PIERCING THE VEIL OF CORPORATE FICTION- When the fiction is used as a means of perpetrating a fraud

or an illegal act or as a vehicle for the evasion of an existing obligation, the circumvention of statutes,
the achievement or perfection of a monopoly or generally the perpetration of knavery or crime, the veil
with which the law covers and isolates the corporation from the members or stockholders who compose
it will be lifted to allow for its consideration merely as an aggregation of individuals.

SOURCE OF INCANTATION:

U.S v. MILWAUKEE REFRIGERATOR TRANSIT Co.,- A corporation is a legal entity but when that 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.

SULDAO V. CIMECH SYSTEM CONSTRUCTION, INC.,- A Corporations authority to act and its liability for its
actions are separate and apart from the individuals who own it.

Corporation Law; A corporation is invested by law with a personality separate from that of its
stockholders or members.—A corporation is invested by law with a personality separate from that of its
stockholders or members. It has a personality separate and distinct from those of the persons
composing it as well as from that of any other entity to which it may be related. Mere ownership by a
single stockholder or by another corporation of all or nearly all of the capital stock of a corporation is
not in itself sufficient ground for disregarding the separate corporate personality. A corporation’s
authority to act and its liability for its actions are separate and apart from the individuals who own it.

Same; As a general rule, a corporation will be looked upon as a legal entity, unless and until sufficient
reason to the contrary appears.—The veil of corporate fiction treats as separate and distinct the affairs
of a corporation and its officers and stockholders. As a general rule, a corporation will be looked upon as
a legal entity, unless and until sufficient reason to the contrary appears. 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. Also, the corporate entity may be disregarded in the
interest of justice in such cases as fraud that may work inequities among members of the corporation
internally, involving no rights of the public or third persons. In both instances, there must have been
fraud and proof of it. For the separate juridical personality of a corporation to be disregarded, the
wrongdoing must be clearly and convincingly established. It cannot be presumed.

ROVELS ENTERPRISES, INC. V. OCAMPO- . The legal fiction of separate corporate existence is not at all
times invincible and the same may be pierced when employed as a means to perpetrate a fraud, confuse
legitimate issues, or used as a vehicle to promote unfair objectives or to shield an otherwise blatant
violation of the prohibition against forum-shopping. While it is settled that the piercing of the corporate
veil has to be done with caution, this corporate fiction may be disregarded when necessary in the
interest of justice.

OBJECTIVES AND EFFECT OF THE APPLICATION OF THE DOCTRINE:

TRADERS ROYAL BANK V. CA- The lending bank sought to pierce the veils of corporate fictions between a
parent corporation and its subsidiary to sustain its rightful claim on the securities that had been
assigned by the subsidiary without consideration to the lending bank in order to secure the loan
obligations of the parent corporation. The court refused the application of the piercing doctrine to
favour the lending bank when it was proven that the assignment of the securities was contrary to
existing rules of the then central bank of the Philippines, which were well known to the officers of the
lending bank. Petitioner cannot put up the excuse of piercing the veil of corporate entity as this is
merely an equitable remedy and may be awarded only in cases when the corporate fiction is used to
defeat public convenience, justify wrong, protect fraud or defend crime or where a corporation is a
mere alter ego or business conduit of a person.--- Piercing the veil of corporate entity requires the court
to see through the protective shroud which exempts its stockholders from liability that ordinarily, they
could be subject to, or distinguishes one corporation from a seemingly separate one, were it not for the
existing corporate fiction. But to do this, the court must be sure that the corporate fiction was misused,
to such an extent that injustice, fraud, or crime was committed upon another, disregarding, thus, his,
her, or its rights. It is the protection of the interest of innocent third persons dealing with the corporate
entity which the law aims to protect by this doctrine.

FRANCISCO MOTORS CORP. V. CA-

GENERAL CREDIT CORP. V. ALSONS DEV. AND INVESTMENT CORP-General Credit Corporation vs. Alsons
Development and Investment Corporation, 513 SCRA 225 , January 29, 2007

Corporation Law; Doctrine of Piercing the Veil of Corporate Fiction; The first consequence of the
doctrine of legal entity of the separate personality of the corporation is that a corporation may not be
made to answer for acts and liabilities of its stockholders or those of legal entities to which it may be
connected or vice versa.—A corporation is an artificial being vested by law with a personality distinct
and separate from those of the persons composing it as well as from that of any other entity to which it
may be related. The first consequence of the doctrine of legal entity of the separate personality of the
corporation is that a corporation may not be made to answer for acts and liabilities of its stockholders or
those of legal entities to which it may be connected or vice versa. The notion of separate personality,
however, may be disregarded under the doctrine—“piercing the veil of corporate fiction”—as in fact the
court will often look at the corporation as a mere collection of individuals or an aggregation of persons
undertaking business as a group, disregarding the separate juridical personality of the corporation
unifying the group. Another formulation of this doctrine is that when two (2) business enterprises are
owned, conducted and controlled by the same parties, both law and equity will, when necessary to
protect the rights of third parties, disregard the legal fiction that two corporations are distinct entities
and treat them as identical or one and the same.

Same; Same; Whether the separate personality of the corporation should be pierced hinges on
obtaining facts, appropriately pleaded or proved.—Whether the separate personality of the corporation
should be pierced hinges on obtaining facts, appropriately pleaded or proved. However, any piercing of
the corporate veil has to be done with caution, albeit the Court will not hesitate to disregard the
corporate veil when it is misused or when necessary in the interest of justice. After all, the concept of
corporate entity was not meant to promote unfair objectives. Authorities are agreed on at least three
(3) basic areas where piercing the veil, with which the law covers and isolates the corporation from any
other legal entity to which it may be related, is allowed. These are: 1) defeat of public convenience, as
when the corporate fiction is used as vehicle for the evasion of an existing obligation; 2) fraud cases or
when the corporate entity is used to justify a wrong, protect fraud, or defend a crime; or 3) alter ego
cases, where a corporation is merely a farce since it is a mere alter ego or business conduit of a person,
or where the corporation is so organized and controlled and its affairs are so conducted as to make it
merely an instrumentality, agency, conduit or adjunct of another corporation.

Same; Same; The Court agrees with the disposition of the appellate court on the application of the
piercing doctrine to the transaction subject of the instant case where, per the Court’s count, the trial
court enumerated no less than 20 documented circumstances and transactions which, taken as a
package, indeed strongly supported the conclusion that a corporation was but an adjunct, an
instrumentality or business conduit of another corporation.—The Court agrees with the disposition of
the appellate court on the application of the piercing doctrine to the transaction subject of this case. Per
the Court’s count, the trial court enumerated no less than 20 documented circumstances and
transactions, which, taken as a package, indeed strongly supported the conclusion that respondent
EQUITY was but an adjunct, an instrumentality or business conduit of petitioner GCC. This relation, in
turn, provides a justifying ground to pierce petitioner’s corporate existence as to ALSONS’ claim in
question. Foremost of what the trial court referred to as “certain circumstances” are the commonality of
directors, officers and stockholders and even sharing of office between petitioner GCC and respondent
EQUITY; certain financing and management arrangements between the two, allowing the petitioner to
handle the funds of the latter; the virtual domination if not control wielded by the petitioner over the
finances, business policies and practices of respondent EQUITY; and the establishment of respondent
EQUITY by the petitioner to circumvent CB rules.