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In applying the alter ego doctrine, the courts are While ownership by one corporation of all or a
concerned with reality and not form, with how the great majority of stocks of another corporation
corporation operated and the individual and their interlocking directorates may serve as
defendants relationship to that operation. 62 With indicia of control, by themselves and without
more, however, these circumstances are Commission70 that this Court has the power to
insufficient to establish an alter ego relationship resolve a question of fact, such as whether a
or connection between DBP and PNB on the one corporation is a mere alter ego of another entity
hand and NMIC on the other hand, that will justify or whether the corporate fiction was invoked for
the puncturing of the latters corporate cover. This fraudulent or malevolent ends, if the findings in
Court has declared that "mere ownership by a the assailed decision are either not supported by
single stockholder or by another corporation of all the evidence on record or based on a
or nearly all of the capital stock of a corporation is misapprehension of facts.
not of itself sufficient ground for disregarding the
separate corporate personality."66 This Court has In this case, nothing in the records shows that the
likewise ruled that the "existence of interlocking corporate finances, policies and practices of NMIC
directors, corporate officers and shareholders is were dominated by DBP and PNB in such a way
not enough justification to pierce the veil of that NMIC could be considered to have no
corporate fiction in the absence of fraud or other separate mind, will or existence of its own but a
public policy considerations."67 mere conduit for DBP and PNB. On the contrary,
the evidence establishes that HRCC knew and
True, the findings of fact of the Court of Appeals acted on the knowledge that it was dealing with
are conclusive and cannot be reviewed on appeal NMIC, not with NMICs stockholders. The letter
to this Court, provided they are borne out of the proposal of Hercon, Inc., HRCCs predecessor-in-
record or are based on substantial evidence. 68 It is interest, regarding the contract for NMICs mine
equally true that the question of whether one stripping and road construction program was
corporation is merely an alter ego of another is addressed to and accepted by NMIC.71 The various
purely one of fact. So is the question of whether a billing reports, progress reports, statements of
corporation is a paper company, a sham or accounts and communications of Hercon,
subterfuge or whether the requisite quantum of Inc./HRCC regarding NMICs mine stripping and
evidence has been adduced warranting the road construction program in 1985 concerned
piercing of the veil of corporate NMIC and NMICs officers, without any indication
69
personality. Nevertheless, it has been held in of or reference to the control exercised by DBP
Sarona v. National Labor Relations
and/or PNB over NMICs affairs, policies and Jose Tengco, Jr. and Rolando Zosa, were
practices.72 established to be members of the board of
governors of DBP and none was proved to be a
HRCC has presented nothing to show that DBP member of the board of directors of PNB. 76 No
and PNB had a hand in the act complained of, the director of NMIC was shown to be also sitting
alleged undue disregard by NMIC of the demands simultaneously in the board of governors/directors
of HRCC to satisfy the unpaid claims for services of both DBP and PNB.
rendered by HRCC in connection with NMICs mine
stripping and road construction program in 1985. In reaching its conclusion of an alter ego
On the contrary, the overall picture painted by the relationship between DBP and PNB on the one
evidence offered by HRCC is one where HRCC was hand and NMIC on the other hand, the Court of
dealing with NMIC as a distinct juridical person Appeals invoked Sibagat Timber Corporation v.
acting through its own corporate officers.73 Garcia,77 which it described as "a case under a
similar factual milieu."78 However, in Sibagat
Moreover, the finding that the respective boards Timber Corporation, this Court took care to
of directors of NMIC, DBP, and PNB were enumerate the circumstances which led to the
interlocking has no basis. HRCCs Exhibit "I- piercing of the corporate veil of Sibagat Timber
5,"74 the initial General Information Sheet Corporation for being the alter ego of Del Rosario
submitted by NMIC to the Securities and Exchange & Sons Logging Enterprises, Inc. Those
Commission, relied upon by the trial court and the circumstances were as follows: holding office in
Court of Appeals may have proven that DBP and the same building, practical identity of the officers
PNB owned the stocks of NMIC to the extent of and directors of the two corporations and
57% and 43%, respectively. However, nothing in it assumption of management and control of Sibagat
supports a finding that NMIC, DBP, and PNB had Timber Corporation by the directors/officers of Del
interlocking directors as it only indicates that, of Rosario & Sons Logging Enterprises, Inc.
the five members of NMICs board of directors,
four were nominees of either DBP or PNB and only Here, DBP and PNB maintain an address different
one was a nominee of both DBP and PNB. 75Only from that of NMIC.79 As already discussed, there
two members of the board of directors of NMIC, was insufficient proof of interlocking directorates.
