EN BANC
G.R. No.
178158 - STRATEGIC ALLIANCE DEVELOPMENT
CORPORATION, Petitioner, v.
RADSTOCK SECURITIES LIMITED and PHILIPPINE NATIONAL CONSTRUCTION CORPORATION, Respondents.
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G.R. No.
180428 - LUIS SISON, Petitioner, v. PHILIPPINE NATIONAL CONSTRUCTION
CORPORATION, and RADSTOCK SECURITIES LIMITED, Respondents.
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D I S S E N T
BERSAMIN, J.:
I
hereby register my dissent to the majority opinion of Justice Carpio that
grants the petition in G.R. No. 180428, and declares (1) PNCC Board Resolution
Nos. BD-092-2000 and BD-099-2000 (recognizing liability for the Marubeni
Corporation (Marubeni) loans) void ab
initio for causing undue injury to the Government and giving unwarranted
benefits to a private party; and (2) the compromise
agreement between the Philippine National Construction Corporation (PNCC)
and Radstock Securities Limited (Radstock) inexistent and void ab initio for being contrary to Section
29(1), Article VI and Sections 3 and 7, Article XII of the Constitution; Section 20(1), Chapter IV, Subtitle B, Title I, Book
V of the Administrative Code of 1987;
Sections 4(2), 79, 84 and 85 of the Government
Auditing Code; Section 3(g) of the Anti-Graft
and Corrupt Practices Act; Article 217 of the Revised Penal Code; and Articles 2241, 2242, 2243 and 2244 of the Civil Code; and that grants the
intervention of Asiavest Merchant Bankers Berhad in G.R. No. 178158.
The
majority opinion declares that Strategic Alliance Development Corporation has
no legal standing to sue.
I
humbly submit that the PNCC Board resolutions and the compromise agreement entered into by and between PNCC and Radstock
were valid and effective, and did not violate any provision of the Constitution or any other law; and that
the intervention of Asiavest Merchant Bankers Berhad in G.R. No. 178158 has no
legal and factual bases.
Let
me justify this submission.
The Case, in a Nutshell
Respondent Radstock had sued for
collection and damages respondent PNCC in the Regional Trial Court (RTC) in P13,151,956,528.00,
plus interests and attorney’s fees. PNCC appealed to the Court of Appeals (CA).[1] On
P17,040,843,968.00
as of P6,185,000,000. [2]
Considering that at the time of the
execution of the compromise agreement,
G.R. No. 156887 (i.e., the appeal of
PNCC from the CA’s affirmance of the RTC’s denial of PNCC’s motion to dismiss in Civil Case No. MC
01-1398) was still also pending in this Court, PNCC and Radstock submitted the compromise agreement for approval of the
Court, which saw fit to require said parties to refer the compromise agreement to the Commission on Audit (COA) for study and
recommendation. On its part, COA recommended the approval of the compromise agreement.
Thereafter, on
The approval of the compromise agreement quickly invited
adverse reaction from several quarters, none of whom had been parties up to
that point in the litigation. One of them was Strategic Alliance Development
Corporation (STRADEC), the petitioner in G.R. No. 178185.[5]
Another was Rodolfo Cuenca. STRADEC and
Before the Court now are the appeals
of STRADEC and Sison.
Common Antecedents[10]
In the period between 1978 and 1980,
Marubeni, a corporation organized under the laws of Japan, had extended two
loan accommodations to PNCC for the following purposes: (1) the sum of US$5
million to finance the purchase of copper concentrates by Construction
Development Corporation of the Philippines (CDCP) Mining Corporation (a
subsidiary of PNCC), which PNCC had guaranteed to pay jointly and severally up
to the amount of P20 million; and
(2) ¥5.46 billion, or its equivalent in Philippine Pesos of P2,099,192,619.00, to finance the
completion of the expansion project of CDCP Mining Corporation in Basay, and as
working capital, which PNCC had also guaranteed to pay jointly and severally. By
a deed of assignment dated
Upon default of PNCC, Radstock sued PNCC in the RTC
in
On
Notwithstanding the pendency of C.A.-G.R. SP No.
66654, Civil Case No. MC 01-1398
proceeded in the RTC. In its answer in Civil Case No. MC 01-1398, PNCC reiterated the
grounds of its motion to dismiss as
affirmative defenses, namely: 1) that the plaintiff had no legal capacity
to sue; 2) that the loan obligation had already prescribed because no valid
demand had been made; and 3) that the letter of guarantee had been signed by a
person not authorized to do so by a valid board resolution.
In C.A.-G.R. SP No. 66654, PNCC argued similar
grounds to assail the denial of its motion
to dismiss, to wit: 1) that the cause of action was barred by prescription;
2) that the pleading asserting the claim stated no cause of action; 3) that the
condition precedent for filing of the instant suit had not been complied with;
and 4) that the plaintiff had no legal capacity to sue. PNCC further
argued that the RTC had committed grave abuse of discretion in issuing the writ
of attachment, for there had been no valid grounds to grant the writ.
On
Soon after the CA had rendered its decision in
C.A.-G.R. SP No. 66654, the RTC promulgated its judgment in Civil Case No. MC 01-1398, declaring PNCC
liable to Radstock in the amount of P13,151,956,528,
plus interest and attorney’s fees. The RTC also threw out all of PNCC’s
affirmative defenses for being inconsistent with the evidence presented.
PNCC appealed the judgment to the CA (C.A.-G.R. CV
No. 87971).
Even
with the main case (Civil Case No. MC
01-1398) having been meanwhile decided, PNCC still appealed by petition
for review on certiorari the CA
decision in C.A.-G.R. SP No. 66654, alleging that the CA gravely erred by
holding that certiorari was not available against the denial of a motion to dismiss; and insisting that
the RTC had not gravely abused its discretion in issuing its assailed orders.
The appeal was docketed as G.R. No. 156887.
On
WHEREFORE, the petition is partly GRANTED and insofar as the
Motion to Set Aside the Order and/or Discharge the Writ of Attachment is concerned,
the Decision of the Court of Appeals on August 30, 2002 and its Resolution of
January 22, 2003 in CA-G.R. SP No. 66654 are REVERSED and SET ASIDE. The
attachments over the properties by the writ of preliminary attachment are
hereby ordered LIFTED effective
upon the finality of this Decision. The Decision and Resolution of the
Court of Appeals are AFFIRMED in all
other respects. The Temporary Restraining Order is DISSOLVED
immediately and the Court of Appeals is directed to PROCEED forthwith with the
appeal filed by PNCC.
No costs.
SO ORDERED.
After
receiving the decision in G.R. No. 156887, the representatives and counsel of PNCC
and Radstock met for a number of times in order to discuss a possible
settlement between them. They reached a final settlement on P17,040,843,968.00 to P6,185,000,000.
On
On
On
Alleging a claim against PNCC arising
from the rejection of its bid during the bidding conducted in 2000 by the
Privatization and Management Office (PMO) for the privatization of the
Government’s PNCC shares,[15]
STRADEC sought reconsideration of the decision of
On
In
the meanwhile, on
Asiavest Merchant Bankers Berhad
(Asiavest), representing itself as a judgment creditor of PNCC, manifested its intention to participate
in C.A.-G.R. SP No. 97982 through its urgent motion for leave to intervene
and to file the attached opposition and motion-in-intervention.
On
Sison moved for reconsideration of
the dismissal, but the CA denied his motion
for reconsideration.[20]
On
On
On
On
On
Additional Antecedents in G.R. No. 178158
In
2000, STRADEC and Dong-A Pharmaceutical Co., Ltd., a Korean corporation,
formed a consortium to participate in
the bidding for the shares and other interests of the Philippine Government in
PNCC. The consortium was named Dong-A Consortium.[26] Dong-A
Consortium’s bid of P1,228,888,800.00
was the highest.[27] On
October 30, 2000, during the bidding process, the representative of the Assets
Privatization Trust (APT) conducting the bidding announced that the indicative
price for the Government’s shares, receivables and other interests in PNCC was P7
billion.[28] All the
bids, including that of Dong-A Consortium, were thus rejected.[29] In several communications thereafter, Dong-A
Consortium demanded that APT issue the notice of award to it. However, APT did not comply, denying any
irregularity in the bidding and informing Dong-A Consortium that its Board of
Directors had confirmed the decision to reject Dong-A Consortium’s bid.[30]
On
October 3, 2005, STRADEC commenced an action for the declaration of its right
to the notice of award and for damages in the RTC in Makati (docketed as Civil
Case No. 05-882) against the PMO (formerly APT) and PNCC.[31]
On
Arguments of the Parties
In G.R. No. 178158, STRADEC contends
that:
I.
The Court
of Appeals not only committed serious reversible error but may have also
gravely abused its discretion in refusing to allow petitioner STRADEC to
intervene in the case.
II.
The
Compromise Agreement between respondents Radstock and PNCC is void for being
contrary to law and public policy.
III.
In the
event the Compromise Agreement between respondents Radstock and PNCC is upheld,
said Compromise Agreement should be made subject to the outcome of Civil Case
No. 05-882.
In G.R. No. 180428, Sison submits the
following arguments in support of his petition:[33]
I.
An action
to annul a final and executory judgment of the Court of Appeals where such
judgment was procured through fraud, and without fault, negligence or
participation of the party concerned, can be filed and maintained before the
Court of Appeals. Hence, the Court of
Appeals gravely erred in dismissing the petition for annulment of judgment for
supposed lack of jurisdiction.
II.
Resolving
the jurisdiction issues presented in this case will enrich jurisprudence.
III.
Petitioner
has a meritorious cause of action, and the instant petition warrants judicial
review due to compelling reasons.
On their part, Radstock and PNCC
similarly argued in their respective memoranda that:[34]
1.
The
Compromise Agreement does not violate public policy.
2.
The
subject matter does not involve an assumption by the government of a private
entity’s obligation in violation of the law and/or the Constitution.
3.
The PNCC
Board Resolution of
4.
The
Compromise Agreement is viable and does not include all oR substantially all of
PNCC’s assets.
5.
The
Decision of the Court of Appeals is not annullable as there was no fraud
practiced here.
On
1.
Does the
Compromise Agreement violate public policy?
2. Does the subject matter involve an assumption by the
government of a private entity’s obligation in violation of the law and/or the
Constitution? Is the PNCC Board Resolution of
3. Is the Compromise Agreement viable in light of the
non-renewal of PNCC’s franchise by Congress and its inclusion of all or
substantially all of PNCC’s assets?
4. Is the Decision of the Court of Appeals annullable even if final and executory on the grounds of fraud, public policy and the Constitution?[35]
Submissions
I
G.R. No. 178158
STRADEC
seeks the reversal of the CA’s denial of its motion for intervention to enable it to have the compromise agreement between Radstock
and PNCC declared void, or, alternatively, to have the compromise agreement made subject to the outcome of Civil Case No.
05-882.
I
believe and submit that STRADEC’s position is untenable. Thus, I join the
majority opinion in its rejection of STRADEC’s intervention.
A
CA Committed No Grave Abuse of Discretion
in denying STRADEC’s Motion for Intervention
Section 2, Rule 19 of the 1997 Rules of Civil Procedure requires that
the motion for intervention “may be filed at
any time before the rendition of judgment by the trial court.”
The CA found that STRADEC had filed
its motion for intervention only
after the CA and the RTC had promulgated their respective decisions. Worthy to note, indeed, is that as of the
time when the joint motion for judgment based on compromise agreement
was submitted by PNCC and Radstock to the CA for consideration and approval, no
motion for intervention was as yet
attached to the CA rollo.[36]
Consequently, the CA held that STRADEC’s motion
for intervention had been filed out of time.
Yet, STRADEC insists that the requirement for its intervention to be made prior to the
rendition of judgment by the RTC should not apply considering that it had no
legal interest in the subject matter of the litigation until upon the execution
of the compromise agreement. It asserts that it became imbued with a legal
interest in the subject matter in litigation due to its being the winning
bidder during the public bidding on October 30, 2000, by which it came to have
the right to acquire the Government’s shares, receivables, securities and other
interests in PNCC, only after the execution of the compromise agreement, because its right would be defeated if the compromise agreement were approved considering
that the compromise agreement provided
for the transfer to Radstock of the Government’s properties, rights, securities
and other interests in PNCC.
STRADEC’s insistence is untenable. The
CA’s rejection of STRADEC’s intervention was proper and in accord with the Rules of Court and pertinent
jurisprudence.
