Petitioners vs. vs. Respondents: Third Division

THIRD DIVISION
[G.R. No. 220926. July 5, 2017.]
LUIS JUAN L. VIRATA and UEM-MARA PHILIPPINES CORPORATION

(now known as CAVITEX INFRASTRUCTURE CORPORATION) ,
petitioners, vs. ALEJANDRO NG WEE, WESTMONT INVESTMENT
CORP., ANTHONY T. REYES, SIMEON CUA, VICENTE CUALOPING,
HENRY CUALOPING, MARIZA SANTOS-TAN, and MANUEL ESTRELLA ,
respondents.
[G.R. No. 221058. July 5, 2017.]
WESTMONT INVESTMENT, CORPORATION , petitioner, vs.

ALEJANDRO NG WEE , respondent.
[G.R. No. 221109. July 5, 2017.]
MANUEL ESTRELLA , petitioner, vs. ALEJANDRO NG WEE , respondent.
[G.R. No. 221135. July 5, 2017.]
SIMEON CUA, VICENTE CUALOPING, and HENRY CUALOPING ,

petitioners, vs. ALEJANDRO NG WEE , respondent.
[G.R. No. 221218. July 5, 2017.]
ANTHONY T. REYES , petitioner, vs. ALEJANDRO NG WEE, LUIS JUAN

VIRATA, UEM-MARA PHILIPPINES CORP., WESTMONT INVESTMENT
CORP., MARIZA SANTOS-TAN, SIMEON CUA, VICENTE CUALOPING,
HENRY CUALOPING, and MANUEL ESTRELLA , respondents.
DECISION
VELASCO, JR. , J : p
Nature of the Case

For resolution is the consolidated petitions assailing the September 30, 2014
Decision 1 and October 14, 2015 Resolution 2 of the Court of Appeals (CA) in CA-G.R.
CV No. 97817. 3 Said rulings a rmed the trial court judgment declaring petitioners
solidarily liable to Alejandro Ng Wee (Ng Wee) in the amount of P213,290,410.36, plus
interests and damages. HTcADC
The Facts
Ng Wee was a valued client of Westmont Bank. Sometime in 1998, he was
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enticed by the bank manager to make money placements with Westmont Investment
Corporation (Wincorp), a domestic corporation organized and licensed to operate as an
investment house, and one of the bank's a liates. 4 Offered to him were "sans
recourse" transactions with the following mechanics as summarized by the CA:
x x x A corporate borrower who needs nancial assistance or funding to
run its business or to serve as working capital is screened by Wincorp. Once it
quali es as an accredited borrower, Wincorp enters into a Credit Line Agreement
for a speci c amount with the corporation which the latter can draw upon in a
series of availments over a period of time. The agreement stipulates that
Wincorp shall extend a credit facility on "best effort" basis and that every
drawdown by the accredited borrower shall be evidenced by a promissory note
executed in favor of Wincorp and/or the investor/s who has/have agreed to
extend the credit facility. Wincorp then scouts for investors willing to provide the
funds needed by the accredited borrower. The investor is matched with the
accredited borrower. An investor who provides the fund is issued a Con rmation
Advice which indicates the amount of his investment, the due date, the term, the
yield, the maturity and the name of the borrower. 5
Lured by representations that the "sans recourse" transactions are safe, stable,
high-yielding, and involve little to no risk, Ng Wee, sometime in 1998, placed
investments thereon under accounts in his own name, or in those of his trustees: Angel
Archangel, Elizabeth Ng Wee, Roberto Tabada Tan, and Alex Lim Tan. 6 In exchange,
Wincorp issued Ng Wee and his trustees Con rmation Advices informing them of the
identity of the borrower with whom they were matched, and the terms under which the
said borrower would repay them. The contents of a Con rmation Advice are typically as
follows:
This is to con rm that pursuant to your authority, we have acted in your
behalf and/or for your bene t, risk or account without recourse or liability, real
or contingent, to Westmont Investment Corporation in respect of the loan
granted to the Borrower named and under the terms specified hereunder
Borrower: _____________
Amount Rate: % Term: Value Date: Due Date:
Yield: Tax: Maturity Value: Instrument:
Payment on Value Date TO No.
For your convenience but without any obligation on our part, we may act
as your collecting and paying agent for this transaction. Kindly note that your
receipt hereof is an indication of your conformity to the foregoing terms and
conditions of the transaction. 7
Special Power of Attorneys (SPAs) are also prepared for the signature of the
lender investor. The SPAs uniformly provide:
The undersigned, whose personal circumstances are stated hereunder,
hereby, by these presents, appoints, names and constitutes Westmont
Investment Corporation (Wincorp), a corporation duly organized and existing
under and by virtue of the laws of the Philippines, with o ce address at 7th
Floor, Westmont Bank Building, 411 Quintin Paredes Street, Binondo, Manila, as
the Attorney-in-Fact of the undersigned:
To agree, deliver, sign, execute loan documents relative to the borrowing
of: ________________________________________________ ("The Borrower") to whom
the undersigned, thru Wincorp, agreed to lend the principal sum of PESOS
_____________________________________
HEREBY GIVING AND GRANTING unto said Attorney-in-Fact power and
authority to do and perform all and every act and thing whatsoever requisite or
necessary to be done in and about the premises, HEREBY RATIFYING AND
CONFIRMING all that said Attorney-in-Fact shall lawfully do or cause to be done
by virtue of these presents. 8
aScITE
Ng Wee's initial investments were matched with Hottick Holdings Corporation

(Hottick), one of Wincorp's accredited borrowers, the majority shares of which was
owned by a Malaysian national by the name of Tan Sri Halim Saad (Halim Saad). Halim
Saad was then the controlling shareowner of UEM-MARA, which has substantial
interests in the Manila Cavite Express Tollway Project (Cavitex). 9
Hottick was extended a credit facility 1 0 with a maximum drawdown of
P1,500,908,026.87 in consideration of the following securities it issued in favor of
Wincorp: (1) a Suretyship Agreement 1 1 executed by herein petitioner Luis Juan Virata
(Virata); (2) a Suretyship Agreement 1 2 executed by YBHG Tan Sri Halim Saad; and (3) a
Third Party Real Estate Mortgage 1 3 executed by National Steel Corporation (NSC).
Hottick fully availed of the loan facility extended by Wincorp, but it defaulted in
paying its outstanding obligations when the Asian nancial crisis struck. As a result,
Wincorp led a collection suit against Hottick, Halim Saad, and NSC for the repayment
of the loan and related costs. 1 4 A Writ of Preliminary Attachment was then issued
against Halim Saad's properties, which included the assets of UEM-MARA Philippines
Corporation (UEM-MARA). 1 5 Virata was not impleaded as a party defendant in the
case.
To induce the parties to settle, petitioner Virata offered to guarantee the full
payment of the loan. The guarantee was embodied in the July 27, 1999 Memorandum
of Agreement 1 6 between him and Wincorp. Virata was then able to broker a
compromise between Wincorp and Halim Saad that paved the way for the execution of
a Settlement Agreement 1 7 dated July 28, 1999. In the Settlement Agreement, Halim
Saad agreed to pay USD1,000,000.00 to Wincorp in satisfaction of any and all claims
the latter may have against the former under the Surety Agreement that secured
Hottick's loan. As a result, Wincorp dropped Halim Saad from the case and the Writ of
Preliminary Attachment over the assets of UEM-MARA was dissolved. 1 8
Thereafter, Wincorp executed a Waiver and Quitclaim 1 9 dated December 1, 1999
in favor of Virata, releasing the latter from any obligation arising from the Memorandum
of Agreement, except for his obligation to transfer forty percent (40%) equity of UEM
Development Philippines, Inc. (UPDI) and forty percent (40%) of UPDI's interest in the
tollway project to Wincorp. Apparently, the Memorandum of Agreement is a mere
accommodation that is not meant to give rise to any legal obligation in Wincorp's favor
as against Virata, other than the stipulated equity transfer.
Alarmed by the news of Hottick's default and nancial distress, Ng Wee
confronted Wincorp and inquired about the status of his investments. Wincorp assured
him that the losses from the Hottick account will be absorbed by the company and that
his investments would be transferred instead to a new borrower account. In view of
these representations, Ng Wee continued making money placements, rolling over his
previous investments in Hottick and even increased his stakes in the new borrower
account — Power Merge Corporation (Power Merge). 2 0
Incorporated on August 4, 1997, Power Merge 2 1 is a domestic corporation, the
primary purpose of which is to "invest in, purchase, or otherwise acquire and own, hold,
use, sell, assign, transfer, mortgage, pledge, exchange or otherwise dispose of real or
personal property of every kind and description." 2 2 Petitioner Virata is the majority
stockholder of the corporation, owning 374,996 out of its 375,000 subscribed capital
stock. 2 3
In a special meeting of Wincorp's board of directors held on February 9, 1999,
the investment house resolved to le the collection case against Halim Saad and
Hottick, 2 4 and, on even date, approved Power Merge's application for a credit line,
extending a credit facility to the latter in the maximum amount of P1,300,000,000.00. 2 5
Based on the minutes of the special meeting, 2 6 board chairman John Anthony B.
Espiritu, Wincorp President Antonio T. Ong (Ong), Mariza Santos-Tan (Santos-Tan),
Manuel N. Tankiansee (Tankiansee), 2 7 and petitioners Manuel A. Estrella (Estrella),
Simeon Cua, Henry T. Cualoping, and Vicente Cualoping (Cua and the Cualopings) were
allegedly in attendance. Thus, on February 15, 1999, Wincorp President Ong and Vice-
President for Operations petitioner Anthony Reyes (Reyes) executed a Credit Line
Agreement 2 8 in favor of Power Merge with petitioner Virata's conformity. HEITAD
Barely a month later, on March 11, 1999, Wincorp, through another board
meeting allegedly attended by the same personalities, increased Power Merge's
maximum credit limit to P2,500,000,000.00. 2 9 Accordingly, an Amendment to the
Credit Line Agreement 3 0 (Amendment) was executed on March 15, 1999 by the same
representatives of the two parties.
Power Merge made a total of six (6) drawdowns from the amended Credit Line
Agreement in the aggregate amount of P2,183,755,253.11. 3 1 Following protocol,
Power Merge issued Promissory Notes in favor of Wincorp, either for itself or as agent
for or on behalf of certain investors, for each drawdown. The Promissory Notes issued
can be summarized thusly: 3 2
Promissory
Availment Date Maturity Date Principal
Note No.
1411 February 12, 1999 February 12, 2000 P8,618,877.35
1537 February 10, 1999 February 10, 2000 P1,124,781,081.10
1538 March 12, 1999 March 11, 2000 P215,660.99
1539 March 12, 1999 March 11, 2000 P671,402,608.61
1540 March 17, 1999 March 16, 2000 P378,381,629.15
1541 March 22, 1999 March 21, 2000 P355,395.91
Total P2,183,755,253.11
And pertinently, the template for the Promissory Notes read:
PROMISSORY NOTE
For value received, I/We ______________, hereby promise to pay
WESTMONT INVESTMENT CORPORATION (WINCORP) , either for itself or as
agent for and on behalf of certain INVESTORS who have placed/invested funds
w i th WINCORP the principal sum of ______________ (___________), Philippine
Currency, on _________ with interest rate of ___________ percent (___%) per annum,
or equivalently the Maturity Amount of ________________________________ PESOS
(____________) Philippine Currency.
Demand and Dishonor Waived: In case of default in the payment of
this Promissory Note, an additional interest on the Maturity Amount at the rate
of three percent (3%) per month shall accrue from the date immediately
following the Maturity Date hereof until the same is fully paid. In addition, I/We
shall be liable to pay liquidated damages in the amount equivalent to twenty
percent (20%) of the Maturity amount.
If this Note is placed in the hands of an attorney for collection, or if
payment herein is collected by suit or through other legal proceedings, I/We
promise to pay WINCORP a sum equal to twenty- ve (25%) of the total amount
due and payable as and for attorney's fees and cost of collection. 3 3
After receiving the promissory notes from Power Merge, Wincorp, in turn, issued
Con rmation Advices to Ng Wee and his trustees, as well as to the other investors who
were matched with Power Merge. A summary of the said Con rmation Advices reveals
that out of the P2,183,755,253.11 drawn by Power Merge, the aggregate amount of
P213,290,410.36 was sourced from Ng Wee's money placements under the names of
his trustees: 3 4
Principal
Serial No. Name Amount of Due Date Maturity Value
Placement
90029 Angel Archangel 1,559,927.96 3/27/2000 1,584,496.83
90821 Robert Tabada Tan 2,300,000.00 3/22/2000 2,336,225.00
90839 Alex Lim Tan 406,825.00 3/24/2000 412,164.58
90844 Alex Lim Tan 1,835,610.44 4/3/2000 1,866,662.85
90860 Alex Lim Tan 2,144,975.50 3/31/2000 2,170,715.21
90861 Alex Lim Tan 8,649,113.51 3/31/2000 8,752,902.87
90864 Alex Lim Tan 2,051,965.81 4/3/2000 2,078,128.37
90866 Alex Lim Tan 8,749,275.96 4/4/2000 8,860,829.23
90869 Alex Lim Tan 4,175,382.61 4/4/2000 4,228,618.74
91319 Elizabeth Ng Wee 1,000,000.00 4/7/2000 1,012,000.00
91654 Robert Tabada Tan 322,117.07 4/11/2000 326,224.06
91712 Elizabeth Ng Wee 1,610,325.19 4/2/2000 1,630,856.84
92673 Elizabeth Ng Wee 1,301,666.89 4/4/2000 1,318,263.14
92761 Elizabeth Ng Wee 2,415,487.78 4/12/2000 2,446,285.25
92900 Robert Tabada Tan 652,571.11 4/13/2000 660,891.39
93619 Alex Lim Tan 508,683.02 4/26/2000 515,741.00
93625 Alex Lim Tan 1,933,335.42 4/26/2000 1,960,160.45

93625 Alex Lim Tan 1,933,335.42 4/26/2000 1,960,160.45
93795 Alex Lim Tan 351,157.75 4/28/2000 356,161.75
93308 Elizabeth Ng Wee 1,000,000.00 4/19/2000 1,012,750.00
Total 210,595,991.62 213,290,410.36
Unknown to Ng Wee, however, was that on the very same dates the Credit Line
Agreement and its subsequent Amendment were entered into by Wincorp and Power
Merge, additional contracts (Side Agreements) were likewise executed by the two
corporations absolving Power Merge of liability as regards the Promissory Notes it
issued. Pertinently, the Side Agreement dated February 15, 1999 reads:
WHEREAS, Powermerge has entered into the Credit Line Agreement with
Wincorp as an accommodation in order to allow Wincorp to hold Powermerge
paper instead of the obligations of Hottick which are right now held by Wincorp.
ATICcS
xxx xxx xxx

