Zuellig Freight v.

National Labor Relations Commission

GR No. 157900 July 22, 2013

Facts:
Ronaldo San Miguel brought a complaint for unfair labor practice/illegal
dismissal against Zeta Brokerage Corporation (old name of petitioner). He alleged
that he had been a checker/customs representative of Zeta and that he, together of
some of the employees, was terminated from employments because the business
will stop operations. He contended that the amendments of the article of
incorporation of Zeta for purposes of changing the corporation name, broadening
the primary functions, and increasing the capital stock does not mean that the
corporation is dissolve resulting to the cessation of business operation.
Zuellig contends that the termination of respondent is for a valid cause
authorized by the Labor Code which is cessation of business operation. That the
termination of employees is a valid management prerogative and that they offered
employment to respondent but the latter failed to signify his acceptance at the
designated period of time.
Issue:
Whether the amendment of article of incorporation and the change of name
of a corporation warrants closure of business operation
Held:
No. The amendments of the article of incorporation of Zeta to change the
corporation name to Zuellig Freight and Cargo Systems, Inc. did not produce the
dissolution of the former corporation. For sure, the Corporation Code defined and
delineated the different modes of dissolution of a corporation, and amendment of
articles of incorporation was not one of them. The effect of the change of name was
not a change of the corporate being. Zeta and petitioner remains the same
corporation. The change of name did not give petitioner the license to terminate the
employees of Zeta like respondent without authorized cause Despite its new name,
Zuellig was mere continuation of Zetas corporate being, and still held the obligation
to honor all of Zetas obligations, one of which was to respect respondents security
of tenure.
Hence, San Miguel was illegally dismissed.
Republic v. CA
GR No. 93073 December 21, 1992

Facts:
Yamaguchi and Fermin Canlas, President and Treasurer respectively of
Worldwide Garment Manufacturing, Inc. By virtue of a board resolution, they were
authorized to apply for credit facilities with the Republic Planters Bank in the form of
exports advances and letters of credit/trust receipts accommodation. Nine
promissory notes were issued by the bank. The note became due and no payment
was made.
On February 5, 1982, petitioner bank filed a complaint against the Worldwide
Garment Manufacturing, Inc., Canlas and Yamaguchi for recovery of sums of money
covered by the nine promissory notes. But the claim against the corporation later on
was dropped. On December 20, 1982, Worldwide Garment Manufacturing, Inc.
changed its name to Pinch Manufacturing Corporation.
Pinch Manufacturing Corporation, together with Canlas and Yamaguchi, was
made solidarily liable for the payment of the nine promissory notes.
Canlas, in his defense, averred that he should not be held liable for such
authorized corporate acts that he performed inasmuch as he signed the promissory
notes in his capacity as officer of the defunct Worldwide Garment Manufacturing.

Issue: Whether Canlas should be held liable for the promissory notes
Held:
Yes. Canlas is solidarily liable on the promissory note that bears his signature.
Under the Negotiable lnstruments Law, persons who write their names on the face
of promissory notes are makers and are liable as such. By signing the notes, the
maker promises to pay to the order of the payee or any holder according to the
tenor thereof. This was made clearer and certain, without reason for ambiguity, by
the presence of the phrase joint and several as describing the unconditional
promise to pay to the order of Republic Planters Bank. Where an instrument
containing the words I promise to pay is signed by two or more persons, they are
deemed to be jointly and severally liable thereon.
As to the liability of Pinch Manufacturing Corporation, such is not
extinguished when the article of incorporation of the latter was amended and
corporate name was changed.
The corporation, upon such change in the name, is no sense a new
corporation, nor the successor of the original corporation. It is the same corporation
with a different name, and its character was not changed. A change in the corporate
name does not make a new corporation. Such has no effect in its rights and
liabilities.
Philippine National Bank v. Hydro Resources Contractor
Gr. No. 167530 March 13, 2013

Facts:
Sometime in 1984, petitioners DBP and PNB foreclosed on certain mortgages
made on the properties of Marinduque Mining and Industrial Corporation (MMIC). As
a result of the foreclosure, DBP and PNB acquired substantially all the assets of
MMIC and resumed the business operations of the defunct MMIC by organizing
NMIC. DBP and PNB owned 57% and 43% of the shares of NMIC, respectively, except
for five qualifying shares. As of September 1984, the members of the Board of
Directors of NMIC were either from DBP or PNB.
Subsequently, NMIC engaged the services of Hercon, Inc., for NMICs Mine
Stripping and Road Construction Program in 1985 for a total contract price of
P35,770,120. After computing the payments already made by NMIC under the
program and crediting the NMICs receivables from Hercon, Inc., the latter found
that NMIC still has an unpaid balance of P8,370,934.74.10, the former made several
demands on NMIC, including a letter of final demand dated August 12, 1986, and
when these were not heeded, a complaint for sum of money was filed in the RTC of
Makati, Branch 136 seeking to hold petitioners NMIC, DBP, and PNB solidarily liable
for the amount owing Hercon, Inc.

