[ G.R. No.

198967, March 07, 2016 ]

JOSE EMMANUEL GUILLERMO, P. PETITIONER, VS. CRISANTO P. USON, RESPONDENT.

DECISION

PERALTA, J.:

Before the Court is a petition for review on certiorari under Rule 45 of the Rules of Court seeking to annul and set aside
the Court of Appeals Decision[1] dated June 8, 2011 and Resolution[2] dated October 7, 2011 in CA G.R. SP No. 115485,
which affirmed in toto the decision of the National Labor Relations Commission (NLRC).

The facts of the case follow.

On March 11, 1996, respondent Crisanto P. Uson (Uson) began his employment with Royal Class Venture Phils., Inc.
(Royal Class Venture) as an accounting clerk.[3] Eventually, he was promoted to the position of accounting supervisor,
with a salary of Php13,000.00 a month, until he was allegedly dismissed from employment on December 20, 2000.[4]

On March 2, 2001, Uson filed with the Sub-Regional Arbitration . Branch No. 1, Dagupan City, of the NLRC a Complaint
for Illegal Dismissal, with prayers for backwages, reinstatement, salaries and 13th month pay, moral and exemplary
damages and attorney's fees against Royal Class Venture.[5]

Royal Class Venture did not make an appearance in the case despite its receipt of summons.[6]

On May 15, 2001, Uson filed his Position Paper[7] as complainant.

On October 22, 2001, Labor Arbiter Jose G. De Vera rendered a Decision[8] in favor of the complainant Uson and ordering
therein respondent Royal Class Venture to reinstate him to his former position and pay his backwages, 13th month pay
as well as moral and exemplary damages and attorney's fees.

Royal Class Venture, as the losing party, did not file an appeal of the decision.[9] Consequently, upon Uson's motion, a
Writ of Execution[10] dated February 15, 2002 was issued to implement the Labor Arbiter's decision.

On May 17, 2002, an Alias Writ of Execution[11] was issued. But with the judgment still unsatisfied, a Second Alias Writ of
Execution[12] was issued on September 11, 2002.

Again, it was reported in the Sheriff's Return that the Second Alias Writ of Execution dated September 11, 2002
remained "unsatisfied." Thus, on November 14, 2002, Uson filed a Motion for Alias Writ of Execution and to Hold
Directors and Officers of Respondent Liable for Satisfaction of the Decision.[13] The motion quoted from a portion of the
Sheriffs Return, which states:

On September 12, 2002, the undersigned proceeded at the stated present business office address of the respondent
which is at Minien East, Sta. Barbara, Pangasinan to serve the writ of execution. Upon arrival, I found out that the
establishment erected thereat is not [in] the respondent's name but JOEL and SONS CORPORATION, a family corporation
owned by the Guillermos of which, Jose Emmanuel F. Guillermo the General Manager of the respondent, is one of the
stockholders who received the writ using his nickname "Joey," [and who] concealed his real identity and pretended that
he [was] the brother of Jose, which [was] contrary to the statement of the guard-on-duty that Jose and Joey [were] one
and the same person. The former also informed the undersigned that the respondent's (sic) corporation has been
dissolved.

On the succeeding day, as per [advice] by the [complainant's] counsel that the respondent has an account at the Bank of
Philippine Islands Magsaysay Branch, A.B. Fernandez Ave., Dagupan City, the undersigned immediately served a notice
of garnishment, thus, the bank replied on the same day stating that the respondent [does] not have an account with the
branch.[14]
On December 26, 2002, Labor Arbiter Irenarco R. Rimando issued an Order[15] granting the motion filed by Uson. The
order held that officers of a corporation are jointly and severally liable for the obligations of the corporation to the
employees and there is no denial of due process in holding them so even if the said officers were not parties to the case
when the judgment in favor of the employees was rendered.[16] Thus, the Labor Arbiter pierced the veil of corporate
fiction of Royal Class Venture and held herein petitioner Jose Emmanuel Guillermo (Guillermo), in his personal capacity,
jointly and severally liable with the corporation for the enforcement of the claims of Uson.[17]

Guillermo filed, by way of special appearance, a Motion for Reconsideration/To Set Aside the Order of December 26,
2002.[18] The same, however, was not granted as, this time, in an Order dated November 24, 2003, Labor Arbiter Niña Fe
S. Lazaga-Rafols sustained the findings of the labor arbiters before her and even castigated Guillenno for his unexplained
absence in the prior proceedings despite notice, effectively putting responsibility on Guillermo for the case's outcome
against him.[19]

On January 5, 2004, Guillermo filed a Motion for Reconsideration of the above Order,[20] but the same was promptly
denied by the Labor Arbiter in an Order dated January 7, 2004.[21]

On January 26, 2004, Uson filed a Motion for Alias Writ of Execution,[22] to which Guillermo filed a Comment and
Opposition on April 2, 2004.[23]

On May 18, 2004, the Labor Arbiter issued an Order[24] granting Uson's Motion for the Issuance of an Alias Writ of
Execution and rejecting Guillermo's arguments posed in his Comment and Opposition.

Guillermo elevated the matter to the NLRC by filing a Memorandum of Appeal with Prayer for a (Writ of) Preliminary
Injunction dated June 10, 2004.[25]

In a Decision[26] dated May 11, 2010, the NLRC dismissed Guillermo's appeal and denied his prayers for injunction.

On August 20, 2010, Guillermo filed a Petition for Certiorari[27] before the Court of Appeals, assailing the NLRC decision.

On June 8, 2011, the Court of Appeals rendered its assailed Decision[28] which denied Guillermo's petition and upheld all
the findings of the NLRC.

The appellate court found that summons was in fact served on Guillermo as President and General Manager of Royal
Class Venture, which was how the Labor Arbiter acquired jurisdiction over the company.[29] But Guillermo subsequently
refused to receive all notices of hearings and conferences as well as the order to file Royal Class Venture's position
paper.[30] Then, it was learned during execution that Royal Class Venture had been dissolved.[31] However, the Court of
Appeals held that although the judgment had become final and executory, it may be modified or altered "as when its
execution becomes impossible or unjust."[32] It also noted that the motion to hold officers and directors like Guillermo
personally liable, as well as the notices to hear the same, was sent to them by registered mail, but no pleadings were
submitted and no appearances were made by anyone of them during the said motion's pendency.[33] Thus, the court
held Guillermo liable, citing jurisprudence that hold the president of the corporation liable for the latter's obligation to
illegally dismissed employees.[34] Finally, the court dismissed Guillermo's allegation that the case is an intra-corporate
controversy, stating that jurisdiction is determined by the allegations in the complaint and the character of the relief
sought.[35]

From the above decision of the appellate court, Guillermo filed a Motion for Reconsideration[36] but the same was again
denied by the said court in the assailed Resolution[37] dated October 7, 2011.

Hence, the instant petition.

Guillermo asserts that he was impleaded in the case only more than a year after its Decision had become final and
executory, an act which he claims to be unsupported in law and jurisprudence.[38] He contends that the decision had
become final, immutable and unalterable and that any amendment thereto is null and void.[39] Guillermo assails the so-
called "piercing the veil" of corporate fiction which allegedly discriminated against him when he alone was belatedly
impleaded despite the existence of other directors and officers in Royal Class Venture.[40] He also claims that the Labor
Arbiter has no jurisdiction because the case is one of an intra-corporate controversy, with the complainant Uson also
claiming to be a stockholder and director of Royal Class Venture.[41]

In his Comment,[42] Uson did not introduce any new arguments but merely cited verbatim the disquisitions of the Court
of Appeals to counter Guillermo's assertions in his petition.

To resolve the case, the Court must confront the issue of whether an officer of a corporation may be included as
judgment obligor in a labor case for the first time only after the decision of the Labor Arbiter had become final and
executory, and whether the twin doctrines of "piercing the veil of corporate fiction" and personal liability of company
officers in labor cases apply.

The petition is denied.

In the earlier labor cases of Claparols v. Court of Industrial Relations[43] and A.C. Ransom Labor Union-CCLU v.
NLRC,[44] persons who were not originally impleaded in the case were, even during execution, held to be solidarity liable
with the employer corporation for the latter's unpaid obligations to complainant-employees. These included a newly-
formed corporation which was considered a mere conduit or alter ego of the originally impleaded corporation, and/or
the officers or stockholders of the latter corporation.[45]Liability attached, especially to the responsible officers, even
after final judgment and during execution, when there was a failure to collect from the employer corporation the
judgment debt awarded to its workers.[46] In Naguiat v. NLRC,[47] the president of the corporation was found, for the first
time on appeal, to be solidarily liable to the dismissed employees. Then, in Reynoso v. Court of Appeals,[48] the veil of
corporate fiction was pierced at the stage of execution, against a corporation not previously impleaded, when it was
established that such corporation had dominant control of the original party corporation, which was a smaller company,
in such a manner that the latter's closure was done by the former in order to defraud its creditors, including a former
worker.

The rulings of this Court in A.C. Ransom, Naguiat, and Reynoso, however, have since been tempered, at least in the
aspects of the lifting of the corporate veil and the assignment of personal liability to directors, trustees and officers in
labor cases. The subsequent cases of McLeod v. NLRC,[49] Spouses Santos v. NLRC[50] and Carag v. NLRC,[51] have all
established, save for certain exceptions, the primacy of Section 31[52] of the Corporation Code in the matter of assigning
such liability for a corporation's debts, including judgment obligations in labor cases. According to these cases, a
corporation is still an artificial being invested by law with a personality separate and distinct from that of its stockholders
and from that of other corporations to which it may be connected.[53] It is not in every instance of inability to collect
from a corporation that the veil of corporate fiction is pierced, and the responsible officials are made liable. Personal
liability attaches only when, as enumerated by the said Section 31 of the Corporation Code, there is a wilfull and
knowing assent to patently unlawful acts of the corporation, there is gross negligence or bad faith in directing the affairs
of the corporation, or there is a conflict of interest resulting in damages to the corporation.[54] Further, in another labor
case,Pantranco Employees Association (PEA-PTGWO), et al. v. NLRC, et al.,[55] the doctrine of piercing the corporate veil
is held to apply only in three (3) basic areas, namely: ( 1) defeat of public convenience as when the corporate fiction is
used as a vehicle for the evasion of an existing obligation; (2) fraud cases or when the corporate entity is used to justify a
wrong, protect fraud, or defend a crime; or (3) alter ego cases, where a corporation is merely a farce since it is a mere
alter ego or business conduit of a person, or where the corporation is so organized and controlled and its affairs are so
conducted as to make it merely an instrumentality, agency, conduit or adjunct of another corporation. In the absence of
malice, bad faith, or a specific provision of law making a corporate officer liable, such corporate officer cannot be made
personally liable for corporate liabilities.[56] Indeed, in Reahs Corporation v. NLRC,[57] the conferment of liability on
officers for a corporation's obligations to labor is held to be an exception to the general doctrine of separate personality
of a corporation.

It also bears emphasis that in cases where personal liability attaches, not even all officers are made accountable. Rather,
only the "responsible officer," i.e., the person directly responsible for and who "acted in bad faith" in committing the
illegal dismissal or any act violative of the Labor Code, is held solidarily liable, in cases wherein the corporate veil is
pierced.[58] In other instances, such as cases of so-called corporate tort of a close corporation, it is the person "actively
engaged" in the management of the corporation who is held liable.[59] In the absence of a clearly identifiable officer(s)
directly responsible for the legal infraction, the Court considers the president of the corporation as such officer.[60]

The common thread running among the aforementioned cases, however, is that the veil of corporate fiction can be
pierced, and responsible corporate directors and officers or even a separate but related corporation, may be impleaded
and held answerable solidarily in a labor case, even after final judgment and on execution, so long as it is established
that such persons have deliberately used the corporate vehicle to unjustly evade the judgment obligation, or have
resorted to fraud, bad faith or malice in doing so. When the shield of a separate corporate identity is used to commit
wrongdoing and opprobriously elude responsibility, the courts and the legal authorities in a labor case have not
hesitated to step in and shatter the said shield and deny the usual protections to the offending party, even after final
judgment. The key element is the presence of fraud, malice or bad faith. Bad faith, in this instance, does not connote
bad judgment or negligence but imports a dishonest purpose or some moral obliquity and conscious doing of wrong; it
means breach of a known duty through some motive or interest or ill will; it partakes of the nature of fraud. [61]

As the foregoing implies, there is no hard and fast rule on when corporate fiction may be disregarded; instead, each case
must be evaluated according to its peculiar circumstances.[62] For the case at bar, applying the above criteria, a finding of
personal and solidary liability against a corporate officer like Guillermo must be rooted on a satisfactory showing of
fraud, bad

faith or malice, or the presence of any of the justifications for disregarding the corporate fiction. As stated
in McLeod,[63] bad faith is a question of fact and is evidentiary, so that the records must first bear evidence of malice
before a finding of such may be made.

It is our finding that such evidence exists in the record. Like the A. C. Ransom, and Naguiat cases, the case at bar involves
an apparent family corporation. As in those two cases, the records of the present case bear allegations and evidence
that Guillermo, the officer being held liable, is the person responsible in the actual running of the company and for the
malicious and illegal dismissal of the complainant; he, likewise, was shown to have a role in dissolving the original
obligor company in an obvious "scheme to avoid liability" which jurisprudence has always looked upon with a suspicious
eye in order to protect the rights of labor.[64]

Part of the evidence on record is the second page of the verified Position Paper of complainant (herein respondent)
Crisanto P. Uson, where it was clearly alleged that Uson was "illegally dismissed by the President/General Manager of
respondent corporation (herein petitioner) Jose Emmanuel P. Guillermo when Uson exposed the practice of the said
President/General Manager of dictating and undervaluing the shares of stock of the corporation."[65] The statement is
proof that Guillermo was the responsible officer in charge of running the company as well as the one who dismissed
Uson from employment. As this sworn allegation is uncontroverted - as neither the company nor Guillermo appeared
before the Labor Arbiter despite the service of summons and notices - such stands as a fact of the case, and now
functions as clear evidence of Guillermo's bad faith in his dismissal of Uson from employment, with the motive
apparently being anger at the latter's reporting of unlawful activities.

Then, it is also clearly reflected in the records that it was Guillermo himself, as President and General Manager of the
company, who received the summons to the case, and who also subsequently and without justifiable cause refused to
receive all notices and orders of the Labor Arbiter that followed.[66] This makes Guillermo responsible for his and his
company's failure to participate in the entire proceedings before the said office. The fact is clearly narrated in the
Decision and Orders of the Labor Arbiter, Uson's Motions for the Issuance of Alias Writs of Execution, as well as in the
Decision of the NLRC and the assailed Decision of the Court of Appeals,[67]which Guillermo did not dispute in any of his
belated motions or pleadings, including in his petition for certiorari before the Court of Appeals and even in the petition
currently before this Court.[68] Thus, again, the same now stands as a finding of fact of the said lower tribunals which
binds this Court and which it has no power to alter or revisit.[69] Guillermo's knowledge of the case's filing and existence
and his unexplained refusal to participate in it as the responsible official of his company, again is an indicia of his bad
faith and malicious intent to evade the judgment of the labor tribunals.

Finally, the records likewise bear that Guillermo dissolved Royal Class Venture and helped incorporate a new firm,
located in the same address as the former, wherein he is again a stockl1older. This is borne by the Sherif11s Return
which reported: that at Royal Class Venture's business address at Minien East, Sta. Barbara, Pangasinan, there is a new
establishment named "Joel and Sons Corporation," a family corporation owned by the Guillermos in which Jose
Emmanuel F. Guillermo is again one of the stockholders; that Guillermo received the writ of execution but used the
nickname "Joey" and denied being Jose Emmanuel F. Guillermo and, instead, pretended to be Jose's brother; that the
guard on duty confirmed that Jose and Joey are one and the same person; and that the respondent corporation Royal
Class Venture had been dissolved.[70] Again, the facts contained in the Sheriffs Return were not disputed nor
controverted by Guillermo, either in the hearings of Uson's Motions for Issuance of Alias Writs of Execution, in
subsequent motions or pleadings, or even in the petition before this Court. Essentially, then, the facts form part of the
records and now stand as further proof of Guillermo's bad faith and malicious intent to evade the judgment obligation.

The foregoing clearly indicate a pattern or scheme to avoid the obligations to Uson and frustrate the execution of the
judgment award, which this Court, in the interest of justice, will not countenance.

As for Guillermo's assertion that the case is an intra-corporate controversy, the Court sustains the finding of the
appellate court that the nature of an action and the jurisdiction of a tribunal are determined by the allegations of the
complaint at the time of its filing, irrespective of whether or not the plaintiff is entitled to recover upon all or some of
the claims asserted therein.[71] Although Uson is also a stockholder and director of Royal Class Venture, it is settled in
jurisprudence that not all conflicts between a stockholder and the corporation are intra-corporate; an examination of
the complaint must be made on whether the complainant is involved in his capacity as a stockholder or director, or as an
employee.[72] If the latter is found and the dispute does not meet the test of what qualities as an intra-corporate
controversy, then the case is a labor case cognizable by the NLRC and is not within the jurisdiction of any other
tribunal.[73] In the case at bar, Uson's allegation was that he was maliciously and illegally dismissed as an Accounting
Supervisor by Guillermo, the Company President and General Manager, an allegation that was not even disputed by the
latter nor by Royal Class Venture. It raised no intra-corporate relationship issues between him and the corporation or
Guillermo; neither did it raise any issue regarding the regulation of the corporation. As correctly found by the appellate
court, Uson's complaint and redress sought were centered alone on his dismissal as an employee, and not upon any
other relationship he had with the company or with Guillermo. Thus, the matter is clearly a labor dispute cognizable by
the labor tribunals.

WHEREFORE, the petition is DENIED. The Court of Appeals Decision dated June 8, 2011 and Resolution dated October 7,
2011 in CA G.R. SP No. 115485 are AFFIRMED.

SO ORDERED
[ GR No. 184666, Jun 27, 2016 ]

REPUBLIC, v. MEGA PACIFIC ESOLUTIONS +

DECISION

SERENO, C.J.:

The instant case is an offshoot of this Court's Decision dated 13 January 2004 (2004 Decision) in a related case
entitled Information Technology Foundation of the Philippines v. Commission on Elections.[1]

In the 2004 case, We 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.

The present case involves the attempt of petitioner Republic of the Philippines to cause the attachment of the
properties owned by respondent MPEI, as well as by its incorporators and stockholders (individual respondents in this
case), in order to secure petitioner's interest and to ensure recovery of the payments it made to respondents for the
invalidated automation contract.

At bench is a Rule 45 Petition assailing the Amended Decision dated 22 September 2008 (Amended Decision) issued by
the Court of Appeals (CA) in CA-G.R. SP No. 95988.[2] In said Amended Decision, the CA directed the remand of the case
to the Regional Trial Court of Makati City, Branch 59 (RTC Makati) for the reception of evidence in relation to petitioner's
application for the issuance of a writ of preliminary attachment. The CA had reconsidered and set aside its previous
Decision dated 31 January 2008 (First Decision)[3] entitling petitioner to the issuance of said writ.

Summarized below are the relevant facts of the case, some of which have already been discussed in this Court's 2004
Decision:

The Facts

Republic Act No. 8436 authorized the COMELEC to use an automated election system for the May 1998 elections.
However, the automated system failed to materialize and votes were canvassed manually during the 1998 and the 2001
elections.

For the 2004 elections, the COMELEC again attempted to implement the automated election system. For this purpose, it
invited bidders to apply for the procurement of supplies, equipment, and services. Respondent MPEI, as lead company,
purportedly formed a joint venture - known as the Mega Pacific Consortium (MPC) - together with We Solv, SK C & C,
ePLDT, Election.com and Oracle. Subsequently, MPEI, on behalf of MPC, submitted its bid proposal to COMELEC.

The COMELEC evaluated various bid offers and subsequently found MPC and another company eligible to participate in
the next phase of the bidding process.[4] The two companies were referred to the Department of Science and
Technology (DOST) for technical evaluation. After due assessment, the Bids and Awards Committee (BAC) recommended
that the project be awarded to MPC. The COMELEC favorably acted on the recommendation and issued Resolution No.
6074, which awarded the automation project to MPC.

Despite the award to MPC, the COMELEC and MPEI executed on 2 June 2003 the Automated Counting and Canvassing
Project Contract (automation contract)[5] for the aggregate amount of P1,248,949,088. MPEI agreed to supply and
deliver 1,991 units of ACMs and such other equipment and materials necessary for the computerized electoral system in
the 2004 elections. Pursuant to the automation contract, MPEI delivered 1,991 ACMs to the COMELEC. The latter, for its
part, made partial payments to MPEI in the aggregate amount of P1.05 billion.

The full implementation of the automation contract was rendered impossible by the fact that, after a painstaking legal
battle, this Court in its 2004 Decision declared the contract null and void.[6] We held that the COMELEC committed a
clear violation of law and jurisprudence, as well as a reckless disregard of its own bidding rules and procedure. In
addition, the COMELEC entered into the contract with inexplicable haste, and without adequately checking and
observing mandatory financial, technical, and legal requirements. In a subsequent Resolution, We summarized the
COMELEC's grave abuse of discretion as having consisted of the following:[7]

1. By a formal Resolution, it awarded the project to "Mega Pacific Consortium," an entity that had not participated
in the bidding. Despite this grant, Comelec entered into the actual Contract with "Mega Pacific eSolutions, Inc."
(MPEI), a company that joined the bidding process but did not meet the eligibility requirements.

2. Comelec accepted and irregularly paid for MPEI's ACMs that had failed the accuracy requirement of 99.9995
percent set up by the Comelec bidding rules. Acknowledging that this rating could have been too steep, the
Court nonetheless noted that "the essence of public bidding is violated by the practice of requiring very high
standards or unrealistic specifications that cannot be met, x x x only to water them down after the award is
made. Such scheme, which discourages the entry ofbona fide bidders, is in fact a sure indication of fraud in
the bidding, designed to eliminate fair competition."