1. Powermerge hereby agrees to execute promissory notes in the aggregate
principal sum of P1,200,000,000.00 in favor of Wincorp and in exchange
therefore, Wincorp hereby assigns, transfers, and conveys to Powermerge
all of its rights, titles and interests by way of a sub-participation over the
promissory notes and other obligations executed by Hottick in favor of
Wincorp; Provided however that the only obligation of Powermerge to
Wincorp shall be to return and deliver to Wincorp all the rights,
title and interests conveyed by Wincorp hereby to Powermerge
over the Hottick obligations. Powermerge shall have no obligation
to pay under its promissory notes executed in favor of Wincorp
but shall be obligated merely to return whatever [it] may have received from
Wincorp pursuant to this agreement.
xxx xxx xxx
3. Wincorp con rms and agrees that this accommodation being entered into
by the parties is not intended to create a payment obligation on the
part of Powermerge . 3 5 (emphasis added)
Save for the amount, identical provisions were included in the March 15, 1999
Side Agreement. 3 6 By virtue of these contracts, Wincorp was able to assign its rights
to the uncollected Hottick obligations and hold Power Merge papers instead. 3 7
However, this also meant that if Power Merge subsequently defaults in the payment of
its obligations, it would refuse, as it did in fact refuse, payment to its investors.
Despite repeated demands, 3 8 Ng Wee was not able to collect Power Merge's
outstanding obligation under the Con rmation Advices in the amount of
P213,290,410.36. This prompted Ng Wee, on October 19, 2000, to institute a
Complaint for Sum of Money with Damages with prayer for the issuance of a Writ of
Preliminary Attachment (Complaint), 3 9 docketed as Civil Case No. 00-99006 before
the Regional Trial Court (RTC), Branch 39 of Manila (RTC). Of the seventeen (17) named
defendants therein, only Virata, Power Merge, UPDI, UEM-MARA, Wincorp, Ong, Reyes,
Cua, Tankiansee, Santos-Tan, Vicente and Henry Cualoping, and Estrella were duly
served with summons. 4 0
In his Complaint, Ng Wee claimed that he fell prey to the intricate scheme of
fraud and deceit that was hatched by Wincorp and Power Merge. As he later
discovered, Power Merge's default was inevitable from the very start since it only had
subscribed capital in the amount of P37,500,000.00, of which only P9,375,000.00 is
actually paid up. He then attributed gross negligence, if not fraud and bad faith, on the
part of Wincorp and its directors for approving Power Merge's credit line application
and its subsequent increase to the amount of P2,500,000,000.00 despite its glaring
inability to pay.
Wincorp o cers Ong and Reyes were likewise impleaded for signing the Side
Agreements that would allow Power Merge to avoid paying its obligations to the
investors. Ng Wee also sought to pierce the separate juridical personality of Power
Merge since Virata owns almost all of the company's stocks. It was further alleged that
Virata acquired interest in UEM-MARA using the funds swindled from the Wincorp
investors.
As an annex to the Complaint, Ng Wee cited the May 5, 2000 Cease and Desist
Order 4 1 issued by the Prosecution and Enforcement Department of the Securities and
Exchange Commission (SEC) in PED Case No. 20-2378 4 2 after its routine audit of the
operations of the investment house. Data gathered by the SEC showed that, as of
December 31, 1999, Wincorp has sourced funds from 2,200 individuals with an average
of P7,000,000,000.00 worth of commercial papers per month. 4 3 In its subsequent
October 27, 2000 Resolution, 4 4 the SEC found that the Con rmation Advices that
Wincorp had been issuing to its investors takes the form of a security that ought to
have been registered before being offered to the public, 4 5 and that the investment
house had also been advancing the payment of interest to the investors to cover up its
borrowers' insolvency. 4 6
The defendants moved for the dismissal of the case for failure to state a cause
of action, among other reasons, moored on the fact that the investments were not
recorded in the name of Ng Wee. These motions, however, were denied by the RTC on
October 4, 2001, which denial was elevated by way of certiorari to the CA, only for the
trial court ruling to be a rmed on August 21, 2003. The issue eventually made its way
to this Court and was docketed as G.R. No. 162928. The Court however, found no
reversible error on the part of the CA when the appellate court sustained the denial of
the motions to dismiss. 4 7 TIADCc
In their respective Answers, the Wincorp and Power Merge camps presented
opposing defenses. 4 8
Wincorp admitted that it brokered Power Merge Promissory Notes to investors
through "sans recourse" transactions. It contended, however, that its only role was to
match an investor with corporate borrowers and, hence, assumed no liability for the
monies that Ng Wee loaned to Power Merge. As proof thereof, Wincorp brought to the
attention of the RTC the language of the SPAs executed by the investors.
"Sans recourse" transactions, Wincorp added, are perfectly legal under
Presidential Decree No. 129 (PD 129), otherwise known as the Investment Houses Law,
and forms part of the brokering functions of an investment house. As a duly licensed
investment house, it was authorized to offer the "sans recourse" transactions to the
public, even without a license to perform quasi-banking functions.
For their part, the Wincorp directors argued that they can only be held liable under
Section 31 of Batas Pambansa Blg. (BP) 68 , 4 9 the Corporation Code, if they assented
to a patently unlawful act, or are guilty of either gross negligence or bad faith in
directing the affairs of the corporation. They explained that the provision is inapplicable
since the approval of Power Merge's credit line application was done in good faith and
that they merely relied on the vetting done by the various departments of the company.
Additionally, Estrella and Tankiansee argued that they were not present during the
special meetings when Power Merge's credit line application was approved and even
objected against the same when they came to know of such fact.
Reyes meanwhile asseverated that the rst paragraph of Sec. 31 cannot nd
application to his case since he is not a director of Wincorp, but its o cer. It is his
argument that he can only be held liable under the second paragraph of the provision if
he is guilty of con ict of interest, which he is not. He likewise claimed that he was duly
authorized to sign the side Credit Line Agreements and Side Agreements on behalf of
Wincorp.
The Wincorp camp reiterated that Ng Wee's Complaint failed to state a cause of
action because the money placements were not registered under his name. It was their
postulation then that the alleged trustees should have instituted the case in their own
names.
On the other hand, petitioners Virata and UEM-MARA harped on the underlying
arrangement between Hottick, Power Merge, and Wincorp. Under the framework,
Hottick will issue Promissory Notes to Wincorp, which will then transfer the same to
Power Merge. In exchange for the transfer, Power Merge will issue its own Promissory
Notes to Wincorp. That way, Wincorp will be holding Power Merge papers, instead of
Hottick.
To implement this arrangement, Wincorp and Power Merge entered into a Credit
Line Agreement with the understanding that Power Merge and Virata's only obligation
thereunder would be to collect payments on the Hottick papers. The Credit Line
Agreement and the issuance of the promissory notes, according to Virata, were mere
accommodations to help Wincorp enforce the outstanding obligations of Hottick. It
was then contrary to their agreement for Wincorp to have offered the Power Merge
papers to investors since it was allegedly agreed upon that Power Merge would incur
no liability to pay the promissory notes it issued Wincorp.
Ruling of the Trial Court
On July 8, 2011, the RTC rendered a Decision 5 0 in Civil Case No. 00-99006 in
favor of Ng Wee. The fallo of the Decision reads:
WHEREFORE , premises considered, judgment is hereby rendered in
favor of plaintiff, ordering the defendants Luis L. Virata, UEM-MARA Philippines
Corporation, Westmont Investment Corporation (Wincorp), Antonio T. Ong,
Anthony T. Reyes, Simeon Cua, Vicente and Henry Cualoping, Mariza Santos-
Tan, and Manuel Estrella to jointly and severally pay plaintiff as follows:
1. The sum of Two Hundred Thirteen Million Two Hundred Ninety Thousand
Four Hundred Ten and 36/100 Pesos (P213,290,410.36), which is the
maturity amount of plaintiff's investment with legal interest at the rate of
twelve (12%) percent per annum from the date of ling of the complaint
until fully paid;
2. Liquidated damages equivalent to twenty percent (20%) of the maturity
amount, and attorney's fees equivalent to 25% of the total amount due
plus legal interest at the rate of twelve (12%) percent per annum from the
date of filing of the complaint until fully paid;
AIDSTE
3. P100,000.00 as moral damages.

4. The complaint against defendant Tankiansee is dismissed for lack of
merit.
Defendants' counterclaim (sic) are dismissed for lack of merit, while the
crossclaims filed by defendants against each other are likewise dismissed, there
being no evidence to support the same.
Cost against the defendants, except defendant Tankiansee.
SO ORDERED. 51
Disposing rst the procedural issue, the RTC reminded the parties that whether
or not Ng Wee had legal standing had already been settled when the defendants'
motions to dismiss were denied with nality. They are then precluded from re-raising
the issue in their memoranda. 5 2
On the merits, the trial court explained that there was no dispute on the factual
circumstances of the case and that, based on these facts, Wincorp and Power Merge
colluded, if not connived, to defraud Ng Wee of his investments. The RTC ratiocinated
that the "sans recourse" transactions were used to conceal Wincorp's direct borrowing;
that Wincorp negated its acts and practices under the "sans recourse" transactions
when it advanced the accrued interest due to the investors to conceal the fact that their
borrowers have already defaulted in their obligations; that Wincorp is a vendor in bad
faith since it knew that the Power Merge notes were uncollectible from the beginning
by virtue of the Side Agreements; and that, in any event, Wincorp violated its duciary
responsibilities as the investors' agent. The RTC held Power Merge equally guilty
because Wincorp could not have perpetrated the fraud without its indispensable
participation as a conduit for the scheme. 5 3
The RTC likewise ruled that Ng Wee presented su cient evidence against the
individual directors and o cers for them to be held liable for fraud and/or bad faith
under Sec. 31 of the Corporation Code, except for Tankiansee. The claim against
Tankiansee was dropped since his immigration records established that he could not
have participated in the special meetings of the Wincorp directors, having been out of
the country during the material dates. Moreover, he led a civil and criminal case
against Wincorp, negating any charge of conspiracy. 5 4
The RTC further found compelling need to pierce through the separate juridical
personality of Power Merge since Virata exercised complete control thereof, owning
374,996 out of 375,000 of its subscribed capital stock. Similarly, the separate juridical
personality of UEM-MARA was pierced to reach the illegal proceeds of the funds
sourced from the defrauded investors. 5 5
The motions for reconsideration from the afore-quoted ruling were denied on
September 9, 2011. 5 6 Separate appeals were then lodged by the following parties: (1)
Wincorp, (2) Santos-Tan, (3) Cua and the Cualopings, (4) Virata and UEM-MARA
Philippines Corp., (5) Reyes, and (6) Estrella. In due time, the appellants and appellees
filed their respective briefs. 5 7
Ruling of the Court of Appeals
On September 30, 2014, the CA promulgated the challenged ruling substantially
affirming the findings of the trial court, viz.:
WHEREFORE , the appeal is DISMISSED . The Decision dated July 8,
2011 and Order dated September 9, 2011 issued by the Regional Trial Court of
Manila, Branch 39 in Civil Case No. 00-99006 are AFFIRMED with the
modification in that defendants-appellants are jointly and severally liable to
pay an interest of twelve percent (12%) per annum of the total monetary awards,
computed from the date of the ling of the complaint until June 30, 2013 and
six percent (6%) per annum from July 1, 2013 until their full satisfaction.
SO ORDERED. 58
Preliminarily, the CA upheld the nding of the RTC that Ng Wee is a real party in
interest and that the Complaint stated a cause of action despite the money placements
being made under the name of Ng Wee's trustees. 5 9
The CA likewise found that Wincorp and Power Merge perpetrated an elaborate
scheme of fraud to inveigle Ng Wee into investing funds. Ng Wee would not have placed
his investments in the "sans recourse" transactions had he not been deceived into
believing that Power Merge is nancially capable of paying the returns on his
investments. In sync with the RTC, the CA found that Wincorp misrepresented Power
Merge's nancial capacity when it accredited Power Merge as a corporate borrower
and granted it a P2,500,000,000.00 credit facility despite the telling signs that the latter
would not be able to perform its obligations, to wit: (1) Power Merge had only been in
existence for two years when it was granted the credit facility; (2) Power Merge was
thinly capitalized with only P37,500,000.00 subscribed capital; (3) Power Merge was
not an on-going concern since it never secured the necessary permits and licenses to
conduct business, it never engaged in any lucrative business, and it did not le the
necessary reports with the SEC; and (4) No security was demanded by Wincorp or was
furnished y Power Merge in relation to the latter's drawdowns. 6 0 AaCTcI
The intent of Wincorp to deceive became even more manifest when it entered
into the Side Agreements with Power Merge. The Side Agreements rendered worthless
Power Merge's Promissory Notes that Wincorp offered to Ng Wee and the other
investors. Meanwhile, the "sans recourse" nature of the transactions prevented the
investors from recovering their investments from the investment house. 6 1
Because of the foregoing fraudulent acts, Wincorp was held liable to Ng Wee as a
vendor of security in bad faith, and for acting beyond the scope of its authority as Ng
Wee's agent when it knowingly purchased worthless securities for him and his co-
investors. 6 2
The CA likewise did not nd merit in Power Merge's defense that it was a mere
accommodation party. Power Merge's participation was indispensable in deceiving Ng
Wee into placing more investments and amounted to actionable fraud. Its conduct that
led to this conclusion include: (1) setting up the Power Merge borrower account; (2) the
laborious execution of Credit Line Agreement, Side Agreements, and promissory notes;
(3) allowing Wincorp to sell worthless Power Merge papers/notes; and (4) receiving
valuable consideration through its drawdowns. 6 3
Anent the liability of the directors, the appellate court sustained the trial court's
application of the doctrine on the piercing of the corporate veil, and also held that under
Sec. 31 of the Corporation Code, corporate o cers can be held liable for having
assented to patently unlawful corporate acts, and for having acted in gross negligence
and/or bad faith in management. 6 4
Here, the CA ratiocinated that the perpetrated investment scheme constituted
estafa under either Art. 315 (1) (b) or Art. 315 (2) (a) of the Revised Penal Code 6 5 due
to Wincorp's violation of its duciary relation with Ng Wee, and its employment of fraud
or deceit to the latter's damage and prejudice. Moreover, Wincorp violated various
commercial laws when it offered the "sans recourse" transactions. For though
denominated as "sans recourse," Wincorp's actuations reveal that the transactions are
actually with recourse since Wincorp virtually borrowed from itself, for itself. Assenting
to these patently unlawful acts, according to the CA, exposed the corporate directors
and officers to liability.
Gross negligence can also be attributed to the Wincorp directors when they
approved Power Merge's credit line application and the subsequent increase of its
credit limit to P2,500,000,000.00 despite Power Merge's evident weak nancial
structure and poor capitalization, so the CA ruled.
The elaborate scheme of deceit and fraud, and the corresponding liability
therefrom, is then imputable to the directors of Wincorp. Meanwhile, Reyes and Virata
cannot escape liability since they signed the Side Agreements that rendered the Power
Merge papers worthless.
The CA also did not nd compelling reason to depart from the RTC's conclusion
as regards UEM-MARA's liability. The appellate court saw the need to reach the illegal
proceeds of funds sourced from the defrauded investors.
Lastly, the CA held that the appellants are jointly and severally liable pursuant to
Art. 1170 of the New Civil Code. 6 6
The motions for reconsideration from the September 30, 2014 Decision were
denied on October 14, 2015 in the following wise:
WHEREFORE , nding no rationally persuasive reasons which would
warrant a modi cation much less, a reversal of our Decision dated September
30, 2014, all the Motions for Reconsideration led by the defendants-appellants
are DENIED . The Notice of Change of Name led by Defendant Manuel Estrella,
is hereby NOTED .
SO ORDERED. 67
Grounds for the Petitions

Aside from Santos-Tan, defendants-appellants a quo appealed the September
30, 2014 Decision and October 14, 2015 Resolution of the CA via the instant recourses.
G.R. No. 220926: Petition for Review
on Certiorari of Luis Juan L. Virata
and UEM-MARA
In their Petition for Review on Certiorari, 6 8 Virata and UEM-MARA claim that
there is no basis in implicating them in the scheme to defraud Ng Wee and the other
investors since there was no privity of contract between them; petitioners never
interacted with Ng Wee. This is allegedly consistent with the CA nding that Wincorp
engaged in direct borrowing with its investors. Thus, petitioners argue that Ng Wee
cannot subsequently claim that his funds were lent to Power Merge. Ng Wee likewise
allegedly failed to prove that Power Merge derived pecuniary bene ts from the
investment transactions. EcTCAD
Petitioners add that the Con rmation Advices were issued by Wincorp alone.
Wincorp had the sole discretion of selecting which corporate borrower to match with
whom. Power Merge, Virata, and UEM-MARA therefore had no control over the matter.
Thus, applying the doctrine of res inter alios acta alteri nocere non debet, third parties
like petitioners may not be prejudiced by the act, declaration, or omission of Wincorp.
The propriety of piercing the corporate veil is also challenged by petitioners.
They argue that Virata's ownership of almost all of the shares of Power Merge does not
automatically justify the application of the doctrine, absent fraud. And according to
petitioners, there was no evidence of fraud, bad faith, or gross negligence on the part of
Virata in the case at bar. It is the postulation that Virata could not be held liable for acts
done in his o cial capacity, including the execution of the Credit Line Agreement and
the Side Agreements, which allegedly are valid arm's length transactions duly
authorized by Power Merge, and that bad faith cannot be presumed from the mere
failure of Power Merge to pay its obligations.
Petitioners also see no valid reason to hold UEM-MARA liable since there is no
evidence of its participation in the allegedly fraudulent act. There is no proof that the
grant of the credit line was for the purpose of acquiring interests in UEM-MARA, or that
the funds obtained by Power Merge were the same funds used by Virata to acquire
interests therein. Petitioner Virata claims that he made use of a P600,000,000.00 credit
facility from Metrobank to facilitate the acquisition.
on Certiorari of Wincorp
In its petition, Wincorp attributes reversible error 6 9 to the CA when it rendered

judgment against the investment house. It claims that it merely performed its normal
function as an investment house by matching and marrying corporate borrowers with
investors. The arrangement it entered into was neither an investment contract between
it and Ng Wee nor an exercise of quasi-banking function, but the brokerage of a
legitimate loan agreement between Ng Wee and Power Merge. Ng Wee expected a
xed interest income at the end of the term of the loan, and not a participation in the
success or loss of the borrower corporation.
Wincorp adds that it was clear to Ng Wee that what was involved was a loan
agreement, and that Wincorp was merely brokering the transaction. As a mere broker
of the transaction, not the bene ciary thereof, Wincorp asserts that it cannot be held
liable for the amount borrowed by Power Merge. Wincorp relies on the text of the
Confirmation Advices issued to Ng Wee to advance this point. 7 0
Based on the language of the Con rmation Advices, Ng Wee knew of and
approved the transactions that Wincorp entered into with Power Merge as his agent;
that Ng Wee's conformity in the series of Con rmations Advices issued in his favor, and
his execution of the corresponding SPAs thereafter, allegedly rati ed Wincorp's acts of
agency in the execution of the loan agreement; and that Ng Wee had been renewing and
rolling over his initial placement, despite knowledge of this setup.
Wincorp further denies violating commercial laws since the transactions are
"without recourse," in compliance with the Bangko Sentral ng Pilipinas (BSP) rule that
only institutions that are granted license to perform quasi-banking functions can
engage in transactions "with recourse." Moreover, the agreement with Ng Wee to broker
a loan, not being a quasi-banking function, is required to be marked as "without
recourse" under Sec. 4103N.2 of the BSP Manual of Regulations for Non-bank Financial
Institutions.
It is also the contention of Wincorp that it is within its discretion whether or not
to approve Power Merge's credit line. It was not an ultra vires act, and is instead
covered by the business judgment rule. The fact that the business strategy turned out
to be unfavorable should not so casually be used to impute liability to the corporation
absent showing of bad faith or gross negligence.
of Manuel Estrella
Petitioner Estrella, one of the directors of Wincorp, instituted a separate petition

71 anchored on the ground that he was a mere nominee in Wincorp of his principals,
Eduardo Espiritu and Wincorp board chairperson John Anthony Espiritu; that he did not
have any real bene cial interest in Wincorp as his appointment was a mere
accommodation to the Espiritus; and that he did not even receive any compensation,
salary, per diem or benefit of any kind from either the Espiritus or from Wincorp.HSAcaE
As a mere nominee, Estrella is involved solely in setting down company policies

and prescribing the general guidelines for the direction of the business and affairs of
Wincorp. In the performance of his duties, he relies heavily on the reports, memoranda,
and information provided them by management. He contends that he was never
involved in the day-to-day management and operations of the company. He then had no
knowledge and could not then have approved of the Side Agreements entered into by
Ong and petitioner Reyes. The Side Agreements were never presented in any of the
meetings Estrella attended, or so he claims.
He also questions the RTC and the CA's reliance on the minutes of the special
meetings naming him as one of the directors who approved Power Merge's credit line
application and its subsequent amendment. He argues that the minutes have already
been discredited when the charges against Tankiansee have been dropped. Estrella
reminds the Court that Tankiansee was likewise included in the list of directors in
attendance during the February 9, 1999 and March 11, 1999 special meetings, only to
be disproved later on by his immigration records that show that he was out of the
country during the material dates.
It was admitted that Estrella attended the February 9, 1999 special meeting, but
claims that he already left before the "other matters" in the agenda, which included
Power Merge's application, were discussed. He denies attending the March 11, 1999
special meeting since he accompanied his wife that day to the hospital for her cancer
treatment. To substantiate these defenses, he brings to the Court's attention the fact
that he did not sign, as he refused to sign, the minutes of the February 9, 1999 and
March 11, 1999 special meetings.
on Certiorari of Simeon Cua, Henry
Cualoping, and Vicente Cualoping
For their defense 7 2 against civil liability in this case, petitioners Cua and the
Cualopings claim that Ng Wee failed to prove that they acted in bad faith or were
grossly negligent in managing the affairs of Wincorp, which is required for directors to
be held liable under Sec. 31 of the Corporation Code. They argued that the extent of
their participation in the alleged fraudulent scheme was limited to acting favorably on
the executive committee's recommendations regarding Power Merge's credit line
application and its subsequent amendment. Mere approval of Power Merge's
applications, however, cannot be equated with bad faith, for the directors relied on the
vetting by the departments responsible for doing so. They point out that Power
Merge's applications underwent scrutiny by the credit committee and executive
committee prior to their approval. The approval cannot then be considered as unlawful,
and neither bad faith nor gross negligence can be attributed to the directors. Rather, it
was performed in the legitimate pursuit of Wincorp's business as a duly-licensed
investment house.
Moreover, petitioners deny any knowledge and participation in the execution of
the Side Agreements with Power Merge, and claim that the execution was performed
by Wincorp President Ong and petitioner Reyes without proper authorization from the
board and, hence, ultra vires. They add that they could not have defrauded Ng Wee since
they had no knowledge that the latter was matched with Power Merge.
on Certiorari of Anthony Reyes
Finally, the grounds 7 3 invoked by petitioner Reyes to support his petition

centered on the argument that he had no hand in the approval of the credit line
application or its increase since he is not a director of Wincorp. He was merely the Vice-
President for Operations of Wincorp, duly authorized as the investment house's
signatory for and to all its documents, transactions and accounts. Thus, he alleges that
he was under obligation to sign the Credit Line Agreement, its Amendment, and the Side
Agreements in favor of Power Merge after the latter's application was approved by
Wincorp's board of directors.
Furthermore, he argues that Sec. 31 of the Corporation Code is inapplicable since
he is neither a director nor trustee of Wincorp, as required by the provision. And
assuming without conceding its applicability, he claims that he cannot be held solidarily
liable since he signed the agreements on behalf of the company in good faith.
The issue of whether or not Ng Wee is a real party in interest was again raised as
an issue in Reyes' petition.
The Comments
Comments of Wincorp
In G.R. No. 220926, led by petitioners Virata and UEM-MARA, Wincorp admitted
in its Comment 7 4 that the execution of the Side Agreements is highly irregular, but
argues that only Ong and Reyes should be held liable therefor since they acted beyond
the scope of their authority. Wincorp claims that the execution of the Side Agreements
releasing Power Merge from its obligations are ultra vires acts of the corporate
officers, for which the investment house cannot be held liable.HESIcT
This argument was further ampli ed in its Comment 7 5 in G.R. No. 221218, led
by Reyes, wherein Wincorp reiterated that the actions of the two o cers (Ong and
Reyes) in executing the Side Agreements, and thereby discharging Virata and Power
Merge from their obligations, was outside the scope of their authority and was not
approved its board of directors. Accordingly, their actions could not legitimately be
considered as actions of Wincorp.
Comment of Virata, UEM-MARA
Petitioners Virata and UEM-MARA argued in their Comment 7 6 in G.R. No.

