G.R. No.

184666, June 27, 2016 - REPUBLIC OF THE PHILIPPINES, Petitioner,

v. MEGA PACIFIC ESOLUTIONS, INC., WILLY U. YU, BONNIE S. YU, ENRIQUE
T. TANSIPEK, ROSITA Y. TANSIPEK, PEDRO O. TAN, JOHNSON W. FONG,
BERNARD I. FONG, AND *LAURIANO A. BARRIOS, Respondents.

FIRST DIVISION
G.R. No. 184666, June 27, 2016
REPUBLIC OF THE PHILIPPINES, Petitioner, v. MEGA PACIFIC
ESOLUTIONS, INC., WILLY U. YU, BONNIE S. YU, ENRIQUE T.
TANSIPEK, ROSITA Y. TANSIPEK, PEDRO O. TAN, JOHNSON W. FONG,
BERNARD I. FONG, AND *LAURIANO A. BARRIOS, Respondents.
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.1chanrobleslaw

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:

chanRoblesvirtualLawlibrary
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 of bona 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.10chanrobleslaw

After the declaration of nullity of the automation contract, the following

incidents transpired:ChanRoblesVirtualawlibrary
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).11chanrobleslaw
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 cralawlawlibrary
4. Respondent MPEI filed a Complaint for Damages12 (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.13chanrobleslaw

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.15chanrobleslaw

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 respondents17 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.19chanrobleslaw

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
individuals21 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:ChanRoblesVirtualawlibrary
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:

chanRoblesvirtualLawlibraryx x x x

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.23chanrobleslaw

Petitioner filed its Answer with Counterclaim24 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.25cralawredchanrobleslaw

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.27chanrobleslaw

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.28chanrobleslaw

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 in Information 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.31chanrobleslaw

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 Decision32 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.33chanrobleslaw

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.35chanrobleslaw

Respondents moved for reconsideration36 of the First Decision of the CA.

Motion for Reconsideration before the CA and the Amended Decision

Upon review, the CA reconsidered its First Decision37 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.38chanrobleslaw

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.42chanrobleslaw

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.44chanrobleslaw

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. Respondents allegedly committed fraud by securing the
46

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.50chanrobleslaw

In their respective Comments, respondents Willy Yu, Bonnie Yu, Enrique

Tansipek, and Rosita Tansipek counter51 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.54chanrobleslaw

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.55chanrobleslaw

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.60chanrobleslaw

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 cralawlawlibrary
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.62chanrobleslaw

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.64chanrobleslaw

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:ChanRoblesVirtualawlibrary
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:

chanRoblesvirtualLawlibrary
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:ChanRoblesVirtualawlibrary
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.67chanrobleslaw

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.68chanrobleslaw

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.71chanrobleslaw

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.73chanrobleslaw

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:

chanRoblesvirtualLawlibraryA. 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.

x x x x

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

x x x x

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.

x x x x

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.

x x x x

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

x x x x

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.

x x x x

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.

x x x x

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

x x x x

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 had already 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

x x x x

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 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.
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.

x x x x

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.

x x x x

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.

x x x x

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.76chanrobleslaw

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 belatedly provided 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.78chanrobleslaw

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.79chanrobleslaw

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:ChanRoblesVirtualawlibrary
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:ChanRoblesVirtualawlibrary
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.85chanrobleslaw

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:ChanRoblesVirtualawlibrary
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:

x x x x

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 cralawlawlibrary

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.87chanrobleslaw

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.88chanrobleslaw

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.
x x x x

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:ChanRoblesVirtualawlibrary
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.

x x x x

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

x x x x

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

x x x x

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.

x x x x

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.

x x x x

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/district canvassing system software; and again on pages 35-
36 thereof, the same audit trail requirement with respect to
the national canvassing system software.

