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China Banking Vs Dyne-Sem

Dynetics obtained an 8.9 million peso loan from China Banking Corporation but failed to repay it after closing operations. China Banking Corporation then sued Dyne-Sem Electronics Corporation, claiming it was an alter ego of Dynetics based on their similar businesses, Dyne-Sem using Dynetics' factory and acquiring its machinery, and some shared officers. However, the court ruled that Dyne-Sem was not an alter ego as its acquisition of Dynetics' assets was through a public bidding, not merger, so Dyne-Sem was not liable for Dynetics' debts.

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803 views1 page

China Banking Vs Dyne-Sem

Dynetics obtained an 8.9 million peso loan from China Banking Corporation but failed to repay it after closing operations. China Banking Corporation then sued Dyne-Sem Electronics Corporation, claiming it was an alter ego of Dynetics based on their similar businesses, Dyne-Sem using Dynetics' factory and acquiring its machinery, and some shared officers. However, the court ruled that Dyne-Sem was not an alter ego as its acquisition of Dynetics' assets was through a public bidding, not merger, so Dyne-Sem was not liable for Dynetics' debts.

Uploaded by

hime mej
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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CHINA BANKING CORPORATION Vs.

DYNE-SEM ELECTRONICS CORPORATION

FACTS OF THE CASE


Dynetics and Elpidio Ong (solidarily liable) obtained a P8,939,000 loan from petitioner China
Banking Corporation as evidenced by promissory notes. The borrowers failed to pay the
obligation. Dynetics has closed its operations and left Ong as the sole responsible for the loan.
Petitioner bank impleaded respondent Dyne-Sem Electronic Corporation as according to petitioner
bank, Dyne-sem is an alter ego of Dynetics. The bases of the petitioner are as follows: 1)
Dynetics and Dyne-Sem are both engaged in the business of integrated circuits and semi
conductor devices; 2) The factory of Dynetics was used by Dyne-sem as its main office, 3)
Dyne-Sem acquired machineries from Dynetics, 4) Dyne-Sem retained some of the officers of
Dynetics. RTC ruled in favor of respondent to which Court of Appeals affirmed; hence, this
petition

ISSUE WON Dyne-Sem is an alter-ego of Dynetics that would allow the court to pierce the former’s
corporate veil.

RULING Dyne-sem is not an alter-ego of Dynetics, and therefore, cannot be held liable for the
loan obtained by Dynetics. Petitioner failed to prove that Dyne-Sem was organized and controlled,
and its affairs conducted, in a manner that made it merely an instrumentality, agency, conduit or
adjunct of Dynetics, or that it was established to defraud Dynetics’ creditors, including petitioner.
The similarity of business of the two corporations did not warrant a conclusion that respondent
was but a conduit of Dynetics. The acquisition of assets of Dyne-Sem was through a public
bidding. What took place was a sale of the assets of the former to the latter. Merger is legally
distinct from a sale of assets. Thus, where one corporation sells or otherwise transfers all its
assets to another corporation for value, the latter is not, by that fact alone, liable for the debts
and liabilities of the transferor. Even the overlapping of incorporators and stockholders of two or
more corporations will not necessarily lead to such inference and justify the piercing of the veil of
corporate fiction.

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