If I were the counsel for Sonnel Construction Company, I will argue that the proximate cause of the death of the victim is the gross negligence of the taxicab driver. The latter drove the taxicab off road and onto the sidewalk in order to avoid the traffic. Furthermore, I will argue that assuming that Nelson was negligent, he alone should be sued as the Sonnel Coonstruction Company has a separate and distinct personality. Nelson’s controlling interest in Sonnel Construction Company does not justify the piercing of the corporate veil.
NO, the RTC is not correct. The court must have first acquire jurisdiction over the corporation(s) involved before its or their separate personalities are disregarded; and the doctrine of piercing the veil of corporate entity can only be raised during a full-blown trial over a cause of action duly commenced involving parties duly brought under the authority of the court by way of service of summons or what passes as such service.
The President of YEC cannot invoke as a defense the doctrine of separate juridical personality to avoid criminal liability. The law specifically makes the director, officer or any person responsible for the violation of the Trust Receipt agreement criminally liable precisely for the reason that a Corporation, being a juridical entity, cannot be the subject of the penalty of imprisonment. Nevertheless, following the same doctrine of separate legal personality, he cannot be civilly liable there being no showing that he bound himself with YEC to pay the loan. Only YEC is liable to pay the loan covered by the letter of credit/trust receipt. (Ching v. Secretary of Justice, G. R. No. 164317, February 6, 2006 and Section 13 of PD 115)
a. Mr. P is not liable. The corporation being a mere artificial person can only act through its representative. The corporate representative is not liable for any act taken on behalf of the corporation unless he acted in bad faith or with gross negligence in directing the affairs of the corporation or made himself liable solidarily with the corporation. In this case, P, as President, signed the loan document not for himself but on behalf of X Corporation. Nothing in the facts indicated show that he bound himself liable with the corporation or he acted in bad faith or with gross negligence.
b. Y, Inc. is not liable. Interlocking shareholders, directors and officers, per se, is not enough reason to set aside the separate legal personalities of X and Y. Piercing the corporate veil based on the alter ego theory requires the concurrence of three elements, namely:
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 (Development Bank of the Philippines v. Hydro Resources Contractors Corporation, G.R. No. 167603, March 13, 2013)
Control then is not enough. The facts do not show that the control over the corporation was used to perpetuate fraud or violate a positive legal duty in contravention of the J Bank’s right and that such control and breach of duty was the proximate cause suffered by the Bank.
a. NO. A corporation, being an artificial person which has no feelings, emotions or senses, and which cannot experience physical suffering or mental anguish, is not entitled to moral damages.
b. YES. When a juridical person has a good reputation that is debased, resulting in social humiliation, moral damages may be awarded. Moreover, goodwill can be considered an asset of the corporation.
a. Under the doctrine of “piercing the veil of corporate entity,” the legal fiction that a corporation is an entity with a juridical personality separate and distinct from its members or stockholders may be disregarded and the corporation will be considered as a mere association of persons, such that liability will attach directly to the officers and the stockholders. It is an equitable doctrine developed to address situations where the separate corporate personality of a corporation is abused or used for wrongful purposes.
b. The doctrine of “piercing the veil of corporate entity” will apply when the corporation’s separate juridical personality is used:
1. To defeat public convenience;
2. To justify wrong, protect fraud, or defend crime;
3. As a shield to confuse the legitimate issues;
4. Where a corporation is the mere alter ego or business conduit of a person; or
5. Where the corporation is so organized and controlled and its affairs are so conducted as to make it merely an instrumentality, agency, conduit or adjunct of another corporation.
The veil of corporate fiction may be pierced by proving in court that the notion of legal entity is being used to defeat public convenience, justify wrong, protect fraud, or defend crime or the entity is just an instrument or alter ego or adjunct of another entity or person.
YES. “Y” Corporation may be held liable for the debts of “X” Corporation. The doctrine of piercing the veil of corporate fiction applies to this case. The two corporations have the same board of directors and “Y” corporation owned substantially all of the stocks of “X” Corporation, which facts justify the conclusion that the latter is merely an extension of the personality of the former, and that the former controls the policies of the latter. Added to this is the fact that “Y” Corporation controls the finances of “X” Corporation which is merely an adjunct, business conduit or alter-ego of “Y” Corporation.
The plaintiff can avail himself of the doctrine of piercing the veil of corporate fiction which can be invoked when a corporation is formed or used in avoiding a just obligation. While it is true that a family corporation may be organized to pursue an estate tax planning, which is not per se illegal or unlawful, the factual settings, however, indicate the existence of a lawsuit that could subject Mr. Pablo to a substantial amount of damages. It would thus be difficult for Mr. Pablo to convincingly assert that the incorporation of the family corporation was intended merely as a case of “estate tax planning”.
a. Under the present Revised Corporation Code, since there is now the One Person Corporation, the minimum number of incorporators is 1 while the maximum is still 15. This is the same rule with regard to the minimum and maximum number of directors of a stock corporation. (Secs. 10 and 13 [f]. RCC)
b. NO. The requirement that at least a majority of the incorporators as well as the directors must be residents of the Philippines has been removed under the present Revised Corporation Code. (Secs. 10 and 22,RCC)