x x x x

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.91chanrobleslaw

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.95chanrobleslaw

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.98chanrobleslaw

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:ChanRoblesVirtualawlibrary
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 narrow can be used to exclude other
qualified bidders or justify improper sole source awards. Unduly vague or
broad specifications can 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.102chanroblesvirtuallawlibrary
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)."104chanrobleslaw

Unjustified Recommendations and Unjustified Winning Bidders

Questionable evaluation in a Bid Evaluation Report (BER) is an indicator of bid

rigging. The Handbook expounds:ChanRoblesVirtualawlibrary
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.105chanroblesvirtuallawlibrary
The Handbook lists unjustified recommendations and unjustified winning
bidders as red flags of a rigged bidding.106chanrobleslaw

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:ChanRoblesVirtualawlibrary
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 x107chanroblesvirtuallawlibrary
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.109chanrobleslaw

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:ChanRoblesVirtualawlibrary
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.110chanroblesvirtuallawlibrary
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:ChanRoblesVirtualawlibrary
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:ChanRoblesVirtualawlibrary
(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 cralawlawlibrary

(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,
2003.111chanroblesvirtuallawlibrary
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 19th century, it has been held
that:ChanRoblesVirtualawlibrary
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, 962.113chanroblesvirtuallawlibrary
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.114chanrobleslaw

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:ChanRoblesVirtualawlibrary
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:ChanRoblesVirtualawlibrary
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:

chanRoblesvirtualLawlibraryx x x x

f. From the time it was incorporated until today, MPEI has not complied
with the reportorial requirements of the Securities and Exchange
Commission;

g. Individual incorporators, acting fraudulently through MPEI, and

in violation of the bidding rules, then subcontracted the
automation contract to four (4) other corporations, namely:
WeSolve Corporation, SK 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 x117chanroblesvirtuallawlibrary
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.119chanroblesvirtuallawlibrary
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. chanrobleslaw
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.122chanroblesvirtuallawlibrary
As regards Enrique and Rosita, the relevant paragraphs in the Answer with
Counterclaim to the Republic's Counterclaim123 are quoted
below:ChanRoblesVirtualawlibrary
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. chanrobleslaw
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.125chanroblesvirtuallawlibrary
Pedro and Laureano offer a similar defense in paragraph 3.3 of their Reply and
Answer with Counterclaim to the Republic's Counterclaim126 dated 28 June
2004, which reads:ChanRoblesVirtualawlibrary
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.127chanroblesvirtuallawlibrary
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:ChanRoblesVirtualawlibrary
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. chanroblesvirtuallawlibrary
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.129chanrobleslaw

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.131chanrobleslaw

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:ChanRoblesVirtualawlibrary
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.135chanrobleslaw

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 Court136 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.137chanrobleslaw

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."139chanrobleslaw

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:ChanRoblesVirtualawlibrary
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 Company144 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.:ChanRoblesVirtualawlibrary
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)145chanroblesvirtuallawlibrary
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
conclusive146 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) Justice152 merely concurred in the
result, while the other joined another Justice in her Separate
Opinion.153chanrobleslaw

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. chanrobleslaw
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.156chanrobleslaw

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.158chanrobleslaw

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.161chanrobleslaw

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.164chanrobleslaw
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.chanRoblesvirtualLawlibrary

Leonardo-De Castro, Bersamin, Perlas-Bernabe, and Caguioa, JJ., concur.

Endnotes:

* Laureano A. Barrios in some part of the records.

1 G.R. No. 159139, 464 Phil. 173 (2004) [the 2004 case].

2Rollo,pp. 31-36; In the case entitled Republic of the Philippines v. Hon.

Winlove M. Dumayas written by Associate Justice Japar B. Dimaampao, and
concurred in by Associate Justices Mario L. Guariña III and Sixto C. Marella,
Jr.

