G.R. No. 111008 November 7, 1994
TRAMAT MERCANTILE, INC. AND DAVID ONG, petitioners, vs. HON. COURT OF APPEALS AND MELCHOR DE LA CUESTA, respondents.

FACTS

On April 9, 1984, private respondent Melchor de la Cuesta, doing business as “Farmers Machineries,” sold one unit of a HINOMOTO TRACTOR Model MB 1100D to petitioner Tramat Mercantile, Inc. (“Tramat”). In payment, David Ong, Tramat’s president and manager, issued a check for P33,500.00. Tramat then sold the tractor, with an attached fabricated lawn mower, to the Metropolitan Waterworks and Sewerage System (“MWSS”) for P67,000.00. David Ong caused a “stop payment” on the check after MWSS refused to pay, having discovered that the tractor’s engine was a reconditioned unit and that the lawn mower had defects. On May 28, 1985, de la Cuesta filed an action for recovery of the P33,500.00, plus attorney’s fees and costs. The trial court ruled in favor of de la Cuesta, ordering Tramat and David Ong jointly and severally liable. The Court of Appeals affirmed this decision in toto.

ISSUE

Whether David Ong, as a corporate officer of Tramat Mercantile, Inc., can be held jointly and severally liable with the corporation for its obligations under the contract of sale.

RULING

No. The Supreme Court modified the decision of the lower courts. It held that David Ong acted in his official capacity as an officer of Tramat, a corporation with a distinct and separate personality. As a rule, a corporate officer is not personally liable for corporate acts unless: 1) he assents to a patently unlawful act, acts in bad faith, or with gross negligence or conflict of interest; 2) he consents to the issuance of watered stocks; 3) he agrees to be personally liable; or 4) a specific provision of law holds him personally accountable. None of these circumstances were present in this case. Therefore, only the corporation, Tramat Mercantile, Inc., should be held liable under the transaction. The Court affirmed the finding that the sale was absolute, not conditional, and that de la Cuesta did not violate any warranty, but set aside the portion holding David Ong jointly and severally liable.