Almirante: Piercing corporate veil

Dominador A. Almirante
·4 min read

Petitioners Maria Lea Jane I. Gesolgon and Marie Stephanie N. Santos alleged that they were hired on March 3, 2008 and April 5, 2008 respectively, by respondent Maciej Mikrut, the chief executive officer of both respondents CyberOne AU and CyberOne PH, as part-time home-based remote customer service representatives of CyberOne Pty. Ltd. (CyberOne AU), an Australian company. Later, they became full-time and permanent employees of CyberOne AU and were eventually promoted as supervisors. Sometime in October 2009, Mikrut asked them to become dummy directors and/or incorporators of CyberOne PH to which they agreed. Consequently, they were promoted as managers with increased benefits. Their salary increases were made to appear as paid for by CyberOne PH.

On March 30, 2011, they were notified by CyberOne AU of their dismissal through furlough notifications placing their employment on hold in view of the company’s cost-cutting measure. Thus, they filed a complaint against respondents Cyberone PH Inc., Maciej Mikrut and CyberOne AU for illegal dismissal and money claims.

The Court of Appeals (CA) reversed the ruling of the National Labor Relations Commission which applied the doctrine of piercing the corporate veils of CyberOne AU and CyberOne Ph.

Did the CA err?

Ruling: No.

Notably, CyberOne AU is a foreign corporation organized and existing under the laws of Australia and is not licensed to do business in the Philippines. CyberOne AU did not appoint and authorize respondents CyberOne PH, a domestic corporation, and Mikrut, the managing director of CyberOne AU and a stockholder of CyberOne PH, as its agents in the Philippines to act in its behalf. Also, it was not shown that CyberOne AU is doing business in the Philippines.

While it is true that CyberOne AU owns majority of the shares of CyberOne PH, this, nonetheless, does not warrant the conclusion that CyberOne PH is a mere conduit of CyberOne AU. The doctrine of piercing the corporate veil applies only in three basic instances, namely: (a) when the separate distinct corporate personality defeats public convenience, as when the corporate fiction is used as a vehicle for the evasion of an existing obligation; (b) in fraud cases, or when the corporate entity is used to justify a wrong, protect a fraud, or defend a crime; or (c) is used in alter ego cases, i.e., where a corporation is essentially 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 conducted as to make it merely an instrumentality, agency, conduit or adjunct of another corporation.

We find that the application of the doctrine of piercing the corporate veil is unwarranted in the present case. First, no evidence was presented to prove that CyberOne PH was organized for the purpose of defeating public convenience or evading an existing obligation. Second, petitioners failed to allege any fraudulent acts committed by CyberOne PH in order to justify a wrong, protect a fraud, or defend a crime. And lastly, the mere fact that CyberOne PH’s major stockholders are CyberOne AU and respondent Mikrut does not prove that CyberOne PH was organized and controlled and its affairs conducted in a manner that made it merely an instrumentality, agency, conduit or adjunct of CyberOne AU. In order to disregard the separate corporate personality of a corporation, the wrongdoing must be clearly and convincingly established.

Moreover, petitioners failed to prove that CyberOne AU and Mikrut, acting as the managing director of both corporations, had absolute control over CyberOne PH. Even granting that CyberOne AU and Mikrut exercised a certain degree of control over the finances, policies and practices of CyberOne PH, such control does not necessarily warrant piercing the veil of corporate fiction since there was not a single proof that CyberOne PH was formed to defraud petitioners or that CyberOne PH was guilty of bad faith or fraud.

Hence, the doctrine of piercing the corporate veil cannot be applied in the instant case. This means that CyberOne AU cannot be considered as doing business in the Philippines through its local subsidiary CyberOne PH. This means as well that CyberOne AU is to be classified as a non-resident corporation not doing business in the Philippines. (Maria Lea Jane I. Gesolgon and Marie Stephanie N. Santos vs. CyberOne PH., et al., G.R. 210741, Oct. 14, 2020).