Olongapo City v. Subic Water
REITERATIONFacts
The Antecedents: Presidential Decree No. 198 authorized the creation of local water districts (LWDs). Olongapo City, pursuant to this decree, transferred its water facilities to the Olongapo City Water District (OCWD). PD 198 allows LWDs to enter into contracts with local government units for payment, not exceeding three percent (3%) of gross receipts from water sales. Olongapo City filed a complaint against OCWD for unpaid electricity bills and failure to remit payments under the contract to pay, seeking recovery of substantial sums and damages. OCWD counterclaimed for unpaid water bills. Subsequently, OCWD entered into a Joint Venture Agreement (JVA) with other entities, leading to the incorporation of Subic Water and Sewerage Co., Inc. (Subic Water), which took over OCWD's water operations. Olongapo City and OCWD later entered into a compromise agreement, offsetting their claims and counterclaims, with OCWD agreeing to pay a net obligation. This agreement also included a request for Subic Water to be a co-maker for OCWD's obligations, with Subic Water's chairman signing on its behalf. The compromise agreement was approved by the Regional Trial Court (RTC) as its judgment. OCWD was later judicially dissolved. Procedural History: Olongapo City filed a motion for the issuance of a writ of execution to enforce the compromise agreement. The RTC granted this motion in July 1999, but no writ was issued. Nearly four years later, in May 2003, Olongapo City filed a second motion for execution. Subic Water, asserting it was a separate entity from OCWD and not a party to the original case, filed a special appearance to quash the writ of execution. The RTC denied Subic Water's motion and ordered the issuance of the writ against OCWD and/or Subic Water. Subic Water then filed a petition for certiorari with the Court of Appeals (CA), arguing grave abuse of discretion by the RTC. The CA granted Subic Water's petition, annulling and setting aside the RTC's orders and the writ of execution, finding that the motion for execution was filed beyond the five-year period allowed by the Rules of Court and that Subic Water was not a party to the case. The Petition: Olongapo City filed a petition for certiorari under Rule 65 of the Rules of Court, challenging the CA's decision. The petitioner argued that the delay in issuing the writ of execution was caused by OCWD and Subic Water, and that the Supreme Court had allowed execution by motion even after the five-year period when the delay was attributable to the judgment debtor. Furthermore, Olongapo City contended that Subic Water could be subjected to the writ as OCWD's co-maker and successor-in-interest, citing the compromise agreement signed by Subic Water's chairman as evidence of its consent and implied solidary liability. The petitioner also argued that Subic Water, having taken over OCWD's operations, should be considered as having acquired OCWD's juridical personality.
Issue(s)
Whether the Petitioner's resort to a Rule 65 petition for certiorari was the proper remedy to challenge the Court of Appeals' decision. Whether the writ of execution issued more than five years after the entry of judgment was valid. Whether Subic Water, as a non-party to the original suit and a separate corporate entity, can be held solidarily liable for OCWD's obligations under the compromise agreement.
Ruling
The Supreme Court dismissed the petition for being the wrong remedy and for lack of merit. The Court affirmed the Court of Appeals' decision annulling and setting aside the RTC's orders and the writ of execution. Respondent Subic Water cannot be made liable under the void writ.
Ratio Decidendi
On Issue 1: A petition for certiorari under Rule 65 is not a substitute for a lost appeal. Since the Court of Appeals' decision was a final order that completely disposed of the case, the proper remedy was a petition for review on certiorari under Rule 45. Petitioner received notice of the CA's denial of its motion for reconsideration on January 9, 2006, giving it until January 24, 2006, to file an appeal. Having failed to do so, the CA decision became final and executory. The remedies of appeal and certiorari are mutually exclusive, and certiorari cannot be used to revive a lost right to appeal. On Issue 2: Under Rule 39, Section 6, a judgment may be executed by motion only within five years from the date of its entry. The Court emphasized that for execution by motion to be valid, both the filing of the motion and the court's actual issuance of the writ must occur within that five-year window. While Petitioner filed its first motion in 1999, it failed to secure the actual issuance of the writ and waited until 2003 to file a second motion, by which time the court had been ousted of jurisdiction. Jurisdiction to issue a writ of execution by motion is solely conferred by law and not by the express or implied will of the parties. The only exception is when the delay is caused by the judgment debtor, which the Petitioner failed to prove in this case. On Issue 3: Subic Water cannot be held liable because it was never a party to the case and never voluntarily submitted to the court's jurisdiction. Under Article 1207 of the Civil Code, solidary liability is never presumed; it must be expressly stated, and the compromise agreement merely 'requested' that Subic Water be a co-maker. Furthermore, under Section 23 of the Corporation Code, a corporation acts through its Board of Directors, and no evidence was presented that Mr. Aldip was authorized to bind Subic Water to the agreement. Subic Water and OCWD are separate and distinct corporate entities, and the corporate veil cannot be pierced without proof that the separate personality was used for fraud or to defeat public convenience. As a mere 10% shareholder, OCWD's debts are not the debts of Subic Water.
Main Doctrine
A writ of execution issued by a court after the lapse of the five-year period from the entry of judgment, without the judgment creditor having filed an independent action within the ten-year prescriptive period, is null and void for having been issued by a court already divested of its jurisdiction. Furthermore, a corporation is a juridical entity separate and distinct from its shareholders, and its corporate veil cannot be pierced without clear proof of fraud, illegitimacy, or deception.