Land Bank of the Philippines vs. CA, G.R. no.
127181, September 4, 2001
[credit accomodations, proposal of “Plan of Payment, trial court absolved Oñate]
Doctrines:
1. A corporation, upon coming into existence, is invested by law with a personality separate
and distinct from those persons composing it as well as from any other legal entity to which it
may be related
This separate and distinct personality is, however, merely a fiction created by law for
convenience and to promote the ends of justice. It may not be used or invoked for ends
subversive to the policy and purpose behind its creation15 or which could not have been
intended by law to which it owes its being.
This is particularly true
a) when the fiction is used to defeat public convenience, justify wrong, protect fraud, defend
crime,17 confuse legitimate legal or judicial issues,18 perpetrate deception or otherwise
circumvent the law; or
b) where the corporate entity is being used as an alter ego, adjunct, or business conduit for the
sole benefit of the stockholders or of another corporate entity.
2. A corporation may assume any name provided it is lawful. There is nothing illegal in a
corporation acquiring the name or as in this case, the initials of one of its shareholders.
3. a stockholder may not, generally, be made to answer for acts or liabilities of the said
corporation, and vice versa. In order to disregard the separate juridical personality of a
corporation, the wrongdoing must be clearly and convincingly established
In the absence of any malice or bad faith, a stockholder or an officer of a corporation cannot
be made personally liable for corporate liabilities.
4. The burden is on petitioner to prove that the corporation and its stockholders are, in fact,
using the personality of the corporation as a means to perpetrate fraud and/or escape a
liability and responsibility demanded by law
Facts:
1. On various dates, petitioner, Land Bank of the Philippines (LBP) extended a series of
credit accommodations to respondent ECO using the trust funds of the Philippine Virginia
Tobacco Administration (PVTA)
2. The proceeds of the credit accommodations were received on behalf of ECO by appellee
Oñate
3. However, on each maturity date, ECO failed to pay despite oral and written demands.
[ECO claims that the company was in financial difficulty for it was unable to collect its
investments with companies which were affected by the financial crisis]
4. ECO proposed a "Plan of Payment", which was initially approved, but subsequently rejected
by the Trust Committee when ECO revised the payment plan removing LBP’s participation.
[Eco proposed that it would set up a financing company which would absorb the loan
obligations]
5. LBP then sent a letter to PVTA where if PVTA did not respond, it would be construed as an
approval to file a suit against ECO.
6. Landbank filed a complaint for Collection of Sum of Money against ECO and Oñate before
the Regional Trial Court
7. a judgment was rendered in favor of LBP; however, appellee Oñate was absolved from
personal liability for insufficiency of evidence
8. both parties filed their respective Motions for Reconsideration
the trial court rendered an Amended Decision
[Oñate was still relieved of liability]
9. The Court of Appeals affirmed in toto the amended decision of the trial court.5
10. Hence, this present petition
Issue:
1. Whether or not the Corporate Veil should be pierced
2. Whether or not Oñate should be held jointly and severally liable with ECo
Held:
I.
No, respondent corporation in this case was being used as a mere alter ego of Oñate to obtain the
loans had not been shown. Bad faith or fraud on the part of ECO and Oñate was not also shown.
if shareholders of ECO meant to defraud petitioner, then they could have just easily absconded
instead of going out of their way to propose "Plans of Payment." Oñate even volunteered to pay a
portion of the corporation’s debt
A corporation, upon coming into existence, is invested by law with a personality separate and distinct
from those persons composing it as well as from any other legal entity to which it may be related
This separate and distinct personality is, however, merely a fiction created by law for convenience
and to promote the ends of justice. It may not be used or invoked for ends subversive to the policy
and purpose behind its creation15 or which could not have been intended by law to which it owes its
being.
This is particularly true
c) when the fiction is used to defeat public convenience, justify wrong, protect fraud, defend
crime,17 confuse legitimate legal or judicial issues,18 perpetrate deception or otherwise
circumvent the law; or
d) where the corporate entity is being used as an alter ego, adjunct, or business conduit for the
sole benefit of the stockholders or of another corporate entity.
II.
No, Bad faith or fraud on the part of ECO and Oñate was not also shown
Oñate volunteered to pay a portion of the corporation’s debt.26 This offer demonstrated good faith on
his part to ease the debt of the corporation of which he was a part
The mere fact that Oñate owned the majority of the shares of ECO is not a ground to conclude that
Oñate and ECO is one and the same. Mere ownership by a single stockholder of all or nearly all of
the capital stock of a corporation is not by itself sufficient reason for disregarding the fiction of
separate corporate personalities
Neither is the fact that the name "ECO" represents the first three letters of Oñate’s name sufficient
reason to pierce the veil
A corporation may assume any name provided it is lawful. There is nothing illegal in a corporation
acquiring the name or as in this case, the initials of one of its shareholders.
a stockholder may not, generally, be made to answer for acts or liabilities of the said corporation,
and vice versa. In order to disregard the separate juridical personality of a corporation, the
wrongdoing must be clearly and convincingly established
In the absence of any malice or bad faith, a stockholder or an officer of a corporation cannot be
made personally liable for corporate liabilities.23
Extra info:
it was established that the P1 Million did not come solely from Oñate. It was taken from a trust
account which was owned by Oñate and other investors.27 It was likewise proved that the P1 Million
was a loan granted by Oñate and his co-depositors to alleviate the plight of ECO. 28 This
circumstance should not be construed as an admission that he was really the debtor and not ECO.
