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G.R. No.


February 27, 1991

A.E. Dacanay for petitioners.
Antonio Quintos Law Office for private respondent.

This is a petition for review on certiorari of the December 29, 1987 decision * of the Court of Appeals in CA-G.R. No.
44, GOOD EARTH EMPORIUM, INC. and LIM KA PING" reversing the decision of respondent Judge ** of the Regional
Trial Court of Manila, Branch 44 in Civil Case No. 85-30484, which reversed the resolution of the Metropolitan Trial
Court Of Manila, Branch 28 in Civil Case No. 09639, *** denying herein petitioners' motion to quash the alias writ of execution issued against them.
As gathered from the records, the antecedent facts of this case, are as follows:
A Lease Contract, dated October 16, 1981, was entered into by and between ROCES-REYES REALTY, INC., as lessor,
and GOOD EARTH EMPORIUM, INC., as lessee, for a term of three years beginning November 1, 1981 and ending
October 31, 1984 at a monthly rental of P65,000.00 (Rollo, p. 32; Annex "C" of Petition). The building which was the
subject of the contract of lease is a five-storey building located at the corner of Rizal Avenue and Bustos Street in
Sta. Cruz, Manila.
From March 1983, up to the time the complaint was filed, the lessee had defaulted in the payment of rentals, as a
consequence of which, private respondent ROCES-REYES REALTY, INC., (hereinafter designated as ROCES for
brevity) filed on October 14, 1984, an ejectment case (Unlawful Detainer) against herein petitioners, GOOD EARTH
EMPORIUM, INC. and LIM KA PING, hereinafter designated as GEE, (Rollo, p. 21; Annex "B" of the Petition). After the
latter had tendered their responsive pleading, the lower court (MTC, Manila) on motion of Roces rendered judgment
on the pleadings dated April 17, 1984, the dispositive portion of which states:
Judgment is hereby rendered ordering defendants (herein petitioners) and all persons claiming title under
him to vacate the premises and surrender the same to the plaintiffs (herein respondents); ordering the
defendants to pay the plaintiffs the rental of P65,000.00 a month beginning March 1983 up to the time
defendants actually vacate the premises and deliver possession to the plaintiff; to pay attorney's fees in
the amount of P5,000.00 and to pay the costs of this suit. (Rollo, p. 111; Memorandum of Respondents)
On May 16, 1984, Roces filed a motion for execution which was opposed by GEE on May 28, 1984 simultaneous with
the latter's filing of a Notice of Appeal (Rollo, p. 112, Ibid.). On June 13, 1984, the trial court resolved such motion
After considering the motion for the issuance of a writ of execution filed by counsel for the plaintiff (herein
respondents) and the opposition filed in relation thereto and finding that the defendant failed to file the
necessary supersedeas bond, this court resolved to grant the same for being meritorious. (Rollo, p. 112)
On June 14, 1984, a writ of execution was issued by the lower court. Meanwhile, the appeal was assigned to the
Regional Trial Court (Manila) Branch XLVI. However, on August 15, 1984, GEE thru counsel filed with the Regional
Trial Court of Manila, a motion to withdraw appeal citing as reason that they are satisfied with the decision of the
Metropolitan Trial Court of Manila, Branch XXVIII, which said court granted in its Order of August 27, 1984 and the
records were remanded to the trial court (Rollo, p. 32; CA Decision). Upon an ex-parte Motion of ROCES, the trial
court issued an Alias Writ of Execution dated February 25, 1985 (Rollo, p. 104; Annex "D" of Petitioner's
Memorandum), which was implemented on February 27, 1985. GEE thru counsel filed a motion to quash the writ of
execution and notice of levy and an urgent Ex-parte Supplemental Motion for the issuance of a restraining order, on
March 7, and 20, 1985, respectively. On March 21, 1985, the lower court issued a restraining order to the sheriff to
hold the execution of the judgment pending hearing on the motion to quash the writ of execution (Rollo, p. 22; RTC
Decision). While said motion was pending resolution, GEE filed a Petition for Relief from judgment before another
court, Regional Trial Court of Manila, Branch IX, which petition was docketed as Civil Case No. 80-30019, but the
petition was dismissed and the injunctive writ issued in connection therewith set aside. Both parties appealed to the
Court of Appeals; GEE on the order of dismissal and Roces on denial of his motion for indemnity, both docketed as
CA-G.R. No. 15873-CV. Going back to the original case, the Metropolitan Trial Court after hearing and disposing
some other incidents, promulgated the questioned Resolution, dated April 8, 1985, the dispositive portion of which
reads as follows:
Premises considered, the motion to quash the writ is hereby denied for lack of merit.

