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G.R.No.127181

TodayisThursday,November12,2015

RepublicofthePhilippines
SUPREMECOURT
Manila
SECONDDIVISION
G.R.No.127181September4,2001
LANDBANKOFTHEPHILIPPINES,petitioner,
vs.
THECOURTOFAPPEALS,ECOMANAGEMENTCORPORATIONandEMMANUELC.OATE,respondents.
QUISUMBING,J.:
Thispetitionforreviewoncertiorariseekstoreverseandsetasidethedecision1promulgatedonJune17,1996
inCAGRNo.CV43239ofpublicrespondentanditsresolution2datedNovember29,1996denyingpetitioners
motionforreconsideration.3
The facts of this case as found by the Court of Appeals and which we find supported by the records are as
follows:
On various dates in September, October, and November, 1980, appellant Land Bank of the Philippines
(LBP)extendedaseriesofcreditaccommodationstoappelleeECO,usingthetrustfundsofthePhilippine
VirginiaTobaccoAdministration(PVTA)intheaggregateamountofP26,109,000.00.Theproceedsofthe
creditaccommodationswerereceivedonbehalfofECObyappelleeOate.
Ontherespectivematuritydatesoftheloans,ECOfailedtopaythesame.Oralandwrittendemandswere
made,butECOwasunabletopay.ECOclaimsthatthecompanywasinfinancialdifficultyforitwasunable
to collect its investments with companies which were affected by the financial crisis brought about by the
DeweyDeescandal.
xxx
OnOctober20,1981,ECOproposedandsubmittedtoLBPa"PlanofPayment"wherebytheformerwould
set up a financing company which would absorb the loan obligations. It was proposed that LBP would
participate in the scheme through the conversion of P9,000,000.00 which was part of the total loan, into
equity.
OnMarch4,1982,LBPinformedECOoftheactiontakenbytheformersTrustCommitteeconcerningthe
"PlanofPayment"whichreadsinpart,asfollows:
xxx
PleasebeinformedthattheBanksTrustCommitteehasdeliberatedontheplanofpaymentduring
itsmeetingsonNovember6,1981andFebruary23,1982.TheCommitteearrivedatadecisionthat
you may proceed with your Plan of Payment provided Land Bank shall not participate in the
undertakinginanymannerwhatsoever.
Inviewthereof,mayweadviseyoutomakenecessaryrevisionintheproposedPlanofPaymentand
submitthesametousassoonaspossible.(Records,p.428)
On May 5, 1982, ECO submitted to LBP a "Revised Plan of Payment" deleting the latters participation in
theproposedfinancingcompany.TheTrustCommitteedeliberatedonthe"RevisedPlanofPayment"and
resolvedtorejectit.LBPthensentalettertothePVTAforthelatterscomments.Theletterstatedthatif
LBPdidnothearfromPVTAwithinfive(5)daysfromthelattersreceiptoftheletter,suchsilencewouldbe
construedtobeanapprovalofLBPsintentiontofilesuitagainstECOanditscorporateofficers.PVTAdid
notrespondtotheletter.
OnJune28,1982,LandbankfiledacomplaintforCollectionofSumofMoneyagainstECOandEmmanuel
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C.OatebeforetheRegionalTrialCourtofManila,Branch50.
Aftertrialonthemerits,ajudgmentwasrenderedinfavorofLBPhowever,appelleeOatewasabsolved
frompersonalliabilityforinsufficiencyofevidence.
Dissatisfied,bothpartiesfiledtheirrespectiveMotionsforReconsideration.LBPclaimedthattherewasan
errorincomputationintheamountstobepaid.LBPalsoquestionedthedismissalofthecasewithregard
toOate.
On the other hand, ECO questioned its being held liable for the amount of the loan. Upon order of the
court,bothpartiessubmittedSupplementalMotionsforReconsiderationandtheirrespectiveOppositionsto
eachothersMotions.
OnFebruary3,1993,thetrialcourtrenderedanAmendedDecision,thedispositiveportionofwhichreads
asfollows:
ACCORDINGLY,theDecision,datedDecember3,1990,isherebymodifiedtoreadasfollows:
WHEREFORE, judgment is rendered ordering defendant Eco Management Corporation to pay
plaintiffLandBankofthePhilippines:
A.ThesumofP26,109,000.00representingthetotalamountoftheten (10) loan accommodations
plus16%interestperannumcomputed from the dates of their respective maturities until fully paid,
brokendownasfollows:
1.theprincipalamountofP4,000,000.00withinterestat16%computedfromSeptember18,
1981
2.theprincipalamountofP5,000,000.00withinterestat16%computedfromSeptember21,
1981
3.theprincipalamountofP1,000,000.00withinterestrateat16%computedfromSeptember
28,1981
4.theprincipalamountofP1,000,000.00withinterestat15%computedfromOctober5,1981
5.theprincipalamountofP2,000,000.00withinterestrateatof16%computedfromOctober
8,1981
6.theprincipalamountofP2,000,000.00withinterestrateatof16%fromOctober23,1981
7.theprincipalamountofP814,000.00withinterestrateatof16%computedfromNovember
1,1981
8. the principal amount of P2,295,000.00 with interest rate at of 16% computed from
November6,1981
9. the principal amount of P3,000,000.00 with interest rate at of 16% computed from
November7,1981
10.theprincipalamountofP5,000,000.00withinterestrateat16%computedfromNovember
9,1981
B.ThesumofP260,000.00asattorneysfeesand
C.Thecostsofthesuit.
ThecaseasagainstdefendantEmmanuelOateisdismissedforinsufficiencyofevidence.
SOORDERED.(Records,p.608)4
TheCourtofAppealsaffirmedintototheamendeddecisionofthetrialcourt.5
OnJune9,1996,petitionerfiledamotionforreconsideration,whichwasdeniedinaresolutiondatedNovember
29,1996.Hence,thispresentpetition,assigningthefollowingerrorsallegedlycommittedbytheCourtofAppeals:
A

