Mactan Rock Industries, Inc. and Tompar vs. Germo

A corporate officer cannot be held solidarily liable for corporate obligations unless the complaint alleges and the evidence clearly and convincingly proves that the officer assented to patently unlawful acts or was guilty of gross negligence or bad faith, notwithstanding the corporation's liability for breach of contract.

MRII, a domestic corporation engaged in water supply and industrial maintenance services, engaged Germo as a marketing consultant under a Technical Consultancy Agreement (TCA) executed on September 21, 2004. The TCA provided that Germo would negotiate sales and services for MRII on a purely commission basis, with no employer-employee relationship created. On May 2, 2006, Germo successfully brokered a contract between MRII and International Container Terminal Services, Inc. (ICTSI) for the supply of 700 cubic meters of purified water daily. MRII commenced supply to ICTSI on February 22, 2007, and ICTSI regularly paid MRII the corresponding fees. Despite demands, MRII failed to pay Germo the commissions due under the TCA, prompting Germo to file a complaint for sum of money after an initial labor complaint was dismissed for lack of jurisdiction.

• The Consultancy Agreement: On September 21, 2004, MRII, through its President/CEO Antonio Tompar, executed a Technical Consultancy Agreement (TCA) with Germo. The TCA stipulated that Germo would serve as MRII's marketing consultant, negotiating and perfecting sales and service contracts, without creating an employer-employee relationship. Compensation was fixed on a purely commission basis plus a monthly allowance of ₱5,000.00.
• The ICTSI Contract: On May 2, 2006, Germo successfully negotiated a supply contract between MRII and International Container Terminal Services, Inc. (ICTSI) for 700 cubic meters of purified water daily. MRII commenced actual supply to ICTSI on February 22, 2007, and ICTSI regularly paid MRII the contract fees.
• Unpaid Commissions: Despite the ICTSI contract generating revenues for MRII, MRII failed to pay Germo the commissions due under the TCA. Germo presented sales invoices covering February 2007 to March 2012 showing unpaid commissions totaling ₱4,499,412.84.
• Prior Proceedings: Germo initially filed a complaint with the National Labor Relations Commission (NLRC), which was dismissed for lack of jurisdiction due to the absence of an employer-employee relationship. He subsequently filed a civil case before the RTC of Muntinlupa, Branch 256, which was dismissed without prejudice due to his counsel's failure to mark documentary evidence at the pre-trial conference.
• Proceedings Below: In the instant case (Civil Case No. 11-029), MRII and Tompar filed an Answer admitting, inter alia, the lack of employer-employee relationship, Germo's status as a consultant, and the genuineness and due execution of the TCA. Due to multiple absences at pre-trial conferences, the RTC declared them in default and allowed Germo to present evidence ex-parte. The RTC found that MRII's contract with ICTSI was realized through Germo's efforts and ordered MRII and Tompar solidarily liable.

• Change of Theory on Appeal: MRII and Tompar argued that the regular courts lacked jurisdiction over the dispute, claiming it was an employment dispute cognizable by the NLRC. They further contended that Germo lacked legal personality to pursue the case because he signed the TCA not in his personal capacity but as a representative of another entity.
• Evidentiary Deficiency: Petitioners maintained that Germo failed to prove that the ICTSI account materialized through his efforts, alleging that ICTSI became MRII's client through the efforts of a certain Ed Fomes rather than through Germo's negotiation.

• Judicial Admissions: Germo countered that petitioners' arguments regarding jurisdiction and legal personality constituted new theories raised for the first time on appeal, directly contradicting their judicial admissions in their Answer below where they expressly acknowledged the absence of an employer-employee relationship and the authenticity of the TCA.
• Factual Findings: Respondent argued that the factual findings of the trial court, as affirmed by the CA, established that: (a) the TCA was valid and binding; (b) MRII's contract with ICTSI was realized through Germo's efforts as marketing consultant; and (c) MRII failed to pay the commissions due under the agreement.

• Personal Liability of Corporate Officers: Whether the Court of Appeals correctly upheld the solidary liability of Antonio Tompar with MRII for the corporate obligation to pay Germo's commissions.
• Change of Theory: Whether petitioners can raise for the first time on appeal the theories that the regular courts lack jurisdiction and that Germo lacked legal personality to sue.
• Existence of Cause of Action: Whether Germo sufficiently proved that the ICTSI contract was obtained through his efforts under the TCA.

• Personal Liability of Corporate Officers: The solidary liability of Tompar was deleted. A corporation possesses a personality separate and distinct from its directors, officers, or employees. Before a director or officer can be held personally liable for corporate obligations, two requisites must concur: (1) the complaint must allege 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) the complainant must clearly and convincingly prove such unlawful acts, negligence or bad faith. Here, Germo's complaint failed to allege that Tompar assented to unlawful acts or acted with gross negligence or bad faith, and the evidence did not clearly and convincingly prove such conduct. Therefore, only MRII remained liable for the corporate obligation.
• Change of Theory: The arguments regarding lack of jurisdiction and Germo's legal personality were rejected. Points of law, theories, issues, and arguments not brought to the attention of the lower court need not be, and ordinarily will not be, considered by a reviewing court as these cannot be raised for the first time on appeal. It would be unfair to the adverse party who would have no opportunity to present further evidence material to the new theory. Moreover, petitioners' statements in their Answer constituted judicial admissions binding upon them, which they could not unilaterally rescind even if disadvantageous.
• Existence of Cause of Action: The liability of MRII for the unpaid commissions was affirmed. The courts below correctly found that Germo entered into a valid TCA with MRII, successfully brokered the ICTSI contract during the effectivity of the agreement, and that MRII refused to pay the commissions despite receiving payments from ICTSI. Factual findings of the trial court, when affirmed by the CA, deserve great weight and respect and will not be disturbed on appeal absent facts of weight and substance overlooked or misinterpreted that would materially affect the disposition.

