VOL.

364, SEPTEMBER 4, 2001

375

Land Bank of the Philippines vs. Court of Appeals

*

G.R. No. 127181. September 4, 2001.

LAND BANK OF THE PHILIPPINES, petitioner, vs. THE

COURT
OP
APPEALS,
ECO
MANAGEMENT
CORPORATION
and
EMMANUEL
C.
OATE,
respondents.
Remedial Law Certiorari It is basic that where what is being
questioned is the sufficiency of evidence, it is a question of fact.
At the outset, we find the matters raised by petitioner in his
argumentation are mainly
_______________
*

SECOND DIVISION.

376

376

SUPREME COURT REPORTS ANNOTATED

Land Bank of the Philippines vs. Court of Appeals

questions of fact which are not proper in a petition of this nature.

Petitioner is basically questioning the evaluation made by the
Court of Appeals of the evidence submitted at the trial. The Court
of Appeals had found that petitioners evidence was not sufficient
to justify the piercing of ECOs corporate personality. Petitioner
contended otherwise. It is basic that where what is being
questioned is the sufficiency of evidence, it is a question of fact.
Nevertheless, even if we regard these matters as tendering an
issue of law, we still find no reason to reverse the findings of the
Court of Appeals.
Corporation Law Piercing the Veil Corporation Fiction 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.
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. By this attribute, a stockholder may not,
generally, be made to answer for acts or liabilities of the said
corporation, and vice versa. This separate and distinct personality
is, however, merely a fiction created by law for convenience and to
promote the ends of justice. For this reason, it may not be used or
invoked for ends subversive to the policy and purpose behind its
creation or which could not have been intended by law to which it
owes its being. This is particularly true 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. In all these cases, the notion of
corporate entity will be pierced or disregarded with reference to
the particular transaction involved.
Same Same 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.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. In order to disregard the separate juridical
personality of a corporation, the wrongdoing must be clearly and
convincingly established. In the
377

VOL. 364, SEPTEMBER 4, 2001

377

Land Bank of the Philippines vs. Court of Appeals

absence of any malice or bad faith, a stockholder or an officer of a

corporation cannot be made personally liable for corporate
liabilities.

PETITION for review on certiorari of a decision of the

Court of Appeals.

The facts are stated in the opinion of the Court.

Miguel M. Gonzales, Norberto L. Martinez and Danilo
B. Beramo for petitioner.
Florante A. Bautista for private respondents.
QUISUMBING, J.:
This petition for review
on certiorari seeks to reverse and
1
set aside the decision promulgated on June 17, 1996 in
CAGR No.
CV43239 of public respondent and its
2
resolution dated November
29, 1996 denying petitioners
3
motion for reconsideration.
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) extended a series of
credit accommodations to appellee ECO, using the trust funds of
the Philippine Virginia Tobacco Administration (PVTA) in the
aggregate amount of P26,109,000.00. The proceeds of the credit
accommodations were received on behalf of ECO by appellee
Oate.
On the respective maturity dates of the loans, ECO failed to
pay the same. Oral and written demands were made, but ECO
was unable to pay. 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 brought
about by the Dewey Dee scandal.
xxx
On October 20, 1981, ECO proposed and submitted to LBP a
Plan of Payment whereby the former would set up a financing
company which would absorb the loan obligations. It was
proposed that LBP would par
_______________
1

CA Rollo, pp. 163170.

Id. at 198.

Id. at 172186.
378

378

SUPREME COURT REPORTS ANNOTATED

Land Bank of the Philippines vs. Court of Appeals

ticipate in the scheme through the conversion of P9,000,000.00

which was part of the total loan, into equity.