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THE COURT OF APPEALS GRAVELY ERRED IN NOT RULING THAT BASED ON THE FACTS AS
ESTABLISHED BY EVIDENCE, THERE EXISTS A SUBSTANTIAL AND JUSTIFIABLE GROUND UPON
WHICH THE LEGAL NOTION OF THE CORPORATE FICTION OF RESPONDENT ECO MANAGEMENT
CORPORATIONMAYBEPIERCED.
B
THE COURT OF APPEALS GRAVELY ERRED IN NOT A[T]TACHING LIABILITY TO RESPONDENT
EMMANUEL C. OATE JOINTLY AND SEVERALLY WITH RESPONDENT ECO MANAGEMENT
CORPORATIONFORTHEPRINCIPALSUMOFP26MPLUSINTERESTTHEREON.
C
THECOURTOFAPPEALSGRAVELYERREDINAFFIRMINGTHERULINGOFTHELOWERCOURTTHE
SAMENOTBEINGSUPPORTEDBYTHEEVIDENCEANDAPPLICABLELAWSANDJURISPRUDENCE.6
Theprimaryissuesforresolutionhereare(1)whetherornotthecorporateveilofECOManagementCorporation
should be pierced and (2) whether or not Emmanuel C. Oate should be held jointly and severally liable with
ECOManagementCorporationfortheloansincurredfromLandBank.
Petitioner contends that the personalities of Emmanuel Oate and of ECO Management Corporation should be
treatedasone,fortheparticularpurposeofholdingrespondentOateliablefortheloansincurredbycorporate
respondent ECO from Land Bank. According to petitioner, the said corporation was formed ostensibly to allow
OatetoacquireloansfromLandBankwhichheusedforhispersonaladvantage.
Petitioner submits the following arguments to support its stand: (1) Respondent Oate owns the majority of the
interest holdings in respondent corporation, specifically during the crucial time when appellees applied for and
obtained the loan from LANDBANK, sometime in September to November, 1980. (2) The acronym ECO stands
fortheinitialsofEmmanuelC.Oate,whichisthelogical,sensibleandconcreteexplanationforthenameECO,
intheabsenceofevidencetothecontrary.(3)RespondentOatehasalwaysreferredtohimselfasthedebtor,
notmerelyasanofficerorarepresentativeofrespondentcorporation.(4)RespondentOatepersonallypaidP1
Milliontakenfromtrustaccountsinhisname.(5)RespondentOatemadeapersonalofferingtopayhispersonal
obligation.(6)RespondentOatecontrolledrespondentcorporationbysimultaneouslyholdingtwo(2)corporate
positions,viz.,asChairmanandastreasurer,beginningfromthetimeofrespondentcorporationsincorporation
andcontinuouslythereafterwithoutbenefitofelection.(7)Respondentcorporationhadnotheldanymeetingof
thestockholdersoroftheBoardofDirectors,asshownbythefactthatnoproceedingofsuchcorporateactivities
was filed with or borne by the record of the Securities and Exchange Commission (SEC). The only corporate
records respondent corporation filed with the SEC were the following: Articles of Incorporation, Treasurers
Affidavit,UndertakingtoChangeCorporateName,StatementofAssetsandLiabilities.7
Private respondents, in turn, contend that Oates only participation in the transaction between petitioner and
respondent ECO was his execution of the loan agreements and promissory notes as Chairman of the
corporations Board of Directors. There was nothing in the loan agreement nor in the promissory notes which
would indicate that Oate was binding himself jointly and severally with ECO. Respondents likewise deny that
ECO stands for Emmanuel C. Oate. Respondents also note that Oate is no longer a majority stockholder of
ECO and that the payment by a third person of the debt of another is allowed under the Civil Code. They also
allegedthattherewasnofraudand/orbadfaithinthetransactionsbetweenthemandLandBank.Hence,private
respondentsconclude,thereisnolegalgroundtopiercetheveilofrespondentcorporationspersonality.8
Attheoutset,wefindthemattersraisedbypetitionerinhisargumentationaremainlyquestionsoffactwhichare
not proper in a petition of this nature.9 Petitioner is basically questioning the evaluation made by the Court of
Appealsoftheevidencesubmittedatthetrial.TheCourtofAppealshadfoundthatpetitionersevidencewasnot
