William C. Yao, Sr. v. People

WILLIAM C. YAO, SR., LUISA C. YAO, RICHARD C. YAO, WILLIAM C. YAO JR., and ROGER C. YAO, petitioners,
vs.
THE PEOPLE OF THE PHILIPPINES, PETRON CORPORATION and PILIPINAS SHELL PETROLEUM CORP., and its Principal, SHELL INT’L PETROLEUM CO. LTD., respondents.

                     
G.R. No. 168306
June 19, 2007

DOCTRINE:

A corporation is an entity separate and distinct from its stockholders, directors or officers. However, when the notion of legal entity is used to defeat public convenience, justify wrong, protect fraud, or defend crime, the law will regard the corporation as an association of persons, or in the case of two corporations merge them into one. Where the separate corporate entity is disregarded, the corporation will be treated merely as an association of persons and the stockholders or members will be considered as the corporation, that is, liability will attach personally or directly to the officers and stockholders.

FACTS:  

Petitioners are incorporators and officers of MASAGANA GAS CORPORATION (MASAGANA), an entity engaged in the refilling, sale and distribution of LPG products. Private respondents Petron Corporation (Petron) and Pilipinas Shell Petroleum Corporation (Pilipinas Shell) are two of the largest bulk suppliers and producers of LPG in the Philippines. Petron is the registered owner in the Philippines of the trademarks GASUL and GASUL cylinders used for its LPG products. It is the sole entity in the Philippines authorized to allow refillers and distributors to refill, use, sell, and distribute GASUL LPG containers, products and its trademarks. 

Pilipinas Shell, on the other hand, is the authorized user in the Philippines of the tradename, trademarks, symbols, or designs of its principal, Shell International Petroleum Company Limited (Shell International), including the marks SHELLANE and SHELL device in connection with the production, sale and distribution of SHELLANE LPGs.  It is the only corporation in the Philippines authorized to allow refillers and distributors to refill, use, sell and distribute SHELLANE LPG containers and products.

On 3 April 2003, (NBI) agent Ritche N. Oblanca (Oblanca) filed two applications for search warrant with the RTC, Cavite City, against petitioners and other occupants of the MASAGANA compound for alleged violation of Section 155, in relation to Section 170 of “The Intellectual Property Code of the Philippines.” The two applications for search warrant uniformly alleged that per information, belief, and personal verification of Oblanca, the petitioners are actually producing, selling, offering for sale and/or distributing LPG products using steel cylinders owned by, and bearing the tradenames, trademarks, and devices of Petron and Pilipinas Shell, without authority and in violation of the rights of the said entities.

MASAGANA, as third party claimant, filed with the RTC a Motion for the Return of Motor Compressor and LPG Refilling Machine. It claimed that it is the owner of the said motor compressor and LPG refilling machine; that these items were used in the operation of its legitimate business; and that their seizure will jeopardize its business interests.

RTC resolved that MASAGANA cannot be considered a third party claimant whose rights were violated as a result of the seizure since the evidence disclosed that petitioners are stockholders of MASAGANA and that they conduct their business through the same juridical entity.

CA affirmed RTC’s decision


Issue:  

Whether or not the CA erred in ruling that the complaint is directed against MASAGANA gas corporation, acting through its officers and directors, hence MASAGANA gas corporation may not be considered as third party claimant whose rights were violated as a result of the seizure.

Held:  

No. It is an elementary and fundamental principle of corporation law that a corporation is an entity separate and distinct from its stockholders, directors or officers. However, when the notion of legal entity is used to defeat public convenience, justify wrong, protect fraud, or defend crime, the law will regard the corporation as an association of persons, or in the case of two corporations merge them into one. In other words, the law will not recognize the separate corporate existence if the corporation is being used pursuant to the foregoing unlawful objectives.

This non-recognition is sometimes referred to as the doctrine of piercing the veil of corporate entity or disregarding the fiction of corporate entity. Where the separate corporate entity is disregarded, the corporation will be treated merely as an association of persons and the stockholders or members will be considered as the corporation, that is, liability will attach personally or directly to the officers and stockholders.

As we now find, the petitioners, as directors/officers of MASAGANA, are utilizing the latter in violating the intellectual property rights of Petron and Pilipinas Shell. Thus, petitioners collectively and MASAGANA should be considered as one and the same person for liability purposes. Consequently, MASAGANA’s third party claim serves no refuge for petitioners. The law does not require that the property to be seized should be owned by the person against whom the search warrants is directed. Ownership, therefore, is of no consequence, and it is sufficient that the person against whom the warrant is directed has control or possession of the property sought to be seized. 

Hence, even if, as petitioners claimed, the properties seized belong to MASAGANA as a separate entity, their seizure pursuant to the search warrants is still valid.

Further, it is apparent that the motor compressor, LPG refilling machine and the GASUL and SHELL LPG cylinders seized were the corpusdelicti, the body or substance of the crime, or the evidence of the commission of trademark infringement. These were the very instruments used or intended to be used by the petitioners in trademark infringement. It is possible that, if returned to MASAGANA, these items will be used again in violating the intellectual property rights of Petron and Pilipinas Shell.