THIRD DIVISION

[G.R. No. 160236. October 16, 2009.]

"G" HOLDINGS, INC. , petitioner, vs . NATIONAL MINES AND ALLIED

WORKERS UNION Local 103 (NAMAWU); SHERIFFS RICHARD H.
APROSTA and ALBERTO MUNOZ, all acting Sheriffs; DEPARTMENT
OF LABOR AND EMPLOYMENT, Region VI, Bacolod District O ce,
Bacolod City , respondents.

DECISION

NACHURA , J : p

Before this Court is a petition for review on certiorari under Rule 45 of the Rules
of Court assailing the October 14, 2003 Decision 1 of the Court of Appeals (CA) in CA-
G.R. SP No. 75322.
The Facts
The petitioner, "G" Holdings, Inc. (GHI), is a domestic corporation primarily
engaged in the business of owning and holding shares of stock of different companies.
2 It was registered with the Securities and Exchange Commission on August 3, 1992.
Private respondent, National Mines and Allied Workers Union Local 103 (NAMAWU),
was the exclusive bargaining agent of the rank and le employees of Maricalum Mining
Corporation (MMC), 3 an entity operating a copper mine and mill complex at Sipalay,
Negros Occidental. 4
MMC was incorporated by the Development Bank of the Philippines (DBP) and
the Philippine National Bank (PNB) on October 19, 1984, on account of their
foreclosure of Marinduque Mining and Industrial Corporation's assets. MMC started its
commercial operations in August 1985. Later, DBP and PNB transferred it to the
National Government for disposition or privatization because it had become a non-
performing asset. 5
On October 2, 1992, pursuant to a Purchase and Sale Agreement 6 executed
between GHI and Asset Privatization Trust (APT), the former bought ninety percent
(90%) of MMC's shares and nancial claims. 7 These nancial claims were converted
into three Promissory Notes 8 issued by MMC in favor of GHI totaling P500M and
secured by mortgages over MMC's properties. The notes, which were similarly worded
except for their amounts, read as follows:
PROMISSORY NOTE

AMOUNT - Php114,715,360.00 [Php186,550,560.00 in the second note,

and Php248,734,080.00 in the third note.

MAKATI, METRO MANILA, PHILIPPINES, October 2, 1992 IcSADC

For Value Received, MARICALUM MINING CORPORATION (MMC) with

postal address at 4th Floor, Manila Memorial Park Bldg., 2283 Pasong Tamo
Extension, Makati, Metro Manila, Philippines, hereby promises to pay "G"
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 HOLDINGS, INC., at its o ce at Phimco Compound, F. Manalo Street, Punta, Sta.
Ana, Manila, the amount of PESOS ONE HUNDRED FOURTEEN MILLION, SEVEN
HUNDRED FIFTEEN THOUSAND AND THREE HUNDRED SIXTY
(Php114,715,360.00) ["PESOS ONE HUNDRED EIGHTY SIX MILLION FIVE
HUNDRED FIFTY THOUSAND FIFE HUNDRED AND SIXTY (Php186,550,560.00)"
in the second note, and "PESOS TWO HUNDRED FORTY EIGHT MILLION, SEVEN
HUNDRED THIRTY FOUR THOUSAND AND EIGHTY (Php248,734,080.00)" in the
third note], PHILIPPINE CURRENCY, on or before October 2, 2002. Interest shall
accrue on the amount of this Note at a rate per annum equal to the interest of 90-
day Treasury Bills prevailing on the Friday preceding the maturity date of every
calendar quarter.
As collateral security, MMC hereby establishes and constitutes in favor of
"G" HOLDINGS, INC., its successors and/or assigns:

1. A mortgage over certain parcels of land, more particularly listed and

described in the Sheriff's Certi cate of Sale dated September 7, 1984
issued by the Ex-Officio Provincial Sheriff of Negros Occidental, Rolando V.
Ramirez, with o ce at Bacolod City following the auction sale conducted
pursuant to the provisions of Act 3135, a copy of which certi cate of sale
is hereto attached as Annex "A" and made an integral part hereof;

2. A chattel mortgage over assets and personal properties more particularly

listed and described in the Sheriff's Certi cate of Sale dated September 7,
1984 issued by the Ex-O cio Provincial Sheriff of Negros Occidental,
Rolando V. Ramirez, with o ce at Bacolod City following the auction
conducted pursuant to the provisions of Act 1508, a copy of which
Certi cate of Sale is hereto attached as Annex "B" and made an integral
part hereof.
3. Mortgages over assets listed in APT Speci c Catalogue GC-031 for MMC, a
copy of which Catalogue is hereby made an integral part hereof by way of
reference, as well as assets presently in use by MMC but which are not
listed or included in paragraphs 1 and 2 above and shall include all assets
that may hereinafter be acquired by MMC.

MARICALUM MINING CORPORATION

(Maker)

xxx xxx xxx 9

Upon the signing of the Purchase and Sale Agreement and upon the full
satisfaction of the stipulated down payment, GHI immediately took physical
possession of the mine site and its facilities, and took full control of the management
and operation of MMC. 1 0
Almost four years thereafter, or on August 23, 1996, a labor dispute (refusal to
bargain collectively and unfair labor practice) arose between MMC and NAMAWU, with
the latter eventually ling with the National Conciliation and Mediation Board of
Bacolod City a notice of strike. 1 1 Then Labor Secretary, now Associate Justice of this
Court, Leonardo A. Quisumbing, later assumed jurisdiction over the dispute and ruled in
favor of NAMAWU. In his July 30, 1997 Order in OS-AJ-10-96-014 (Quisumbing Order),
Secretary Quisumbing declared that the lay-off (of workers) implemented on May 7,
1996 and October 7, 1996 was illegal and that MMC committed unfair labor practice.
He then ordered the reinstatement of the laid-off workers, with payment of full
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 backwages and bene ts, and directed the execution of a new collective bargaining
agreement (CBA) incorporating the terms and conditions of the previous CBA providing
for an annual increase in the workers' daily wage. 1 2 In two separate cases — G.R. Nos.
133519 and 138996 — led with this Court, we sustained the validity of the Quisumbing
Order, which became final and executory on January 26, 2000. 1 3 TIDcEH

On May 11, 2001, then Acting Department of Labor and Employment (DOLE)
Secretary, now also an Associate Justice of this Court, Arturo D. Brion, on motion of
NAMAWU, directed the issuance of a partial writ of execution (Brion Writ), and ordered
the DOLE sheriffs to proceed to the MMC premises for the execution of the same. 1 4
Much later, in 2006, this Court, in G.R. Nos. 157696-97, entitled Maricalum Mining
Corporation v. Brion and NAMAWU, 1 5 a rmed the propriety of the issuance of the
Brion Writ.
The Brion Writ was not fully satis ed because MMC's resident manager resisted
its enforcement. 1 6 On motion of NAMAWU, then DOLE Secretary Patricia A. Sto. Tomas
ordered the issuance of the July 18, 2002 Alias Writ of Execution and Break-Open Order
(Sto. Tomas Writ). 1 7 On October 11, 2002, the respondent acting sheriffs, the
members of the union, and several armed men implemented the Sto. Tomas Writ, and
levied on the properties of MMC located at its compound in Sipalay, Negros Occidental.
18

On October 14, 2002, GHI led with the Regional Trial Court (RTC) of Kabankalan
City, Negros Occidental, Special Civil Action (SCA) No. 1127 for Contempt with Prayer
for the Issuance of a Temporary Restraining Order (TRO) and Writ of Preliminary
Injunction and to Nullify the Sheriff's Levy on Properties. 1 9 GHI contended that the
levied properties were the subject of a Deed of Real Estate and Chattel Mortgage,
dated September 5, 1996 2 0 executed by MMC in favor of GHI to secure the aforesaid
P550M promissory notes; that this deed was registered on February 24, 2000; 2 1 and
that the mortgaged properties were already extrajudicially foreclosed in July 2001 and
sold to GHI as the highest bidder on December 3, 2001, as evidenced by the Certi cate
of Sale dated December 4, 2001. 2 2
The trial court issued ex parte a TRO effective for 72 hours, and set the hearing
on the application for a writ of injunction. 2 3 On October 17, 2002, the trial court
ordered the issuance of a Writ of Injunction (issued on October 18, 2002) 2 4 enjoining
the DOLE sheriffs from further enforcing the Sto. Tomas Writ and from conducting any
public sale of the levied-on properties, subject to GHI's posting of a P5M bond. 2 5
Resolving, among others, NAMAWU's separate motions for the reconsideration
of the injunction order and for the dismissal of the case, the RTC issued its December 4,
2002 Omnibus Order, 2 6 the dispositive portion of which reads:
WHEREFORE, premises considered, respondent NAMAWU Local 103's
Motion for Reconsideration dated October 23, 2002 for the reconsideration of the
Order of this Court directing the issuance of Writ of Injunction prayed for by
petitioner and the Order dated October 18, 2002 approving petitioner's Injunction
Bond in the amount of P5,000,000.00 is hereby DENIED.
Respondent's Motion to Dismiss as embodied in its Opposition to
Extension of Temporary Restraining Order and Issuance of Writ of Preliminary
Injunction with Motion to Dismiss and Suspend Period to File Answer dated
October 15, 2002 is likewise DENIED.
Petitioner's Urgent Motion for the return of the levied rearms is GRANTED.
Pursuant thereto, respondent sheriffs are ordered to return the levied rearms and
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 handguns to the petitioner provided the latter puts [up] a bond in the amount of
P332,200.00. DASEac