Likewise. In moving for the dismissal of the appeal Lim Ka Ping who was then assisted by counsel simply stated that defendants (herein petitioners) are satisfied with the decision of the Metropolitan Trial Court (Records of CA. 20. p. 43). 20. 54). Roces moved to dismiss the appeal but the Court denied the motion. the Court of Appeals reversed the decision of the Regional Trial Court and reinstated the Resolution of the Metropolitan Trial Court of Manila. On further appeal.) which production resulted in petitioners having to claim belatedly that there was an "overpayment" of about half a million pesos (Rollo. 37) but produced only during the hearing (Ibid. there is absolutely no reference to the alleged payment of one million pesos as evidenced by Exhibit 1 dated September 20. On certiorari. finding that the amount of P1 million evidenced by Exhibit "I" and another P1 million evidenced by the pacto de retro sale instrument (Exhibit "2") were in full satisfaction of the judgment obligation. this petition. however. there is no indication in the pacto de retro sale which was drawn in favor of Jesus Marcos Roces and Marcos V. p. Exhibit 1/A had been signed by persons other than judgment creditors (RocesReyes Realty. the dispositive portion of which is as follows: WHEREFORE. the dispositive portion of which reads: Premises considered. 37) Article 1240 of the Civil Code of the Philippines provides that: Payment shall be made to the person in whose favor the obligation has been constituted. pp. p. . MTC decision). Meantime. or any person authorized to receive it. reversed the decision of the Municipal Trial Court. No pronouncement as to costs. in private respondents' (petitioners') Motion to Quash the Writ of Execution and Notice of Levy dated March 7. p. In the case at bar. 29). p. Inc. 1985 are hereby recalled. 1985. full or partial. Roces and not the respondent corporation. (Rollo. respondent Appellate Court correctly concluded that there was in fact nopayment of the judgment debt. was no longer President or even an officer of Roces-Reyes Realty. As aptly observed by the said court: What immediately catches one's attention is the total absence of any writing alluding to or referring to any settlement between the parties of private respondents' (petitioners') judgment obligation. No such proof was submitted but merely inferred by the Regional Trial Court (Rollo. (Rollo. the Court of Appeals dismissed Roces' petition and remanded the case to the RTC. the Regional Trial Court of Manila. in fact. 45-48). (Rollo. He.) coupled with the fact that said exhibit was not even alleged by GEE and Lim Ka Ping in their original motion to quash the alias writ of execution (Rollo. that it was in payment. denied being in possession of authority to receive payment for the respondent corporation nor does the receipt show that he signed in the same capacity as he did in the Lease Contract at a time when he was President for respondent corporation (Rollo. MTC Decision) GEE appealed and by coincidence. of the Metropolitan Trial Court of Manila Branch XXXIII is hereby REINSTATED. 25-27) and remarking on the utter absence of any writing in Exhibits "1/A" and "2/B" to indicate payment of the judgment debt. Exhibit "1". 1984. Inc. pp. p. 1985. there is no indication in the receipt. or to its successor in interest nor is there positive evidence that the payment was made to a person authorized to receive it. The latter. 1988 was denied (Rollo. of the judgment obligation. Hence. On April 6. Manager of Good Earth only in the course of the latter's testimony. was raffled to the same Court. the supposed payments were not made to Roces-Reyes Realty. that the obligation embodied therein had something to do with petitioners' judgment obligation with respondent corporation. the judgment appealed from is hereby REVERSED and the Resolution dated April 8. As pointed out by petitioner (respondent corporation) this was brought out by Linda Panutat. p. p. GEE's Motion for Reconsideration of April 5. judgment is hereby rendered reversing the Resolution appealed from quashing the writ of execution and ordering the cancellation of the notice of levy and declaring the judgment debt as having been fully paid and/or Liquidated. Moreover. 25) from Marcos Roces having signed the Lease Contract as President which was witnessed by Jesus Marcos Roces. (Rollo. 1987. Branch IX became vacant and the case was re-raffled to Branch XLIV. lifted and set aside. 40). p. Finding that the common exhibit. at the time he received the money (Exhibit "1") and signed the sale with pacto de retro (Exhibit "2"). A careful study of the common exhibits (Exhibits 1/A and 2/B) shows that nowhere in any of said exhibits was there any writing alluding to or referring to any settlement between the parties of petitioners' judgment obligation (Rollo. or his successor in interest.The restraining orders issued on March 11 and 23. Inc. The main issue in this case is whether or not there was full satisfaction of the judgment debt in favor of respondent corporation which would justify the quashing of the Writ of Execution. Notably. RTC Branch IX.

the totality of the amount covered by the receipt (Exhibit "1/A") and that of the sale with pacto de retro(Exhibit "2/B") all in the sum of P2 million. which militates against the claim of petitioner that the aforesaid amount (P2M) was in full payment of the judgment obligation. far exceeds petitioners' judgment obligation in favor of respondent corporation in the sum of P1. Cruz v. Being an officer or stockholder of a corporation does not make one's property also of the corporation. and vice-versa.00. 365). 152 SCRA 482). As a consequence of the separate juridical personality of a corporation.560.000. In other words. 5. patently unfounded. 30 Phil. Likewise. The absence of a note to evidence the loan is explained by Jesus Marcos Roces who testified that the IOU was subsequently delivered to private respondents (Rollo. GEE was also indebted to respondent corporation for a larger amount. 12 Phil. Insurance Commission. that said payment was in satisfaction of the judgment debt. Shareowners are in no legal sense the owners of corporate property (or credits) which is owned by the corporation as a distinct legal person (Concepcion Magsaysay-Labrador v.R. There is a disputable presumption that money paid by one to the other was due to the latter (Sec. 97-98). 89561 September 13. December 19. Ramos v. the petition is hereby DENIED and the Decision of the Respondent court is hereby AFFIRMED. 5(f) Rule 131.00 by P440.R. Rules of Court). No. September 26. It has been an established rule that when the existence of a debt is fully established by the evidence (which has been done in this case). therefore. Tai Tong Chuache & Co. SO ORDERED. 1988 Edition. v. Jesus Marcos Roces testified that the amount of P1 million evidenced by the receipt (Exhibit "1") is the payment for a loan extended by him and Marcos Roces in favor of Lim Ka Ping. G.000. be said to have gravely abused its discretion in finding lack of convincing and reliable evidence to establish payment of the judgment obligation as claimed by petitioner. 158 SCRA 366). pp. 11 Phil. the burden of proving that it has been extinguished by payment devolves upon the debtor who offers such a defense to the claim of the plaintiff creditor (herein respondent corporation) (Chua Chienco v. Pinon v. citing Professor Ballantine). 1âwphi1 The fact that at the time payment was made to the two Roces brothers. Contrary to the Regional Trial Court's premise that it was incumbent upon respondent corporation to prove that the amount was delivered to the Roces brothers in the payment of the loan in the latter's favor. especially in the case at bar where the amount was not receipted for by respondent corporation and there is absolutely no indication in the receipt from which it can be reasonably inferred. No. Dalisay.On the other hand. Petitioners' averments that the respondent court had gravely abused its discretion in arriving at the assailed factual findings as contrary to the evidence and applicable decisions of this Honorable Court are therefore. No. for they are separate entities (Traders Royal Bank v. The burden of evidence resting on the petitioners to establish the facts upon which their action is premised has not been satisfactorily discharged and therefore. 83376. The appellate court cannot. 1989). 58168. 656. CA-G. PREMISES CONSIDERED. CA. May 29. the corporate debt or credit is not the debt or credit of the stockholder. 1985 Resolution of the Metropolitan Trial Court of Manila. they have to bear the consequences. nor is the stockholder's debt or credit that of the corporation (Prof. p. A corporation has a personality distinct and separate from its individual stockholders or members. v. It is for GEE and Lim Ka Ping to prove otherwise.1989. the delivery of the amount to and the receipt thereof by the Roces brothers in their names raises the presumption that the said amount was due to them. it is for the latter to prove that the payments made were for the satisfaction of their judgment debt and not vice versa. 219. Vargas. G. Respondent court was correct in stating that it "cannot go beyond what appears in the documents submitted by petitioners themselves (Exhibits "1" and "2") in the absence of clear and convincing evidence" that would support its claim that the judgment obligation has indeed been fully satisfied which would warrant the quashal of the Alias Writ of Execution. Petitioners' explanation that the excess is interest and advance rentals for an extension of the lease contract (Rollo. No. Ledesma. is not supportive of the Regional Trial Court's conclusions that the payment was in favor of the latter. CA-G.R. The assertion is home by the receipt itself whereby they acknowledged payment of the loan in their names and in no other capacity. 25-28) is belied by the absence of any interest awarded in the case and of any agreement as to the extension of the lease nor was there any such pretense in the Motion to Quash the Alias Writ of Execution. 1990 . De Osorio. 78412. it is wellentrenched in Our jurisprudence that each party in a case must prove his own affirmative allegations by the degree of evidence required by law (Stronghold Insurance Co.R. For indeed. Jose Nolledo's "The Corporation Code of the Philippines. In addition. 1989. pp. no such inference can be made from the execution of the pacto de retro sale which was not made in favor of respondent corporation but in favor of the two Roces brothers in their individual capacities without any reference to the judgment obligation in favor of respondent corporation. reinstating the April 8.

