eneral Credit Corp v. Alsons Dev.

and
Investment Corp
FACTS: Petitioner General Credit
Corporation (GCC), then known
as Commercial Credit
Corporation (CCC),
established CCC franchise companies
in different urban centers of the
country. In furtherance of its
business, GCC
was able to secure license from
Central Bank (CB) and SEC to engage
also in quasi-banking activities.
On the other
hand, respondent CCC Equity
Corporation (EQUITY) was organized
in by GCC for the purpose of, among
other
things, taking over the operations and
management of the various franchise
companies. At a time
material hereto,
respondent Alsons Development and
Investment Corporation (ALSONS)
and the Alcantara family, each
owned, just
like GCC, shares in the aforesaid GCC
franchise companies, e.g., CCC Davao
and CCC Cebu
General Credit Corp v. Alsons Dev.
and Investment Corp
FACTS:
Petitioner General Credit
Corporation (GCC), then known
as Commercial Credit Corporation
(CCC), established CCC franchise
companies in different urban centers
of the country. In furtherance of
its business, GCC was able to secure
license from Central Bank (CB) and
SEC to engage also in quasi-
banking activities. On the other hand,
respondent CCC Equity Corporation
(EQUITY) was organized in by
GCC for the purpose of, among other
things, taking over the operations and
management of the various
franchise companies. At a time
material hereto, respondent Alsons
Development and Investment
Corporation (ALSONS) and the
Alcantara family, each owned, just
like GCC, shares in the aforesaid GCC
franchise companies, e.g., CCC Davao
and CCC Cebu.
ALSONS and the Alcantara family,
for a consideration of P2M, sold their
shareholdings (101,953 shares),
in the CCC franchise companies to
EQUITY. EQUITY issued ALSONS
et al., a "bearer" promissory note
for P2M with a one-year maturity
date.4 years later, the Alcantara family
assigned its rights and interests
over the bearer note to ALSONS
which became the holder thereof. But
even before the execution of the
assignment deal aforestated, letters
of demand for interest payment
were already sent to EQUITY.
EQUITY no longer then having assets
or property to settle its obligation nor
being extended financial
support by GCC, pleaded
inability to pay. ALSONS,
having failed to collect on the
bearer note
aforementioned, filed a complaint
for a sum of money against
EQUITY and GCC. GCC is
being
impleaded as party-defendant for any
judgment ALSONS might secure
against EQUITY and, under
the doctrine of piercing the veil
of corporate fiction, against
GCC, EQUITY having been
organized as a tool and mere conduit
of GCC.
According to EQUITY (cross-claim
against GCC): it acted merely as
intermediary or bridge for loan
transactions and other dealings of
GCC to its franchises and the
investing public; and is solely
dependent
upon GCC for its funding
requirements. Hence, GCC is solely
and directly liable to ALSONS, the
former
having failed to provide EQUITY the
necessary funds to meet its obligations
to ALSONS. GCC filed its
ANSWER to Cross-claim, stressing
that it is a distinct and separate entity
from EQUITY.
RTC, finding that EQUITY was
but an instrumentality or adjunct
of GCC and considering the
legal
consequences and implications of such
relationship, rendered judgment for
Alson.
CA affirmed.
ISSUE: WON the doctrine of
"Piercing the Veil of Corporate
Fiction" should be applied in the case
at bar.
HELD: YES.
The notion of separate personality,
however, may be disregarded under
the doctrine – "piercing the veil of
corporate fiction" – as in fact the court
will often look 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.
eneral Credit Corp v. Alsons Dev. and
Investment Corp
FACTS: Petitioner General Credit
Corporation (GCC), then known
as Commercial Credit
Corporation (CCC),
established CCC franchise companies
in different urban centers of the
country. In furtherance of its
business, GCC
was able to secure license from
Central Bank (CB) and SEC to engage
also in quasi-banking activities.
On the other
hand, respondent CCC Equity
Corporation (EQUITY) was organized
in by GCC for the purpose of, among
other
things, taking over the operations and
management of the various franchise
companies. At a time
material hereto,
respondent Alsons Development and
Investment Corporation (ALSONS)
and the Alcantara family, each
owned, just
like GCC, shares in the aforesaid GCC
franchise companies, e.g., CCC Davao
and CCC Cebu
General Credit Corp v. Alsons Dev.
and Investment Corp
FACTS:
Petitioner General Credit
Corporation (GCC), then known
as Commercial Credit Corporation
(CCC), established CCC franchise
companies in different urban centers
of the country. In furtherance of
its business, GCC was able to secure
license from Central Bank (CB) and
SEC to engage also in quasi-
banking activities. On the other hand,
respondent CCC Equity Corporation
(EQUITY) was organized in by
GCC for the purpose of, among other
things, taking over the operations and
management of the various
franchise companies. At a time
material hereto, respondent Alsons
Development and Investment
Corporation (ALSONS) and the
Alcantara family, each owned, just
like GCC, shares in the aforesaid GCC
franchise companies, e.g., CCC Davao
and CCC Cebu.
ALSONS and the Alcantara family,
for a consideration of P2M, sold their
shareholdings (101,953 shares),
in the CCC franchise companies to
EQUITY. EQUITY issued ALSONS
et al., a "bearer" promissory note
for P2M with a one-year maturity
date.4 years later, the Alcantara family
assigned its rights and interests
over the bearer note to ALSONS
which became the holder thereof. But
even before the execution of the
assignment deal aforestated, letters
of demand for interest payment
were already sent to EQUITY.
EQUITY no longer then having assets
or property to settle its obligation nor
being extended financial
support by GCC, pleaded
inability to pay. ALSONS,
having failed to collect on the
bearer note
aforementioned, filed a complaint
for a sum of money against
EQUITY and GCC. GCC is
being
impleaded as party-defendant for any
judgment ALSONS might secure
against EQUITY and, under
the doctrine of piercing the veil
of corporate fiction, against
GCC, EQUITY having been
organized as a tool and mere conduit
of GCC.
According to EQUITY (cross-claim
against GCC): it acted merely as
intermediary or bridge for loan
transactions and other dealings of
GCC to its franchises and the
investing public; and is solely
dependent
upon GCC for its funding
requirements. Hence, GCC is solely
and directly liable to ALSONS, the
former
having failed to provide EQUITY the
necessary funds to meet its obligations
to ALSONS. GCC filed its
ANSWER to Cross-claim, stressing
that it is a distinct and separate entity
from EQUITY.
RTC, finding that EQUITY was
but an instrumentality or adjunct
of GCC and considering the
legal
consequences and implications of such
relationship, rendered judgment for
Alson.
CA affirmed.
ISSUE: WON the doctrine of
"Piercing the Veil of Corporate
Fiction" should be applied in the case
at bar.
HELD: YES.
The notion of separate personality,
however, may be disregarded under
the doctrine – "piercing the veil of
corporate fiction" – as in fact the court
will often look 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.
General Credit Corp v. Alsons Dev. and Investment Corp

