SUPREME COURT REPORTS ANNOTATED VOLUME 345

*
G.R. Nos. 116124-25. November 22, 2000.

BIBIANO O. REYNOSO IV, petitioner, vs. HON. COURT

OF APPEALS and GENERAL CREDIT CORPORATION,
respondents.

Corporation Law; Securities & Exchange Commission; Fraud;

When the corporate fiction is used to perpetrate fraud or promote
injustice, the law steps in to remedy the problem. When that
happens, the corporate character is not necessarily abrogated. It
continues for legitimate objective. However, it is pierced in order to
remedy injustice.—It is obvious that the use by CCC-QC of the same
name of Commercial Credit Corporation was intended to publicly
identify it as a component of the CCC group of companies engaged
in one and the same business, i.e., investment and financing. Aside
from CCC-Quezon City, other franchise companies were organized
such as CCC-North Manila and CCC-Cagayan Valley. The
organization of subsidiary corporations as what was done here is
usually resorted to for the aggrupation of capital, the ability to
cover more territory and population, the decentralization of
activities best decentralized, and the securing of other legitimate
advantages. But when the mother corporation and its subsidiary
cease to act in good faith and honest business judgment, when the
corporate device is used by the parent to avoid its liability for
legitimate obligations of the subsidiary, and when the corporate
fiction is used to perpetrate fraud or promote injustice, the law
steps in to remedy the problem. When that happens, the corporate
character is not necessarily abrogated. It continues for legitimate
objectives. However, it is pierced in order to remedy injustice, such
as that inflicted in this case.
Same; Same; Same; The ends of justice are not served if further
litigation is encouraged when the issue is determinable based on the
records.—If the corporate fiction is sustained, it becomes a handy
deception to avoid a judgment debt and work an injustice. The
decision raised to us for review is an invitation to multiplicity of
litigation. As we stated in Islamic Directorate vs. Court of Appeals,
the ends of justice are not served if further litigation is encouraged
when the issue is determinable based on the records.
Same; Courts; Contracts; Fraud; Piercing the Veil of Corporate
Fiction; Courts have been organized to put an end to controversy.

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SUPREME COURT REPORTS ANNOTATED VOLUME 345

This purpose should not be negated by an inapplicable and wrong

use of the fiction of the

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* FIRST DIVISION.

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336 SUPREME COURT REPORTS ANNOTATED

Reynoso IV vs. Court of Appeals

corporate veil.—A court judgment becomes useless and ineffective if

the employer, in this case CCC as a mother corporation, is placed
beyond the legal reach of the judgment creditor who, after
protracted litigation, has been found entitled to positive relief.
Courts have been organized to put an end to controversy. This
purpose should not be negated by an inapplicable and wrong use of
the fiction of the corporate veil.

PETITION for review on certiorari of a decision of the

Court of Appeals.

The facts are stated in the opinion of the Court.

     Soo, Gutierrez, Leogardo & Lee for petitioner.
     Antonio R. Bautista and Partners for private
respondent.

YNARES-SANTIAGO, J.:

Assailed in this petition for review is the consolidated

decision of the Court of Appeals dated July 7, 1994, which
reversed the separate decisions of the Regional Trial Court
of Pasig City and the Regional Trial Court of Quezon City
in two cases between petitioner Reynoso and respondent
General Credit Corporation (GCC).
Sometime in the early 1960s, the Commercial Credit
Corporation (hereinafter, “CCC”), a financing and
investment firm, decided to organize franchise companies
in different parts of the country, wherein it shall hold
thirty percent (30%) equity. Employees of the CCC were
designated as resident managers of the franchise
companies. Petitioner Bibiano O. Reynoso, IV was
designated as the resident manager of the franchise
company in Quezon City, known as the Commercial Credit
Corporation of Quezon City (hereinafter, “CCC-QC”).

