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PHILIPPINE BANK OF COMMUNICATIONS v. CA

FACTS:

The petitioner, Philippine Bank of Communications (PBCOM), filed a petition to annul a Deed of Exchange executed by respondent Joseph L.G. Chua in favor of Jaleco Development, Inc. PBCOM alleged that the deed of exchange was fraudulent as Chua was a surety in three Surety Agreements executed in favor of PBCOM. The appellate court summarized the facts, which included the execution of Surety Agreements and trust receipts between Fortune Motors (Phils.), Inc. and PBCOM, as well as a Surety Agreement between Forte Merchant Finance, Inc. and PBCOM. Chua executed the Deed of Exchange, transferring a parcel of land to Jaleco Development, Inc. in exchange for shares of the corporation. PBCOM filed a complaint for the annulment of the Deed of Exchange, but the complaint was dismissed.

In its petition, PBCOM asserted that it discovered a property previously owned by Chua, which was transferred to Jaleco Development Inc. through the Deed of Exchange. Chua admitted the existence of the Deed of Exchange in his answer and claimed it was done in good faith. JALECO, however, stated in its answer that it had no knowledge or information about the allegations, including the existence of the Deed of Exchange. The court deemed JALECO's denial ineffective since the Deed of Exchange was attached to the petition, citing a previous case where a denial based on lack of knowledge or information is not valid when the fact in question is within the defendant's knowledge.

ISSUES:

  1. Whether the defendant's answer constitutes a specific denial under Section 10, Rule 8.

  2. Whether the pendency of other cases for collection of money renders the petition for annulment of deed of exchange premature.

  3. Whether the declaration in Lim Tan Hu v. Ramolete that a Clerk of Court is not legally authorized to receive evidence ex-parte is consistent with established judicial practice.

  4. Whether there is a legal impediment to the admissibility of the evidence presented by the petitioner against JALECO.

  5. Whether the Deed of Exchange executed by Joseph Chua and JALECO Development, Inc. was executed with the intention to defraud Chua's creditor.

  6. Whether JALECO's separate personality should be disregarded and the corporate veil should be pierced.

RULING:

  1. The defendant's answer does not constitute a specific denial under Section 10, Rule 8. The court ruled that the rule authorizing an answer stating that the defendant has no knowledge or information sufficient to form a belief as to the truth of an averment and giving such answer the effect of a denial does not apply where the fact as to which want of knowledge is asserted is so plainly and necessarily within the defendant's knowledge that his averment of ignorance must be palpably untrue. In the present case, a copy of the promissory note sued upon was attached to the complaint, making it easy for the defendant to specifically allege in their answer whether or not they had executed the alleged mortgage.

  2. The pendency of other cases for collection of money does not render the petition for annulment of deed of exchange premature. The court held that since the petitioner is entitled to demand payment of the whole financial obligations of the principal debtors, including the respondent, the petitioner has the right to file an annulment of the deed of exchange to protect its interests and prevent the judgments in the other cases from becoming illusory.

  3. The declaration in Lim Tan Hu v. Ramolete that a Clerk of Court is not legally authorized to receive evidence ex-parte is not consistent with established judicial practice. There are several instances under the rules where the function of receiving evidence can be delegated to commissioners, including the Clerk of Court. Therefore, a Clerk of Court can receive evidence ex-parte. The Court has the ultimate responsibility to pass upon the evidence received and can discard incompetent proofs and declare what facts have been established.

  4. There is no legal impediment to the admissibility of the evidence presented by the petitioner against JALECO. The evidence presented by the petitioner establishes the liability of respondent Chua under the Surety Agreements and the lack of other properties to cover the claims of the petitioner except for the Dasmariñas property. The evidence also shows that the Dasmariñas property was sold to JALECO, but respondent Chua continued to stay in the property. The principle that a corporation has a separate personality can be disregarded or the veil of corporate fiction pierced when the corporation is used as a cloak for fraud or illegality, or to work an injustice, or when necessary for the protection of creditors.

  5. Yes, the Deed of Exchange was not what it purports to be and was executed with the sole intention to defraud Chua's creditor. Thus, it is considered a transaction between Chua and himself and not between Chua and JALECO.

  6. Yes, JALECO's separate personality should be disregarded and the corporate veil should be pierced because Chua took advantage of his control over JALECO to execute the Deed of Exchange to defraud his creditor, making JALECO a mere alter ego of Chua.

PRINCIPLES:

  • A specific denial under Section 10, Rule 8 requires the defendant to specifically allege facts that will controvert the material averments in the complaint.

  • A denial by stating that the defendant is without knowledge or information sufficient to form a belief as to the truth of a material averment in the complaint is not considered a specific denial when the fact as to which want of knowledge is asserted is so plainly and necessarily within the defendant's knowledge that his averment of ignorance must be palpably untrue.

  • The pendency of other cases does not render a petition for annulment of a deed of exchange premature if the debtor has no property to satisfy the debts and the annulment is sought to protect the interests of the petitioner.

  • A Clerk of Court can receive evidence ex-parte, as long as the Court has the ultimate responsibility to pass upon the evidence and can discard incompetent proofs. (Based on the several instances under the rules where the function of receiving evidence can be delegated to commissioners, including the Clerk of Court)

  • The separate personality of a corporation can be disregarded or the veil of corporate fiction pierced when the corporation is used as a cloak for fraud or illegality, or to work an injustice, or when necessary for the protection of creditors. (Based on the principle that a corporation is invested with a separate personality, but exceptions apply when needed for equity purposes or to protect creditors)

  • The corporate veil may be pierced and the separate legal personality of a corporation disregarded when it is used as a shield to perpetrate fraud or an illegal act, or when it is used to defeat public convenience, justify wrong, protect fraud, or defend crime.

  • Sham or simulated transactions executed with the intention to defraud creditors may be declared null and void.

  • The alter ego doctrine may be applied when the corporation is a mere instrumentality or alter ego of its owner or controller, allowing the disregard of the corporation's separate personality.