Monday, February 26, 2024

Philippine National Bank vs. Hydro Resources Contractors Corp. G.R. Nos. 167530/61; 167603; March 13, 2013 [Case Digest]

 

Philippine National Bank vs. Hydro Resources Contractors Corp.

G.R. Nos. 167530/61; 167603; March 13, 2013.

First Division [LEONARDO-DE CASTRO, J.]

Facts:

            Sometime in 1984, petitioners DBP and PNB foreclosed on certain mortgages made on the properties of Marinduque Mining and Industrial Corporation (MMIC). As a result of the foreclosure, DBP and PNB acquired substantially all the assets of MMIC and resumed the business operations of the defunct MMIC by organizing NMIC. DBP and PNB owned 57% and 43% of the shares of NMIC, respectively, except for five qualifying shares. As of September 1984, the members of the Board of Directors of NMIC, namely, Jose Tengco, Jr., Rolando Zosa, Ruben Ancheta, Geraldo Agulto, and Faustino Agbada, were either from DBP or PNB.

                Subsequently, NMIC engaged the services of Hercon, Inc., for NMIC’s Mine Stripping and Road Construction Program in 1985 for a total contract price of ₱35,770,120. After computing the payments already made by NMIC under the program and crediting the NMIC’s receivables from Hercon, Inc., the latter found that NMIC still has an unpaid balance of ₱8,370,934.74. Hercon, Inc. made several demands on NMIC, including a letter of final demand dated August 12, 1986, and when these were not heeded, a complaint for sum of money was filed in the RTC of Makati, Branch 136 seeking to hold petitioners NMIC, DBP, and PNB solidarily liable for the amount owing Hercon, Inc.

                Subsequent to the filing of the complaint, Hercon, Inc. was acquired by HRCC in a merger. This prompted the amendment of the complaint to substitute HRCC for Hercon, Inc.

                Thereafter, on December 8, 1986, then President Corazon C. Aquino issued Proclamation No. 50 creating the APT for the expeditious disposition and privatization of certain government corporations and/or the assets thereof. Pursuant to the said Proclamation, on February 27, 1987, DBP and PNB executed their respective deeds of transfer in favor of the National Government assigning, transferring and conveying certain assets and liabilities, including their respective stakes in NMIC. In turn and on even date, the National Government transferred the said assets and liabilities to the APT as trustee under a Trust Agreement. Thus, the complaint was amended for the second time to implead and include the APT as a defendant.

                In its answer, NMIC claimed that HRCC had no cause of action. It also asserted that its contract with HRCC was entered into by its then President without any authority. Moreover, the said contract allegedly failed to comply with laws, rules and regulations concerning government contracts. NMIC further claimed that the contract amount was manifestly excessive and grossly disadvantageous to the government. NMIC made counterclaims for the amounts already paid to Hercon, Inc. and attorney’s fees, as well as payment for equipment rental for four trucks, replacement of parts and other services, and damage to some of NMIC’s properties.

                For its part, DBP’s answer raised the defense that HRCC had no cause of action against it because DBP was not privy to HRCC’s contract with NMIC. Moreover, NMIC’s juridical personality is separate from that of DBP. PNB’s answer also invoked lack of cause of action against it. It also raised estoppel on HRCC’s part and laches as defenses, claiming that the inclusion of PNB in the complaint was the first time a demand for payment was made on it by HRCC. PNB also invoked the separate juridical personality of NMIC and made counterclaims for moral damages and attorney’s fees.

            RTC pierced the corporate veil of NMIC and held DBP and PNB solidarily liable with NMIC. The business of NMIC was then also being conducted and controlled by both DBP and PNB. In fact, it was Rolando M. Zosa, then Governor of DBP, who was signing and entering into contracts with third persons, on behalf of NMIC.

            CA affirmed the piercing of the veil of the corporate personality of NMIC and held DBP, PNB, and APT solidarily liable with NMIC. It is indubitable that [NMIC] was owned by appellants DBP and PNB to the extent of 57% and 43% respectively; that said two (2) appellants are the only stockholders, with the qualifying stockholders of five (5) consisting of its own officers and included in its charter merely to comply with the requirement of the law as to number of incorporators; and that the directorates of DBP, PNB and [NMIC] are interlocked.

 

Issue:

            Whether or not there is sufficient ground to pierce the veil of corporate fiction.