Respondent's lawyer, Atty. Jose Lapak, is strictly warned not to resort

again to disrespectful and contemptuous language in his pleadings, otherwise,
the same shall be dealt with accordingly.
SO ORDERED. 2 7

Aggrieved, NAMAWU led with the CA a petition for certiorari under Rule 65,
assailing the October 17, 18 and December 4, 2002 orders of the RTC. 2 8
After due proceedings, on October 14, 2003, the appellate court rendered a
Decision setting aside the RTC issuances and directing the immediate execution of the
Sto. Tomas Writ. The CA ruled, among others, that the circumstances surrounding the
execution of the September 5, 1996 Deed of Real Estate and Chattel Mortgage yielded
the conclusion that the deed was sham, ctitious and fraudulent; that it was executed
two weeks after the labor dispute arose in 1996, but surprisingly, it was registered only
on February 24, 2000, immediately after the Court a rmed with nality the Quisumbing
Order. The CA also found that the certi cates of title to MMC's real properties did not
contain any annotation of a mortgage lien, and, suspiciously, GHI did not intervene in the
long drawn-out labor proceedings to protect its right as a mortgagee of virtually all the
properties of MMC. 2 9
The CA further ruled that the subsequent foreclosure of the mortgage was
irregular, effected precisely to prevent the satisfaction of the judgment against MMC. It
noted that the foreclosure proceedings were initiated in July 2001, shortly after the
issuance of the Brion Writ; and, more importantly, the basis for the extrajudicial
foreclosure was not the failure of MMC to pay the mortgage debt, but its failure "to
satisfy any money judgment against it rendered by a court or tribunal of competent
jurisdiction, in favor of any person, rm or entity, without any legal ground or reason". 3 0
Further, the CA pierced the veil of corporate ction of the two corporations. 3 1 The
dispositive portion of the appellate court's decision reads: ATcaHS

WHEREFORE, in view of the foregoing considerations, the petition is

GRANTED. The October 17, 2002 and the December 4, 2002 Order of the RTC,
Branch 61 of Kabankalan City, Negros Occidental are hereby ANNULLED and SET
ASIDE for having been issued in excess or without authority. The Writ of
Preliminary Injunction issued by the said court is lifted, and the DOLE Sheriff is
directed to immediately enforce the Writ of Execution issued by the Department of
Labor and Employment in the case "In re: Labor Dispute in Maricalum Mining
Corporation" docketed as OS-AJ-10-96-01 (NCMB-RB6-08-96). 3 2

The Issues
Dissatis ed, GHI elevated the case to this Court via the instant petition for review
on certiorari, raising the following issues:
I
WHETHER OR NOT GHI IS A PARTY TO THE LABOR DISPUTE BETWEEN
NAMAWU AND MMC.
II

WHETHER OR NOT, ASSUMING ARGUENDO THAT THE PERTINENT DECISION OR

ORDER IN THE SAID LABOR DISPUTE BETWEEN MMC AND NAMAWU MAY BE
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 ENFORCED AGAINST GHI, THERE IS ALREADY A FINAL DEETERMINATION BY
THE SUPREME COURT OF THE RIGHTS OF THE PARTIES IN SAID LABOR
DISPUTE CONSIDERING THE PENDENCY OF G.R. NOS. 157696-97.

III
WHETHER OR NOT GHI IS THE ABSOLUTE OWNER OF THE PROPERTIES
UNLAWFULLY GARNISHED BY RESPONDENTS SHERIFFS.
IV

WHETHER OR NOT THE HONORABLE HENRY D. ARLES CORRECTLY ISSUED A

WRIT OF INJUNCTION AGAINST THE UNLAWFUL EXECUTIOIN ON GHI'S
PROPERTIES.

V
WHETHER OR NOT THE VALIDITY OF THE DEED OF REAL AND CHATTEL
MORTGAGE OVER THE SUBJECT PROPERTIES BETWEEN MMC AND GHI MAY
BE COLLATERALLY ATTACKED.

VI
WHETHER OR NOT, ASSUMING ARGUENDO THAT THE VALIDITY OF THE SAID
REAL AND CHATTEL MORTGAGE MAY BE COLLATERALLY ATTACKED, THE
SAID MORTGAGE IS SHAM, FICTITIOUS AND FRAUDULENT.
VII

WHETHER OR NOT GHI IS A DISTINCT AND SEPARATE CORPORATE ENTITY

FROM MMC. ESDHCa

VIII
WHETHER OR NOT GHI CAN BE PREVENTED THROUGH THE ISSUANCE OF A
RESTRAINING ORDER OR INJUNCTION FROM TAKING POSSESSION OR BE
DISPOSSESSED OF ASSETS PURCHASED BY IT FROM APT. 3 3

Stripped of non-essentials, the core issue is whether, given the factual

circumstances obtaining, the RTC properly issued the writ of injunction to prevent the
enforcement of the Sto. Tomas Writ. The resolution of this principal issue, however, will
necessitate a ruling on the following key and interrelated questions:
1. Whether the mortgage of the MMC's properties to GHI was a sham;
2. Whether there was an effective levy by the DOLE upon the MMC's real
and personal properties; and
3. Whether it was proper for the CA to pierce the veil of corporate ction
between MMC and GHI.
Our Ruling
Before we delve into an extended discussion of the foregoing issues, it is
essential to take judicial cognizance of cases intimately linked to the present
controversy which had earlier been elevated to and decided by this Court.
Judicial Notice .
Judicial notice must be taken by this Court of its Decision in Maricalum Mining
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 Corporation v. Hon. Arturo D. Brion and NAMAWU, 3 4 in which we upheld the right of
herein private respondent, NAMAWU, to its labor claims. Upon the same principle of
judicial notice, we acknowledge our Decision in Republic of the Philippines, through its
trustee, the Asset Privatization Trust v. "G" Holdings, Inc., 3 5 in which GHI was
recognized as the rightful purchaser of the shares of stocks of MMC, and thus, entitled
to the delivery of the company notes accompanying the said purchase. These company
notes, consisting of three (3) Promissory Notes, were part of the documents executed
in 1992 in the privatization sale of MMC by the Asset Privatization Trust (APT) to GHI.
Each of these notes uniformly contains stipulations "establishing and constituting in
favor of GHI" mortgages over MMC's real and personal properties. The stipulations
were subsequently formalized in a separate document denominated Deed of Real
Estate and Chattel Mortgage on September 5, 1996. Thereafter, the Deed was
registered on February 4, 2000. 3 6
We nd both decisions critically relevant to the instant dispute. In fact, they
should have guided the courts below in the disposition of the controversy at their
respective levels. To repeat, these decisions respectively con rm the right of NAMAWU
to its labor claims 3 7 and a rm the right of GHI to its nancial and mortgage claims
over the real and personal properties of MMC, as will be explained below. The assailed
CA decision apparently failed to consider the impact of these two decisions on the
case at bar. Thus, we nd it timely to reiterate that: "courts have also taken judicial
notice of previous cases to determine whether or not the case pending is a moot one or
whether or not a previous ruling is applicable to the case under consideration". 3 8 HIEASa

However, the CA correctly assessed that the authority of the lower court to issue
the challenged writ of injunction depends on the validity of the third party's (GHI's)
claim of ownership over the property subject of the writ of execution issued by the
labor department. Accordingly, the main inquiry addressed by the CA decision was
whether GHI could be treated as a third party or a stranger to the labor dispute, whose
properties were beyond the reach of the Writ of Execution dated December 18, 2001. 3 9
In this light, all the more does it become imperative to take judicial notice of the
two cases aforesaid, as they provide the necessary perspective to determine whether
GHI is such a party with a valid ownership claim over the properties subject of the writ
of execution. In Juaban v. Espina, 4 0 we held that "in some instances, courts have also
taken judicial notice of proceedings in other cases that are closely connected to the
matter in controversy. These cases may be so closely interwoven, or so clearly
interdependent, as to invoke a rule of judicial notice". The two cases that we have taken
judicial notice of are of such character, and our review of the instant case cannot stray
from the findings and conclusions therein.
Having recognized these crucial Court rulings, situating the facts in proper
perspective, we now proceed to resolve the questions identified above.
The mortgage
was not a sham .
Republic etc. v. "G" Holdings, Inc. acknowledged the existence of the Purchase
and Sale Agreement between the APT and the GHI, and recounts the facts attendant to
that transaction, as follows:
The series of negotiations between the petitioner Republic of the
Philippines, through the APT as its trustee, and "G" Holdings culminated in the
execution of a purchase and sale agreement on October 2, 1992. Under the
agreement, the Republic undertook to sell and deliver 90% of the entire issued and
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 outstanding shares of MMC, as well as its company notes , to "G" Holdings in
consideration of the purchase price of P673,161,280. It also provided for a down
payment of P98,704,000 with the balance divided into four tranches payable in
installment over a period of ten years. 4 1

