WPM INTERNATIONAL TRADING, INC. AND
She was abroad and that she did
WARLITO P. MANLAPAZ v. FE CORAZON
LABAYEN
G.R. No. 182770
September 17, 2014
Doctrine:
For the piercing of the corporate veil to apply it
must be clearly established that the separate and
distinct personality of the corporation is used to
justify a wrong, protect fraud, or perpetrate a
deception. The court must be certain that the
corporate fiction was misused to such an extent
that injustice, fraud, or crime was committed
against another. It cannot be presumed.
Facts:
 The petitioner, WPM International Trading, Inc.
(WPM), is a domestic corporation engaged in
the restaurant business, while Warlito P.
Manlapaz is its president.
 Sometime in 1990, WPM entered into a
management agreement with Labayen, by
virtue of which the respondent was authorized
to operate, manage and rehabilitate Quickbite,
a restaurant owned and operated by WPM. As
part of her tasks, the respondent looked for a
contractor who would renovate the two
existing Quickbite outlets in Divisoria, Manila
and Lepanto St., University Belt, Manila.
Pursuant to the agreement, the respondent
engaged the services of CLN Engineering
Services (CLN) to renovate Quickbite-Divisoria
at the cost of P432,876.02.
 On June 13, 1990, Quickbite-Divisoria’s
renovation was finally completed, and its
possession was delivered to the respondent.
However, out of the P432,876.02 renovation
cost, only the amount of P320,000.00 was
paid to CLN, leaving a balance of P112,876.02
 On October 19, 1990, CLN filed a complaint
for sum of money and damages before the
RTC against the respondent and Manlapaz.
The respondent was declared in default for her
failure to file a responsive pleading. The RTC
found the respondent liable to pay CLN actual
damages in the amount of P112,876.02 with
12% interest per annum from June 18, 1990
(the date of first demand) and 20% attorney’s
fees.
 Respondent instituted a complaint for
damages against the petitioners, WPM and
Manlapaz. Respondent alleged that in the
previous RTC case, she was adjudged liable
for a contract that she entered into for and in
behalf of the petitioners, to which she should
be entitled to reimbursement. Her participation
in the management agreement was limited
only to introducing Manlapaz to Engineer
Carmelo Neri, CLN’s general manager. It was
actually Manlapaz and Neri who agreed on the
terms and conditions of the agreement and
that when the complaint for damages was filed
against her.
not know of the case until she returned to the
Philippines and received a copy of the
decision of the RTC.
 In his defense, Manlapaz claims that the
respondent had exceeded her authority as
agent of WPM, the renovation agreement
should only bind her and since WPM has a
separate and distinct personality, Manlapaz
cannot be made personally liable for the
respondent’s claim.
 RTC held that the respondent is entitled to
indemnity from Manlapaz. Based on the
records, there is a clear indication that WPM is
a mere instrumentality or business conduit of
Manlapaz. The RTC also found that Manlapaz
had complete control over WPM considering
that he is its chairman, president and treasurer
at the same time.
 CA affirmed and held that the petitioners are
barred from raising as a defense the
respondent’s alleged lack of authority to enter
into the renovation agreement in view of their
tacit ratification of the contract.
Issue:
1. Whether or not WPM is a mere instrumentality,
alter-ego, and business conduit of Manlapaz? No.
2. Whether or not Manlapaz is jointly and severally
liable with WPM to the respondent for
reimbursement, damages and interest? No.
Held:
Piercing the corporate veil based on the alter ego
theory requires the concurrence of three elements,
namely:
a) Control, not mere majority or complete stock
control, but complete domination, not only of
finances but of policy and business practice in
respect to the transaction attacked so that the
corporate entity as to this transaction had at the
time no separate mind, will or existence of its own;
b) Such control must have been used by the
defendant to commit fraud or wrong, to perpetuate
the violation of a statutory or other positive legal
duty, or dishonest and unjust act in contravention
of plaintiff’s legal right; and
c) The aforesaid control and breach of duty must
have proximately caused the injury or unjust loss
complained of.
The absence of any of these elements prevents
piercing the corporate veil.
In the present case, the attendant circumstances
do not establish that WPM is a mere alter ego of
Manlapaz.