3. The software program of the counting machines likewise failed to detect previously downloaded precinct results
and to prevent them from being reentered. This failure, which has not been corrected x x x, would have allowed
unscrupulous persons to repeatedly feed into the computers the results favorable to a particular candidate, an
act that would have translated into massive election fraud by just a few key strokes.

4. Neither were the ACMs able to print audit trails without loss of data - a mandatory requirement under Section 7
of Republic Act No. 8436. Audit trails would enable the Comelec to document the identities of the ACM
operators responsible for data entry and downloading, as well as the times when the various data were
processed, in order to forestall fraud and to identify the perpetrators. The absence of audit trails would have
posed a serious threat to free and credible elections.

5. Comelec failed to explain satisfactorily why it had ignored its own bidding rules and requirements. It admitted
that the software program used to test the ACMs was merely a "demo" version, and that the final one to be
actually used in the elections was still being developed. By awarding the Contract and irregularly paying for the
supply of the ACMs without having seen — much less, evaluated — the final product being purchased, Comelec
desecrated the law on public bidding. It would have allowed the winner to alter its bid substantially, without any
public bidding.

All in all, Comelec subverted the essence of public bidding: to give the public an opportunity for fair competition and a
clear basis for a precise comparison of bids.[8] (Emphasis supplied)
As a consequence of the nullification of the automation contract, We directed the Office of the Ombudsman to
determine the possible criminal liability of persons responsible for the contract.[9] This Court likewise directed the Office
of the Solicitor General to protect the government from the ill effects of the illegal disbursement of public funds in
relation to the automation contract.[10]

After the declaration of nullity of the automation contract, the following incidents transpired:

1. Private respondents in the 2004 case moved for reconsideration of the 2004 Decision, but the motion was
denied by this Court in a Resolution dated 17 February 2004 (2004 Resolution).[11]

2. The COMELEC filed a "Most Respectful Motion for Leave to Use the Automated Counting Machines in the
Custody of the Commission on Elections for use in the 8 August 2005 Elections in the Autonomous Region for
 Muslim Mindanao" dated 9 December 2004 (Motion for Leave to Use ACMs), which was denied by this Court in
its Resolution dated 15 June 2005 (2005 Resolution).

3. Atty. Romulo B. Macalintal (Macalintal) filed an "Omnibus Motion for Leave of Court (1) to Reopen the Case; and
(2) to Intervene and Admit the Attached Petition in Intervention," which was denied by this Court in its
Resolution dated 22 August 2006 (2006 Resolution); and

4. Respondent MPEI filed a Complaint for Damages[12] (Complaint) with the RTC Makati, from which the instant
case arose.

The above-mentioned incidents are discussed in more detail below.

BACKGROUND PROCEEDINGS

Private respondents' Motion for Reconsideration

Private respondents in the 2004 case moved for reconsideration of the 2004 Decision. Aside from reiterating the
procedural and substantive arguments they had raised, they also argued that the 2004 Decision had exposed them to
possible criminal prosecution.[13]

This Court denied the motion in its 2004 Resolution and ruled that no prejudgment had been made on private
respondents' criminal liability. We further ruled that although the 2004 Decision stated that the Ombudsman shall
"determine the criminal liability, if any, of the public officials (and conspiring private individuals, if any) involved in the
subject Resolution and Contract," We did not make any premature conclusion on any wrongdoing, but precisely directed
the Ombudsman to make that determination after conducting appropriate proceedings and observing due process.

Similarly, it appears from the record that several criminal and administrative Complaints had indeed been filed with the
Ombudsman in relation to the declaration of nullity of the automation contract.[14] The Complaints were filed against
several public officials and the individual respondents in this case.[15]

In a Resolution issued on 28 June 2006,[16] the Ombudsman recommended the filing of informations before the
Sandiganbayan against some of the public officials and the individual respondents[17] for violation of Section 3(e) of
Republic Act No. 3019 (the Anti-Graft and Corrupt Practices Act). However, on 27 September 2006,[18] upon
reconsideration, the Ombudsman reversed its earlier ruling in a Supplemental Resolution (September Resolution),
directing the dismissal of the criminal cases against the public officials, as well as the individual respondents, for lack of
probable cause.[19]

With this development, a Petition for Certiorari was filed with this Court on 13 October 2006 and docketed as G.R. No.
174777.[20] In the Petition, several individuals[21] assailed the September Resolution of the Ombudsman finding no
probable cause to hold respondents criminally liable. The case remains pending with this Court as of this date.

COMELEC's Motion for Leave to Use ACMs in the ARMM Elections

The COMELEC filed a motion with this Court requesting permission to use the 1,991 ACMs previously delivered by
respondent MPEI, for the ARMM elections, then slated to be held on 8 August 2005. In its motion, the COMELEC claimed
that automation of the ARMM elections was mandated by Republic Act No. 9333, and since the government had no
available funds to finance the automation of those elections, the ACMs could be utilized for the 2005 elections.

This Court denied the Motion in Our 2005 Resolution. We ruled that allowing the use of the ACMs would have the effect
of illegally reversing and subverting a final decision We had promulgated. We further ruled that the COMELEC was
asking for permission to do what it had precisely been prohibited from doing under the 2004 Decision. This Court also
ruled that the grant of the motion would bar or jeopardize the recovery of government funds paid to respondents.
Considering that the COMELEC did not present any evidence to prove that the defects had been addressed, We held that
the use of the ACMs and the software would expose the ARMM elections to the same electoral ills pointed out in the
2004 Decision.

Atty. Macalintal's Omnibus Motion

Atty. Romulo Macalintal sought to reopen the 2004 case in order that he may be allowed to intervene as a taxpayer and
citizen. His purpose for intervening was to seek another testing of the ACMs with the ultimate objective of allowing the
COMELEC to use them, this time for the 2007 national elections.

This Court denied his motion in Our 2006 Resolution, ruling that Atty. Macalintal failed to demonstrate that certain
supervening events and legal circumstances had transpired to justify the reliefs sought. We in fact found that, after Our
determination that the ACMs had failed to pass legally mandated technical requirements in 2004, they were simply put
in storage. The ACMs had remained idle and unused since the last evaluation, at which they failed to hurdle crucial tests.
Consequently, We ruled that if the ACMs were not good enough for the 2004 national elections or the 2005 ARMM
elections, then neither would they be good enough for the 2007 national elections, considering that nothing was done
to correct the flaws that had been previously underscored in the 2004 Decision. We held that granting the motion would
be tantamount to rendering the 2004 Decision totally ineffective and nugatory.

Moreover, because of our categorical ruling that the whole bidding process was void and fraudulent, the proposal to use
the illegally procured, demonstratively defective, and fraud-prone ACMs was rendered nonsensical. Thus:

We stress once again that the Contract entered into by the Comelec for the supply of the ACMs was declared VOID by
the Court in its Decision, because of clear violations of law and jurisprudence, as well as the reckless disregard by the
Commission of its own bidding rules and procedure. In addition, the poll body entered into the Contract with
inexplicable haste, without adequately checking and observing mandatory financial, technical and legal requirements. As
explained in our Decision, Comelec's gravely abusive acts consisted of the following:

xxxx

To muddle the issue, Comelec keeps on saying that the "winning" bidder presented a lower price than the only other
bidder. It ignored the fact that the whole bidding process was VOID and FRAUDULENT. How then could there have
been a "winning" bid?[22] (Emphasis supplied)
THE INSTANT CASE

Complaint for Damages filed by respondents with the RTC Makati and petitioner's Answer with Counterclaim, with an
application for a writ of preliminary attachment, from which the instant case arose

Upon the finality of the declaration of nullity of the automation contract, respondent MPEI filed a Complaint for
Damages before the RTC Makati, arguing that, notwithstanding the nullification of the automation contract, the
COMELEC was still bound to pay the amount of P200,165,681.89. This amount represented the difference between the
value of the ACMs and the support services delivered on one hand, and on the other, the payment previously made by
the COMELEC.[23]

Petitioner filed its Answer with Counterclaim[24] and argued that respondent MPEI could no longer recover the unpaid
balance from the void automation contract, since the payments made were illegal disbursements of public funds. It
contended that a null and void contract vests no rights and creates no obligations, and thus produces no legal effect at
all. Petitioner further posited that respondent MPEI could not hinge its claim upon the principles of unjust enrichment
and quasi-contract, because such presume that the acts by which the authors thereof become obligated to each other
are lawful, which was not the case herein.[25]

By way of a counterclaim, petitioner demanded from respondents the return of the payments made pursuant to the
automation contract.[26] It argued that individual respondents, being the incorporators of MPEI, likewise ought to be
impleaded and held accountable for MPEI's liabilities. The creation of MPC was, after all, merely an ingenious scheme to
feign eligibility to bid.[27]

Pursuant to Section 1(d) of Rule 57 of the Rules of Court, petitioner prayed for the issuance of a writ of preliminary
attachment against the properties of MPEI and individual respondents. The application was grounded upon the
fraudulent misrepresentation of respondents as to their eligibility to participate in the bidding for the COMELEC
automation project and the failure of the ACMs to comply with mandatory technical requirements.[28]

Subsequently, the trial court denied the prayer for the issuance of a writ of preliminary attachment,[29] ruling that there
was an absence of factual allegations as to how the fraud was actually committed.

The allegations of petitioner were found to be unreliable, as the latter merely copied from the declarations of the
Supreme Court inInformation Technology Foundation of the Phils, v. COMELEC the factual allegations of MPEI's lack of
qualification and noncompliance with bidding requirements. The trial court further ruled that the allegations of fraud on
the part of MPEI were not supported by the COMELEC, the office in charge of conducting the bidding for the election
automation contract. It was likewise held that there was no evidence that respondents harbored a preconceived plan
not to comply with the obligation; neither was there any evidence that MPEI's corporate fiction was used to perpetrate
fraud. Thus, it found no sufficient basis to pierce the veil of corporate fiction or to cause the attachment of the
properties owned by individual respondents.

Petitioner moved to set aside the trial court's Order denying the writ of attachment,[30] but its motion was denied.[31]

Appeal before the CA and the First Decision

Aggrieved, petitioner filed an appeal with the CA, arguing that the trial court had acted with grave abuse of discretion in
denying the application for a writ of attachment.

As mentioned earlier, the CA in its First Decision[32] reversed and set aside the trial court's Orders and ruled that there
was sufficient basis for the issuance of a writ of attachment in favor of petitioner.

The appellate court explained that the averments of petitioner in support of the latter's application actually reflected
pertinent conclusions reached by this Court in its 2004 Decision. It held that the trial court erred in disregarding the
following findings of fact, which remained unaltered and unreversed: (1) COMELEC bidding rules provided that the
eligibility and capacity of a bidder may be proved through financial documents including, among others, audited
financial statements for the last three years; (2) MPEI was incorporated only on 27 February 2003, or 11 days prior to
the bidding itself; (3) in an attempt to disguise its ineligibility, MPEI participated in the bidding as lead company of MPC,
a putative consortium, and submitted the incorporation papers and financial statements of the members of the
consortium; and (4) no proof of the joint venture agreement, consortium agreement, memorandum of agreement, or
business plan executed among the members of the purported consortium was ever submitted to the COMELEC.[33]

According to the CA, the foregoing were glaring indicia or badges of fraud, which entitled petitioner to the issuance of
the writ. It further ruled that there was sufficient reason to pierce the corporate veil of MPEI. Thus, the CA allowed the
attachment of the properties belonging to both MPEI and individual respondents.[34] The CA likewise ruled that even if
the COMELEC committed grave abuse of discretion in capriciously disregarding the rules on public bidding, this should
not preclude or deter petitioner from pursuing its claim against respondents. After all, the State is not estopped by the
mistake of its officers and employees.[35]

Respondents moved for reconsideration[36] of the First Decision of the CA.

Motion for Reconsideration before the CA and the Amended Decision

Upon review, the CA reconsidered its First Decision[37] and directed the remand of the case to the RTC Makati for the
reception of evidence of allegations of fraud and to determine whether attachment should necessarily issue.[38]
The CA explained in its Amended Decision that respondents could not be considered to have fostered a fraudulent
intent to dishonor their obligation, since they had delivered 1,991 units of ACMs.[39] It directed petitioner to present
proof of respondents' intent to defraud COMELEC during the execution of the automation contract.[40] The CA likewise
emphasized that the Joint Affidavit submitted in support of petitioner's application for the writ contained allegations
that needed to be substantiated.[41] It added that proof must likewise be adduced to verify the requisite fraud that
would justify the piercing of the corporate veil of respondent MPEI.[42]

The CA further clarified that the 2004 Decision did not make a definite finding as to the identities of the persons
responsible for the illegal disbursement or of those who participated in the fraudulent dealings.[43] It instructed the trial
court to consider, in its determination of whether the writ of attachment should issue, the illegal, imprudent and hasty
acts in awarding the automation contract by the COMELEC. In particular, these acts consisted of: (1) awarding the
automation contract to MPC, an entity that did not participate in the bidding; and (2) signing the actual automation
contract with respondent MPEI, the company that joined the bidding without meeting the eligibility requirement.[44]

Rule 45 Petition before Us

Consequently, petitioner filed the instant Rule 45 Petition,[45] arguing that the CA erred in ordering the remand of the
case to the trial court for the reception of evidence to determine the presence of fraud. Petitioner contends that this
Court's 2004 Decision was sufficient proof of the fraud committed by respondents in the execution of the voided
automation contract.[46] Respondents allegedly committed fraud by securing the automation contract, although MPEI
was not qualified to bid in the first place.[47] Their claim that the members of MPC bound themselves to the automation
contract was an indication of bad faith as the contract was executed by MPEI alone.[48] Neither could they deny that the
software submitted during the bidding process was not the same one that would be used on election day.[49] They could
not dissociate themselves from telltale signs such as purportedly supplying software that later turned out to be non-
existent.[50]

In their respective Comments, respondents Willy Yu, Bonnie Yu, Enrique Tansipek, and Rosita Tansipek counter[51] that
this Court never ruled that individual respondents were guilty of any fraud or bad faith in connection with the
automation contract, and that it was incumbent upon petitioner to present evidence on the allegations of fraud to
justify the issuance of the writ.[52] They likewise argue that the 2004 Decision cannot be invoked against them, since
petitioner and MPEI were co-respondents in the 2004 case and not adverse parties therein.[53] Respondents further
contend that the allegations of fraud are belied by their actual delivery of 1,991 units of ACMs to the COMELEC, which
they claim is proof that they never had any intention to evade performance.[54]

They further allege that this Court, in its 2004 Decision, even recognized that it had not found any wrongdoing on their
part, and that the Ombudsman had already made a determination that no probable cause existed with respect to
charges of violation of Anti-Graft and Corrupt Practices Act.[55]

Echoing the other respondents' arguments on the lack of particularity in the allegations of fraud,[56] respondents MPEI,
Johnson Wong, Bernard Fong, Pedro Tan, and Lauriano Barrios likewise argue that they were not parties to the 2004
case; thus, the 2004 Decision thereon is not binding on them.[57] Individual respondents likewise argue that the findings
of fact in the 2004 Decision were not conclusive,[58] considering that eight (8) of the fifteen (15) justices allegedly refused
to go along with the factual findings as stated in the majority opinion.[59] Thereafter, petitioner filed its Reply to the
Comments.[60]

Based on the submissions of both parties, the following issues are presented to this Court for resolution:

1. Whether petitioner has sufficiently established fraud on the part of respondents to justify the issuance of a writ
of preliminary attachment in its favor; and
 2. 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.

The Court's Ruling

The Petition is meritorious. A writ of preliminary attachment should issue in favor of petitioner over the properties of
respondents MPEI, Willy Yu (Willy) and the remaining individual respondents, namely: Bonnie S. Yu (Bonnie), Enrique T.
Tansipek (Enrique), Rosita Y. Tansipek (Rosita), Pedro O. Tan (Pedro), Johnson W. Fong (Johnson), Bernard I. Fong
(Bernard), and Lauriano Barrios (Lauriano). The bases for the writ are the following:

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 ACMs does not negate fraud on the part of respondents MPEI and Willy.

5. Estoppel does not lie against the state when it acts to rectify mistakes, errors or illegal acts of its officials and
agents.

6. The findings of the Ombudsman are not controlling in the instant case.

DISCUSSION

I.
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.

Petitioner argues that the findings of this Court in the 2004 Decision serve as sufficient basis to prove that, at the time of
the execution of the automation contract, there was fraud on the part of respondents that justified the issuance of a
writ of attachment. Respondents, however, argue the contrary. They claim that fraud had not been sufficiently
established by petitioner.

We rule in favor of petitioner. Fraud on the part of respondents MPEI and Willy, as well as of the other individual
respondents — Bonnie, Enrique, Rosita, Pedro, Johnson, Bernard, and Lauriano — has been established.

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 or properties 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.[61] The provisional remedy of attachment is available in order that the defendant may not dispose of the
property attached, and thus prevent the satisfaction of any judgment that may be secured by the plaintiff from the
former.[62]

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.[63] 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.[64]

Petitioner relied upon Section 1(d), Rule 57 of the Rules of Court as basis for its application for a writ of preliminary
attachment. This provision states:

Section 1. Grounds upon which attachment may issue. At the commencement of the action or at any time before entry
of judgment, a plaintiff or any proper party may have the property of the adverse party attached as security for the
satisfaction of any judgment that may be recovered in the following cases:

xxxx

(d) In an action against a party who has been guilty of a fraud in contracting the debt or incurring the obligation upon
which the action is brought, or in the performance thereof. (Emphasis supplied)
For a writ of preliminary attachment to issue under the above-quoted rule, the applicant must sufficiently show the
factual circumstances of the alleged fraud.[65] In Metro, Inc. v. Lara's Gift and Decors, Inc.,[66] We explained:

To sustain an attachment on this ground, it must be shown that the debtor in contracting the debt or incurring the
obligation intended to defraud the creditor. 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. To
constitute a ground for attachment in Section 1(d), Rule 57 of the Rules of Court, fraud should be committed upon
contracting the obligation sued upon. A debt is fraudulently contracted if at the time of contracting it the debtor has a
preconceived plan or intention not to pay, as it is in this case. x x x.

The applicant for a writ of preliminary attachment must sufficiently show the factual circumstances of the alleged fraud
because fraudulent intent cannot be inferred from the debtor's mere non-payment of the debt or failure to comply with
his obligation. (Emphasis supplied)
An amendment to the Rules of Court added the phrase "in the performance thereof" to include within the scope of the
grounds for issuance of a writ of preliminary attachment those instances relating to fraud in the performance of the
obligation.[67]

Fraud is a generic term that is used in various senses and assumes so many different degrees and forms that courts are
compelled to content themselves with comparatively few general rules for its discovery and defeat. For the same
reason, the facts and circumstances peculiar to each case are allowed to bear heavily on the conscience and judgment of
the court or jury in determining the presence or absence of fraud. In fact, the fertility of man's invention in devising new
schemes of fraud is so great that courts have always declined to define it, thus, reserving for themselves the liberty to
deal with it in whatever form it may present itself.[68]

Fraud may be characterized as the voluntary execution of a wrongful act or a wilful omission, while knowing and
intending the effects that naturally and necessarily arise from that act or omission.[69] In its general sense, fraud is
deemed to comprise anything calculated to deceive—including all acts and omission and concealment involving a breach
of legal or equitable duty, trust, or confidence justly reposed—resulting in damage to or in undue advantage over
another.[70] Fraud is also described as embracing all multifarious means that human ingenuity can device, and is resorted
to for the purpose of securing an advantage over another by false suggestions or by suppression of truth; and it includes
all surprise, trick, cunning, dissembling, and any other unfair way by which another is cheated.[71]

While fraud cannot be presumed, it need not be proved by direct evidence and can well be inferred from attendant
circumstances.[72]Fraud by its nature is not a thing susceptible of ocular observation or readily demonstrable physically;
it must of necessity be proved in many cases by inferences from circumstances shown to have been involved in the
transaction in question.[73]

In the case at bar, petitioner has sufficiently discharged the burden of demonstrating the commission of fraud by
respondent MPEI in the execution of the automation contract in the two ways that were enumerated earlier and
discussed below:

A. Respondent MPEI had perpetrated a scheme against petitioner to secure the automation contract by using MPC as
supposed bidder and eventually succeeding in signing the automation contract as MPEI alone, an entity which was
ineligible to bid in the first place.

To avoid any confusion relevant to the basis of fraud, We quote herein the pertinent portions of this Court's 2004
Decision with regard to the identity, existence, and eligibility of MPC as bidder:[74]

On the question of the identity and the existence of the real bidder, respondents insist that, contrary to petitioners'
allegations, the bidder was not Mega Pacific eSolutions, Inc. (MPEI), which was incorporated only on February 27, 2003,
or 11 days prior to the bidding itself. Rather, the bidder was Mega Pacific Consortium (MPC), of which MPEI was but a
part. As proof thereof, they point to the March 7, 2003 letter of intent to bid, signed by the president of MPEI allegedly
for and on behalf of MPC. They also call attention to the official receipt issued to MPC, acknowledging payment for the
bidding documents, as proof that it was the "consortium" that participated in the bidding process.

We do not agree. The March 7, 2003 letter, signed by only one signatory — "Willy U. Yu, President, Mega Pacific
eSolutions, Inc., (Lead Company/Proponent) For: Mega Pacific Consortium" — and without any further proof, does not
by itself prove the existence of the consortium. It does not show that MPEI or its president have been duly pre-
authorized by the other members of the putative consortium to represent them, to bid on their collective behalf and,
more important, to commit them jointly and severally to the bid undertakings. The letter is purely self-serving and
uncorroborated.