The "company notes" mentioned therein were actually the very same three (3)
Promissory Notes amounting to P550M, issued by MMC in favor of GHI. As already
adverted to above, these notes uniformly contained stipulations "establishing and
constituting" mortgages over MMC's real and personal properties.
It may be remembered that APT acquired the MMC from the PNB and the DBP.
Then, in compliance with its mandate to privatize government assets, APT sold the
aforesaid MMC shares and notes to GHI. To repeat, this Court has recognized this
Purchase and Sale Agreement in Republic, etc. v. "G" Holdings, Inc.
The participation of the Government, through APT, in this transaction is
signi cant. Because the Government had actively negotiated and, eventually, executed
the agreement, then the transaction is imbued with an aura of o cial authority, giving
rise to the presumption of regularity in its execution. This presumption would cover all
related transactional acts and documents needed to consummate the privatization
sale, inclusive of the Promissory Notes. It is obvious, then, that the Government,
through APT, consented to the "establishment and constitution" of the mortgages on
the assets of MMC in favor of GHI, as provided in the notes. Accordingly, the notes (and
the stipulations therein) enjoy the bene t of the same presumption of regularity
accorded to government actions. Given the Government consent thereto, and clothed
with the presumption of regularity, the mortgages cannot be characterized as sham,
fictitious or fraudulent. IHaSED

Indeed, as mentioned above, the three (3) Promissory Notes, executed on

October 2, 1992, "established and constituted" in favor of GHI the following mortgages:
1. A mortgage over certain parcels of land, more particularly listed and
described in the Sheriff's Certi cate of Sale dated September 7, 1984
issued by the Ex-Officio Provincial Sheriff of Negros Occidental, Rolando V.
Ramirez, with o ce at Bacolod City following the auction sale conducted
pursuant to the provisions of Act 3135, a copy of which certi cate of sale
is hereto attached as Annex "A" and made an integral part hereof;

2. A chattel mortgage over assets and personal properties more particularly

listed and described in the Sheriff's Certi cate of Sale dated September 7,
1984 issued by the Ex-O cio Provincial Sheriff of Negros Occidental,
Rolando V. Ramirez, with o ce at Bacolod City following the auction
conducted pursuant to the provision of Act 1508, a copy of which
Certi cate of Sale is hereto attached as Annex "B" and made an integral
part hereof.
3. Mortgages over assets listed in APT Speci c catalogue GC-031 for MMC, a
copy of which Catalogue is hereby made an integral part hereof by way of
reference, as well as assets presently in use by MMC but which are not
listed or included in paragraphs 1 and 2 above and shall include all assets
that may hereinafter be acquired by MMC. 4 2

It is di cult to conceive that these mortgages, already existing in 1992, almost

four (4) years before NAMAWU led its notice of strike, were a " ctitious" arrangement
intended to defraud NAMAWU. After all, they were agreed upon long before the seeds
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 of the labor dispute germinated.
While it is true that the Deed of Real Estate and Chattel Mortgage was executed
only on September 5, 1996, it is beyond cavil that this formal document of mortgage
was merely a derivative of the original mortgage stipulations contained in the
Promissory Notes of October 2, 1992. The execution of this Deed in 1996 does not
detract from, but instead reinforces, the manifest intention of the parties to "establish
and constitute" the mortgages on MMC's real and personal properties.
Apparently, the move to execute a formal document denominated as the Deed of
Real Estate and Chattel Mortgage came about after the decision of the RTC of Manila in
Civil Case No. 95-76132 became nal in mid-1996. This conclusion surfaces when we
consider the genesis of Civil Case No. 95-76132 and subsequent incidents thereto, as
narrated in Republic, etc. v. "G" Holdings, Inc., viz.:
Subsequently, a disagreement on the matter of when installment payments
should commence arose between the parties. The Republic claimed that it should
be on the seventh month from the signing of the agreement while "G" Holdings
insisted that it should begin seven months after the ful llment of the closing
conditions. AHSaTI

Unable to settle the issue, "G" Holdings led a complaint for speci c
performance and damages with the Regional Trial Court of Manila, Branch 49,
against the Republic to compel it to close the sale in accordance with the
purchase and sale agreement. The complaint was docketed as Civil Case No. 95-
76132.

During the pre-trial, the respective counsels of the parties manifested that
the issue involved in the case was one of law and submitted the case for
decision. On June 11, 1996, the trial court rendered its decision. It ruled in favor of
"G" Holdings and held:
"In line with the foregoing, this Court having been convinced that the
Purchase and Sale Agreement is indeed subject to the nal closing
conditions prescribed by Stipulation No. 5.02 and conformably to Rule 39,
Section 10 of the Rules of Court, accordingly orders that the Asset
Privatization Trust execute the corresponding Document of
Transfer of the subject shares and nancial notes and cause the
actual delivery of subject shares and notes to "G" Holdings, Inc.,
within a period of thirty (30) days from receipt of this Decision ,
and after "G" Holdings Inc., shall have paid in full the entire balance, at its
present value of P241,702,122.86, computed pursuant to the prepayment
provisions of the Agreement. Plaintiff shall pay the balance
simultaneously with the delivery of the Deed of Transfer and actual
delivery of the shares and notes.
SO ORDERED."
The Solicitor General led a notice of appeal on behalf of the Republic on
June 28, 1996. Contrary to the rules of procedure, however, the notice of appeal
was led with the Court of Appeals (CA), not with the trial court which rendered
the judgment appealed from.
No other judicial remedy was resorted to until July 2, 1999 when the
Republic, through the APT, led a petition for annulment of judgment with the CA.
It claimed that the decision should be annulled on the ground of abuse of
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 discretion amounting to lack of jurisdiction on the part of the trial court. . . .
Finding that the grounds necessary for the annulment of judgment were
inexistent, the appellate court dismissed the petition. . . . 4 3

With the RTC decision having become nal owing to the failure of the Republic to
perfect an appeal, it may have become necessary to execute the Deed of Real Estate
and Chattel Mortgage on September 5, 1996, in order to enforce the trial court's
decision of June 11, 1996. This appears to be the most plausible explanation for the
execution of the Deed of Real Estate and Chattel Mortgage only in September 1996.
Even as the parties had already validly constituted the mortgages in 1992, as explicitly
provided in the Promissory Notes, a speci c deed of mortgage in a separate document
may have been deemed necessary for registration purposes. Obviously, this
explanation is more logical and more sensible than the strained conjecture that the
mortgage was executed on September 5, 1996 only for the purpose of defrauding
NAMAWU. HICSaD

It is undeniable that the Deed of Real Estate and Chattel Mortgage was formally
documented two weeks after NAMAWU led its notice of strike against MMC on
August 23, 1996. However, this fact alone cannot give rise to an adverse inference for
two reasons. First, as discussed above, the mortgages had already been "established
and constituted" as early as October 2, 1992 in the Promissory Notes, showing the
clear intent of the parties to impose a lien upon MMC's properties. Second, the mere
ling of a notice of strike by NAMAWU did not, as yet, vest in NAMAWU any de nitive
right that could be prejudiced by the execution of the mortgage deed.
The fact that MMC's obligation to GHI is not re ected in the former's nancial
statements — a circumstance made capital of by NAMAWU in order to cast doubt on
the validity of the mortgage deed — is of no moment. By itself, it does not provide a
su cient basis to invalidate this public document. To say otherwise, and to invalidate
the mortgage deed on this pretext, would furnish MMC a convenient excuse to absolve
itself of its mortgage obligations by adopting the simple strategy of not including the
obligations in its nancial statements. It would ignore our ruling in Republic, etc. v. "G"
Holdings, Inc., which obliged APT to deliver the MMC shares and nancial notes to GHI.
Besides, the failure of the mortgagor to record in its nancial statements its loan
obligations is surely not an essential element for the validity of mortgage agreements,
nor will it independently affect the right of the mortgagee to foreclose.
Contrary to the CA decision, Tanongon v. Samson 4 4 is not "on all fours" with the
instant case. There are material differences between the two cases. At issue in
Tanongon was a third-party claim arising from a Deed of Absolute Sale executed
between Olizon and Tanongon on July 29, 1997, after the NLRC decision became nal
and executory on April 29, 1997. In the case at bar, what is involved is a loan with
mortgage agreement executed on October 2, 1992, well ahead of the union's notice of
strike on August 23, 1996. No presumption of regularity inheres in the deed of sale in
Tanongon, while the participation of APT in this case clothes the transaction in 1992
with such a presumption that has not been successfully rebutted. In Tanongon, the
conduct of a full-blown trial led to the nding — duly supported by evidence — that the
voluntary sale of the assets of the judgment debtor was made in bad faith. Here, no trial
was held, owing to the motion to dismiss led by NAMAWU, and the CA failed to
consider the factual ndings made by this Court in Republic, etc. v. "G" Holdings, Inc.
Furthermore, in Tanongon, the claimant did not exercise his option to le a separate
action in court, thus allowing the NLRC Sheriff to levy on execution and to determine the
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 rights of third-party claimants. 4 5 In this case, a separate action was led in the regular
courts by GHI, the third-party claimant. Finally, the questioned transaction in Tanongon
was a plain, voluntary transfer in the form of a sale executed by the judgment debtor in
favor of a dubious third-party, resulting in the inability of the judgment creditor to
satisfy the judgment. On the other hand, this case involves an involuntary transfer
(foreclosure of mortgage) arising from a loan obligation that well-existed long before
the commencement of the labor claims of the private respondent.
Three other circumstances have been put forward by the CA to support its
conclusion that the mortgage contract is a sham. First, the CA considered it highly
suspect that the Deed of Real Estate and Chattel Mortgage was registered only on
February 4, 2000, "three years after its execution, and almost one month after the
Supreme Court rendered its decision in the labor dispute". 4 6 Equally suspicious, as far
as the CA is concerned, is the fact that the mortgages were foreclosed on July 31,
2001, after the DOLE had already issued a Partial Writ of Execution on May 9, 2001. 4 7
To the appellate court, the timing of the registration of the mortgage deed was too
coincidental, while the date of the foreclosure signified that it was "effected precisely to
prevent the satisfaction of the judgment awards". 4 8 Furthermore, the CA found that the
mortgage deed itself was executed without any consideration, because at the time of
its execution, all the assets of MMC had already been transferred to GHI. 4 9
These circumstances provided the CA with su cient justi cation to apply Article
1387 of the Civil Code on presumed fraudulent transactions, and to declare that the
mortgage deed was void for being simulated and fictitious. 5 0
We do not agree. We find this Court's ruling in MR Holdings, Ltd. v. Sheriff Bajar 5 1
pertinent and instructive:
Article 1387 of the Civil Code of the Philippines provides:

