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Ramoso vs. CA • Commercial Credit Corporation was

registered with SEC as a generalfnancing and investment corporation.CCC made proposals to several investors

or the organization o ranchisecompanies in di erent localities.

•

Petitioners herein invested and boughtmajority shares o stoc s! while CCCretained minority holdings. "anagementcontracts were e#ecuted between each

ranchise company and CCC.• $n %&'(! CCC attempted to obtain a

)uasi*ban ing license rom Central +an o the Philippines. +ut there was ahindrance because Section %,- o C+/s0"anual o 1egulations or +an s and2ther 3inancial $ntermediaries!0 states4

• Sec. 1326. General Policy. Dealings of a

bank with any of its directors, o icers or stockholders and their related interestsshould be in the regular course of business and u on ter!s not less

fa"orable to the bank than those o eredto others. #$! hasis su lied%

• 5he above 62S1$ regulation and setguidelines are entitled to ma e sure thatlendings by ban s or other fnancialinstitutions to its own directors! o icers!stoc holders or related interests areabove board. $n view o said hindrance!what CCC did was divest itsel o itsshareholdings in the ranchisecompanies. $t incorporated CCC E)uityto ta e over the administration o the

ranchise companies under newmanagement contracts. $n themeantime! CCC continued providing adiscounting line or receivables o the

ranchise companies through CCCE)uity. 5herea ter! CCC changed itsname to 7eneral Credit Corporation87CC9.

• 5he companies/ operations were oncourse until %&:%! when adverse mediareports unraveled anomalies in thebusiness o 7CC. ;pon investigation!petitioners allegedly discovered thedissipation o the assets o theirrespective ranchise companies

• 2n 3ebruary -(! %&:(! petitioners fled asuit against 7CC! CCC E)uity and 13C.Petitioners prayed or 8%9 receivership!

8-9 an order directing 7CC and CCCE)uity solidarily to pay petitioners anddepositors or the losses they sustained!and 8,9 nullifcation o the agreementbetween 7CC and 13C.

• 2n 3ebruary -,! %&&

veil0 o 7CC! CCC E)uity! and theranchise companies. =e later declared

that 7CC was not liable to individualpetitioners or the losses! since asinvestors they assumed the ris o theirrespective investments. 5he ranchisecompanies and the individual petitionerswere held not liable to 7CC or the badaccounts incurred by the latter throughthe discounting process

• the SEC reversed the ruling o itshearing o icer

Issue:>hether or not the veil o corporate fctionbe pircedRuling:

• >here one corporation is so organizedand controlled and its a airs areconducted so that it is! in act! a mereinstrumentality or adjunct o the other!the fction o the corporate entity o theinstrumentality may be disregarded...?5@he control and breach o duty mustpro#imately cause the injury or unjust

loss or which the complaint is made.

• $n any given case! e#cept e#pressagency! estoppel! or direct tort! threeelements must be proved4

• Control! not mere majority or completestoc control! but complete domination!not only o fnances but o policy andbusiness practice in respect to thetransaction attac ed so that thecorporate entity as to this transactionhad at the time no separate mind! will ore#istence o its ownA

• Such control must have been used bythe de endant to commit raud or wrong!to perpetrate the violation o thestatutory or other positive legal duty! ordishonest and unjust act incontravention o plainti /s legal rightsAand

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• the a oresaid control and breach o dutymust pro#imately cause the injury orunjust loss complained o .

• 5he absence o any one o theseelements prevents Bpiercing thecorporate veil.0

• 5he second element re)uired or the

application o the instrumentality rule isnot present in this case. ;pon closescrutiny o the various testamentary anddocumentary evidence presented duringtrial! it may be observed thatpetitioner/s claim o dissipation o assetsand resources belonging to the ranchisecompanies has not been reasonablysupported by said evidence at hand withthe Commission. $n act! the disputeddecision o the hearing o icer dealtmainly with the aspect o control

e#ercised by 7CC over the ranchisecompanies without a concrete fnding o raud on the part o the ormer to the

prejudice o individual petitioners/interests. s previously discussed! merecontrol on the part o 7CC through CCCE)uity over the operations and businesspolicies o the ranchise companies doesnot necessarily warrant piercing the veilo corporate fction without proo o

raud• s a general rule! a corporation will be

loo ed upon as a legal entity! unless anduntil su icient reason to the contraryappears. >hen the notion o legal entityis used to de eat public convenience!

justi y wrong! protect raud! or de endcrime! the law will regard thecorporation as an association o persons.' lso! the corporate entity maybe disregarded in the interest o justice

in such cases as raud that may wor ine)uities among members o thecorporation internally! involving norights o the public or third persons. $nboth instances! there must have been

raud! and proo o it. 3or the separate juridical personality o a corporation tobe disregarded! the wrongdoing must beclearly and convincingly established.: $tcannot be presumed.&

• >e agree with the fndings o the SECconcurred in by the appellate court thatthere was no raud nor mismanagementin the control e#ercised by 7CC and byCCC E)uity! over the ranchisecompanies. >hether the e#istence o thecorporation should be pierced dependson )uestions o acts! appropriatelypleaded. "ere allegation that a

corporation is the alter ego o theindividual stoc holders is insu icient.5he presumption is that thestoc holders or o icers and thecorporation are distinct entities. 5heburden o proving otherwise is on theparty see ing to have the court piercethe veil o the corporate entity.%< $n this!petitioner ailed.

• s to SEC/s jurisdiction. s therespondent SEC notes in its comment!Bthe ranchised companies accounts

discounted by 7CC would arise even i there is no intra*corporate relationshipbetween the parties. $n other words! thecontroversy did not arise out o theparties/ relationships as stoc holders.5he Court agrees. 5his matter is betterle t to the regular courts in which theprivate respondents have fled suits toen orce the suretyship agreementsallegedly e#ecuted by the petitioners.0%,

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