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SUPREME COURT REPORTS ANNOTATED VOLUME 345

CCC-QC entered into an exclusive management contract

with CCC whereby the latter was granted the management
and full control of the business activities of the former.
Under the contract, CCC-QC shall sell, discount and/or
assign its receivables to CCC. Subsequently, however, this
discounting arrangement was discontinued pursuant to the
so-called “DOSRI Rule,” prohibiting the lending of funds by
corporations to its directors, officers, stockholders and
other persons with related interests therein.
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VOL. 345, NOVEMBER 22, 2000 337

Reynoso IV vs. Court of Appeals

On account of the new restrictions imposed by the Central

Bank policy by virtue of the DOSRI Rule, CCC decided to
form CCC Equity Corporation, (hereinafter, “CCC-Equity”),
a wholly-owned subsidiary, to which CCC transferred its
thirty (30%) percent equity in CCC-QC, together with two
seats in the latter’s Board of Directors.
Under the new set-up, several officials of Commercial
Credit Corporation, including petitioner Reynoso, became
employees of CCC-Equity. While petitioner continued to be
the Resident Manager of CCC-QC, he drew his salaries and
allowances from CCCEquity. Furthermore, although an
employee of CCC-Equity, petitioner, as well as all
employees of CCC-QC, became qualified members of the
Commercial Credit Corporation Employees Pension Plan.
As Resident Manager of CCC-QC, petitioner oversaw the
operations of CCC-QC and supervised its employees. The
business activities of CCC-QC pertain to the acceptance of
funds from depositors who are issued interest-bearing
promissory notes. The amounts deposited are then loaned
out to various borrowers. Petitioner, in order to boost the
business activities of CCC-QC, deposited his personal funds
in the company. In return, CCC-QC issued to him its
interest-bearing promissory notes.
On August 15, 1980, a1 complaint for sum of money with
preliminary attachment, docketed as Civil Case No. Q-
30583, was instituted in the then Court of First Instance of
Rizal by CCC-QC against petitioner, who had in the
meantime been dismissed from his employment by CCC-
Equity. The complaint was subsequently amended in order
to include 2 Hidelita Nuval, petitioner’s wife, as a party
defendant. The complaint alleged that petitioner
embezzled the funds of CCC-QC amounting to
P1,300,593.11. Out of this amount, at least P630,000.00

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SUPREME COURT REPORTS ANNOTATED VOLUME 345

was used for the purchase of a house and lot located at No.
12 Macopa Street, Valle Verde I, Pasig City. The property
was mortgaged to CCC, and was later foreclosed.

_______________

1 Rollo, pp. 60-63.

2 Ibid.,pp.64-68.

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338 SUPREME COURT REPORTS ANNOTATED

Reynoso IV vs. Court of Appeals

In his amended Answer, petitioner denied having

unlawfully used funds of CCC-QC and asserted that the
sum of P1,300,593.11 represented his money placements in
CCC-QC, as shown by twenty-three (23) checks which he
3
issued to the said company.
The case was subsequently transferred to the Regional
Trial Court of Quezon City, Branch 86, pursuant to the
Judiciary Reorganization Act of 1980.
On January 14, 1985, the trial court rendered its
decision, the decretal portion of which states:

Premises considered, the Court finds the complaint without merit.

Accordingly, said complaint is hereby DISMISSED.
By reason of said complaint, defendant Bibiano Reynoso IV
suffered degradation, humiliation and mental anguish.
On the counterclaim, which the Court finds to be meritorious,
plaintiff corporation is hereby ordered:

a) to pay defendant the sum of P185,000.00 plus 14% interest

per annum from October 2, 1980 until fully paid;
b) to pay defendant P3,639,470.82 plus interest thereon at the
rate of 14% per annum from June 24, 1981, the date of filing
of Amended Answer, until fully paid; from this amount may
be deducted the remaining obligation of defendant under
the promissory note of October 24, 1977, in the sum of
P9,738.00 plus penalty at the rate of 1% per month from
December 24, 1977 until fully paid;
c) to pay defendants P200,000.00 as moral damages;
d) to pay defendants P100,000.00 as exemplary damages;
e) to pay defendants P25,000.00 as and for attorney’s fees; plus
costs of the suit.