Renato J.. Castillo is the judicial administratrix of the estate of Felipe Castillo in Special Proceeding No. Rivera (Rivera). BORMAHECO.. MAURICIA M. DE CASTILLO. The original complaint for annulment of title filed in the court a quo by herein petitioners included as party defendants the Philippine Machinery Parts Manufacturing Co. RIVERA.000. in CA-GR CV No. vs. with assessed . COURT OF APPEALS. 4053. pending before Branch IX.00 b) To defendant-appellant Bormaheco: (i) expenses of litigation in the amount of P5. LEOVINA C. with cost against plaintiffs. 14132.. de Castillo.00 and (ii) attorney's fees of P15. Robles for P. RADA.. and 3) Ordering plaintiffs-appellees to pay upon defendants' counterclaims: a) To defendant-appellant PM Parts: (i) damages consisting of the value of the fruits in the subject parcels of land of which they were deprived in the sum of P26. ABAÑEZ. Inc. Philippine Machinery Parts Manufacturing Co.000. Inc. (Bormaheco) and Santiago M. Martin M. the previous administratrix of the said proceedings prior to 1970 (per exhibits A-1 and A-2) which case was filed in Court way back in 1964. A Second Amended Complaint was filed. 15412. Castillo Umali. INC.00. No. CFI of Quezon (per Exhibit A) which intestate proceedings was instituted by Mauricia Meer Vda.00 and (ii) attorney's fees of P15. VICTORIA M." 1the dispositive portion whereof provides: WHEREFORE. Bormaheco.. MARIETTA C. the judgment appealed from must be.: This is a petition to review the decision of respondent Court of Appeals. 14134 with assessed value of P3. VDA. SO ORDERED.000. et al. (PM Parts). dated August 3. During the pre-trial conference.. Edmundo T..000. REGALADO. De Guzman for respondent BORMAHECO. No. as it is hereby REVERSED. Inc. Zepeda for petitioners..100. Rivera as party plaintiff. UMALI. TCT No. Inc. entitled "Buenaflor M. 2) Ordering plaintiffs-appellees to vacate the subject properties. BERTILLA C. JALBUENA and SANTIAGO M. J. petitioners. the parties entered into the following stipulation of facts: As between all parties: Plaintiff Buenaflor M.M. INC. In lieu thereof. b) The four (4) parcels of land described in paragraph 3 of the Complaint were originally covered by TCT No. T-42104 and Tax Dec. this time impleading Santiago M.BUENAFLOR C. a judgment is hereby rendered1) Dismissing the complaint. Parts Manufacturing Co. 1989. et al. respondents. viewed in the light of the entire record. T 32227 and Tax Dec. CASTILLO. vs. Inc.00. Insurance Corporation of the Philippines (ICP). and PHILIPPINE MACHINERY PARTS MANUFACTURING CO.

Inc. 14135. No. namely: TCT No. T-13116 (Exhibit G ) and TCT No. November and December 1970 and January 1971. T 23708 (Exhibit P). g) On 26 August l976. Navoa of the City of Manila on October 24. 281114 evidenced by a contract marked Exhibit J and Exhibit I for Bormaheco. Cervantes served later on as President of PM Parts. T-24849 (Exhibit T ).00. f) That on 10 April 1975. T-23705 (Exhibit M). j) That the Surety Bond No. the Insurance Corporation of the Philippines sold to PM Parts the immovables in question (per Exhibit 6 for PM Parts) and by reason thereof. Bertilla Castillo.130. T-24846 (Exhibit Q ). de Castillo and of her children.1970. new titles in the name of Mauricia Meer Vda. and also he is one of the Board of Directors of PM Parts. C-1 -to C3 c) That the above-enumerated four (4) parcels of land were the subject of the Deed of Extra-Judicial Partition executed by the heirs of Felipe Castillo (per Exhibit D) and by virtue thereof the titles thereto has (sic) been cancelled and in lieu thereof. T-31762 and Tax Dec. De Guzman was the legal counsel of Bormaheco. all surnamed Castillo has (sic) been issued. represented by Santiago Rivera. one (1) unit Caterpillar Tractor D-7 with Serial No. Buenaflor Castillo. de Castillo' genther letter to Modesto N. with assessed value of P3. with assessed value of P6. TCT No. . Marietta and Leovina. T13117 (Exhibit H ) d) That mentioned parcels of land were submitted as guaranty in the Agreement of Counter-Guaranty with Chattel-Real Estate Mortgage executed on 24 October 1970 between Insurance Corporation of the Philippines and Slobec Realty Corporation represented by Santiago Rivera (Exhibit 1). Inc. B-1 to B-3 C. i) Defendant Bormaheco.value of P5. Marietta Castillo and Leovina Castillo. Victoria.. that Modesto N. T 23706 (Exhibit N ). Victoria Castillo. TCT No.580. T-24847 (Exhibit R ). namely: Buenaflor. Mauricia Castillo Meer. per TCT No. later Executive Vice-President thereof. and who also is the legal counsel of Insurance Corporation of the Philippines and PM Parts. 14133. No. e) That based on the Certificate of Sale issued by the Sheriff of the Province of Quezon in favor of Insurance Corporation of the Philippines it was able to transfer to itself the titles over the lots in question. 14010 issued by co-defendant ICP was likewise secured by an Agreement with Counter-Guaranty with Real Estate Mortgage executed by Slobec Realty & Development.. Martin M. Inc. Atty. TCT No. Bertilla.00. TCT No. T-13113 (Exhibit F). namely: TCT No. T-12113 (Exhibit E ). Inc. President.00 (per Exhibits A-2 and B. Inc. on the other hand. on November 25. TCT No.. succeeded in transferring unto itself the titles over the lots in dispute. Mauricia Meer Vda. and that Atty. 1970 sold to Slobec Realty and Development. T-24848 (Exhibit). later President thereof.. as mortgagors in favor of ICP which document was executed and ratified before notary public Alberto R. and TCT No. Cervantes stating that she and her children refused to comply with his demands (Exhibit V-2). T-42103 with Tax Dec. de Guzman was retained by Insurance Corporation of the Philippines specifically for foreclosure purposes only. Inc. Cervantes was the Vice-President of Bormaheco. TCT No.150. TCT No. h) That from at least the months of October. namely: per TCT No. Modesto N. T-23707 (Exhibit 0) and TCT No.

