PIONEER INSURANCE SURETY CORPORATION This separate corporate personality shields

v. MORNING STAR et al. corporate officers acting in good faith and

Topic: The Corporation and the State within the scope of their authority from
personal liability except for situations
FACTS: enumerated by law and jurisprudence
Morning Start is a travel and tours agency with
Benny Wong, Estelita Wong, Arsenio Chua, The Court also found that the individual
Sonny Chua, and Wong Yan Tak as shareholders respondents DID NOT act in bad faith
and members of the board of directors
International Air Transport Association (IATA) is Bad faith imports a dishonest purpose or some
a Canadian corporation licensed to do business moral obliquity and conscious doing of a wrong,
in the Philippines IATA appointed Morning Star not simply bad judgement or negligence
as an accredited travel agent IATA and Morning
Star entered into a passengers sales agency Also, individual respondents did no exhibit gross
agreement in which Morning Star is tasked to negligence because the Court found out that
report all air transport ticket sales to IATA the same board of directors were also managing
Pioneer Insurance Surety Corp. is the surety another corporation which did fairly well
company of Morning Star Morning Star compared to Morning Star. The mere fact that
accumulated over Php 100m and USD 457k of Morning Star incurred huge losses and that it
debt from IATA which was paid for by Pioneer has no assets at the time it contracted the large
Insurance Pioneer Insurance filed a case against financial obligations did not amount to gross
Morning Start and its shareholders for a sum of negligence by the members of the board of
money Pioneer’s arguments included: directors (individual respondents).
They included the individual respondents
because they, as shareholders and members of
the board of directors, were grossly negligent
and were in bad faith when they handled
Morning Star (massive debt was caused by their
gross negligence and bad faith) Cited Section 31
of the Corporation Code Individual respondents
argued that:
The shareholders are separate and distinct from
the corporation, hence they cannot be sued

RTC: Morning Star and the individual

respondents are liable CA: absolved the
individual respondents and only held Morning
Star liable for the debt

ISSUE: WON the individual respondents should

be held liable for the company’s debt

HELD: NO

The SC maintained that the corporation’s

personality is separate and distinct from those
that represent the corporation
Lessons Applicable: Defective attempt to form
a corp. does NOT result in at least a
partnership absent intent to form one
(Corporate Law)
FACTS:
1965: Jacob S. Lim is an owner-operator of
Southern Airlines (SAL), a single proprietorship
relation of partners as bet. themselves, when
their purpose is that no partnership shall exists
Should be implied only when necessary to do
justice bet. the parties (i.e. only pretend to
make others liable)
Lim never intended to form a corp.

May 17 1965: Japan Domestic Airlines (JDA) and

Lim entered into a sales contract regarding:
 2 DC-#A type aircrafts
 1 set of necessary spare parts
 Total: $ 190,000 in installments

May 22 1965: Pioneer Insurance and Surety

Corp. as surety executed its surety bond in favor
of JDA on behalf of its principal Lim

Border Machinery and Heacy Equipment Co,

Inc. Francisco and Modesto Cervantes and
Constancio Maglana contributed funds for the
transaction based on the misrepresentation of
Lim that they will form a new corp.. to expand
his business

Jun 10 1965: Lim as SAL executed in favor of

Pioneer a deed of chattel mortgage as security
Restructuring of obligation to change the
maturity was done 2x w/o the knowledge of
other defendants made the surety of JDA
prescribed so not entitled to reimbursement

Upon default on the 2/8 payments, Pioneer

paid for him and filed a petition for the
foreclosure of chattel mortgage as security
CA affirmed Trial of Merits: Only Lim is liable to
pay

ISSUE: W/N failure of respondents to

incorporate = de facto partnership.

HELD: NO. CA affirmed.

Partnership inter se does NOT necessarily exist,

for ordinarily CANNOT be made to assume the