CEASE VS CA

FACTS:
Forrest Cease and five (5) other American citizens formed Tiaong Milling and Plantation
Company. Eventually, the shares of the other original incorporators were bought out by
Cease with his children. The companys charter lapsed in June 1958. Forrest Cease died in
August 1959. There was no mention whether there were steps to liquidate the company.
Some of his children wanted an actual division while others wanted a reincorporation. Two of
his children, Benjamin and Florence, initiated Special Proceeding No. 3893 with CFI Tayabas
asking that the Tiaong Milling and Plantation Corporation be declared identical to Forrest
Cease and that its properties be divided among his children as intestate heirs. Defendants
opposed the same but the CFI ruled in favor of the plaintiffs. Defendants filed a notice of
appeal from the CFIs decision but the same was dismissed for being premature. The case
was elevated to the SC which remanded it to the Court of Appeals. The CA dismissed the
petition.
ISSUE: Whether or not the Court of Appeals erred in affirming the lower courts decision that
the subject properties owned by the corporation are also properties of the estate of Forrest
Cease
HELD: NO. The trial court indeed found strong support, one that is based on a wellentrenched principle of law which is the theory of "merger of Forrest L. Cease and The
Tiaong Milling as one personality", or that "the company is only the business conduit and
alter ego of the deceased Forrest L. Cease and the registered properties of Tiaong Milling are
actually properties of Forrest L. Cease and should be divided equally, share and share alike
among his six children, ... ", the trial court aptly applied the familiar exception to the general
rule by disregarding the legal fiction of distinct and separate corporate personality and
regarding the corporation and the individual member one and the same. In shredding the
fictitious corporate veil, the trial judge narrated the undisputed factual premise, thus:
While the records showed that originally its incorporators were aliens, friends or third-parties
in relation to another, in the course of its existence, it developed into a close family
corporation. The Board of Directors and stockholders belong to one family the head of which
Forrest L. Cease always retained the majority stocks and hence the control and management
of its affairs. It must be noted that as his children increase or become of age, he continued
distributing his shares among them adding Florence, Teresa and Marion until at the time of
his death only 190 were left to his name. Definitely, only the members of his family
benefited from the Corporation.
The corporation 'never' had any account with any banking institution or if any account was
carried in a bank on its behalf, it was in the name of Mr. Forrest L. Cease. There is truth in
plaintiff's allegation that the corporation is only a business conduit of his father and an
extension of his personality, they are one and the same thing. Thus, the assets of the
corporation are also the estate of Forrest L. Cease, the father of the parties herein who are
all legitimate children of full blood.
A rich store of jurisprudence has established the rule known as the doctrine of disregarding
or piercing the veil of corporate fiction.
GENERAL RULE: a corporation is vested by law with a personality separate and distinct from
the persons composing it as well as any other legal entity to which it may be related. By

virtue of this attribute, a corporation may not, generally, be made to answer for acts or
liabilities of its stockholders or those of the legal entities to which it may be connected, and
vice versa. This separate and distinct personality is, however, merely a fiction created by law
for convenience and to promote the ends of justice
EXCEPTIONS: Such rule may not be used or invoked for ends subversive of the policy and
purpose behind its creation or which could not have been intended by law to which it owes
its being. This is particularly true where the fiction is used to defeat public convenience,
justify wrong, protect fraud, defend crime, confuse legitimate legal or judicial issues,
perpetrate deception or otherwise circumvent the law
This is likewise true where the corporate entity is being used as an alter ego, adjunct, or
business conduit for the sole benefit of the stockholders or of another corporate. In any of
these cases, the notion of corporate entity will be pierced or disregarded, and the
corporation will be treated merely as an association of persons or, where there are two
corporations, they will be merged as one, the one being merely regarded as part or the
instrumentality of the other.
An indubitable deduction from the findings of the trial court cannot but lead to the
conclusion that the business of the corporation is largely, if not wholly, the personal venture
of Forrest L. Cease. There is not even a shadow of a showing that his children were
subscribers or purchasers of the stocks they own. Their participation as nominal
shareholders emanated solely from Forrest L. Cease's gratuitous dole out of his own shares
to the benefit of his children and ultimately his family.
If the Court sustained the theory of petitioners that the trial court acted in excess of
jurisdiction or abuse of discretion amounting to lack of jurisdiction in deciding the civil case
as a case for partition, Tiaong Milling and Plantation Company would have been able to
extend its corporate existence beyond the period of its charter which lapsed in June, 1958
under the guise and cover of F. L, Cease Plantation Company, Inc. as Trustee which would be
against the law, and as Trustee shall have been able to use the assets and properties for the
benefit of the petitioners, to the great prejudice and defraudation. of private respondents.
Hence, it becomes necessary and imperative to pierce that corporate veil.
The judgment appealed from is AFFIRMED.

