Case Summary (G.R. No. 198436)
Key Individuals and Context
- Petitioner: Pioneer Insurance & Surety Corporation (insurer under BSP-Philippines Agents Credit Insurance Program)
- Accredited Agent: Morning Star Travel & Tours, Inc. (appointed by IATA to sell air tickets on credit through the Billing and Settlement Plan)
- Individual Respondents: Estelita Co. Wong (President/Director), Benny H. Wong (Chairman/Director), Arsenio Chua (Director), Sonny Chua (Secretary/Director), Wong Yan Tak (Treasurer/Director)
- International Air Transport Association (IATA): Canadian corporation overseeing ticket settlement
- Related Entities: Morning Star Management Ventures Corp.; Pic ’N Pac Mart, Inc.; Morning Star Tour Planners, Inc. (alleged successor)
Petitioner
- Paid to IATA P100,479,171.59 and US$457,834.14 on behalf of Morning Star under credit insurance after Morning Star defaulted on remittances.
- Seeks to hold Morning Star’s directors and officers personally and solidarily liable under Section 31, Corporation Code.
Respondents
- Assert separate juridical personality shields them from personal liability absent clear proof of bad faith, gross negligence, or fraud.
Key Dates
- 1993: IATA accredits Morning Star as BSP agent.
- Nov. 1, 2001–Dec. 31, 2002 & Jan. 1–Dec. 31, 2003: Credit insurance coverage.
- Dec. 16, 2002–Apr. 30, 2003: Accrued unpaid remittances.
- Nov. 10, 2005: Complaint filed before Makati RTC.
- Nov. 9, 2007: RTC default judgment holding all respondents jointly and severally liable.
- Feb. 28, 2011: CA decision deletes officers’ liability; holds only Morning Star liable; deletes exemplary damages and attorneys’ fees.
- Aug. 31, 2011: CA denies reconsideration.
- Jul. 8, 2015: Supreme Court resolves Review on the Merits.
Applicable Law
- 1987 Constitution (Article VIII): judicial power vested in Supreme Court; limited review to questions of law under Rule 45.
- Corporation Code (B.P. Blg. 68), Section 31: directors/trustees liable for willful, bad faith or grossly negligent acts.
- Rule 45, Rules of Court: review of factual findings only for patent misappreciation.
- Jurisprudence on separate corporate personality, piercing the veil (Concept Builders v. NLRC), badges of fraud (Oria v. McMicking), interest rate adjustment (Nacar v. Gallery Frames).
Procedural History
- RTC: Pioneer obtains ex parte default judgment against Morning Star and its officers; finds gross negligence and bad faith; orders solidary liability for P100,479,171.59 and US$457,834.14, plus interest (12%), attorney’s fees, exemplary damages, litigation expenses.
- CA: Affirms liability of Morning Star only; deletes officers’ liability, exemplary damages, and attorney’s fees for lack of basis.
- Supreme Court: Reviews petition under Rule 45; considers exceptions for misappreciation of facts; affirms CA’s ruling with modification on interest rate.
Issues Presented
- Whether factual findings on piercing the corporate veil may be reviewed under the “patent misappreciation of facts” exception.
- Whether circumstances justify piercing Morning Star’s corporate veil to impose solidary liability on its officers.
Supreme Court’s Analysis on Reviewability
- Under Rule 45, only questions of law are reviewable, except when there is patent misappreciation of facts.
- No such misappreciation by the CA; its factual findings on lack of exceptional circumstances are supported by the record.
Supreme Court’s Analysis on Separate Corporate Personality
- A corporation is a separate legal entity (1987 Constitution, Article XII, Sec. 11); officers enjoy limited liability.
- Section 31 requires clear and convincing proof of willful unlawful acts, bad faith, or gross negligence.
- Bad faith implies conscious wrongdoing or fraud, not mere business risk or misjudgment.
- Insolvency and interlocking directorships alone do not establish bad faith.
Analysis of Badges of Fraud
- Petitio
Case Syllabus (G.R. No. 198436)
Factual Background
- Morning Star Travel & Tours, Inc. (“Morning Star”) was appointed by the International Air Transport Association (“IATA”) as an accredited travel agent under a Passenger Sales Agency Agreement, required to report ticket sales and remit payments through IATA’s centralized Billing and Settlement Plan (BSP).
- IATA obtained a Credit Insurance Policy from Pioneer Insurance & Surety Corporation (“Pioneer”) for the period November 1, 2001–December 31, 2002 (renewed January 1, 2003–December 31, 2003), to guarantee payment of agents’ BSP obligations.
- Morning Star accrued BSP billing of P49,051,641.80 and US$325,865.35 (December 16–31, 2002) but failed to remit; IATA notified Morning Star of default on January 17 and January 20, 2003, and later demanded P109,728,051.00 and US$457,834.14 as of April 30, 2003.
- Pioneer validated IATA’s claim, paid IATA P100,479,171.59 and US$457,834.14, and received a subrogation receipt and release on December 23, 2003; Pioneer then formally demanded payment from Morning Star by letter dated September 23, 2003.
Procedural History
- On November 10, 2005, Pioneer filed a Complaint for Collection of Sum of Money and Damages against Morning Star and its directors/officers (Benny Wong, Estelita Wong, Arsenio Chua, Sonny Chua, Wong Yan Tak).
- Morning Star, Benny Wong, and Estelita Wong were served November 22, 2005; the other respondents were initially unserved. The RTC granted default due to failure to answer, and Pioneer presented evidence ex parte.
- An alias summons was issued and served February 5, 2007; Morning Star again declared in default. A motion for leave to file a late answer (June 28, 2007) was denied, and reconsideration was likewise denied.
- The Regional Trial Court (Makati City, Branch 143) rendered judgment on November 9, 2007, ordering all defendants to pay jointly a