SO ORDERED.

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SUPREME COURT REPORTS ANNOTATED VOLUME 345

Both parties appealed to the then Intermediate Appellate

Court. The appeal of Commercial Credit Corporation of
Quezon City was dismissed for failure to pay docket fees.
Petitioner, on the other hand, withdrew his appeal.

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3 Id., p. 19.

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Reynoso IV vs. Court of Appeals

Hence, the decision became final and, accordingly, a Writ of

4
Execution was issued on July 524, 1989. However, the
judgment remained unsatisfied, prompting petitioner to
file a Motion for Alias Writ of Execution, Examination of
Judgment Debtor, and to Bring Financial Records for
Examination to Court. CCC-QC filed an Opposition to
6
petitioner’s motion, alleging that the possession of its
premises and records had been taken over by CCC.
Meanwhile, in 1983, CCC became known as the General
Credit Corporation.
On November 22, 1991, the Regional Trial Court of
Quezon City issued an Order directing General Credit
Corporation to file its 7comment on petitioner’s motion for
alias writ of execution. General Credit Corporation filed a8
Special Appearance and Opposition on December 2, 1991,
alleging that it was not a party to the case, and therefore
petitioner should direct his claim against CCC-QC and not9
General Credit Corporation. Petitioner filed his reply,
stating that the CCC-QC is in adjunct instrumentality,
conduit and agency of CCC. Furthermore, petitioner
invoked the decision of the Securities and Exchange
Commission in SEC Case No. 2581, entitled, “Avelina G.
Ramoso, et al., Petitioner versus General Credit Corp., et
al., Respondents,” where it was declared that General
Credit Corporation CCC-Equity and other franchised
companies including CCC-QC were declared as one
corporation.
On December 9, 1991, the Regional Trial Court of
Quezon City ordered the issuance of an alias writ of
10
execution. On December 20, 1991, General Credit
11
Corporation filed an Omnibus Motion, alleging that SEC
Case No. 2581 was still pending appeal, and maintaining
that the levy on properties of the General Credit
Corporation by the deputy sheriff of the court was

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SUPREME COURT REPORTS ANNOTATED VOLUME 345

erroneous.

______________

4 Id., p. 297.
5 Id., p. 299.
6 Id., p. 300.
7 Id., p. 320.
8 Id., pp. 321-324.
9 Id., pp. 331-332.
10 Id., pp. 333-335.
11 Id., pp. 336-342.

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340 SUPREME COURT REPORTS ANNOTATED

Reynoso IV vs. Court of Appeals

In his Opposition to the Omnibus Motion, petitioner

insisted that General Credit Corporation is just the new
name of Commercial Credit Corporation; hence, General
Credit Corporation and Commercial Credit Corporation
should be treated as one and the same entity.
On February 13, 1992, the Regional 12Trial Court of
Quezon City denied the Omnibus Motion. On March 5,
1992, it issued an13 Order directing the issuance of an alias
writ of execution.
Previously, on February 21, 1992, General Credit
Corporation instituted a complaint before the Regional
Trial Court of Pasig against Bibiano Reynoso IV and
Edgardo C. Tanangco, in his capacity as Deputy Sheriff of
14
Quezon City, docketed as Civil Case No. 61777, praying
that the levy on its parcel of land located in Pasig, Metro
Manila and covered by Transfer Certificate of Title No.
29940 be declared null and void, and that defendant sheriff
be enjoined from consolidating ownership over the land and
from further levying on other properties of General Credit
Corporation to answer for any liability under the decision
in Civil Case No. Q30583.
The Regional Trial Court of Pasig, Branch 167, did not
issue a temporary restraining order. Thus, General Credit
Corporation instituted two (2) petitions for certiorari with15
the Court of Appeals, docketed as CA-G.R. SP No. 27518
and CA-G.R. SP No. 27683. These cases were later
consolidated.
On July 7, 1994, the Court of Appeals rendered a
decision in the two consolidated cases, the dispositive
portion of which reads:

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SUPREME COURT REPORTS ANNOTATED VOLUME 345

WHEREFORE, in SP No. 27518 we declare the issue of the

respondent court’s refusal to issue a restraining order as having
been rendered moot by our Resolution of 7 April 1992 which, by way
of injunctive relief, provided that “the respondents and their
representatives are hereby enjoined from conducting an auction
sale (on execution) of petitioner’s properties as well as initiating
similar acts of levying (upon) and selling on

_______________

12 Id., pp. 382-383.

13 Id., pp. 384-385.
14 Id., pp. 386-400.
15 Id., pp. 402-425.

341

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Reynoso IV vs. Court of Appeals

execution other properties of said petitioner.” The injunction thus

granted, as modified by the words in parenthesis, shall remain in
force until Civil Case No. 61777 shall have been finally terminated.
In SP No. 27683, we grant the petition for certiorari and
accordingly NULLIFY and SET ASIDE, for having been issued in
excess of jurisdiction, the Order of 13 February 1992 in Civil Case
No. Q-30583 as well as any other order or process through which
the petitioner is made liable under the judgment in said Civil Case
No. Q-30583.
No damages and no costs.
16
SO ORDERED.

Hence, this petition for review anchored on the following

arguments:

1. THE HONORABLE COURT OF APPEALS ERRED

IN CA-G.R. SP NO. 27683 WHEN IT NULLIFIED
AND SET ASIDE THE 13 FEBRUARY 1992
ORDER AND OTHER ORDERS OR PROCESS OF
BRANCH 86 OF THE REGIONAL TRIAL COURT
OF QUEZON CITY THROUGH WHICH
GENERAL CREDIT CORPORATION IS MADE
LIABLE UNDER THE JUDGMENT THAT WAS
RENDERED IN CIVIL CASE NO. Q-30583.
2. THE HONORABLE COURT OF APPEALS ERRED
IN CA-G.R. SP NO. 27518 WHEN IT ENJOINED
THE AUCTION SALE ON EXECUTION OF THE
PROPERTIES OF GENERAL CREDIT

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SUPREME COURT REPORTS ANNOTATED VOLUME 345

CORPORATION AS WELL AS INITIATING

SIMILAR ACTS OF LEVYING UPON AND
SELLING ON EXECUTION OF OTHER
PROPERTIES OF GENERAL CREDIT
CORPORATION.
3. THE HONORABLE COURT OF APPEALS ERRED
IN HOLDING THAT GENERAL CREDIT
CORPORATION IS A STRANGER TO CIVIL
CASE NO. Q-30583, INSTEAD OF, DECLARING
THAT COMMERCIAL CREDIT CORPORATION
OF QUEZON CITY IS THE ALTER EGO,
INSTRUMENTALITY, CONDUIT OR ADJUNCT
OF COMMERCIAL CREDIT CORPORATION AND
ITS SUCCESSOR GENERAL CREDIT
CORPORATION.

At the outset, it must be stressed that there is no longer

any controversy over petitioner’s claims against his former
employer, CCC-QC, inasmuch as the decision in Civil Case
No. Q-30583 of the

_______________

16 Id., pp. 57-58.

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342 SUPREME COURT REPORTS ANNOTATED

Reynoso TV vs. Court of Appeals

Regional Trial Court of Quezon City has long become final

and executory. The only issue, therefore, to be resolved in
the instant petition is whether or not the judgment in favor
of petitioner may be executed against respondent General
Credit Corporation. The latter contends that it is a
corporation separate and distinct from CCC-QC and,
therefore, its properties may not be levied upon to satisfy
the monetary judgment in favor of petitioner. In short,
respondent raises corporate fiction as its defense. Hence,
we are necessarily called upon to apply the doctrine of
piercing the veil of corporate entity in order to determine if
General Credit Corporation, formerly CCC, may be held
liable for the obligations of CCCQC.
The petition is impressed with merit.
A corporation is an artificial being created by operation
of law, having the right of succession and the powers,
attributes, and properties expressly authorized by law or
17
incident to its existence. It is an artificial being invested

