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On the other hand, plaintiffs are directed to reimburse

the defendant the amount of [P]10,942,200.00, representing
the buy back price of the 60,790,000 KPP shares of stocks at
[P]0.18 per share.
FIRST DIVISION SO ORDERED. . . .
The Resolution was ultimately affirmed by the Supreme Court
[G.R. No. 199687. March 24, 2014.] and attained finality.
When the Writ of Execution was returned unsatisfied, private
PACIFIC REHOUSE CORPORATION, petitioner, vs. COURT
respondents moved for the issuance of an alias writ of execution to
OF APPEALS and EXPORT AND INDUSTRY BANK, INC.,
hold Export and Industry Bank, Inc. liable for the judgment obligation
respondents.
as E-Securities is "a wholly-owned controlled and dominated
subsidiary of Export and Industry Bank, Inc., and is[,] thus[,] a mere
[G.R. No. 201537. March 24, 2014.] alter ego and business conduit of the latter. E-Securities opposed the
motion[,] arguing that it has a corporate personality that is separate
PACIFIC REHOUSE CORPORATION, PACIFIC CONCORDE and distinct from petitioner. On July 27, 2011, private respondents
CORPORATION, MIZPAH HOLDINGS, INC., FORUM filed their (1) Reply attaching for the first time a sworn statement
executed by Atty. Ramon F. Aviado, Jr., the former corporate
HOLDINGS CORPORATION and EAST ASIA OIL COMPANY,
secretary of petitioner and E-Securities, to support their alter ego
INC., petitioners, vs. EXPORT AND INDUSTRY BANK, INC.,
theory; and (2) Ex-Parte Manifestation alleging service of copies of
respondent.
the Writ of Execution and Motion for Alias Writ of Execution on
petitioner.

DECISION On July 29, 2011, the RTC concluded that E-Securities is a

mere business conduit or alter ego of petitioner, the dominant parent
corporation, which justifies piercing of the veil of corporate fiction.
The trial court brushed aside E-Securities' claim of denial of due
REYES, J : p

