Corporation CASES Sandiganbayan ruling on Marcos ill-gotten wealth case

Corporation CASES Based on the Syllabus of Fr. Agustin EN BANC G.R. No.
149802 January 20, 2006
ALFONSO T. YUCHENGCO AN Y REALTY COR!ORAT"ON, Petitioners, vs. THE HONORA#LE SAN "GAN#AYAN, FOURTH "$"S"ON, RE!U#L"C OF THE !H"L"!!"NES, !RES" ENT"AL CO%%"SS"ON ON GOO GO$ERN%ENT, ESTATE OF FER "NAN E. %ARCOS, "%EL A R. %ARCOS, !R"%E HOL "NGS, "NC., ESTATE OF RA%ON U. COJUANGCO, r&'r&(&n)&* +y "%EL A O. COJUANGCO, an* "%EL A O. COJUANGCO, Respondents. x -----------------------------------------x G.R. No. 1,0-20 January 20, 2006
ALFONSO T. YUCHENGCO AN Y REALTY COR!ORAT"ON, Petitioners, vs. RE!U#L"C OF THE !H"L"!!"NES, !RES" ENT"AL CO%%"SS"ON ON GOO GO$ERN%ENT, ESTATE OF FER "NAN E. %ARCOS, "%EL A R. %ARCOS, !R"%E HOL "NGS, "NC., ESTATE OF RA%ON U. COJUANGCO r&'r&(&n)&* +y "%EL A O COJUANGCO, an* "%EL A O. COJUANGCO, Respondents. x -----------------------------------------x G.R. No. 1,-4,9 January 20, 2006
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ALFONSO T. YUCHENCGO AN Y REALTY COR!ORAT"ON, Petitioners, vs. THE HONORA#LE SAN "GAN#AYAN, FOURTH "$"S"ON, RE!U#L"C OF THE !H"L"!!"NES, !RES" ENT"AL CO%%"SS"ON ON GOO GO$ERN%ENT, ESTATE OF FER "NAN E. %ARCOS, "%EL A R. %ARCOS, !R"%E HOL "NGS, "NC., ESTATE OF RA%ON U. COJUANGCO r&'r&(&n)&* +y "%EL A O. COJUANGCO, an* "%EL A O. COJUANGCO, Respondents. x -----------------------------------------x G.R. No. 1,0-6. January 20, 2006
RE!U#L"C OF THE !H"L"!!"NES, r&'r&(&n)&* +y )3& !RES" ENT"AL CO%%"SS"ON ON GOO GO$ERN%ENT, Petitioner, vs. ESTATE OF FER "NAN E. %ARCOS, "%EL A R. %ARCOS, "%EL A /"%EE0 R. %ARCOS8%ANOTOC, TO%AS %ANOTOC, "RENE R. %ARCOS8 ARANETA, GREGOR"O %A. ARANETA, """, FER "NAN R. %ARCOS, JR., "%EL A COJUANGCO, ESTATE OF RA%ON COJUANGCO /r&'r&(&n)&* +y )3& A*21n1()ra)r17, "%EL A COJUANGCO0, !R"%E HOL "NGS, "NC., ALFONSO T. YUCHENGCO, AN Y. REALTY COR!ORAT"ON,Respondents. EC!S!"N CAR!"O %ORALES, J.: #hese five $onsolidated petitions pray for the nullifi$ation of $ertain issuan$es of the Sandi%anbayan in Civil Case No. &&&', (Republi$ of the Philippines v. Estate of )erdinand E. *ar$os, et al.( #he $o+plaint in Civil Case No. &&&' ,or the $ase- .as filed before the Sandi%anbayan on /uly 10, 1123 by the Republi$ of the Philippines ,the Republi$throu%h the Presidential Co++ission on 4ood 4overn+ent ,PC44- a%ainst for+er President and *rs. *ar$os, their three $hildren, and so+e other individuals. #he $o+plaint .as later a+ended to i+plead additional defendants. #he $ase is for the re$overy of alle%ed ill-%otten .ealth of the *ar$oses, a+on% .hi$h are shares of sto$5 in the Philippine #ele$o++uni$ations !nvest+ent Corporation ,P#!C-6 30,331 shares in the na+e of Ra+on 7. Co8uan%$o, '1,9'9 shares in the na+e of !+elda ". Co8uan%$o, and 111,:19 shares in the na+e of Pri+e ;oldin%s !n$orporated ,P;!-. P#!C is the bi%%est sto$5holder of P< #, it o.nin% so+e '2= of the outstandin% shares in P< # at the ti+e Civil Case No. &&&' .as filed.1
RE!U#L"C OF THE !H"L"!!"NES, Petitioner, vs. HON. SAN "GAN#AYAN /FOURTH "$"S"ON0, ESTATE OF FER "NAN E. %ARCOS /r&'r&(&n)&* +y 1)( A*21n1()ra)or, )3& #ur&au o4 "n)&rna5 R&6&nu&0, "%EL A R. %ARCOS, !R"%E HOL "NGS, "NC., ESTATE OF RA%ON U. COJUANGCO /r&'r&(&n)&* +y 1)( A*21n1()ra)r17, "%EL A O. COJUANGCO0, "%EL A O. COJUANGCO, ALFONSO T. YUCHENGCO, an* Y REALTY COR!ORAT"ON, Respondents. x -----------------------------------------x G.R. No. 1,-20. January 20, 2006
Corporation CASES Based on the Syllabus of Fr. Agustin !n the $ourse of the pro$eedin%s in Civil Case No. &&&', the first three petitions assailin% interlo$utory orders of the Sandi%anbayan .ere filed before this Court. #hus, the petitions in G.R. No(. 149802 an* 1,0-20, filed by Alfonso >u$hen%$o and > Realty Corporation, $o+plainants-in-intervention in Civil Case No. &&&', assail via petition for $ertiorari orders and resolutions of the Sandi%anbayan denyin% their +otions to suspend trial pendin% dis$overy pro$eedin%s and to re-set trial dates ,.ith alternative prayer for a $han%e in the order of trial-, and de$larin% the+ as havin% .aived their ri%ht to present eviden$e. #he petition in G.R. No. 1,0-6., filed by the Republi$, assails via petition for $ertiorari the Sandi%anbayan "rders denyin% its Respe$tful *otion for Additional #i+e to Co+plete the Presentation of Eviden$e and dire$tin% it to sub+it its offer of eviden$e .ithin ?& days. urin% the penden$y of these first three petitions, the Sandi%anbayan $ontinued .ith the pro$eedin%s in Civil Case No. &&&', no restrainin% order en8oinin% the sa+e havin% been issued by this Court. #he Sandi%anbayan, still durin% the penden$y of the first three petitions, pro+ul%ated in Civil Case No. &&&' a Partial e$ision on *ay 0, '&&' the dispositive portion of .hi$h reads6 @;ERE)"RE, pre+ises $onsidered, the $o+plaint of plaintiff Republi$ of the Philippines on the P< # shares sub8e$t of separate trial is hereby !S*!SSE for la$5 of +erit. #he *otion for Su++ary /ud%+ent Afiled by !+elda Co8uan%$o, et alB is hereby 4RAN#E , and the Co+plaint-in-!ntervention Afiled by the >u$hen%$osB !S*!SSE . S" "R ERE . ,7nders$orin% supplied#he last t.o of the five petitions at bar, both for revie. on $ertiorari, .ere thereupon filed. #he petition in G.R. No. 1,-20. filed by the $o+plainants-in-intervention >u$hen%$os, and that in G.R. No. 1,-4,9 filed by the Republi$,both $hallen%e the Partial e$ision. #he in$idents that %ave rise to the filin% of the petitions are stated in the +inorityCs dissentin% opinion penned by /usti$e Can$io 4ar$ia .hi$h i++ediately follo.s this +a8ority opinion. #he dissentin% opinion substantially reiterates the draft that /usti$e 4ar$ia prepared .hi$h .as used by this Court as a .or5in% basis for its deliberations. !n issue in these petitions are6
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1. @hether petitioners in G.R. No(. 149802, 1,0-20 and 1,0-6. .ere denied due pro$ess .hen the Sandi%anbayan in effe$t dire$ted the+ to ter+inate the presentation of their respe$tive eviden$eD and '. @hether the Partial e$ision bein% assailed via petition for revie. in G.R. No(. 1,-20. an* 1,-4,9, $onfor+s to the eviden$e presented, the la. andEor settled 8urispruden$e. #here is no disa%ree+ent .ith respe$t to the disposition-dis+issal by the +inority of the first three petitions F the first havin% be$o+e +oot, and the se$ond and third for la$5 of %rave abuse of dis$retion on the part of the Sandi%anbayan. ' #here is also no disa%ree+ent .ith respe$t to the disposition-denial by the +inority of the fourth petition ,4.R. No. 19?'&3- in the absen$e of reversible error on the part of the Sandi%anbayan. !t is .ith respe$t to the disposition-denial by the +inority of the fifth petition ,4.R. No. 19?:91- insofar as it denied the prayer of the Republi$ for a 8ud%+ent orderin% the Estate of Ra+on 7. Co8uan%$o ,Co8uan%$o-, !+elda ". Co8uan%$o, P;!, their assi%ns, no+inees and a%ents to re$onvey to the Republi$ 111,:19 P#!C shares re%istered in the na+e of P;! that the +a8ority does not a%ree, in li%ht of the i++ediately follo.in% dis$ussions. #he Sandi%anbayan havin% held in its 3?-pa%e Partial e$ision ? that the Republi$ has failed to prove that the P< # shares sou%ht to be re$overed are ill-%otten, thus6 . . . the Republi$ has failed to provide su$h (proof of authenti$ity or reliability( of the do$u+ents offered by it in eviden$e. #hus al+ost all the do$u+ents offered by the Republi$ are photo$opies, and no effort .as underta5en . . . to sub+it the ori%inals of said do$u+ents, or to have the+ properly identified, or to other.ise 8ustify the ad+ission of +ere photo$opies. Not surprisin%ly, defendants . . . ob8e$ted to the ad+ission of the Republi$Cs do$u+entary exhibits, $itin% violation of the Best Eviden$e Rule ,Se$tion ?, Rule 1?& of the Revised Rules of Civil Pro$edure A(Rules(B, the Rules of Presentation of o$u+entary Eviden$e ,Se$tion '&, Rule 1?' of the Rules-. #he ;earsay Eviden$e Rule, and the rule as to PurposeEs of o$u+entary Eviden$e ,Se$tion ?:, Rule 1?' of the Rules-.(: ,7nders$orin% supplied-, a dis$ussion of the eviden$e presented in the $ase is in order. FACTUAL #AC9GROUN OF !H" AN "TS EAL"NGS :"TH !T"C
