Case Doctrine

1 BCDA Vs CIR, GR No. 205925, 20 GOCCs- Bases Conversion and Development Authority (BCDA) is a government instrumentality vested with corporate powers. As such, it is exempt from the payment of docket fees
June 2018 required under Section 21, Rule 141 of the Rules of Court.

A government instrumentality may be endowed with corporate powers and at the same time retain its classification as a government “instrumentality” for all other purposes.

In order to qualify as a Government-Owned and -Controlled Corporation (GOCC), one must be organized either as a stock or nonstock corporation.

Section 8 of Republic Act (RA) No. 7227 states that after distribution of the proceeds acquired from Bases Conversion and Development Authority’s (BCDA’s) activities, the balance, if any, shall
accrue and be remitted to the National Treasury.

Bases Conversion and Development Authority (BCDA) does not qualify as a nonstock corporation because it is not organized for any of the purposes mentioned under Section 88 of the
Corporation Code.

Bases Conversion and Development Authority (BCDA) is neither a stock nor a nonstock corporation. BCDA is a government instrumentality vested with corporate powers. Under Section 21,Rule
141 of the Rules of Court, agencies and instrumentalities of the Republic of the Philippines are exempt from paying legal or docket fees.
2 Sawadjaan vs CA, GR No. 141735, De Facto Corporation - By its failure to submit its by-laws on time, the AIIBP may be considered a de facto corporation whose right to exercise corporate powers may not be inquired into
2005 collaterally in any private suit to which such corporations may be a party.

A corporation which has failed to file its by-laws within the prescribed period does not ipso facto lose its powers as such.
3 Barlin vs. Ramirez, GR No. L-2832, ROMAN CATHOLIC CHURCH.—The Roman Catholic Church is a juridical person in the Philippine Islands. Prior to the cession of the Philippines to the United States the King of Spain was
1096 not the owner of the consecrated churches therein and had no right to the possession thereof. The exclusive right to such possession was in the Roman Catholic Church and such right has
continued since such cession and now exists.

CHURCH BUILDINGS; POSSESSION; ADMINISTRATION; ESTOPPEL.—In an action brought by the Roman Catholic Church to recover a church building, against a priest whom it has put in
possession thereof to administer the same, the latter is estopped from alleging ownership at the time he took possession either in himself or in a third person.

The Government of the Philippine Islands has never undertaken to transfer to the municipalities the ownership or right of possession of the churches therein.
4 Narra Nickel Mining Corp vs Redmont Control Test; Grandfather Rule; Basically, there are two acknowledged tests in determining the nationality of a corporation: the control test and the grandfather rule. Paragraph 7 of
Consolidated Mines Corp, GR No. DOJ Opinion No. 020, Series of 2005, adopting the 1967 SEC Rules which implemented the requirement of the Constitution and other laws pertaining to the controlling interests in enterprises
195580, 2014 engaged in the exploitation of natural resources owned by Filipino citizens, provides: Shares belonging to corporations or partnerships at least 60% of the capital of which is owned by Filipino
citizens shall be considered as of Philippine nationality, but if the percentage of Filipino ownership in the corporation or partnership is less than 60%, only the number of shares corresponding to
such percentage shall be counted as of Philippine nationality. Thus, if 100,000 shares are registered in the name of a corporation or partnership at least 60% of the capital stock or capital,
respectively, of which belong to Filipino citizens, all of the shares shall be recorded as owned by Filipinos. But if less than 60%, or say, 50% of the capital stock or capital of the corporation or
partnership, respectively, belongs to Filipino citizens, only 50,000 shares shall be counted as owned by Filipinos and the other 50,000 shall be recorded as belonging to aliens. The first part of
paragraph 7, DOJ Opinion No. 020, stating “shares belonging to corporations or partnerships at least 60% of the capital of which is owned by Filipino citizens shall be considered as of Philippine
nationality,” pertains to the control test or the liberal rule. On the other hand, the second part of the DOJ Opinion which provides, “if the percentage of the Filipino ownership in the corporation or
partnership is less than 60%, only the number of shares corresponding to such percentage shall be counted as Philippine nationality,” pertains to the stricter, more stringent grandfather rule.

