Kukan International Corporation (KIC)
v. Hon. Amor Reyes (RTC Manila Br. 21)
& Romeo Morales
G.R. No. 182729
Velasco, Jr., J. 29 September 2010
Presenter: Julian Jerome E. Dumpit
FALLO
• WHEREFORE, the petition is hereby
GRANTED. The CA’s January 23, 2008
Decision and April 16, 2008 Resolution in
CA-G.R. SP No. 100152 are hereby
REVERSED and SET ASIDE. The levy placed
upon the personal properties of Kukan
International Corporation is hereby ordered
lifted and the personal properties ordered
returned to Kukan International
Corporation. The RTC of Manila, Branch 21 is
hereby directed to execute the RTC Decision
dated November 28, 2002 against Kukan,
FACTS
1.In 1998, Kukan, Inc. contracted RM Morales to install signages on
a building being constructed in Makati City. After completing the
work, and despite repeated demands, Kukan, Inc refused to pay
the balance for the contract price. Prompting Morales to file a
money claim before the RTC.
2.After filing an Answer, Kukan, Inc. no longer participated in the
proceedings, trial ensued with evidence presented ex parte.
Judgment was rendered in favor of RM Morales.
3.After becoming final & executory and upon issuance of a writ of
execution, the Sheriff levied upon the properties of Kukan
International Corporation (KIC) in Makati to satisfy the judgment.
Kukan International filed a third-party claim, stating that it was
not the judgment debtor as it was different from Kukan, Inc.
FACTS
4. “In reaction to the third party claim, Morales interposed an
Omnibus Motion dated April 30, 2003. In it, Morales prayed,
applying the principle of piercing the veil of corporate fiction,
that an order be issued for the satisfaction of the judgment debt
of Kukan, Inc. with the properties under the name or in the
possession of KIC, it being alleged that both corporations are
but one and the same entity. KIC opposed Morales’ motion. By
Order of May 29, 20039 as reiterated in a subsequent order, the
court denied the omnibus motion. In a bid to establish the link
between KIC and Kukan, Inc., and thus determine the true
relationship between the two, Morales filed a Motion for
Examination of Judgment Debtors dated May 4, 2005. In this
motion Morales sought that subpoenae be issued against the
primary stockholders of Kukan, Inc., among them Michael Chan,
a.k.a. Chan Kai Kit.”
5. The RTC granted the motion to pierce the corporate veil and
ordered Michael Chan and KIC jointly and severally liable to pay
RULING & RELEVANT DOCTRINE
• Doctrine of Piercing the Veil of Corporate Fiction – “[W]hen its corporate
legal entity is used as a cloak for fraud or illegality. This is the doctrine of
piercing the veil of corporate fiction. The doctrine applies only when such
corporate fiction is used to defeat public convenience, justify wrong,
protect fraud, or defend crime, or when it is made as a shield to confuse
the legitimate issues, or where a corporation is the 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.” To
disregard the separate juridical personality of a corporation, the
wrongdoing must be established clearly and convincingly. It cannot be
presumed.
• The Court ruled in this case that the piercing of the corporate veil did not
apply to KIC in this case, absent clear and convincing evidence to establish
the acts aforestated, it cannot apply. Moreover, KIC was not impleaded as
a party to the case. Jurisdiction was not acquired over the person of KIC.
RULING & RELEVANT DOCTRINE
• To pierce the veil of corporate fiction, due process must be observed. The
Court stated that: “(1) the court must first acquire jurisdiction over the
corporation or corporations involved before its or their separate
personalities are disregarded; and (2) the doctrine of piercing the veil of
corporate entity can only be raised during a full-blown trial over a cause of
action duly commenced involving parties duly brought under the authority
of the court by way of service of summons or what passes as such
service.”
RATIONALE
• The Supreme Court stated that the evidence was
insufficient to warrant the piercing of the corporate veil, it
must be proved by clear and convincing evidence.
Crucially, the third party claim by KIC was not tantamount
to a voluntary appearance based on jurisprudence. As
such, the Court did not validly acquire jurisdiction over KIC
to be able to subject it to a proper hearing to see if the
corporate veil must be pierced.
CRITIQUE
• In contrast to I/AME v. Litton, I agree with the decision of
the Supreme Court in this case. Following the principle
that the piercing doctrine must not be used “cavalierly”
means that Courts must be circumspect in piercing the
veil of corporate fiction. As such, due process must always
be followed. Jurisdiction must be acquired over the person
of the corporation and they must be entitled to a full-
blown trial to determine whether the veil should be
pierced.