 

Held:

            No; a corporation is an artificial entity created by operation of 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 from that of its stockholders and from that of other corporations to which it may be connected. As a consequence of its status as a distinct legal entity and as a result of a conscious policy decision to promote capital formation, a corporation incurs its own liabilities and is legally responsible for payment of its obligations. In other words, by virtue of the separate juridical personality of a corporation, the corporate debt or credit is not the debt or credit of the stockholder. This protection from liability for shareholders is the principle of limited liability.

            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.

            The doctrine of piercing the corporate veil applies only in three (3) basic areas, namely: 1) defeat of public convenience as when the corporate fiction is used as a vehicle for the evasion of an existing obligation; 2) fraud cases or when the corporate entity is used to justify a wrong, protect fraud, or defend a crime; or 3) alter ego cases, where a corporation is merely a farce since it is a mere alter ego or business conduit of a person, or 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.

                        In this connection, case law lays down a three-pronged test to determine the application of the alter ego theory, which is also known as the instrumentality theory, 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.

            The first prong is the "instrumentality" or "control" test. This test requires that the subsidiary be completely under the control and domination of the parent. It examines the parent corporation’s relationship with the subsidiary. It inquires whether a subsidiary corporation is so organized and controlled and its affairs are so conducted as to make it a mere instrumentality or agent of the parent corporation such that its separate existence as a distinct corporate entity will be ignored. It seeks to establish whether the subsidiary corporation has no autonomy and the parent corporation, though acting through the subsidiary in form and appearance, "is operating the business directly for itself."

            The second prong is the "fraud" test. This test requires that the parent corporation’s conduct in using the subsidiary corporation be unjust, fraudulent or wrongful. It examines the relationship of the plaintiff to the corporation. It recognizes that piercing is appropriate only if the parent corporation uses the subsidiary in a way that harms the plaintiff creditor. As such, it requires a showing of "an element of injustice or fundamental unfairness."

            The third prong is the "harm" test. This test requires the plaintiff to show that the defendant’s control, exerted in a fraudulent, illegal or otherwise unfair manner toward it, caused the harm suffered. A causal connection between the fraudulent conduct committed through the instrumentality of the subsidiary and the injury suffered or the damage incurred by the plaintiff should be established. The plaintiff must prove that, unless the corporate veil is pierced, it will have been treated unjustly by the defendant’s exercise of control and improper use of the corporate form and, thereby, suffer damages.

                        To summarize, piercing the corporate veil based on the alter ego theory requires the concurrence of three elements: control of the corporation by the stockholder or parent corporation, fraud or fundamental unfairness imposed on the plaintiff, and harm or damage caused to the plaintiff by the fraudulent or unfair act of the corporation. The absence of any of these elements prevents piercing the corporate veil.

            Philippine National Bank vs. Hydro Resources Contractors Corp.

G.R. Nos. 167530/61; 167603; March 13, 2013.

First Division [LEONARDO-DE CASTRO, J.]

Facts:

            Sometime in 1984, petitioners DBP and PNB foreclosed on certain mortgages made on the properties of Marinduque Mining and Industrial Corporation (MMIC). As a result of the foreclosure, DBP and PNB acquired substantially all the assets of MMIC and resumed the business operations of the defunct MMIC by organizing NMIC. DBP and PNB owned 57% and 43% of the shares of NMIC, respectively, except for five qualifying shares. As of September 1984, the members of the Board of Directors of NMIC, namely, Jose Tengco, Jr., Rolando Zosa, Ruben Ancheta, Geraldo Agulto, and Faustino Agbada, were either from DBP or PNB.

            Subsequently, NMIC engaged the services of Hercon, Inc., for NMIC’s Mine Stripping and Road Construction Program in 1985 for a total contract price of ₱35,770,120. After computing the payments already made by NMIC under the program and crediting the NMIC’s receivables from Hercon, Inc., the latter found that NMIC still has an unpaid balance of ₱8,370,934.74. Hercon, Inc. made several demands on NMIC, including a letter of final demand dated August 12, 1986, and when these were not heeded, a complaint for sum of money was filed in the RTC of Makati, Branch 136 seeking to hold petitioners NMIC, DBP, and PNB solidarily liable for the amount owing Hercon, Inc.

            Subsequent to the filing of the complaint, Hercon, Inc. was acquired by HRCC in a merger. This prompted the amendment of the complaint to substitute HRCC for Hercon, Inc.

