TRADERS ROYAL BANK V.

CA
269 SCRA 15
FACTS:

Filriters through a Detached Agreement transferred ownership to Philfinance a

Central Bank Certificate of Indebtedness. It was only through one of its officers by
which the CBCI was conveyed without authorization
from the company. Petitioner and Philfinance later entered into a
Repurchase agreement, on which petitioner bought the CBCI from
Philfinance. The latter agreed to repurchase the CBCI but failed to do so. When the
petitioner tried to have it registered in its name in the CB, the latter didn't want to
recognize the transfer.

HELD:

The CBCI is not a negotiable instrument. The instrument provides for a promise
to pay the registered owner Filriters. Very clearly, the instrument
was only payable to Filriters. It lacked the words of negotiability which
should have served as an expression of the consent that the instrument may be
transferred by negotiation.

The language of negotiability which characterize a negotiable paper as a

credit instrument is its freedom to circulate as a substitute for money. Hence,
freedom of negotiability is the touchstone relating to the protection of holders in due
course, and the freedom of negotiability is the foundation
for the protection, which the law throws around a holder in due course. This
freedom in negotiability is totally absent in a certificate of
indebtedness as it merely acknowledges to pay a sum of money to a specified
person or entity for a period of time.

The transfer of the instrument from Philfinance to TRB was merely an

assignment, and is not governed by the negotiable instruments law. The
pertinent question then is—was the transfer of the CBCI from Filriters to
Philfinance and subsequently from Philfinance to TRB, in accord with existing law,
so as to entitle TRB to have the CBCI registered in its name
with the Central Bank? Clearly shown in the record is the fact that
Philfinance’s title over CBCI is defective since it acquired the instrument from
Filriters fictitiously. Although the deed of assignment stated that the
transfer was for ‘value received‘, there was really no consideration
involved. What happened was Philfinance merely borrowed CBCI from
Filriters, a sister corporation. Thus, for lack of any consideration, the assignment
made is a complete nullity. Furthermore, the transfer wasn't in
conformity with the regulations set by the CB. Giving more credence to rule that
there was no valid transfer or assignment to petitioner.

Umali vs Court of Appeals

189 SCRA 529 [GR No. 89561 September 13, 1990]

Facts: Plaintiff Santiago Rivera is the nephew of plaintiff Mauricia Mur Vda. de Castillo. The Castillo family are the
owners of parcel of land located in Lucena City which was given as security for a loan from the development Bank of
the Philippines (DBP) 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 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 Castillo family. In this agreement,
Santiago Rivera obliged himself to pay the Castillo family the sum of P70,000 immediately after the execution of the
agreement and to pay additional amount of P40,000 after the property has been converted into a subdivision. Rivera,
with agreement approached Mr. Modesto Cervantes, president of defendant Bormaheco and proposed to purchase
from Bormaheco two tractors model D7 and D8 subsequently a sales agreement was executed on December 28, 1970.
On January 3, 1971, Slobec, through Rivera, executed in favor of Bormaheco a chattel mortgage over the said
equipment as security for the payment of the aforesaid balance of P180,000. As further security of the aforementioned
unpaid balance, Slobec obtained from insurance corporation of the Philippines a security bond, with Insurance
Corporation of the Philippines (ICP) as surety and Slobec as principal, in favor of Bormaheco, as borne out of by
Exhibit 8. 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 Mauricia Mur Vda. de Castillo, Buenaflor Castillo Umali,
Bertilla Castillo-Rada, Victoria Castillo, Marietta Castillo and Leovina Castillo Jalbuena as mortgagors and insurance
corporation of the Philippines as mortgagee. In this agreement, ICP guaranteed the obligation of Slobec with
Bormaheco in the amount of P180,000. In giving the bond, ICP required that the Castillos mortgage to them the
properties in question, namely, four parcels of land covered by TCT in the name of the aforementioned mortgagors,
namely TCT no. 13114, 13115, 13116, and 13117 all of the Register of Deeds of Lucena City. Meanwhile, 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 with a bid of P285,212, a certificate of sale was issued by the provincial sheriff of Lucena City
and TCT over the subject parcels of land were issued.

Issue: Whether or not the foreclosure is proper so as to apply the doctrine of piercing the veil of corporate entity.

Held: No. Under the doctrine of piercing the veil of corporate entity, when valid grounds therefore exists, the legal
fiction that a corporation is an entity with a juridical personality separate and distinct from its members or stockholders
may be disregarded. 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, on 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 veil 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 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.

