Penta Capital Finance Corporation v. Bay

SERENO, J.:

Before us is a consolidated Petition for Review on Certiorari under Rule 45 impugning the Decision dated 30 July 2003 and Resolution dated 9 February 2004 of the Court of Appeals,1 which modified the interests applied by the trial court in computing the judgment awards; but affirmed the Orders dated 3 and 19 April, 23 May, 2 August, and 3 October 2002 issued by the trial court in the course of execution proceedings. Penta Capital Finance Corporation (Penta) was originally known as Commercial Credit Corporation (CCC), a financing and investment firm, which established in different parts of the country certain franchise companies, including Commercial Credit Corporation of Quezon City (CCC-QC). CCC designated its own employees as resident managers of its franchise companies, with Bibiano Reynoso IV (Reynoso) as resident manager of CCC-QC.

CCC-QC accepts funds from depositors to whom it issues interest-bearing promissory notes. In view of the exclusive management contract between CCC and CCC-QC, the latter would sell/discount and/or assign its receivables to the former, which loans them out to various borrowers as money market placements.2 In view of the Central Bank's promulgation of the DOSRI Rule,3 CCC subsequently created CCC Equity Corporation (CCC Equity), a wholly owned subsidiary, to which it had transferred its 30% equity and two seats in the franchise corporations' board of directors. In February 1976, CCC allegedly transferred to its stockholders all its shares in CCC Equity as property dividends.

Under the new setup, CCC Equity substituted CCC in the management contract with the franchise companies. Several CCC-QC officials, like Reynoso, became employees of CCC Equity and received salaries and allowances from the latter. Still, all employees of CCC-QC remained qualified members of the Commercial Credit Corporation Employees Pension Plan, even when CCC-QC was already partly owned by CCC Equity and technically had nothing to do with CCC.

Reynoso deposited personal funds to CCC-QC, which in return issued to him interest-bearing Promissory Notes.4 In a separate transaction, Reynoso mortgaged to CCC his house and lot in Valle Verde, Pasig City.5 The latter later foreclosed the property, and the title thereto was later consolidated in its name when no redemption was made. On 15 August 1980, CCC-QC instituted with the Regional Trial Court of Quezon City, Branch 866 (RTC QC), a Complaint7 against Reynoso for a sum of money with preliminary attachment, on the allegation that he had embezzled company funds amounting to ₱ 1,300,593.11. Reynoso filed a Counterclaim8 based on his money placements with CCC-QC, as shown by 23 checks he had issued in its favor.

During the pendency of the case, or on 2 September 1983, CCC changed its name to General Credit Corporation (GCC). On 14 January 1985, the RTC QC - then presided by Judge Antonio Solano - rendered a Decision9 dismissing CCC-QC's Complaint, but granting Reynoso's Counterclaim. The dispositive portion of the Decision reads: Premises considered, the court finds the complaint without merit.

Accordingly, said complaint is hereby DISMISSED. By reason of said complaint, defendant Bibiano Reynoso IV suffered degradation, humiliation and mental anguish. On the counterclaim, which the Court finds to be meritorious, plaintiff corporation is hereby ordered: a) to pay defendant the sum of ₱ 185,000.00 plus 14% interest per annum from October 2, 1980 until fully paid; b) to pay defendant ₱ 3,639,470.82 plus interest thereon at the rate of 14% per annum from June 24, 1981, the date of filing of Amended Answer, until fully paid; from this amount may be deducted the remaining obligation of defendant under the promissory note of October 24, 1977, in the sum of ₱ 9,738.00 plus penalty at the rate of 1% per month from December 24, 1977 until fully paid; c) to pay defendants ₱ 200,000.00 as moral damages; d) to pay defendants ₱ 100,000.00 as exemplary damages; e) to pay defendants ₱ 25,000.00 as and for attorney's fees; plus costs of the suit.