On March 4, 1982, LBP informed ECO of the action taken by

the formers Trust Committee concerning the Plan of Payment
which reads in part, as follows:
xxx
Please be informed that the Banks Trust Committee has deliberated
on the plan of payment during its meetings on November 6, 1981 and
February 23, 1982. The Committee arrived at a decision that you may
proceed with your Plan of Payment provided Land Bank shall not
participate in the undertaking in any manner whatsoever.
In view thereof, may we advise you to make necessary revision in the
proposed Plan of Payment and submit the same to us as soon as possible.
(Records, p. 428)

On May 5, 1982, ECO submitted to LBP a Revised Plan of

Payment deleting the latters participation in the proposed
financing company. The Trust Committee deliberated on the
Revised Plan of Payment and resolved to reject it. LBP then
sent a letter to the PVTA for the latters comments. The letter
stated that if LBP did not hear from PVTA within five (5) days
from the latters receipt of the letter, such silence would be
construed to be an approval of LBPs intention to file suit against
ECO and its corporate officers. PVTA did not respond to the
letter.
On June 28, 1982, Landbank filed a complaint for Collection of
Sum of Money against ECO and Emmanuel C. Oate before the
Regional Trial Court of Manila, Branch 50.
After trial on the merits, a judgment was rendered in favor of
LBP however, appellee Oate was absolved from personal
liability for insufficiency of evidence.
Dissatisfied, both parties filed their respective Motions for
Reconsideration. LBP claimed that there was an error in
computation in the amounts to be paid. LBP also questioned the
dismissal of the case with regard to Oate.
On the other hand, ECO questioned its being held liable for the
amount of the loan. Upon order of the court, both parties
submitted Supplemental Motions for Reconsideration and their
respective Oppositions to each others Motions.
On February 3, 1993, the trial court rendered an Amended
Decision, the dispositive portion of which reads as follows:
379

VOL. 364, SEPTEMBER 4, 2001

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Land Bank of the Philippines vs. Court of Appeals

ACCORDINGLY, the Decision, dated December 3, 1990, is hereby
modified to read as follows:

WHEREFORE, judgment is rendered ordering defendant Eco

Management Corporation to pay plaintiff Land Bank of the
Philippines:
A. The sum of P26,109,000.00 representing the total amount of
the ten (10) loan accommodations plus 16% interest per annum
computed from the dates of their respective maturities until fully
paid, broken down as follows:
1. the principal amount of P4,000,000.00 with interest at
16% computed from September 18, 1981
2. the principal amount of P5,000,000.00 with interest at
16% computed from September 21, 1981
3. the principal amount of P1,000,000.00 with interest rate
at 16% computed from September 28, 1981
4. the principal amount of P1,000,000.00 with interest at
15% computed from October 5, 1981
5. the principal amount of P2,000,000.00 with interest rate
at of 16% computed from October 8, 1981
6. the principal amount of P2,000,000.00 with interest rate
at of 16% from October 23, 1981
7. the principal amount of P814,000.00 with interest rate at
of 16% computed from November 1, 1981
8. the principal amount of P2,295,000.00 with interest rate
at of 16% computed from November 6, 1981
9. the principal amount of P3,000,000.00 with interest rate
at of 16% computed from November 7, 1981
10. the principal amount of P5,000,000.00 with interest rate
at 16% computed from November 9, 1981
B. The sum of P260,000.00 as attorneys fees and
C. The costs of the suit.
The case as against defendant Emmanuel Oate is dismissed
for insufficiency of evidence.
4
SO ORDERED. (Records, p. 608)
_______________
4

Id. at 163166.
380

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SUPREME COURT REPORTS ANNOTATED

Land Bank of the Philippines vs. Court of Appeals

The Court of Appeals

affirmed in toto the amended decision
5
of the trial court.
On June 9, 1996, petitioner filed a motion for
reconsideration, which was denied in a resolution dated
November 29, 1996. Hence, this present petition, assigning
the following errors allegedly committed by the Court of
Appeals:
A
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 CORPORATION MAY BE PIERCED.
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 CORPORATION FOR THE PRINCIPAL
SUM OF P26M PLUS INTEREST THEREON.
C
THE COURT OF APPEALS GRAVELY ERRED IN
AFFIRMING THE RULING OF THE LOWER COURT THE
SAME NOT BEING SUPPORTED BY THE EVIDENCE
AND
6
APPLICABLE LAWS AND JURISPRUDENCE.

