Sps Fernandez vs Smart Communications, GR 212885,July 17, 2019*

DOCTRINE
As a general rule, a corporation’s representatives are not bound by the terms of the contract executed by the corporation. They are not personally liable for obligations and liabilities incurred on or in behalf of the corporation. Exception, when the piercing the
veil of corporate fiction is applicable

FACTS:
Petitioners   Nolasco   Fernandez   and   Maricris   Fernandez
were the Chief Executive Officer and Member of the Board of Directors of EOL, respectively.
EOL or Everything Online, Inc is a corporation that offers internet services nationwide through franchisees. Respondent Smart ,on the other hand, is a mobile phone service provider.
Sometime in 2006, EOL sought the services of SMART to provide for the mobile requirements of EOLfor its expansions. Meetings ensued and an agreement was reached which led EOL’s corporate president SalustianoG. Samaco III to sign two (2) corporate service applications and letters of undertaking which states:The President and each one of the directors and officers of the corporation shall be held solidarily liable in their personal capacity with the subscriber for all charges for the use of the   SMART Celfones  acquired  by the   said subscriber.
In September 13, 2006, in order to release and approved the remaining phone line applications, there respondent specified the terms of agreements over the phone lines covered, restated and clarified the agreements between EOL and SMART through a letter of agreement, agreeing on the full responsibility as to the terms and conditions mentioned in the agreement. EOL also executed an Undertaking, that again, provides for a stipulation that the President and directors be held solidarily liable in their personal capacity. The same was signed by Samaco and Petitioner Nolasco.
After the execution of the EOL undertaking, Smart averred that its credit and collection departmentsent by email, phone bills to EOL, yet the same were returned and EOL allegedly refused to receive the bills, stating that it was not liable for the payment of bills of phone lines assigned to franchisees.
Despite repeated demands by the respondent, EOL failed to pay its payables which already amounted to P 39,770,810.87 as of October 31, 2008. This prompted the respondent to file an application for a writ of preliminary attachment before the RTC of Makati Branch 62 for the collection of sum of money against EOL including the petitioners.The RTC dismissed the case and granted petitioners’ motion to dismiss and set aside the writ. On appeal by petition for certiorari under Rule 65, the CA reversed the lower court.

ISSUE: WON Spouse Fernandez are not solidarily liable with EOL?

RULING:
Maricris is not solidarily liable while Nolasco is.
As a general rule, a corporation's representatives are not bound by the terms of the contract executed by the corporation. "They are not personally liable for obligations and liabilities incurred on or in behalf of the corporation. " There are instances, however, when the distinction between personalities of directors, officers, and representatives, and of the corporation, are disregarded. This corporation is being abused or being used for wrongful purposes. The piercing of the corporate veil must be done with caution. To justify the piercing of the veil of corporate fiction, "it must be shown by clear and convincing proof that the separate: and distinct personality of the corporation was purposefully employed to evade a legitimate and binding commitment and perpetuate a
fraud or like wrongdoings."
A corporate director, trustee, or officer is to be held solidarily liable with the corporation in the following instances:1. When directors and trustees or, in appropriate cases, the officers of a corporation:
(a)   vote for or assent to patently unlawful acts of the corporation;
(b)  act in bad faith or with gross negligence in directing the corporate affairs;
(c)   are guilty of conflict of interest to the prejudice of the corporation, its stockholders or members, and other persons;2.
When a director or officer has consented to the issuance of watered stocks or who, having knowledge thereof, did not file
with the corporate secretary his written objection thereto;
3)          When a director, trustee or officer has contractually agreed or stipulated to hold himself personally and solidarily liable with the Corporation; or
4)          When a director, trustee or officer is made, by specific provision of law, personally liable for his corporate action.These instances have not been shown in the case of Maricris. While the Amended Complaint alleged that EOL fraudulently refused to pay the amount due, nothing in the said pleading or its annexes would show the basis of Maricris' alleged fraudulent act that warrants piercing the corporate veil. With regard to Nolasco, as CEO, he signed the EOL Undertaking purportedly binding himself to be held solidarily liable in his personal capacity with the franchisee or assignee for all charges forthe use of SMART cell phone units acquired by Everything Online, Inc. "WHEREFORE, premises considered, the petition is PARTLY GRANTED.