“Corporate layering” is admittedly allowed by the FIA; but if it is used to circumvent the Constitution and pertinent laws, then it becomes illegal. Further, the pronouncement of
petitioners that the grandfather rule has already been abandoned must be discredited for lack of basis. Art. XII, Sec. 2 of the Constitution provides: Sec. 2. All lands of the public domain, waters,
minerals, coal, petroleum and other mineral oils, all forces of potential energy, fisheries, forests or timber, wildlife, flora and fauna, and other natural resources are owned by the State. With the
exception of agricultural lands, all other natural resources shall not be alienated. The exploration, development, and utilization of natural resources shall be under the full control and supervision of
the State. The State may directly undertake such activities, or it may enter into co-production, joint venture or production-sharing agreements with Filipino citizens, or corporations or associations
at least sixty per centum of whose capital is owned by such citizens. Such agreements may be for a period not exceeding twenty-five years, renewable for not more than twenty-five years, and
under such terms and conditions as may be provided by law.

A partnership is defined as two or more persons who bind themselves to contribute money, property, or industry to a common fund with the intention of dividing the profits among themselves.

Pseudo-Partnerships; As a rule, corporations are prohibited from entering into partnership agreements; consequently, corporations enter into joint venture agreements with other
corporations or partnerships for certain transactions in order to form “pseudo partnerships.”

The “control test” is still the prevailing mode of determining whether or not a corporation is a Filipino corporation, within the ambit of Sec. 2, Art. II of the 1987 Constitution, entitled
to undertake the exploration, development and utilization of the natural resources of the Philippines. When in the mind of the Court there is doubt, based on the attendant facts and
circumstances of the case, in the 60-40 Filipino-equity ownership in the corporation, then it may apply the “grandfather rule.”

1
 Case Doctrine
5 Roy III vs. Herbosa, GR 207246, 2016, Public Utility Corporation; As defined in the Implementing Rules and Regulations of the Securities Regulation Code (SRC-IRR), beneficial owner or beneficial ownership means any
2017 person who, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has or shares voting power and/or investment returns or power.

The term “full beneficial ownership” found in the FIA-IRR is to be understood in the context of the entire paragraph defining the term “Philippine national.” Mere legal title is not enough to meet the
required Filipino equity, which means that it is not sufficient that a share is registered in the name of a Filipino citizen or national, i.e., he should also have full beneficial ownership of the share. If
the voting right of a share held in the name of a Filipino citizen or national is assigned or transferred to an alien, that share is not to be counted in the determination of the required Filipino equity.
In the same vein, if the dividends and other fruits and accessions of the share do not accrue to a Filipino citizen or national, then that share is also to be excluded or not counted.

Given that beneficial ownership of the outstanding capital stock of the public utility corporation has to be determined for purposes of compliance with the 60% Filipino ownership requirement, the
definition in the SRC-IRR can now be applied to resolve only the question of who is the beneficial owner or who has beneficial ownership of each “specific stock” of the said corporation. Thus, if a
“specific stock” is owned by a Filipino in the books of the corporation, but the stock’s voting power or disposing power belongs to a foreigner, then that “specific stock” will not be deemed as
“beneficially owned” by a Filipino.

If the Filipino has the “specific stock’s” voting power (he can vote the stock or direct another to vote for him), or the Filipino has the investment power over the “specific stock” (he can dispose of
the stock or direct another to dispose it for him), or he has both (he can vote and dispose of the “specific stock” or direct another to vote or dispose it for him), then such Filipino is the “beneficial
owner” of that “specific stock” — and that “specific stock” is considered (or counted) as part of the 60% Filipino ownership of the corporation. In the end, all those “specific stocks” that are
determined to be Filipino (per definition of “beneficial owner” or “beneficial ownership”) will be added together and their sum must be equivalent to at least 60% of the total outstanding shares of
stock entitled to vote in the election of directors and at least 60% of the total number of outstanding shares of stock, whether or not entitled to vote in the election of directors.