process on petitioner as ". . . case records show that notices

regarding these proceedings had been tendered to the latter, which
On the scales of justice precariously lie the right of a prevailing party to
refused to even receive them. Clearly, [petitioner] had been
his victor's cup, no more, no less; and the right of a separate entity from being
sufficiently put on notice and afforded the chance to give its side[,]
dragged by the ball and chain of the vanquished party.
yet[,] it chose not to." Thus, the RTC disposed as follows:
The facts of this case as garnered from the Decision 1 dated April 26, WHEREFORE, . . .,
2012 of the Court of Appeals (CA) in CA-G.R. SP No. 120979 are as follows:
Let an Alias Writ of Execution be issued relative to the
We trace the roots of this case to a complaint instituted with above-entitled case and pursuant to the RESOLUTION dated
the Makati City Regional Trial Court (RTC), Branch 66, against EIB October 18, 2005 and to this Order directing defendant EIB
Securities, Inc. (E-Securities) for unauthorized sale of 32,180,000 Securities, Inc., and/or Export and Industry Bank, Inc., to
DMCI shares of private respondents Pacific Rehouse Corporation, fully comply therewith.
Pacific Concorde Corporation, Mizpah Holdings, Inc., Forum
Holdings Corporation, and East Asia Oil Company, Inc. In its October The Branch Sheriff of this Court is directed to cause the
18, 2005 Resolution, the RTC rendered judgment on the pleadings. immediate implementation of the given alias writ in
The fallo reads: accordance with the Order of Execution to be issued anew by
the Branch Clerk of Court.
WHEREFORE, premises considered, judgment is
hereby rendered directing the defendant [E-Securities] to SO ORDERED. . . .
return the plaintiffs' [private respondents herein] 32,180,000 With this development, petitioner filed an Omnibus Motion (Ex
DMCI shares, as of judicial demand. cTACIa
Abundanti Cautela) questioning the alias writ because it was not
impleaded as a party to the case. The RTC denied the motion in its
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Order dated August 26, 2011 and directed the garnishment of and ordered the garnishment of the properties of E-Securities and/or Export
P1,465,799,000.00, the total amount of the 32,180,000 DMCI shares Bank. The CA also set a hearing to determine the necessity of issuing a writ
at P45.55 per share, against petitioner and/or E-Securities. 2 . . . . of injunction, viz.:
(Citations omitted)
Considering the amount ordered to be garnished from
The Regional Trial Court (RTC) ratiocinated that being one and the petitioner Export and Industry Bank, Inc. and the fiduciary duty of the
same entity in the eyes of the law, the service of summons upon EIB banking institution to the public, there is grave and irreparable injury
Securities, Inc. (E-Securities) has bestowed jurisdiction over both the parent that may be caused to [Export Bank] if the assailed Orders are
and wholly-owned subsidiary. 3 The RTC cited the cases of Sps. Violago v. BA immediately implemented. We thus resolve to GRANT the Temporary
Restraining Order effective for a period of sixty (60) days from notice,
Finance Corp. et al. 4 and Arcilla v. Court of Appeals 5 where the doctrine of
restraining/enjoining the Sheriff of the Regional Trial Court of Makati
piercing the veil of corporate fiction was applied notwithstanding that the
City or his deputies, agents, representatives or any person acting in
affected corporation was not brought to the court as a party. Thus, the RTC their behalf from executing the July 29, 2011 and August 26, 2011
held in its Order 6 dated August 26, 2011: EHaCTA
Orders. [Export Bank] is DIRECTED to POST a bond in the sum of
fifty million pesos (P50,000,000.00) within ten (10) days from notice,
WHEREFORE, premises considered, the Motion for
to answer for any damage which private respondents may suffer by
Reconsideration with Motion to Inhibit filed by defendant EIB
reason of this Temporary Restraining Order; otherwise, the same
Securities, Inc. is denied for lack of merit. The Omnibus Motion Ex
shall automatically become ineffective.
Abundanti C[au]tela is likewise denied for lack of merit.
Let the HEARING be set on September 27, 2011 at 2:00 in the
Pursuant to Rule 39, Section 10 (a) of the Rules of Court, the
afternoon at the Paras Hall, Main Building, Court of Appeals, to
Branch Clerk of Court or the Branch Sheriff of this Court is hereby
determine the necessity of issuing a writ of preliminary injunction.
directed to acquire 32,180,000 DMCI shares of stock from the
The Division Clerk of Court is DIRECTED to notify the parties and
Philippine Stock Exchange at the cost of EIB Securities, Inc. and
their counsel with dispatch.
Export and Industry Bank[,] Inc. and to deliver the same to the
plaintiffs pursuant to this Court's Resolution dated October 18, 2005. xxx xxx xxx
To implement this Order, let GARNISHMENT issue against SO ORDERED. 11
ALL THOSE HOLDING MONEYS, PROPERTIES OF ANY AND ALL
KINDS, REAL OR PERSONAL BELONGING TO OR OWNED BY Pacific Rehouse Corporation (Pacific Rehouse), Pacific Concorde
DEFENDANT EIB SECURITIES, INC. AND/OR EXPORT AND Corporation, Mizpah Holdings, Inc., Forum Holdings Corporation and East
INDUSTRY BANK[,] INC., [sic] in such amount as may be sufficient Asia Oil Company, Inc. (petitioners) filed their Comment 12 to Export Bank's
to acquire 32,180,000 DMCI shares of stock to the Philippine Stock petition and proffered that the cases mentioned by Export Bank are
Exchange, based on the closing price of Php45.55 per share of DMCI inapplicable owing to their clearly different factual antecedents. The
shares as of August 1, 2011, the date of the issuance of the Alias petitioners alleged that unlike the other cases, there are circumstances
Writ of Execution, or the total amount of PhP1,465,799,000.00. peculiar only to E-Securities and Export Bank such as: 499,995 out of
SO ORDERED. 7
500,000 outstanding shares of stocks of E-Securities are owned by Export
Bank; 13 Export Bank had actual knowledge of the subject matter of litigation
CA-G.R. SP No. 120979 as the lawyers who represented E-Securities are also lawyers of Export Bank.
Export and Industry Bank, Inc. (Export Bank) filed before the CA a 14 As an alter ego, there is no need for a finding of fraud or illegality before the