SO ORDERED. This Decision became final and executory on 27 May 1989.10 On 24 July 1989, the RTC QC issued a Writ of Execution on the "goods and chattels of plaintiff COMMERCIAL CREDIT CORPORATION."11 When the writ was returned unsatisfied on 11 December 1989, Reynoso filed a Motion for Issuance of Alias Writ of Execution and, thereafter, a Motion for examination of the financial records of CCC-QC. In the course of opposing his Motion, CCC-QC President Dr. Concepcion vda.

de Blaylock (Blaylock) alleged that the company had not been operating for about 10 years, and that "the Commercial Credit Corporation of the Philippines took possession of the premises of the office of CCC-QC, together with all its records and documents. ..."12 On 16 August 1991, the RTC QC again There being no leviable properties of CCC-QC, Sheriff Edgardo Tanangco reported that on 23 August 1991, he "levied whatever rights, interests, titles, participation said plaintiff may have" over the Valle Verde property, which was registered in the name of "Commercial Credit Corporation."

The said property was sold on execution on 20 September 1991 by Deputy Sheriff Edgardo Tanangco at public auction, with Reynoso as the highest and sole bidder in the amount of ₱ 650,151.50. This amount was credited as partial satisfaction of the judgment obligation.13 Meanwhile, the Notice of Sheriff's Sale was sent to "General Credit Corporation (Formerly Commercial Credit Corporation, ACE Bldg., RADA corner dela Rosa Sts., Makati, Metro Manila" on 2 October 1991, but this notice was returned with the notation "RTS UNKNOWN AT GIVEN ADDRESS 10-9."

On 29 October 1991, Deputy Sheriff Tanangco issued a Sheriff's Certification of Sale of the levied property. On 11 November 1991, Reynoso filed a second Alias Writ of Execution, arguing that CCC-QC and CCC were one and the same, and praying that the sheriff be directed to levy upon CCC's personal and real properties. Attached to the Motion was the 23 February 1990 Decision of Hearing Officer Antonio Esteves in Securities and Exchange Commission (SEC) Case No. 2581, entitled "Avelina G. Ramoso, et al. v. General Credit Corporation et al.,"

which held that CCC (then known as GCC) and CCC-QC, together with others, were one and the same corporation.14 On 22 November 1991, CCC's counsel appeared before the RTC QC and was granted time to file a comment on the Alias Writ of Execution.15 In its Special Appearance and Opposition,16 CCC alleged that it was not a party to the case, and that the cited Decision in SEC Case No. 2581 was still pending resolution of the SEC en banc. CCC also moved that further levies on its other properties be stopped. On 9 December 1991, the RTC QC ordered the issuance of the second alias writ.17 18 Attached to this Motion was a copy of a SEC Certification that SEC Case No. 2581 was still pending.

This Omnibus Motion was denied by the RTC QC in its 13 February 1992 Order due to the admission by CCC in the latter's pleading that it was an alter ego of CCC-QC.19 To recover its Valle Verde property, CCC filed with the Regional Trial Court of Pasig City, Branch 167 (RTC Pasig),20 on 21 February 1992, an action for terceria (third-party claim) against Reynoso and Quezon City Deputy Sheriff Edgardo Tanangco.

CCC prayed that (1) the levy on the Valle Verde property be declared void; (2) respondents be enjoined from consolidating ownership over the property pending resolution of the suit; and (3) respondents be enjoined from making further levies on petitioner's properties to answer for any liability under the Decision in Civil Case No. Q-30583. The RTC Pasig denied the prayer for injunction of CCC, prompting the latter to file on 13 March 1992 a Petition for Certiorari with prayer for preliminary injunction and/or temporary restraining order. Docketed in the Court of Appeals (CA) as Meanwhile, noting that the records failed to show that CCC had taken a legal step to suspend the implementation of its Order dated 9 December 1991, the RTC QC issued another Alias Writ of Execution against the goods and chattels of petitioner GCC on 6 March 1992.21 On 6 April 1992, the RTC QC's issuance of the second Alias Writ of Execution was impugned by the CCC in the CA via a Petition for Certiorari with prayer for preliminary injunction and/or temporary restraining order, docketed as CA-G.R. SP No. 27683.

RTC QC Judge Solano, Reynoso and Deputy Sheriff Tanangco were named respondents therein. Meanwhile, CCC/GCC changed its name to Penta Capital Finance Corporation (Penta) on 1 December 1993. The CA consolidated CA-G.R. SP Nos. 27683 and 27518.

