G.R. No. 175733 - Westmont Bank vs. Funai Philippines, Corporation

Westmont Bank (now United Overseas Bank Phils.) granted loans in April and May 1997 to Funai Philippines Corporation and Spouses Antonio and Sylvia Yutingco in the aggregate principal amount of P10,000,000.00 evidenced by three promissory notes: PN No. 97-043 (P3,600,000.00; 19%; maturing August 20, 1997), PN No. 97-051 (P2,800,000.00; 18%; maturing May 7, 1997), and PN No. 97-067 (P3,600,000.00; 19%; maturing August 26, 1997).
The promissory notes contained a stipulation that, if the obligation were referred to an attorney or a collection agency or a suit was instituted, Spouses Antonio and Sylvia Yutingco would pay twenty percent (20%) of the total amount due as attorney’s fees, exclusive of costs and other expenses.

The original defendants defaulted on the PNs and ignored demands for payment; Westmont Bank filed a Complaint for sum of money with prayer for a writ of preliminary attachment on January 16, 1998, docketed as Civil Case No. 98-86853.
The RTC issued an ex parte Writ of Preliminary Attachment dated February 19, 1998, and an Order dated March 24, 1998 directing attachment of properties under control of the original defendants.
Sheriffs Gerry C. Duncan and Carmelo V. Cachero levied and seized properties at (a) No. 9 Northpark Avenue, Bellevue, Grace Village, Quezon City; and (b) 2nd Level, Phase III, Sta. Lucia East Grand Mall, Cainta, Rizal (Sta. Lucia).

Panamax Corporation, through Acting President Pepito Ong Ngo, filed an Affidavit of Third-Party Claim over the Sta. Lucia properties asserting Panamax as the owner.
Westmont Bank filed an Amended Complaint on April 18, 1998, impleading as additional defendants Panamax Corporation, Pepito Ong Ngo, Aimee R. Alba, Richard N. Yu, Annabelle Baesa, and Nenita Resane, alleging they were alter egos, conduits, dummies, or nominees of Spouses Yutingco to defraud creditors.
Westmont Bank filed a Second Amended Complaint on August 6, 1998 adding Maria Ortiz as an additional defendant.
The original defendants answered on August 14, 1998, alleging nonpayment due to circumstances beyond their control and asserting a counterclaim for damages and attorney’s fees for alleged irregular levy.
The additional defendants moved to dismiss and later answered, denying any legal tie to Westmont Bank and interposing a counterclaim for actual, moral, and exemplary damages and attorney’s fees.

Westmont Bank moved for judgment on the pleadings on December 11, 1998.
A public auction sale of the seized properties was held on March 16, 2001, realizing net proceeds of P1,030,000.00.
In a Decision dated June 20, 2001, the RTC adjudged the original defendants jointly and severally liable to Westmont Bank for P10,000,000.00 less the auction proceeds (P1,030,000.00), plus 19% legal interest from filing until paid; the RTC dismissed the Amended and Second Amended Complaints as to the additional defendants and ordered return of items wrongfully seized to Panamax’s premises at Sta. Lucia.

Westmont Bank filed a partial motion for reconsideration of the RTC’s dismissal of claims against the additional defendants, which was denied on July 19, 2001; Westmont Bank filed a notice of partial appeal (CA-G.R. CV No. 71933).
The additional defendants filed a Motion for Execution Pending Appeal on July 4, 2001, alleging the seized items faced obsolescence and depreciation; the RTC granted execution pending appeal in an Order dated July 17, 2001 and issued a writ of execution the same date directed to Sheriffs Duncan and Cachero to return the seized items.
Westmont Bank refused to release the seized items; the RTC issued an Order dated July 23, 2001 enjoining compliance with the writ or issuance of a break-open order.
Westmont Bank filed a petition for certiorari with urgent motion for TRO and/or preliminary injunction in the Court of Appeals (CA-G.R. SP. No. 65785) seeking to prevent implementation of the July 17 and July 23, 2001 Execution Orders.

The RTC issued a Break-Open Order dated July 25, 2001 to enforce the writ. The CA issued a TRO on July 26, 2001 enjoining Sheriffs Duncan and Cachero from enforcing the writ.
A CA process server served a copy of the TRO on the RTC Clerk at around 2:30 p.m. and i...(Subscriber-Only)

Whether the CA erred in not applying the alter ego doctrine to hold the additional defendants liable.
Whether the CA erred in not treating the additional defendants as necessary parties to the action.
Whether the CA erred in denying Westmont Bank exemplary damages.
Whether the CA erred in reducing enforcement of the express stipulation on attorney’s fees in the promissory notes.