ROVELS ENTERPRISE, Inc. vs OCAMPO 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 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 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of December 29, 1975 authorizing the payment of creditors with unissued shares of the corporation be as it is hereby repealed: Resolved further that the matter as well as the amount of the creditors claims be given adequate study and consideration by the Board.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 They also alleged that the TTTDC Board Resolution dated December 29, 1975 was repealed by the March 1, 1976 Resolution.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. Consequently, the issuance of shares of stock to corporate creditors of the Tagaytay Taal Tourist Development Corporation Corporation is null and void. > Subsequently, TTTDC, Jose Silva, Emmanuel Ocampo, et. al., and another stockholder of TTTDC, (the SILVA GROUP, 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 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]). 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 priviesin-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 mere alter ego or 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 W orkers 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 f acilities 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.
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 f act 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, 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.
ISSUE:
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). (BSPA). They were employed employed as security guards. 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 t he 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 filed a complaint 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. 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 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 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’ 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 f or 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 individual incorporators, officers and directors could not be properly directed against the corporation without violating basic principles governing corporations.
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