KUKAN INTERNATIONAL CORPORATION vs. REYES G.R. No. 182729
September 29 2!1!
"ACTS# Sometime "ACTS# Sometime in March 1998, Kukan, Inc. conducted bidding for the supply and instal installat lation ion of sig signag nages es in a build building ing being being constr construc ucted ted in Makati Makati City City. omeo omeo Morales tendered the !inning bid and !as a!arded the "h" # million contract. Short changed, Morales $led a Complaint !ith the %C against Kukan, Inc. for a sum of money. %he %C rendered a &ecision in fa'or of Morales and against Kukan, Inc. (fter the decision became $nal and e)ecutory, Morales mo'ed for and secured a !rit of e)ecution against Kukan, Inc. %he sheri* then le'ied upon 'arious personal properties of Kukan International Corporation +KIC. KIC then $led an (-da'it of %hird"arty %hird"arty Claim. /otably, KIC !as incorporated in (ugust 0, or shortly after Kukan, Inc. had stopped participating in Ci'il Case. In reaction to the third party claim, Morales interposed an 2mnibus Motion dated (pril 3, 03. In it, Morales prayed, applying the principle of piercing the 'eil of corporate $ction, that an order be issued for the satisfaction of the 4udgment debt of Kukan, Inc. !ith the properties under the name or in the possession of KIC, it being alleged that both corporations are but one and the same entity. 5y 2rder of May 09, 03 as reiterated in a subse6uent order, the court denied the omnibus motion. In a bid to establish the link bet!een KIC and Kukan, Inc., and thus determine the true relationship relationship bet!een the t!o, Morales $led a Motion for 7)amination of udgment &ebtors dated May , 0#. In this motion Morales sought that subpoena be issued against the primary stockholders of Kukan, Inc., among them Michael Chan, a.k.a. Chan Kai Kit. %his too !as denied by the trial court in an 2rder dated May 0, 0#. Morales then sought the inhibition of the presiding 4udge, 7duardo 5. "eralta, "eralta, r., !ho e'entually granted the motion. %he case !as rera:ed to 5ranch 01, presided by public respondent udge (mor eyes. eyes. 5efore the Manila %C, 5ranch 01, Morales $led a Motion to "ierce the ;eil of Corporate s KIC>s motion motion for recon reconsid sidera eratio tion n in the assail assailed ed resol resoluti ution. on. ?ence, ?ence, the instant petition for re'ie!. ISSUE# @het @hethe herr the the tria triall and and appe appell llat ate e cour courts ts corr correc ectl tly y appl applie ied, d, unde underr the the premises, premises, the principle of piercing the 'eil of corporate $ction. RULING# RULING# "iercing the 'eil of corporate entity apllies onlyA +1 the court must $rst ac6uire 4urisdiction o'er the corporation or corporations in'ol'ed before its or their separate personalities are disregardedB and +0 the doctrine of piercing the 'eil of corporate entity can only be raised during a fullblo!n trial o'er a cause of action
duly commenced in'ol'ing parties duly brought under the authority of the court by !ay of ser'ice of summons or !hat passes as such ser'ice. Mere o!nership by a single stockholder or by another corporation of a substantial block of shares of a corporation does not, standing alone, pro'ide su-cient 4usti$cation for disregarding the separate corporate personality. s $nances, policies, and business practicesB he used such control to commit fraudB and the control !as the pro)imate cause of the $nancial loss complained of by Morales. %he absence of any of the elements pre'ents the piercing of the corporate 'eil. (nd indeed, the records do not sho! the presence of these elements. In $ne, there is no sho!ing that the incorporation, and the separate and distinct personality, of KIC !as used to defeat Morales> right to reco'er from Kukan, Inc. udging from the records, no serious attempt !as made to le'y on the properties of Kukan, Inc. Morales could not, thus, 'alidly argue that Kukan, Inc. tried to a'oid liability or had no property against !hich to proceed. %he suggestion that KIC is but a continuation and successor of Kukan, Inc., o!ned and controlled as they are by the same stockholders, stands !ithout factual basis. It is true that Michael Chan, a.k.a. Chan Kai Kit, o!ns of the outstanding capital stock of both corporations. 5ut such circumstance, standing alone, is insu-cient to establish identity. %here must be at least a substantial identity of stockholders for both corporations in order to consider this factor to be constituti'e of corporate identity. 7'idently, the aforementioned case relied upon by Morales cannot 4ustify the application of the principle of piercing the 'eil of corporate $ction to the instant case. (s sho!n by the records, the name Michael Chan, the similarity of business acti'ities engaged in, and incidentally the !ord DKukanD appearing in the corporate names pro'ide the ne)us bet!een Kukan, Inc. and KIC. (s illustrated, these circumstances are insu-cient to establish the identity of KIC as the alter ego or successor of Kukan, Inc.