3 Id. at 293-302.

4 Id. at 82.

5 Id. at 84-106.

6 The dispositive portion of this Court's Decision in the 2004 case is stated as
follows:
chanRoblesvirtualLawlibraryWherefore, the PETITION is GRANTED. The Court
hereby declares NULL and VOID Comelec Resolution No. 6074 awarding the
contract for Phase II of the CAES to Mega Pacific Consortium (MPC). Also
declared null and void is the subject Contract executed between Comelec and
Mega Pacific eSolutions (MPEI). Comelec is further ORDERED to refrain from
implementing any other contract or agreement entered into with regard to this
project.

Let a copy of this Decision be furnished the Office of the Ombudsman which
shall determine the criminal liability, if any, of the public officials (and
conspiring private individuals, if any) involved in the subject Resolution and
Contract. Let the Office of the Solicitor General also take measures to protect
the government and vindicate public interest from the ill effects of the illegal
disbursements of public funds made by reason of the void Resolution and
Contract.

7Resolution dated 22 August 2006; Rollo (G.R. No. 159139), Vol. V, pp. 4127-
4137.

8 Id.

9 Supra note 6.

10 Id.

11Rollo (G.R. No. 159!39), Vol. IV, pp. 3324-3339.

12Rollo,pp. 153-169; Pertaining to the case entitled Mega Pacific eSolutions,

Inc. v. Republic of the Philippines, docketed as Civil Case No. 04-346.

13 Supra note 11.

14Rollo, pp. 822-825; The four (4) cases are as follows:

chanRoblesvirtualLawlibrary(1) "Kilosbayan Foundation and Bantay

Katarungan Foundation, represented by Atty. Emilio C. Capulong, Jr. v.
Benjamin Santos Abalos, Resurreccion Zante Borra, Florentino Aglipay Tuason,
Rufino San Buenaventura Javier, Mehol Kiram Sadain, Luzviminda Gaba
Tancangco, Pablo Ralph Cabatian Lantion, Willy U. Yu, Bonnie S. Yu, Enrique
T. Tansipek, Pedro O. Tan, Johnson W. Fong and Laureano A. Barrios," docketed
as OMB-L-C-04-0922-J, for violation of Sec. 3(e) and (g) of R.A. 3019 and
Sec. 2 of R.A. 7080;

(2) "Sen. Aquilino Q. Pimentel, Jr., Field Investigation Office (FIO) Office of the
Ombudsman, represented by Atty. Maria Olivia Elena A. Roxas v. Benjamin
Santos Abalos, Resurreccion Zante Borra, Florentino Aglipay Tuason, Rufino
San Buenaventura Javier, Mehol Kiram Sadain, Luzviminda Gaba Tancangco,
Pablo Ralph Cabatian Lantion, Eduardo Dulay Mejos, Gideon Gillego de
Guzman, Jose Parel Balbuena, Lamberto Posadas Llamas, Bartolome Javillonar
Sinocruz, Jr., Jose Marundan Tolentino, Jr., Jaime Zita Paz, Zita Buena-
Castillon, Rolando T. Viloria, Willy U. Yu, Bonnie S. Yu, Enrique T. Tansipek,
Pedro O. Tan, Johnson W. Fong and Laureano A. Barrios," docketed as OMB-
L-C-04-0983-J, for violation of Sec. 3(e) and (g) of R.A. 3019;

(3) "Sen. Aquilino Q. Pimentel, Jr. v. Luzviminda Gaba Tancangco, Pablo Ralph
Cabatian Lantion," docketed as OMB-C-C-04-0011-A for violation of Sec. 3(e)
and (g) of R.A. 3019; and cralawlawlibrary

(4) "Sen. Aquilino Q. Pimentel, Jr., Field Investigation Office (FIO) Office of the
Ombudsman, represented by Atty. Maria Olivia Elena A. Roxas v. Eduardo
Dulay Mejos, Gideon Gillego de Guzman, Jose Parel Balbuena, Lamberto
Posadas Llamas, Bartolome Javillonar Sinocruz, Jr., Jose Marundan Tolentino,
Jr., Jaime Zita Paz, Zita Buena-Castillon, Rolando T. Viloria," docketed as OMB-
L-A-04-0706-J for dishonesty, grave misconduct and conduct prejudicial to the
best interest of service.