The certified xerox copy of the notarial register of Notary Public Guillermo Aragones issued by the Bureau of Records Management is hereto submitted as Exhibit BB That said chattel mortgage was superseded by another document dated January 23. t) Although it appears that the realties in issue has (sic) been sold by Insurance Corporation of the Philippines in favor of PM Parts on 1 0 April 1975.. As between plaintiffs and defendant Bormaheco. Inc.. Martin M. Slobec Realty Development Corporation. Inc. Mauricia Meer about its ownership and the assignment of Mr. T-13116 and T-13117 of the Register of Deeds of Lucena City. Menandro Umali for purposes of repair. by Mr. and which document was presented to the Register of Deeds on 1 October 1973. represented by Santiago Rivera.1973. on or about October 2. 33234 (Exhibits 9 and 9-A. T-13114. n) That plaintiff and other heirs are harvest fruits of the property (daranghita) which is worth no less than Pl. r) That on 23 January 1971. m) That in August 1976. Bormaheco. at Makati. as counsel of Insurance Corporation of the Philippines purchased at public auction for said corporation the four (4) parcels of land subject of tills case (per Exhibit L). Cervantes a Chattel Mortgage concerning one unit model CAT D7 Caterpillar Crawler Tractor as described therein as security for the payment in favor of the mortgagee of the amount of P180. Cervantes. Inc. it appears in the notarial register of the notary public who notarized them that those two documents were executed on 11 December 1970.1971 (Exhibit 16). 10368 (per Exhibits 10 and 10-A for Bormaheco. de Guzman. l) That the tractor sold by defendant Bormaheco.000. T13115. Inc.00 (per Exhibit J) which document was superseded by the Sales Agreement dated January 23. PM Parts notified Mrs. to Slobec Realty & Development. 1971. Inc. received from Bormaheco. at Makati. formerly Vice. Inc o) That on 25 November 1970. p) On 18 December 1970. Inc. Inc.000. in representation of the Slobec Realty & Development Corporation executed in favor of Bormaheco.) and delivery receipt No. one (1) tractor Caterpillar Model D-7 pursuant to Invoice No. Rizal. Same Rivera.000.00 per harvest.President and now President of Bormaheco. represented by its Vice-President Modesto N. and in the document entitled Sales Agreement (per Exhibit J) that it was executed on 18 December 1970. Atty. 1971 (Exhibit 15). q) Although it appears on the document entitled Chattel Mortgage (per Exhibit K) that it was executed on 25 November 1970.k) That the property mortgaged consisted of four (4) parcels of land situated in Lucena City and covered by TCT Nos. Rizal. was delivered to Bormaheco.. the Bormaheco. represented by its Vice-President Modesto Cervantes and Slobec Realty Corporation represented by Santiago Rivera executed the sales agreement concerning the sale of one (1) unit Model CAT D7 Caterpillar Crawler Tractor as described therein for the amount of P230. sent . Inc s) That on 28 September 1973. Modesto N.00 (per Exhibit K) that Id document was superseded by another chattel mortgage dated January 23. Inc. Petronilo Roque as caretaker of the subject property.

