HEIRS OF FE TAN UY vs.

INTERNATIONAL EXCHANGE BANK

TOPIC: Peircing the Veil & Liability of corporate officers (both in this case) Digested by: Jiggy
Marquez

NOTES: two (2) companies; Hammer and Goldkey were treated as one bec both were family
corporations owned by Chua and his family, they obtained a loan and tried to avoid it by
submitting falsified financial records, RTC held the treasurer Ong solidarily liable to pay the loan
but SC ruled she shouldn’t be liable solidarily bec. The plaintiff did not pray for this.

FACTS:

From June 23 1997 to Sep. 3 1997, International Exchange Bank granted 9 loans totaling to P
24,938,898.08 (close to 25M) – granted loans to Hammer Garments Corporation
secured/covered by promissory notes and deeds of assignment. These were made by Hammer
represented by its President and General Manager Manuel “Chua”

The loans were furthermore secured by Several properties of GoldKey over several of its
properties and a P25 Million-Peso surety agreement siged by Chua and his wife Uy (but later on
RTC found this signature as a forgery) – Hammer garments corporation defaulted on the 25 M
loan which prompted, International Exchange Bank / iBank to file a complaint for sum of money
to recover it.

RTC: found the signature of Uy as a forgery but still held her solidarily liable as an officer and
stockholder of Hammer Garments Corp. and agreed with GoldKey (that its liability was limited
to its assets only) but found and concluded ultimately that both HAMMER and GOLDKEY were
one and the same bec its officers, assets, place of business are the same and both are fam
corporations of the Chua & Uy. CA: affirmed.

ISSUES:
1) Whether Uy can be held liable to iBank/International Exchange Bank for the loan – NO.
2) Whether Goldkey can be held liable for the obligation of Hammer for being a mere alter ego
of the latter(Hammer). -YES

HELD:

1) Uy is not liable, it was not shown that she committed or participated in a commission of
a wrong or was grossly negligent. The Heirs of Uy are correct to allege that iBank never
said that Uy committed acts warranting for piercing of the corporate veil. iBank did not
demand that she be held solidarily liable, the note that says she will be a surety was also
found to be forgery. At most Uy can only be charged with negligence as treasuer for
allowing the company to enter a loan when they were in a precarious financial position.
 Before a director or officer of a corporation can be held personally liable for corporate
obligations, however, the following requisites must concur: (1) the 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) the
complainant must clearly and convincingly prove such unlawful acts, negligence or bad
faith.

(DOCTRINE) Solidary liability will then attach to the directors, officers or employees of the
corporation in certain circumstances, such as:

1. When directors and trustees or, in appropriate cases, the officers of a corporation: (a)
vote for or assent to patently unlawful acts of the corporation; (b) act in bad faith or with
gross negligence in directing the corporate affairs; and (c) are guilty of conflict of interest to
the prejudice of the corporation, its stockholders or members, and other persons;

2. When a director or officer has consented to the issuance of watered stocks or who,
having knowledge thereof, did not forthwith file with the corporate secretary his written
objection thereto;

3. When a director, trustee or officer has contractually agreed or stipulated to hold himself
personally and solidarily liable with the corporation; or

4. When a director, trustee or officer is made, by specific provision of law, personally liable
for his corporate action

2) GoldKey is/was reminded that it was being sued not because of the mortgage but because it
acted as an alter ego of Hammer – Both corporations are family owned, the incorporators and
shareholders are relatives of Chua, The place of business is in the same place, the Defendant
Chua is the President and Chief Operating Officer of both GoldKey and Hammer, the assets of
GoldKey and Hammer are comingled. When Chua disappeared, Goldkey ceased to operate
despite the claim that the other officers are able to continue the business of GoldKey, and
GoldKey obviously suffered financial setback / ruin when Hammer was in financial ruin.

(DOCTRINE) Concept Builders, Inc. v. NLRC provides for probative factors for identity to apply
piercing;

(1) Stock ownership by one or common ownership of both corporations; (2) Identity of
directors and officers;
(3) The manner of keeping corporate books and records, and (4) Methods of conducting the
business.
(DOCTRINE) When two business enterprises are owned, conducted and controlled by the same
parties, both law and equity will, when necessary to protect the rights of third parties, disregard
the legal fiction that two corporations are distinct entities and treat them as identical or one
and the same. (General Credit Corporation v. Alsons Development and Investment Corporation,
542 Phil. 219, 231; 513 SCRA 225, 238 (2007).)