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SOLIDBANK CORPORATION v. MINDANAO FERROALLOY CORPORATION

FACTS:

The case involves two separate disputes between Solidbank Corporation and two corporations, Mindanao Ferroalloy Corporation (Minfaco) and Land Bank of the Philippines (LBP), as well as several individual respondents. In the first dispute, Minfaco obtained a loan from Solidbank, which it failed to pay. Solidbank filed a complaint against Minfaco and the individual respondents, alleging their joint and several liability for Minfaco's loan. The trial court dismissed the complaint against the individual respondents, finding no evidence of their personal liability. It rendered summary judgment in favor of Solidbank against Minfaco. The Court of Appeals upheld the trial court's decision, ruling that the individual respondents were not solidarily liable and were not liable for damages. In the second dispute, LBP filed a complaint for foreclosure against Minfaco and the individual respondents, claiming their joint and several liability for Minfaco's debt. The trial court found the individual respondents jointly and solidarily liable. The Court of Appeals affirmed the decision but modified the award of damages. The individual respondents petitioned the Supreme Court, challenging their joint and solidary liability as well as the award of damages.

ISSUES:

  1. Whether the individual respondents are jointly or solidarily liable with Minfaco.

  2. Whether the corporate officers can be held personally liable for the consequences of their acts on behalf of the corporation.

  3. Whether the authority of Respondents Cu and Hong to sign for and on behalf of the corporation has been established.

  4. Whether the corporate veil should be pierced to hold the individual respondents personally liable for the debt.

  5. Whether fraud and bad faith have been proven by the petitioner.

  6. Can the court take judicial notice of the practices of banks and financial institutions?

  7. Should the individual respondents be awarded damages?

RULING:

  1. The individual respondents are not jointly or solidarily liable with Minfaco. The findings of fact made by the trial and appellate courts, which were not shown to have any exceptional circumstance that warrants their disregard, establish that the individual respondents did not sign the loan documents as comakers, and there was no evidence of fraud or deception to justify piercing the corporate veil.

  2. Corporate officers cannot be held personally liable for their acts on behalf of the corporation, as long as these acts are within the scope of their authority and in good faith. There is a separate corporate personality that shields corporate officers from personal liability, and personal liability may only attach under certain circumstances such as assenting to patently unlawful acts, acting in bad faith or gross negligence, consenting to the issuance of watered stocks, or being made personally answerable by a specific provision of law. In this case, there was no evidence of any of these circumstances to hold the individual respondents personally liable.

  3. The authority of Respondents Cu and Hong to sign for and on behalf of the corporation has been established through a resolution of the corporation's Board of Directors.

  4. The corporate veil should not be pierced because the wrongdoing and fraud alleged by the petitioner have not been clearly and convincingly established.

  5. Fraud and bad faith have not been proven by the petitioner as it failed to establish that it was deceived into granting the loans because of the respondents' misrepresentations and/or insidious actions.

  6. Yes, the court can take judicial notice of the practices of banks and financial institutions. It is within the court's discretion to take judicial notice of matters that are of public knowledge or ought to be known to judges because of their judicial functions. In this case, the court noted that it is the uniform practice of banks and financial institutions to investigate, examine, and assess the credit standing or real estate offered as security before approving a loan.

  7. No, the individual respondents should not be awarded damages. To justify an award of damages for malicious prosecution, two elements must be proven: malice or sinister design to vex or humiliate, and want of probable cause. In this case, while the petitioner was proven wrong in impleading the spouses, there was not enough evidence to establish that the suit was patently malicious. The petitioner honestly believed that the spouses had benefited from the proceeds of the loan, and there was no evident bad faith or malice. Therefore, an award for damages is not proper.

PRINCIPLES:

  • A corporation has a separate personality from that of its officers and is liable for its own acts.

  • Corporate officers cannot be held personally liable for their acts on behalf of the corporation, as long as these acts are within the scope of their authority and in good faith.

  • Solidary liability cannot be lightly inferred and must be expressly stated or required by law or the nature of the obligation.

  • In a joint obligation, there must be at least two debtors, each liable only for a proportionate part of the debt.

  • Under the Negotiable Instruments Law, agents or representatives may sign negotiable instruments for and on behalf of a disclosed principal if duly authorized.

  • The corporate veil may be pierced under certain circumstances, but clear and convincing evidence is required to establish wrongdoing or fraud.

  • Fraud must be proven by clear and convincing evidence, and bad faith involves a design to mislead or deceive another.

  • The court can take judicial notice of matters that are of public knowledge or ought to be known to judges because of their judicial functions.

  • The exercise of a legal right must be done in accordance with the proper norm and must not be done arbitrarily, unjustly, or excessively to the prejudice or injury of another.

  • A person who causes damage to another contrary to law, whether willfully or negligently, is liable for damages.

  • One who willfully causes loss or injury to another in a manner contrary to morals, good customs, or public policy is liable for damages.

  • Damages for malicious prosecution can only be awarded when there is clear and convincing evidence that the action instituted was unfounded and untenable and was done with gross and evident bad faith.

  • Attorney's fees can be recovered in certain circumstances, as enumerated in Article 2208 of the Civil Code, and when the court deems it just and equitable. However, none of these circumstances are present in this case.