Corporation CASES Based on the Syllabus of Fr. Agustin P;! .as re%istered on "$tober 9, 1133 .ith the follo.in% five ,9- in$orporators6 Jo(& . Ca2'o(, Jr. /(on o4 Jo(& Yao Ca2'o(0, Ro5an*o Ga'u* /Ga'u*0, R&na)o L1r1o /L1r1o0, Ern&()o A+a5o( /A+a5o(0, an* G&r6a;1o Ga61o5a /Ga61o5a0 , .ith :&& shares ea$h, .ith a par value of P1&& per share. #he total a+ount of $apital sto$5 subs$ribed .as thus P'&&,&&&.&&, P9&,&&&.&& of .hi$h .as a$tually paid.9 !ts pla$e of business .as at 00 7nited Street, *andaluyon%, *etro *anila.0 #he five P;! in$orporators, in their $apa$ity as sto$5holders, ele$ted the+selves as dire$tors on "$tober 1&, 1133. "n even date, they ele$ted the follo.in% as offi$ers of the $orporation6 Rolando C. 4apud - President /ose . Ca+pos, /r. - Gi$e-President 4ervasio #. 4aviola - #reasurer )ran$is$o 4. e 4uH+an - Se$retary Rodolfo R. i+aano - Assistant Se$retary *ean.hile, 9:,?:1 shares in another $orporation, P#!C, .ere ($ontributed to andEor abandoned( by one of its sto$5holders, 4eneral #elephone and Ele$troni$s ,4#E-, an A+eri$an $orporation, in favor of P#!C. "n e$e+ber '&, 1133, the P#!C Board of ire$tors resolved to sell su$h 9:,?:1 shares to its sto$5holders in proportion to their holdin%s. 3 No sto$5holder, apart fro+ Co8uan%$o, P#!C President and +e+ber of its Board of ire$tors, expressed interest in pur$hasin% the shares.2 All the 9:,?:1 shares .ere then transferred to his na+e. Co8uan%$o and <uis #irso Rivilla ,Rivilla-, another sto$5holder of P#!C, to%ether .ith P;! President 4apud, for%ed an a%ree+ent dated /anuary '3, 1132 referrin% to the (various dis$ussions durin% .hi$h ACo8uan%$o and RivillaB offered to sell and AP;!B a%reed to pur$hase partially paid subs$riptions and $o++on shares of AP#!CB.( 1 #he a%ree+ent .hi$h indi$ated the basi$ ter+s and $onditions of the transa$tion states that the nu+ber of P#!C shares .hi$h Co8uan%$o and Rivilla .ere prepared to sell to P;! .as (111,41, ;o22on (3ar&( representin%46.12,0< of the subs$ribed and outstandin% shares of P#!C.( "n April '&, 1132, the P#!C Board of ire$tors %ranted Co8uan%$o and Rivilla authoriHation to transfer their P#!C shares to P;!. 1&
Co8uan%$o thereafter $eded to P;! 33,311 P#!C shares re%istered in his na+e via t.o separate deeds of assi%n+ent both dated *ay ', 1132, one for ::,&'? shares and the other for ??,010 shares.11 Rivilla li5e.ise $onveyed P#!C ??,010 shares re%istered in his na+e to P;! via a deed of assi%n+ent also dated *ay ', 1132. 1'#hus, a )o)a5 o4 111,41, !T"C (3ar&( .as )ran(4&rr&* )o !H" on %ay 2, 19.8. 4apud and /ose . Ca+pos, /r. later assi%ned all their shares in P;! ,:&& shares ea$hto Co8uan%$o and P#!C ire$tor "s$ar Afri$a ,Afri$a-, respe$tively, via t.o separate deeds of assi%n+ent dated )ebruary 12, 1121.1? "n *ay 1, 1121, Co8uan%$o and Afri$a .ere ele$ted dire$tors of P;!, repla$in% 4apud and /ose . Ca+pos, /r., .hile the other dire$tors F <irio, Abalos, and 4aviola F re+ained as su$h.1: "n even date, Co8uan%$o and Afri$a .ere ele$ted by the P;! Board of ire$tors as President and Gi$e-President, respe$tively, .hile de 4uH+an and 4aviola re+ained as Se$retary and #reasurer, respe$tively. 19 SubseIuently, by eed of Assi%n+ent 10 dated /une 112? ,the day is not indi$ated-, Afri$a transferred all his :&& P;! shares J ':& to Antonio Co8uan%$o and 10& to #rinidad Co8uan%$o >ulo. "n even date, the re+ainin% in$orporators on the board of dire$tors F <irio, Abalos, and 4aviola F ea$h exe$uted a deed of assi%n+ent transferrin% their P;! shares to +e+bers of the Co8uan%$o fa+ily. #hus <irio transferred ':& shares to Antonio Co8uan%$o and 10& to #rinidad C. >uloD 13 Abalos transferred ?'& shares to Ra+on ". Co8uan%$o, /r. and 2& to *i%uel ". Co8uan%$oD12 and 4aviola transferred ?'& shares to *a. Gi$toria ". Co8uan%$o >ulo and 2& also to Antonio Co8uan%$o.11 #ENEF"C"AL O:NERSH"! OF !H" Si%nifi$antly, respondents in 4.R. No. 19?:91, na+ely6 Estate of Ra+on Co8uan%$o, !+elda ". Co8uan%$o, P;!, and !+elda R. *ar$os all a%ree .ith petitioner Republi$ that P;! has an undis$losed benefi$ial o.ner, their only disa%ree+ent bein% .ho this o.ner is. #he Co8uan%$os and P;! in their Co++ent proffer that the benefi$ial o.ners are the Co8uan%$os, ar%uin% as follo.s6 x x x #he unsupported alle%ation that President *ar$os o.ned the disputed shares in P< #, P#!C and P;! 2ayperhaps explain the $ir$u+stan$es surroundin% P;!Cs in$orporation, .hy P#!CCs sto$5holders .ere disinterested in pur$hasin% P< #Cs shares in 1133, .hy P#!CCs sto$5holders .aived their ri%ht of first refusal in 1132, .hy there are no proper entries in P;!Cs Sto$5 and #ransfer Boo5, or .hy the sub8e$t shareholdin%s .ere not in$luded in Ra+on 7. Co8uan%$oCs Estate inventory. ;o.ever, the $onverse syllo%is+ is not true F the details of P;!Cs in$orporation, or the fa$t that P#!CCs sto$5holders .ere disinterested in pur$hasin% P< #Cs shares in 1133, or that
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Corporation CASES Based on the Syllabus of Fr. Agustin P#!CCs sto$5holders .aived their ri%ht of first refusal in 1132, or that there are no proper entries in P;!Cs Sto$5 and #ransfer Boo5, or that :&& P;! shares .ere not in$luded in Ra+on 7. Co8uan%$oCs Estate inventory do not ne$essarily establish that President *ar$os o.ned the sub8e$t shares in P;!, P#!C and P< #. T3&(& ;1r;u2()an;&( (3o= )3a) !H" 3a* an un*1(;5o(&* 'r1n;1'a5 an* +&n&41;1a5 o=n&r. Su+(&>u&n) &6&n)(, i.e. the assignment of shares in 1121 and 112?, reveal and ;on41r2 )3a) %r. Ra2on U. Co?uan@;o an* 31( 4a215y =&r& )3& 'r1n;1'a5 an* +&n&41;1a5 o=n&r( o4 !H" , and, $orollarily, the sub8e$t P;!, P#!C and P< # shares, not President *ar$os.'& ,E+phasis, itali$s and unders$orin% supplied!+elda *ar$os, on the other hand, $onsistent .ith the theory of petitioner