The mere fact, therefore, that the business 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.

Francisco Motors Corporation v. CA

and Sps. Manuel (G.R. No. 100812)
Date: June 4, 2016Author: jaicdn0 Comments

Facts:

Petitioner Francisco Motors Corp filed a complaint to recover from respondent spouses
Manuel the unpaid balance of the jeepney bought by the latter from them. As their answer,
respondent spouses interposed a counterclaim for unpaid legal services by Gregorio
Manuel which was not paid by petitioner corporation’s directors and officers. Respondent
Manuel alleges that he represented members of the Francisco family who were directors
and officers of herein petitioner corporation in an intestate estate proceeding but even after
its termination, his services were not paid. The trial court ruled in favor of petitioner but
also allowed respondent spouses’ counterclaim. CA affirmed.

Issue:
Whether or not petitioner corporation may be held liable for the liability incurred by its
directors and officers in their personal capacity.

Ruling: NO.

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 court’s resort to this doctrine.

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 Trinidad’s
estate. These estate proceedings did not involve any business of petitioner.

Furthermore, considering the nature of the legal services involved, whatever obligation
said incorporators, directors and officers of the corporation had incurred, it was incurred in
their personal capacity. When directors and officers of a corporation are unable to
compensate a party for a personal obligation, it is far-fetched to allege that the corporation
is perpetuating fraud or promoting injustice, and be thereby held liable therefore by
piercing its corporate veil.

BOYER – ROXAS VS. COURT OF APPEALS

211 SCRA 470 (1992)

FACTS OF THE CASE

When Eugenia V. Roxas died, her heirs formed a corporation under
the name and style of Heirs of Eugenia V. Roxas, Inc. using her
estate as the capital of the corporation, the private respondent
herein. It was primarily engaged in agriculture business, however it
amended its purpose to enable it to engage in resort and restaurant
business. Petitioners are stockholders of the corporation and two
of the heirs of Eugenia. By tolerance, they were allowed to occupy
some of the properties of the corporation as their residence.
However, the board of directors of the corporation passed a
resolution evicting the petitioners from the property of the
corporation because the same will be needed for expansion.
At the RTC, private respondent presented its evidence averring
that the subject premises are owned by the corporation. Petitioners
failed to present their evidence due to alleged negligence of their
counsel. RTC handed a decision in favor of private respondent.
Petitioners appealed to the Court of Appeals but the latter denied
the petition and affirmed the ruling of the RTC. Hence, they
appealed to the Supreme Court. In their appeal, petitioners argues
that the CA made a mistake in upholding the decision of the RTC,
and that their occupancy of the subject premises should be
respected because they own an aliquot part of the corporation as
stockholders, and that the veil of corporate fiction must be pierced
by virtue thereof.

ISSUE
1. Whether petitioner’s contention were correct as regards the
piercing of the corporate veil.
2. Whether petitioners were correct in their contention that they
should be respected as regards their occupancy since they own an
aliquot part of the corporation.

RULING
1.Petitioner’s contention to pierce the veil of corporate fiction is
untenable. As aptly held by the court: “..The separate personality
of a corporation may ONLY be disregarded when the corporation
is used as a cloak or cover for fraud or illegality, or to work injustice,
or when necessary to achieve equity or when necessary for the
protection of creditors.”
2. As regards petitioners contention that they should be respected
on their occupancy by virtue of an aliquot part they own on the
corporation as stockholders, it also fails to hold water. The court
held that “properties owned by a corporation are owned by it as an
entity separate and distinct from its members. While shares of
stocks are personal property, they do not represent property of the
corporation. A share of stock only typifies an aliquot part of the
corporation’s property, or the right to share in its proceeds to that
extent when distributed according to law and equity, but its holder
is not the owner of any part of the capital of the corporation. Nor is
he entitled to the possession of any definite portion of its property
or assets. The holder is not a co-owner or a tenant in common of
the corporate property.”

Adelio C. Cruz vs Quiterio L. Dalisay

Adm. Matter No. R-181-P July 31, 1987

Fernan, J:

Administrative Matter in the Supreme Court.

Malfeasance in office, corrupt practices and serious irregularities.

Doctrine: A corporation has a personality distinct and separate from its individual stockholders or
members.

