G.R. No. 173333 ; August 13, 2008
LUCIA MAGALING, PARALUMAN R. MAGALING, MARCELINA MAGALING-TABLADA, and BENITO R. MAGALING (Heirs of the late Reynaldo Magaling), petitioners, vs. PETER ONG, respondent.

FACTS

Respondent Peter Ong filed a complaint for sum of money against Spouses Reynaldo and Lucia Magaling and Termo Loans & Credit Corporation. Ong alleged that Reynaldo Magaling, as president and controlling stockholder of Termo Loans, induced him to lend money to the corporation with a promise to pay monthly interest. The corporation issued postdated checks and a promissory note for the loans. Upon the corporation’s failure to pay, Ong sued, arguing the spouses should be held jointly and severally liable as the corporation was their mere alter ego. The Regional Trial Court (RTC) ruled in favor of Ong, holding the spouses and the corporation jointly and severally liable and issuing a writ of preliminary attachment against the spouses’ properties.
The Court of Appeals (CA) reversed the RTC. The CA absolved petitioner Lucia Magaling from personal liability, finding no clear evidence that she committed fraud in contracting the obligation or that she used the corporate fiction to evade payment. The CA sustained the liability of the corporation and the late Reynaldo Magaling but lifted the writ of attachment against Lucia Magaling’s separate properties. Petitioners, the heirs of Reynaldo Magaling, elevated the case, arguing the CA erred in not applying the doctrine of piercing the corporate veil to hold Lucia liable.

ISSUE

Whether the Court of Appeals erred in not holding petitioner Lucia Magaling personally liable for the corporate debt of Termo Loans & Credit Corporation.

RULING

The Supreme Court denied the petition and affirmed the CA’s decision. The legal logic rests on the fundamental principle of corporate personality, which separates the juridical entity from its 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. The burden of proof lies with the party seeking to disregard corporate identity.
In this case, petitioners failed to present clear and convincing evidence that Lucia Magaling used the corporate structure to commit fraud or evade her personal obligations. The complaint and evidence primarily pertained to acts undertaken by Reynaldo Magaling in his corporate capacity. The issuance of checks and the promissory note were corporate acts. Mere ownership of stock or being an officer is insufficient to justify personal liability. There was no showing that Lucia Magaling herself abused the corporate form or that her separate property was confused with corporate assets. Therefore, the corporate veil must be respected, and she cannot be held personally liable for the corporation’s debt. The corporate obligation remains with Termo Loans and, by extension, the estate of Reynaldo Magaling in his capacity as a responsible corporate officer, but not as a personal liability extending to his spouse’s separate property.