DISREGARDING CORPORATE ENTITY c.
Castro is the president, Maximo Cristobal is the Sec-Treasurer
G.R. L-5081 – Marvel Building Corporation v. David (Collector, BIR)
LABRADOR, J.
Marvel Building Corporation is a company incorporated with a capital stock of PHP
2,000,000, majority of which is owned by Maria Castro (President), Amado Yatco, Segundo
Esguerra and Maximo Cristobal (Sec-Treasurer) [4 out of 11 stockholders]. Such corporation
acquired various assets which included three real properties. Sometime in 1950, the
Secretary of Finance recommended to collect war profit taxes assessed against Castro and
the seizure of the aforementioned three real properties. The plaintiffs as stockholders filed
the present case to enjoin the BIR from auctioning the seized properties alleging that it is
Marvel Corporation who owns the properties not Castro. The SC decided in favor of the BIR,
ratiocinating that based on the circumstantial evidence presented, the other stockholders
only served as dummies of Castro and the latter was, in actuality, the sole and exclusive
owner of all the shares of stock of Marvel Corporation.
DOCTRINE
CORPORATIONS – PIERICING THE CORPORATE VEIL; CONTRARY TO LAW;
EVASION OF LIABILITY TO GOVERNMENT – the corporate fiction in this case was
disregarded as the corporation was used to evade taxes – thus the stockholders become
personally liable and not the corporation.
CORPORATIONS; CIRCUMSTANTIAL EVIDENCE SHOWING ONE-MAN
CORPORATION. — the existence of endorsed certificates discovered by internal revenue
agents between 1948 and 1949 in the possession of the Secretary-Treasurer of a supposed
corporation; the fact that twenty-five certificates were signed by its president for no justifiable
reason; the fact that its principal stockholder 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 treasurer
in the name of the alleged corporation but were kept by the principal stockholder 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 she 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 her alone — are circumstantial evidence which are not only
convincing but conclusive that she is the sole and exclusive owner of all the shares of stock
of the corporation and that the other partners are her dummies.
FACTS
1. In 1950, the Secretary of Finance recommended the collection of war profits taxes (PHP
3,593,950.78) from Mrs. Maria B. Castro ("Castro") and in the process, seized various
properties, including the following buildings registered under the name of Marvel
Building Corporation ("MBC") of which Castro is the President:
a. Aguinaldo Building
b. Wise Building
c. Dewey Boulevard-Padre Faura Mansion
2. Plaintiffs, as stockholders of MBC, filed a complaint with the CFI of Manila which
rendered judgement in favor of them.
3. The BIR appealed to the SC against the said judgement (though the title of the original
case in the CFI was retained which is why we still have Marvel v. David as CIR collector)
4. MBC has the following attributes:
a. Capital Stock: PHP 2,000,000
b. Of which subscribed by incorporators (11): PHP 1,025,000 (see Other Notes
for the breakdown)
d. Of the incorporators, the following have familial ties:
i. Maximo Cristobal is a half-brother of Castro
ii. Antonio Cristobal is a half-brother of Castro
iii. Maria Cristobal is a half-sister of Castro
iv. Segundo Esguerra Sr. is the husband of Maria Cristobal, which
makes him the brother-in-law of Castro
e. It does not appear that the stockholders or board of directors ever held a
business meeting.
f. No books or minutes were ever mentioned by the plaintiffs or offered at the
trial.
i. Incidentally, from the books of the corporation, it was discovered
that advances to the corporation of PHP 125K were made by Castro
and roughly PHP 103K and PHP 161K in 1948 and 1949
respectively.
g. The by-laws of the corporation, if any had ever been approved, were not
presented in court.
h. No report of the affairs of the corporation has been made – either its
transactions or accounts.
