GR 198436; (July, 2015) (Digest)
G.R. No. 198436 , July 8, 2015
PIONEER INSURANCE SURETY CORPORATION, Petitioner, vs. MORNING STAR TRAVEL & TOURS, INC., ESTELITA CO WONG, BENNY H. WONG, ARSENIO CHUA, SONNY CHUA, AND WONG YAN TAK, Respondents.
FACTS
Petitioner Pioneer Insurance & Surety Corporation issued a Credit Insurance Policy to the International Air Transport Association (IATA) to assure payments by accredited travel agents for airline ticket sales under the Billing and Settlement Plan. Respondent Morning Star Travel & Tours, Inc., an IATA-accredited agent, failed to remit its collections, resulting in overdue accounts of P100,479,171.59 and US$457,834.14. Pioneer paid IATA these amounts pursuant to the policy and was subrogated to IATA’s rights. Pioneer filed a Complaint for Collection against Morning Star and its individual shareholders/directors (Estelita Co Wong, Benny H. Wong, Arsenio Chua, Sonny Chua, and Wong Yan Tak). The Regional Trial Court ruled in favor of Pioneer, holding all respondents jointly and severally liable. The Court of Appeals modified the decision, absolving the individual respondents from solidary liability and holding only Morning Star liable. Pioneer filed this Petition for Review, assailing the appellate court’s exoneration of the individual respondents.
ISSUE
Whether the doctrine of piercing the corporate veil applies to hold the individual respondents solidarily liable with respondent Morning Star Travel and Tours, Inc.
RULING
No. The Supreme Court denied the petition and affirmed the Court of Appeals’ decision. The general rule is that a corporation has a separate and distinct personality from its officers and stockholders. Piercing the corporate veil is an exception applied only when the corporate fiction is used to defeat public convenience, justify wrong, protect fraud, or defend crime. For directors to be held solidarily liable under Section 31 of the Corporation Code, the plaintiff must prove that the directors acted in bad faith or with gross negligence in directing the corporation’s affairs. In this case, Pioneer failed to present clear and convincing evidence to overcome the presumption of separate corporate identity. The testimony of Pioneer’s witness, Atty. Vincenzo Nonato M. Taggueg, was based merely on assumptions and his examination of Securities and Exchange Commission documents, which is insufficient to prove bad faith or gross negligence. The fact that Morning Star incurred losses and accumulated debts, without more, does not justify piercing the corporate veil. The alleged badges of fraud, such as the operation of other corporations by the individual respondents and the establishment of a new travel agency by their children, were not substantiated by evidence. Therefore, only the corporation, Morning Star, is liable for the debt.