THIRD
DIVISION
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LUCIA MAGALING,
PARALUMAN R. MAGALING, MARCELINA MAGALING-TABLADA, and BENITO R. MAGALING
(Heirs of the late Reynaldo Magaling), Petitioners, - versus - PETER ONG, Respondent. |
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G. R. No. 173333 Present: YNARES-SANTIAGO,
Chairperson, AUSTRIA-MARTINEZ, TINGA,* CHICO-NAZARIO, and NACHURA, JJ. Promulgated: August
13, 2008 |
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CHICO-NAZARIO, J.:
Before this Court is a Petition for Review on Certiorari[1] filed under Rule 45 of the Rules of
Court, as amended, seeking the reversal of the Decision[2] and Amended
Decision[3]
both of the Court of Appeals, dated 31 August 2005 and 28 June 2006,
respectively, in CA-G.R. CV No. 70954, entitled, “Peter Ong v.
Spouses Reynaldo Magaling and Lucia Magaling, and Thermo Loans and Credit
Corporation.” The assailed rulings reversed and
set aside the Decision[4] of the
Regional Trial Court (RTC), Branch 13, Lipa City, Batangas, which made
petitioner Lucia Magaling, together with her spouse, Reynaldo Magaling,[5]
and Termo[6]
Loans & Credit Corporation, jointly and severally liable to respondent Peter
Ong for the corporate obligation of the aforenamed corporation as adjudged in
the RTC Decision dated 23 June 1999.
As culled from the record, the antecedent facts of the present petition
are as follows:
On P389,000.00, with interest, attorney’s fees and costs of suit, with
prayer for issuance of a writ of preliminary attachment against the spouses
Reynaldo Magaling and Lucila Magaling (Spouses Magaling) and Termo Loans & Credit
Corporation (Termo Loans). The Complaint alleged that:
3. Defendants
Sps. Reynaldo Magaling and Lucila Magaling are the controlling
stockholders/owners of Thermo (sic) Loans and Credit Corp. and had used the
corporation as mere alter ego or adjunct to evade the payment of valid
obligation;
4. On
or about December 1994, defendant Reynaldo Magaling, (sic) approached plaintiff
in his store at Lipa City and induced him to lend him money and/or his company
Thermo (sic) Loans and Credit Corp. with undertaking to pay interest at the
rate of two and a half (2 ½%) percent per month. Defendant gave assurance that
he and his company Thermo (sic) Loans and Credit Corp. will be able to pay the
loan. Without the assurance plaintiff
would not have lent the money;
5. Based
on the assurance and representation of Reynaldo Magaling, Peter Ong extended
loan to defendants. As of September 1997, the principal loan extended to
defendants stands at P350,000.00. The interest thereon computed at 2 ½ %
per month is P8,750.00 per month;
6. In
acknowledgment of the loan, on or about September 1997, defendants issued and
tendered to plaintiff series of postdated checks more particularly described as
follows:
Planters
Bank
Check No. Date Amount
0473400 P8,750.00
0473401
0473402
0473403
0473404
0473405
0473406
which were issued
for payment of interest and principal loan of P350,000.00. However, only
check nos. 473400 and 473401 were cleared by the bank. Check no. 473402 was
likewise dishonored but it was subsequently replaced with cash x x x;
7. Despite
demands, oral and written, defendants Sps. Reynaldo and Lucila Magaling and/or
Thermo (sic) Loans and Credit Corp. unjustifiably and illegally failed, refused
and neglected and still fail, refuse and neglect to pay to the prejudice and
damage of plaintiff. As of P389,043.96 inclusive
of interest;
It was alleged
further that Reynaldo Magaling, as President of Termo Loans, together with the
corporation’s treasurer, a certain Mrs. L. Rosita, signed a Promissory Note[8] in
favor of Ong for the amount of P300,000.00 plus a monthly interest of
2.5%.
Because of the
failure of Termo Loans to pay its outstanding obligation despite demand, Ong
filed the above-mentioned complaint praying that Spouses Magaling and Termo
Loans be ordered to pay, jointly and severally, the principal amount of P389,000.00,
plus interest, attorney’s fees and costs of suit. In addition to the preceding
entreaty, Ong asked for the issuance of the writ of preliminary attachment pursuant
to Section 1(d), Rule 57 of the Rules of Court, as amended.
On 7 October 1998, acting on Ong’s prayer for the issuance of a writ of
preliminary attachment grounded on the allegation that Spouses Magaling “were
guilty of fraud in contracting the obligation subject of the complaint for sum
of money”[9];
and finding the same to be impressed with merit, the RTC issued an Order[10]
directing the issuance of the writ[11]
prayed for upon the filing of a bond in the amount of P390,000.00.
Meanwhile, on
In their defense, Spouses Magaling alleged in their Answer with Counterclaim[15] dated
[P]laintiff (Peter Ong) on its (sic) own
invested money with Termo Loans and Credit Corp. x x x without any inducement
from answering defendants much less assurance that Termo Loans will be able to
pay the loan. Plaintiff got attracted with the rate of interest being given by
Termo Loans to money placements and this
is the reason why plaintiff, at its own risk, invested money with Termo Loans.
x x x x
The alleged checks appear to have been issued
by Termo Loans as a corporation and answering defendants are not even
signatories thereto. Furthermore, the Promissory Note x x x was issued by Termo
Loans and not by defendants in their individual capacity.