Subsequent to the filing of the complaint, Hercon, Inc. was acquired by HRCC
in a merger.

Pursuant to the said Proclamation, on February 27, 1987, DBP and PNB
executed their respective deeds of transfer in favor of the National Government
assigning, transferring and conveying certain assets and liabilities, including their
respective stakes in NMIC. In turn and on even date, the National Government
transferred the said assets and liabilities to the APT as trustee under a Trust
Agreement.

NMIC claimed that HRCC had no cause of action. It also asserted that its
contract with HRCC was entered into by its then President without any authority.

DBPs answer, it contended that NMICs juridical personality is separate from

that of DBP.

Issue:
Whether NMIC is an alter ego
Whether there is sufficient ground to pierce the veil of corporate fiction of
NMIC and held DBP and PNB solidarily liable with NMIC
Held:
No. Case law lays down a three-pronged test to determine the application of
the alter ego theory, which is also known as the instrumentality theory, namely:

(1) Control or instrumentality test.

This test requires that the subsidiary be completely under the control and
domination of the parent. It seeks to establish whether the subsidiary corporation
has no autonomy and the parent corporation, though acting through the subsidiary
in form and appearance, is operating the business directly for itself. This must have
been exercised at the time the acts complained of took place.
 (2) Fraud test.

This test requires that the parent corporations conduct in using the subsidiary
corporation be unjust, fraudulent or wrongful. It recognizes that piercing is
appropriate only if the parent corporation uses the subsidiary in a way that harms
the plaintiff creditor

(3) The aforesaid control and breach of duty must have proximately caused
the injury or unjust loss complained of. (Harm Test)

This test requires the plaintiff to show that the defendants control, exerted in a
fraudulent, illegal or otherwise unfair manner toward it, caused the harm suffered. A
causal connection between the fraudulent conduct committed through the
instrumentality of the subsidiary and the injury suffered or the damage incurred by
the plaintiff should be established.

These tests had not been satisfactory met in the present case. The absence
of any of these elements prevent piercing the corporate veil. There is nothing in the
records shows that the corporate finances, policies and practices of NMIC were
dominated by DBP and PNB in such a way that NMIC could be considered to have no
separate mind, will or existence of its own but a mere conduit for DBP and PNB. On
the contrary, the evidence establishes that HRCC knew and acted on the knowledge
that it was dealing with NMIC, not with NMICs stockholders.

DBP and PNB maintain an address different from that of NMIC. There was
insufficient proof of interlocking directorates. There was not even an allegation of
similarity of corporate officers. HRCCs evidence shows that NMIC operated as a
distinct entity endowed with its own legal personality.

Under the deeds of transfer executed by DBP and PNB, the liability of the APT
as transferee of the rights, titles and interests of DBP and PNB in NMIC will attach
only if DBP and PNB are held liable, the APT incurs no liability for the judgment
indebtedness of NMIC. As such assignee, therefore, the APT incurs no liability with
respect to NMIC other than whatever liabilities may be imputable to its assignors,
DBP and PNB.

Lastly, as to contingent liability for which the National Government may be

held liable for, this refers to contingent liabilities of DBP and PNB. Since DBP and
PNB may not be held solidarily liable with NMIC, no contingent liability may be
imputed to the APT as well. Only NMIC as a distinct and separate legal entity is
liable to pay its corporate obligation to HRCC in the amount of P8,370,934.74, with
legal interest thereon from date of demand.
 Livesey v. Binswanger

Gr. No. 177493 March 19, 2014

Facts:

Livesey was hired by CBB \Philippines Strategic Property Services, Inc. (CBB)
as Director and Head of Business Space Development. Later on, he was designated
Manging Director. Allegedly, despite the several deals for CBB he drew up, CBB
failed to pay him a significant portion of his salary. He was compelled to resign and
filed a complaint for illegal dismissal with money claims.

CBB deny liability and alleged that it engaged Livesey as a corporate officer
in April 2001: he was elected Vice-President, and thereafter, he became President. It
claimed that Livesey was later designated as Managing Director when it became an
extension office of its principal in Hongkong.

There was a compromise agreement reached by the parties. But it was not
fully complied with thus Livesey filed for a writ of execution alleging that in the
process of serving respondents the writ, he learned that respondents, in an attempt
to avoid their liabilities to complainant have organized another corporation,
Binswanger Philippines, Inc. He claimed that there was evidence showing that CBB
and Binswanger Philippines, Inc. (Binswanger) are one and the same corporation,
pointing out that CBB stands for Chesterton Blumenauer Binswanger. Invoking the
doctrine of piercing the veil of corporate fiction, Livesey prayed that an alias writ of
execution be issued against respondents Binswanger and Keith Elliot, CBBs former
President, and now Binswangers President and Chief Executive Officer (CEO).

