Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION

G.R. No. 108734 May 29, 1996

CONCEPT BUILDERS, INC., petitioner,
vs.
THE NATIONAL LABOR RELATIONS COMMISSION, (First Division); and
Norberto Marabe; Rodolfo Raquel, Cristobal Riego, Manuel Gillego,
Palcronio Giducos, Pedro Aboigar, Norberto Comendador, Rogelio Salut,
Emilio Garcia, Jr., Mariano Rio, Paulina Basea, Alfredo Albera, Paquito
Salut, Domingo Guarino, Romeo Galve, Dominador Sabina, Felipe Radiana,
Gavino Sualibio, Moreno Escares, Ferdinand Torres, Felipe Basilan, and
Ruben Robalos, respondents.

HERMOSISIMA, JR., J.:p

The corporate mask may be lifted and the corporate veil may be pierced when a
corporation is just but the alter ego of a person or of another corporation. Where
badges of fraud exist; where public convenience is defeated; where a wrong is
sought to be justified thereby, the corporate fiction or the notion of legal entity
should come to naught. The law in these instances will regard the corporation as a
mere association of persons and, in case of two corporations, merge them into one.
Thus, where a sister corporation is used as a shield to evade a corporation's
subsidiary liability for damages, the corporation may not be heard to say that it has
a personality separate and distinct from the other corporation. The piercing of the
corporate veil comes into play.
This special civil action ostensibly raises the question of whether the National Labor
Relations Commission committed grave abuse of discretion when it issued a "breakopen order" to the sheriff to be enforced against personal property found in the
premises of petitioner's sister company.
Petitioner Concept Builders, Inc., a domestic corporation, with principal office at 355
Maysan Road, Valenzuela, Metro Manila, is engaged in the construction business.
Private respondents were employed by said company as laborers, carpenters and
riggers.

On November, 1981, private respondents were served individual written notices of

termination of employment by petitioner, effective on November 30, 1981. It was
stated in the individual notices that their contracts of employment had expired and
the project in which they were hired had been completed.
Public respondent found it to be, the fact, however, that at the time of the
termination of private respondent's employment, the project in which they were
hired had not yet been finished and completed. Petitioner had to engage the
services of sub-contractors whose workers performed the functions of private
respondents.
Aggrieved, private respondents filed a complaint for illegal dismissal, unfair labor
practice and non-payment of their legal holiday pay, overtime pay and thirteenthmonth pay against petitioner.
On December 19, 1984, the Labor Arbiter rendered judgment 1 ordering petitioner to
reinstate private respondents and to pay them back wages equivalent to one year
or three hundred working days.
On November 27, 1985, the National Labor Relations Commission (NLRC) dismissed
the motion for reconsideration filed by petitioner on the ground that the said
decision had already become final and executory. 2
On October 16, 1986, the NLRC Research and Information Department made the
finding that private respondents' back wages amounted to P199,800.00. 3
On October 29, 1986, the Labor Arbiter issued a writ of execution directing the
sheriff to execute the Decision, dated December 19, 1984. The writ was partially
satisfied through garnishment of sums from petitioner's debtor, the Metropolitan
Waterworks and Sewerage Authority, in the amount of P81,385.34. Said amount
was turned over to the cashier of the NLRC.
On February 1, 1989, an Alias Writ of Execution was issued by the Labor Arbiter
directing the sheriff to collect from herein petitioner the sum of P117,414.76,
representing the balance of the judgment award, and to reinstate private
respondents to their former positions.
On July 13, 1989, the sheriff issued a report stating that he tried to serve
the alias writ of execution on petitioner through the security guard on duty but the
service was refused on the ground that petitioner no longer occupied the premises.
On September 26, 1986, upon motion of private respondents, the Labor Arbiter
issued a second alias writ of execution.
The said writ had not been enforced by the special sheriff because, as stated in his
progress report, dated November 2, 1989:

1. All the employees inside petitioner's premises at 355 Maysan Road, Valenzuela,
Metro Manila, claimed that they were employees of Hydro Pipes Philippines, Inc.
(HPPI) and not by respondent;
2. Levy was made upon personal properties he found in the premises;
3. Security guards with high-powered guns prevented him from removing the
properties he had levied upon. 4
The said special sheriff recommended that a "break-open order" be issued to enable
him to enter petitioner's premises so that he could proceed with the public auction
sale of the aforesaid personal properties on November 7, 1989.
On November 6, 1989, a certain Dennis Cuyegkeng filed a third-party claim with the
Labor Arbiter alleging that the properties sought to be levied upon by the sheriff
were owned by Hydro (Phils.), Inc. (HPPI) of which he is the Vice-President.
On November 23, 1989, private respondents filed a "Motion for Issuance of a BreakOpen Order," alleging that HPPI and petitioner corporation were owned by the same
incorporator/stockholders. They also alleged that petitioner temporarily suspended
its business operations in order to evade its legal obligations to them and that
private respondents were willing to post an indemnity bond to answer for any
damages which petitioner and HPPI may suffer because of the issuance of the
break-open order.
In support of their claim against HPPI, private respondents presented duly certified
copies of the General Informations Sheet, dated May 15, 1987, submitted by
petitioner to the Securities Exchange Commission (SEC) and the General
Information Sheet, dated May 25, 1987, submitted by HPPI to the Securities and
Exchange Commission.
The General Information Sheet submitted by the petitioner revealed the following:
1. Breakdown of Subscribed Capital
Name of Stockholder Amount Subscribed
HPPI P 6,999,500.00
Antonio W. Lim 2,900,000.00
Dennis S. Cuyegkeng 300.00
Elisa C. Lim 100,000.00
Teodulo R. Dino 100.00
Virgilio O. Casino 100.00

2. Board of Directors
Antonio W. Lim Chairman
Dennis S. Cuyegkeng Member
Elisa C. Lim Member
Teodulo R. Dino Member
Virgilio O. Casino Member
3. Corporate Officers
Antonio W. Lim President
Dennis S. Cuyegkeng Assistant to the President
Elisa O. Lim Treasurer
Virgilio O. Casino Corporate Secretary
4. Principal Office
355 Maysan Road
Valenzuela, Metro Manila. 5
On the other hand, the General Information Sheet of HPPI revealed the following:
1. Breakdown of Subscribed Capital
Name of Stockholder Amount Subscribed
Antonio W. Lim P 400,000.00
Elisa C. Lim 57,700.00
AWL Trading 455,000.00
Dennis S. Cuyegkeng 40,100.00
Teodulo R. Dino 100.00
Virgilio O. Casino 100.00
2. Board of Directors
Antonio W. Lim Chairman
Elisa C. Lim Member

