CASE TITLE: Marvel Building Corp. v.
David
CASE NO.: G.R. No. L-5081 DATE: February 24, 1954
STUDENT NAME: Ali STUDENT NUMBER: 2024xxx
SUBJECT & SECTION: CORPORATION LAW SEMESTER: 1st
PROFESSOR: Attorney
DOCTRINE: An incorporator as the sole and exclusive owner of all the shares of stock
of a Corporation and that the other partners were her dummies to evade
payment of taxes is one way to pierce the veil of the corporate fiction.
FACTS:
Marvel Building Corporation was incorporated in February 1947. The articles of
incorporation contained a capital stock of P 2,000,000.00 of which majority of its
stockholders were Castro (President), Yatco, Esguerra and Cristobal (Secretary-
Treasurer) from the total of 11 stockholders.
During the existence of the corporation, it acquired assets including buildings,
namely, Aguinaldo Building, Wise Building and Dewey Boulevard-Padre Faura Mansion.
Towards the end of year 1948, internal revenue examiners discovered that from the 11
stock certificates, all of it were endorsed in the blank by the subscribers, except the one
subscribed by Castro. There was also no business meeting held by the BODs, no by-laws
and that the corporation never had any reports of their transactions or affairs. As a result,
Secretary of Finance recommended the collection of war profit taxes assessed against
Castro in the amount of P3.5 million and seize the 3 buildings named above.
Marvel Bldg filed a complaint for the release of the seized property contending that
said property were owned by the corporation and not solely by Castro. The trial court
ruled in favor of Marvel Bldg and enjoin CIR from selling the same. CIR appealed, and
CA ruled that trial court failed to show that Castro as not the true owner of all the stock
certificates of the corporation, therefore confiscation of the property against the Mavel
Bldg was justified. Hence, this petition.
ISSUE:
Whether or not Maria B. Castro is the owner of all the shares of stock of the Marvel
Building Corporation and the other stockholders mere dummies of hers.
RULING:
Yes, Maria B. Castro is the owner of all the shares of stock of the Marvel Building
Corporation and the other stockholders mere dummies of hers.
The existence of endorsed certificates where 25 certificates were signed by the
Castro, for no justifiable reason; despite 2 sets of certificates were issued, Castro had
made enormous profits and, therefore, had a motive to hide them to evade the payment
of taxes, the fact that the other subscribers had no incomes of sufficient magnitude to
justify their big subscriptions; the fact that the subscriptions were not receipted for and
deposited by the treasurer in the name of the corporation but were kept by Castro herself;
the fact that the stockholders or the directors never appeared to have ever met to discuss
the business of the corporation; the fact that Castro advanced big sums of money to the
corporation without any previous arrangement or accounting, and the fact that the books
of accounts were kept as if they belonged to Castro alone — these facts were of patent
and potent significance. This implied that Castro would not have asked them to endorse
their stock certificates, or be keeping these in her possession, if they were really the
owners. They never would have consented that Castro keep the funds without receipts
or accounting, nor that she manages the business without their knowledge or
concurrence, were they owners of the stocks in their own rights. Each and every one of
the facts all set forth above, in the same manner, was inconsistent with the claim that the
stockholders, other than Castro, own their shares in their own right.
Thus, Maria B. Castro as the sole and exclusive owner of all the shares of stock of
the Marvel Building Corporation and that the other partners were her dummies.
