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CORPORATION LAW Pantranco Employees Asso. (PEA-PTGWO) v. NLRC,
DOCTRINE OF SEPARATE PERSONALITY
Nature of the Doctrine of Separate Personality
Pioneer Insurance Surety Corp. vs. Morning Star
Travel & Tours, Inc., et. al., G.R. No. 198436, July 08,
2015
As a general rule, a corporation has a separate
and distinct personality from those who represent it.
Zambrano vs. Philippine Carpet Manufacturing Corp.,
GR No 224099, June 21,2017
A corporation has a personality separate and
distinct from the persons composing it, as well as from
any other legal entity to which it may be related.
Consequence of the Doctrine of Separate Personality
Bustos vs. Millians Shoe, Inc. GR NO 185024, April 24,
2017
By virtue of that doctrine, stockholders of a
corporation enjoy limited liability: the corporate debt is
not the debt of the stockholder.
Shrimp Specialists, Inc. vs. Fuji-Triumph Agri-
Industrial Corp., GR No. 168756, December 7, 2009
Ownership by a single or small group of
stockholders of nearly all of the capital stock of the
corporation is not by itself a sufficient ground to
disregard the separate corporate personality. Thus,
obligations incurred by corporate officers, acting as
corporate agents, are direct accountabilities of the
corporation they represent.
Separate Personality: Corporate Director
Edsa Shangri-La Hotel and Resort, Inc. vs BF Corp. GR
No. 145842, June 27, 2008
The obligations incurred by corporate officers,
acting as corporate agents, are not theirs but direct
accountabilities of the corporation they represent.
Even if Roxas-del Castillo, at the time ESHRI
defaulted in paying BF’s monthly progress bill, was still a
director, before she could be held personally liable as
corporate director, it must be shown that she acted in a
manner and under the circumstances contemplated
under Section 31 of the Corporation Code.
Shrimp Specialists, Inc. vs. Fuji-Triumph Agri-
Industrial Corp., GR No. 168756, December 7, 2009
Obligations incurred by corporate officers as
corporate agents are direct accountabilities of the
corporation they represent.
To hold Eugene Lim (the president) solidarily
liable should be more than just signing on behalf of the
corporation because artificial entities can only act
through natural persons.
SMC: Generally, if the president/corporate officer sign a
document or contract in behalf of the corporation, and
obligations were incurred because of signing the
document. That officer will not be held liable.
Separate Personality: Subsidiary/Affiliate Corporation
GR No 170689, March 17, 2009
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 subsidiary’s
separate existence shall be respected, and the liability of
the parent corporation as well as the subsidiary will be
confined to those arising int heir respective businesses.
Separate Personality: Owners and Stockholders
Manuel C Espiritu Jr. vs. Petron Corporation, et al, GR
No 170891, November 24, 2009
The owners of the corporation are its
stockholders and are to be distinguished from its
directors or officers. It must be noted that in a
corporation the management of its business is generally
vested in its BOD not to its stockholders.
Stockholders are basically investors in the
corporation. They do not have a hand in the running of
the day to day business of the corporation unless they
are at the same time directors and officers of the
corporation.
Before a stockholder may be held criminally
liable for the acts committed by the corporation, it must
be shown that he had knowledge of the criminal act
committed in the name of the corporation and that he
took part in the same or gave his consent to its
commission, whether by action or inaction.
DOCTRINE OF PIERCING THE VEIL OF CORPORATE
FICTION
SMC: This doctrine runs opposite the doctrine of
separate personality.
Queensland-Tokyo Commodities, Inc et al. vs.
Thomas George, GR No 172727, September 8, 2010
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.
Livesey vs. Binswanger, Phil. Inc. GR No. 177493,
March 19, 2014
The doctrine of piercing the veil of corporation
fiction is a legal precept that allows a corporation’s
separate personality to be disregarded under certain
circumstances, so that a corporation and its stockholders
or members, or a corporation and another related
corporation could be treated as a single entity. The
doctrine is an equitable principle, it being meant to apply
only in situations where the separate corporate
personality of a corporation is being abused or being
used for wrongful purposes.
SMC: The court consistently said that there must be
showing that the separate personality is being used or
abused by the defendant. The court will not then hesitate
to pierce the corporate fiction.

