 BF Corporations vs Shang-ri La collection suit  Corp Representatives may be compelled to arbitration proceedings IF bad faith and
 Construction of Shang’s multilevel parking malice in their acts are alleged in representing the corp
 Shang defaulted; case brought to Arbitration pursuant to clause in the contract
(condition precedent to any right of legal action)
 Eventually granted; but parties failed to agree on the law that should govern
arbitration
 The Shang Board wants to be excluded from the proceedings, claiming they are not a
party to the agreement
 Court said they are interested parties (Art 31 CoCo and Art 1217 CC)
 CA held that directors were jointly and solidarily liable
ISSUE: should the directors be made parties to the arbitration proceedings? – YES.
LANUZA VS
- Directors said they did not sign the arbitration agreement in any capacity
BF CORP.
 E-Securites and Export and Industry Bank Inc are being held to answer solidarily to
return to Pacific et al its 32M DMCI shares
 It was found that E-Securities was a mere alter ego of Export
 That the summon to E-Securities is a valid notice to Export
 Export prayed for TRO to stop garnishment, claiming its distinct
 CA granted TRO bec of importance of baking in public
 Pacific said 499,995 of 500k shares of E-Service are owned by Export Bank; hence,
PACIFIC there’s actual knowledge
REHOUSE VS  Since E-Service is an alter ego, no need for any findings/evidence before applying
CA the piercing the veil doctrine
 CA made the Prelim Injunction permanent; says being a subsidiary company of the
parent company, there is no enough justification to pierce the veil; there must be
proof the Export exploited
 Meanwhile, when the absent justices went back, it appears that they were not
agreeable to the permanent TRO so it was contested
ISSUE: can RTC execute the writ of execution against Export? - NO.
 May be compelled to determine if the distinction bet the corp personality and
directors’ personality should be disregarded
 Corp exercises its powers thru directors such as consent of the corp thru its
representatives (not consent of reps personally)
 GR: Reps are not personally liable for the obligations entered into by the corporation
 INSTANCES: when corp personality is used to perpetuate fraud; made alter
ego/conduit
 When pierced, they are treated as one person – when corp is adjudged liable, director
also liable:
a. Willfully voted for unlawful corporate act
b. Guilty of gross negligence in directing corp affairs
c. Acquired personal/pecuniary interest in conflict with his duty
 Also solidarily liable in the ff cases:
a. Consented to issuance of atered stocks
b. Made himself solidarily liable
c. Specific provision of law
 When these circumstances are present, the court is of duty to determine the
circumstances that will gauge the liability; to avoid multiplicity of suits for single
action
 Done so that legal fiction cannot perpetuate illegalities
In this case, the incidental issue w/n there is a need to pierce the corp veil is
determined along with the issue of crop’s acts that violate BF’s rights
 Corporation not implead cannot be subject to court’s process of piercing the veil;
acquiring jurisdiction cannot be dispensed with
 Piercing come after court acquired juris over the corp
 Juris is acquired: a. service of summon; b. voluntary appearance
 But in Arcilla, Corp not impleaded was made liable bec the corp and the owner is one
and the same; alter ego niya yung corp – but the rule is the PERSON was made a
party and yung corp yung subsequently made liable even without being impleaded
 ALTER EGO – mere instrumentality of the other; control must be the proximate cause
of the injury: (elements)
a. Control in finance, policy and business practice
b. Such control was used to perpetuate fraud
c. Control and breach proximately caused the injury
 In this case, the three elements are not present to justify alter ego
 Mere control does not justify piercing; THERE MUST BE FRAUD
 Ownership of majority of stock may be a badge of control but never a conclusive
proof of ownership
 Also, almost full ownership of one is not a legit basis to pierce
  Alleged rebates on freight were not paid to shipper the Brewing Co. but instead to  GR: Corporation is a legal entity
Refrigerator Transit  EXN (pierce): as an association of persons -- when there’s sufficient reason to believe
 Refrigerator Transit was made as dummy so as to circumvent the Elkins Act that the notion of legal entity is being used to defeat public convenience
 In this case, there is IDENTITY OF INTEREST

US VS
MILWAUKEE

 GCC (formerly CCC) had franchise companies in urban centers; doing quasi-baking
activities
 Equity was organized also by GCC to take over the operations and management of
franchise companies
 Alson (shares owner of GCC franchise companies) sold its 101k shares to Equity
 But Equity failed to pay; President said company asset not enough
GENERAL  Alson wants to pierce to make GCC also liable since Equity is just its conduit
CREDIT VS  Trial Court ruled that GCC and Equity are solidarily liable
ALSONS
ISSUE: Should GCC be made solidarily liable? – Yes.
 When veil is pierced, corp will just be viewed as a mere collection of individuals
without separate juridical entity
 When Two Corps are conducted and controlled by same parties, veil can also be
pierced if done
 Instances when Veil may by Pierced (Question of Facts):
1. Defeat of Public Convenience – evasion of existing obligation
2. Fraud Cases – corp is used to justify a qrong
3. Alter Ego Cases – corp is merely a farce; merely a conduit or agency of another
corporation
 In this case, certain circumstances are taken together which justified the piercing
(that Equity is an adjunct of GCC)

 Concept Builder (construction business) employer of Respondents  Probative factors justifying Piercing:
 Respondents were dismissed; corp said the project which is the cause why they are 1. Stock ownership common to both
hired was done; Respondents said no, they are beig terminated bec Concept 2. Identity of directors
employed a sub-contractor 3. Manner of keeping corpo books
 Illegal dismissal case; writ of execution 4. Methods of conducting business
 To satisfy the balance, a second alias of writ of execution was sought to be served in  Instrumentality Rule – A organizes and control B; dominion over fiancé, policies and
CONCEPT the Office but all employees refused to receive it saying they were employees of HPP practices; AND SUCH CONTROL IS EXERCISED AT THE TIME ACTS COMPLIED OF
BUILDERS and not Concept HAPPENED
VS NLRC  HPPI opposed the break-open order; HPPI is manufacturing firm

ISSUE: Is HPPI solidarily liable for the back wages? – Yes.