ta5in% advanta%e of their offi$e, authority, influen$e, $onne$tions or relationships, resultin% in their un8ust enri$h+ent, and $ausin% da+a%e and pre8udi$e to the )ilipino people and the Republi$ of the Philippines.(1 #he alle%ed ill-%otten assets in this $ase are shares of sto$5 in Pri+e ;oldin%s !n$. ,P;!- .hi$h, in turn, holds shares in Philippine #ele$o++uni$ations !nvest+ent Corporation ,P#!C-, a shareholder in the Philippine <on% istan$e #elephone Co+pany ,P< #-. #he Republi$Cs $ase is pre+ised on the theory that P;! is a (du++y $orporation,( not o.ned by private respondent Co8uan%$o fa+ily, but +erely held in benefi$ial trust for for+er President )erdinand E. *ar$os. ! have $losely revie.ed the re$ords and revisited both fa$tual and le%al bases of the Sandi%anbayan e$ision, and found that the Republi$ failed to prove its $ase by preponderan$e of eviden$e. #he Republi$Cs $ase is an$hored al+ost entirely upon the testi+onies of *essrs. /ose >. Ca+pos, Rolando 4apud and )ran$is$o de 4uH+an. #hey atte+pted to prove that P;! .as a $orporate vehi$le (or%aniHed for( *ar$os. As (benefi$ial o.ner( of P;!, *ar$os used Ra+on 7. Co8uan%$o as a (du++y( $ontrollin% P;! and its assets. #he sa+e .itnesses identified the modus operandi e+ployed by *ar$os to hide his ill%otten .ealth. 7nfortunately, the eviden$e for the Republi$ fails to sho. that P;! is *ar$osC (du++y $orporation.( @itness Ca+pos, in des$ribin% the modus operandi behind du++y $orporations (or%aniHed for( *ar$os, stated6
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SE!ARATE "SSENT"NG O!"N"ON SAN O$AL8GUT"ERREA, J.B ! 8oin *r. /usti$e Can$io C. 4ar$ia in his .ell-$rafted issent in 4.R. No. 19?:91 denyin% the Republi$Cs petition and affir+in% respondent Sandi%anbayanCs e$ision. !n $ivil suits for forfeiture before the Sandi%anbayan, li5e the instant $ase, the Republi$ +ust +eet the burden of proof and establish =1)3 a 'r&'on*&ran;& o4 &61*&n;& that the property in Iuestion F (. . . are assets and properties purportedly pertainin% to for+er President )erdinand E. *ar$os andEor his .ife *rs. !+elda Ro+ualdeH *ar$os, their $lose relatives, subordinates, business asso$iates, du++ies, a%ents or no+inees .hi$h had been or .ere a$Iuired by the+ dire$tly or indire$tly, throu%h or as a result of the i+proper or ille%al use of funds or properties o.ned by the 4overn+ent of the Philippines or any of its bran$hes, instru+entalities, enterprises, ban5s or finan$ial institutions, or by
(!n the or%aniHation, ad+inistration and +ana%e+ent of the above-na+ed $orporations, as it .as +y poli$y that .henever su$h a $orporation is or%aniHed for and on behalf of the intended benefi$iaries, " &7&;u)& an* " r&>u1r& a55 2y (a1* a((o;1a)&( )o &7&;u)& a &&* o4 Tru() or &&* o4 A((1@n2&n) *u5y (1@n&* 1n 4a6or o4 an unna2&* +&n&41;1ary an* )o *&516&r )3& or1@1na5 ;o'y )3&r&o4 )o )3& 4or2&r !r&(1*&n). !t is in fa$t +y poli$y and pro$edure that .e dis$lai+ $o+pletely any interest in any su$h business and +a5e it $lear to the for+er President that .e hold su$h interests on his behalf.( !n his affidavit, Ca+pos na+ed P;! as one of the $o+panies he or%aniHed for President *ar$os. >et, .hen as5ed if the modus operandi .as applied to P;! as it .as .ith the other *ar$os du++y $orporations, he va$illated,' thus6 (?. !n your S.orn State+ent, pa%e ', you stated that .ith respe$t to the $orporations you held in trust for President *ar$os, it .as your Kpoli$yC that .henever su$h a $orporation .as or%aniHed, you exe$uted, and you reIuired all your business asso$iates
Corporation CASES Based on the Syllabus of Fr. Agustin to exe$ute, a eed of #rust or eed of Assi%n+ent in favor of an Kunna+ed benefi$iary,C and delivered the ori%inals thereof to President *ar$os. xxx @as this Kpoli$yC )"<<"@E !N #;E CASE ") AP;!BL xxx ANS@ER6 KAll the $orporations ! or%aniHed F that .as the standard poli$y F that .e surrendered dire$t to President *ar$os.C( Ca+pos also testified that he had n&6&r ;o22un1;a)&* 1n any 2ann&r =3a)(o&6&r =1)3 !r&(1*&n) %ar;o(, 31( a55&@&* 'r1n;1'a5, nor =1)3 Ra2on Co?uan@;o r&@ar*1n@ %ar;o(C +&n&41;1a5 o=n&r(31' o4 (3ar&( o4 ()o;D 1n !H" or !T"C or !r12& Ho5*1n@(, "n;., thus6 (3. id you ever have any dis$ussions or $orresponden$es .ith President *ar$os re%ardin% his benefi$ial o.nership or the benefi$ial o.nership by any +e+ber of his fa+ily, dire$tly or indire$tly, of shares of sto$5 in Philippine <on% istan$e #elephone Co+pany ,P< #-, Philippine #ele$o++uni$ations !nvest+ent Corporation ,P#!C- or Pri+e ;oldin%s, !n$.L Ans.er6 No, %aCa2. xxx id you ever have any dis$ussions or $orresponden$es .ith Ra+on 7. Co8uan%$o re%ardin% the benefi$ial o.nership by President *ar$os or any +e+ber of his fa+ily, dire$tly or indire$tly, of shares of sto$5 in P< #, P#!C or Pri+e ;oldin%s, !n$.L Ans.er6 No, %aCa2.( Considerin% the fa$t that Ca+pos F by his o.n ad+ission F .as the or%aniHer of du++y $orporations for *ar$os, it is $ontrary to hu+an experien$e that he never had any dis$ussion .ith the for+er President about P;!, if indeed it .as su$h a du++y $orporation. "bviously, there .as nothin% to dis$uss .ith President *ar$os about P;! be$ause it .as not one of his du++y $orporations. !n fa$t, the Republi$Cs other .itness, Atty. )ran$is$o de 4uH+an, ad+itted that P;! did not +eet the des$ription of a *ar$os du++y $orporation, thus, to Iuote the very sa+e passa%e $ited in the issent6 (M6 :a( 1) )3& ()an*ar* o'&ra)1n@ 'ro;&*ur& 1n Jo(& Yao Ca2'o( 3o5*1n@( ;o2'an1&( )3a) )3& ()o;D ;&r)141;a)&( o4 )3& ()o;D3o5*&r( =ou5* +& &n*or(&* 1n +5anDE A6 Y&(, (1r.
M6 And .ho .ould hold $ustody or possession of thoseE ban5 endorsed sto$5 $ertifi$atesL A6 !n the $ase of +any of the $orporations ! thin5 in$ludin% Pri+e ;oldin%s, !n$. these are not fully paid shares and therefore, ! 5ne. that no sto$5 $ertifi$ates have been issued, sir. M6 So, ('&;141;a55y 1n )3& ;a(& o4 !r12& Ho5*1n@(, "n;. )3&r& =&r& no ()o;D ;&r)141;a)&( 1((u&* +&;au(& )3& (u+(;r1')1on( =&r& no) 4u55y 'a1*E A6 >es, sir. M6 o you Dno= 14 )3& ()o;D3o5*&r( o4 !r12& Ho5*1n@(, "n;., )31( 1( 'r1or )o 1981, 3a* &7&;u)&* &&* o4 A((1@n2&n) 1n +5anD 4or )3&1r (u+(;r1')1on )o !H" (3ar&(E A6 Y&(, (1r, )3& ()an*ar* o'&ra)1n@ 'ro;&*ur& 1n )3& ;o2'an1&( o4 %r. Ca2'o( 1( )3a) a55 )3& (u+(;r1+&r( =ou5* 3a6& &1)3&r a &&* o4 A((1@n2&n) (1@n&* or a &&* o4 Tru(), (1r. M6 And you are referrin% to these holdin% $o+panies that *r. Ca+pos, a nu+ber of holdin% $o+panies that *r. Ca+pos have $aused to be in$orporated, these are the $o+paniesL A6 >es, sir. M6 >ou said eed of #rust, .ould there be a desi%nated trusteeL A6 No, sir. M6 So, these are eeds of Assi%n+ent or .ould be left blan5L A6 >es, sir. M6 But the assi%nors or the trustees or %rantors .ould all si%n, .ould all exe$ute these eedsL A6 >es, sir. M6 @ho .ould have possession, you +entioned standard operatin% pro$edure or S"P, under the S"P .ho .ould hold the blan5 deedsL eeds of #rust, the benefi$iary of .hi$h
Nazareno
Corporation CASES Based on the Syllabus of Fr. Agustin A6 A $opy of .hi$h usually t.o ,'- $opies are +ade, sir. M6 #.o ,'- ori%inalsL A6 No. M6 Nerox $opiesL A6 No. "ne ori%inal and one Nerox $opy and the ori%inal .ill be in$luded in the re$ords, sir. M6 #he re$ords of that parti$ular $o+panyL A6 >es, sir, and the other one .e %ive it to the #reasurer. M6 "f that parti$ular $o+panyL A6 No, to *r. 4aviola, sir. M6 *r. 4aviola .as the #reasurer of Pri+e ;oldin%s, !n$. .asnCt heL A6 ! thin5 he is be$ause he is al.ays, .as the #reasurer of +any of the $o+panies of *r. Ca+pos, sir. M6 So, there is the S"P also, *R. 4erva$io 4aviola is the #reasurer of Pri+e ;oldin%s, !n$.L A6 >es, sir. xxx xxx xxx M6 No., .ho .ould hold the re$ords of these $o+panies .hi$h .ould in$lude those blan5 eeds of Assi%n+ent or eeds of #rustL A6 :&55, )3& a;)ua5 ;u()o*1an o4 )3a) =155 +& )3& L&@a5 &'ar)2&n) =3o 3a( a55 )3& 5&@a5 415&(, (1r. M6 :a( 1) no) or =ou5* you ;on(1*&r 1) r1(Dy )3a) )3& +5anD &&*( o4 A((1@n2&n) or +5anD &&*( o4 Tru() o4 a55 )3& (3ar&( 1n )31( ;o2'an1&( 3& r1@3) )3&r& 1n )3& r&;or*(, +& a2on@ )3& ;or'ora)& r&;or*(, )3a) (o2&+o*y ;ou5* )aD& )3&2 an* 'u) )3&1r na2&(E