Neither does an official receipt issued to MPC, acknowledging payment for the bidding documents, constitute proof that
it was the purported consortium that participated in the bidding. Such receipts are issued by cashiers without any legally
sufficient inquiry as to the real identity or existence of the supposed payor.

To assure itself properly of the due existence (as well as eligibility and qualification) of the putative consortium,
Comelec's BAC should have examined the bidding documents submitted on behalf of MPC. They would have easily
discovered the following fatal flaws.

xxxx

The Eligibility Envelope was to contain legal documents such as articles of incorporation, x x x to establish the bidder's
financial capacity.

In the case of a consortium or joint venture desirous of participating in the bidding, it goes without saying that the
Eligibility Envelope would necessarily have to include a copy of the joint venture agreement, the consortium agreement
or memorandum of agreement — or a business plan or some other instrument of similar import — establishing the due
existence, composition and scope of such aggrupation. Otherwise, how would Comelec know who it was dealing with,
and whether these parties are qualified and capable of delivering the products and services being offered for bidding?

In the instant case, no such instrument was submitted to Comelec during the bidding process. x x x

xxxx

However, there is no sign whatsoever of any joint venture agreement, consortium agreement, memorandum of
agreement, or business plan executed among the members of the purported consortium.

The only logical conclusion is that no such agreement was ever submitted to the Comelec for its consideration,as part
of the bidding process.

It thus follows that, prior the award of the Contract, there was no documentary or other basis for Comelec to
conclude that a consortium had actually been formed amongst MPEI, SK C&C and WeSolv, along with Election.com
and ePLDT. Neither was there anything to indicate the exact relationships between and among these firms; their diverse
roles, undertakings and prestations, if any, relative to the prosecution of the project, the extent of their respective
investments (if any) in the supposed consortium or in the project; and the precise nature and extent of their respective
liabilities with respect to the contract being offered for bidding. And apart from the self-serving letter of March 7, 2003,
there was not even any indication that MPEI was the lead company duly authorized to act on behalf of the others.

xxxx

Hence, had the proponent MPEI been evaluated based solely on its own experience, financial and operational track
record or lack thereof, it would surely not have qualified and would have been immediately considered ineligible to
bid, as respondents readily admit.

xxxx

At this juncture, one might ask: What, then, if there are four MOAs instead of one or none at all? Isn't it enough that
there are these corporations coming together to carry out the automation project? Isn't it true, as respondent aver, that
nowhere in the RFP issued by Comelec is it required that the members of the joint venture execute a single written
agreement to prove the existence of a joint venture. x x x

xxxx

The problem is not that there are four agreements instead of only one. The problem is that Comelec never bothered to
check. It never based its decision on documents or other proof that would concretely establish the existence of the
claimed consortium or joint venture or agglomeration.

xxxx

True, copies of financial statements and incorporation papers of the alleged "consortium" members were submitted. But
these papers did not establish the existence of a consortium, as they could have been provided by the companies
concerned for purposes other than to prove that they were part of a consortium or joint venture.

xxxx

In brief, despite the absence of competent proof as to the existence and eligibility of the alleged consortium (MPC), its
capacity to deliver on the Contract, and the members' joint and several liability therefor, Comelec nevertheless
assumed that such consortium existed and was eligible. It then went ahead and considered the bid of MPC, to which
the Contract was eventually awarded, in gross violation of the former's own bidding rules and procedures contained
in its RFP. Therein lies Comclec's grave abuse of discretion.

Sufficiency of the Four Agreements

Instead of one multilateral agreement executed by, and effective and binding on, all the five "consortium members" —
as earlier claimed by Commissioner Tuason in open court — it turns out that what was actually executed were four
(4) separate and distinct bilateral Agreements. Obviously, Comelec was furnished copies of these Agreements
only after the bidding process had been terminated, as these were not included in the Eligibility Documents. x x x

xxxx

At this point, it must be stressed most vigorously that the submission of the four bilateral Agreements to
Comelec after the end of the bidding process did nothing to eliminate the grave abuse of discretion it hadalready
committed on April 15, 2003.
Deficiencies Have Not Been "Cured"

In any event, it is also claimed that the automation Contract awarded by Comelec incorporates all documents executed
by the "consortium" members, even if these documents are not referred to therein. x x x

xxxx

Thus, it is argued that whatever perceived deficiencies there were in the supplementary contracts - those entered into
by MPEI and the other members of the "consortium" as regards their joint and several undertakings — have been cured.
Better still, such deficiencies have supposedly been prevented from arising as a result of the above-quoted provisions,
from which it can be immediately established that each of the members of MPC assumes the same joint and several
liability as the other members.

The foregoing argument is unpersuasive. First, the contract being referred to, entitled "The Automated Counting and
Canvassing Project Contract," is between Comelec and MPEI, not the alleged consortium, MPC. To repeat, it isMPEI -
not MPC - that is a party to the Contract. Nowhere in that Contract is there any mention of a consortium or joint
venture, of members thereof, much less of joint and several liability. Supposedly executed sometime in May 2003, the
Contract bears a notarization date of June 30, 2003, and contains the signature of Willy U. Yu signing as president of
MPEI (not for and on behalf of MPC), along with that of the Comelec chair. It provides in Section 3.2 that MPEI (not
MPC) is to supply the Equipment and perform the Services under the Contract, in accordance with the appendices
thereof; nothing whatsoever is said about any consortium or joint venture or partnership.

xxxx

Eligibility of a Consortium Based on the Collective Qualifications of Its Members

Respondents declare that, for purposes of assessing the eligibility of the bidder, the members of MPC should be
evaluated on a collective basis. Therefore, they contend, the failure of MPEI to submit financial statements (on
account of its recent incorporation) should not by itself disqualify MPC, since the other members of the "consortium"
could meet the criteria set out in the RFP.

xxxx

Unfortunately, this argument seems to assume that the "collective" nature of the undertaking of the members of MPC,
their contribution of assets and sharing of risks, and the "community" of their interest in the performance of the
Contract entitle MPC to be treated as a joint venture or consortium; and to be evaluated accordingly on the basis of the
members' collective qualifications when, in fact, the evidence before the Court suggest otherwise.

xxxx

Going back to the instant case, it should be recalled that the automation Contract with Comelec was not executed by
the "consortium" MPC - or by MPEI for and on behalf of MPC - but by MPEI, period. The said Contract contains no
mention whatsoever of any consortium or members thereof. This fact alone seems to contradict all the suppositions
about a joint undertaking that would normally apply to a joint venture or consortium: that it is a commercial
enterprise involving a community of interest, a sharing of risks, profits and losses, and so on.

xxxx

To the Court, this strange and beguiling arrangement of MPEI with the other companies does not qualify them to be
treated as a consortium or joint venture, at least of the type that government agencies like the Comelec should be
dealing with. With more reason is it unable to agree to the proposal to evaluate the members of MPC on a collective
basis. (Emphases supplied)
These findings found their way into petitioner's application for a writ of preliminary attachment,[75] in which it claimed
the following as bases for fraud: (1) respondents committed fraud by securing the election automation contract and, in
order to perpetrate the fraud, by misrepresenting the actual bidder as MPC and MPEI as merely acting on MPC's behalf;
(2) while knowing that MPEI was not qualified to bid for the automation contract, respondents still signed and executed
the contract; and (3) respondents acted in bad faith when they claimed that they had bound themselves to the
automation contract, because it was not executed by MPC—or by MPEI on MPC's behalf—but by MPEI alone.[76]

We agree with petitioner that respondent MPEI committed fraud by securing the election automation contract; and, in
order to perpetrate the fraud, by misrepresenting that the actual bidder was MPC and not MPEI, which was only acting
on behalf of MPC. We likewise rule that respondent MPEI has defrauded petitioner, since the former still executed the
automation contract despite knowing that it was not qualified to bid for the same.

The established facts surrounding the eligibility, qualification and existence of MPC — and of MPEI for that matter —
and the subsequent execution of the automation contract with the latter, when all taken together, constitute badges of
fraud that We simply cannot ignore. MPC was considered an illegitimate entity, because its existence as a joint venture
had not been established. Notably, the essential document/s that would have shown its eligibility as a joint
venture/consortium were not presented to the COMELEC at the most opportune time, that is, during the qualification
stage of the bidding process. The concealment by respondent MPEI of the essential documents showing its eligibility to
bid as part a joint venture is too obvious to be missed. How could it not have known that the very document showing
MPC as a joint venture should have been included in their eligibility envelope?

Likewise notable is the fact that these supposed agreements, allegedly among the supposed consortium members,
were belatedlyprovided to the COMELEC after the bidding process had been terminated; these were not included in the
Eligibility Documents earlier submitted by MPC. Similarly, as found by this Court, these documents did not prove any
joint venture agreement among the parties in the first place, but were actually individual agreements executed by each
member of the supposed consortium with respondent MPEI.

More startling to the dispassionate mind is the incongruence between the supposed actual bidder MPC, on one hand,
and, on the other, respondent MPEI, which executed the automation contract. Significantly, respondent MPEI was not
even eligible and qualified to bid in the first place; and yet, the automation contract itself was executed and
signed singly by respondent MPEI, not on behalf of the purported bidder MPC, without any mention whatsoever of the
members of the supposed consortium.

From these established facts, We can surmise that in order to secure the automation contract, respondent MPEI
perpetrated a scheme against petitioner by using MPC as supposed bidder and eventually succeeding in signing the
automation contract as MPEI alone. Worse, it was respondent MPEI alone, an entity that was ineligible to bid in the first
place, that eventually executed the automation contract.

To a reasonable mind, the entire situation reeks of fraud, what with the misrepresentation of identity and
misrepresentation as to creditworthiness. It is in these kinds of fraudulent instances, when the ability to abscond is
greatest, to which a writ of attachment is precisely responsive.

Further, the failure to attach the eligibility documents is tantamount to failure on the part of respondent MPEI to
disclose material facts. That omission constitutes fraud.

Pursuant to Article 1339 of the Civil Code,[77] silence or concealment does not, by itself, constitute fraud, unless there is a
special duty to disclose certain facts, or unless the communication should be made according to good faith and the
usages of commerce.[78]

Fraud has been defined to include an inducement through insidious machination. Insidious machination refers to a
deceitful scheme or plot with an evil or devious purpose. Deceit exists where the party, with intent to deceive, conceals
or omits to state material facts and, by reason of such omission or concealment, the other party was induced to give
consent that would not otherwise have been given.[79]

One form of inducement is covered within the scope of the crime of estafa under Article 315, paragraph 2, of the
Revised Penal Code, in which, any person who defrauds another by using fictitious name, or falsely pretends to possess
power, influence, qualifications, property, credit, agency, business or imaginary transactions, or by means of similar
deceits executed prior to or simultaneously with the commission of fraud is held criminally liable. In Joson v.
People,[80] this Court explained the element of defraudation by means of deceit, by giving a definition of fraud and
deceit, in this wise:

What needs to be determined therefore is whether or not the element of defraudation by means of deceit has been
established beyond reasonable doubt.

In the case of People v. Menil, Jr., the Court has defined fraud and deceit in this wise:

Fraud, in its general sense, is deemed to comprise anything calculated to deceive, including all acts, omissions, and
concealment involving a breach of legal or equitable duty, trust, or confidence justly reposed, resulting in damage to
another, or by which an undue and unconscientious advantage is taken of another. It is a generic term embracing all
multifarious means which human ingenuity can devise, and which are resorted to by one individual to secure an
advantage over another by false suggestions or by suppression of truth and includes all surprise, trick, cunning,
dissembling and any unfair way by which another is cheated. On the other hand, deceit is the false representation of a
matter of fact, whether by words or conduct, by false or misleading allegations, or by concealment of that which
should have been disclosed which deceives or is intended to deceive another so that he shall act upon it to his legal
injury.(Emphases supplied)
For example, in People v. Comila,[81] both accused-appellants therein represented themselves to the complaining
witnesses to have the capacity to send them to Italy for employment, even as they did not have the authority or license
for the purpose. It was such misrepresentation that induced the complainants to part with their hard-earned money for
placement and medical fees. Both accused-appellants were criminally held liable for estafa.

In American jurisprudence, fraud may be predicated on a false introduction or identification.[82] In Union Co. v.
Cobb,[83] the defendant therein procured the merchandise by misrepresenting that she was Mrs. Taylor Ray and at
another time she was Mrs. Ben W. Chiles, and she forged their name on charge slips as revealed by the exhibits of the
plaintiff. The sale of the merchandise was induced by these representations, resulting in injury to the plaintiff.

In Raser v. Moomaw,[84] it was ruled that the essential elements necessary to constitute actionable fraud and deceit
were present in the complaint. It was alleged that, to induce plaintiff to procure a loan, defendant introduced him to a
woman who was falsely represented to be Annie L. Knowles of Seattle, Washington, the owner of the property, and that
plaintiff had no means of ascertaining her true identity. On the other hand, defendant knew, or in the exercise of
reasonable caution should have known, that she was an impostor, and that plaintiff relied on the representations,
induced his client to make the loan, and had since been compelled to repay it. In the same case, the Court ruled that
false representations as to the identity of a person are actionable, if made to induce another to act thereon, and such
other does so act thereon to his prejudice.[85]

In this case, analogous to the fraud and deceit exhibited in the above-mentioned circumstances, respondent MPEI had
no excuse not to be forthright with the documents showing MPC's eligibility to bid as a joint venture. The Invitation to
Bid, as quoted in our 2004 Decision, could not have been any clearer when it stated that only bids from qualified
entities, such as a joint venture, would be entertained:

INVITATION TO APPLY FOR ELIGIBILITY AND TO BID

The Commission on Elections (COMELEC), pursuant to the mandate of Republic Act Nos. 8189 and 8436, invites
interested offerers, vendors, suppliers or lessors to apply for eligibility and to bid for the procurement by purchase,
lease, lease with option to purchase, or otherwise, supplies, equipment, materials and services needed for a
comprehensive Automated Election System, consisting of three (3) phases: (a) registration/verification of voters, (b)
automated counting and consolidation of votes, and (c) electronic transmission of election results, with an approved
budget of TWO BILLION FIVE HUNDRED MILLION (Php2,500,000,000) Pesos.

Only bids from the following entities shall be entertained:

xxxx

d. Manufacturers, suppliers and/or distributors forming themselves into a joint venture, i.e., a group of two (2) or
more manufacturers, suppliers and/or distributors that intend to be jointly and severally responsible or liable for a
particular contract, provided that Filipino ownership thereof shall be at least sixty percent (60%); and

e. Cooperatives duly registered with the Cooperatives Development Authority.[86] (Emphases supplied)
No reasonable mind would argue that documents showing the very existence of a joint venture need not be included in
the bidding envelope showing its existence, qualification, and eligibility to undertake the project, considering that the
purpose of prequalification in any public bidding is to determine, at the earliest opportunity, the ability of the bidder to
undertake the project.[87]

As found by this Court in its 2004 Decision, it appears that the documents that were submitted after the bidding, which
respondents claimed would prove the existence of the relationship among the members of the consortium, were
actually separate agreements individually executed by the supposed members with MPEI. We had ruled that these
documents were highly irregular, considering that each of the four different and separate bilateral Agreements was valid
and binding only between MPEI and the other contracting party, leaving the other "consortium" members total
strangers thereto. Consequently, the other consortium members had nothing to do with one another, as each one dealt
only with MPEI.[88]

Considering that they merely showed MPEI's individual agreements with the other supposed members, these
agreements confirm to our mind the fraudulent intent on the part of respondent MPEI to deceive the relevant officials
about MPC. The intent was to cure the deficiency of the winning bid, which intent miserably failed. Said this Court:[89]

We are unconvinced, PBAC was guided by the rules, regulations or guidelines existing before the bid proposals were
opened on November 10, 1989. The basic rule in public bidding is that bids should be evaluated based on the required
documents submitted before and not after the opening of bids. Otherwise, the foundation of a fair and competitive
public bidding would be defeated. Strict observance of the rules, regulations, and guidelines of the bidding process is
the only safeguard to a fair, honest and competitive public bidding.

In underscoring the Court's strict application of the pertinent rules, regulations and guidelines of the public bidding
process, We have ruled in C & C Commercial vs. Menor (L-28360, January 27, 1983, 120 SCRA 112), that Nawasa properly
rejected a bid of C & C Commercial to supply asbestos cement pressure which bid did not include a tax clearance
certificate as required by Administrative Order No. 66 dated June 26, 1967. In Caltex (Phil.) Inc., et. al. vs. Delgado
Brothers, Inc. et. al., (96 Phil. 368, 375), We stressed that public biddings are held for the protection of the public and
the public should be given the best possible advantages by means of open competition among the bidders.

xxxx

INTER TECHNICAL's failure to comply with what is perceived to be an elementary and customary practice in a public
bidding process, that is, to enclose the Form of Bid in the original and eight separate copies of the bidding documents
submitted to the bidding committee is fatal to its cause. All the four pre-qualified bidders which include INTER
TECHNICAL were subject to Rule IB 2.1 of the Implementing Rules and Regulations of P.D. 1594 in the preparation of
bids, bid bonds, and pre-qualification statement and Rule IB 2.8 which states that the Form of Bid, among others, shall
form part of the contract. INTER TECHNICAL's explanation that its bid form was inadvertently left in the office (p. 6,
Memorandum for Private Respondent, p. 355, Rollo) will not excuse compliance with such a simple and basic
requirement in the public bidding process involving a multi-million project of the Government. There should be strict
application of the pertinent public bidding rules, otherwise the essential requisites of fairness, good faith, and
competitiveness in the public bidding process would be rendered meaningless. (Emphases supplied)
All these circumstances, taken together, reveal a scheme on the part of respondent MPEI to perpetrate fraud against the
government. The purpose of the scheme was to ensure that MPEI, an entity that was ineligible to bid in the first place,
would eventually be awarded the contract. While respondent argues that it was merely a passive participant in the
bidding process, We cannot ignore its cavalier disregard of its participation in the now voided automation contract.

B. Fraud on the part of respondent MPEI was further shown by the fact that despite the failure of its ACMs to pass the
tests conducted by the DOST, respondent still acceded to being awarded the automation contract.

Another token of fraud is established by Our findings in relation to the failure of the ACMs to pass the tests of the DOST.
We quote herein the pertinent portions of this Court's 2004 Decision in relation thereto:

After respondent "consortium" and the other bidder, TIM, had submitted their respective bids on March 10, 2003, the
Comelec's BAC — through its Technical Working Group (TWG) and the DOST — evaluated their technical proposals.

xxxx

According to respondents, it was only after the TWG and the DOST had conducted their separate tests and submitted
their respective reports that the BAC, on the basis of these reports formulated its comments/recommendations on the
bids of the consortium and TIM.

The BAG, in its Report dated April 21, 2003, recommended that the Phase II project involving the acquisition of
automated counting machines be awarded to MPEI. x x x

xxxx

The BAC, however, also stated on page 4 of its Report: "Based on the 14 April 2003 report (Table 6) of the DOST, it
appears that both Mega-Pacific and TIM (Total Information Management Corporation) failed to meet some of the
requirements. x x x

xxxx

Failure to Meet the Required Accuracy Rating

The first of the key requirements was that the counting machines were to have an accuracy rating of at least 99.9995
percent.The BAC Report indicates that both Mega Pacific and TIM failed to meet this standard.

The key requirement of accuracy rating happens to be part and parcel of the Comelec's Request for Proposal (RFP). x x
x

xxxx

x x x Whichever accuracy rating is the right standard — whether 99.995 or 99.9995 percent — the fact remains that the
machines of the so-called "consort him" failed to even reach the lesser of the two. On this basis alone, it ought to have
been disqualified and its bid rejected outright.

At this point, the Court stresses that the essence of public bidding is violated by the practice of requiring very high
standards or unrealistic specifications that cannot be met — like the 99.9995 percent accuracy rating in this case —
only to water them down after the bid has been award.[sic] Such scheme, which discourages the entry of
prospective bona fide bidders, is in fact a sure indication of fraud in the bidding, designed to eliminate fair
competition. Certainly, if no bidder meets the mandatory requirements, standards or specifications, then no award
should be made and a failed bidding declared.

xxxx

Failure of Software to Detect Previously Downloaded Data

Furthermore, on page 6 of the BAC Report, it appears that the "consortium" as well as TIM failed to meet another key
requirement — for the counting machine's software program to be able to detect previously downloaded precinct
results and to prevent these from being entered again into the counting machine. This same deficiency on the part of
both bidders reappears on page 7 of the BAC Report, as a result of the recurrence of their failure to meet the said key
requirement.

That the ability to detect previously downloaded data at different canvassing or consolidation levels is deemed of
utmost importance can be seen from the fact that it is repeated three times in the RFP. x x x.

Once again, though, Comelec chose to ignore this crucial deficiency, which should have been a cause for the gravest
concern. x x x.

xxxx

Inability to Print the Audit Trail

But that grim prospect is not all. The BAC Report, on pages 6 and 7, indicate that the ACMs of both bidders were unable
to print the audit trail without any loss of data. In the case of MPC, the audit trail system was "not yet incorporated" into
its ACMs.

xxxx

Thus, the RFP on page 27 states that the ballot counting machines and ballot counting software must print an audit trail
of all machine operations for documentation and verification purposes. Furthermore, the audit trail must be stored on
the internal storage device and be available on demand for future printing and verifying. On pages 30-31, the RFP also
requires that the city/municipal canvassing system software be able to print an audit trail of the canvassing operations,
including therein such data as the date and time the canvassing program was started, the log-in of the authorized users
(the identity of the machine operators), the date and time the canvass data were downloaded into the canvassing
system, and so on and so forth. On page 33 of the RFP, we find the same audit trail requirement with respect to
the provincial/districtcanvassing system software; and again on pages 35-36 thereof, the same audit trail requirement
with respect to the nationalcanvassing system software.

xxxx

The said provision which respondents have quoted several times, provides that ACMs are to possess certain features
divided into two classes: those that the statute itself considers mandatory and other features or capabilities that the law
deems optional.Among those considered mandatory are "provisions for audit trails"! x x x.

