G.R. No. 220926 , March 21, 2018
Ng Wee, et al. vs. Wincorp Finance and Investment Corporation, et al.

FACTS

This case involves a credit line extended by Wincorp to Power Merge, secured by promissory notes. However, side agreements executed by Wincorp officers Antonio Ong and Anthony Reyes simultaneously with the credit agreements virtually exonerated Power Merge from liability on the notes. An investor, Ng Wee, who was not privy to these side agreements, sought to recover his investment.
The ponencia found actionable fraud by Wincorp and pierced the corporate veil, holding its directors and officers personally and solidarily liable with the corporation under Section 31 of the Corporation Code for assenting to the patently unlawful credit agreements. The dissent, penned by Justice Tijam, concurs with the findings of fraud and liability against Wincorp, Ong, and Reyes, but disagrees with the personal liability imposed on the other individual petitioners: Simeon Cua, Vicente and Henry Cualoping, Mariza Santos-Tan, and Manuel Estrella.

ISSUE

Whether the individual petitioners (Cua, the Cualopings, Santos-Tan, and Estrella) should be held personally and solidarily liable for the corporate obligations of Wincorp to Ng Wee.

RULING

No. The dissenting opinion holds that the corporate veil should not be pierced to impose personal liability on these specific individuals. The principle of separate corporate personality is fundamental, and its disregard is an exception requiring clear and convincing evidence that the corporate fiction was used to perpetrate a fraud or injustice. Personal liability for directors under Section 31 of the Corporation Code attaches only when they willfully and knowingly assent to patently unlawful corporate acts, or are guilty of gross negligence or bad faith.
The dissent reasons that the mere approval of the Credit Line Agreement and its Amendment, which falls within Wincorp’s ordinary business as an investment house, cannot be equated to assenting to a patently unlawful act. The records do not establish that these individuals knew of, authorized, or ratified the fraudulent side agreements executed by Ong and Reyes. Their approval of the main credit agreements, which later proved to be an unfavorable business strategy, constitutes at most an error in business judgment, not the bad faith, fraud, or gross negligence required to pierce the corporate veil or to trigger personal liability under Section 31. Therefore, there is no legal basis to hold them jointly and severally liable.