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SUPREME COURT REPORTS ANNOTATED VOLUME 345

by law with a personality separate and distinct from those

of the persons composing it as well as from that of any
18
other legal entity to which it may be related. It was
evolved to make possible the aggregation and assembling of
huge amounts of capital upon which big business depends.
It also has the advantage of non-dependence on the lives of
those who compose it even as it enjoys certain rights and
conducts activities of natural persons.
Precisely because the corporation is such a prevalent
and dominating factor in the business life of the country,
the law has to look carefully into the exercise of powers by
these artificial persons it has created.
Any piercing of the corporate veil has to be done with
caution. However, the Court will not hesitate to use its
supervisory and adjudicative powers where the corporate
fiction is used as an unfair device to achieve an inequitable
result, defraud creditors, evade contracts and obligations,
or to shield it from the effects of a

______________

17 CORPORATION CODE, Section 2.

18 Yu v. National Labor Relations Commission, 245 SCRA 134 [1995].

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VOL. 345, NOVEMBER 22, 2000 343

Reynoso IV vs. Court of Appeals

court decision. The corporate fiction has to be disregarded

when necessary in the interest of justice.
In First Philippine International Bank v. Court of
19
Appeals, et al., we held:

When the fiction is urged as a means of perpetrating a fraud or an

illegal act or as a vehicle for the evasion of an existing obligation,
the circumvention of statutes, the achievement or perfection of a
monopoly or generally the perpetration of knavery or crime, the veil
with which the law covers and isolates the corporation from the
members or stockholders who compose it will be lifted to allow for
its consideration merely as an aggregation of individuals.

Also in the above-cited case, we stated that this Court has

pierced the veil of corporate fiction in numerous cases
where 20it was used, among others, to avoid a judgment
credit; to avoid inclusion of corporate assets as part of the
21 22
estate of a decedent; to avoid liability arising from debt;
when made use of as a shield to perpetrate fraud and/or
23
confuse legitimate issues; or to promote unfair objectives

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SUPREME COURT REPORTS ANNOTATED VOLUME 345

24
or otherwise to shield them.
In the appealed judgment, the Court of Appeals
sustained respondent’s arguments of separateness and its
character as a different corporation which is a non-party or
stranger to this case.
The defense of separateness will be disregarded where
the business affairs of a subsidiary corporation are so
controlled by the mother corporation to the extent that it
becomes an instrument or agent of its parent. But even
when there is dominance over the affairs of the subsidiary,
the doctrine of piercing the veil of corpo-

_______________

19 252 SCRA 259, 287-288 [1996].

20 Sibagat Timber Corp. v. Garcia, 216 SCRA 470 [1992]; Tan Boon
Bee & Co., Inc. v. Jarencio, 163 SCRA 205 [1988].
21 Cease v. CA, 93 SCRA 483 [1979].
22 Arcilla v. CA, 215 SCRA 120 [1992]; Philippine Bank of
Communications v. CA, 195 SCRA 567 [1991].
23 Jacinto v. CA, 198 SCRA 211 [1991].
24 Villanueva v. Adre, 172 SCRA 876 [1989].

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344 SUPREME COURT REPORTS ANNOTATED

Reynoso IV vs. Court of Appeals

rate fiction applies only when such fiction is used to defeat

public 25convenience, justify wrong, protect fraud or defend
crime.
We stated in Tomas Lao Construction v. National Labor
26
Relations Commission, that the legal fiction of a
corporation being a judicial entity with a distinct and
separate personality was envisaged for convenience and to
serve justice. Therefore, it should not be used as a
subterfuge to commit injustice and circumvent the law.
Precisely for the above reasons, we grant the instant
petition.
It is obvious that the use by CCC-QC of the same name
of Commercial Credit Corporation was intended to publicly
identify it as a component of the CCC group of companies
engaged in one and the same business, i.e., investment and
financing. Aside from CCCQuezon City, other franchise
companies were organized such as CCC-North Manila and
CCC-Cagayan Valley. The organization of subsidiary
corporations as what was done here is usually resorted to
for the aggrupation of capital, the ability to cover more

