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 Mandaluyong City (Civil Case No. MC 01-1398). The RTC rendered judgment in favor of Radstock, mandating PNCC to pay to Radstock the amount of  P13,151,956,528.00, plus interests and attorney’s fees. PNCC appealed to the Court of Appeals (CA).[1] On August 18, 2006, after negotiations held while the appeal (CA-GR CV No. 87971) was still pending in the CA, PNCC and Radstock entered into a compromise agreement, agreeing to reduce PNCC’s adjudged liability in the amount of P17,040,843,968.00 as of July 31, 2006 to 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 November 22, 2006, the Court instructed PNCC and Radstock to submit the compromise agreement to the CA for approval because CA-GR CV No. 87971 was still pending. [3]  On January 25, 2007, the CA approved it.[4]

 

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 Cuenca wanted to intervene in order to assail the compromise agreement between PNCC and Radstock as null and void. The CA rejected their proposed interventions.[6]  On the other hand, Luis Sison (Sison), the petitioner in G.R. No. 180428,[7] filed a petition for annulment of judgment approving the compromise agreement,[8] which was raffled to another division of the CA.  The CA dismissed the petition.[9]

 

Before the Court now are the appeals of STRADEC and Sison. Cuenca did not pursue his cause after the rejection of his intervention.

 

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) Ą5.46 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 January 10, 2001, Marubeni assigned the credit to Radstock, a corporation organized under the laws of the British Virgin Islands, with office address at Suite 602, 76 Kennedy Road,  Hong Kong. After due date of the obligation, Marubeni and Radstock had demanded payment, but PNCC failed and refused to pay the obligation.

 

Upon default of PNCC, Radstock sued PNCC in the RTC in Mandaluyong City to recover the debt and consequential damages, praying for the issuance of a writ of preliminary attachment. The suit was docketed as Civil Case No. MC 01-1398.

 

On January 23, 2001, the RTC issued a writ of preliminary attachment, the service of which led to the garnishment of PNCC’s bank accounts and the attachment of several of PNCC’s real properties. On February 14, 2001, PNCC moved to set aside the order of January 23, 2001, and to discharge the writ of attachment. Two weeks later, PNCC filed a motion to dismiss. The RTC denied both motions. After the RTC denied PNCC’s corresponding motions for reconsideration, PNCC instituted a special civil action for certiorari in the CA (C.A.-G.R. SP No. 66654).

 

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 August 30, 2002, the CA decided C.A.-G.R. SP No. 66654. It held that the RTC did not act with grave abuse of discretion; and that the denial of the motion to dismiss, being interlocutory, could not be questioned through a special civil action for certiorari. The CA denied PNCC’s motion for reconsideration on January 22, 2003.

 

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 October 3, 2005, the Court resolved G.R. No. 156887, viz:

 

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 August 17, 2006. They submitted to the Court their compromise agreement on August 18, 2006.[11]  In the compromise agreement, PNCC and Radstock agreed to reduce PNCC’s adjudged liability as of July 31, 2006 from P17,040,843,968.00 to P6,185,000,000.

 

On December 4, 2006, the Court in G.R. No. 156887 referred the compromise agreement to the COA for comment. In due time, COA submitted its compliance, whereby it recommended the approval of the compromise agreement.[12] 

 

On November 22, 2006, the Court instructed PNCC and Radstock to submit the compromise agreement to the CA because the appeal of the RTC decision was still pending thereat.[13] 

 

          On January 25, 2007, the CA rendered its decision approving the compromise agreement.[14]

 

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 January 25, 2007.

 

Cuenca, a stockholder of PNCC and its former President and Chairman of the Board of Directors, filed a motion for intervention, maintaining that PNCC had no obligation to pay Radstock.[16] 

 

On May 31, 2007, however, the CA denied STRADEC’s motion for reconsideration and Cuenca’s motion for intervention.[17] 

 

          In the meanwhile, on February 20, 2007, Sison also joined the legal fray in the CA by filing his petition for annulment of judgment approving the compromise agreement (C.A.-G.R. SP No. 97982).[18] 

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 June 12, 2007, the CA (Ninth Division) promulgated a resolution in C.A.-G.R. SP No. 97982 dismissing Sison’s petition for annulment of judgment approving the compromise agreement and denying Asiavest’s urgent motion for leave to intervene.[19]

 

Sison moved for reconsideration of the dismissal, but the CA denied his motion for reconsideration.[20]

 

          On June 20, 2007, STRADEC came to the Court to seek a review on certiorari (G.R. No. 178158), praying that the compromise agreement be declared void for violating the law and public policy.  It sought a temporary restraining order or writ of preliminary injunction.[21]

 

Cuenca did not appeal.

