"x x x.
Hence, when the directors, as in this case, are impleaded in a case against a corporation, alleging malice orbad faith on their part in directing the affairs of the corporation, complainants are effectively alleging that the directors and the corporation are not acting as separate entities. They are alleging that the acts or omissions by the corporation that violated their rights are also the directors’ acts or omissions.90 They are alleging that contracts executed by the corporation are contracts executed by the directors. Complainants effectively pray that the corporate veilbe pierced because the cause of action between the corporation and the directors is the same.
In that case, complainants have no choice but to institute only one proceeding against the parties.1âwphi1 Under the Rules of Court, filing of multiple suits for a single cause of action is prohibited. Institution of more than one suit for the same cause of action constitutes splitting the cause of action, which is a ground for the dismissal ofthe others. Thus, in Rule 2:
Section 3. One suit for a single cause of action. — A party may not institute more than one suit for a single cause of action. (3a)
Section 4. Splitting a single cause of action;effect of. — If two or more suits are instituted on the basis of the same cause of action, the filing of one or a judgment upon the merits in any one is available as a ground for the dismissal of the others. (4a)
It is because the personalities of petitioners and the corporation may later be found to be indistinct that we rule that petitioners may be compelled to submit to arbitration.
However, in ruling that petitioners may be compelled to submit to the arbitration proceedings, we are not overturning Heirs of Augusto Salas wherein this court affirmed the basic arbitration principle that only parties to an arbitration agreement may be compelled to submit to arbitration. In that case, this court recognizedthat persons other than the main party may be compelled to submit to arbitration, e.g., assignees and heirs. Assignees and heirs may be considered parties to an arbitration agreement entered into by their assignor because the assignor’s rights and obligations are transferred to them upon assignment. In other words, the assignor’s rights and obligations become their own rights and obligations. In the same way, the corporation’s obligations are treated as the representative’s obligations when the corporate veil is pierced. Moreover, in Heirs of Augusto Salas, this court affirmed its policy against multiplicity of suits and unnecessary delay. This court said that "to split the proceeding into arbitration for some parties and trial for other parties would "result in multiplicity of suits, duplicitous procedure and unnecessary delay."91 This court also intimated that the interest of justice would be best observed if it adjudicated rights in a single proceeding.92 While the facts of that case prompted this court to direct the trial court to proceed to determine the issues of thatcase, it did not prohibit courts from allowing the case to proceed to arbitration, when circumstances warrant.
Hence, the issue of whether the corporation’s acts in violation of complainant’s rights, and the incidental issue of whether piercing of the corporate veil is warranted, should be determined in a single proceeding. Such finding would determine if the corporation is merely an aggregation of persons whose liabilities must be treated as one with the corporation.
However, when the courts disregard the corporation’s distinct and separate personality from its directors or officers, the courts do not say that the corporation, in all instances and for all purposes, is the same as its directors, stockholders, officers, and agents. It does not result in an absolute confusion of personalities of the corporation and the persons composing or representing it. Courts merely discount the distinction and treat them as one, in relation to a specific act, in order to extend the terms of the contract and the liabilities for all damages to erring corporate officials who participated in the corporation’s illegal acts. This is done so that the legal fiction cannot be used to perpetrate illegalities and injustices.
Thus, in cases alleging solidary liability with the corporation or praying for the piercing of the corporate veil, parties who are normally treated as distinct individuals should be made to participate in the arbitration proceedings in order to determine ifsuch distinction should indeed be disregarded and, if so, to determine the extent of their liabilities.
x x x."
G.R. No. 174938, October 1, 2014.
GERARDO LANUZA, JR. AND ANTONIO O. OLBES, Petitioners, vs. BF CORPORATION, SHANGRI-LA PROPERTIES, INC., ALFREDO C. RAMOS, RUFO B. COLAYCO, MAXIMO G. LICAUCO III, AND BENJAMIN C. RAMOS, Respondents.