CIR VS NORTON
Norton and Harrison is a corporation organized in 1911, (1) to buy and sell at wholesale and
retail, all kinds of goods, wares, and merchandise; (2) to act as agents of manufacturers in
the United States and foreign countries; and (3) to carry on and conduct a general wholesale
and retail mercantile establishment in the Philippines. Jackbilt is, likewise, a corporation
organized on February 16, 1948 primarily for the purpose of making, producing and
manufacturing concrete blocks. Under date of July 27, 1948. Norton and Jackbilt entered into
an agreement whereby Norton was made the sole and exclusive distributor of concrete
blocks manufactured by Jackbilt. Pursuant to this agreement, whenever an order for
concrete blocks was received by the Norton & Harrison Co. from a customer, the order was
transmitted to Jackbilt which delivered the merchandise direct to the customer. Payment for
the goods is, however, made to Norton, which in turn pays Jackbilt the amount charged the
customer less a certain amount, as its compensation or profit.
It was under this procedure that the sale of concrete blocks manufactured by Jackbilt was
conducted until May 1, 1953, when the agency agreement was terminated and a
management agreement between the parties was entered into. The management
agreement provided that Norton would sell concrete blocks for Jackbilt, for a fixed monthly
fee of P2,000.00, which was later increased to P5,000.00.
During the existence of the distribution or agency agreement, or on June 10, 1949, Norton &
Harrison acquired by purchase all the outstanding shares of stock of Jackbilt. Apparently, due
to this transaction, the Commissioner of Internal Revenue, after conducting an investigation,
assessed the respondent Norton & Harrison for deficiency sales tax and surcharges in the
amount of P32,662.90, making as basis thereof the sales of Norton to the Public. In other
words, the Commissioner considered the sale of Norton to the public as the original sale and
not the transaction from Jackbilt. The period covered by the assessment was from July 1,
1949 to May 31, 1953. As Norton and Harrison did not conform with the assessment, the
matter was brought to the Court of Tax Appeals.
Held:
It has been settled that the ownership of all the stocks of a corporation by another
corporation does not necessarily breed an identity of corporate interest between the two
companies and be considered as a sufficient ground for disregarding the distinct
personalities (Liddell & Co., Inc. v. Coll. of Int. Rev. L-9687, June 30, 1961). However, in the
case at bar, we find sufficient grounds to support the theory that the separate identities of
the two companies should be disregarded. Among these circumstances, which we find not