As further security of the aforementioned unpaid balance. 33234 (Exhs. ICP guaranteed the obligation of Slobec with Bormaheco in the amount of P180. 281114. executed in favor of Bormaheco a Chattel Mortgage (Exh. and proposed to purchase from Bormaheco two (2) tractors Model D-7 and D-8 Subsequently. Modesto Cervantes. Bormaheco. Marietta Castillo and Leovina Castillo Jalbuena. This tractor was known by Rivera to be a reconditioned and repainted one [Stipulation of Facts. de Castillo. Record) was executed by and between Slobec Realty and Development. who proposed to them the conversion into subdivision of the four (4) parcels of land adjacent to the mortgaged property to raise the necessary fund.000. As shown by the contract. 111. The Castillo family are the owners of a parcel of land located in Lucena City which was given as security for a loan from the Development Bank of the Philippines. Victoria Castillo. the properties of the Castillos were foreclosed by ICP As the highest bidder with a bid of P285. Meanwhile. The Idea was accepted by the Castillo family and to carry out the project. represented by Rivera received from Bormaheco the subject matter of the said Sales Agreement. a Surety Bond..00. 1).00 was to constitute a down payment. Slobec. as mortgagors and Insurance Corporation of the Philippines (ICP) as mortgagee. and Slobec Realty and Development. u) That the Caterpillar Crawler Tractor Model CAT D-7 which was received by Slobec Realty Development Corporation was actually reconditioned and repainted. foreclosure of the said property was about to be initiated. for violation of the terms and conditions of the Counter-Guaranty Agreement (Exh. 13116 and 13117 all of the Register of Deeds for Lucena City. President of defendant Bormaheco. through Rivera.00 of which P50.00 immediately after the execution of the agreement and to pay the additional amount of P400. 10 and 10-A. In this agreement. K. a Certificate of Sale was issued by the Provincial Sheriff of Lucena City and Transfer Certificates of Title over the subject parcels of land were issued by the Register of Deeds of Lucena City in favor of ICP namely. Inc. 113). a Memorandum of Agreement (Exh. a Sales Agreement was executed on December 28. Record). de Castillo. executed a Sales Agreement over one unit of Caterpillar Tractor D-7 with Serial No. T 23706. p. 1971.000. Inc. namely TCT Nos. namely. Exhibit U .000. T-23707 and T-23708 (Exhs. 9 and 9-A. The aforesaid surety bond was in turn secured by an Agreement of Counter-Guaranty with Real Estate Mortgage (Exhibit I. Record). Santiago Rivera obliged himself to pay the Castillo family the sum of P70. Buenaflor Castillo Umali. 29. the price was P230. Record) over the said equipment as security for the payment of the aforesaid balance of P180.000. The mortgagors had one (1) year from the date of the registration of the certificate . demanding that she and her children should vacate the premises. represented by its President Santiago Rivera and the Castillo family.00. par. 1971. 112. in favor of Bormaheco.212. U p. four parcels of land covered by TCTs in the name of the aforementioned mortgagors.) as surety and Slobec as principal. namely. 127. This problem was made known to Santiago Rivera. Bertilla Castillo-Rada. 10368 (Exhs. 13115. armed with the agreement.his letter dated 9 August 1976 to Mauricia Meer Vda.000. Slobec obtained from Insurance Corporation of the Phil. as borne out by Exhibit '8' (p.000. Pre-trial Order. T-23705. On the occasion of the execution on January 23. On the same date.00 after the property has been converted into a subdivision. ICP required that the Castillos mortgage to them the properties in question. J. On January 23. approached Mr. 22. (u)]. as evidenced by the contract marked Exhibit '16'. In giving the bond. of the Sales Agreement Exhibit '16'. Record) executed by Rivera as president of Slobec and Mauricia Meer Vda. Record) and Delivery Receipt No. represented by its President. Inc. the aforementioned tractor Caterpillar Model D-7 as evidenced by Invoice No. Santiago Rivera. de Castillo (Exhibit V). M to P. and the balance of P180. Rivera. 38-45).00 payable in eighteen monthly installments.. p. pp.000. 24. p. 13114. In this agreement. p.1970 (Exh. TCT Nos. p.00. with ICP (Insurance Corporation of the Phil. Slobec. " 2 We cull the following antecedents from the decision of respondent Court of Appeals: Plaintiff Santiago Rivera is the nephew of plaintiff Mauricia Meer Vda. For their failure to pay the amortization.

13116. PM Parts transferred unto itself the titles over the lots in dispute so that said parcels of land are now covered by TCT Nos. as shown in Exh. 139. Plaintiffs pray that the four (4) parcels of land subject hereof be declared as owned by the estate of the late Felipe Castillo and that all Transfer Certificates of Title Nos. with the following decretal portion: WHEREFORE. Rivera as a party plaintiff (p. 444. Record). impleading Santiago M. ICP sold to Phil. 1970 (Exhibit K) Sales Agreement dated January 23. L) and the Deeds of Authority to Sell. Rec. ICP consolidated its ownership over the subject parcels of land through the requisite affidavit of consolidation of ownership dated October 29. p. 1974. 23. I). 1976. '22'(p. by way of affirmative and special defenses that the complaint did not state facts sufficient to state a cause of action against defendants.13115. Insurance Corporation of the Phil. 1983. the heirs of the late Felipe Castillo. who (Mrs. 1971 (Exhibit 17). declaring the following documents: Agreement of Counter-Guaranty with Chattel-Real Estate Mortgage dated October 24. Machinery Parts Manufacturing Co. 24847. Record). Certificate of Sale (Exh. Rec. that defendant PM Parts is an innocent purchaser for value and relied on the face of the title before it bought the subject property (p. they filed an Amended Complaint on January 10. pp. On July 20. that plaintiffs are guilty of laches in not asserting their alleged right in due time. that plaintiffs are not entitled to the reliefs demanded. Castillo Umali as the appointed administratrix of the properties in question filed an action for annulment of title before the then Court of First Instance of Quezon and docketed thereat as Civil Case No. 744. 23706. Thereafter. Castillo) in turn sent her reply expressing her refusal to comply with his demands. I) as well as the Deed of Sale (Annexes J. plaintiffs filed their Second Amended Complaint. T-24847.). 24848 and 24849 as well as those appearing as encumbrances at the back of the certificates of title mentioned be declared as a nullity and defendants to pay damages and attorney's fees (pp. 46-49.1970 (Exhibit 1). 23708. 3 After trial. T-24846. Mauricia Meer Castillo requesting her and her children to vacate the subject property. Sale and the Affidavit of Consolidation of Ownership (Annexes F. 24846. Record). 1975. Mr. the court a quo rendered judgment. . Rec.of sale. On April 10. the defendants controverted the complaint and alleged.13117. particularly plaintiff Buenaflor M. 1970 (Exhibit J) Chattel Mortgage dated November 25. PM Parts. In their amended answer. Consequently. (PM Parts) the four (4) parcels of land and by virtue of said conveyance. 23707.1976 addressed to plaintiff Mrs. that is. to redeem the property. Thereafter. Chattel Mortgage dated January 23. Q-T. but they failed to do so. 8085. through its President. Sales Agreement dated December 28. H. 706. 1971 (Exhibit 16). T-24848 and T-24849 (Exhs. G.). that plaintiffs are estopped or precluded from asserting the matters set forth in the Complaint. 1974. 71071 1. (Branch IX) before whom the administration proceedings has been pending. 138. Record). L and M) are void for being entered into in fraud and without the consent and approval of the Court of First Instance of Quezon. 1980 (p.). until October 1. 13114. 23705. K. judgment is hereby rendered in favor of the plaintiffs and against the defendants. sent a letter dated August 9. a Deed of Sale of Real Estate covering the subject properties was issued in favor of ICP (Exh. They contended that all the aforementioned transactions starting with the Agreement of Counter-Guaranty with Real Estate Mortgage (Exh. Pursuant thereto. Modesto Cervantes. On September 29.

