LBP VS CA CASE DIGEST

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.