Dennis S. Cuyegkeng Member

Virgilio O. Casino Member
Teodulo R. Dino Member
3. Corporate Officers
Antonio W. Lim President
Dennis S. Cuyegkeng Assistant to the President
Elisa C. Lim Treasurer
Virgilio O. Casino Corporate Secretary
4. Principal Office
355 Maysan Road, Valenzuela, Metro Manila. 6
On February 1, 1990, HPPI filed an Opposition to private respondents' motion for
issuance of a break-open order, contending that HPPI is a corporation which is
separate and distinct from petitioner. HPPI also alleged that the two corporations
are engaged in two different kinds of businesses, i.e., HPPI is a manufacturing firm
while petitioner was then engaged in construction.
On March 2, 1990, the Labor Arbiter issued an Order which denied private
respondents' motion for break-open order.
Private respondents then appealed to the NLRC. On April 23, 1992, the NLRC set
aside the order of the Labor Arbiter, issued a break-open order and directed private
respondents to file a bond. Thereafter, it directed the sheriff to proceed with the
auction sale of the properties already levied upon. It dismissed the third-party claim
for lack of merit.
Petitioner moved for reconsideration but the motion was denied by the NLRC in a
Resolution, dated December 3, 1992.
Hence, the resort to the present petition.
Petitioner alleges that the NLRC committed grave abuse of discretion when it
ordered the execution of its decision despite a third-party claim on the levied
property. Petitioner further contends, that the doctrine of piercing the corporate veil
should not have been applied, in this case, in the absence of any showing that it
created HPPI in order to evade its liability to private respondents. It also contends
that HPPI is engaged in the manufacture and sale of steel, concrete and iron pipes,
a business which is distinct and separate from petitioner's construction business.
Hence, it is of no consequence that petitioner and HPPI shared the same premises,
the same President and the same set of officers and subscribers. 7

We find petitioner's contention to be unmeritorious.

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. 8 But, this separate and distinct personality of a corporation is
merely a fiction created by law for convenience and to promote justice. 9 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, 10 this separate personality of the corporation may be disregarded or the
veil of corporate fiction pierced. 11 This is true likewise when the corporation is
merely an adjunct, a business conduit or an alter ego of another corporation. 12
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. 13
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 instances, 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.
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. 14
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. 15
In this case, the NLRC noted that, while petitioner claimed that it ceased its
business operations on April 29, 1986, it filed an Information Sheet with the
Securities and Exchange Commission on May 15, 1987, stating that its office
address is at 355 Maysan Road, Valenzuela, Metro Manila. On the other hand, HPPI,
the third-party claimant, submitted on the same day, a similar information sheet
stating that its office address is at 355 Maysan Road, Valenzuela, Metro Manila.
Furthermore, the NLRC stated that:
Both information sheets were filed by the same Virgilio O. Casio as the corporate
secretary of both corporations. It would also not be amiss to note that both
corporations had the same president, thesame board of directors,
the same corporate officers, and substantially the same subscribers.
From the foregoing, it appears that, among other things, the respondent (herein
petitioner) and the third-party claimant shared the same address and/or premises.
Under this circumstances, (sic) it cannot be said that the property levied upon by
the sheriff were not of respondents. 16
Clearly, petitioner ceased its business operations in order to evade the payment to
private respondents of back wages and to bar their reinstatement to their former
positions. HPPI is obviously a business conduit of petitioner corporation and its
emergence was skillfully orchestrated to avoid the financial liability that already
attached to petitioner corporation.
The facts in this case are analogous to Claparols v. Court of Industrial
Relations, 17 where we had the occasion to rule:
Respondent court's findings that indeed the Claparols Steel and Nail Plant, which
ceased operation of June 30, 1957, was SUCCEEDED by the Claparols Steel
Corporation effective the next day, July 1, 1957, up to December 7, 1962, when the
latter finally ceased to operate, were not disputed by petitioner. It is very clear that

the latter corporation was a continuation and successor of the first entity . . . . Both
predecessors and successor were owned and controlled by petitioner Eduardo
Claparols and there was no break in the succession and continuity of the same
business. This "avoiding-the-liability" scheme is very patent, considering that 90%
of the subscribed shares of stock of the Claparols Steel Corporation (the second
corporation) was owned by respondent . . . Claparols himself, and all the assets of
the dissolved Claparols Steel and Nail plant were turned over to the emerging
Claparols Steel Corporation.
It is very obvious that the second corporation seeks the protective shield of a
corporate fiction whose veil in the present case could, and should, be pierced as it
was deliberately and maliciously designed to evade its financial obligation to its
employees.
In view of the failure of the sheriff, in the case at bar, to effect a levy upon the
property subject of the execution, private respondents had no other recourse but to
apply for a break-open order after the third-party claim of HPPI was dismissed for
lack of merit by the NLRC. This is in consonance with Section 3, Rule VII of the NLRC
Manual of Execution of Judgment which provides that:
Should the losing party, his agent or representative, refuse or prohibit the Sheriff or
his representative entry to the place where the property subject of execution is
located or kept, the judgment creditor may apply to the Commission or Labor
Arbiter concerned for a break-open order.
Furthermore, our perusal of the records shows that the twin requirements of due
notice and hearing were complied with. Petitioner and the third-party claimant were
given the opportunity to submit evidence in support of their claim.
Hence, the NLRC did not commit any grave abuse of discretion when it affirmed the
break-open order issued by the Labor Arbiter.
Finally, we do not find any reason to disturb the rule that factual findings of quasijudicial agencies supported by substantial evidence are binding on this Court and
are entitled to great respect, in the absence of showing of grave abuse of a
discretion. 18
WHEREFORE, the petition is DISMISSED and the assailed resolutions of the NLRC,
dated April 23, 1992 and December 3, 1992, are AFFIRMED.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 165442

