Pantranco Employees vs. NLRC as a subsidiary of PNB.
as a subsidiary of PNB. Mega Prime is also included for having acquired PNBs shares over PNB-
FACTS:
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. 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.
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 cost-saving 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.
ISSUE:
Whether or not PNEI employees can attach the properties (specifically the Pantranco
properties) of PNB, PNB-Madecor and Mega Prime to satisfy their unpaid labor claims against
PNEI?
RULING:
NO.
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.
The settled rule that the power of the court in executing judgments extends only to
properties unquestionably belonging to the judgment debtor alone. To be sure, one mans goods
shall not be sold for another mans debts. 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.
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
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. This is a fiction created
by law for convenience and to prevent injustice. Obviously, PNB, PNB-Madecor, Mega Prime,
and PNEI are corporations with their own personalities.
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.
Lastly, while we recognize that there are peculiar circumstances or valid grounds that
may exist to warrant the piercing of the corporate veil, none applies in the present case whether
between PNB and PNEI; or PNB and PNB-Madecor.
SIAIN ENTERPRISES v. CUPERTINO
G.R. No. 170782 | June 22, 2009
Doctrine of piercing the veil of corporate fiction
This is a is a petition for review on certiorari under Rule 45 of the Rules of Court assailing
the decision of the Court of Appeals which affirmed the decision of the Regional Trial Court
Siain Enterprises, Inc. obtained a loan of P37,000,000.00 from respondent Cupertino
Realty Corporation (Cupertino) covered by a promissory note signed by both petitioner’s and
Cupertino’s respective presidents, Cua Le Leng and Wilfredo Lua. The parties then executed an
amendment to promissory note which provided for a seventeen percent (17%) interest per annum
on the P37,000,000.00 loan. The amendment to promissory note was likewise signed by Cua Le
Leng and Wilfredo Lua on behalf of petitioner and Cupertino, respectively.
Another promissory note was signed by Cua Le Leng in favor of Cupertino for
P160,000,000.00. Cua Le Leng signed the second promissory note as maker, on behalf of
petitioner, and as co-maker, liable to Cupertino in her personal capacity.
However, on March 11, 1996, through counsel, wrote Cupertino and demanded the
release of the P160,000,000.00 loan. In complete refutation, Cupertino, likewise through counsel,
responded and denied that it had yet to release the P160,000,000.00 loan. Cupertino maintained
that petitioner had long obtained the proceeds of the aforesaid loan. With this, Cupertino
instituted extrajudicial foreclosure proceedings over the properties subject of the amended real
estate mortgage.
RTC rendered a decision dismissing petitioner’s complaint and ordering it to pay
Cupertino P100,000.00 each for actual and exemplary damages, and P500,000.00 as attorney’s fees.
The RTC recalled and set aside its previous order declaring the notarial foreclosure of the
mortgaged properties as null and void. On appeal, the CA, as previously adverted to, affirmed
the RTC’s ruling.
In this regard, the lower courts applied the doctrine of “piercing the veil of corporate
fiction” to preclude petitioner from disavowing receipt of the P160,000,000.00 and paying its
obligation under the amended real estate mortgage.
ISSUE:
Petitioner asseverates that the lower courts erroneously applied the doctrine of
“piercing the veil of corporate fiction” when both gave credence to Cupertino’s evidence showing
that petitioner’s affiliates were the previous recipients of part of the P160,000,000.00 indebtedness
of petitioner to Cupertino. Is this valid?