15Except Rosita Y. Tansipek and Bernard I. Fong, who have not been
impleaded.

16Rollo (G.R. No. 174777), Vol. I, pp. 88-122; The pertinent portions of
the fallo are quoted below:

chanRoblesvirtualLawlibraryWHEREFORE, premises considered, it is

respectfully recommended that:

chanRoblesvirtualLawlibrary1. An Information for Violation of Section 3 (e) of

Republic Act No. 3019, be filed before the Sandiganbayan against respondents
EDUARDO MEJOS, GIDEON G. DE GUZMAN, JOSE P. BALBUENA, LAMBERTO P.
LLAMAS and BARTOLOME J. SINOCRUZ, JR. in conspiracy with private
respondents WILLY U. YU, BONNIE YU, ENRIQUE TANSIPEK, ROSITA Y.
TANSIPEK, PEDRO O. TAN, JOHNSON W. FONG, BERNARD L. FONG and
LAUREANO BARRIOS;

x x x x

5. That further fact-finding investigation be conducted by this Office on the

following matters:

chanRoblesvirtualLawlibrarya. Charges involving violation of Section 3 (g) of

Republic Act 3019 and other pertinent laws;

b. On the criminal liability of all persons who may have conspired with public
officials in the subject contract;

c. On the culpability of other individuals who were not originally charged in

the complaints, but may have participated and benefited in the awarding of
the subject Contract; and cralawlawlibrary

d. the disbursement of public funds made on account of the void Resolution

and Contract.

17 Including Rosita Y. Tansipek and Bernard I. Fong.

18Rollo, pp. 825-826.

19 Id. at 822-876; The dispositive portion states:

chanRoblesvirtualLawlibraryWHEREFORE, the Office recommends the

following:
1. That the Resolution dated 28 June 2006 be REVERSED and SET ASIDE.
2. That the criminal complaints against public and private respondents be
DISMISSED for lack of probable cause.
3. That the administrative complaint against public respondents be
DISMISSED.
4. That the matter of the editorial article appearing in the July 2006 issue
of Kilosbayan by Former Senator Jovito R. Salonga be REFERRED to the
Internal Affairs Board for investigation.
20 See rollo (G.R. No. 174777), Vol. I. p. 3; Entitled Sen. Aquilino Q. Pimentel,
Jr. v. Omb. Ma. Merceditas N. Gutierrez.

21 Id.; Including Sen. Aquilino Q. Pimentel, Jr., Sergio L. Osmena III, Pamfilo
M. Lacson, Alfredo S. Lim, Jamby A.S. Madrigal, Luisa P. Ejercito-Estrada,
Jinggoy E. Estrada, Rodolfo G. Biazon and Richard F. Gordon.

22 Supra note 7 at 4132-4134.

23Rollo, pp. 161-163.

24 Id. at 170-195.

25cralawred Id. at 185-187.

26 Id. at 190-192.

27 Id. at 191-192 & 196-200.

28 Id. at 201-211.

29 Order dated 28 March 2006; id at 213-214.

30 Id. at 215-226.

31 Id. at 227.

32 Id. at 293-302.
33 Id. at 299-300.

34 Id. at 300.

35 Id. at 301.

36 Id. at 303-330 & 331-352.

37 Id. at 31-36.

38 Id. at 36.

39 Id. at 32.

40 Id. at 33.

41 Id.

42 Id.

43 Id.

44 Id. at 34.

45 Id. at 10-30.

46 Id. at 19.

47 Id. at 22.

48 Id. at 23.

49 Id. at 24.

50 Id.

51 Id. at 793-821.

52 Id. at 795-796.

53 Id. at 801-803.

54 Id. at 817-819.

55 Id. at 807-808.

56 Id. at 884-886

57 Id. at 906-915.
58 Id. at 897-903.

59 Id. at 902.

60 Id. at 924-934.

61Virata v. Aquino, 152 Phil. 405 (1973).