On 7 July 1994, it granted the Petition, nullified the Alias Writ of Execution, and declared that the proper remedy for the Valle Verde property was the terceria filed with the Pasig court.22 Reynoso questioned this CA Decision via a Petition for Review before the Supreme Court (SC), docketed as G.R. No. 116124-25 and entitled "Reynoso v. Court of Appeals." On 22 November 2000, this Court issued a Decision23 overturning that of the CA. CCC filed a Motion for Reconsideration, but it was denied by this Court on 6 August 2001.

On 21 December 2001, CCC registered with the Sheriff of Quezon City a third-party claim (with an Affidavit of Third-Party Claim executed by petitioner's president, Jovencio Cinco) on its Valle Verde property; two condominium units under Condominium Certificates of Title Nos. 5462 and 5463; bank deposits; and various office equipment, all subjects of the Notice of Garnishment and Notice of Levy upon personal properties. CCC stated that it was exercising its right of redemption ad cautelam over the Valle Verde property. It remitted to the sheriff Metrobank Cashier's Check No. 2610004069 in the amount of ₱ 703,987.36, inclusive of interest amounting to ₱ 53,095.71.

On 12 March 2002, CCC filed with the RTC QC a Motion to Quash the Alias Writ of Execution on its Valle Verde property and the Alias Writ of Execution dated 6 March 1992 pertaining to its two condominium units on the 10th floor of the ACT Tower Condominium. Judge Teodoro Bay, who took over from Judge Solano upon the latter's retirement as presiding judge of the RTC QC, denied the Motion to Quash the Writ of Execution in the Order dated 3 April 2002. Judge Bay reasoned that, as finally decided by the SC in Reynoso v. Court of Appeals, CCC-QC, CCC, and GCC were one and the same corporation.

In an Order dated 19 April 2002 , the RTC QC directed the issuance of another Alias Writ of Execution to implement its 1985 Decision in response to Reynoso's Ex Parte Motion to Issue an Alias Writ of Execution on the ground that while the ruling in CA-G.R. SP No. 27518 had previously enjoined the sheriff from levying on the properties of CCC and selling them on execution, the SC had already overturned the said CA ruling. The Alias Writ of Execution was then issued, commanding Sheriff Angelito Acosta (who had taken the place of deceased Deputy Sheriff Edgardo Tanangco) to execute on the "goods and chattels of Commercial Credit Corporation of Quezon City/General Credit Corporation/Penta Capital Finance Corporation." On 29 April 2002, CCC filed an Urgent Consolidated Motion praying that 1) the execution be quashed; 2) the sheriff be required to file a monthly report in accordance with Section 14, Rule 39 of the Rules of Court; and 3) the RTC QC declare itself without jurisdiction to resolve with finality the issue of piercing the corporate veil, since the issue was within the jurisdiction of the RTC Pasig City in Civil Case No. 61777 (92).

In an Order dated 23 May 2002 , the RTC QC denied CCC's Consolidated Motion and required the parties to submit their own computation of the amount of execution. Reynoso filed his Compliance; CCC filed a Compliance Ad Cautelam and, the next day, a Motion to resolve/clarify in the interest of substantial justice. The Motion of CCC sought to reopen discussions on the matter of piercing its corporate veil of fiction.

In its Order dated 2 August 2002 , the RTC QC denied CCC's Motion to resolve/clarify, reiterating that the issue had already been resolved with finality by the SC. In its Order dated 9 August 2002 , the RTC QC issued an Order determining that the sum of ₱ 71,768,227.3524 minus the outstanding obligation of Reynoso to CCC was the proper computation of the award in his favor. In its Order dated 3 October 2002 , the RTC QC reiterated its 9 August 2002 Order.

On 8 October 2002, CCC filed with the CA another Petition for Certiorari and Prohibition, docketed as CA-G.R. SP No. 73207 and entitled "Penta Capital Finance Corporation v. Judge Teodoro Bay, et In its Decision dated 30 July 2003 ,25 the CA declared as excessive the interests fixed by the RTC QC. It held that Reynoso was entitled to recover from CCC only the amount of ₱ 13,947,240.04, based on the computation26 made in the presence of the parties by the CA's chief accountant, Carmencita Angelo. The appellate court, however, affirmed the RTC QC Orders dated 3 and 19 April, 23 May, 2 and August, and 3 October 2002.