FACTS: Petitioner General Credit Corporation (GCC), then known as Commercial Credit
Corporation (CCC), established CCC franchise companies in different urban centers of the country.
In furtherance of its business, GCC was able to secure license from Central Bank (CB) and SEC to
engage also in quasi-banking activities. On the other hand, respondent CCC Equity Corporation
(EQUITY) was organized in by GCC for the purpose of, among other things, taking over the
operations and management of the various franchise companies. At a time, material hereto,
respondent Alsons Development and Investment Corporation (ALSONS) and the Alcantara family,
each owned, just like GCC, shares in the aforesaid GCC franchise companies, e.g., CCC Davao and
CCC Cebu. ALSONS and the Alcantara family, for a consideration of P2M, sold their shareholdings
(101,953 shares), in the CCC franchise companies to EQUITY. EQUITY issued ALSONS et al., a
"bearer" promissory note for P2M with a one-year maturity date.4 years later, the Alcantara family
assigned its rights and interests over the bearer note to ALSONS which became the holder thereof.
But even before the execution of the assignment deal aforestated, letters of demand for interest
payment were already sent to EQUITY. EQUITY no longer then having assets or property to settle
its obligation nor being extended financial support by GCC, pleaded inability to pay. ALSONS,
having failed to collect on the bearer note aforementioned, filed a complaint for a sum of money
against EQUITY and GCC. GCC is being impleaded as party-defendant for any judgment ALSONS
might secure against EQUITY and, under the doctrine of piercing the veil of corporate fiction, against
GCC, EQUITY having been organized as a tool and mere conduit of GCC. According to EQUITY
(cross-claim against GCC): it acted merely as intermediary or bridge for loan transactions and other
dealings of GCC to its franchises and the investing public; and is solely dependent upon GCC for its
funding requirements. Hence, GCC is solely and directly liable to ALSONS, the former having failed
to provide EQUITY the necessary funds to meet its obligations to ALSONS. GCC filed its ANSWER
to Cross-claim, stressing that it is a distinct and separate entity from EQUITY. RTC, finding that
EQUITY was but an instrumentality or adjunct of GCC and considering the legal consequences and
implications of such relationship, rendered judgment for Alson. CA affirmed.
ISSUE: WON the doctrine of "Piercing the Veil of Corporate Fiction" should be applied in the case at
bar.