A6 %ay+& )3&r& 1( (o2& r1(D )3&r& +u) you (&&, (1r, )3& '&o'5& 1n )3& L&@a5 &'ar)2&n) ar& =&55 )ru()&* +y a55 o4 u(. T3&y 3a6& +&&n =1)3 )3& ;o2'any 4or 2any y&ar( an* ;on(1*&r1n@ )3& ;o2'&)&n;& )3a) )3&y 3a6& &()a+51(3&* =1)3 u(, no+o*y =ou5* &6&n @&) )3o(& r&;or*( =1)3ou), 5&)C( (ay or*&r o4 %r. Ca2'o( or 2& or )3& Cor'ora)& S&;r&)ary, (1r. M6 And .ho .ere these trusted people of the <e%al epart+entL A6 #he la.yers, sir. M6 Could you %ive us the na+esL AD >es, t.o of the+ died and one of the+ retired. *r. 7rbano )ran$is$o .as the only survivor, sir. M6 Can ! have the na+es of those .ho diedL A6 Ed ;ala%ao, ! $annot re+e+ber the other one, sir. M6 #hese are the trusted la.yers of the <e%al epart+ent of 7N!<ABL A6 >es, sir. xxx M6 o you Dno= =3a) 3a''&n&* )o )3o(& +5anD *&&*( o4 A((1@n2&n) o4 &&*( o4 Tru() o4 !r12& Ho5*1n@(, "n;. )3a) =&r& &n)ru()&* =1)3 )3& )ru()&* 5a=y&r( o4 UN"LA#E A6 :3&n !r12& Ho5*1n@(, "n;.C( r&;or*( =&r& *&516&r&*, a55 )3o(& r&;or*(, a55 )3o(& 'a'&r( ar& =1)3 )3& r&;or*(, (1r. M6 So, you are referrin% to the 112' delivery to the representative of *r. Ra+on 7. Co8uan%$oL A6 Y&(, (1r, &7;&') )=o /20 &&*( o4 A((1@n2&n) =31;3 =&r& " )31nD 2a*& *1r&;)5y a4)&r=ar*( =3&n %r. Ga'u* an* %r. Jo(& Ca2'o(, Jr. 2a*& )3& *1r&;) a((1@n2&n)( )o '&r(on( a;)ua55y *&(1@na)&* 1n )3& &&*( o4 A((1@n2&n), (1r. M6 @ho .ere thoseL
Nazareno
Corporation CASES Based on the Syllabus of Fr. Agustin A6 #he shares of *r. 4apud .as ,sic- %iven to *r. Ra+on 7. Co8uan%$o, *r. Ca+pos, /r. ! $anCt re+e+ber to .ho+ he +ade the assi%n+ent, sir.( !f, a$$ordin% to the Republi$Cs o.n .itness, the shares of a *ar$os du++y $orporation are $overed by a eed of Assi%n+ent endorsed to an unna+ed benefi$iary, then Atty. e 4uH+anCs above ad+issions are fatal to the Republi$Cs $ase. ;is $ate%ori$al de$laration is that the blan5 eeds of Assi%n+ent and eeds of #rust $overin% P;! shares .ere not delivered to *ar$os, but to Ra+on 7. Co8uan%$o. No., delivery of the blan5 deeds of Assi%n+ent and eeds of #rust .as a $ru$ial ele+ent of the modus operandi. Considerin% that *ar$os .as not in possession of the eeds over P;! shares, he $ould not have $ontrolled or +ana%ed P;!. #o be sure, there .as no point or%aniHin% P;! as a du++y $orporation for *ar$os sin$e he $ould not perfor+ these fun$tions. @itness 4apud testified that he assi%ned his P;! shares to Ra+on 7. Co8uan%$o F not *ar$os, thus6 (C"NS7< A47!<7C;"6 "( 1) r&a55y )ru& )3a) you a((1@n&* your 400 (3ar&( F1n !r12& Ho5*1n@(G )o Ra2on U. Co?uan@;oE *R. 4AP7 6 Y&(. C"NS7< A47!<7C;"6 ;o. +u$h did you re$eive as $onsideration for assi%nin% your shares to hi+L *R. 4AP7 6 #he $onsideration for this assi%n+ent .as that upon +y assi%n+ent, first, +y fidu$iary responsibilities as no+inee .ere extin%uished, and se$ondly, ! had transferred and extin%uished any and all liabilities under the subs$ription payable. C"NS7< A47!<7C;"6 o you Dno= 14 Ra2on Co?uan@;o r&;&16&* )3& (a1* (3ar&( 4or 312(&54 or 4or any+o*y &5(&E *R. 4AP7 6 " *onC) Dno=.( !n fa$t, .hile he $ould have easily identified *ar$os as the benefi$ial o.ner of P;!, .itness 4apud F .ho su$$eeded Ca+pos as President of P;! F refused under oath to do so. !nstead6 (C"NS7< A47!<7C;"6 #he heirs of Ra+on 7. Co8uan%o, na+ely !+elda ". Co8uan%$o and her $hildrenO $lai+ that they o.n ei%hty ,2&- per$ent of the outstandin% $apital sto$5 of Pri+e ;oldin%, .hile the Estate of Ra+on 7. Co8uan%$o
alle%edly o.ns the re+ainin% t.enty ,'&- per$entL Muestion6 Based on your personal 5no.led%e, do you affir+ or deny the said alle%ationL *R. 4AP7 6 " *o no) Dno=. " ;an n&1)3&r a441r2 nor *&ny.( #he +a8ority of +y $ollea%ues hold that (4apudCs state+ent relatin% to subseIuent exe$ution of deeds of assi%n+ent to Co8uan%$o and his 5in does not detra$t fro+ the prior delivery of blan5 deeds to the for+er President, espe$ially so in this $ase .here, by 4apudCs o.n re$ountin%, he and his $o-in$orporators exe$uted the 1121 and 112? eeds of Assi%n+ent .ith the 5no.led%e and authoriHation of the sa+e person to .ho+ the earlier deeds .ere delivered F President *ar$os.( But the ponencia $onveniently sidesteps the reality that there is no eviden$e of su$h prior delivery to *ar$os. @itness de 4uH+an de$lared that the blan5 eeds of Assi%n+ent over P;! shares .ere pla$ed in the $ustody of the <e%al epart+ent, and thereafter delivered to Ra+on Co8uan%$o, to%ether .ith all the re$ords of P;!. #he +a8ority also hold that the alle%ed exe$ution by the in$orporators, as (no+inees( of *ar$os, of the eeds of Assi%n+entE eeds of #rust is $onsistent .ith 4apudCs state+ent that he re$eived virtually nothin% in return for P;! shares. But to +y +ind, this is falla$ious F a $on8e$ture +ade to fit an insi%nifi$ant fa$t. A strai%htfor.ard explanation is si+ply that .hen the P;! shares .ere assi%ned to Ra+on 7. Co8uan%$o F the true benefi$ial o.ner -4apudCs role as a no+inee be$a+e untenable. "bviously, a no+ineeCs role ends .hen the prin$ipalCs exer$ise of his ri%ht be%ins. Nor is it a$$urate to say that there .as an absen$e of $onsideration for the transfer of the P;! shares. 4apud hi+self ad+itted that the $onsideration for the assi%n+ent of his shares to Co8uan%$o .as the ter+ination of his fidu$iary responsibilities as no+inee and the extin%uish+ent of his liabilities under the subs$ription. #he ponencia does not explain .hy *ar$os allo.ed the exe$ution of the eeds of Assi%n+ent in favor of respondent Co8uan%$os. !f P;! .as indeed a du++y $orporation, then it .ould be $ontrary to hu+an experien$e for President *ar$os to deprive hi+self of the le%al +e$hanis+ to assert his alle%ed benefi$ial o.nership. !ndeed, if the transfer of P;! shares to the Co8uan%$o fa+ily .as .ith the (blessin%s( of President *ar$os, then it $an only +ean the he .as never interested in those shares F a fa$t $onsistent .ith Ca+posC state+ent that he (never dis$ussed( the P;! shares .ith *ar$os. #herefore, the plausible reason for this is that *ar$os never o.ned the shares in the first pla$e. #he realisti$ s$enario, therefore, is that these shares a$tually pertained to Ra+on 7. Co8uan%$o fro+ the be%innin% and the assi%n+ents to hi+ and +e+bers of his fa+ily
Nazareno
Corporation CASES Based on the Syllabus of Fr. Agustin +erely $onfir+ed .hat already existed in fa$t. !n other .ords, Co8uan%$o F not *ar$os F has been the benefi$ial o.ner of the shares from the start. #his explains .hy no blan5 eeds of #rust or Assi%n+ent .ere exe$uted and delivered by the sto$5holders of P;!, and the reason .hy they exe$uted and delivered eeds of Assi%n+ent spe$ifi$ally na+in% Ra+on 7. Co8uan%$o and the +e+bers of his fa+ily as the assi%nees of the P;! shares. #his also explains .hy P;!Cs $apitaliHation .as not in$reased despite its a$Iuisition of P#!C shares. An in$rease .as unne$essary be$ause Ra+on 7. Co8uan%$o a$tually did not part .ith the o.nership of the P#!C shares transferred to P;!, sin$e after all, he, not *ar$os, o.ned the P;!. #hat he is the o.ner thereof is sho.n by the follo.in% $ir$u+stan$es6 ,a- respondent Co8uan%$o too5 over as Chair+an and President of P;! after the assi%n+entD and ,b- the boo5s and re$ords of P;! .ere turned over to hi+, as testified to by de 4uH+an, the Republi$Cs .itness. Certainly, these assi%n+ents are effe$tive6 (@hen a for+al deed of assi%n+ent is exe$uted by the transferor in favor of a transferee, for the purpose of assi%nin% shares of sto$5, endorse+ent and delivery reIuire+ents stated in Se$tion 0? of the Corporation Code are dee+ed substantially $o+plied .ith. #his +ode of transfer $overs a situation .here no $ertifi$ate of sto$5 has been issued or .here the sto$5 $ertifi$ate is not in the possession of the transferorsto$5holder so that the shares of sto$5 +ay be transferred by +eans of a deed of assi%n+ent.