 

On July 2, 2007, the Court directed PNCC and Radstock, their officers, agents, representatives and other persons acting under their orders to maintain the status quo ante.[22]

 

On September 21, 2007, Asiavest presented its urgent motion for leave to intervene and to file the attached opposition and motion-in-intervention in G.R. No. 178158.[23]

         

On November 26, 2007, Sison also came to the Court via his own petition for review on certiorari to appeal the CA decision (G.R. No. 180428).[24]

 

          On February 18, 2008, the Court consolidated G.R. No. 180428 and G.R. No. 178158.[25]

 

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 October 6, 2006, STRADEC filed a motion for intervention in this Court, seeking to intervene in order to seek the nullification of the compromise agreement.[32] After the CA had approved the compromise agreement through the decision in C.A.-G.R. CV No. 87971, STRADEC filed a motion for reconsideration. The CA denied the motion for reconsideration on May 31, 2007, resulting in STRADEC’s present appeal in G.R. No. 178158.

 

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 October 20, 2000 is not defective or illegal.

 

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 January 13, 2009, the Court conducted oral arguments in both appeals, and limited the matters to be covered to the following:

 

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 October 20, 2000 defective or illegal?

 

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 interventionmay 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 November 5, 2007 in C.A.-G.R. SP No. 97982, whereby the CA, Ninth Division, denied his motion for reconsideration of the decision promulgated on June 12, 2007 dismissing his petition for annulment of judgment approving the compromise agreement, and also denied Asiavest’s urgent motion for leave to intervene and to file the attached opposition and motion-in-intervention.[43]  

 

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-ŕ-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 April 19, 2001 which first denied the Motion to Dismiss meticulously explained the legal and factual basis for the trial court’s rejection of the four grounds raised by PNCC:

 

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 July 25, 1996.  Further, it is interesting to note that defendant had, in the Board meeting held last October 20, 2000, clearly acknowledged the subject indebtedness to Marubeni. . . .

 

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 August 9, 1978 and loan Agreement executed on May 19, 1980.  Apparently however, this case is being filed against defendant PNCC under the letters of guarantee [sic]. [P]laintiff is not filing this case against CDCP-M under the loan agreement and the advance payment agreement entered between Marubeni and CDPM wherein [sic] arbitration clauses are provided.

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 Philippines without any proof that it has a required license. This argument is erroneous.  The plaintiff in this case is suing on an isolated transaction…. As correctly stated by the Plaintiff, it does not intend to engage in any other business in the Philippines except to sue and collect what has been assigned to it by Marubeni Corporation.

 

 

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 January 13, 2009, a concern about the validity of the compromise agreement due to the lack of presidential or congressional approval was raised.  Allegedly, the lack of presidential or congressional approval contravened the law, particularly Section 20, Chapter 4, Sub-Title B, Title 1, Book 5, of Executive Order No. 292,[55] which required such approval in the disposition of properties valued at more than 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, SEC can exercise jurisdiction. These GOCCs are regarded as private corporations despite common misconceptions. That the government may own the controlling shares in the corporation does not diminish the fact that the latter owes its existence to the Corporation Code. More pointedly, Section 143 of the Corporation Code gives SEC the authority and power to implement its provisions, specifically for the purpose of regulating the entities created pursuant to such provisions. These entities include corporations in which the controlling shares are owned by the government or its agencies.

 

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 SEC regulation and jurisdiction.