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SUPREME COURT REPORTS ANNOTATED VOLUME 345

territory and population, the decentralization of activities

best decentralized, and the securing of other legitimate
advantages. But when the mother corporation and its
subsidiary cease to act in good faith and honest business
judgment, when the corporate device is used by the parent
to avoid its liability for legitimate obligations of the
subsidiary, and when the corporate fiction is used to
perpetrate fraud or promote injustice, the law steps in to
remedy the problem. When that happens, the corporate
character is not necessarily abrogated. It continues for
legitimate objectives. However, it is pierced in order to
remedy injustice, such as that inflicted in this case.
Factually and legally, the CCC had dominant control of
the business operations of CCC-QC. The exclusive
management contract insured that CCC-QC would be
managed and controlled by CCC and would not deviate
from the commands of the mother corporation. In addition
to the exclusive management contract,

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25 Union Bank of the Philippines v. Court of Appeals, 290 SCRA 198

[1998].
26 278SCRA716 [1997].

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Reynoso IV vs. Court of Appeals

CCC appointed its own employee, petitioner, as the

resident manager of CCC-QC.
Petitioner’s designation as “resident manager” implies
that he was placed in CCC-QC by a superior authority. In
fact, even after his assignment to the subsidiary
corporation, petitioner continued to receive his salaries,
allowances, and benefits from CCC, which later became
respondent General Credit Corporation. Not only that.
Petitioner and the other permanent employees of CCC-QC
were qualified members and participants of the Employees
Pension Plan of CCC.
There are other indications in the record which attest to
the applicability of the identity rule in this case, namely:
the unity of interests, management, and control; the
transfer of funds to suit their individual corporate
conveniences; and the dominance of policy and practice by
the mother corporation insure that CCC-QC was an
instrumentality or agency of CCC.

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SUPREME COURT REPORTS ANNOTATED VOLUME 345

As petitioner stresses, both CCC and CCC-QC were

engaged in the same principal line of business involving a
single transaction process. Under their discounting
arrangements, CCC financed the operations of CCC-QC.
The subsidiary sold, discounted, or assigned its accounts
receivables to CCC.
The testimony of Joselito D. Liwanag, accountant and
auditor of CCC since 1971, shows the pervasive and
27
intensive auditing function of CCC over CCC-QC. The two
corporations also shared the same office space. CCC-QC
had no office of its own.
The complaint in Civil Case No. Q-30583, instituted by
CCC-QC, was even verified by the director-representative
of CCC. The lawyers who filed the complaint and amended
complaint were all inhouse lawyers of CCC.
The challenged decision of the Court of Appeals states
that CCC, now General Credit Corporation, is not a formal
party in the case. The reason for this is that the complaint
was filed by CCC-QC against petitioner. The choice of
parties was with CCC-QC. The judgment award in this
case arose from the counterclaim which petitioner set up
against CCC-QC.

_______________

27 TSN, March 24, 1982; Rollo, pp. 69-150.

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346 SUPREME COURT REPORTS ANNOTATED

Reynoso IV vs. Court of Appeals

The circumstances which led to the filing of the aforesaid

complaint are quite revealing. As narrated above, the
discounting agreements through which CCC controlled the
finances of its subordinates became unlawful when Central
Bank adopted the DOSRI prohibitions. Under this rule the
directors, officers, and stockholders are prohibited from
borrowing from their company. Instead of adhering to the
letter and spirit of the regulations by avoiding DOSRI
loans altogether, CCC used the corporate device to continue
the prohibited practice. CCC organized still another
corporation, the CCC-Equity Corporation. However, as a
wholly owned subsidiary, CCC-Equity was in fact only
another name for CCC. Key officials of CCC, including the
resident managers of subsidiary corporations, were
appointed to positions in CCC-Equity.
In order to circumvent the Central Bank’s disapproval of

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SUPREME COURT REPORTS ANNOTATED VOLUME 345