Issue: Whether the piercing of corporate fiction is applicable

Held:

Yes. While it is true that a corporation, by legal fiction and convenience, is an

entity shielded by a protective mantle and imbued by law with a character alien to
the persons comprising it, the shield, however, is not at all times impenetrable and
cannot be extended to a point beyond its reason and policy. Circumstances might
deny a claim for corporate personality, under the "doctrine of piercing the veil of
corporate fiction."

Piercing the veil of corporate fiction is an equitable doctrine developed to

address situations where the separate corporate personality of a corporation is
abused or used for wrongful purposes. Under the doctrine, the corporate existence
may be disregarded where the entity is formed or used for non-legitimate purposes,
such as to evade a just and due obligation, or to justify a wrong, to shield or
perpetrate fraud or to carry out similar or inequitable considerations, other
unjustifiable aims or intentions, in which case, the fiction will be disregarded and
the individuals composing it and the two corporations will be treated as identical.

In the present case, there is indubitable link between CBBs closure and
Binswangers incorporation. CBB ceased to exist in name only; it re-emerged in the
person of Binswanger. It was not just coincidence that Binswanger is engaged in the
same line of business CBB embarked on: (1) it even holds office in the very same
building and on the very same floor where CBB once stood; (2) CBBs key officers,
Elliot, no less, and Catral moved over to Binswanger, performing the tasks they
were doing at CBB; (3) notwithstanding CBBs closure, Binswangers Web Editor
(Young), in an e-mail correspondence, supplied the information that Binswanger is
"now known" as either CBB (Chesterton Blumenauer Binswanger or as Chesterton
Petty, Ltd., in the Philippines; (4) the use of Binswanger of CBBs paraphernalia
(receiving stamp) in connection with a labor case where Binswanger was summoned
by the authorities, although Elliot claimed that he bought the item with his own
money; and (5) Binswangers takeover of CBBs project with the PNB.

To pave way for CBBs reappearance as Binswanger, it is very much evident

in CBBs demise and Binswangers creation. It is quite obvious then that the purpose
of closing and putting up new corporation by CBB is to evade CBBs liabilities to
Livesey and its other financial liabilities.

WPM International Trading, Inc. v. Fe Corazon Labayen

Gr. No. 182770 September 17, 2014

Facts:

Labayen is the owner of H.B.O. Systems Cosnultants, a management and

consultant firm. WPM entered into a management agreement with respondent by
virtue of which the respondent was authorized to operate, manage and rehabilitate
Quickbite, a restaurant owned and operated by WPM. As part of her tasks, the
respondent looked for a contractor who would renovate the two existing Quickbite
outlets in Divisoria, Manila and Lepanto St., University Belt, Manila. Pursuant to the
agreement, the respondent engaged the services of CLN Engineering Services (CLN)
to renovate Quickbite-Divisoria at the cost of P432,876.02. This amount was not
fully paidwhen the renovation was finished. Hence, complaint for collection of sum
of money was instituted against respondent. Respondent in turn instituted a
complaint for damages against WPM and Manlapaz alleging that she be reimbursed.

Manlapaz, the president of WPM alleged that he cannot be liable because

WMP has a separate and distinct personality.
Issue:

(1) Whether WPM is a mere instrumentality, alter-ego, and business conduit

of Manlapaz

(2) Whether Manlapaz is jointly and severally liable with WPM to the
respondent for reimbursement, damages and interest

Held:

No. WPM is not a mere alter ego of Manlapaz. Manlapaz is only a principal
stockholder of WPM. Records do not show that WPM was organized and controlled,
and its affairs conducted in a manner that made it merely an instrumentality,
agency, conduit or adjunct ofManlapaz. As held in Martinez v. Court of Appeals, the
mere ownership by a single stockholder of even all or nearly all of the capital stocks
of a corporation is not by itself a sufficient ground to disregard the separate
corporate personality. To disregard the separate juridical personality of a
corporation, the wrongdoing must be clearly and convincingly established.

Manlapaz had nocontrol/domination over WPM or its finances. Thus, the

control necessary to invoke the instrumentality or alter ego rule is not majority or
even complete stock control but such domination of finances, 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. 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.

On the contrary, the evidence establishes that CLN and the respondent knew
and acted on the knowledgethat they were dealing with WPM for the renovation of
the latters restaurant, and not with Manlapaz.

Since there is no proof that WPM attempts to avoid liability or has no property
against which to proceed, Manlapaz should npot be held liable jointly and severally
to respondent. Only WPM is liable to indemnify the respondent.