            Thereafter, on December 8, 1986, then President Corazon C. Aquino issued Proclamation No. 50 creating the APT for the expeditious disposition and privatization of certain government corporations and/or the assets thereof. Pursuant to the said Proclamation, on February 27, 1987, DBP and PNB executed their respective deeds of transfer in favor of the National Government assigning, transferring and conveying certain assets and liabilities, including their respective stakes in NMIC. In turn and on even date, the National Government transferred the said assets and liabilities to the APT as trustee under a Trust Agreement. Thus, the complaint was amended for the second time to implead and include the APT as a defendant.

            In its answer, NMIC claimed that HRCC had no cause of action. It also asserted that its contract with HRCC was entered into by its then President without any authority. Moreover, the said contract allegedly failed to comply with laws, rules and regulations concerning government contracts. NMIC further claimed that the contract amount was manifestly excessive and grossly disadvantageous to the government. NMIC made counterclaims for the amounts already paid to Hercon, Inc. and attorney’s fees, as well as payment for equipment rental for four trucks, replacement of parts and other services, and damage to some of NMIC’s properties.

            For its part, DBP’s answer raised the defense that HRCC had no cause of action against it because DBP was not privy to HRCC’s contract with NMIC. Moreover, NMIC’s juridical personality is separate from that of DBP. PNB’s answer also invoked lack of cause of action against it. It also raised estoppel on HRCC’s part and laches as defenses, claiming that the inclusion of PNB in the complaint was the first time a demand for payment was made on it by HRCC. PNB also invoked the separate juridical personality of NMIC and made counterclaims for moral damages and attorney’s fees.

            RTC pierced the corporate veil of NMIC and held DBP and PNB solidarily liable with NMIC. The business of NMIC was then also being conducted and controlled by both DBP and PNB. In fact, it was Rolando M. Zosa, then Governor of DBP, who was signing and entering into contracts with third persons, on behalf of NMIC.

            CA affirmed the piercing of the veil of the corporate personality of NMIC and held DBP, PNB, and APT solidarily liable with NMIC. It is indubitable that [NMIC] was owned by appellants DBP and PNB to the extent of 57% and 43% respectively; that said two (2) appellants are the only stockholders, with the qualifying stockholders of five (5) consisting of its own officers and included in its charter merely to comply with the requirement of the law as to number of incorporators; and that the directorates of DBP, PNB and [NMIC] are interlocked.

 

Issue:

            Whether or not there is sufficient ground to pierce the veil of corporate fiction.

 

Held:

            No; a corporation is an artificial entity created by operation of 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 from that of its stockholders and from that of other corporations to which it may be connected. As a consequence of its status as a distinct legal entity and as a result of a conscious policy decision to promote capital formation, a corporation incurs its own liabilities and is legally responsible for payment of its obligations. In other words, by virtue of the separate juridical personality of a corporation, the corporate debt or credit is not the debt or credit of the stockholder. This protection from liability for shareholders is the principle of limited liability.

            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.

            The doctrine of piercing the corporate veil applies only in three (3) basic areas, namely: 1) defeat of public convenience as when the corporate fiction is used as a vehicle for the evasion of an existing obligation; 2) fraud cases or when the corporate entity is used to justify a wrong, protect fraud, or defend a crime; or 3) alter ego cases, where a corporation is merely a farce since it is a mere alter ego or business conduit of a person, or 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.

                        In this connection, case law lays down a three-pronged test to determine the application of the alter ego theory, which is also known as the instrumentality theory, 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.

            The first prong is the "instrumentality" or "control" test. This test requires that the subsidiary be completely under the control and domination of the parent. It examines the parent corporation’s relationship with the subsidiary. It inquires whether a subsidiary corporation is so organized and controlled and its affairs are so conducted as to make it a mere instrumentality or agent of the parent corporation such that its separate existence as a distinct corporate entity will be ignored. It seeks to establish whether the subsidiary corporation has no autonomy and the parent corporation, though acting through the subsidiary in form and appearance, "is operating the business directly for itself."

            The second prong is the "fraud" test. This test requires that the parent corporation’s conduct in using the subsidiary corporation be unjust, fraudulent or wrongful. It examines the relationship of the plaintiff to the corporation. It recognizes that piercing is appropriate only if the parent corporation uses the subsidiary in a way that harms the plaintiff creditor. As such, it requires a showing of "an element of injustice or fundamental unfairness."

