Olongapo City v. Subic Water and Sewerage Co., Inc.

G.R. No. 171626, 6 August 2014

FACTS:

Petitioners seek to hold liable for its agreement with the Olongapo City Water District, the respondent who succeeded the latter’s operations. Respondent counters that it is a separate entity from its predecessor and that the same merely owned 10% of its stocks.

ISSUE:

the respondent be held liable?

RULING:

No. It may not.

Petitioner practically suggests that since Subic Water took over OCWD’s water operations in Olongapo City, it also acquired OCWD’s juridical personality, making the two entities one and the same.

This is an interpretation that we cannot make or adopt under the facts and the evidence of this case. Subic Water clearly demonstrated that it was a separate corporate entity from OCWD. OCWD is just a ten percent (10%) shareholder of Subic Water. As a mere shareholder, OCWD’s juridical personality cannot be equated nor confused with that of Subic Water.

It is basic in corporation law that a corporation is a juridical entity vested with a legal personality separate and distinct from those acting for and in its behalf and, in general, from the people comprising it. Under this corporate reality, Subic Water cannot be held liable for OCWD’s corporate obligations in the same manner that OCWD cannot be held liable for the obligations incurred by Subic Water as a separate entity.

The corporate veil should not and cannot be pierced unless it is clearly established that the separate and distinct personality of the corporation was used to justify a wrong, protect fraud, or perpetrate a deception.

In Concept Builders, Inc. v. NLRC, the Court enumerated the possible probative factors of identity which could justify the application of the doctrine of piercing the corporate veil. These are:

(1) Stock ownership by one or common ownership of both corporations;
(2) Identity of directors and officers;
(3) The manner of keeping corporate books and records; and
(4) Methods of conducting the business.

The burden of proving the presence of any of these probative factors lies with the one alleging it. Unfortunately, petitioner simply claimed that Subic Water took over OCWD’s water operations in Olongapo City.

Apart from this allegation, petitioner failed to demonstrate any link to justify the construction that Subic Water and OCWD are one and the same.

*Case digest by Roger Angielo V. Atenta, JD-IV, Andres Bonifacio College, SY 2019-2020

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