 

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 October 3, 2006 submitted to the Court,[65] thus:

 

 

The Government Accounting and Auditing Manual (GAAM) Volume I, prescribed under COA Circular No. 91-368 dated January 1, 1992, specifically under Title 7, Chapter 3 thereof, primarily governs the disposal/divestment of government assets. Section 501 of the said Chapter states:

 

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 January 27, 1989) relevantly provides:

 

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 May 1, 2007.  That is clear from Section 2 of P.D. No. 1894, which states:

 

 

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 Pasay City with a total area of 129,548 square meters, more or less, particularly described in Transfer Certificate of Title No. T-34997 of the Registry of Deeds for Pasay City. The transfer value is P3,817,779,000.00;

 

2.     T-452587 (T-23646) – Parańaque (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)-Parańaque (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-Parańaque (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 Philippines and/or to corporations or associations qualified under the Constitution and authorized by law to engage in toll operations;

 

(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 May 1, 2007. This recognition was reflected in the opinion dated November 24, 1995 of then Justice Secretary Teofisto T. Guingona, Jr., to wit:[83]

 

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 May 1, 2007, gives it the “right, privilege and authority to construct, maintain and operate” the NSLE.  The Toll Operation Certificate which TRB may issue to the PNCC and its joint venture partner after the expiration of its franchise on May 1, 2007 is an entirely new authorization, this time for the operation and maintenance of the NSLE, which is already an existing toll facility.  In other words, the right of PNCC and its joint venture partner, after May 1, 2007, to operate and maintain the existing NSLE will no longer be founded on its legislative franchise which is not thereby extended, but on the new authorization to be granted by the TRB pursuant to Section 3(e), abovequoted, of P.D. 1112. [84]

 

 

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 TRB could not contract out the rehabilitation and expansion of existing government-owned public works, particularly our national roads and highways, is unacceptable, because it will wreak havoc to the operations and maintenance not only of the NLEX, but also of other and future public constructions and developments. Similarly unacceptable is an interpretation that the expiration of the franchise of PNCC vis-ŕ-vis the NLEX operated to bar PNCC or any other participating private entity from collecting toll fees from the operations of the NLEX, because it would unfairly outlaw the current operation of the MNTC, a joint-venture company between PNCC and the Metro Pacific Group, which had spent substantially for the rehabilitation and expansion works of the NLEX.

 

At any rate, the majority’s interpretation will hinder the efforts of the National Government, through the TRB, of effecting improvements in existing national highways through the private sector, which will surely hesitate to involve itself in projects in which it will not be permitted to recoup or recover the substantial costs entailed in construction and development.

 

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. Sale or other disposition of assets. - Subject to the provisions of existing laws on illegal combinations and monopolies, a corporation may, by a majority vote of its board of directors or trustees, sell, lease, exchange, mortgage, pledge or otherwise dispose of all or substantially all of its property and assets, including its goodwill, upon such terms and conditions and for such consideration, which may be money, stocks, bonds or other instruments for the payment of money or other property or consideration, as its board of directors or trustees may deem expedient, when authorized by the vote of the stockholders representing at least two-thirds (2/3) of the outstanding capital stock, or in case of non-stock corporation, by the vote of at least to two-thirds (2/3) of the members, in a stockholder's or member's meeting duly called for the purpose. Written notice of the proposed action and of the time and place of the meeting shall be addressed to each stockholder or member at his place of residence as shown on the books of the corporation and deposited to the addressee in the post office with postage prepaid, or served personally: Provided, That any dissenting stockholder may exercise his appraisal right under the conditions provided in this Code.

 

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 Philippines:

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 RTC, PNCC urged the following grounds as affirmative defenses, namely: 1) that the plaintiff had no 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 by a valid board resolution.

 

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 October 20, 2000 proves that PNCC incurred an obligation in favor of Marubeni.  PNCC’s Board of Directors would not have issued the resolution if the obligation was unfounded, considering that the resolution admitted its liability, to wit:

 

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 Philippines in the amount of P36,023,784,751.00; and

 

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 November 22, 2006).

[4]       Id., pp. 31- 43.

[5]      Id., pp. 3-26.

[6]      Id.

[7]      Rollo, G.R. No. 180428, pp. 3-42.

[8]      Id., pp. 107-140.