Inc.00 for and as attomey's fees. are likewise null and void. In aside the finding of the lower court that there was necessity to pierce the veil of corporate existence. 3. Rivera. in lieu thereof.. and the Register of Deeds of Lucena City is hereby directed to issue. In holding and finding that the actions entered into between petitioner Rivera with Cervantes are all fair and regular and therefore binding between the parties thereto. not only based on erroneous conclusions of facts.Philippines in favor of defendant Philippine Machinery Parts Manufacturing Co. In reversing the decision of the lower court of affirming the same 5 I. be declared nun and void. The sale by Insurance Corporation of the. 6 Chattel Mortgage 7 and the Agreement of Counter-Guaranty with Chattel/Real Estate Mortgage. and actual litigation expenses in the sum of P6. aside from the fact that it was Bormaheco.00. that the tractor was received by Rivera only on January 23.00. SO ORDERED. in the alleged amount of P50. the evidence on record reveals that petitioners had every intention to . to Bormaheco. to secure the obligation of ICP under its surety bond. 1971 and not in 1970 as stated in the Chattel Mortgage (Exhibit K). T 23705. it will be noted that petitioners submission under the first assigned error hinges purely on questions of fact.000. respondent court reversed the aforequoted decision of the trial court and rendered the judgment subject of this petitionPetitioners contend that respondent Court of Appeals erred: 1.. Rivera never made any advance payment. Petitioners aver that the transactions entered into between Santiago M. Transfer Certificates of Title Nos. and that when the Agreement of Counter-Guaranty with Chattel/Real Estate Mortgage was executed on October 24. In reversing the decision of the lower court. With costs against the defendants. and 4. and not Rivera. 2.. holding valid and binding the supposed payment by ICP of its obligation to Bormaheco. T23707 and T-23708 (Exhibits M. that there was no fraud employed by private respondents in the execution thereof. such as the Sales Agreement. the sum of P10. transfer certificates of title in the names of the plaintiffs.500. over Id four (4) parcels of land and Transfer Certificates of Title Nos.00. contrary to petitioners' allegation. N. Such allegation is premised primarily on the fact that contrary to the stipulations agreed upon in the Sales Agreement (Exhibit J). jointly and severally. O and P) issued in the name of Insurance Corporation of the Philippines. which paid the premium for the surety bond issued by ICP At the outset. Consequently. as President of Slobec Realty and Development Company (Slobec) and Mode Cervantes. despite the fact that the surety bond issued it had already expired when it opted to foreclose extrajudically the mortgage executed by the petitioners. T-24848 and T-24849 subsequently issued by virtue of said sale in the name of Philippine Machinery Parts Manufacturing Co.. Orders the defendants jointly and severally to pay the plaintiffs moral damages in the sum of P10. as Vice-President of Bormaheco. 8 are all fraudulent and simulated and should.000.000. Inc. therefore. T 24846.Certificate of Sale dated September 28. T-24847. 1970. Respondent Court of Appeals made several findings to the effect that the questioned documents are valid and binding upon the parties. 1973 executed by the Provincial Sheriff of Quezon in favor of Insurance Corporation of the Philippines (Exhibit L). erroneous presumptions not supported by the evidence on record but also. null and void for being fictitious. Defendants are likewise ordered to pay the plaintiffs. the Sales Agreement and Chattel Mortgage had not as yet been executed.00. spurious and without consideration. except Santiago Rivera. 4 As earlier stated.000. and that. T-23706. are similarly declared null and void. exemplary damages in the amount of P5.

which renders the contract null and void. II. binding on this Court in the absence of sufficient and convincing proof. In addition. or defend crime. on the contrary. sufficient to justify the piercing of the corporate fiction. ICP and PM Parts. The subsequent act of Rivera in receiving and making use of the tractor subject matter of the Sales Agreement and Chattel Mortgage. the legal corporate entity is disregarded only if it is sought to hold the officers and stockholders directly liable for a corporate debt or obligation. the alleged failure of Rivera to pay the consideration agreed upon in the Sales Agreement. neither are we inclined to apply the doctrine invoked by petitioners in granting the relief sought. cannot be availed of by the guilty party to justify and support an action for the declaration of nullity of the contract. when the parties do not intend to be bound at all by the same. does not convince us of the validity of petitioners' contention that the contracts entered into by the parties are either absolutely simulated or downright fraudulent. agency. Under the circumstances. He is now estopped from questioning the validity of the suretyship bound by their undertakings in the various transactions had with private respondents. that is. In such cases. protect fraud. the legal fiction that a corporation is an entity with a juridical personality separate and distinct from its members or stockholders may be disregarded. The evidence of record. 12 The doctrine applies when the corporate fiction is used to defeat public convenience. The fact that it was Bormaheco which paid the premium for the surety bond issued by ICP does not per se affect the validity of the bond. conduit or adjunct of another corporation. or where the corporation is so organized and controlled and its affairs are so conducted as to make it merely an instrumentality. that the former acted with grave abuse of discretion. petitioners seek to pierce the V621 Of corporate entity of Bormaheco. under the circumstances. liability will attach directly to the officers and stockholders. binding on Rivera. 10 We are not persuaded that such quantum of proof exists in the case at bar. or at least expected. Bormaheco accepted the payment of the premium as an agent of ICP The execution of the deed of sale with a right of repurchase in favor of Bormaheco under such circumstances sufficiently establishes the fact that Rivera recognized Bormaheco as an agent of ICP Such payment to the agent of ICP is. when valid grounds therefore exist. on an overall calibration. To set aside a document solemnly executed and voluntarily delivered. which clearly constitutes a breach of the contract. Assuming that petitioners were indeed defrauded by private respondents in the foreclosure of the mortgaged properties. conduce to the conclusion that petitioners had every intention to be bound by these contracts. thus. The occurrence of these series of transactions between petitioners and private respondents is a strong indication that the parties actually intended. we find no compelling reason to deviate from this long-standing jurisprudential pronouncement. There is absolute simulation. It is our considered opinion that piercing the veil of corporate entity is not the proper remedy in order that the foreclosure proceeding may be declared a nullity under the circumstances obtaining in the legal case at bar. this fact alone is not. Petitioners themselves admit in their present petition that Rivera executed a Deed of Sale with Right of Repurchase of his car in favor of Bormaheco and agreed that a part of the proceeds thereof shall be used to pay the premium for the bond. 9 The basic characteristic of this type of simulation of contract is the fact that the apparent contract is not really desired or intended to either produce legal effects or in any way alter the juridical situation of the parties. In the instant case. the corporation will be considered as a mere association of persons. The members or stockholders of the corporation will be considered as the corporation. since petitioners do not intend to hold the officers and/or members of respondent corporations personally liable therefor. Neither will an allegation of fraud prosper in this case where petitioners failed to show that they were induced to enter into a contract through the insidious words and machinations of private respondents without which the former would not have executed such contract. 11 In effect. justify wrong. concomitant with the execution of the Agreement of CounterGuaranty with Chattel/Real Estate Mortgage. Under the doctrine of piercing the veil of corporate entity. In the first place. and the simultaneous issuance of a surety bond in favor of Bormaheco. Petitioners are merely seeking the declaration of the . alleging that these corporations employed fraud in causing the foreclosure and subsequent sale of the real properties belonging to petitioners While we do not discount the possibility of the existence of fraud in the foreclosure proceeding. the proof of fraud must be clear and convincing. inter alia. 15 In the case at bar. it is these corporations which desire to enforce an alleged right against petitioners. therefore. Equity and fair play dictates that one who commits a breach of his contract may not seek refuge under the protective mantle of the law. petitioners do not seek to impose a claim against the individual members of the three corporations involved. to exact fulfillment of their respective obligations from one another. It is a general rule in this jurisdiction that findings of fact of said appellate court are final and conclusive and. 13 or when it is made as a shield to confuse the legitimate issues 14 or where a corporation is the mere alter ego or business conduit of a person.