Rule 19 of the 1997 Rules of Civil Procedure, which regulates the procedure for permitting an intervention, relevantly provides:
Section
1. Who may intervene. — A person who
has a legal interest in the matter in litigation, or in the success of either
of the parties, or an interest against both, or is so situated as to be
adversely affected by a distribution or other disposition of property in the
custody of the court or of an officer thereof may, with leave of court, be
allowed to intervene in the action. The court shall consider whether or not the
intervention will unduly delay or prejudice the adjudication of the rights of
the original parties, and whether or not the intervenor's rights may be fully
protected in a separate proceeding. (2[a], [b]a, R12)
To be able to intervene in an action,
therefore, the prospective intervenor must show an interest in the litigation that is of
such direct and material character that he will either gain or lose by the
direct legal operation and effect of judgment.[37]
STRADEC did not demonstrate
sufficiently enough that it had the requisite legal interest in the subject
matter of the litigation between Radstock and PNCC. On the contrary, STRADEC’s
interest, if any, was far from direct and material, but was, at best, a mere
expectancy, contingent and purely inchoate, due to such interest being
dependent on a favorable outcome of Civil Case No. 05-882, which was then still
pending in the RTC. Therein lay the
weakness of STRADEC’s position.
Intervention is a proceeding in a
suit or action by which a third person is permitted by the court to make
himself a party, either joining the plaintiff in claiming what is sought by the
complaint, or uniting with the defendant in resisting the claims of the
plaintiff, or demanding something adverse to both of them. It is the act or
proceeding by which a third person becomes a party to a suit pending between two
others. It is the admission, by leave of court, of a person not an original
party to pending legal proceedings, by which such person becomes a party for
the protection of some alleged right or interest to be affected by such
proceedings.[38]
I contend that the right to intervene
is not absolute, for intervention is merely permissive; and that the conditions
for the right of intervention to be exercised must be shown by the party
proposing to intervene. The procedure to
secure the right to intervene is fixed by a statute or rule, and intervention can
be secured only in accordance with the terms of the applicable statutory or
reglementary provision. Under the rules on intervention, the allowance
or disallowance of a motion to intervene is addressed to the sound discretion
of the court or judge. [39]
B
Allowance of STRADEC’s Intervention
Will Unduly Delay Adjudication
of the Rights of the Original Parties
The decision of the RTC pronouncing
PNCC liable to Radstock for P13,151,956,528.00, plus interests and
attorney’s fees, for an obligation incurred between 1978 and 1980, was
promulgated as early as on December 10, 2002. Matters involved in the case have also already
reached this Court (G.R. No. 156887), with the Court upholding the denial of
PNCC’s motion to dismiss. Allowing
STRADEC to intervene would mean having to remand the case to the CA or the RTC
for the reception of evidence and the introduction of new issues. Under such
circumstances, the intervention would give birth to the unwanted prospect of letting
this case drag on for a few more years.
I submit that the petition fails
because the Court cannot permit a further delay.
The purpose of intervention – never
an independent action, but ancillary and supplemental to the existing
litigation – is not to obstruct or to unnecessarily delay the placid operation
of the machinery of trial, but merely to afford one not an original party, yet
having a certain right or interest in the pending case, the opportunity to
appear and be joined so he can assert or protect such right or interest.[40]
Accordingly, as a general guide for determining whether a party may be allowed
to intervene or not, the trial court, in the exercise of its sound discretion,
shall consider whether or not the intervention will unduly delay or prejudice the adjudication of
the rights of the original parties, and whether or not the intervenor’s
rights may be fully protected in a separate proceeding.[41]
C
STRADEC’s Rights Are Fully
Protected in Civil Case No. 05-882
STRADEC
apprehends that its
right cannot be fully protected in Civil Case No. 05-882 because it would have
nothing to acquire except worthless shares should the compromise agreement be upheld, considering that the assets of PNCC
were being conveyed to Radstock under the compromise
agreement.
STRADEC’s
apprehensions are unwarranted.
STRADEC’s
apprehensions would not be assuaged through its intervention in the action
between Radstock and PNCC or through the nullification of the compromise agreement. STRADEC was a stranger in relation to the
transaction by which PNCC had incurred the obligations subject of the compromise agreement. Indeed, it would
be irregular to subordinate to STRADEC’s unsettled claim the right of Radstock
to collect as PNCC’s creditor. The alleged possibility that STRADEC might be left with worthless
shares was no reason to allow its intervention
in order only to assail the compromise
agreement, for such intervention would not enable PNCC to avoid its
liability to Radstock, or to save PNCC from being liable with its own assets for
its obligations to Radstock, should the courts ultimately find that the
obligations were justly due and demandable. On the other hand, STRADEC could
still hold PNCC’s remaining assets liable should it prevail in Civil Case No.
05-882. Based on COA’s earlier cited
compliance, PNCC had remaining assets by which it could start anew and
pursue its plans to revitalize its operation.[42]
II
G.R. No. 180428
I
disagree with the majority opinion in respect of Sison’s petition for annulment
of judgment approving the compromise
agreement.
Let
me give my reasons for my dissent.
A
CA’s Denial of Sison’s Petition for
Annulment of Judgment
Approving the Compromise Agreement Was Correct
Sison assails the resolution dated
Sison contends that the CA thereby
gravely erred in holding that it had no jurisdiction over his petition for
annulment in C.A.-G.R. SP No. 97982 respecting the final disposition of the CA
in C.A.-G.R. CV NO. 87971.[44]
The CA rationalized its dismissal of
Sison’s petition thuswise:[45]
Stripped to its barest essential, the petition should be dismissed. The Court of Appeals has no jurisdiction to annul its own final and executory judgment.
The Court’s jurisdiction over actions for annulment of judgment, as in the instant case, pertains only to those rendered by the Regional Trial Courts (Sec. 9[2], BP Blg. 129; Sec. 1 Rule 47, 1997 Rules of Civil Procedure).
Sison’s
contention is untenable and erroneous. We should instead sustain the CA, whose
ruling was correct and in accord with the Rules
of Court and applicable jurisprudence.
The
jurisdiction to annul a judgment rendered by the Regional Trial Court is
expressly granted to the CA by Section 9 (2) of Batas Pambansa Blg. 129, otherwise known as the Judiciary Reorganization Act. The
procedure for the purpose is governed by Rule 47, 1997 Rules of Civil Procedure, whose Section 1 provides:
Section 1. Coverage. – This Rule shall govern the annulment by the Court of Appeals of judgments or final orders and resolutions in civil actions of Regional Trial Courts for which the ordinary remedies of new trial, appeal, petition for relief or other appropriate remedies are no longer available through no fault of the petitioner.
Explaining the coverage of the
procedure under Rule 47 in Grande v. University of the Philippines,[46]
the Court definitely ruled out the
application of Rule 47 to the
nullification of a decision of the CA, viz:
The annulment of judgments, as a recourse, is equitable in character, allowed only in exceptional cases, as where there is no available or other adequate remedy. It is generally governed by Rule 47 of the 1997 Rules of Civil Procedure. Section 1 thereof expressly states that the Rule “shall govern the annulment by the Court of Appeals of judgments of final orders and resolutions in civil action of Regional Trial Courts for which the ordinary remedies of new trial, appeal, petition for relief or other appropriate remedies are no longer available through no fault of the petitioner.” Clearly, Rule 47 applies only to petitions for the nullification of judgments rendered by regional trial courts filed with the Court of Appeals. It does not pertain to the nullification of decisions of the Court of Appeals.
Still,
Sison supports his choice of remedy by citing the ruling in Conde v.
Intermediate Appellate Court.[47]
I find Sison’s
reliance on Conde to be misplaced.
The error attributed to the
Intermediate Appellate Court in Conde
was not its refusal to exercise jurisdiction, but rather its declaration that
the complaint for annulment of judgment should be filed with the Supreme Court.
Such declaration was erroneous, considering that the Supreme Court has no
original jurisdiction to look into allegations of fraud upon which the
complaint for annulment is based.[48]
The reasoning in Conde emphasized the
principle that the Supreme Court decides only questions of law, because it is
not its function to analyze or weigh evidence,[49]
especially if newly introduced. By
virtue of the Supreme Court’s remanding the case to the Intermediate Appellate
Court, however, it then behooved the Intermediate Appellate Court in Conde to
take cognizance of the remanded case. Its hesitation to follow the order of
remand merited for the Intermediate Appellate Court an admonition.
In dismissing Sison’s petition for
annulment of the approval of the compromise
agreement, the CA was simply applying the pertinent law and rules. Thereby,
the CA did not err, because the CA could not, on its own accord, take
cognizance of his petition to annul its own judgment absent any specific
directive from the Supreme Court, as in Conde.
Sison then points out the lack of any
remedy under the Rules of Court in
instances wherein a compromise agreement
was entered into late in the litigation process, such as during the appeal, by which
persons aggrieved by the compromise
agreement were prevented from filing an action to annul the judgment based
on a compromise agreement or from
resorting to other remedies. He posits
that the Rules of Court must now be
given a liberal interpretation, thereby warranting the allowance of his
petition vis-à-vis the compromise agreement.
Again, I cannot side with Sison. That
he now finds himself bereft of any available remedy is not due to the lack of
any remedies under the law or the Rules
of Court, but rather due to his wrong choice of remedy. Also, his lack of
standing to assail the compromise
agreement, which we shall shortly delve on, militated against his position.
B
Sison Has No Standing to Assail
the Compromise Agreement
Sison alleges in his petition that he
is a stockholder of record of PNCC by virtue of his holding 52,000 common
shares.[50] Even as a stockholder of PNCC, however,
he lacks the requisite standing to assail the compromise agreement executed between PNCC and Radstock.
A corporation is vested by law with a
personality separate and distinct from that of each person composing or
representing it.[51] This legal personality of the
corporation gives rise to the proposition that a stockholder may not generally
bring a suit to repudiate the actions of the corporation, unless it is a
stockholder’s suit, more commonly known as a derivative suit. Although
Sison does not allege that he filed a derivative suit, it can be fairly deduced
that he was assailing the compromise
agreement based on his being a stockholder of PNCC.
Did Sison’s action qualify as a
stockholder’s suit?
In this jurisdiction, the
stockholder must comply with the essential requisites for the filing of a derivative suit. The requisites are set
forth in Section 1, Rule 8 of the Interim
Rules of Procedure Governing Intra-Corporate Controversies,[52]
namely:
1.
That he was a
stockholder or member at the time the acts or transactions subject of the
action occurred and at the time the action was filed;
2. That he exerted all
reasonable efforts to exhaust all remedies available under the articles of
incorporation, by-laws, laws or rules governing the corporation or partnership
to obtain the relief he desires, and alleges the same with particularity in the
complaint;
3.
No appraisal rights are available for the act or acts complained of; and
4.
The suit is not a
nuisance or harassment suit.
Sison’s petition did not qualify as a
stockholder’s suit. To begin with, he did not allege that he had exhausted all
remedies available under the articles of incorporation, by-laws, or rules
governing the corporation to obtain the relief he desired. And, secondly, he did
not allege that no appraisal rights were available for the act or acts
complained of.
A stockholder’s suit is always one in equity, but it cannot prosper without
first complying with the legal requisites for its institution.[53] Consequently,
Sison’s petition was correctly disallowed.
III
The Compromise Agreement
Was Not Prejudicial to PNCC
The decision of PNCC to enter into
the compromise agreement with
Radstock did not prejudice PNCC and its stockholders for several reasons.
Firstly, the compromise agreement reduced PNCC’s probable liability from the
staggering starting sum of P13,151,956,528.00, as the RTC had adjudged,
to the much lesser sum of P6,196,000,000.00.
Considering that it was highly probable for the CA, as the appellate forum, to
affirm the higher liability given its frequency of upholding, rather than
reversing or modifying, the RTC on appeal, PNCC thereby effectively avoided the
much greater liability. The result was certainly favorable to PNCC and its stockholders.
Secondly, the chances of PNCC for
success in its appeal against Radstock were realistically very low. This was
because by the time of the execution of the compromise
agreement, the CA, in C.A.-G.R. SP No. 66654, and the Court, in G.R. No.