62Adlawan v. Tomol, 262 Phil. 893 (1990).

63 Id.

64 Id.

65Metro, Inc. v. Lara's Gift and Decors, Inc., 621 Phil. 162 (2009).

66Id., citing Liberty Insurance Corporation v. Court of Appeals, G.R. No.

104405, 13 May 1993 222 SCRA 37, 45.

67Liberty Insurance Corporation v. Court of Appeals, supra, citing old Sec.

1(d). Rule 57 of the Rules of Court:

chanRoblesvirtualLawlibrary"In an action against a party who has been guilty

of fraud in contracting the debt or incurring the obligation upon which the
action is brought, Section 1(d) of Rule 57 authorizes the plaintiff or any proper
party to have the property of the adverse party attached as security for the
satisfaction of any judgment that may be recovered therein. Thus:

chanRoblesvirtualLawlibrary
'Rule 57, Sec. 1. Grounds upon which attachment may issue. —

'(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
concealing or disposing of the property for the taking, detention or conversion
of which the action is brought;"'

68 37 AM. JUR. 2D Fraud and Deceit § 1 (1968).

69International Corporate Bank v. Gueco, 404 Phil. 353 (2001).

70Ortega v. People, 595 Phil. 1103 (2008).

71Republic v. Estate of Alfonso Lim, Sr., 611 Phil. 37 (2009).

72Sps. Godinez v. Alano, 362 Phil. 597 (1999).

73 37 AM. JUR. 2D Fraud and Deceit § 439 (1968).

74Information Technology Foundation of the Philippines v. COMELEC, 464 Phil.
173, 209-226 (2004).

75Rollo, pp. 201 -211.

76 Id. at 203-205, 211; Petitioner's allegations in its application for the

issuance of a writ of preliminary attachment are as follows:

chanRoblesvirtualLawlibrary4. Indeed, plaintiff and dcfendants-in-

counterclaim committed fraud by securing the election automation contract
even if MPEI (plaintiff) was not qualified to bid for the said contract. To
perpetrate the said fraud, plaintiff and defendants-in-counterclaim
misrepresented that the actual bidder was Mega Pacific Consortium, and that
MPEI (plaintiff) was only acting on behalf of MPC. x x x. Anent plaintiffs claim
that the MPC members bound themselves under the election automation
contract, suffice it to say that the Supreme Court held that "the automation
Contract with Comelec was not executed by the 'consortium' MPC—or by MPEI
(plaintiff) for and in behalf of MPC—but by MPEI (plaintiff), period. The said
Contract contains no mention whatsoever of any consortium or members
thereof."

5. Both plaintiff and defendants-in-counterclaim knew that plaintiff

was not qualified to bid for the election automation contract. In fact,
the Supreme Court clearly declared that had the proponent MPEI (plaintiff)
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. This notwithstanding, plaintiff still bidded for the election
automation contract; signed the same; and implemented, albeit
partially, the provisions thereof.

x x x x

4. Plaintiff Mega Pacific eSolutions, Inc. and defendants-in-counterclaim Willy

Yu, et. al. committed fraud in securing the automation contract even if
the bid for the same was not awarded to them, but to an ineligible
consortium Mega Pacific Consortium; and that said plaintiff, while it
was the one which signed the voided automation contract, was
ineligible to bid for the same. (Emphases supplied)

77Art. 1339. Failure to disclose facts, when there is a duty to reveal them, as
when the parties are bound by confidential relations, constitutes fraud. (NEW
CIVIL CODE, Art. 1339)

78Rural Bank of Sta. Maria, Pangasinan v. Court of Appeals, 373 Phil. 27

(1999).

79Cathay Pacific Airways Ltd v. Spouses Vasquez, 447 Phil. 306 (2003).

