of Rule 86 of ROC.
FRANCISCO MOTORS CORPORATION vs CA
FACTS:
> Petitioner filed a complaint against private respondents to recover sum of
money representing the balance of the jeep body purchased by the Manuels
from petitioner.
> In their answer, private respondents interposed a counterclaim for unpaid
legal services by Gregorio Manuel which was not paid by the incorporators,
directors and officers of the petitioner.
> The trial court decided the case in favor of petitioner in regard to the
petitioners claim for money, but also allowed the counter-claim of private
respondents.
> CA ruled that evidence shows that the plaintiff-appellant Francisco Motors
Corporation is composed of the heirs of the late Benita Trinidad as directors
and incorporators for whom defendant Gregorio Manuel rendered legal
services in the intestate estate case of their deceased mother. Equity and
justice demands plaintiff-appellants veil of corporate identity should be
pierced and the defendant be compensated for legal services rendered to
the heirs, who are directors of the plaintiff-appellant corporation.
ISSUE:
Whether or not CA erred in piercing the corporate veil?
RULING:
NO. Petitioner submits that respondent court should not have
resorted to piercing the veil of corporate fiction because the transaction
concerned only respondent Gregorio Manuel and the heirs of the late Benita
Trinidad. According to petitioner, there was no cause of action by said
respondent against petitioner; personal concerns of the heirs should be
distinguished from those involving corporate affairs. Petitioner further
contends that the present case does not fall among the instances wherein
the courts may look beyond the distinct personality of a corporation.
According to petitioner, the services for which respondent Gregorio Manuel
seeks to collect fees from petitioner are personal in nature. Hence, it avers
the heirs should have been sued in their personal capacity, and not involve
the corporation.
Basic in corporation law is the principle that a corporation has a separate
personality distinct from its stockholders and from other corporations to
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which it may be connected. However, under the doctrine of piercing the veil
of corporate entity, the corporations separate juridical personality may be
disregarded, for example, when the corporate identity is used to defeat
public convenience, justify wrong, protect fraud, or defend crime. Also,
where the corporation 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, then its distinct personality may be ignored.
In these circumstances, the courts will treat the corporation as a mere
aggrupation of persons and the liability will directly attach to them. The legal
fiction of a separate corporate personality in those cited instances, for
reasons of public policy and in the interest of justice, will be justifiably set
aside.

In our view, however, given the facts and circumstances of this case, the
doctrine of piercing the corporate veil has no relevant application here.
Respondent court erred in permitting the trial courts resort to this doctrine.
The rationale behind piercing a corporation’s identity in a given case is to
remove the barrier between the corporation from the persons comprising it to
thwart the fraudulent and illegal schemes of those who use the corporate
personality as a shield for undertaking certain proscribed activities. However,
in the case at bar, instead of holding certain individuals or persons
responsible for an alleged corporate act, the situation has been reversed. It
is the petitioner as a corporation which is being ordered to answer for the
personal liability of certain individual directors, officers and incorporators
concerned. Hence, it appears to us that the doctrine has been turned upside
down because of its erroneous invocation. Note that according to private
respondent Gregorio Manuel his services were solicited as counsel for
members of the Francisco family to represent them in the intestate
proceedings over Benita Trinidads estate. These estate proceedings did not
involve any business of petitioner.

The personality of the corporation and those of its incorporators, directors

and officers in their personal capacities ought to be kept separate in this
case. The claim for legal fees against the concerned individual incorporators,
officers and directors could not be properly directed against the corporation
without violating basic principles governing corporations.

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