HELD: YES. The notion of separate personality, however, may be disregarded under the doctrine
"piercing the veil of corporate fiction" as in fact the court will often look 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. Another formulation of this
doctrine is that when two (2) business enterprises are owned, conducted and controlled by the same
parties, both law and equity will, when necessary to protect the rights of third parties, disregard the
legal fiction that two corporations are distinct entities and treat them as identical or one and the
same. This relation, in turn, provides a justifying ground to pierce petitioners corporate existence as
to ALSONS claim in question. Foremost of what the trial court referred to as "certain circumstances"
are the commonality of directors, officers and stockholders and even sharing of office between
petitioner GCC and respondent EQUITY; certain financing and management arrangements between
the two, allowing the petitioner to handle the funds of the latter; the virtual domination if not control
wielded by the petitioner over the finances, business policies and practices of respondent EQUITY;
and the establishment of respondent EQUITY by the petitioner to circumvent CB rules. Some of the
detailed circumstances: [respondent]EQUITY and [petitioner] GCC had common directors and/or
officers as well as stockholders. Disclosed likewise is the fact that when [EQUITYs President]
Labayen sold the shareholdings of EQUITY in said franchise companies, practically the entire
proceeds thereof were surrendered to GCC, and not received by EQUITY GCC financed
EQUITYand EQUITY was, in fact, a wholly owned subsidiary of GCC, funds invested by EQUITY in
the CCC franchise companies actually came from CCC Phils.orGCC GCC cause the incorporation of
EQUITY and its business affairs were considered as GCCs own business endeavors. EQUITY never
acted independently but took their orders from GCC EQUITY was organized by GCC for the purpose
of circumventing [CB] rules and regulations and the Anti-Usury Law ((a) using as a conduit its non-
quasi bank affiliates . (b)issuingwithout recourse facilities to enable GCC to extend credit to affiliates
like EQUITY which go beyond the single borrowers limit without the need of showing outstanding
balance in the book of accounts.) There being a parent-subsidiary corporation relationship between
EQUITY and GCC, GCC maybe held responsible for the acts and contracts of its subsidiary
EQUITY, especially that the latter has no sufficient property to settle its obligations. For, after all,
GCC was the entity which initiated and benefited immensely from the fraudulent scheme perpetrated
in violation of the law.

Ever Electrical v. Samahang Manggagawa

FACTS: Petitioner Ever Electrical Manufacturing, Inc.(EEMI)is a corporation engaged in the

business of manufacturing electrical parts and supplies. Respondents are members of the workers
union. EEMI closed its operations on 2006 resulting in the termination of its employees. Hence, the
union filed for illegal dismissal with prayer for benefits (13th month, separation, damages, attorneys
fees). They alleged that the closure was without any warning, notice, or memo, in full disregard of
the requirements under Labor Code. EEMIs Arguments, losses due to the following factors: In 1995,
it invested 500 million in Orient Bank. During the Asian Currency crises, various economies in
Southeast Asian Region were hurt badly, and EEMI was directly affected and suffered huge losses.
1996 EEMI obtained a loan in the amount of P121,400,000.00 from United Coconut Planters
Bank(UCPB).As security for the loan, EEMIs land and its improvements, including the factory, were
mortgaged to UCPB. EEMI further suffered from losses because of the entry of cheap goods from
China and other Asian countries. Lastly, the closure of Orient Bank added to its financial woes
because it is where most of its resources were invested. It was not able to meet its obligations to
UCPB. Issues under UCPB In an attempt to save the company, EEMI entered into adacion en
pagoarrangement with UCPB which, in effect, transferred ownership of the companys property to
UCPB. Originally, EEMI wanted to lease the premises to continue its business operation but under
UCPBs policy, a previous debtor who failed to settle its loan obligation was not eligible to lease its
acquired assets. Hence they mutually agreed to circumvent this policy. UCPB agreed to lease it to
an affiliate corporation, EGO Electrical Supply Co, Inc.(EGO), for and in behalf of EEMI. However,
after a while, despite their lease contract, UCPB instituted an unlawful detainer suit against EGO.
The writ was issued, hence EEMIs employees was not able to enter the factory.