(? Additionally, the Republi$ failed to prove that *ar$os had a subsistin% interest in P;!. #here had been no intervention on his part in the affairs of P< #, P#!C, or P;!. Nor did he issue instru$tions that (hu%ely and inexpli$ably benefited( these $o+panies indi$atin% he had any a$tual interest therein. Another sour$e of debate in this $ase has been the evidentiary standard appli$able to this and other ill-%otten .ealth $ases, %iven the Sandi%anbayanCs relian$e on Baseco vs. PCGG: and related 8urispruden$e. #he ponenciastresses that this Court never intended to lay do.n evidentiary standards in Baseco and, therefore, the Sandi%anbayanCs referen$e to su$h standards is nothin% +ore than its (inferen$e fro+ its readin% of the e$ision.( ! disa%ree. #o +y +ind, Baseco is appli$able. Baseco is a land+ar5 rulin% that $onfir+s the modus operandi des$ribed by the Republi$Cs .itnesses here. !n that $ase, (street $ertifi$ates( ,i.e. sto$5 $ertifi$ates endorsed in blan5- and eeds of Assi%n+ent to various $orporations in$ludin% Baseco, also assi%ned in blan5, .ere a+on% the do$u+ents found to have been in *ar$osC possession in *ala$aPan%. @e .ere $onvin$ed that based on su$h proof, *ar$os (a$tually o.ns .ell ni%h one hundred per$ent of its outstandin% sto$5.(9
But unli5e Baseco, here there is no su$h do$u+entary eviden$e. Neither P;! sto$5 $ertifi$ates nor P;! eeds of Assi%n+ent have turned up in *ar$osC hands. @itness de 4uH+an testified that assi%n+ents of P;! shares .ere delivered to Co8uan%$o, not *ar$os. o$u+entary eviden$e ,Exhibits (1( to (9(, for instan$e- $learly identify Ra+on 7. Co8uan%$o and the +e+bers of his fa+ily as the assi%nees of P;! shares F $ertainly re+ovin% any idea that these .ere assi%ned in blan5 to an (unna+ed benefi$iary.( Be$ause this is a $ivil forfeiture $ase, then the Republi$ +ust establish, by a (preponderan$e of eviden$e,( that the P;! shares .ere (ill-%otten .ealth.( !ts burden is explained by this Court, thus6 (EIuiponderan$e of eviden$e rule states6 @hen the s$ales shall stand upon an eIuipoise and there is nothin% in the eviden$e .hi$h shall in$line it to one side or the other, the $ourt .ill find for the defendant. 7nder said prin$iple, the plaintiff +ust rely on the stren%th of his eviden$e and not on the .ea5nesses of defendantCs $lai+. Even if the eviden$e of the plaintiff +ay be stron%er than that of the defendant, )3&r& 1( no 'r&'on*&ran;& o4 &61*&n;& on 31( (1*& 14 (u;3 &61*&n;& 1( 1n(u441;1&n) 1n 1)(&54 )o &()a+51(3 31( ;au(& o4 a;)1on.(01awphil.net Si+ilarly6 (@e are at a loss to deter+ine .hi$h position is $orre$t. 7nder the $ir$u+stan$es, .e are $onstrained to de$ide the issues under the rule of burden of proof. @here the eviden$e on an issue of fa$t is in eIuipoise or there is any doubt on .hi$h the eviden$e preponderates the party havin% the burden of proof falls upon that issue, that is to say, if the eviden$e tou$hin% on disputed fa$ts is eIually balan$ed, or if it does not produ$e a 8ust, rational belief of its existen$e, or it leaves the +ind in a state of perplexity the party holdin% the affir+ative as to su$h fa$t +ust fail. ,'? C./. 111'-(3 So +ust it be in this $ase. "n the assu+ption that the Republi$ has presented a persuasive $ase, it +ay not be said that the defendants do not have in their favor an eIually persuasive one. Even .ere .e to find the balan$e of eviden$e to be 8ust about at eIuipoise, the Republi$Cs instant $lai+ F as a +atter of la. F +ust fall. So+e +i%ht ar%ue that the evidentiary reIuire+ent in $ivil forfeiture $ases has an even hi%her standard, that is, proof beyond reasonable doubt. !n Cabal vs. Kapunan,2 .e ruled that pro$eedin%s for forfeiture of property in favor of the State ,under the Anti-
Nazareno
Corporation CASES Based on the Syllabus of Fr. Agustin 4raft <a.- is $ri+inal and penal in nature be$ause su$h a$tions are pri+arily to punish for violation of a duty or a publi$ .ron% and to deter others fro+ offendin% in the li5e +anner. )orfeiture of property is in substan$e a $ri+inal pro$eedin%, and su$h forfeiture has been held to parta5e of the nature of a penalty. :HEREFORE, ! vote to ENY the petition in 4. and AFF"R% respondent Sandi%anbayanCs Partial e$ision. ANGEL"NA Asso$iate Justi$e R. No. 19?:91 CONCURR"NG O!"N"ON CALLEJO, SR., J.B
Nazareno
SAN O$AL8GUT"ERREA
! $on$ur .ith the +a8ority opinion penned by *ada+ /usti$e Con$hita Carpio *orales and vote to %rant the petition in 4.R. No. 19?:91 to the extent that it prays for the re$onveyan$e to the Republi$ of the Philippines of 111,:19 shares of sto$5 of the Philippine #ele$o++uni$ation !nvest+ent Corp. ,P#!C- re%istered in the na+e of Pri+e ;oldin%s !n$. ,P;!-. P#!C is the bi%%est sto$5holder of Philippine <on% istan$e #elephone Co. ,P< #-, o.nin% '2= of its outstandin% shares or totalin% approxi+ately 0'9 +illion P< # shares valued at approxi+ately 1.0 billion pesos.
Foo)no)&(
1
)irst @hereas Clause, Exe$utive "rder No. ' ,1120-. eposition of 12 e$e+ber 1119, #rans$ript, Exhibit QQQ to QQQ-1-N. Id. at 2&3. No. <-39229, *ay '3, 1123, 19& SCRA 121. Ibid, at ''2.
#he shares of sto$5 of P#!C are re%istered in the follo.in% na+es6 111,:19 ,:0= of total shares- are held by P;!D 30,331 .ere held by Ra+on Co8uan%$o durin% his lifeti+eD and '1,9'9 are held by !+elda Co8uan%$o ,::= of total shares-. !n its A+ended Co+plaint for Re$onveyan$e, Reversion, A$$ountin%, Restitution and a+a%es, the Republi$ of the Philippines, throu%h the Presidential Co++ission on 4ood 4overn+ent ,PC44-, alle%es, inter alia! that these P#!C shares of sto$5 held by P;! and the Co8uan%$os belon% in truth and in fa$t to the *ar$oses. !n other .ords, P;! and the Co8uan%$os are +ere du++iesE$onduitsEno+inees of the *ar$oses .ho effe$tively o.ned P#!C and, ne$essarily, the disputed shares of sto$5 of P< #. Pursuant to its +andate, the PC44 filed the $o+plaint for reversion of the *ar$osesC ill-%otten .ealth in$ludin% these P< # shares of sto$5 to the Republi$. !n their respe$tive Ans.ers, P;! and the Co8uan%$os vehe+ently deny that the *ar$os fa+ily o.ned the disputed shares of sto$5. P;!, in parti$ular, asserted that the +e+bers of the fa+ily of the late Ra+on Co8uan%$o o.n allthe outstandin% shares in P;!. !+elda *ar$os, on the other hand, ad+itted in her Ans.er that they hold benefi$ial o.nership over these shares of sto$5. She +aintained that their .ealth .as la.fully a$Iuired. Alfonso >u$hen%$o and > Corp. filed a $o+plaint in intervention see5in% to re$over fro+ the Co8uan%$os their shares of sto$5 and assertin% o.nership thereof as a%ainst the Republi$. >u$hen%$o $lai+s that the *ar$os re%i+e $o+pelled hi+ into %ivin% up 0= of P#!C shares for+erly o.ned by 4re%orio Ro+ulo and <eonides Girata and deprived hi+ of exer$isin% his option to buy 4eneral #elephone and Ele$troni$s, !n$.Cs
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Sapu an! et al. vs. C", 4.R. No. 11201, "$tober 11, 111', '1: SCRA 3&1, 3&9-3&0.