Facts:

1. In a sworn complaint dated July 23, 1984, Adelio Cruz (complainant) charged Quiterio Dalisay
(respondent),

Senior Deputy Sheriff of Manila, with malfeasance in office, corrupt practices and serious
irregularities
allegedly committed as follows:

a. Respondent attached and/or levied the money belonging to complainant Cruz when he was not

himself the judgment debtor in the final judgment of an NLRC case sought to be enforced but rather

the company known as “Qualitrans Limousine Service, Inc.”.

b. Respondent also caused the service of the alias writ of execution upon complainant who is a

resident of Pasay City, despite knowledge that his territorial jurisdiction covers Manila only and

does not extend to Pasay City.

2. In his Comment, respondent explained that when he garnished complainant’s cash deposit at the
Philtrust

bank he was merely performing a ministerial duty. And that while it is true that said writ was addressed
to

Qualitrans Limousine Service, Inc., it is also a fact that complainant had executed an affidavit before the

Pasay City assistant fiscal stating that he is the owner/ president of Qualitrans. Because of that
declaration,

the counsel for the plaintiff in the labor case advised him to serve notice of garnishment on the Philtrust

bank.

3. On November 12, 1984 this case was referred to the executive judge of the RTC of Manila for
investigation,

report and recommendation. However, prior to the termination of the proceedings, complainant
executed an

affidavit of desistance stating that he is no longer interested in prosecuting the case and that there was
just

a misunderstanding between complainant and respondent.

4. On May 29, 1986, acting on respondent’s motion the executive judge issued an order recommending
the

dismissal of the case.

Issue: WON the complaint should be dismissed based on complainant’s motion of desistance.

Held: NO

Reason:

1. It has been held that desistance of complainant does not preclude the taking of disciplinary action
against

respondent.
2. Respondent’s actuation in enforcing a judgment against complainant who is not a judgment debtor in
the

case calls for disciplinary action. What is incumbent upon respondent is to ensure that only the portion
of a

decision ordained or decreed in the dispositive part should be the subject of the execution.

3. 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. Respondent, however,

choose 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 equity that as a legal entity, a
corporation

has a personality distinct and separate from its individual stockholders or members.

4. The mere fact that one is president of the corporation does not render the property he owns or
possesses

the property of the corporation, since that president, as an individual, and the corporation are
separate

entities.

Decision: ACCORDINGLY, we find Respondent Deputy Sheriff Quiterio l. Dalisay NEGLIGENT

in the

enforcement of the writ of execution in NLRC Case No. 8-12389-91, and a fine equivalent to 3 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. Let a copy of the Resolution be filed in the personal record of the respondent.

KOPPEL VS. ALFREDO L. YATCO, COLLECTOR OF

INTERNAL REVENUE,
11:45 PM Corporation law, Koppel v. Yatco, piercing the corporate veil No comments
 G.R. No. L-47673 October 10, 1946
Facts:
 Koppel Philippines Inc. (KPI) has a capital stock divided into thousand (1,000) shares of P100 each.
 The Koppel Industrial Car and Equipment Company (KICEC) owns 995 shares of the total capital stock. KICEC is organized under
US laws and not licensed to do business in the Philippines. The remaining five (5) shares only were and are owned one each by
officers of the KPI.
 They have the following business process:
o (1) "When a local buyer was interested in the purchase of railway materials, machinery, and supplies, it asked for price quotations from
KPI";
o (2) "KPI then cabled for the quotation desired from Koppel Industrial Car and Equipment Company";
o (3) "KPI, however, quoted to the purchaser a selling price above the figures quoted by Koppel Industrial Car and Equipment Company";
o (4) "On the basis of these quotations, orders were placed by the local purchasers
 KPI paid under protest the P64,122.51 demanded by the CIR.

Total profit Php 3,772,403,82

KPI Share Php 132,201.30

KPI paid commercial broker’s tax (4% of KPI Share) Php 5,288.05

CIR demanded (1% of Total Profit) + 25% surcharge for late payment – Paid tax Php 64,122.51

 It appears that KICEC is the only foreign principal of KPI.

