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    Kukan International - Case Digest

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    anailabuca
    The Supreme Court ruled that the trial court and appellate court incorrectly applied the principle of piercing the corporate veil between Kukan, Inc. and Kukan International Corporation (KIC). KIC was not impleaded in the original civil case against Kukan, Inc. and entered only a special appearance to assert that it was a separate entity from Kukan, Inc. For the veil piercing doctrine to apply, it must be shown that the separate personalities of the two corporations were used to evade a legitimate commitment or perpetrate a wrongdoing. However, there was no evidence that Kukan, Inc.'s assets were transferred to KIC to avoid liability, or that KIC was a continuation of Kuk

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    Kukan International - Case Digest

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    anailabuca
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    The Supreme Court ruled that the trial court and appellate court incorrectly applied the principle of piercing the corporate veil between Kukan, Inc. and Kukan International Corporation (KIC). KIC was not impleaded in the original civil case against Kukan, Inc. and entered only a special appearance to assert that it was a separate entity from Kukan, Inc. For the veil piercing doctrine to apply, it must be shown that the separate personalities of the two corporations were used to evade a legitimate commitment or perpetrate a wrongdoing. However, there was no evidence that Kukan, Inc.'s assets were transferred to KIC to avoid liability, or that KIC was a continuation of Kuk

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    The Supreme Court ruled that the trial court and appellate court incorrectly applied the principle of piercing the corporate veil between Kukan, Inc. and Kukan International Corporation (KIC). KIC was not impleaded in the original civil case against Kukan, Inc. and entered only a special appearance to assert that it was a separate entity from Kukan, Inc. For the veil piercing doctrine to apply, it must be shown that the separate personalities of the two corporations were used to evade a legitimate commitment or perpetrate a wrongdoing. However, there was no evidence that Kukan, Inc.'s assets were transferred to KIC to avoid liability, or that KIC was a continuation of Kuk

    Copyright:

    © All Rights Reserved
    Download as ODT, PDF, TXT or read online from Scribd
    Download as odt, pdf, or txt
    2K views2 pages

    Kukan International - Case Digest

    Uploaded by

    anailabuca
    The Supreme Court ruled that the trial court and appellate court incorrectly applied the principle of piercing the corporate veil between Kukan, Inc. and Kukan International Corporation (KIC). KIC was not impleaded in the original civil case against Kukan, Inc. and entered only a special appearance to assert that it was a separate entity from Kukan, Inc. For the veil piercing doctrine to apply, it must be shown that the separate personalities of the two corporations were used to evade a legitimate commitment or perpetrate a wrongdoing. However, there was no evidence that Kukan, Inc.'s assets were transferred to KIC to avoid liability, or that KIC was a continuation of Kuk

    Copyright:

    © All Rights Reserved
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    Download as odt, pdf, or txt
    of 2

    KUKAN INTERNATIONAL CORPORATION VS. HON.

