119 Westmont Bank vs. Funai Philippines Corporation-Converted (With Watermark) B2021
119 Westmont Bank vs. Funai Philippines Corporation-Converted (With Watermark) B2021
The Additional Defendants moved to dismiss the complaint, alleging that Westmont’s complaint has no
cause of action against them and they were not parties-in-interest absent any proof linking them to the
transaction between Westmont and Funai & Sps. Yutingco.
RTC eventually adjudged Funai & Sps. Yutico solidarily liable for the PHP 10 Million with Westmont, but
dismissed the Amended Complaints (impleading the Additional Defendants) for failure to state a
cause of action as Westmont’s allegations were mere inferences of fact (and are not ultimate facts).
When Westmont appealed with the CA, the CA affirmed the RTC decision dismissing the Amended
Complaints, ruling that Westmont had no cause of action against the Additional Defendants as they had
no participation in Funai & Sps. Yutingco’s execution of the PNs. Hence, this petition.
Issue: Is CA correct in holding that the Additional Defendants are not necessary parties to the case, thus
warranting the dismissal of the Amendment Complaint? – Yes
RTC & CA both dismissed Westmont’s Amended Complaints to implead the Additional Defendants, but
differed on the grounds:
RTC: failure to state a cause of action CA: lack of cause of action
- Refers to insufficiency of the allegations in - Refers to insufficiency of the factual basis
the pleading for the action
- Dismissal: may be raised at the earliest - Dismissal: may be raised any time after the
stages of the proceedings through a questions of fact have been resolved on
Motion to Dismiss under Rule 16, Rules of the basis of stipulations, admissions, or
Court evidence presented by the plaintiff
The CA’s ground of lack of cause of action of the Amended Complaints cannot be the basis for dismissal
as there has yet no stipulations, admission or evidence that has been presented in this case. But anyway,
the Amended Complaints are still dismissible on the ground of failure to state a cause of action, as
the RTC correctly held. A complaint that states a sufficient cause of action when it complies with all
these 3 essential elements:
✓ A right in favor of the plaintiff, by whatever means and under whatever law it arises
✓ An obligation on the part of the defendant to respect/not to violate such right
✓ An act/omission by the defendant violating the right of the plaintiff or constituting a breach of the
obligation of the defendant for which the plaintiff may maintain an action for recovery of damages
→ If these elements do not concur, the complaint becomes vulnerable to a Motion to Dismiss
on the ground of failure to state a cause of action.
Westmont’s Amended Complaints readily show their failure to state a cause of action as the allegations do
not offer ultimate facts (as required by Sec. 5, Rule 8 of the RoC) which would warrant an action against
the Additional Defendants for the collection of the amount due on the PNs. In the absence of specific
averments, the complaints present no basis upon which the SC should act or for the defendant to
meet the complaint with an intelligent answer. Thus, the complaint must be dismissed for failure to
state a cause of action, as what the RTC did. 1
The SC also further held that while facts alleged in a complaint are hypothetically admitted by the
defendant who moves to dismiss the complaint on the ground of failure to state a cause of action, it should
be remembered that the hypothetical admission extends only to the relevant and material facts well
pleaded in the complaint, as well as inferences fairly deductible therefrom.
SC affirms the CA decision and dismissed the Amended Complaints impleading the Additional Defendants
in the case.
Facts
1. Around April to May 1997, Funal Philippines Corp. (Funai) and Sps. Antonio & Sylvia Yutingco
(Sps. Yutingco) obtained several loans amounting to PHP 10 Million loan from Westmont Bank.
2. The Promissory Notes (PNs) covering the loans all commonly provide that in case these PNs are
referred to an attorney-at-law or a collection agency, or a suit is instituted in court for collection, Sps.
Yutingco shall be liable to pay 20% of the total amount due as attorney’s fees, exclusive of costs of
suit and other expenses.
3. Funai and Sps. Yutingco were not able to pay the loans when it fell due despite Westmont’s demands.
So, Westmont filed a Complaint for sum of money with prayer for the issuance of a writ of preliminary
attachment (WOPA) before the RTC Manila Br. 49 on 16 Jan. 1998 [Civil Case No. 98-86853]
Procedural History
A. RTC Proceedings
1. 19 Feb. 1998: RTC issued a WOPA after an ex parte hearing and ordered the attachment of real and
personal properties of Funai and Sps. Yutingco. (no mention of what the properties were levied)
2. 24 Mar. 1998: RTC issued an Order directing the attachment of properties under the names of
other persons but are under the control of Funai and Sps. Yutingco. RTC ordered Sheriff Gerry
Duncan and Sheriff Carmelo Cachero to levy and seize the the following properties:
a. No. 9 Northpark Avenue, Bellevue, Grace Village, Quezon City
b. 2nd Level, Phase III, Sta. Lucia East Grand Mall, Cainta, Rizal (Sta. Lucia)
3. Pepito Ong Ngo (Ngo), Acting President of Panamax Corp. (Panamax) filed with the RTC a 3rd Party
Claim over the Sta. Lucia Property, claiming that Panamax is the true and lawful owner of Sta. Lucia
4. [IMPORTANT] 20 Apr. 1998: Westmont filed an Amended Complaint to implead as Additional
Defendants Panamax, Ngo, Aimee Alba, Richard Yu, Annabelle Baesa, Nenita Resane, and praying
that they be declared as mere alter egos, conduits, dummies, or nominees of Sps. Yutingco to
defraud their creditors, including Westmont. A 2nd Amended Complaint (Aug. 6, 1998) was submitted
by Westmont to include Maria Ortiz to the roster of additional defendants. [Amended Complaints]
5. 14 Aug. 1998: Funai & Sps. Yutingco filed an Answer with Counterclaim saying that nonpayment
of the loan was due to circumstances beyond their control and occasioned by Westmont’s sudden
treacherous manipulation leaving them with no room to make arrangements for payment. They also
asked for attorney’s fees, actual & moral damages for the irregular levy of their properties.