The Spouses
Magaling further clarified that:
There could be no fraud on the part of
Reynaldo Magaling regarding the post-dated checks because he is not even a
signatory thereto. The alleged assurances/warranties to plaintiff are mere
after thoughts to make answering defendants personally answerable for corporate
obligations of Termo Loans, and to give semblance of merit to plaintiff’s
application for attachment.
For its part, Termo Loans failed to file an Answer; thus, upon Ong’s
motion, the RTC declared said corporation in default and allowed Ong to present
evidence ex parte.
Pursuant to the writ of preliminary attachment earlier issued, and
evidenced by the Sheriff’s Return[16] dated
The Spouses Magaling expectedly moved for the reconsideration of the
The Writ of Preliminary Attachment x x x was
improperly or irregularly issued as there is no existing ground to support the
issuance of an attachment.
Plaintiff nakedly alleged that the individual
defendants are guilty of fraud in contracting the obligation. Nevertheless, a
perusal of the Amended Complaint and the annexes thereto readily reveals that
the obligation subject of the present case is corporate in character and not
personal obligations of the individual defendants.[18]
In an Order[19]
dated
FIRSTLY, it appears that the obligation was
incurred by Termo Loans and Credit Corporation x x x. It is therefore a
corporate liability and not the personal obligation of herein movants. As
correctly stated by the movants, a corporation has a personality separate and
distinct from that of the stockholders and officers.
SECONDLY, the checks which bounced do not
bear the signatures of herein movants. It is indeed implausible that movants
will give assurances concerning checks they did not sign.
THIRDLY, the obligation appears to have been
incurred in 1994 x x x. “Fraud” was alleged in connection with the checks that
bounced, and which appear to have been issued only in 1998 by way of renewal of
plaintiff’s money placement. It appears therefore that if there was indeed
fraud, the same was not committed simultaneously with the inception of the
obligation.
On
WHEREFORE, the Court finds for the plaintiff
and against the defendant-corporation and hereby orders the latter to pay the
former the following amounts:
1.
The sum of P350,000.00 representing principal obligation;
2.
Interest at the rate of 2.5% per month from date of default until full
payment (sic)
3.
P20,000.00 as and for
attorney’s fees;
4.
The expenses of litigation; and
5.
The cost of suit.[21]
On
In a parallel development, trial on the merits concerning Ong’s cause of
action against the Spouses Magaling ensued.
On
Records show that the subject obligation is
the obligation of defendant corporation. The Non-negotiable Promissory Note No.
551 dated
x x x x
Furthermore, the Planters Development Bank
Checks (Exh. A – A-3) which were allegedly issued by defendant Reynaldo
Magaling to herein plaintiff were corporate checks under the account name of
Thermo (sic) Loans and Credit Corporation with defendant Reynaldo Magaling not
even a signatory thereof. In fact, plaintiff’s demand letter dated
The fallo of the foregoing
decision thus states:
WHEREFORE, foregoing premises considered, the
instant Complaint against defendants-spouses Magaling is hereby DISMISSED for
lack of merit.[27]
Ong appealed the instant case to the Court of Appeals.
In a Decision dated
WHEREFORE, the foregoing considered, the instant
appeal is hereby GRANTED. The assailed decision is REVERSED and SET ASIDE and a
new one entered declaring appellee spouses Magaling jointly and severally
liable to appellant Peter Ong for the corporate obligation of Thermo (sic) Loans
adjudged in the decision of the trial court dated
The Court of Appeals, in reversing the
The Spouses Magaling moved for the reconsideration of the aforequoted
decision. But not to be outdone, Ong likewise filed a motion for
reconsideration, albeit partial, that is, insofar as the issue of the propriety
of the discharge of the writ of preliminary attachment was concerned.
The Spouses Magaling’s motion for reconsideration was denied by the Court
of Appeals in its Amended Decision dated
With respect to appellant’s prayer, he
invited Our attention to his assignment of error in his Appellant’s Brief where
he sought the nullification of the Order of the trial court discharging the
writ of attachment. He argued that the said Order granting such discharge had
the effect of prejudging the merits of the case at a time when Thermo (sic) Loans
and Credit Corp. had not even filed its answer to the complaint. Indeed, We
find that such discharge, even before the issues were joined, prematurely
adjudicated the merits of the case on the lack of personal liability of appellees,
and without the latter even posting a counter bond. Therefore, as prayed for by
appellant, the discharge of attachment is declared illegal and the writ of
attachment is declared effective and subsisting.[29]
And the dispositive part of the Amended
Decision provides:
WHEREFORE, the foregoing considered, the
partial motion for reconsideration of appellant is GRANTED. Accordingly, the
Order discharging the writ of attachment is SET ASIDE and the Writ of
Attachment is hereby declared effective and subsisting. Appellees’ motion for
reconsideration is DENIED.[30]
Hence, the present petition premised on the following arguments[31]:
I.
THE COURT OF APPEALS ACTED WITH GRAVE ABUSE OF DISCRETION AND IN EXCESS
OF JURISDICTION IN RELYING ON A GROUND RAISED ONLY FOR THE FIRST TIME ON
APPEAL, TO MAKE REYNALDO MAGALING PERSONALLY LIABLE FOR CORPORATE LIABILITY;
and
II.