3
Pilar #evelopment Corp. vs. I"C, No. <-3''2?, SCRA '19.

2
e$e+ber 1', 1120, 1:0
0 SCRA 1&91, $itin% Katigba$ vs. Solicitor General! et al. , 4.R. No. 11?'2, e$e+ber '', 1121.
#he <a.phil Pro8e$t - Arellano <a. )oundation
Corporation CASES Based on the Syllabus of Fr. Agustin ,4#ECs- '9= eIuity in P#!C. #his '9= eIuity in P#!C .as subseIuently a$Iuired by P;!. After protra$ted hearin%s, the Sandi%anbayan rendered the assailed Partial e$ision dated *ay 0, '&&' dis+issin% the Republi$Cs $o+plaint insofar as it see5s to re$over the P< # shares. #he petition in 4.R. No. 19?:91 is filed by the Republi$ assailin% the Partial e$ision. >u$hen%$o and > Corp. also assail the said Partial e$ision in their petition in 4.R. No. 19?'&3. #he petition in 4.R. No. 19&?03 is filed by the Republi$ assailin% the Sandi%anbayanCs "rder denyin% its Respe$tful *otion for Additional #i+e to Co+plete the Presentation of Eviden$e. #he petitions in 4.R. Nos. 1:12&' and 19&?'& .ere filed by >u$hen%$o and > Corp. assailin% the "rders of the Sandi%anbayan denyin% their +otions to suspend trial pendin% dis$overy pro$eedin%s and $an$ellation of hearin%s. #he Sandi%anbayan de$lared the+ to have .aived their ri%ht to present eviden$e. !n the Partial e$ision, the Sandi%anbayan ruled that the Republi$ failed to prove that the P< # shares are part of the ill-%otten .ealth of the *ar$oses. ConseIuently, it affir+ed the P;!Cs and the Co8uan%$oCs o.nership over the disputed shares. #he Sandi%anbayan held that (al+ost all the do$u+ents offered by the Republi$ are photo$opiesD( thus, the latter failed to provide (su$h proof of authenti$ity or reliability6( @e are therefore $onstrained to find that the Republi$Cs do$u+entary eviden$e, to the extent that they are +ere photo$opies, or are other.ise unidentified, unauthenti$ated, and $onstitutive of hearsay, +ay not be 8ustifiably relied upon by this Court, nor +ay their inte%rity be assu+ed, for their purpose of establishin% the fa$ts, or for supportin% the theory pursued by the Republi$. *ore parti$ularly, there is no $o+petent eviden$e to sho. that defendant )erdinand *ar$os had any hand in P#!C, or in the a$Iuisition by the defendants Co8uan%$o in their o.n na+es of any of their shares therein. #here is no $o+petent eviden$e to establish or even infer, the existen$e of a relationship of trust bet.een the defendants Co8uan%$o and defendant )erdinand *ar$os .ith P#!C, or to establish that presidential $on$essions, benefits, or other in$entives that $ould have i+proved the finan$ial and operational situation of P#!C, P< #, and P;!, .ere a$$orded said $o+panies by defendant )erdinand *ar$os. A$$ordin%ly, there is no $o+petent eviden$e to prove the Republi$Cs alle%ation that the P< # shares herein .ere ill%otten. "n the other hand, there is eviden$e for the defense .hi$h establishes the fa$t that all shares in P;! .ere vested upon defendant Ra+on 7. Co8uan%$o and his fa+ily. #hus
1&
do$u+ents .ere offered in eviden$e plainly na+in% and identifyin% Ra+on 7. Co8uan%$o and +e+bers of his fa+ily as assi%nees of P;! shares, and in the absen$e of blan5 eeds of Assi%n+ent andEor eeds of trust exe$uted by sto$5holders of P;!, said $orporation +ay not be said to have been or%aniHed for defendant *ar$osCs benefit. #o reiterate, it is the existen$e of su$h blan5 eeds of Assi%n+ent andEor eeds of #rust that distin%uishes $orporations asserted to be o.ned by defendant )erdinand *ar$os fro+ the others. *ore i+portantly, .ith the assi%n+ent of P;! shares spe$ifi$ally to defendant Ra+on 7. Co8uan%$o and +e+bers of his fa+ily, defendant )erdinand *ar$os lost the essential le%al instru+entation or +e$hanis+ upon .hi$h he $ould have $lai+ed the shares in o.nership or $o+pel the re$onveyan$e thereof to hi+. <i5e.ise, there is, by the eviden$e, suffi$ient basis to $on$lude that the defendants Co8uan%$o a$Iuired the shares in their na+es in P#!C as the a$tual and benefi$ial o.ners thereof. !n fa$t, based on plaintiffCs o.n offered do$u+ent, it is $lear and indubitable that defendants Co8uan%$o .ere ori%inal sto$5holders of P#!C, hen$e held so+e of their shares therein as early as 1103. #hese shares have been $lai+ed by the+ in a$tual and benefi$ial o.nership. @hen defendant Ra+on 7. Co8uan%$o died on *ay 0, 112:, the 30,331 P#!C shares re%istered in his na+e .ere de$lared as part of his estate.1 #he Sandi%anbayan, in fine, ruled that the Republi$ failed to prove by preponderant eviden$e that P#!C as .ell as the disputed shares in P< # belon%ed to the *ar$oses. #he +a8ority opinion further adds the follo.in% relevant fa$ts6 P;! .as in$orporated in 1133 by /ose . Ca+pos ,son of /ose >ao Ca+pos-, 4apud, Renato <irio, Ernesto Abalos and 4erva$io 4aviola, .ith :&& shares ea$h in their na+es. #hese in$orporators .ere also the offi$ers of P;!. *ean.hile, in 1133, 9:,?:1 shares of P#!C, ori%inally o.ned by 4#E, a 7S $orporation, .ere a$Iuired by Ra+on Co8uan%$o, .ho .as then P#!C President and +e+ber of its board of dire$tors. !n 1132, to%ether .ith <uis Revilla, another sto$5holder of P#!C, Ra+on Co8uan%$o $eded a total of 111,:19 P#!C shares to P;! throu%h several deeds of assi%n+ent. !n 1121, 4apud and /ose . Ca+pos later assi%ned all their shares in P;! ,:&& shares ea$h- to Co8uan%$o and "s$ar Afri$a, respe$tively, throu%h separate deeds of assi%n+ent.
