Albert v. University Publishing
REITERATIONFacts
1. The Antecedents: Mariano A. Albert sued University Publishing Co., Inc. for breach of contract, alleging the company, through its President Jose M. Aruego, agreed to pay P30,000.00 for the exclusive right to publish his revised Commentaries on the Revised Penal Code and for his share in previous sales. The contract stipulated payment in eight quarterly installments, with failure to pay one installment rendering the rest due. The defendant admitted the contract's existence but claimed the plaintiff breached it by failing to deliver the manuscript. Plaintiff died before trial and was substituted by his estate's administrator, Justo R. Albert. 2. Procedural History: The Court of First Instance of Manila rendered judgment in favor of the plaintiff, ordering the defendant to pay P23,000.00 with interest. This Court, in a prior appeal (G.R. No. L-9300), reduced the damages to P15,000.00. In a subsequent appeal (G.R. No. L-15275), this Court held that the P15,000.00 judgment, having become final and executory, should be executed in full, as payment already made had been considered in its fixation. The lower court subsequently issued a writ of execution against University Publishing Co., Inc. Plaintiff then petitioned for a writ of execution against Jose M. Aruego, alleging that University Publishing Co., Inc. was a non-existent entity. The lower court denied this petition, leading to the present appeal. 3. The Petition: The plaintiff-appellant seeks to execute the judgment against Jose M. Aruego, arguing that University Publishing Co., Inc. is not a registered corporation and thus has no separate juridical personality. The appellant contends that Aruego, by representing the non-existent entity and signing the contract as its President, assumed personal liability. The appellant argues that Aruego had his day in court as the real party in interest and that substance must prevail over form, citing the doctrine that one who misrepresents a corporation's existence becomes personally liable. The petition is filed to enforce the judgment against Aruego, as the actual party to the contract and litigation, despite the initial suit being filed against the purported corporation.
Issue(s)
Whether a judgment rendered against a non-existent corporation can be executed against the person who represented himself as its agent and controlled the defense of the case.
Ruling
The Supreme Court set aside the order of the lower court denying the petition for execution against Jose M. Aruego and remanded the case, ordering the lower court to hold supplementary proceedings for the purpose of carrying the judgment into effect against University Publishing Co., Inc. and/or Jose M. Aruego.
Ratio Decidendi
On Issue 1: The Court held that because University Publishing Co., Inc. was not registered with the Securities and Exchange Commission (SEC), it had no independent juridical personality and could not even be considered a de facto corporation under the rule in Hall v. Piccio. The doctrine of corporation by estoppel cannot be invoked by Aruego because he willfully misrepresented the entity's existence to the plaintiff and the court; one who induces another to act upon such misrepresentation cannot later shield himself behind the principle of estoppel. Relying on Salvatiera v. Garlitos, the Court reaffirmed that a person acting on behalf of a non-existent corporation assumes personal liability for the contracts entered into. Aruego was the person who actually signed the contract, reaped its benefits, and exercised total control over the litigation, including cross-examining witnesses and filing appeals through his own law firm. Consequently, Aruego had his 'day in court' and due process was substantially observed because he was, in reality, the person who had the right to control the proceedings. The Court emphasized that litigation is not a game of technicalities and substance must prevail over form to prevent a failure of justice.
Main Doctrine
A person who represents a non-existent entity as a corporation and induces another to act upon such misrepresentation, making contracts and litigating as if the entity were real, becomes personally liable for the obligations incurred, as he is deemed the real party in interest and has had his day in court.