            The third prong is the "harm" test. This test requires the plaintiff to show that the defendant’s control, exerted in a fraudulent, illegal or otherwise unfair manner toward it, caused the harm suffered. A causal connection between the fraudulent conduct committed through the instrumentality of the subsidiary and the injury suffered or the damage incurred by the plaintiff should be established. The plaintiff must prove that, unless the corporate veil is pierced, it will have been treated unjustly by the defendant’s exercise of control and improper use of the corporate form and, thereby, suffer damages.

            This Court finds that none of the tests has been satisfactorily met in this case.

            In applying the 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. With respect to the control element, it refers not to paper or formal control by majority or even complete stock control but actual control which amounts to "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." In addition, the control must be shown to have been exercised at the time the acts complained of took place.

            While ownership by one corporation of all or a great majority of stocks of another corporation and their interlocking directorates may serve as indicia of control, by themselves and without more, however, these circumstances are insufficient to establish an alter ego relationship or connection between DBP and PNB on the one hand and NMIC on the other hand, that will justify the puncturing of the latter’s corporate cover. This Court has declared that "mere ownership by a single stockholder or by another corporation of all or nearly all of the capital stock of a corporation is not of itself sufficient ground for disregarding the separate corporate personality." This 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."

Zambrano vs. Philippine Carpet Manufacturing Corporation G.R. No. 224099, June 21, 2017 [Case Digest]

 

Zambrano vs. Philippine Carpet Manufacturing Corporation

G.R. No. 224099, June 21, 2017

Second Division, [Mendoza, J.,]

Facts:

            The petitioners averred that they were employees of private respondent Philippine Carpet Manufacturing Corporation (Phil Carpet). On January 3, 2011, they were notified of the termination of their employment effective February 3, 2011 on the ground of cessation of operation due to serious business losses. They were of the belief that their dismissal was without just cause and in violation of due process because the closure of Phil Carpet was a mere pretense to transfer its operations to its wholly owned and controlled corporation, Pacific Carpet Manufacturing Corporation (PacificCarpet). They claimed that the job orders of some regular clients of PhilCarpet were transferred to Pacific Carpet; and that from October to November 2011, several machines were moved from the premises of Phil Carpet to Pacific Carpet. They asserted that their dismissal constituted unfair labor practice as it involved the mass dismissal of all union officers and members of the Philippine Carpet Manufacturing Employees Association (PHILCEA).

                In its defense, Phil Carpet countered that it permanently closed and totally ceased its operations because there had been a steady decline in the demand for its products due to global recession, stiffer competition, and the effects of a changing market. Thus, in order to stem the bleeding, the company implemented several cost-cutting measures, including voluntary redundancy and early retirement programs. In 2007, the car carpet division was closed. Moreover, from a high production capacity of about 6,000 square meters of carpet a month in 2002, its final production capacity steadily went down to an average of 350 square meters per month for 2009 and 2010. Subsequently, the Board of Directors decided to approve the recommendation of its management to cease manufacturing operations. The termination of the petitioners' employment was effective as of the close of office hours on February 3, 2011. Phil Carpet likewise faithfully complied with the requisites for closure or cessation of business under the Labor Code. The petitioners and the Department of Labor and Employment (DOLE) were served written notices one (1) month before the intended closure of the company. The petitioners ·were also paid their separation pay and they voluntarily executed their respective Release and Quitclaim before the DOLE officials.

                Labor Arbiter (LA) dismissed the complaints for illegal dismissal and unfair labor practice. It ruled that the termination of the petitioners' employment was due to total cessation of manufacturing operations of Phil Carpet because it suffered continuous serious business losses from 2007 to 2010. The LA further found that the petitioners voluntarily accepted their separation pay and other benefits and eventually executed their individual release and quitclaim in favor of the company. Finally, it declared that there was no showing that the total closure of operations was motivated by any specific and clearly determinable union activity of the employees.

                NLRC affirmed the findings of the LA. CA ruled that the total cessation of Phil Carpet's manufacturing operations was not made in bad faith because the same was clearly due to economic necessity. It determined that there was no convincing evidence to show that the regular clients of Phil Carpet secretly transferred their job orders to Pacific Carpet; and that Phil Carpet's machines were not transferred to Pacific Carpet but were actually sold to the latter after the closure of business as shown by the several sales invoices and official receipts issued by Phil Carpet. The CA adjudged that the dismissal of the petitioners who were union officers and members of PHILCEA did not constitute unfair labor practice because Phil Carpet was able to show that the closure was due to serious business losses.