THE COURT OF APPEALS ACTED WITH GRAVE ABUSE OF DISCRETION AND IN EXCESS
OF JURISDICTION IN REINSTATING THE PRELIMINARY ATTACHMENT.
At the outset, we note that while the instant suit is denominated as a
“Petition for Review on Certiorari,”
under Rule 45 of the Revised Rules of Court, the allegations for the allowance
of this petition are that the appellate court committed grave abuse of
discretion amounting to lack or excess of jurisdiction in reversing the
decision dated 5 February 2001 of the RTC. This is a procedural error. This
being an appeal by certiorari, under Rule 45 of the Revised Rules of
Court, this Court’s power to review is generally limited to questions of law
and errors of judgment.[32] Under
this mode of appeal, this Court is precluded from entertaining errors of
jurisdiction or grave abuse of discretion – a question which may be
appropriately addressed through a petition for certiorari under Rule 65 of the Revised Rules of Court. In any
case, to put an end to the present controversy, in accordance with the liberal
spirit pervading the Revised Rules of Court and in the interest of justice,
this Court decided to treat the present petition for certiorari as an appeal by certiorari,
considering that it was filed[33]
within 15 days from receipt of the Amended
Decision of the Court of Appeals denying petitioners’ motion for
reconsideration.
In the case at bar, the Spouses Magaling claim that the Court of Appeals gravely
abused its discretion when it (1) held the Spouses Magaling equally liable with
Termo Loans with regard to the financial liability of the latter; and (2)
reinstated the writ of preliminary attachment.
In ruling against the Spouses Magaling on the sole
issue of whether or not they “may be held personally liable for the corporate
obligation of Thermo (sic) Loans in favor of Peter Ong,”[34]
the Court of Appeals debunked the ratiocination of the RTC that “the checks issued
by appellee Reynaldo Magaling were all corporate checks under the account name
of Thermo (sic) Loans to which he was not even a signatory (of) x x x (and)
that the demand letter was addressed to Thermo (sic) Loans and not to Reynaldo
Magaling.”[35]
It took note of the following:
Appellee Reynaldo Magaling testified that as president of
Thermo (sic) Loans from 1994 up to 1997, it was his duty and responsibility to
supervise the personnel and the operation of the corporation. (Citation
omitted.) The Articles of Incorporation of Thermo (sic) Loans where he was
incorporator and director states its primary purpose was to engage in the
business of a lending investor, lending money to persons and entities under the
terms and conditions allowed by law. Renaldo (sic) Magaling likewise admitted
that there are other twenty more different companies also dealing in financing
or lending business. (Citation omitted.) Thus, while it is true that there may
have been no fraud at the inception of the transaction with appellant Peter Ong,
and from 1994 to 1997, he was paid his monthly interest of 2.5% on his
investment or P8,750.00 monthly, the degree of diligence required of Reynaldo
Magaling as director and president of Thermo (sic) Loans was not shown to have
been exercised by him as expected from the highest officer of the said company.
Reynaldo Magaling resigned as president of Thermo (sic)
Loans in 1998 when the company already became insolvent. He admitted that when
he resigned, nobody took over as president of the company. Neither were the
investors informed about the bankruptcy thereof, and nor was any bankruptcy or
insolvency or suspension of payments proceedings instituted to protect the
assets of the corporation and the interest of its investors. As director and
president of the company, he seemed to know nothing at all about its
operations, nor could he produce any financial document like the company’s financial
statement, and in his own words, he conveniently gave all the responsibilities
to the manager x x x.
Considering the nature of the business of Thermo (sic)
Loans and other lending companies of appellee Reynaldo Magaling. It behooved him to have exercised utmost
diligence in running the affairs of Thermo (sic) Loans to protect its interest
and its investors. Miserably, he failed in this respect that the trial court
even commented that he seemed not to know anything about the operation of his
business. (Citation omitted.)
It then concluded that:
Clearly, Reynaldo Magaling was
grossly negligent in directing the affairs of Thermo (sic) Loans without due
regard to the plight of its investors and thus should be held jointly and
severally liable for the corporate obligation of Thermo (sic) Loans to
appellant Peter Ong.[36]
In asking this Court to reverse and set aside the above-quoted Decision, as well as the Amended Decision, of the Court of
Appeals, the petitioners contend that the appellate court failed to appreciate
several important facts: 1) that the issue of whether or not a corporate debt
or credit can be the debt or credit of a stockholder was alleged for the first
time on appeal; 2) that “the Amended
Complaint did not allege that Reynaldo Magaling was guilty of gross
negligence or bad faith in directing the affairs of the corporation”[37]; 3)
that the solvency of Termo Loans was never put in issue or raised by Ong; and
4) that negligence “is not one of the grounds provided for by Rule 57 of the
Rules of Court that will warrant (the) issuance of preliminary attachment.”[38]
Ong, in traversing the allegations in support of the present petition, argues
in his Comment that he brought up the
issue of Reynaldo Magaling’s negligence in managing the affairs of Termo Loans
in his Memorandum before the RTC where he stated that:
Being President, it is incumbent upon
Reynaldo Magaling to know the financial condition of his company. He was found
wanting and did not know the financial condition of his company. How many
creditors does the company have? He was supposed to know that as President but
he does not know. One glaring fact that stands out is that these creditors are
left with an empty bag and cannot collect because of the negligence of Reynaldo
Magaling in running his financing companies.[39]
From the preceding arguments and counter-arguments, the threshold issues
proper for this Court’s consideration are, given the facts of the case, whether
or not the Court of Appeals erred in: 1) making the Spouses Magaling and Termo
Loans jointly and severally liable to Ong for the obligation incurred by the
corporation; and 2) reinstating the writ of preliminary attachment issued
against two (2) real properties of the Spouses Magaling.