petition for certiorari with prayer for the issuance of a temporary restraining doctrine of piercing the veil of corporate fiction can be applied. 15
order (TRO) 8 seeking the nullification of the RTC Order dated August 26,
After oral arguments before the CA, the parties were directed to file
2011 for having been made with grave abuse of discretion amounting to lack
their respective memoranda. 16
or excess of jurisdiction. In its petition, Export Bank made reference to several
rulings 9 of the Court upholding the separate and distinct personality of a On October 25, 2011, the CA issued a Resolution, 17 granting Export
corporation. Bank's application for the issuance of a writ of preliminary injunction, viz.: ADcSHC

In a Resolution dated September 2, 2011, the CA issued a 60-day

10 WHEREFORE, finding [Export Bank's] application for the
TRO enjoining the execution of the Orders of the RTC dated July 29, 2011 ancillary injunctive relief to be meritorious, and it further appearing
and August 26, 2011, which granted the issuance of an alias writ of execution that there is urgency and necessity in restraining the same, a Writ of
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Preliminary Injunction is hereby GRANTED and ISSUED against the Considering that G.R. Nos. 199687 and 201537 originated from the
Sheriff of the Regional Trial Court of Makati City, Branch 66, or his same set of facts, involved the same parties and raised intertwined issues, the
deputies, agents, representatives or any person acting in their behalf cases were then consolidated. 28
from executing the July 29, 2011 and August 26, 2011 Orders. Public
respondents are ordered to CEASE and DESIST from enforcing and Issues
implementing the subject orders until further notice from this Court. 18 In précis, the issues for resolution of this Court are the following:
The petitioners filed a Manifestation 19 and Supplemental Manifestation In G.R. No. 199687,
20 challenging the above-quoted CA resolution for lack of concurrence of WHETHER THE CA COMMITTED GRAVE ABUSE OF
Associate Justice Socorro B. Inting (Justice Inting), who was then on official DISCRETION IN GRANTING EXPORT BANK'S APPLICATION
leave. FOR THE ISSUANCE OF A WRIT OF PRELIMINARY
On December 22, 2011, the CA, through a Special Division of Five, INJUNCTION. DASCIc

issued another Resolution, 21 which reiterated the Resolution dated October In G.R. No. 201537,
25, 2011 granting the issuance of a writ of preliminary injunction.
I.
On January 2, 2012, one of the petitioners herein, Pacific Rehouse filed
WHETHER THE CA COMMITTED A REVERSIBLE ERROR IN
before the Court a petition for certiorari 22 under Rule 65, docketed as G.R. RULING THAT EXPORT BANK MAY NOT BE HELD LIABLE FOR
No. 199687, demonstrating its objection to the Resolutions dated October 25, A FINAL AND EXECUTORY JUDGMENT AGAINST E-
2011 and December 22, 2011 of the CA. SECURITIES IN AN ALIAS WRIT OF EXECUTION BY PIERCING
ITS VEIL OF CORPORATE FICTION; and
On April 26, 2012, the CA rendered the assailed Decision 23 on the
merits of the case, granting Export Bank's petition. The CA disposed of the II.
case in this wise:
WHETHER THE CA COMMITTED A REVERSIBLE ERROR IN
We GRANT the petition. The Orders dated July 29, 2011 and RULING THAT THE ALTER EGO DOCTRINE IS NOT
August 26, 2011 of the Makati City Regional Trial Court, Branch 66, APPLICABLE.
insofar as [Export Bank] is concerned, are NULLIFIED. The Writ of
Ruling of the Court
Preliminary Injunction (WPI) is rendered PERMANENT.
G.R. No. 199687
SO ORDERED. 24
The Resolution dated October 25, 2011 was initially challenged by the
The CA explained that the alter ego theory cannot be sustained petitioners in its Manifestation 29 and Supplemental Manifestation 30 due to the
because ownership of a subsidiary by the parent company is not enough lack of concurrence of Justice Inting, which according to the petitioners
justification to pierce the veil of corporate fiction. There must be proof, apart rendered the aforesaid resolution null and void.
from mere ownership, that Export Bank exploited or misused the corporate
fiction of E-Securities. The existence of interlocking incorporators, directors To the petitioners' mind, Section 5, Rule VI of the Internal Rules of the
and officers between the two corporations is not a conclusive indication that CA (IRCA) 31 requires the submission of the resolution granting an application
they are one and the same. 25 The records also do not show that Export Bank for TRO or preliminary injunction to the absent Justice/s when they report
has complete control over the business policies, affairs and/or transactions of back to work for ratification, modification or recall, such that when the absent
E-Securities. It was solely E-Securities that contracted the obligation in Justice/s do not agree with the issuance of the TRO or preliminary injunction,
furtherance of its legitimate corporate purpose; thus, any fall out must be the resolution is recalled and without force and effect. 32 Since the resolution
confined within its limited liability. 26 which granted the application for preliminary injunction appears short of the
required number of consensus, owing to the absence of Justice Inting's
The petitioners, without filing a motion for reconsideration, filed a signature, the petitioners contest the validity of said resolution.
Petition for Review 27 under Rule 45 docketed as G.R. No. 201537,
impugning the Decision dated April 26, 2012 of the CA. The petitioners also impugn the CA Resolution dated December 22,
2011 rendered by the Special Division of Five. The petitioners maintain that
pursuant to Batas Pambansa Bilang 129 33 and the IRCA, 34 such division is
created only when the three members of a division cannot reach a unanimous
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vote in deciding a case on the merits. Furthermore, for petitioner Pacific