Aside from the fact that Manlapaz was the
principal stockholder of WPM, records do not show
that WPM was organized and controlled, and its
affairs conducted in a manner that made it merely
an instrumentality, agency, conduit or adjunct of
Manlapaz.
The respondent failed to prove that Manlapaz,
acting as president, had absolute control over
WPM. Even granting that he exercised a certain
degree of control over the finances, policies and
practices of WPM, in view of his position as
president, chairman and treasurer of the
corporation, such control does not necessarily
warrant piercing the veil of corporate fiction since
there was not a single proof that WPM was formed
to defraud CLN or the respondent, or that
Manlapaz was guilty of bad faith or fraud.
On the contrary, the evidence establishes that
CLN and the respondent knew and acted on the
knowledge that they were dealing with WPM for
the renovation of the latter’s restaurant, and not
with Manlapaz. That WPM later reneged on its
monetary obligation to CLN, resulting to the filing
of a civil case for sum of money against the
respondent, does not automatically indicate fraud,
in the absence of any proof to support it.
It is emphasized that the piercing of the veil of
corporate fiction is frowned upon and thus, must
be done with caution. It can only be done if it has
been clearly established that the separate and
distinct personality of the corporation is used to
justify a wrong, protect fraud, or perpetrate a
deception. The court must be certain that the
corporate fiction was misused to such an extent
that injustice, fraud, or crime was committed
against another, in disregard of its rights; it cannot
be presumed.
Notes:
The doctrine of piercing the corporate veil applies
only in three (3) basic instances, namely:
a) when the separate and distinct corporate
personality defeats public convenience, as when
the corporate fiction is used as a vehicle for the
evasion of an existing obligation
b) in fraud cases, or when the corporate entity is
used to justify a wrong, protect a fraud, or defend
a crime; or
c) is used in alter ego cases, i.e., where a
corporation is essentially 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 so conducted as to
make it merely an instrumentality, agency,
conduit or adjunct of another corporation.
___________________________________________
NUCCIO SAVERIO and NS International, Inc. v.
ALFONSO PUYAT
PETITIONER: Nuccio Saverio and NS International
Inc. RESPONDENT: Alfonso G. Puyat
SUMMARY: NSI allegedly owed Puyat a P460k
balance from a MOA that Nuccio signed on behalf of
NSI. RTC and CA ruled in favor of Puyat, piercing the
corporate veil. SC held that first, the "Breakdown of
Account" (basis for the P460k balance) was not
supported by the evidence Puyat presented. Second,
the corporate veil should not be pierced because
Puyat failed to prove that alter-ego elements were
present. The indicators that the RTC and CA
appreciated in the case were not sufficient to pierce
the corporate veil. Hence, the SC ruled in favor of
Nuccio and NSI, and the case was remanded to the
RTC.
DOCTRINE: Mere ownership by a single stockholder
or by another corporation of all or nearly all of the
capital stocks of the corporation is not, by itself, a
sufficient ground for disregarding the separate
corporate personality. Other than mere ownership of
capital stocks, circumstances showing that the
corporation is being used to commit fraud or proof of
existence of absolute control over the corporation have
to be proven. In short, before the corporate fiction can
be disregarded, alter-ego elements must first be
sufficiently established. Mere ownership by a
stockholder of all or nearly all of the capital stocks of a
corporation does not, by itself, justify the disregard of
the separate corporate personality.
In order for the ground of corporate ownership to
stand, the following circumstances should also be
established:
(1) that the stockholders had control or complete
domination of the corporation’s finances and that the
latter had no separate existence with respect to the act
complained of;
(2) that they used such control to commit a wrong or
fraud; and
(3) the control was the proximate cause of the loss or
injury.
FACTS:
1. Respondent Puyat granted a loan to Petitioner NS
International Inc. (NSI), pursuant to the Memorandum
of Agreement and Promissory Note (MOA) between
NSI and Puyat. During the signing of the MOA, NSI
was represented by Co-Petitioner Nuccio.
 • Puyat would extend a credit line with a limit
of P500k to NSI, to be paid within 30 days of signing
the document
• Loan carried an interest rate fo 17% per
annum, or at an adjusted rate of 25% per annum if the
payment is beyond the stipulated period.
• NSI received P300k and machineries for their
fertilizer processing business, but it failed to
materialize.
2. Nuccio made personal payments to Puyat
amounting to P600k. But Nuccio allegedly had an
outstanding balance of P460k, and when Nuccio
defaulted, Puyat filed a collection suit with the RTC
because Nuccio still allegedly owed Puyat for the value
of the machineries as shown by the Breakdown of
Account that Puyat presented in court.
3. Nuccio contends that Puyat's allegation isn't true
because they've already paid the loan as evidenced by
the receipt for P600k, and further submit that their
remaining obligation to pay for the machineries was
extinguished because their business failed to
materialize.
4. RTC ruled for Puyat. The P600k didn't completely
extinguish the loan. Further, RTC said that Nuccio and
NSI are one and the same because of the ff. indicators
[henced they applied the doctrine of piercing the
corporate veil]:
• 1) Nuccio's act of entering a loan with Puyat
for financing NSI's business
• 2) The "NS" in "NSI" stands for "Nuccio
Saverio"
5. CA affirmed RTC. Nuccio and NSI are one and the
same because of the ff.:
• 1) Nuccio owned 40% of NSI
• 2) Nuccio personally entered into the MOA
with Puyat
• 3) Nuccio and NSI were represented by the
same counsel
• 4) NSI did not object to Nuccio's acts,
showing Nuccio's control over the corporation
• 5) Nuccio's control over NSI was used to
commit a wrong/fraud.
6. NUCCIO AND NSI'S ARGUMENTS:
• The Breakdown of Account was hearsay
because Ramoncito Puyat, the one who prepared it,
was not presented in court to authenticate it.
• The award is not in the RTC's ruling, and the
specific amount is hence undetermined
• There is a need for proper accounting to
determine the exact liability
• There was no showing that corporate fiction
was used to defeat public convenience, justify a
wrong, protect fraud, or defend a crime
• Nuccio's mere ownership of 40% doesn't
justify piercing the separate and distinct personality of
NSI
7. ALFONSO PUYAT'S ARGUMENTS:
• These are factual issues, so it's beyond the
ambit of a Rule 45 petition (present case) as to the
documentary and testimonial evidence presented in
the RTC and affirmed by the CA.
ISSUES:
WON RTC and CA were correct in applying the
piercing of the corporate veil doctrine and in holding
Nuccio and NSI solidarily liable for the P460k allegedly
owed to Puyat?- NO
RULING:
Petition GRANTED in favor of Nuccio and NSI. RTC
and CA rulings are reversed and set aside. The case is
remanded to RTC for proper accounting and reception
of evidence to determine NSI's indebtedness to Puyat.
RATIO: [AS TO PIERCING THE CORPORATE VEIL]
1. Piercing the veil of corporate fiction is not justified.
Nuccio and NSI are NOT one and the same.
2. The rule is settled that a corporation is vested by
law with a personality separate and distinct from the
persons composing it. Following this principle, a
stockholder, generally, is not answerable for the acts
or liabilities of the corporation, and vice versa. The
obligations incurred by the corporate officers, or other
persons acting as corporate agents, are the direct
accountabilities of the corporation they represent, and
not theirs. A director, officer or employee of a
corporation is generally not held personally liable for
obligations incurred by the corporation and while there
may be instances where solidary liabilities may arise,
these circumstances are exceptional.
3. Mere ownership by a single stockholder or by
another corporation of all or nearly all of the capital
stocks of the corporation is not, by itself, a sufficient
ground for disregarding the separate corporate
personality. Other than mere ownership of capital
stocks, circumstances showing that the corporation is
being used to commit fraud or proof of existence of
absolute control over the corporation have to be
proven. In short, before the corporate fiction can be
disregarded, alter-ego elements must first be
sufficiently established.
4. Hi-Cement Corporation v. Insular Bank of Asia and
America: SC did NOT apply piercing the veil doctrine
on the ground that the corporation was a mere alter
ego because mere ownership by a stockholder of all or
nearly all of the capital stocks of a corporation does
not, by itself, justify the disregard of the separate
corporate personality. In order for the ground of
corporate ownership to stand, the following
circumstances should also be established: (1) that the
stockholders had control or complete domination of the
corporation’s finances and that the latter had no
separate existence with respect to the act complained
of; (2) that they used such control to commit a wrong
or fraud; and (3) the control was the proximate cause
of the loss or injury.

