Land Bank of the Philippines vs Court of Appeals

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.
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.
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.
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 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 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 separate corporate personalities.
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.