G.R. No. 142435 . April 30, 2003.
ESTELITA BURGOS LIPAT and ALFREDO LIPAT, petitioners, vs. PACIFIC BANKING CORPORATION, REGISTER OF DEEDS, RTC EX-OFFICIO SHERIFF OF QUEZON CITY and the Heirs of EUGENIO D. TRINIDAD, respondents.

FACTS

Petitioners Estelita and Alfredo Lipat owned a sole proprietorship, Bela’s Export Trading (BET). Estelita executed a Special Power of Attorney (SPA) authorizing their daughter, Teresita, to obtain loans from respondent Pacific Banking Corporation (PBC) and to mortgage their property as security. In 1979, Teresita secured a loan for BET, and the spouses executed a Real Estate Mortgage (REM) over their Quezon City property. The mortgage contract was a continuing one, securing present and future obligations. Subsequently, BET was incorporated into Bela’s Export Corporation (BEC), a family corporation where the Lipats were major stockholders and officers. BEC, through Teresita, obtained additional credit accommodations from PBC, which were covered by promissory notes, a trust receipt, and export bills. All these subsequent obligations were secured by the same REM.
When BEC defaulted, PBC foreclosed the mortgage. The property was sold at auction to respondent Eugenio D. Trinidad. The Lipats filed a complaint for annulment of the mortgage, foreclosure, and sale. They argued that the subsequent obligations were ultra vires acts of Teresita without a board resolution and were solely BEC’s corporate debts, not theirs. They contended the SPA and original REM only covered the initial BET loan.

ISSUE

Whether the petitioners are personally liable for the subsequent credit obligations incurred by BEC, making the foreclosure of their mortgaged property valid.

RULING

Yes. The Supreme Court affirmed the lower courts’ dismissal of the complaint, upholding the validity of the foreclosure. The legal logic rests on the doctrine of piercing the corporate veil and the principle of estoppel. While BEC possessed a separate juridical personality, the Court found it to be a mere alter ego of the Lipat family. The corporation was formed right after the original loan, utilized the same assets and business, and was dominated by the Lipats as incorporators, directors, and officers. This identity of interest and control made the separate corporate fiction susceptible to being disregarded to prevent injustice, as the corporation was used to evade the obligations secured by the spouses’ own property.
Furthermore, the petitioners are estopped from denying the authority of Teresita or the scope of the mortgage. The REM was explicitly a continuing contract, securing future obligations. By allowing Teresita to act on behalf of BEC and use the mortgaged property as security for years, and by Estelita personally attempting to negotiate the obligations with the bank, the Lipats clothed Teresita with apparent authority. The bank relied on this authority and the clear terms of the mortgage in good faith. Consequently, the mortgage rightfully secured all of BEC’s subsequent debts, and its foreclosure for default was valid. The defense of ultra vires acts was unavailing against the bank, a third party in good faith.