G.R. No. 127181 ; September 4, 2001
LAND BANK OF THE PHILIPPINES, petitioner, vs. THE COURT OF APPEALS, ECO MANAGEMENT CORPORATION and EMMANUEL C. OÑATE, respondents.

FACTS

Petitioner Land Bank of the Philippines (LBP) extended credit accommodations totaling P26,109,000.00 to respondent ECO Management Corporation (ECO) in 1980, using trust funds from the Philippine Virginia Tobacco Administration. The proceeds were received by respondent Emmanuel C. Oñate on ECO’s behalf. ECO defaulted upon the loans’ maturity. ECO submitted a “Plan of Payment” proposing to set up a financing company to absorb the obligations, with LBP converting part of the loan into equity. LBP’s Trust Committee rejected participation but allowed ECO to revise the plan. ECO submitted a “Revised Plan of Payment” deleting LBP’s participation, which was also rejected. After PVTA did not respond to a notice, LBP filed a collection suit against ECO and Oñate.
The Regional Trial Court held ECO liable but absolved Oñate personally, a decision affirmed by the Court of Appeals. LBP filed this petition, arguing that the corporate veil of ECO should be pierced to hold Oñate jointly and severally liable. LBP contended Oñate used the corporation as an alter ego, noting his receipt of the loan proceeds and his subsequent offer to pay P1 million towards the debt.

ISSUE

The primary issues are (1) whether the corporate veil of ECO should be pierced, and (2) whether Emmanuel C. Oñate should be held jointly and severally liable with ECO for the loans.

RULING

The Supreme Court denied the petition and affirmed the Court of Appeals. On the first issue, the Court held that the corporate fiction cannot be pierced absent clear and convincing evidence that the corporation is a mere alter ego, used to perpetrate fraud or evade a legal obligation. The mere fact that Oñate, as a corporate officer, received the loan proceeds on behalf of ECO does not justify disregarding the separate corporate personality. ECO’s financial difficulties, attributed to the Dewey Dee scandal, were a business risk, not proof of bad faith or fraud by Oñate.
On the second issue, the Court ruled that Oñate cannot be held personally liable. His acts of receiving the loan proceeds and proposing payment plans were done in his official corporate capacity. His offer to pay P1 million, which was sourced from a trust account he co-owned with other investors and was structured as a loan to ECO, demonstrated a good faith effort to assist the corporation, not an admission of personal liability. The evidence presented by LBP was insufficient to prove that Oñate abused the corporate form to commit a wrong. Therefore, the separate juridical personality of ECO must be respected, and Oñate cannot be held solidarily liable for its corporate debts.