156887, had already passed upon the merits of PNCC’s motion to dismiss by denying substantially all the affirmative defenses that PNCC had raised against
Radstock. Specifically, the CA affirmed
the RTC’s denial of PNCC’s motion to
dismiss. In G.R. No. 156887, [54]
the Court affirmed the CA’s ruling, holding as follows:
We
have carefully reviewed the Motion to Dismiss and the action taken by the court
a quo and we find nothing that may constitute a grave abuse. The
Order of
With
respect to the first issue of whether or not the instant action had already
been barred by prescription, the Court, after judicious examination of the
environmental circumstances of this case and upon examination of the pertinent
jurisprudence, is inclined to rule in the NEGATIVE. The averment on the
pleadings submitted by the parties had so far revealed that the above-entitled
case instituted by plaintiff Radstock Securities Limited for a sum of money and
damages against defendant Philippine National Construction Corporation is not
barred by prescription in light of the several demand letters and
correspondences exchanged by the parties up to
xxx
Regarding
the issue of whether or not the plaintiff has a valid cause of action against
the defendant, the Court notes that the defendant heavily relies on the
argument that the subject letter of guarantee executed by Alfredo Asuncion is
void for lack of authority from the PNCC Board of Directors. This is
misplaced in light of the fact that when a corporation such as the defendant in
this case presents an officer to be the duly authorized signatory to a document
coupled with submission of a duly notarized Secretary’s Certificate said third
party has every right to rely on the regularity of actions done by said
corporation. . . .
xxx
As
regards the issue of whether or not the condition precedent for filing the
instant suit has not been complied with, the [C]ourt finds the contention
asserted by defendant to be bereft of merit. In setting up this ground of
prematurity, defendant argues that plaintiff failed to comply with the
provisions on arbitration embodied in the advance agreement executed on
xxx
Lastly,
the defendant contended that the plaintiff has no legal capacity to sue and in
support thereof it claims that RADSTOCK is engaged in business in the
If
error had been committed by the trial court, it was not of the character of
grave abuse that relief through the extraordinary remedy of certiorari
may be availed. Indeed, the grounds relied upon by PNCC are matters that
are better threshed out during the trial since they can only be considered
after evidence has been adduced and weighed.
With
its affirmative defenses thus disposed of, the settlement by means of the compromise agreement would surely work
to the benefit of PNCC and its stockholders.
IV
Compromise Agreement Was Not Contrary to Law,
Morals, Good Customs, Public Order and Public Policy
Was the compromise agreement between PNCC and Radstock contrary to law, morals, good customs, public
order and public policy?
A
Compromise Agreement Did Not
Require Congressional Approval
During the oral arguments held on P100,000.00.[56]
I contend and hold that the cited law
did not apply, considering that the liability of PNCC to Radstock was not yet settled at the time of the
execution of the compromise agreement.
In Benedicto v. Board of
Administrators of Television Stations and Guingona, Jr. v. PCGG,[57] the
Court clarified that Section 20, Chapter 4, Sub-Title B, Title 1, Book 5, of
Executive Order No. 292, was applicable only to a settled claim or liability, to wit:
Prior congressional approval is not required for the PCGG to enter into a compromise agreement with persons against whom it has filed actions for recovery of ill-gotten wealth. Section 20, Chapter 4, Subtitle B, Title I, Book V of the Revised Administrative Code of 1987 (E.O. No. 292) cited by Senator Guingona is inapplicable as it refers to a settled claim or liability. The provision reads:
Section 20. Power to Compromise Claims. –
(1)
When the interest of
the Government so requires, the Commission may compromise or release, in whole
or in part, any settled claim or liability to any
government agency not exceeding ten thousand pesos arising out of
any matter or case before it or within its jurisdiction, and with the written
approval of the President, it may likewise compromise or release any similar
claim or liability not exceeding one hundred thousand pesos. In case the claim
or liability exceeds one hundred thousand pesos, the application for relief
therefrom shall be submitted, through the Commission and the President, with
their recommendations, to the Congress;
xxx xxx
xxx
The Government’s claim against Benedicto is not yet settled, and the ownership of the alleged ill-gotten assets is still being litigated in the Sandiganbayan. Hence, the PCGG’s compromise agreement with Benedicto need not be submitted to the Congress for approval. (Underline supplied for emphasis)
The exception of a compromise or
release of a claim or liability yet to be
settled from the requirement for presidential and congressional approval is
realistic and practical. In a settlement by compromise agreement, the
negotiating party must have the freedom to negotiate and bargain with the other
party. Otherwise, tying the hands of the Government representative by requiring
him to submit each step of the negotiation to the President and to Congress will
unduly hinder him from effectively entering into any compromise agreement.
The majority opinion stresses that Benedicto v. Board of Administrators of Television Stations is inapplicable, arguing that the claim in Benedicto was not yet
settled because no party therein ever admitted liability, while the
claim subject of this case was already settled upon the PNCC Board’s recognition
of PNCC’s obligation to Marubeni.
I cannot agree with the majority, considering that the recognition by PNCC
of its obligation to Marubeni did not signify that the claim was already
settled. On the contrary, the claim of
Marubeni was far from settled, inasmuch as it still became the subject of
litigation in the courts in which PNCC resisted liability by pleading various defenses.
In fact, the PNCC Board’s resolution
dated June 19, 2001 essentially revoked the previous resolutions (i.e., Resolution No. BD-092-2000 and
Resolution No. BD-099-2000) recognizing PNCC’s debts to Marubeni.
The majority hold that the PNCC Board had no autonomous power to
compromise. They cite Section 36(2) of Presidential Decree (P.D.) 1445 (Government Auditing Code of the Philippines),
which requires the express grant by the charters of the government-owned or government-controlled
corporations (GOCCs) involved of the power to enter into compromise agreements,
and insist that nowhere in P.D. 1113, as amended, was the PNCC’s Board given
the authority to enter into compromise
agreements. Thus, they conclude that the compromise agreement was illegal.
With all due respect, I believe that the majority err.
Firstly, it is incorrect to state that P.D. 1113 and its amendatory law,
P.D. 1894, constituted the charter of PNCC, because said laws merely granted to
PNCC a secondary franchise. The
existence of PNCC was independent of the operation of said laws. Hence, the
silence of P.D. 1113 and P.D. 1894 on the grant to PNCC of the power to enter
into compromise agreements was
irrelevant.
It becomes appropriate to stress, for
purposes of clarity, that the primary franchise of a corporation should
not be confused with its secondary franchise, if any. According to J.R.S. Business Corp. v. Imperial
Insurance, Inc.:[58]
For practical purposes, franchises, so far as relating to corporations, are divisible into (1) corporate or general franchises; and (2) special or secondary franchises. The former is the franchise to exist as a corporation, while the latter are certain rights and privileges conferred upon existing corporations, such as the right to use the streets of a municipality to lay pipes or tracks, erect poles or string wires.
The distinction between the two franchises of a corporation should always be delineated. The primary franchise (or the right to exist as such) is vested in the
individuals composing the corporation, not in the corporation itself, and
cannot be conveyed in the absence of a legislative authority to do so; but the
special or secondary franchise of a corporation is vested in the corporation itself,
and may ordinarily be conveyed or mortgaged under a general power granted to the
corporation to dispose of its property, except such special or secondary
franchises as are charged with a public use.[59]
The general
law under which a private corporation is formed or organized is the Corporation Code, whose requirements
must be complied with by individuals desiring to incorporate themselves. Only
upon such compliance will the corporation come into being and acquire a
juridical personality, as to give rise to its right to exist and to act as a
legal entity. This right is a corporation’s primary franchise. In
contrast, a government corporation is normally created by special law, often
referred to as its charter.[60]
And, secondly, PNCC, prior to its acquisition by the Government, was a
private corporation organized under the Corporation
Code, and, as such, it was governed by the Corporation Code and its own articles of incorporation. This fact has
been judicially recognized in PNCC v. Pabion,[61] to wit:
xxx GOCCs may either be (1) with original charter or created by special law; or (2) incorporated under general law, via either the Old Corporation Code or the New Corporation Code.
xxx xxx xxx
xxx, we have no doubt that over GOCCs established
or organized under the Corporation Code,
Glaringly erroneous, therefore, is petitioner's reliance on Quimpo v. Tanodbayan and its theory that it is immaterial "whether a corporation is acquired by purchase or through the conversion of the loans of the GFIs into equity in a corporation [because] such corporation loses its status as a private corporation and attains a new status as a GOCC." First, based on the discussion above, PNCC does not "lose" its status as a private corporation, even if we were to assume that it is a GOCC. Second, neither would such loss of status prevent it from being further classified into an acquired asset corporation, as will be discussed below.
xxx xxx xxx
Lest the focus of
our disposition of this case be lost in the maze of arguments strewn before us,
we stress that PNCC is a
corporation created in accordance with the general corporation statute. Hence,
it is essentially a private corporation, notwithstanding the government's
interest therein through the debt-to-equity conversion imposed by PD 1295.
Being a private corporation, PNCC is subject to
Not being a
government corporation created by special law, PNCC does not owe its
creation to some
charter or special
law, but to the Corporation
Code. Its powers are enumerated in the Corporation
Code[62]
and its articles of incorporation. As an autonomous entity, it undoubtedly has
the power to compromise and to enter into a settlement through its Board of
Directors, just like any other private corporation organized under the Corporation Code. To maintain otherwise is to ignore the character
of PNCC as a corporate entity organized under the Corporation Code, by which it was vested with a personality and an identity
distinct and separate from those of its stockholders or members.[63]
B
Public Bidding Was not Required
Sison opposes the disposition of
PNCC’s assets through the compromise agreement as against public policy
for lack of a public bidding.
I cannot agree with Sison.
The rationale for requiring a public
bidding is the need to prevent the Government from being shortchanged by
minimizing the occasions
for corruption and the temptations to commit abuse of discretion on the part of
government authorities.[64]
As a rule, divestment or disposal of government property should be
undertaken primarily through public bidding. The mode of disposition of Government
properties and assets is not limited to public bidding, however, because there
are recognized exceptions, including when public bidding is not the most
advantageous means for the Government to divest or dispose of its properties.
The
compromise agreement was not entered into one-sidedly in favor of
Radstock, for, as in all compromises, it involved reciprocal concessions from
both parties. PNCC’s decision to enter
into the compromise agreement was apparently
an exercise of a business judgment to advance its interests. The obvious direct
consequence of the compromise agreement was to limit PNCC’s adjudged liability
of P13,151,956,528 (which would be higher due to increments from
interest charges) to a lesser liability of P6,185,000,000. Under the circumstances, the compromise
agreement could not be considered as disadvantageous to PNCC and the
National Government.
The Court itself referred the compromise agreement
to the COA, the primary guardian of public accountability. In due time, the COA
recommended the approval of the compromise
agreement, stating in its compliance
dated
The
Government Accounting and Auditing Manual (GAAM) Volume I, prescribed under COA
Circular No. 91-368 dated
Sec. 501. Authority or responsibility for property disposal/divestment. – The full and sole authority and responsibility for the divestment and disposal of property and other assets owned by the national government agencies or instrumentalities, local government units and government-owned and/or controlled corporations and their subsidiaries shall be lodged in the heads of the departments, bureaus, and offices of the national government, the local government units and the governing bodies or managing heads of government-owned or controlled corporations and their subsidiaries conformably to their respective corporate charters or articles of incorporation, who shall constitute the appropriate committee or body to undertake the same.
The
sale or disposal of the properties of the government is based on their assessed
value and not just on a percentage thereof.
Admittedly,
and as discussed earlier, the audit guidelines under COA Circular No. 89-296 as
reiterated in the Government Accounting and Auditing Manual are not applicable
in the herein case. Nonetheless, consistent with
the objective of public bidding, COA favors the disposal of government
properties in the amount most advantageous to the government. It is noted that the transfer value of 70% of assessed value
still falls within the standards set by government financial institutions
which invariably range from 70% to 100% of the appraised value for properties
situated in urban areas. The maximum
percentage prescribed in Section 37 of Republic Act No. 8791, the Banking Law
of 2000, provides that loans and other credit accommodations against real
estate shall not exceed 75% of the appraised value of the respective real
estate security. Taking this into account and the declared policy that the authority to
dispose its assets is lodged with the head of the entity, COA deems the herein
transfer valuation reasonable.
Under
the regular procedure involving disposal of government property, COA would have
initially conducted an appraisal of the property to determine its valuation.
However, considering
the exceptional circumstances in the instant case, the appraisals performed by
the established independent appraisers are allowable. The parties engaged the services of
Royal Asia Appraisal Corporation, Cuervo Appraisers, Inc., Asian Appraisal Co.,
Inc. and Valencia Appraisal Corporation which are reputable appraisal firms. Even COA has had
occasions to engage the services of the last three independent appraisers
mentioned above to help ensure that the government will not be disadvantaged in
any manner. Hence, COA finds no reason
to doubt the reasonableness of their appraisal.