The primary issues for resolution here are (1) whether or

not the corporate veil of ECO Management Corporation
should be pierced and (2) whether or not Emmanuel C.
Oate should be held jointly and severally liable with ECO
Management Corporation for the loans incurred from Land
Bank.
Petitioner contends that the personalities of Emmanuel
Oate and of ECO Management Corporation should be
treated as one, for
_______________
5

Id. at 170.

Rollo, p. 25.
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VOL. 364, SEPTEMBER 4, 2001

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Land Bank of the Philippines vs. Court of Appeals

the particular purpose of holding respondent Oate liable

for the loans incurred by corporate respondent ECO from
Land Bank. According to petitioner, the said corporation
was formed ostensibly to allow Oate to acquire loans from
Land Bank which he used for his personal advantage.
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 for the initials of Emmanuel C. Oate, which is the
logical, sensible and concrete explanation for the name
ECO, in the absence of evidence to the contrary. (3)
Respondent Oate has always referred to himself as the
debtor, not merely as an officer or a representative of
respondent corporation. (4) Respondent Oate personally
paid P1 Million taken from trust accounts in his name. (5)
Respondent Oate made a personal offering to pay his
personal obligation. (6) Respondent Oate controlled
respondent corporation by simultaneously holding two (2)
corporate positions, viz., as Chairman and as treasurer,
beginning from the time of respondent corporations
incorporation and continuously thereafter without benefit
of election. (7) Respondent corporation had not held any
meeting of the stockholders or of the Board of Directors, as
shown by the fact that no proceeding of such corporate
activities 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, Undertaking to Change
Corporate
7
Name, Statement of Assets and Liabilities.
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
_______________
7

Id. at 2628.

382

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SUPREME COURT REPORTS ANNOTATED

Land Bank of the Philippines vs. Court of Appeals

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 alleged that there was no
fraud and/or bad faith in the transactions between them
and Land Bank. Hence, private respondents conclude,
there is no legal ground8 to pierce the veil of respondent
corporations personality.
At the outset, we find the matters raised by petitioner in
his argumentation are mainly questions of 9fact which are
not proper in a petition of this nature. Petitioner is
basically questioning the evaluation made by the Court of
Appeals of the evidence submitted at the trial. The Court of
Appeals had found that petitioners evidence was not
sufficient to
justify the piercing of ECOs corporate
10
personality. Petitioner contended otherwise. It is basic
that where what is being questioned
is the sufficiency of
11
evidence, it is a question of fact. Nevertheless, even if we
regard these matters as tendering an issue of law, we still
find no reason to reverse the findings of the Court of
Appeals.
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
12
to which it may be related. By this attribute, a stockholder
may not, generally, be made to answer for acts or liabilities
of the said corporation, and
_______________
8

Id. at 197204.

Herrera, Remedial Law, Volume VII, pp. 520521, citing FNCB

Finance vs. Estavillo, G.R. No. 93394, 192 SCRA 514, 517 (1990) and
Universal Motors vs. Court of Appeals, G.R. No. 47432, 205 SCRA 448 455
(1992).
10

CA Rollo, p. 167.

11

Herrera, Id. at 521, citing 2 Moran p. 473 1979 ed. Cheeseman vs.

IAC, G.R. No. 74833, 193 SCRA 93, 100101 (1991) Paterno vs. Paterno
G.R. No. 63680, 183 SCRA 630, 636637 (1990).
12

Yutivo Sons Hardware Company vs. Court of Tax Appeals, 1 SCRA

160, 165 (1961) Francisco Motors Corporation vs. CA, 309 SCRA 72 82
(1999).