[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]     Id., pp. 259-271.

[13]    Id., p. 270.

[14]     Id., pp. 31-43.

[15]     Id., pp. 113-117.

[16]     Id., p. 48.

[17]     Id., pp. 46-54.

[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]     Id., pp. 47-49.

[21]     Rollo, G.R. No. 178158, pp. 3-26.

[22]     Id., pp. 142-145.

[23]     Id., pp. 237-241.

[24]     Rollo, G.R. No. 180428, pp. 3-42.

[25]     Rollo, G.R. No. 178158, p. 358.

[26]     Id., p. 8.

[27]     Id., p. 11.

[28]     Id., pp. 9-10.

[29]     Id., p. 11.

[30]     Id., pp. 11-13.

[31]     Id., pp. 55-69.

[32]     Id., pp. 113-134.

[33]     Rollo, G.R. 180428, p. 17.

[34]     Rollo, G.R. 178158, pp. 402-443; pp. 444-540.

[35]     Id., between pp. 393 and 394.

[36]     Rollo, G.R. No. 178158, pp. 265-269 (CA decision dated January 25, 2007).

[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]     Id., pp. 3-44.

[45]     Id., p 46.

[46]     G.R. No. 148456, September 15, 2006, 502 SCRA 67, 70.

[47]     G.R. No. 70443, September 15, 1986, 144 SCRA 144.

[48]     Id., pp 148-151.

[49]     Id., p. 149.

[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, June 18, 2009.

[54]     PNCC v. Dy, G.R. No. 156887, October 3, 2005, 472 SCRA 1, 8-9.

[55]     Revised Administrative Code of 1987.

[56]     TSN, January 13, 2009, pp. 269-278.

[57]     G.R. No. 87710 & G.R. No. 96087, March 31, 1992, 207 SCRA 659, 667-668.

[58]    G.R. No. L-19891, July 31, 1964, 11 SCRA 634.

[59]    Villanueva, C., Philippine Corporate Law, Rex Bookstore, Inc., p. 18 (2003).

[60]    I Campos and Lopez-Campos, The Corporation Code, Central Lawbook Publishing, Co., Inc., p. 2 (1990). 

[61]    G.R. No. 131715, December 8, 1999, 320 SCRA 188.

[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 Philippines, p. 293 (1997).

[69]     G.R. No. 1115444, July 6, 2004, 433 SCRA 424,

[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, January 31, 1978, 81 SCRA 314, 319.

[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, March 26, 1997, 270 SCRA 538, 550-551.

[80]     Underlines supplied for emphasis.

[81]    G.R. No. 168914, July 4, 2007, 526 SCRA 465, 476.

[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, November 28, 1989, 179 SCRA 630, 634-635.

[87]    Underlines supplied for emphasis.

[88]    G.R. No. 158261, December 18, 2006, 511 SCRA 123, 147.

[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]     Id., p. 396; citing Sturgill v. Lovell Lumber Co., 67 S.E. 2d 321, 323, 13 W. Va. 259.

[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] 31 December 2005). The report summarizes PNCC’s ongoing and projected projects, thus:

 

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, Bataan, and Subic, Olongapo City.  The rehabilitation and extension of the South Luzon Tollway has been entered into by the Company through a Joint Venture Agreement (JVA) and subsequently an amended JVA with Hopewell Crown Infrastructure, Inc. (HCII).  The objective of which is to refurbish the Alabang to Calamba, Laguna segment of the South Luzon Expressway and extend the same to Lucena City in Quezon Province.

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, February 18, 2970, 31 SCRA 413, 422-423.

[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 (July 3, 2002).

[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, December 3, 1974, 61 SCRA 284.

[113]   G.R. No. 127882, December 1, 2004, 445 SCRA 1, 91-93.

[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, November 20, 1991, 203 SCRA 767, 784.

[121]    Romero v. Senator Estrada, G.R. No. 174105, April 2, 2009.

[122]    Id.

[123]    G.R. No. 155001, January 21, 2004, 420 SCRA 575, 606.

[124]    Rollo, G.R. No. 178158, pp. 237-238.

[125]    Id., pp. 238-239.

[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.