ISSUES:1. Whether or not CA erred in finding that the closure was not due to business losses --- NO

2. Whether the CA erred in finding Vicente Go solidarily liable with EEMI - YES

HELD: Petition partially granted. Decision of CA modified. In this case, EEMI failed to establish that
the main reason for its closure was business reverses.As aptly observed by the CA, the cessation of
EEMIs business was not directly brought about by serious business losses or financial reverses, but
by reason of the enforcement of a judgment against it.Thus, EEMI should be required to pay
separation pay to its affected employees.

SOLIDARY LIABILITY ISSUE As a general rule, corporate officers should not be held solidarily liable
with the corporation for separation pay for it is settled that a corporation is invested by law with
separate juridical personality. The following reasoning of LA is incorrect: LA said that Go, as
President of the corporation, actively participated in the management of EEMIs corporate
obligations. He is the one who represented EEMI in major contracts. His negligence in not paying
the lease rental of the plant in behalf of the lessee EGO Electrical Supply, Inc., prompted the bank to
file an unlawful detainer case against the lessee, EGO Electrical Supply Co. This evasion of an
existing obligation, made respondent Go as liable as respondent EEMI, for complainants money
awards. In the present case, Go may have acted in behalf of EEMI but the companys failure to
operate cannot be equated to bad faith. Unless it can be shown that the closure was deliberate,
malicious and in bad faith, the Court must not piece the corporate veil.As there is no evidence that
Go, as EEMIs President, acted maliciously or in bad faith in handling their business affairs and in
eventually implementing the closure of its business, he cannot be held jointly and solidarily liable
with EEMI.

TRADERS ROYAL BANK, petitioner, vs. COURT OF APPEALS, FILRITERS GUARANTY ASSURANCE
CORPORATION and CENTRAL BANK of the PHILIPPINES, respondents. G.R. No. 93397/ 269 SCRA 16
March 3, 1997

FACTS: Private respondent Filriters is the registered owner of Central Bank Certificate of Indebtedness
(CBCI) No. D891 with a face value of P500,000.00. Under a deed of assignment, Filriters transferred CBCI
No. D891 to Philippine Underwriters Finance Corporation (Philfinance). Subsequently, Philfinance
transferred CBCI No. D891, which was still registered in the name of Filriters, to herein petitioner
Traders Royal Bank (TRB). The transfer was made under a repurchase agreement, granting Philfinance
the right to repurchase the instrument on or before April 27, 1981. When Philfinance failed to buy back
the note on maturity date, it executed a deed of assignment, conveying to petitioner all its right and the
title to CBCI No. D891. Armed with the deed of assignment, petitioner then sought the transfer and
registration of CBCI No. D891 in its name before the Security and Servicing Department of the Central
Bank (CB). Central Bank, however, refused to effect the transfer and registration in view of an adverse
claim filed by private respondent Filriters. Having no other recourse, petitioner filed a special civil action
for mandamus against the Central Bank in the Regional Trial Court of Manila. The suit, however, failed to
get a favourable judgment.

ISSUE: WON CBCI No. D891 was not a negotiable instrument which would have served as an expression
of consent that the instrument may be transferred by negotiation.

RULING: The CBCI is not a negotiable instrument. The instrument provides for a promise to pay the
registered owner Filriters. Very clearly, the instrument was only payable to Filriters. It lacked the words
of negotiability which should have served as an expression of the consent that the instrument may be
transferred by negotiation. The language of negotiability which characterize a negotiable paper as a
credit instrument is its freedom to circulate as a substitute for money. Hence, freedom of negotiability is
the touchstone relating to the protection of holders in due course, and the freedom of negotiability is
the foundation for the protection, which the law throws around a holder in due course. This freedom in
negotiability is totally absent in a certificate of indebtedness as it merely acknowledges to pay a sum of
money to a specified person or entity for a period of time. Thus, the transfer of the instrument from
Philfinance to TRB was merely an assignment, and is not governed by the negotiable instruments law.