Case Digest (G.R. No. 57937)
Facts:
In Luis Juan L. Virata and UEM-Amara Philippines Corporation (now Cavitex Infrastructure Corporation) vs. Alejandro Ng Wee, et al. (G.R. Nos. 220926, 221058, 221109, 221135, 221218), decided July 5, 2017 under the 1987 Constitution, the Supreme Court resolved consolidated petitions against the Court of Appeals’ affirmance of a Regional Trial Court (RTC) judgment ordering petitioners jointly and severally to pay respondent‐investor Alejandro Ng Wee ₱213,290,410.36 plus interests, damages, and attorney’s fees. Ng Wee, a long‐time client of Westmont Bank, was introduced in 1998 by bank officers to Westmont Investment Corporation (Wincorp), an affiliate licensed as an investment house under Presidential Decree No. 129. He placed his funds—held under trustees Angel Archangel, Elizabeth Ng Wee, Roberto Tabada Tan, and Alex Lim Tan—in so‐called “sans recourse” transactions brokered by Wincorp, evidenced by Confirmation Advices and Special Powers of Attorney (SPAs).Initially matched
Case Digest (G.R. No. 57937)
Facts:
- Parties and Transaction Mechanics
- Respondent Alejandro Ng Wee, a valued client of Westmont Bank, was introduced in 1998 to “sans recourse” placements with Westmont Investment Corporation (Wincorp).
- Wincorp’s “sans recourse” process: it accredits corporate borrowers, executes a Credit Line Agreement, issues Confirmation Advices to matched investors, and arranges promissory notes drawn by borrowers, while disclaiming liability.
- Investors sign Special Powers of Attorney (SPAs) granting Wincorp authority to execute loan documents on their behalf.
- Hottick Borrower Account and Settlement
- Wincorp extended Hottick Holdings a P1.5 billion credit line secured by suretyships from petitioner Virata, YBhg. Halim Saad, and a mortgage by National Steel Corporation.
- After the 1997–1998 Asian financial crisis, Hottick defaulted. Wincorp sued Hottick and Halim Saad; properties of Halim Saad’s UEM-MARA Philippines were attached.
- Virata negotiated a Settlement Agreement (July 28, 1999) under a July 27, 1999 Memorandum of Agreement: Halim Saad paid USD 1 million, Wincorp released him, and Wincorp issued a December 1, 1999 Waiver and Quitclaim limiting Virata’s obligation to transferring equity in UPDI and its tollway interest.
- Power Merge Borrower Account
- Power Merge Corporation, incorporated August 4, 1997, with Virata holding 374,996 of 375,000 shares, applied for and received a P1.3 billion credit line (Feb 15, 1999), later amended to P2.5 billion (Mar 15, 1999) at special board meetings attended by Wincorp officers (Ong, Reyes, Santos-Tan, Tankiansee, Estrella, Cua, Cualopings).
- Power Merge made six drawdowns totalling P2,183,755,253.11; promissory notes were issued, and Wincorp on-sold portions to investors under 50+ Confirmation Advices totaling P213,290,410.36 under trustee names for Ng Wee.
- Simultaneously with each credit agreement, Wincorp and Power Merge executed Side Agreements sub-participating Hottick obligations to Power Merge, absolving Power Merge from payment under its notes and conferring on Wincorp the right to the underlying Hottick claims.
- Default and Procedural History
- Power Merge defaulted; investors, including Ng Wee, could not collect. On October 19, 2000, Ng Wee sued Wincorp, Power Merge, Virata, UEM-MARA, Wincorp directors/officers (Ong, Reyes, Cua, Cualopings, Santos-Tan, Estrella), alleging fraud, breach of fiduciary duty, and seeking to pierce corporate veils.
- Defendants’ motions to dismiss for lack of real party in interest were denied by RTC (Oct 4, 2001), CA (Aug 21, 2003), and this Court in G.R. 162928 (affirming real party and cause of action).
- Trial (2005–2011): witness testimony and documents showed Ng Wee’s beneficial ownership of P213 million placements; SPAs; Side Agreements’ concealment; Power Merge’s minimal capitalization (P37.5 million paid-in), non-existent business operations, and Wincorp’s advancement of interest.
- RTC Decision (July 8, 2011): found collusion and fraud by Wincorp, Power Merge; held them, Virata, UEM-MARA, and Wincorp directors/officers (except Tankiansee) jointly and severally liable for P213,290,410.36 plus 12% interest from complaint, 20% liquidated damages, 25% attorney’s fees, and P100,000 moral damages; pierced Power Merge and UEM-MARA veils; dismissed Tankiansee.
- CA Decision (Sept 30, 2014): affirmed RTC, modified interest to 12% until June 30, 2013, 6% thereafter; denied reconsideration (Oct 14, 2015).
Issues:
- Real Party in Interest and Cause of Action
- Whether Ng Wee, investing through trustees, is the real party in interest.
- Whether his complaint stated a valid cause of action.
- Liability of Westmont Investment Corporation
- Whether Wincorp’s role was mere brokerage/agency or sale of securities requiring registration.
- Whether “sans recourse” transactions were truly without recourse or effectively quasi-banking with recourse.
- Whether Wincorp committed fraud, breached warranty, or exceeded agency authority.
- Liability of Power Merge and Virata
- Whether Power Merge and Virata are liable for fraud.
- Whether liability arises under promissory notes as makers or as accommodation parties.
- Liability of UEM-MARA Philippines Corporation
- Whether UEM-MARA can be held liable for receipt or laundering of proceeds.
- Liability of Wincorp Directors and Officers
- Application of Section 31, Batas Pambansa 68 (Corporation Code): willful assent to unlawful acts, gross negligence, bad faith.
- Piercing the corporate veil over Power Merge and personal liability of Virata.
- Liability of Reyes, Cua, Cualopings, Santos-Tan, Estrella under corporate officer/director standards.
- Damages and Remedies
- Proper award of principal, interests, liquidated damages, attorney’s fees, moral damages.
- Validity of contractual stipulations and judicial reduction under Civil Code.
- Counterclaims and Cross-claims
- Whether appellants’ cross-claims for indemnity/liberation prosper.
Ruling:
- (Subscriber-Only)
Ratio:
- (Subscriber-Only)
Doctrine:
- (Subscriber-Only)