sufficienttojustifythepiercingofECOscorporatepersonality.10Petitionercontendedotherwise.Itisbasicthat
wherewhatisbeingquestionedisthesufficiencyofevidence,itisaquestionoffact.11Nevertheless,evenifwe
regardthesemattersastenderinganissueoflaw,westillfindnoreasontoreversethefindingsoftheCourtof
Appeals.
Acorporation,uponcomingintoexistence,isinvestedbylawwithapersonalityseparateanddistinctfromthose
persons composing it as well as from any other legal entity to which it may be related.12 By this attribute, a
stockholdermaynot,generally,bemadetoanswerforactsorliabilitiesofthesaidcorporation,andviceversa.13
Thisseparateanddistinctpersonalityis,however,merelyafictioncreatedbylawforconvenienceandtopromote
theendsofjustice.14Forthisreason,itmaynotbeusedorinvokedforendssubversivetothepolicyandpurpose
behinditscreation15orwhichcouldnothavebeenintendedbylawtowhichitowesitsbeing.16Thisisparticularly
truewhenthefictionisusedtodefeatpublicconvenience,justifywrong,protectfraud,defendcrime,17 confuse
legitimatelegalorjudicialissues,18perpetratedeceptionorotherwisecircumventthelaw.19Thisislikewisetrue
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wherethecorporateentityisbeingusedasanalterego,adjunct,orbusinessconduitforthesolebenefitofthe
stockholdersorofanothercorporateentity.20Inallthesecases,thenotionofcorporateentitywillbepiercedor
disregardedwithreferencetotheparticulartransactioninvolved.21
Theburdenisonpetitionertoprovethatthecorporationanditsstockholdersare,infact,usingthepersonalityof
thecorporationasameanstoperpetratefraudand/orescapealiabilityandresponsibilitydemandedbylaw.In
order to disregard the separate juridical personality of a corporation, the wrongdoing must be clearly and
convincinglyestablished.22Intheabsenceofanymaliceorbadfaith,astockholderoranofficerofacorporation
cannotbemadepersonallyliableforcorporateliabilities.23
ThemerefactthatOateownedthemajorityofthesharesofECOisnotagroundtoconcludethatOateand
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.24
Neither is the fact that the name "ECO" represents the first three letters of Oates name sufficient reason to
pierce the veil. Even if it did, 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
nameorasinthiscase,theinitialsofoneofitsshareholders.
ThatrespondentcorporationinthiscasewasbeingusedasamerealteregoofOatetoobtaintheloanshadnot
been shown. Bad faith or fraud on the part of ECO and Oate was not also shown. As the Court of Appeals
observed,ifshareholdersofECOmeanttodefraudpetitioner,thentheycouldhavejusteasilyabscondedinstead
of going out of their way to propose "Plans of Payment."25 Likewise, Oate volunteered to pay a portion of the
corporationsdebt.26Thisofferdemonstratedgoodfaithonhisparttoeasethedebtofthecorporationofwhich
he was a part. It is understandable that a shareholder would want to help his corporation and in the process,
assurethathisstakesinthesaidcorporationaresecured.Inthiscase,itwasestablishedthattheP1Milliondid
notcomesolelyfromOate.ItwastakenfromatrustaccountwhichwasownedbyOateandotherinvestors.27
ItwaslikewiseprovedthattheP1MillionwasaloangrantedbyOateandhiscodepositorstoalleviatetheplight
of ECO.28 This circumstance should not be construed as an admission that he was really the debtor and not
ECO.
In sum, we agree with the Court of Appeals conclusion that the evidence presented by the petitioner does not
sufficetoholdrespondentOatepersonallyliableforthedebtofcorespondentECO.Noreversibleerrorcould
beattributedtorespondentcourtsdecisionandresolutionwhichpetitionerassails.
WHEREFORE,thepetitionisDENIEDforlackofmerit.ThedecisionandresolutionoftheCourtofAppealsinCA
G.R.CVNo.43239areAFFIRMED.Costsagainstpetitioner.
SOORDERED.
Bellosillo,Mendoza,Buena,andDeLeon,Jr.,JJ.,concur.