The “beneficial owner or beneficial ownership” definition in the Implementing Rules and Regulations of the Securities Regulation Code (SRC-IRR) is understood only in determining the respective
nationalities of the outstanding capital stock of a public utility corporation in order to determine its compliance with the percentage of Filipino ownership required by the Constitution.

The application of the sixty-forty (60-40) Filipino-foreign ownership requirement separately to each class of shares, whether common, preferred nonvoting, preferred voting or any other class of
shares fails to understand and appreciate the nature and features of stocks as financial instruments.

Stock Corporations - stock corporations are allowed to create shares of different classes with varying features is a flexibility that is granted, among others, for the corporation to
attract and generate capital (funds) from both local and foreign capital markets.

As mandated by Section 11, Article XII of the Constitution, all the executive and managing officers of a public utility company must be Filipinos. Thus, the all-Filipino management team must first
be convinced that any of the eight (8) corporate actions in Section 6 of the Corporation Code will be to the best interest of the company.

Allowing stockholders holding preferred shares without voting rights to vote in the eight (8) corporate matters enumerated in Section 6 of the Corporation Code is an acknowledgment of their right
of ownership.

A too restrictive definition of “capital” will surely have a dampening effect on the business milieu by eroding the flexibility inherent in the issuance of preferred shares with varying terms and
conditions.

Compliance by the SEC-MC No 8 with such Constitutional Requirements, as expounded on by the Court in the Gamboa Decision and Resolution:

The Memorandum Circular correctly applied such requirements when it stated thus:

“Section 2. All covered corporations shall, at all times, observe the constitutional or statutory ownership requirement. For purposes of determining compliance, the required percentage (60%) of
Filipino ownership shall be applied to BOTH:
a. the total number of outstanding shares of stock entitled to vote in the election of directors; AND
b. the total number of outstanding shares of stock, whether or not entitled to vote in the election of directors.”

In effect, to determine the compliance of the domestic corporation with the Constitutional requirement, there are two tests to be applied:

1. Compliance with the 60% rule applied to the total number of outstanding shares of stock entitled to vote in the election of directors, AND
2. Compliance with the 60% rule applied to the total number of outstanding shares of stock, whether or not entitled to vote in the election of directors.
6 Santos vs NLRC, GR 101699, 1996 Corporate Officers; Piercing the Veil of Corporate Fiction; A corporation is a juridical entity with legal personality separate and distinct from those acting for and in its behalf and, in
general, from the people comprising it—obligations incurred by the corporation, acting through its directors, officers and employees, are its sole liabilities.—A corporation is a juridical
entity with legal personality separate and distinct from those acting for and in its behalf and, in general, from the people comprising it. The rule is that obligations incurred by the corporation, acting
through its directors, officers and employees, are its sole liabilities. Nevertheless, being a mere fiction of law, peculiar situations or valid grounds can exist to warrant, albeit done sparingly, the
disregard of its independent being and the lifting of the corporate veil. As a rule, this situation might arise when a corporation is used to evade a just and due obligation or to justify a wrong, to
shield or perpetrate fraud, to carry out similar other unjustifiable aims or intentions, or as a subterfuge to commit injustice and so circumvent the law.

Instances when personal civil liability can also be said to lawfully attach to a corporate director, trustee or officer.—In Tramat Mercantile, Inc. vs. Court of Appeals, the Court has collated the
settled instances when, without necessarily piercing the veil of corporate fiction, personal civil liability can also be said to lawfully attach to a corporate director, trustee or officer; to wit: When—
“(1) He assents

(a) to a patently unlawful act of the corporation, or

“(2) He consents to the issuance of watered stocks or who, having knowledge thereof, does not forthwith file with the corporate secretary his written objection thereto;

“(3) He agrees to hold himself personally and solidarily liable with the corporation; or

“(4) He is made, by a specific provision of law, personally answer for his corporate action.”

The basic rule is still that which can be deduced from the Court’s pronouncement in Sunio v. National Labor Relations Commission, i.e., that mere ownership by a single stock-holder 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.

