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property and not that of GRAPHIC, and accordingly, advised the sheriff to cease and desist
246 Phil. 211
from carrying out the scheduled auction sale on July 26, 1974. Notwithstanding the said
letter, the sheriff proceeded with the scheduled auction sale, sold the property to the
SECOND DIVISION petitioner, it being the highest bidder, and issued a Certificate of Sale in favor of petitioner
(Rollo, p. 48). More than five (5) hours after the auction sale and the issuance of the
[ G.R. No. L-41337. June 30, 1988 ] certificate of sale, PADCO filed an Affidavit (Ibid., p. 47). Thereafter, on July 30, 1974,
PADCO filed with the Court of First Instance of Manila, Branch XXIII, a Motion to Nullify
Sale on Execution (With Injunction) (Ibid., pp. 49-55), which was opposed by the
TAN BOON BEE & CO., INC., PETITIONER, VS. THE HONORABLE petitioner (Ibid., pp. 56-68). Respondent judge, in an Order dated March 26, 1975 (Ibid.,
HILARION U. JARENCIO, PRESIDING JUDGE OF BRANCH XXIII pp. 64-69), ruled in favor of PADCO. The decretal portion of the said order, reads:
OF THE COURT OF FIRST INSTANCE OF MANILA, GRAPHIC
PUBLISHING, INC., AND PHILIPPINE AMERICAN DRUG "WHEREFORE, the sale of the 'Heidelberg’ cylinder press executed by the
COMPANY, RESPONDENTS. Sheriff in favor of the plaintiff as well as the levy on the said property is hereby
set aside and declared to be without any force and effect. The Sheriff is ordered
DE CIS ION to return the said machinery to its owner, the Philippine American Drug Co."

Petitioner filed a Motion For Reconsideration (Ibid., pp. 70-93) and an Addendum to
PARAS, J.: Motion for Reconsideration (Ibid., pp. 94-108), but in an Order dated August 13, 1975, the
same was denied for lack of merit (Ibid., p. 109). Hence, the instant petition.
This is a petition for certiorari, with prayer for preliminary injunction, to annul and set
aside the March 26, 1975 Order of the then Court of First Instance of Manila, Branch In a Resolution dated September 12, 1975, the Second Division of this Court resolved to
XXIII, setting aside the sale of "Heidelberg" cylinder press executed by the sheriff in favor require the respondents to comment, and to issue a temporary restraining order (Rollo, p.
of the herein petitioner, as well as the levy on the said property, and ordering the sheriff to 111). After submission of the parties' Memoranda, the case was submitted for decision in
return the said machinery to its owner, herein private respondent Philippine American Drug the Resolution of November 28, 1975 (Ibid., p. 275).
Company.
Petitioner, to support its stand, raised two (2) issues, to wit:
Petitioner herein, doing business under the name and style of Anchor Supply Co., sold on
credit to herein private respondent Graphic Publishing, Inc. (GRAPHIC for short) paper I
products amounting to P55,214.73. On December 20, 1972, GRAPHIC made partial
payment by check to petitioner in the total amount of P24,848.74; and on December 21, THE RESPONDENT JUDGE GRAVELY EXCEEDED, IF NOT ACTED
1972, a promissory note was executed to cover the balance of P30,365.99, In the said WITHOUT JURISDICTION WHEN HE ACTED UPON THE MOTION OF
promissory note, it was stipulated that the amount will be paid on monthly installments and PADCO, NOT ONLY BECAUSE SECTION 17, RULE 39 OF THE RULES
that failure to pay any installment would make the amount immediately demandable with OF COURT WAS NOT COMPLIED WITH, BUT ALSO BECAUSE THE
an interest of 12% per annum. On September 6, 1973, for failure of GRAPHIC to pay any CLAIMS OF PADCO WHICH WAS NOT A PARTY TO THE CASE COULD
installment, petitioner filed with the then Court of First Instance of Manila, Branch XXIII, NOT BE VENTILATED IN THE CASE BEFORE HIM BUT IN
presided over by herein respondent judge, Civil Case No. 91857 for a Sum of Money INDEPENDENT PROCEEDING.