August 25, 2010

NASECO GUARDS ASSOCIATION-PEMA (NAGA-PEMA), Petitioner,

vs.
NATIONAL SERVICE CORPORATION (NASECO), Respondent.
DECISION
VILLARAMA, JR., J.:
This petition for review on certiorari under Rule 45 assails the Decision1 dated May
27, 2004 of the Court of Appeals (CA) in CA-G.R. SP No. 76667. The appellate court
set aside the January 15, 20032 and March 11, 20033 Orders of the Department of
Labor and Employment (DOLE) and ordered the latter to allow the parties to adduce
evidence in support of their respective positions.
The facts follow.
Respondent National Service Corporation (NASECO) is a wholly-owned subsidiary of
the Philippine National Bank (PNB) organized under the Corporation Code in 1975. It

supplies security and manpower services to different clients such as the Securities
and Exchange Commission, the Philippine Deposit Insurance Corporation, Food
Terminal Incorporated, Forex Corporation and PNB. Petitioner NASECO Guards
Association-PEMA (NAGA-PEMA) is the collective bargaining representative of the
regular rank and file security guards of respondent. NASECO Employees Union-PEMA
(NEMU-PEMA) is the collective bargaining representative of the regular rank and file
(non-security) employees of respondent such as messengers, janitors, typists, clerks
and radio-telephone operators.4
On December 2, 1993, respondent entered into a memorandum of agreement 5 with
petitioner. The terms of the agreement covered the monetary claims of the
petitioner such as salary adjustments, conversion of salary scheme under Republic
Act (R.A.) No. 67586 to R.A. No. 6727,7 signing bonus, leaves and other benefits. A
year after, petitioner demanded full negotiation for a collective bargaining
agreement (CBA) with the respondent and submitted its proposals thereto.
On June 8, 1995, petitioner and respondent agreed to sign a CBA on non-economic
terms.8
On September 24, 1996, petitioner filed a notice of strike because of respondents
refusal to bargain for economic benefits in the CBA. Following conciliation hearings,
the parties again commenced CBA negotiations and started to resolve the issues on
wage increase, productivity bonus, incentive bonus, allowances, and other benefits
but failed to reach an agreement.
Meanwhile, respondent and NEMU-PEMA entered into a CBA on non-economic
terms.9 Unfortunately, a dispute among the leaders of NEMU-PEMA arose and at a
certain point, leadership of the organization was unclear. Hence, the negotiations
concerning the economic terms of the CBA were put on hold until the internal
dispute could be resolved.
On April 29, 1997, petitioner filed a notice of strike before the National Conciliation
and Mediation Board (NCMB) against respondent and PNB due to a bargaining
deadlock. The following day, NEMU-PEMA likewise filed a notice of strike against
respondent and PNB on the ground of unfair labor practices. 10 Efforts by the NCMB
to conciliate failed and pursuant to Article 263(g) of the Labor Code,11 as amended,
then DOLE Secretary Cresenciano B. Trajano assumed jurisdiction over the strike
notices on June 25, 1998.12
On November 19, 1999, then DOLE Secretary Bienvenido E. Laguesma issued a
Resolution13 directing petitioner and respondent to execute a new CBA incorporating
therein his dispositions regarding benefits of the employees as to wage increase,
productivity bonus, vacation and sick leave, medical allowances and signing bonus.
Respondent was further ordered to negotiate, for purposes of collective bargaining
agreement, with NEMU-PEMA led by its president, Ligaya Valencia. The charge of
unfair labor practice against respondent and PNB was dismissed. 14

Respondent promptly filed a petition for certiorari before the CA questioning the
DOLE Secretarys order and arguing that the ruling of the DOLE Secretary in favor of
the unions and awarding them monetary benefits totaling five hundred thirty-one
million four hundred forty-six thousand six hundred sixty-six and 67/100
(P531,446,666.67) was inimical and deleterious to its financial standing and will
result in closure and cessation of business for the company.
By Decision15 dated March 19, 2001 (first CA Decision), the CA partly granted the
petition and ruled that a recomputation and reevaluation of the benefits awarded
was in order.
WHEREFORE, the instant petition is partly GRANTED in that the case is remanded to
the Secretary of Labor for purposes of recomputation and reevaluation of the CBA
benefits.
SO ORDERED.16
In compliance with the CA directive, then DOLE Secretary Patricia A. Sto. Tomas
conducted several clarificatory hearings. On January 15, 2003, Secretary Sto. Tomas
issued an Order which provides:
From the above, it is indubitable that the total cost to NASECO of our questioned
award would amount to onlyP322,725,000, not P531,446,666.67 as claimed by the
company. Thus, our November 19, 1999 Order is hereby affirmed en toto.
WHEREFORE, judgment is hereby rendered:
1. [D]irecting NAGA-PEMA and NASECO to execute a new collective bargaining
agreement effective November 1, 1993, incorporating therein the dispositions
contained in our November 19, 1999 Order as well as all other items agreed upon
by the parties.
2. Ordering NASECO to negotiate with NEMA-PEMA for a new collective bargaining
agreement.
The charges of unfair labor practice against NASECO and PNB are dismissed for lack
of merit.
SO ORDERED.17
Respondent filed a motion for reconsideration with the DOLE Secretary which was
denied on March 11, 2003.
Respondent thus filed a petition for certiorari with the CA arguing that the DOLE
Secretary, in issuing the January 15, 2003 Order deprived respondent of due
process of law for there was no reevaluation that took place in the DOLE. It also
argued that the order merely recomputed the DOLE Secretarys initial award
of P531,446,666.67 and reduced it to P322,725,000.00, contrary to the ruling of the

CA to recompute and reevaluate. Respondent claimed that what the DOLE Secretary
should have done was to let the parties introduce evidence to show the proper
computation of the monetary awards under the approved CBA.
In its second Decision dated May 27, 2004, the CA granted the petition, thus:
WHEREFORE, the orders dated 15 January 2003 and 11 March 2003 are hereby SET
ASIDE and the case remanded to the public respondent to allow the parties to
adduce evidence in support of their respective positions.
SO ORDERED.18
A motion for reconsideration was filed by herein petitioner but the same was denied
by the CA on September 22, 200419 finding no reason to reverse and set aside its
earlier decision.
Petitioner now comes to this Court for relief by way of a petition for review on
certiorari seeking to set aside and reverse the May 27, 2004 Decision and the
September 22, 2004 Resolution of the CA.
The main issue in this case is whether or not the respondents right to due process
was violated. A side issue raised by the petitioner is whether or not PNB, being the
undisputed owner of and exercising control over respondent, should be made liable
to pay the CBA benefits awarded to the petitioner.
Petitioner argues first that there was no violation of due process because
respondent was never prohibited by the DOLE Secretary to submit supporting
documents when the instant case was pending on remand. Petitioner contends that
due process is properly observed when there is an opportunity to be heard, to
present evidence and to file pleadings, which was never denied to respondent.
Second, petitioner argues that the CA erred in stating that respondent was a
company operating at a loss and therefore cannot be expected to act generously
and confer upon its employees additional benefits exceeding what is mandated by
law. It is the petitioners position that based on the "no loss, no profit" policy of
respondent with PNB, respondent in truth has no "pocket" of its own and is, in
effect, one (1) and the same with PNB with regard to financial gains and/or
liabilities. Thus, petitioners contend that the CBA benefits should be shouldered by
PNB considering the poor financial condition of respondent. To support such claim,
petitioner submitted evidence 20 to show that PNB is in superb financial condition
and is very much capable of shouldering the CBA award. 21
Respondent on the other hand maintains that the DOLE Secretary violated its right
to due process when she merely recomputed the CBA award instead of reevaluating
the entire case and allowing it to present supporting documents in accordance with
the first CA decision.22 It claims that the order of the CA to reevaluate included and
required a full assessment of the case together with reception of evidence such as

