SCENARIO C:

The plaintiff team argues the following facts are enough to warrant piercing
the veil: First, that Wapera corporation and M-ore corporation are both
owned by Wal Apera; Second, that Wapera corporation being the parent
company of M-ore corporation is insolvent.

In answer, Defense team asserts that the court cannot pierce the veil of
corporate fiction of M-ore Corp for: First, Wapera Corporation as the
judgment debtor of Alpha and M-ore Corp has separate and distinct
personalities. Second: That the insolvency of Wapera Corporation cannot
justify the piercing of the corporate veil and go against M-ore corporation.

DECISION:

The plaintiff’s claim is not meritorious.

The plaintiff team asserts that corporate veil may be pierced in favor of
Alpha. The plaintiff merely cited the case of General Corp V. Alsons
Development and Investment Corporation which recognizes the application of
the doctrine of piercing the corporate veil to protect the right of third parties,
but they failed to alleged that the same uncontroverted facts are shown in the
case of Wapera Corporation in order for piercing the veil to apply.

The plaintiff team explained that the corporate veil must be lifted only if it
was used to shield fraud, defend crime, justify a wrong, defeat public
convenience, insulate bad faith, or perpetuate injustice. Nevertheless, control
and ownership of all assets of another corporation is not an indication of a
fraudulent intent to evade labor claims and liabilities. So piercing the veil
cannot be warranted in the case of Wapera corporation.

In order that the corporate veil may be pierced in favor of Alpha, the plaintiff
team must present clear and convincing evidence to prove that Wapera
corporation is guilty of fraud or gross negligence amounting to bad faith to
evade its obligation to Alpha.

The plaintiff failed to prove that the corporate fiction is being used as a
means to commit fraud on the part of the Stockholders of Wapera
Corporation. Also, the plaintiff’s claim of piercing the veil making M-ore
corporation, the subsidiary corporation liable for the obligation of its parent
company, the Wapera Corporation which is insolvent does not justify piercing
the veil. The plaintiff should have follow the application of totality of
circumstance test to see if piercing the veil is warranted and should realize
that ownership does not guarantee piercing the veil unless such separate
juridical personality of Wapera Corporation was used as a shield to confuse
issues, protect fraud, justify wrong, and defend crime.

For instance, in citing the case of Sula ng Bayan, Inc. v. Araneta, Inc. , "[t]he
doctrine of alter ego is based upon the misuse of a corporation by an
individual for wrongful or inequitable purposes, and in such case the court
merely disregards the corporate entity and holds the individual responsible
for acts knowingly and intentionally done in the name of the corporation."
The plaintiff should have mentioned things like: “This, Wal Apera has done in
this case. Wal Apera formed WaPera Corporation, to evade paying his
judgment creditor, Alpha.” Thus there is no alter-ego to speak of without
factors shown by the plaintiff to justify piercing the veil.

Moreover, plaintiff's claim of piercing the veil is not warranted in this case, it
may be possible to recommend that Alpha run after the other properties of
WaPera Corporation that could satisfy the money judgment - first personal,
then other real properties if any.

On the other hand, the defense team is correct in citing the case of Martinez
v. Court of Appeals which emphasized that the veil of separate corporate
personality may be lifted when such personality is used to defeat public
convenience, justify wrong, protect fraud or defend crime; or used as a shield
to confuse legitimate issues; or when the corporation is merely an adjunct, a
business conduit or an alter ego of another corporation. Absent showing proof
of those circumstances mentioned in the case of Martinez v. Court of Appeals
to be present in the case of Wapera corporation, it can not be said to be an
alter ego of M-ore corporation. The defense team is also correct in presenting
that Wapera Corporation being the owner of only 1% of shares of M-ore
Corporation clearly and convincingly shows that the Wapera corporation is
separate and distinct from its stockholders.

Lastly, the defense team’s claim that since piercing the veil does not apply,
Alpha may be paid out of the available funds generated from the liquidation
of the assets of Wapera Corporation but only proportionate to the amount of
its debt.

We agree with the defense team that the corporate veil of WaPera corporation
cannot be pierced to satisfy a money judgment against it. M-ore Corporation
and Wal Apera- the natural person - is not the alter ego of WaPera
Corporation and so piercing the veil cannot be warranted. Generally, if it can
be proven that fraud was committed by the company before the creditor, then
the creditor can go against the stockholders or members of the corporation.
But absent showing uncontroverted facts, WaPera Corporation and M-ore
Corporation cannot be regarded as being one and the same person:

(1) Wal Apera is 99 percent owned by WaPera Corporation;

(2) WaPera corporation is insolvent and
(3) M-ore Corporation is 98 percent owned by Wal Apera, 1 percent of his
wife and 1 percent owned by WaPera Corp.

First, the defendant is correct in saying that the corporate entity can not be
disregarded and that Alpha, the claimant may not go against the stockholder
for the obligation of the WaPera corporation. This is true since the mere proof
of control of the Wal Apera of the corporation himself will not authorize
piercing the veil of the corporation. There must be proof of fraud or evil
motive.
Second, even if WaPera Corporation is insolvent, it remains to be separate
and distinct from its stockholders and subsidiary corporation. The
stockholders and subsidiary corporation cannot be personally liable for the
judgment debt of WaPera Corporation to pay its loan, for Wal Apera and
M-ore Corporation are not treated as one and the same; nor WaPera
corporation deemed the alter ego of Wal Apera without proving the
circumstance test. Last, WaPera Corporation as mere owner of M-ore
corporation does not warrant the corporate veil to be pierced. WaPera
corporation should be shown to have been used in the perpetration of fraud
by M-ore Corporation.

Wapera corporation and M-ore Corporation cannot be treated as one entity-

one is note a mere instrumentality of the other, nor can Wal Apera be
presumed to have committed wrong without necessary and factual basis.
Piercing the veil should be applied with caution. Thus, the piercing of the
corporate veil of WaPera Corporation to enforce the execution of the
judgment is not applied.

The piercing of the corporate veil may apply to corporations as well as natural
persons involved with corporations. The "corporate mask may be lifted and
the corporate veil may be pierced when a corporation is just but the alter ego
of a person or of another corporation." But again, such must be established
clearly and convincingly.

In the long line of cases, the Supreme court held that just because you are a
majority stockholder of the corporation does not necessarily mean that the
corporation is an Alter ego. It should be alleged that there is fraud and that it
is merely created to defeat public convenience or created to form tax
avoidance purposes for instance. It does not necessarily mean that you hold
the majority stocks or that the court may step in to pierce the corporate veil
and hold the stockholders personally liable for whatever obligations that the
corporation enters into.
As a conclusion, the corporate veil should not be pierced because there is no
evidence of fraud on the part of corporate officers or the Wapera corporation
and that M-ore corporation is not an alter-ego of Wapera corporation.