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