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Tramat Mercantile vs. CA

The Supreme Court ruled that David Ong cannot be held jointly and severally liable with Tramat Mercantile, Inc. for the transaction involving a tractor sold by Melchor de la Cuesta. Ong acted in his capacity as an officer of the corporation, which has a distinct legal personality separate from its officers. Personal liability for corporate officers typically arises only under specific conditions, none of which were present in this case.

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9 views1 page

Tramat Mercantile vs. CA

The Supreme Court ruled that David Ong cannot be held jointly and severally liable with Tramat Mercantile, Inc. for the transaction involving a tractor sold by Melchor de la Cuesta. Ong acted in his capacity as an officer of the corporation, which has a distinct legal personality separate from its officers. Personal liability for corporate officers typically arises only under specific conditions, none of which were present in this case.

Uploaded by

Michelle Lim
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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G.R. No.

111008 November 7, 1994


TRAMAT MERCANTILE, INC. AND DAVID ONG, petitioners, vs. HON. COURT OF APPEALS
AND MELCHOR DE LA CUESTA, respondents.

FACTS: Melchor de la Cuesta, doing business under the name and style of "Farmers Machineries," sold
to ("Tramat"), one (1) unit HINOMOTO TRACTOR. In payment, David Ong, Tramat's president and
manager, issued a check for P33,500. Tramat, in turn, sold the tractor, together with an attached lawn
mower fabricated by it, to the NAWASA for P67,000.00. David Ong caused a "stop payment" of the
check when NAWASA refused to pay the tractor and lawn mower after discovering that, aside from some
stated defects of the attached lawn mower, the engine (sold by de la Cuesta) was a reconditioned unit.

De la Cuesta filed an action. Ong, averred that de la Cuesta had no cause of action; that the questioned
transaction was between plaintiff and Tramat Mercantile, Inc., and not with Ong in his personal capacity;
and that the payment of the check was stopped because the subject tractor had been priced as a brand
new, not as a reconditioned unit. The trial court granted the action and ordered Ong to pay P33,500.

ISSUE: Whether or not Ong can be held jointly and severally liable with Tramat for the subject
transaction.

RULING: No. The Supreme Court held that it was, nevertheless, an error to hold David Ong jointly and
severally liable with TRAMAT to de la Cuesta under the questioned transaction. Ong had there so acted,
not in his personal capacity, but as an officer of a corporation, TRAMAT, with a distinct and separate
personality. As such, it should only be the corporation, not the person acting for and on its behalf, that
properly could be made liable thereon.3

Personal liability of a corporate director, trustee or officer along (although not necessarily) with the
corporation may so validly attach, as a rule, only when —
1. He assents (a) to a patently unlawful act of the corporation, or
(b) for bad faith, or gross negligence in directing its affairs, or (c) for conflict of interest,
resulting in damages to the corporation, its stockholders or other persons;4
2. He consents to the issuance of watered stocks or who, having knowledge thereof, does not
forthwith file with the corporate secretary his written objection thereto; 5
3. He agrees to hold himself personally and solidarily liable with the corporation; 6 or
4. He is made, by a specific provision of law, to personally answer for his corporate action. 7

In the case, there is no indication that petitioner David Ong could be held personally accountable

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