221218, the only petition where they are impleaded as respondents, that petitioner
Reyes' cross-claim has no factual and legal basis. Aside from Reyes' general averments
that Wincorp and Power Merge connived and colluded to defraud the investors, he did
not cite any specific basis for holding Virata and UEM-MARA liable to him.
Comment of Ng Wee
Respondent Ng Wee led his Comment 7 7 on the consolidated petitions but

merely refuted petitioner Reyes' claims. Ng Wee emphasized that Reyes did not assail
the ndings of the CA that the transactions between Wincorp and Power Merge were
impressed with fraud. Moreover, Reyes' indispensable participation in the fraud,
especially his signing of the Side Agreements, rendered him liable to respondent Ng
Wee. His signatures to the Side Agreements meant that he adhered to its contents,
including the release of Power Merge from its obligations under the Promissory Notes.
Meanwhile, petitioners Reyes, Estrella, Cua, and the Cualopings did not le their
respective comments 7 8 despite due notice. 7 9
The Issues
Succinctly stated, the issues raised in the consolidated petitions boil down to the
following:
1. Whether or not the case was prosecuted in the name of the real party in
interest;
2. Whether or not Ng Wee was able to establish his cause/s of action against
Wincorp and Power Merge;
3. Whether or not it is proper to pierce the veil of corporate ction under the
circumstances of the case;
4. Whether or not the counterclaims and cross-claims of the parties should
prosper; and
5. Whether or not the award of damages to Ng Wee is proper.
The Court now resolves these issues in seriatim.
The Court's Ruling
I.
Ng Wee is the Real Party in Interest
Petitioners present legal issues on both procedure and substance. Resolving
rst the procedural aspect of the case, the Court rules that Ng Wee is a real party in
interest, contrary to the petitioners' claim.
Law of the Case doctrine bars the
re-litigation of a settled issue
As a general rule, every action must be prosecuted or defended in the name of

the real party in interest. 8 0 Section 2, Rule 3 of the Rules of Court de nes a real party in
interest as "the party who stands to be bene ted or injured by the judgment in the suit,
or the party entitled to the avails of the suit."
In this case, it is worth recalling that the procedural issue on whether or not Ng
Wee is the real party in interest had already been resolved by this Court in G.R. No.
162928. There, the Court found neither abuse of discretion on the part of the RTC nor
reversible error on the CA when they ruled that Ng Wee had the legal personality to le
the Complaint to recover his investments. The resolutions by the CA and this Court
sustaining the October 4, 2001 Order had already attained nality and could no longer
be modi ed. Concomitantly, the parties are barred from re-raising the issues settled
therein, pursuant to the law of the case doctrine. caITAC
The law of the case doctrine applies in a situation where an appellate court has
made a ruling on a question on appeal and thereafter remands the case to the lower
court for further proceedings; the question settled by the appellate court becomes the
law of the case at the lower court and in any subsequent appeal. It means that whatever
is irrevocably established as the controlling legal rule or decision between the same
parties in the same case continues to be the law of the case, whether correct on
general principles or not, so long as the facts on which the legal rule or decision was
predicated continue to be the facts of the case before the court. 8 1
It is inconsequential that the issue raised in G.R. No. 162928 pertained to the
alleged grave abuse of discretion committed by the RTC in denying the motions to
dismiss, and not to the merits of the motions to dismiss per se. For as the Court has
elucidated in Banco de Oro-EPCI, Inc. v. Tansipek:
x x x there is no substantial distinction between an appeal and a
Petition for Certiorari when it comes to the application of the Doctrine
of the Law of the Case. The doctrine is founded on the policy of ending
litigation. The doctrine is necessary to enable the appellate court to perform its
duties satisfactorily and e ciently, which would be impossible if a question
once considered and decided by it were to be litigated anew in the same case
upon any and every subsequent appeal. 8 2 (emphasis added)
We are then constrained to abide by Our prior ruling in G.R. No. 162928 that Ng
Wee is a real party in interest in this case.
Ng Wee successfully stated a cause
of action based on a hypothetical
admission of the allegations in his
complaint
To be sure, hornbook doctrine is that when the a rmative defense of dismissal

is grounded on the failure to state a cause of action, a ruling thereon should be based
on the facts alleged in the complaint. 8 3 Otherwise stated, whether or not Ng Wee
successfully stated a cause of action requires hypothetically admitting and scrutinizing
the allegations in his Complaint. A reproduction of its pertinent contents is hence
apropos:
xxx xxx xxx
2.5 Relying on said representations, [Ng Wee] placed substantial amounts of
money in his own name and in the names of others with defendant Wincorp on
several occasions. Some of the outstanding placements of [Ng Wee] with
defendant Wincorp, which were loaned to defendant Virata/Power Merge, are in
the names of Robert Tabada Tan, Elizabeth Ng Wee, Alex Lim Tan and Angel
Archangel who hold said placements in trust for [Ng Wee]. 8 4
As aptly noted by the trial court in its October 4, 2001 Order denying the motions
to dismiss:
In the Complaint, [Ng Wee] has clearly averred that he placed some of his money
placements in the names of other persons and that said persons held the said
money placements in trust for him (paragraph 2.5 of the complaint). With such
allegation of ownership of the funds, [Ng Wee] is clearly the real party in interest
as he stands to be bene ted or injured by the judgment in the instant case.
(Section 2, Rule 3, Rules of Court)
xxx xxx xxx
Hence, this Court cannot grant the dismissal of the Complaint on this ground,
since the allegations in the Complaint show, on the contrary, that [Ng Wee] is the
real party in interest. 8 5 (words in brackets added)
The RTC is correct in its observation that there is su cient allegation that Ng
Wee is the actual injured party in the failed investment. As the alleged owner of the
funds placed under the names of Robert Tabada Tan, Elizabeth Ng Wee, Alex Lim Tan
and Angel Archangel in Wincorp, Ng Wee lost P213,290,410.36 from Power Merge's
default and non-payment of its obligations under the credit facility extended by the
investment house. This controverts petitioners' claim that Ng Wee is not the real party
in interest herein.
Testimonial evidence on record
established Ng Wee's ownership over
the invested funds; Ng Wee does not
lack cause of action
Even the evidence on record would belie petitioners' claim that Ng Wee is not the
real party in interest. Elizabeth Ng Wee, Alex Lim Tan and Angel Archangel were
straightforward in their testimonies that the funds invested in Power Merge belonged
to Ng Wee, albeit recorded under their names. They likewise executed documents
denominated as "Declaration of Trust" wherein they categorically stated that they
merely held the funds in trust for Ng Wee, the beneficial owner. ICHDca
Angel Archangel admitted the trust relation in the following manner:

Q: What can you say about the money placement in Wincorp?
A: It is not my money, sir.
Q: And whose money is it, Madam Witness?
A: Alejandro Ng Wee.
Q: And what is your participation insofar as that money placement is
concerned?
A: None, sir. 8 6
Elizabeth Ng Wee, meanwhile, testified in the following wise:
Q: Now you said you transacted with this Gilda because you were instructed
by your brother to transact with her?
A: Yes, sir.
Q: And why did you follow his instruction?
A: It is his money.
Q: Which one?
A: Those placements, sir.
xxx xxx xxx
Q: And why are these money placements under your name, Madam Witness,
if these are his money?
A: He requested me to handle this money on behalf of him, sir.
Q: And you earlier identi ed ve (5) con rmation advices, what relation do
these con rmation advices have to the con rmation which you have
identified and said that you surrendered to your brother?
A: They are the same, sir.
Q: I see. Why did you surrender them to your brother?
A: Simply because they are not my money, sir. Those are his, so it is up to him
to do something about what will happen.
xxx xxx xxx
Q: I am holding before me a document introduced by the lawyer of your
brother previously marked as Exhibit "JJJ" entitled Declaration of Trust,
kindly go over the document.
A: Okay.
Q: There is a signature at the bottom portion of the document, whose
signature is that?
A: That is my signature, sir. 8 7
And when Alex Lim Tan took the witness stand:
xxx xxx xxx
A: He [referring to Alejandro Ng Wee] called me up and he requested me if he
can use my name in placing his money with Westmont for money
placement.
Q: You mentioned Westmont. What is that Westmont?
A: Westmont Investment Corporation, sir.
Q: And what was your response, if any, to the request of Plaintiff?
A: I agreed.
Q: And what happened next after you agreed?
A: He let me sign the documents specifically the Confirmation Advices, sir.
xxx xxx xxx
Q: And what did you do after he sent these Confirmation Advices to you?
A: I signed it, sir.
Q: And after signing these documents, what else did you do if any? TCAScE
A: I returned them to Mr. Wee, Sir.

Q: And why did you return these documents to him?
A: Because he owns it, sir.
xxx xxx xxx
Q: Apart from the Confirmation Advices that you identified today, did you sign
any other document in connection with the investment represented by
these Confirmation Advices?
A: There was, sir.
Q: Can you tell us what was that document, Mr. Witness?
A: The Declaration of Trust, Sir. 8 8
Finally, Wincorp employees Ruben Tobias and Gilda Lucena testi ed 8 9 that they
were instructed by Ng Wee to rename several of his investments under the Power
Merge Account to the names of Alex Lim Tan and Robert Tabada Tan. Effectively, Ruben
Tobias and Gilda Lucena corroborated the claim of Ng Wee that the investments in
Power Merge that were recorded under those names are actually respondent Ng Wee's.
From the foregoing evidence on record, it can no longer be gainsaid that Ng Wee
is the real party in interest in the present case. The allegation in his Complaint that he is
the actual owner of the P213,290,410.36 infused in Power Merge under the names of
Robert Tabada Tan, Elizabeth Ng Wee, Alex Lim Tan and Angel Archangel has been
established by preponderant evidence, and, more signi cantly, has already become the
law of the case. The procedural issue raised by petitioners therefore lacks merit.
II.
Liability of the Corporations to Ng Wee
With the procedural issue disposed, the Court will now proceed to ascertain the
liability of the parties to Ng Wee, beginning with the major players in this controversy.
On this point, worthy of note is that none of the petitioners disputed the fact that Ng
Wee is entitled to recover the amount that he has invested. What they only required,
which they also invoked as the ground for their motions to dismiss, is that Ng Wee
prove that the amounts invested actually belonged to him. Thus, having established that
Ng Wee is the real party in interest and that he is the bene cial owner of the
investments under the names of Robert Tabada Tan, Elizabeth Ng Wee, Alex Lim Tan
and Angel Archangel, his entitlement to recover the P213,290,410.36 becomes
indubitable. The only question that remains now is: from whom can Ng Wee recover the
P213,290,410.36 investment? To this, petitioners would pose clashing claims, which
prompts this Court to elucidate on their respective exposures to civil liability.
Only Wincorp is liable to Ng Wee for
fraud; Power Merge is liable based
on contract
a. That Wincorp defrauded Ng Wee is a finding

of fact that is conclusive on this Court
Axiomatic in this jurisdiction is that, as a general rule, only questions of law may
be raised in a Petition for Review on Certiorari under Rule 45 of the Rules of Court. 9 0
The appellate court's ndings of fact being conclusive, the jurisdiction of this Court in
appealed cases is limited to reviewing and revising the errors of law. 9 1 As We have
emphatically declared in a long line of cases, "it is not the function of the Supreme Court
to analyze or weigh such evidence all over again, its jurisdiction being limited to
reviewing errors of law that might have been committed by the lower court." 9 2
Enumerated in Medina v. Mayor Asistio, Jr. 9 3 are the recognized exceptions to
the general rule. 9 4 But insofar as Wincorp is concerned, it failed to establish that any of
these exceptions obtain in the present case. Thus, the Court sustains the nding of the
trial court, as a rmed by the CA, that Wincorp is liable to Ng Wee for perpetrating an
elaborate scheme to defraud its investors. As held by the CA:
[Ng Wee] would not have placed funds or invested [in] the "sans recourse"
transactions under the Power Merge borrower account had he not been deceived
into believing that Power Merge is nancially capable of paying the returns of
his investments/money placements. Wincorp accredited Power Merge as a
borrower, given it a credit line in the maximum amount of P2,500,000,000.00,
Philippine Currency, allowed it to make drawdowns up to P2,183,755,253.11,
Philippine Currency, matched it with [Ng Wee's] investments/money placements
to the extent of P213,290,410.36, Philippine Currency, notwithstanding telling
signs which immediately cast doubt on its ability to perform its obligations
under the Credit Line Agreements, Promissory Notes and [Con rmation Advices],
to wit: (1) Power Merge had only been in existence as a corporation for barely
two (2) years when it was accredited as borrower by Wincorp; (2) Power Merge
is a thinly capitalized corporation with only P37,500,000.00 subscribed capital
stock; (3) Power Merge is not an on-going concern because (a) Despite the fact
that Power Merge's principal place of business is at 151 Paseo de Roxas St.,
Makati City, it has neither registered nor conducted any business at Makati City
as evident from the Certi cation dated January 3, 2006 issued by the Business
Permits O ce of Makati City; (b) it is not engaged in any lucrative business to
nance its operation; Despite the fact that its primary purpose is to "invest in,
purchase, or otherwise acquire and own, hold, use, sell, assign, transfer,
mortgage, pledge, exchange, or otherwise dispose of real or personal property of
every kind and description. . .," no proof was adduced to show that it was
carrying out or has carried out this mandate in accordance with the law; (c)
From the time of its incorporation until the revocation of its Certi cate of
Incorporation on March 15, 2004, Power Merge has failed to le annual reports
required by the SEC such as General Information Sheets and Financial
Statements; (4) No security whatsoever was demanded by Wincorp or furnished
by Power Merge in relation to its credit line and drawdowns. Indeed, no person in
his proper frame of mind would venture to lend hundreds of millions of pesos to
a business entity having such a financial setup. x x xcTDaEH
xxx xxx xxx

The intent to defraud and deceive [Ng Wee] of his investments/money
placements was manifest from the very start. Wincorp and Power Merge entered
into a Credit Line Agreement on February 15, 1999 and an Amendment to Credit
Line Agreement on March 15, 1999. It is interesting to note that they
simultaneously executed two Side Agreements which are peculiar because: (1)
The dates of execution of the two Side Agreements coincide with the dates of
execution of the credit agreements; (2) [The] two Side Agreements were
executed by the same exact parties: Antonio Ong and Anthony Reyes for and on
behalf of Wincorp and [Virata] and Augusto Geluz for and on behalf of Power
Merge; (3) The Credit Line Agreement dated February 15, 1999 and the First Side
Agreement dated February 15, 1999 were both acknowledged before notary
public, Atty. Fina De La Cuesta-Tantuico while the Amendment to Credit Line
Agreement dated March 15, 1999 and the Second Side Agreement dated March
15, 1999 were both acknowledged before notary public, Atty. Eric R.G. Espiritu;
(4) The two Side Agreements have the same exact provisions as the two credit
agreements insofar as it purports to extend a credit line and increase the credit
line of Power Merge but the two Side Agreements relieve Power Merge from any
liability arising from the execution of the agreements and promissory notes. 9 5
Jurisprudence de nes "fraud" as the voluntary execution of a wrongful act, or a
willful omission, knowing and intending the effects which naturally and necessarily arise
from such act or omission. In its general sense, fraud is deemed to comprise anything
calculated to deceive, including all acts and omissions and concealment involving a
breach of legal or equitable duty, trust, or con dence justly reposed, resulting in
damage to another, or by which an undue and unconscientious advantage is taken of
another. Fraud is also described as embracing all multifarious means which human
ingenuity can device, and which are resorted to by one individual to secure an
advantage over another by false suggestions or by suppression of truth and includes all
surprise, trick, cunning, dissembling, and any unfair way by which another is cheated. 9 6
Under Article 1170 of the New Civil Code, those who in the performance of their
obligations are guilty of fraud are liable for damages. The fraud referred to in this
Article is the deliberate and intentional evasion of the normal fulfillment of obligation. 9 7
Clearly, this provision is applicable in the case at bar. It is beyond quibble that Wincorp
foisted insidious machinations upon Ng Wee in order to inveigle the latter into investing
a signi cant amount of his wealth into a mere empty shell of a corporation. And instead
of guarding the investments of its clients, Wincorp executed Side Agreements that
virtually exonerated Power Merge of liability to them; Side Agreements that the
investors could not have been aware of, let alone authorize.
The summation of Wincorp's actuations establishes the presence of actionable
fraud, for which the company can be held liable. In Joson vs. People, the Court upheld
the ruling that where one states that the future pro ts or income of an enterprise shall
be a certain sum, but he actually knows that there will be none, or that they will be
substantially less than he represents, the statements constitute an actionable fraud
where the hearer believes him and relies on the statement to his injury. 9 8
Just as in Joson, it is abundantly clear in the present case that the pro ts which
Wincorp promised to the investors would not be realized by virtue of the Side
Agreements. The investors were kept in the dark as regards the existence of these
documents, and were instead presented with Con rmation Advices from Wincorp to
give the transactions a semblance of legitimacy, and to convince, if not deceive, the
investors to roll over their investments or to part with their money some more.
b. Power Merge is not guilty of fraud, but is
liable under contract nonetheless
The story, however, is different for Power Merge. The circumstances of this case
points to the conclusion that Power Merge and Virata were not active parties in
defrauding Ng Wee. Instead, the company was used as a mere conduit in order for
Wincorp to be able to conceal its act of directly borrowing funds for its own account.
This is made evident by one highly peculiar detail — the date of the Power Merge's
drawdowns. cSaATC
It must be remembered that the special meeting of Wincorp's board of directors