"Art. 1387. All contracts by virtue of which the debtor alienates

property by gratuitous title are presumed to have been entered into in fraud
of creditors, when the donor did not reserve su cient property to pay all
debts contracted before the donation. cdrep

Alienations by onerous title are also presumed fraudulent when

made by persons against whom some judgment has been rendered in any
instance or some writ of attachment has been issued. The decision or
attachment need not refer to the property alienated, and need not have
been obtained by the party seeking rescission.
In addition to these presumptions, the design to defraud creditors
may be proved in any other manner recognized by law and of evidence."
This article presumes the existence of fraud made by a debtor.
Thus, in the absence of satisfactory evidence to the contrary, an alienation
of a property will be held fraudulent if it is made after a judgment has been
rendered against the debtor making the alienation. This presumption of
fraud is not conclusive and may be rebutted by satisfactory and
convincing evidence. All that is necessary is to establish
a rmatively that the conveyance is made in good faith and for a
sufficient and valuable consideration.
The "Assignment Agreement" and the "Deed of Assignment" were executed
for valuable considerations. Patent from the "Assignment Agreement" is the fact
that petitioner assumed the payment of US$18,453,450.12 to ADB in satisfaction
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 of Marcopper's remaining debt as of March 20, 1997. Solidbank cannot deny this
fact considering that a substantial portion of the said payment, in the sum of
US$13,886,791.06, was remitted in favor of the Bank of Nova Scotia, its major
stockholder.
The facts of the case so far show that the assignment contracts were
executed in good faith. The execution of the "Assignment Agreement" on March
20, 1997 and the "Deed of Assignment" on December 8, 1997 is not the alpha of
this case. While the execution of these assignment contracts almost
coincided with the rendition on May 7, 1997 of the Partial Judgment in
Civil Case No. 96-80083 by the Manila RTC , however, there was no intention
on the part of petitioner to defeat Solidbank's claim. It bears reiterating that as
early as November 4, 1992, Placer Dome had already bound itself under a
"Support and Standby Credit Agreement" to provide Marcopper with cash ow
support for the payment to ADB of its obligations. When Marcopper ceased
operations on account of disastrous mine tailings spill into the Boac River and
ADB pressed for payment of the loan, Placer Dome agreed to have its subsidiary,
herein petitioner, pay ADB the amount of US$18,453,450.12.
Thereupon, ADB and Marcopper executed, respectively, in favor of
petitioner an "Assignment Agreement" and a "Deed of Assignment". Obviously,
the assignment contracts were connected with transactions that
happened long before the rendition in 1997 of the Partial Judgment in
Civil Case No. 96-80083 by the Manila RTC. Those contracts cannot be
viewed in isolation . If we may add, it is highly inconceivable that ADB, a
reputable international nancial organization, will connive with Marcopper to
feign or simulate a contract in 1992 just to defraud Solidbank for its claim four
years thereafter. And it is equally incredible for petitioner to be paying the huge
sum of US$18,453,450.12 to ADB only for the purpose of defrauding Solidbank of
the sum of P52,970,756.89. ADECcI

It is said that the test as to whether or not a conveyance is fraudulent is —

does it prejudice the rights of creditors? We cannot see how Solidbank's right
was prejudiced by the assignment contracts considering that
substantially all of Marcopper's properties were already covered by the
registered "Deed of Real Estate and Chattel Mortgage" executed by
Marcopper in favor of ADB as early as November 11, 1992. As such,
Solidbank cannot assert a better right than ADB, the latter being a
preferred creditor. It is basic that mortgaged properties answer
primarily for the mortgaged credit, not for the judgment credit of the
mortgagor's unsecured creditor. Considering that petitioner assumed
Marcopper's debt to ADB, it follows that Solidbank's right as judgment creditor
over the subject properties must give way to that of the former. 5 2

From this ruling in MR Holdings, we can draw parallel conclusions. The execution
of the subsequent Deed of Real Estate and Chattel Mortgage on September 5, 1996
was simply the formal documentation of what had already been agreed in the seminal
transaction (the Purchase and Sale Agreement) between APT and GHI. It should not be
viewed in isolation, apart from the original agreement of October 2, 1992. And it cannot
be denied that this original agreement was supported by an adequate consideration.
The APT was even ordered by the court to deliver the shares and nancial notes of
MMC in exchange for the payments that GHI had made.
It was also about this time, in 1996, that NAMAWU led a notice of strike to
protest non-payment of its rightful labor claims. 5 3 But, as already mentioned, the
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 outcome of that labor dispute was yet unascertainable at that time, and NAMAWU
could only have hoped for, or speculated about, a favorable ruling. To paraphrase MR
Holdings, we cannot see how NAMAWU's right was prejudiced by the Deed of Real
Estate and Chattel Mortgage, or by its delayed registration, when substantially all of the
properties of MMC were already mortgaged to GHI as early as October 2, 1992. Given
this reality, the Court of Appeals had no basis to conclude that this Deed of Real Estate
and Chattel Mortgage, by reason of its late registration, was a simulated or ctitious
contract.
The importance of registration and its binding effect is stated in Section 51 of
the Property Registration Decree or Presidential Decree (P.D.) No. 1529, 5 4 which reads:
SECTION 51. Conveyance and other dealings by registered owner. —
An owner of registered land may convey, mortgage, lease, charge or otherwise
deal with the same in accordance with existing laws. He may use such forms,
deeds, mortgages, leases or other voluntary instrument as are su cient in law.
But no deed, mortgage, lease or other voluntary instrument, except a will
purporting to convey or effect registered land, shall take effect as a conveyance or
bind the land, but shall operate only as a contract between the parties and as
evidence of authority to the Registry of Deeds to make registration.

The act of registration shall be the operative act to convey or affect the
land insofar as third persons are concerned, and in all cases under this Decree,
the registration shall be made in the O ce of the Register of Deeds for the
province or the city where the land lies. 5 5

Under the Torrens system, registration is the operative act which gives validity to
the transfer or creates a lien upon the land. Further, entrenched in our jurisdiction is the
doctrine that registration in a public registry creates constructive notice to the whole
world. 5 6 Thus, Section 51 of Act No. 496, as amended by Section 52 of P.D. No. 1529,
provides:
SECTION 52. Constructive notice upon registration. — Every
conveyance, mortgage, lease, lien, attachment, order, judgment, instrument or
entry affecting registered land shall, if registered, led or entered in the O ce of
the Register of Deeds for the province or city where the land to which it relates
lies, be constructive notice to all persons from the time of such registering, ling
or entering. EScHDA