CCCQC’s mode of reducing its DOSRI lender accounts and

its directive to follow Central Bank requirements, resident
managers, including petitioner, were told to observe a
pseudo-compliance with the phasing out orders. For his
unwillingness to satisfactorily conform to these directives
and his reluctance to resort to illegal practices, petitioner
earned the ire of his employers. Eventually, his services
were terminated, and criminal and civil cases were filed
against him.
Petitioner issued twenty-three checks as money
placements with CCC-QC because of difficulties faced by
the firm in implementing the required phase-out program.
Funds from his current account in the Far East Bank and
Trust Company were transferred to CCCQC. These monies
were alleged in the criminal complaints against him as
having been stolen. Complaints for qualified theft and
estafa were brought by CCC-QC against petitioner. These
criminal cases were later dismissed. Similarly, the civil
complaint which was filed with the Court of First Instance
of Pasig and later transferred to the Regional Trial Court of
Quezon City was dismissed, but his counterclaims were
granted.
Faced with the financial obligations which CCC-QC had
to satisfy, the mother firm closed CCC-QC, in obvious fraud
of its creditors. CCC-QC, instead of opposing its closure,
cooperated in its own demise. Conveniently, CCC-QC
stated in its opposition to the mo-
347

VOL. 345, NOVEMBER 22, 2000 347

Reynoso IV vs. Court of Appeals

tion for alias writ of execution that all its properties and
assets had been transferred and taken over by CCC.
Under the foregoing circumstances, the contention of
respondent General Credit Corporation, the new name of
CCC, that the corporate fiction should be appreciated in its
favor is without merit.
Paraphrasing the28 ruling in Claparols v. Court of
Industrial Relations, reiterated in Concept 29Builders, Inc.
v. National Labor Relations Commission, it is very
obvious; that respondent “seeks the protective shield of a
corporate fiction whose veil the present case could, and
should, be pierced as it was deliberately and maliciously
designed to evade its financial obligation of its employees.”
If the corporate fiction is sustained, it becomes a handy
deception to avoid a judgment debt and work an injustice.

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SUPREME COURT REPORTS ANNOTATED VOLUME 345

The decision raised to us for review is an invitation to

multiplicity of litigation. As we stated 30 in Islamic
Directorate of the Phils. vs. Court of Appeals, the ends of
justice are not served if further litigation is encouraged
when the issue is determinable based on the records.
A court judgment becomes useless and ineffective if the
employer, in this case CCC as a mother corporation, is
placed beyond the legal reach of the judgment creditor who,
after protracted litigation, has been found entitled to
positive relief. Courts have been organised to put an end to
controversy. This purpose should not be negated by an
inapplicable and wrong use of the fiction of the corporate
veil.
WHEREFORE, the decision of the Court of Appeals is
hereby REVERSED and SET ASIDE. The injunction
against the holding of an auction sale for the execution of
the decision in Civil Case No. Q-30583 of properties of
General Credit Corporation, and the levying upon and
selling on execution of other properties of General Credit
Corporation, is LIFTED.
SO ORDERED.

     Davide, Jr. (C.J., Chairman), Puno, Kapunan and

Pardo, JJ., concur.

_______________

28 65 SCRA 613 11975].

29 257 SCRA 149 [1996].
30 272 SCRA 454 [1997].

348

348 SUPREME COURT REPORTS ANNOTATED

Veterans Federation of the Philippines vs. Court of Appeals

Judgment reversed and set aside.

Notes.—Basic in corporation law is the principle that a

corporation has a separate personality distinct from its
stockholders and from other corporations to which it may
be connected. (Francisco Motors Corporation vs. Court of
Appeals, 309 SCRA 72 [1999])
The rationale behind piercing a corporation’s identity in
a given case is to remove the barrier between the
corporation from the persons comprising it to thwart the
fraudulent and illegal schemes of those who use the
corporate personality as a shield for undertaking certain

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SUPREME COURT REPORTS ANNOTATED VOLUME 345

proscribed activities. (Ibid.)

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