The petition is not meritorious.
It is basic that a corporation is a juridical entity with legal
personality separate and distinct from those acting for and in its behalf and,
in general, from the people comprising it.[40] The general rule is that obligations incurred
by the corporation, acting through its directors, officers and employees, are
its sole liabilities, and vice versa.
There are times, however, when
solidary liabilities may be incurred and the veil of corporate fiction may be
pierced. Exceptional circumstances warranting such disregard of a separate
personality are summarized as follows:
1. When
directors and trustees or, in appropriate case, the officers of a corporation:
(a) vote
for or assent to patently unlawful acts of the corporation;
(b) act
in bad faith or with gross negligence in directing the corporate affairs;
(c) are
guilty of conflict of interest to the prejudice of the corporation, its
stockholders or members, and other persons;[41]
2. When
a director or officer has consented to the issuance of watered down stocks or
who, having knowledge thereof, did not forthwith file with the corporate
secretary his written objection thereto;[42]
3. When
a director, trustee or officer has contractually agreed or stipulated to hold
himself personally and solidarily liable with the corporation;[43]
or
4. When
a director, trustee or officer is made, by specific provision of law,
personally liable for his corporate action.[44]
In making the Spouses Magaling co-defendants of Termo Loans, Ong alleged in
his Complaint for Sum of Money filed with the RTC that the spouses Reynaldo
Magaling and Lucia Magaling were the controlling stockholders and/or owners of
Termo Loans, and that they had used the corporation to evade the payment of a valid
obligation. The appellate court eventually
found the Spouses Magaling equally liable with Termo Loans for the sum of money
sought to be collected by Ong.
As explained above, to hold a director, a trustee or an officer
personally liable for the debts of the corporation and, thus, pierce the veil
of corporate fiction, bad faith or gross negligence by the director, trustee or
officer in directing the corporate affairs must be established clearly and
convincingly. Bad faith is a question of fact and is evidentiary. Bad faith
does not connote bad judgment or negligence. It imports a dishonest purpose or
some moral obliquity and conscious wrongdoing. It means breach of a known duty
through some ill motive or interest. It partakes of the nature of fraud.[45]
In the present case, there is nothing substantial on record to show that
Reynaldo Magaling, as President of Termo Loans, has, indeed, acted in bad faith
in inviting Ong to invest in Termo Loans and/or in obtaining a loan from Ong for
said corporation in order to warrant his personal liability. From all
indications, the proceeds of the investment and/or loan were indeed utilized by
Termo Loans. Likewise, bad faith does not arise just because a corporation
fails to pay its obligations, because the inability to pay one’s obligation is
not synonymous with fraudulent intent not to honor the obligations.[46]
The foregoing discussion notwithstanding, this Court still cannot totally
absolve Reynaldo Magaling from any liability considering his gross negligence
in directing the affairs of Termo Loans; thus, he must be made personally
liable for the debt of Termo Loans to Ong.
In order to pierce the veil of corporate fiction, for reasons of negligence
by the director, trustee or officer in the conduct of the transactions of the
corporation, such negligence must be gross. Gross negligence is one that is
characterized by the want of even slight care, acting or omitting to act in a
situation where there is a duty to act, not inadvertently but willfully and
intentionally with a conscious indifference to consequences insofar as other
persons may be affected;[47] and
must be established by clear and convincing evidence. Parenthetically, gross or
willful negligence could amount to bad faith.[48]
In the case at bar, in their Memorandum
filed before the RTC, the Spouses Magaling argued that “the Amended Complaint did not allege that
Reynaldo Magaling was guilty of gross negligence or bad faith in directing the
affairs of the corporation”; and that respondent Ong was not able to adduce
evidence to offset the effect of the particular allegation. Hence, they insist
that it was unfair for the appellate court to conclude that Reynaldo Magaling
failed to exercise the necessary diligence in running Termo Loans.
We disagree.
Petitioners’ argument is that Ong failed to
actually allege in the complaint Reynaldo Magaling’s gross negligence in
running Termo Loans as basis for making the subject sum of money a personal
liability of Reynaldo. For them, it is,
thus, too late in the day to raise the alleged gross negligence of Termo Loans’
President, Reynaldo Magaling, as this matter has not been pleaded before the
RTC. Or simply put, issues raised for the first time on appeal and not raised
timely in the proceedings in the lower court are barred for being violative of
basic due process.
Generally, laws, theories, issues and
arguments not adequately brought to the attention of the lower court need not
be, and ordinarily will not be, considered by a reviewing court, as they cannot
be raised for the first time on appeal[49]
and, as such, are deemed to have been waived. Basic consideration of due process impels this
rule.[50] In the case at bar, however, the issue
respecting Reynaldo Magaling’s gross negligence was seasonably raised in the
proceedings before the RTC. The
testimonial evidence elicited from Reynaldo Magaling himself during his cross-examination
in the RTC bears out his wanton disregard of the transactions of Termo Loans,
particularly in consideration of the fact that he was the latter’s President.
