Title: GENERAL CREDIT CORPORATION (now PENTA CAPITAL FINANCE

CORPORATION), petitioner, vs. ALSONS DEVELOPMENT and INVESTMENT

CORPORATION and CCC EQUITY CORPORATION, respondents. Docket Number: G.R.
No.154975 Date: January 29, 2007

Facts:

Petitioner General Credit Corporation (GCC), formerly known as Commercial Credit

Corporation (CCC), established CCC franchise companies in urban areas around the
country. To further its business, it secured a license before the Central Bank (CB) and the
Securities and Exchange Commission (SEC) to also engage in quasi-banking activities.
On the other hand, respondent CCC Equity Corporation (Equity) was established by GCC to
take over the operations of their franchises.

Meanwhile, respondent Alsons Development (Alsons) and the Alcantara family

owned a total of 101,953 shares of GCC franchises. The Alcantara family assigned its rights
and interests of its shares to Alsons, making the latter the sole owner of the total shares.
Eventually, Alsons decided to sell these shares to Equity, which the latter promised to pay.
Because of Equity’s failure to pay, Alsons then filed a complaint for sums of money against
Equity and GCC.

Equity claims that GCC should be liable for the payment of shares since it has always
been dependent on GCC on its business operations. However, GCC claims that it has no
liability on the payment of stocks, being a separate entity from Equity.

Issue:
whether or not the doctrine of piercing the veil of corporate fiction be applied to
Equity Corporation? Or in other words, whether Equity and GCC should both be regarded
merely as an aggregate of persons doing business enterprise?

Court Ruling:

The Court held that the corporate veil of Equity Corporation be pierced.
The Court cites three basic areas where piercing the veil of corporate fiction is allowed.
First, when it is used to defeat public convenience to evade existing operations or
“equity piercing”; second, in fraud cases where it is used to justify a wrong or “fraud
piercing” and third, in alter ego cases where the corporation is organized as to make
it merely an instrumentality agency.

In this case, the Court has the right to pierce GCC’s corporate veil because evidence
point to the following facts: first, Equity is but an instrumentality of GCC and has always
been dependent on the latter for its operations, second, the commonality of directors,
stockholders and sharing of office between the two companies shows that they should
clearly be regarded merely as an aggregate of persons in a business enterprise; third, the
establishment of Equity is primarily for GCC to circumvent Central Bank rules specifically
the Anti-Usury Law, using it as a conduit to its non-quasi bank affiliates; and lastly, the
funds invested by Equity to GCC franchises are from GCC funds as well.

Applying the three basic areas of corporate veil piercing, GCC clearly defeated public
convenience when it established Equity to extend credit to its investors which in turn is not
allowed by the law; it justified a wrong by fraudulently evading the Anti-Usury Law
established by the Central Bank to quasi-banking businesses, and lastly, Equity was but a
mere instrumentality of GCC for it to get away with its obligations.
 PHILIPPINE NATIONAL BANK & NATIONAL SUGAR DEVELOPMENT CORPORATION
(NASUDECO)
vs.
ANDRADA ELECTRIC & ENGINEERING COMPANY
GR No. 142936. April 17, 2002

FACTS:
Respondent is a partnership duly organized, existing, and operating under the laws
of the Philippines is a semi-government corporation duly organized, existing and operating
under the laws of the Philippines; whereas, NASUDECO is also a semi-government
corporation and the sugar arm of the PNB; and the defendant Pampanga Sugar Mills
(PASUMIL in short), is a corporation organized, existing and operating under the 1975 laws
of the Philippines; that the plaintiff is engaged in the business of general construction for
the repairs and/or construction of different kinds of machineries and buildings.

On August 26, 1975, PNB acquired the assets of the defendant PASUMIL that were
earlier foreclosed by the DBP. PNB organized the defendant NASUDECO in September,
1975, to take ownership and possession of the assets and ultimately to nationalize and
consolidate its interest in other PNB controlled sugar mills; that prior to October 29, 1971,
the defendant PASUMIL engaged the services of defendant for electrical rewinding and
repair, most of which were partially paid by the defendant PASUMIL, leaving several
unpaid accounts with the plaintiff; that finally, on October 29, 1971, the plaintiff and the
defendant PASUMIL entered into a construction contract.

The defendant PASUMIL and the defendant PNB, and now the defendant
NASUDECO, failed and refused to pay the plaintiff their just, valid and demandable
obligation based on the contract. Defendant prayed that judgment be rendered against the
defendants PNB, NASUDECO, and PASUMIL.

ISSUE:

Whether or not the Veil of Corporate Fiction should be pierced in this case.

RULING:

NO. The absence of the elements in the present case precludes the piercing of the
corporate veil. First, other than the fact that petitioners acquired the assets of PASUMIL,
there is no showing that their control over it warrants the disregard of corporate
personalities. Second, there is no evidence that their juridical personality was used to
commit a fraud or to do a wrong; or that the separate corporate entity was farcically used
as a mere alter ego, business conduit or instrumentality of another entity or person. Third,
respondent was not defrauded or injured when petitioners acquired the assets of PASUMIL.
Being the party that asked for the piercing of the corporate veil, respondent had the burden
of presenting clear and convincing evidence to justify the setting aside of the separate
corporate personality rule. However, it utterly failed to discharge this burden; it failed to
establish by competent evidence that petitioner‘s separate corporate veil had been used to
conceal fraud, illegality or inequity.