2
 Case Doctrine
7 PNB vs. CA, GR No. L-27155, 1978 Corporations can be liable in same manner as natural persons, for tort.—A corporation is civilly liable in the same manner as natural persons for torts, because “generally speaking, the rules
governing the liability of a principal or master for a tort committed by an agent or servant are the same whether the principal or master be a natural person or a corporation, and whether the
servant or agent be a natural or artificial person. All of the authorities agree that a principal or master is liable for every tort which he expressly directs or authorizes, and this is just as true of a
corporation as of a natural person.
8 Naguiat vs. NLRC, GR No. 116123, The President of a corporation who actively manages the business falls within the meaning of an “employer” as contemplated by the Labor Code and may be held jointly and
1997 severally liable for the obligations of the corporation to its dismissed employees.

“Close Family Corporations”; Stockholders who are actively engaged in the management or operation of the business and affairs of a close corporation shall be personally liable for corporate torts
unless the corporation has obtained reasonably adequate liability insurance.

Corporate Torts; Our jurisprudence is wanting as to the definite scope of “corporate tort.”—Our jurisprudence is wanting as to the definite scope of “corporate tort.” Essentially, “tort”
consists in the violation of a right given or the omission of a duty imposed by law. Simply stated, tort is a breach of a legal duty. Article 283 of the Labor Code mandates the employer to grant
separation pay to employees in case of closure or cessation of operations of establishment or undertaking not due to serious business losses or financial reverses, which is the condition obtaining
at bar. CFTI failed to comply with this law-imposed duty or obligation. Consequently, its stockholder who was actively engaged in the management or operation of the business should be held
personally liable.

Business Losses; Separation Pay; Business losses or financial reverses, in order to sustain retrenchment of personnel or closure of business and warrant exemption from payment of separation
pay, must be proved with clear and satisfactory evidence.
9 Ching v. SEC of DOJ, GR No. 164317, The law specifically makes the officers, employees or other officers or persons responsible for the offense, without prejudice to the civil liabilities of such corporation and/or board
2006 of directors, officers, or other officials or employees responsible for the offense. The rationale is that such officers or employees are vested with the authority and responsibility to devise
means necessary to ensure compliance with the law and, if they fail to do so, are held criminally accountable; thus, they have a responsible share in the violations of the law.

If the crime is committed by a corporation or other juridical entity, the directors, officers, employees or other officers thereof responsible for the offense shall be charged and
penalized for the crime; A corporation may be charged and prosecuted for a crime if the imposable penalty is fine.

When a criminal statute designates an act of a corporation or a crime and prescribes punishment therefor, it creates a criminal offense which, otherwise, would not exist and such
can be committed only by the corporation. But when a penal statute does not expressly apply to corporations, it does not create an offense for which a corporation may be punished. On the
other hand, if the State, by statute, defines a crime that may be committed by a corporation but prescribes the penalty therefor to be suffered by the officers, directors, or employees of such
corporation or other persons responsible for the offense, only such individuals will suffer such penalty. Corporate officers or employees, through whose act, default or omission the corporation
commits a crime, are themselves individually guilty of the crime.
10 SIA vs CA, GR No 108222, 1997 When a law expressly provides that a corporation may be proceeded against criminally, the responsible officer will be held personally liable for the crimes committed by the
corporation. However, such liability will only attach to the officer when the corporation is directly required by law to do an act in a given manner, and the same law makes the person
who fails to perform the act in the prescribed manner expressly liable criminally. For example:
1) Under the Anti-Money Laundering Act, juridical persons are also defined as offenders.
2) The RCC provides situations where corporations are liable for criminal sanctions:
a) SEC. 161. Violation of Duty to Maintain Records, to Allow their Inspection or Reproduction;
b) SEC. 165. Fraudulent Conduct of Business;
c) SEC. 166. Acting as Intermediaries for Graft and Corrupt Practices;
d) SEC. 167. Engaging Intermediaries
for Graft and Corrupt Practices
11 Prime White Cement vs IAC, GR No. When contracts signed by corporate officers binding on corporation.—Under the Corporation Law, which was then in force at the time this case arose, as well as under the present
68555, 1993 Corporation Code, all corporate powers shall be exercised by the Board of Directors, except as otherwise provided by law. Although it cannot completely abdicate its power and responsibility to
act for the juridical entity, the Board may expressly delegate specific powers to its President or any of its officers. In the absence of such express delegation, a contract entered into by its
President, on behalf of the corporation, may still bind the corporation if the board should ratify the same expressly or impliedly. Implied ratification may take various forms—like silence or
acquiescence; by acts showing approval or adoption of the contract; or by acceptance and retention of benefits flowing therefrom. Furthermore, even in the absence of express or implied authority
by ratification, the President as such may, as a general rule, bind the corporation by a contract in the ordinary course of business, provided the same is reasonable under the circumstances.
These rules are basic, but are all general and thus quite flexible. They apply where the President or other officer, purportedly acting for the corporation, is dealing with a third person, i.e., a person
outside the corporation.