(Rollo, pp. 36-38). Respondent judge declared GRAPHIC in default for failure to file its
answer within the reglementary period and plaintiff (petitioner herein) was allowed to II
present its evidence ex parte. In a Decision dated January 18, 1974 (Ibid., pp. 39-40), the
trial court ordered GRAPHIC to pay the petitioner the sum of P30.365.99 with 12% THE RESPONDENT JUDGE GRAVELY ABUSED HIS DISCRETION
interest from March 30, 1973 until fully paid, plus the costs of suit. On motion of WHEN HE REFUSED TO PIERCE THE PADCO'S (IDENTITY) AND
petitioner, a writ of execution was issued by respondent judge; but the aforestated writ DESPITE THE ABUNDANCE OF EVIDENCE CLEARLY SHOWING THAT
having expired without the sheriff finding any property of GRAPHIC, an alias writ of PADCO WAS CONVENIENTLY SHIELDING UNDER THE THEORY OF
execution was issued on July 2, 1974. CORPORATE FICTION.

Pursuant to the said issued alias writ of execution, the executing sheriff levied upon one (1) Petitioner contends that respondent judge gravely exceeded, if not, acted without
unit printing machine identified as "Original Heidelberg Cylinder Press" Type H 222, NR jurisdiction, in nullifying the sheriff's sale not only because Section 17, Rule 39 of the Rules
78048, found in the premises of GRAPHIC. In a Notice of Sale of Execution of Personal of Court was not complied with, but more importantly because PADCO could not have
Property dated July 29, 1974, said printing machine was scheduled for auction sale on July litigated its claim in the same case, but in an independent civil proceeding.
26, 1974 at 10:00 o'clock at 14th St., Cor. Atlanta St., Port Area, Manila (Ibid., p. 45); but
in a letter dated July 19, 1974, herein private respondent, Philippine American Drug This contention is well-taken.
Company (PADCO for short) had informed the sheriff that the printing machine is its
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10/1/24, 4:11 PM [ G.R. No. L-41337. June 30, 1988 ] 10/1/24, 4:11 PM [ G.R. No. L-41337. June 30, 1988 ]

In the case of Bayer Philippines, Inc. vs. Agana (63 SCRA 355, 366-367 [1975]), this created by law for convenience and to promote justice (Laguna Transportation Company
Court categorically ruled as follows: vs. SSS, 107 Phil. 833 [I960]). Accordingly, this separate personality of the corporation
may be disregarded, or the veil of corporate fiction pierced, in cases where it is used as a
"In other words, construing Section 17 of Rule 39 of the Revised Rules of cloak or cover for fraud or illegality, or to work an injustice, or where necessary to achieve
Court, the rights of third-party claimants over certain properties levied upon by equity or when necessary for the protection of creditors (Sulo ng Bayan, Inc. vs. Araneta,
the sheriff to satisfy the judgment should not be decided in the action where the Inc., 72 SCRA 347 [1976]). Corporations are composed of natural persons and the legal
third-party claims have been presented, but in the separate action instituted by fiction of a separate corporate personality is not a shield for the commission of injustice and
the claimants. inequity [Chenplex, Philippines, Inc., et al. vs. Hon. Pamatian, et al., 57 SCRA 408
[1974]). Likewise, this is true when the corporation is merely an adjunct, business conduit
"x x x. Otherwise stated, the court issuing a writ of execution is supposed to or alter ego of another corporation. In such case, the fiction of separate and distinct
enforce the authority only over properties of the judgment debtor, and should a corporation entities should be disregarded (Commissioner of Internal Revenue vs. Norton
third party appear to claim the property levied upon by the sheriff, the & Harrison Company, 11 SCRA 714 [1964]).
