G.R. No. 161759, 2 July 2014


Union Refinery Corporation (URC) was established under the Corporation Code of the Philippines. In the course of its business undertakings, URC imported oil products into the country.

Oilink was incorporated for the primary purpose of manufacturing, importing, exporting, buying, selling or dealing in oil and gas, and their refinements and by-products at wholesale and retail of petroleum. URC and Oilink had interlocking directors when Oilink started its business.

In applying for and in expediting the transfer of the operator’s name for the Customs Bonded Warehouse thenoperated by URC, Esther Magleo, the Vice-President and General Manager of URC, sent a letter to manifest that URC and Oilink had the same Board of Directors and that Oilink was 100% owned by URC.

A formal demand requiring URC to pay the taxes and duties on its oil imports and to pay for the Value-Added Taxes (VAT), special duties and excise taxes were given. URC, challenged the demands made.

Customs Commissioner formally directed that URC pay URC’s special duties, VAT and Excise Taxes that it had failed to pay as well as other deficiency taxes. Magleo, in behalf of URC, denied its liability,and proposed for a compromise. The Commissioner responded by rejecting Magleo’s proposal, and directed URC to pay its due.

Manuel Co, URC’s President, conveyed URC’s willingness to pay, of which the initial amount would be taken from the collectibles of Oilink from the National Power Corporation, and the balance to be paid in monthly installments over a period ofthree years to be secured with corresponding post-dated checks and its future available tax credits.

Customs made a final demand upon URC and Oilink. Oilink formally protested the assessment on the ground that it was not the party liable for the assessed deficiency taxes. Oilink appealed to the CTA, seeking the nullification of the assessment. The CTA rendered its decision declaring as null and void the assessment of the Commissioner of Customs. Aggrieved, the Commissioner of Customs brought a petition for review in the CA alleging that the CTA gravely erred in holding that the Commissioner of Customs could not pierce the veil of corporate fiction. The CA ruled in favor of the respondents. Thus, this instant petition.


Whether or not the Commissioner of Customs could lawfully pierce the veil of corporate fiction in order to treat Oilink as the mere alter ego of URC.


NO, there was no ground to pierce the veil of corporate existence.

A corporation, upon coming into existence, is invested by law with a personality separate and distinct from those of the persons composing it as well as from any other legal entity to which it may be related. For this reason, a stockholder is generally not made to answer for the acts or liabilities of the corporation, and viceversa.

The separate and distinct personality of the corporation is, however, a mere fiction established by law for convenience and to promote the ends of justice. It may not be used or invoked for ends that subvert the policy and purpose behind its establishment, or intended by law to which the corporation owes its being.

This is true particularly when the fiction is used to defeat public convenience, to justify wrong, to protect fraud, to defend crime, to confuse legitimate legal or judicial issues, to perpetrate deception or otherwise to circumvent the law.

This is likewise true where the corporate entity is being used as an alter ego, adjunct, or business conduit for the sole benefit of the stockholders or of another corporate entity. In such instances, the veil of corporate entity will be pierced or disregarded with reference to the particular transaction involved.

In Philippine National Bank v. Ritratto Group, Inc.,the Court has outlined the following circumstances thatare useful in the determination of whether a subsidiary is a mere instrumentality of the parent-corporation, viz:

1. Control, not mere majority or complete control, but complete domination, not only of finances butof policy and business practice in respect to the transaction attacked so that the corporate entity as to this transaction had at the time no separatemind, will or existence of its own;

2. Such control must have been used by the defendant to commit fraud or wrong, to perpetrate the violation of a statutory or other positive legal duty, or dishonest and, unjust act incontravention of plaintiff’s legal rights; and

3. The aforesaid control and breach of duty must proximately cause the injury or unjust loss complained of.
In applying the “instrumentality” or”alter ego” doctrine, the courts are concerned with reality, not form, and with how the corporation operated and the individual defendant’s relationship to the operation.Consequently, the absence of any one of the foregoing elements disauthorizes the piercing of the corporate veil.

Indeed, the doctrine of piercing the corporate veil has no application here because the Commissioner of Customs did not establish that Oilink had been set up to avoid the payment of taxes or duties, or for purposes that would defeat public convenience, justify wrong, protect fraud, defend crime, confuse legitimate legal or judicial issues, perpetrate deception or otherwise circumvent the law.

It is also noteworthy that from the outset the Commissioner of Customs sought to collect the deficiency taxes and duties from URC, and that it was only on July 2, 1999 when the Commissioner of Customs sent the demand letter to both URC and Oilink. That was revealing, because the failure of the Commissioner of Customs to pursue the remedies against Oilink from the outset manifested that its belated pursuit of Oilink was only an afterthought.

*Case digest by Doreena Pauline V. Aranal, JD – 4, Andres Bonifacio College, SY 2019 – 2020