5. The Court also observed, based on the facts, that the incorporators' financial status
either had the following attributes:
a. No ITRs filed in certain years; or
b. If ITRs were filed in other years, they were exempt from tax then; or
c. No war profit tax returns (WPTRs) were filed
d. Most of the incorporators' incomes did not exceed PHP 10,000 or if it did, did
not exceed PHP 20,000 (except for Jose Lopez who had a PHP 20,785
income in 1947)
ISSUE with HOLDING
1. WON Maria Castro is the owner of all the shares of stock of MBC and the other
stockholders mere dummies. – YES. All facts presented before the Court are
circumstantial evidence which are difficult to fabricate and thus not only
convincing but conclusive.
a. The SC held that the most important evidence presented by the BIR to prove
their claim was the endorsement in blank of the shares of stock issued in the
name of the other incorporators, and the possession thereof by Castro.
i. This fact was testified by Felipe Aquino, the internal revenue
examiner and photostatic copies were taken of such certificates.
ii. Aquino was accompanied by Mariano in examining the books and
papers of MBC
b. In addition Julio Llamado, MBC's bookkeeper, testified that he was the one
who prepared the aforementioned certificates and recognized the
photocopies in trial as copies of the original.
i. Plaintiff's halfhearted denial of the existence of blank certificates
holds no water.
ii. Their imputation of bad faith on Aquino and Mariano also does not
help their case but actually worsens it since it does not deny the
existence of the certificates nor that Aquino and Mariano had made
the examination. This cannot discredit the testimonies of the
defendant's witnesses.
iii. Their imputation of bad faith on Llamado also does not lie since
Castro and the Llamados were close friends from way back and,
1
 more importantly, the endorsed certificates were kept by Llamado OTHER NOTES
himself. The Articles of Incorporation of the Marvel Building Corporation is dated
iv. The Court believes that the Llamados had personal knowledge of February 12, 1947 and according to it the capital stock is P2,000,000, of which P1,025,000
these certificates and this in turn renders improbable plaintiff's claim was (at the time of incorporation) subscribed and paid by the following incorporators:
that their testimonies were biased.
c. The Court also disproved plaintiff's attempt to show by expert evidence that Maria B. Castro -------- 250 shares ------P250,000.00
the endorsement could have been super imposed – that the signatures made Amado A. Yatco ------- 100" ------ 100,000.00
on the other papers were pasted and thereafter the documents photographed. Santiago Tan ----------- 100" ------ 100,000.00
i. Only a mere possibility Jose T. Lopez ---------- 90" ------ 90,000.00
ii. Printed endorsement has a heavy line at the bottom for the signature Benita Lamagna --------- 90" ------ 90,000.00
and there is no indication that this line is covered by superimposed C.S. Gonzales ----------- 80" ------ 80,000.00
paper Maria Cristobal --------- 70" ------ 70,000.00
iii. Signatures and lines are clear and distinct where they cross one Segundo Esguerra, Sr. -- 75" ------ 75,000.00
another Ramon Sangalang -------- 70" ------ 70,000.00
d. The Court also observed that Castro admitted having signed 25 stock Maximo Cristobal ------- 55" ------ 55,000.00
certificates but offered no explanation why she had to sign as many as 25 Antonio Cristobal ------ 45" ------ 45,000.00
stock certificates when only 11 were actually issued. _________
i. It is common practice among unscrupulous merchants to carry two PHP 1,025,000.00 (1,025 SHARES)
sets of books, one for themselves and another to be shown to tax
collectors – and this was what Castro was probably doing.
e. Also, based on fact # 5, the other stockholders did not have incomes as to
enable them to pay in full for the supposed subscriptions, while Castro has
been found to have made gains as seen in her ITRs.
DIGESTER:
i. Moreover, only three of the plaintiffs testified, and even such
testimony was wrought with inconsistencies – Cristobal cannot even
remember specifically by dates and fixed amounts how and when
the payments were made – in spite of the fact that such
subscriptions cost a lot of money.
ii. Castro also failed to substantiate her claim that payments of the
subscription were deposited by her in the National City Bank of New
York – no deposit slips were presented nor any evidence at all.
f. Lastly, it is significant that the plaintiffs, the supposed subscribers, did not
even come to court to assert that they actually paid for their subscriptions and
were not dummies of Castro. They had it in their power to rebut the charges
but chose to keep silent.
i. Moreover, fact that the books of accounts were kept as if they
belonged to Maria B. Castro alone proves that:
1. Castro would not have asked them to endorse their stock
certificates, or be keeping these in her possession, if they
were really the owners
2. The subscribers never would have consented that Maria
B. 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.
g. Each and every one of the facts all set forth above, in the same manner, is
inconsistent with the claim that the stockholders, other than Maria B. Castro,
owned their shares in their own right.

DISPOSITIVE PORTION
Wherefore, the judgment appealed from should be, as it hereby is, reversed and the action
filed by plaintiffs-appellees, dismissed, with costs against plaintiffs-appellees. So ordered.