Case Summary (G.R. No. 182729)
Petitioner
Kukan International Corporation, seeking to annul RTC and CA orders that pierced its corporate veil and made it liable for Kukan, Inc.’s debts.
Respondents
Hon. Amor Reyes (in her official capacity) and Romeo M. Morales (judgment creditor).
Key Dates
• March 1998 – Kukan, Inc. awards contract to Morales.
• February 17, 1999 – Date from which legal interest accrues.
• November 28, 2002 – RTC renders final decision against Kukan, Inc.
• August 2000 – KIC incorporated.
• March 12 & June 7, 2007 – RTC Branch 21 orders piercing KIC’s corporate veil.
• January 23 & April 16, 2008 – CA affirms those orders.
• September 29, 2010 – Supreme Court decision under the 1987 Constitution.
Applicable Law
• 1987 Philippine Constitution – Due process guarantees.
• 1997 Rules of Civil Procedure, Rules 14, 16, and 18 – Summons, motions to dismiss, and execution.
• Doctrine of Finality and Immutability of Judgment – Established by jurisprudence (Tan v. Timbal; Republic v. Tango).
• Doctrine of Piercing the Corporate Veil – Equity principle to disregard separate juridical personality when used to perpetrate fraud or evade obligations (Pantranco; Rivera v. United Laboratories).
Facts
Morales completed his contracted work but received only PhP 1,976,371.07, leaving PhP 1,412,130.93 unpaid. After Kukan, Inc. defaulted in proceedings, the RTC awarded Morales PhP 1,201,724 plus damages and costs. Morales secured writs of execution and levied on assets at an office occupied by KIC. KIC filed a third-party claim asserting distinct corporate identity. Morales then moved to pierce the corporate veil; the RTC denied early motions but granted relief under Branch 21, declaring KIC and Kukan, Inc. one entity and holding KIC liable. The CA denied KIC’s petition for certiorari, prompting this Supreme Court review.
Issues
- Whether a final and executory judgment against Kukan, Inc. can be executed against KIC’s property.
- Whether the RTC acquired jurisdiction over KIC despite lack of summons or impleader.
- Whether the RTC and CA correctly applied the doctrine of piercing the corporate veil to hold KIC liable.
First Issue: Execution Against Non-Party Corporation
• Supreme Court reiterates the court’s supervisory control over execution does not permit alteration of a final and executory judgment (Carpio v. Doroja; Javier v. CA; Tan v. Timbal; Republic v. Tango).
• The November 28, 2002 decision explicitly directed only Kukan, Inc. to pay Morales. Extending execution to KIC alters the decision’s dispositive tenor and violates the immutability of judgment.
• A writ of execution must conform strictly to the fallo; any excess is a nullity.
Second Issue: Jurisdiction Over KIC
• Jurisdiction over defendants in civil suits is acquired by service of summons or voluntary appearance (Orion Security; Palma v. Galvez).
• Voluntary appearance under Rule 14, Sec. 20 is limited to unqualified submission. Special appearances to challenge jurisdiction or assert separate identity do not waive objections (La Naval Drug Corp.; Garcia v. Sandiganbayan).
• KIC’s filings were special appearances resisting jurisdiction; they did not constitute waiver. The RTC never acquired jurisdiction over KIC.
Third Issue: Piercing the Corporate Veil
• Piercing the veil is an equitable remedy applied only after a court has jurisdiction and upon clear, convincing proof of fraud, inequity, or alter-ego misuse of corporate form (Pantranco; Rivera; Andrada
Case Syllabus (G.R. No. 182729)
Facts
- In March 1998, Kukan, Inc. invited bids for the supply and installation of interior signages in a Makati City building.
- Romeo M. Morales submitted the winning bid and was awarded a PhP 5,000,000 contract, later reduced to PhP 3,388,502 after exclusions.
- Morales completed his obligations but received only PhP 1,976,371.07, leaving an unpaid balance of PhP 1,412,130.93.
- Morales filed Civil Case No. 99-93173 against Kukan, Inc. in the RTC of Manila, Branch 17.
- Kukan, Inc. defaulted in November 2000; the RTC admitted Morales’s evidence ex parte and rendered a decision on November 28, 2002 awarding:
• PhP 1,201,724.00 with 12% legal interest from February 17, 1999
• PhP 50,000 as moral damages
• PhP 20,000 as attorney’s fees
• PhP 7,960.06 as litigation expenses - Morales obtained a writ of execution (February 7, 2003) and the sheriff levied on personal properties at Unit 2205, 88 Corporate Center, Salcedo Village—purported office of Kukan International Corporation (KIC).
- KIC, incorporated in August 2000, filed an Affidavit of Third-Party Claim asserting separate corporate identity from Kukan, Inc.
- Morales moved (April 30, 2003) to pierce the corporate veil and hold KIC liable; the RTC denied the Omnibus Motion by Order of May 29, 2003.
- Morales sought Examination of Judgment Debtors (May 4, 2005) against Kukan, Inc. stockholders; the RTC denied it on May 24, 2005.
- The presiding judge inhibited himself; the case was re-raffled to Branch 21 under Judge Amor Reyes.
- Morales filed a new “Motion to Pierce the Veil of Corporate Fiction” (January 3, 2007); on March 12, 2007, the RTC granted it, declaring KIC and Kukan, Inc. one and the same and making KIC jointly and severally liable with Michael Chan.
- KIC’s motion for reconsideration was denied on June 7, 2007.
- KIC petitioned the Court of Appeals (CA); on January 23, 2008, the CA denied the petition and, on April 16, 2008, denied reconsideration.
- KIC then filed this Petition for Review on Certiorari under Rule 45 before the Supreme Court.
Procedural History
- RTC Branch 17: Decision (Nov 28, 2002) in favor of Morales against Kukan, Inc.; became final and executory.
- RTC Branch 21: Order (Mar 12, 2007) granting Morales’s motion to pierce corporate veil;