morals. 1306. Furthermore. 1970. We agree with the appellants that the foreclosure proceedings instituted by the ICP was in the exercise of a legal right. 1971 provides that the balance of P180. and thereafter transacted with petitioners. the liability of ICP under the surety bond had already expired. New Civil Code).000.000. The liability of INSURANCE CORPORATION OF THE PHILIPPINES. III. 18 The surety bond was dated October 24. However. petitioners failed to establish by clear and convincing evidence that private respondents were purposely formed and operated. which resulted in the accrual of ICPS liability to Bormaheco. it is disputably presumed that the ordinary course of business has been followed: Second. 17 1. Third." 19 On the other hand. it is hereby agreed and understood that the INSURANCE CORPORATION OF THE PHILIPPINES will not be liable for any claim not presented in writing to the Corporation within THIRTY (30) DAYS from the expiration of this BOND. and its authorization to foreclose the mortgage upon Slobec's default. First. which relief may be obtained without having to disregard the aforesaid corporate fiction attaching to respondent corporations.nullity of the foreclosure sale. R and Q Section 5. ICP had the right to proceed at once to the foreclosure of the mortgage as mandated by the provisions of Art. and (b) at the time of the foreclosure of the mortgage. Rule 5. B-1401 0 which was issued by ICP in favor of Bormaheco. Secondly. The main issue for resolution is whether there was a valid foreclosure of the mortgaged properties by ICP Petitioners argue that the foreclosure proceedings should be declared null and void for two reasons. that the businesses of two or more corporations are interrelated is not a justification for disregarding their separate personalities. * New Rules of Court which provides that it is disputably presumed that private transactions have been fair and regular. pertinently provides in part as follows: 1. 1972. 1971. public order or public policy. This presumption is in consonance with pars. wherein ICP and Slobec undertook to guarantee the payment of the balance of P180. likewise. was admittedly insolvent. This is a valid and binding stipulation in the absence of showing that it is contrary to law. 1971 up to July 23. plus the fact that no receipt was presented to show the amount allegedly paid by ICP to Bormaheco. and that the obligee hereby waives his right to bring claim or file any action against Surety and after the termination of one (1) year from the time his cause of action accrues. declared: Now to the question of whether or not the foreclosure by the ICP of the real estate mortgage was in the exercise of a legal right. the Agreement of Counter-Guaranty with Real Estate Mortgage (Exh. in finding for the validity of the foreclosure sale. an annotation on the upper part thereof states: "NOTE: EFFECTIVITY DATE OF THIS BOND SHALL BE ON JANUARY 22. The mere fact. Surety Bond No. 2071 Civil Code for these further reasons: Slobec.: (1) no written notice was furnished by Bormaheco to ICP anent the failure of Slobec in paying its obligation with the former. good customs. with the sole intention of defrauding the latter. Petitioners asseverate that there was no notice of default issued by Bormaheco to ICP which would have entitled Bormaheco to demand payment from ICP under the suretyship contract. 1) expressly grants to ICP the right to foreclose the real estate mortgage in the event of 'non-payment or non-liquidation of the entire indebtedness or fraction thereof upon maturity as stipulated in the contract'. 20 The Promissory Note executed by Slobec on even date in favor of Bormaheco further provides that the obligation shall be payable on or before February 23.00 payable in eighteen (18) monthly installments on one unit of Model CAT D-7 Caterpillar Crawler Tractor. especially because Bormaheco consented to ICPs foreclosure of the mortgage. Slobec's obligation becomes demandable by reason of the expiration of the period of payment. under this BOND will expire Twelve (I 2) months from date hereof. Respondent court.00 shall be payable in eighteen (18) monthly installments. the principal debtor. viz. therefore. (Art. 21 . 16 absent sufficient showing that the corporate entity was purposely used as a shield to defraud creditors and third persons of their rights. the Sales Agreement dated January 23. ICP has in its favor the legal presumption that it had indemnified Bormaheco by reason of Slobec's default in the payment of its obligation under the Sales Agreement. and that nonpayment of any of the installments when due shall make the entire obligation immediately due and demandable.