35 addition to E-Securities, against whom the writ of execution may be enforced
Rehouse, this Resolution is likewise infirm because the purpose of the in the Order 46 dated July 29, 2011 of the RTC. In including Export Bank, the
formation of the Special Division of Five is to decide the case on the merits RTC considered E-Securities as a mere business conduit of Export Bank. 47
and not to grant Export Bank's application for a writ of preliminary injunction. Thus, one of the arguments interposed by the latter in its Opposition 48 that it
36
was never impleaded as a defendant was simply set aside.
We hold that the opposition to the CA resolutions is already nugatory This action by the RTC begs the question: may the RTC enforce the
because the CA has already rendered its Decision on April 16, 2012, which alias writ of execution against Export Bank?
disposed of the substantial merits of the case. Consequently, the petitioners'
The question posed before us is not novel.
concern that the Special Division of Five should have been created to resolve
cases on the merits has already been addressed by the rendition of the CA The Court already ruled in Kukan International Corporation v. Reyes 49
Decision dated April 16, 2012. that compliance with the recognized modes of acquisition of jurisdiction
"It is well-settled that courts will not determine questions that have cannot be dispensed with even in piercing the veil of corporate fiction, to wit:
become moot and academic because there is no longer any justiciable The principle of piercing the veil of corporate fiction, and the
controversy to speak of. The judgment will not serve any useful purpose or resulting treatment of two related corporations as one and the same
have any practical legal effect because, in the nature of things, it cannot be juridical person with respect to a given transaction, is basically
enforced." 37 In such cases, there is no actual substantial relief to which the applied only to determine established liability; it is not available to
petitioners would be entitled to and which would be negated by the dismissal confer on the court a jurisdiction it has not acquired, in the first place,
of the petition. 38 Thus, it would be futile and pointless to address the issue in over a party not impleaded in a case. Elsewise put, a corporation
not impleaded in a suit cannot be subject to the court's process
G.R. No. 199687 as this has become moot and academic.
of piercing the veil of its corporate fiction. In that situation, the
G.R. No. 201537 court has not acquired jurisdiction over the corporation and, hence,
The petitioners bewail that the certified true copy of the CA Decision any proceedings taken against that corporation and its property
would infringe on its right to due process. Aguedo Agbayani, a
dated April 26, 2012 along with its Certification at the bottom portion were not
recognized authority on Commercial Law, stated as much:
signed by the Chairperson 39 of the Special Division of Five; thus, it is not
binding upon the parties. 40 The petitioners quoted this Court's "23. Piercing the veil of corporate entity applies to
pronouncement in Limkaichong v. Commission on Elections, 41 that a decision determination of liability not of jurisdiction. . . .
must not only be signed by the Justices who took part in the deliberation, but This is so because the doctrine of piercing the veil
must also be promulgated to be considered a Decision. 42 aHIEcS of corporate fiction comes to play only during the trial of
the case after the court has already acquired jurisdiction
A cursory glance on a copy of the signature page 43 of the decision over the corporation. Hence, before this doctrine can be
attached to the records would show that, indeed, the same was not signed by applied, based on the evidence presented, it is imperative that
CA Associate Justice Magdangal M. de Leon. However, it must be noted that the court must first have jurisdiction over the corporation. . . ."
the CA, on May 7, 2012, issued a Resolution 44 explaining that due to 50 (Citations omitted)
inadvertence, copies of the decision not bearing the signature of the
From the preceding, it is therefore correct to say that the court must first
Chairperson were sent to the parties on the same day of promulgation. The
and foremost acquire jurisdiction over the parties; and only then would the
CA directed the Division Clerk of Court to furnish the parties with copies of the
parties be allowed to present evidence for and/or against piercing the veil of
signature page with the Chairperson's signature. Consequently, as the
corporate fiction. If the court has no jurisdiction over the corporation, it follows
mistake was immediately clarified and remedied by the CA, the lack of the
that the court has no business in piercing its veil of corporate fiction because
Chairperson's signature on the copies sent to the parties has already become
such action offends the corporation's right to due process.
a non-issue.
"Jurisdiction over the defendant is acquired either upon a valid service
It must be emphasized that the instant cases sprang from Pacific
of summons or the defendant's voluntary appearance in court. When the
Rehouse Corporation v. EIB Securities, Inc. 45 which was decided by this
defendant does not voluntarily submit to the court's jurisdiction or when there
Court last October 13, 2010. Significantly, Export Bank was not impleaded in
is no valid service of summons, 'any judgment of the court which has no
said case but was unexpectedly included during the execution stage, in
jurisdiction over the person of the defendant is null and void.'" 51 "The
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defendant must be properly apprised of a pending action against him and for the adjudged award because the same constitutes a corporate liability
assured of the opportunity to present his defenses to the suit. Proper service which cannot even bind the corporation as the latter is not a party to the
of summons is used to protect one's right to due process." 52 DCcTHa collection suit. The Court made the succeeding observations:

As Export Bank was neither served with summons, nor has it voluntarily [B]y no stretch of even the most fertile imagination may one be able
appeared before the court, the judgment sought to be enforced against E- to conclude that the challenged Amended Decision directed Csar
Marine Resources, Inc. to pay the amounts adjudged. By its clear
Securities cannot be made against its parent company, Export Bank. Export
and unequivocal language, it is the petitioner who was declared
Bank has consistently disputed the RTC jurisdiction, commencing from its
liable therefor and consequently made to pay. . . ., even if We are to
filing of an Omnibus Motion 53 by way of special appearance during the assume arguendo that the obligation was incurred in the name of
execution stage until the filing of its Comment 54 before the Court wherein it the corporation, the petitioner would still be personally liable
was pleaded that "RTC [of] Makati[, Branch] 66 never acquired jurisdiction therefor because for all legal intents and purposes, he and the
over Export [B]ank. Export [B]ank was not pleaded as a party in this case. It corporation are one and the same. Csar Marine Resources, Inc. is
was never served with summons by nor did it voluntarily appear before RTC nothing more than his business conduit and alter ego. The fiction of
[of] Makati[, Branch] 66 so as to be subjected to the latter's jurisdiction." 55 a separate juridical personality conferred upon such corporation by
law should be disregarded. . . . . 58 (Citation omitted)
In dispensing with the requirement of service of summons or voluntary
appearance of Export Bank, the RTC applied the cases of Violago and Arcilla. It is important to bear in mind that although CMRI was not a party to the
The RTC concluded that in these cases, the Court decided that the doctrine of suit, it was Arcilla, the defendant himself who was found ultimately liable for
piercing the veil of corporate personality can be applied even when one of the the judgment award. CMRI and its properties were left untouched from the
affected parties has not been brought to the Court as a party. 56 main case, not only because of the application of the alter ego doctrine, but
also because it was never made a party to that case. AScTaD

