GR 132403; (September 2007) (Digest)
G.R. No. 132403 & G.R. No. 132419; September 28, 2007
HI-CEMENT CORPORATION, Petitioner, vs. INSULAR BANK OF ASIA AND AMERICA (now EQUITABLE-PCI BANK), Respondent. / E.T. HENRY & CO. and SPOUSES ENRIQUE TAN and LILIA TAN, Petitioners, vs. INSULAR BANK OF ASIA AND AMERICA (now EQUITABLE-PCI BANK), Respondent.
FACTS
Respondent bank granted E.T. Henry & Co. a credit facility for the “Purchase of Short Term Receivables,” which involved the re-discounting of postdated checks issued by its clients, including Hi-Cement Corporation. From 1979 to 1981, E.T. Henry re-discounted these checks with the bank, executing corresponding promissory notes and deeds of assignment. In February 1981, twenty crossed checks issued by Hi-Cement, bearing the restriction “deposit to payee’s account only,” were dishonored, as were checks from other clients. The bank filed a complaint for sum of money against E.T. Henry, its controlling stockholders (spouses Tan), and the corporate drawers, including Hi-Cement.
The trial court held all defendants solidarily liable for the value of the dishonored checks and other loan deficiencies. The Court of Appeals affirmed this decision. Hi-Cement appealed, arguing its officers lacked authority to issue the checks, the bank was not a holder in due course, and it should not be solidarily liable for other corporations’ checks. E.T. Henry and the spouses Tan separately appealed, contesting the piercing of the corporate veil and the validity of a foreclosure sale.
ISSUE
The primary issues were: (1) whether Hi-Cement is liable for the dishonored crossed checks issued by its officers; (2) whether the bank was a holder in due course entitled to enforce the checks; and (3) whether the spouses Tan could be held solidarily liable for E.T. Henry’s corporate obligations.
RULING
The Supreme Court partially granted the petitions. On Hi-Cement’s liability, the Court ruled it was estopped from denying the authority of its general manager and treasurer to issue the checks. Their positions inherently carried such authority, and Hi-Cement’s continuous issuance of checks to E.T. Henry over two years constituted ratification. However, the bank was not a holder in due course of the crossed checks. A crossing is a warning of non-negotiability, and the bank, as a collecting agent, was duty-bound to credit the proceeds only to the payee’s account. By purchasing the checks via re-discounting, the bank violated this fiduciary duty and assumed the risk of dishonor. Consequently, Hi-Cement’s liability is not to the bank but to the payee, E.T. Henry.
Regarding the spouses Tan, the Court found no compelling reason to pierce the corporate veil. Mere ownership by a single stockholder or the fact that the corporation is a family business is insufficient. There was no evidence that the spouses used the corporate fiction to defraud or evade an existing obligation. Thus, they could not be held solidarily liable for E.T. Henry’s corporate debts. The Court remanded the case to the trial court to determine the precise liabilities among the parties in accordance with this ruling, particularly Hi-Cement’s obligation to E.T. Henry.