HELD:
Yes. As a general rule, a corporation will be deemed a separate legal entity until
sufficient reason to the contrary appears. But the rule is not absolute. A corporation’s separate
and distinct legal personality may be disregarded and the veil of corporate fiction pierced when
the notion of legal entity is used to defeat public convenience, justify wrong, protect fraud, or
defend crime. In this case, Cupertino presented overwhelming evidence that petitioner and its
affiliate corporations had received the proceeds of the P160,000,000.00 loan increase which was
then made the consideration for the Amended Real Estate Mortgage. The facts established in the
case at bar has convinced the Court of the propriety to apply the principle by virtue of which, the
juridical personalities of the various corporations involved are disregarded and the ensuing
liability of the corporation to attach directly to its responsible officers and stockholders
These are as follows:
1. That the checks, debit memos and the pledges of the jewelries, condominium
units and trucks were constituted not exclusively in the name of [petitioner] but
also either in the name of Yuyek Manufacturing Corporation, Siain Transport,
Inc., Cua Leleng and Alberto Lim is of no moment.
2. Siain and Yuyek have [a] common set of [incorporators], stockholders and board of
directors;
3. They have the same internal bookkeeper and accountant in the person of Rosemarie
Ragodon;
4. They have the same office address at 306 Jose Rizal St., Mandaluyong City;
5. They have the same majority stockholder and president in the person of Cua Le Leng;
and
6. In relation to Siain Transport, Cua Le Leng had the unlimited authority by and on
herself, without authority from the Board of Directors, to use the funds of Siain Trucking
to pay the obligation incurred by the [petitioner] corporation.
7. As such, [petitioner] corporation is now estopped from denying the above
apparent authorities of Cua Le Leng who holds herself to the public as
possessing the power to do those acts, against any person who dealt in good faith
as in the case of Cupertino.
RYUICHI YAMAMOTO v. NISHINO LEATHER INDUSTRIES, INC. and IKUO NISHINO
551 SCRA 447 (2008)
To disregard the separate juridical personality of a corporation, the wrongdoing or unjust act in
contravention of a plaintiff’s legal rights must be clearly and convincingly established. Also, without
acceptance, a mere offer produces no obligation.
Ryuichi Yamamoto and Ikuo Nishino agreed to enter into a joint venture wherein
Nishino would acquire such number of shares of stock equivalent to 70% of the authorized capital
stock of the corporation. However, Nishino and his brother Yoshinobu Nishino acquired more
than 70% of the authorized capital stock. Negotiations subsequently ensued in light of a planned
takeover by Nishino who would buy-out the shares of stock of Yamamoto who was advised
through a letter that he may take all the equipment/ machinery he had contributed to the
company (for his own use and sale) provided that the value of such machines is deducted from
the capital contributions which will be paid to him. However, the letter requested that he give his
“comments on all the above, soonest”. On the basis of the said letter, Yamamoto attempted to
recover the machineries but Nishino hindered him to do so, drawing him to file a Writ of
Replevin. The Trial Court issued the writ. However, on appeal, Nishino claimed that the
properties being recovered were owned by the corporation and the above-said letter was a mere
proposal which was not yet authorized by the Board of Directors. Thus, the Court of Appeals
reversed the trial court’s decision despite Yamamoto’s contention that the company is merely an
instrumentality of the Nishinos.
ISSUE:
Whether or not Yamamoto can recover the properties he contributed to the company in
view of the Doctrine of Piercing the Veil of Corporate Fiction and Doctrine of Promissory
Estoppel.
HELD:
One of the elements determinative of the applicability of the doctrine of piercing the veil
of corporate fiction is that 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 the plaintiff’s legal rights. To disregard the separate juridical
personality of a corporation, the wrongdoing or unjust act in contravention of a plaintiff’s legal
rights must be clearly and convincingly established; it cannot be presumed. Without a
demonstration that any of the evils sought to be prevented by the doctrine is present, it does not
apply. Estoppel may arise from the making of a promise. However, it bears noting that the letter
was followed by a request for Yamamoto to give his “comments on all the above, soonest.” What
was thus proffered to Yamamoto was not a promise, but a mere offer, subject to his acceptance.
Without acceptance, a mere offer produces no obligation. Thus, the machineries and equipment,
which comprised Yamamoto’s investment, remained part of the capital property of the
corporation.