The other terms and conditions of the compromise agreement appear to be fair and above board and COA finds no compelling grounds to oppose the same. Accordingly, COA recommends the approval of the parties’ compromise agreement appended in their “Joint Motion for Judgment Based on Compromise.” [66]
COA Circular No. 89-296 (dated
III. DEFINITION AND SCOPE: - These audit guidelines shall be observed and adhered to in the divestment or disposal of property and other assets of all government entities/instrumentalities, whether national, local or corporate, including the subsidiaries thereof but shall not apply to the disposal of merchandise or inventory held for sale in the regular course of business nor to the disposal by government financial institutions of foreclosed assets or collaterals acquired in the regular course of business and not transferred to the National Government under Proclamation No. 50. They shall not also cover dation in payment as contemplated under Article 1245 of the New Civil Code. [67]
In this regard, it is well to point out that the majority also invoke COA
Circular No. 89-296, citing Part V thereof entitled Modes of Disposal/Divestment.
The cited rule does provide an exception. According to COA’s compliance,
supra, the audit guidelines under COA Circular
No. 89-296 did not apply to the compromise agreement due to its being
akin to a dacion en pago. Under Article
1245 of the Civil Code, a dacion
en pago or a dation in
payment involves the alienation of property to the creditor in satisfaction of
a debt in money. The modern concept of dation in payment considers it as a novation by change of the object.[68]
Thus, the compromise agreement was a dacion en pago, in that a
novation by a change of the object took place due to the original obligation of
PNCC to pay its liability (adjudged in the amount of P13,151,956,528)
being thereby converted into another obligation whereby PNCC would transfer the
real properties listed in the compromise agreement to the qualified
assignees nominated by Radstock. Regardless of the pegging of the values of the
listed properties at specified amounts, the transfer to Radstock’s assignees
would already constitute a performance of PNCC’s obligations. In other words, the obligation of PNCC to
Radstock would be deemed fulfilled, although Radstock might realize a lesser
value from the assignees for the properties.
Verily, the dispositions made in the compromise
agreement, being in the nature of a dacion en pago, did not require
public bidding. This conclusion accords with the holding in Uy v. Sandiganbayan,[69]
where the Court sustained the argument of PCGG that the dacion en pago
transactions were beyond the ambit of COA Circular No. 89-296.
C
Expiration of PNCC’S Legislative Franchise
Did Not Affect the Compromise Agreement
Sison argues
that the legislative franchise granted to PNCC already expired on May 1, 2007 and
was not extended or renewed by Congress; that upon the expiration of the
legislative franchise of PNCC, all its assets, including those derived from its
operations, reverted to the National Government; and that the disposition of
PNCC funds under the compromise agreement, being beyond the expiration
of PNCC’s franchise, would violate the constitutional provision requiring an
appropriation law for the expenditure of National Government funds.
I consider Sison’s
submissions not well-taken.
Section 5 of
Presidential Decree (P.D.) No. 1894,[70] amendatory
of P.D. No. 1113, PNCC’s legislative franchise, provides:
Section 5. In consideration of this franchise, the GRANTEE shall:
(a) Construct,
operate and maintain at its own expense the Expressways; and
(b) Turn over, without cost, the toll facilities and all equipment, directly related thereto to the
Government upon expiration of the franchise period.[71]
The law is clear enough. The mandated
reversion applied only to the
“toll facilities and all equipment
directly related thereto,” and did
not extend to all the assets of
PNCC. Sison’s interpretation was plainly at war with what the law itself
explicitly contemplated. Worse, his interpretation would nullify PNCC’s right to due process as to its
other assets, and even tended to thwart the national policy to encourage the
private sector to invest and participate in public works involving toll
operations.
P.D. No. 1894 likewise contemplated
the continuance of PNCC’s tollways operations beyond the expiration of its legislative
franchise on
Section 2. The term of the franchise provided
under Presidential Decree No. 1113 for the North Luzon Expressway and the South
Luzon Expressway which is thirty (30) years from 1 May 1977 shall remain the
same; provided
that, the franchise granted for the Metro Manila Expressway and all extensions
linkages, stretches and diversions that may be constructed after the date of approval of this
decree shall likewise have a term of thirty (30) years commencing from the date
of completion of the project.
If the reversion covered all assets, PNCC would be unable to exist
and to continue to operate upon the expiration of its legislative franchise
under P.D. No. 1113.
Yet, the majority pointedly assert that Radstock’s counsel already admitted
during the oral argument that all of PNCC’s assets and properties had reverted
to the National Government.
The assertion of the majority is too
sweeping. It ignores that the so-called admission
of Radstock’s counsel was not, properly speaking, a judicial admission that bound
Radstock on the matter of reversion.
To begin with, the statements in question made by Radstock’s counsel did
not relate to facts, but to conclusions of law. Indeed, a judicial admission is
an admission made in the course of the proceeding in the same case, verbal or
written, by a party accepting for the purposes of the suit the truth of some alleged fact, which said party cannot
thereafter disprove.[72]
Clearly, the rule on admissions does not apply to a wrong interpretation and mistaken
application of the laws, and the Court is not to be bound by a mistaken
interpretation of the law made by a counsel, even if said interpretation is
adverse to the client.
Even granting, arguendo, that PNCC’s secondary franchise
expired, all the properties and funds
of PNCC might not automatically revert to the National Government, to the
detriment and in violation of the right to due process of PNCC’s private
creditors, particularly those that transacted with it when it was still a
purely private corporation. We have always sustained the view that a GOCC has a
personality of its own, distinct and separate from that of the National Government;
and has all the powers of the corporation under the Corporation Law pursuant to which it has been established.[73]
To accord with our precedent rulings, we should not declare the PNCC’s funds to
be beyond reach for being by nature public funds of the National Government.[74]
Secondly, the majority thereby sweep aside the principle of parity between
contracting parties. We ought to remember that when the National Government enters into a commercial transaction, it abandons its
sovereign capacity and descends to the level of the other party, to be treated
like the latter. By engaging in a
particular business through the instrumentality of a corporation (that is, PNCC), therefore, the National Government should be considered as divesting itself pro hac vice of its sovereign
character, so as to render the corporation subject to the rules of law
governing private corporations.[75]
This is only fair.
Thirdly, to have all the
properties and assets of PNCC deemed reverted to the Government upon expiration
of PNCC’s franchise to operate the tollways would definitely violate the right
to due process of PNCC’s private creditors.
Such a sudden change in the characterization of PNCC’s properties and
assets from private to public would leave PNCC’s private creditors with very
limited recourses, despite their valid claims.
Incidentally, the compromise
agreement listed the properties to be affected by the agreement between
PNCC and Radstock, as follows:
1. PNCC’s right over that parcel of land located in P3,817,779,000.00;
2. T-452587 (T-23646) – Parañaque (5,123 square meters)
subject to the clarification of the PMO claims thereon. The transfer value is P45,000,900.00;
3. T-49499 (529715 including T-68146-G (S-29716)
(1,9747-A)-Parañaque (107 square meters) (54 square meters) subject to the
clarification of the PMO claims thereon. The transfer value is P1,409,100.00;
4. 5(sic)-29716-Parañaque (27,762 square meters) subject
to the clarification of the PMO claims thereon. The transfer value is P242,917,500.00;
5. P-169 – Tagaytay (49,107 square meters). The transfer
value is P13,749,400.00;
6. P-170 – Tagaytay (49,100 square meters). The transfer
value is P13,749,400.00;
7. N-3320–Town and Country Estate; Antipolo (10,000
square meters). The transfer value is P16,800,000.00;
8. N-7424 – Antipolo (840 square meters). The transfer
value is P940,800.00;
9. N-7425 – Antipolo (850 square meters) The transfer
value is P952,000.00;
10. N-7426 – Antipolo (958 square meters). The transfer
value is P1,073,100.00;
11. T-485276 – Antipolo (741 square meters) The transfer
value is P830,200.00;
12. T-485277 – Antipolo (741 square meters). The transfer
value is P761,600.00;
13. T-485278 – Antipolo (701 square meters). The transfer
value is P785,400.00;
14. T-131500-Bulacan (CDCP Farms Corp.) (4,945 square
meters). The transfer value is P6,475,000.00;
15. T-131501-Bulacan (678 square meters). The transfer
value is P887,600.00;
16. T-26,154 (M) – Bocaue, Bulacan (2,841 square meters)
The transfer value is P3,779,300.00;
17. T-29,308 (M) –
Bocaue, Bulacan (733 square meters). The transfer value is P974,400.00;
18. T-29,309 (M) – Bocaue, Bulacan (1,141 square meters).
The transfer value is P1,517,600.00; and
19. T- 260578 (R. Bengzon) Sta. Rita, Guiguinto, Bulacan
(20,000 square meters). The transfer value is P25,2000,0000.00.
Rather than generalizing
that all the aforecited properties reverted to the National Government upon the
expiration of PNCC’s legislative franchise, Sison should first establish in
proceedings appropriate for the purpose a premise for his jealously argued
interpretation that such properties were directly related to the operation and
maintenance of the tollways covered by its expired secondary franchise. Before
that is done, it is not reasonable to generalize on the matter. Consequently,
Sison’s insistence that PNCC became a mere trustee of the National Government
upon the expiration of the legislative franchise is dismissed for being
unfounded.
D
Toll Operation
Certificate from TRB to
PNCC
Was Legal Basis for PNCC to Collect and Appropriate
Revenues Generated from PNCC-operated Tollways
and Its Share in Gross Receipts of NLEX Tollway
Development
Sison insists that upon the
expiration of its legislative franchise, PNCC could not validly dispose of the
revenues collected from its operated tollways and of its share in the gross
receipts of the tollway development and operation contractors, because such
revenues and receipts already belonged to the National Government.
However, the fact is that the Manila
North Tollway Corporation (MNTC), a joint-venture company between PNCC and
Metro Pacific Group, was granted a toll
operation certificate (TOC) by the Toll Regulatory Board (TRB) authorizing
MNTC to operate and maintain the NLEX from 2005 to 2035 through its operations
and maintenance company, the Tollway Management Corporation (TMC).[76]
Sison
counters that the TOC was not the equivalent of and could not replace the
legislative franchise of PNCC under P.D. No. 1849.
Sison’s arguments are not persuasive.
Under P.D. No. 1112,[77] TRB has the following powers, among others:
Section 3. Powers and
Duties of the Board. The Board shall have in addition to its general powers
of administration the following powers and duties:
(a) Subject to the approval of the President of the
Philippines, to enter into contracts in behalf of the Republic of the Philippines
with persons, natural or juridical, for the construction, operation and maintenance of
toll facilities such as but not limited to national highways, roads, bridges,
and public thoroughfares. Said contract shall be open to citizens of
the
(b) Determine and decide the kind, type and nature of public improvement
that will be constructed and/or operated as toll facilities;
xxx
xxx xxx
(e) To grant authority to operate a toll facility and to issue therefore
the necessary "Toll Operation Certificate" subject to such
conditions as shall be imposed by the Board including inter alia the
following:[78]
xxx
xxx xxx
Undoubtedly,
TRB had the statutory authority to enter in behalf of the National Government into
a contract for the construction, operation and maintenance of toll facilities;
to determine and decide the kind, type, and nature of public improvement to be
constructed and operated as toll facilities; and to issue a TOC to authorize a
grantee to operate a toll facility.
In addition,
P.D. No. 1894, amending P.D. No. 1113, invested TRB with the jurisdiction and
supervision over PNCC as the grantee with respect to the Expressways, and the
toll facilities necessarily appurtenant thereto. Its Section 4 states, viz:
Section 4. The Toll Regulatory Board is hereby
given jurisdiction and supervision over the GRANTEE with respect to the
Expressways, the toll facilities necessarily appurtenant thereto and, subject
to the provisions of Section 8 and 9 hereof, the toll that the GRANTEE will
charge the users thereof.
By its
issuance of the TOC, therefore, TRB was simply exercising its powers under P.D.
No. 1112. It did not thereby extend PNCC’s legislative franchise, which it
could not legally do. Its issuance of the TOC was proper, not ultra vires, even if the effect was to
permit PNCC, through MNTC, to continue to operate the toll facilities.