A closer perusal on the rulings of this Court in Violago and Arcilla,

however, reveals that the RTC misinterpreted the doctrines on these cases. The disparity between the instant case and those of Violago and Arcilla
We agree with the CA that these cases are not congruent to the case at bar. is that in said cases, although the corporations were not impleaded as
In Violago, Spouses Pedro and Florencia Violago (Spouses Violago) filed a defendant, the persons made liable in the end were already parties thereto
third party complaint against their cousin Avelino Violago (Avelino), who is since the inception of the main case. Consequently, it cannot be said that the
also the president of Violago Motor Sales Corporation (VMSC), for selling Court had, in the absence of fraud and/or bad faith, applied the doctrine of
them a vehicle which was already sold to someone else. VMSC was not piercing the veil of corporate fiction to make a non-party liable. In short,
impleaded as a third party defendant. Avelino contended that he was not a liabilities attached only to those who are parties. None of the non-party
party to the transaction personally, but VMSC. The Court ruled that "[t]he fact corporations (VMSC and CMRI) were made liable for the judgment award
that VMSC was not included as defendant in [Spouses Violago's] third party against Avelino and Arcilla.
complaint does not preclude recovery by Spouses Violago from Avelino;
The Alter Ego Doctrine is not
neither would such non-inclusion constitute a bar to the application of the
applicable
piercing-of-the-corporate-veil doctrine." 57 It should be pointed out that
although VMSC was not made a third party defendant, the person who was "The question of whether one corporation is merely an alter ego of
found liable in Violago, Avelino, was properly made a third party defendant in another is purely one of fact. So is the question of whether a corporation is a
the first instance. The present case could not be any more poles apart from paper company, a sham or subterfuge or whether petitioner adduced the
Violago, because Export Bank, the parent company which was sought to be requisite quantum of evidence warranting the piercing of the veil of
accountable for the judgment against E-Securities, is not a party to the main respondent's corporate entity." 59
case. As a rule, the parties may raise only questions of law under Rule 45,
In Arcilla, meanwhile, Calvin Arcilla (Arcilla) obtained a loan in the name because the Supreme Court is not a trier of facts. Generally, we are not duty-
of Csar Marine Resources, Inc. (CMRI) from Emilio Rodulfo. A complaint was bound to analyze again and weigh the evidence introduced in and considered
then filed against Arcilla for non-payment of the loan. CMRI was not by the tribunals below. 60 However, justice for all is of primordial importance
impleaded as a defendant. The trial court eventually ordered Arcilla to pay the that the Court will not think twice of reviewing the facts, more so because the
judgment creditor for such loan. Arcilla argued that he is not personally liable RTC and the CA arrived in contradicting conclusions.

