jon comm law digest i

8/18/2019 Jon Comm Law Digest I

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Heirs of Fe Tan Uy vs. International Exchange Bank

Ponente: Mendoza

Author: Diaz de Rivera

Doctrines:(1)Before a director or ocer of a corporation can be held personally

liable for corporate obligations, however, the following reqisites !st

concr" (1) the co!plainant !st allege in the co!plaint that the

director or ocer assented to patently nlawfl acts of the corporation,

or that the ocer was gilty of gross negligence or bad faith# and ($)

the co!plainant !st clearly and convincingly prove sch nlawfl

acts, negligence or bad faith%($)&nder a variation of the doctrine of piercing the veil of corporate

'ction, when two bsiness enterprises are owned, condcted and

controlled by the sa!e parties, both law and eqity will, whennecessary to protect the rights of third parties, disregard the legal

'ction that two corporations are distinct entities and treat the! as

identical or one and the sa!e%

Facts:

n several occasions, nternational *+change Ban (iBan), granted loans to

-a!!er .ar!ents /orporation (-a!!er)% 0he loans were secred by a 2

Million3eso Real *state Mortgage e+ected by .oldey Develop!ent

/orporation (.oldey) over several of its properties and a $4 Million3eso

5rety 6gree!ent signed by Manel /ha (/ha), -a!!er and .oldey7s/* and resident, and his wife, 8e 0an &y (Uy )%

-a!!er had an otstanding obligation of $4,9$:,1;;%


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($)Ahether .oldey can be held liable for the obligation of -a!!er for

being a !ere alter ego of the latter% C*5%

!atio:

"#$ There is no sho%ing that Uy co&&itte' gross negligence.

In the a(sence of any of the re)uisites for &aking a cor*orateo+cer, 'irector or stockhol'er *ersonally lia(le for the

o(ligations of a cor*oration, Uy, as a treasurer an' stockhol'er

of Ha&&er, cannot (e &a'e to ans%er for the un*ai' 'e(ts of

the cor*oration.

Basic is the rle in corporation law that a corporation is a >ridical entity

which is vested with a legal personality separate and distinct fro! those

acting for and in its behalf and, in general, fro! the people co!prising it%

8ollowing this principle, obligations incrred by the corporation, acting

throgh its directors, ocers and e!ployees, are its sole liabilities% 6director, ocer or e!ployee of a corporation is generally not held personally

liable for obligations incrred by the corporation% evertheless, this legal

'ction !ay be disregarded if it is sed as a !eans to perpetrate frad or an

illegal act, or as a vehicle for the evasion of an e+isting obligation, the

circ!vention of stattes, or to confse legiti!ate isses%

Before a director or ocer of a corporation can be held personally liable for

corporate obligations, however, the following reqisites !st concr" (1) the

co!plainant !st allege in the co!plaint that the director or ocer

assented to patently nlawfl acts of the corporation, or that the ocer was

gilty of gross negligence or bad faith# and ($) the co!plainant !st clearlyand convincingly prove sch nlawfl acts, negligence or bad faith%

n this case, it was not alleged, !ch less proven, that &y co!!itted an act

as an ocer of -a!!er that wold per!it the piercing of the corporate veil%

6 reading of the co!plaint reveals that with regard to &y, iBan did not

de!and that she be held liable for the obligations of -a!!er becase she

was a corporate ocer who co!!itted bad faith or gross negligence in the

perfor!ance of her dties sch that the lifting of the corporate !as wold

be !erited% Ahat the co!plaint si!ply stated is that she, together with her

errant hsband /ha, acted as srety of -a!!er, as evidenced by her

signatre on the 5rety 6gree!ent which was later fond by the R0/ to have

been forged%

/onsidering that the only basis for holding &y liable for the pay!ent of the

loan was proven to be a falsi'ed doc!ent, there was no scient

>sti'cation for the R0/ to have rled that &y shold be held >ointly and

severally liable to iBan for the npaid loan of -a!!er% 6t !ost, &y cold


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have been charged with negligence in the perfor!ance of her dties as

treasrer of -a!!er by allowing the co!pany to contract a loan despite its

precarios 'nancial position% 0he shortco!ings of &y are not scient to

>stify the piercing of the corporate veil which reqires that the negligence of

the ocer !st be so gross that it cold a!ont to bad faith and !st be

established by clear and convincing evidence%

"-$ ol'key is lia(le for the o(ligation of Ha&&er for (eing

an alter ego of the latter.