was conducted on February 9 and March 11 of 1999, while the Credit Line Agreement
and its Amendment were entered into on February 15 and March 15 of 1999,
respectively. But as indicated in Power Merge's schedule of drawdowns, 9 9 Wincorp
already released to Power Merge the sum of P1,133,399,958.45 as of February 12,
1999, before the Credit Line Agreement was executed. And as of March 12, 1999, prior
to the Amendment, P1,805,018,228.05 had already been released to Power Merge.
The fact that the proceeds were released to Power Merge before the signing of
the Credit Line Agreement and the Amendment thereto lends credence to Virata's claim
that Wincorp did not intend for Power Merge to be strictly bound by the terms of the
credit facility; and that there had already been an understanding between the parties on
what their respective obligations will be, although this agreement had not yet been
reduced into writing. The underlying transaction would later on be revealed in black and
white through the Side Agreements, the tenor of which amounted to Wincorp's
intentional cancellation of Power Merge and Virata's obligation under their Promissory
Notes. 1 0 0 In exchange, Virata and Power Merge assumed the obligation to transfer
equity shares in UPDI and the tollway project in favor of Wincorp. An arm's length
transaction has indeed taken place, substituting Virata and Power Merge's obligations
under the Promissory Notes, in pursuance of the Memorandum of Agreement and
Waiver and Quitclaim executed by Virata and Wincorp. Thus, as far as Wincorp, Power
Merge, and Virata are concerned, the Promissory Notes had already been discharged.
It was the understanding of the two companies that the Promissory Notes would
not be passed on to the hands of third persons and that, in any event, Wincorp
guaranteed Virata that he and Power Merge would not be held liable thereon. Driven by
the desire to completely settle his obligation as a surety under the Hottick account,
Virata took the deal and relied in good faith that Wincorp's o cials would honor their
gentleman's agreement. But as events unfolded, it turned out that Wincorp was in
evident bad faith when it subsequently assigned credits pertaining to portions of the
loan and the corresponding interests in the Promissory Notes to the investors in the
form of Con rmation Advices when it knew fully well of Power Merge's discharge from
liability.
Between Wincorp and Power Merge, it is Wincorp, as the assignor of the portions
of credit, that is under obligation to disclose to the investors the existence and
execution of the Side Agreements. Failure to do so, to Our mind, only goes to show that
the target of Wincorp's fraud is not any particular individual, but the public at large. On
the other hand, it was not Power Merge's positive legal duty to forewarn the investors
of its discharge since the company did not deal with them directly. Power Merge and
Virata were agnostic as to the source of funds since they relied on their underlying
agreement with Wincorp that they would not be liable for the Promissory Notes issued.
As far as it was concerned, Power Merge was merely laying the groundwork
prescribed by Wincorp towards ful lling its obligations under the Waiver and Quitclaim.
Virata was not impelled by any Machiavellian mentality when he signed the Side
Agreements in Power Merge's behalf. Therefore, only Wincorp can be held liable for
fraud. Nevertheless, as will later on be discussed, Power Merge and Virata can still be
held liable under their contracts, but not for fraud.
The "sans recourse" transactions
cannot exempt Wincorp from
liability for having been offered in
violation of commercial laws
Wincorp attempts to evade liability by hiding behind the "sans recourse" nature of
the transactions with Ng Wee. It argues that as a mere agent or broker that matches an
investor with a borrower, it cannot be held liable for the invested amount in case of an
unsuccessful or failed match. As evidenced by the Con rmation Advices and SPAs
signed by the investors, Wincorp is merely tasked to deliver the amount to be loaned to
the borrower, and does not guarantee its borrowers' financial capacity.
The argument deserves scant consideration.
a. The "sans recourse" transactions are
deemed "with recourse"
An investment house is an enterprise that engages in the underwriting of
securities of other corporations. 1 0 1 Securities underwriting, in turn, refers to the
process by which underwriters raise capital investments on behalf of the corporation
issuing the securities. Thus, aside from performing the regular powers of a corporation
under the Corporation Code, a duly licensed investment house is granted additional
powers under Sec. 7 1 0 2 of Presidential Decree No. (PD) 129. cHDAIS
Conspicuously absent in the enumerated additional powers of an investment

house, however, is the authority to perform quasi-banking functions. Even as a nancial
intermediary, investment houses are not allowed to engage in quasi-banking functions,
unless authorized by the Monetary Board through the issuance of a Certi cate of
Authority. 1 0 4
The Omnibus Rules and Regulations for Investment Houses and Universal Banks
Registered as Underwriters de nes "quasi-banking function" as the function of
"borrowing funds for the borrower's own account from 20 or more persons or
corporate lenders at any one time, through the issuance, endorsement or
acceptance of debt instruments of any kind other than deposits which may
include but need not be limited to acceptances, promissory notes, participations,
certi cates of assignment or similar instruments with recourse , trust certi cates or
of repurchase agreements for purposes of relending or purchasing of receivables and
other obligations." 1 0 5
Given the de nition, it would appear on paper that offering the "sans recourse"
transactions does not qualify as the performance of a quasi-banking function
specifically because it is "sans recourse" against Wincorp. As provided under S4101Q.3
of the Manual of Regulations for Non-Bank Financial Institutions:
S4101Q.3. Transactions not considered quasi-banking. The following shall
not constitute quasi-banking:
xxx xxx xxx
a. The mere buying and selling without recourse of instruments
mentioned in Sec.4101Q: Provided that:
(1) The institution selling without recourse shall indicate or stamp in
conspicuous print on the instrument/s, as well as on the con rmation of
sale (COS), the phrase without recourse or sans recourse and the following
statement:
(name of financial intermediary)
assumes no liability for the payment
directly or indirectly, of the instrument
(2) In the absence of the phrase without recourse or sans recourse and
without the above-required accompanying statement, the instrument so
issued, endorsed or accepted shall automatically be considered as falling
within the purview of the rules on quasi-banking. (emphasis added)
However, the Court a rms the appellate court's nding that the true nature of
t h e "sans recourse" transactions contradicts Wincorp's averment. A perusal of the
records would show that Wincorp engaged in practices that rendered the transactions
to be "with recourse" and, consequently, within the ambit of quasi-banking rules.
First, Wincorp did not act as a mere nancial intermediary between Ng Wee and
Power Merge, but effectively obtained the funds for its own account. To borrow funds
for one's own account should not only be taken in its literal meaning to the effect that
Wincorp and its bene cial owners literally borrowed the funds invested by Ng Wee.
Rather, it should be interpreted in this case while bearing in mind Wincorp's end goal —
to assign its rights to the uncollected, if not worthless, Hottick obligations and hold
more valuable Power Merge papers in their stead. Without enticing the investors to put
up capital for Power Merge, Wincorp would not have been able to facilitate the
exchange. Thus, with Power Merge as a conduit, Wincorp's borrowings from its
investors redounded to its bene t. This is bolstered by Wincorp's act of executing the
Side Agreements releasing Power Merge from its obligation to pay under its
Promissory Notes, exposing itself to liability to pay the same.
Second, in PED Case No. 20-2378, the Prosecution and Enforcement
Department of the SEC found that as of December 31, 1999, Wincorp has sourced
funds from 2,200 individuals with an average of P7,000,000,000.00 worth of
commercial papers per month. This gure unquestionably exceeds the "20 or more
persons or corporate lenders" threshold.
Third, the Con rmation Advices that are marked "sans recourse" are actually
"with recourse." On this point, a reproduction of the succeeding paragraphs of
S4101Q.3 of the Manual of Regulations for Non-Bank Financial Institutions is in order:
xxx xxx xxx
Provided further, that any of the following practices or practices similar
and/or tantamount thereto in connection with a without recourse
transaction rendered such transaction as with recourse and within the
purview of the rules on quasi-banking. ISHCcT
xxx xxx xxx

(iii) Payment with the funds of the nancial intermediary which
assigned, sold or transferred the debt instrument without recourse,
unless the nancial intermediary can show that the issuer has with the said
nancial intermediary funds corresponding to the amount of the obligation.
(emphasis added)
From the above provision, Wincorp's act of advancing the payment of interests
when the corporate borrower is unable to pay despite the borrowing being branded as
without recourse, rendered it to be with recourse. Coupled with the above-
circumstances, offering the "sans recourse" transactions should then be categorized as
an exercise of a quasi-banking function. The transactions were merely being
denominated as "sans recourse" by Wincorp to circumvent the license requirement
under the law. The alleged "sans recourse" nature of the transactions cannot then be
used by Wincorp as a shield against liability to Ng Wee.
b. Wincorp engaged in the sale of unregistered
securities
There is more to the "sans recourse" transactions than meets the eye, so much
so that the operations of Wincorp cannot be oversimpli ed as mere brokering of loans.
As discovered by the SEC in PED Case No. 20-2378, and as ruled by the CA, Wincorp
was, in reality, selling to the public securities, i.e., shares in the Power Merge credit in
the form of investment contracts.
Securities are shares, participation or interests in a corporation or in a
commercial enterprise or pro t-making venture and evidenced by a certi cate,
contract, instruments, whether written or electronic in character. 1 0 6 As a general rule,
securities are not to be sold or offered for sale or distribution without due registration,
and provided that information on the securities shall be made available to prospective
purchasers. 1 0 7
Included in the list of securities that require registration prior to offer, sale, or
distribution are investment contracts. 1 0 8 An investment contract refers to a contract,
transaction or scheme whereby a person invests his money in a common enterprise
and is led to expect pro ts primarily from the efforts of others. 1 0 9 It is presumed to
exist whenever a person seeks to use the money or property of others on the promise
of profits. 1 1 0
In this jurisdiction, the Court employs the Howey test, named after the landmark
case of Securities and Exchange Commission v. W.J. Howey Co. , 1 1 1 to determine
whether or not the security being offered takes the form of an investment contract. The
case served as the foundation for the domestic definition of the said security.

Under the Howey test, the following must concur for an investment contract to
exist: (1) a contract, transaction, or scheme; (2) an investment of money; (3) investment
is made in a common enterprise; (4) expectation of pro ts; and (5) pro ts arising
primarily from the efforts of others. Indubitably, all of the elements are present in the
extant case.
First, Wincorp offered what it purported to be "sans recourse" transactions
wherein the investment house would allegedly match investors with pre-screened
corporate borrowers in need of financial assistance.
Second, Ng Wee invested the aggregate amount of P213,290,410.36 in the
"sans recourse" transactions through his trustees, as embodied in the Con rmation
Advices.
Third, prior to being matched with a corporate borrower, all the monies infused
by the investors are pooled in an account maintained by Wincorp. 1 1 2 This ensures that
there are enough funds to meet large drawdowns by single borrowers.
Fourth, the investors were induced to invest by Wincorp with promises of high
yield. In Ng Wee's case, his Con rmation Advices reveal that his funds were supposed
to earn 13.5% at their respective maturity dates.
Fifth, the pro tability of the enterprise depended largely on whether or not
Wincorp, on best effort basis, would be able to match the investors with their approved
corporate borrowers.
Apparent then is that the factual milieu of the case at bar su ciently satis es the
Howey test. The "sans recourse" transactions are, in actuality, investment contracts
wherein investors pool their resources to meet the nancial needs of a borrowing
company. This does not stray far from the illustration given by former Associate
Justice Roberto A. Abad in Securities and Exchange Commission v. Prosperity.com,
Inc., to wit: CAacTH
An example that comes to mind would be the long-term commercial papers that
large companies, like San Miguel Corporation (SMC), offer to the public for
raising funds that it needs for expansion. When an investor buys these papers
or securities, he invests his money, together with others, in SMC with an
expectation of profits arising from the efforts of those who manage and operate
that company. SMC has to register these commercial papers with the SEC
before offering them to investors. 1 1 3
Likewise, in SEC Admin Case No. 09-07-88 entitled In Re: D 1st Cell Pawnshop,
Inc., 1 1 4 the SEC ruled that by soliciting investments from P50,000.00 up to
P300,000.00 and promising a return of four percent (4%) per month, D 1st Cell
Pawnshop offered investment contracts to the public.
No error can then be attributed to the CA when it designated the "sans recourse"
transactions as investment contracts. No fault can also be ascribed to the appellate
court in nding that Wincorp virtually purchased and resold securities, and not just
brokered a loan. The most telling circumstance that negate Wincorp's claim of mere
brokerage, as mentioned earlier, is the fact that it paid for the interest payments due
from the corporate borrowers that defaulted. This effectively estopped Wincorp from
denying liability from its investors in this case.
Wincorp cannot hide behind its license to operate as an investment house when
it offered the "sans recourse" transactions to the public. For though investment houses
are authorized to do the following: 1 1 5
xxx xxx xxx
6. Act as financial consultant, investment adviser, or broker;
7. Act as portfolio manager, and/or financial agent x x x;
8. Encourage companies to go public, and initiate and/or promote,
whenever warranted, the formation, merger, consolidation, reorganization, or
recapitalization of productive enterprises, by providing assistance or
participation in the form of debt or equity nancing or through the extension of
financial or technical advice or service;
xxx xxx xxx
their license to perform investment house functions does not excuse them from
complying with the security registration requirements under the law. For clarity, the
license requirement to operate as an investment houses is separate and distinct from
the registration requirement for the securities they are offering, if any.
In dealing in securities, Wincorp was under legal obligation to comply with the
statutory registration and disclosure requirements. Under BP 178, otherwise known as
the Revised Securities Act, which was still in force at the time material in this case,
investment contracts are securities, and their sale, transactions that are not exempt
from these requirements. 1 1 6 As such, adherence to Sections 4 and 8 of BP 178 must
be strictly observed, to wit:
Section 4. Requirement of registration of securities. — (a) No
securities, except of a class exempt under any of the provisions of Section ve
hereof or unless sold in any transaction exempt under any of the provisions of
Section six hereof, shall be sold or offered for sale or distribution to the public
within the Philippines unless such securities shall have been registered and
permitted to be sold as hereinafter provided.
xxx xxx xxx
Section 8. Procedure for registration. — (a) All securities required to be
registered under subsection (a) of Section four of this Act shall be registered
through the filing by the issuer or by any dealer or underwriter interested in
the sale thereof , in the o ce of the Commission, of a sworn registration
statement with respect to such securities, containing or having attached thereto,
the following:
xxx xxx xxx
(8) A statement of the capitalization of the issuer and of all companies
controlling, controlled by or commonly controlled with the issuer, including the
authorized and outstanding amounts of its capital stock and the proportion
thereof paid up; the number and classes of shares in which such capital stock is
divided; par value thereof, or if it has no par value, the stated or assigned value
thereof; a description of the respective voting rights, preferences, conversion and
exchange rights, rights to dividends, pro ts, or capital of each class, with
respect to each other class, including the retirement and liquidation rights or
values thereof.
xxx xxx xxx
(14) The speci c purposes in detail and the approximate amounts to be
devoted to such purposes, so far as determinable, for which the security to be
offered is to supply funds, and if the funds are to be raised in part from other
sources, the amounts and the sources thereof.
xxx xxx xxx
(27) A balance sheet as of a date not more than ninety days prior to the
date of the ling of the registration statement showing all of the assets of the
issuer, the nature and cost thereof, whenever determinable with intangible items
segregated, including any loan to or from any o cer, director, stockholder or
person directly or indirectly controlling or controlled by the issuer, or person
under direct or indirect common control with the issuer. x x x All the liabilities of
the issuer, including surplus of the issuer, showing how and from what sources
such surplus was created, all as of a date not more than ninety days prior to the
filing of the registration statement. x x x IAETDc
(28) A profit and loss statement of the issuer showing earnings and income,
the nature and source thereof, and the expenses and xed charges in such
detail and such form as the Commission shall prescribe for the latest scal year
x x x Such statement shall show what the practice of the issuer has been during
the three years or lesser period as to the character of the charges, dividends or
other distributions made against its various surplus accounts, and as to
depreciation, depletion, and maintenance charges, and if stock dividends or
avails from the sale of rights have been credited to income, they shall be shown
separately with statement of the basis upon which credit is computed. Such
statement shall also differentiate between recurring and nonrecurring income
and between any investment and operating income. Such statement shall be
certified by an independent certified public accountant.
xxx xxx xxx
(30) A copy of any agreement or agreements or, if identical agreements are
used, the forms thereof made with any underwriter, including all contracts and
agreements referred to in subparagraph (19) hereof. (emphasis added)
In the guise of merely brokering loans between an investor and a corporate
borrower, that it is not in the business of selling securities, Wincorp conveniently failed
to disclose to the investors the necessary information under Section 8 of BP 178. To
the mind of the Court, offering the "sans recourse" transactions without compliance
therewith constitutes fraudulent transactions within the contemplation of Section 29 of
the law. 1 1 7
Non-disclosure of the capitalization details and the nancial statements of the
issuer Power Merge under Secs. 8 (8), (27), and (28) resulted in the failure of the
investors to pay heed to the red ags that the enterprise was doomed to fail: (1) the
fact that it only had an outstanding capital stock of P37,500,000.00, of which the total
actually paid is only P9,375,000.00; (2) that it has not been complying with the
reportorial requirements, including the submission of nancial statements to the SEC;
(3) and that Power Merge is not an ongoing concern since it does not engage in any
legitimate business. In addition, non-compliance with Sections 8 (14) and (30)
prevented the investors from discovering the true intent behind the approval of the
Power Merge credit line application and the underlying transactions behind its issuance
of Promissory Notes.
Clearly then, because Wincorp had been successful in its scheme of passing off
the "sans recourse" transactions as mere brokering of loans, it managed to circumvent
the registration and disclosure requirements under BP 178, and managed to commit
fraud in a massive scale against its investors to the latter's damage and prejudice, for
which Wincorp ought to be held liable.
c. Wincorp is liable as a vendor in bad faith
and for breach of warranty
Aside from its liability arising from its fraudulent transactions, Wincorp is also
liable to Ng Wee for breach of warranty. It cannot be emphasized enough that Wincorp
is not the mere agent that it claims to be; its operations ought not be reduced to the
mere matching of investors with corporate borrowers. Instead, it must be borne in
mind that it not only performed the functions of a nancial intermediary duly registered
and licensed to perform the powers of an investment house, it is also engaged in the
selling of securities, albeit in violation of various commercial laws. And just as in any
other contracts of sale, the vendor of securities is likewise bound by certain warranties,
including those contained in Article 1628 of the New Civil Code on assignment of
credits, to wit:
Article 1628. The vendor in good faith shall be responsible for the
existence and legality of the credit at the time of the sale , unless it
should have been sold as doubtful; but not for the solvency of the debtor, unless
it has been so expressly stipulated or unless the insolvency was prior to the sale
and of common knowledge.
xxx xxx xxx
The vendor in bad faith shall always be answerable for the payment of
all expenses, and for damages . (emphasis added)
That the securities sold to Ng Wee turned out to be "with recourse," not "sans
recourse" as advertised, does not remove it from the coverage of the above article. In
fact, such circumstance would even classify Wincorp as a vendor in bad faith, within the
contemplation of the last paragraph of the provision. But other than the fraudulent
designation of the transaction as "sans recourse," Wincorp's bad faith was also brought
to the fore by the execution of the Side Agreements, which cast serious suspicion over,
if it did not effectively annul, the existence and legality of the credits assigned to Ng
Wee under the numerous Confirmation Advices in the name of his trustees. DcHSEa
Anent the claim that Wincorp allegedly did not warrant the capacity of Power
Merge to pay its obligations, the CA had this much to say:
[Petitioners] argue that the nancial capacity of Power Merge has always
been a matter of public record. We are not persuaded. The material
misrepresentations have been made by Wincorp to [Ng Wee], to the effect that
Power Merge was structurally sound and nancially able to undertake a series
of loan transactions. Even if Power Merge's nancial integrity is veritable from
the articles of incorporation or other public records, it does not follow that the
elaborate scheme of fraud and deceit would be beyond commission when
precisely there are bending representations that Power Merge would be able to
meet its obligations. Moreover, [petitioners'] argument assumes that there is a
legal obligation on the part of [Ng Wee] to undertake investigation of Power
Merge before agreeing to the matching of his investments with the accredited
borrower. There is no such obligation. It is unfair to expect a person to procure
every available public record concerning an applicant for funds to satisfy
himself of the latter's nancial standing. A least that is not the way an average
person takes care of his concerns. In addition, no amount of investigation
could have revealed that the Power Merge papers are rendered
worthless and noncollectable (sic) [be]cause of the Side Agreements
entered into by Wincorp and Power Merge.
Wincorp's attempt to shift the blame on [Ng Wee] deserves no credence.
Since the transaction involve[s] a considerable sum of money, Wincorp
presupposes that [Ng Wee] would have taken great pains to scrutinize and
understand all the documents affecting his investment/money placement. It
also presumes that [Ng Wee] was fully aware of the contents and meaning of
the [Con rmation Advices] and [Special Power of Attorneys] he signed. He took
a calculated risk. As such, he should be estopped from claiming that he suffered
damage and prejudice.
The argument is specious. As ruled in People of the Philippines v.
Priscilla Balasa:
xxx xxx xxx
The fact that the buyer makes an independent
investigation or inspection has been held not to preclude
him from relying on the representation made by the seller
where the seller has superior knowledge and the falsity of
such representation would not be apparent from such
examination or inspection , and, a fortiori, where the efforts
of a buyer to learn the true profits or income of a business
or property are thwarted by some device of the seller, such
efforts have been held not to preclude a recovery. It has
often been held that the buyer of a business or property is entitled
to rely on the seller's statements concerning its pro ts, income or
rents. The rule — that where a speaker has knowingly and
deliberately made a statement concerning a fact the
falsity of which is not apparent to the hearer, and has
thus accomplished a fraudulent result, he cannot defend
against the fraud by proving that the victim was negligent
in failing to discover the falsity of the statement — is said
to be peculiarly applicable where the owner of the property or a
business intentionally makes a false statement concerning its
rents, profits or income.
Applying the foregoing to this case, assuming that [Ng Wee] made an
investigation, that should not preclude him from relying on the representations
of Wincorp because: (1) It is an investment house which is presumed to
conduct an investigation of its borrowers before it matches the same
to its investors. As testi ed to by its employees, Wincorp has an Investigation
Credit Committee and Executive Committee which screen, investigate and
accredit borrowers before they are submitted for approval of the board of
directors; (2) It did not only materially misrepresent the nancial
incapacity of Power Merge to pay, it also failed to disclose that the
instruments executed by Power Merge in connection with the
investments/money placements of [Ng Wee] are worthless in view of
the Side Agreements executed by the parties. 1 1 8 (emphasis added)
Verily, the same acts of misrepresentations that constituted fraud in Wincorp's
transactions with Ng Wee are the very same acts that amounted to bad faith on its part
as vendor of securities. Inescapably, liability attaches because of Wincorp's dishonest
dealings.
d. Even as an agent, Wincorp can still be held
liable
The argument that Wincorp is a mere agent that could not be held liable for
Power Merge's unpaid loan is equally unavailing. For even if the Court were to accede to
the argument and undercut the signi cance of Wincorp's participation from vendor of
securities to purely attorney-in-fact, the investment house would still not be immune.
Agency, in Wincorp's case, is not a veritable defense.
Through the contract of agency, a person binds himself to render some service
or to do something in representation or on behalf of another, with the consent or
authority of the latter. 1 1 9 As the basis of agency is representation, there must be, on
the part of the principal, an actual intention to appoint, an intention naturally inferable
from the principal's words or actions. In the same manner, there must be an intention
on the part of the agent to accept the appointment and act upon it. Absent such mutual
intent, there is generally no agency. 1 2 0 SCaITA
There is no dearth of statutory provisions in the New Civil Code that aim to
preserve the duciary character of the relationship between principal and agent. Of the
established rules under the code, one cannot be more basic than the obligation of the
agent to carry out the purpose of the agency within the bounds of his authority. 1 2 1
Though he may perform acts in a manner more advantageous to the principal than that
speci ed by him, 1 2 2 in no case shall the agent carry out the agency if its execution
would manifestly result or damage to the principal. 1 2 3
In the instant case, the SPAs executed by Ng Wee constituted Wincorp as agent
relative to the borrowings of Power Merge, allegedly without risk of liability on the part
of Wincorp. However, the SPAs, as couched, do not speci cally include a provision
empowering Wincorp to excuse Power Merge from repaying the amounts it had drawn
from its credit line via the Side Agreements. They merely authorize Wincorp "to agree,
deliver, sign, execute loan documents" relative to the borrowing of a corporate
borrower. Otherwise stated, Wincorp had no authority to absolve Power Merge from
the latter's indebtedness to its lenders. Doing so therefore violated the express terms
of the SPAs that limited Wincorp's authority to contracting the loan.
In no way can the execution of the Side Agreements be considered as part and
parcel of Wincorp's authority since it was not mentioned with specificity in the SPAs. As
far as the investors are concerned, the Side Agreements amounted to a gratuitous
waiver of Power Merge's obligation, which authority is required under the law to be
contained in an SPA for its accomplishment. 1 2 4
Finally, the bene t from the Side Agreements, if any, redounded instead to the
agent itself, Wincorp, which was able to hold Power Merge papers that are more
valuable than the outstanding Hottick obligations that it exchanged. In discharging its
duties as an alleged agent, Wincorp then elected to put primacy over its own interest
than that of its principal, in clear contravention of the law. 1 2 5 And when Wincorp
thereafter concealed from the investors the existence of the Side Agreements, the
company became liable for fraud even as an agent. 1 2 6
Power Merge is liable to Ng Wee
under its Promissory Notes
a. Virata is liable for the Promissory Notes

