Case Summary (G.R. No. 194995)
Procedural History and Motion for Amended Writ of Execution
After the April 12, 2002 RTC decision became final, Montilla, Jr. moved for the issuance of a writ of execution, which was granted. Subsequent sheriff’s reports revealed that mining properties previously held by Marinduque Mining and Industrial Corporation (MMIC) had been acquired by GHI via a foreclosure sale from Maricalum in 2001. Montilla, Jr. then filed a motion for an amended writ of execution to include GHI as a judgment debtor to enforce the judgment against the properties now under GHI's control. The RTC denied this motion by an Amended Order dated July 9, 2004, finding that GHI was not a party nor successor in interest directly liable under the judgment, and enforcing the decision against GHI without appropriate due process would be unlawful.
Court of Appeals Decision
The Court of Appeals (CA) affirmed the RTC's ruling, ruling that GHI was not a party in the original case and thus could not be bound by a judgment to which it was not a party or given an opportunity to be heard. The CA emphasized due process considerations and held that altering the decision to include a nonparty through an amended writ of execution would be beyond the court’s jurisdiction. The CA also rejected Montilla, Jr.’s argument that GHI and MMIC were the same entity, citing that the presence of interlocking directors alone does not suffice to pierce corporate fiction. It found that if control existed over MMIC, it was exercised by the Asset Privatization Trust (APT), not GHI.
Petitioner’s Arguments on Reconsideration and Petition for Review
Montilla, Jr. argued on reconsideration and subsequent Supreme Court petition that GHI is a transferee pendente lite—that is, a party who acquired the property subject to existing legal claims—and thus bound by the judgment against its predecessor. He contended GHI had actual and constructive knowledge of the claims and was not a purchaser in good faith. He asserted the principle of caveat emptor applies and maintained that the corporate veil between GHI and Maricalum should be pierced, holding GHI as an alter ego of Maricalum.
Applicable Law on Execution and Party Bound by Judgment
Execution of a final judgment is a matter of right under Section 1, Rule 39 of the Rules of Court, but limited to parties involved in the case and their successors in interest. Courts may not alter final judgments or extend enforcement to non-parties, as doing so violates due process protections under Section 1, Article III of the 1987 Philippine Constitution. Judgments in personam bind only parties and their successors-in-interest, not strangers to the case. Further, execution may only cover properties belonging to the judgment debtor.
Legal Principles on Corporate Transfers and Liability
The transfer of assets or shares between corporations does not automatically impose liability for predecessor’s debts on the transferee unless circumstances such as express or implied assumption of obligations, merger, continuation of identity, or fraud exist. The principle that a parent or holding company maintains a separate juridical personality from its subsidiaries is well-settled unless the corporate veil is pierced under strict conditions: (1) control amounting to domination of finances and policies such that the subsidiary lacks a separate mind or will; (2) such control used to commit fraud or injustice; and (3) proximate causation of injury or loss by such control.
Court’s Analysis on Corporate Separation and Piercing of the Corporate Veil
In this case, the Supreme Court affirmed prior jurisprudence holding that GHI, as a holding company investing in Maricalum, did not assume liabilities of Maricalum by acquiring its assets and shares. The
...continue readingCase Syllabus (G.R. No. 194995)
Facts and Procedural History
- On April 12, 2002, the Regional Trial Court (RTC) of Kabankalan City, Branch 61, issued a Decision granting Emilio D. Montilla, Jr.’s complaint for Complimiento de Contrator and Rendecion de Cuentas con Daños y Perjuicios (Compliance for Contracts and Accounting with Damages) in Civil Case No. 142 (96-5488).
- The RTC declared rescinded a 1938 contract involving San Remigio Mines, Inc., Real Copper, and Emilio Montilla Sr., and ordered accounting and payment of specific percentages of payments and royalties to Montilla, Jr. as heir and administrator.
- The RTC declared several contracts null and void for fraud, ordered return of mining rights, and imposed moral and exemplary damages and attorney’s fees on defendants San Remigio, Real Copper, and Marinduque Mining Industrial Corporation (MMIC).
- The Decision became final and executory, paving the way for execution of judgment.
- A writ of execution was issued but a sheriff’s report indicated MMIC had no properties subject to execution as they were foreclosed and acquired by G Holdings, Inc. (GHI).
- Montilla, Jr. moved for issuance of an amended writ of execution to include GHI as successor or assignee of San Remigio Mines and related entities.
- The RTC denied the motion, finding GHI not a party to the case nor successor-in-interest liable for the judgment, and emphasized due process and jurisdictional limitations.
- Montilla, Jr. filed a motion for reconsideration denied by the RTC.
- Montilla, Jr. then petitioned the Court of Appeals (CA) by certiorari, which denied the petition, affirming the RTC rulings.
- The CA ruled GHI was not a party, the corporate veil was not pierced despite interlocking directors, and the judgment could not be enforced against GHI without violating due process.
- Montilla, Jr. moved for reconsideration before the CA, asserting GHI as transferee pendente lite and alter ego of Maricalum, which was denied.
- Montilla, Jr. filed a petition for review on certiorari before the Supreme Court, reiterating arguments that GHI must be bound by the judgment as transferee and alter ego.
Issues Presented
- Whether the Court of Appeals committed reversible error in affirming the RTC’s denial of Montilla, Jr.’s motion to amend the writ of execution to include GHI, a non-party, as liable for the judgment.
- Whether GHI, as a successor-in-interest or transferee pendente lite of Maricalum’s properties, is bound by a judgment rendered against the original defendant Marinduque Mining Industrial Corporation.
- Whether the corporate veil between GHI and Maricalum may be pierced under the alter ego doctrine to hold GHI liable.
Legal Principles on Execution of Judgments
- Execution of a final, executory judgment is a ministerial duty of the court and is governed by Section 1, Rule 39 of the Rules of Civil Procedure.
- Courts can only execute judgments against parties to the case or their successors in interest duly impleaded.
- Modification of the dispositive portion of a final j