Business corporation has distinct legal personality from its owners

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Persida Acosta

Dear PAO,
I won a labor case against the corporation I was previously employed with. My problem is that the sheriff assigned to the case told me that we could not go after the property of the owner of the corporation and that of his officials. He told me that we could only go after the property of the corporation because that was only what the court’s decision states. Is the sheriff correct?
Sincerely yours,
James

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Dear James,
For your information, a corporation has a juridical personality separate and distinct from its owners and officers.
The Honorable Supreme Court declared in Ever Electrical Manufacturing Inc. (Eemi) and Vicente Go v. Samahang Manggagawa ng Ever Electrical/ Namawu Local 224 (G.R. No. 194795 June 13, 2012; ponente: Associate Justice Jose Catral Mendoza) that “[a]s 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 a personality separate and distinct from those of the persons composing it as well as from that of any other legal entity to which it may be related. Mere ownership by a single stockholder or by another corporation of all or nearly all of the capital stock of a corporation is not of itself sufficient ground for disregarding the separate corporate personality.”

Hence, due to the distinct legal personality that the law has bestowed upon the corporation from its owners and officers, the latter could not be held liable for the liabilities of the former, and vice versa. This is called the veil of corporate fiction.

Nevertheless, in the aforementioned case, there are exceptions wherein the veil of corporate fiction may be disregarded or “pierced.” Such are when the corporation is being used to “1) defeat of public convenience as when the corporate fiction is used as a vehicle for the evasion of an existing obligation; 2) fraud cases or when the corporate entity is used to justify a wrong, protect fraud or defend a crime; or 3) alter ego cases, where a corporation is merely a farce since it is a mere alter ego or business conduit of a person, or where the corporation is so organized and controlled and its affairs are so conducted as to make it merely an instrumentality, agency, conduit or adjunct of another corporation. In the absence of malice, bad faith or a specific provision of law making a corporate officer liable, such corporate officer cannot be made personally liable for corporate liabilities.”

On that note, we would like to inform you that the facts you have narrated are insufficient to make a categorical conclusion as to whether there are grounds to pierce the veil of corporate fiction. Absent such instances, the veil of corporate fiction may not be disregarded or pierced.

Again, we find it necessary to mention that this opinion is solely based on the facts you have narrated and our appreciation of the same. The opinion may vary when the facts are changed or elaborated.
We hope that we were able to enlighten you on the matter.

Editor’s note: Dear PAO is a daily column of the Public Attorney’s Office. Questions for Chief Acosta may be sent to dearpao@manilatimes.net

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