Footnotes
1CARollo,pp.163170.
2Id.at198.
3Id.at172186.
4Id.at163166.
5Id.at170.
6Rollo,p.25.
7Id.at2628.
8Id.at197204.
9Herrera,RemedialLaw,VolumeVII,pp.520521,citingFNCBFinancevs.Estavillo,G.R.No.93394,192

SCRA514,517(1990)andUniversalMotorsvs.CourtofAppeals,G.R.No.47432,205SCRA448,455
(1992).
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10CARollo,p.167.
11Herrera,Id.at521,citing2Moranp.4731979edCheesemanvs.IAC,G.R.No.74833,193SCRA93,

100101(1991)Paternovs.Paterno,G.R.No.63680,183SCRA630,636637(1990).
12YutivoSonsHardwareCompanyvs.CourtofTaxAppeals,1SCRA160,165(1961)FranciscoMotors

Corporationvs.CA,309SCRA72,82(1999).
13NAMARCOvs.AssociatedFinanceCompany,19SCRA962,965(1967)
14AzcorManufacturing,Inc.vs.NLRC,303SCRA26,35(1999).
15EmilioCanoEnterprisesInc.,vs.CIR,121Phil.276,278279(1965).
16McConnelvs.CourtofAppeals,1SCRA722,725(1961).
17Supra,note10at165.
18R.F.Sugay&Co.vs.Reyes,120Phil.1497,1502(1964).
19GregorioAraneta,Inc.vs.PazTuasondePaterno,49O.G.45,56(1953).
20Comm.InternalRevenuevs.NortonHarrisonCorp.,120Phil.684,690691(1964).
21Koppel,Inc.vs.Yatco,77Phil.496,505(1946).
22ComplexElectronicsEmployeesAssociationvs.NationalLaborRelationsCommission, 310 SCRA 403,

418(1999).
23Id.at421.
24TradersRoyalBankvs.CourtofAppeals,269SCRA15,2930(1997).
25CAdecision,p.7Rollo,p.52.
26Onemillionpesos.
27TSN,April3,1984,pp.6162Records,pp.206207.
28Records,p.454,Exhibit"K".
TheLawphilProjectArellanoLawFoundation

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