G.R. No. L-26364 - Albert vs. Court of 1st Instance

Case Summary (G.R. No. L-26364)

Key Dates and Procedural Posture

Litigation commenced in 1949; the dispute reached the Supreme Court multiple times across nineteen years (notable appeals and resolutions: L-9300 promulgated April 18, 1958; L-15275 promulgated October 24, 1960; L-18350 dismissed May 17, 1961; L-19118 promulgated January 30, 1965; resolution on motion for reconsideration denied June 16, 1965).
After the Supreme Court’s January 30, 1965 decision (and June 16, 1965 resolution), the lower court issued and later vacated execution orders; subsequent supplementary proceedings followed in which late-produced corporate documents were admitted by the trial court; petitioner then filed the present petition for certiorari and mandamus.
Applicable constitutional framework: the 1935 Philippine Constitution (due process principles invoked as the basis for assessing notice and opportunity to be heard).

Relevant Legal Regulatory Context

Registration with the Securities and Exchange Commission (SEC) to establish corporate existence.
Doctrines relied upon in the decision: non-registration consequences (no juridical personality), corporate-by-estoppel, piercing the corporate veil, agency liability for acting on behalf of non-existent principal, estoppel against inconsistent procedural positions, and conclusiveness of final appellate judgments.
Ethical norm invoked: Canon 22 of the Canons of Legal Ethics—candor and fairness of counsel before the courts.

Factual Background (compact)

Plaintiff sued the named defendant “University Publishing Co., Inc.” for breach of contract and ultimately obtained a judgment for P15,000 with legal interest. When execution was sought after appellate proceedings, plaintiff’s counsel and the sheriff discovered that SEC records did not show registration of University Publishing Co., Inc. The contract had been signed by Jose M. Aruego as “President”; Aruego and his law firm had acted as counsel for the corporation throughout the litigation, and Aruego had made partial payments under the contract. The trial court initially denied execution against Aruego on the ground that he was not a party. The Supreme Court in L-19118 held that, given non-registration and the record, the “corporation” had no separate legal personality and Aruego was the real defendant; it remanded to the lower court to carry the judgment into effect against University Publishing Co., Inc. and/or Jose M. Aruego. After that decision, the corporation and Aruego attempted to produce registration and reconstituted records, but those were presented late. The trial court thereafter vacillated, admitted documents in supplementary proceedings, and denied execution, prompting the present certiorari and mandamus petition.

Issues Presented

Whether a judgment rendered against an apparent but unregistered corporation may be enforced against the individual who acted as its president, signed the contract, received benefits, and conducted the defense in fact.
Whether the trial judge committed grave abuse of discretion by refusing to issue execution against Aruego after the Supreme Court’s definitive ruling that he was the real party in interest.
Whether documents reconstituting corporate records, produced after the Supreme Court’s decision, could be admitted to reopen or defeat enforcement at the execution stage.

Supreme Court Holding (core)

The petition was granted. The Supreme Court held that the January 30, 1965 decision (and its June 16, 1965 resolution) had already determined that, on the record then before the Court, University Publishing Co., Inc. was unregistered and had no separate juridical personality; therefore the judgment could be carried into effect against Jose M. Aruego, who was the real party in interest. The trial court’s subsequent orders that denied execution and admitted late evidentiary materials were set aside as grave abuse of discretion. The lower court was directed to issue a writ of execution against University Publishing Co., Inc. and/or Jose M. Aruego. Treble costs were imposed on Aruego.