 The KPI corporation bore alone incidental expenses - as, for instance, cable expenses-not only those of its own cables but also those
of its "principal" .
 The KPI's "share in the profits" realized from the transactions in which it intervened was left virtually in the hands of KICEC
 Where drafts were not paid by the purchasers, the local banks were instructed not to protest them but to refer them to KPI which was
fully empowered by KICEC to instruct the banks with regards to disposition of the drafts and documents
 Where the goods were European origin, consular invoices, bill of lading, and, in general, the documents necessary for clearance
were sent directly to KPI
 If the KPI had in stock the merchandise desired by local buyers, it immediately filled the orders of such local buyersand made
delivery in the Philippines without the necessity of cabling its principal in America either for price quotations or confirmation or
rejection of that agreed upon between it and the buyer
 Whenever the deliveries made by KICEC were incomplete or insufficient to fill the local buyer's orders, KPI used to make good the
deficiencies by deliveries from its own local stock, but in such cases it charged its principal only the actual cost of the merchandise
thus delivered by it from its stock and in such transactionsKPI did not realize any profit#fluffypeaches
 CFI:
o KPI is a mere dummy or branch ("hechura") of KICEC.
o did not deny legal personality to Koppel (Philippines), Inc. for any and all purposes, but in effect its conclusion was that, in the
transactions involved herein, the public interest and convenience would be defeated and what would amount to a tax evasion
perpetrated, unless resort is had to the doctrine of "disregard of the corporate fiction."
Issues/Ruling:
1. WON KPI is a domestic corporation distinct and separate from, and not a mere branch of KICEC

KPI:
 Its corporate existence as cannot be collaterally attacked and that the Government is estopped from so doing.
SC:
 Koppel (Philippines), Inc. was a mere branch or agency or dummy ("hechura") of Koppel Industrial Car and Equipment Co. The lower
court did not hold that the corporate personality of KPI would also be disregarded in other cases or for other purposes. It would have
had no power to so hold. The courts' action in this regard must be confined to the transactions involved in the case at bar "for the
purpose of adjudging the rights and liabilities of the parties in the case. They have no jurisdiction to do more." <3 peaches
 United States vs. Milwaukee Refrigeration Transit
o General Rule: a corporation will be looked upon as a legal entity as a general rule, and until sufficient reason to the contrary appears;
o Exception: Wthe notion of legal entity is used to defeat public convenience, justify wrong, protect fraud, or defend crime, the law will
regard the corporation as an association of persons.
 Manifestly, the principle is the same whether the "person" be natural or artificial.
 A very numerous and growing class of cases wherein the corporate entity is disregarded is that (it 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)."
 Where it appears that 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 persons, disregard the legal fiction that two corporations are distinct entities, and treat
them as identical. (Abney vs. Belmont Peaches Country Club Properties, Inc., 279 Pac., 829.) #bebegurrpeaches
 The fact that KPI is a mere branch is conclusively borne out by the fact, among others, that the amount of the so-called "share in
the profits" of KPIwas ultimately left to the sole, unbridled control of KICEC. If KPI was intended to function as a bona fide
separate corporation, we cannot conceive how this arrangement could have been adopted.
 No group of businessmen could be expected to organize a mercantile corporation if the amount of that profit were to be subjected to
such a unilateral control of another corporation, unless indeed the former has previously been designed by the incorporators to serve
as a mere subsidiary, branch or agency of the latter.

 KPI charged the parent corporation no more than actual cost - without profit whatsoever - for merchandise allegedly of its own to
complete deficiencies of shipments made by said parent corporation.

G.R. No. L-20451 December 28, 1964

R. F. SUGAY and CO., INC., petitioner,

vs.
PABLO C. REYES, CESAR CURATA, PACIFIC PRODUCTS, INC., and WORKMEN'S
COMPENSATION COMMISSION, respondents.

G. S. Mangay for petitioner.

Ross, Selph & Carrascoso and Reyes & Flores for respondent Pacific Products, Inc.
R. P. Decena for respondent Cesar Curata
Villavieja & Martinez for respondent Workmen's Compensation Commission.

PAREDES, J.:

This is a Workmen's Compensation Case, the compensability of the injuries suffered by the
claimants, Pablo C. Reyes, and Cesar Curata, being admitted by all the parties. The only issue
requiring determination is, who among the three (3) persons (Romulo Sugay, R. F. Sugay & Co.,
Inc., and Pacific Products, Inc.) is the statutory employer of said claimants and who should be liable
for their disability compensation.

