Title
Pacific Rehouse Corp. vs. Court of Appeals
Case
G.R. No. 199687
Decision Date
Mar 24, 2014
Unauthorized sale of DMCI shares led to a dispute over jurisdiction and corporate veil piercing; SC ruled Export Bank not liable as it was not a party to the case.

Case Summary (G.R. No. 123936)

Petitioner and Respondent

Petitioner: Pacific Rehouse Corporation (consolidated with Pacific Concorde Corporation, Mizpah Holdings, Inc., Forum Holdings Corporation, East Asia Oil Company, Inc.)
Respondent: Export and Industry Bank, Inc. (seeking relief from Court of Appeals and Supreme Court)

Key Dates

• Original RTC decision on merits: October 18, 2005 (final and executory)
• Alias writ of execution issued by RTC: July 29 & August 26, 2011
• CA temporary restraining order: September 2, 2011
• CA writ of preliminary injunction (preliminary): October 25, 2011; reiterated December 22, 2011
• CA decision nullifying alias writ and making injunction permanent: April 26, 2012
• Supreme Court decision: March 24, 2014

Applicable Law

1987 Philippine Constitution (due process, equal protection)
Rule 39 (Writs of Execution) and Rule 65 (Certiorari), Rules of Court
Doctrine of piercing the corporate veil under Philippine jurisprudence

Factual and Procedural Background

  1. Makati RTC Branch 66 rendered a judgment directing return of 32.18 million DMCI shares by E-Securities and reimbursement to E-Securities of P10.94 million.
  2. Judgment became final; execution returned unsatisfied.
  3. Private respondents moved for an alias writ to attach Export Bank’s assets on alter ego grounds.
  4. RTC granted alias writ and ordered garnishment of P1.465 billion against E-Securities and/or Export Bank.
  5. Export Bank obtained a TRO and preliminary injunction from the CA, arguing lack of due process and separate corporate personality.
  6. CA on April 26, 2012 nullified the RTC orders insofar as Export Bank was concerned and made the injunction permanent.

Issues Presented

  1. Whether the CA gravely abused its discretion in granting Export Bank’s writ of preliminary injunction (G.R. No. 199687).
  2. Whether the CA erred in ruling that Export Bank cannot be held liable under the alter ego doctrine and in refusing to pierce its corporate veil (G.R. No. 201537).

Court’s Analysis: Jurisdiction and Due Process

• A party must be properly served or voluntarily appear for a court to acquire jurisdiction.
• The doctrine of piercing the corporate veil determines liability only after jurisdiction over the party is established.
• Export Bank was neither served with summons nor voluntarily appeared before the RTC; enforcing the alias writ against it violated due process.
• Kukan International Corp. v. Reyes: “a corporation not impleaded in a suit cannot be subject to the court’s process of piercing the veil of its corporate fiction.”

Standards for Piercing the Corporate Veil

To disregard a subsidiary’s separate personality, petitioner must prove:

  1. Complete domination of finances, policies and business practices such that the subsidiary had no separate mind or will;
  2. Use of that control to commit fraud or wrong, violate a duty or perpetrate injustice;
  3. Direct causal connection between the control-breach and the injury complained of.

Application to Export Bank and E-Securities

• Ownership of 499,995 of 500,000 shares and interlocking directors/officers, common office location and shared legal counsel were argued as badges of control


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