It cannot be said that the Spouses Magaling
were not given an opportunity to refute the issue of his supposed gross
negligence in directing the affairs of Termo Loans when the same, having been
established by his own testimony during cross-examination, could have been
objected to at the time it was made. Objection
to evidence cannot be raised for the first time on appeal; when a party desires
the court to reject the evidence offered, he must so state in the form of
objection. Without such objection, he
cannot raise the question for the first time on appeal. That the Spouses Magaling were not able to
present evidence to the contrary was solely due to the ineffectiveness of their
counsel in rebutting the evidence unearthed and brought to light during the
witness’ presentation in court. Their counsel
could have clarified in the re-direct examination the matters revealed during
cross-examination, but he did not do so.
Reynaldo Magaling’s gross negligence became
apparent, undeniable and proven during the course of the proceedings in the
trial court. Reynaldo Magaling was the lone
witness presented in court to belie the claim of Ong. On cross-examination, he
(Reynaldo Magaling) clearly and plainly shed light on how Termo Loans was run
under his aegis, to wit:
ATTY. NG:
Q. Mr. witness, this company that you have,
this Flagship Lending Corporation, you said …. When was this established, Mr.
witness?
A. I think it is in 1998, more or less,
sir.
Q. 1998. How about this First Solid Lending
Corporation, when was this put up?
A. I cannot remember also when it started
operating, sir.
COURT:
Q. So, when did you first realize that you
have difficulty in receiving payments from borrowers?
A. In the later part of ….
Q. 19 …..?
A. In 1998, Your Honor.
Q. And in 1998 you did not tell Peter Ong
that there was difficulty in receiving payments from the borrowers?
A. He knew about it, Your Honor.
Q. You cannot presume that the investor
knows that you have difficulty. You have
to tell the investor. Did you tell him?
A. It was told to him by our manager, what
was happening, Your Honor.
Q. Your Manager. But you, yourself did not tell him?
A. I cannot remember, Your Honor.
COURT:
Q. So, there was absolutely no occasion for
you to tell him even in passing in his store that there is danger in the
P300,000.00 investment?
A. No, Your Honor.
Q.
How about the other investors? Did you not also tell them of such a situation
that you were in in your company?
A. No, Your Honor.
Q. Why not?
A. I did not tell that to investors, what is
going on for fear that they might be afraid of what is happening, Your Honor.[51]
x x x x
ATTY.
NG:
Q. Mr.
Witness, was there a formal bankruptcy proceedings filed in dissolving the
company?
x
x x x
WITNESS:
A. I
do not know, sir.
ATTY.
NG:
Q.
Being the President, you do not know or you refused to know?
A. No,
sir. I resigned at that time in 1998,
sir.
COURT:
Q. And
who took over as President?
A. Nobody
took over, Your Honor.
Q. How
about the investors? Did they get all
their money?
WITNESS:
A. I
do not know, Your Honor.
ATTY.
NG:
Q. As
of the time that you were still the President, were there other investors in
the company, is it not, aside from Peter Ong?
A. Yes,
sir.
Q. Do
you know how much was the investment of the other persons aside from Peter Ong?
x
x x x
WITNESS:
A. Like
me, I have invested, sir.
ATTY.
NG:
Q. How
much?
A. P1.8
Million, sir.
Q. That
is your share in the company?
A. No. That is not a share, sir.
Q. So,
that is your investment in the company?
A. That
is my investment, sir.
Q. How
about the other persons who also invested money with your company?
A. I
do not know that, sir.
Q. Can
you produce the financial statement of Thermo (sic) Loans, Mr. witness?
A. (No
answer).
COURT:
Q. So,
as President, you do not know who are the other investor?
A. I
know the Directors, but the other investors, I do not know, Your Honor.
Q. Who
is in-charged (sic) of the company?
A. As
of now, Your Honor?
Q. As
of now?
A. Our
manager, Your Honor.
ATTY.
NG:
Q. But
because you were the President, you also supervised your manager, is it not?
A. Yes,
sir.
Q. To
your knowledge, can you name some of the other persons who also invested in
your company, if you know?
A. Yes,
sir.
Q. Can
you name them?
A. The
Directors listed there, sir.
Q. How
much did the Directors invest in this company?
A. That
I do not know, sir.
COURT:
Q. Upon
insolvency, the fact that Thermo (sic) Loans became insolvent in 1998, did all
the investors get their money?
A. Many
are saying that they will get their money, Your Honor.
Q. But
did they actually get their money investment?
A. The
others were not able to get back, Your Honor.
Q. Did
they file a case against you?
A. No
charges were filed against me, Your Honor.
Q. How
about Thermo (sic) Loans?
A. I
do not know, Your Honor.
Q. So,
this is the only case filed by an investor against Thermo (sic) Loans?
A. Yes,
Your Honor.
ATTY.
NG:
Q. Mr.
Witness, going back to your relationship with Mr. Peter Ong, were you the one
who convinced Peter Ong to invest in your company, the Thermo (sic) Loans?
A. I
do not remember that, sir.
COURT:
Q. But
you talked to him about the interest and the principal?