Reasoning: Corporate Existence, Liability and Piercing the Veil

Non-registration: The Court accepted the SEC certification that the records showed no registration; a non-registered entity cannot be regarded as a corporation (citing precedent such as Hall v. Piccio). Consequently, no separate juridical personality existed on the evidence then in the record.
Personal liability for acting for a non-existent principal: Where a person induces others to believe in a corporation’s existence and acts as its representative, that person is personally liable for contracts entered into or acts performed as such agent (citing Salvatierra v. Garlitos and related authority). Aruego had signed as president, made partial payments, and litigated in the corporate name; thus he was the real defendant in substance.
Piercing the corporate veil: Even with duly organized corporations, the Court has pierced corporate fiction to achieve justice; here piercing was appropriate because the “corporation” was non-existent or, on the record, indistinguishable from Aruego’s personal dealings.
Corporate-by-estoppel: The doctrine was inapplicable in terms of shifting some legal consequences, but the closely related principle that a person representing a non-existent corporation assumes personal obligations was directly invoked. The Court emphasized that a litigant cannot take procedural positions to mislead adversaries or the court and then reverse course to the adversary’s prejudice.

Reasoning: Due Process, Day in Court, and Finality of Judgments

Due process: The Court construed due process functionally: it requires notice and opportunity to be heard. Because Aruego had negotiated the contract, made payments, appeared as counsel and witness, and exercised the rights of a defendant in the proceedings, the Court concluded he had “his day in court” and that due process was substantially observed. Formal misnaming of parties did not defeat the substantive fairness that had already been accorded.
Finality and conclusiveness: The Supreme Court stressed the need for finality of judgments and that inferior courts must respect and follow appellate determinations. The issue whether execution could be pursued against Aruego had been finally decided in L-19118; the trial court’s re-opening of that question or failure to give effect to the Supreme Court’s dispositive language amounted to grave abuse of discretion. The Court reiterated that inferior courts must apply Supreme Court rulings and not ignore them because of disagreement.

Reasoning: Evidentiary and Ethical Considerations

Late production of corporate documents: The University Publishing Co., Inc. and Aruego withheld and only belatedly produced registration and reconstituted records after an adverse Supreme Court ruling. The Court ruled that, on the unique facts here, those late papers could not be allowed to undo the prior determination; the parties had elected to keep the record as it stood and the late disclosure looked to be a speculative tactic to delay execution. The Court left open the possibility that properly submitted evidence in future cases might be considered, but refused to permit relitigation here.
Professional ethics and estoppel: Aruego, as counsel and a member of the Bar, had an ethical duty of candor; by concealing the corpor

Case Syllabus (G.R. No. L-26364)

Procedural History

Original action docketed in 1949; the litigation traversed the courts repeatedly over a span of 19 years and reached this Court four prior times before the present petition (making the present the fifth appearance).
Prior Supreme Court docket entries and dispositions related to this controversy: L-9300 (promulgated April 18, 1958); L-15275 (promulgated October 24, 1960); L-18350 (dismissed May 17, 1961); L-19118 (promulgated January 30, 1965; resolution on motion for reconsideration denied June 16, 1965).
After the L-19118 decision and resolution, petitioner returned to the Court of First Instance (CFI) and pursued execution; a sequence of filings and orders followed in 1965–1966 including motions to execute, intervention by Aruego, supplementary proceedings, and conflicting rulings by Judge Gaudencio Cloribel.
Specific lower court dates and actions of record include: writ of execution issued by CFI on July 22, 1961; Securities and Exchange Commission (SEC) certification issued July 31, 1961; verified petition to execute against Aruego filed August 10, 1961; unsworn manifestation by University Publishing Co., Inc. on August 11, 1961; CFI order denying execution September 9, 1961; L-19118 decision January 30, 1965; SEC reconstitution documents procured April 1, 1965; petitioner’s motion for execution filed July 28, 1965; Aruego’s motion to intervene July 30, 1965; CFI order granting execution February 21, 1966; CFI order denying execution March 5, 1966 after reconsideration; supplementary proceedings ordered May 20, 1966; Aruego presented documents May 28, 1966; CFI denied plaintiff’s motion for execution July 13, 1966.
The present filing is a petition for certiorari and mandamus to review and correct the CFI’s orders of March 5, May 20, and July 13, 1966.