But, there is nothing in Act No. 496, as amended by P.D. No. 1529, that imposes a
period within which to register annotations of "conveyance, mortgage, lease, lien,
attachment, order, judgment, instrument or entry affecting registered land". If liens were
not so registered, then it "shall operate only as a contract between the parties and as
evidence of authority to the Registry of Deeds to make registration". If registered, it
"shall be the operative act to convey or affect the land insofar as third persons are
concerned". The mere lapse of time from the execution of the mortgage document to
the moment of its registration does not affect the rights of a mortgagee.
Neither will the circumstance of GHI's foreclosure of MMC's properties on July
31, 2001, or after the DOLE had already issued a Partial Writ of Execution on May 9,
2001 against MMC, support the conclusion of the CA that GHI's act of foreclosing on
MMC's properties was "effected to prevent satisfaction of the judgment award". GHI's
mortgage rights, constituted in 1992, antedated the Partial Writ of Execution by nearly
ten (10) years. GHI's resort to foreclosure was a legitimate enforcement of a right to
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 liquidate a bona de debt. It was a reasonable option open to a mortgagee which, not
being a party to the labor dispute between NAMAWU and MMC, stood to suffer a loss if
it did not avail itself of the remedy of foreclosure.
The well-settled rule is that a mortgage lien is inseparable from the property
mortgaged. 5 7 While it is true that GHI's foreclosure of MMC's mortgaged properties
may have had the "effect to prevent satisfaction of the judgment award against the
speci c mortgaged property that rst answers for a mortgage obligation ahead of any
subsequent creditors", that same foreclosure does not necessarily translate to having
been "effected to prevent satisfaction of the judgment award" against MMC.
Likewise, we note the narration of subsequent facts contained in the Comment of
the O ce of the Solicitor General. Therein, it is alleged that after the Partial Writ of
Execution was issued on May 9, 2001, a motion for reconsideration was led by MMC;
that the denial of the motion was appealed to the CA; that when the appeal was
dismissed by the CA on January 24, 2002, it eventually became the subject of a review
petition before this Court, docketed as G.R. No. 157696; and that G.R. No. 157696 was
decided by this Court only on February 9, 2006.
This chronology of subsequent events shows that February 9, 2006 would have
been the earliest date for the unimpeded enforcement of the Partial Writ of Execution,
as it was only then that this Court resolved the issue. This happened four and a half
years after July 31, 2001, the date when GHI foreclosed on the mortgaged properties.
Thus, it is not accurate to say that the foreclosure made on July 31, 2001 was "effected
[only] to prevent satisfaction of the judgment award".
We also observe the error in the CA's nding that the 1996 Deed of Real Estate
and Chattel Mortgage was not supported by any consideration since at the time the
deed was executed, "all the real and personal property of MMC had already been
transferred in the hands of G Holdings". 5 8 It should be remembered that the Purchase
and Sale Agreement between GHI and APT involved large amounts (P550M) and even
spawned a subsequent court action (Civil Case No. 95-76132, RTC of Manila). Yet,
nowhere in the Agreement or in the RTC decision is there any mention of real and
personal properties of MMC being included in the sale to GHI in 1992. These properties
simply served as mortgaged collateral for the 1992 Promissory Notes. 5 9 The
Purchase and Sale Agreement and the Promissory Notes themselves are the best
evidence that there was ample consideration for the mortgage. THDIaC

Thus, we must reject the conclusion of the CA that the Deed of Real Estate and
Chattel Mortgage executed in 1996 was a simulated transaction.
On the issue of whether there
had been an effective levy upon
the properties of GHI.
The well-settled principle is that the rights of a mortgage creditor over the
mortgaged properties are superior to those of a subsequent attaching creditor. In
Cabral v. Evangelista, 6 0 this Court declared that:
Defendants-appellants purchase of the mortgaged chattels at the public
sheriff's sale and the delivery of the chattels to them with a certi cate of sale did
not give them a superior right to the chattels as against plaintiffs-mortgagees.
Rule 39, Section 22 of the old Rules of Court (now Rule 39, Section 25 of the
Revised Rules), cited by appellants precisely provides that "the sale conveys to the
purchaser all the right which the debtor had in such property on the day the
execution or attachment was levied". It has long been settled by this Court that
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 "The right of those who so acquire said properties should not and can not be
superior to that of the creditor who has in his favor an instrument of mortgage
executed with the formalities of the law, in good faith, and without the least
indication of fraud. This is all the more true in the present case, because, when
the plaintiff purchased the automobile in question on August 22, 1933, he knew,
or at least, it is presumed that he knew, by the mere fact that the instrument of
mortgage, Exhibit 2, was registered in the o ce of the register of deeds of Manila,
that said automobile was subject to a mortgage lien. In purchasing it, with full
knowledge that such circumstances existed, it should be presumed that he did so,
very much willing to respect the lien existing thereon, since he should not have
expected that with the purchase, he would acquire a better right than that which
the vendor then had". In another case between two mortgagees, we held that "As
between the rst and second mortgagees, therefore, the second mortgagee has at
most only the right to redeem, and even when the second mortgagee goes
through the formality of an extrajudicial foreclosure, the purchaser acquires no
more than the right of redemption from the first mortgagee". The superiority of the
mortgagee's lien over that of a subsequent judgment creditor is now expressly
provided in Rule 39, Section 16 of the Revised Rules of Court, which states with
regard to the effect of levy on execution as to third persons that "The levy on
execution shall create a lien in favor of the judgment creditor over the right, title
and interest of the judgment debtor in such property at the time of the levy,
subject to liens or encumbrances then existing".

Even in the matter of possession, mortgagees over chattel have superior,

preferential and paramount rights thereto, and the mortgagor has mere rights of
redemption. 6 1
Similar rules apply to cases of mortgaged real properties that are registered.
Since the properties were already mortgaged to GHI, the only interest remaining in the
mortgagor was its right to redeem said properties from the mortgage. The right of
redemption was the only leviable or attachable property right of the mortgagor in the
mortgaged real properties. We have held that —
The main issue in this case is the nature of the lien of a judgment creditor,
like the petitioner, who has levied an attachment on the judgment debtor's (CMI)
real properties which had been mortgaged to a consortium of banks and were
subsequently sold to a third party, Top Rate.

xxx xxx xxx

The sheriff's levy on CMI's properties, under the writ of attachment
obtained by the petitioner, was actually a levy on the interest only of the judgment
debtor CMI on those properties. Since the properties were already mortgaged to
the consortium of banks, the only interest remaining in the mortgagor CMI was its
right to redeem said properties from the mortgage. The right of redemption was
the only leviable or attachable property right of CMI in the mortgaged real
properties. The sheriff could not have attached the properties themselves, for they
had already been conveyed to the consortium of banks by mortgage (de ned as a
"conditional sale"), so his levy must be understood to have attached only the
mortgagor's remaining interest in the mortgaged property — the right to redeem it
from the mortgage. 6 2 CHDTEA

xxx xxx xxx

There appears in the record a factual contradiction relating to whether the

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 foreclosure by GHI on July 13, 2001 6 3 over some of the contested properties came
ahead of the levy thereon, or the reverse. NAMAWU claims that the levy on two trucks
was effected on June 22, 2001, 6 4 which GHI disputes as a misstatement because the
levy was attempted on July 18, 2002, and not 2001. 6 5 What is undisputed though is
that the mortgage of GHI was registered on February 4, 2000, 6 6 well ahead of any levy
by NAMAWU. Prior registration of a lien creates a preference, as the act of registration
is the operative act that conveys and affects the land, 6 7 even against subsequent
judgment creditors, such as respondent herein. Its registration of the mortgage was
not intended to defraud NAMAWU of its judgment claims, since even the courts were
already judicially aware of its existence since 1992. Thus, at that moment in time, with
the registration of the mortgage, either NAMAWU had no properties of MMC to attach
because the same had been previously foreclosed by GHI as mortgagee thereof; or by
virtue of the DOLE's levy to enforce NAMAWU's claims, the latter's rights are subject to
the notice of the foreclosure on the subject properties by a prior mortgagee's right.
GHI's mortgage right had already been registered by then, and "it is basic that
mortgaged properties answer primarily for the mortgaged credit, not for the judgment
credit of the mortgagor's unsecured creditor". 6 8
On the issue of piercing the
veil of corporate fiction.
The CA found that:
"Ordinarily, the interlocking of directors and o cers in two different
corporations is not a conclusive indication that the corporations are one and the
same for purposes of applying the doctrine of piercing the veil of corporate
ction. However, when the legal ction of the separate corporate personality is
abused, such as when the same is used for fraudulent or wrongful ends, the
courts have not hesitated to pierce the corporate veil (Francisco vs. Mejia, 362
SCRA 738). In the case at bar, the Deed of Real Estate and Chattel Mortgage was
entered into between MMC and G Holdings for the purpose of evading the
satisfaction of the legitimate claims of the petitioner against MMC. The notion of
separate personality is clearly being utilized by the two corporations to perpetuate
the violation of a positive legal duty arising from a nal judgment to the prejudice
of the petitioner's right." 6 9

Settled jurisprudence 7 0 has it that —

"(A) corporation, upon coming into existence, is invested by law with a
personality separate and distinct from those persons composing it as well as
from any other legal entity to which it may be related. By this attribute, a
stockholder may not, generally, be made to answer for acts or liabilities of the
said corporation, and vice versa. This separate and distinct personality is,
however, merely a ction created by law for convenience and to promote the ends
of justice. For this reason, it may not be used or invoked for ends subversive to
the policy and purpose behind its creation or which could not have been intended
by law to which it owes its being. This is particularly true when the ction is
used to defeat public convenience, justify wrong, protect fraud, defend
crime, confuse legitimate legal or judicial issues, perpetrate deception
or otherwise circumvent the law. This is likewise true where the corporate
entity is being used as an alter ego, adjunct, or business conduit for the
sole bene t of the stockholders or of another corporate entity. In all
these cases, the notion of corporate entity will be pierced or disregarded with
reference to the particular transaction involved.
EHcaDT