finds no application to the case at bar. if a default exists. the liability of Slobec became an unsecured obligation. it follows. Therefore. 1972 up to July 23. the liability of ICP was extinguished when Bormaheco failed to file a written claim against it within thirty (30) days from the expiration of the surety bond. twelve (1 2) months from its effectivity date. should be declared null and void. Inc. Thereafter. however. to terminate at a specified time. where the contract of suretyship stipulates that notice of the principal's default be given to the surety. Besides. 1972. 22 Fundamental likewise is the rule that. which are waived by the obligee. 26 While ordinarily the termination of a surety's liability is governed by the provisions of the contract of suretyship. the surety bond issued by ICP was to expire on January 22. generally the failure to comply with the condition will prevent recovery from the surety. Consequently. it has been held that where The guarantor holds property of the principal as collateral surety for his personal indemnity. 27 This is an exception to the general rule that the obligation of the surety continues for the same period as that of the principal debtor. under the terms of the bond. Private respondent PM Parts posits that it is a buyer in good faith and. Rule 131 of the Rules of Court provides that the burden of evidence lies with the party who asserts an affirmative allegation. " 25 The failure. such as a failure to give notice of slight defaults. Furthermore. whereas Slobec's installment payment was to end on July 23. The default of Slobec during this period cannot be a valid basis for the exercise of the right to foreclose by ICP since its surety contract had already been terminated. Section 1. 30 The Agreement of Counter-Guaranty with Chattel/Real Estate Mortgage states that it is being issued for and in consideration of the obligations assumed by the Mortgagee-Surety Company under the terms and conditions of ICP Bond No. the suretyship contract expressly provides that ICP shag not be liable for any claim not filed in writing within thirty (30) days from the expiration of the bond. 3. 1972. after the expiration of the surety bond under which ICP as surety has not incurred any liability. Consequently. ICP could not validly foreclose that real estate mortgage executed by petitioners in its favor since it never incurred any liability under the surety bond. There are certain instances. a demand or notice of default is not required to fix the surety's liability. or until January 22. as erroneously relied upon by respondent Court of Appeals. 31 There is no doubt that said Agreement of Counter-Guaranty is issued for the personal indemnity of ICP Considering that the fact of payment by ICP has never been established. the allegation of ICP that it has paid Bormaheco is not supported by any documentary evidence. until he has paid something as such guarantor neither he nor the creditor can resort to such collaterals. when failure to comply with the condition will not extinguish the surety's liability. the court a quocategorically stated that '(n)o evidence was presented to show that Bormaheco demanded payment from ICP nor was there any action taken by Bormaheco on the bond posted by ICP to guarantee the payment of plaintiffs obligation. IV. or where the surety already has knowledge or is chargeable with knowledge of the default.00. 14010 in behalf of Slobec Realty Development Corporation and in favor of Bormaheco. It cannot claim exemption from the required written notice since its case does not fall under any of the exceptions hereinbefore enumerated. to which he may resort only after payment by himself. that ICP cannot foreclose on the subject properties. 1972. his obligation cannot be enlarged by an unauthorized extension thereof. while ICP guaranteed the payment by Slobec of the balance of P180.000. 23 Hence. There is nothing in the records of the proceedings to show that ICP indemnified Bormaheco for the failure of the plaintiffs to pay their obligation. The submission is without merit and the conclusion is specious . 1972. therefore. such liability is strictly limited to that assumed by its terms. therefore. such guaranty was valid only for and within twelve (1 2) months from the date of effectivity of the surety bond. the foreclosure of the mortgage.It is basic that liability on a bond is contractual in nature and is ordinarily restricted to the obligation expressly assumed therein. It cannot be extended by implication beyond the terms the contract. while he is liable to the full extent thereof. it acquired a valid title over the subject properties. 2. except where required by the provisions of the contract. Lastly. as where the principal debtor is required to make payment by installments. 28 It is possible that the period of suretyship may be shorter than that of the principal obligation. or on mere suspicion of possible default. The liability of a surety is measured by the terms of his contract. Since ICP failed to duly prove the fact of payment. where the obligation of a surety is. of Bormaheco to notify ICP in writing about Slobec's supposed default released ICP from liability under its surety bond. 24 In the case at bar. pursuant to the doctrine above adverted to. from January 23. or where. and. 29 In the case at bar. the disputable presumption that private transactions have been fair and regular. We have repeatedly held that the extent of a surety's liability is determined only by the clause of the contract of suretyship as well as the conditions stated in the bond. there is excuse or provision in the suretyship contract exempting the surety for liability therefor. In its decision dated May 25 1987.

of the four (4) parcels of land covered by the aforesaid certificates of title.1973. except Santiago Rivera. later. It must be noted that Modesto N. Accordingly. T-24846. and (4) Transfer Certificates of Title Nos.. The foregoing dispositions are without prejudice to such other and proper legal remedies as may be available to respondent Bormaheco. T24848 and T-24849 in the name of Philippine Machinery Parts Manufacturing Co. These facts were admitted without qualification in the stipulation of facts submitted by the parties before the trial court. SO ORDERED. and judgment is hereby rendered declaring the following as null and void: (1) Certificate of Sale. T-23706. Atty. the transfer certificates of title issued in its name. WHEREFORE. executed by the Provincial Sheriff of Quezon in favor of the Insurance Corporation of the Philippines. Hence. T-24848 and T24849 subsequently issued by virtue of said sale in the name of the latter corporation.. T24847. Inc. as well as the certificate of sale. who is the Executive Vice-President of Bormaheco. Cervantes served as Vice-President of Bormaheco and. Inc. and to issue in lieu thereof the corresponding transfer certificates of title in the name of herein petitioners. dated September 28.We have stated earlier that the doctrine of piercing the veil of corporate fiction is not applicable in this case. against herein petitioners. Martin de Guzman. However. as President of PM Parts. it cannot be said that PM Parts had no knowledge of the aforesaid several transactions executed between Bormaheco and petitioners. T-24846. The Register of Deeds of Lucena City is hereby directed to cancel Transfer Certificates of Title Nos. the defense of good faith may not be resorted to by private respondent PM Parts which is charged with knowledge of the true relations existing between Bormaheco. In addition. . must be declared null and void since they cannot be considered altogether free of the taint of bad faith. ICP and herein petitioners. (2) Transfer Certificates of Title Nos. (3) the sale by Insurance Corporation of the Philippines in favor of Philippine Machinery Parts Manufacturing Co. was also the legal counsel of ICP and PM Parts. T-24847. the decision of respondent Court of Appeals is hereby REVERSED and SET ASIDE. T-23707 and T-23708 issued in the name of the Insurance Corporation of the Philippines. T-23705. its inapplicability has no bearing on the good faith or bad faith of private respondent PM Parts. On this fact alone. Inc.