In this
jurisdiction, the power of administrative agencies to issue operating permits
or franchises to public utilities has long been recognized. In Philippine Airlines v. Civil
Aeronautics Board,[79] for
instance, the Court pronounced:
Given the foregoing postulates, we find that the
Civil Aeronautics Board has the authority to issue a Certificate of Public
Convenience and Necessity, or Temporary Operating Permit to a domestic air
transport operator, who, though not possessing a legislative franchise, meets
all the other requirements prescribed by law. Such requirements were enumerated
in Section 21 of R.A. 776.
There
is nothing in the law nor in the Constitution, which indicates that a
legislative franchise is an indispensable requirement for an entity to operate
as a domestic air transport operator. Although Section 11 of Article XII recognizes
Congress’ control over any franchise, certificate or authority to operate a
public utility, it does not mean Congress has exclusive authority to issue the
same. Franchises issued by Congress are not required
before each and every public utility may operate. In many instances, Congress has seen it fit
to delegate this function to government agencies, specialized particularly in
their respective areas of public service.
A reading of Section 10 of the same reveals the
clear intent of Congress to delegate the authority to regulate the issuance of
a license to operate domestic air transport services:
SECTION 10.
Powers and Duties of the Board. (A) Except as otherwise provided herein, the
Board shall have the power to regulate the economic aspect of air
transportation, and shall have general supervision and regulation of, the
carriers, general sales agents, cargo sales agents, and air freight forwarders
as well as their property rights, equipment, facilities and franchise, insofar
as may be necessary for the purpose of carrying out the provision of this Act.[80]
Likewise, we
said in Metropolitan Cebu Water District v. Adala:[81]
Moreover, this Court, in Philippine Airlines, Inc. vs. Civil Aeronautics Board, has construed the
term “franchise” broadly so as to include, not only authorizations issuing
directly from Congress in the form of statute, but also those granted by
administrative agencies to which the power to grant franchises has been
delegated by Congress, to wit:
Congress has granted certain administrative agencies the power to grant
licenses for, or to authorize the operation of certain public utilities. With the growing complexity of modern life,
the multiplication of the subjects of governmental regulation, and the
increased difficulty of administering the laws, there is constantly growing
tendency towards the delegation of greater powers by the legislature, and
towards the generally recognized that a franchise may be derived indirectly
from the state through a duly designated agency, and to this extent, the power
to grant franchises has frequently been delegated, even to agencies other than
those of legislative in nature. In pursuance of this, it has been held that privileges
conferred by grant by local authorities as agents for the state constitute as
much a legislative franchise as though the grant had been made by an act of the
Legislature. [82]
For its
part, the Executive Department has also recognized the power of TRB to issue
the TOC to PNCC independently of the legislative franchise that was due to
expire on
Upon re-examination of P.D. No. 1113 (PNCC
Charter), as amended by P.D. No. 1894, we reiterate the view expressed in
Opinion No. 45, s. 1995 that TRB has no authority to extend the legislative
franchise of PNCC over the existing NSLE.
However, TRB is not precluded under Section 3(e) of P.D. No. 1112 (TRB Charter)
to grant PNCC and its joint venture partner the authority to operate the
existing toll facility of the NSLE and to issue therefore the necessary “Toll
Operation Certificate” for a period coinciding with the term of the
proposed Metro Manila Skyway.
xxx xxx xxx
It should be noted that the existing franchise of
PNCC over the NSLE, which will expire on
It serves
well to note, too, that the TOC was not for the same project covered by PNCC’s
legislative franchise under P.D. No. 1894, but for a new project, the
rehabilitation of the NLEX, which was completed in 2005. In the effort to
rehabilitate the NLEX, the MNTC incurred substantial costs. The authority to collect reasonable toll fees
from users of that expressway was the consideration given to the MNTC as the tollway
operator to enable it to recoup the investment.
In this connection, the claim of the majority that Radstock’s counsel
admitted during the oral arguments that an appropriation law was needed to
authorize the payment by PNCC out of the toll fees is unwarranted. The supposed
admission was apparently counsel’s response to the query of whether the
collection of toll fees went to the general fund of the National Government. As
such, the response was an expression of counsel’s interpretation of the law, which,
albeit sounding like an admission, has no legal significance for purposes of
this resolution. It hardly requires clarification that an opinion on a matter
of law given in the course of the proceedings is not binding on the party on
whose behalf it is made, because the question of law is best left to the
determination of the court.
Besides, the interpretation that the
At any rate, the majority’s interpretation will hinder the efforts of the
National Government, through the
Lastly, Sison’s
plea for the nullification of the compromise agreement, on the ground of
the invalidity of the assignment to Radstock of the share of PNCC in the toll
operation for the NLEX, has no basis. The right of PNCC, through MNTC, to the revenues from the
operation of the tollways is to be deemed settled for purposes of these cases. We
cannot delve into whether or not the TOC issued to PNCC for the years from 2007
until 2035 was valid or not, because that is not a proper issue for the Court
to consider and decide herein. We should not forget that the issue was not
presented to the CA at the time it considered and approved the compromise
agreement. Besides, PNCC continued to have the right to the revenues from the
toll operation by authority of the TOC.
E
Compromise Agreement Is Not In Fraud
of the National Government
Another submission of Sison is that
the disposition of PNCC’s assets through the compromise agreement would
be in fraud of the National Government, because Radstock would be thereby
preferred to the National Government in relation to the assets of PNCC, in
violation of the credit preference provided in the Civil Code. He avers that “the satisfaction of the PNCC obligation
to the State or the National Government clearly takes preference and has
priority over the satisfaction of the obligation to RADSTOCK”; and that “the terms of the
compromise agreement which call for the transfer of PNCC assets xxx to Radstock
is in contravention of the order and preference of credits under the New Civil
Code, hence void.”[85]
However, Sison’s
submission does
not really show how the compromise agreement would contravene the credit
preference in favor of the National Government.
To begin with,
the credit preference set by
the Civil Code may not be invoked
herein to assail the compromise agreement, considering that these cases
were neither proceedings for bankruptcy or insolvency, nor general judicial
liquidation proceedings. Cogently, the Court explained when preference of credit may be invoked
in Development Bank of the Philippines v. Secretary of Labor,[86]
thus:
xxx
A preference of credit bestows upon the preferred creditor an advantage of
having his credit satisfied first ahead of other claims which may be
established against the debtor. Logically,
it becomes material only when the properties and assets of the debtor are
insufficient to pay his debts in full; for if the debtor is amply able to
pay his various creditors in full, how can the necessity exist to determine
which of his creditors shall be paid first or whether they shall be paid out of
the proceeds of the sale of the debtor’s specific property? Indubitably, the preferential
right of credit attains significance only after the properties of the debtor
have been inventoried and liquidated, and the claims held by his various
creditors have been established.
In this jurisdiction, bankruptcy, insolvency and general judicial liquidation proceedings provide the only proper venue for the enforcement of a creditor’s preferential right xxx for these are in rem proceedings binding against the whole world where all persons having interest in the assets of the debtors are given the opportunity to establish their respective credits.[87]
Nor will it be automatic for the National
Government to be preferred as to the assets of any individual or corporation in
financial straits. In In Re: Petition for Assistance in the Liquidation of
the Rural Bank of Bokod (Benguet), Inc., Philippine Deposit Insurance
Corporation v. Bureau of Internal Revenue,[88] the Court clarifies:
xxx The Government, in this case, cannot generally claim preference of credit, and receive payments ahead of the other creditors of RBBI. Duties, taxes, and fees due the Government enjoy priority only when they are with reference to a specific movable property, under Article 2241 (1) of the Civil Code, or immovable property, under Article 2242 (1) of the same Code. However, with reference to the other real and personal property of the debtor, sometimes referred to as “free property,” the taxes and assessments due the National Government, other than those in Articles 2241(1) and 2242 (1) of the Civil Code will come only in ninth place in the order of the preference.[89]
Verily,
any creditor who may feel aggrieved by the compromise agreement (such that
his rights over PNCC’s assets may be prejudiced by the compromise agreement)
should initiate the proper
proceedings to protect his rights. Yet, no bankruptcy, insolvency, or general
judicial liquidation proceedings have been initiated or filed by any of PNCC’s
creditors. With none, including the Government, having done so as yet, it is
improper and premature for Sison to cry fraud
against the Government.
Secondly, Sison insists that PNCC was
“technically insolvent.”[90]
Sison’s insistence cannot be given
any significance in relation to the compromise agreement. The meanings
of the terms insolvent and insolvency have not been fixed, their
definitions being dependent upon the business or factual situation to which the
terms are applied.[91] Ordinarily,
a person is insolvent when all his
properties are not sufficient to pay all of his debts.[92]
This definition is the general and popular meaning of the term insolvent. In this jurisdiction, the
state of insolvency is governed by special laws to the extent that they are not
inconsistent with the Civil Code.[93] In
other words, the state of insolvency is primarily governed by the Civil Code and subsidiarily by the Insolvency Law (Act No. 1956, as
amended).[94]
Under Act No. 1956, there are two
distinct proceedings by which to declare a person insolvent, namely: a) the voluntary
or debtor-initiated proceedings;[95] and
b) the involuntary or creditor-initiated proceedings, which require that the
petition be filed by three or more creditors.[96] The
judicial declaration that a person (either natural or juridical) is insolvent
produces legal effects, particularly on the disposition of the debtor’s assets.[97] Until and unless there is an insolvency
proceeding or a judicial declaration that a person is insolvent, however, any
state of insolvency of a debtor remains legally insignificant as far as his
capacity to dispose of his properties is concerned. This capacity to dispose is not in itself
iniquitous or questionable, for the creditor is not meanwhile left without
recourse. There are remedies for the creditor in case any disposition of the
debtor’s assets is in fraud of creditors.
Should the creditors not feel that an
insolvency or even rehabilitation proceeding (in the case of corporations like
PNCC) is appropriate or beneficial for them, their decision to desist from
commencing such proceeding is a business judgment that fully lies within their
discretion. Without any proceeding being
initiated by either the debtor or the creditors, no court has the power to
declare that a debtor is insolvent and to bring to bear upon the debtor the legal
consequences of the Insolvency Law. A court that does so risks meddling in
business affairs or policies that are best left to those who know the
appropriate actions to take and decide what action or actions to take. A
unilateral court intervention can result in a premature cessation of business
that can produce untoward and unexpected effects on either or both the debtor
and the creditors.
The Court may not even try to determine
whether PNCC was insolvent or not, considering that the original jurisdiction
to take cognizance of such issue does not pertain to the Court. Neither was
such issue properly raised in the lower courts. For sure, the term technically insolvent as applied to PNCC
cannot be competently ascertained in these cases. It is relevant to note,
however, that only the COA report has been made available to show the financial
condition of PNCC to the Court, but even said report favored the approval of
the compromise agreement.[98]
Thirdly, Sison argues that with the compromise
agreement, PNCC’s business would wind down to “merely the operation of the
South Luzon Expressway, the holding of shares in investee subsidiaries and
affiliates, and the minor participation in the gross receipt of the tollway
development and operation contractors.”[99] He
then concludes that the compromise agreement would amount to transferring
or disposing of substantially all of
the assets of PNCC, in violation of the requirement under Section 40 of
the Corporation Code for stockholders’
approval thereof.
The argument is fallacious, because it is based on a
mistaken premise.
Section 40 of the Corporation Code provides:
Sec. 40.
A sale or other disposition shall be deemed to cover
substantially all the corporate property and assets if thereby the corporation
would be rendered incapable of continuing the business or accomplishing the
purpose for which it was incorporated.
After such authorization or approval by the stockholders or
members, the board of directors or trustees may, nevertheless, in its
discretion, abandon such sale, lease, exchange, mortgage, pledge or other
disposition of property and assets, subject to the rights of third parties
under any contract relating thereto, without further action or approval by the
stockholders or members.
Nothing in this section is intended to restrict the power
of any corporation, without the authorization by the stockholders or members,
to sell, lease, exchange, mortgage, pledge or otherwise dispose of any of its
property and assets if the same is necessary in the usual and regular course of
business of said corporation or if the proceeds of the sale or other
disposition of such property and assets be appropriated for the conduct of its
remaining business.
In non-stock corporations where there are no members with
voting rights, the vote of at least a majority of the trustees in office will
be sufficient authorization for the corporation to enter into any transaction
authorized by this section. (28 1/2a) [100]
The law defines a sale or disposition of substantially all
assets and property as one by which the
corporation “would be rendered incapable of continuing the business or
accomplishing the purpose for which it was incorporated.” Any
disposition short of this will not need stockholder action.[101] The
text and tenor of Section 40, supra,
are clear and do not require interpretation, that the Court must not read any
other meaning to the law.