GR: A board director or other corporate officer cannot readily enter into a contract with his own corporation;
XPN: A director of a corporation holds a position of trust and as such, he owes a duty of loyalty to his corporation. In case his interests conflict with those of the corporation, he cannot sacrifice the
latter to his own advantage and benefit. As corporate managers, directors are committed to seek the maximum amount of profits for the corporation. This trust relationship "is not a matter of
statutory or technical law. It springs from the fact that directors have the control and guidance of corporate affairs and property and hence of the property interests of the stockholders."

On the other hand, a director's contract with his corporation is not in all instances void or voidable. If the contract is fair and reasonable under the circumstances, it may be ratified by the
stockholders provided a full disclosure of his adverse interest is made.

No moral damages for lost goodwill are awardable to a corporation.—As a result of this action which has been proven to be without legal basis, petitioner corporation's reputation and
goodwill have been prejudiced. However, there can be no award for moral damages under Article 2217 and succeeding articles on Section 1 of Chapter 3 of Title XVIII of the Civil Code in favor of
a corporation.

Granting arguendo that the "dealership agreement" involved here would be valid and enforceable if entered into with a person other than a director or officer of the corporation, the fact that the
other party to the contract was a Director and Auditor of the petitioner corporation changes the whole situation. First of all, We believe that the contract was neither fair nor reasonable. The
"dealership agreement" entered into in July, 1969, was to sell and supply to respondent Te 20,000 bags of white cement per month, for five years starting September, 1970, at the fixed price of
P9.70 per bag. Respondent Te is a businessman himself and must have known, or at least must be presumed to know, that at that time, prices of commodities in general, and white cement in
particular, were not stable and were expected to rise. At the time of the contract, petitioner corporation had not even commenced the manufacture of white cement, the reason why delivery was
not to begin until 14 months later. He must have known that within that period of six years, there would be a considerable rise in the price of white cement. In fact, respondent Te's own
Memorandum shows that in September, 1970, the price per bag was P 14.50, and by the middle of 1975, it was already P37.50 per bag. Despite this, no provision was made in the "dealership
agreement" to allow for an increase in price mutually acceptable to the parties. Instead, the price was pegged at P9.70 per bag for the whole five years of the contract. Fairness on his part as a
director of the corporation from whom he was to buy the cement, would require such a provision. In fact, this unfairness in the contract is also a basis which renders a contract entered into by the
President, without authority from the Board of Directors, void or voidable, although it may have been in the ordinary course of business. We believe that the fixed price of P9.70 per bag for a
period of five years was not fair and reasonable. Respondent Te, himself, when he subsequently entered into contracts to resell the cement to his "new dealers" Henry Wee and Gaudencio
Galang stipulated as follows: The price of white cement shall be mutually determined by us but in no case shall the same be less than P14.00 per bag (94 Ibs)."
12 Crystal vs BPI, GR 172428, 2008 Moral Damages; Corporation Law; Statements in Manero and Mambulao are mere obiter dicta; While the Court may allow the grant of moral damages to corporations, it is not automatically
granted; there must still be proof of the existence of the factual basis of the damage and its causal relation to the defendant’s acts.

3
 Case Doctrine
13 Kukan vs Reyes, GR No. 182729, 2010 Making another corporation, thru the medium of a writ of execution, answerable for an adjudged liability against another is a clear case of altering a decision, an instance of granting relief not
contemplated in the decision sought to be executed.