Factual Background

Plaintiff Mariano A. Albert sued University Publishing Company, Inc. for breach of contract; Albert died before trial and Justo R. Albert as administrator was substituted.
This Court in L-15275 determined the defendant’s liability and awarded plaintiff P15,000.00 with legal interest from judicial demand.
From the inception of the suit through the appellate proceedings, the corporate existence of University Publishing Company, Inc. was taken for granted and not put in issue until execution proceedings.
On July 22, 1961, when execution was to be enforced, plaintiff’s counsel and the Sheriff went to see Jose M. Aruego, who had signed the contract as President of University Publishing Co., Inc., and discovered that the entity did not appear on SEC records.
SEC issued a certification on July 31, 1961 stating that its records did not show registration of UNIVERSITY PUBLISHING CO., INC., either as a corporation or partnership.
Aruego had signed the contract as “President” of University Publishing Co., Inc.; he appeared and litigated through his own law firm (Aruego, Mamaril and Associates); he made partial payments under the contract; out of capital stock of P2,000.00 he subscribed P1,600.00 and paid P450.00 of P500.00 paid subscription as shown in documents later presented by him.
University Publishing Co., Inc. and Aruego withheld documents bearing on corporate existence during prior proceedings and only later (after the adverse Supreme Court decision) supplied certificates, articles of incorporation, by-laws, and a certificate of reconstitution.

Legal Issues Presented

Whether the judgment rendered against University Publishing Co., Inc. could be executed against the personal assets and properties of Jose M. Aruego despite his not being formally named as defendant in the original action.
Whether University Publishing Co., Inc. was a validly existing corporation under the law, in view of the SEC certification of non-registration.
Whether the late production of corporate registration documents and reconstituted records after this Court’s judgment could be admitted and considered to alter the prior ruling.
Whether Aruego was afforded due process and had his “day in court” such that he could be held personally liable.
Whether Judge Gaudencio Cloribel’s subsequent refusal to order execution against Aruego, notwithstanding the Supreme Court’s disposition, constituted grave abuse of discretion warranting certiorari.

Lower Court Rulings and Actions Leading to This Petition

CFI issued a writ of execution against University Publishing Co., Inc. on July 22, 1961; on execution attempt, counsel and Sheriff discovered non-registration.
CFI denied plaintiff’s petition to execute against Aruego on September 9, 1961, stating that Aruego was not a party to the case.
After L-19118 and remand, the CFI initially granted a writ of execution (February 21, 1966), then on reconsideration (March 5, 1966) denied issuance of a writ of execution against Aruego on the ground he had never been a party.
The CFI ordered supplementary proceedings (May 20, 1966) to permit Aruego to present evidence, and after Aruego presented corporate documents and director certifications (May 28, 1966), the CFI on July 13, 1966 denied plaintiff’s motion for execution.
These contradicting orders prompted petitioner to seek certiorari and mandamus to enforce the Supreme Court’s prior directive.

Supreme Court’s Holding in L-19118 (January 30, 1965) and Resolution (June 16, 1965)

The Supreme Court in an extended opinion by Justice Jose P. Bengzon held that the SEC’s certification of non-registration established that University Publishing Co., Inc. could not be considered a corporation, not even a de facto one (citing Hall vs. Piccio, 86 Phil. 603).
Because the entity had no legal personality separate from Jose M. Aruego, it could not be sued independently; Aruego was the real defendant in substance and conduct.
Corporate-by-estoppel doctrine was not invoked and was inapplicable because Aruego had induced plaintiff and the court to believe in the corporation’s existence by representing the entity as a duly organized corporation and signing as President; one who induces another to act on such misrepresentation cannot later rely on corporate fiction to avoid liability (citing Salvatiera vs. Garlitos).
The Court reiterated its practice of piercing the corporate veil when justice requires, citing numerous precedents (Arnold v. Willits & Patterson; Koppel (Phil.), Inc. v. Yatco; La Campana Coffee Factory, Inc. v. Kaisahan ng mga Manggagawa; Marvel Building Corporation v. David; and others).
The Court found that Aruego had in fact exercised