DOCTRINE OF PIERCING THE VEIL OF CORPORATE FICTION

Piercing the corporate veil is warranted when "the separate personality of a corporation is used as a
means to perpetrate fraud or an illegal act, or as a vehicle for the evasion of an existing obligation, the
circumvention of statutes, or to confuse legitimate issues.” Lanuza Jr. vs. BF Corporation G.R. No.
174938 October 1, 2014

Also in the case of WPM International Trading, Inc. and Warlito Manlapaz vs. Labayen, G.R. No.
182770, September 17, 2014, the corporation’s separate juridical personality may be disregarded when
there is an abuse of the corporate form. Whenever the doctrine applies, the principal and the conduit
will be treated as one; the controlled corporation will be deemed to have, “so to speak, no separate
mind, will or existence of its own, and is but a conduit for its principal.”

Classification of Piercing Cases

1. Fraud Piercing

When the corporate entity is used to commit fraud or to justify a wrong, or to defend a crime.

Example:

a) In NAMARCO v. Associated Finance Co.,G.R. No. L-20886, 1967, where a stockholder, who has
absolute control over the affairs of the corporation, entered into a contract with another corporation
through fraud and false representations, such stockholder shall be liable solidarily with co-defendant
corporation even when the contract sued upon was entered into on behalf of the corporation.

2. Equity Piercing

Defeat of public convenience as when the corporate fiction is used as a vehicle for the evasion of an
existing obligation.

Example:

In Telephone Engineering and Service Co., Inc. V. WCC, G.R. No. L-28694, 1981, the veil of corporate
fiction may be pierced as when the same is made as a shield to confuse the legitimate issues.

In Emilio Cano Ent. v. CIR, G.R. No. L-20502, 1965, when used to raise issues relating only to
technicalities.

3. Alter Ego Piercing

When the corporate entity is merely a farce since the corporation is merely the alter ego, business
conduit or instrumentality of a person or another entity.

Example:

In Arnold v. Willets and Patterson, Ltd., G.R. No. L-20214, 1923, where the stock of a corporation is
owned by one person whereby the corporation functions only for the benefit of such individual owner,
the corporation and the individual should be deemed the same.
Also in the case of Tan Boon Bee & Co. v. Jarencio, G.R. No. L-41337, 1988, when the corporation is
merely an adjunct, business conduit or alter ego of another corporation, the fiction of separate and
distinct corporation entities should be disregarded.

NOTE: This is an exception to the Doctrine of Separate Corporate Entity.

CORPORATE JURIDICAL PERSONALITY

GENERAL RULE: Doctrine of Separate Juridical Personality

A corporation has a legal personality separate and distinct from its stockholders or members, as well as
from that of any other entity to which it may be related. A corporation authority to act and its liability
for its actions are separate and apart from the individuals who own it. Secosa, et. al. vs. Heirs of Erwin
Francisco, G.R. No. 160039, January 29, 2004

EXCEPTION: Doctrine of Piercing the Veil of Corporate Fiction

The corporation’s separate juridical personality may be disregarded when there is an abuse of the
corporate form. Whenever the doctrine applies, the principal and the conduit will be treated as one; the
controlled corporation will be deemed to have, “so to speak, no separate mind, will or existence of its
own, and is but a conduit for its principal.” WPM International Trading, Inc. and Warlito Manlapaz vs.
Labayen, G.R. No. 182770, September 17, 2014

Receipts showing the chain of custody cannot be altered or modified while the specimen is in transit
to the next custodian. Even a minimal change in the marking stated in these documents is fatal to the
identity and integrity of the corpus delicti.