Doctrine of Piercing the Veil of Corporate Fiction; Under the doctrine of “piercing the veil of corporate fiction,” the court looks at the corporation as a mere collection of individuals or an
aggregation of persons undertaking business as a group, disregarding the separate juridical personality of the corporation unifying the group.

Due Process; A corporation not impleaded in a suit cannot be subject to the court’s process of piercing the veil of its corporate fiction—in that situation, the court has not acquired jurisdiction over
the corporation and, hence, any proceedings taken against that corporation and its property would infringe on its right to due process.

Where the motion to pierce the veil of corporate fiction states a new cause of action, i.e., for the liability of defendant corporation to be borne by another entity on the alleged identity of the two
corporations, such new cause of action should be properly ventilated in another complaint and subsequent trial where the doctrine of piercing the corporate veil can, if appropriate, be applied,
based on the evidence adduced—the matter could hardly be the subject, under the premises, of a mere motion interposed after the principal action against the defendant corporation alone had
peremptorily been terminated.

Paid-up capital is merely seed money to start a corporation or a business entity; Paid-up capitalization of PhP 5,000 is not and should not be taken as a reflection of the firm’s capacity to
meet its recurrent and long-term obligations—the equity portion cannot be equated to the viability of a business concern, for the best test is the working capital which consists of the liquid assets
of a given business relating to the nature of the business concern.

The circumstance that a single stockholder owns 40% of the outstanding capital stock of two corporations, standing alone, is insufficient to establish identity—there must be at least
a substantial identity of stockholders for both corporations in order to consider this factor to be constitutive of corporate identity.—The suggestion that KIC is but a continuation and
successor of Kukan, Inc., owned and controlled as they are by the same stockholders, stands without factual basis. It is true that Michael Chan, a.k.a. Chan Kai Kit, owns 40% of the outstanding
capital stock of both corporations. But such circumstance, standing alone, is insufficient to establish identity. There must be at least a substantial identity of stockholders for both corporations in
order to consider this factor to be constitutive of corporate identity.

Piercing the veil of corporate fiction is frowned upon.—Accordingly, those who seek to pierce the veil must clearly establish that the separate and distinct personalities of the corporations are
set up to justify a wrong, protect fraud, or perpetrate a deception. In the concrete and on the assumption that the RTC has validly acquired jurisdiction over the party concerned, Morales ought to
have proved by convincing evidence that Kukan, Inc. was collapsed and thereafter KIC purposely formed and operated to defraud him. Morales has not to us discharged his burden.
14 Umali vs. Court of Appeals, 189 SCRA Piercing the veil of corporate entities, not proper remedy when the corporation employed fraud in the foreclosure proceedings.—Under the doctrine of piercing the veil of corporate
529, G.R. No. 89561 September 13, 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
1990 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 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 the existence of fraud in the foreclosure proceedings, 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 case at bar.
15 Traders Royal Bank vs CA, GR No. Petitioner cannot put up the excuse of piercing the veil of corporate entity, as this is merely an equitable remedy, and may be awarded only in cases when the corporate fiction is
93397, 1997 used to defeat public convenience, justify wrong, protect fraud or defend crime or where a corporation is a mere alter ego or business conduit of a person.

Piercing the veil of corporate entity requires the court to see through the protective shroud which exempts its stockholders from liabilities that ordinarily, they could be subject to, or
distinguishes one corporation from a seemingly separate one, were it not for the existing corporate fiction.
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 a sufficient reason for disregarding the fiction of separate
corporate personalities.
An entity which deals with corporate agents within circumstances showing that the agents are acting in excess of corporate authority may not hold the corporation liable.
Notes.—When valid ground exists, the legal fiction that a corporation is an entity with a juridical personality separate and distinct from its members or stockholders may be disregarded. (Guatson
International Travel and Tours, Inc. vs. National Labor Relations Commission, 230 SCRA 815 [1994])
A corporation is a juridical entity with legal personality separate and distinct from those acting for and in its behalf and, in general, from the people comprising it—obligations incurred by the
corporation, acting through its directors, officers and employees, are its sole liabilities. (Santos vs. National Labor Relations Commission, 254 SCRA 673 [1996])

