Albert v. Court of First Instance
REITERATIONFacts
The Antecedents: This case originated from a breach of contract claim filed by Mariano A. Albert against University Publishing Co., Inc. Albert subsequently died, and his estate's administrator, Justo R. Albert, was substituted as the plaintiff. The core dispute revolved around the liability of University Publishing Co., Inc. for P15,000.00 plus legal interest, a liability that was eventually affirmed by this Court. A significant complication arose when it was discovered that University Publishing Co., Inc. was not a registered corporation, leading to questions about the proper party against whom the judgment should be enforced. Procedural History: The litigation has a protracted history, reaching the Supreme Court multiple times since its inception in 1949. After the Supreme Court affirmed the P15,000.00 judgment in L-15275, attempts to execute the judgment in the Court of First Instance of Manila revealed that University Publishing Co., Inc. was not registered with the Securities and Exchange Commission. This led to a petition to enforce the judgment against Jose M. Aruego, who had signed the contract as President of the purported corporation. The Court of First Instance initially denied this petition, ruling Aruego was not a party. This denial was appealed to the Supreme Court (L-19118), which reversed the lower court's order, holding Aruego personally liable due to the non-existence of the corporation and his active role in the litigation. Despite this ruling, subsequent attempts to execute the judgment against Aruego in the lower court were met with further denials and reconsiderations by the same judge, prompting the current petition for certiorari and mandamus. The Petition: The petitioner seeks a writ of certiorari and mandamus to compel the respondent court to issue a writ of execution against Jose M. Aruego, enforcing the Supreme Court's prior rulings in L-19118. The petitioner argues that the respondent judge has acted with grave abuse of discretion by repeatedly denying execution against Aruego, despite clear Supreme Court decisions establishing his personal liability. The petition contends that the respondent judge either failed to comprehend or deliberately ignored the import of the Supreme Court's judgments and resolutions, particularly those in L-19118, which definitively held that the judgment against the non-existent University Publishing Co., Inc. could and should be enforced against Jose M. Aruego. The petitioner asserts that the respondent judge's actions are contrary to the principle of conclusiveness of judgment and undermine the authority of the Supreme Court.
Issue(s)
Whether the respondent court gravely abused its discretion in repeatedly denying the execution of the judgment against Jose M. Aruego despite prior Supreme Court rulings. Whether Jose M. Aruego, having acted as president of a non-existent corporation and having had his day in court, can be held personally liable for the judgment against the said entity.
Ruling
The petition for certiorari and mandamus is granted. The orders of Judge Gaudencio Cloribel dated March 5, May 20, and July 13, 1966, are declared null and void. The Court a quo is directed to forthwith issue a writ of execution against University Publishing Company, Inc. and/or Jose M. Aruego. Treble costs are assessed against respondent Jose M. Aruego.
Ratio Decidendi
On the issue of grave abuse of discretion and the conclusiveness of judgment: The Supreme Court held that the respondent judge gravely abused his discretion by repeatedly denying the execution of the judgment against Jose M. Aruego, despite clear and unequivocal rulings in G.R. No. L-19118 that established Aruego's personal liability. The Court emphasized that the principle of conclusiveness of judgment dictates that once a matter has been litigated and decided by a competent court, it cannot be relitigated. The respondent judge's actions, which amounted to ignoring or misinterpreting the Supreme Court's decisions, were characterized as an act deserving "unsympathetic and unqualified condemnation." The Court reiterated that the Supreme Court has the final word on what the law is, and inferior courts must adhere to its rulings. The repeated denial of execution, after the Supreme Court had explicitly ordered supplementary proceedings for carrying the judgment into effect against Aruego, demonstrated a willful disregard of judicial hierarchy and established jurisprudence. On the personal liability of Jose M. Aruego: The Court affirmed that Jose M. Aruego is personally liable for the judgment. This liability stems from his actions in representing a non-existent entity, University Publishing Company, Inc., as its president. The Court applied the doctrine that a person who purports to act on behalf of a corporation that has no valid existence assumes the obligations and becomes personally liable for contracts entered into as such agent. Aruego's conduct, including signing the contract as president and inducing the plaintiff to believe in the corporation's existence, coupled with his active participation in the litigation through his law firm, meant he had his "day in court." The Court found that Aruego, by withholding crucial documents proving corporate existence until after an adverse ruling, acted with "ambush" and failed in his duty of candor and fairness as a lawyer. The principle of piercing the corporate veil was invoked, as Aruego was essentially the corporation, subscribing to a vast majority of its capital stock and making the majority of its paid-in contributions, thereby making him the real party in interest.
Main Doctrine
A party who has induced another to act upon a wilful misrepresentation that a corporation was duly organized and existing under the law cannot thereafter set up against his victim the principle of corporation by estoppel. Furthermore, a court may pierce the veil of corporate fiction to administer the ends of justice, especially when a party, acting as the alter ego of a non-existent entity, has had his day in court and due process has been substantially observed.