SECTION 2
had money of her own to pay for her P20,000 initial
LIDDELL & CO., INC. vs. CIR
DOCTRINE:
It is of course accepted that the mere fact that one or
more corporations are owned and controlled by a single stockholder
is not of itself sufficient ground for disregarding separate corporate
entities. Authorities support the rule that it is lawful to obtain a
corporation charter, even with a single substantial stockholder, to
engage in a specific activity, and such activity may co-exist with
other private activities of the stockholder. If the corporation is a
substantial one, conducted lawfully and without fraud on another,
its separate identity is to be respected.
FACTS:
Petitioner Liddell & Co. is a domestic corporation engaged
in importing and retailing Oldsmobile, Chevrolet cars and trucks, and
GMC. It established in 1946 with an authorized capital of P100,000
divided into 1,000 shares at P100 each. Of this authorized capital,
196 shares at P19,600 were subscribed and paid by Frank Liddell
while the other 4 shares were each in the names of Kurz, Darras,
Manzano and Serrano.
An amendment as to the purpose clause of its Articles of
Incorporation was made, limiting its business activities to
importations only and Liddell Motors, Inc. was registered with the
SEC with an authorized capital of P100,000 of which 20,000 was
subscribed and paid for. The shares were divided as follows: Irene
Liddell (wife of Frank Liddell) had 19,996 shares while Lichauco,
Bromwell, Rosario and Silva had 1 share each.
Upon review of the transactions between Liddell & Co. and
Liddell Motors, Inc. the CIR determined that the latter was but an
alter ego of Liddell & Co. Thus, for sales tax purposes, the sales
made by Liddell Motors, Inc. were considered original sales of Liddell
& Co. The CIR assessed a tax deficiency plus surcharges in the
amount of P1,317,629.61.
CTA upheld the position of the CIR.
ISSUE:
WON Liddell Motors, Inc. is an alter ego of Liddell & Co.
RULING:
YES. Liddell Motors, Inc. is an alter ego of Liddell & Co.
Liddell & Co. is wholly owned by Frank Liddell. As of the time of its
organization, 98% of the capital stock belonged to Frank Liddell. The
20% paid-up subscription with which the company began its
business was paid by him. The subsequent subscriptions to the
capital stock were made by him and paid with his own money.
As to Liddell Motors, Inc. SC is fully persuaded that Frank
Liddell also owned it. He supplied the original capital funds. It is not
proven that his wife Irene, ostensibly the sole incorporator of Liddell
Motors, Inc.
subscription. Her income in the United States in the years 1943 and
1944 and the savings therefrom could not be enough to cover the
amount of subscription, much less to operate an expensive trade
like the retail of motor vehicles. The alleged sale of her property in
Oregon might have been true, but the money received therefrom
was never shown to have been saved or deposited so as to be still
available at the time of the organization of the Liddell Motors, Inc.
The evidence at hand also shows that Irene Liddell had scant
participation in the affairs of Liddell Motors, Inc.
There are quite a series of conspicuous circumstances that
militate against the separate and distinct personality of Liddell
Motors, Inc. from Liddell & Co.8 SC notice that the bulk of the
business of Liddell & Co. was channeled through Liddell Motors, Inc.
On the other hand, Liddell Motors, Inc. pursued no activities except
to secure cars, trucks, and spare parts from Liddell & Co. Inc. and
then sell them to the general public. These sales of vehicles by
Liddell & Co. to Liddell Motors, Inc. for the most part were shown to
have taken place on the same day that Liddell Motors, Inc. sold such
vehicles to the public. We may even say that the cars and trucks
merely touched the hands of Liddell Motors, Inc. as a matter of
formality.
During the first six months of 1949, Liddell & Co. issued
ten (10) checks payable to Frank Liddell which were deposited by
Frank Liddell in his personal account with the Philippine National
Bank. During this time also, he issued in favor of Liddell Motors, Inc.
six (6) checks drawn against his personal account with the same
bank. The checks issued by Frank Liddell to the Liddell Motors, Inc.
were significantly for the most part issued on the same day when
Liddell & Co. Inc. issued the checks for Frank Liddell9 and for the
same amounts.
It is of course accepted that the mere fact that one or
more corporations are owned and controlled by a single stockholder
is not of itself sufficient ground for disregarding separate corporate
entities. Authorities10 support the rule that it is lawful to obtain a
corporation charter, even with a single substantial stockholder, to
engage in a specific activity, and such activity may co-exist with
other private activities of the stockholder. If the corporation is a
substantial one, conducted lawfully and without fraud on another,
its separate identity is to be respected.
Accordingly, the mere fact that Liddell & Co. and Liddell
Motors, Inc. are corporations owned and controlled by Frank Liddell
directly or indirectly is not by itself sufficient to justify the disregard
of the separate corporate identity of one from the other.
PALACIO vs. FELY TRANSPORTATION COMPANY Accordingly, defendants Fely Transportation and Isabelo
Calingasan should be held subsidiarily liable for P500.00 which
DOCTRINE: Alfredo Carillo was ordered to pay in the criminal case and which
amount he could not pay on account of insolvency.
We believe that this is one case where the defendant
corporation should not be heard to say that it has a personality The present action is not barred by the judgment of the
separate and distinct from its members when to allow it to do so CFI in the criminal case. While there seems to be some confusion on
would be to sanction the use of the fiction of corporate entity as a part of the plaintiffs as to the theory on which the is based —
shield to further an end subversive of justice. whether ex-delito or quasi ex-delito (culpa aquiliana) — We are
convinced, from the discussion prayer in the brief on appeal, that
FACTS:
they are insisting the subsidiary civil liability of the defendant.
Carillo is the driver of AC-787 jeep owned and operated by
defendant company. While driving at Halcon Street, Quezon City he
ran over the child of petitioner due to recklessness and negligence.
He suffered a simple fracture and was hospitalized and was
continued to be treated for 5 months. Because of his child’s injury
he had to abandon his welding shop where he derives income to
support his family and was forced to sell some of his machineries for
a lower price than their value and spent such other amounts of
money for litigation.

During the prosecution of the criminal case against the

driver, an attempt was unsuccessfully made by the prosecution to
prove moral damages suffered by Palacio however the CFI still found
the driver guilty beyond reasonable doubt.

The lower court barred the judgment in the criminal case

and held that the person subsidiarily liable to pay damages is Isabel
Calingasan, the employer, and not the defendant corporation.

ISSUE:

WON defendant corporation can be held liable for

damages.

RULING:

Isabelo Calingasan and defendant Fely Transportation may

be regarded as one and the same person. It is evident that Isabelo
Calingasan's main purpose in forming the corporation was to evade
his subsidiary civil liability resulting from the conviction of his driver,
Alfredo Carillo. This conclusion is borne out by the fact that the
incorporators of the Fely Transportation are Isabelo Calingasan, his
wife, his son, Dr. Calingasan, and his two daughters. We believe that
this is one case where the defendant corporation should not be
heard to say that it has a personality separate and distinct from its
members when to allow it to do so would be to sanction the use of
the fiction of corporate entity as a shield to further an end
subversive of justice. Furthermore, the failure of the defendant
corporation to prove that it has other property than the jeep (AC-
687) strengthens the conviction that its formation was for the
purpose above indicated.

And while it is true that Isabelo Calingasan is not a party in

this case, yet, is held in the case of Alonso v. Villamor, this Court can
substitute him in place of the defendant corporation as to the real
party in interest. This is so in order to avoid multiplicity of suits and
thereby save the parties unnecessary expenses and delay.