 

Issue 1:

            Whether the petitioners were dismissed from employment for a lawful cause.

 

Held:

            No; the petitioners were terminated from employment for an authorized cause. Article 298. Closure of establishment and reduction of personnel. -The employer may also terminate the employment of any employee due to the installation of labor-saving devices, redundancy, retrenchment to prevent losses or the closing or cessation of operations of the establishment or undertaking unless the closing is for the purpose of circumventing the provisions of this Title, by serving a written notice on the workers and the Department of Labor and Employment at least one (1) month before the intended date thereof. In case of termination due to the installation of labor-saving devices or redundancy, the worker affected thereby shall be entitled to a separation pay equivalent to at least one (1) month pay or to at least one (1) month pay for every year of service, whichever is higher. In case of retrenchment to prevent losses and in cases of closure or cessation of operations of establishment or undertaking not due to serious business losses or financial reverses, the separation pay shall be equivalent to at least one (1) month pay or at least one-half (1/2) month pay for every year of service, whichever is higher. A fraction of at least six (6) months shall be considered as one (1) whole year.

            Closure of business is the reversal of fortune of the employer whereby there is a complete cessation of business operations and/or an actual locking-up of the doors of establishment, usually due to financial losses. Closure of business, as an authorized cause for termination of employment, aims to prevent further financial drain upon an employer who cannot pay anymore his employees since business has already stopped. In such a case, the employer is generally required to give separation benefits to its employees, unless the closure is due to serious business losses.

 

Issue 2:

            Whether the petitioners’ termination from employment constitutes unfair labor practice.

 

Held:

            No; the dismissal of the petitioners did not amount to unfair labor practice. Unfair labor practice refers to acts that violate the workers' right to organize. There should be no dispute that all the prohibited acts constituting unfair labor practice in essence relate to the workers' right to self-organization. Thus, an employer may only be held liable for unfair labor practice if it can be shown that his acts affect in whatever manner the right of his employees to self-organize.

            The general principle is that one who makes an allegation has the burden of proving it. Although there are exceptions to this general rule, in the case of unfair labor practice, the alleging party has the burden of proving it. Moreover, good faith is presumed and he who alleges bad faith has the duty to prove the same.

            The petitioners miserably failed to discharge the duty imposed upon them. They did not identify the acts of Phil Carpet which, they claimed, constituted unfair labor practice. They did not even point out the specific provisions which Phil Carpet violated. Thus, they would have the Court pronounce that Phil Carpet committed unfair labor practice on the ground that they were dismissed from employment simply because they were union officers and members. The constitutional commitment to the policy of social justice, however, cannot be understood to mean that every labor dispute shall automatically be decided in favor of labor.

 

Issue 3:

            Whether Pacific Carpet may be held liable for Phil Carpet’s obligation.

 

Held:

            No; a corporation is an artificial being created by operation of 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 from the persons composing it, as 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.

            Further, the Court's ruling in Philippine National Bank vs. Hydro Resources Contractors Corporation is enlightening, viz.: The doctrine of piercing the corporate veil applies only in three (3) basic areas, namely: 1) defeat of public convenience as when the corporate fiction is used as a vehicle for the evasion of an existing obligation; 2) fraud cases or when the corporate entity is used to justify a wrong, protect fraud, or defend a crime; or 3) alter ego cases, where a corporation is merely a farce since it is a mere alter ego or business conduit of a person, or 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.

                        In this connection, case law lays down a three-pronged test to determine the application of the alter ego theory, which is also known as the instrumentality theory, 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 plaintiffs legal right; and

            (3) The aforesaid control and breach of duty must have proximately caused the injury or unjust loss complained of.

            The first prong is the "instrumentality" or "control" test. This test requires that the subsidiary be completely under the control and domination of the parent. It examines the parent corporation's relationship with the subsidiary. It inquires whether a subsidiary corporation is so organized and controlled and its affairs are so conducted as to make it a mere instrumentality or agent of the parent corporation such that its separate existence as a distinct corporate entity will be ignored. It seeks to establish whether the subsidiary corporation has no autonomy and the parent corporation, though acting through the subsidiary in form and appearance, "is operating the business directly for itself."

