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11: Land Bank vs CA, Onate

FACTS: In 1980, ECO Management Corporation (ECO) obtained


loans amounting to about P26 million from Land Bank. ECO
defaulted in its payment but in 1981, ECO submitted a Payment
Plan with the hope of restructuring its loan. The plan was rejected
and Land Bank sued ECO. It impleaded Emmanuel C. Oate, the
majority stockholder of ECO who is serving as the Chairman and
treasurer of ECO.

persons composing it as well as from any other legal entity to which


it may be related. The corporate fiction is only disregarded when
the fiction is used to defeat public convenience, justify wrong,
protect fraud, defend crime, confuse legitimate legal or judicial
issues, perpetrate deception or otherwise circumvent the law. This
is likewise true 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. None of the foregoing
was proved by Land Bank.

The trial court ruled in favor of Land Bank but Oate was absolved
from liabilities. The Court of Appeals affirmed the decision of the
trial court.

The mere fact that Oate owned the majority of the shares of ECO
is not a ground to conclude that Oate 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

Land Bank appealed as it wanted Oate to be personally liable on


the following grounds (among others): a) ECO stands for Emmanuel
C. Oate, b) Oate is the majority stockholder, c) ECO was formed
ostensibly to allow Oate to acquire loans from Land Bank which he
used for his personal advantage, d) Oate holds two positions in
the corporation, and e) ECO never held any board meeting which
just shows only Oate was in control of the corporation.

for disregarding the fiction of separate corporate personalities.

ISSUE: Whether or not Oate should be held personally.


HELD: No. Land Bank was not able to produce sufficient evidence
to prove its claim. A corporation, upon coming into existence, is
invested by law with a personality separate and distinct from those

Anent the issue of the corporate name , the fact that Oates
initials coincide with the corporate name ECO is not sufficient to
disregard the corporate fiction. Even if ECO does stand for
Emmanuel C. Oate, it does not mean that the said corporation is
merely a dummy of Oate. 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.