even as an accommodation party
A promissory note is a specie of negotiable instruments. Under Section 60 of the
Negotiable Instruments Law, the maker of a promissory note engages that he will pay it
according to its tenor. In this case, the Promissory Notes executed by Virata in behalf
of Power Merge are couched in the following wise:
PROMISSORY NOTE
For value received, I/We _____________, hereby promise to pay
WESTMONT INVESTMENT CORPORATION (WINCORP) , either for itself or as
agent for and on behalf of certain INVESTORS who have placed/invested
funds with WINCORP the principal sum of ___________ (___________), Philippine
Currency, on __________ with interest rate of ____________ percent (___%) per
annum, or equivalently the Maturity Amount of ______________________________
PESOS (____________) Philippine Currency. (emphasis added)
It is crystal clear that Power Merge, through Virata, obligated itself to pay
Wincorp and those who invested through it the values stated in the Promissory Notes.
The validity and due execution of the Promissory Notes were not even contested.
Instead, Virata postulates that he merely executed the Promissory Notes on behalf of
Power Merge as an accommodation for Wincorp, and that neither he nor Power Merge
received any pecuniary benefit from the credit facility. He thus claims that he and Power
Merge cannot be held liable for the Promissory Notes that were executed.
The argument is specious.
On its face, the documentary evidence on record reveals that Power Merge
actually received the proceeds from the Credit Line Agreement. But even if We assume
for the sake of argument that Power Merge, through Virata, is as a mere
accommodation party under the Promissory Notes, liability would still attach to them in
favor of the holder of the instrument for value.
In Gonzales v. Philippine Commercial and International Bank , 1 2 7 the Court held
that an accommodation party lends his name to enable the accommodated party to
obtain credit or to raise money; he receives no part of the consideration for the
instrument but assumes liability to the other party or parties thereto. Prescinding from
the foregoing, an accommodation party is one who meets all the following three
requisites, viz.: (1) he must be a party to the instrument, signing as maker, drawer,
acceptor, or indorser; (2) he must not receive value therefor; and (3) he must sign for
the purpose of lending his name or credit to some other person. 1 2 8 aTHCSE
The rst element, that Power Merge, through Virata, executed the Promissory
Notes as maker cannot be disputed. Meanwhile, petitioners would have the Court
hypothetically admit that they did not receive the proceeds from the drawdowns, in
satisfaction of the second requisite. And lastly, this was allegedly done for the purpose
of lending its name to conceal Wincorp's direct borrowing from its clients.
In gratia argumenti that the above elements are established facts herein, liability
will still attach to the accommodation parties pursuant to Sec. 29 of the Negotiable
Instruments Law. The provision states:
Sec. 29. Liability of accommodation party. — An accommodation
party is one who has signed the instrument as maker, drawer, acceptor, or
indorser, without receiving value therefor, and for the purpose of lending his
name to some other person. Such a person is liable on the instrument to
a holder for value, notwithstanding such holder, at the time of taking
the instrument, knew him to be only an accommodation party.
(emphasis added)
The basis for the liability under Section 29 is the underlying relation between the
accommodated party and the accommodation party, which is one of principal and
surety. 1 2 9 In a contract of surety, a person binds himself solidarily liable with the
principal debtor of an obligation. 1 3 0 But though a suretyship agreement is, in essence,
accessory or collateral to a valid principal obligation, the surety's liability to the creditor
is immediate, primary, and absolute. He is directly and equally bound with the principal.
131
In a similar fashion, the accommodation party cum surety in a negotiable

instrument is deemed an original promisor and debtor from the beginning; he is
considered in law as the same party as the debtor in relation to whatever is adjudged
touching the obligation of the latter since their liabilities are so interwoven as to be
inseparable. 1 3 2 It is beyond cavil then that Power Merge and Virata can be held liable
for the amounts stated in the Promissory Notes. Consequently, they are also liable for
the assignment to Ng Wee of portions thereof as embodied in the Con rmation
Advices.
b. The Side Agreements do not bind third
parties thereto
Virata and Power Merge cannot invoke the Side Agreements as bases for its
alleged exemption from liability to Ng Wee, simply because the latter was not privy to
the covenants. Ng Wee cannot be charged with knowing the existence of the Side
Agreements, let alone ratify the same.
The basic principle of relativity of contracts is that, as a general rule, contracts
take effect only between the parties, their assigns and heirs. 1 3 3 The sound reason for
the exclusion of non-parties to an agreement is the absence of a vinculum or juridical tie
which is the efficient cause for the establishment of an obligation. 1 3 4
Needless to state, Ng Wee does not fall under any of the classes that are
deemed privy as far as the Side Agreements are concerned. At most, he only authorized
Wincorp, through the SPAs, to "agree, deliver, sign, [and] execute loan documents"
relative to the borrowing of Power Merge. This authority does not extend to excusing
Power Merge from paying its obligations under the Promissory Notes that it issued for
the bene t of the investors. Thus, even if we were to assume that the execution of the
Side Agreements was with the imprimatur of the Wincorp board of directors, Power
Merge would still have been able to determine, based on a cursory reading of the SPAs,
that Wincorp's acquiescence to the Side Agreements is an ultra vires act insofar as its
principals, Ng Wee included, are concerned.
c. Power Merge cannot escape liability to Ng
Wee under the Credit Line Agreement
That Power Merge did not directly transact with Ng Wee and the other investors
does not exonerate it from civil liability, for its liability also nds basis on the language
of the Credit Line Agreement.
To recall, Power Merge obtained a P2,500,000,000.00 credit facility from
Wincorp, as one of the latter's corporate borrowers. Under the terms of the credit
facility, Power Merge obligated itself to issue Promissory Notes in favor of Wincorp, for
itself "or on behalf of certain investors" for each of its drawdowns. The Credit Line
Agreement pertinently provides: cAaDHT
CREDIT LINE AGREEMENT

xxx xxx xxx
WHEREAS, the BORROWER has applied for nancial
accommodation/credit line from WINCORP.
WHEREAS, WINCORP by itself or on behalf of certain investors,
have agreed to extend the nancial accommodation/credit line sought
by the BORROWER under the terms and conditions hereunder provided.
NOW, WHEREFORE, for and in consideration of the foregoing premises,
the parties hereto agreed as follows:
1. GRANT OF CREDIT FACILITY. WINCORP, either by itself or on behalf of
certain investors , shall extend to the BORROWER a credit facility, on best
efforts basis, in the amount of up to but not exceeding the equivalent sum
of ONE BILLION TWO HUNDRED MILLION PESOS (P1,200,000,000.00),
Philippine Currency, upon terms and conditions embodied in this
Agreement.
xxx xxx xxx
3. PROMISSORY NOTE. Subject to the availability of funds, the BORROWER
may avail all or any portion of this credit facility under the terms and
conditions hereunder agreed upon, and the BORROWER shall execute in
favor of WINCORP and/or the investors who have agreed to
extend the credit facility to the BORROWER a Promissory Note
corresponding to each drawdown to evidence its indebtedness.
4. INTEREST RATE. The BORROWER agrees to pay WINCORP, either by
itself or on behalf of its investors, interest on the principal amount
of each availment at the rate prevailing on the date of such availment as
agreed upon in the corresponding Promissory Note/s. 1 3 5 (underscoring
supplied, emphasis added)
Virata and Power Merge cannot then deny knowledge that the amounts that were
drawn against the credit facility may not necessarily be from Wincorp's own coffers,
but may potentially be from the monies pooled by its clients, even though their
identities were at that time anonymous to Power Merge. As can be gleaned, Power
Merge was informed through the plain text of the Credit Line Agreement that Wincorp
may indorse portions of the investment, and the corresponding interest in the
Promissory Notes, to its willing clients and act on the latter's behalf. It then matters not
that Power Merge and Virata never personally dealt with Ng Wee for given the setup; Ng
Wee became privy to the Credit Line Agreement when he was assigned his shares in the
investment, and when he expressed his conformity therewith through the Con rmation
Advices.
Furthermore, it cannot escape the attention of the Court that this is not the rst
time for Virata to transact with Wincorp. To refresh, Virata executed a Surety
Agreement to answer Hottick's drawdowns from its own credit facility with Wincorp.
He is then familiar with the nature of Wincorp's primary functions, whether as a mere
nancial intermediary or dealer in securities as in this case, rather than its true creditor.
Power Merge and Virata cannot then feign ignorance that the money they have been
receiving are from the clients that Wincorp attracted to invest.
III.
Piercing the Corporate Veil
Indubitably, Wincorp and Power Merge are liable to Ng Wee for fraud and under
contract, respectively. The thrust of majority of the petitioners, however, is that they
cannot be held liable for the business judgments of the corporations they are part of
given the latter's separate juridical personalities.
G.R. No. 220926: The liabilities of
Luis Juan L. Virata and UEM-
MARA
a. Virata is liable for the obligations of Power Merge