16 R.F. Sugay & Co., Inc. vs. Reyes, 12 Corporate fiction cannot be used to shield real employer from liability.—The contention of petitioner that it was not he, but a corporation controlled by him, that should be liable for
SCRA 700, No. L-20451 December 28, compensation to the injured workmen was rejected, because it is a legal truism that when the veil of corporate fiction is made is a shield to perpetrate a fraud and/or confuse legitimate issues, the
1964 same should be pierced.
17 NAMARCO vs Associated Finance, GR Stockholders; When stockholder is guilty of fraud in dealing with another corporation.—A stockholder is guilty of fraud where, through false representation, he succeeded in inducing https://drive.google.com/drive/u/1/folders/1K39juTh6_TBKoRQ7K-
No. 20886, 1967 another corporation to enter into an exchange agreement with the corporation he represented and over whose business he had absolute control and where it further appears that said stockholder PUX4ihghYsSw8P
had full knowledge of the fact that his corporation was in no position to comply with the obligation which he had caused it to assume.
When corporate fiction may be disregarded; Stockholder’s liability for corporation’s obligations.—Said stockholder can not seek refuge behind the general principle that a corporation has
a personality distinct and separate from that of its stockholders and that the latter are not personally liable for the corporate obligations. The court is justified in piercing the veil of corporate fiction
and in holding said stockholder solidarily liable with the corporation for the sums of money adjudged in favor of the aggrieved corporation. When the corporation is the mere alter ego of a person,
the corporate fiction may be disregarded; the same being true when the corporation is controlled, and its affairs are so conducted as to make it merely an instrumentality, agency or conduit of
another. Namarco vs. Associated Finance Co., Inc., 19 SCRA 962, No. L-20886 April 27, 1967
18 Lafarge Cement Philippines, Inc. vs. Piercing the Veil Corporate Fiction; Allegations of fraud and bad faith on the part of certain corporate officers or stockholders may warrant the piercing of the veil of corporate fiction
Continental Cement Corporation, 443 so that the said individual may not seek refuge therein, but may be held individually and personally liable for his or her actions.—The inclusion of a corporate officer or stockholder—
SCRA 522, G.R. No. 155173 Cardenas in Sapugay or Lim and Mariano in the instant case—is not premised on the assumption that the plaintiff corporation does not have the financial ability to answer for damages, such that
November 23, 2004 it has to share its liability with individual defendants. Rather, such inclusion is based on the allegations of fraud and bad faith on the part of the corporate officer or stockholder. These allegations
may warrant the piercing of the veil of corporate fiction, so that the said individual may not seek refuge therein, but may be held individually and personally liable for his or her actions. In Tramat
Mercantile v. Court of Appeals, the Court held that generally, it should only be the corporation that could properly be held liable. However, circumstances may warrant the inclusion of the personal
liability of a corporate director, trustee, or officer, if the said individual is found guilty of bad faith or gross negligence in directing corporate affairs. Remo Jr. v. IAC has stressed that while a
corporation is an entity separate and distinct from its stockholders, the corporate fiction may be disregarded if “used to defeat public convenience, justify a wrong, protect fraud, or defend crime.”
In these instances, “the law will regard the corporation as an association of persons, or in case of two corporations, will merge them into one.” Thus, there is no debate on whether, in alleging bad
faith on the part of Lim and Mariano the counterclaims had in effect made them “indispensable parties” thereto; based on the alleged facts, both are clearly parties in interest to the counterclaim.