In brief, respondents cannot deny that the provision requiring audit trails is indeed mandatory, considering the
wording of Section 7 of RA 8436. Neither can Respondent Comelec deny that it has relied on the BAC Report, which
indicates that the machines or the software was deficient in that respect. And yet, the Commission simply disregarded
this shortcoming and awarded the Contract to private respondent, thereby violating the very law it was supposed to
implement.[90](Emphases supplied)
The above-mentioned findings were further echoed by this Court in its 2006 Resolution with a categorical conclusion
that the bidding process was void and fraudulent.[91]
Again, these factual findings found their way into the application of petitioner for a writ of preliminary attachment,[92] as
it claimed that respondents could not dissociate themselves from their telltale acts of supplying defective machines and
nonexistent software.[93]The latter offered no defense in relation to these claims.

We see no reason to deviate from our finding of fraud on the part of respondent MPEI in the 2004 Decision and 2006
Resolution. Despite its failure to meet the mandatory requirements set forth in the bidding procedure, respondent still
acceded to being awarded the contract. These circumstances reveal its ploy to gain undue advantage over the other
bidders in general, even to the extent of cheating the government.

The word "bidding" in its comprehensive sense means making an offer or an invitation to prospective contractors,
whereby the government manifests its intention to make proposals for the purpose of securing supplies, materials, and
equipment for official business or public use, or for public works or repair.[94] Three principles involved in public bidding
are as follows: (1) the offer to the public; (2) an opportunity for competition, and (3) a basis for an exact comparison of
bids. A regulation of the matter, which excludes any of these factors, destroys the distinctive character of the system
and thwarts the purpose of its adoption.[95]

In the instant case, We infer from the circumstances that respondent MPEI welcomed and allowed the award of the
automation contract, as it executed the contract despite the full knowledge that it had not met the mandatory
requirements set forth in the RFP. Respondent acceded to and benefitted from the watering down of these mandatory
requirements, resulting in undue advantage in its favor. The fact that there were numerous mandatory requirements
that were simply set aside to pave the way for the award of the automation contract does not escape the attention of
this Court. Respondent MPEI, through respondent Willy, signed and executed the automation contract with COMELEC. It
is therefore preposterous for respondent argue that it was a "passive participant" in the whole bidding process.

We reject the CA's denial of petitioner's plea for the ancillary remedy of preliminary attachment, considering that the
cumulative effect of the factual findings of this Court establishes a sufficient basis to conclude that fraud had attended
the execution of the automation contract. Such fraud is deducible from the 2004 Decision and further upheld in the
2006 Resolution. It was incongruous, therefore, for the CA to have denied the application for a writ of preliminary
attachment, when the evidence on record was the same that was used to demonstrate the propriety of the issuance of
the writ of preliminary attachment. This was the same evidence that We had already considered and passed upon, and
on which We based Our 2004 Decision to nullify the automation contract. It would not be right for this Court to ignore
these illegal transactions, as to do so would be tantamount to abandoning its constitutional duty of safeguarding public
interest.

II.
Application of the piercing doctrine justifies the issuance of a writ of preliminary attachment over the properties of
the individual respondents.

Individual respondents argue that since they were not parties to the 2004 case, any factual findings or conclusions
therein should not be binding upon them.[96] Since they were strangers to that case, they are not bound by the judgment
rendered by this Court.[97]They claim that their fundamental right to due process would be violated if their properties
were to be attached for a purported corporate debt on the basis of a court ruling in a case in which they were not given
the right or opportunity to be heard.[98]

We cannot subscribe to this argument. In the first place, it could not be reasonably expected that individual respondents
would be impleaded in the 2004 case. As admitted by respondents, the issues resolved in the 2004 Decision were limited
to the following: (1) whether to declare Resolution No. 6074 of the COMELEC null and void; (2) whether to enjoin the
implementation of any further contract that may have been entered into by COMELEC with MPC or MPEI; and (3)
whether to compel COMELEC to conduct a rebidding of the project. To implead individual respondents then was
improper, considering that the automation contract was entered into by respondent MPEI. This Court even
acknowledged this fact by directing that the liabilities of persons responsible for the nullity of the contract be
determined in another appropriate proceeding and by directing the OSG to undertake measures to protect the interests
of the government.

At any rate, individual respondents have been fully afforded the right to due process by being impleaded and heard in
the subsequent proceedings before the courts a quo. Finally, they cannot argue violation of due process, as respondent
MPEI, of which they are incorporators/stockholders, remains vulnerable to the piercing of its corporate veil.

A. There are red flags indicating that MPEI was used to perpetrate the fraud against petitioner, thus allowing the
piercing of its corporate veil.

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.[99] It invokes the use of the doctrine of piercing the
corporate veil, to which the canon of separate juridical personality is vulnerable, as a way to reach the personal
properties of the individual respondents. Petitioner paints a picture of a sham corporation set up by all the individual
respondents for the purpose of securing the automation contract.

We agree with petitioner.

Veil-piercing in fraud cases requires that the legal fiction of separate juridical personality is used for fraudulent or
wrongful ends.[100] For reasons discussed below, We see red flags of fraudulent schemes in public procurement, all of
which were established in the 2004 Decision, the totality of which strongly indicate that MPEI was a sham corporation
formed merely for the purpose of perpetrating a fraudulent scheme.

The red flags are as follows: (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. We shall discuss each in detail.

Overly Narrow Specifications

The World Bank's Fraud and Corruption Awareness Handbook: A Handbook for Civil Servants Involved in Public
Procurement, (Handbook) identifies an assortment of fraud and corruption indicators and relevant schemes in public
procurement.[101] One of the schemes recognized by the Handbook is rigged specifications:

Scheme: Rigged specifications. In a competitive market for goods and services, any specifications that seem to be
drafted in a way that favors a particular company deserve closer scrutiny. For example, specifications that are too
narrowcan be used to exclude other qualified bidders or justify improper sole source awards. Unduly vague or broad
specificationscan allow an unqualified bidder to compete or justify fraudulent change orders after the contract is
awarded. Sometimes, project officials will go so far as to allow the favored bidder to draft the specifications.[102]
In Our 2004 Decision, We identified a red flag of rigged bidding in the form of overly narrow specifications. As already
discussed, the accuracy requirement of 99.9995 percent was set up by COMELEC bidding rules. This Court recognized
that this rating was "too high and was a sure indication of fraud in the bidding, designed to eliminate fair
competition."[103] Indeed, "the essence of public bidding is violated by the practice of requiring very high standards or
unrealistic specifications that cannot be met...only to water them down after the bid has been award(ed)."[104]

Unjustified Recommendations and Unjustified Winning Bidders

Questionable evaluation in a Bid Evaluation Report (BER) is an indicator of bid rigging. The Handbook expounds:

Questionable evaluation and unusual bid patterns may emerge in the BER. After the completion of the evaluation
process, the Bid Evaluation Committee should present to the implementing agency its BER, which describes the
results and the process by which the BEC has evaluated the bids received. The BER may include a number of indicators
of bid rigging, e.g., questionable disqualifications, and unusual bid patterns.[105]
The Handbook lists unjustified recommendations and unjustified winning bidders as red flags of a rigged bidding.[106]

The red flags of questionable recommendation and unjustified awards are raised in this case. As earlier discussed, the
project was awarded to MPC, which proved to be a nonentity. It was MPEI that actually participated in the bidding
process, but it was not qualified to be a bidder in the first place. Moreover, its ACMs failed the accuracy requirement set
by COMELEC. Yet, MPC — the nonentity — obtained a favorable recommendation from the BAC, and the automation
contract was awarded to the former.

Failure to Meet Contract Terms

Failure to meet the terms of a contract is regarded as a fraud by the Handbook:

Scheme: Failure to meet contract terms. Firms may deliberately fail to comply with contract requirements. The
contractor will attempt to conceal such actions often by falsifying or forging supporting documentation and bill for the
work as if it were done in accordance with specifications. In many cases, the contractors must bribe inspection or project
personnel to accept the substandard goods or works, or supervision agents are coerced to approve substandard work. x
x x[107]
As mentioned earlier, this Court already found the ACMs to be below the standards set by the COMELEC. We reiterated
their noncompliant status in Our 2005 and 2006 Resolutions.

As early as 2005, when the COMELEC sought permission from this Court to utilize the ACMs in the then scheduled
ARMM elections, We declared that the proposed use of the machines would expose the ARMM elections to the same
dangers of massive electoral fraud that would have been inflicted by the projected automation of the 2004 national
elections. We based this pronouncement on the fact that the COMELEC failed to show that the deficiencies had been
cured.[108] Yet again, this Court in 2006 blocked another attempt to use the ACMs, this time for the 2007 elections. We
reiterated that because the ACMs had merely remained idle and unused since their last evaluation, in which they failed
to hurdle the crucial tests, then their defects and deficiencies could not have been cured by then.[109]

Based on the foregoing, the ACMs delivered were plagued with defects that made them fail the requirements set for the
automation project.

Shell or fictitious company

The Handbook regards a shell or fictitious company as a "serious red flag," a concept that it elaborates upon:

Fictitious companies are by definition fraudulent and may also serve as fronts for government officials. The typical
scheme involves corrupt government officials creating a fictitious company that will serve as a "vehicle" to secure
contract awards. Often, the fictitious—or ghost— company will subcontract work to lower cost and sometimes
unqualified firms. The fictitious company may also utilize designated losers as subcontractors to deliver the work, thus
indicating collusion.

Shell companies have no significant assets, staff or operational capacity. They pose a serious red flag as a bidder on
public contracts, because they often hide the interests of project or government officials, concealing a conflict of
interest and opportunities for money laundering. Also, by definition, they have no experience.[110]
MPEI qualifies as a shell or fictitious company. It was nonexistent at the time of the invitation to bid; to be precise, it was
incorporated only 11 days before the bidding. It was a newly formed corporation and, as such, had no track record to
speak of.

Further, MPEI misrepresented itself in the bidding process as "lead company" of the supposed joint venture. The
misrepresentation appears to have been an attempt to justify its lack of experience. As a new company, it was not
eligible to participate as a bidder. It could do so only by pretending that it was acting as an agent of the putative
consortium.

The timing of the incorporation of MPEI is particularly noteworthy. Its close nexus to the date of the invitation to bid and
the date of the bidding (11 days) provides a strong indicium of the intent to use the corporate vehicle for fraudulent
purposes. This proximity unmistakably indicates that the automation contract served as motivation for the formation of
MPEI: a corporation had to be organized so it could participate in the bidding by claiming to be an agent of a pretended
joint venture.

The timing of the formation of MPEI did not escape the scrutiny of Justice Angelina Sandoval-Gutierrez, who made this
observation in her Concurring Opinion in the 2004 Decision:

At this juncture, it bears stressing that MPEI was incorporated only on February 27, 2003 as evidenced by its Certificate
of Incorporation. This goes to show that from the time the COMELEC issued its Invitation to Bid (January 28, 2003) and
Request for Proposal (February 17, 2003) up to the time it convened the Pre-bid Conference (February 18, 2003), MPEI
was literally a non-existent entity. It came into being only on February 27, 2003 or eleven (11) days prior to the
submission of its bid, i.e. March 10, 2003. This poses a legal obstacle to its eligibility as a bidder. The Request for
Proposal requires the bidder to submit financial documents that will establish to the BAC's satisfaction its financial
capability which include:

(1) audited financial statements of the Bidder's firm for the last three (3) calendar years, stamped "RECEIVED" by the
appropriate government agency, to show its capacity to finance the manufacture and supply of Goods called for and a
statement or record of volumes of sales;

(2) Balance Sheet;

(3) Income Statement; and

(4) Statement of Cash Flow.

As correctly pointed out by petitioners, how could MPEI comply with the above requirement of audited financial
statements for the last three (3) calendar years if it came into existence only eleven (11) days prior to the bidding?

To do away with such complication, MPEI asserts that it was MP CONSORTIUM who submitted the bid on March 10,
2003. It pretends compliance with the requirements by invoking the financial capabilities and long time existence of the
alleged members of the MP CONSORTIUM, namely, Election.Com, WeSolv, SK CeC, ePLDT and Oracle. It wants this Court
to believe that it is MP CONSORTIUM who was actually dealing with the COMELEC and that its (MPEI) participation is
merely that of a "lead company and proponent" of the joint venture. This is hardly convincing. For one, the contract for
the supply and delivery of ACM was between COMELEC and MPEI, not MP CONSORTIUM. As a matter of fad, there
cannot be found in the contract any reference to the MP CONSORTIUM or any member thereof for that matter. For
another, the agreements among the alleged members of MP CONSORTIUM do not show the existence of a joint-venture
agreement. Worse, MPEI cannot produce the agreement as to the "joint and several liability" of the alleged members of
the MP CONSORTIUM as required by this Court in its Resolution dated October 7, 2003.[111]
Respondent MPEI was formed to perpetrate the fraud against petitioner.

The totality of the red flags found in this case leads Us to the inevitable conclusion that MPEI was nothing but a sham
corporation formed for the purpose of defrauding petitioner. Its ultimate objective was to secure the P1,248,949,088
automation contract. The scheme was to put up a corporation that would participate in the bid and enter into a contract
with the COMELEC, even if the former was not qualified or authorized to do so.

Without the incorporation of MPEI, the defraudation of the government would not have been possible. The formation of
MPEI paved the way for its participation in the bid, through its claim that it was an agent of a supposed joint venture, its
misrepresentations to secure the automation contract, its misrepresentation at the time of the execution of the
contract, its delivery of the defective ACMs, and ultimately its acceptance of the benefits under the automation
contract.

The foregoing considered, veil-piercing is justified in this case.

We shall next consider the question of whose assets shall be reached by the application of the piercing doctrine.
B. 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.

A corporation's privilege of being treated as an entity distinct and separate from the stockholders is confined to
legitimate uses, and is subject to equitable limitations to prevent its being exercised for fraudulent, unfair, or illegal
purposes.[112] As early as the 19thcentury, it has been held that:

The general proposition that a corporation is to be regarded as a legal entity, existing separate and apart from the
natural persons composing it, is not disputed; but that the statement is a mere fiction, existing only in idea, is well
understood, and not controverted by any one who pretends to accurate knowledge on the subject. It has been
introduced for the convenience of the company in making contracts, in acquiring property for corporate purposes, in
suing and being sued, and to preserve the limited liability of the stockholder by distinguishing between the corporate
debts and property of the company and of the stockholders in their capacity as individuals. All fictions of law have been
introduced for the purpose of convenience, and to subserve the ends of justice. It is in this sense that the maxim in
fictione juris subsistit aequitas is used, and the doctrine of fictions applied. But when they are urged to an intent and
purpose not within the reason and policy of the fiction, they have always been disregarded by the courts. Broom's,
Legal Maxims 130. "It is a certain rule," says Lord Mansfield, C.J., "that a fiction of law never be contradicted so as to
defeat the end for which it was invented, but for every other purpose it may be contradicted." Johnson v. Smith, 2 Burr,
962.[113]
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.[114]

We have consistently held that when the notion of legal entity is used to defeat public convenience, justify wrong,
protect fraud, or defend crime, the law will regard the corporation as an association of persons.[115] Thus, considering
that We find it justified to pierce the corporate veil in the case before Us, MPEI must, perforce, be treated as a mere
association of persons whose assets are unshielded by corporate fiction. Such persons' individual liability shall now be
determined with respect to the matter at hand.

Contrary to respondent Willy's claims, his participation in the fraud is clearly established by his unequivocal agreement
to the execution of the automation contract with the COMELEC, and his signature that appears on the voided contract.
As far back as in the 2004 Decision, his participation as a signatory' to the automation contract was already established:

The foregoing argument is unpersuasive. First, the contract being referred to, entitled "The Automated Counting and
Canvassing Project Contract," is between Comelec and MPEI, not the alleged consortium, MPC. To repeat, it is MPEI - not
MPC - that is a party to the Contract. Nowhere in that Contract is there any mention of a consortium or joint venture, of
members thereof much less of joint and several liability. Supposedly executed sometime in May 2003, the Contract bears
a notarization date of June 30, 2003, and contains the signature of Willy U. Yu signing as president of MPEI (not for and
on behalf of MPC), along with that of the Comelec chair. It provides in Section 3.2 that MPEI (not MPC) is to supply the
Equipment and perform the Services under the Contract, in accordance with the appendices thereof; nothing
whatsoever is said about any consortium or joint venture or partnership. x x x (Emphasis supplied)
That his signature appears on the automation contract means that he agreed and acceded to its terms.[116] His
participation in the fraud involves his signing and executing the voided contract.

The execution of the automation contract with a non-eligible entity and the subsequent award of the contract despite
the failure to meet the mandatory requirements were "badges of fraud" in the procurement process that should have
been recognized by the CA to justify the issuance of the writ of preliminary attachment against the properties of
respondent Willy.

With respect to the other individual respondents, petitioner, in its Answer with Counterclaim, alleged:

30. Also, inasmuch as MPEI is in truth a mere shell corporation with no real assets in its name, incorporated merely to
feign eligibility for the bidding of the automated contract when it in fact had none, to the great prejudice of the
Republic, plaintiffs individual incorporators should likewise be made liable together with MPEI for the automated
contract amount paid to and received by the latter. The following circumstances altogether manifest that the individual
incorporators merely cloaked themselves with the veil of corporate fiction to perpetrate a fraud and to eschew liability
therefor, thus:

xxxx

From the time it was incorporated until today, MPEI has not complied with the reportorial requirements of the
f.
Securities and Exchange Commission;
Individual incorporators, acting fraudulently through MPEI, and in violation of the bidding rules,
thensubcontracted the automation contract to four (4) other corporations, namely: WeSolve Corporation, SK
g.
C&C, ePLDT and election.com, to comply with the capital requirements, requisite five (5)-year corporate standing
and the technical qualifications of the Request for Proposal;

x x x x[117]
In response to petitioner's allegations, respondents Willy and Bonnie stated in their Reply and Answer (Re: Answer with
Counterclaim dated 28 June 2004):[118]

3.3 As far as plaintiff MPEI and defendants-in-counterclaim are concerned, they dealt with the COMELEC with full
transparency and in utmost good faith. All documents support its eligibility to bid for the supply of the ACMs and their
peripheral services, were submitted to the COMELEC for its evaluation in full transparency. Pertinently, neither plaintiff
MPEI nor any of its directors, stockholders, officers or employees had any participation in the evaluation of the bids and
eventual choice of the winning bidder.[119]
Respondents Johnson's and Bernard's denials were made in paragraphs 2.17 and 3.3 of their Answer with Counterclaim
to the Republic's Counterclaim, to wit:[120]

2.17 The erroneous conclusion of fact and law in paragraph 30 (f) and (g) of the Republic's answer is denied, having been
pleaded in violation of the requirement, that only ultimate facts arc to be stated in the pleadings and they are
falsehoods. The truth of the matter is that there could not have been fraud, as these agreements were submitted to the
COMELEC for its evaluation and assessment, as to the qualification of the Consortium as a bidder, a showing of
transparency in plaintiffs dealings with the Republic.[121]

3.3 As far as plaintiff MPEI and defendants-in-counterclaim are concerned, they dealt with the COMELEC with full
transparency and in utmost good faith. All documents support its eligibility to bid for the supply of the automated
counting machines and its peripheral services, were submitted to the COMELEC for its evaluation in full transparency.
Pertinently, the plaintiff or any of its directors, stockholders, officers or employees had no participation in the evaluation
of the bids and eventual choice of the winning bidder.[122]
As regards Enrique and Rosita, the relevant paragraphs in the Answer with Counterclaim to the Republic's
Counterclaim[123] are quoted below:

2.17. The erroneous conclusion of fact and law in paragraph 30 (F) and (G) of the Republic's answer is denied, having
been pleaded in violation of the requirement, that only ultimate facts are to be stated in the pleadings and they are
falsehoods. The truth of the matter is that there could not have been fraud, as these agreements were submitted to the
COMELEC for its evaluation and assessment, as to the qualification of the Consortium as a bidder, a showing of
transparency in plaintiffs dealings with the Republic.[124]

3.3. As far as the plaintiff and herein answering defendants-in-counterclaim are concerned, they dealt with the
Commission on Elections with full transparency and in utmost good faith. All documents in support of its eligibility to
bid for the supply of the automated counting machines and its peripheral services were submitted to the Commission on
Elections for its evaluation in full transparency. Pertinently, the plaintiff or any of its directors, stockholders, officers or
employees had no participation in the evaluation of the bids and eventual choice of the winning bidder.[125]
Pedro and Laureano offer a similar defense in paragraph 3.3 of their Reply and Answer with Counterclaim to the
Republic's Counterclaim[126] dated 28 June 2004, which reads:
3.3. As far as plaintiff MPEI and defendants-in-counterclaim are concerned, they dealt with the COMELEC with full
transparency and in utmost good faith. All documents support its eligibility to bid for the supply of the ACMs and their
peripheral services, were submitted to the COMELEC for its evaluation in full transparency. Pertinently, neither plaintiff
MPEI nor any of its directors, stockholders, officers or employees had any participation in the evaluation of the bids and
eventual choice of the winning bidder.[127]
It can be seen from the above-quoted paragraphs that the individual respondents never denied their participation in the
questioned transactions of MPEI, merely raising the defense of good faith and shifting the blame to the COMELEC. The
individual respondents have, in effect, admitted that they had knowledge of and participation in the fraudulent
subcontracting of the automation contract to the four corporations.