Nazareno
Corporation CASES Based on the Syllabus of Fr. Agustin "n that sa+e year, Co8uan%$o and Afri$a be$a+e dire$tors of P;! and its President and Gi$e-President, respe$tively. !n 112?, Afri$a transferred his :&& P;! shares to Antonio Co8uan%$o and #rinidad Co8uan%$o >ulo. Also, <irio, Abalos and 4aviola, re+ainin% in$orporators of P;!, transferred their 1,'&& shares in P;! to +e+bers of the Co8uan%$o fa+ily throu%h deeds of assi%n+ent. !n effe$t, the Co8uan%$os a$Iuired full $ontrol of P;!. &'o(1)1on o4 Ca2'o( Ca+pos .as a *ar$os $rony. ;e $ate%ori$ally stated that he or%aniHed $orporations for and in behalf of Pres. *ar$os. ;e %ave a list of these $orporations .hi$h in$luded P;!. !t .as his poli$y that (.henever su$h $orporation is or%aniHed for and on behalf of the intended benefi$iaries, ! exe$ute and reIuire all +y said business asso$iates to exe$ute a eed of #rust or eed of Assi%n+ent duly si%ned in favor of unna+ed benefi$iary and to deliver the ori%inal $opy thereof to the for+er President.( !n 1131, he suffered a severe heart atta$5D thus, he transferred to 4apud the +ana%e+ent of these $orporations. @hen $ate%ori$ally as5ed durin% his deposition .hether the poli$y of exe$utin% deeds of trust or assi%n+ent in favor of an (unna+ed benefi$iary( and deliverin% the+ to then Pres. *ar$os .as follo.ed in the $ase of P;!, Ca+pos replied that (all the $orporations ! or%aniHed F that .as the standard poli$y F that .e surrendered dire$t to President *ar$os.( #hese state+ents .ere $orroborated by the testi+ony of de 4uH+an on $rossexa+ination to the effe$t that he re$eived instru$tions fro+ Ca+pos to or%aniHe P;! and thereafter, he ,Ca+pos- told hi+ that it .as 4apud .ho .ould be %ivin% instru$tions re%ardin% P;!. #he fore%oin% state+ents $learly sho. that P;! .as one of the $orporations or%aniHed by Ca+pos for and in behalf of Pres. *ar$os and that in all the $orporations he or%aniHed, it .as the standard poli$y that they surrendered Aa deed of trust or assi%n+entB dire$t to the latter. !n other .ords, P;! .as benefi$ially o.ned by Pres. *ar$os. #eposition of Gapud 4apud .as one of the in$orporators of P;! and a $lose asso$iate of Ca+pos. @hen as5ed .hether he 5ne. the benefi$ial o.ners of P;!, 4apud ans.ered that .hat he 5ne. .as that (the shares of sto$5 andEor assi%n+ents endorsed in blan5 .ere delivered to Pres. *ar$os by *r. Ca+pos.( Also, that the deed of assi%n+ent in blan5
11
$overin% his ,4apudCs- :&& shares in P;! .as delivered by Ca+pos to Pres. *ar$os. ;o.ever, he affir+ed that he subseIuently transferred these shares to Ra+on Co8uan%$o throu%h a deed of assi%n+ent. 4apudCs testi+ony $orroborates Ca+posC state+ent that P;! .as or%aniHed for and in behalf of Pres. *ar$os. #here is no $ontradi$tion bet.een 4apudCs $lai+s that blan5 deed of assi%n+ent $overin% his shares in P;! .as delivered to Pres. *ar$os and, later, he exe$uted a deed of assi%n+ent $overin% these sa+e shares in favor of Co8uan%$o. ! a%ree .ith the disIuisitions of the +a8ority that 4apudCs state+ent relatin% to the subseIuent exe$ution of deeds of assi%n+ent to Co8uan%$o and his 5in does not detra$t fro+ the prior delivery of blan5 deeds to the for+er President, espe$ially so in this $ase .here, by 4apudCs o.n re$ountin%, he and his $o-in$orporators exe$uted the 1121 and 112? deeds of assi%n+ent .ith the 5no.led%e and authoriHation of the sa+e person to .ho+ the earlier deeds .ere delivered F President *ar$os. $"CE CONSUL HERNAN EA So the aforesaid eeds of Assi%n+ents obviously .ere .ith the 5no.led%e and upon authoriHation and order of for+er President )erdinand E. *ar$os, is this $orre$tL *R. 4AP7 . Considerin% that Pri+e ;oldin%s, !n$. .as in$orporated upon the instru$tions of for+er President *ar$os, obviously all the no+inees .ould a$t only upon his authoriHation. #hatCs +y ans.er. As %leaned fro+ the deposition of 4apud, there is pra$ti$ally no $onsideration for the transfer by 4apud of his shares to Co8uan%$o6 C"NS7< A47!<7C;". ;o. +u$h did you re$eive as $onsideration for assi%nin% your shares to hi+L *R 4AP7 . #he $onsideration for the assi%n+ent .as that upon +y assi%n+ent, first, +y fidu$iary responsibilities as no+inee .ere extin%uished, and se$ondly, ! had transferred and extin%uished any and all liabilities under the subs$ription payable. &'o(1)1on o4 *& GuH2an e 4uH+an .as the Corporate Se$retary of P;!. !n his testi+ony, de 4uH+an identified the ori%inal in$orporators of P;!, na+ely, 4apud, <irio, 4aviola and Abalos, as $lose asso$iates of Ca+pos. #he other in$orporator, /ose . Ca+pos, /r., .as the latterCs son. #he offi$e of P;! .as .ithin the pre+ises of the 7nited <aboratories, another $orporation $ontrolled by Ca+pos.
Nazareno
Corporation CASES Based on the Syllabus of Fr. Agustin Based on the fore%oin%, there is nary any eviden$e on Co8uan%$oCs role in the or%aniHation of P;! to substantiate the thesis that the sa+e .as benefi$ially o.ned by Co8uan%$o. "n the other hand, the Republi$Cs thesis that President *ar$os is the benefi$ial o.ner of P;! (is dedu$ed fro+ established fa$ts .hi$h, .ei%hed by $o++on experien$e, en%ender the inferen$e as a very stron% probability.( Preponderan$e of eviden$e lies .ith the Republi$. "n the basis of the eviden$e on re$ord, ! a+ $onvin$ed that that President *ar$os o.ned P;! and all the in$orporators thereof a$ted under his dire$tion and that on$e this is a$5no.led%ed, the follo.in% $on$lusions inevitably follo.6 1. Co8uan%$o .as ele$ted President and too5 over the +ana%e+ent of P;! on 1121 .ith the $ooperation of the *ar$os no+inees .ho, it +ust be e+phasiHed, still held the +a8ority sto$5holdin% as of that dateD '. As the re+ainin% in$orporators on the Board divested their shares only in 112?, Co8uan%$o +ana%ed a *ar$os-$ontrolled $orporation for at least t.o yearsD ?. #he si+ultaneous divest+ent of shares by the three re+ainin% in$orporators on the Board to Co8uan%$oCs $lose relatives in 112? .ere .ith the 5no.led%e and authoriHation of their Prin$ipal F President *ar$os. #he preponderan$e of eviden$e lies .ith the Republi$ .ith respe$t to the 111,:19 shares of P#!C re%istered in the na+e of P;!. Su$h eviden$e $onsists of the state+ent of Ca+pos as $orroborated by the state+ents of 4apud and e 4uH+an. )or $larity, the o.nership of the outstandin% P#!C shares are divided as follo.s6 I 111,:19 shares are held by the Pri+e ;oldin%s !n$. ,P;!-D I 30,331 .ere held by Ra+on Co8uan%$o durin% his lifeti+e andD I '1,9'9 are held by !+elda Co8uan%$o. #hus, :0= of the total shares are held by P;! .hile the other ::= are held by the Co8uan%$os. ;o.ever, as sho.n earlier, the Co8uan%$o fa+ily eventually a$Iuired $ontrol of P;! .hen, in 112?, its in$orporators transferred their shares to the for+er. @ith respe$t to the in$orporation of P;!, the follo.in% alle%ations in the S.orn State+ent dated *ar$h '1, 1120 of Ca+pos are enli%htenin%6
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1. *y relationship .ith the then President )erdinand E. *ar$os dates ba$5 to the ti+e .hen he .as first ele$ted as Con%ress+an of the then Philippine Con%ress. #he relationship $ontinued .hen he .as then ele$ted President of the Republi$ of the Philippines. T3&r&a4)&r " a((1()&* 1n )3& or@an1Ha)1on an* a;>u1(1)1on o4 (o2& +u(1n&(( 6&n)ur&( 4or )3& 4or2&r !r&(1*&n). Fo55o=1n@ 31( *1r&;)16& " 1n()ru;)&* 2y 5a=y&r( an* r&>u&()&* )3& a((1()an;& o4 2y o)3&r +u(1n&(( a((o;1a)&( an* o441;&r( o4 )3& ;o2'any )o or@an1H&, &()a+51(3 an* 2ana@& )3&(& +u(1n&(( 6&n)ur&( 4or an* on +&3a54 o4 )3& !r&(1*&n)I 2. T3& ;o2'an1&( )3a) =& 3a6& or@an1H&* 4or an* on +&3a54 o4 4or2&r !r&(1*&n) %ar;o( ar& 51()&* 1n Ann&7 JAJ a))a;3&* 3&r&=1)3I ?. !n the or%aniHation, ad+inistration and +ana%e+ent of the abovena+ed $orporations, it .as +y 'o51;ythat .henever su$h a $orporation is or%aniHed for and on behalf of the intended benefi$iaries, ! exe$ute and ! reIuire all +y said business asso$iates to exe$ute a &&* o4 Tru() or &&* o4 A((1@n2&n) duly si%ned in favour of an unna+ed benefi$iary and to deliver the ori%inal $opy thereof to the for+er President. !t is in fa$t +y 'o51;y and pro$edure that .e dis$lai+ $o+pletely any interest in any of su$h businesses and +a5e it $lear to the for+er President that .e hold su$h interests on his behalfD :. !n the latter part of 1131 suffered a severe heart atta$5 and .as $onfined in the intensive $are unit of the *a5ati *edi$al Center. x x x 9. "$$asioned by the .ithdra.al of +y a$tive parti$ipation in the +ana%e+ent of the abovena+ed $orporations, %r. Ro5an*o C. Ga'u* .ho .as +y finan$ial $onsultant too5 over the dire$t responsibility of dire$tin%, +ana%in% and ad+inisterin% all the a$tivities of the said $orporations. ;o.ever, sin$e *r. 4apud did not have the ad+inistrative staff to effi$iently +ana%e the businesses, he reIuested +e that all the e+ployees and offi$ers involved in the or%aniHation should $ontinue to re+ain in the $o+panies even only in a no+inal $apa$ity $onsiderin% that they had previously dis$lai+ed any interest therein. !t is for this reason that Rolando C. 4apud and +y business asso$iates, na+ely, *ariano R. #an, Jo(& . Ca2'o(, Jr.,<u$iano E. SalaHar, Fran;1(;o G. & GuH2an, 4uiller+o C. 4astro$5, Ern&()o S. A+a5o(, G&r6a(1o T. Ga61o5a, Rodolfo i+aano, *anuel En%.a, <ourdes ). )lorentino, )lorentin, aniel M. #an and EliHabeth S. Ca+pos $ontinued to be na+ed sto$5holders in these $orporations althou%h they did not have any finan$ial interest therein. ,E+phasis and unders$orin% supplied-. Annex A referred to by Ca+pos in$luded P;!.