Both parties filed their respective Motions for Reconsideration of the Decision of the CA, which subsequently denied both motions. CCC then filed an appeal by certiorari with this Court, docketed as G.R. No. 162100, wherein it raises the following issues : (1) the interest computation made by the RTC QC was grossly excessive; (2) the execution is tainted with irregularities; and (3) the RTC QC judge should have suspended execution of the properties of petitioner and allowed it to pursue its third-party claim to its logical conclusion. Respondent Reynoso also filed a Petition for Review with this Court, docketed as G.R. No. 162395 , questioning the CA's reduction of the the sum due him under the RTC QC Decision.

Reynoso argues that the CA failed to consider that the two judgment amounts were money market placements that were "rolled over." Thus, the principal (original placement) earns interest (in this case, 14% per annum) after the lapse of the agreed period. The earned interest plus the principal becomes the new principal/placement, which again earns interest when the placement is rolled over.

Under the terms of the money market placement, the outstanding balance earns 14% interest per annum, until both principal and interest are paid. Aside from these interest earnings, a 12% interest per annum In its Resolution dated 27 April 2004, this Court ordered the consolidation of the two cases. Consolidated Issues 1.

Whether the CA seriously erred in not holding that execution proceedings before the RTC QC was tainted with irregularities 2. Whether the CA seriously erred in not finding that the RTC QC should have suspended execution of the properties of CCC/Penta and allowed the latter to pursue its third party claim to its logical conclusion 3. Whether the CA seriously erred in holding that Penta's right of redemption had prescribed 4.

Whether the CA seriously erred in its computation of interest Our Ruling We affirm the CA Decision in toto. On the first issue In Reynoso v.

Court of Appeals ,27 CCC/GCC/Penta assailed the validity of the execution proceedings in the RTC QC on various grounds, mainly the fact that the latter had allowed the levy and sale of the Valle Verde property. Allegedly, this property was not owned by judgment debtor CCC-QC, but by CCC/GCC/Penta itself - an entity separate and distinct from the former. We held in the said case, though, that since the circumstances warranted piercing the corporate veil, judgment in favor of Reynoso may be executed against GCC (now Penta), an alter ego of CCC-QC.

CCC/GCC/Penta presented the same arguments in Reynoso, as it has done now. Even assuming that any of its present arguments is novel, it would be unavailing if it is based on the same factual milieu under which the Reynoso ruling was made . The orderly administration of justice and basic considerations of fair play abhor a piecemeal presentation of points of law, theories, issues, and arguments.28 At any rate, CCC/GCC/Penta fails to identify any change in the facts upon which Reynoso was predicated as to warrant a different conclusion in the present case.

Thus, the Court's ruling in Reynoso may be considered "the law of the case" in respect of the validity of the execution proceedings against CCC/Penta. The principle of the law of the case is embodied in Section 47(b) and (c), Rule 39 of the Rules of Court.29 As we explained in Litton Mills, Inc. v. Galleon Trader, Inc. ,30 this principle holds that "(w)hatever has been irrevocably established as the controlling legal rule between the parties in a case continues to be the law of the case, whether correct on general principles or not, so long as the facts on which such decision was predicated continue to be facts of the case before the Court.

Once a judgment has become final, the issues therein should be laid to rest." As Reynoso has long become final and can no longer be modified, the continued insistence of CCC/GCC/Penta that the execution proceedings were invalid cannot be entertained. On the second issue CCC insists that the RTC QC should have suspended execution insofar as the properties of CCC/Penta were concerned, and that the trial court should have allowed petitioner to pursue its third-party claim to its logical conclusion.

We disagree. As discussed in the first section, CCC and CCC-QC are one and the same entity in the context of the subject execution of the judgment in favor of Reynoso. Meanwhile, the remedy of terceria is available only to a third person other than the judgment obligor or the latter's agent who claims a property levied on.31 Hence, not being a third party to the execution proceedings, the remedy of terceria is not available to CCC/Penta.