financial statements, and the omission of such is a violation of its right to due
process.
As to the petitioners argument that respondent and PNB are essentially the same
when it comes to financial condition, respondent contends that although a
subsidiary, it has a separate and distinct personality from PNB with its own charter.
Hence, the issue of PNBs financial well-being is immaterial in this case.
The petition is partly meritorious.
In simple terms, the constitutional guarantee of due process requires that a litigant
be given "a day in court." It is the availability of the opportunity to be heard that
determines whether or not due process was violated. A litigant may or may not avail
of the opportunity to be heard but as long as such was made available to him/her,
there is no violation of the due process clause. In the case of Lumiqued v.
Exevea,23 this Court declared that "[a]s long as a party was given the opportunity to
defend his interests in due course, he cannot be said to have been denied due
process of law, for this opportunity to be heard is the very essence of due process.
Moreover, this constitutional mandate is deemed satisfied if a person is granted an
opportunity to seek reconsideration of the action or ruling complained of."
The respondents right to due process in this case has not been denied. The order in
the first CA decision to recompute and reevaluate was satisfied when the DOLE
Secretary reexamined their initial findings and adjusted the awarded benefits. A
reevaluation, contrary to what the respondent claims, is a process by which a
person or office (in this case the DOLE secretary) revisits its own initial
pronouncement and makes another assessment of its findings. In simple terms, to
reevaluate is to take another look at a previous matter in issue. A reevaluation does
not necessitate the introduction of new materials for review nor does it require a full
hearing for new arguments.
From a procedural standpoint, a reevaluation is a continuation of the original case
and not a new proceeding. Hence, the evidence, financial reports and other
documents submitted by the parties in the course of the original proceeding are to
be visited and reviewed again. In this light, the respondent has been given the
opportunity to be heard by the DOLE Secretary.
Also, contrary to the claim of the respondent that it was barred by the DOLE
Secretary to introduce supporting documents during the recomputation and
reevaluation, the records show that an Order by then Secretary of Labor Patricia A.
Sto. Tomas dated July 11, 2002 specifically allowed both parties to submit their
respective computations as regards the awarded benefits. To wit:
WHEREFORE, the Bureau of Working Conditions is hereby directed to submit to this
Office a detailed computation of the CBA benefits indicated in the resolution of

November 19, 2001 within twenty (20) days from receipt of this Order. The parties
may submit their own computations to the Bureau for validation.
SO ORDERED.24 (Italics supplied.)
It is thus inaccurate for the respondent to claim that it was denied due process
because it had all the opportunity to introduce any supporting document in the
course of the recomputation and reevaluation of the DOLE Secretary. Respondent
admits that it did attach the financial statements and other documents in support of
its alleged financial incapacity to pay the CBA awarded benefits, the same evidence
it had earlier submitted before the CA (Memorandum in the first CA decision) in the
motion for reconsideration of the DOLE Secretarys January 15, 2003 Order. 25 There
is thus no showing that the DOLE Secretary denied respondent this basic
constitutional right.
On the issue of liability, petitioner contends that PNB should be held liable to
shoulder the CBA benefits awarded to them by virtue of it being a company having
full financial, managerial and functional control over respondent as its subsidiary,
and by reason of the unique "no loss, no profit" scheme implemented between
respondent and PNB.
We are not persuaded.
Verily, what the petitioner is asking this Court to do is to pierce the veil of corporate
fiction of respondent and hold PNB (being the mother company) liable for the CBA
benefits.
In Concept Builders, Inc. v. NLRC,26 we explained the doctrine of piercing the
corporate veil, as follows:
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.
Also in Pantranco Employees Association (PEA-PTGWO) v. National Labor Relations
Commission,27 this Court ruled:
Whether the separate personality of the corporation should be pierced hinges on
obtaining facts appropriately pleaded or proved. However, any piercing of the
corporate veil has to be done with caution, albeit the Court will not hesitate to
disregard the corporate veil when it is misused or when necessary in the interest of

justice. After all, the concept of corporate entity was not meant to promote unfair
objectives.
Applying the doctrine to the case at bar, we find no reason to pierce the corporate
veil of respondent and go beyond its legal personality. Control, by itself, does not
mean that the controlled corporation is a mere instrumentality or a business conduit
of the mother company. Even control over the financial and operational concerns of
a subsidiary company does not by itself call for disregarding its corporate fiction.
There must be a perpetuation of fraud behind the control or at least a fraudulent or
illegal purpose behind the control in order to justify piercing the veil of corporate
fiction. Such fraudulent intent is lacking in this case.
Petitioner argues that the appreciation, analysis and inquiry of this case may go
beyond the presentation of respondent, and therefore must include the PNB, the
bank being the undisputed whole owner of respondent and the sole provider of
funds for the companys operations and for the payment of wages and benefits of
the employees, under the "no loss, no profit" scheme. 28
We disagree. There is no showing that such "no loss, no profit" scheme between
respondent and PNB was implemented to defeat public convenience, justify wrong,
protect fraud or defend crime, or is used as a device to defeat the labor laws, nor
does the scheme show that respondent is a mere business conduit or alter ego of
PNB. Absent proof of these circumstances, respondents corporate personality
cannot be pierced.1wphi1
It is apparent that petitioner wants the Court to disregard the corporate personality
of respondent and directly go after PNB in order for it to collect the CBA benefits. On
the same breath, however, petitioner argues that ultimately it is PNB, by virtue of
the "no loss, no profit" scheme, which shoulders and provides the funds for financial
liabilities of respondent including wages and benefits of employees. If such scheme
was indeed true as the petitioner presents it, then there was absolutely no need to
pierce the veil of corporate fiction of respondent. Moreover, the Court notes the
pendency of a separate suit for absorption or regularization of NASECO employees
filed by petitioner and NEMU-PEMA against PNB and respondent, docketed as NLRC
NCR Case No. 06-03944-96), which is still on appeal with the National Labor
Relations Commission (NLRC), as per manifestation by respondent. In the said case,
petitioner submitted for resolution by the labor tribunal the issues of whether PNB is
the employer of NASECOs work force and whether NASECO is a labor-only
contractor.29
WHEREFORE, the petition is PARTLY GRANTED. The Decision dated May 27, 2004
and Resolution dated September 22, 2004 in CA-G.R. SP No. 76667 are hereby
REVERSED and SET ASIDE as to the order to remand the case to the Secretary of
Labor for introduction of supporting evidence. Accordingly, the Orders of the

Secretary of Labor dated January 15, 2003 and March 11, 2003 are REINSTATED and
UPHELD.
No costs.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 170689

