You are on page 1of 2

CASES ON CORPORATION LAW PREPARED BY: Cernal, John Vincent I. LLB 3-2 SUBMITTED TO: Atty.

Linatoc

COMMISSIONER OF INTERNAL REVENUE, petitioner, vs. THE ESTATE OF BENIGNO P. TODA, JR., Represented by Special Co-administrators Lorna Kapunan and Mario Luza Bautista, respondents. G.R. No. 147188, September 14,2004 “A corporation has a juridical personality distinct and separate from the persons owning or composing it. Thus, the owners or stockholders of a corporation may not generally be made to answer for the liabilities of a corporation and vice versa” FACTS: Benigno Toda was authorized by Cibeles Insurance Corporation (CIC) to sell the Cibeles building and the 2 parcels of land over which the said corporation was standing for an amount of 90 million pesos. Toda was the president of the said corporation and was the owner of 99.991% of its issued and outstanding capital stock. Toda sold the land to one Rafael Albonaga for 100 million pesos who in return resold the land to Royal Match Inc. for 200 million pesos. Thereafter Toda sold his entire shares of stocks to one Le hun Choa for an amount of 12.5 million pesos. 3 years thereafter Toda died. The commissioner of internal revenue sent a notice to the new Cibeles insurance corporation for the payment of deficiency tax amounting to P.79,099,999.20 for the year 1988. The new CIC claimed that it should not be held liable therefor but the Old CIC, since the old CIC was owned by entirely different shareholders and that Toda has expressly granted the buyer of the property free from all tax liabilities for the years 1987-1989. The estate of Toda received the notice of assessment to pay deficiency taxes for the same amount, but the special co-administrators of the property Lorna Kapunan and Mario Bautista filed a protest which the CIR denied on the ground of fraud. The CIR said the sale to Albonaga and Albonaga’s subsequent sale to Royal Match Inc. should be treated as a single transaction only, where Albonaga was neither the buyer in the first sale nor the seller in the second sale. The 100 million pesos gained from the fraudulent sale was taxed only for 5% capital gains tax instead of a 35% corporate income tax. Clearly the sale was intended to evade payment and therefore fraudulent and false, and Toda the registered owner of the shares sold should be held liable to the payment of deficiency tax.

he knowingly and voluntarily held himself personally liable for all the tax liabilities of CIC and the buyer for the years 1987. however. There are. 2. as contained in the Deed of Sale of Shares of Stock. or other persons. certain instances in which personal liability may arise. He agrees to hold himself personally and solidarily liable with the corporation. 1988. It has been held in a number of cases that personal liability of a corporate director. or officer along. the owners or stockholders of a corporation may not generally be made to answer for the liabilities of a corporation and vice versa. He consents to the issuance of watered down stocks or. 3. and 1989. . (b) bad faith or gross negligence in directing its affairs. by specific provision of law. since its obligation arose from Toda’s contractual undertaking. or 4. and 1989. deny liability for CIC’s deficiency income tax for the year 1989 by invoking the separate corporate personality of CIC. When the late Toda undertook and agreed “to hold the BUYER and Cibeles free from any all income tax liabilities of Cibeles for the fiscal years 1987. therefore. having knowledge thereof. He assents to the (a) patently unlawful act of the corporation. Respondent estate cannot. its stockholders. to personally answer for his corporate action. or (c) conflict of interest. with the corporation may validly attach when: 1. albeit not necessarily. It is worth noting that when the late Toda sold his shares of stock to Le Hun T. A corporation has a juridical personality distinct and separate from the persons owning or composing it. He is made. Thus.ISSUE: Whether or Not the estate of Toda should be held liable for payment of the deficiency Tax? HELD: Yes. does not forthwith file with the corporate secretary his written objection thereto. 1988. Choa.” he thereby voluntarily held himself personally liable therefor. resulting in damages to the corporation. trustee.