Yao vs People

Yao, Sr. vs. People G.R. No. 168306

June 19, 2007

FACTS:

Petitioners William Yao, Sr. and several others were incorporators and officers of Masagana Gas Corporation. In 2003, the NBI, acting on reports that petitioners unlawfully and in violation of intellectual property rights of Petron Corporation and Pilipinas Shell, produce, sell, distribute LPG products using LPG cylinders owned by Petron and Shell and by virtue of search warrants, raided the premises of Masagana and confiscated, among other things, the motor compressor and refilling machine owned by Masagana. Masagana Corporation intervened in the case and asked for the return of said pieces of equipment. It argued that even if the same was being used by petitioners in their unlawful activity, the equipment cannot be confiscated because having a personality separate and distinct from that of its incorporators, directors and officers, said properties are owned by the corporation and not by the petitioners. The court denied Masagana’s motion.

ISSUE:

Whether or not the doctrine of piercing the veil of corporate entity is applicable in the case.

RULING:

The Supreme Court reiterated that it is a fundamental principle of corporation law that a corporation is an entity separate and distinct from its stockholders, directors or officers. However, when the 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 or in the case of two corporations merge them into one. Hence, in this case, liability will attach personally or directly to the officers and stockholders.

The findings of the Court show that petitioners, as director/officers of Masagana were utilizing the corporation in violating the intellectual property rights of Petron and Pilipinas Shell. As such, the doctrine of piercing the veil of corporate entity applies.