On the third issue Again, we find no error in the Decision of the CA, holding that Penta's right of redemption has prescribed. We quote with approval the pertinent portion of its assailed Decision in this regard: Penta's right of redemption over the Valle Verde property was recognized by respondent Judge in the Order dated April 3, 2002, considering that CCC-QC, CCC and GCC, which was later renamed Penta Capital, are one and the same corporation as ruled with finality by the Supreme Court. Nonetheless, we agree with Reynoso that Penta Capital can no longer exercise its right to redeem the Valle Verde property.

Record shows that the Valle Verde property, which was registered in the name of CCC under TCT No. 29940, was levied upon and sold at public auction on October 29, 1991 with Reynoso as the highest bidder. The certificate of sale in favor of Reynoso was registered on TCT No. 29940 on November 7, 1991. Section 28, Rule 39 of the Rules of Civil Procedure provides that the judgment obligor or redemptioner may redeem the property from the purchaser at any time within one (1) year from the date of the registration of the certificate of sale.

Inasmuch as one year is composed of 365 days, CCC or its successors-in-interest had only until November 6, 1992 within which to redeem the Valle Verde property. However, it was only on December 21, 2002 that Penta Capital sent a notice to the Sheriff that it was redeeming ad cautelam the Valle Verde property, together with a cashier's check for ₱ 703,897.36, inclusive of interest. On February 20, 1992, Penta Capital filed with the Regional Trial Court of Pasig City a third-party claim with respect to the Valle Verde property and other properties that may be levied upon by Deputy Sheriff Edgardo C. Tanangco of respondent court.

Penta Capital's argument that it could not redeem the Valle Verde property within the one year period, which expired on November 6, 1992, in view of the temporary restraining order issued by this Court on March 13, 1992, the writ of preliminary injunction issued on April 7, 1994 and the decision dated July 7, 1994 of this Court in CA-G.R. SP No. 27518, does not persuade us. As correctly pointed out by Reynoso, the injunction issued by this Court in CA-G.R. SP No. 27518 did not cover the Valle Verde property. The temporary restraining order and injunction issued by this Court in said case merely enjoined the respondents therein from conducting an auction sale on execution of the properties of GCC, as well as from initiating similar acts of levying upon and selling on execution other properties of the latter until Civil Case No. 61777 before the Regional Trial Court of Pasig City shall have been finally terminated.

On the other hand, the levy and sale of the Valle Verde property had already been consummated when the temporary restraining order and injunction were issued by this Court. Settled is the rule that consummated acts can no longer be restrained by injunction. Injunction would not lie where the acts sought to have been enjoined had already become a fait accompli or an accomplished or consummated act.

The right of redemption should be exercised within the period prescribed by law. The right to redeem becomes functus officio on the date of its expiry and its exercise after the period is not really one of redemption but a repurchase.32 On the fourth issue The RTC QC ruled that CCC/GCC/Penta should pay Reynoso the following amounts: a) to pay defendant the sum of ₱ 185,000.00 plus 14% interest per annum from October 2, 1980 until fully paid; b) to pay defendant ₱ 3,639,470.82 plus interest thereon at the rate of 14% per annum from June 24, 1981, the date of filing of Amended Answer, until fully paid; from this amount may be deducted the remaining obligation of defendant under the promissory note of October 24, 1977, in the sum of ₱ 9,738.00 plus penalty at the rate of 1% per month from December 24, 1977 until fully paid; c) to pay defendants ₱ 200,000.00 as moral damages; d) to pay defendants ₱ 100,000.00 as exemplary damages; e) to pay defendants ₱ 25,000.00 as and for attorney's fees; plus costs of the suit.

Based on the above figures, the RTC QC eventually computed the award to Reynoso as ₱ 71,768,227.35. When this matter reached the CA, its chief accountant computed the judgment award at ₱ 13,947,240.04, after both parties had agreed to deduct from the total judgment award the sum of ₱ 650,150.50 paid by Reynoso for the Valle Verde property. The CA's computation is as follows: A. Principal Amount ₱ 185,000.00 Interest therein @ 14% per annum from October 2, 1980 up to November 30, 2002 573,986.57 Total