5. IN THIS CASE: The circumstances do not warrant

the piercing of the veil of NSI’s corporate fiction. Aside
from the undisputed fact of Nuccio’s 40%
shareholdings with NSI, the RTC applied the piercing
the veil doctrine based on the following reasons:

• 1) There was no board resolution authorizing

Nuccio to enter into a contract of loan.
• 2) Nuccio and NSI were represented by one
and the same counsel.
• 3) NSI did not object to Nuccio’s act of
contracting the loan.
• 4) The control over NSI was used to commit
a wrong or fraud.
• 5) Nuccio’s admission that "NS" in the
corporate name "NSI" means "Nuccio Saverio."

6. SC is NOT convinced of the sufficiency of these

above cited reasons. RTC failed to provide a clear and
convincing explanation why the doctrine was applied. It
merely declared that its application of the doctrine of
piercing the veil of corporate fiction has a basis,
specifying for this purpose the act of Nuccio’s entering
into a contract of loan with the respondent and the
reasons stated above.

7. The records of the case, however, do not show that

Nuccio had control or domination over NSI’s finances.
The mere fact that it was Nuccio who, in behalf of the
corporation, signed the MOA is not sufficient to prove
that he exercised control over the corporation’s
finances. Neither the absence of a board resolution
authorizing him to contract the loan nor NSI’s failure to
object thereto supports this conclusion. These may be
indicators that, among others, may point the proof
required to justify the piercing the veil of corporate
fiction, but by themselves, they do not rise to the level
of proof required to support the desired conclusion.

8. It should be noted in this regard that while Nuccio

was the signatory of the loan and the money was
delivered to him, the proceeds of the loan were
unquestionably intended for NSI’s proposed business
plan. That the business did not materialize is not also
sufficient proof to justify a piercing, in the absence of
proof that the business plan was a fraudulent scheme
geared to secure funds from the respondent for the
petitioners’ undisclosed goals.

9. Considering that the basis for holding Nuccio liable

for the payment of the loan has been proven to be
insufficient, we find no justification for the RTC to hold
him jointly and solidarily liable for NSI’s unpaid loan.
Similarly, we find that the CA ruling is wanting in
sufficient explanation to justify the doctrine’s
application and affirmation of the RTC’s ruling. With
these points firmly in mind, we hold that NSI’s liability
should not attach to Nuccio.