March 17, 2009

PANTRANCO EMPLOYEES ASSOCIATION (PEA-PTGWO) and PANTRANCO

RETRENCHED EMPLOYEES ASSOCIATION (PANREA), Petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION (NLRC), PANTRANCO NORTH
EXPRESS, INC. (PNEI), PHILIPPINE NATIONAL BANK (PNB), PHILIPPINE
NATIONAL BANK-MANAGEMENT AND DEVELOPMENT CORPORATION (PNBMADECOR), and MEGA PRIME REALTY AND HOLDINGS CORPORATION (MEGA
PRIME), Respondents.
x - - - - - - - - - - - - - - - - - - - - - - -x
G.R. No. 170705

March 17, 2009

PHILIPPINE NATIONAL BANK, Petitioner,

vs.
PANTRANCO EMPLOYEES ASSOCIATION, INC. (PEA-PTGWO), PANTRANCO
RETRENCHED EMPLOYEES ASSOCIATION (PANREA) AND PANTRANCO
ASSOCIATION OF CONCERNED EMPLOYEES (PACE), ET AL., PHILIPPINE
NATIONAL BANK-MANAGEMENT DEVELOPMENT CORPORATION (PNBMADECOR), and MEGA PRIME REALTY HOLDINGS, INC., Respondents.
DECISION
NACHURA, J.:
Before us are two consolidated petitions assailing the Court of Appeals (CA)
Decision1 dated June 3, 2005 and its Resolution2 dated December 7, 2005 in CA-G.R.
SP No. 80599.

In G.R. No. 170689, the Pantranco Employees Association (PEA) and Pantranco
Retrenched Employees Association (PANREA) pray that the CA decision be set aside
and a new one be entered, declaring the Philippine National Bank (PNB) and PNB
Management and Development Corporation (PNB-Madecor) jointly and solidarily
liable for the P722,727,150.22 National Labor Relations Commission (NLRC)
judgment in favor of the Pantranco North Express, Inc. (PNEI) employees; 3 while in
G.R. No. 170705, PNB prays that the auction sale of the Pantranco properties be
declared null and void.4
The facts of the case, as found by the CA, 5 and established in Republic of the Phils.
v. NLRC,6 Pantranco North Express, Inc. v. NLRC,7 and PNB MADECOR v. Uy,8 follow:
The Gonzales family owned two corporations, namely, the PNEI and Macris Realty
Corporation (Macris). PNEI provided transportation services to the public, and had
its bus terminal at the corner of Quezon and Roosevelt Avenues in Quezon City. The
terminal stood on four valuable pieces of real estate (known as Pantranco
properties) registered under the name of Macris. 9 The Gonzales family later incurred
huge financial losses despite attempts of rehabilitation and loan infusion. In March
1975, their creditors took over the management of PNEI and Macris. By 1978, full
ownership was transferred to one of their creditors, the National Investment
Development Corporation (NIDC), a subsidiary of the PNB.
Macris was later renamed as the National Realty Development Corporation
(Naredeco) and eventually merged with the National Warehousing Corporation
(Nawaco) to form the new PNB subsidiary, the PNB-Madecor.
In 1985, NIDC sold PNEI to North Express Transport, Inc. (NETI), a company owned
by Gregorio Araneta III. In 1986, PNEI was among the several companies placed
under sequestration by the Presidential Commission on Good Government (PCGG)
shortly after the historic events in EDSA. In January 1988, PCGG lifted the
sequestration order to pave the way for the sale of PNEI back to the private sector
through the Asset Privatization Trust (APT). APT thus took over the management of
PNEI.
In 1992, PNEI applied with the Securities and Exchange Commission (SEC) for
suspension of payments. A management committee was thereafter created which
recommended to the SEC the sale of the company through privatization. As a costsaving measure, the committee likewise suggested the retrenchment of several
PNEI employees. Eventually, PNEI ceased its operation. Along with the cessation of
business came the various labor claims commenced by the former employees of
PNEI where the latter obtained favorable decisions.
On July 5, 2002, the Labor Arbiter issued the Sixth Alias Writ of
Execution10 commanding the NLRC Sheriffs to levy on the assets of PNEI in order to
satisfy the P722,727,150.22 due its former employees, as full and final satisfaction
of the judgment awards in the labor cases. The sheriffs were likewise instructed to

proceed against PNB, PNB-Madecor and Mega Prime. 11 In implementing the writ, the
sheriffs levied upon the four valuable pieces of real estate located at the corner of
Quezon and Roosevelt Avenues, on which the former Pantranco Bus Terminal stood.
These properties were covered by Transfer Certificate of Title (TCT) Nos. 8788187884, registered under the name of PNB-Madecor. 12 Subsequently, Notice of Sale of
the foregoing real properties was published in the newspaper and the sale was set
on July 31, 2002. Having been notified of the auction sale, motions to quash the writ
were separately filed by PNB-Madecor and Mega Prime, and PNB. They likewise filed
their Third-Party Claims.13 PNB-Madecor anchored its motion on its right as the
registered owner of the Pantranco properties, and Mega Prime as the successor-ininterest. For its part, PNB sought the nullification of the writ on the ground that it
was not a party to the labor case.14 In its Third-Party Claim, PNB alleged that PNBMadecor was indebted to the former and that the Pantranco properties
would answer for such debt. As such, the scheduled auction sale of the aforesaid
properties was not legally in order.15
On September 10, 2002, the Labor Arbiter declared that the subject Pantranco
properties were owned by PNB-Madecor. It being a corporation with a distinct and
separate personality, its assets could not answer for the liabilities of PNEI.
Considering, however, that PNB-Madecor executed a promissory note in favor of
PNEI forP7,884,000.00, the writ of execution to the extent of the said amount was
concerned was considered valid.16
PNBs third-party claim to nullify the writ on the ground that it has an interest in
the Pantranco properties being a creditor of PNB-Madecor, on the other hand, was
denied because it only had an inchoate interest in the properties. 17
The dispositive portion of the Labor Arbiters September 10, 2002 Resolution is
quoted hereunder:
WHEREFORE, the Third Party Claim of PNB Madecor and/or Mega Prime Holdings,
Inc. is hereby GRANTED and concomitantly the levies made by the sheriffs of the
NLRC on the properties of PNB Madecor should be as it (sic) is hereby LIFTED subject
to the payment by PNB Madecor to the complainants the amount of P7,884,000.00.
The Motion to Quash and Third Party Claim of PNB is hereby DENIED.
The Motion to Quash of PNB Madecor and Mega Prime Holdings, Inc. is hereby
PARTIALLY GRANTED insofar as the amount of the writ exceeds P7,884,000.00.
The Motion for Recomputation and Examination of Judgment Awards is hereby
DENIED for want of merit.
The Motion to Expunge from the Records claimants/complainants Opposition dated
August 3, 2002 is hereby DENIED for lack of merit.