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"It is a fundamental principle of corporation law that a corporation is an 1. Defendant EIB Securities, a subsidiary corporation
entity separate and distinct from its stockholders and from other corporations 100% totally owned by Export and Industry Bank, Inc., was only re-
to which it may be connected. But, this separate and distinct personality of a activated by the latter in 2002-2003 and the continuance of its
corporation is merely a fiction created by law for convenience and to promote operations was geared for no other reason tha[n] to serve as the
justice. So, when the notion of separate juridical personality is used to defeat securities brokerage arm of said parent corporation bank;
public convenience, justify wrong, protect fraud or defend crime, or is used as 2. It was the parent corporation bank that provided and
a device to defeat the labor laws, this separate personality of the corporation infused the fresh working cash capital needed by defendant EIB
may be disregarded or the veil of corporate fiction pierced. This is true Securities which prior thereto was non-operating and severely cash-
likewise when the corporation is merely an adjunct, a business conduit or an strapped. [This was so attested by the then Corporate Secretary of
alter ego of another corporation." 61 both corporations, Atty. Ramon Aviado, Jr., in his submitted Sworn
Statement which is deemed allowable "evidence on motion", under
"Where one corporation is so organized and controlled and its affairs Sec. 7, Rule 133, Rules on Evidence; Bravo vs. Borja, 134 SCRA
are conducted so that it is, in fact, a mere instrumentality or adjunct of the 438];
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 3. For effective control purposes, defendant EIB Securities
complete stock control but such domination of finances, policies and practices and its operating office and staff are all housed in Exportbank Plaza
located at Chino Roces cor. Sen. Gil Puyat Avenue, Makati City
that the controlled corporation has, so to speak, no separate mind, will or
which is the same building w[h]ere the bank parent corporation has
existence of its own, and is but a conduit for its principal. It must be kept in
its headquarters;
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 4. As shown in the General Information Sheets annually
proximately cause the injury or unjust loss for which the complaint is made." 62 filed with the S.E.C. from 2002 to 2011, both defendant EIB
Securities and the bank parent corporation share common key
The Court has laid down a three-pronged control test to establish when Directors and corporate officers. Three of the 5-man Board of
the alter ego doctrine should be operative: Directors of defendant EIB Securities are Directors of the bank parent
(1) Control, not mere majority or complete stock control, but corporation, namely: Jaime C. Gonzales, Pauline C. Tan and Dionisio
complete domination, not only of finances but of policy and E. Carpio, Jr. In addition, Mr. Gonzales is Chairman of the Board of
business practice in respect to the transaction attacked so that the both corporations, whereas Pauline C. Tan is concurrently
corporate entity as to this transaction had at the time no separate President/General Manager of EIB Securities, and Dionisio Carpio
mind, will or existence of its own; Jr., is not only director of the bank, but also Director Treasurer of
defendant EIB Securities;
(2) Such control must have been used by the defendant to
commit fraud or wrong, to perpetuate the violation of a statutory or 5. As admitted by the bank parent corporation in its
other positive legal duty, or dishonest and unjust act in consolidated audited financial statements[,] EIB Securities is a
contravention of plaintiff's legal right; and CONTROLLED SUBSIDIARY, and for which reason its financial
condition and results of operations are included and integrated as
(3) The aforesaid control and breach of duty must [have] part of the group's consolidated financial statements, examined and
proximately caused the injury or unjust loss complained of. 63 audited by the same auditing firm;
The absence of any one of these elements prevents 'piercing the 6. The lawyers handling the suits and legal matters of
corporate veil' in applying the 'instrumentality' or 'alter ego' doctrine, the courts defendant EIB Securities are the same lawyers in the Legal
are concerned with reality and not form, with how the corporation operated Department of the bank parent corporation. The Court notes that in
and the individual defendant's relationship to that operation. 64 Hence, all [the] above-entitled suit, the lawyers who at the start represented
three elements should concur for the alter ego doctrine to be applicable. DCcAIS
said defendant EIB Securities and filed all the pleadings and filings in
its behalf are also the lawyers in the Legal Services Division of the
In its decision, the RTC maintained that the subsequently enumerated bank parent corporation. They are Attys. Emmanuel A. Silva,
factors betray the true nature of E-Securities as a mere alter ego of Export Leonardo C. Bool, Riva Khristine E. Maala and Ma. Esmeralda R.
Bank: Cunanan, all of whom worked at the Legal Services Division of
Export Industry Bank located at 36/F, Exportbank Plaza, Don Chino
Roces Avenue, cor. Sen. Gil Puyat Avenue, Makati City.
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2/9/2020 G.R. Nos. 199687 & 201537 | Pacific Rehouse Corp. v. Court of 2/9/2020 G.R. Nos. 199687 & 201537 | Pacific Rehouse Corp. v. Court of

