G.R. No. 162100 and G.R. No. 162395; January 18, 2012
PENTA CAPITAL FINANCE CORPORATION, Petitioner, vs. The Honorable TEODORO BAY, Presiding Judge of the Regional Trial Court, Quezon City, Branch 86; ANGELITO ACOSTA, Deputy Sheriff of RTC QC Branch 86; BIBIANO REYNOSO IV, and Commercial Credit Corporation of Quezon City, Respondents.

BIBIANO REYNOSO IV, Petitioner, vs. PENTA CAPITAL FINANCE CORPORATION, Respondent.

FACTS

Penta Capital Finance Corporation (Penta) was originally known as Commercial Credit Corporation (CCC), a financing firm that established franchise companies, including Commercial Credit Corporation of Quezon City (CCC-QC). CCC designated its employees, including Bibiano Reynoso IV, as resident managers of its franchises. CCC-QC accepted deposits and issued promissory notes, then sold/assigned its receivables to CCC. Due to Central Bank’s DOSRI Rule, CCC created CCC Equity Corporation, a wholly-owned subsidiary, to which it transferred its 30% equity in the franchises. CCC later transferred these shares to its stockholders as property dividends. Under the new setup, CCC Equity substituted CCC in the management contract with franchise companies. Reynoso, while an employee of CCC Equity, deposited personal funds with CCC-QC, which issued him interest-bearing Promissory Notes. In a separate transaction, Reynoso mortgaged his house and lot in Valle Verde, Pasig City to CCC, which later foreclosed and consolidated title in its name.
On August 15, 1980, CCC-QC filed a Complaint against Reynoso in the Regional Trial Court of Quezon City, Branch 86 (RTC QC) for sum of money with preliminary attachment, alleging embezzlement of company funds. Reynoso filed a Counterclaim based on his money placements with CCC-QC. During the case, CCC changed its name to General Credit Corporation (GCC) on September 2, 1983. On January 14, 1985, the RTC QC dismissed CCC-QC’s Complaint but granted Reynoso’s Counterclaim, ordering CCC-QC to pay Reynoso specific sums with interest, moral and exemplary damages, and attorney’s fees. This Decision became final and executory on May 27, 1989.
On July 24, 1989, the RTC QC issued a Writ of Execution against the goods and chattels of “plaintiff COMMERCIAL CREDIT CORPORATION.” The writ was returned unsatisfied. Reynoso filed for an Alias Writ of Execution. On August 16, 1991, the RTC QC issued an alias writ against “the goods and chattels of plaintiff COMMERCIAL CREDIT CORPORATION.” With no leviable properties of CCC-QC, the sheriff levied on the Valle Verde property registered in the name of “Commercial Credit Corporation.” The property was sold at public auction on September 20, 1991, with Reynoso as the highest bidder. Notice of the sale was sent to GCC but was returned with the notation “RTS UNKNOWN AT GIVEN ADDRESS.”
Reynoso filed a second Alias Writ of Execution, arguing CCC-QC and CCC were one and the same, attaching a 1990 SEC Decision in a separate case (SEC Case No. 2581) that held CCC and CCC-QC were one corporation. CCC (GCC) opposed, claiming it was not a party to the case and the SEC Decision was pending en banc resolution. The RTC QC ordered issuance of the second alias writ. CCC filed an Omnibus Motion to reconsider, quash the alias writ, and nullify the sale of the Valle Verde property, which was denied by the RTC QC on February 13, 1992, due to CCC’s admission in its pleading that it was an alter ego of CCC-QC.
CCC filed an action for terceria in the RTC Pasig to recover the Valle Verde property and enjoin further levies. The RTC Pasig denied the injunction, prompting CCC to file a Petition for Certiorari in the Court of Appeals (CA-G.R. SP No. 27518). Meanwhile, the RTC QC issued another Alias Writ of Execution against GCC on March 6, 1992, which CCC also challenged in the CA via another Petition for Certiorari (CA-G.R. SP No. 27683). CCC/GCC changed its name to Penta Capital Finance Corporation on December 1, 1993. The CA consolidated the two petitions and initially granted them, nullifying the Alias Writ of Execution. However, the Supreme Court reversed the CA’s decision, lifting the injunction against the execution sale and allowing levies on GCC’s properties.
Subsequently, execution proceedings continued in the RTC QC. Reynoso filed a Motion for Issuance of an Alias Writ of Execution and to Direct Sheriff to Levy on Personal and Real Properties of Penta. The RTC QC granted the motion. Penta filed several motions to quash the writs and recall orders, which were denied. The RTC QC issued orders directing the computation of accrued interest and the issuance of an alias writ of execution. Penta and Reynoso both filed Petitions for Certiorari with the CA challenging various RTC QC orders. The CA consolidated these petitions and rendered a Decision on July 30, 2003, modifying the interest rates applied by the trial court but affirming the challenged RTC QC orders. Both parties filed Motions for Reconsideration, which were denied by the CA on February 9, 2004. Hence, these consolidated Petitions for Review on Certiorari under Rule 45 were filed before the Supreme Court.

