Professional Documents
Culture Documents
7. Unknown to Ng Wee, however, on the same date the two 11. The cross claim of Virata against Ong, Reyes and the
Agreements were separately signed, Side Agreements board members were also granted and Wincorp, Ong and
were also entered between Wincorp (represented by Ong Reyes together with the board members were ordered
and Reyes) and Power Merge absolving Power Merge of jointly and severally liable to pay and reimburse Virata for
liability on the PNs. any payment or contribution he made to Ng Wee.
Petitioners filed for an MR which is the basis of this 2. Section 31 of the Corporation Code provides: Section 31.
Resolution. Liability of directors, trustees or officers . — Directors or trustees
who willfully and knowingly vote for or assent to patently
12. The Court notes that the grounds relied upon by Virata, unlawful acts of the corporation or who are guilty of gross
Estrella, Ng Wee, Cua and the Cualopings, Reyes, and negligence or bad faith in directing the affairs of the corporation
Wincorp are the same or substantially similar to those or acquire any personal or pecuniary interest in conflict with their
raised in their respective petitions thus were denied. duty as such directors or trustees shall be liable jointly and
severally for all damages resulting therefrom suffered by the
13. Santos-Tan however did not appeal the decision of the CA corporation, its stockholders or members and other persons.
holding her liable with her co-parties to Ng Wee and was
only participating in the proceedings in her plea of When a director, trustee or officer attempts to acquire or acquire,
reconsideration. She argues that the cross-claim should in violation of his duty, any interest adverse to the corporation in
not have been granted because the Side Agreements respect of any matter which has been reposed in him in
which served as the basis thereof never got the imprimatur confidence, as to which equity imposes a disability upon him to
of the Board of Directors. Moreover, considering the deal in his own behalf, he shall be liable as a trustee for the
P2.18bn drawdowns of Power Merge, she found it corporation and must account for the profits which otherwise
iniquitous and immoral to require her and her co-directors would have accrued to the corporation.
to reimburse Virata of whatever he was required to pay Ng
Wee. 3. For Cua and the Cualopings, the totality of circumstances
proves that they are either complicit to the fraud, or at the very
ISSUES: 1. Are the board of directors personally liable to Ng Wee least guilty of gross negligence.
for the investment he
a. The board is charged with a fiduciary duty which it failed to fulfill
placed with Power Merge through Wincorp? YES when it did not heed the warning signs which would have
cautioned it from approving the loan in haste: (1) Power
RATIO:
Merge has only been in existence for two years when it
1. In its 5 July 2017 decision, the Court explained the liabilities of was granted a credit facility; (2) Power Merge was thinly
the board directors in view of Section 31 of the Corporation Code. capitalized with only P37,500,000.00 subscribed capital;
(3) Power Merge was not an ongoing concern since it
never secured the necessary permits and licenses to likewise did not allow him to use as defense his being a
conduct business, it never engaged in any lucrative mere nominee and that he only had one nominal share as
business, and it did not file the necessary reports with the well as whether or not he received compensation or
SEC; and (4) no security other than its Promissory Notes honoraria for attending the board meetings.
was demanded by Wincorp or was furnished by Power
Merge in relation to the latter's drawdowns. 6. The liability of Santos-Tan is no different from Cua and the
Cualopings in their personal capacity under Section 31 of
b. Further, prior to Power Merge’s application for a credit facility, the Corporation Code.
Virata had outstanding unpaid transactions with Wincorp
for its Hottick obligations. Instead of impleading Virata in 7. The contention that the Side Agreements were without the
the Hottick account, however, Wincorp released him from imprimatur of its board of directors cannot be given
liability and granted him a credit facility in the amount of credence. The totality of circumstances supports the
P1.3bn. conclusion that the Wincorp directors impliedly ratified, if
not furtively authorized, the signing of the Side
c. It is immaterial if Cua and the Cualopings approved or not the Agreements in order to lay the groundwork for the
Side Agreements or authorized its signing. Wincorp could fraudulent scheme.
have avoided its troubles if they were vigilant enough to
disapprove the Power Merge credit application. a. Virata had existing obligations to Wincorp from the
Hottick account. However, the board excluded
4. Tankiansee was absolved because his immigration records Virata as a party respondent to its collection suit
clearly show that he was outside the country during the against Hottick and, on the same day, approved
dates when the Agreements were approved by the board. the P1.3bn credit line to Power Merge.
2. The directors did not willfully and knowingly vote for or assent
to the execution of the Side Agreements that exonerated
Power Merge of its liability on the promissory notes,
except for the signatories who were Ong and Reyes.