Total Petroleum vs Lim, June 23, 2020 *

Doctrine:
To hold a director or officer personally liable for corporate obligations, two requisites must concur:
(1)      complainant must allege in the complaint that the director or officer assented to patently unlawful acts of the corporation, or that the officer was guilty of gross negligence or bad faith; and
(2)      complainant must clearly and convincingly prove such
unlawful acts, negligence or bad faith
To hold a director or officer personally liable for debts of the corporation, and thus pierce the veil of corporate fiction, the bad faith or wrongdoing of the director or officer must be established clearly and convincingly.
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Facts:
●     On December 1, 1999 Tyreplus, through its President
Edgardo Lim, entered into a Commercial Distributorship Agreement with Total.
●     On December 31, 1999, Tyreplus' General Manager Brigido Tan resigned, prompting Lim to take over the company operations. Lim discovered that Tan used the name of
Tyreplus to pursue Tan's personal interest.
●     Thus, in order to remove the bad image Tan had created,
Tyreplus had purportedly changed its name to Superpro
Industrial Sales Corporation.
●     using the letterhead "Superpro Ind. Sales Corp." Lim wrote Total that "Superpro Industrial Sales Corporation" will be the new trade name of Tyreplus Sales Corporation
●     on March 9, 2000, Total served on Tyreplus a notice of pre-termination of Distributorship Agreement
○ Tyreplus committed a contractual breach when it assigned its distributorship rights and obligations to Superpro, a separate and distinct corporation, without Total's knowledge and consent.
●     Total further asserts that Lim should also be held personally liable for transacting in bad faith by misleading it into believing that Tyreplus got dissolved and changed its name to Superpro.

Issue: Whether Lim should be held personally liable for Tyreplus' obligations in his capacity as its President.

Held:
●     YES
●     To hold a director or officer personally liable for debts of the corporation, and thus pierce the veil of corporate fiction, the bad faith or wrongdoing of the director or officer must be established clearly and convincingly.
●     Here, Lim had been the frontrunner in the transactions between Total and Tyreplus, and subsequently, Total with Superpro. Lim categorically identified himself as the President of Tyreplus and Superpro. Lim admitted and declared his active participation in the management and operation of Tyreplus and Superpro, as the President of both companies.
●     Lim as the President of Tyreplus is the controlling mind of this company, as Tyreplus had no mind of its own.
●     Days after the contract with Superpro was executed, Lim started changing this tone, this time, he claimed that Superpro had actually emerged as a new entity. Not only that. For no valid reason, Lim, on behalf of Tyreplus, ordered
a stop-payment on the checks he issued as payment for the obligations of Tyreplus to Total. And after Total demanded payment of the obligations of Tyreplus, Lim, on behalf of
Tyreplus, instituted the case for damages against Total.
●     Lim dealt in bad faith when he knowingly misled Total into executing the new Agreement with Superpro. Lim falsely declared to Total that Tyreplus' name was merely changed to Superpro, albeit he subsequently asserted that in fact the companies are two (2) distinct and separate. Lim's misuse of Tyreplus as a corporation to perpetuate breach of contractual obligations renders Lim personally liable.
Lim, therefore, should be made liable jointly and severally liable with Tyreplus in the payment of the latter's obligations due to Total.