7. Finally[,] and this is very significant, the control and Furthermore, ownership by Export Bank of a great majority or all of
sway that the bank parent corporation held over defendant EIB stocks of E-Securities and the existence of interlocking directorates may serve
Securities was prevailing in June 2004 when the very act complained as badges of control, but ownership of another corporation, per se, without
of in plaintiff's Complaint took place, namely the unauthorized proof of actuality of the other conditions are insufficient to establish an alter
disposal of the 32,180,000 DMCI shares of stock. Being then under ego relationship or connection between the two corporations, which will justify
the direction and control of the bank parent corporation, the the setting aside of the cover of corporate fiction. The Court has declared that
unauthorized disposal of those shares by defendant EIB Securities is "mere ownership by a single stockholder or by another corporation of all or
attributable to, and the responsibility of the former. 65 nearly all of the capital stock of a corporation is not of itself sufficient ground
All the foregoing circumstances, with the exception of the admitted for disregarding the separate corporate personality." The Court has likewise
stock ownership, were however not properly pleaded and proved in ruled that the "existence of interlocking directors, corporate officers and
accordance with the Rules of Court. 66 These were merely raised by the shareholders is not enough justification to pierce the veil of corporate fiction in
petitioners for the first time in their Motion for Issuance of an Alias Writ of the absence of fraud or other public policy considerations." 75
Execution 67 and Reply, 68 which the Court cannot consider. "Whether the While the courts have been granted the colossal authority to wield the
separate personality of the corporation should be pierced hinges on obtaining sword which pierces through the veil of corporate fiction, concomitant to the
facts appropriately pleaded or proved." 69 DIETcH exercise of this power, is the responsibility to uphold the doctrine of separate
entity, when rightly so; as it has for so long encouraged businessmen to enter
Albeit the RTC bore emphasis on the alleged control exercised by
into economic endeavors fraught with risks and where only a few dared to
Export Bank upon its subsidiary E-Securities, "[c]ontrol, by itself, does not
venture.
mean that the controlled corporation is a mere instrumentality or a business
conduit of the mother company. Even control over the financial and Hence, any application of the doctrine of piercing the corporate veil
operational concerns of a subsidiary company does not by itself call for should be done with caution. A court should be mindful of the milieu where it
disregarding its corporate fiction. There must be a perpetuation of fraud is to be applied. It must be certain that the corporate fiction was misused to
behind the control or at least a fraudulent or illegal purpose behind the control such an extent that injustice, fraud, or crime was committed against another,
in order to justify piercing the veil of corporate fiction. Such fraudulent intent is in disregard of its rights. The wrongdoing must be clearly and convincingly
lacking in this case." 70 established; it cannot be presumed. Otherwise, an injustice that was never
unintended may result from an erroneous application. 76
Moreover, there was nothing on record demonstrative of Export Bank's
wrongful intent in setting up a subsidiary, E-Securities. If used to perform In closing, we understand that the petitioners are disgruntled at the
legitimate functions, a subsidiary's separate existence shall be respected, and turnout of this case — that they cannot enforce the award due them on its
the liability of the parent corporation as well as the subsidiary will be confined entirety; however, the Court cannot supplant a remedy which is not
to those arising in their respective business. 71 To justify treating the sole sanctioned by our laws and prescribed rules.
stockholder or holding company as responsible, it is not enough that the WHEREFORE, the petition in G.R. No. 199687 is hereby DISMISSED
subsidiary is so organized and controlled as to make it "merely an for having been rendered moot and academic. The petition in G.R. No.
instrumentality, conduit or adjunct" of its stockholders. It must further appear 201537, meanwhile, is hereby DENIED for lack of merit. Consequently, the
that to recognize their separate entities would aid in the consummation of a Decision dated April 26, 2012 of the Court of Appeals in CA-G.R. SP No.
wrong. 72 120979 is AFFIRMED.
As established in the main case 73 and reiterated by the CA, the subject SO ORDERED.
32,180,000 DMCI shares which E-Securities is obliged to return to the
Sereno, C.J., Leonardo-de Castro, Bersamin and Villarama, Jr., JJ.,
petitioners were originally bought at an average price of P0.38 per share and
concur.
were sold for an average price of P0.24 per share. The proceeds were then
used to buy back 61,100,000 KPP shares earlier sold by E-Securities. Quite
unexpectedly however, the total amount of these DMCI shares ballooned to
Footnotes
P1,465,799,000.00. 74 It must be taken into account that this unexpected
turnabout did not inure to the benefit of E-Securities, much less Export Bank. 1. Penned by Associate Justice Mario V. Lopez, with Associate Justice
Amy C. Lazaro-Javier, concurring; Associate Justice Vicente S.E. Veloso
penned a Separate Concurring Opinion. Associate Justices Magdangal M.
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