Petitioner Virata reiterates his claim that piercing the corporate veil of Power
Merge for the sole reason that he owns majority of its shares is improper. He adds that
the Credit Line Agreements and Side Agreements were valid arm's length transactions,
and that their executions were in the performance of his o cial capacity, which he
cannot be made personally liable for in the absence of fraud, bad faith, or gross
negligence on his part.
The Court rejects these arguments.
Concept Builders, Inc. v. NLRC instructs that as a fundamental principle of
corporation law, a corporation is an entity separate and distinct from its stockholders
and from other corporations to which it may be connected. But, this separate and
distinct personality of a corporation is merely a ction created by law for convenience
and to promote justice. Thus, authorities discuss that when the notion of separate
juridical personality is used (1) to defeat public convenience, justify wrong, protect
fraud or defend crime; (2) as a device to defeat the labor laws; or (3) when the
corporation is merely an adjunct, a business conduit or an alter ego of another
corporation, this separate personality of the corporation may be disregarded or the veil
of corporate fiction pierced. 1 3 6
The circumstances of Power Merge clearly present an alter ego case that
warrants the piercing of the corporate veil.
To elucidate, case law lays down a three-pronged test to determine the
application of the alter-ego theory, namely:
(1) Control, not mere majority or complete stock control, but complete
domination, not only of nances but of policy and business practice in respect
to the transaction attacked so that the corporate entity as to this transaction
had at the time no separate mind, will or existence of its own;
(2) Such control must have been used by the defendant to commit fraud or
wrong, to perpetuate the violation of a statutory or other positive legal duty, or
dishonest and unjust act in contravention of plaintiff's legal right; and
HCaDIS
(3) The aforesaid control and breach of duty must have proximately caused
the injury or unjust loss complained of. 1 3 7
In the present case, Virata not only owned majority of the Power Merge shares;
he exercised complete control thereof. He is not only the company president, he also
owns 374,996 out of 375,000 of its subscribed capital stock. Meanwhile, the remainder
was left for the nominal incorporators of the business. The reported address of
petitioner Virata and the principal o ce of Power Merge are even one and the same.
1 3 8 The clearest indication of all: Power Merge never operated to perform its business
functions, but for the bene t of Virata. Speci cally, it was merely created to ful ll his
obligations under the Waiver and Quitclaim, the same obligations for his release from
liability arising from Hottick's default and non-payment.
Virata would later on use his control over the Power Merge corporation in order
to ful ll his obligation under the Waiver and Quitclaim. Impelled by the desire to settle
the outstanding obligations of Hottick under the terms of the settlement agreement,
Virata effectively allowed Power Merge to be used as Wincorp's pawn in avoiding its
legal duty to pay the investors under the failed investment scheme. Pursuant to the
alter ego doctrine, petitioner Virata should then be made liable for his and Power
Merge's obligations.
b. UEM-MARA cannot be held liable
There is, however, merit in the argument that UEM-MARA cannot be held liable to
respondent Ng Wee. The RTC and the CA held that the corporation ought to be held
solidarily liable with the other petitioners "in order that justice can reach the illegal
proceeds from the defrauded investments of [Ng Wee] under the Power Merge
account." 1 3 9 According to the trial court, Virata laundered the proceeds of the Power
Merge borrowings and stashed them in UEM-MARA to prevent detection and discovery
and hence, UEM-MARA should likewise be held solidarily liable.
We disagree.
UEM-MARA is an entity distinct and separate from Power Merge, and it was not
established that it was guilty in perpetrating fraud against the investors. It was a non-
party to the "sans recourse" transactions, the Credit Line Agreement, the Side
Agreements, the Promissory Notes, the Con rmation Advices, and to the other
transactions that involved Wincorp, Power Merge, and Ng Wee. There is then no reason
to involve UEM-MARA in the fray. Otherwise stated, respondent Ng Wee has no cause of
action against UEM-MARA. UEM-MARA should not have been impleaded in this case.
A cause of action is the act or omission by which a party violates a right of
another. 1 4 0 The essential elements of a cause of action are (1) a right in favor of the
plaintiff by whatever means and under whatever law it arises or is created; (2) an
obligation on the part of the named defendant to respect or not to violate such right;
and (3) an act or omission on the part of such defendant in violation of the right of the
plaintiff or constituting a breach of the obligation of the defendant to the plaintiff for
which the latter may maintain an action for recovery of damages or other appropriate
relief. 1 4 1
The third requisite is severely lacking in this case. Respondent Ng Wee cannot
point to a speci c wrong committed by UEM-MARA against him in relation to his
investments in Wincorp, other than being the object of Wincorp's desires. He merely
alleged that the proceeds of the Power Merge loan was used by Virata in order to
acquire interests in UEM-MARA, but this does not, however, constitute a valid cause of
action against the company even if we were to assume the allegation to be true. It
would indeed be a giant leap in logic to say that being Wincorp's objective
automatically makes UEM-MARA a party to the fraud. UEM-Mara's involvement in this
case is merely incidental, not direct.
G.R. No. 221218: The liability of
Anthony Reyes
To restate, basic is the rule that a corporation is invested by law with a

personality separate and distinct from that of the persons composing it as well as from
that of any other legal entity to which it may be related. Following this, obligations
incurred by the corporation, acting through its directors, o cers and employees, are its
sole liabilities, and said personalities are generally not held personally liable thereon.
142
By way of exception, a corporate director, a trustee or an o cer, may be held

solidarily liable with the corporation under Sec. 31 of the Corporation Code which
reads: AHCETa

Section 31. Liability of directors, trustees or o cers. — Directors or
trustees who willfully and knowingly vote for or assent to patently unlawful
acts of the corporation or who are guilty of gross negligence or bad faith in
directing the affairs of the corporation or acquire any personal or pecuniary
interest in con ict with their duty as such directors or trustees shall be liable
jointly and severally for all damages resulting therefrom suffered by the
corporation, its stockholders or members and other persons.
When a director, trustee or o cer attempts to acquire or acquire, in
violation of his duty, any interest adverse to the corporation in respect of any
matter which has been reposed in him in con dence, as to which equity
imposes a disability upon him to deal in his own behalf, he shall be liable as a
trustee for the corporation and must account for the pro ts which otherwise
would have accrued to the corporation. (emphasis added)
Petitioner Reyes relies on the black letter law in his bid for absolution. He claims
that he is not a director of Wincorp, but its Vice-President for Operations. Thus, he can
only be held liable under the second paragraph of the provision. As can be read, o cers
are only precluded from acquiring or attempting to acquire any interest in con ict with
that of the company he is serving. There being no allegation of him being guilty of
conflict of interest, Reyes argues that he cannot be held liable under the provision.
The argument is bereft of merit.
Ascribing liability to a corporate director, trustee, or officer by invoking Sec. 31 of
the Corporation Code is distinct from the remedial concept of piercing the corporate
veil. While Sec. 31 expressly lays down speci c instances wherein the mentioned
personalities can be held liable in their personal capacities, the doctrine of piercing the
corporate veil, on the other hand, is an equitable remedy resorted to only when the
corporate ction is used, among others, to defeat public convenience, justify wrong,
protect fraud or defend a crime. 1 4 3
Applying the doctrine, petitioner cannot escape liability by claiming that he was
merely performing his function as Vice-President for Operations and was duly
authorized to sign the Side Agreements in Wincorp's behalf. The Credit Line Agreement
is patently contradictory if not irreconcilable with the Side Agreements, which he
executed on the same day as the representative for Wincorp. The execution of the Side
Agreements was the precursor to the fraud. Taken with Wincorp's subsequent offer to
its clients of the "sans recourse" transactions allegedly secured by the Promissory
Notes, it is a clear indicia of fraud for which Reyes must be held accountable.
G.R. No. 221135: The liabilities of
Cua and the Cualopings
On the other hand, the liabilities of Cua and the Cualopings are more
straightforward. They admit of approving the Credit Line Agreement and its subsequent
Amendment during the special meetings of the Wincorp board of directors, but
interpose the defense that they did so because the screening committee found the
application to be above board. They deny knowledge of the Side Agreements and of
Power Merge's inability to pay.
We are not persuaded.
Cua and the Cualopings cannot effectively distance themselves from liability by
raising the defenses they did. As ratiocinated by the CA:
Such submission creates a loophole, especially in this age of
compartmentalization, that would create a nearly fool-proof scheme whereby
well-organized enterprises can evade liability for nancial fraud. Behind the veil
of compartmentalized departments, such enterprise could induce the investing
public to invest in a corporation which is nancially unable to pay with
promises of de nite returns on investment. If we follow the reasoning of
defendants-appellants, we allow the masterminds and pro teers from the
scheme to take the money and run without fear of liability from law simply
because the defrauded investor would be hard-pressed to identify or pinpoint
from among the various departments of a corporation which directly enticed
him to part with his money. 1 4 4
Petitioners Cua and the Cualopings bewail that the above-quoted statement is
overarching, sweeping, and bereft of legal or factual basis. But as per the records, the
totality of circumstances in this case proves that they are either complicit to the fraud,
or at the very least guilty of gross negligence, as regards the "sans recourse"
transactions from the Power Merge account.
The board of directors is expected to be more than mere rubber stamps of the
corporation and its subordinate departments. It wields all corporate powers bestowed
by the Corporation Code, including the control over its properties and the conduct of its
business. 1 4 5 Being stewards of the company, the board is primarily charged with
protecting the assets of the corporation in behalf of its stakeholders. ScHADI
Cua and the Cualopings failed to observe this duciary duty when they assented
to extending a credit line facility to Power Merge. In PED Case No. 20-2378, the SEC
discovered that Power Merge is actually Wincorp's largest borrower at about 30% of
the total borrowings. 1 4 6 It was then incumbent upon the board of directors to have
been more circumspect in approving its credit line facility, and should have made an
independent evaluation of Power Merge's application before agreeing to expose it to a
P2,500,000,00.00 n risk.
Had it ful lled its duciary duty, the obvious warning signs would have cautioned
it from approving the loan in haste. To recapitulate: (1) Power Merge has only been in
existence for two years when it was granted a credit facility; (2) Power Merge was
thinly 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
conduct business, it never engaged in any lucrative business, and it did not le the
necessary reports with the SEC; and (4) no security other than its Promissory Notes
was demanded by Wincorp or was furnished by Power Merge in relation to the latter's
drawdowns.
It cannot also be ignored that prior to Power Merge's application for a credit
facility, its controller Virata had already transacted with Wincorp. A perusal of his
records with the company would have revealed that he was a surety for the Hottick
obligations that were still unpaid at that time. This means that at the time the Credit
Line Agreement was executed on February 15, 1999, Virata still had direct obligations
to Wincorp under the Hottick account. But instead of impleading him in the collection
suit against Hottick, Wincorp's board of directors effectively released Virata from
liability, and, ironically, granted him a credit facility in the amount of P1,300,000,000.00
on the very same day.
This only goes to show that even if Cua and the Cualopings are not guilty of fraud,
they would nevertheless still be liable for gross negligence 1 4 7 in managing the affairs
of the company, to the prejudice of its clients and stakeholders. Under such
circumstances, it becomes immaterial whether or not they approved of the Side
Agreements or authorized Reyes to sign the same since this could have all been
avoided if they were vigilant enough to disapprove the Power Merge credit application.
Neither can the business judgment rule 1 4 8 apply herein for it is elementary in
corporation law that the doctrine admits of exceptions: bad faith being one of them,
gross negligence, another. 1 4 9 The CA then correctly held petitioners Cua and the
Cualopings liable to respondent Ng Wee in their personal capacity.
G.R. No. 221109: The liability of
Manuel Estrella
To refresh, Estrella echoes the defense of Tankiansee, who was exempted from
liability by the trial court. He claims that just like Tankiansee, he was not present during
Wincorp's special board meetings where Power Merge's credit line was approved and
subsequently amended. Both also claimed that they protested and opposed the
board's actions. But despite the parallels in their defenses, the trial court was
unconvinced that Estrella should be released from liability. Estrella appealed to the CA,
but the adverse ruling was sustained.
We agree with the findings of the courts a quo.
The minutes of the February 9, 1999 and March 11, 1999 Wincorp Special Board
Meetings were considered as damning evidence against Estrella, just as they were for
Cua and the Cualopings. Although they were said to be unreliable insofar as Tankiansee
is concerned, the trial court rightly distinguished between the circumstances of Estrella
and Tankiansee to justify holding Estrella liable.
For perspective, Tankiansee was exempted from liability upon establishing that it
was physically impossible for him to have participated in the said meetings since his
immigration records clearly show that he was outside the country during those speci c
dates. In contrast, no similar evidence of impossibility was ever offered by Estrella to
support his position that he and Tankiansee are similarly situated.
Estrella submitted his departure records proving that he had left the country in
July 1999 and returned only in February of 2000. Be that as it may, this is undoubtedly
insu cient to establish his defense that he was not present during the February 9,
1999 and March 11, 1999 board meetings. Instead, the minutes clearly state that
Estrella was present during the meetings when the body approved the grant of a credit
line facility to Power Merge. Estrella would even admit being present during the
February 9, 1999 meeting, but attempted to evade responsibility by claiming that he left
the meeting before the "other matters," including Power Merge's application, could have
been discussed.
Unfortunately, no concrete evidence was ever offered to con rm Estrella's alibi.
In both special meetings scheduled, Estrella averred that he accompanied his wife to a
hospital for her cancer screening and for dialogues on possible treatments. However,
this claim was never corroborated by any evidence coming from the hospital or from
his wife's physicians. Aside from his mere say-so, no other credible evidence was
presented to substantiate his claim. Thus, the Court is not inclined to lend credence to
Estrella's self-serving denials.
Neither can petitioner Estrella be permitted to raise the defense that he is a mere
nominee of John Anthony Espiritu, the then chairman of the Wincorp board of directors.
It is of no moment that he only had one nominal share in the corporation, which he did
not even pay for, just as it is inconsequential whether or not Estrella had been receiving
compensation or honoraria for attending the meetings of the board.
The practice of installing undiscerning directors cannot be tolerated, let alone
allowed to perpetuate. This must be curbed by holding accountable those who
fraudulently and negligently perform their duties as corporate directors, regardless of
the accident by which they acquired their respective positions.
In this case, the fact remains that petitioner Estrella accepted the directorship in
the Wincorp board, along with the obligations attached to the position, without
question or quali cation. The duciary duty of a company director cannot conveniently
be separated from the position he occupies on the tri ing argument that no monetary
bene t was being derived therefrom. The gratuitous performance of his duties and
functions is not su cient justi cation to do a poor job at steering the company away
from foreseeable pitfalls and perils. The careless management of corporate affairs, in
itself, amounts to a betrayal of the trust reposed by the corporate investors, clients, and
stakeholders, regardless of whether or not the board or its individual members are
being paid. The RTC and the CA, therefore, correctly disregarded the defense of Estrella
that he is a mere nominee. aICcHA
IV.
Effect of the Side Agreements
Effect of the Side Agreements on the
solidary liability of the petitioners
The courts a quo dismissed all counterclaims and cross-claims lodged by

