Republic of the Philippines vs.
Mega Pacific eSolutions, Inc., Willy U. Yu, Bonnie S. Yu, Enrique T. Tansipek,
Rosita Y. Tansipek, Pedro O. Tan, Johnson W. Fong, Bernard I. Fong, and
Lauriano A. Barrios (preliminary attachment)
G.R. No. 184666
June 27, 2016
First Division
Ponente: Sereno, CJ
Gist:
A writ of preliminary attachment
may be issued over the properties of incorporators through the doctrine of
piercing the corporate veil. To successfully do so, fraud must be sufficiently
established by the factual findings of the court and other pronouncements.
Facts:
-
In January 2004, Information
Technology Foundation of the Philippines v. Commission on Elections was
promulgated where the Supreme Court declared void the automation contract
executed by respondent Mega Pacific eSolutions, Inc. (MPEI) and the Commission
on Elections (COMELEC) for the supply of automated counting machines (ACMs) for
the 2004 national elections.
-
In this Rule 45 Petition assailing the Amended
Decision issued by the Court of Appeals, petitioner Republic of the Philippines
attempts to cause the attachment of the properties owned by respondent MPEI, as
well as by its incorporators and stockholders (individual respondents), in
order to secure petitioner’s interest and to secure recovery of the payments it
made to respondents for the invalidated automation contract.
Issues:
- Whether a writ of preliminary attachment may be issued against the properties of individual respondents, considering that they were not parties to the 2004 case
Ruling:
The Petition is meritorious. A writ of
preliminary attachment should issue in favor of petitioner over the properties
of respondents on the following grounds: (1) fraud on the part of respondent
MPEI was sufficiently established by the factual findings of this Court in its
2004 Decision and subsequent pronouncements; (2) a writ of preliminary
attachment may issue over the properties of the individual respondents using
the doctrine of piercing the corporate
veil; (3) the factual findings of this Court that have become final cannot
be modified or altered much less reversed, and are controlling in the instant
case; (4) the delivery of 1,991 units of the ACM does not negate fraud on the
part of respondents MPEI and Willy; (5) estoppels does not lie against the
state when it acts to rectify mistakes, errors or illegal acts of its officials
and agents; and (6) the findings of the Ombudsman are not controlling in the
instant case.
For brevity, only the first two findings
by the Court shall be discussed in relation to the issuance of a writ of
preliminary attachment.
1. Fraud on the part of respondent MPEI was
sufficiently established by the factual findings of this Court in the latter’s
2004 Decision and subsequent pronouncements
A writ of
preliminary attachment is a provisional remedy issued upon the order of the
court where an action is pending. Through the writ, the property of the
defendant may be levied upon and held thereafter by the sheriff as security for
the satisfaction of whatever judgment might be secured by the attaching
creditor against the defendant.
The purpose
and function of an attachment or garnishment is twofold. First, it seizes upon
property of an alleged debtor in advance of final judgment and holds it subject
to appropriation, thereby preventing the loss or dissipation of the property
through fraud or other means. Second, it subjects the property of the debtor to
the payment of a creditor’s claim, in those cases in which personal service
upon the debtor cannot be obtained. This remedy is meant to secure a contingent
lien on the defendant’s property until the plaintiff can, by appropriate
proceedings, obtain a judgment and have the property applied to its
satisfaction, or to make some provision for unsecured debts in cases in which
the means of satisfaction thereof are liable to be removed beyond the
jurisdiction, or improperly disposed of or concealed, or otherwise placed
beyond the reach of creditors.
For a writ
of preliminary attachment to issue under Section 1(d), Rule 57 of the Rules of
Court, the applicant must sufficiently show the factual circumstances of the
alleged fraud.
In Metro, Inc. v. Lara’s Gift and Decors, Inc.,
the Court explained that “the fraud must
relate to the execution of the agreement and must have been the reason which
induced the other party into giving consent which he would not have otherwise
given.”
2. Application of the piercing doctrine justifies
the issuance of a writ of preliminary attachment over the properties of the
individual respondents
Petitioner
seeks the issuance of a writ of preliminary attachment over the personal assets
of the individual respondents, notwithstanding the doctrine of separate
juridical personality. It invokes the use of the doctrine of piercing the
corporate veil.
Veil-piercing
in fraud cases requires that the legal fiction of separate juridical personality
is used for fraudulent or wrongful ends. As established in the 2004 Decision,
four (4) red flags of fraudulent schemes in public procurement were evident in
the case, such as: (1) overly narrow specifications; (2) unjustified
recommendations and unjustified winning bidders; (3) failure to meet the terms
of the contract; and (4) shell or fictitious company.
Because all
the individual respondents actively participated in the perpetration of the
fraud against petitioner, their personal assets may be subject to a writ of
preliminary attachment by piercing the corporate veil.
The main
effect of disregarding the corporate fiction is that stockholders will be held
personally liable for the acts and contracts of the corporation, whose
existence, at least for the purpose of the particular situation involved, is
ignored.
It bears
stressing that the remaining individual respondents, together with respondent
Willy, incorporated MPEI. As incorporators and businessmen about to embark on a
new business venture involving a sizeable capital, the remaining individual respondents
should have known of Willy’s scheme to perpetrate the fraud against petitioner.
It is clear
to the Court that inequity would result if they do not attach personal
liability to all the individual respondents. Indeed, to allow the corporate
fiction to remain intact would only subvert the ends of justice.
