The Linden Suites, Inc. vs. Meridien Far East Properties, Inc.

The court that rendered a final and executory judgment has the inherent supervisory authority to examine the officers of a corporate judgment obligor to discover assets for the satisfaction of the judgment, and such examination does not violate the doctrine of separate corporate personality when its sole purpose is to locate corporate assets, not to hold the officers personally liable.

Petitioner The Linden Suites, Inc. filed a complaint for damages against respondent Meridien Far East Properties, Inc. before the RTC of Pasig City, alleging that respondent's building encroached on its property. The RTC rendered a decision ordering respondent to pay petitioner the cost of demolition, actual and compensatory damages, and attorney's fees. The decision was affirmed with modification by the Court of Appeals and ultimately by the Supreme Court, becoming final and executory in 2009. A writ of execution was issued but was returned unserved because the sheriff could not locate respondent at its known addresses. Petitioner then filed an Urgent Motion to Examine Judgment Obligor, praying that respondent's officers be directed to appear for examination regarding respondent's income and properties to satisfy the judgment.

• Nature of the Action: Petitioner filed a complaint for damages against respondent for the cost of demolishing a retaining wall that encroached on petitioner's property.
• Judgment and Finality: The RTC ruled in favor of petitioner. The decision was affirmed by the CA and the Supreme Court, becoming final and executory in 2009.
• Execution Proceedings: A writ of execution was issued but was returned unserved after the sheriff failed to locate respondent at its office and registered addresses.
• Motion for Examination: Petitioner filed an Urgent Motion to Examine Judgment Obligor, seeking to have respondent's officers examined to discover respondent's assets for satisfying the judgment. Petitioner noted that respondent's officers were identical to those of another corporation (MERDC) sharing the same address.
• RTC's Denial: The RTC denied the motion, ruling that (1) the officers could not be compelled to appear outside their place of residence (Makati City) per Section 36, Rule 39 of the Rules of Court, and (2) examining the officers would violate the doctrine of separate juridical personality.
• CA's Affirmance: The CA dismissed petitioner's certiorari petition, agreeing with the RTC's interpretation of Section 36, Rule 39 and finding no grave abuse of discretion.

• Interpretation of Section 36, Rule 39: Petitioner argued that the CA erred in its interpretation of the prohibition under Section 36, Rule 39 of the Rules of Court. It contended that the prohibition against compelling a judgment obligor to appear outside their residence applies to any court except the court that rendered the judgment.
• Supervisory Control of Judgment Court: Petitioner maintained that the RTC, as the judgment court, has inherent supervisory control over the execution of its judgment, which includes the authority to examine the judgment obligor or its officers to discover assets.
• Inapplicability of Separate Personality Doctrine: Petitioner asserted that the examination of respondent's officers was not intended to hold them personally liable but solely to ascertain respondent's properties and income for the satisfaction of the corporate debt.

• Territorial Jurisdiction Limitation: Respondent countered that its officers cannot be compelled to appear before the RTC of Pasig City because they reside in Makati City, invoking the limitation in Section 36, Rule 39 of the Rules of Court.
• Violation of Separate Corporate Personality: Respondent argued that examining its officers would violate the doctrine of separate juridical personality, as the officers are distinct from the corporation.
• Motion Dismissal: Respondent sought dismissal of the motion, alleging that the persons sought to be examined are not the judgment obligors in the RTC decision.

• Jurisdiction and Supervisory Control: Whether the RTC, as the court that rendered the final and executory judgment, has the authority to examine respondent's officers to discover assets for the satisfaction of the judgment, notwithstanding the officers' residence outside its territorial jurisdiction.
• Application of Separate Personality Doctrine: Whether the examination of respondent's officers for the purpose of ascertaining the corporation's assets violates the doctrine of separate juridical personality.

• Jurisdiction and Supervisory Control: The RTC, as the judgment court, possesses inherent supervisory control over the execution of its judgment. This authority includes the power to employ necessary auxiliary processes, such as examining the officers of a corporate judgment obligor, to discover assets and enforce the writ. The prohibition in Section 36, Rule 39 against compelling a judgment obligor to appear outside their residence does not apply to the court that rendered the judgment, which retains residual authority to ensure execution.
• Application of Separate Personality Doctrine: The doctrine of separate juridical personality is inapplicable. The examination sought was not intended to pierce the corporate veil or hold the officers personally liable for the corporate debt. Its sole purpose was to ascertain the corporation's assets and income to satisfy the judgment against the corporation itself. The RTC's denial on this ground was a misapplication of the doctrine.

• Supervisory Control of the Judgment Court — The court which renders a judgment retains general supervisory control over its execution. This inherent power, derived from Rule 135, Section 5(g) of the Rules of Court, allows the court to amend and control its processes, issue auxiliary writs, and employ necessary means to carry its judgment into effect. It includes the authority to determine all questions of fact and law involved in the execution.
• Examination of Judgment Obligor under Rule 39 — Section 36, Rule 39 provides a remedy for a judgment obligee to discover the assets of a judgment obligor. The examination may be conducted by the court or a commissioner. The Supreme Court clarified that the limitation—that a judgment obligor cannot be compelled to appear outside their residence—does not strip the judgment court of its inherent power to utilize this remedy to enforce its own judgment.
• Doctrine of Separate Juridical Personality — A corporation has a legal personality separate and distinct from its officers, stockholders, and other corporations. This legal fiction may be disregarded only in specific instances, such as when it is used to perpetrate fraud, evade an existing obligation, or confuse legitimate issues. The doctrine is not violated when corporate officers are examined solely to locate corporate assets for the satisfaction of a corporate liability.

• "The court which rendered the judgment has supervisory control over the execution of its judgment. It does not, however, give the court the power to alter or amend a final and executory decision in the absence of the recognized exceptions..."
• "The RTC, pursuant to its residual authority, should have issued auxiliary writs and employed processes and other means necessary to execute its final judgment."
• "What is clear therein is that the sole objective of the examination of the officers was to ascertain the properties and income of respondent which can be subjected for execution in order to satisfy the final judgment and nothing else."

• Kukan International Corporation v. Reyes, 646 Phil. 210 (2010) — Cited to establish the principle that the deciding court has supervisory control over the execution of its judgment and the right to determine every question of fact and law involved in the execution.
• Mejia v. Gabayan, 495 Phil. 459 (2005) — Cited to support the court's inherent power under Rule 135 to control its processes and orders to make them conformable to law and justice, including the authority to stay execution or modify a decision in the higher interest of justice.
• Heirs of Tan Uy v. International Exchange Bank, 703 Phil. 477 (2013) — Cited to define the doctrine of separate juridical personality and the exceptions for piercing the corporate veil.

• Section 36, Rule 39, Rules of Court — Provides for the examination of a judgment obligor in case of an unsatisfied writ of execution. The Court interpreted the provision's limitation regarding the obligor's residence as not applicable to the judgment court itself.
• Section 5(g), Rule 135, Rules of Court — Provides that a court has the inherent power "[t]o amend and control its process and orders so as to make them conformable to law and justice." This was cited as the basis for the judgment court's supervisory control over execution.
• Section 6, Rule 135, Rules of Court — Provides that when by law jurisdiction is conferred on a court, all auxiliary writs, processes, and other means necessary to carry it into effect are deemed included. This was cited to support the court's authority to employ necessary processes for execution.

• Justice Inting
• Justice Gaerlan
• Justice Dimaampao
• Senior Associate Justice Perlas-Bernabe (Chairperson) — Concurring with a separate concurring opinion.