A. Yes,
Your Honor.
Q. But
you did not mention to him that you have other lending companies?
A. In
that matter, I do not remember, Your Honor.
ATTY.
NG:
Q. Mr.
Witness, when this company, Thermo (sic) Loans pulled (sic) it up,
“nagsarado,” it was a de facto, there
was no…. who got hold of the assets of the company?
A. I
do not know that, sir.
Q. Why?
A. Because
I am not only attending to that company, I have so many other companies, sir.
COURT:
Q. You did not go after your P1.8
Million?
A. Nomore (sic), Your Honor, because “ako’y
kinukunsensya rin ng aking sarili, bilang Katoliko’y ayaw ko nang makasali pa
sa ibang bagay na sa banda roo’y pera lang ho iyon.”
Q. “Nakukunsiyensya
ka” but you were not being bothered for the money of the other investors?
How can that be? Your conscience bothers you?
A. If I will think about it, I might get
sick. I did not bother to run after my investment for reason of health
x x x.
ATTY.
NG:
Q. Okay,
Mr. Witness, considering that you are a businessman engaged in similar lines of
lending company and being the President, the former President of Themo (sic)
Loans, you had …. you were furnished with final…. with financial statement of
the company was it not?
A. I
do not remember that, sir.
COURT:
Q. You
did not call a meeting of the Directors and other stock holders that your
company is going down?
A. No
more, Your Honor, because no Directors attended the meeting.
Q. But
you called a meeting?
A. Yes,
Your Honor. I called a meeting but nobody attended the meeting.
ATTY.
NG:
Q. Where
are now the financial records of the company?
A. That
I do not know, sir.
Q. How
about your own personal records? Your
personal copy of the financial statement of the company, considering that your
classification in Rotary Club is financial services?
A. I
do not know where it was placed, sir.
Q. So,
you are telling this Court that you cannot produce anymore the financial
statement related to this company, is it?
A. No,
sir. Not like that.
Q. Where
you tried to retrieve or will you try to retrieve the financial statement of
this company?
A. I
gave all the responsibilities to the manager, sir.[52]
Reynaldo Magaling’s very own testimony gave
reason for the appellate court’s finding of gross negligence on his part. Instead of the intended effect of refuting the
supposition that Termo Loans was assiduously managed, Reynaldo Magaling’s
foregoing testimony only convincingly displayed his gross negligence in the
conduct of the affairs of Termo Loans. From our standpoint, his casual manner,
insouciance and nonchalance, nay,
indifference, to the predicament of the distressed corporation glaringly
exhibited a lackadaisical attitude from a top office of a corporation, a
conduct totally abhorrent in the corporate world.
Reynaldo Magaling is not a novice in the field of
commerce. He is a seasoned businessman running several lending companies. During
his cross- examination, he admitted that he had, aside from Termo Loans,
various other lending companies, to wit:
ATTY. NG:
Q.
Mr. witness, you said that you are a
businessman by profession?
WITNESS:
A.
Yes, sir.
x x x x
ATTY. NG:
Q.
In 1994 when you got this alleged
investment from Peter Ong, what were the businesses that you own or control at
that time?
x x x x
WITNESS:
A. I did
not receive the investment of Peter Ong, it was the company who received,
sir.
ATTY. NG:
Q.
Okay.
But what were your businesses that you had at that time?
A.
Lending companies, sir.
Q.
What are the names of that lending
companies that you had?
A.
Thermo Loans, sir.
Q.
Aside from Thermo Loans?
A.
First Solid Lending Company,
sir.
Q.
What else?
A.
Mediator Lending Company,
sir.
Q.
What else?
A.
Beneficial Lending Company,
sir.
Q.
What else?
A.
Vintage Lending Company, sir.
Q.
What else?
A.
New Profile Lending Company,
sir.
Q.
What else?
A.
Smart Cash Lending Company,
sir.
Q. What else?
A. Cash Line Lending Company,
sir.
Q. What else?
A. Insight Lending Company, sir.
Q. What else?
A. Antigo Lending Company, sir.
Q. What else?
A. Flagship Lending Company,
sir.
Q. What else?
COURT:
Q.
So, what happened to all these
lending companies now?
A.
They are okay, Your Honor.
ATTY. NG:
Q. Do you mean to tell this Honorable Court
that all these companies are now doing well and still existing including Thermo
Loans?
A. Thermo Loans was insolvent at that time,
sir. But you did not ask those
insolvent. I have so many companies that are already insolvent. But you did not ask about the company that
are solvent.
COURT:
Q. Among those companies which you mentioned,
which of those are solvent and which are not?
A. All of those I mentioned except Thermo
Loans, Your Honor.[53]
x x x x
COURT:
Q. And Peter Ong
could have not parted with the Three Hundred Thousand pesos (P300,000.00)
investment if he did not talk to you?
A. He
talked to me, Your Honor.
ATTY. NG:
Q.
He talked to you? Now, that you admitted ….
COURT:
Q. Who was the one who made the offer for
him to invest? Was he the one who
voluntarily invested the money or you were the one who convinced him to invest the P300,000.00 money
to Thermo Loans Lending and Credit Corporation?