successfully refuted by appellee Norton are: (a) Norton and Harrison owned all the
outstanding stocks of Jackbilt; of the 15,000 authorized shares of Jackbilt on March 31, 1958,
14,993 shares belonged to Norton and Harrison and one each to seven others; (b) Norton
constituted Jackbilt's board of directors in such a way as to enable it to actually direct and
manage the other's affairs by making the same officers of the board for both companies. For
instance, James E. Norton is the President, Treasurer, Director and Stockholder of Norton. He
also occupies the same positions in Jackbilt corporation, the only change being, in the
Jackbilt, he is merely a nominal stockholder. The same is true with Mr. Jordan, F. M. Domingo,
Mr. Mantaring, Gilbert Golden and Gerardo Garcia, while they are merely employees of the
North they are Directors and nominal stockholders of the Jackbilt (c) Norton financed the
operations of the Jackbilt, and this is shown by the fact that the loans obtained from the RFC
and Bank of America were used in the expansion program of Jackbilt, to pay advances for
the purchase of equipment, materials rations and salaries of employees of Jackbilt and other
sundry expenses. There was no limit to the advances given to Jackbilt so much so that as of
May 31, 1956, the unpaid advances amounted to P757,652.45, which were not paid in cash
by Jackbilt, but was offset by shares of stock issued to Norton, the absolute and sole owner
of Jackbilt; (d) Norton treats Jackbilt employees as its own. Evidence shows that Norton paid
the salaries of Jackbilt employees and gave the same privileges as Norton employees, an
indication that Jackbilt employees were also Norton's employees. Furthermore service
rendered in any one of the two companies were taken into account for purposes of
promotion; (e) Compensation given to board members of Jackbilt, indicate that Jackbilt is
merely a department of Norton.

McLeod vs NLRC
On February 2, 1995, John F. McLeod filed a complaint for retirement benefits, vacation and
sick leave benefits, non-payment of unused airline tickets, holiday pay, underpayment of
salary and 13th month pay, moral and exemplary damages, attorneys fees plus interest
against Filipinas Synthetic Corporation (Filsyn), Far Eastern Textile Mills, Inc., Sta. Rosa
Textiles, Inc., Patricio Lim and Eric Hu.
Complainant alleged that he is an expert in textile manufacturing process; that as
early as 1956 he was hired as the Assistant Spinning Manager of Universal Textiles, Inc.
(UTEX); that he was promoted to Senior Manager and worked for UTEX till 1980 under its
President, respondent Patricio Lim; that in 1978 Patricio Lim formed Peggy Mills, Inc. with
respondent Filsyn having controlling interest; that complainant was absorbed by Peggy Mills
as its Vice President and Plant Manager of the plant at Sta. Rosa, Laguna; that at the time of
his retirement complainant was receiving P60,000.00 monthly with vacation and sick leave
benefits; 13th month pay, holiday pay and two round trip business class tickets on a ManilaLondon-Manila itinerary every three years which is convertible to cas[h] if unused; that in
January 1986, respondents failed to pay vacation and leave credits and requested
complainant to wait as it was short of funds but the same remain unpaid at present; that
complainant is entitled to such benefit as per CBA provision.