petitioners against Ng Wee and each other. However, the Court nds reason to grant
the cross-claim of Virata that he be reimbursed by his co-parties of the amount that he
and UEM-MARA may be adjudged to be liable for. 1 5 2
The reinstatement and grant of the cross-claim is anchored on the stipulation
under the Side Agreements. Worthy of note is that neither the RTC nor the CA nulli ed
the contract, despite their acerbic language towards the same. They merely held that
the agreements cannot be used as protection against liability for repayment to the
investors, without more. The Side Agreements even served as basis for the courts a
quo to declare that the con rmation advices being issued to the investors were
worthless and uncollectible credit instruments, and to label the "sans recourse"
transactions as without any economically-valuable object.
As such, the Side Agreements remain to be binding and enforceable on the
parties thereto: Wincorp, Virata, and Power Merge. We give credence to the argument
of Virata that, as per the language of the Side Agreements themselves, what transpired
was an arm's length transaction, wherein in exchange for Wincorp assuming liability for
Power Merge's drawdowns and promissory notes, Power Merge obligated itself "to
return and deliver to Wincorp all the rights, title and interests conveyed by Wincorp
hereby to [Power Merge] over the Hottick obligations." It appears then that there is
ample consideration for the release.
Indeed, the Court must not only look at the "sans recourse" transactions in
isolation, but also consider the underlying transactions and ascertain the true intention
of the contracting parties. On this score, a narration on the relationship between
Hottick, Wincorp, and Power Merge bears reiteration:
On February 21, 1997, Hottick, through a credit facility, borrowed money from
Wincorp in the amount of P1,500,908,026.00, as evidenced by a Promissory Note
issued by Hottick in favor of the investment house, and guaranteed by Halim Saad and
petitioner Virata. When the Asian nancial crisis struck, Hottick experienced nancial
distress and was unable to pay its obligations. This prompted Wincorp to le a
collection case against Hottick and Halim Saad.
Virata was not impleaded in the collection suit, and he would turn out to be
instrumental in brokering a settlement agreement between Wincorp and Hottick. But in
exchange for his exclusion in the proceedings, he executed a Memorandum of
Agreement under which he assumes the obligation to transfer forty percent (40%) of
UPDI's outstanding shares and forty percent (40%) of UPDI's interest in the tollway
project to Wincorp, among others. It would be clari ed in the December 1, 1999 Waiver
and Quitclaim, however, that the equity transfers would be Virata's only obligation under
the Memorandum of Agreement. Said Waiver and Quitclaim provides:
This is to con rm that notwithstanding the terms of the Memorandum of
Agreement dated July 27, 1999 between our company and yourself, our
company hereby irrevocably and unconditionally releases, waives and agrees to
forever hold you, your heirs and assigns free and harmless from and against
any claim, obligation or liability arising out of or in connection with the
Memorandum of Agreement; provided, however, that your undertaking to cause
the assignment, transfer and delivery to our company of at least forty percent
(40%) of the equity of UEM Development Philippines, Inc. ("UPDI") and at least
forty percent (40%) of the interest/share of UPDI in the Manila Cavite Express
Tollway Project (the "Project") shall have been fully complied with. We hereby
reiterate that, except for your aforesaid obligation to assign, transfer
and deliver to our company at least forty (40%) of UPDI's outstanding
shares and at least forty percent (40%) of UPDI's interest/share in the
Project, the Memorandum of Agreement is a mere accommodation on
your part and does not give rise to any legal rights or consequences in
our company's favour as against yourself, your heirs or assigns. 1 5 3
(emphasis added) EHaASD
As can be gleaned, the signi cant portions of the Waiver and Quitclaim mirror the
content of the Side Agreements. But based on the peculiar transactions between the
players herein, the similarity does not end with the content, but extends to the intent.
Reproducing the salient provisions of the Side Agreements:
WHEREAS, Powermerge has entered into the Credit Line Agreement with
Wincorp as an accommodation in order to allow Wincorp to hold Powermerge
paper instead of the obligations of Hottick which are right now held by Wincorp.
xxx xxx xxx
1. Powermerge hereby agrees to execute promissory notes in the aggregate
principal sum of P1,200,000,000.00 in favor of Wincorp and in exchange
therefore, Wincorp hereby assigns, transfers, and conveys to Powermerge
all of its rights, titles and interest by way of a sub-participation over the
promissory notes and other obligations executed by Hottick in favor of
Wincorp; Provided however that the only obligation of Powermerge to
Wincorp shall be to return and deliver to Wincorp all the rights,
title and interests conveyed by Wincorp hereby to Powermerge
over the Hottick obligations. Powermerge shall have no obligation
to pay under its promissory notes executed in favor of Wincorp
but shall be obligated merely to return whatever may have received from
Wincorp pursuant to this agreement.
xxx xxx xxx
3. Wincorp con rms and agrees that this accommodation being entered
into by the parties is not intended to create a payment obligation on
the part of Powermerge . 1 5 4 (emphasis added)
The above documents, besides the non-suit against Virata, readily convey that
the parties did not intend to create a payment obligation on the part of Power Merge;
the latter was merely used as a conduit by Wincorp for the acquisition of equity shares.
They also con rm that Power Merge was just a mere accommodation party to the
issuance of the Promissory Notes that Wincorp sold to its clients, consistent with the
ndings of the courts a quo that Wincorp borrowed the funds for its own account.
Though these circumstances do not exculpate Power Merge and Virata from paying a
holder for value under the negotiable instruments they issued, they nevertheless entitle
Power Merge and Virata, as surety, to indemni cation by way of reimbursement from
Wincorp and its liable directors and o cers, the main debtors, for any amount stated in
the note that petitioners Virata and Power Merge would be compelled to defray,
pursuant to Art. 2066 of the New Civil Code. 1 5 5
V.
Award of Damages
Beyond doubt, Ng Wee is entitled to recover the investments he infused in
Wincorp. This was never the central issue in this case. Other than raising Ng Wee's
alleged failure to state a cause of action in his complaint, none of the petitioners
questioned his right to be compensated for the losses he suffered in the fraudulent
investment scheme. Having ascertained the extent of the liabilities of the petitioners,
the Court will now determine the amount to be awarded to Ng Wee.
The trial and appellate court correctly held that Ng Wee should rst be
recompensed for the maturity amount of the investments he made in Power Merge
through Wincorp, which totalled P213,290,410.36. Pursuant to our ruling in the seminal
case of Nacar v. Gallery Frames , 1 5 6 the amount shall earn interest at twelve percent
(12%) per annum from the date of ling of the Complaint on October 19, 2000 until
June 30, 2013, and six percent (6%) from July 1, 2013 until full satisfaction.
Moreover, the Credit Line Agreement provides for a stipulation of three percent
(3%) additional monthly interest as penalty, twenty percent (20%) interest of the entire
amount due as liquidated damages, and twenty- ve percent (25%) of the entire amount
due as attorney's fees. These additional rates of interest are likewise re ected in the
promissory notes issued by Power Merge for which the liable petitioners can be held
responsible. However, unlike the trial court and the CA, the Court nds that these
contractual stipulations cannot fully be imposed.
The freedom to contract is not absolute. And one of the more general
restrictions thereon is enshrined in Article 1306 of the Civil Code which precludes the
contracting parties from establishing stipulations, clauses, terms, and conditions that
are contrary to law, morals, good customs, public order, and public policy. In this
jurisdiction, the Court has never shied away from striking down iniquitous and
unconscionable interest rates for failing to meet this standard. 1 5 7 We see no reason to
depart from the practice in this case. DaIAcC
That said, the Court herein refuses to impose the three percent (3%) additional
monthly penalty interest, and instead a rms the trial and appellate court's nulli cation
of the same. Such exorbitant interest rate is void for being contrary to morals, if not
against the law. 1 5 8 Being a void stipulation, the monthly penalty interest is deemed
inexistent from the beginning. 1 5 9 In its stead, the imposition of legal interest pursuant
to Nacar is deemed sufficient.
Anent the twenty percent (20%) liquidated damages, the Court sees the need to
reduce the amount. Liquidated damages are those agreed upon by the parties to a
contract, to be paid in case of breach thereof. 1 6 0 Although it can conclusively be
deduced from the contracts that the parties intended to impose such additional
charges, the Court nevertheless, by express provision in Article 2227 of the New Civil
Code, has the right to temper them if they are unconscionable. 1 6 1 Considering that the
base amount of the indebtedness in this case is by itself already staggering, imposing
an additional twenty percent (20%) interest against the persons liable would prove to
be too cumbersome. The Court therefore sees the need to reduce the amount to only
ten percent (10%) of the total maturity value of Ng Wee's investment in Power Merge.
The same downward modi cation is in order as regards the award of attorney's
fees. Although Ng Wee nds justi cation for the entitlement to the award under Article
2208 of the New Civil Code, 1 6 2 the same provision mandates that "in all cases, the
attorney's fees and expenses of litigation must be reasonable." Just as We have
reduced the rate for liquidated damages, the Court likewise tempers the stipulated rate
of attorney's fees to five percent (5%) of the total amount due on Ng Wee's investment.
Finally, the Court sees no cogent reason to disturb the RTC's award of moral
damages in favor of Ng Wee in the amount of P100,000.00, as a rmed by the
appellate court. Discussed in the following wise in Philippine Savings Bank v. Sps.
Mañalac, Jr. is the concept of moral damages:
Moral damages are meant to compensate the claimant for any physical
suffering, mental anguish, fright, serious anxiety, besmirched reputation,
wounded feelings, moral shock, social humiliation and similar injuries unjustly
caused. Although incapable of pecuniary estimation, the amount must
somehow be proportional to and in approximation of the suffering in icted.
Moral damages are not punitive in nature and were never intended to
enrich the claimant at the expense of the defendant. There is no hard-
and-fast rule in determining what would be a fair and reasonable amount of
moral damages, since each case must be governed by its own peculiar facts.
Trial courts are given discretion in determining the amount, with the
limitation that it should not be palpably and scandalously excessive.
Indeed, it must be commensurate to the loss or injury suffered. 1 6 3 (emphasis
added)
Ng Wee's claim for moral damages in the amount of P5,000,000.00 is indeed too
excessive, even with the principal amount in mind. To reiterate, moral damages were
never meant to enrich the claimant. The court therefore upholds the RTC and the CA's
grant of the reduced amount of P100,000.00.
Finally, the judgment of liability shall earn additional six percent (6%) interest
reckoned from finality, also pursuant to the Nacar ruling.
WHEREFORE , premises considered, the Court resolves:
1. To PARTIALLY GRANT the Petition for Review on Certiorari of Luis Juan
L. Virata and UEM-MARA, docketed as G.R. No. 220926;
2. To DENY the Petition for Review on Certiorari of Westmont Investment
Corporation, docketed as G.R. No. 221058;
3. To DENY the Petition for Review of Manuel Estrella, docketed as G.R. No.
221109;
4. T o DENY the Petition for Review on Certiorari of Simeon Cua, Henry
Cualoping, and Vicente Cualoping, docketed as G.R. No. 221135; and
5. To DENY the Petition for Review on Certiorari of Anthony Reyes, docketed
as G.R. No. 221218.
The September 30, 2014 Decision and October 14, 2015 Resolution of the Court
of Appeals in CA-G.R. CV No. 97817 a rming the July 8, 2011, Decision of the Regional
Trial Court, Branch 39 of Manila is hereby AFFIRMED with MODIFICATION . As
modi ed, the dispositive portion of the trial court Decision in Civil Case No. 00-99006
shall read:
WHEREFORE , premises considered, judgment is hereby rendered in
favor of plaintiff, ordering the defendants Luis L. Virata, Westmont Investment
Corporation (Wincorp), Antonio T. Ong, Anthony T. Reyes, Simeon Cua, Vicente
and Henry Cualoping, Mariza Santos-Tan, and Manuel Estrella to jointly and
severally pay plaintiff as follows: TAacHE
1. The sum of Two Hundred Thirteen Million Two Hundred Ninety Thousand
Four Hundred Ten and 36/100 Pesos (P213,290,410.36), which is the
maturity amount of plaintiff's investment with legal interest at the rate of
twelve (12%) percent per annum from the date of ling of the complaint on
October 19, 2000 until June 30, 2013 and six percent (6%) from July 1,
2013 until fully paid;
2. Liquidated damages equivalent to ten percent (10%) of the maturity
amount, and attorney's fees equivalent to ve percent (5%) of the total
amount due plus legal interest at the rate of twelve (12%) percent per
annum from the date of ling of the complaint until June 30, 2013 and six
percent (6%) from July 1, 2013 until fully paid;
3. P100,000.00 as moral damages.
4. Additional interest of six percent (6%) per annum of the total monetary
awards, computed from finality of judgment until full satisfaction.
5. The complaint against defendants Manuel Tankiansee and UEM-MARA
Philippines Corporation is dismissed for lack of merit.
The cross claim of Luis Juan L. Virata is hereby GRANTED. Westmont
Investment Corporation (Wincorp), Antonio T. Ong, Anthony T. Reyes, Simeon
Cua, Vicente and Henry Cualoping, Mariza Santos-Tan, and Manuel Estrella are
hereby ordered jointly and severally liable to pay and reimburse Luis Juan L.
Virata for any payment or contribution he (Luis Juan L. Virata) may make or be
compelled to make to satisfy the amount due to plaintiff Alejandro Ng Wee. All
other counterclaims against Alejandro Ng Wee and cross-claims by the
defendants as against each other are dismissed for lack of merit.
Cost against the defendants, except defendants Manuel Tankiansee and
UEM-MARA Philippines Corporation.
SO ORDERED.
Bersamin, Reyes, Jardeleza and Tijam, JJ., concur.
Footnotes
1. Rollo (G.R. No. 220926), pp. 67-142. Penned by Associate Justice Ramon A. Cruz and
concurred in by Associate Justices Hakim S. Abdulwahid and Romeo F. Barza.
2. Id. at 144-152.
3. Entitled "Alejandro Ng Wee (plaintiff-appellee) vs. Luis Juan Virata, UEM-MARA Philippines
Corporation, Westmont Investment Corporation, Anthony Reyes, Mariza Santos-Tan,
Simeon Cua, Vicente Cualoping, Henry Cualoping, and Manuel Estrella (defendants-
appellants)."
4. Rollo (G.R. No. 220926), p. 69.
5. Id.
6. Id.
7. Id. at 482.
8. Id. at 830.
9. Id. at 156.
10. Id. at 228.
11. Id. at 237.
12. Id. at 242.

13. Id. at 246.
14. Id. at 665.
15. Id. at 70.
16. Id. at 423.
17. Id. at 434.
18. Id. at 70-71.
19. Id. at 481.

20. Id. at 71.
21. Also referred to as "Powermerge."
22. Rollo (G.R. No. 220926), p. 647.
23. Id. at 648.
24. Id. at 1015.
25. Id. at 1013.
26. Id. at 1011.

27. Also referred to as "Tan Kian See."
28. Rollo (G.R. No. 220926), p. 385.
29. Id. at 1018.
30. Id. at 395.
31. Id. at 73.
32. Id. at 411-422.

33. Id. at 411.
34. Id. at 482-499.
35. Id. at 392.

36. Id. at 405.
37. Id. at 73.
38. Id. at 896-903.
39. Id. at 193. Entitled "Alejandro Ng Wee vs. Luis Juan L. Virata, Power Merge Corporation,
UEM Development Phils., Inc., UEM-MARA Philippines Corporation, United Engineers
(Malaysia) Berhad, Majlis Amanah Rakyat, Renong Berhad, Westmont Investment
Corporation, Antonio T. Ong, Anthony T. Reyes, Simeon S. Cua, Manuel N. Tan Kian See,
Mariza Santos-Tan, Vicente T. Cualoping, Henry T. Cualoping, Manuel A. Estrella, and
John Anthony B. Espiritu."
40. Rollo (G.R. No. 220926), pp. 153-154.
41. Id. at 508.
42. Entitled "In the Matter of Westmont Investment Corporation."
43. Rollo (G.R. No. 220926), p. 508.
44. Id. at 1030.
45. Id. at 1041.
46. Id. at 509-510.

47. Id. at 77.
48. Id. at 167-171.
49. Section 31. Liability of directors, trustees or o cers. — Directors or trustees who willfully
and knowingly vote for or assent to patently unlawful acts of the corporation or who are
guilty of gross negligence or bad faith in directing the affairs of the corporation or
acquire any personal or pecuniary interest in con ict with their duty as such directors or
trustees shall be liable jointly and severally for all damages resulting therefrom suffered
by the corporation, its stockholders or members and other persons.
When a director, trustee or o cer attempts to acquire or acquire, in violation of his duty,
any interest adverse to the corporation in respect of any matter which has been reposed
in him in con dence, as to which equity imposes a disability upon him to deal in his own
behalf, he shall be liable as a trustee for the corporation and must account for the pro ts
which otherwise would have accrued to the corporation.
50. Rollo (G.R. No. 220926), p. 153. Penned by Presiding Judge Noli C. Diaz.
51. Id. at 191-192.
52. Id. at 171-172.
53. Id. at 172-183.
54. Id. at 183-187.
55. Id. at 187-190.
56. Id. at 1508-1527.
57. Id. at 80-95.
58. Id. at 130.
59. Id. at 96-104.
60. Id. at 110.

61. Id. at 112.
62. Id. at 113-115.
63. Id. at 116-117.
64. Id. at 117-127.
65. Article 315. Swindling (estafa). — Any person who shall defraud another by any of the
means mentioned herein below shall be punished by:
1. With unfaithfulness or abuse of confidence, namely:
xxx xxx xxx
(b) By misappropriating or converting, to the prejudice of another, money, goods, or any
other personal property received by the offender in trust or on commission, or for
administration, or under any other obligation involving the duty to make delivery of or to
return the same, even though such obligation be totally or partially guaranteed by a
bond; or by denying having received such money, goods, or other property.
xxx xxx xxx
2. By means of any of the following false pretenses or fraudulent acts executed prior to or
simultaneously with the commission of the fraud:
(a) By using ctitious name, or falsely pretending to possess power, in uence,
quali cations, property, credit, agency, business or imaginary transactions, or by means
of other similar deceits.
6 6 . Article 1170. Those who in the performance of their obligations are guilty of fraud,
negligence, or delay, and those who in any manner contravene the tenor thereof, are
liable for damages.
67. Rollo (G.R. No. 220926), p. 150.
68. Id. at 18. The issues are:
I.
THE COURT OF APPEALS DECIDED CONTRARY TO LAW WHEN IT FOUND PETITIONERS

LIABLE TO RESPONDENT NG WEE DESPITE THE ABSENCE OF ANY PRIVITY OF
CONTRACT BETWEEN THEM
II.
THE COURT OF APPEALS DECIDED CONTRARY TO LAW IN RULING THAT THE
DOCTRINE OF PIERCING THE VEIL OF CORPORATE FICTION APPLIES TO THIS CASE
AND THAT PETITIONER VIRATA, AS DIRECTOR OF POWER MERGE, SHOULD BE
PERSONALLY LIABLE TO RESPONDENT NG WEE
III.
THE COURT OF APPEALS DECIDED CONTRARY TO LAW IN RULING THAT UEM-MARA IS
LIABLE TO RESPONDENT NG WEE
69. Rollo (G.R. No. 221058), p. 25. The issues are:
I.
THE HONORABLE COURT OF APPEALS ERRED IN FINDING THE TRANSACTIONS AMONG

THE PARTIES HEREIN AS FRAUDULENT
II.
THE HONORABLE COURT OF APPEALS ERRED IN APPRECIATING THE NATURE OF THE
MONEY MARKET TRANSACTION AND THE CORRESPONDING DUTIES AND LIABILITIES
OF THE PARTIES, AND HOLDING INSTEAD THAT PETITIONER WINCORP IS INVOLVED
IN QUASI-BANKING ACTIVITIES
III.
THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT WINCORP IS LIABLE
EVEN IN ITS CAPACITY AS MERE AGENT/BROKER IN THE LOAN TRANSACTION
IV.
THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT WINCORP IS
SOLIDARILY LIABLE WITH THE OTHER DEFENDANTS
70. Id. at 20. This is to confirm that pursuant to your authority, we have acted in your behalf
and/or for your bene t, risk or account without recourse or liability, real or
contingent, to Westmont Investment Corporation in respect of the loan
granted to the Borrower named and under the terms specified hereunder.
xxx xxx xxx
For your convenience but without any obligation on our part , we may act as your
collecting and paying agent for this transaction. Kindly note that your receipt hereof is
an indication of your conformity to the foregoing terms and conditions of the
transaction. (emphasis added)
71. Rollo (G.R. No. 221109), pp. 115-117. The issues are:
I.
xxx xxx xxx
THE COURT OF APPEALS GRAVELY ERRED IN RULING THAT THE HEREIN PETITIONER
[IS] GUILTY OF GROSS NEGLIGENCE AND BAD FAITH IN DIRECTING THE AFFAIRS OF
WINCORP
II.
xxx xxx xxx
THE COURT OF APPEALS GRAVELY ERRED IN FAILING TO RULE THAT THE WRIT OF
PRELIMINARY ATTACHMENT AGAINST APPELLANT ESTRELLA'S BEL-AIR PROPERTY
WAS IRREGULAR AND CONTRARY TO THE REVISED RULES OF PROCEDURE AND
SETTLED LEGAL PRINCIPLES

I.
THE COURT OF APPEAL'S 30 SEPTEMBER 2014 DECISION AND 26 OCTOBER 2015
RESOLUTION OUGHT TO BE ANNULLED AND SET ASIDE, FOR BEING CONTRARY TO
SEC. 31. OF THE CORPORATION CODE AS WELL AS TO THE DOCTRINE IN CARAG VS.
NATIONAL LABOR RELATIONS COMMISSION, 520 SCRA 28 (2007), VDA. DE ROXAS VS.
ROXAS-CRUZ, G.R. NO. 182378, MARCH 6, 2013, HEIRS OF FE TAN UY VS.
INTERNATIONAL EXCHANGE BANK , G.R. NO. 166282, FEBRUARY 13, 2013, AND OTHER
CASES, HOLDING THAT BEFORE THE CORPORATE VEIL MAY BE PIERCED, AND THE
SEPARATE PERSONALITY MAY BE DISREGARDED SO THAT LIABILITIES ARE
ATTACHED TO INDIVIDUAL CORPORATE DIRECTORS/OFFICERS, THERE MUST BE
CLEAR AND CONVINCING EVIDENCE OF ANY WRONGDOING COMMITTED BY SAID
CORPORATE DIRECTOR/OFFICER AND THAT SUCH ILL-MOTIVE OR BAD FAITH
CANNOT BE PRESUMED.
xxx xxx xxx
(A)
PETITIONERS SHOULD NOT BE HELD JOINTLY AND SOLIDARILY LIABLE WITH THE
OTHER DEFENDANTS IN CIVIL CASE NO. 00-99006 FOR ANY OF RESPONDENT'S
CLAIMS. NO CLEAR AND CONVINCING EVIDENCE EXIST THAT PETITIONERS SIMEON
CUA, HENRY CUALOPING, AND VICENTE CUALOPING ASSENTED TO THE PATENTLY
UNLAWFUL ACTS OF THE CORPORATION WINCORP WHICH IS REQUIRED TO HOLD
DIRECTORS LIABLE FOR CORPORATE ACTS UNDER SECTION 31 OF THE
CORPORATION CODE AND APPLICABLE JURISPRUDENCE.
xxx xxx xxx
(B)
NO CLEAR AND CONVINCING EVIDENCE EXIST THAT PETITIONERS SIMEON CUA,
HENRY CUALOPING, AND VICENTE CUALOPING WERE GUILTY OF GROSS NEGLIGENCE
OR BAD FAITH IN DIRECTING THE AFFAIRS OF THE CORPORATION WINCORP WHICH IS
REQUIRED TO HOLD DIRECTORS LIABLE UNDER SECTION 31 OF THE CORPORATION
CODE AND APPLICABLE JURISPRUDENCE.
xxx xxx xxx
II.
PETITIONERS SIMEON CUA, VICENTE CUALOPING, AND HENRY CUALOPING SHOULD BE
ABSOLVED FROM LIABILITY IN THIS CASE.
I.
THE COURT OF APPEALS COMMITTED SERIOUS ERROR IN RULING THAT PETITIONER
REYES WAS A DIRECTOR OF WINCORP. PETITIONER REYES SIMPLY WAS NOT, AND
HAD NEVER BEEN, A DIRECTOR OF RESPONDENT WINCORP.
II.
THE COURT OF APPEALS RULED IN A MANNER NOT IN ACCORD WITH THIS
HONORABLE COURT'S APPLICABLE DECISIONS WHEN IT HELD PETITIONER REYES
PERSONALLY LIABLE TO RESPONDENT NG WEE SIMPLY FOR BEING RESPONDENT
WINCORP'S SIGNATORY IN THE SUBJECT TRANSACTIONS BETWEEN RESPONDENTS
WINCORP AND POWER MERGE. PETITIONER REYES ACTED IN GOOD FAITH AND
WITHIN THE SCOPE OF HIS AUTHORITY AS A CORPORATE OFFICER OF RESPONDENT
WINCORP.
III.
THE COURT OF APPEALS RULED IN A MANNER NOT IN ACCORD WITH THIS
HONORABLE COURT'S APPLICABLE DECISIONS WHEN IT HELD PETITIONER REYES
SOLIDARILY LIABLE WITH THE OTHER RESPONDENTS FOR LIQUIDATED AND MORAL
DAMAGES AND ATTORNEY'S FEES TO RESPONDENT NG WEE. THE PROVISION ON
LIQUIDATED DAMAGES CANNOT APPLY TO PETITIONER REYES, AS HE WAS NOT A
PARTY TO THE AGREEMENT. SIMILARLY, HE CANNOT BE HELD LIABLE FOR MORAL
DAMAGES WHEN IT WAS NOT ESTABLISHED THAT HE ACTED IN BAD FAITH.
IV.
PETITIONER REYES' CROSS-CLAIMS SHOULD HAVE BEEN GRANTED, INASMUCH AS

THE COURT OF APPEALS FOUND COLLUSION BETWEEN RESPONDENTS WINCORP
AND VIRATA, AND HELD THEM LIABLE TO RESPONDENT NG WEE.
74. Rollo (G.R. No. 220926), pp. 5045-5051.