It bears stressing that the remaining individual respondents, together with respondent Willy, incorporated MPEI. As
incorporators, they are expected to be involved in the management of the corporation and they are charged with the
duty of care. This is one of the reasons for the requirement of ownership of at least one share of stock by an
incorporator:

The reason for this, as explained by the lawmakers, is to avoid the confusion and/or ambiguities arising in a situation
under the old corporation law where there exists one set of incorporators who are not even shareholders and another
set of directors/incorporators who must all be shareholders of the corporation. The people who deal with said
corporation at such an early stage are confused as to who are the persons or group really authorized to act in behalf of
the corporation. (Proceedings of the Batasan Pambansa on the Proposed Corporation Code). Another reason may be
anchored on the presumption that when an incorporator has pecuniary interest in the corporation, no matter how
minimal, he will be more involved in the management of corporate affairs and to a greater degree, be concerned with
the welfare of the corporation.[128]
As incorporators and businessmen about to embark on a new business venture involving a sizeable capital (P300
million), the remaining individual respondents should have known of Willy's scheme to perpetrate the fraud against
petitioner, especially because the objective was a billion peso automation contract. Still, they proceeded with the illicit
business venture.

It is clear to this Court that inequity would result if We do not attach personal liability to all the individual respondents.
With a definite finding that MPEI was used to perpetrate the fraud against the government, it would be a great injustice
if the remaining individual respondents would enjoy the benefits of incorporation despite a clear finding of abuse of the
corporate vehicle. Indeed, to allow the corporate fiction to remain intact would not subserve, but instead subvert, the
ends of justice.

III.
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.

Respondents argue that the 2004 Decision did not resolve and could not have resolved the factual issue of whether they
had committed any fraud, as the Supreme Court is not a trier of facts; and the 2004 case, being a certiorari case, did not
deal with questions of fact.[129]

Further, respondents argue that the findings of this Court ought to be confined only to those issues actually raised and
resolved in the 2004 case, in accordance with the principle of conclusiveness of judgment.[130] They explain that the
issues resolved in the 2004 Decision were only limited to the following: (1) whether to declare COMELEC Resolution No.
6074 null and void; (2) whether to enjoin the implementation of any further contract that may have been entered into
by COMELEC with MPC or MPEI; and (3) whether to compel COMELEC to conduct a rebidding of the project.[131]

It is obvious that respondents are merely trying to escape the implications or effects of the nullity of the automation
contract that they had executed. Section 1, Rule 65 of the Rules of Court, clearly sets forth the instances when a petition
for certiorari can be used as a proper remedy:
Section 1. Petition for certiorari. — When any tribunal, board or officer exercising judicial or quasi-judicial functions has
acted without or in excess of its jurisdiction, or with grave abuse of discretion amounting to lack or excess of jurisdiction,
and there is no appeal, or any plain, speedy, and adequate remedy in the ordinary course of law. a person aggrieved
thereby may file a verified petition in the proper court, alleging the facts with certainty and praying that judgment be
rendered annulling or modifying the proceedings of such tribunal, board or officer, and granting such incidental reliefs as
law and justice may require.
The term "grave abuse of discretion" has a specific meaning. An act of a court or tribunal can only be considered to have
been committed with grave abuse of discretion when the act is done in a "capricious or whimsical exercise of judgment
as is equivalent to lack of jurisdiction."[132] The abuse of discretion must be so patent and gross as to amount to an
"evasion of a positive duty or to a virtual refusal to perform a duty enjoined by law, or to act at all in contemplation of
law, as where the power is exercised in an arbitrary and despotic manner by reason of passion and
hostility."[133] Furthermore, the use of a petition for certiorari is restricted only to "truly extraordinary cases wherein the
act of the lower court or quasi-judicial body is wholly void."[134] From the foregoing definition, it is clear that the special
civil action of certiorari under Rule 65 can only strike down an act for having been done with grave abuse of discretion if
the petitioner could manifestly show that such act was patent and gross.[135]

We had to ascertain from the evidence whether the COMELEC committed grave abuse of discretion, and in the process,
were justified in making some factual findings. The conclusions derived from the factual findings are inextricably
intertwined with this Court's determination of grave abuse of discretion. They have a direct bearing and are in fact
necessary to illustrate that the award of the automation contract was done hastily and in direct violation of law. This
Court has indeed made factual findings based on the evidence presented before it; in turn, these factual findings
constitute the controlling legal rule between the parties that cannot be modified or amended by any of them. This Court
is bound to consider the factual findings made in the 2004 Decision in order to declare that there is fraud for the
purpose of issuing the writ of preliminary attachment.

Respondents appear to have misunderstood the implications of the principle of conclusiveness of judgment on their
cause. Contrary to their claims, the factual findings are conclusive and have been established as the controlling legal rule
in the instant case, on the basis of the principle of res judicata—more particularly, the principle of conclusiveness of
judgment.

This doctrine of res judicata which is set forth in Section 47 of Rule 39 of the Rules of Court[136] lays down two main rules,
namely: (1) the judgment or decree of a court of competent jurisdiction on the merits concludes the litigation between
the parties and their privies and constitutes a bar to a new action or suit involving the same cause of action either before
the same or any other tribunal; and (2) any right, fact, or matter in issue directly adjudicated or necessarily involved in
the determination of an action before a competent court in which a judgment or decree is rendered on the merits is
conclusively settled by the judgment therein and cannot again be litigated between the parties and their privies whether
or not the claims or demands, purposes, or subject matters of the two suits are the same.[137]

These two main rules mark the distinction between the principles governing the two typical cases in which a judgment
may operate as evidence.[138] The first general rule stated above and corresponding to the afore-quoted paragraph (b) of
Section 47, Rule 39 of the Rules of Court, is referred to as "bar by former judgment"; while the second general rule,
which is embodied in paragraph (c) of the same section and rule, is known as "conclusiveness of judgment."[139]

In Calalang v. Register of Deeds of Quezon City,[140] We discussed the concept of conclusiveness of judgment as
pertaining even to those matters essentially connected with the subject of litigation in the first action. This Court
explained therein that the bar on re-litigation extends to those questions necessarily implied in the final judgment,
although no specific finding may have been made in reference thereto, and although those matters were directly
referred to in the pleadings and were not actually or formally presented. If the record of the former trial shows that the
judgment could not have been rendered without deciding a particular matter, it will be considered as having settled that
matter as to all future actions between the parties; and if a judgment necessarily presupposes certain premises, they are
as conclusive as the judgment itself:
The second concept — conclusiveness of judgment — states that a fact or question which was in issue in a former suit
and was there judicially passed upon and determined by a court of competent jurisdiction, is conclusively settled by
the judgment therein as far as the parties to that action and persons in privity with them are concerned and cannot
be again litigated in any future action between such parties or their privies, in the same court or any other court of
concurrent jurisdiction on either the same or different cause of action, while the judgment remains unreversed by
proper authority. It has been held that in order that a judgment in one action can be conclusive as to a particular matter
in another action between the same parties or their privies, it is essential that the issue be identical. If a particular point
or question is in issue in the second action, and the judgment will depend on the determination of that particular
point or question, a former judgment between the same parties or their privies will be final and conclusive in the
second if that same point or question was in issue and adjudicated in the first suit (Nabus v. Court of Appeals, 193
SCRA 732 [1991]). Identity of cause of action is not required but merely identity of issue.

Justice Fcliciano, in Smith Bell & Company (Phils.), Inc. v. Court of Appeals (197 SCRA 201, 210 [1991]), reiterated Lopez v.
Reyes (76 SCRA 179 [1977]) in regard to the distinction between bar by former judgment which bars the prosecution of a
second action upon the same claim, demand, or cause of action, and conclusiveness of judgment which bars the
relitigation of particular facts or issues in another litigation between the same parties on a different claim or cause of
action.

The general rule precluding the re-litigation of material facts or questions which were in issue and adjudicated in
former action are commonly applied to all matters essentially connected with the subject matter of the litigation.
Thus, it extends to questions necessarily implied in the final judgment, although no specific finding may have been
made in reference thereto and although such matters were directly referred to in the pleadings and were not actually
or formally presented. Under this rule, if the record of the former trial shows that the judgment could not have been
rendered without deciding the particular matter, it will be considered as having settled that matter as to all future
actions between the parties and if a judgment necessarily presupposes certain premises, they are as conclusive as the
judgment itself.[141](Emphases supplied)
The foregoing disquisition finds application to the case at bar.

Undeniably, the present case is merely an adjunct of the 2004 case, in which the automation contract was declared to
be a nullity. Needless to say, the 2004 Decision has since become final. As earlier explained, this Court arrived at several
factual findings showing the illegality of the automation contract; in turn, these findings were used as basis to justify the
declaration of nullity.

A closer scrutiny of the 2004 Decision would reveal that the judgment could not have been rendered without deciding
particular factual matters in relation to the following: (1) identity, existence and eligibility of MPC as a bidder; (2) failure
of the ACMs to pass DOST technical tests; and (3) remedial measures undertaken by the COMELEC after the award of
the automation contract. Under the principle of conclusiveness of judgment, We are precluded from re-litigating these
facts, as these were essential to the question of nullity. Otherwise stated, the judgment could not have been rendered
without necessarily deciding on the above-enumerated factual matters.

Thus, under the principle of conclusiveness of judgment, those material facts became binding and conclusive on the
parties, in this case MPEI and, ultimately, the persons that comprised it. When a right or fact has been judicially tried
and determined by a court of competent jurisdiction, or when an opportunity for that trial has been given, the judgment
of the court—as long as it remains unreversed—should be conclusive upon the parties and those in privity with
them.[142] Thus, the CA should not have required petitioner to present further evidence of fraud on the part of
respondent Willy and MPEI, as it was already necessarily adjudged in the 2004 case.

To allow respondents to argue otherwise would be violative of the principle of immutability of judgment. When a final
judgment becomes executory, it becomes immutable and unalterable and may no longer undergo any modification,
much less any reversal.[143]In Navarro v. Metropolitan Bank & Trust Company[144] this Court explained that the underlying
reason behind this principle is to avoid delay in the administration of justice and to avoid allowing judicial controversies
to drag on indefinitely, viz.:
No other procedural law principle is indeed more settled than that once a judgment becomes final, it is no longer
subject to change, revision, amendment or reversal, except only for correction of clerical errors, or the making of nunc
pro tunc entries which cause no prejudice to any party, or where the judgment itself is void. The underlying reason for
the rule is two-fold: (1) to avoid delay in the administration of justice and thus make orderly the discharge of judicial
business, and (2) to put judicial controversies to an end, at the risk of occasional errors, inasmuch as controversies
cannot be allowed to drag on indefinitely and the rights and obligations of every litigant must not hang in suspense for
an indefinite period of time. As the Court declared in Yau v. Silverio,

Litigation must end and terminate sometime and somewhere, and it is essential to an effective and efficient
administration of justice that, once a judgment has become final, the winning party be, not through a mere subterfuge,
deprived of the fruits of the verdict. Courts must therefore guard against any scheme calculated to bring about that
result. Constituted as they are to put an end to controversies, courts should frown upon any attempt to prolong them.
Indeed, just as a losing party has the right to file an appeal within the prescribed period, the winning party also has the
correlative right to enjoy the finality of the resolution of his case by the execution and satisfaction of the judgment. Any
attempt to thwart this rigid rule and deny the prevailing litigant his right to savor the fruit of his victory must
immediately be struck down. x x x. (Emphasis supplied)[145]
In the instant case, adherence to respondents' position would mean a complete disregard of the factual findings We
made in the 2004 Decision, and would certainly be tantamount to reversing the same. This would invariably cause
further delay in the efforts to recover the amounts of government money illegally disbursed to respondents back in
2004.

Next, respondents argue that the findings of fact in the 2004 Decision are not conclusive[146] considering that eight (8) of
the fifteen (15) justices of this Court refused to go along with the factual findings as stated in the majority
opinion.[147] This argument fails to convince.

Fourteen (14) Justices participated in the promulgation of the 2004 Decision. Out of the fourteen (14) Justices, three (3)
Justices registered their dissent,[148] and two (2) Justices wrote their Separate Opinions, each recommending the
dismissal of the Petition.[149] Of the nine (9) Justices who voted to grant the Petition, four (4) joined the ponente in his
disposition of the case,[150] and two (2) Justices wrote Separate Concurring Opinions.[151] As to the remaining two (2)
Justices, one (1) Justice[152] merely concurred in the result, while the other joined another Justice in her Separate
Opinion.[153]

Contrary to the allegations of respondents, an examination of the voting shows that nine (9) Justices voted in favor of
the majority opinion, without any qualification regarding the factual findings made therein. In fact, the two (2) Justices
who wrote their own Concurring Opinions echoed the lack of eligibility of MPC and the failure of the ACMs to pass the
mandatory requirements.

Finally, respondents cannot argue that, from the line of questioning of then Justice Leonardo A. Quisumbing during the
oral arguments in the 2004 case, he did not agree with the factual findings of this Court. Oral arguments before this
Court are held precisely to test the soundness of each proponent's contentions. The questions and statements
propounded by Justices during such an exercise are not to be construed as their definitive opinions. Neither are they
indicative of how a Justice shall vote on a particular issue; indeed, Justice Quisumbing clearly states in the 2004 Decision
that he concurs in the results. At any rate, statements made by Our Members during oral arguments are not stare
decisis; what is conclusive are the decisions reached by the majority of the Court.

IV.
The delivery of 1,991 units of ACMs does not negate fraud on the part of respondents Willy and MPEI.

The CA in its Amended Decision explained that respondents could not be considered to have fostered a fraudulent
intent to not honor their obligation, since they delivered 1,991 units of ACMs.[154] In turn, respondents argue that
respondent MPEI had every intention of fulfilling its obligation, because it in fact delivered the ACMs as required by the
automation contract.[155]
We disagree with the CA and respondents. The fact that the ACMs were delivered cannot induce this Court to disregard
the fraud respondent MPEI had employed in securing the award of the automation contract, as established above.
Furthermore, they cannot cite the fact of delivery in their favor, considering that the ACMs delivered were substandard
and noncompliant with the requirements initially set for the automation project.

In Our 2004 Decision, We already found the ACMs to be below the standards set by the COMELEC. The noncompliant
status of these ACMs was reiterated by this Court in its 2005 and 2006 Resolutions. The CA therefore gravely erred in
considering the delivery of 1,991 ACMs as evidence of respondents' willingness to perform the obligation (and thus,
their lack of fraud) considering that, as exhaustively discussed earlier, the ACMs delivered were plagued with defects
and failed to meet the requirements set for the automation project.

Under Article 1233 of the New Civil Code, a debt shall not be understood to have been paid, unless the thing or service
in which the obligation consists has been completely delivered or rendered. In this case, respondents cannot be
considered to have performed their obligation, because the ACMs were defective.

V.
Estoppel does not lie against the State when it acts to rectify the mistakes, errors or illegal acts of its officials and
agents.

Respondents claim that the 2004 Decision may not be invoked against them, since the petitioner and the respondents
were co-respondents and not adverse parties in the 2004 case. Respondents further explain that since petitioner and
respondents were on the same side at the time, had the same interest, and took the same position on the validity and
regularity of the automation contract, petitioner cannot now invoke the 2004 Decision against them.[156]

Contrary to respondents' contention, estoppel generally finds no application against the State when it acts to rectify
mistakes, errors, irregularities, or illegal acts of its officials and agents, irrespective of rank. This principle ensures the
efficient conduct of the affairs of the State without any hindrance to the implementation of laws and regulations by the
government. This holds true even if its agents' prior mistakes or illegal acts shackle government operations and allow
others—some by malice—to profit from official error or misbehavior, and even if the rectification prejudices parties who
have meanwhile received benefit.[157] Indeed, in the 2004 Decision, this Court even directed the Ombudsman to
determine the possible criminal liability of public officials and private persons responsible for the contract, and the OSG
to undertake measures to protect the government from the ill effects of the illegal disbursement of public funds.[158]

The equitable doctrine of estoppel for the prevention of injustice and is for the protection of those who have been
misled by that which on its face was fair and whose character, as represented, parties to the deception will not, in the
interest of justice, be heard to deny.[159] It cannot therefore be utilized to insulate from liability the very perpetrators of
the injustice complained of.

VI.
The findings of the Office of the Ombudsman are not controlling in the instant case.

Respondents further claim that this Court has recognized the fact that it did not determine or adjudge any fraud that
may have been committed by individual respondents. Rather, it referred the matter to the Ombudsman for the
determination of criminal liability.[160] The Ombudsman in fact made its own determination that there was no probable
cause to hold individual respondents criminally liable.[161]

Respondents miss the point. The main issue in the instant case is whether respondents are guilty of fraud in obtaining
and executing the automation contract, to justify the issuance of a writ of preliminary attachment in petitioner's favor.
Meanwhile, the issue relating to the proceedings before the Ombudsman (and this Court in G.R. No. 174777) pertains to
the finding of lack of probable cause for the possible criminal liability of respondents under the Anti-Graft and Corrupt
Practices Act.

The matter before Us involves petitioner's application for a writ of preliminary attachment in relation to its recovery of
the expended amount under the voided contract, and not the determination of whether there is probable cause to hold
respondents liable for possible criminal liability due to the nullification of the automation contract. Whether or not the
Ombudsman has found probable cause for possible criminal liability on the part of respondents is not controlling in the
instant case.

CONCLUSION

If the State is to be serious in its obligation to develop and implement coordinated anti-corruption policies that promote
proper management of public affairs and public property, integrity, transparency and accountability,[162] it needs to
establish and promote effective practices aimed at the prevention of corruption,[163] as well as strengthen our efforts at
asset recovery.[164]

As a signatory to the United Nations Convention Against Corruption (UNCAC),[165] the Philippines acknowledges its
obligation to establish appropriate systems of procurement based on transparency, competition and objective criteria in
decision-making that are effective in preventing corruption.[166] To promote transparency, and in line with the country's
efforts to curb corruption, it is useful to identify certain fraud indicators or "red flags" that can point to corrupt
activity.[167] This case - arguably the first to provide palpable examples of what could be reasonably considered as "red
flags" of fraud and malfeasance in public procurement - is the Court's contribution to the nation's continuing battle
against corruption, in accordance with its mandate to dispense justice and safeguard the public interest.

WHEREFORE, premises considered, the Petition is GRANTED. The Amended Decision dated 22 September 2008 of the
Court of Appeals in CA-G.R. SP. No. 95988 is ANNULLED AND SET ASIDE. A new one is entered DIRECTING the Regional
Trial Court of Makati City, Branch 59, to ISSUE in Civil Case No. 04-346, entitled Mega Pacific eSolutions, Inc., vs. Republic
of the Philippines, the Writ of Preliminary Attachment prayed for by petitioner Republic of the Philippines against the
properties of respondent Mega Pacific eSolutions, Inc., and Willy U. Yu, Bonnie S. Yu, Enrique T. Tansipek, Rosita Y.
Tansipek, Pedro O. Tan, Johnson W. Fong, Bernard I. Fong and Lauriano Barrios.

No costs.

SO ORDERED
[ GR No. 208535, Oct 19, 2016 ]

LEO'S RESTAURANT & BAR CAF&EACUTE v. LAARNE C. BENSING +

RESOLUTION

DEL CASTILLO, J.:

This is a Petition for Review en Certiorari assailing the November 27, 2012 Decision[2] of the Court of Appeals (CA) in CA
GR. SP No, 03222-MIN, The CA set aside the June 4, 2009[3] and July 31, 2009[4] Resolutions of the National Labor
Relations Commission (NLRC) in NLRC Case No. MAC-02-010081-2008, and reinstated the November 28, 2008 NLRC
Resolution[5] finding illegal respondent Laarne C. Densing's (respondant) dismissal from work. Also assailed is the July 12,
2013 CA Resulution[6] denying petitioners' Motion for Reconsideration.

Factual Antecedents

On January 2, 2002, Kimwa Construction & Development Corporation (Kimwa) employed respondent as liaison
officer.[7] Allegedly, Kimwa also operated Leo's Restaurant and Bar Cafe (Restobar), and the Mountain Suite Business
Apartelle (Apartelle); on July 4, 2005, it appointed respondent as Administrative Officer/Human Resource (HR) Head of
these establishments with a salary of P15,000.00 per month; and, said appointment took effect on October 18, 2005
when the establishments became fully operational.[8]

Thereafter, Leo Y. Lua (Leo), the Manager of the Restobar and the Apartelle, issued upon respondent a
Memorandum[9] requesting her to temporarily report at Kimwa's Main Office starting December 30, 2005.

On December 30, 2005, respondent received another Memorandum[10] from Leo requiring her to explain the
circumstances surrounding the agreement between the Restobar and Pepsi Products Philippines, Inc. (Pepsi), and the
benefits she derived therefrom. Leo accused her of having signed said contract without authority from him and of not
informing him of the benefits arising from the contract. The Memorandum also indicated that Pepsi gave the Restobar
10 cases of soft drinks during its opening night, and additional 67 cases for December 2005 but its records reflected
receiving only 20 out of said 67 cases.

In her Explanation,[11] respondent stated that on October 24, 2005, in the presence of Jovenal[12] Ablanque (Ablanque),
Sales Manager of Pepsi, Leo verbally authorized her to sign the contract with Pepsi on behalf of the Restobar. The
following day, Ablanque, returned to the Restobar, and respondent signed the contract pursuant to Leo's verbal
instruction. She gave no explanation anent the benefits arising from the contract as she purportedly did not intervene in
Leo and Ablanque's discussion on the matter. She added that the Restobar received only 10 and additional 20 cases of
Pepsi drinks, and she did not receive personal benefits arising from the contract.