Rationale of the Doctrine of Piercing the Veil
Eric Godfrey Stanley Livesey vs. Binswanger, Phil. Inc.
GR No. 177493, March 19, 2014
It 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 perpetuate
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.
Pacific Rehouse Corp. vs. CA, et al. GR No. 199687,
March 24, 2014
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 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.
SMC: There is no need of using or abusing the doctrine
to be liable.
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 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.
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.
Effect if the Veil of Corporate Fiction is Pierced
Pacific Rehouse Corp. vs. CA, et al. GR No. 199687,
March 24, 2014
The principle of piercing the veil of corporate
fiction shall result in the treatment of two related
corporations as one and the same juridical person with
respect to a given transaction. As such, the liability of
one may be imposed on the other.
Factors to be considered by the Court in Piercing the
Veil of Corporate Fiction of Two Corporations
For the Court to pierce the veil of corporate
fiction of two corporations, the confluence of the
following factors is needed:
(1) The first corporation is dissolved;
(2) The assets of the first corporation is transferred
to a second corporation to avoid financial
liability of the first corporation; and
(3) Both corporations are owned and controlled by
the same person, such that the second
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corporation should be considered as a
continuation and successor of the first
corporation.
Factors of Identity that may be considered in the
application of the doctrine
Heirs of Fe Tan Uy, et al. vs. Int’l Exchange Bank et al,
GR No 166282-83, February 13, 2013
(1) Stock ownership by one or common ownership
of both corporations (Common Ownership);
(2) Identity of directors and officers (Interlocking
Directorship);
(3) The manner of keeping corporate books and
records.
Alter-Ego Test
Where one corporation is so organized and
controlled and its affairs are conducted so that it is, in
fact, 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 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.
Three-pronged tests to establish the Alter-Ego Doctrine
Pacific Rehouse Corp. vs. CA, et al. GR No. 199687,
March 24, 2014
The three-pronged control test to establish
when the alter ego doctrine should be operative are 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 right; and
(3) The aforesaid control and breach of duty must
[have] proximately caused 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.
Hence, all three elements should concur for the
alter ego doctrine to be applicable.
PNB vs. Hydro Resources Contractors Corp, GR No.
167530, March 13, 2013
The Court has declared that “mere ownership by
single stockholder or by another corporation of all or
nearly all of the capital stock of a corporation is not itself
sufficient ground for disregarding the separate corporate

