G.R. No. 220926 /G.R. No. 221058/G.R. No. 221109/G.R. No. 221135/G.R. No. 221218, July 5, 2017
LUIS JUAN L. VIRATA and UEMMARA PHILIPPINES CORPORATION (now CAVITEXINFRASTRUCTURE CORPORATION), Petitioners vs. ALEJANDRO NG WEE, WESTMONT INVESTMENT CORP., ANTHONY T. REYES, SIMEON CUA, VICENTE CUALOPING, HENRY CUALOPING, MARIZA SANTOSTAN, and MANUEL ESTRELLA, Respondents (Consolidated Cases)

FACTS

Alejandro Ng Wee, a client of Westmont Bank, was induced by the bank manager to invest in “sans recourse” transactions offered by its affiliate, Westmont Investment Corporation (Wincorp). These transactions involved Wincorp matching investor funds with accredited corporate borrowers. Ng Wee, relying on representations of safety and high yield, placed substantial investments. Wincorp issued Confirmation Advices detailing the borrower and terms, and Ng Wee executed Special Powers of Attorney (SPAs) authorizing Wincorp to act on his behalf. A significant portion of Ng Wee’s investments was matched with Hottick Holdings Corporation. Hottick defaulted during the Asian financial crisis.
Wincorp filed a collection suit against Hottick and its guarantors. Luis Juan Virata, a surety for Hottick, brokered a settlement. A Compromise Agreement was approved by the court, wherein Virata and UEM-MARA (now Cavitex) assumed Hottick’s debt to Wincorp. The agreement included a schedule for payments to Wincorp’s various creditors, including Ng Wee. However, Virata and UEM-MARA failed to make the scheduled payments. Consequently, Ng Wee filed a complaint for sum of money and damages against Wincorp, its officers/directors (Anthony Reyes, Simeon Cua, Vicente Cualoping, Henry Cualoping, Mariza Santos-Tan, Manuel Estrella), and Virata and UEM-MARA.

ISSUE

The primary issue is whether the petitioners (Wincorp, its officers/directors, Virata, and UEM-MARA) are solidarily liable to Ng Wee for the unpaid investments.

RULING

Yes, the petitioners are solidarily liable. The Supreme Court affirmed the lower courts’ decisions. The legal logic proceeds as follows: First, Wincorp, through its officers and directors, committed gross negligence and bad faith. The “sans recourse” designation in the Confirmation Advices was a misrepresentation. By matching Ng Wee’s funds with a single, high-risk borrower (Hottick) without diversification and despite knowing Hottick’s precarious financial state, Wincorp breached its fiduciary duty to act with utmost good faith. The officers/directors failed to exercise the diligence of a good father of a family, making them personally liable under the doctrine of piercing the corporate veil due to their willful and deliberate acts.
Second, Virata and UEM-MARA’s liability is contractual and direct. Their obligation stems from the court-approved Compromise Agreement, wherein they expressly assumed the debt owed to Wincorp’s creditors, including Ng Wee. Their failure to comply rendered them liable for the principal amount. The Court rejected their defense that Ng Wee was not a party to that agreement, ruling that Ng Wee, as a clearly designated creditor-beneficiary under the agreement, had a direct right of action against them for its enforcement. Consequently, all petitioners are jointly and severally liable to Ng Wee for the unpaid principal, with legal interest, temperate damages