Heirs of Durano Sr. vs Spouses Uy
344 SCRA 238 [GR No. 136456 October 24, 2000]
Facts: As far back as August 1970, a 128 hectare of land located in the barrios of Dunga and Cahumayhumayan, Danao City. On December 27, 1973, the late Congressman Ramon Durano Sr. together with his son Ramon Durano III, and the latter’s wide Elizabeth Hotchkins-Durano, instituted an action for damages against spouses Angeles Sepulveda Uy and Emigdio Beng Sing Uy, Spouses Faustino Alatan and Valeriana Garro, Spouses Rufino Lavador and Aurelia Mata, Silvestre Ramos, Hermogenes Tito, Teotimo Gonzales, Primitiva Garro, Julian Garro, Ismael Garro, Bienvido Castro, Glicerio Alcala, Felemon Lavador, Candelario Lumantao, Garino Quimbo, Justino Tito, Marcelino Gonzales, Salvador Duyday, Venancia Repaso, Leodegracia Gonzales, Jose dela Calzada, Restituta Gonzales, and Cosme Ramos before branch XVII of the then Court of First Instance of Cebu, Danao City.. Herein respondents are the possessors of the subject parcel of land which they are cultivating, it was used to be owned by CEPCO who later sold the same to Durano & Co. On September 15, 1990, Durano & Co sold the disputed property to petitioner Ramon Durano III, who procured the registration of these lands in his name under TCT no. T-103 and T-104. The different parts of the entire land was bulldozed by the petitioner’s company resulting to the destruction of plants and other products that were placed by the respondents. Hence, a claim for damages was lodged against herein petitioner. The respondents presented tax declaration covering the different areas of the parcel of land that is titled in each of them as proof that they are entitled for the said damages.
Issue: Whether or not the doctrine of piercing the veil of corporate entity can be applied in order to make Durano & Co liable for damages.
Held: Yes. The court of appeals applied the well-recognized principle of piercing the corporate veil, i.e. the law will regard the act of the corporation as the ac of its individual stockholders, when it is shown that the corporation was used merely as an alter ego by those persons in the commission of fraud or other illegal acts.
That the test in determining the applicability of the doctrine of piercing the veil of corporate fiction is as follows:
- Control, not mere majority or complete stock control, but complete domination, not only of finances but of policy and business practice in respect to the transaction attacked so that the corporate entity as to this transaction had at the time no separate mind, will or existence of its own.
- Such control must, have been used by the defendant to commit fraud or wrong, to perpetrate the violation of statutory or other positive legal duty, on dishonest and unjust acts in contravention of plaintiff’s legal right; and
- The aforesaid control and breach of duty must proximately cause the injury or unjust loss complained of.
The absence of any one of these elements prevents the piercing the corporate veil. In applying the instrumentality or alter ego doctrine, the courts are concerned with reality not form, with how the corporation operated and the individual defendants relationship to that operation.