There was not even an allegation of similarity of unjust act in contravention of plaintiffs legal
corporate officers. Instead of evidence that DBP rights." It is a recognition that, even assuming
and PNB assumed and controlled the that DBP and PNB exercised control over NMIC,
management of NMIC, HRCCs evidence shows there is no evidence that the juridical personality
that NMIC operated as a distinct entity endowed of NMIC was used by DBP and PNB to commit a
with its own legal personality. Thus, what obtains fraud or to do a wrong against HRCC.
in this case is a factual backdrop different from,
not similar to, Sibagat Timber Corporation. There being a total absence of evidence pointing
to a fraudulent, illegal or unfair act committed
In relation to the second element, to disregard the against HRCC by DBP and PNB under the guise of
separate juridical personality of a corporation, the NMIC, there is no basis to hold that NMIC was a
wrongdoing or unjust act in contravention of a mere alter ego of DBP and PNB. As this Court
plaintiffs legal rights must be clearly and ruled in Ramoso v. Court of Appeals82:
convincingly established; it cannot be presumed.
Without a demonstration that any of the evils As a general rule, a corporation will be looked
sought to be prevented by the doctrine is present, upon as a legal entity, unless and until sufficient
it does not apply.80 reason to the contrary appears. When the notion
of legal entity is used to defeat public
In this case, the Court of Appeals declared: convenience, justify wrong, protect fraud, or
defend crime, the law will regard the corporation
We are not saying that PNB and DBP are guilty of as an association of persons. Also, the corporate
fraud in forming NMIC, nor are we implying that entity may be disregarded in the interest of justice
NMIC was used to conceal fraud. x x x.81 in such cases as fraud that may work inequities
among members of the corporation internally,
Such a declaration clearly negates the possibility involving no rights of the public or third persons.
that DBP and PNB exercised control over NMIC In both instances, there must have been fraud,
which DBP and PNB used "to commit fraud or and proof of it. For the separate juridical
wrong, to perpetuate the violation of a statutory personality of a corporation to be disregarded, the
or other positive legal duty, or dishonest and
wrongdoing must be clearly and convincingly contingent liability for which the National
established. It cannot be presumed. Government, through the APT, may be held liable
under the said provision refers to contingent
As regards the third element, in the absence of liabilities of DBP and PNB. Since DBP and PNB may
both control by DBP and PNB of NMIC and fraud or not be held solidarily liable with NMIC, no
fundamental unfairness perpetuated by DBP and contingent liability may be imputed to the APT as
PNB through the corporate cover of NMIC, no well. Only NMIC as a distinct and separate legal
harm could be said to have been proximately entity is liable to pay its corporate obligation to
caused by DBP and PNB on HRCC for which HRCC HRCC in the amount of P8,370,934.74, with legal
could hold DBP and PNB solidarily liable with interest thereon from date of demand.
NMIC.1wphi1
As trustee of the assets of NMIC, however, the APT
Considering that, under the deeds of transfer should ensure compliance by NMIC of the
executed by DBP and PNB, the liability of the APT judgment against it. The APT itself acknowledges
as transferee of the rights, titles and interests of this.84
DBP and PNB in NMIC will attach only if DBP and
PNB are held liable, the APT incurs no liability for WHEREFORE, the petitions are hereby GRANTED.
the judgment indebtedness of NMIC. Even HRCC
recognizes that "as assignee of DBP and PNB 's The complaint as against Development Bank of
loan receivables," the APT simply "stepped into the Philippines, the Philippine National Bank, and
the shoes of DBP and PNB with respect to the the Asset Privatization Trust, now the Privatization
latter's rights and obligations" in NMIC. 83 As such and Management Office, is DISMISSED for lack of
assignee, therefore, the APT incurs no liability with merit. The Asset Privatization Trust, now the
respect to NMIC other than whatever liabilities Privatization and Management Office, as trustee of
may be imputable to its assignors, DBP and PNB. Nonoc Mining and Industrial Corporation, now the
Philnico Processing Corporation, is DIRECTED to
Even under Section 2.02 of the respective deeds ensure compliance by the Nonoc Mining and
of transfer executed by DBP and PNB which HRCC Industrial Corporation, now the Philnico Processing
invokes, the APT cannot be held liable. The Corporation, with this Decision.
SO ORDERED.