On January 2, 2006, Leo issued another Memorandum[13] requiring respondent to answer why she signed the Pepsi
contract even without authority to do so, and to explain whether her apology addressed to Leo was an acceptance of
her fault on the charges against her.

In her Answer,[14] respondent remained firm that she did not receive any personal benefits from Pepsi. Also, she stated
that she apologized to Leo because she knew that the latter had "feelings of doubt" about her but it was not because
she accepted the accusations against her.

Later, in a Memorandum[15] dated January 3, 2006, respondent was required to answer these charges: 1) she committed
dishonesty when she charged to the Restobar's account 50% of the food she ordered therefrom without approval of its
Owner or Manager; 2) she violated her duties when she did not inform Leo of the signing of the Pepsi contract; and, 3)
she failed to account for 47 soft drinks cases that Pepsi gave the Restobar.
In her Explanation,[16] respondent asserted that the charges of dishonesty was not related to the Pepsi Qonteact such
that she opted not to answer said accusation. With regard to the alleged missing Pepsi drinks, she affirmed that Pepsi
clarified the matter already, particularly to where these soft drinks were placed or given.

In a Letter[17] dated January 4, 2006, Pepsi, through its Settlement and Credit Manager Jerome T. Eslabon, certified that
Pepsi gave the Restobar 10 cases of Pepsi products on its opening day, and 20 cases of Pepsi 12 oz. on December 7,
2005. It stressed that it did riot give cash assistance or cash equivalent to any staff of the Restobar. It also asked Leo to
disregard the erroneous volume of documents it inadvertently gave him, and assured him that Pepsi already adjusted his
records to reflect the correct figures.

However, on January 12, 2006, on the ground of loss of trust and confidence, Leo terminated respondent effective
January 15, 2006.[18]

Respondent thus filed an Amended Complaint[19] for illegal dismissal, illegal suspension, non-payment of 13th month pay,
separation pay in lieu of reinstatement, moral and exemplary damages, and attorney's fees against Kimwa, and herein
petitioners, the Restobar, the Apartelle, Leo, and/or Amelia Y. Lua (Amelia).

In her Position Paper,[20] respondent claimed that petitioners and Kimwa failed to establish that she was dismissed for
valid causes. She argued that as Administrative Officer/HR Head, she was tasked to oversee the operations of the
Restobar and the Apartelle, including the authority to sign the agreement with Pepsi. According to her, Leo also
authorized her to sign the agreement in his behalf, and such authority was. communicated to her in the presence of the
Sales Manager of Pepsi.

In addition, respondent emphasized that she received no personal benefits in connection with the Pepsi contract, and
there was no proof that she received anything from Pepsi. She also stressed that Pepsi was delivering its products to the
Restobar and the Apartelle, not to her. In fine, she. argued that her having entered the Pepsi contract was insufficient
basis for petitioners and Kimwa to lose their trust in her, and use the same to terminate her.

For their part, petitioners and Kimwa, in their Position Paper,[21] argued that it was Amelia, Leo's sister, who owned the
Restobar and the Apartelle. They averred that these establishments were separate entities from Kimwa, and Leo was
merely its Manager. They further claimed that on October 15, 2005, respondent resigned from Kimwa and transferred to
the Restobar and the Apartelle for higher pay.

In addition, petitioners and Kimwa asserted that respondent, was validly terminated as she committed dishonesty,
abuse of confidence, and breach of trust against her employer. They explained that respondent entered into a contract
with Pepsi, whereby the Restobar committed to purchase 2,400 cases of Pepsi products per year for a period of two
years or from October 2005 to October 2007. They stressed that respondent entered this contract without prior
authority from Leo or Amelia, and without disclosure to them of the benefits arising therefrom. They also alleged that
respondent committed dishonesty when she charged some of her meals and offer/invitation expenses to the Restobar,
without approval of its Owner or Manager. They likewise stated that respondent was given opportunity to explain her
side before she was terminated.

Furthermore, petitioners and Kimwa insisted that while under the employ of Kimwa, respondent received advance
payment of her benefits, separation pay and other claims. They added that having received monetary benefits,
respondent had no more cause of action against them.

Ruling of the Executive Labor Arbiter

On November 20, 2007, the Executive Labor Arbiter (LA) rendered a Decision[22] dismissing the Complaint for lack of.
merit. The LA, nonetheless, ordered petitioners and Kimwa to pay respondent separation pay amounting to P15,000.00.

The LA decreed that petitioners and Kimwa validly dismissed respondent on the ground of loss of trust and confidence.
He pointed out that employers cannot be compelled to retain the services of their employees who were guilty of acts
inimical to the interests of the employer; and, the dismissal of an erring employee was a measure of self-protection,

The LA also declared that respondent committed acts contrary to the interest of her employer when she charged
personal food consumption to the Restobar, entered into an exclusive contract with Pepsi, and failed to account for the
Pepsi products donated to the Restobar. He further stated that petitioners and Kimwa complied with the required
procedural due process when they issued memoranda informing respondent of the charges against her and giving her
notice of her dismissal.

Nevertheless, the LA granted respondent one month salary as separation pay ratiocinating that respondent entered the
Pepsi contract in good faith and she presumed that she was authorized to enter the same.

Respondent appealed the LA Decision.

Ruling of the National Labor Relations Commission

On November 28, 2008, the NLRC issued its Resolution[23] finding respondent's dismissal illegal. It set aside the LA
Decision and ordered petitioners to pay respondent backwages, separation pay, moral and exemplary damages,
13th month pay differential, and attorney's fees. The dispositive portion of the NLRC Resolution reads:

WHEREFORE, premises laid, the appealed Decision of the Executive Labor Arbiter dated November 20, 2007 is hereby
set aside and a new one is entered finding complainant Laarne Densing illegally dismissed and respondents Leo
Restaurant and Bar Cafe and Mountain Suite Apartelle and/or Leo Y. Lua and Amelia Y. Lua, proprietors of the said
establishment, to be solidarily liable to pay complainant Laarne Densing's backwages, based on her latest salary, to be
computed from the date of her dismissal on January 15, 2006 up to the finality of this resolution; separation pay, based
on her latest salary, to be computed from the inception of her employment on January 2, 2002 up to the finality of this
Resolution; moral and exemplary damages in the amount of Fifty Thousand (Php50,000.00) each; 13 th month pay
differential in the amount of Pbp1,250.00; and ten percent (10%) attorney's fees computed from the total monetary
awards.

SO ORDERED.[24]

According to the NLRC, respondent's claim that she had the authority to enter the contract with Pepsi was supported by
evidence, which included the Sworn Statement of the Sales Manager of-Pepsi, and a Certification from concerned Pepsi
Managers that Pepsi donated only 10 cases of softdrinks and additional 20 cases of Pepsi 12 oz. to the Restobar.

The NLRC added that even assuming that respondent was without explicit authority from the owner of the Restobar, she
still validly entered the contract with Pepsi as the signing thereof was within her duty as the one in charge of the
operations of the Restobar. It also noted that there was no showing that respondent was ill-motivated in signing the
Pepsi contract; and she signed it to the best interest of the Restobar.

The NLRC ruled that the imputation that respondent charged food to the Restobar was related to her representation
privilege granted her by the Restobar; and, there was no evidence that she abused this privilege.

Petitioners and Kimwa moved for a reconsideration of the November 28, 2008 NLRC Resolution.

On June 4,2009, the NLRC granted the Motion for Reconsideration. It set aside its November 28, 2008 Resolution, and
dismissed the Complaint for lack of merit.[25]

In reversing itself, the NLRC held that respondent's functions did not include any authority to sign or execute contracts
for and in behalf of the Restobar. It added that even assuming that Leo verbally authorized her to sign the Pepsi
agreement, respondent signed the same in her name, as if she was the Restobar's owner. It also held that if not for the
fact that respondent was suspended and later dismissed, the whereabouts of the donated Pepsi products would not
have been traced. It likewise faulted respondent for charging 50% of her meals to the Restobar without approval from
its Owner or Chief Officer. It added that respondent was given opportunity to be heard when various memoranda were
issued to her.

On July 31, 2009, the NLRC denied[26] respondent's Motion for Reconsideration.

Ruling of the Court of Appeals

Respondent filed: with the CA a Petition for Certiorari essentially reiterating that she was illegally dismissed.

On November 27, 2012s the CA rendered the assailed Decision[27] setting aside the June 4, 2009 and July 31, 2009
Resolutions of the NLRC, and reinstating the November 28, 2008 NLRC Resolution.

The CA reasoned that as Administrative Officer/HR Head, respondent held a position of trust and confidence.
Nevertheless, it explained that petitioners failed to prove that respondent committed any of the following acts imputed
against her: a) signing the Pepsi agreement on behalf of the Restobar without authority from Leo; b) failure to account
for the products donated by Pepsi to the Restobar; and, c) unauthorized charges of food on the account of the Restobar.

The CA stressed that the foregoing grounds had been adequately passed upon in the NLRC November 28, 2008
Resolution before it reversed itself and issued its June 4, 2009 and July 31, 2009 Resolutions. It added that even if
respondent had no express authority to sign the agreement with Pepsi, her having entered it was not sufficient to
dismiss her from work, especially in the absence of malicious intent or fraud on her part. It pointed out that the
Restobar did not suffer damage because of respondent's act.

According to the CA, respondent even acted in good faith when she signed the contract with Pepsi on the impression
that sit was part of her duties and responsibilities. It also quoted with approval the November 28, 2003 NLRC Resolution
declaring that there was no evidence that respondent abused her representation privilege, which included the charging
of food expense when entertaining guests of the Restobar. Finally, it held that respondent did not deserve the penalty of
dismissal especially so since she committed no prior infractions in her more than three years of service.

On July 12,2013, the CA denied[28] petitioners' Motion for Reconsideration. Petitioners thus filed this Petition raising
these grounds:

1. [T]he Honorable Appellate Court erred in [accepting the [t]heory of the Respondent that Kimwa Construction
operated Leo's Restobar or Leo's Restaurant and Bar Cafe, Mountain Suite Business Apartelle.[29]

2. [T]he Honorable Appellate Court erred when it [h]eld that x x x to justify the dismissal of an employee base[d],
on loss of trust and confidence, the acts of said employee should be proven by substantial evidence and founded
on clearly established facts.[30]

3. [T]he Petition for Review [r]aises a question of law and of facts that justif[y r]eview of the Appellate Court's
Decision and its denial of the Motion for Reconsideration.[31]

4. [T]he Appellate Court also erred in [granting] Moral and Exemplary Damages [to respondent].[32]

Petitioners argue that the CA erred in holding that Kimwa owned and operated the Restobar and the Apartelle. They
assert that these establishments are single proprietorships owned by Amelia and managed by Leo. They also asseverate
that there are sufficient bases to dismiss respondent as she signed the exclusivity contract with Pepsi as if she was the
owner of the Restobar, and she did not account for the products donated by Pepsi to the latter. Finally, they submit that
respondent is not entitled to moral and exemplary damages as they did not act in bad faith in dismissing her.
Respondent, on her end, counters that although she held a position of trust and confidence, there is no showing that she
committed willful breach of trust against her employer. She argued that she acted in good faith when she signed the
exclusivity contract with Pepsi such that there is no reason to hold that she committed any dishonest conduct that
would warrant her employer's loss of trust in her.

Issue

Whether respondent was validly dismissed on the ground of loss of trust and confidence.

Our Ruling

The Court denies the Petition.

As a rule, the findings of fact of the CA when fully supported by evidence are conclusive and binding on the parties and
are not reviewable by the Court. However, this rule admits of exceptions including such instance where the factual
findings of the CA are contrary to those of the labor tribunals.[33]

In this case, the LA and the NLRC are one in ruling that respondent was validly dismissed from work. The CA ruled
otherwise, Considering these divergent positions, the Court deems it necessary to review, re-evaluate, and re-examine
the findings of the CA as they are contrary to those of the LA and the NLRC.[34]

First, petitioners deny that Kimwa owned and operated the Restobar and the Apartelle. They claim that Amelia owned
these establishments, and Leo only managed them.

The Court is unconvinced.

As will be discussed hereunder, sufficient pieces of evidence show that Kimwa, Leo, and Amelia owned, managed, and
operated the Restobar and the Apartelle. They also continuously employed respondent, previously as liaison officer and
thereafter as Administrative Officer/HR Head of the Restobar and the Apartelle.

On July 4, 2005, while respondent was still a liaison officer of Kimwa, Leo, as "Proprietor/Chief Executive Officer of
Kimwa Construction & Development Corp./Mountain Suite Business Apartelle" appointed her as Administrative
Officer/HR Head of the Restobar and the Apartelle to be effective as soon as the establishments were officially
operational.[35] On October 19, 2005, Leo, in the same capacity as cited above, confirmed the appointment of
respondent and declared its effectivity beginning October 18, 2005.[36]

Moreover, in his January 2, 2006 Memorandum,[37] while respondent was acting as Adrninistrative Officer/HR Head of
the Restobar and the Apartelle, Leo required her to temporarily report at Kimwa's Main Office. Apart from this, all
Memoranda[38] to Explain issued by Leo to respondent as well as the Notice[39] of her Termination were written under
the heading "Kimwa Construction & Dev. Corp." It is also worth noting that the Restobar is a namesake of Leo as the
same is named "Leo's Restaurant and Bar Cafe." As regards Amelia, petitioners repeatedly alleged that she is the owner
of the Restobar and the Apartelle and she never disputed this matter.

At the same time, it is settled that where it shows that business entities are owned, controlled, and conducted by tfce
same parties, Jaw and equity will disregard the legal fiction that they are distinct and shall treat them as one entity in
order to protect the rights of third persons. Here, it appearing that Kimwa, Leo, and Amelia owned, controlled and
managed the Restobar and the Apartelle, they are treated as a single entity accountable for the dismissal of
respondent.[40]

Based on the foregoing, petitioners continually employed respondent from the time she was assigned in Kimwa until she
was appointed Administrative Officer/HR Head of the Restobar and the Apartelle.

Second, petitioners argue that respondent was validly terminated for loss of trust and confidence.

Such argument is without merit.

An employer has the right to dismiss an employee for just causes, which include willful breach of trust and confidence
reposed on him or her by the employer. To temper such right to dismiss, and to reconcile it with the employee's security
of tenure, it is the employer who has the burden to show that the dismissal of the employee is for a just cause.[41] Such
determination of just cause must also be made with fairness, in good faith, and only after observance of due process of
law.[42]

Moreover, to dismiss an employee on the ground of loss of trust and confidence, two requisites must concur: (a) the
concerned employee must be holding a position of trust; and, (b) the loss of trust must be based on willful breach of
trust based on clearly established facts.[43]

Loss of trust and confidence as a ground for dismissal is never intended for abuse by reason of its subjective nature. It
must be pursuant to a breach done willfully, knowingly and purposely without any valid excuse. It must rest on
substantial grounds and not on mere suspicion, whims, or caprices of the employer.[44]

In fine, "loss of confidence should not be simulated. It should not be used as a subterfuge for causes which are
improper, illegal, or unjustified. Loss of confidence may not be arbitrarily asserted in the face of overwhelming evidence
to the contrary. It must be genuine, not a mere afterthought to justify earlier action taken in bad faith."[45]

Here, respondent, as Administrative Officer/HR Head of the Restobar and the Apartelle, had the following duties and
functions:

1. Has the authority/information in all operation, administrative and functional matters.

2. Reports directly to the owner.
3. Oversees the entire operations of the business that includes over-all property/furnitur[e] maintenance &
expenditures.
4. Handles all employees of the establishments.
5. Carries out HR policies & procedures[.]
6. Responsible in the recruitment, screening & selection of new employment for vacant position. .
7. Plans & conducts new employee orientation to foster positive attitude towards company goals.
8. Develops & maintains a human resourc[e] system that meets top management information needs.
9. Wage and salary administration.
10. Labor & Employee relations, welfare & benefits.[46]

As far as the first requisite is concerned, respondent is shown to occupy a position of trust as her managerial work was
directly related to management policies, and generally required exercise of discretion and independent judgment.[47]

Nonetheless, the second requirement is wanting since petitioners failed to prove that their loss of trust on respondent
was founded on clearly established facts.

Records show that on December 30, 2005, Leo required respondent to explain her supposed infractions when she
signed, without the approval of the owner, the contract between the Restobar and Pepsi; and her failure to account the
items Pepsi donated to the Restobar.

Respondent aptly explained these matters to Leo. According to her, Leo verbally authorized her to sign the agreement
with Pepsi. This verbal instruction was given in the presence of Ablanque, Sales Manager of Pepsi.
In his Affidavit[48] dated February 9, 2006, Ablanque corroborated respondent's assertion. He certified that during his
visits in the Restobar, he discussed with Leo his proposal of an exclusivity contract between Pepsi and the Restobar. In
the course of their negotiation in September 2005, Leo agreed to the contract, and authorized respondent to sign the
same.

Also, as declared by the CA, even granting for the sake of argument that respondent signed the Pepsi contract without
the express authority from Leo, her act was .well within her functions. As above quoted, respondent 1) had the authority
in all operational, administrative and functional matters of the Restobar and the Apartelle; and, 2) had the duty to
oversee the entire operations of the business, including the over-all property/furniture, maintenance and
expenditures.[49]

Therefore, having entered the Pepsi contract is not sufficient basis for petitioners to lose their;; trust in respondent. Leo
authorized her to enter said agreement. Even assuming that there was no explicit order for her to do so, respondent still
acted within her authority as in-charge of all operation, administrative and functional matters of the establishments.

Notably, although the LA ruled that respondent was validly dismissed, the LA (in granting separation pay), recognized
that respondent acted in good faith when she entered into the Pepsi contract, viz.:

[Respondent] x x x nonetheless entered into said agreement in good faith. [Respondent] presumed that she was
authorized to enter into said Exclusivity Agreement. In this regard, the undersigned is inclined to grant [respondent's]
claim for separation pay considering that her dismissal is premised on a vague authority, x x x[50]

Indeed, there was no malice or any fraudulent intent on the part of respondent when she sighed the Pepsi contract.
There is likewise no evidence that she personally benefited therefrom. In fact, the Restobar itself received the items
donated by Pepsi, and the Restobar did not suffer any damage arising from the Pepsi contract.

Loss of trust and confidence must stem from dishonest, deceitful or fraudulent acts. In the absence of such malicious
intent or fraud on the part of respondent, she committed no willful breach of trust against her employer.[51]

In addition, the Court finds that the charge that respondent failed to account for a certain number of products Pepsi
donated to the Restobar is without basis.

On January 4, 2006, Pepsi clarified that it donated only 10 cases of its products on the opening night of the Restobar,
and an additional 20 cases of Pepsi 12 oz. on December 7, 2005. It added that Pepsi gave no other donation to the
Restobar or its staff. Pepsi admitted its lapses, and apologized to Leo; it also requested him to disregard the inadvertent
entries in the documents it gave him.

Since Pepsi clarified the matter and as established, there is no unaccounted donation made by Pepsi to the Restobar,
then the allegation - that respondent committed loss of trust because of unaccounted donation from Pepsi — is
untenable. Indeed, petitioners' loss of trust and confidence was merely simulated. It was arbitrarily asserted despite
sufficient evidence to the contrary.[52]

Moreover, the charge of dishonesty against respondent for purportedly charging 50% of the food she personally ordered
to the account of the Restobar is unsubstantiated. This accusation was cited in Leo's January 3,2006 Memorandum but
was not at all specified in the Notice of Termination against respondent as said notice centered on respondent's act of
having entered the contract with Pepsi. In any case, as correctly observed in the November 28, 2008 Resolution of the
NLRC, Restobar "was not really saddled by those entertainment expenses because the foods and meals were eventually
deducted against [respondent's] salary, which for one reason or another [respondent] offered no objection."[53]

Finally, the Court sustains the grant of moral and exemplary damages, and attorney's fees in favor of respondent.
Moral damages is awarded to an illegally dismissed or suspended employee when the employer acted in bad faith or
fraud, or in such manner oppressive to labor or contrary to morals, good customs or public policy,[54] as in this case.

As discussed, petitioners primarily charged respondent of having entered the contract with Pepsi without authority from
the Owner or the Manager of the Restobar. Nevertheless, as also established, Leo was well aware of this contract, as
Pepsi itself attested, The Restobar also directly received the Pepsi products. Moreover, despite respondent having
explained herself, and Pepsi having fully and timely clarified the matters surrounding the contract, petitioners still
dismissed respondent. It thus appears that such dismissal was pre-determined by petitioners even before respondent
explained herself regarding the charges against her.

For having shown bad faith or such "conscious and intentional design to do a wrongful act for a dishonest purpose or
moral obliquity,"[55] petitioners are liable to pay respondent moral damages amounting to P50,000.00. They are 'likewise
liable to pay respondent exemplary damages amounting to P50,000.00 as it is also shown that her dismissal was carried
out in such a malicious and oppressive manner. Such grant of exemplary damages is deemed necessary to deter
employers from committing the same or similar acts. The award of attorney's fees is likewise sustained since exemplary
damages is awarded here, and considering further that respondent has been compelled to file this case and incurred
expenses to protect her interest.[56]

To recapitulate, in order to dismiss an employee on the ground of loss of trust and confidence, the employee must be
guilty of an actual and willful breach of duty duly supported by substantial evidence.57 Since petitioners failed to show
that respondent actually and willfully breached their trust, then the CA properly ruled that petitioners dismissed her
without any valid cause. Henceforth, the CA properly set aside the NLRC Resolutions dated June 4, 2009 and July 31,
2009, and reinstated the NLRC Resolution dated November 28,2008.

WHEREFORE, the Petition is DENIED. The Decision dated November 27, 2012 and Resolution dated July 12, 2013 of the
Court of Appeals in CA-G.R SP No. 03222-MIN are AFFIRMED.