personality. The court has likewise ruled that the
existence of interlocking directors, corporate officers and
shareholders is not enough justification to pierce the veil
of corporate fiction in the absence of fraud or other
public policy considerations.”
On the Doctrine of PVCF as the General Rule or the
Exception
Umali vs. CA, GR No 89561, September 12, 1990
It is more of an exception to the general rule.
The mere fact that the business of two or more
corporations are interrelated is not a justification for
disregarding their separate personalities, absent
sufficient showing that the corporate entity was
purposely used as a shield to defraud creditors and third
persons of their rights.
Heirs of Fe Tan Uy, et al. vs. Int’l Exchange Bank et al,
GR No 166282-83, February 13, 2013
It behooves this court to emphasize that the
piercing of the veil of corporate fiction is frowned upon
and can only be done if it has been clearly established
that the separate and distinct personality of the
corporation is used to justify a wrong, protect fraud, or
perpetuate a deception.
Hence any application of the doctrine of PVCF
should be done with caution. A court should be mindful
of the milieu where it is to be applied. It must be certain
that the corporate fiction was misused to such an extent
that injustice, fraud, or crim was committed against
another, in disregard of its rights.
Rationale of the Doctrine of PVCF
PNB vs. Andrada Electric and Engineering Co., GR No
142936, April 17, 2002
The wrongdoing must be clearly and
convincingly established; it cannot be presumed.
Otherwise, an injustice that was never unintended may
result from an erroneous application.
Can the doctrine be used to determine jurisdiction?
Pacific Rehouse Corp. vs. CA, et al. GR No. 199687,
March 24, 2014
No, PVCF applies to determine the liability and
not of jurisdiction. This is so because the doctrine of
PVCF comes to play only during the trial of the case after
the court has already acquired jurisdiction over the
corporation. Hence, before this doctrine can be applied,
based on the evidence presented, it is imperative that
the court must first have jurisdiction over the
corporation.
If the court has no jurisdiction over the
corporation, it follows that the court has no business in
piercing its veil of corporate fiction because such action
offends the corporation’s right to due process.
PVCF is basically applied only to determine
established liability; it is not available to confer on the
court a jurisdiction it has not acquired, in the first place,
over a party not impleaded in a case.
Elsewise put, a corporation is not impleaded in a
suit cannot be subject to the court’s process of piercing
the veil of its corporate fiction, in that situation, the court
has not acquired jurisdiction over the corporation and,
hence, any proceedings taken against that corporation
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and its property would infringe on its right to due
process.
Comparative Analysis of Jurisprudence
Piercing the Veil of Corporate Fiction: Can a corporation
be made liable for the obligation of an affiliate company
under the Doctrine for Piercing the Veil of Corporate
Fiction?
Eric Godfrey Stanley Livesey vs. Binswanger, Phil. Inc.
GR No. 177493, March 19, 2014
Yes. A corporation can be made liable for the
obligation of an affiliate company under the Doctrine of
Piercing the Veil of Corporate Fiction.
It has long been settled that the law vests a
corporation with a personality distinct and separate from
its SH or members. In the same vein, 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.
Nonetheless, the shield is not at all times
impenetrable and cannot be extended to the point
beyond its reason and policy. Circumstances might deny
a claim for corporate personality, under the doctrine of
piercing the veil of corporate fiction.
PVCF 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 perpetuate
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, we see an indubitable link
between CBB’s closure and Binswanger’s incorporation.
CBB ceased to exist only in name; it re-emerged in the
person of Binswanger for an urgent purpose – to avoid
payment by CBB of the last two installments of its
monetary obligation to Livesey, as well as its other
financial liabilities. Freed of CBB’s liabilities, especially
that owing to Livesey, Binswanger can continue, as it did
continue, CBB’s real estate brokerage business.
Zambrano vs. Philippine Carpet Manufacturing Corp.,
/ Pacific Carpet Mfg. Corp, et al. GR No 224099, June
21,2017
No. A corporation cannot be made liable for the
obligation of an affiliate company under the Doctrine of
PVCF.
Pacific Carpet has a personality separate can
distinct from Phil. Carpet.
A corporation is an artificial being created by
law. It possesses the right of succession and such
powers, attributes, and properties expressly authorized
by law or incident to its existence. It has a personality
separate and distinct form the persons composing it, as
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well as from any other legal entity to which may be

related.
Equally well settled is the principle that the
corporate mask may be removed or the corporate veil
pierced when the corporation is just an alter-ego of a
person or of another corporation. For reasons of public
policy and in the interest of justice, the corporate veil will
justifiably be impaled only when it becomes a shield for
fraud, illegality, or inequity committed against third
persons.
Hence, any application of the Doctrine of PVCF
should be done with caution. A court should be mindful
of the milieu where it is to be applied. It must be certain
that the corporate fiction was misused to such an extent
that injustice, fraud or crime was committed against
another, in disregard of rights. The wrongdoing must be
clearly and convincingly established; it cannot be
presumed. Otherwise, an injustice that was never
unintended may result from an erroneous application.

Case Comparison:
In Livesey vs Binswanger Case, the court ruled
that a corporation can be made liable for the obligation
of an affiliate company under the Doctrine of PVCF. In
Zambrano vs. Phil. Carpet, the court held that it cannot
be made liable.

Ratio Decidendi:
In the Livesey Case, the court ruled that when
one corporation was closed and in order to organize
another for the purpose of evading its liabilities, there is
obvious bad faith. This wrongful intent cannot and must
not condone, for it will give a premium to an iniquitous
business strategy where a corporation is formed or used
for a non-legitimate purpose, such as to evade a just and
due obligation.
In the case of Zambrano, the court ruled that it
could not be said that the Pacific Carpet was set up to
evade Phil. Carpet’s liabilities. As to the transfer of Phil.
Carpet’s machines to Pacific Carpet, settled is the rule
that “where on 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.

Conclusion:
The ruling in the case of Zambrano did not
overturn the doctrine laid down in the Livesey case.
The court merely clarified the general rule and
applied the exception to prevent the abuse of the
doctrine of separate personality.