a. Additional Defendants moved to Dismiss the complaint and also filed an Answer, alleging
that the Westmont’s complaint (a) stated no cause of action against them, considering the
lack of legal tie with Westmont, and (b) that they were not parties-in-interest absent any proof
linking them to the transaction between Westmont and Funai & Sps. Yutingco.
6. 11 Dec. 1998: Westmont moved for a judgment on the pleadings. During its pendency, a public
auction sale of the Yutingco properties, conducted on 16 Mar. 2001, realized an amount of PHP 1.03
Million
7. 20 June 2001 [RTC Decision]: RTC adjudged Funai & Sps. Yutingco jointly and severally liable for
the PHP 10 Million loan, less PHP 1.03 Million realized from the public auction sale, and 19% legal
interest.
a. [IMPORTANT] RTC dismissed the Amended Complaints (impleading the additional
defendants) for failure to state a cause of action in Westmont’s complaint as its allegations
were mere inferences of fact (not ultimate facts). Thus, RTC ordered the return of the wrongfully
seized Sta. Lucia property to Panamax.
b. Westmont’s partial motion for reconsideration (MR) was also denied. So, Westmont filed a
notice of partial appeal with the CA [CA GR CV No. 71933].
8. 6 July 2001: Additional Defendants filed a Motion for Execution Pending Appeal with the RTC
for the return of the wrongfully seized items. RTC Granted this motion in 17 July 2001 [RTC
Execution Order 17 July 2001].
a. 23 July 2001: Westmont refused to release the seized properties so RTC issued another
Order [RTC Execution Order 23 July 2001] enjoining Westmont to comply with the order of
execution, otherwise a Break-Open Order shall be issued.
b. Aggrieved, Westmont filed with the CA a petition for certiorari with a prayer for a TRO or Writ of
Preliminary Injunction (WOPI) to prevent the RTC and additional defendants from implementing 2
the July 17 & 23, 2001 Execution Orders. [CA GR SP No. 65785]
9. 25 July 2001: Westmont still refused to release the seized properties, so RTC issued a Break-Open
Order on 25 July 2001 to enforce the execution orders.
a. 26 July 2001: CA issued a TRO enjoining Sheriffs Duncan and Cachero from enforcing the
execution orders.
i. 2:30 PM – CA Process Server Alfredo Obrence, Jr. (Obrence) duly served a copy of the
TRO to the RTC Clerk of Court and also informed Sheriff Cachero of such TRO over the
phone. But bad ass Sheriff Cachero still proceeded with implementing the writ of
execution.
ii. 3:00 PM – Westmont’s representative was able to secure a fax copy of the TRO. This fax
copy was shown to Sheriff Cachero, but bad ass Sheriff Cachero merely ignored it.
Various audio, video, and electrical appliances were taken out from warehouse and were
loaded into a truck. (there was no mention whose warehouse the items were taken out
from, but this should refer to one of the additional defendant’s properties)
iii. 4:15 PM – CA Process Server Obrence arrived at the site and served Sheriff Cachero a
duplicate original copy of the TRO. Nonetheless, the items on the truck were not unloaded
and the truck was allowed to leave the premises.
10. Westmont filed a case for indirect contempt against Sheriffs Cachero & Duncan, and Ngo which was
docketed as CA GR SP No. 66410. This was consolidated with CA GR SP No. 65785.
2. GR No. 180162: CA was correct in finding Sheriff Cachero guilty of indirect contempt.
- A sheriff is duty-bound to know the basic rules in the implementation of a writ of execution and should
be vigilant in the exercise of that authority. While it is the sheriff’s ministerial duty to implement the
writ of execution promptly, they are bound to discharge their duties with prudence and caution, which
careful men usually exercise in the management of their affairs.
- Sheriff Cachero, being an officer of the court, should have exercised prudence by verifying whether
there was really a TRO issued so as to avoid committing an act that would result in the thwarting of
this Court’s order.
- Assuming that his testimony that the loading of the items was completed at 4:00 PM, and that the CA
Process Server Obrence was 15 minutes late in serving the TRO, the phone call and the
presentation of the fax copy of the TRO sufficiently notified him of the Court’s order which
enjoined them from carrying out the writ of execution. The fact of his prior actual knowledge was
never refuted by him. It was also undisputed that he already knew of the existence of the TRO even
before he broke the padlock of the warehouse.
- Settled is the rule that where a party has actual notice, no matter how acquired, of an injunction
clearly informing him from what he must abstain, he is legally bound from that time to desist
from what he is restrained and inhibited from doing, and will be punished for a violation
thereof, even though it may not have served, or may have been served on him defectively.