&nder a variation of the doctrine of piercing the veil of corporate 'ction,

when two bsiness enterprises are owned, condcted and controlled by the

sa!e parties, both law and eqity will, when necessary to protect the rights

of third parties, disregard the legal 'ction that two corporations are distinct

entities and treat the! as identical or one and the sa!e%

Ahile the conditions for the disregard of the >ridical entity !ay vary, thefollowing are so!e probative factors of identity that will >stify the

application of the doctrine of piercing the corporate veil, as laid down

in Concept Builders, Inc. v NLRC"

(1) 5toc ownership by one or co!!on ownership of both

corporations#

($) dentity of directors and ocers#

(=) 0he !anner of eeping corporate boos and records, and

(9) Methods of condcting the bsiness%

Based on the following, it was apparent that .oldey was !erely an ad>nct

of -a!!er and, as sch, the legal 'ction that it has a separate personality

fro! that of -a!!er shold be brshed aside as they are, ndeniably, one

and the sa!e"

1% Both corporations are fa!ily corporations of Manel /ha and his wife

8e 0an &y%

$% -a!!er .ar!ents and .oldey share the sa!e oce and practically

transact their bsiness fro! the sa!e place%

=% Manel /ha is the resident and /hief perating cer of bothcorporations% 6ll bsiness transactions of .oldey and -a!!er are

done at the instance of Manel /ha who is athorized to do so by the

corporations%

9% 0he assets of .oldey and -a!!er are co3!ingled% 0he real properties

of .oldey are !ortgaged to secre -a!!ers obligation with creditor

hans%


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4% Ahen Manel /ha EdisappearedE, the .oldey ceased to operate%

Dispositive Portion: WHEREFORE, the petitions are PARTLY GRANTED. The

Auust !", #$$% Decision and the Dece&'er #, #$$% Resolution o( the Court

o( Appeals, in CA)*.R. C+ No. "-!, are here'y MODIFIED. /e Tan Uy is

released (ro& any lia'ility arisin (ro& the de'ts incurred 'y 0a&&er (ro&

iBan1. 0a&&er *ar&ents Corporation, 2anuel Chua Uy Po Tion and

*old1ey Develop&ent Corporation are 3ointly and severally lia'le to pay

International 45chane Ban1 the su& o( P!6,%#$,!."# representin the

unpaid loan o'liation o( 0a&&er as o( Dece&'er !#, ! plus interest.

/alley olf 0ountry 0lu(, Inc. vs. !osa 1. v'a. De 0ara&

Ponente: Tinga, 2.

Author: Dia3 'e !ivera

Doctrine:The right of a non-stock corporation such as Valley Golf to expel a member through

the forfeiture of the Golf Share may be established in the by-laws alone.

Facts:

Fermin Z. aram! "r. #aram$ subscribed to purchased and paid for in full one share

#Golf Share$ in the capital stock of Valley Golf. %owe&er! aram stopped and

defaulted paying his monthly dues. Thereafter! aram died.

Valley Golf sent fi&e #'$ letters to aram concerning his delin(uent account) the

first! second and fifth letters were addressed to aram while the third and fourt

letters were addressed to the estate of aram. The Golf Share was sold at publicauction on fo The Golf Share was sold at public auction on ** "une *+, for

/'!000.00 after the 1oard of 2irectors had authori3ed the sale in a meeting on **

4pril *+,! and the 5otice of 4uction Sale was published in the 6 "une *+, edition

of the hilippine 2aily 7n(uirer.8*09o r /'!000.00 after the 1oard of 2irectors had

authori3ed the sale and after the notice was published in the hilippine 2aily

7n(uirer. The heirs of aram filed an action for recon&eyance against Valley Golf

before the Securities and :xchange ommission to reco&er the Golf Share.

Issue:

;hether a non-stock corporation! such as Valley Golf! sei3e and dispose of the

membership share of a fully-paid member on account of its unpaid debts to the

corporation when it is authori3ed to do so under the corporate by-laws but not by

the 4rticles of 7ncorporation. or hearing$ in the absence of any pro&isions

regarding the manner of gi&ing notice under the articles of incorporation or its by-

laws.


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Ratio:

The right of a non-stock corporation such as Valley Golf to expel a member through

the forfeiture of the Golf Share may be established in the by-laws alone. Section +*

of the orporation ode pro&ides)

S:. +*. Termination of membership.—?embership shall be terminated in the

manner and for the causes provided in the articles of incorporation or the

by-laws. Termination of membership shall ha&e the effect of extinguishing all

rights of a member in the corporation or in its property! unless otherwise pro&ided

in the articles of incorporation or the by-laws. #:mphasis supplied$

Generally in theory! a non-stock corporation has the power to effect the termination

of a member without ha&ing to constitute a lien on the membership share or to

undertake the elaborate process of selling the same at public auction. The articles

of incorporation or the by-laws can &ery well simply pro&ide that the failure of a

member to pay the dues on time is cause for the board of directors to terminate

membership.


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matter how one may precisely define such term! it is e&ident in this case that the

termination of aramCs membership betrayed the dictates of substantial =ustice.

7n the case at bar! Valley Golf acted in clear bad faith when it sent the final notice to

aram under the pretense they belie&ed him to be still ali&e! when in fact they had&ery well known that he had already died. The fact that the third and fourth letters

were directed at the estate of aram stands as incontro&ertible proof that Valley

Golf had known of aramCs death e&en prior to the auction sale. This reason alone!

e&ocati&e as it is of the absence of substantial =ustice in the sale of the Golf Share!

is sufficient to nullify the sale

Dispositive Portion: WHEREFORE , the petition is DENIED. Costs against

petitioners.

jon comm law digest i

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