Tupaz vs. Court of Appeals (G.R. No. 145578, November 18, 2005)

- CASE DIGEST - 

SUBJECT: CORPORATION LAW

Tupaz vs. Court of Appeals 
G.R. No. 145578
November 18, 2005

Topic: DOCTRINE OF CORPORATE ENTITY

FACTS: Jose C. Tupaz IV - VP for Operations and Petronila C. Tupaz  -VP/Treasurer of EL ORO Engraver Corporation, entered into a contract with the AFP - Armed Forces Of The Philippines  to supply the latter with “survival bolos.” To finance the purchase of the raw materials for the bolos, The Tupaz’s in behalf of EL ORO Corporation, applied with respondent bank BPI - Bank of the Philippine Islands for 2 commercial Letters of Credit.  The LCs were in favor of El Oro Corporation’s suppliers, TANCHAOCO Manufacturing Incorporated.

Simultaneous with the issuance of the LCs, the 2 Tupazes, petitioners hereto signed TRUST RECEIPTS in favor of respondent bank BPI. 

Now here comes the issue. Jose C. Tupaz IV  signed, in his personal capacity, a trust receipt corresponding to a Letter of Credit for P564,871.  The problem was, petitioners did not comply with their undertaking under the TRUST RECEIPTS. Respondent bank naturally made several demands for payments but EL ORO Corporation made partial payments only.

So as a consequence, respondent bank BPI sent final demand letters to EL ORO Corporation where EL ORO replied that it could not fully pay its debt because the AFP (Armed Forces of the Philippines) had delayed paying for the survival bolos. (in short, naipit sya)

 

Issue: Did Petitioners herein stated bind themselves personally with regard to the company debt described when they signed the Trust Receipts?

 

Held: NO.

 A CORPORATE REPRESENTATIVE signing as a solidary guarantee as corporate representative did not undertake to guarantee personally the payment of the corporation’s debts.

 In the aforementioned trust receipt, petitioners signed below its clause as officers of El Oro Corporation. Thus, under petitioner Petronila Tupaz’s signature are the words “Vice-Pres–Treasurer” and under petitioner Jose Tupaz’s signature are the words “Vice-Pres–Operations.” By so signing that trust receipt, PETITIONERS DID NOT BIND THEMSELVES PERSONALLY LIABLE FOR EL ORO CORPORATION’S OBLIGATION.

 In Ong v. Court of Appeals, a corporate representative signed a solidary guarantee clause in two trust receipts in his capacity as corporate representative. There, the Court held that the corporate representative did not undertake to guarantee personally the payment of the corporation’s debts.

 A corporation, being a juridical entity, may act only through its directors, officers, and employees. Debts incurred by these individuals, acting as such corporate agents, are not theirs but the direct liability of the corporation they represent.