FACTS: Collado, in behalf of Queensland-Tokyo Commodities, Inc. (QTCI), licensed broker engaged in the trading of commodity futures, and respondent Thomas George signed a Customer’s Agreement. Part of the agreement was the Special Power of Attorney executed by respondent, appointing Mendoza as his attorney-in-fact with full authority to trade and manage his account. The SEC issued a Cease-and-Desist Order (CDO) against QTCI. Respondent George demanded from QTCI the return of his investment, but it was not heeded. While seeking legal assistance, he discovered that Mendoza and Lontoc were not licensed commodity futures salesmen. George filed a complaint for Recovery of Investment with Damages with the SEC against petitioners QTCI, Lau, and Collado, and against the unlicensed salesmen, Mendoza and Lontoc.
Petitioners denied liability, as they were not aware of, nor were they privy to, any arrangement which resulted in the account of respondent being handled by unlicensed brokers. Moreover, petitioners claimed that respondent is now estopped from raising it as a ground for the return of his investment, after almost a year of transacting business with QTCI without having questioned the authority of Mendoza and Lontoc as commodity futures salesmen. Hence, the prayer for the dismissal of the complaint.
The SEC ordered QTCI, Lau and Collado to jointly and severally pay the respondent George, to return of respondent’s peso and dollar investments, plus legal rate of interest. The SEC En Banc denied petitioners appeal. The CA affirmed the SEC, that petitioners violated the Revised Rules and Regulations on Commodity Futures Trading when they allowed an unlicensed salesman, like Mendoza, to handle respondent’s account. The CA also upheld the nullification of the Customer’s Agreement.
ISSUE: Whether QCTI and its unlicensed brokers may be held liable to return respondent’s peso and dollar investments pursuant to the Customer’s Agreement.
RULING: Yes. Personal liability of a corporate director, trustee, or officer, along (although not necessarily) with the corporation, may validly attach, as a rule, only when – (1) he assents to a patently unlawful act of the corporation, or when he is guilty of bad faith or gross negligence in directing its affairs, or when there is a conflict of interest resulting in damages to the corporation, its stockholders, or other persons; (2) he consents to the issuance of watered down stocks or who, having knowledge thereof, does not forthwith file with the corporate secretary his written objection thereto; (3) he agrees to hold himself personally and solidarily liable with the corporation; or (4) he is made by a specific provision of law personally answerable for his corporate action.
Here, petitioner Collado assented to the unlawful act of QTCI, and that petitioner Lau is grossly negligent in directing the affairs of QTCI. Pursuant to Section 31 of the Corporation Code, they are therefore, jointly and severally liable with QTCI for all the damages and awards due to respondent George.