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 Given this jurisprudential principle and the factual circumstances obtaining in this
case, we now ask: Was the CA correct in piercing the veil of corporate identity of GHI
and MMC?
In our disquisition above, we have shown that the CA's nding that there was a
"simulated mortgage" between GHI and MMC to justify a wrong or protect a fraud has
struggled vainly to nd a foothold when confronted with the ruling of this Court in
Republic v. "G" Holdings, Inc.
The negotiations between the GHI and the Government — through APT, dating
back to 1992 — culminating in the Purchase and Sale Agreement, cannot be depicted
as a contrived transaction. In fact, in the said Republic, etc. v. "G" Holdings, Inc., this
Court adjudged that GHI was entitled to its rightful claims — not just to the shares of
MMC itself, or just to the nancial notes that already contained the mortgage clauses
over MMCs disputed assets, but also to the delivery of those instruments. Certainly, we
cannot impute to this Court's ndings on the case any badge of fraud. Thus, we reject
the CA's conclusion that it was right to pierce the veil of corporate ction, because the
foregoing circumstances belie such an inference. Furthermore, we cannot ascribe to
the Government, or the APT in particular, any undue motive to participate in a
transaction designed to perpetrate fraud. Accordingly, we consider the CA
interpretation unwarranted.
We also cannot agree that the presumption of fraud in Article 1387 of the Civil
Code relative to property conveyances, when there was already a judgment rendered or
a writ of attachment issued, authorizes piercing the veil of corporate identity in this
case. We nd that Article 1387 nds less application to an involuntary alienation such
as the foreclosure of mortgage made before any nal judgment of a court. We thus
hold that when the alienation is involuntary, and the foreclosure is not fraudulent
because the mortgage deed has been previously executed in accordance with
formalities of law, and the foreclosure is resorted to in order to liquidate a bona de
debt, it is not the alienation by onerous title contemplated in Article 1387 of the Civil
Code wherein fraud is presumed.
Since the factual antecedents of this case do not warrant a nding that the
mortgage and loan agreements between MMC and GHI were simulated, then their
separate personalities must be recognized. To pierce the veil of corporate fiction would
require that their personalities as creditor and debtor be conjoined, resulting in a
merger of the personalities of the creditor (GHI) and the debtor (MMC) in one person,
such that the debt of one to the other is thereby extinguished. But the debt embodied in
the 1992 Financial Notes has been established, and even made subject of court
litigation (Civil Case No. 95-76132, RTC Manila). This can only mean that GHI and MMC
have separate corporate personalities.
Neither was MMC used merely as an alter ego, adjunct, or business conduit for
the sole bene t of GHI, to justify piercing the former's veil of corporate ction so that
the latter could be held liable to claims of third-party judgment creditors, like NAMAWU.
In this regard, we nd American jurisprudence persuasive. In a decision by the Supreme
Court of New York 7 1 bearing upon similar facts, the Court denied piercing the veil of
corporate ction to favor a judgment creditor who sued the parent corporation of the
debtor, alleging fraudulent corporate asset-shifting effected after a prior nal
judgment. Under a factual background largely resembling this case at bar, viz.:
In this action, plaintiffs seek to recover the balance due under judgments
they obtained against Lake George Ventures Inc. (hereinafter LGV), a subsidiary
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 of defendant that was formed to develop the Top O' the World resort community
overlooking Lake George, by piercing the corporate veil or upon the theory that
LGV's transfer of certain assets constituted fraudulent transfers under the Debtor
and Creditor Law. We previously upheld Supreme Court's denial of defendant's
motion for summary judgment dismissing the complaint (252 A.D.2d 609, 675
N.Y.S.2d 234) and the matter proceeded to a nonjury trial. Supreme Court
thereafter rendered judgment in favor of defendant upon its ndings that,
although defendant dominated LGV, it did not use that domination to commit a
fraud or wrong on plaintiffs. Plaintiffs appealed.EcDSTI

The trial evidence showed that LGV was incorporated in November 1985.
Defendant's principal, Francesco Galesi, initially held 90% of the stock and all of
the stock was ultimately transferred to defendant. Initial project funding was
provided through a $2.5 million loan from Chemical Bank, secured by defendant's
guarantee of repayment of the loan and completion of the project. The loan
proceeds were utilized to purchase the real property upon which the project was to
be established. Chemical Bank thereafter loaned an additional $3.5 million to
LGV, again guaranteed by defendant, and the two loans were consolidated into a
rst mortgage loan of $6 million. In 1989, the loan was modi ed by splitting the
loan into a $1.9 term note on which defendant was primary obligor and a $4.1
million project note on which LGV was the obligor and defendant was a
guarantor.

Due to LGV's lack of success in marketing the project's townhouses and

in order to protect itself from the exercise of Chemical Bank's
enforcement remedies , defendant was forced to make monthly installments of
principal and interest on LGV's behalf. Ultimately, defendant purchased the
project note from Chemical Bank for $3.1 million, paid the $1.5 million balance on
the term note and took an assignment of the rst mortgage on the project's realty.
After LGV failed to make payments on the indebtedness over the course of the
succeeding two years, defendant brought an action to foreclose its mortgage.
Ultimately, defendant obtained a judgment of foreclosure and sale in the amount
of $6,070,246.50. Defendant bid in the property at the foreclosure sale and
thereafter obtained a deficiency judgment in the amount of $3,070,246.50.

Following the foreclosure sale, LGV transferred to defendant all of the

shares of Top of the World Water Company, a separate entity that had been
organized to construct and operate the water supply and delivery system for the
project, in exchange for a $950,000 reduction in the deficiency judgment.

the U.S. Supreme Court of New York held —

Based on the foregoing, and accepting that defendant exercised complete
domination and control over LGV, we are at a loss as to how plaintiffs perceive
themselves to have been inequitably affected by defendant's foreclosure action
against LGV, by LGV's divestiture of the water company stock or the sports
complex property, or by defendant's transfer to LGV of a third party's uncollectible
note, accomplished solely for tax purposes. It is undisputed that LGV was,
and for some period of time had been, unable to meet its obligations
and, at the time of the foreclosure sale, liens against its property
exceeded the value of its assets by several million dollars, even
including the water company and sports complex at the values
plaintiffs would assign to them . In fact, even if plaintiffs' analysis were
utilized to eliminate the entire $3 million de ciency judgment, the fact remains
that subordinate mortgages totaling nearly an additional $2 million
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 have priority over plaintiffs' judgments.
As properly concluded by Supreme Court, absent a nding of any
inequitable consequence to plaintiffs, both causes of action pleaded in
the amended complaint must fail. Fundamentally, a party seeking to
pierce the corporate veil must show complete domination and control of
the subsidiary by the parent and also that such domination was used to
commit a fraud or wrong against the plaintiff that resulted in the
plaintiff's injury (252 A.D.2d 609, 610, 675 N.Y.S.2d 234, supra; see, Matter of
Morris v. New York State Dept. of Taxation & Fin., 82 N.Y.2d 135, 141, 603
N.Y.S.2d 807, 623 N.E.2d 1157). Notably, "[e]vidence of domination alone
does not su ce without an additional showing that it led to inequity,
fraud or malfeasance" (TNS Holdings v. MKI Sec. Corp., 92 N.Y.2d 335, 339,
680 N.Y.S.2d 891, 703 N.E.2d 749). ASHEca

xxx xxx xxx

In reaching that conclusion, we speci cally reject a number of plaintiffs'

assertions, including the entirely erroneous claims that our determination on the
prior appeal (252 A.D.2d 609, 675 N.Y.S.2d 234, supra) set forth a "roadmap" for
the proof required at trial and mandated a verdict in favor of plaintiffs upon their
production of evidence that supported the decision's "listed facts". To the
contrary, our decision was predicated upon the existence of such evidence, absent
which we would have granted summary judgment in favor of defendant. We are
equally unpersuaded by plaintiffs' continued reliance upon defendant's December
1991 unilateral conversion of its intercompany loans with LGV from debt to
equity, which constituted nothing more than a "bookkeeping transaction" and had
no apparent effect on LGV's obligations to defendant or defendant's right to
foreclose on its mortgage. 7 2

This doctrine is good law under Philippine jurisdiction.

I n Concept Builders, Inc. v. National Labor Relations Commission, 7 3 we laid
down the test in determining the applicability of the doctrine of piercing the veil of
corporate fiction, to wit:
1. Control, not mere majority or complete control, but complete domination,
not only of nances but of policy and business practice in respect to the
transaction attacked so that the corporate entity as to this transaction had
at the time no separate mind, will or existence of its own.