  FIlriters execute Detached Assignment, delivering to Philfinance all its rights to the  To justify piercing, there must be clear showing that Corporate Fiction was misused
CBCI worth P3.5M; which Phil conveyed to TRB to the extent that injustice was committed
 There was a Repurchase Agreement; but matured and was not able to repurchase;  In this case, it is shown that TRB was not defrauded when it purchased the CBCI from
the whole CBCI was entered into the books of Philfiance; but it can’t be registered Philfinance
despite compliance o Registered in the name of Filriters
 Filriters interjected and said that the CBCI were reserve investment; its transfer o Transfer Clause of CBCI
would violate trust fund doctrine; it was made without board resolution; personal o TRB is a commercial bank
TRADERS
act of Banaria (SVP) 
ROYAL VS
 Transfer from Filriters to Philfinance was fictitious, no consideration, did conform
CA
with the Central Bank Circular
 TRB said Filters should still be liable since Philfinance owns 90% of Filriters; hence
payment by TRB to Phil for the CBCI is actual payment to Filfiters
 Fil to Phil was deed of assignment basically; hence when the CBCI was transferred to
TRB, TRB acquired the rights of FIL

ISSUE:
 Union wants its CBA with Textile be extended to Acrylic  Piercing will not be allowed unless the purpose is to seek to hold officers directly
liable for corporate debt

INDOPHIL
VS CALICA

 Manuel purchased jeep body from Francisco Motors; collection suit instituted by  The intestate proceeding did not involve any business of Francisco Corp; it is the act
Francisco of the Family, not the corp
 Manuel defense: his services when still the Asst Legal Officer of Francisco not yet  Offsetting will prejudice the corporation
paid = OFFSET  When individuals are unable to compensate, it is far fetch to conclude that the corp is
 Francisco said as a corporation, it should not be held liable for the attorney’s fee of liable bec it perpetuated fraud
Manuel since this was incurred by the incorporator, director, etc (Heirs o Benita
FRANCISCO Trinidad) in their personal capacity in the intestate case
MOTORS VS
CA ISSUE: can we apply piercing to claim the unpaid legal fees? – NO.
  Tan Tong both owner/incorporator of Lacampana Coffee and La Campana Gaugau  One business with two trade names
 Entered into a CBA with PLOW; breakaway group Kaisahan
 Kaisahan was an affiliate of Kalipunan; demanded higher wage
 Demand not granted; mediation instituted; pending this, Labor Union’s permit
revoked

LA ISSUE: can union demand from both Coffee and Gaugau?

CAMPANA
VS KKM

 PNB’s subsidiary company (Hong Kong) extended Letters of Credit to Ritratto and  Contract was between PNB-IFL and respondent
Dadasan  No need to pierce since PNB is being sued by Respondent not bec it acted as Atty-in-
 When the outstanding debt reached ____, foreclosure was needed fact in initiating the foreclosure proceeding
 WPI was granted in favor of Debtor

ISSUE: is it proper to include PNB from the WPI thereby preventing it to foreclose? –
NO.
PNB VS
Can PNB be impleaded given that PNB-IFL is its subsidiary? –NO.
RITRATTO

 Castillo owns a land which was mortgaged to DBP to secure loan  We pierce when we want individual officer directly liable for corporate debt
 About to be foreclosed; Rivera (nephew) suggested that it be converted into a  In this case, no personal claim against shareholders of the three corporations; the
subdivision to raise funds fraud alleged that led to the foreclosure does not justify piercing; no proof that the
 MOA entered by Slobec (Rivera) and Castillo family three were formed for the purpose of defrauding him
 Slobec entered into a sales agreement with Bormacheco for the purchase of  In this case, ICP cannot foreclose the REM bec it never incurred liability under the
Caterpillar Tractor – chattel mortgage + Surety Surety Agreement since no evidence showed that Bormacheco demanded from ICP
 Surety bond was secured by REM within 30 days after expiration of the bond
 There was a violation in the Couter-Guaranty Agreement hence the REM was sought
UMALI VS to be foreclosed by ICP (surety)
CA  ICP consolidated ownership; sold 4 parcels to PM Parts
 Heirs were asked to vacate; Case instituted claiming that the REM, foreclosure was
void since there was a pending administration case and the permission of the court
not obtained
 All contracts were declared void for being simulated bet Rivera and Bormacheco

Rivrera wants to pierce the veil claiming that Bormacheco, ICP and PM Parts
employed fraud to cause the foreclosure

ISSUE: should we pierce? NO.

  Plantiff (buyer) and Mortgagee instituted this 
 Paz Tuazon de Paterno (Owner); leased out with RFR
 Paz obtained numerous loans from Jose Vidal secured by REM
 Paz then decided to sell; negotiated with Gregorio Araneta; preferred right of lessees
and Vidal as mortgagee but would sell to Araneta if willing to buy at 400k
 Tenants exercised right; DOS also executed with Araneta re area covered by the
GREGORIO
mortgage
ARANETA
VS DE  Before this, Paz tried to pay but Vidal refused bec there was a period – until April
PATERNO 1943
 War broke and there was repudiation
 Araneta instituted this claim to compel Paz to deliver clear title

Can there be no absolute sale to Araneta unless mortgage is cancelled? – NO.

 

BOYER-
ROXAS VS
CA

 

SIAIN
ENTERPRIE
VS
CUPERTINO