In the evening of January 13, 1961, respondents Pablo Reyes and Cesar Curata suffered burns of
various degrees, while painting the building of the Pacific Products, Inc., caused by a fire of
accidental origin, resulting in their temporary disability from work. For said injuries they filed claims
for disability and medical expenses against the R. F. Sugay & Co., Inc., Romulo F. Sugay and the
Pacific Products, Inc. The R. F. Sugay & Co., Inc., answered the claim, alleging that the corporation
was not the employer of the claimants but it was the Pacific Products, Inc., which had an
administration and supervision job contract with Romulo F. Sugay, who, aside from being the
President of the corporation, bearing his name, had also a business of his own, distinct and separate
from said corporation; and that the Regional Office of the Department of Labor had no jurisdiction
over the subject matter. Romulo F. Sugay did not file an Answer, but voluntarily appeared during the
hearing and disclaimed liability. The Answer of Pacific Products, Inc., contained the customary
admissions and denials, and averred that its business was mainly in the manufacture and sale of
lacquer and other painting materials. As defenses, it stated that the claimants were the employees of
respondents R. F. Sugay Construction Co., Inc., and/or Romulo F. Sugay that as a result of the, fire,
it incurred a loss of P2,000,000.00, occasioned by the employment of incompetent men in the
painting of its factory by the Sugays.

The Hearing Officer dismissed the case with respect, to R. F. Sugay & Co., Inc., and Romulo F.
Sugay "for want of employer-employee relationship with the claimants, either directly or through an
independent contractor" declaring:

WHEREFORE, the Pacific Products, Inc., is hereby adjudged to pay through this office, the
following benefits to the claimants as follows:

1. To PABLO C. REYES, the sum of P490.05 as temporary total disability benefits plus
P44.53 for permanent partial disability of index finger plus P40.20 for the middle finger plus
P49.48 for the ring finger; plus hospital and medical expenses of P659.70 or a total of ONE
THOUSAND TWO HUNDRED EIGHTY-THREE and 96/100 PESOS (P1,283.96) as total
benefits under the Act.

2. To CESAR CURATA, the sum of P415.80 as temporary total disability compensation plus
P477.75 and P273.00 for impairment of his right and left feet plus P4,459.96 as medical and
hospital expenses or a total of FIVE THOUSAND SIX HUNDRED TWENTY-FIVE and
80/100 PESOS (P5,625.80) as total benefits under the Act.

3. To pay to this office the sum of EIGHTEEN PESOS (P18.00) as fees for the two claims
pursuant to Section 55 of the Act.

The respondents, ROMULO F. SUGAY and R. F. SUGAY & CO., INC., should be as they
are hereby exempted from any liability for lack of employer-employee relationship with the
claimants.

Pacific Products, Inc., appealed the above decision to the Commission. On August 24, 1962,
Commissioner Jose Sanchez rendered judgment affirming the compensability of the injuries and the
amounts due them, but modified the decision of the Hearing Officer, by finding that R. F. Sugay &
Co., Inc., was the statutory employer of the claimants and should be liable to them. Pacific Products,
Inc., was absolved from all responsibility. In the decision, the Associate Commissioner, made the
following findings and conclusions, to wit:
 xxx xxx xxx

A careful study of the evidence leads us to the conclusion that, although the accident
happened within the premises of the respondent Pacific Products, Inc., the responsibility for
the payment of the compensation due in this case should be lodged somewhere else. In the
first place, even the evidence presented by the claimants and the other two respondents
clearly established the fact that the accident occurred while the claimant, were painting the
Office of Pacific Products Inc., an undertaking which had nothing to do with the business of
the latter. It was fairly shown that Pacific Products, Inc., was engaged in the manufacture
and sale of paints, varnish and other allied products, and, therefore, the work which was then
being undertaken in its office at the time of the accident has nothing to do with the nature of
its business. The records disclose that the injured painter were hired, through an
intermediary, by R. F. Sugay & Co., which was purposely established "to engage itself in the
constructions, repairs, remodelling of all kinds of houses, residences, edifices and all such
other buildings and all kinds of construction works allied thereto." (Exh. "11", Articles of
Incorporation of R. F. Sugay & Co., Inc., page 241 Records of the case.)

