• ‘Pierce veil of corporate entity’ if company is evading its liability

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    Persida Acosta

    Dear PAO,
    I filed a complaint for illegal dismissal against W Security Agency before the National Labor Relations Commission. I won the case and upon execution of the decision, the Sheriff informed me that he cannot execute it because the agency had already been dissolved before the decision came out. I pointed to the Sheriff the pieces of property of the security agency in order to be levied but the Sheriff said he cannot attach these assets because they are owned by S Security Agency, a different agency. This is not true because for ten years that I have been employed by W Security Agency, I have known that these two agencies are owned by the same person and have the same set of officers. What is my remedy in order to make my security agency liable?
    Athelstan

    Dear Athelstan,
    There is a principle in law called “piercing the veil of corporate entity” that can be availed of in your situation. In Sarona vs. NLRC (G.R. No. 185280, January 18, 2012; ponente, Associate Justice Bienvenido Reyes), theSupreme Court stated:

    “The doctrine of piercing the corporate veil applies only in three (3) basic areas, namely: 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.”

    The Supreme Court went on further and said, “As ruled in Prince Transport, Inc., et al. v. Garcia, et al., it is the act of hiding behind the separate and distinct personalities of juridical entities to perpetuate fraud, commit illegal acts, evade one’s obligations that the equitable piercing doctrine was formulated to address and prevent:
    “A settled formulation of the doctrine of piercing the corporate veil is that when two 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 these two entities are distinct and treat them as identical or as one and the same. In the present case, it may be true that Lubas is a single proprietorship and not a corporation. However, petitioners’ attempt to isolate themselves from and hide behind the supposed separate and distinct personality of Lubas so as to evade their liabilities is precisely what the classical doctrine of piercing the veil of corporate entity seeks to prevent and remedy.”

    In your case, the distinct personality of your former security agency (W Security Agency) can be pierced because it is being used in order to evade liability. Your former security agency, and the other security agency (S Security Agency), which you mentioned in your letter, are owned by the same person and managed by the same set of officers. These are indications that they are the same; hence, S Security Agency may be made to pay the liability of W Security Agency.

    We hope that we were able to answer your queries. Please be reminded that this advice is based solely on the facts you have narrated and our appreciation of the same. Our opinion may vary when other facts are changed or elaborated.

    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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