SO ORDERED
FIRST DIVISION

[ G.R. No. 193816, November 21, 2016 ]

ERSON ANG LEE DOING BUSINESS AS "SUPER LAMINATION SERVICES," PETITIONER, V. SAMAHANG MANGGAGAWA NG
SUPER LAMINATION (SMSLS-NAFLU-KMU), RESPONDENT.

DECISION

SERENO, C.J.:

This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court on the Decision[1] and Resolution[2] of the
Court of Appeals (CA) affirming the assailed Decision[3] of the Department of Labor and Employment (DOLE). DOLE
allowed the conduct of certification election among the rank-and-file employees of Super Lamination Services (Super
Lamination), Express Lamination Services, Inc. (Express Lamination), and Express Coat Enterprises, lnc. (Express Coat).
THE ANTECEDENT FACTS

Petitioner Erson Ang Lee (petitioner), through Super Lamination, is a duly registered entity principally engaged in the
business of providing lamination services to the general public. Respondent Samahan ng mga Manggagawa ng Super
Lamination Services (Union A) is a legitimate labor organization, which is also a local chapter affiliate of the National
Federation of Labor Unions - Kilusang Mayo Uno.[4] It appears that Super Lamination is a sole proprietorship under
petitioner's name,[5] while Express Lamination and Express Coat are duly incorporated entities separately registered with
the Securities and Exchange Commission (SEC).[6]

On 7 March 2008, Union A filed a Petition for Certification Election[7] to represent all the rank-and-file employees of
Super Lamination.[8]

Notably, on the same date, Express Lamination Workers' Union (Union B) also filed a Petition for Certification Election to
represent all the rank-and-file employees of Express Lamination.[9]

Also on the same date, the Samahan ng mga Manggagawa ng Express Coat Enterprises, Inc. (Union C) filed a Petition for
Certification Election to represent the rank-and-file employees of Express Coat.[10]

Super Lamination, Express Lamination, and Express Coat, all represented by one counsel, separately claimed in their
Comments and Motions to Dismiss that the petitions must be dismissed on the same ground — lack of employer-
employee relationship between these establishments and the bargaining units that Unions A, B, and C seek to represent
as well as these unions' respective members.[11]Super Lamination, in its Motion, posited that a majority of the persons
who were enumerated in the list of members and officers of Union A were not its employees, but were employed by
either Express Lamination or Express Coat.[12] Interestingly, both Express Lamination and Express Coat, in turn,
maintained the same argument that a majority of those who had assented to the Petition for Certification Election were
not employees of either company, but of one of the two other companies involved.[13]

All three Petitions for Certification Election of the Unions were denied. On 21 May 2008, an Order was issued by DOLE
National Capital Region (NCR) Med-Arbiter Michael Angelo Parado denying the respective petitions of Unions B and C on
the ground that there was no existing employer-employee relationship between the members of the unions and the
companies concerned. On 23 May 2008, DOLE NCR Med-Arbiter Alma Magdaraog-Alba also denied the petition of
respondent Union A on the same ground.[14]

The three unions filed their respective appeals before the Office of the DOLE Secretary, which consolidated the appeal
because the involved companies alternately referred to one another as the employer of the members of the bargaining
units sought to be represented.[15] The unions argued that their petitions should have been allowed considering that the
companies involved were unorganized, and that the employers had no concomitant right to oppose the petitions. They
also claimed that while the questioned employees might have been assigned to perform work at the other companies,
they were all under one management's direct control and supervision.[16]

DOLE, through Undersecretary Romeo C. Lagman, rendered the assailed Decision, the dispositive portion of which reads
as follows:

WHEREFORE, premises considered, the appeals filed by Express Lamination Workers Union (ELWU-NAFLU-KMU),
Samahang Manggagawa ng Express Coat Enterprises, Inc. (SMEC-NAFLU-KMU) and Samahang Manggagawa ng Super
Lamination Services (SMSLS NAFLU-KMU) are hereby GRANTED and the Orders dated 21 May 2008 of DOLE-NCR
Mediator-Arbiter Michael Angelo T. Parado are hereby REVERSED and SET ASIDE. The Order dated 23 May 2008 of DOLE
NCR Mediator-Arbiter Alma E. Magdaraog-Alba is likewise REVERSED and SET ASIDE.

Accordingly, let the entire records of this be remanded to the regional office of origin for the immediate conduct of
certification election among the rank-and-file employees of Express Lamination Services, Inc., Super Lamination Services
and Express Coat Enterprises Inc., after the conduct of pre-election conference/s, with the following as choices;

1. Express Lamination Workers Union-NAFLU-KMU;

2. Samahan ng mga Manggagawa ng Super Lamination Services NAFLU-KMU;

3. Samahang ng mga Manggagawa ng Express Coat Enterprises, Inc.-NAFLU-KMU; and

4. "No Union."

The employer/s and/or contending union(s) are hereby directed to submit to the Regional Office of origin, within ten
(10) days from receipt of this Decision, a certified list of employees in the bargaining unit or the payrolls covering the
members of the bargaining unit for the last three (3) months prior to the issuance of the Decision.

SO DECIDED.[17](Emphases in the original)

DOLE found that Super Lamination, Express Lamination, and Express Coat were sister companies that had a common
human resource department responsible for hiring and disciplining the employees of the three companies. The same
department was found to have also given them daily instructions on how to go about their work and where to report for
work. It also found that the three companies involved constantly rotated their workers, and that the latter's
identification cards had only one signatory.[18]

To DOLE, these circumstances showed that the companies were engaged in a work-pooling scheme, in light of which
they might be considered as one and the same entity for the purpose of determining the appropriate bargaining unit in a
certification election.[19]DOLE applied the concept of multi-employer bargaining under Sections 5 and 6 of DOLE
Department Order 40-03, Series of 2003. Under that concept, the creation of a single bargaining unit for the rank-and-
file employees of all three companies was not implausible and was justified under the given circumstances.[20] Thus, it
considered these rank-and-file employees as one bargaining unit and ordered the conduct of a certification election as
uniformly prayed for by the three unions.

Aggrieved, petitioner instituted an appeal before the CA, which denied his Petition and affirmed the Decision of DOLE. It
sided with DOLE in finding that Super Lamination, Express Lamination, and Express Coat were sister companies that had
adopted a work-pooling scheme. Therefore, it held that DOLE had correctly applied the concept of multi-employer
bargaining in finding that the three companies could be considered as the same entity, and their rank-and-file
employees as comprising one bargaining unit.[21]

Petitioner filed a Motion for Reconsideration of the CA Decision, but the motion was denied.[22] Therefore, he now
comes to this Court through the present Petition.

ISSUES

From the established facts and arguments, we cull the issues as follows:

1. Whether the application of the doctrine of piercing the corporate veil is warranted

2. Whether the rank-and-file employees of Super Lamination, Express Lamination, and Express Coat constitute an
appropriate bargaining unit

THE COURT'S RULING

We deny the petition.

An application of the doctrine of

piercing the corporate veil is
warranted.

Petitioner argues that separate corporations cannot be treated as a single bargaining unit even if their businesses are
related,[23] as these companies are indubitably distinct entities with separate juridical personalities.[24] Hence, the
employees of one corporation cannot be allowed to vote in the certification election of another corporation, lest the
abovementioned rule be violated.[25]

Petitioner's argument, while correct, is a general rule. This Court has time and again disregarded separate juridical
personalities under the doctrine of piercing the corporate veil. It has done so in cases where a separate legal entity is
used to defeat public convenience, justify wrong, protect fraud, or defend crime, among other grounds.[26] In any of
these situations, the law will regard it as an association of persons or, in case of two corporations, merge them into
one.[27]

A settled formulation of the doctrine of piercing the corporate veil is that when two business enterprises are owned,
conducted, and controlled by the same parties, both law and equity will, when necessary to protect the rights of third
parties, disregard the legal fiction that these two entities are distinct and treat them as identical or as one and the
same.[28]

This formulation has been applied by this Court to cases in which the laborer has been put in a disadvantageous position
as a result of the separate juridical personalities of the employers involved.[29] Pursuant to veil-piercing, we have held
two corporations jointly and severally liable for an employee's back wages.[30] We also considered a corporation and its
separately incorporated branches as one and the same for purposes of finding the corporation guilty of illegal
dismissal.[31] These rulings were made pursuant to the fundamental doctrine that the corporate fiction should not be
used as a subterfuge to commit injustice and circumvent labor laws.[32]

Here, a certification election was ordered to be held for all the rank-and-file employees of Super Lamination, Express
Lamination, and Express Coat. The three companies were supposedly distinct entities based on the fact that Super
Lamination is a sole proprietorship while Express Lamination and Express Coat were separately registered with the
SEC.[33] The directive was therefore, in effect, a piercing of the separate juridical personalities of the corporations
involved. We find the piercing to be proper and in accordance with the law as will be discussed below.

The following established facts show that Super Lamination, Express Lamination, and Express Coat are under the control
and management of the same party — petitioner Ang Lee. In effect, the employees of these three companies have
petitioner as their common employer, as shown by the following facts:

1. Super Lamination, Express Lamination, and Express Coat were engaged in the same business of providing
lamination services to the public as admitted by petitioner in his petition.[34]

2. The three establishments operated and hired employees through a common human resource department as
found by DOLE in a clarificatory hearing.[35] Though it was not clear which company the human resource
department was officially attached to, petitioner admits in his petition that such department was shared by the
three companies for purposes of convenience.[36]

3. The workers of all three companies were constantly rotated and periodically assigned to Super Lamination or
Express Lamination or Express Coat to perform the same or similar tasks.[37] This finding was further affirmed
when petitioner admitted in his petition before us that the Super Lamination had entered into a work-pooling
agreement with the two other companies and shared a number of their employees.[38]

4. DOLE found and the CA affirmed that the common human resource department imposed disciplinary sanctions
and directed the daily performance of all the members of Unions A, B, and C.[39]

5. Super Lamination included in its payroll and SSS registration not just its own employees, but also the supposed
employees of Express Lamination and Express Coat. This much was admitted by petitioner in his Motion to
Dismiss[40] which was affirmed by the Med-Arbiter in the latter's Order.[41]

6. Petitioner admitted that Super Lamination had issued and signed the identification cards of employees who
were actually working for Express Lamination and Express Coat.[42]

7. Super Lamination, Express Lamination, and Express Coat were represented by the same counsel who interposed
the same arguments in their motions before the Med-Arbiters and DOLE.[43]

Further, we discern from the synchronized movements of petitioner and the two other companies an attempt to
frustrate or defeat the workers' right to collectively bargain through the shield of the corporations' separate juridical
personalities. We make this finding on the basis of the motions to dismiss filed by the three companies. While similarly
alleging the absence of an employer-employee relationship, they alternately referred to one another as the employer of
the members of the bargaining units sought to be represented respectively by the unions. This fact was affirmed by the
Med-Arbiters' Orders finding that indeed, the supposed employees of each establishment were found to be alternately
the employees of either of the two other companies as well. This was precisely the reason why DOLE consolidated the
appeals filed by Unions A, B, and C.[44]

Due to the finger-pointing by the three companies at one another, the petitions were dismissed. As a result, the three
unions were not able to proceed with the conduct of the certification election. This also caused confusion among the
employees as to who their real employer is, as Union A claims in its Comment.[45]
We hold that if we allow petitioner and the two other companies to continue obstructing the holding of the election in
this manner, their employees and their respective unions will never have a chance to choose their bargaining
representative. We take note that all three establishments were unorganized. That is, no union therein was ever duly
recognized or certified as a bargaining representative.[46]

Therefore, it is only proper that, in order to safeguard the right of the workers and Unions A, B, and C to engage in
collective bargaining, the corporate veil of Express Lamination and Express Coat must be pierced. The separate existence
of Super Lamination, Express Lamination, and Express Coat must be disregarded. In effect, we affirm the lower tribunals
in ruling that these companies must be treated as one and the same unit for purposes of holding a certification election.

Petitioner has cited Diatagon Labor Federation Local v. Ople[47] and Indophil Textile Mill Worker Union v. Calica[48] in
which this Court refused to treat separate corporations as a single bargaining unit. Those cases, however, are not
substantially identical with this case and would not warrant their application herein. Unlike in the instant case, the
corporations involved were found to be completely independent or were not involved in any act that frustrated the
laborers' rights.

In Diatagon,[49] we refused to include the 236 employees of Georgia Pacific International Corporation in the bargaining
unit of the employees of Liangga Bay Logging Co., Inc. This Court's refusal was in light of the fact that the two
corporations were indubitably distinct entities with separate corporate identities and origins. Moreover, there was no
discernible attempt to frustrate any of their labor-related rights, as the only conflict was over which bargaining unit they
belonged to.

In Indophil,[50] this Court refused to pierce the corporate veil of Indophil Textile Mill and Indophil Acrylic Manufacturing.
We found that the creation of Indophil Acrylic was not a device to evade the application of the collective bargaining
agreement (CBA) between petitioner union and Indophil Textile Mill. This Court further found that despite the similarity
in their business operations, the separate personalities of the two corporations were maintained and were not used for
any of the purposes specified under the law that would warrant piercing. It is also apparent in this case that the workers'
rights were not being hampered by the employers concerned, as the only issue between them was the extent of the
subject CBA's application.

In this case, not only were Super Lamination, Express Lamination, and Express Coat found to be under the control of
petitioner, but there was also a discernible attempt to disregard the workers' and unions' right to collective bargaining.

The foregoing considered, we find no error in the CA's affirmance of the DOLE directive. We affirm DOLE's application by
analogy of the concept of multi-employer bargaining to justify its Decision to treat the three companies as one. While
the multi-employer bargaining mechanism is relatively new and purely optional under Department Order No. 40-03, it
illustrates the State's policy to promote the primacy of free and responsible exercise of the right to collective
bargaining.[51] The existence of this mechanism in our labor laws affirm DOLE's conclusion that its treatment of the
employees of the three companies herein as a single bargaining unit is neither impossible nor prohibited.[52] It is justified
under the circumstances discussed above.

Besides, it is an established rule that factual findings of labor officials, who are deemed to have acquired expertise in
matters within their jurisdiction, are generally accorded by the courts not only respect but even finality when supported
by substantial evidence; i.e., that amount of relevant evidence which a reasonable mind might accept as adequate to
justify a conclusion.[53]
The bargaining unit of the rank-and
file employees of the three companies
is appropriate.

Petitioner argues that there is no showing that the rank-and-file employees of the three companies would constitute an
appropriate bargaining unit on account of the latter's different geographical locations.[54] This contention lacks merit.
The basic test for determining the appropriate bargaining unit is the application of a standard whereby a unit is deemed
appropriate if it affects a grouping of employees who have substantial, mutual interests in wages, hours, working
conditions, and other subjects of collective bargaining.[55] We have ruled that geographical location can be completely
disregarded if the communal or mutual interests of the employees are not sacrificed.[56]

In the present case, there was communal interest among the rank-and-file employees of the three companies based on
the finding that they were constantly rotated to all three companies, and that they performed the same or similar duties
whenever rotated.[57]Therefore, aside from geographical location, their employment status and working conditions were
so substantially similar as to justify a conclusion that they shared a community of interest. This finding is consistent with
the policy in favor of a single-employer unit, unless the circumstances require otherwise.[58] The more solid the
employees are, the stronger is their bargaining capacity.[59]

As correctly observed by the CA and DOLE, while there is no prohibition on the mere act of engaging in a work-pooling
scheme as sister companies, that act will not be tolerated, and the sister companies' separate juridical personalities will
be disregarded, if they use that scheme to defeat the workers' right to collective bargaining. The employees' right to
collectively bargain with their employers is necessary to promote harmonious labor-management relations in the
interest of sound and stable industrial peace.[60]

WHEREFORE, the Petition for Review on Certiorari under Rule 45 is DENIED for lack of merit. The Court of Appeals
Decision[61]and Resolution[62] in CA-G.R. SP No. 109486 are hereby AFFIRMED.

SO ORDERED
[ GR No. 203770, Nov 23, 2016 ]

MANUELA AZUCENA MAYOR v. EDWIN TIU +

DECISION

MENDOZA, J.:
This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court assailing the October 5, 2011[1] and
September 24, 2012[2]

Resolutions of the Court of Appeals (CA) in CA-G.R. SP No. 06256, which dismissed the petition filed by Remedios Tiu
(Remedios) and Manuela Azucena Mayor (Manuela) for procedural infirmities. The said CA petition challenged the
January 20, 2011[3] and June 10, 2011[4] Orders of the Regional Trial Court, Branch 6, Tacloban City (RTC-Br. 6), in Sp.
Proc. No. 2008-05-30, a case for Probate of Last Will and Testament and Issuance of Letters of Testamentary.

The Antecedents:

On May 25, 2008, Rosario Guy-Juco Villasin Casilan (Rosario), the widow of the late Primo Villasin (Primo), passed away
and left a holographic Last Will and Testament,[5] wherein she named her sister, Remedios Tiu (Remedios), and her niece,
Manuela Azucena Mayor (Manuela), as executors. Immediately thereafter, Remedios and Manuela filed a petition for
the probate of Rosario's holographic will[6] with prayer for the issuance of letters testamentary (probate proceedings).
The petition was raffled to the Regional Trial Court, Branch 9, Tacloban City (RTC-Br. 9) and docketed as Sp. Proc. No.
2008-05-30. They averred that Rosario left properties valued at approximately P2.5 million.

On May 29, 2008, respondent Damiana Charito Marty (Marty) claiming to be the adopted daughter of Rosario, filed a
petition for letters of administration before the RTC, Branch 34, Tacloban City (RTC-Br. 34), docketed as Sp. Proc. No.
2008-05-32, but it was not given due course because of the probate proceedings. Per records, this dismissal is subject of
a separate proceeding filed by Marty with the CA Cebu City, docketed as CA G.R. SP No. 04003.[7]

On June 12, 2008, in its Order,[8] the RTC-Br. 9 found the petition for probate of will filed by Remedios and Manuela as
sufficient in form and substance and set the case for hearing.

Consequently, Marty filed her Verified Urgent Manifestation and Motion,[9] dated June 23, 2008, stating that Remedios
kept the decedent Rosario a virtual hostage for the past ten (10) years and her family was financially dependent on her
which led to the wastage and disposal of the properties owned by her and her husband, Primo. Marty averred that until
the alleged will of the decedent could be probated and admitted, Remedios

and her ten (10) children had no standing to either possess or control the properties comprising the estate of the
Villasins. She prayed for the probate court to: 1) order an immediate inventory of all the properties subject of the
proceedings; 2) direct the tenants of the estate, namely, Mercury Drug and Chowking, located at Primrose Hotel, to
deposit their rentals with the court; 3) direct Metrobank, P. Burgos Branch, to freeze the accounts in the name of
Rosario, Primrose Development Corporation (Primrose) or Remedios; and 4) lock up the Primrose Hotel in order to
preserve the property until final disposition by the court.

On July 8, 2008, Remedios and Manuela filed their Comment/Opposition[10] to the urgent manifestation averring that
Marty was not an adopted child of the Villasins based on a certification issued by the Office of the Clerk of Court of
Tacloban City, attesting that no record of any adoption proceedings involving Marty existed in their records. They also
argued that the probate court had no jurisdiction over the properties mistakenly claimed by Marty as part of Rosario's
estate because these properties were actually owned by, and titled in the name of, Primrose. Anent the prayer to direct
the tenants to deposit the rentals to the probate court, Remedios and Manuela countered that the probate court had no
jurisdiction over properties owned by third persons, particularly by Primrose, the latter having a separate and distinct
personality from the decedent's estate.

In her Reply,[11] dated July 15, 2008, Marty cited an order of the Court of First Instance of Leyte (CFI Leyte) in SP No.
1239,[12]claiming that as early as March 3, 1981, the veil of corporate entity of Primrose was pierced on the ground that
it was a closed family corporation controlled by Rosario after Primo's death. Thus, Marty alleged that "piercing" was
proper in the case of Rosario's estate because the incorporation of Primrose was founded on a fraudulent consideration,
having been done in contemplation of Primo's death.

Further, on July 22, 2008, in her Opposition to the Petition for the Approval of the Will of the Late Rosario Guy-Juco
Villasin Casilan,[13] Marty impugned the authenticity of her holographic will.

Meanwhile, Edwin Tiu (Edwin), a son of Remedios, also filed his Opposition,[14] dated June 13, 2008.

After a protracted exchange of pleadings, the parties submitted their respective memoranda.

The January 14, 2009 Order

In its January 14, 2009 Order,[15] the RTC-Br. 9 granted the motion of Marty and appointed the OIC Clerk of Court as
special administrator of the Estate. The Probate Court also ordered Mercury Drug and Chowking to deposit the rental
income to the court and Metrobank to freeze the bank accounts mentioned in the motion of Marty. The doctrine of
piercing the corporate veil was applied in the case considering that Rosario had no other properties that comprised her
estate other than Primrose. According to the probate court, for the best interest of whoever would be adjudged as the
legal heirs of the Estate, it was best to preserve the properties from dissipation.

On January 22, 2009, Remedios and Manuela filed their Motion for Inhibition[16] on the ground of their loss of trust and
confidence in RTC-Br. 9 Presiding Judge Rogelio C. Sescon (Judge Sescon) to dispense justice. Later, they also filed their
Motion for Reconsideration Ad Cautelam,[17] dated February 3, 2009, arguing that Rosario's estate consisted only of
shares of stock in Primrose and not the corporation itself. Thus, the probate court could not order the lessees of the
corporation to remit the rentals to the Estate's administrator. With regard to the appointment of a special
administrator, Remedios and Manuela insisted that it be recalled. They claimed that if ever there was a need to appoint
one, it should be the two of them because it was the desire of the decedent in the will subject of the probation
proceedings.

