FACTS:

Respondent iBank, granted loans to Hammer Garments Corp., for the total amount of P24,938,898.08. The loans were secured by a P 9 Million-Peso Real Estate Mortgage executed by Goldkey over several of its properties and a P 25 Million-Peso Surety Agreement signed by Chua, President and General Manager of Hammer and his wife, Fe Tan Uy.

Hammer defaulted, prompting iBank to foreclose on Goldkey’s third-party Real Estate Mortgage. The mortgaged properties were sold for P 12 million during the foreclosure sale, leaving an unpaid balance of P 13.4M. For failure of Hammer to pay the deficiency, iBank filed a Complaint for sum of money on against Hammer, Chua, Uy, and Goldkey.

The RTC ruled in favor of iBank. The RTC concluded that Goldkey and Hammer were one and the same entity. When Chua absconded, both Hammer and Goldkey ceased to operate. As such, the piercing of the veil of corporate fiction was warranted. Uy was found liable to iBank together with Chua, Hammer and Goldkey for the deficiency of P13.4M.

On appeal, the CA affirmed the findings of the RTC.

Hence, these petitions filed separately by the heirs of Uy and Goldkey.

ISSUE:

Whether or not Goldkey can be held liable for the obligation of Hammer for being a mere alter ego of the latter.

RULING:

Under a variation of the doctrine of piercing the veil of corporate fiction, when two business enterprises are owned, conducted and controlled by the same parties, both law and equity will, when necessary to protect the rights of third parties, disregard the legal fiction that two corporations are distinct entities and treat them as identical or one and the same.

While the conditions for the disregard of the juridical entity may vary, the following are some probative factors of identity that will justify the application of the doctrine of piercing the corporate veil, as laid down in Concept Builders, Inc. v NLRC:

(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.

These factors are unquestionably present in the case of Goldkey and Hammer, as both corporations are family corporations of defendants Chua and his wife Uy. The other incorporators and shareholders of the two corporations are the brother and sister of Chua and the sister of Uy, and the daughter of Chua and Uy.

Also, Hammer and Goldkey share the same office and practically transact their business from the same place.

Finally, the assets of Goldkey and Hammer are co-mingled.

Based on the foregoing findings of the RTC, it was apparent that Goldkey was merely an adjunct of Hammer and, as such, the legal fiction that it has a separate personality from that of Hammer should be brushed aside as they are, undeniably, one and the same.