4
 Case Doctrine
19 Concept Builders vs NLRC, GR No. Doctrine of Piercing the Veil of Corporate Fiction; The separate and distinct personality of a corporation is merely a fiction created by law for convenience and to promote justice; https://docs.google.com/document/d/1qp5vmlXAOQ-Fc3QGeE-
108734, 1996 When the notion of separate juridical personality is used to defeat public convenience, justify wrong, protect fraud or defend crime, or is used as a device to defeat the labor laws, f_S6i7iCa1LFqT7YlJhkZG5E/edit?usp=sharing
this separate personality of the corporation may be disregarded or the veil of corporate fiction pierced.—It is a fundamental principle of corporation law that a corporation is an entity
separate and distinct from its stockholders and from other corporations to which it may be connected. But, this separate and distinct personality of a corporation is merely a fiction created by law
for convenience and to promote justice. So, when the notion of separate juridical personality is used to defeat public convenience, justify wrong, protect fraud or defend crime, or is used as a
device to defeat the labor laws, this separate personality of the corporation may be disregarded or the veil of corporate fiction pierced. This is true likewise when the corporation is merely an
adjunct, a business conduit or an alter ego of another corporation.

Some probative factors of identity that will justify the application of the doctrine of piercing the corporate veil.—The conditions under which the juridical entity may be disregarded vary
according to the peculiar facts and circumstances of each case. No hard and fast rule can be accurately laid down, but certainly, there are some probative factors of identity that will justify the
application of the doctrine of piercing the corporate veil, to wit: “1. Stock ownership by one or common ownership of both corporations. 2. Identity of directors and officers. 3. The manner of
keeping corporate books and records. 4. Methods of conducting the business.”

“Instrumentality Rule,” Explained.—The SEC en banc explained the “instrumentality rule” which the courts have applied in disregarding the separate juridical personality of corporations as
follows: “Where one corporation is so organized and controlled and its affairs are conducted so that it is, in fact, a mere instrumentality or adjunct of the other, the fiction of the corporate entity of
the ‘instrumentality’ may be disregarded. The control necessary to invoke the rule is not majority or even complete stock control but such domination of finances, policies and practices that the
controlled corporation has, so to speak, no separate mind, will or existence of its own, and is but a conduit for its principal. It must be kept in mind that the control must be shown to have been
exercised at the time the acts complained of took place. Moreover, the control and breach of duty must proximately cause the injury or unjust loss for which the complaint is made.”

Test in determining the applicability of the doctrine of piercing the veil of corporate fiction.—The test in determining the applicability of the doctrine of piercing the veil of corporate fiction is
as follows:

“1. Control, not mere majority or complete stock control, but complete domination, not only of finances but of policy and business practice in respect to the transaction attacked so that the
corporate entity as to this transaction had at the time no separate mind, will or existence of its own;

2. Such control must have been used by the defendant to commit fraud or wrong, to perpetuate the violation of a statutory or other positive legal duty, or dishonest and unjust act in contravention
of plaintiff’s legal rights; and

3. The aforesaid control and breach of duty must proximately cause the injury or unjust loss complained of. The absence of any one of these elements prevents ‘piercing the corporate veil.’ In
applying the ‘instrumentality’ or ‘alter ego’ doctrine, the courts are concerned with reality and not form, with how the corporation operated and the individual defendant’s relationship to that
operation.”

The question of whether a corporation is a mere alter ego, a mere sheet or paper corporation, a sham or a subterfuge is purely one of fact.—Thus, the question of whether a corporation
is a mere alter ego, a mere sheet or paper corporation, a sham or a subterfuge is purely one of fact.
20 La Compana Coffee Factory vs "Disregarding Corporate Entity.—The doctrine that a corporation is a legal entity existing separate and apart from the persons composing it is a legal theory introduced for purposes of https://drive.google.com/file/d/17JLkTlBHt08b7O5qp1KH4Wp9VE2BWmrf/view?
Kaisahan ng Manggagawa, GR No. L- convenience and to subserve the ends of justice. The concept cannot, therefore, be extended to a point beyond its reason and policy, and when invoked in support of an end subversive of this usp=drive_link
5677, 1953 policy, will be disregarded by the courts. Thus, in an appropriate case and in furtherance of the ends of justice, a corporation and the individual or individuals owning all its stocks and assets will
be-treated as identical, the corporate entity being disregarded where used as a cloak or cover for fraud or illegality.

A subsidiary or auxiliary corporation which is created by a parent corporation merely as an agency for the latter may sometimes be regarded as identical with the parent corporation, especially if
the stockholders or officers of the two corporations are substantially the same or their system of operation unified."