2. Such control must have been used by the defendant to commit fraud or
wrong, to perpetuate the violation of a statutory or other positive legal duty,
or dishonest and, unjust act in contravention of plaintiffs legal rights; and,

3. The aforesaid control and breach of duty must proximately cause the
injury or unjust loss complained of.
xxx xxx xxx

Time and again, we have reiterated that mere ownership by a single stockholder
or by another corporation of all or nearly all of the capital stock of a corporation is not,
by itself, a su cient ground for disregarding a separate corporate personality. 7 4 It is
basic that a corporation has a personality separate and distinct from that composing it
as well as from that of any other legal entity to which it may be related. Clear and
convincing evidence is needed to pierce the veil of corporate fiction. 7 5
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 In this case, the mere interlocking of directors and o cers does not warrant
piercing the separate corporate personalities of MMC and GHI. Not only must there be
a showing that there was majority or complete control, but complete domination, not
only of nances but of policy and business practice in respect to the transaction
attacked, so that the corporate entity as to this transaction had at the time no separate
mind, will or existence of its own. The mortgage deed transaction attacked as a basis
for piercing the corporate veil was a transaction that was an offshoot, a derivative, of
the mortgages earlier constituted in the Promissory Notes dated October 2, 1992. But
these Promissory Notes with mortgage were executed by GHI with APT in the name of
MMC, in a full privatization process. It appears that if there was any control or
domination exercised over MMC, it was APT, not GHI, that wielded it. Neither can we
conclude that the constitution of the loan nearly four (4) years prior to NAMAWU's
notice of strike could have been the proximate cause of the injury of NAMAWU for
having been deprived of MMC's corporate assets. IDcHCS

On the propriety of injunction

to prevent execution by the
NLRC on the properties
of third-party claimants
It is settled that a Regional Trial Court can validly issue a Temporary Restraining
Order (TRO) and, later, a writ of preliminary injunction to prevent enforcement of a writ
of execution issued by a labor tribunal on the basis of a third-party's claim of ownership
over the properties levied upon. 7 6 While, as a rule, no temporary or permanent
injunction or restraining order in any case involving or growing out of a labor dispute
shall be issued by any court — where the writ of execution issued by a labor tribunal is
sought to be enforced upon the property of a stranger to the labor dispute, even upon a
mere prima facie showing of ownership of such claimant — a separate action for
injunctive relief against such levy may be maintained in court, since said action neither
involves nor grows out of a labor dispute insofar as the third party is concerned. 7 7
Instructively, National Mines and Allied Workers' Union v. Vera: 7 8
Petitioners' reliance on the provision of Art. 254 of the New Labor Code
(herein earlier quoted) which prohibits injunctions or restraining orders in any
case involving or growing out of a 'labor dispute' is not well-taken. This has no
application to the case at bar. Civil Case No. 2749 is one which neither "involves"
nor "grows out" of a labor dispute. What 'involves' or 'grows out' of a labor dispute
is the NLRC case between petitioners and the judgment debtor, Philippine Iron
Mines. The private respondents are not parties to the said NLRC case. Civil Case
No. 2749 does not put in issue either the fact or validity of the proceeding in the
NLRC case nor the decision therein rendered, much less the writ of execution
issued thereunder. It does not seek to enjoin the execution of the decision against
the properties of the judgment debtor. What is sought to be tried in Civil Case No.
2749 is whether the NLRC's decision and writ of execution, above mentioned,
shall be permitted to be satis ed against properties of private respondents, and
not of the judgment debtor named in the NLRC decision and writ of execution.
Such a recourse is allowed under the provisions of Section 17, Rule 39 of the
Rules of Court.

To sustain petitioners' theory will inevitably lead to disastrous

consequences and lend judicial imprimatur to deprivation of property without due
process of law. Simply because a writ of execution was issued by the NLRC does
not authorize the sheriff implementing the same to levy on anybody's property. To
deny the victim of the wrongful levy, the recourse such as that availed of by the
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 herein private respondents, under the pretext that no court of general jurisdiction
can interfere with the writ of execution issued in a labor dispute, will be
sanctioning a greater evil than that sought to be avoided by the Labor Code
provision in question. Certainly, that could not have been the intendment of the
law creating the NLRC. For well-settled is the rule that the power of a court to
execute its judgment extends only over properties unquestionably belonging to
the judgment debtor."

Likewise, since the third-party claimant is not one of the parties to the action, he
cannot, strictly speaking, appeal from the order denying his claim, but he should le a
separate reivindicatory action against the execution creditor or the purchaser of the
property after the sale at public auction, or a complaint for damages against the bond
filed by the judgment creditor in favor of the sheriff. 7 9
A separate civil action for recovery of ownership of the property would not
constitute interference with the powers or processes of the labor tribunal which
rendered the judgment to execute upon the levied properties. The property levied upon
being that of a stranger is not subject to levy. Thus, a separate action for recovery, upon
a claim and prima facie showing of ownership by the petitioner, cannot be considered
as interference. 8 0
Upon the ndings and conclusions we have reached above, petitioner is situated
squarely as such third-party claimant. The questioned restraining order of the lower
court, as well as the order granting preliminary injunction, does not constitute
interference with the powers or processes of the labor department. The registration of
the mortgage document operated as notice to all on the matter of the mortgagee's
prior claims. O cial proceedings relative to the foreclosure of the subject properties
constituted a prima facie showing of ownership of such claimant to support the
issuance of injunctive reliefs. ESCTIA

As correctly held by the lower court:

The subject incidents for TRO and/or Writ of Injunction were summarily
heard and in resolving the same, the Court believes, that the petitioner has a clear
and unmistakable right over the levied properties. The existence of the subject
Deed of Real Estate and Chattel Mortgage, the fact that petitioner initiated a
foreclosure of said properties before the Clerk of Court and Ex-O cio Sheriff, RTC
Branch 61, Kabankalan City on July 13, 2001, the fact that said Ex-O cio Sheriff
and the Clerk of Court issue a Notice of Foreclosure, Possession and Control over
said mortgaged properties on July 19, 2001 and the fact that a Sheriff's
Certi cate of Sale was issued on December 3, 2001 are the basis of its
conclusion. Unless said mortgage contract is annulled or declared null and void,
the presumption of regularity of transaction must be considered and said
document must be looked [upon] as valid.

Notably, the O ce of the Solicitor General also aptly observed that when the
respondent maintained that the Deed of Real Estate and Chattel mortgage was entered
into in fraud of creditors, it thereby admitted that the mortgage was not void, but
merely rescissible under Article 1381 (3) of the Civil Code; and, therefore, an
independent action is needed to rescind the contract of mortgage. 8 1 We, however, hold
that such an independent action cannot now be maintained, because the mortgage has
been previously recognized to exist, with a valid consideration, in Republic, etc. v. "G"
Holdings, Inc.
A final word
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 The Court notes that the case filed with the lower court involves a principal action
for injunction to prohibit execution over properties belonging to a third party not
impleaded in the legal dispute between NAMAWU and MMC. We have observed,
however, that the lower court and the CA failed to take judicial notice of, or to consider,
our Decisions in Republic, etc. v. "G" Holdings, Inc., and Maricalum Mining Corporation v.
Brion and NAMAWU, in which we respectively recognized the entitlement of GHI to the
shares and the company notes of MMC (under the Purchase and Sale Agreement), and
the rights of NAMAWU to its labor claims. At this stage, therefore, neither the lower
court nor the CA, nor even this Court, can depart from our ndings in those two cases
because of the doctrine of stare decisis.
From our discussion above, we now rule that the trial court, in issuing the
questioned orders, did not commit grave abuse of discretion, because its issuance was
amply supported by factual and legal bases.
We are not unmindful, however, of the fact that the labor claims of NAMAWU,
acknowledged by this Court in Maricalum, still awaits nal execution. As success fades
from NAMAWU's efforts to execute on the properties of MMC, which were validly
foreclosed by GHI, we see that NAMAWU always had, and may still have, ample
supplemental remedies found in Rule 39 of the Rules of Court in order to protect its
rights against MMC. These include the examination of the judgment obligor when
judgment is unsatis ed, 8 2 the examination of the obligors of judgment obligors, 8 3 or
even the resort to receivership. 8 4
While, theoretically, this case is not ended by this decision, since the lower court
is still to try the case led with it and decide it on the merits, the matter of whether the
mortgage and foreclosure of the assets that are the subject of said foreclosure is
ended herein, for the third and nal time. So also is the consequential issue of the
separate and distinct personalities of GHI and MMC. Having resolved these principal
issues with certainty, we nd no more need to remand the case to the lower court, only
for the purpose of resolving again the matter of whether GHI owns the properties that
were the subject of the latter's foreclosure.
WHEREFORE , the Petition is GRANTED . The Decision of the Court of Appeals
dated October 14, 2003 is SET ASIDE . The Omnibus Order dated December 4, 2002 of
the Regional Trial Court, Branch 61 of Kabankalan City, Negros Occidental is
AFFIRMED . No costs. STEacI

SO ORDERED .
Carpio Morales, * Chico-Nazario, ** Peralta and Abad, *** JJ., concur.

