Bank of Commerce vs. Marilyn Nite, G.R. No.

211535, July 22, 2015

CORPO

REQUISITES TO PIERCE THE VEIL OF CORPORATE FICTION: To hold a

director or officer personally liable for corporate obligations, two
requisites must concur: (1) complainant must allege in the complaint that
the director or officer assented to patently unlawful acts of the corporation,
or that the officer was guilty of gross negligence or bad faith; and (2)
complainant must clearly and convincingly prove such unlawful acts,
negligence or bad faith. To hold a director personally liable for debts of the
corporation, and thus pierce the veil of corporate fiction, the bad faith or
wrongdoing of the director must be established clearly and
convincingly. It is settled that the transaction between Bancom and Bancap
is an ordinary sale.

ULTRAVIRES ACTS ARE NOT ALWAYS UNLAWFUL: In addition, we

consider the testimony of Lagrimas Nuqui, the Legal Officer in Charge of the
Government Securities Department of the Bangko Sentral ng Pilipinas from
1994 to 1998, who explained that primary issues of treasury bills are
supposed to be issued only to accredited dealers but these accredited banks
can sell to anyone who need not be accredited, and such buyers, who may
be corporations or individuals, are classified as the secondary market. The
trial court and the Court of Appeals found that Bancap sold the treasury bills
as a secondary dealer. As such, Bancap's act of selling securities to Bancom
is at most ultra vires and not patently unlawful.

FACTS:

Respondent was charged, together with one Bradley and Escalambre, with
violation of Section 19 of Batas Pambansa Bilang 178. Nite was also charged,
together with Bradley, Escalambre, and Yang, with Estafa. The two cases
were tried jointly.

The prosecution's argument was that Nite, as President of Bancapital

Development Corporation (Bancap), violated Section 19 of BP Blg. 178 when
Bancap sold P250 million worth of treasury bills to Bank of Commerce
(Bancom) without being registered as broker, dealer, or salesman of
securities. The prosecution also alleged that Nite defrauded Bancom by
falsely pretending to possess and own P250 million worth of treasury bills
that Bancap supposedly sold to Bancom when none of the treasury bills
described in the Confirmation of Sale and Letter of Undertaking issued by
Bancap were ever delivered to Bancom. On Trial, the court ruled that the
prosecution was not able to establish that Bancap acted as a primary dealer
that needed to be accredited. According to the trial court, Bancap acted as a
secondary dealer and did not buy the treasury bills directly from the Central
Bank. The trial court ruled that the element of deceit was non-existent and
that at the time of the transaction, Bancom was aware that Bancap was not
in physical possession of the treasury bills subject of the sale. Hence, Nite
was ACQUITTED of both charges made. However, she was ordered to pay
BANK OF COMMERCE representing the civil obligation of BANCAPITAL. Nite
filed a partial motion for reconsideration which was later granted.
When it was the prosecution's turn to file a motion for reconsideration,
it alleges that the trial court erred in absolving Nite of her civil liability to
Bancom. The prosecution alleged that the trial court erred in not piercing the
corporate veil of Bancap when it was adequately shown that Nite used the
company to perpetuate fraud and to evade an existing obligation.
Nevertheless, the said motion was denied for lack of merit.

On Appeal, it affirmed the TCs Decision. Hence, Bancom filed a petition for
review before this Court.

ISSUE: W/N the Court of Appeals erred in not piercing the corporate veil of
Bancap even though the same was being used to perpetuate fraud.

RULING:

We deny the petition.

The general rule is that a corporation is invested by law with a personality

separate and distinct from that of the persons composing it, or from any
other legal entity that it may be related to.12 The obligations of a corporation,
acting through its directors, officers, and employees, are its own sole
liabilities.13 Therefore, the corporation's directors, officers, or employees are
generally not personally liable for the obligations of the
corporation.14chanrobleslaw

To hold a director or officer personally liable for corporate obligations, two

requisites must concur: (1) complainant must allege in the complaint that the
director or officer assented to patently unlawful acts of the corporation, or
that the officer was guilty of gross negligence or bad faith; and (2)
complainant must clearly and convincingly prove such unlawful acts,
negligence or bad faith.15 To hold a director personally liable for debts of the
corporation, and thus pierce the veil of corporate fiction, the bad faith or
wrongdoing of the director must be established clearly and
convincingly.16chanrobleslaw
The court considered the testimony of Lagrimas Nuqui, the Legal Officer in
Charge of the Government Securities Department of the Bangko Sentral ng
Pilipinas from 1994 to 1998, who explained that primary issues of treasury
bills are supposed to be issued only to accredited dealers but these
accredited banks can sell to anyone who need not be accredited, and such
buyers, who may be corporations or individuals, are classified as the
secondary market. The trial court and the Court of Appeals found that
Bancap sold the treasury bills as a secondary dealer. 17 As such, Bancap's act
of selling securities to Bancom is at most ultra vires and not patently
unlawful.

Based on the foregoing, we cannot hold Nite personally liable for Bancap's
corporate liability.

WHEREFORE, we DENY the petition.