75. Rollo (G.R. No. 221218), pp. 1035-1040.
76. Id. at 935-951.
77. Id. at 1043-1106.
78. Cua, Vicente and Henry Cualoping, and Estrella are respondents in G.R. No. 221218, and in
G.R. No. 220926 along with Reyes.
79. Rollo (G.R. No. 221218), p. 901; Rollo (G.R. No. 220926), p. 5042.
80. RULES OF COURT, Rule 3, Section 2.
81. Vios v. Pantangco, Jr., G.R. No. 163103, February 6, 2009, 578 SCRA 129, 143.
82. G.R. No. 181235, July 22, 2009, 593 SCRA 456, 466-467.
83. Clidoro vs. Jalmanzar, G.R. No. 176598, July 9, 2014, 729 SCRA 350.
84. Rollo (G.R. No. 220926), p. 197.

85. Id. at 97-98.
86. TSN, August 17, 2005, pp. 14-33, as cited in the September 30, 2014 Court of Appeals
Decision in CA-G.R. CV No. 97817, pp. 34-35; id. at 100-101.
87. TSN, August 24, 2005, pp. 40-52, as cited in the September 30, 2014 Court of Appeals
88. TSN, September 7, 2005, pp. 7-32, as cited in the September 30, 2014 Court of Appeals
89. TSN, July 13, 2005 and January 18, 2006, as cited in the September 30, 2014 Court of
Appeals Decision in CA-G.R. CV No. 97817, p. 37; id. at 103.
90. RULES OF COURT, Rule 45, Sec. 1.

91. Far Eastern Surety and Insurance Co., Inc. v. People , G.R. No. 170618, November 20, 2013,
710 SCRA 358.
92. Dihiansan v. Court of Appeals, No. L-49539, September 14, 1987, 153 SCRA 712, 716.
93. G.R. No. 75450, November 8, 1990, 191 SCRA 218.
94. Id. at 223-224: (1) When the conclusion is a nding grounded entirely on speculation,
surmises or conjectures; (2) When the inference made is manifestly mistaken, absurd or
impossible; (3) Where there is a grave abuse of discretion; (4) When the judgment is
based on a misapprehension of facts; (5) When the ndings of fact are con icting; (6)
When the Court of Appeals, in making its ndings, went beyond the issues of the case
and the same is contrary to the admissions of both appellant and appellee; (7) The
ndings of the Court of Appeals are contrary to those of the trial court; (8) When the
ndings of fact are conclusions without citation of speci c evidence on which they are
based; (9) When the facts set forth in the petition as well as in the petitioner's main and
reply briefs are not disputed by the respondents; and (10) The finding of fact of the Court
of Appeals is premised on the supposed absence of evidence and is contradicted by the
evidence on record.
95. Rollo (G.R. No. 220926), pp. 110-113.

96. Republic v. Estate of Alfonso Lim, Sr. , G.R. No. 164800, July 22, 2009, 593 SCRA 404, 417-
418.
97. Legaspi Oil Co., Inc. v. Court of Appeals, G.R. No. 96505 July 1, 1993, 224 SCRA 213.
98. G.R. No. 178836, July 23, 2008, 559 SCRA 649, 657-658.
99. Rollo (G.R. No. 220926), pp. 411-412.

100. See NEGOTIABLE INSTRUMENTS LAW, Section 119 (c).
101. PRESIDENTIAL DECREE NO. 129, Section 2.
102. Section 7. Powers. — In addition to the powers granted to corporations in general, an
Investment House is authorized to do the following:
1. Arrange to distribute on a guaranteed basis securities of other corporations and of the
Government or its instrumentalities;
2. Participate in a syndicate undertaking to purchase and sell, distribute or arrange to
distribute on a guaranteed basis securities of other corporations and of the Government
or its instrumentalities;
3. Arrange to distribute or participate in a syndicate undertaking to purchase and sell on a
best-efforts basis securities of other corporations and of the Government or its
instrumentalities;
4. Participate as soliciting dealer or selling group member in tender offers, block sales, or
exchange offering or securities; deal in options, rights or warrants relating to securities
and such other powers which a dealer may exercise under the Securities Act;
5. Promote, sponsor, or otherwise assist and implement ventures, projects and programs
that contribute to the economy's development;
6. Act as financial consultant, investment adviser, or broker;
7. Act as portfolio manager, and/or nancial agent, but not as trustee of a trust fund or
trust property;
8. Encourage companies to go public, and initiate and/or promote, whenever warranted,
the formation, merger, consolidation, reorganization, or recapitalization of productive
enterprises, by providing assistance or participation in the form of debt or equity
financing or through the extension of financial or technical advice or service;
9. Undertake or contract for researches, studies and surveys on such matters as business
and economic conditions of various countries, the structure of nancial markets, the
institutional arrangements for mobilizing investments;
10. Acquire, own, hold, lease or obtain an interest in real and/or personal property as may
be necessary or appropriate to carry on its objectives and purposes;
11. Design pension, profit-sharing and other employee benefits plans; and
12. Such other activities or business ventures as are directly or indirectly related to the
dealing in securities and other commercial papers, unless otherwise governed or
prohibited by special laws, in which case the special law shall apply.
103. Note from the Publisher: Copied verbatim from the o cial copy. Missing Footnote
Reference and Footnote Text.
104. PD 129, Sec. 12.
105. Id., Sec. 2 (K).
106. REPUBLIC ACT NO. 8799, Section 3; see also BATAS PAMBANSA BLG. 178, Section 2 (a).
107. REPUBLIC ACT NO. 8799, Sec. 8; see also BATAS PAMBANSA BLG. 178, Sec. 4.
108. REPUBLIC ACT NO. 8799, Sec. 3.1 (b); see also BATAS PAMBANSA BLG. 178, Sec. 2.
109. Power Homes Unlimited Corporation v. Securities and Exchange Commission , G.R. No.
164182, February 26, 2008, 546 SCRA 567, 575-576.
110. Securities and Exchange Commission v. Santos , G.R. No. 195542, March 19, 2014, 719
SCRA 514.
111. 328 US 293 (1946).
112. Rollo (G.R. No. 220296), p. 1040.
113. G.R. No. 164197, January 25, 2012, 664 SCRA 28, 32.
114. Dated July 8, 2010.

115. PRESIDENTIAL DECREE NO. 129, Sec. 7.
116. BATAS PAMBANSA BLG. 178, Secs. 5 and 6.
117. Section 29. Fraudulent transactions. — (a) It shall be unlawful for any person, directly or
indirectly, in connection with the purchase or sale of any securities —
(1) To employ any device, scheme, or artifice to defraud, or
(2) To obtain money or property by means of any untrue statement of a material fact or
any omission to state a material fact necessary in order to make the statements made,
in the light of the circumstances under which they were made, not misleading, or
(3) To engage in any act, transaction, practice, or course of business which operates or
would operate as a fraud or deceit upon any person.
118. Rollo (G.R. No, 220926), pp. 111-112; citations omitted.
119. NEW CIVIL CODE, Article 1868.
120. Tuazon v. Heirs of Bartolome Ramos , G.R. No. 156262, July 14, 2005, 463 SCRA 408, 414-
415.
121. NEW CIVIL CODE, Article 1881: The agent must act within the scope of his authority. He
may do such acts as may be conducive to the accomplishment of the purpose of the
agency.
122. NEW CIVIL CODE, Article 1882: The limits of the agent's authority shall not be considered
exceeded should it have been performed in a manner more advantageous to the
principal than that specified by him.
123. NEW CIVIL CODE, Article 1888: An agent shall not carry out an agency if its execution
would manifestly result in loss or damage to the principal.
124. NEW CIVIL CODE, Article 1878: Special powers of attorney are necessary in the following
cases:
xxx xxx xxx
(4) To waive any obligation gratuitously;
xxx xxx xxx
125. NEW CIVIL CODE, Article 1889: The agent shall be liable for damages if, there being a
conflict between his interests and those of the principal, he should prefer his own.
126. NEW CIVIL CODE, Article 1909: The agent is responsible not only for fraud, but also for
negligence, which shall be judged with more or less rigor by the courts, according to
whether the agency was or was not for a compensation.
127. G.R. No. 180257, February 23, 2011, 644 SCRA 180, 192.
128. Bautista v. Auto Plus Traders, Incorporated, G.R. No. 166405, August 6, 2008, 561 SCRA
223, 230.
129. Aglibot v. Santia, G.R. No. 185945, December 5, 2012, 687 SCRA 283, 297-298.
131. Ang v. Associated Bank, G.R. No. 146511, September 5, 2007, 532 SCRA 244.
132. Id. at 273-274.

134. Doña Adela Export International, Inc. v. Trade and Investment Development Corporation
(TIDCORP), G.R. No. 201931, February 11, 2015, 750 SCRA 429, 448.
135. Rollo (G.R. No. 220926), pp. 385-386.
136. G.R. No. 108734, May 29, 1996, 257 SCRA 149, 157-158.
137. Id. at 159.

138. Rollo (G.R. No. 220926), p. 4 & p. 647.
139. Id. at 189.
140. RULES OF COURT, Rule 2, Sec. 2.
141. Soloil, Inc. v. Philippine Coconut Authority , G.R. No. 174806, August 11, 2010, 628 SCRA
185, 190.
142. Heirs of Fe Tan Uy vs. International Exchange Bank , G.R. No. 166282, February 13, 2013,
690 SCRA 519.
143. Sanchez v. Republic, G.R. No. 172885, October 9, 2009, 603 SCRA 229.
144. Rollo, p. 120.
145. BATAS PAMBANSA BLG. 68, Section 23: The board of directors or trustees. — Unless
otherwise provided in this Code, the corporate powers of all corporations formed under
this Code shall be exercised, all business conducted and all property of such
corporations controlled and held by the board of directors or trustees to be elected from
among the holders of stocks, or where there is no stock, from among the members of the
corporation, who shall hold o ce for one (1) year until their successors are elected and
qualified.
146. Rollo (G.R. No. 220926), p. 1046:
Borrower Amount in P
ACL DEVELOPMENT CORPORATION 547,767,109.56
AZKCON CONSTRUCTION 93,656,152.60
CHEVY CHASE 56,978,251.17
EBECAP HOLDINGS 801,394,335.75
EBECOM HOLDINGS 52,211,422.98
EBEDEV, INC. 464,483,827.47
GLOBAL EQUITIES 11,033,800.70
GOLDEN ERA HOLDINGS, INC. 256,402,882.46
LUIS JUAN L. VIRATA 2,003,004.51
MONTEVERDE HOLDINGS, INC. 138,395,178.36
PEARLBANK SECURITIES, INC. 464,829,187.32
PHILMEDIA POST 856,785.18
POWER MERGE CORPORATION 2,500,000,000.00
STA. LUCIA REALTY & DEVELOPMENT, INC. 718,039,235.09
STRAIGHTLINE INTERNATIONAL 132,806,766.18
SUN-O-TELECOM 40,000,000.00
THING ON DEVELOPMENT 183,221,246.80
TIME EXPONENTS 1,200,000.00
UNIOIL RESOURCES A & HOLDINGS CO. 40,927,260.92
WETMONT MAMBURAO BEACH RESORT 14,913,454.79
WINCORP SECURITIES 1,500,000.00
ZIPPORAH REALTY HOLDINGS 289,795,316.86
TOTAL P6,812,415,218.70
147. Gross negligence is characterized by want of even slight care, acting or omitting to act in a
situation where there is a duty to act, not inadvertently but willfully and intentionally with
a conscious indifference to consequences insofar as other persons may be affected. See
LBC Express-Metro Manila, Inc. v. Mateo, G.R. No. 168215, June 9, 2009, 589 SCRA 33.
148. Under the "business judgment rule," the courts are barred from intruding into the business
judgments of the corporation, when the same are made in good faith.
149. Republic Telecommunications Holdings, Inc. v. Court of Appeals , G.R. No. 135074 January
29, 1999, 302 SCRA 403.
152. Rollo (G.R. No. 220926), p. 536.
153. Rollo (G.R. No. 220926), p. 481.
154. Id. at 392.

155. Article 2066. The guarantor who pays for a debtor must be indemni ed by the latter. The
indemnity comprises:
(1) The total amount of the debt;
(2) The legal interests thereon from the time the payment was made known to the debtor,
even though it did not earn interest for the creditor;
(3) The expenses incurred by the guarantor after having noti ed the debtor that payment
had been demanded of him;
(4) Damages, if they are due.
156. G.R. No. 189871, August 13, 2013, 703 SCRA 439.
157. Silos v. Philippine National Bank, G.R. No. 181045, July 2, 2014, 728 SCRA 617.
158. Chua v. Timan, G.R. No. 170452, August 13, 2008, 562 SCRA 146.
159. Castro v. Tan, G.R. No. 168940, November 24, 2009, 605 SCRA 231.
160. Article 2226, New Civil Code.
161. Article 2227. Liquidated damages, whether intended as an indemnity or a penalty, shall be
equitably reduced if they are iniquitous or unconscionable.
162. Article 2208. In the absence of stipulation, attorney's fees and expenses of litigation, other
than judicial costs, cannot be recovered, except:
xxx xxx xxx
(2) When the defendant's act or omission has compelled the plaintiff to litigate with third
persons or to incur expenses to protect his interest;
xxx xxx xxx

(5) Where the defendant acted in gross and evident bad faith in refusing to satisfy the
plaintiff's plainly valid, just and demandable claim;
xxx xxx xxx
(11) In any other case where the court deems it just and equitable that attorney's fees and
expenses of litigation should be recovered.
163. G.R. No. 145441, April 26, 2005, 457 SCRA 203, 221.
n Note from the Publisher: Copied verbatim from the official copy.

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THIRD DIVISION

[G.R. No. 220926. July 5, 2017.]

LUIS JUAN L. VIRATA and UEM-MARA PHILIPPINES CORPORATION

[G.R. No. 221058. July 5, 2017.]

WESTMONT INVESTMENT, CORPORATION , petitioner, vs.

[G.R. No. 221109. July 5, 2017.]

MANUEL ESTRELLA , petitioner, vs. ALEJANDRO NG WEE , respondent.

[G.R. No. 221135. July 5, 2017.]

SIMEON CUA, VICENTE CUALOPING, and HENRY CUALOPING ,

[G.R. No. 221218. July 5, 2017.]

ANTHONY T. REYES , petitioner, vs. ALEJANDRO NG WEE, LUIS JUAN

Nature of the Case

Ng Wee's initial investments were matched with Hottick Holdings Corporation

93625 Alex Lim Tan 1,933,335.42 4/26/2000 1,960,160.45

xxx xxx xxx

3. P100,000.00 as moral damages.

Grounds for the Petitions

In its petition, Wincorp attributes reversible error 6 9 to the CA when it rendered

Petitioner Estrella, one of the directors of Wincorp, instituted a separate petition

As a mere nominee, Estrella is involved solely in setting down company policies

Finally, the grounds 7 3 invoked by petitioner Reyes to support his petition

Petitioners Virata and UEM-MARA argued in their Comment 7 6 in G.R. No.

Respondent Ng Wee led his Comment 7 7 on the consolidated petitions but

As a general rule, every action must be prosecuted or defended in the name of

To be sure, hornbook doctrine is that when the a rmative defense of dismissal

Angel Archangel admitted the trust relation in the following manner:

A: I returned them to Mr. Wee, Sir.

a. That Wincorp defrauded Ng Wee is a finding

xxx xxx xxx

It must be remembered that the special meeting of Wincorp's board of directors

Conspicuously absent in the enumerated additional powers of an investment

xxx xxx xxx

CD Technologies Asia, Inc. 2018 cdasiaonline.com

a. Virata is liable for the Promissory Notes

In a similar fashion, the accommodation party cum surety in a negotiable

CREDIT LINE AGREEMENT

a. Virata is liable for the obligations of Power Merge

To restate, basic is the rule that a corporation is invested by law with a

By way of exception, a corporate director, a trustee or an o cer, may be held

CD Technologies Asia, Inc. 2018 cdasiaonline.com

The courts a quo dismissed all counterclaims and cross-claims lodged by

12. Id. at 242.

19. Id. at 481.

26. Id. at 1011.

32. Id. at 411-422.

35. Id. at 392.

46. Id. at 509-510.

60. Id. at 110.

THE COURT OF APPEALS DECIDED CONTRARY TO LAW WHEN IT FOUND PETITIONERS

THE HONORABLE COURT OF APPEALS ERRED IN FINDING THE TRANSACTIONS AMONG

CD Technologies Asia, Inc. 2018 cdasiaonline.com

PETITIONER REYES' CROSS-CLAIMS SHOULD HAVE BEEN GRANTED, INASMUCH AS

74. Rollo (G.R. No. 220926), pp. 5045-5051.

84. Rollo (G.R. No. 220926), p. 197.

CD Technologies Asia, Inc. 2018 cdasiaonline.com

95. Rollo (G.R. No. 220926), pp. 110-113.

99. Rollo (G.R. No. 220926), pp. 411-412.

114. Dated July 8, 2010.

133. NEW CIVIL CODE, Article 1311.