Footnotes

* Additional member vice Justice Antonio T. Carpio per Special Order No. 744 dated
October 13, 2009.
** Acting Chairperson vice Justice Antonio T. Carpio per Special Order No. 743 dated
October 13, 2009.
*** Additional member vice Justice Presbitero J. Velasco, Jr. per Special Order No. 753
dated October 13, 2009.
1. Penned by Associate Justice Jose L. Sabio, Jr., with Associate Justices Delilah Vidallon
Magtolis (retired) and Hakim S. Abdulwahid concurring. CA rollo,pp. 1268-1283.
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 2. Rollo, Vol. 1, p. 574. The company's primary purpose, stated in the Articles of
Incorporation, is as follows:
"To own and hold shares of stock of different companies such as but not limited to
mining, manufacturing, trading and industrial concerns, and to deal, engage and
transact directly or indirectly (sic) all forms of business and mercantile acts (sic) the
transactions concerning all kinds of real or personal property, movable, semi-movable,
goods, wares (sic) chattels, choses in action, tangible and intangible property (sic)
technical and industrial equipments (sic) and machineries, personal and real rights and
documents, securities, evidence of indebtedness or representative of value or other
forms of obligations, services and all things, including future ones, which are not
excluded from the commerce of man or which are not contrary to law or good morals."
(Id.)
3. CA rollo, p. 5.
4. Rollo, Vol. 1, p. 604.
5. Id.
6. Id. at 157-174.
7. Id. at 158.
8. Id. at 175-177.
9. Id.
10. Id. at 170 and 574.
11. Records, p. 320.

12. CA rollo, p. 7. The dispositive portion of the Quisumbing Order reads:

"WHEREFORE, judgment is hereby rendered:
"1. Declaring that the lay-offs implemented on May 7, 1996 and October 7, 1996 as
illegal;

"2. Ordering that all workers, whether union members or not, who were laid-off on
May 7, 1996 and October 7, 1996 be immediately reinstated without gap in service, loss
of seniority, and that their full backwages and benefits from the time of termination until
actual reinstatement be paid;

"3. Declaring the Company to have violated the Labor Code provisions on Unfair
Labor Practice for negotiating in bad faith and later refusing to negotiate; and
"4. Ordering the parties to enter into a new collective bargaining agreement
incorporating all the terms and conditions of the previous collective bargaining
agreement between the Company and the NFL, except the name of the exclusive
bargaining agent, and providing for an annual across-the-board increase in the daily
wage of all rank and file workers in the amount of P60.00 per day from February, 1996
until January, 1998 and another P50.00 increase annually effective February 1, 1998
until January 31, 2000.

"SO ORDERED".
13. Rollo, Vol. 1, p. 1099; see Maricalum Mining Corporation v. Brion and NAMAWU, G.R.
Nos. 157696-97, February 9, 2006, 482 SCRA 87, 93-94.
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 14. Id. at 1099.
15. Supra note 13.
16. Records, p. 15.
17. Id. at 15-18.
18. Id. at 2.
19. Id. at 1-11.
20. Id. at 19-39.
21. Id. at 19, CA rollo, pp. 992-993.
22. Records, pp. 45-47.
23. Id. at 70-71.
24. Id. at 90.
25. Id. at 85D-89.
26. Id. at 344-364.
27. Id. at 164.
28. Supra notes 24, 25 and 26.
29. Rollo, Vol. 1, pp. 111-112.
30. Id. at 112.
31. Id. at 115-116.
32. Id. at 116.
33. Id. at 1093-1094.
34. Supra note 13.
35. G.R. No. 141241, November 22, 2005, 475 SCRA 608.
36. Rollo, Vol. 1, pp. 19-39.
37. The Quisumbing Order was affirmed by this Court in Maricalum Mining Corp. v. Brion
and NAMAWU, supra note 13.
38. Baguio v. Teofila L. Vda. de Jalagat, et al. 149 Phil. 436, 440 (1971).
39. Rollo, Vol. 1, p. 110.
40. G.R. No. 170049, March 14, 2008, 548 SCRA 588, 611; citing Bongato v. Sps. Malvar,
436 Phil. 109, 117-118 (2002).
41. Supra note 35, at 613; emphasis supplied.
42. Rollo, Vol. 1, pp. 175-177.
43. Supra note 35, at 613-615; emphasis supplied. It may be added that when the Republic,
through the APT, elevated the case to the Court, we sustained the CA's dismissal of the
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 Republic's petition, and as already adverted to, effectively upheld the right of GHI to the
transfer and delivery of the shares and the financial notes.

44. 431 Phil. 729 (2002).

45. In Lim v. Court of Appeals, G.R. No. 149748, November 16, 2006, 507 SCRA 38, 50, this
Court ruled that "(t)he power of the sheriff to rule on the issue of ownership is settled".
46. Rollo, Vol. 1, p. 111.
47. Id. at 112.
48. Id.
49. Id. at 113.
50. Id. at 114.
51. 430 Phil. 443, 467-469 (2002).
52. Emphasis supplied.
53. The Notice of Strike was filed on August 23, 1996.

54. Talusan v. Tayag, 408 Phil. 373, 390 (2001).

55. Underscoring supplied.
56. Olizon v. Court of Appeals, G.R. No. 107075, September 1, 1994, 236 SCRA 148, 159.
57. Consolidated Bank and Trust Corporation v. Court of Appeals, G.R. No. 78771, January
23, 1991, 193 SCRA 158, 176; citing Philippine National Bank v. Mallorca, No. L-22538,
October 31, 1967, 21 SCRA 694, 698.

58. Rollo, Vol. 1, p. 113.

59. Under the Representations and Warranties clause of the Purchase and Sale Agreement
dated October 2, 1992, paragraph (k) "Asset Catalogue GC 031" briefly describes all
movable and immovable properties owned by or leased to MMC (id. at 165).
60. Cabral, et al. v. Evangelista, et al., 139 Phil. 300, 306-307 (1969).
61. In Northern Motors, Inc. v. Judge Coquia, 160 Phil. 1091, 1095 (1975), in cases of
chattel of mortgages, this Court pronounced:

We hold, under the facts of this case, that Northern Motors, Inc., as chattel
mortgagee and unpaid vendor, should not be required to vindicate in a separate action
its claims for the seven mortgaged taxicabs and for the proceeds of the execution sale
of the other eight mortgaged taxicabs.
Inasmuch as the condition of the chattel mortgages had already been broken and
Northern Motors, Inc. had in fact instituted an action for replevin so that it could take
possession of the mortgaged taxicabs (Civil Case No. 20536, Rizal CFI) it has a superior,
preferential and paramount right to have possession of the mortgaged taxicabs and to
claim the proceeds of the execution sale (See Bachrach Motor Co. v. Summer, 42 Phil. 3;
Northern Motors, Inc. v. Herrera, L-32674, February 22, 1973, 49 SCRA 392).
Respondent sheriff wrongfully levied upon the mortgaged taxicabs and erroneously took
possession of them. He could have levied only upon the right or equity of redemption
pertaining to the Manila Yellow Taxicab Co., Inc. as chattel mortgagor and judgment
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 debtor, because that was the only leviable or attachable property right of the company in
the mortgaged taxicabs (Manila Mercantile Co. v. Flores, 50 Phil. 759; Levy Hermanos,
Inc. v. Ramirez and Casimiro, 60 Phil. 978, 981). "After a chattel mortgage is executed,
there remains in the mortgagor a mere right of redemption" (citing Tizon v. Valdez and
Morales, 48 Phil. 910, 916).
62. Quezon Bearing & Parts Corporation v. Court of Appeals, G.R. No. 76537, August 28,
1989, 176 SCRA 825, 829-830.
63. Rollo, Vol 1, p. 105
64. Id.
65. Id. at 47.
66. February 24, 2000, as per the allegation of NAMAWU, cited in the Decision of RTC Br.
61, Negros Occidental, dated December 4, 2002.
67. Macadangdang. v. Martinez, G.R. No. 158682, January 31, 2005, 450 SCRA 363, 369.
68. MR Holdings, Ltd. v. Sheriff Bajar, supra note 51, at 469.
69. Rollo, Vol. 1, pp. 115-116.
70. Land Bank of the Philippines v. Court of Appeals, 416 Phil. 774, 782-783. emphasis
supplied.
71. George REBH et al. v. ROTTERDAM VENTURES INC., Doing Business as Galesi Group,
277 A.D.2d 659, 716 N.Y.S.2d 457 (2000).
72. Emphasis supplied.

73. G.R. No. 108734, May 29, 1996, 257 SCRA 149, 159.
74. Francisco v. Mejia, G.R. No. 141617, August 14, 2001, 362 SCRA 738, 753.
75. Manila Hotel Corp. v. NLRC, 397 Phil. 1, 19 (2000).
76. Penalosa v. Villanueva, G.R. No. 75305, September 26, 1989, 177 SCRA 778, 786.
77. Id.
78. L-44230, November 19, 1984, 133 SCRA 259, 269-270.

79. Yupangco Cotton Mills, Inc. v. Court of Appeals, 424 Phil. 469, 480 (2002).
80. Id. at 481.
81. Rollo, Vol. 1, p. 785.
82. Rules of Court, Rule 39, Sec. 36.
83. Rules of Court, Rule 39, Sec 37.
84. Rules of Court, Rule 39, Sec. 41.

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