SO ORDERED.18
On appeal to the NLRC, the same was denied and the Labor Arbiters disposition
was affirmed.19 Specifically, the NLRC concluded as follows:
(1) PNB-Madecor and Mega Prime contended that it would be impossible for them to
comply with the requirement of the labor arbiter to pay to the PNEI employees the
amount of P7.8 million as a condition to the lifting of the levy on the properties,
since the credit was already garnished by Gerardo Uy and other creditors of PNEI.
The NLRC found no evidence that Uy had satisfied his judgment from the promissory
note, and opined that even if the credit was in custodia legis, the claim of the PNEI
employees should enjoy preference under the Labor Code.
(2) The PNEI employees contested the finding that PNB-Madecor was indebted to
the PNEI for only P7.8 million without considering the accrual of interest. But the
NLRC said that there was no evidence that demand was made as a basis for
reckoning interest.
(3) The PNEI employees further argued that the labor arbiter may not properly
conclude from a decision of Judge Demetrio Macapagal Jr. of the RTC of Quezon City
that PNB-Madecor was the owner of the properties as his decision was reconsidered
by the next presiding judge, nor from a decision of the Supreme Court that PNEI was
a mere lessee of the properties, the fact being that the transfer of the properties to
PNB-Madecor was done to avoid satisfaction of the claims of the employees with the
NLRC and that as a result of a civil case filed by Mega Prime, the subsequent sale of
the properties by PNB to Mega Prime was rescinded. The NLRC pointed out that
while the Macapagal decision was set aside by Judge Bruselas and hence, his
findings could not be invoked by the labor arbiter, the titles of PNB-Madecor are
conclusive and there is no evidence that PNEI had ever been an owner. The
Supreme Court had observed in its decision that PNEI owed back rentals of P8.7
million to PNB-Madecor.
(4) The PNEI employees faulted the labor arbiter for not finding that PNEI, PNB, PNBMadecor and Mega Prime were all jointly and severally liable for their claims. The
NLRC underscored the fact that PNEI and Macris were subsidiaries of NIDC and had
passed through and were under the Asset Privatization Trust (APT) when the labor
claims accrued. The labor arbiter was correct in not granting PNBs third-party claim
because at the time the causes of action accrued, the PNEI was managed by a
management committee appointed by the PNB as the new owner of PNRI (sic) and
Macris through a deed of assignment or transfer of ownership. The NLRC says at
length that the same is not true with PNB-Madecor which is now the registered
owner of the properties.20
The parties separate motions for reconsideration were likewise denied. 21 Thereafter,
the matter was elevated to the CA by PANREA, PEA-PTGWO and the Pantranco

Association of Concerned Employees. The latter group, however, later withdrew its
petition. The former employees petition was docketed as CA-G.R. SP No. 80599.
PNB-Madecor and Mega Prime likewise filed their separate petition before the CA
which was docketed as CA-G.R. SP No. 80737, but the same was dismissed. 22
In view of the P7,884,000.00 debt of PNB-Madecor to PNEI, on June 23, 2004, an
auction sale was conducted over the Pantranco properties to satisfy the claim of the
PNEI employees, wherein CPAR Realty was adjudged as the highest bidder. 23
On June 3, 2005, the CA rendered the assailed decision affirming the NLRC
resolutions.
The appellate court pointed out that PNB, PNB-Madecor and Mega Prime are
corporations with personalities separate and distinct from PNEI. As such, there being
no cogent reason to pierce the veil of corporate fiction, the separate personalities of
the above corporations should be maintained. The CA added that the Pantranco
properties were never owned by PNEI; rather, their titles were registered under the
name of PNB-Madecor. If PNB and PNB-Madecor could not answer for the liabilities of
PNEI, with more reason should Mega Prime not be held liable being a mere
successor-in-interest of PNB-Madecor.
Unsatisfied, PEA-PTGWO and PANREA filed their motion for reconsideration; 24 while
PNB filed its Partial Motion for Reconsideration. 25 PNB pointed out that PNB-Madecor
was made to answer for P7,884,000.00 to the PNEI employees by virtue of the
promissory note it (PNB-Madecor) earlier executed in favor of PNEI. PNB, however,
questioned the June 23, 2004 auction sale as the P7.8 million debt had already been
satisfied pursuant to this Courts decision in PNB MADECOR v. Uy. 26
Both motions were denied by the appellate court. 27
In two separate petitions, PNB and the former PNEI employees come up to this
Court assailing the CA decision and resolution. The former PNEI employees raise the
lone error, thus:
The Honorable Court of Appeals palpably departed from the established rules and
jurisprudence in ruling that private respondents Pantranco North Express, Inc.
(PNEI), Philippine National Bank (PNB), Philippine National Bank Management and
Development Corporation (PNB-MADECOR), Mega Prime Realty and Holdings, Inc.
(Mega Prime) are not jointly and severally answerable to the P722,727,150.22
Million NLRC money judgment awards in favor of the 4,000 individual members of
the Petitioners.28
They claim that PNB, through PNB-Madecor, directly benefited from the operation of
PNEI and had complete control over the funds of PNEI. Hence, they are solidarily
answerable with PNEI for the unpaid money claims of the employees. 29 Citing A.C.
Ransom Labor Union-CCLU v. NLRC, 30 the employees insist that where the employer

