Bank of the Philippine Islands v. Carlito Lee
REITERATIONFacts
The Antecedents: Respondent Carlito Lee filed a complaint for sum of money with damages and application for a writ of attachment against Trendline Resources & Commodities Exponent, Inc. (Trendline) and Leonarda Buelva (defendants) for P5.8 million, representing his lost investments. A writ of preliminary attachment was issued, garnishing Trendline's savings accounts with Citytrust Banking Corporation (Citytrust) amounting to P700,962.10. The Regional Trial Court (RTC) ruled in favor of Lee, finding the defendants jointly and severally liable. Citytrust and BPI later merged, with BPI as the surviving corporation, absorbing all liabilities of Citytrust. Procedural History: After the Court of Appeals (CA) affirmed the RTC decision, Lee sought execution and release of the garnished deposits. BPI, as the successor of Citytrust, denied possession of the accounts. The RTC denied Lee's subsequent motions for execution and enforcement of garnishment, citing lack of evidence that BPI took over the accounts and that BPI was not a party to the case. Lee filed a petition for certiorari with the CA. The Petition: The CA annulled the RTC orders, finding grave abuse of discretion and holding BPI liable for the garnished deposits, stating that BPI became a party-in-interest upon its merger with Citytrust and that the loss of records was not a valid ground to deny execution.
Issue(s)
Whether the Court of Appeals erred in not dismissing the petition for certiorari filed by respondent Carlito Lee as an improper remedy. Whether the Court of Appeals erred in ruling that petitioner BPI became a party-in-interest in the case upon its merger with Citytrust Banking Corporation. Whether the Court of Appeals erred in not ruling that the motion for execution and/or enforcement of garnishment is not the appropriate remedy when a third party is involved during the execution process. Whether the Court of Appeals erred in ruling that petitioner BPI should be held accountable for the amount of P700,962.10.
Ruling
The Supreme Court denied the petition and affirmed the decision of the Court of Appeals, holding Bank of the Philippine Islands (BPI) liable for the garnished deposits of Trendline Resources & Commodities Exponent, Inc. (Trendline) with the defunct Citytrust Banking Corporation (Citytrust).
Ratio Decidendi
On the propriety of certiorari: The Court held that the RTC's denial of the motion for execution and/or enforcement of garnishment was an interlocutory order because it did not finally dispose of the case but merely involved the implementation of a writ. According to Section 1, Rule 41 of the Revised Rules of Court, an appeal from such an order is not allowed, and the aggrieved party may file an appropriate special civil action, such as certiorari under Rule 65. Therefore, the CA did not err in assuming jurisdiction over the petition for certiorari. On BPI becoming a party-in-interest: The Court affirmed the CA's ruling that BPI became a party-in-interest upon its merger with Citytrust. Section 5, Rule 65 of the Revised Rules of Court requires interested parties to be impleaded. By virtue of the merger, BPI absorbed all liabilities and obligations of Citytrust, making it directly interested in the outcome of the case. Furthermore, upon service of the writ of garnishment, Citytrust became a "virtual party" or "forced intervenor," and this status was transferred to BPI as the surviving corporation. On the appropriateness of the remedy: The Court found that a separate action under Section 43, Rule 39 of the Revised Rules of Court is contemplated when the garnishee claims an interest adverse to the judgment debtor or denies the debt. In this case, neither situation applied, as Citytrust had admitted possession of the deposit accounts. Therefore, a motion for execution and/or enforcement of garnishment was the appropriate remedy to compel BPI, as the successor of Citytrust, to comply with the court's orders. On BPI's accountability for the garnished amount: The Court reiterated that through the merger, BPI assumed all liabilities and obligations of Citytrust, including the garnished deposits. The Articles of Merger explicitly stated that BPI would be responsible for all liabilities of Citytrust as if BPI had incurred them itself. The Court emphasized that garnishment places attached properties in custodia legis, and the garnishee is obliged to keep the deposit intact and deliver it upon court order. The loss of bank records was deemed not a valid ground for dissolving the garnishment, and BPI could not avoid its obligation by claiming the fund was not transferred, given the merger agreement.
Main Doctrine
A surviving corporation that absorbs the liabilities and obligations of a merged entity, including garnished deposits, becomes liable to the extent of such deposits, and the loss of bank records is not a ground for dissolving the garnishment.