383

VOL. 364, SEPTEMBER 4, 2001

383

Land Bank of the Philippines vs. Court of Appeals

13

vice versa. This separate and distinct personality is,

however, merely a fiction created14by law for convenience
and to promote the ends of justice. For this reason, it may
not be used or invoked for ends
subversive to the policy and
15
purpose behind its creation or which could not have
been
16
intended by law to which it owes its being. This is
particularly true when the fiction is used to defeat public
17
convenience, justify wrong, protect fraud, defend
crime,
18
confuse legitimate legal or judicial issues, 19perpetrate
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
20
the stockholders or of another corporate entity. In all
these cases, the notion of corporate entity will be pierced or
disregarded
with reference to the particular transaction
21
involved.
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. In
order to disregard the separate juridical personality of a
corporation, the wrongdoing
must be clearly and
22
convincingly established. In the absence of any malice or
bad faith, a stockholder or an officer of a corporation
cannot
23
be made personally liable for corporate liabilities.
_______________
13

NAMARCO vs. Associated Finance Company, 19 SCRA 962, 965

(1967).
14

Azcor Manufacturing, Inc. vs. NLRC, 303 SCRA 26, 35 (1999).

15

Emilio Cano Enterprises, Inc., vs. CIR, 121 Phil. 276, 278279 (1965).

16

McConnel vs. Court of Appeals, 1 SCRA 722, 725 (1961).

17

Supra, note 10 at 165.

18

R.F. Sugay & Co. vs. Reyes, 120 Phil. 1497, 1502 (1964).

19

Gregorio Araneta, Inc. vs. Paz Tuason de Paterno, 49 O.G. 45, 56

(1953).
20

Comm. Internal Revenue vs. Norton Harrison Corp., 120 Phil. 684,

690691 (1964).
21
22

Koppel, Inc. vs. Yatco, 77 Phil. 496, 505 (1946).

Complex Electronics Employees Association vs. National Labor

Relations Commission, 310 SCRA 403, 418 (1999).

23

Id. at 421.
384

384

SUPREME COURT REPORTS ANNOTATED

Land Bank of the Philippines vs. Court of Appeals

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 for disregarding
the fiction of
24
separate corporate personalities. 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 name or as in this case, the
initials of one of its shareholders.
That respondent corporation in this case was being used
as a mere alter ego of Oate to obtain the loans had not
been shown. Bad faith or fraud on the part of ECO and
Oate was not also shown. As the Court of Appeals
observed, if shareholders of ECO meant to defraud
petitioner, then they could have just easily absconded
instead of25 going out of their way to propose Plans of
Payment. Likewise, Oate
volunteered to pay a portion of
26
the corporations debt. This offer demonstrated good faith
on his part to ease the debt of the corporation of which he
was a part. It is understandable that a shareholder would
want to help his corporation and in the process, assure that
his stakes in the said corporation are secured. In this case,
it was established that the P1 Million did not come solely
from Oate. It was taken from a trust account
which was
27
owned by Oate and other investors. It was likewise
proved that the P1 Million was a loan granted by 28Oate
and his codepositors to alleviate the plight of ECO. 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
suffice to hold re
_______________
24

Traders Royal Bank vs. Court of Appeals, 269 SCRA 15, 2930 (1997).

25

CA decision, p. 7 Rollo, p. 52.

26

One million pesos.

27

TSN, April 3, 1984, pp. 6162 Records, pp. 206207.

28

Records, p. 454, Exhibit K.

385

VOL. 364, SEPTEMBER 4, 2001

385

Sabio vs. International Corporate Bank, Inc.

spondent Oate personally liable for the debt of co

respondent ECO. No reversible error could be attributed to
respondent courts decision and resolution which petitioner
assails.
WHEREFORE, the petition is DENIED for lack of merit.
The decision and resolution of the Court of Appeals in CA
G.R. CV No. 43239 are AFFIRMED. Costs against
petitioner.
SO ORDERED.
Bellosillo (Chairman), Mendoza, Buena and De
Leon, Jr., JJ., concur.
Petition denied, judgment and resolution affirmed.
Note.The mere fact that one or more corporations are
owned or controlled by the same or single stockholder is not
a sufficient ground for disregarding separate corporate
personalities. (Complex Electronics Employees Association
vs. National Labor Relations Commission, 310 SCRA 403
[1999])
o0o

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