G.R. No. 204029 - Rebusquillo vs. Spouses Gualvez

The petitioners, Estelita Burgos Lipat and Alfredo Lipat, are spouses and owners involved in both domestic and international garment businesses.
They operated Belaas Export Trading (BET), a single proprietorship engaged in the manufacture of garments for both the domestic market and for export.
Besides BET, they owned a U.S.-based firm, aMystical Fashions, which sold products imported from the Philippines through BET.

Estelita Lipat executed a special power of attorney on December 14, 1978, appointing her daughter, Teresita Lipat, as her attorney-in-fact.
This power of attorney empowered Teresita to secure loans and other credit accommodations from Pacific Banking Corporation (Pacific Bank) and to execute mortgage contracts on properties owned or co-owned by Estelita.
In April 1979, Teresita, acting under this authority, secured a loan amounting to P583,854.00 for BET to purchase fabrics for garments destined for export to aMystical Fashions.

To secure the said loan, a real estate mortgage was executed over the property located at No. 814 Aurora Boulevard, Cubao, Quezon City.
The mortgage contract was drafted broadly to cover not only the original loan of P583,854.00 but also any additional or new loans, discounting lines, overdrafts, and other credit facilities that might later be obtained from Pacific Bank.

On September 5, 1979, BET was incorporated into a family corporation named Belaas Export Corporation (BEC) to better manage the business.
BEC continued the same business of manufacturing and exporting garments and used the same equipment and facilities as BET.
In BEC, the Lipat spouses held the majority of the shares (300 out of 420 shares) while Teresita Lipat held a smaller portion, and the firm was managed by the family.
Estelita Lipat was designated president of BEC, with Teresita serving as vice-president and general manager.
Subsequent to the incorporation, the original loan was restructured in the name of BEC, and additional loans were similarly obtained, with promissory notes, export bills, and trust receipts executed by Teresita on behalf of the corporation.

BEC eventually defaulted on its loan payments after additional loans and credit lines were drawn using the same mortgage.
Following a series of demand letters from Pacific Bank’s liquidator, Estelita Lipat requested extra time to personally settle BEC’s obligations; however, she failed to meet her promise.
Consequently, Pacific Bank foreclosed on the real estate mortgage, and on January 31, 1989, a certificate of sale was issued in favor of Eugenio D. Trinidad, the highest bidder.
On November 28, 1989, the Lipat spouses filed a complaint before the Quezon City Regional Trial Court (RTC) for the annulment of the real estate mortgage, extrajudicial foreclosure, and the certificate of sale.

BEC was in substance a family corporation and a mere alter ego or business conduit for the Lipats.
Allowing the separate corporate personality in this case would shield the petitioners from their obligations.
The mortgaged property was liable not only for the original loan amount but for subsequent loans and credit accommodations as well.

The RTC also set a redemption period of five months and seventeen days from the finality of its decision.

The Lipats appealed the RTC decision to the Court of Appeals, relying mainly on the contention that:

The doctrine of piercing the corporate veil (or alter ego doctrine) was wrongly applied.
Their property should only be liable for the original loan and not for the additional credit lines and loans obtained by BEC.
They disagreed with imposing 15% attorney’s fees in the extrajudicial foreclosure, and they later contested liability for certain promissory notes and trust receipts.

There was ample evidence that BEC was merely the alter ego of the Lipats.
The transactions indicated that BEC and BET were inseparable in terms of ownership, management, and business operations.
The mortgage contract’s broad language legally bound the mortgaged property to cover additional and new loans.

The petition for review sought to reverse the Court of Appeals’ decisions on the following grounds:

The application of the doctrine of piercing the corporate veil was erroneous without a clear demonstration of fraud.
The mortgaged property should not be liable for subsequent loans and credit lines beyond the original amount.
The imposition of 15% attorney’s fees was beyond the jurisdiction of the trial court as it was raised for the first time on appeal.
Liability of Alfredo Lipat for transactions which he did not personally endorse, particularly regarding promissory notes and other credit instruments.

Whether the courts below erred in applying the alter ego (or instrumentality) doctrine to disregard the separate corporate personality of BEC given its unity with BET.
Whether clear evidence of fraud was necessary or whether control and domination suffice to pierce the veil.

Whether the mortgaged property should be held liable solely for the original loan of P583,854.00.
Whether the property is also liable for additional credit lines and loans evidenced by the promissory notes, trust receipt, and export bills executed subsequently by BEC.

Whether the petitioners may be held liable for the additional 15% attorney's fees stipulated in the real estate mortgage.
Whether raising the attorney’s fees issue for the first time on appeal is procedurally acceptable.