G.R. No. 182770 September 17, 2014
WPM INTERNATIONAL TRADING, INC. and WARLITO P. MANLAPAZ, Petitioners, vs. FE CORAZON LABAYEN, Respondent.

FACTS

Respondent Fe Corazon Labayen, owner of H.B.O. Systems Consultants, entered into a management agreement with petitioner WPM International Trading, Inc. (WPM), a corporation engaged in the restaurant business, to operate and rehabilitate its Quickbite restaurant. As part of her tasks, she engaged CLN Engineering Services (CLN) to renovate a Quickbite outlet for ₱432,876.02. Only ₱320,000 was paid, leaving a balance of ₱112,876.02. CLN filed a complaint for sum of money (Civil Case No. Q-90-7013) against Labayen, and the RTC held her liable for the balance plus interest and attorney’s fees. Labayen then filed a complaint for damages (Civil Case No. Q-92-13446) against WPM and its president, Warlito P. Manlapaz, seeking reimbursement, alleging she entered the renovation contract on their behalf. The RTC declared WPM in default and held Manlapaz personally liable, finding WPM to be his mere instrumentality. The CA affirmed but modified the attorney’s fees award, applying the doctrine of piercing the corporate veil based on factors such as Manlapaz’s control over WPM, his multiple corporate positions, and the derivation of “WPM” from his initials.

ISSUE

1. Whether WPM is a mere instrumentality, alter ego, and business conduit of Manlapaz.
2. Whether Manlapaz is jointly and severally liable with WPM to Labayen for reimbursement, damages, and interest.

RULING

1. No. The Supreme Court held that the doctrine of piercing the corporate veil was improperly applied. The circumstances cited by the lower courts—Manlapaz being the principal stockholder, holding multiple positions, his residence being WPM’s office, and the acronym similarity—are insufficient to prove that WPM was a mere alter ego. The mere ownership of all or nearly all capital stock is not enough to disregard corporate personality. The required elements for the alter ego theory were not met: there was no evidence of complete domination by Manlapaz over WPM’s policy and business practice, nor proof that such control was used to commit fraud or wrong that proximately caused Labayen’s injury. The wrongdoing necessary to pierce the veil was not clearly and convincingly established.
2. No. Since the corporate veil cannot be pierced, Manlapaz is not jointly and severally liable with WPM. The separate juridical personality of the corporation is upheld. The Court found that the lower courts’ judgment was based on a misapprehension of facts, warranting a review. The petition was granted, and the CA decision was reversed and set aside.