procedure laid down by the Rules is that such claim should be the subject of a
separate and independent action. In the instant case, petitioner's evidence established that PADCO was never engaged in the
printing business; that the board of directors and the officers of GRAPHIC and PADCO
'xxx xxx xxx. were the same; and that PADCO holds 50% share of stock of GRAPHIC. Petitioner
likewise stressed that PADCO's own evidence shows that the printing machine in question
"xxx This rule is dictated by reasons of convenience as 'intervention is more had been in the premises of GRAPHIC since May, 1965, long before PADCO even
likely to inject confusion into the issues between the parties in the case xxx. with acquired its alleged title on July 11, 1966 from Capitol Publishing. That the said machine
which the third-party claimant has nothing to do and thereby retard instead of was allegedly leased by PADCO to GRAPHIC on January 24, 1966, even before PADCO
facilitate the prompt dispatch of the controversy which is the underlying purchased it from Capitol Publishing on July 11, 1966, only serves to show that PADCO's
objective of the rules of pleading and practice.' Besides, intervention may not be claim of ownership over the printing machine is not only farce and sham but also
permitted after trial has been concluded and a final judgment rendered in the unbelievable.
case."
Considering the aforestated principles and the circumstances established in this case,
However, the fact that petitioner questioned the jurisdiction of the court during the initial respondent judge should have pierced PADCO's veil of corporate identity.
hearing of the case but nevertheless actively participated in the trial, bars it from
questioning now the court's jurisdiction. A party who voluntarily participated in the trial, Respondent PADCO argues that if respondent judge erred in not piercing the veil of its
like the herein petitioner, cannot later on raise the issue of the court's lack of jurisdiction corporate fiction, the error is merely an error of judgment and not an error of jurisdiction
(Philippine National Bank vs. Intermediate Appellate Court, 143 SCRA [1986]). correctable by appeal and not by certiorari.
As to the second issue (the non-piercing of PADCO's corporate identity) the decision of To this argument of respondent, suffice it to say that the same is a mere technicality. In the
respondent judge is as follows: case of Rubio vs. Mariano (52 SCRA 338, 343 [1973]), this Court ruled:
"The plaintiff, however, contends that the controlling stockholders of the "While We recognize the fact that these movants — the MBTC, the Phillips
Philippine American Drug Co. are also the same controlling stockholders of the spouses, the Phillips corporation and the Hacienda Benito, Inc. — did raise in
Graphic Publishing, Inc. and, therefore, the levy upon the said machinery which their respective answers the issue as to the propriety of the instant petition for
was found in the premises occupied by the Graphic Publishing, Inc. should be certiorari on the ground that the remedy should have been appeal within the
upheld. This contention cannot be sustained because the two corporations were reglementary period, We considered such issue as a mere technicality which
duly incorporated under the Corporation Law and each of them has a juridical would have accomplished nothing substantial except to deny to the petitioner the
personality distinct and separate from the other and the properties of one cannot right to litigate the matters he raised x x x." Litigations should, as much as
be levied upon to satisfy the obligation of the other. This legal preposition is possible, be decided on their merits and not on technicality (De las Alas vs.
elementary and fundamental." Court of Appeals, 83 SCRA 200, 216 [1978]). Every party-litigant must be
afforded the amplest opportunity for the proper and just determination of his
It is true that a corporation, upon coming into being, is invested by law with a personality cause, free from the unacceptable plea of technicalities (Heirs of Ceferino
separate and distinct from that of the persons composing it as well as from any other legal Morales vs. Court of Appeals, 67 SCRA 304, 310 [1975]).
entity to which it may be related (Yutivo & Sons Hardware Company vs. Court of Tax
Appeals, 1 SCRA 160 [1961]; and Emilio Cano Enterprises, Inc. vs. CIR, 13 SCRA 290 PREMISES CONSIDERED, the March 26, 1975 Order of the then Court of First
[1965]). As a matter of fact, the doctrine that a corporation is a legal entity distinct and Instance of Manila, is ANNULLED and SET ASIDE, and the Temporary Restraining
separate from the members and stockholders who compose it is recognized and respected Order issued is hereby made permanent.
in all cases which are within reason and the law (Villa Rey Transit, Inc. vs. Ferrer, 25
SCRA 845 [1968]). However, this separate and distinct personality is merely a fiction SO ORDERED.
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