In 1991 Filsyn sold Peggy Mills, Inc. to Far Eastern Textile Mills, Inc. as per agreement and
this was renamed as Sta. Rosa Textile with Patricio Lim as Chairman and President;
complainant alleged that all respondents being one and the same entities are solidarily
liable for all salaries and benefits and complainant is entitled to; that all respondents have
the same address at 12/F B.A. Lepanto Building, Makati City; that their counsel holds office in
the same address; that all respondents have the same offices and key personnel such as
Patricio Lim and Eric Hu; that respondents Position Paper is verified by Marialen C. Corpuz
who knows all the corporate officers of all respondents; that the veil of corporate fiction may
be pierced if it is used as a shield to perpetuate fraud and confuse legitimate issues.
On 3 April 1998, the Labor Arbiter rendered his decision.
Filipinas Synthetic Fiber Corporation (Filsyn), Far Eastern Textile Mills, Inc. (FETMI), Sta. Rosa
Textiles, Inc. (SRTI), Patricio L. Lim (Patricio), and Eric Hu appealed to the NLRC.
WHEREFORE, the Decision dated 3 April 1998 is hereby REVERSED and SET ASIDE and a new
one is entered ORDERING respondent Peggy Mills, Inc. to pay complainant his retirement pay
equivalent to 22.5 days for every year of service for his twelve (12) years of service from
1980 to 1992 based on a salary rate of P50,495.00 a month.
The Court of Appeals rejected McLeods theory that all respondent corporations are the
same corporate entity which should be held solidarily liable for the payment of his monetary
claims.
The Court of Appeals ruled that the fact that (1) all respondent corporations have the same
address; (2) all were represented by the same counsel, Atty. Isidro S. Escano; (3) Atty.
Escano holds office at respondent corporations address; and (4) all respondent corporations
have common officers and key personnel, would not justify the application of the doctrine of
piercing the veil of corporate fiction.
The Court of Appeals held that there should be clear and convincing evidence that SRTI,
FETMI, and Filsyn were being used as alter ego, adjunct or business conduit for the sole
benefit of Peggy Mills, Inc. (PMI), otherwise, said corporations should be treated as distinct
and separate from each other.
Held:
McLeod claims that "for purposes of determining employer liability, all private respondents
are one and the same employer" because: (1) they have the same address; (2) they are all
engaged in the same business; and (3) they have interlocking directors and officers.35
This assertion is untenable.
A corporation is an artificial being invested by law with a personality separate and distinct
from that of its stockholders and from that of other corporations to which it may be
connected.36
While a corporation may exist for any lawful purpose, the law will regard it as an association
of persons or, in case of two corporations, merge them into one, when its corporate legal
entity is used as a cloak for fraud or illegality. This is the doctrine of piercing the veil of
corporate fiction. The doctrine applies only when such corporate fiction is used to defeat
public convenience, justify wrong, protect fraud, or defend crime,37 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.38
To disregard the separate juridical personality of a corporation, the wrongdoing must be
established clearly and convincingly. It cannot be presumed.39
Here, we do not find any of the evils sought to be prevented by the doctrine of piercing the
corporate veil.
Respondent corporations may be engaged in the same business as that of PMI, but this fact
alone is not enough reason to pierce the veil of corporate fiction.40
Personal liability of corporate directors, trustees or officers attaches only when (1) they
assent to a patently unlawful act of the corporation, or when they are guilty of bad faith or
gross negligence in directing its affairs, or when there is a conflict of interest resulting in
damages to the corporation, its stockholders or other persons; (2) they consent to the
issuance of watered down stocks or when, having knowledge of such issuance, do not
forthwith file with the corporate secretary their written objection; (3) they agree to hold
themselves personally and solidarily liable with the corporation; or (4) they are made by
specific provision of law personally answerable for their corporate action.57
On Patricios personal liability, it is settled that in the absence of malice, bad faith, or
specific provision of law, a stockholder or an officer of a corporation cannot be made
personally liable for corporate liabilities.55
Considering that McLeod failed to prove any of the foregoing exceptions in the present case,
McLeod cannot hold Patricio solidarily liable with PMI.
The records are bereft of any evidence that Patricio acted with malice or bad faith. Bad faith
is a question of fact and is evidentiary. Bad faith does not connote bad judgment or
negligence. It imports a dishonest purpose or some moral obliquity and conscious
wrongdoing. It means breach of a known duty through some ill motive or interest. It partakes
of the nature of fraud.58
In the present case, there is nothing substantial on record to show that Patricio acted in bad
faith in terminating McLeods services to warrant Patricios personal liability. PMI had no
other choice but to stop plant operations. The work stoppage therefore was by necessity.
The company could no longer continue with its plant operations because of the serious
business losses that it had suffered. The mere fact that Patricio was president and director of
PMI is not a ground to conclude that he should be held solidarily liable with PMI for McLeods
money claims.