80 581 Phil. 612 (2008).

81 545 Phil. 755 (2007).

8237 Am Jur 2d Fraud and Deceit § 50 citing Union Co. v. Cobb, 73 Ohio L.
Abs. 155, 136 N.E. 2d 429 (Ct. App. 10th Dist. Franklin County 1955)
and Raser v. Moomaw, 78 Wash. 653, 139 P. 622 (1914).

8373 Ohio L. Abs. 155, 136 N.E. 2d 429 (Ct. App. 10th Dist. Franklin County
1955).

84 78 Wash. 653; 139 P. 622 (1914).

85 Id.

86Information Technology Foundation of the Philippines v. COMELEC, 464 Phil.

173, 193-194 (2004).

87Agan, Jr. v. PIATCO, Inc., 450 Phil. 744 (2003).

88Information Technology Foundation of the Philippines v. COMELEC, supra, at

215-216.

89Republic of the Philippines v. Judge Capulong, 276 Phil. 136, 152-153

(1991).

90Information Technology Foundation of the Philippines, Inc. v. COMELEC,

supra note 90 at 227, 232-238.

91 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:

chanRoblesvirtualLawlibrary"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? x x x" (Supra note 7 at
4132-4134.)

92Rollo, pp. 201 -211.

93 Id. at 208.

94JG Summit Holdings, Inc. v. Court of Appeals, 458 Phil. 581 (2003).

95Malaga v. Penachos, Jr., G.R. No. 86695, 3 September 1992, 213 SCRA 516.

96 Id. at 797-801 & 906-915.

97 Id. at 798.
98 Id. at 800.

99 The general rule is that a corporation has a separate juridical personality

distinct from the persons composing it. Remo, Jr. v. Intermediate Appellate
Court, 254 Phil. 409, 411 (1989). One implication of the doctrine is that
corporate creditors may not reach the personal assets of the shareholders,
who are liable only to the extent of their subscription under the related
doctrine of limited liability. (Philippine National Bank v. Hydro Resources
Contractors Corp., G.R. Nos. 167530, 167561, 167603, 13 March 2013, 693
SCRA 294)

100See Black's Law Dictionary, 1147-1148 (6th ed. 2008). See also Kukan
International Corp. v. Reyes, 646 Phil. 210 (2010) and Cesar Lapuz Villanueva
and Teresa S. Villanueva-Tiansay, Philippine Corporate Law, p. 105 (2013).

101International Bank for Reconstruction and Development/The World Bank,

2013, Fraud and Corruption Awareness Handbook: A Handbook for Civil
Servants Involved in Public Procurement, 1 (last visited 15 November 2015)
<http://www-
wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/2014/04/
25/000456286_20140425150639/Rendered/PDF/877290PUB0Frau00Box382
l47B00PUBLIC0.pdf> (Fraud and Corruption Awareness Handbook).

102 Id. at 17-18.

103 Supra note 7.

104 Supra note 1.

105 Supra note 101 at 30.

106 Id.

107 Supra note 101 at 39.

108 This Court in its 2005 Resolution in 2004 case ruled as follows:

chanRoblesvirtualLawlibraryThe Motion has not at all demonstrated that these

technical requirements have been addressed from the time our Decision was
issued up to now. In fact, Comelec is merely asking for leave to use the
machines, without mentioning any specific manner in which the foregoing
requirements have been satisfactorily met.

Equally important, we stressed in our Decision that "[n]othing was said or

done about the software — the deficiencies as to detection and prevention of
downloading and entering previously downloaded data, as well as the
capability to print an audit trail. No matter how many times the machines were
tested and retested, if nothing was done about the programming defects and
deficiencies, the same danger of massive electoral fraud remains."
Other than vaguely claiming that its four so-called "experts" have
"unanimously confirmed that the software development which the Comelec
undertook, [was] in line with the internationally accepted standards (ISO/IEC
12207) [for] software life cycle processes," the present Motion has not shown
that the alleged "software development" was indeed extant and capable of
addressing the "programming defects and deficiencies" pointed out by this
Court.