A. I cannot remember, Your Honor, because
due to the lapse of time. It was in
1994.[54]
x x x x
COURT:
Q. So, what you are saying now is that,
your manager and Peter Ong made preliminary talks about Peter Ong investing in
Thermo Loans and Credit Corporation and thereafter, you also talked with Peter
Ong about Peter Ong’s investing in Thermo Loans?
A. Yes, Your Honor.
Q. What about after that?
A. After four (4) years … that investment
was in 1994 up to 1998, Your Honor, and this last … in the year 1999, the
corporation became insolvent, Your Honor.[55]
x x x x
ATTY. NG:
x
x x x
Q. What happened when … Mr. witness, how
did Thermo Loans become bankrupt?
A. The reason is that, the borrowers did
not pay, sir.[56]
Accordingly,
the Court of Appeals observed correctly when it succinctly stated that, “[c]learly,
Reynaldo Magaling was grossly negligent in directing the affairs of Thermo
(sic) Loans without due regard to the plight of its investors and thus should
be held jointly and severally liable for the corporate obligation of Thermo
(sic) Loans to appellant Peter Ong.”
On the propriety of the RTC’s discharge of the preliminary attachment, we
hew to the provisions of the law and jurisprudence.
A writ of preliminary attachment is a provisional remedy by virtue of
which a plaintiff or other proper party may, at the commencement of the action
or at any time thereafter, have the property of the adverse party taken into
the custody of the court as security for the satisfaction of the judgment that
may be recovered.[57] The chief purpose of the remedy of attachment
is to secure a contingent lien on defendant’s property until plaintiff can, by
appropriate proceedings, obtain a judgment and have such property applied to
its satisfaction, or to make some provision for unsecured debts in cases where
the means of satisfaction thereof are liable to be removed beyond the
jurisdiction, or improperly disposed of or concealed, or otherwise placed
beyond the reach of creditors.[58]
For the provisional remedy to issue, Sec. 1, Rule 57 of the Rules of
Court, as amended, provides that:
SECTION 1. Grounds upon which attachment may issue. – At the commencement of
the action or at any time before entry of judgment, a plaintiff or any proper
party may have the property of the adverse party attached as security for the
satisfaction of any judgment that may be recovered in the following cases:
(a) In
an action for the recovery of a specified amount of money or damages, other
than moral and exemplary, on a cause of action arising from law, contract,
quasi-contract, delict or quasi-delict against a party who is about to depart
from the Philippines with intent to defraud his creditors;
(b) In
an action for money or property embezzled or fraudulently misapplied or
converted to his own use by a public officer, or an officer of a corporation,
or an attorney, factor, broker, agent, or clerk, in the course of his
employment as such, or by any other person in a fiduciary capacity, or for a
willful violation of duty;
(c) In
an action to recover possession of property unjustly or fraudulently taken,
detained or converted, when the property, or any part thereof, has been
concealed, removed, or disposed of to prevent its being found or taken by the
applicant or an authorized person;
(d) In
an action against a party who has been guilty of a fraud in contracting the
debt or incurring the obligation upon which the action is brought, or in the
performance thereof;
(e) In
an action against a party who has removed or disposed of his property, or is
about to do so, with intent to defraud his creditors; or
(f) In
an action against a party who does not reside and is not found in the
Once the writ of preliminary attachment is issued, the same rule provides
for two ways by which it can be dissolved or discharged.
First, the writ of preliminary
attachment may be discharged upon a security given, i.e., a counter-bond, viz:
SEC. 12. Discharge
of attachment upon giving counter-bound. – After a writ of
attachment has been enforced, the party whose property has been attached, or
the person appearing on his behalf, may move for the discharge of the
attachment wholly or in part on the security given. The
court shall, after due notice and hearing, order the discharge of the
attachment if the movant makes a cash deposit, or files a counter-bond executed
to the attaching party with the clerk of the court where the application is
made, in an amount equal to that fixed by the court in the order of attachment,
exclusive of costs. But if the
attachment is sought to be discharged with respect to a particular property,
the counter-bond shall be equal to the value of that property as determined by
the court. In either case, the cash
deposit or the counter-bond shall secure the payment of any judgment that the
attaching party may recover in the action.
A notice of the deposit shall forthwith be served on the attaching
party. Upon the discharge of an
attachment in accordance with the provisions of this section, the property
attached, or the proceeds of any sale thereof, shall be delivered to the party
making the deposit or giving the counter-bond, or to the person appearing on
his behalf, the deposit or counter-bond aforesaid standing in place of the
property so released. Should such
counter-bond for any reason be found to be, or become insufficient, and the
party furnishing the same fail to file an additional counter-bond, the
attaching party may apply for a new order of attachment. (Emphasis supplied.)
Second, said provisional remedy must be
shown to have been irregularly or improperly issued, to wit:
SEC. 13. Discharge
of attachment on other grounds. – The party whose property has been
ordered attached may file a motion with the court in which the action is
pending, before or after levy or even after the release of the attached
property, for an order to set aside or discharge the attachment on the ground that the same was improperly
or irregularly issued or enforced, or that the bond is insufficient. If the attachment is excessive, the discharge
shall be limited to the excess. If the
motion be made on affidavits on the part of the movant but not otherwise, the
attaching party may oppose the motion by counter-affidavits or other evidence
in addition to that on which the attachment was made. After
due notice and hearing, the court shall order the setting aside or the
corresponding discharge of the attachment if it appears that it was improperly
or irregularly issued or enforced, or that the bond is insufficient, or that
the attachment is excessive, and the defect is not cured forthwith. (Emphasis supplied.)