xxx xxx xxx

The evidence adduced by the parties indicates rather clearly that, except for the fact that the
Pacific Products, Inc. supplied the paint, it did not exercise any of the above-enumerated
powers. The claimants were hired by one Rodolfo Babatid pursuant to the instruction
received by the latter from Romulo Sugay. They were paid by Eduardo Sugay, brother of
Romulo and Secretary of R. F. Sugay & Co., and were under the control of these persons
during the time they were painting the office of Pacific Products, Inc. Following the rulings
enunciated in the abovecited decisions of the Supreme Court.1 we are constrained to
disagree with the Hearing Officer's decision in so far as it held that respondent Pacific
Products, Inc. should be solely responsible for the payment of the compensation he awarded
in favor of the claimants. Neither can we see the reason of the Hearing Officer in ordering
said respondent to pay the compensation in this case after ruling categorically that "the
herein claimants were casual employees of Pacific Products, Inc." A casual employee,' by
the way, is one "whose employment is purely casual and is not for the purposes of the
occupation or business of the employer." (Section 39[b] Workmen's. Compensation Act, as
amended.)

xxx xxx xxx

... In a situation like this, much weight should be given to the testimony of a person who does
not stand to lose or gain from the outcome of the case. Rodolfo Babatid, who was presented
by both the respondent Romulo Sugay and the claimants, swore on the witness stand that he
has been for a long time, an employee of the firm R. F. Sugay & Co. and that he hired the
other painters pursuant to Sugay as president of said firm. This witness, and the two
claimants were in unison in declaring that they were paid by the firm, thru its secretary
Eduardo Sugay, who directly supervised them in their work. That the claimants were of the
belief that they were hired by R. F. Sugay & Co., thru Mr. Babatid, is also shown by their
declarations under oath that they were paid thru the company payroll; which they signed. ... .
These two persons, as already adverted to above, expressed their honest belief that they
were connected with R. F. Sugay & Co., having been hired by one who was known to be a
trusted employee of said business establishment. Under this set of facts it may be said that
R. F. Sugay & Co., is now estopped from denying any relationship with the claimants
because, thru its responsible officials, it made others believe that the painters hired by Mr.
Babatid were being employed by it. Without insinuating that the dual role played by Romulo
 F. Sugay was intended to be used as a subterfuge of the corporation to cloak the
responsibilities of the corporation under his presidency, we must state that such dual roles
cannot be allowed to confuse the facts relating to employer-employee relationships.

The Commission en banc, on September 19, 1962, denied the motion for reconsideration stating
that there was "nothing to warrant a modification much less a reversal, of the decision sought to be
reviewed." In the appeal of R. F. Sugay & Co., to this Court, it is insisted that Pacific Products, Inc.
was the employer of the claimants.

At the outset, We would wish to point out that this case is an appeal from the decision of the
Workmen's Compensation Commission. Needless to state, in this class of proceedings, only
questions of law should be raised, the findings of facts made by the Commission, being conclusive
and binding upon this Court. (Bernardo vs. Pascual, L-13260, October 31, 1960.) Indeed, We are
authorized to inquire into the facts, but only when the conclusions thereupon are not supported by
the evidence. In the case at bar, however, We find that the findings of facts made by the
Commissioner and concurred in by the Commission en banc are fully supported by the evidence on
record which clearly points out that R. F. Sugay & Co., is the statutory employer of the claimants.
The decisive elements showing that it is the employer, are present, such as selection and
engagement; payment of wages; power of dismissal, and control (Viaña vs. Alejo-Alagadan, et al.,
May 31, 1956). These powers were lodged in R. F. Sugay & Co. On this very score alone, the
petition for review should be dismissed.

There was a faint attempt by the petitioning corporation, to evade liability, by advancing the theory
that Romulo P. Sugay, its President, was the one who entered into a contract of administration and
supervision for the painting of the factory of the Pacific Products, Inc., and making it appear that said
Romulo F. Sugay acted as an agent of the Pacific Products, Inc., and as such, the latter should be
made answerable to the compensation due to the claimants. We, however, agree with the
Commission that "the dual roles of Romulo F. Sugay should not be allowed to confuse the facts
relating to employer-employee relationship." It is a legal truism that when the veil of corporate fiction
is made as a shield to perpetrate a fraud and/or confuse legitimate issues (here, the relation of
employer-employee), the same should be pierced. Verily the R. F. Sugay & Co., Inc. is a business
conduit of R. F. Sugay.

IN VIEW HEREOF, the writ is denied, and the judgment appealed from, is hereby affirmed, in all
respects. Costs taxed against petitioner R. F. Sugay & Co., Inc., in both instances.

Bengzon, C.J., Bautista Angelo, Concepcion, Reyes, J.B.L., Barrera, Dizon, Regala, Makalintal,
Bengzon, J.P., and Zaldivar, JJ., concur.