    AMOR REYES
    G.R. NO. 182729, SEPTEMBER 29, 2010
    FACTS:
    Private respondent Romeo M. Morales doing business under the name RM Morales Trophies
    and Plaques was awarded a P5 million contract for the supply and installation of signages in a
    building constructed in Makati sometime in March 1998. The contract price was later reduced to
    P3,388,502 because some items were deleted from the contract. Morales complied with his
    contractual obligations but he was paid only the amount of P1,976,371.07 leaving a balance of
    P1,412,130.93. He filed a case against Kukan, Inc., for sum of money with the RTC of Manila
    docketed as Civil Case No. 99-93173. Kukan Inc., stopped participating in the proceedings in
    November 2000, hence, it was declared in default and Morales presented his evidence ex-parte
    against petitioner.
    On November 28, 2002, the RTC rendered a decision in favor of Morales and against
    Kunkan, Inc. ordering the latter to pay the sum of P1,201,724.00 with legal interest of 12% per
    annum until fully paid; P50,000.00 as moral damages,P20,000.00 as attorney's fees and P7,960.06
    as litigation expenses. The counterclaimfiled by Kunkan, Inc. was dismissed. The decision became
    final and executory During the execution, the sheriff levied the personal properties found at the
    office of Kukan, Inc.. Claiming it owned the properties levied, Kukan International Corporation
    (KIC) fied an Affidavit of Third Party Claim. Morales filed an Omnibus Motion praying to apply
    the principle of piercing the veil of corporate entity. He alleged that Kankun, Inc. and KIC are one
    and the same corporation His Motion was denied. On Motion of Morales the presiding Judge of
    Branch 17 of RTC Manila inhibited himself from hearing the case. It was raffled to Branch 21
    which granted the Motion filed by Morales on March 12, 2007 and decreed that Kukan, Inc. and
    Kukan International Inc., as one and the same corporation; that the levy made on the properties of
    KIC is valid; and ordering Kunkan International Corp. and Michael Chan as jointly and severally
    liable to pay the award pursuant to the Decision dated November 28, 2002. KIC filed a Motion for
    Reconsideration which was denied.KIC brought the case to the Court of Appeals which rendered
    the Decision n January 23, 2008 denying KIC's petition. The CA also denied its Motion for
    Reconsideration in the Resolution dated June 7, 2007.
    Hence, this case.
    ISSUE/S: One of the issues raised is whether or not the trial court and the appellate court
    correctly applied the principle of piercing the veil of corporate entity.
    HELD: The Supreme Court ruled that the doctrine of piercing the veil of corporate entity finds no
    application in this case.
    According to the Supreme Court, the principle of piercing the veil of corporate entity and
    the resulting treatment of two related corporation as one and the same juridical person applies only
    to established liability and not to confer jurisdiction. In this case, the Supreme Court ruled that KIC
    was not made a party defendant in Civil Case No. 99-93173. It entered a special but not a voluntary
    appearance in the trial court to assert that it was a separate entity and has a separate legal
    personality from Kunkan, Inc. KIC was not impleaded nor served with summons. Hence, it could
    only assert its claim through the affidavits, comments and motions filed by special apperance before
    the RTC that it is a separate juridical entity.
    The Supreme stated that the doctrine of piercing the veil of corporate entity comes to play

    during the trial of the case after the court has already acquired jurisdiction over the corporation.
    To justify the piercing of the veil of corporate fiction, it must be shown by clear and
    convincing proof that the separate and distinct personality of the corporation was purposely
    employed to evade a legitimate and binding comittment and perpetuate a fraud or like a
    wrongdoings.
    In those instances when the Court pierced the veil of corporate fiction of two corporations,
    there was a confluence of the following factors:
    1.

    A first corporation is dissolved;

    2.
    The assets of the first corporation is transferred to a second corporation to avoid a financial
    liability of the first corporation; and
    3.
    Both corporations are owned and controlled by the same persons such that the second
    corporation should be considered as a continuation and successor of the first corporation.
    In this case, the second and third factors are conspicuously absent. There is, therefore, no
    compelling justification for disregarding the fiction of corporate entity separating Kukan, Inc. from
    KIC. In applying the principle, both the RTC and the CA miserably failed to identify the presence
    of the abovementioned factors.
    The High Court stated that neither should the level of paid-up capital of Kukan, Inc. upon its
    incorporation be viewed as a badge of fraud, for it is in compliance with Sec. 13 of the Corporation
    Code, which only requires a minimum paid-up capital of PhP 5,000.
    The suggestion that KIC is but a continuation and successor of Kukan, Inc., owned and
    controlled as they are by the same stockholders, stands without factual basis. The fact that Michael
    Chan, a.k.a. Chan Kai Kit, owns 40% of the outstanding capital stock of both corporations standing
    alone, is insufficient to establish identity. There must be at least a substantial identity of
    stockholders for both corporations in order to consider this factor to be constitutive of corporate
    identity.
    Petition granted.

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