In the case at bar, there is no question that no counter bond was given
by the Spouses Magaling for the discharge or dissolution of the writ of preliminary
attachment, as their position is that the provisional remedy was irregularly or
improperly issued. They sought the
discharge or dissolution of the writ based on Sec. 13, Rule 57 of the Rules of
Court, as amended. Under said provision,
when the attachment is challenged for having been illegally or improperly
issued, there must be a hearing, with the burden of proof to sustain the writ
being on the attaching creditor.[59] That hearing embraces not only the right to
present evidence but also a reasonable opportunity to know the claims of the
opposing parties and meet them. It means
a fair and open hearing.[60] Herein, there is no showing that a hearing was
conducted prior to the issuance of the
WHEREFORE, premises considered, the instant petition is DENIED. Accordingly, the assailed
SO ORDERED.
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MINITA
V. CHICO-NAZARIO
Associate Justice |
WE
CONCUR:
Associate Justice
Chairperson
MA. ALICIA AUSTRIA-MARTINEZ
Associate Justice |
DANTE
O. TINGA
Associate Justice |
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ANTONIO EDUARDO B. NACHURA Associate
Justice |
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ATTESTATION
I attest that the conclusions in the above
Decision were reached in consultation before the case was assigned to the
writer of the opinion of the Court’s Division.
CONSUELO YNARES-SANTIAGO
Associate Justice
Chairperson, Third Division
Pursuant to Article VIII,
Section 13 of the Constitution, and the Division Chairman’s Attestation, it is
hereby certified that the conclusions in the above Decision were reached in
consultation before the case was assigned to the writer of the opinion of the
Court’s Division.
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REYNATO S. PUNO
Chief Justice |
* Designated as an additional member in place of Associate Justice Ruben T. Reyes who concurred in the Court of Appeals decision.
[1] Rollo, pp. 21-30.
[2] Penned by Court of Appeals
Associate Justice Josefina Guevara-Salonga with Associate Justices Ruben T.
Reyes (now an Associate Justice of this Court) and Fernanda Lampas-Peralta
concurring; Annex “A” of the Petition; rollo,
p. 32-41.
[3] Annex “B” of the Petition; id. at 42-44.
[4] Annex “E” of the Petition; id. at 59-65. Penned by Judge Jane Aurora C. Lantion.
[5] Reynaldo Magaling passed away on
[6] Referred to in the record of the case as THERMO Loans & Credit Corporation but should be read as TERMO (Loans & Credit Corporation) per the latter’s Articles of Incorporation; records, pp. 117-128.
[7] Records, pp. 1-8.
[8] Annex “B” of the Amended Complaint; rollo, p. 50.
[9] Records, p. 11.
[10]
[11]
[12] Motion for Leave to Admit Amended Complaint; id. at 53-54.
[13]
[14]
[15] Annex “D” of the Petition; rollo, pp. 53-58.
[16] Records, p. 46.
[17] Noel M. Ramos
[18] Records, p. 79.
[19]
[20]
[21] Rollo,
p. 71.
[22] Records, p. 150.
[23]
[24]
[25]
[26] Rollo,
pp. 63-64.
[27]
[28]
[29]
[30]
[31]
[32] Tañedo
v. Court of Appeals, 322 Phil. 84, 95 (1996).
[33] Court of Appeals Amended Decision dated
[34] Court
of Appeals’ Decision, p. 6; rollo, p.
11.
[35] Court
of Appeals’ Decision, p. 7; id. at 12.
[36] Court of Appeals’ Decision, pp. 8-9; id. at 13-14.
[37] Petition, p. 5; id. at 25.
[38] Petition,
p. 7; id. at 27.
[39] Records,
p. 237.
[40] McLeod v. National Labor Relations Commission, G.R. No. 146667,
[41] Sec. 31, Corporation Code.
[42] Sec. 65, Corporation Code.
[43] De
Asis and Co., Inc. v. Court of Appeals, G.R. No. L-61549,
[44] Exemplified in Article 144, Corporation Code; See also Sec. 13, Presidential Decree 115 entitled, “The Trust Receipts Law.”
[45] McLeod
v. National Labor Relations Commission, supra note 40.
[46] Adlawan
v. Torres, G.R. Nos. 65957-58,
[47] Fonacier
v. Sandiganbayan, G.R. No. 50691,
[48] Fores
v. Miranda, 105 Phil. 266, 276.
[49] Eastern Assurance & Surety Corporation v. Land Transportation Franchising and Regulatory Board, 459 Phil. 395, 415 (2003).
[50] Philippine Nails and Wires Corporation v. Malayan Insurance Company, Inc., 445 Phil. 465, 478 (2003).
[51] TSN,
[52]
[53]
[54]
[55]
[56]
[57]
[58] Chemphil
Export & Import Corp. v. Court of Appeals, G.R. Nos. 112438-39,
[59] Benitez
v. Intermediate Appellate Court, G.R. No. L-71535,
[60] Monson v. Secretary of Agriculture, No. 81 F.S.C., April 28, 1938, cited in Martin, Constitutional Law, 1988 Ed., 233; cited in Peroxide Philippines Corp. v. Court of Appeals, id.