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THE MANILA HOTEL CORP Vs NLRC

MHICL is a Hong Kong corporation that trained staff for the Palace Hotel in Beijing under a management agreement. An employee of the Palace Hotel, respondent Santos, was terminated and filed a complaint against MHICL and its incorporator MHC for illegal dismissal. The court ruled that MHC could not be held liable for damages simply due to owning 50% of MHICL's capital stock. Piercing the corporate veil requires that the corporation be used as an alter ego or business conduit and that control was used to commit fraud or wrong, which was not proven in this case. As separate legal entities, there was insufficient evidence to pierce the veil between MHICL and MHC.

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62 views1 page

THE MANILA HOTEL CORP Vs NLRC

MHICL is a Hong Kong corporation that trained staff for the Palace Hotel in Beijing under a management agreement. An employee of the Palace Hotel, respondent Santos, was terminated and filed a complaint against MHICL and its incorporator MHC for illegal dismissal. The court ruled that MHC could not be held liable for damages simply due to owning 50% of MHICL's capital stock. Piercing the corporate veil requires that the corporation be used as an alter ego or business conduit and that control was used to commit fraud or wrong, which was not proven in this case. As separate legal entities, there was insufficient evidence to pierce the veil between MHICL and MHC.

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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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THE MANILA HOTEL CORP. AND MANILA HOTEL INTL. LTD. vs.

NATIONAL
LABOR RELATIONS COMMISSION, ARBITER CEFERINA J.DIOSANA AND
MARCELO G. SANTOS
MHICL is a corporation duly organized and existing under the laws of HongKong. MHC is an
“incorporator” of MHICL, owning 50% of its capital stock. By virtue of a “management
agreement” with the Palace Hotel (Wang Fu CompanyLimited), MHICL trained the personnel
and staff of the Palace Hotel at Beijing,China.Respondent Santos accepted an employment offer
from Palace Hotel. OnNovember 5, 1988, respondent Santos left for Beijing, China. He started to
work atthe Palace Hotel. A year later he received a letter stating that his employment is being
terminated due to business reverses brought about by the political upheavalin China. On
February 20, 1990, respondent Santos filed a complaint for illegaldismissal.

ISSUE: Whether or not the doctrine of piercing the corporate veil is available to make MHC
liable for damages.

RULING: NO. MHC, as a separate and distinct juridical entity cannot be held liable. True,MHC
is an incorporator of MHICL and owns fifty percent (50%) of its capital stock.However, this is
not enough to pierce the veil of corporate fiction between MHICLand MHC.Piercing the veil of
corporate entity is an equitable remedy. It is resorted to when the corporate fiction is used to
defeat public convenience, justify wrong,protect fraud or defend a crime. It is done only when a
corporation is a mere alterego or business conduit of a person or another corporation.In Traders
Royal Bank v. Court of Appeals, the court held that “the mereownership by a single stockholder
or by another corporation of all or nearly all ofthe capital stock of a corporation is not of itself a
sufficient reason for disregardingthe fiction of separate corporate personalities.” The tests in
determining whether the corporate veil may be pierced are: First,the defendant must have control
or complete domination of the other corporation’sfinances, policy and business practices with
regard to the transaction attacked. There must be proof that the other corporation had no separate
mind, will orexistence with respect the act complained of. Second, control must be used by the
defendant to commit fraud or wrong. Third, the aforesaid control or breach of dutymust be the
proximate cause of the injury or loss complained of. The absence ofany of the elements prevents
the piercing of the corporate veil.It is basic that a corporation has a personality separate and
distinct from those composing it as well as from that of any other legal entity to which it may
berelated. Clear and convincing evidence is needed to pierce the veil of corporatefiction. In this
case, the court found no evidence to show that MHICL and MHC areone and the same entity.

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