ISSUE

The primary issue is whether the Court of Appeals erred in affirming the Orders of the RTC QC in the execution proceedings, particularly regarding: (1) the liability of Penta (formerly CCC/GCC) for the judgment debt of CCC-QC based on the doctrine of piercing the corporate veil; and (2) the proper computation of interest on the judgment award.

RULING

The Supreme Court denied the petitions and affirmed the Court of Appeals’ Decision with modification regarding the interest computation.
1. On Piercing the Corporate Veil and Penta’s Liability:
The Supreme Court held that the doctrine of piercing the corporate veil applies, making Penta liable for the judgment debt of CCC-QC. The Court found that CCC-QC was a mere instrumentality or alter ego of CCC (now Penta). The facts established that CCC created and controlled CCC-QC, designated its employees as managers, and had an exclusive management contract where CCC-QC assigned its receivables to CCC. The creation of CCC Equity was a scheme to circumvent the DOSRI Rule, and CCC continued to treat CCC-QC as its own, with employees remaining part of CCC’s pension plan. The SEC Decision in Case No. 2581, which became final, declared CCC and CCC-QC as one corporation. Penta was estopped from denying its liability, as it had previously admitted in its pleadings before the RTC QC that it was the alter ego of CCC-QC. The principle of conclusiveness of judgment applied, as the issue of corporate identity had been settled in the prior SEC case. Therefore, Penta’s properties could be levied upon to satisfy the judgment obligation in Civil Case No. Q-30583.
2. On the Computation of Interest:
The Supreme Court modified the interest computation. The RTC QC’s 1985 Decision awarded specific sums with “14% interest per annum until fully paid.” The Court ruled that where a judgment does not specify the interest rate’s reckoning date, the interest should be computed from the date of the judgment’s finality. The CA correctly computed the interest on the principal amounts from May 27, 1989 (the date of finality of the RTC QC Decision). However, the Court clarified that the interest rate of 14% per annum should be applied only until June 30, 2013. Thereafter, in accordance with Bangko Sentral ng Pilipinas Circular No. 799, the legal interest rate for judgments is 6% per annum from July 1, 2013, until full satisfaction. The compounding of interest as ordered by the RTC QC was deleted, as the judgment did not provide for compounded interest. Only simple interest should be applied.
Dispositive Portion:
WHEREFORE, the Petitions are DENIED. The Court of Appeals Decision dated July 30, 2003 and Resolution dated February 9, 2004 are AFFIRMED with MODIFICATION. The interest on the principal sums awarded in the January 14, 1985 Decision of the Regional Trial Court of Quezon City, Branch 86 in Civil Case No. Q-30583 shall be computed at the rate of fourteen percent (14%) per annum from May 27, 1989 until June 30, 2013, and at the rate of six percent (6%) per annum from July 1, 2013 until full payment. No pronouncement as to costs.