Sison himself admitted that even after
the compromise agreement was approved, PNCC still had assets by which to
continue its businesses.[102] Thus,
because the assets to be covered by the compromise agreement were not
substantially all the assets of PNCC within the context of Section 40, supra, the stockholders’ approval was
not required. The disposition through the compromise agreement, although
involving a substantial portion of the total assets, would not amount to the
sale or disposition of substantially all assets and property as to render PNCC
incapable of continuing the business or accomplishing the purpose for which it
was incorporated.
Fourthly,
Sison contends that PNCC would be reduced to a holding company, which would
constitute an abandonment of the business for which it was organized.
The
contention is unfounded.
For
one, the records before us show that PNCC is not abandoning the business for
which it was organized. PNCC sought a
legislative franchise to operate the NLEX, but it was not granted the franchise.
PNCC was granted the TOC by TRB, which authorized PNCC, through MNTC, to operate
the rehabilitated and extended NLEX.[103] PNCC currently operates tollways and plans to
enter into other tollways development projects.[104]
It
is noteworthy that the COA, in its compliance
submitted to the Court,[105] recognized the efforts of PNCC to
improve the latter’s operations:
It is the assessment of the Government Corporate Counsel that PNCC has only a 50-50 chance of winning the case, thus, entering into a compromise agreement will spare the corporation from losing at least P13 billion of its assets. COA shares the view that with this settlement, the PNCC, armed with its remaining assets can start anew and pursue its plans to revitalize its operations. [106]
Also, the investing corporation
assumes risks in every business venture. There may be many factors affecting
the business that may force the corporation to reduce or downsize its
operations in the meanwhile.
Nonetheless, the downsizing of the operations does not mean the abandonment
of the business for which the corporation has been organized. Accordingly, the wisdom of the execution of
the compromise agreement should not be questioned, absent any clear and
convincing proof establishing that the compromise agreement would truly render
PNCC incapable of continuing its business.
G
Compromise Agreement Does Not Violate
Constitutional Ban on Foreign Ownership of Land
The
compromise agreement between PNCC and Radstock provides:
2. This Compromise amount shall be paid by PNCC to RADSTOCK in the following manner:
a.
PNCC shall assign to a third party
assignee to be designated by RADSTOCK all its rights and interests to the
following real properties provided the assignees shall be duly qualified to own
real properties in the
xxx
Sison holds that this provision in
the compromise agreement would vest in Radstock, a foreign corporation, the
rights of ownership over the 19 parcels of land listed in the compromise
agreement and thereby violate the constitutional provision prohibiting
ownership by foreign entities of land in the Philippines; that the right to
assign rights and interests in real property is an attribute of ownership; that
Radstock would be, for all intents and purposes, the beneficial owner of the
real properties during the period from the execution of the compromise
agreement until the actual transfer of the ownership of the properties to
third parties designated by Radstock; and that in the meantime PNCC would be
holding the properties only in trust.
Section 7, Article XII of the 1987 Constitution reads:
Section 7. Save in cases of hereditary succession, no private lands shall be transferred or conveyed except to individuals, corporations, or associations qualified to acquire or hold lands of the public domain.
Sison’s submissions are unacceptable.
In interpreting the aforecited provision of the Constitution, the following instruction
given in J.M. Tuason & Co. Inc. v. Land Tenure Administration[107] is useful:
We look to the language of the document itself in search
for its meaning. We do not of course
stop there, but that is where we begin.
It is to be assumed that the words in which constitutional provisions
are couched express the objective sought to be attained. They are to be given their ordinary meaning
except where technical terms are employed in which case the significance thus
attached to them prevails. As the Constitution is not primarily a lawyer’s
document, it being essential for the rule of law to obtain that it should ever
be present in the people’s consciousness, its language, as much as possible,
should be understood in the sense they have in common use. What it says
according to the text of the provision construed compels acceptance and negates
the power of the courts to alter it, based on the postulate that the framers
and the people mean what they say. Thus there are cases where the need for
construction is reduced to a minimum.
Well-settled principles of constitutional construction are
also firm guides for interpretation. These principles are reiterated in Francisco
v. The House of Representatives,[108] to wit:
First, verba legis, that is, wherever possible, the
words used in the Constitution must be given their ordinary meaning except
where technical terms are employed. xxx.
xxx xxx xxx
Second, where there is ambiguity, ratio legis et anima. The words of the Constitution should be
interpreted in accordance with the intent of the framers. xxx.
Finally, ut magis valeat quam pereat. The
Constitution is to be interpreted as a whole.
A plain reading of the aforecited
provision of the Constitution and the
compromise agreement does not support
the conclusion that the latter violates the former. The compromise
agreement nowhere stated that any lands or real properties are to be
transferred to Radstock, or any non-qualified person. Indeed, the transfer of
any lands or real properties contemplated by the compromise agreement is in favor of a party duly qualified to own and hold real properties under the Constitution. The arrangement would not give to Radstock
any right other than to designate qualified assignees, who should only be a Filipino citizen, or a corporation organized
under the Philippine law, but with at least 60% Filipino equity. During the
time that Radstock would be looking for qualified assignees, ownership over the
real properties subject of the compromise agreement would not be transferred
to it, but would remain with PNCC.
Although it may be argued
that the “right to designate the qualified assignee to the property” is an
attribute of ownership, it does not necessarily follow that the presence of
such right already means that the person holding the right has become the owner
of the property. There is more to
ownership than being able to designate an assignee for the property. The attributes of ownership are: jus utendi
(right to possess and enjoy), jus fruendi (right to the fruits), jus
abutendi (right to abuse or consume), jus disponendi (right to
dispose or alienate), and jus vindicandi (right to recover or
vindicate).[109] An owner of a thing or property may agree to transfer,
assign, or limit the rights attributed to his ownership, but this does not mean
that he loses his ownership over the thing.
Accordingly, one may lease his property to others without affecting his
title over it; or he may enter into a contract limiting his enjoyment or use of
the property; or he may bind himself to first offer a thing for sale to a
particular person before selling it to another; or he may agree to let another
person designate an assignee to whom the property will be transferred or sold
in consideration of an obligation. In any of such situations, there is no
actual or legal transfer of ownership, for ownership still pertains, legally
and for all intents and purposes, to the owner, not to the other person to whom
an attribute of ownership has been
transferred.
Nowhere in
the compromise agreement is Radstock
given any of the attributes of ownership, like the right
to control and use the properties, or the right to benefit from the properties
(e.g., rent), or the right to exclude
others from the properties, or, for that matter, any other right of an owner. Neither
is Radstock thereby
put in any position to demand or to ask PNCC to lease the properties to an
assignee. What it has under the compromise agreement is only the right to designate a qualified
assignee for the property.
It is also wrong for Sison to insist that
the compromise agreement would create a trust relationship between PNCC and Radstock. Trust is the legal
relationship between one person having an equitable ownership in property and
another person owning the legal title to such property, the equitable ownership
of the former entitling him to the performance of certain duties and the
exercise of certain powers by the latter.[110]
By definition, trust relations between parties are either express or implied.[111]
Express trusts are created by the direct and positive acts of the parties, by
some writing or deed, or will, or by words evincing an intention to create a trust.[112]
The compromise agreement would
not vest in Radstock any equitable
ownership over the property. The
required performance of certain duties by PNCC (mainly the transfer of the real
properties to the qualified assignees nominated by Radstock) under the compromise
agreement would not emanate from Radstock’s equitable ownership, which
Radstock would not have. The performance of such duty would not arise either upon
the approval of the compromise agreement, but upon the fulfillment by
Radstock of its obligation to nominate the qualified assignees. PNCC and
Radstock had no intention to create a trust, because the circumstances of the
transaction negated the formation of a trust agreement between them resulting
from the compromise agreement.
On the assumption, for the sake of argument, that the compromise agreement gives Radstock a right that is an attribute of
ownership, such grant may still be justified nonetheless by the totality of the
circumstances as the end result of the whole operation of the compromise agreement; and, as such, it
would still be consistent with, not violative of, the constitutional ban on
foreign ownership of lands. In La
Bugal-B’Laan Tribal Association, Inc. v. Ramos,[113] the
Court ratiocinated:
Petitioners sniff at the
citation of Chavez v. Public Estates
Authority, and Halili v. C.A.,
claiming that the doctrines in these cases are wholly inapplicable to the
instant case.
Chavez
clearly teaches: “Thus, the Court
has ruled consistently that where a Filipino citizen sells land to an alien who
later sells land to a Filipino, the invalidity of the first transfer is
corrected by the subsequent sale to a citizen. Similarly, where the
alien who buys the land subsequently acquires Philippine citizenship, the sale
is validated since the purpose of the constitutional ban to limit land
ownership to Filipinos has been achieved. In short, the law disregards the constitutional disqualification of the buyer to
hold land if the land is subsequently transferred to a qualified party, or the
buyer himself becomes a qualified party.”
In their Comment, petitioners
contend that in Chavez and Halili, the object of the transfer (the
land) was not what was assailed for alleged unconstitutionality. Rather, it was the transaction that was
assailed; hence subsequent compliance with constitutional provisions would cure
its infirmity. In contrast, the instant
case it is the FTAA itself, the object of the transfer, that is being assailed
as invalid and unconstitutional. So, petitioners claim that the subsequent
transfer of a void FTAA to a Filipino corporation would not cure the defect.
Petitioners are confusing
themselves. The present Petition has been filed, precisely because the grantee
of the FTAA was a wholly owned subsidiary of a foreign corporation. It cannot
be gainsaid that anyone would have asserted that the same FTAA was void if it
had at the outset been issued to a Filipino corporation. The FTAA, therefore,
is not per se defective or unconstitutional.
It was questioned only because it has been issued to an allegedly non-qualified,
foreign-owned corporation.
We believe that this case is
clearly analogous to Halili, in which
the land acquired by a non-Filipino was re-conveyed to a qualified vendee and
the original transaction was thereby cured. Paraphrasing Halili, the same rationale applies to the instant
case: assuming arguendo the invalidity of its prior grant to a foreign
corporation, the disputed FTAA - being
now held by a Filipino corporation - can no longer be assailed; the objective of the constitutional provision
- to keep the exploration, development
and utilization of our natural resources in Filipino hands - has been served.
More accurately speaking, the present situation is one degree better
than obtaining in Halili, in which the original sale to a non-Filipino
was clearly and indisputably violative of the constitutional prohibition and
thus void ab initio. In the
present case, the issuance/grant of the subject FTAA to the foreign-owned WMCP
was not illegal, void or unconstitutional at the time. The matter had to be brought to court,
precisely for adjudication as to whether the FTAA and the Mining Law had indeed
violated the Constitution. Since up to
this point, the decision of this Court declaring the FTAA void has yet to
become final, to all intents and purposes, the FTAA must be deemed valid and
constitutional.
The situation herein is even more favorable than that in La Bugal. Firstly, the compromise
agreement does not attempt to transfer any of the subject real properties
to any non-qualified person. The title
or ownership of the lands is to be transferred only upon designation by
Radstock of a qualified assignee, and the transfer is to be effected by PNCC
directly to the assignee, without the title passing to Radstock in the interim.
Secondly, the compromise agreement does not attempt to create any kind of title
over the properties in favor of Radstock. It simply allows Radstock to
designate a qualified assignee to whom the properties may be assigned or
transferred. It does not give any other right to Radstock. Thirdly,
the arrangement may even be more beneficial to PNCC, considering that PNCC gets
to settle its much lessened obligation for a definite and sure amount of 75% of
the assessed values of the subject properties, regardless of the price that Radstock
gets from its designated assignee. Incidentally, this is a better bargain for
PNCC (and ultimately for the Government), compared to a bidding out of the
properties in which there are ever-present risks of recovering a much lower
value). Fourthly, the arrangement
transfers from PNCC to Radstock the obligation and task of looking for a
qualified assignee of the properties. And, lastly,
the present case involves a series of interrelated and dependent transactions
that will always result in a situation not inconsistent with the Constitution, considering that the
assignee will always be a qualified person or entity.
H
The Obligation of
PNCC to
Marubeni Was Established
In the
On appeal (C.A.-G.R. SP No. 66654), PNCC raised the
same grounds, to wit: 1) that the cause of action was barred by prescription;
2) that the pleading asserting the claim stated no cause of action; 3) that the
condition precedent for the filing of the instant suit had not been complied
with; and 4) that the plaintiff had no legal capacity to sue.