De Asis and Co vs CA
Defendant Francisco de Asis & Co., Inc. was organized sometime in 1967 with
Francisco de Asis as its president and Leocadio de Asis as one of the members of the Board
of Directors, As a stock brokerage company, it did business in the Makati Stock Exchange
wherein one becomes a member upon the execution of an undertaking by at least 2
members of its Board of Directors who own 95% of the stocks to answer solidarily for the
corporation liabilities of the member company. Leocadio de Asis and Francisco de Asis who
owned 95% of the outstanding capital stock of the Francisco de Asis & Co., Inc. executed a

joint and several undertaking on July 25, 1967 wherein they jointly and severally warrant the
equitable payment of all valid and legitimate corporate liabilities of Francisco de Asis & Co.,
Inc. in connection with its membership in the Makati Stock Exchange.
Sometime in June, 1970 the defendant company thru its president Francisco de Asis
approached Mrs. Mercedes P. Delgado for assistance to secure a loan in the amount of
P200,000.00 from the Resource & Finance Corporation. Since Francisco de Asis was a good
friend and his father Leocadio de Asis was solvent and answerable in a joint and solidarily
undertaking of the company, she agreed to raise the amount of P200,000.00 as requested.
On the part of the defendants only Leocadio de Asis testified. He stated that he is a lawyer.
He was compelled to execute this joint and several undertaking which in his opinion is null
and void especially considering that a nominal stock member like himself will be held liable
because no license will be issued unless this condition is first satisfied.
The corporation had never pass any resolution authorizing Francisco de Asis to secure a loan
of P200,000.00 from Mercedes P. Delgado. As a matter of fact, he had no knowledge of this
transaction except when the instant suit was filed.
Petitioners raised the same assignments of errors presented and passed upon by the
appellate court that the latter erred (1) in declaring that the obligation sued upon was
corporate loan of Francisco de Asis and Co., Inc. and not a personal loan of Francisco de Asis
with the private respondent; and (2) in holding petitioner Leocadio de Asis liable, jointly and
severally, with petitioners Francisco de Asis and Francisco de Asis & Co., Inc. under the "Joint
and Several Undertakings."

If the transaction contemplated by the parties herein is that of a personal loan to Francisco
de Asis, then plaintiff could have simply written out a check in the latter's name or deposited
the amount of the loan in his personal account. (page 33, Rollo).
The claim of the corporation that it had not authorized Francisco de Asis to obtain loan for
the company from the private respondent is belied by the fact that upon deposit of the sum
of P200,000.00 in its current account, it had retained and disbursed the said amount. And,
assuming that it had not really authorized Francisco de Asis to borrow money from private
respondent, the company is still obliged to return the same under Article 2154 of the Civil
Code which provides:
If something is received when there is no right to demand it, and it was unduly delivered
through mistake, the obligation to return it arises.
Relative to the argument that Francisco and Leocadio de Asis' liability under their "Joint and
Several Undertaking" is limited to the obligation of the corporation in connection with its
membership at the Makati Stock Exchange, their liability is spelled out by Exhibit "A" as
follows:
NOW, THEREFORE, for and in consideration of the foregoing premises, the Owners
hereby jointly and severally warrant the equitable payment of all valid and legitimate
corporate liabilities of the Francisco de Asis & Co., Inc. in connection with its membership at
the Makati Stock Exchange.
The execution of the foregoing instrument is a requirement for membership in the Makati
Stock Exchange. Subdivision 2, Section 1 of Article XIII of the Constitution of the Makati
Stock Exchange clearly states:

that stockholders owning at least 95% of the outstanding capital stock of the
applicant corporation shall execute a public instrument making themselves jointly and
severally liable without limitation for all the transactions and dealings of said corporation
and a copy of said document shall be filed with the Commission provided, however, that if
the 95% outstanding capital stock is owned by only one person another stockholder shall be
required to execute with him the said public instrument or guaranty.
And, as pointed out by respondent appellate court, "Leocadio and Francisco de Asis
knowingly and voluntarily executed and signed the Joint and Several Undertaking, Exhibit
"A" ". More so, in the case of Leocadio de Asis who is a lawyer and, therefore, knew the legal
import and far-reaching consequences of the document he signed.

Martinez vs CA

BPI International Finance3 is a foreign corporation not doing business in the Philippines, with
office address at the Bank of America Tower, 12 Harcourt Road, Central Hongkong. It was a
deposit-taking company organized and existing under and by virtue of the laws of Hongkong,
and was also engaged in investment banking operations therein.