Koppel Philippines, Inc. v. Alfredo Yatco (Collector of Internal Revenue) GR L47673, 77 Phil 496, October 10, 1946

Koppel Philippines, Inc. v. Alfredo Yatco (Collector of Internal Revenue)

GR L47673, 77 Phil 496, October 10, 1946

Corporation Law Case Digest by John Paul C. Ladiao (15 March 2016)

(Topic: Right to bring action, acquire and possess property --- relate with Art. 46 of NCC)

FACTS:

That plaintiff is a corporation duly organized and existing under and by virtue of the laws of the Philippines, with principal office therein at the City of Manila, the capital stock of which is divided into thousand (1,000) shares of P100 each. The Koppel Industrial Car and Equipment company, a corporation organized and existing under the laws of the State of Pennsylvania, United States of America, and not licensed to do business in the Philippines, owned nine hundred and ninety-five (995) shares out of the total capital stock of the plaintiff from the year 1928 up to and including the year 1936, and the remaining five (5) shares only were and are owned one each by officers of the plaintiff corporation.

If the plaintiff had in stock the merchandise desired by local buyers, it immediately filled the orders of such local buyers and made delivery in the Philippines without the necessity of cabling its principal in America either for price quotations or confirmation or rejection of that agreed upon between it and the buyer.

the amount of the so-called "share in the profits" of Koppel (Philippines), Inc., was ultimately left to the sole, unbridled control of Koppel Industrial Car and Equipment Company.

ISSUE:

Whether or not the transactions involved herein, the public interest and convenience would be defeated and what would amount to a tax evasion perpetrated, unless resort is had to the doctrine of "disregard of the corporate fiction."?

HELD:

Yes.

there would be only one, but very important, difference between the two schemes — a difference in tax liability on the ground that the sales were made through another and distinct corporation, as alleged broker, when we have seen that this latter corporation is virtually owned by the former, or that they practically one and the same, is to sanction a circumvention of our tax laws, and permit a tax evasion of no mean proportions and the consequent commission of a grave injustice to the Government.

The lower court did not deny legal personality to Koppel (Philippines), Inc. for any and all purposes, but in effect its conclusion was that, in the transactions involved herein, the public interest and convenience would be defeated and what would amount to a tax evasion perpetrated, unless resort is had to the doctrine of "disregard of the corporate fiction."

The court did not hold that the corporate personality of Koppel (Philippines), Inc., would also be disregarded in other cases or for other purposes. It would have had no power to so hold.

The courts' action in this regard must be confined to the transactions involved in the case at bar "for the purpose of adjudging the rights and liabilities of the parties in the case.