• Personal Liability of Corporate Officers (Two-Requisite Rule) — Before a director or officer of a corporation can be held personally liable for corporate obligations, the following must concur: (1) the complaint must allege 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) the complainant must clearly and convincingly prove such unlawful acts, negligence or bad faith. The mere fact that a corporate officer signed a contract or was aware of corporate obligations does not automatically result in solidary liability; the separate corporate personality shields officers from personal liability for corporate acts done in good faith and within the scope of their authority.
• Prohibition Against Change of Theory on Appeal — A party who deliberately adopts a certain theory upon which the case is tried and decided by the lower court will not be permitted to change theory on appeal. Points of law, theories, issues, and arguments not brought to the attention of the lower court need not be, and ordinarily will not be, considered by a reviewing court, as these cannot be raised for the first time at such late stage. The rule admits of exceptions only when the factual bases thereof would not require presentation of any further evidence by the adverse party to enable it to properly meet the issue raised in the new theory.
• Judicial Admissions — An admission, verbal or written, made by a party in the course of the proceedings in the same case, does not require proof. The admission may be contradicted only by showing that it was made through palpable mistake or that no such admission was made. Judicial admissions are conclusive upon the party making them and cannot be denied or disproved as against the admitter, even if such admissions place the party at a disadvantageous position.
• Interest Rates on Monetary Awards (Nacar Doctrine) — Monetary obligations arising from breach of contract earn legal interest at the rate of twelve percent (12%) per annum from judicial demand until June 30, 2013, and thereafter at the rate of six percent (6%) per annum from July 1, 2013 until the finality of the decision. From finality until full payment, all monetary awards earn interest at six percent (6%) per annum.

• "As a rule, a party who deliberately adopts a certain theory upon which the case is tried and decided by the lower court, will not be permitted to change theory on appeal. Points of law, theories, issues and arguments not brought to the attention of the lower court need not be, and ordinarily will not be, considered by a reviewing court, as these cannot be raised for the first time at such late stage. It would be unfair to the adverse party who would have no opportunity to present further evidence material to the new theory, which it could have done had it been aware of it at the time of the hearing before the trial court." — Articulating the rule against changing theories on appeal and the rationale of fairness to the adverse party.
• "It is a basic rule that a corporation is a juridical entity which is vested with legal and personality separate and distinct from those acting for and in behalf of, and from the people comprising it. As a general rule, directors, officers, or employees of a corporation cannot be held personally liable for the obligations incurred by the corporation, unless it can be shown that such director/officer/employee is guilty of negligence or bad faith, and that the same was clearly and convincingly proven." — Establishing the general rule of corporate personality and the exception requiring proof of bad faith or negligence.
• "Thus, before a director or officer of a corporation can be held personally liable for corporate obligations, the following requisites must concur: (1) the 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) the complainant must clearly and convincingly prove such unlawful acts, negligence or bad faith." — Enumerating the two requisites for piercing the corporate veil or imposing personal liability on corporate officers.

• Maxicare PCIB CIGNA Healthcare (now Maxicare Healthcare Corporation) v. Contreras, 702 Phil. 688 (2013) — Cited for the proposition that parties cannot change their theory of the case on appeal.
• Arco Pulp and Paper Co., Inc. v. Lim, 737 Phil. 137 (2014) — Applied for the rule that corporate officers cannot be held personally liable for corporate obligations absent allegations and proof of assent to unlawful acts, gross negligence, or bad faith.
• Nacar v. Gallery Frames, 716 Phil. 267 (2013) — Followed for the computation of legal interest rates on monetary awards.
• Constantino v. Heirs of Constantino, Jr., 718 Phil. 575 (2013) — Cited regarding the binding nature of judicial admissions.
• Almojuela v. People, 734 Phil. 636 (2014) — Cited for the rule that factual findings of the trial court, when affirmed by the CA, deserve great weight and respect.

• Section 4, Rule 129, Rules of Court — Defines judicial admissions as admissions made by a party in the course of proceedings that do not require proof and may be contradicted only by showing palpable mistake or that no such admission was made. Applied to bind petitioners to their admissions in their Answer regarding the nature of the relationship and the authenticity of the TCA.
• Section 21, Rule 3, Rules of Court — Defines indigent parties and provides that the amount of docket and other lawful fees exempted shall be a lien on any judgment rendered favorable to the indigent. Applied to sustain the lien on Germo's monetary awards.
• Section 19, Rule 141, Rules of Court — Provides that legal fees shall be a lien on any judgment rendered in the case favorable to the indigent litigant unless the court otherwise provides. Applied to impose the filing fees as a lien on the monetary awards.

Antonio T. Carpio (Chairperson), Diosdado M. Peralta, Alfredo Benjamin S. Caguioa, and Andres B. Reyes, Jr.