corporation ceases to exist and is no longer able to satisfy the judgment awards in
favor of its employees, the owner of the employer corporation should be made
jointly and severally liable.31 They added that malice or bad faith need not be
proven to make the owners liable.
On the other hand, PNB anchors its petition on this sole assignment of error, viz.:
THE AUCTION SALE OF THE PROPERTY COVERED BY TCT NO. 87884 INTENDED TO
PARTIALLY SATISFY THE CLAIMS OF FORMER WORKERS OF PNEI IN THE AMOUNT
OF P7,884,000.00 (THE AMOUNT OF PNB-MADECORS PROMISSORY NOTE IN FAVOR
OF PNEI) IS NOT IN ORDER AS THE SAID PROPERTY IS NOT OWNED BY PNEI.
FURTHER, THE SAID PROMISSORY NOTE HAD ALREADY BEEN GARNISHED IN FAVOR
OF GERARDO C. UY WHICH LED TO THREE (3) PROPERTIES UNDER THE NAME OF
PNB-MADECOR, NAMELY TCT NOS. 87881, 87882 AND 87883, BEING LEVIED AND
SOLD ON EXECUTION IN THE "PNB-MADECOR VS. UY" CASE (363 SCRA 128 [2001])
AND "GERARDO C. UY VS. PNEI" (CIVIL CASE NO. 95-72685, RTC MANILA, BRANCH
38).32
PNB insists that the Pantranco properties could no longer be levied upon because
the promissory note for which the Labor Arbiter held PNB-Madecor liable to PNEI,
and in turn to the latters former employees, had already been satisfied in favor of
Gerardo C. Uy. It added that the properties were in fact awarded to the highest
bidder. Besides, says PNB, the subject properties were not owned by PNEI, hence,
the execution sale thereof was not validly effected. 33
Both petitions must fail.
G.R. No. 170689
Stripped of the non-essentials, the sole issue for resolution raised by the former
PNEI employees is whether they can attach the properties (specifically the
Pantranco properties) of PNB, PNB-Madecor and Mega Prime to satisfy their unpaid
labor claims against PNEI.
We answer in the negative.
First, the subject property is not owned by the judgment debtor, that is, PNEI.
Nowhere in the records was it shown that PNEI owned the Pantranco properties.
Petitioners, in fact, never alleged in any of their pleadings the fact of such
ownership. What was established, instead, in PNB MADECOR v. Uy 34 and PNB v.
Mega Prime Realty and Holdings Corporation/Mega Prime Realty and Holdings
Corporation v. PNB35 was that the properties were owned by Macris, the predecessor
of PNB-Madecor. Hence, they cannot be pursued against by the creditors of PNEI.
We would like to stress the settled rule that the power of the court in executing
judgments extends only to properties unquestionably belonging to the judgment
debtor alone.36 To be sure, one mans goods shall not be sold for another mans

debts.37 A sheriff is not authorized to attach or levy on property not belonging to the
judgment debtor, and even incurs liability if he wrongfully levies upon the property
of a third person.38
Second, PNB, PNB-Madecor and Mega Prime are corporations with personalities
separate and distinct from that of PNEI. PNB is sought to be held liable because it
acquired PNEI through NIDC at the time when PNEI was suffering financial reverses.
PNB-Madecor is being made to answer for petitioners labor claims as the owner of
the subject Pantranco properties and as a subsidiary of PNB. Mega Prime is also
included for having acquired PNBs shares over PNB-Madecor.
The general rule is that a corporation has a personality separate and distinct from
those of its stockholders and other corporations to which it may be
connected.39 This is a fiction created by law for convenience and to prevent
injustice.40 Obviously, PNB, PNB-Madecor, Mega Prime, and PNEI are corporations
with their own personalities. The "separate personalities" of the first three
corporations had been recognized by this Court in PNB v. Mega Prime Realty and
Holdings Corporation/Mega Prime Realty and Holdings Corporation v. PNB 41 where
we stated that PNB was only a stockholder of PNB-Madecor which later sold its
shares to Mega Prime; and that PNB-Madecor was the owner of the Pantranco
properties. Moreover, these corporations are registered as separate entities and,
absent any valid reason, we maintain their separate identities and we cannot treat
them as one.
Neither can we merge the personality of PNEI with PNB simply because the latter
acquired the former. Settled is the rule that where one corporation sells or otherwise
transfers all its assets to another corporation for value, the latter is not, by that fact
alone, liable for the debts and liabilities of the transferor. 42
Lastly, while we recognize that there are peculiar circumstances or valid grounds
that may exist to warrant the piercing of the corporate veil, 43 none applies in the
present case whether between PNB and PNEI; or PNB and PNB-Madecor.
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.44 Another formulation of this doctrine is that
when two business enterprises are owned, conducted and controlled by the same
parties, both law and equity will, when necessary to protect the rights of third
parties, disregard the legal fiction that two corporations are distinct entities and
treat them as identical or as one and the same. 45
Whether the separate personality of the corporation should be pierced hinges on
obtaining facts appropriately pleaded or proved. However, any piercing of the
corporate veil has to be done with caution, albeit the Court will not hesitate to
disregard the corporate veil when it is misused or when necessary in the interest of

justice. After all, the concept of corporate entity was not meant to promote unfair
objectives.46
As between PNB and PNEI, petitioners want us to disregard their separate
personalities, and insist that because the company, PNEI, has already ceased
operations and there is no other way by which the judgment in favor of the
employees can be satisfied, corporate officers can be held jointly and severally
liable with the company. Petitioners rely on the pronouncement of this Court in A.C.
Ransom Labor Union-CCLU v. NLRC47 and subsequent cases.48
This reliance fails to persuade. We find the aforesaid decisions inapplicable to the
instant case.
For one, in the said cases, the persons made liable after the companys cessation of
operations were the officers and agents of the corporation. The rationale is that,
since the corporation is an artificial person, it must have an officer who can be
presumed to be the employer, being the person acting in the interest of the
employer. The corporation, only in the technical sense, is the employer. 49 In the
instant case, what is being made liable is another corporation (PNB) which acquired
the debtor corporation (PNEI).
Moreover, in the recent cases Carag v. National Labor Relations Commission 50 and
McLeod v. National Labor Relations Commission, 51 the Court explained the doctrine
laid down in AC Ransom relative to the personal liability of the officers and agents of
the employer for the debts of the latter. In AC Ransom, the Court imputed liability to
the officers of the corporation on the strength of the definition of an employer in
Article 212(c) (now Article 212[e]) of the Labor Code. Under the said provision,
employer includes any person acting in the interest of an employer, directly or
indirectly, but does not include any labor organization or any of its officers or agents
except when acting as employer. It was clarified in Carag and McLeod that Article
212(e) of the Labor Code, by itself, does not make a corporate officer personally
liable for the debts of the corporation. It added that the governing law on personal
liability of directors or officers for debts of the corporation is still Section 31 52 of the
Corporation Code.
More importantly, as aptly observed by this Court in AC Ransom, it appears that
Ransom, foreseeing the possibility or probability of payment of backwages to its
employees, organized Rosario to replace Ransom, with the latter to be eventually
phased out if the strikers win their case. The execution could not be implemented
against Ransom because of the disposition posthaste of its leviable assets evidently
in order to evade its just and due obligations. 53 Hence, the Court sustained the
piercing of the corporate veil and made the officers of Ransom personally liable for
the debts of the latter.
Clearly, what can be inferred from the earlier cases is that the doctrine of piercing
the corporate veil applies only in three (3) basic areas, namely: 1) defeat of public