At bottom, the proposed use of the ACMs would subject 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.

109 This Court in its 2006 Resolution in 2004 case ruled thus:

chanRoblesvirtualLawlibraryLike the earlier Comelec Motion, however, the

present one of Atty. Macalintal utterly fails to demonstrate - nay, even slightly
indicate - what "certain supervening and legal circumstances [have]
transpired" to justify the reliefs it seeks. In fact, after the Court had ruled,
among others, that the ACMs had failed to pass legally mandated
technical requirements, they have admittedly been simply stored.

In other words, they have merely remained idle and unused since
their last evaluation in which they failed to hurdle the crucial tests.
Thus, again we say, the ACMs were not good enough for either the
2004 national elections or for the 2005 ARMM polls; why should they
be good enough for the 2007 elections, considering that nothing has
been done to correct the legal, jurisprudential and technical flaws
underscored in our final and executory Decision? Likewise, we repeat
that no matter how many times the machines were retested, if nothing was
done about the programming defects and deficiencies, the same danger of
massive electoral fraud remains. (Emphases supplied)

110 Fraud and Corruption Awareness Handbook, p. 40.

111 Supra note 1 at 277-278.

112Jose C. Campos Jr., and Maria Clara Lopez-Campos. The Corporation Code,
Volume I, p. 149 (1990).

113State
ex rel. Attorney General v. Standard Oil Co., Supreme Court of Ohio,
49 Ohio St., 137, N.E. 279 (1892), cited in Campos, Note 112, at 154.
(Emphases supplied)

114 Supra Note 111.

115Koppel Philippines, Inc. v. Yatco, 77 Phil. 496 (1946); Laguna

Transportation Co., Inc. v. Social Security System, 107 Phil. 833
(1960), Francisco v. Mejia, G.R. No. 141617 (14 August 2001); Yao, Sr. v.
People, 552 Phil. 195 (2007).
116See Traders Royal Bank v. Cuison Lumber Co., Inc., 606 Phil. 700
citing People's Industrial and Commercial Corp. v. Court of Appeals, 346 Phil.
189:ChanRoblesVirtualawlibrary
"The clear and neat principle is that the offer must be certain and definite with
respect to the cause or consideration and object of the proposed contract,
while the acceptance of this offer — express or implied — must be
unmistakable, unqualified, and identical in all respects to the offer. The
required concurrence, however, may not always be immediately clear
and may have to be read from the attendant circumstances; in fact, a
binding contract may exist between the parties whose minds have
met, although they did not affix their signatures to any written
document." (Emphasis supplied)
117Rollo, pp. 181-182.

118 Records, Vol. 2, pp. 866-884.

119 Id. at 877.

120 Id. at 853-865.

121 Id. at 889.

122 Id. at 877.

123 Id. at 885-897.

124 Id. at 889.

125 Id. at 892.

126 Id. at 900-918.

127 Id. at 911.

128Lopez, Rosario N., The Corporation Code of the Philippines (Annotated),

Volume 1 (1994), p. 170.

129Rollo, pp. 892-897.

130 Id. at 804.

131 Id. at 803-804.

132Ganaden v. Court of Appeals, 665 Phil. 261 (2011).

133Yu
v. Reyes-Carpio, 667 Phil. 474 (2011), citing 2 JOSE Y. FERIA & MARIA
CONCEPCION S. NOCHE, CIVIL PROCEDURE ANNOTATED 463 (2001).
134J.L. Bernardo Construction v. Court of Appeals, 381 Phil. 25 (2000).

135Yu v. Reyes-Carpio, supra.