As the excerpts of the Court’s decision in G.R. No. 156887 show,[114] the defense of prescription of the claim and the other defenses of PNCC
were passed upon, and the Court upheld the CA’s affirmance of the RTC’s denial of PNCC’s motion to dismiss based on such defenses. The ruling in G.R. No. 156887 bars the re-litigation in these
consolidated cases of the same issues, particularly a bar by prescription,
because of the application of the doctrine of law of the case.
Law of the case is defined as the
opinion delivered on a former appeal. More specifically, it means that whatever
is once irrevocably established as the controlling legal rule between the same parties in the same case continues to
be the law of the case, whether
correct on general principles or not, so long as the facts on which such
decision was predicated continue to be facts of the case before the court,[115] notwithstanding that the rule laid down may have been
reversed in other cases.[116] Indeed, after the appellate court has issued a pronouncement
on a point presented to it with a full opportunity to be heard having been
accorded to the parties, that pronouncement should be regarded as the law of
the case and should not be reopened on a remand of the case.[117]
The concept of the law of the case is explained in Mangold v. Bacon,[118] thus:
The general rule, nakedly and badly put, is that legal conclusions announced on a first appeal, whether on the general law or the law as applied to the concrete facts, not only prescribe the duty and limit the power of the trial court to strict obedience and conformity thereto, but they become and remain the law of the case in all after steps below or above on subsequent appeal. The rule is grounded on convenience, experience, and reason. Without the rule there would be no end to criticism, re-agitation, re-examination, and reformulation. In short, there would be endless litigation. It would be intolerable if parties litigant were allowed to speculate on changes in the personnel of a court, or on the change of our rewriting propositions once gravely ruled on solemn argument and handed down as the law of a given case. An itch to reopen questions foreclosed on a first appeal would result in the foolishness of the inquisitive youth who pulled up his corn to see how it grew. Courts are allowed, if they so choose, to act like ordinary sensible persons. The administration of justice is a practical affair. The rule is a practical and a good one of frequent and beneficial use.
Resultantly, the
liability of PNCC to Radstock was established, rendering the decision to enter into
a compromise agreement a wise move on the part of PNCC. The same result cannot
be contemplated if the nullification of the compromise
agreement were decreed herein, because PNCC would probably lose by an
adjudgment against it of a larger liability.
I
The Resolution of PNCC’s Board Recognizing
Its Obligation to Marubeni Bound PNCC
Board Resolution No.
BD-092-2000 dated
RESOLUTION
NO. BD-09202000
RESOLVED, That the Board recognizes, acknowledges and
confirms PNCC’s obligations as of September 30, 1999 with the following
entities, exclusive of interests and other charges that may subsequently accrue
and still become due therein, to wit:
a). the Government of the Republic of the
b). Marubeni Corporation in the amount of
P10,743,103,388.00.
Yet, the majority would have
the Court strike down the resolution, and not give it effect, because it was null
and void. They opine that the PNCC Board approved a transaction that was
manifestly and grossly disadvantageous to the National Government, and that such
transaction was even a corrupt and unlawful act. They conclude that the resolution, being unlawful
and a criminal act, was void ab initio
and could not be implemented or in any way given effect by the Executive or
Judicial Branch of the Government.
I am not persuaded.
That its issuance might
have been unwise or disadvantageous to PNCC, which I do not concede, did not
invalidate Resolution No. BD-092-1000. The resolution, being simply a
recognition of a prior indebtedness in favor of Marubeni and the Government,
was clearly issued within the corporation’s powers; hence, it was neither illegal
nor ultra vires. Indeed, had PNCC remained a purely private corporation,
no issue would be raised against the propriety of its Board of Directors
thereby recognizing an indebtedness.
The majority rely heavily on the transcripts of the Senate Committee hearings
to buttress the imputation of bad faith behind the passage of the board
resolution that recognized PNCC’s debts to Marubeni. They copiously quote the
privilege speech of Senator Franklin Drilon delivered during the plenary
session of December 21, 2006; and the transcripts of the Senate Committee hearings
held on December 14, 2006.
To me, the reliance on the privilege speech and the transcripts of the
Senate Committee hearings is unwarranted and misplaced.
The speeches of
legislators delivered on the floor and the testimonies of resource persons
given in Congressional committee hearings, like those quoted in the majority
opinion, have no probative value in judicial adjudication, for they are
not recognized as evidence
under the Rules
of
Court. Even the rule on judicial notice embodied in Section 1,[119]
Rule 129, of the Rules of Court does
not accord probative value to such speeches and testimonies, because the rule extends
only to the official acts of the
Legislative Department. The term official
acts, in its general sense, may encompass all activities of the Congress,
like the laws enacted and resolutions adopted, but the statements of the
legislators and testimonies cannot be regarded, by any stretch of legal
understanding, as the “official act of the legislative department.” At best, the
courts can only take judicial notice
of the fact that such statements or speeches were made by such persons, or that
such hearings were conducted.
Although this Court can take cognizance of the proceedings of the Senate, as
acts of a department of the National Government, the testimonies or statements
of the persons during the hearings or sessions may not be used to prove disputed
facts in the courts of law. They cannot
substitute actual testimony as basis for making findings of fact necessary for
the determination of a controversy by the courts. In other words, they are incompetent for purposes
of judicial proceedings.
Moreover, in Bengzon,
Jr. v. Senate Blue Ribbon Committee, [120] the Court defined the
limitation on the power of the Legislative Department to investigate a
controversy exclusively pertaining to the Judicial Department, and regarded as
an encroachment into the exclusive
domain of judicial jurisdiction any probe or inquiry by the Senate Blue Ribbon Committee into the
same
justiciable controversy already before the Sandiganbayan, declaring:
In fine, for the respondent
[Senate Blue Ribbon] Committee to probe and inquire into that same justiciable
controversy already before the Sandiganbayan, would be an encroachment into the
exclusive domain of judicial jurisdiction that had much earlier set
in. In Baremblatt v. United States,
it was held that:
Broad as it is, the power is not, however, without
limitations. Since Congress may only
investigate into those areas in which it may potentially legislate or
appropriate, it cannot inquire into matters which are within the exclusive
province of one of the other branches of the government. Lacking the judicial power given to the
Judiciary, it cannot inquire into matters that are exclusively the concern of
the Judiciary. Neither can it supplant the Executive in what
exclusively belongs to the Executive. xxx.
Indeed, the distinctions
between court proceedings, on one hand, and legislative investigations in aid
of legislation, on the other hand, derive from their different purposes. Courts
conduct hearings to settle, through the application of law, actual
controversies arising between adverse litigants and involving demandable
rights.[121] In court proceedings, the person’s rights to
life, liberty and property may be directly and adversely affected. The Rules of Court prescribes procedural safeguards consistent with the
principles of due process and equal protection guaranteed by the Constitution. The manner in which disputed
matters can be proven in judicial proceedings as provided in the Rules of Court must be followed. In contrast, the legislative bodies conduct
their inquiries under less safeguards and restrictions, because inquiries in aid of
legislation are undertaken as tools to gather information, in order to enable the
legislators to act wisely and effectively, and in order to determine whether
there is a need to improve existing laws, or to enact new or remedial
legislation.[122]
In particular, the Senate is not bound by the Rules of Court. Its inquiries
permit witnesses to relate matters that are hearsay, or to give mere opinion,
or to transmit information considered incompetent under the Rules of Court. The witnesses serve as resource persons,
often unassisted by counsel, and appear before the legislators, who are the
inquisitors. The latter have no obligation to act as impartial judges during
the proceedings. The inquiries do not include direct examinations and cross-examinations,
and leading questions are frequent.
Cogently, the proper treatment of the findings of
congressional committees by courts of law became the subject of the following
observations made in Agan, Jr. v.
Philippine International Air Terminals Co., Inc.:[123]
Finally, the respondent Congressmen assert that at least
two (2) committee reports by the House of Representatives found the PIATCO
contracts valid and contend that this Court, by taking cognizance of the cases
at bar, reviewed an action of a co-equal body. They insist that the Court must
respect the findings of the said committees of the House of Representatives. With
due respect, we cannot subscribe to
their submission. There is a fundamental difference between a
case in court and an investigation of a congressional committee. The purpose of
a judicial proceeding is to settle the dispute in controversy by adjudicating
the legal rights and obligations of the parties to the case. On the other hand, a congressional
investigation is conducted in aid of legislation. Its aim is to assist and
recommend to the legislature a possible action that the body may take with
regard to a particular issue, specifically as to whether or not to enact a new
law or amend an existing one. Consequently, this Court cannot treat the
findings in a congressional committee report as binding because the facts
elicited in congressional hearings are not subject to the rigors of the Rules
of Court on admissibility of evidence. The Court in assuming jurisdiction
over the petitions at bar simply performed its constitutional duty as the
arbiter of legal disputes properly brought before it, especially in this
instance when public interest requires nothing less.
V
Asiavest’s Intervention
Had No Leg to Stand On
Asiavest
was a judgment creditor of PNCC by virtue of the Court’s judgment in G.R. No.
110263. After 5 years from the issuance
of a writ of execution in its favor, Asiavest’s judgment award is yet to be
satisfied.[124]
In G.R. No.
178158, Asiavest filed its urgent motion for leave to intervene and to file
the attached opposition and motion-in-intervention, claiming that it had a
legal interest as an unpaid judgment creditor of PNCC, nay a superior right,
over the properties subject of the compromise
agreement.[125]
It prayed, if allowed to intervene, that the compromise agreement be nullified because, otherwise, PNCC might no
longer have properties sufficient to satisfy the judgment in favor of the
former.
The Court granted the urgent
motion of movant-intervenor Asiavest for leave to intervene and to file
opposition and motion in intervention [re: judgment based on compromise].[126] However, Asiavest was not required to
file a comment.
The position of Asiavest cannot be sustained.
To start with, Asiavest has no direct
and material interest in the approval (or disapproval) of the compromise agreement between PNCC and
Radstock.
Secondly, Asiavest’s request to
intervene was made too late in the proceedings. Under Section 2, Rule 19, 1997 Rules of Civil Procedure, an
intervention, to be permitted, must be sought prior to the rendition of the
judgment by the trial court.
Thirdly, the avowed interest of
Asiavest in PNCC’s assets emanated from its being a creditor of PNCC by final
judgment, and was not related to the personal obligations of PNCC in favor of
Marubeni (that is, the guarantees for the loans) that were the subject of the compromise agreement. Such interest did
not entitle Asiavest to attack the compromise
agreement between PNCC and Radstock.
The interest that entitles a
person to intervene in a suit already commenced between other persons must be in the matter in litigation and
of such character that the intervenor will either gain or lose by direct legal
operation and effect of the judgment.[127]
The conditions for a proper intervention in relation to Asiavest simply did not
exist. Moreover, sustaining Asiavest’s posture may mean allowing other
creditors to intervene in an action involving their debtor brought by another
creditor against such debtor upon the broad pretext that they were thereby
prejudiced. The absurdity of Asiavest’s posture, being plain, can never be
permitted under the rules on intervention.[128]
Fourthly, that Asiavest is yet to
recover from PNCC under the final judgment rendered in G.R. No. 110263 gave the
former no standing to intervene in
the action Radstock brought against PNCC to enforce the latter’s guarantees.
Asiavest was an absolute stranger to the juridical situation arising between
Radstock and PNCC. The proper recourse of Asiavest was, instead, to pursue the
execution of the judgment until satisfaction, a remedy that is amply provided
for in Rule 39 of the Rules of Court.
Lastly, Asiavest’s argument that the compromise agreement might be in fraud
of it as a judgment creditor of PNCC, in support of which newspaper reports are
cited,[129] is
unpersuasive. The allegation of fraud remains unsupported by admissible and
credible evidence presented by Asiavest, considering that mere newspaper
reports are incompetent and inadmissible hearsay.[130]
IN VIEW OF ALL THE FOREGOING CONSIDERATIONS, I vote to dismiss the petitions in
G.R. No. 178158 and G.R. No. 180428; to disallow the intervention of Asiavest
Merchant Bankers Berhad; to affirm the decision dated January 25, 2007, the
resolution dated May 31, 2007 promulgated in C.A.-G.R. CV No. 87971, and the
resolution dated June 12, 2007 promulgated in C.A.-G.R. SP No. 97982.
LUCAS P.