convenience as when the corporate fiction is used as a vehicle for the evasion of an
existing obligation; 2) fraud cases or when the corporate entity is used to justify a
wrong, protect fraud, or defend a crime; or 3) alter ego cases, where a corporation
is merely a farce since it 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.54 In the absence of malice, bad faith, or a specific provision of
law making a corporate officer liable, such corporate officer cannot be made
personally liable for corporate liabilities. 55
Applying the foregoing doctrine to the instant case, we quote with approval the CA
disposition in this wise:
It would not be enough, then, for the petitioners in this case, the PNEI employees, to
rest on their laurels with evidence that PNB was the owner of PNEI. Apart from
proving ownership, it is necessary to show facts that will justify us to pierce the veil
of corporate fiction and hold PNB liable for the debts of PNEI. The burden
undoubtedly falls on the petitioners to prove their affirmative allegations. In line
with the basic jurisprudential principles we have explored, they must show that PNB
was using PNEI as a mere adjunct or instrumentality or has exploited or misused the
corporate privilege of PNEI.
We do not see how the burden has been met. Lacking proof of a nexus apart from
mere ownership, the petitioners have not provided us with the legal basis to reach
the assets of corporations separate and distinct from PNEI. 56
Assuming, for the sake of argument, that PNB may be held liable for the debts of
PNEI, petitioners still cannot proceed against the Pantranco properties, the same
being owned by PNB-Madecor, notwithstanding the fact that PNB-Madecor was a
subsidiary of PNB. The general rule remains that PNB-Madecor has a personality
separate and distinct from PNB. The mere fact that a corporation owns all of the
stocks of another corporation, taken alone, is not sufficient to justify their being
treated as one entity. If used to perform legitimate functions, a subsidiarys
separate existence shall be respected, and the liability of the parent corporation as
well as the subsidiary will be confined to those arising in their respective
businesses.57
In PNB v. Ritratto Group, Inc.,58 we outlined the circumstances which are useful in
the determination of whether a subsidiary is but a mere instrumentality of the
parent-corporation, to wit:
1. The parent corporation owns all or most of the capital stock of the subsidiary;
2. The parent and subsidiary corporations have common directors or officers;
3. The parent corporation finances the subsidiary;

4. The parent corporation subscribes to all the capital stock of the subsidiary or
otherwise causes its incorporation;
5. The subsidiary has grossly inadequate capital;
6. The parent corporation pays the salaries and other expenses or losses of the
subsidiary;
7. The subsidiary has substantially no business except with the parent corporation
or no assets except those conveyed to or by the parent corporation;
8. In the papers of the parent corporation or in the statements of its officers, the
subsidiary is described as a department or division of the parent corporation, or its
business or financial responsibility is referred to as the parent corporations own;
9. The parent corporation uses the property of the subsidiary as its own;
10. The directors or executives of the subsidiary do not act independently in the
interest of the subsidiary, but take their orders from the parent corporation;
11. The formal legal requirements of the subsidiary are not observed.
None of the foregoing circumstances is present in the instant case. Thus, piercing of
PNB-Madecors corporate veil is not warranted. Being a mere successor-in-interest
of PNB-Madecor, with more reason should no liability attach to Mega Prime.
G.R. No. 170705
In its petition before this Court, PNB seeks the annulment of the June 23, 2004
execution sale of the Pantranco properties on the ground that the judgment debtor
(PNEI) never owned said lots. It likewise contends that the levy and the eventual
sale on execution of the subject properties was null and void as the promissory note
on which PNB-Madecor was made liable had already been satisfied.
It has been repeatedly stated that the Pantranco properties which were the subject
of execution sale were owned by Macris and later, the PNB-Madecor. They were
never owned by PNEI or PNB. Following our earlier discussion on the separate
personalities of the different corporations involved in the instant case, the only
entity which has the right and interest to question the execution sale and the
eventual right to annul the same, if any, is PNB-Madecor or its successor-in-interest.
Settled is the rule that proceedings in court must be instituted by the real party in
interest.
A real party in interest is the party who stands to be benefited or injured by the
judgment in the suit, or the party entitled to the avails of the suit. 59 "Interest" within
the meaning of the rule means material interest, an interest in issue and to be
affected by the decree, as distinguished from mere interest in the question
involved, or a mere incidental interest. 60 The interest of the party must also be

personal and not one based on a desire to vindicate the constitutional right of some
third and unrelated party.61 Real interest, on the other hand, means a present
substantial interest, as distinguished from a mere expectancy or a future,
contingent, subordinate, or consequential interest. 62
Specifically, in proceedings to set aside an execution sale, the real party in interest
is the person who has an interest either in the property sold or the proceeds thereof.
Conversely, one who is not interested or is not injured by the execution sale cannot
question its validity.63
In justifying its claim against the Pantranco properties, PNB alleges that Mega Prime,
the buyer of its entire stockholdings in PNB-Madecor was indebted to it (PNB).
Considering that said indebtedness remains unpaid, PNB insists that it has an
interest over PNB-Madecor and Mega Primes assets.
Again, the contention is bereft of merit. While PNB has an apparent interest in Mega
Primes assets being the creditor of the latter for a substantial amount, its interest
remains inchoate and has not yet ripened into a present substantial interest, which
would give it the standing to maintain an action involving the subject properties. As
aptly observed by the Labor Arbiter, PNB only has an inchoate right to the
properties of Mega Prime in case the latter would not be able to pay its
indebtedness. This is especially true in the instant case, as the debt being claimed
by PNB is secured by the accessory contract of pledge of the entire stockholdings of
Mega Prime to PNB-Madecor.64
The Court further notes that the Pantranco properties (or a portion thereof ) were
sold on execution to satisfy the unpaid obligation of PNB-Madecor to PNEI. PNBMadecor was thus made liable to the former PNEI employees as the judgment
debtor of PNEI. It has long been established in PNB-Madecor v. Uy and other similar
cases that PNB-Madecor had an unpaid obligation to PNEI amounting to more or
less P7 million which could be validly pursued by the creditors of the latter. Again,
this strengthens the proper parties right to question the validity of the execution
sale, definitely not PNB.
Besides, the issue of whether PNB has a substantial interest over the Pantranco
properties has already been laid to rest by the Labor Arbiter. 65 It is noteworthy that
in its Resolution dated September 10, 2002, the Labor Arbiter denied PNBs ThirdParty Claim primarily because PNB only has an inchoate right over the Pantranco
properties.66 Such conclusion was later affirmed by the NLRC in its Resolution dated
June 30, 2003.67Notwithstanding said conclusion, PNB did not elevate the matter to
the CA via a petition for review. Hence it is presumed to be satisfied with the
adjudication therein.68 That decision of the NLRC has become final as against PNB
and can no longer be reviewed, much less reversed, by this Court. 69 This is in accord
with the doctrine that a party who has not appealed cannot obtain from the

appellate court any affirmative relief other than the ones granted in the appealed
decision.70
WHEREFORE, premises considered, the petitions are hereby DENIED for lack of
merit.
SO ORDERED.