Mar 10

It is too late to protect your assets once a lawsuit is imminent. Once someone threatens to sue you or once you are deeply embroiled in litigation, your attempts to protect your assets may be mistaken for a simulated scheme to defraud your creditors. Take the true-to-life Philippine case of brothers Ishwar and Choithram. In 1966 when real estate values were relatively low, Ishwar who was based in New York, USA, entrusted Choithram with $150, 000.00 to be invested in real estate in the Philippines. With his brother’s money, Choithram bought two pieces of real estate in Ortigas where he built buildings to be rented to other companies.
In a move tQ claim the property as his own to the detriment of his brother, Choithram assigned and transferred all of his brother’s interests in the business to his daughter-in-law (Nirmla). To protect his assets in case his brother won in court, Choithram transferred his shares of stock in two corporations to his children. Being Nirmia’s agent, he also mortgaged the properties that were the subject of litigation for $3 million in favor of a corporation organized in the Cayman Islands with a capital of only one hundred dollars ($100.00). The Court saw these moves as a ploy to place these properties beyond the reach of Ishwar, a potential judgment creditor. These surreptitious moves were ruled as a grand scheme to render ineffective any judgment that may be rendered against Choithram. The mortgage to a shell corporation organized in the Cayman Islands is void. Choithram (as industrial partner) and his brother (as capitalist partner) should share equally the fruit of their joint venture. But Choithram should pay moral and exemplary damages and attorney’s fees because of his devious machinations and evident bad faith and malice in attempting to dispose or dissipate the properties to deprive his brother of any possible means to recover any award the court may grant in his favor. The Register of Deeds was ordered to cancel the annotation of the mortgage on the titles of the land.