136 Sec. 47. Effect of judgments or final orders. — The effect of a judgment or
final order rendered by a court of the Philippines, having jurisdiction to
pronounce the judgment or final order, may be as follows:

chanRoblesvirtualLawlibrary
x x x x

(b) In other cases, the judgment or final order is, with respect to the matter
directly adjudged or as to any other matter that could have been raised in
relation thereto, conclusive between the parties and their successors in
interest by title subsequent to the commencement of the action or special
proceeding, litigating for the same thing and under the same title and in the
same capacity; and cralawlawlibrary

(c) In any other litigation between the same parties or their successors in
interest, that only is deemed to have been adjudged in a former judgment or
final order which appears upon its face to have been so adjudged, or which
actually and necessarily included therein or necessary thereto.

137Reforzado v. Sps. Lopez, 627 Phil. 294 (2010).

138Alamayri v. Pabale, 576 Phil. 146 (2008).

139Sps. Noceda v. Arbizo-Directo, 639 Phil. 483 (2010).

140 G.R. Nos. 76265 and 83280, 11 March 1994, 231 SCRA 88.

141 Id. at 99-100.

142Malayang Samahan ng Munggagawa sa Balanced Food v. Pinakamasarap

Corporation, 464 Phil. 998 (2004).

143AGG Trucking v. Yuag, 675 Phil. 108 (2011).

144 612 Phil. 462, 471 (2009).

145 Id. at 471.

146Rollo, pp. 897-903.

147 Id. at p. 902.

148Justices Renato C. Corona, Adolfo S. Azcuna and Dante O. Tinga registered

their dissent. Justice Dante O. Tinga wrote a dissenting opinion.
149Justices Hilario G. Davide, Jr. and Jose C. Vitug wrote their separate
opinions voting for dismissal of the Petition.

150The 2004 Decision was penned by Justice Artemio V. Panganiban, with

Justices Antonio T. Carpio, Ma. Alicia Austria-Martinez, Conchita Carpio-
Morales and Romeo J. Callejo, Sr. concurring therein.

151Justices Consuelo Ynares-Santiago and Justice Angelina Sandoval-

Gutierrez.

152 Justice Leonardo A. Quisumbing.

153Justice Reynato S. Puno joins in opinion of Justice Consuelo Ynares-

Santiago.

154Rollo, p. 32.

155 Id. at 306-307.

156Rollo, pp. 801-803.

157Secretary of Finance v. Ora Maura Shipping Lines, 610 Phil. 419 (2009).

158 Supra note 6.

159 31 C.J.S. Estoppel §1 (1964).

160Rollo, pp. 893-897.

161 Id. at pp. 807-808.

162Chapter 2, Article 5(1), United Nations Convention Against Corruption.

2349 U.N.T.S. 41 (in force 14 Dec. 2005) (signed by the Philippines on 09 Dec.
2003 and ratified on 8 Nov. 2006).

163Chapter 2, Article 5(2), United Nations Convention Against Corruption.

2349 U.N.T.S. 41 (in force 14 Dec. 2005) (signed by the Philippines on 09 Dec.
2003 and ratified on 8 Nov. 2006).

164Chapter 5, Article 51, United Nations Convention Against Corruption. 2349

U.N.T.S. 41 (in force 14 Dec. 2005) (signed by the Philippines on 09 Dec. 2003
and ratified on 8 Nov. 2006).

165United Nations Convention Against Corruption. 2349 U.N.T.S. 41 (in force

14 Dec. 2005) (signed by the Philippines on 09 Dec. 2003 and ratified on 8
Nov. 2006).

166Chapter 2, Article 9, United Nations Convention Against Corruption. 2349

U.N.T.S. 41 (in force 14 Dec. 2005) (signed by the Philippines on 09 Dec. 2003
and ratified on 8 Nov. 2006).
167 Most Common Red Flags of Fraud and Corruption in Procurement (available
at
<http://siteresources.worldbank.org/INTDOII/Resources/Red_flags_reader_f
riendly.pdf> (last visited on 8 January 2016).