In its Order,[18] dated March 27, 2009, the RTC-Br. 9 denied the motion for reconsideration for lack of merit and affirmed
its January 14, 2009 Order. The presiding judge, Judge Sescon, also granted the motion for inhibition and ordered that
the records of the case be referred to the RTC Executive Judge for reraffling. The case was later re-raffled to RTC-Br.6,
Judge Alphinor C. Serrano, presiding judge.

Aggrieved by the denial of their motion for reconsideration, Remedios and Manuela filed a petition for certiorari with
the CA in Cebu City, docketed as CA-G.R. S.P. No. 04254, assailing the January 14, 2009 and March 27, 2009 Orders of
the RTC-Br. 9.[19]

Ruling of the CA

In its October 16, 2009 Decision,[20] the CA reversed the assailed orders of the RTC Br. 9, except as to the appointment of
a special administrator insofar as this relates to properties specifically belonging to the "Estate." It held that Primrose
had a personality separate and distinct from the estate of the decedent and that the probate court had no jurisdiction
to apply the doctrine of piercing the corporate veil.

According to the CA, nowhere in the assailed orders of the probate court was it stated that its determination of the title
of the questioned properties was only for the purpose of determining whether such properties ought to be included in
the inventory. When the probate court applied the doctrine of "piercing," in effect, it adjudicated with finality the
ownership of the properties in favor of the Estate. The CA stated that RTC-Br. 9 had no jurisdiction to adjudicate
ownership of a property claimed by another based on adverse title; and that questions like this must be submitted to a
court of general jurisdiction and not to a probate court.
The CA added that assuming that the probate court's determination on the issue of ownership was merely intended to
be provisional, Marty's contentions still had no merit. The properties, which she claimed to be part of the estate of
Rosario and over which she claimed co-ownership, comprised of real properties registered under the Torrens system. As
such, Primrose was considered the owner until the titles to those properties were nullified in an appropriate ordinary
action. The CA further stated that the RTC erroneously relied on the order issued by the CFI Leyte in 1981, in the probate
proceedings involving the estate of Primo. Whatever determination the CFI made at the time regarding the title of the
properties was merely provisional, hence, not conclusive as to the ownership.

By reason of the favorable decision by the CA, Remedios and Manuela filed their Motion to Partially Revoke the Writ of
Execution Enforcing the January 14, 2009 Order of the Honorable Court and Manifestation in Compliance with the
October 21, 2009 Order (Ad Cautelam),[21] dated October 27, 2009.

In its Order,[22] dated November 17, 2009, the RTC-Br. 6 partially granted the motion as it revoked the power of the
special administrator to oversee the day-to-day operations of Primrose. It also revoked the order with respect to
Mercury Drug and Chowking, reasoning out that the said establishments dealt with Primrose, which had a personality
distinct and separate from the estate of the decedent. In the said order, Atty. Blanche A. Sa1ino nominated by
oppositors Marty and Edwin, was appointed special administrator to oversee the day-to-day operations of the estate.
The same order also upheld the January 14, 2009 Order, as to the conduct and inventory of all the properties comprising
the estate.

This order was not questioned or appealed by the parties.

Omnibus Motion

On September 24, 2010, or almost ten (10) months after the November 17, 2009 Order of the probate court was issued,
Marty, together with her new counsel, filed her Omnibus Motion,[23] praying for the probate court to: 1) order Remedios
and Manuela to render an accounting of all the properties and assets comprising the estate of the decedent; 2) deposit
or consign all rental payments or other passive income derived from the properties comprising the estate; and 3)
prohibit the disbursement of funds comprising the estate of the decedent without formal motion and approval by the
probate court.

Ruling of the RTC-Br. 6

In its January 20, 2011 Order, the RTC-Br. 6 granted Marty's Omnibus Motion. Although it agreed with the October 16,
2009 CA Decision reversing the January 14, 2009 Order of the RTC-Br. 9, nonetheless, it acknowledged the urgency and
necessity of appointing a special administrator. According to the probate court, considering that there was clear
evidence of a significant decrease of Rosario's shares in the outstanding capital stock of Primrose,[24] prudence dictated
that an inquiry into the validity of the transfers should be made. A final determination of this matter would be outside
the limited jurisdiction of the probate court, but it was likewise settled that the power to institute an action for the
recovery of a property claimed to be part of the estate was normally lodged with the executor or administrator. Thus,
the probate court disposed:

WHEREFORE, for the reasons aforestated, and so as not to render moot any action that the special administrator, or the
regular administrator upon the latter's qualification and appointment, may deem appropriate to take on the matter (i.e.
Whether or not to institute in the name of the estate the appropriate action for the recovery of the shares of stock), this
Court herebyGRANTS Oppositor Marty's Omnibus Motion, dated September 24, 2010, and thus hereby:

1. DIRECTS petitioners, either individually or jointly, to: (a) RENDER AN ACCOUNTING of all the properties and assets
comprising the estate of the decedent that may have come into their possession; and, (b) DEPOSIT OR CONSIGN all the
rentals payments or such other passive incomes from the properties and assets registered in the name of Primrose
Development Corporation, including all income derived from the Primrose Hotel and the lease contracts with Mercury
Drug and Chowking Restaurant, both within fifteen (15) days from receipt of this Order;
2. DIRECTS the Special Administrator to take possession and charge of the properties comprising the decedent's estate,
specially those pertaining to the sharesholding of the decedent in Primrose Development Corporation, to determine
whether or not action for the recovery of the shares of stock supposedly transferred from the decedent to petitioners
Remedios Tiu, Manuela Azucena Mayor should be instituted in the name of the estate against the said transferees and
to submit a Report on the foregoing matters to this Court, within fifteen (15) days from receipt of this Order; and,

3. ORDERS that no funds comprising the estate of the decedent shall be disbursed without formal Motion therefor, with
the conformity of the Special Administrator, duly approved by this Court.

SO ORDERED.[25] [Underscoring supplied]

The partial motion for reconsideration of the above order filed by Remedios and Manuela was denied in the other
assailed order of the RTC-Br. 6, dated June 10, 2011.[26]

Dissatisfied, Remedios and Manuela availed of the special civil action of certiorari under Rule 65, and filed a petition
before the CA.

Action by the CA

The CA, however, in its October 5, 2011 Resolution,[27] dismissed the same based on the following infirmities: 1) there
was no proper proof of service of a copy of the petition on the respondents which was sent by registered mail; 2)
petitioners failed to indicate on the petition the material date when the motion for reconsideration was filed; 3) the
copy of the assailed order was not certified true and correct by the officer having custody of the original copy; and 4) the
serial number of the commission of the notary public, the province-city where he was commissioned, the office address
of the notary public and the roll of attorney's number were not properly indicated on the verification and certification of
non-forum shopping.

Remedios and Manuela moved for reconsideration of the assailed CA resolution, but to no avail, as the appellate court
denied the motion in its September 24, 2012 Resolution.

Hence, this petition before the Court, filed only by Manuela as Remedios had also passed away, and anchored on the
following

GROUNDS

I.

THE HONORABLE COURT OF APPEALS COMMITTED GROSS AND REVERSIBLE ERROR IN THE APPLICATION OF LAW AND
THE RULES WARRANTING REVIEW WHEN IT MISAPPLIED SECTION 13, RULE 13 OF THE RULES OF COURT AND
DECLARED THAT THERE WAS NO PROPER PROOF OF SERVICE BY REGISTERED MAIL.

II.

THE HONORABLE COURT OF APPEALS COMMITTED GROSS AND REVERSIBLE ERROR IN THE APPLICATION OF LAW AND
THE RULES WARRANTING REVIEW WHEN IT MISAPPLIED JURISPRUDENCE AND RULE 65 AND IT HELD THAT
PETITIONER MAYOR DID NOT COMPLY WITH THE MATERIAL DATE RULE.

III.

THE HONORABLE COURT OF APPEALS COMMITTED GROSS AND REVERSIBLE ERROR IN THE APPLICATION OF LAW AND
THE RULES WARRANTING REVIEW WHEN IT DECLARED THAT PETITIONER MAYOR FAILED TO COMPLY WITH THE
REQUIREMENT OF SECTION 1, RULE 65 FOR FAILING TO ATTACH CERTIFIED TRUE COPY OF THE ORDER OF THE TRIAL
COURT.

IV.

THE HONORABLE COURT OF APPEALS COMMITTED GROSS AND REVERSIBLE ERROR IN THE APPLICATION OF LAW AND
THE RULES WARRANTING REVIEW WHEN IT DECLARED THAT PETITIONER MAYOR DID NOT COMPLY WITH THE
REQUIREMENT OF VERIFICATION AND CERTIFICATION AGAINST FORUM SHOPPING.

V.

THE HONORABLE COURT OF APPEALS COMMITTED GROSS AND REVERSIBLE ERROR IN THE APPLICATION OF LAW AND
THE RULES WARRANTING REVIEW WHEN IT ALLOWED TECHNICALITIES TO BE USED TO DEFEAT SUBSTANTIAL RIGHT
OF THE PARTIES.

VI.

PETITIONERS HAVE GOOD CAUSE AND A MERITORIOUS CASE AGAINST HEREIN RESPONDENTS AS PARAGRAPH 1(B) OF
THE DISPOSITIVE PORTION OF THE FIRST ASSAILED ORDER SHOULD HAVE BEEN REVERSED BECAUSE IT OVERTURNS
THE DECISION OF THE COURT OF APPEALS DATED 16 OCTOBER 2009 WHICH HAS LONG BECOME FINAL AND
EXECUTORY.[28]
Petitioner Manuela argued that:

There was actual compliance with Section 13, Rule 13 of the Rules of Court. The CA petition was accompanied by a
notarized affidavit of service and filing of registered mail. At the time the petition was filed, this was the best
1)
evidence of the service. The other registry receipts for the other parties were also attached to the petition.
Further, the available registry return card was furnished the CA in the motion for reconsideration.[29]
The failure of the petition to comply with the rule on a statement of material dates could be excused because the
2)
dates were evident from the records.[30]
The petitioner went to the RTC of Tacloban to secure certified true copies of the assailed orders. Only the stamped
name of the Clerk of Court, however, appeared thereon, because the particular branch had no stamp pad which
3)
had the phrase for certification. The branch did not even have a typewriter in order to affix the phrase on the
copies. These inadequacies could not be attributed to the petitioners.[31]
The lack of information pertaining to the notary public in the verification and certification against forum-shopping
4)
should not invalidate the same because, again, it was not attributable to the parties.[32]
5) Technicalities should never be used to defeat the substantive rights of a party.[33]
In its January 23, 2013 Resolution[34] the Court ordered the respondents to file their respective comments. Marty, in her
Comment, insisted that the petitioner failed to comply with the procedural requirements as stated by the CA.[35]

In her Reply to Comment,[36] petitioner Manuela clarified that the affidavit of service was executed on August 31, 2011,
which was after the petition was signed by the lawyers and after it was verified by the petitioner herself. After
contesting Marty's arguments on the alleged procedural infirmities of the petitions with the CA and this Court, Manuela
asserted that the final and executory October 16, 2009 Decision of the CA already held that Primrose had a personality
separate and distinct from the estate of decedent Rosario.

Meanwhile, in his Manifestation,[37] dated May 29, 2013, Edwin affirmed that he and Manuela decided to patch up their
differences and agreed to settle amicably. Accordingly, he manifested that he was withdrawing from the case pursuant
to their agreement.

On June 18, 2014, Manuela filed her Motion for Issuance of Temporary Restraining Order and Writ of Preliminary
Injunction[38] on the ground that a flurry of orders had been issued by the RTC-Br. 6 in the implementation of the
assailed January 20, 2011 Order, such as the Order,[39] dated May 27, 2013, wherein the probate court vaguely ordered
"the inventory of the exact extent of the 'decedent's estate.'" Then another order was issued appointing an auditing firm
to conduct an inventory/audit of the Estate including the rentals and earnings derived from the lease of Mercury Drug
and Chowking Restaurant, as tenants of Primrose.[40] According to petitioner Manuela, although an inventory of the
assets of the decedent was proper, the probate court ordered an inventory of the assets of Primrose, a separate and
distinct entity. Manuela asserts that it was clearly in error.

In her Supplement to the Motion for Issuance of Temporary Restraining Order and Writ of Preliminary
Injunction,[41] dated June 17, 2013, Manuela informed the Court that the inventory and accounting of Primrose would
already commence on June 19, 2013.

Marty filed her Opposition,[42] dated July 3, 2013, stating that the petition of Manuela had been rendered moot and
academic as the probate court had declared her as the sole heir of Rosario and appointed her administrator of the
estate. She argued that an injunctive relief would work injustice to the estate because of the total assimilation by
petitioner of the shareholdings of the decedent in Primrose and her share in the corporation's income corresponding to
her shareholdings.

Finding that the requisites for preliminary injunctive relief were present,[43] the Court issued the TRO[44] in favor of
Manuela on October 14, 2013. At the outset, the Court was convinced that the rights of Primrose sought to be protected
by the grant of injunctive relief were material and substantial and the TRO was issued in order to prevent any
irreparable damage to a corporate entity that could arise from the conduct of an accounting by the court-appointed
inventory.

The Court's Ruling

The Court now resolves the subject case by the issuance of a permanent injunction, as prayed for by petitioner Manuela.
This position is supported by law and jurisprudence, as follows:

First. Artificial persons include (1) a collection or succession of natural persons forming a corporation; and (2) a
collection of property to which the law attributes the capacity of having rights and duties. This class of artificial persons
is recognized only to a limited extent in our law. Example is the estate of a bankrupt or deceased person.[45] From this
pronouncement, it can be gleaned that the estate of the deceased person is a juridical person separate and distinct from
the person of the decedent and any other corporation. This status of an estate comes about by operation of law. This is
in consonance with the basic tenet under corporation law that a corporation has a separate personality distinct from its
stockholders and from other corporations to which it may be connected.[46]

Second. The doctrine of piercing the corporate veil has no relevant application in this case. Under this doctrine, the
court looks at the corporation as a mere collection of individuals or an aggregation of persons undertaking business as a
group, disregarding the separate juridical personality of the corporation unifying the group. Another formulation of this
doctrine is that when two business enterprises are owned, conducted and controlled by the same parties, both law and
equity will, when necessary to protect the rights of third parties, disregard the legal fiction that two corporations are
distinct entities and treat them as identical or as one and the same.[47] The purpose behind piercing a corporation's
identity is to remove the barrier between the corporation and the persons comprising it to thwart the fraudulent and
illegal schemes of those who use the corporate personality as a shield for undertaking certain proscribed activities.[48]

Here, instead of holding the decedent's interest in the corporation separately as a stockholder, the situation was
reversed. Instead, the probate court ordered the lessees of the corporation to remit rentals to the estate's administrator
without taking note of the fact that the decedent was not the absolute owner of Primrose but only an owner of shares
thereof. Mere ownership by a single stockholder or by another corporation of all or nearly all of the capital stocks of a
corporation is not of itself a sufficient reason for disregarding the fiction of separate corporate
personalities.[49] Moreover, to disregard the separate juridical personality of a corporation, the wrongdoing cannot be
presumed, but must be clearly and convincingly established.[50]

Third. A probate court is not without limits in the determination of the scope of property covered in probate
proceedings. In a litany of cases, the Court had defined the parameters by which a probate court may extend its probing
arms in the determination of the question of title in probate proceedings. In Pastor, Jr. vs. Court of Appeals,[51] the Court
explained that, as a rule, the question of ownership was an extraneous matter which the probate court could not resolve
with finality. Thus, for the purpose of determining whether a certain property should, or should not, be included in the
inventory of estate properties, the probate court may pass upon the title thereto, but such determination is provisional,
not conclusive, and is subject to the final decision in a separate action to resolve title. It is a well-settled rule that a
probate court or one in charge of proceedings, whether testate or intestate, cannot adjudicate or determine title to
properties claimed to be part of the estate but which are equally claimed to belong to outside parties. It can only
determine whether they should, or should not, be included in the inventory or list of properties to be overseen by the
administrator. If there is no dispute, well and good; but if there is, then the parties, the administrator and the opposing
parties have to resort to an ordinary action for a final determination of the conflicting claims of title because the probate
court cannot do so.[52]

In this case, respondent Marty argues that the subject properties and the parcel of land on which these were erected
should be included in the inventory of Rosario's estate. More so, the arrears from the rental of these properties were
later on ordered to be remitted to the administrator of the estate grounded on the allegation that Rosario had no other
properties other than her interests in Primrose. To the Court's mind, this holding of the probate court was in utter
disregard of the undisputed fact the subject land is registered under the Torrens system in the name of Primrose, a third
person who may be prejudiced by the orders of the probate court. In Valera vs. Inserto:[53] the Court stated:

x x x, settled is the rule that a Court of First Instance (now Regional Trial Court), acting as a probate court, exercises but
limited jurisdiction, and thus has no power to take cognizance of and determine the issue of title to property claimed by
a third person adversely to the decedent, unless the claimant and all the other parties having legal interest in the
property consent, expressly or impliedly, to the submission of the question to the probate court for adjudgment, or the
interests of third persons are not thereby prejudiced, the reason for the exception being that the question of whether or
not a particular matter should be resolved by the Court in the exercise of its general jurisdiction or of its limited
jurisdiction as a special court (e.g. probate, land registration, etc.), is in reality not a jurisdictional but in essence of
procedural one, involving a mode of practice which may be waived.

xxxx

x x x These considerations assume greater cogency where, as here, the Torrens title to the property is not in the
decedent's names but in others, a situation on which this Court has already had occasion to rule. [54] [Emphasis and
underscoring supplied]
Thus, the probate court should have recognized the incontestability accorded to the Torrens title of Primrose over
Marty's arguments of possible dissipation of properties. In fact, in the given setting, even evidence purporting to support
a claim of ownership has to yield to the incontestability of a Torrens title, until after the same has been set aside in the
manner indicated in the law itself. In other words, the existence of a Torrens title may not be discounted as a mere
incident in special proceedings for the settlement of the estate of deceased persons. Put clearly, if a property covered by
Torrens title is involved, "the presumptive conclusiveness of such title should be given due weight, and in the absence of
strong compelling evidence to the contrary, the holder thereof should be considered as the owner of the property in
controversy until his title is nullified or modified in an appropriate ordinary action, particularly, when as in the case at
bar, possession of the property itself is in the persons named in the title."[55]

Additionally, Presidential Decree (P.D.) No. 1529[56] proscribes a collateral attack on a Torrens title:

Sec. 48. Certificate not subject to collateral attack. - A certificate of title shall not be subject to collateral attack. It cannot
be altered, modified or cancelled except in a direct proceeding in accordance with law.
In Cuizon vs. Ramolete,[57] the property subject of the controversy was duly registered under the Torrens system. To this,
Court categorically stated:

Having been apprised of the fact that the property in question was in the possession of third parties and more
important, covered by a transfer certificate of title issued in the name of such third parties, the respondent court should
have denied the motion of the respondent administrator and excluded the property in question from the inventory of
the property of the estate. It had no authority to deprive such third persons of their possession and ownership of the
property.[58] x x x [Emphasis and underscoring supplied]
A perusal of the records of this case would show that that no compelling evidence was ever presented to substantiate
the position of Marty that Rosario and Primrose were one and the same, justifying the inclusion of the latter's properties
in the inventory of the decedent's properties. This has remained a vacant assertion. At most, what Rosario owned were
shares of stock in Primrose. In turn, this boldly underscores the fact that Primrose is a separate and distinct personality
from the estate of the decedent. Inasmuch as the real properties included in the inventory of the estate of Rosario are in
the possession of, and are registered in the name of, Primrose, Marty's claims are bereft of any logical reason and
conclusion to pierce the veil of corporate fiction.

Fourth. The probate court in this case has not acquired jurisdiction over Primrose and its properties. Piercing the veil of
corporate entity applies to determination of liability not of jurisdiction; it is basically applied only to determine
established liability. It is not available to confer on the court a jurisdiction it has not acquired, in the first place, over a
party not impleaded in a case.[59] This is so because the doctrine of piercing the veil of corporate fiction comes to play
only during the trial of the case after the court has already acquired jurisdiction over the corporation. Hence, before this
doctrine can be even applied, based on the evidence presented, it is imperative that the court must first have
jurisdiction over the corporation.[60]

Hence, a corporation not impleaded in a suit cannot be subject to the court's process of piercing the veil of its corporate
fiction. Resultantly, any proceedings taken against the corporation and its properties would infringe on its right to due
process.

In the case at bench, the probate court applied the doctrine of piercing the corporate veil ratiocinating that Rosario had
no other properties that comprise her estate other than her shares in Primrose. Although the probate court's intention
to protect the decedent's shares of stock in Primrose from dissipation is laudable, it is still.an error to order the
corporation's tenants to remit their rental payments to the estate of Rosario.

Considering the above disquisition, the Court holds that a permanent and final injunction is in order in accordance with
Section 9, Rule 58 of the Rules of Court which provides that "[i]f after the trial of the action it appears that the applicant
is entitled to have the act or acts complained of permanently enjoined, the court shall grant a final injunction
perpetually restraining the party or person enjoined from the commission or continuance of the act or acts or
confirming the preliminary mandatory injunction." Undoubtedly, Primrose stands to suffer an irreparable injury from the
subject order of the probate court.

WHEREFORE, the petition is GRANTED. The Temporary Restraining Order, dated June 14, 2013, is hereby
made PERMANENT, effective immediately. The Regional Trial Court, Branch 6, Tacloban City, is ENJOINED from
enforcing and implementing its January 20, 2011 and June 10, 2011 Orders, insofar as the corporate properties of
Primrose Development Corporation are concerned, to avert irreparable damage to a corporate entity, separate and
distinct from the Estate of Rosario Guy-Juco Villasin Casilan.

SO ORDERED