BERSAMIN
Associate Justice
[1] Philippine
National Construction Corporation v. Hon. Amalia F. Dy, et al., G.R. No. 156887, October 3, 2005, 472 SCRA 1, 5. Penned
by Associate Justice Azcuna and concurred in by Chief Justice Davide, Jr.,
Associate Justice Quisimbing, Associate Justice Ynares-Santiago, and Associate
Justice Carpio.
[2] Rollo, G.R. No. 178158, pp. 31- 43 (CA decision dated January 25,
2007; penned by Associate Justice Del Castillo (now a Member of the Court) and
concurred in by Presiding Justice Reyes (now retired Member of the Court) and Associate
Justice Romilla-Lontok.
[3] Rollo,
G.R. No. 178158, pp. 259-271 (the resolution
in G.R. No. 156887 dated
[4]
[5]
[6]
[7] Rollo, G.R. No. 180428, pp. 3-42.
[8]
[9] Id.,
pp. 45-46 (CA decision in CA-G.R. SP No. 97982, penned by Justice Pizarro, and
concurred in by Justice Cruz and Justice Lampas-Peralta).
[10] The
narrative contained in the section Common
Antecedents is partly derived from the background facts rendered in Philippine
National Construction Corporation v. Hon. Amalia F. Dy, et al., G.R. No.
156887, October 3, 2005, 472 SCRA 1.
[11] Rollo, G.R. No. 178158, p. 416.
[12]
[13]
[14]
[15]
[16]
[17]
[18] Rollo,
G.R. No. 180428, pp. 107-140.
[19] Rollo,
G.R. No. 180428, at pp. 45-46 (penned by Justice Pizarro, and concurred in by
Justice Cruz and Justice Lampas-Peralta).
[20]
[21] Rollo, G.R. No. 178158, pp. 3-26.
[22]
[23]
[24] Rollo,
G.R. No. 180428, pp. 3-42.
[25] Rollo, G.R. No. 178158, p. 358.
[26]
[27]
[28]
[29]
[30]
[31]
[32]
[33] Rollo, G.R. 180428,
p. 17.
[34] Rollo, G.R. 178158, pp. 402-443; pp. 444-540.
[35]
[36] Rollo, G.R. No. 178158, pp. 265-269 (CA decision
dated
[37] Garcia v.
David, 67 Phil. 279.
[38] Nieto, Jr. v. Court of Appeals, G.R. No.
166984, August 7, 2007, 529 SCRA 285; citing Garcia v. David, 67 Phil. 279, 282-283.
[39] Big
Country Ranch Corporation v. Court of Appeals, G.R. No. 102927, October 12,
1993, 227 SCRA 161, 165.
[40] Garcia v. David, supra, note 37, pp. 282-283.
[41] Sec. 1, Rule
19, 1997 Rules of Civil Procedure.
[42] Rollo, G.R. No. 178158, p. 266.
[43] Rollo, G.R. No. 180428, pp. 45-46 (CA
Resolution in CA-GR SP No. 97982).
[44]
[45]
[46] G.R. No. 148456,
[47] G.R. No. 70443,
[48]
[49]
[50] Rollo, G.R. 18042, p. 7.
[51] Sec. 2, Corporation Code; Solidbank
Corporation v. Mindanao Ferroalloy Corporation, G.R. No. 153535, July 28,
2005, 464 SCRA 409, 420.
[52] Section 1. Derivative
action.- A stockholder or member may
bring an action in the name of a corporation or association, as the case may
be, provided, that:
(1) He was a
stockholder or member at the time the acts or transactions subject of the
action occurred and at the time the action was filed;
(2) He exerted
all reasonable efforts, and alleges the same with particularity in the
complaint, to exhaust all remedies available under the articles of
incorporation, by-laws, laws or rules governing the corporation or partnership
to obtain the relief he desires;
(3) No appraisal
rights are available for the act or acts complained of; and
(4) The suit is
not a nuisance or harassment suit.
In
case of nuisance or harassment suit, the court shall forthwith dismiss the
case.
[53] Yu v.
Yukayguan, G.R. No. 177549,
[54] PNCC v. Dy, G.R. No. 156887,
[55] Revised Administrative Code of 1987.
[56] TSN,
[57] G.R. No.
87710 & G.R. No. 96087,
[58] G.R. No.
L-19891,
[59] Villanueva, C.,
Philippine Corporate Law, Rex Bookstore, Inc., p. 18 (2003).
[60] I
[61] G.R. No.
131715,
[62] Section 36, Corporation
Code, enumerates some of the
powers of a private corporation:
Sec. 36. Corporate
powers and capacity. -
Every corporation incorporated under this Code has the power and capacity:
1. To sue and be sued in its corporate
name;
2. Of succession by its corporate name for
the period of time stated in the articles of incorporation and the certificate
of incorporation;
3. To adopt and use a corporate seal;
4. To amend its articles of incorporation
in accordance with the provisions of this Code;
5. To adopt by-laws, not contrary to law,
morals, or public policy, and to amend or repeal the same in accordance with
this Code;
6. In case of stock corporations, to issue
or sell stocks to subscribers and to sell stocks to subscribers and to sell
treasury stocks in accordance with the provisions of this Code; and to admit
members to the corporation if it be a non-stock corporation;
7. To
purchase, receive, take or grant, hold, convey, sell, lease, pledge, mortgage
and otherwise deal with such real and personal property, including securities
and bonds of other corporations, as the transaction of the lawful business of
the corporation may reasonably and necessarily require, subject to the
limitations prescribed by law and the Constitution;
8. To enter into merger or consolidation
with other corporations as provided in this Code;
9. To make reasonable donations, including
those for the public welfare or for hospital, charitable, cultural, scientific,
civic, or similar purposes: Provided, That no corporation, domestic or foreign,
shall give donations in aid of any political party or candidate or for purposes
of partisan political activity;
10. To establish pension, retirement, and
other plans for the benefit of its directors, trustees, officers and employees;
and
11. To
exercise such other powers as may be essential or necessary to carry out its
purpose or purposes as stated in the articles of incorporation.
[63] Section 2, Corporation
Code, provides:
Sec. 2. Corporation defined. - A corporation is an artificial being created by operation of law, having the right of succession and the powers, attributes and properties expressly authorized by law or incident to its existence.
[64] Manila International Airport Authority v.
Olongapo Maintenance Services, Inc., G.R. No. 146184-85, January 31, 2008,
543 SCRA 269, 275.
[65] Rollo,
G.R. No. 178158, pp. 265-269.
[66] Underline supplied for emphasis.
[67] Underline supplied for emphasis.
[68] IV Tolentino, Civil Code of the
[69] G.R. No. 1115444,
[70] Entitled Amending the Franchise of the Philippine National Construction Corporation to Construct, Maintain and Operate Toll Facilities in the North Luzon and South Luzon Expressways to include the Metro Manila Expressway to serve as an Additional Artery in the Transportation of Trade and Commerce in Metro Manila.
[71] Underline supplied for emphasis.
[72] Section 4, Rule 129, Rules of Court; 5 Herrera, Remedial Law, Rex Book Store, p. 107 (1999).
[73] PNCC v.
Pabion, supra, at footnote 61; also National Shipyard & Steel v. Court of Industrial
Relations, 118 Phil. 782, 789.
[74] National Shipyard & Steel v. Court of Industrial Relations, supra.
[75] Philippine
National Bank v. Court of Industrial Relations, G.R. No. L-32667,
[76] Rollo,
G.R. No. 178185, p. 511.
[77] Entitled Authorizing the Establishment Of Toll Facilities On Public Improvements, Creating A Board For The Regulation Thereof And For Other Purposes.
[78] Underlines
supplied for emphasis.
[79] G.R. No.
119528,
[80] Underlines supplied for emphasis.
[81] G.R. No. 168914,
[82] Underlines supplied for emphasis.
[83] DOJ Opinion No. 122, s. 1995.
[84] Underlines
supplied for emphasis.
[85] Rollo, G.R. No. 178158, p. 247.
[86] G.R. No.
79351,
[87] Underlines
supplied for emphasis.
[88] G.R. No. 158261,
[89] Underlines
supplied for emphasis.
[90] Rollo,
G.R. No. 180428, p. 248.
[91] 21A Words and Phrases, p. 397; citing Howell
v. Knox, Tex.Civ.App., 211
S.W.2d 324, 328.
[92]
[93] Article
2237, Civil Code.
[94] De Leon, The Law on Insurance (with
Insolvency Law), p. 254 (2003).
[95] Section 14,
Act No. 1956.
[96] Section 20,
Act No. 1956.
[97] Section 52,
Act No. 1956, provides in part that:
SECTION 52. Corporations and sociedades anonimas; Banking. — The provisions of
this Act shall apply to corporations and sociedades
anonimas x x x. Whenever any corporation is declared insolvent, its property and assets
shall be distributed to the creditors; x x x
[98] Rollo, G.R. No. 178158, pp. 265-269.
[99] Rollo,
G.R. 180428, p. 249.
[100] Underlines supplied for emphasis.
[101] II Campos and Lopez-Campos, The Corporation
Code, p. 464 (1990).
[102] Rollo,
G.R. No. 180428, p. 249.
[103] Rollo,
G.R. No. 178185, p. 511.
[104] Rollo, G.R. No. 180428, p. 423 (COA’s Audit Report on PNCC For the Year
End[ing]
TOLLWAYS DEVELOPMENT CONTRACTS
The company has entered into
Joint Venture Partnerships with internationally notable engineering companies and
other reputable local corporations, under the Build-Operate-Transfer scheme,
for the construction, rehabilitation, refurbishment, modernization, and
expansion of the existing Expressways.
A product of this partnership
is the Metro Manila Skyway Project, the first elevated tollway in the country
built in joint partnership with the Indonesian firm P.T. Citra Gung Persada
(CITRA). Another project of the joint
undertaking efforts is the Manila North Tollway Project with First Philippine
Infrastructure Development Corporation (FPIDC), which involves the
rehabilitation of the North Luzon Tollway and its expansion to the special
economic zones in Zambales, Clark Pampanga,
An Alternative to the JVA
with HCII, if the same does not materialize, is an on-going negotiation with
the NDC to develop design, construct, finance, operate, and maintain the SLEX
Project. The proposed Project involves
the rehabilitation of the Alabang Viaduct and the extension of the SLEX from
Calamba, Laguna to Sto. Tomas, Batangas.
This will be documented likewise by a JVA.
[105] Rollo, G.R. No. 178158, p. 256.
[106] Underlines
supplied for emphasis.
[107] G.R. No.
L-21064,
[108] G.R. Nos. 160261, 160262, 160263, 160277, 160292,
160295, 160310, 160318, 160342, 160343, 160360, 160365, 160370, 160376, 160392,
160397, 160403, and 160405, November 10, 2003; 415 SCRA 44.
[109] Samartino v.
Raon, 433 Phil. 173, 189 (
[110] Morales
v. Court of Appeals, G. R. No. 117228, June 19, 1997, 274 SCRA 282,
297-300; IV Tolentino, Civil Code of the
Philippines, p. 669 (1997).
[111] Article 1441, Civil Code.
[112] Ramos
v. Ramos, No. L-19872,
[113]
G.R. No.
127882,
[114] Supra, at pp. 22-23.
[115] 21 C.J.S. 330.
[116] Zarate v. Director of Lands, 39 Phil. 747.
[117] Bachrach Motor
Co.v. Esteva,
67 Phil 16.
[118] 237 Mo. 496; cited in Zarate v. Director of Lands, supra
[119] Section 1. Judicial
notice, when mandatory. - A court shall take judicial notice, without the
introduction of evidence, of the existence and territorial extent of states,
their political history, forms of government and symbols of nationality, the
law of nations, the admiralty and maritime courts of the world and their seals,
the political constitution and history of the Philippines, the official acts of the legislative, executive and judicial departments
of the Philippines, the laws of nature, the measure of time, and the
geographical divisions. (1a)
[120] G.R. No.
89914,
[121] Romero v.
Senator Estrada, G.R. No. 174105,
[122]
[123] G.R. No.
155001,
[124] Rollo, G.R. No. 178158, pp. 237-238.
[125]
[126] Rollo,
G.R. No. 178158, p. 291.
[127] Nordic
Asia Limited v. Court of Appeals, 451 Phil. 482, 492-493.
[128] Batama
Farmer’s Cooperative Marketing Association, Inc. v. Hon. Rosal, 149 Phil.
514, 524.
[129] Rollo,
G.R. 178158, pp. 254-258.
[130] People v.
Fajardo, 373 Phil. 915, 925.