G.R. No. 167530 , 167561, 167603; March 13, 2013
PHILIPPINE NATIONAL BANK and ASSET PRIVATIZATION TRUST and DEVELOPMENT BANK OF THE PHILIPPINES, Petitioners, vs. HYDRO RESOURCES CONTRACTORS CORPORATION, Respondent.

FACTS

Sometime in 1984, petitioners DBP and PNB foreclosed on mortgages of Marinduque Mining and Industrial Corporation (MMIC) properties. They acquired substantially all of MMIC’s assets and organized Nonoc Mining and Industrial Corporation (NMIC) to resume operations. DBP owned 57% and PNB owned 43% of NMIC’s shares, except for five qualifying shares. As of September 1984, NMIC’s Board of Directors were all from DBP or PNB. In 1985, NMIC engaged Hercon, Inc. for a Mine Stripping and Road Construction Program for a total contract price of ₱35,770,120. After computation, an unpaid balance of ₱8,370,934.74 remained. Hercon, Inc. made demands and, after no payment, filed a complaint for sum of money against NMIC, DBP, and PNB in the RTC Makati (Civil Case No. 15375). Hercon, Inc. was later acquired by respondent Hydro Resources Contractors Corporation (HRCC) in a merger, leading to an amendment of the complaint to substitute HRCC. Subsequently, President Corazon C. Aquino issued Proclamation No. 50 creating the Asset Privatization Trust (APT). DBP and PNB executed deeds of transfer conveying their stakes in NMIC to the National Government, which then transferred them to APT under a Trust Agreement. The complaint was amended a second time to implead APT. NMIC, in its answer, claimed HRCC had no cause of action, that the contract was entered into without authority, and that it was disadvantageous to the government, while also making counterclaims. DBP and PNB, in their answers, invoked lack of privity, the separate juridical personality of NMIC, and raised defenses of estoppel and laches, with counterclaims. APT defended on grounds of lack of cause of action and lack of privity.

ISSUE

Whether the corporate veil of NMIC should be pierced to hold petitioners DBP, PNB, and APT solidarily liable with NMIC for the unpaid obligation to HRCC.

RULING

Yes. The Supreme Court affirmed the Court of Appeals’ decision which modified the RTC’s ruling. The RTC had pierced NMIC’s corporate veil, holding DBP and PNB solidarily liable with NMIC, but dismissed the complaint against APT while directing it, as trustee, to ensure compliance. The Court of Appeals modified this by holding APT solidarily liable as well. The Supreme Court found sufficient grounds to pierce the corporate fiction. NMIC was owned almost entirely by DBP (57%) and PNB (43%), with its board composed entirely of directors from these banks. NMIC was a mere adjunct, business conduit, or alter ego of DBP and PNB. The Court emphasized that allowing NMIC to be used to secure contracts and then to evade payment of a just debt would be unjust. Therefore, DBP and PNB were held solidarily liable with NMIC. Furthermore, APT, as the successor-in-interest of DBP and PNB with respect to their stakes in NMIC, assumed their liabilities and was likewise held solidarily liable. The award in favor of HRCC for ₱8,370,934.74 plus legal interest was upheld.