            The second prong is the "fraud" test. This test requires that the parent corporation's conduct in using the subsidiary corporation be unjust, fraudulent or wrongful.1âwphi1 It examines the relationship of the plaintiff to the corporation. It recognizes that piercing is appropriate only if the parent corporation uses the subsidiary in a way that harms the plaintiff creditor. As such, it requires a showing of "an element of injustice or fundamental unfairness."

            The third prong is the "harm" test. This test requires the plaintiff to show that the defendant's control, exerted in a fraudulent, illegal or otherwise unfair manner toward it, caused the harm suffered. A causal connection between the fraudulent conduct committed through the instrumentality of the subsidiary and the injury suffered or the damage incurred by the plaintiff should be established. The plaintiff must prove that, unless the corporate veil is pierced, it will have been treated unjustly by the defendant's exercise of control and improper use of the corporate form and, thereby, suffer damages.

            To summarize, piercing the corporate veil based on the alter ego theory requires the concurrence of three elements: control of the corporation by the stockholder or parent corporation, fraud or fundamental unfairness imposed on the plaintiff, and harm or damage caused to the plaintiff by the fraudulent or unfair act of the corporation. The absence of any of these elements prevents piercing the corporate veil.

                        The Court finds that none of the tests has been satisfactorily met in this case. Although ownership by one corporation of all or a great majority of stocks of another corporation and their interlocking directorates may serve as indicia of control, by themselves and without more, these circumstances are insufficient to establish an alter ego relationship or connection between Phil Carpet on the one hand and Pacific Carpet on the other hand, that will justify the puncturing of the latter's corporate cover.

            This Court has declared that "mere ownership by a single stockholder or by another corporation of all or nearly all of the capital stock of a corporation is not of itself sufficient ground for disregarding the separate corporate personality." It 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."

            It must be noted that Pacific Carpet was registered with the Securities and Exchange Commission on January 29, 1999, such that it could not be said that 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 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. "

 

Issue 4:

            Whether the quitclaims signed by the petitioners are valid and binding.

 

Held:

            Yes; the quitclaims were valid and binding upon the petitioners.

            Where the person making the waiver has done so voluntarily, with a full understanding thereof, and the consideration for the quitclaim is credible and reasonable, the transaction must be recognized as being a valid and binding undertaking. Not all quitclaims are per se invalid or against policy, except (1) where there is clear proof that the waiver was wangled from an unsuspecting or gullible person, or (2) where the terms of settlement are unconscionable on their face; in these cases, the law will step in to annul the questionable transactions.

            In this case, the petitioners question the validity of the quitclaims they signed on the ground that Phil Carpet's closure was a mere pretense. As the closure of Phil Carpet, however, was supported by substantial evidence, the petitioners' reason for seeking the invalidation of the quitclaims must necessarily fail. Further, as aptly observed by the CA, the contents of the quitclaims, which were in Filipino, were clear and simple, such that it was unlikely that the petitioners did not understand what they were signing. Finally, the amount they received was reasonable as the same complied with the requirements of the Labor Code.

Tuesday, February 20, 2024

DEPED PERMIT TO STUDY Format 2024

 

Republic of the Philippines

Department of Education

_________ Region

Division of __________

 

 

PERMIT TO STUDY

 

 

Schools Division Superintendent                                                              

Division of ____________

 

Sir/Madam:

 

          I have the honor to apply for enrolment in _____________ in the course of the ____________ in the College of _____________.

          I understand that this permit is hereby granted to the undersigned that the minimum number of hours to be rendered shall not affect my time in _____________ National High School. Thus, it should always be given a priority.

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             Very truly yours,

 

 

   _________________________

     Signature over printed name

 

SERVICE RECORD

 

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Study Load: ______   HRD Serial #: ______             Date & Time Claimed: _____________________

Received by:  _____________________                   Claimed by: _____________________________

Date & Time Received: ________________               Signature: _______________________________

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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DON’T PRINT THIS 2ND PAGE, THIS IS ONLY A REMINDER/ INSTRUCTION

 

-          PRINT THE FORM ON LONG BOND PAPER

-          This form is for both teaching and non-teaching personnel

-          Serial number is generated by School AO

-          School AO should countersign on the side of Immediate Superior

-          Permit to study and permit to teach must be secured on or before enrolment/teaching.

-          Attachments duly approved by DEPED Division Office and signed by School Registrar's office:

Permit to Study: Study Load

Permit to Teach: Work load