Siain Enterprises v. Cupertino Realty
REITERATIONFacts
The Antecedents: On April 10, 1995, Siain Enterprises, Inc. (petitioner) obtained a loan of ₱37,000,000.00 from Cupertino Realty Corporation (respondent). This was secured by a real estate mortgage. An amendment to the promissory note on April 12, 1995, set the interest at 17% per annum. On August 16, 1995, petitioner, through its president Cua Le Leng, signed a second promissory note for ₱160,000,000.00, with Cua Le Leng also co-making in her personal capacity. This note stipulated a 30% compounding interest per annum, a 3% monthly penalty, and 20% attorney's fees. On the same date, an amendment to the real estate mortgage increased the secured loan to ₱197,000,000.00, consolidating the initial ₱37,000,000.00 and the additional ₱160,000,000.00. Petitioner later demanded the release of the ₱160,000,000.00, claiming it had not been received. Respondent denied this, stating petitioner had already obtained the loan proceeds and was attempting to evade its obligation, especially after the first loan became overdue. Procedural History: Respondent initiated extrajudicial foreclosure proceedings. Petitioner filed a complaint seeking to enjoin the foreclosure, alleging the amended real estate mortgage was void for lack of consideration (non-receipt of the ₱160,000,000.00). The Regional Trial Court (RTC) dismissed the complaint, ordered petitioner to pay damages and attorney's fees, and upheld the validity of the foreclosure. The Court of Appeals (CA) affirmed the RTC's decision. Both lower courts found that petitioner failed to overcome respondent's evidence of consideration and gave more weight to the latter's affirmative evidence. They also applied the doctrine of piercing the veil of corporate fiction. The Petition: Petitioner filed a petition for review on certiorari with the Supreme Court, insisting on the nullity of the amended real estate mortgage due to non-receipt of the ₱160,000,000.00 consideration. Petitioner argued that the amended mortgage did not reflect the true agreement and that the lower courts erred in applying the doctrine of piercing the veil of corporate fiction.
Issue(s)
Whether the amended real estate mortgage is void for lack of consideration. Whether the lower courts erred in applying the doctrine of piercing the veil of corporate fiction.
Ruling
The petition is DENIED. The Decision of the Court of Appeals in CA-G.R. CV No. 71424 is AFFIRMED. Costs against the petitioner.
Ratio Decidendi
On the validity of the amended real estate mortgage and lack of consideration: The Supreme Court affirmed the rulings of the lower courts, holding that the amended real estate mortgage was valid and supported by consideration. The Court reiterated the well-entrenched rule that factual findings of the trial court, especially when affirmed by the appellate court, are accorded the highest degree of respect and are considered conclusive between the parties, unless exceptions apply. The Court found that petitioner's bare denial of receipt of the ₱160,000,000.00 loan proceeds was insufficient to overcome the disputable presumption of sufficient consideration for contracts and negotiable instruments, as provided by the Rules of Court and the Negotiable Instruments Law. Cupertino's affirmative evidence, including various loan documents and testimony, was given more weight than petitioner's negative evidence. The Court noted that petitioner failed to present rebuttal evidence despite opportunities, leading to the implied admission of Cupertino's claims. Furthermore, the Court pointed out that the initial ₱37,000,000.00 loan was under an escrow arrangement to pay petitioner's DBP obligation, explaining why petitioner would not have possessed those proceeds directly, but this did not negate the existence of consideration for the subsequent transactions. On the application of the doctrine of piercing the veil of corporate fiction: The Supreme Court upheld the lower courts' application of the doctrine of piercing the veil of corporate fiction. The Court explained that while a corporation has a separate legal personality, this fiction can be disregarded when it is used to defeat public convenience, justify wrong, protect fraud, or defend crime. In this case, Cupertino presented overwhelming evidence that petitioner and its affiliate corporations (Siain Transport, Inc., Yuyek Manufacturing Corporation) had received the proceeds of the ₱160,000,000.00 loan increase. The Court found a commonality in incorporators, stockholders, directors, bookkeepers, and addresses among these corporations, with Cua Le Leng being the common president and majority stockholder. This unity of operations and control led the courts to conclude that these corporations were mere alter egos of Cua Le Leng. Consequently, the obligations incurred by these entities were deemed to be that of petitioner itself. The Court also applied the same principle to Cupertino, considering it the alter ego of Wilfredo Lua, thus validating the transactions entered into prior to Cupertino's incorporation.
Main Doctrine
The presumption of consideration for contracts and negotiable instruments is satisfactory if uncontradicted and can only be overcome by preponderant evidence. A party's bare denial of receipt of loan proceeds is insufficient to overcome the creditor's affirmative evidence of consideration, especially when supported by various loan documents and the doctrine of piercing the veil of corporate fiction is applied to hold affiliated corporations and their officers liable.