Nazareno
Corporation CASES Based on the Syllabus of Fr. Agustin !n his S.orn State+ent dated e$e+ber 12, 1119, Ca+pos further averred6 ?. !n your S.orn State+ent, pa%e ', you stated that .ith respe$t to the $orporations you held in trust for President *ar$os, it .as your (poli$y( that .henever su$h a $orporation .as or%aniHed, you exe$uted, and you reIuired all your business asso$iates to exe$ute, A eed of #rust or eed of Assi%n+ent in favor of an (unna+ed benefi$iary(, and delivered the ori%inals thereof to President *ar$os. x x x :a( )31( J'o51;yJ 4o55o=&* 1n )3& ;a(& o4 F!H"GE 7 7 7 ANS:ERB A55 )3& ;or'ora)1on( " or@an1H&* K )3a) =a( )3& ()an*ar* 'o51;y K )3a) =& (urr&n*&r&* *1r&;) )o !r&(1*&n) %ar;o(. ?.1 @as it also your poli$y to deliver to President *ar$os the sto$5 $ertifi$ates that you and your business asso$iates held in trust for hi+L ANS@ER6 >es, *aC+. ?.' !f sto$5 $ertifi$ates that you and your business asso$iates held in trust for President *ar$os .ere delivered to hi+ .as it also your poli$y to have the sto$5 $ertifi$ates indorsed in blan5L @ere the sto$5 $ertifi$ates in SP;!T indorsed in blan5L ANS@ER6 "4 there are $ertifi$ates issued in Pri+e ;oldin%s, it is the sa+e .ay it .as delivered to hi+. "4 there is su$h $ertifi$ate issued, it is indorsed in blan5 and 4o55o= )3& (a2& 'a))&rn 4or a55 )3& ;or'ora)1on( . @hatever .e have de$ided, .e deliver, si%n in blan5 and deliver to hi+. ?.?. id you and your business asso$iates deliver to President *ar$os the sto$5 $ertifi$ates issued by AP;!BL !f not, .hat did you and your business asso$iates do .ith the sto$5 $ertifi$atesL ANS@ER6 "4 Pri+e ;oldin%s $ertifi$ates have been issued, as ! said *aC+, it is delivered to the President. :. !n your S.orn State+ent, pa%e ', you also stated that (it is in fa$t +y poli$y and pro$edure that .e dis$lai+ $o+pletely any interest( in the business or%aniHed for President *ar$os and (+a5e it $lear to the for+er President that .e held su$h interests in his behalf( . . . . :a( )31( J'o51;y an* 'ro;&*ur&J 4o55o=&* 1n )3& ;a(& o4 F!H"GE 777 ANS:ERB T3& 'o51;y 1( 4o55o=&* +y &6&ry ;or'ora)1on )3a) =& or@an1H&* 4or )3& !r&(1*&n).
1?
:.1 id you and your business asso$iates also (dis$lai+ $o+pletely any interest( in ... ,P#!C- and (+a5e it $lear to the for+er President that .e hold su$h interests on his behalf(L ANS@ER6 *aC+, as ! said, ! donCt 5no. that Pri+e ;oldin%s has su$h holdin%s of the P#!C shares that you referred to. ,KE+phasis and unders$orin% suppliedT3& a*21((1on( o4 Ca2'o( ar& ?u*1;1a5I 3&n;&, ;on;5u(16& on 312 an* 31( (u;;&((or(81n81n)&r&(). T3& (a2& ;an +& ;on)ra*1;)&* on5y +y (3o=1n@ )3a) 1) =a( 2a*& )3rou@3 'a5'a+5& 21()aD& or )3a) no (u;3 a*21((1on =a( 2a*&. ' A55 'roo4( (u+21))&* +y 312 an* 31( (u;;&((or( ;on)rary )3&r&)o or 1n;on(1()&n) )3&r&=1)3 (3ou5* +& 1@nor&*, =3&)3&r o+?&;)1on 1( 1n)&r'o(&* +y 312 or no). ? T3& a*21((1on( o4 Ca2'o( ar& &6&n a*21((1on( a@a1n() 1n)&r&(), an*, 3&n;&, )ru()=or)3y. For )3&1r 'ar), )3& Co?uan@;o( 4a15&* )o a55&@&, 2u;3 5&(( (3o=, )3a) )3& a*21((1on( o4 Ca2'o( =&r& 2a*& )3rou@3 'a5'a+5& 21()aD& or )3a) no (u;3 a*21((1on =a( 2a*&. !t bears stressin% that under Exe$utive "rder No. 1:,: the Iuantu+ of eviden$e reIuired in $ases involvin% forfeiture pro$eedin%s is preponderan$e of eviden$e, i.e., (eviden$e .hi$h is of %reater .ei%ht, or +ore $onvin$in% than that .hi$h is offered in opposition to it. #he ter+ Kpreponderan$e of eviden$eC +eans the .ei%ht, $redit and value of the a%%re%ate eviden$e on either side and is usually $onsidered to be synony+ous .ith the ter+s K%reater .ei%ht of eviden$eC or K%reater .ei%ht of the $redible eviden$e.C Preponderan$e of the eviden$e +eans eviden$e .hi$h is offered in opposition thereto.(9 #he testi+ony of Ca+pos, as $orroborated by 4apud and de 4uH+an, that he or%aniHed P;! for and in behalf of Pres. *ar$os should be a$$orded %reat probative .ei%ht. #he in$orporators of the said $orporation .ere $lose asso$iates of Ca+pos and, in fa$t, 4apud ad+itted that he did not really o.n the shares re%istered in his na+e and that the deed of assi%n+ent $overin% these shares .as delivered by Ca+pos to Pres. *ar$os. Relian$e by the dissentin% opinion on the deeds of assi%n+ent purportedly exe$uted by the P;! in$orporators in favor of Co8uan%$o fa+ily +e+bers is +ispla$ed. #he fa$t that in these deeds of assi%n+ents the Co8uan%$os .ere spe$ifi$ally na+ed, does not $onstitute proof that the benefi$ial o.nership of P;! belon%ed to the Co8uan%$os althou%h they ,deeds of assi%n+ent .ith spe$ifi$ na+es- deviated fro+ the (standard pra$ti$e( +entioned by Ca+pos of deliverin% invariably blan5 deeds of assi%n+ent to Pres. *ar$os. #o reiterate, there is no eviden$e at all that there .as a $onsideration for the transfer by the in$orporators of their shares in favor of the Co8uan%$os. As 4apud stated in his deposition6
Nazareno
Corporation CASES Based on the Syllabus of Fr. Agustin C"NS7< A47!<7C;"6 ;o. +u$h did you re$eive as $onsideration for assi%nin% your shares to hi+ Areferrin% to Ra+on Co8uan%$oBL *R. 4AP7 6 #he $onsideration for the assi%n+ent .as that upon +y assi%n+ent, first, +y fidu$iary responsibilities as no+inee .ere extin%uished, and se$ondly, ! had transferred and extin%uished any and all liabilities under the subs$ription payable. #his la$5 of $onsideration renders the a$Iuisition by the Co8uan%$os of the said P;! shares of no 8uridi$al effe$t. !t also appears that the transfer by these in$orporators of their shares in favor of Co8uan%$o .as +ade .ith the 5no.led%e and $onsent of then Pres. *ar$os. As 4apud further averred in his deposition6 G!CE C"NS7< ;ERNAN EQ6 Can .e note your ob8e$tion and let *r. 4apud ans.er. So the aforesaid eeds of Assi%n+ents obviously .ill be .ith the 5no.led%e and upon authoriHation and order of for+er Pres. )erdinand E. *ar$os, is this $orre$tL *R. 4AP7 6 Considerin% that Pri+e ;oldin%s, !n$. .as in$orporated upon the instru$tions of for+er President *ar$os, obviously all the no+inees .ould a$t only upon his authoriHation. #hatCs +y ans.er. G!CE C"NS7< ;ERNAN EQ6 So the deposition ends. 4iven the la$5 of $onsideration and the authority %iven by Pres. *ar$os therefor, it .ould thus appear that the deeds of assi%n+ent exe$uted by the P;! in$orporators in favor of Ra+on Co8uan%$o and his fa+ily .ere for%ed for the purpose of $onveyin% +ana%e+ent and $ontrol of P;! to the latter .ho li5e.ise a$ted for and in behalf of Pres. *ar$os. "SSENT"NG O!"N"ON !n fine, the preponderan$e of eviden$e lies .ith the Republi$ insofar as the 111,:19 shares in P#!C held by P;! are $on$erned. A%ain, the eviden$e sho.s that P;! .as or%aniHed for and in behalf of Pres. *ar$os. #hus, the 111,:19 shares in P#!C, and ne$essarily the $orrespondin% shares in P< #, held by P;! +ust be re$onveyed to the Republi$ as part of the *ar$osesC ill-%otten .ealth. ACC"R !N4<>, ! vote to %rant the petition in 4.R. No. 19?:91 to the extent that it prays for the re$onveyan$e to the Republi$ of 111,:19 shares of sto$5 of P#!C re%istered in the na+e of P;!. GARC"A, J.: Foo)no)&(
1
1:
JR.
RO%EO Asso$iate /usti$e
J.
CALLEJO,
Nazareno
Assailed Partial e$ision, pp. ?'-??. Rule 1'1, Se$tion :, Revised Rules of Eviden$e. Cunanan v. "mparo! 2& Phil. ''1.
'
Exe$utive "rder No. 1: provides that ($ivil suits for restitution, reparation of da+a%es, forfeiture pro$eedin%s provided for under Republi$ A$t No. 1?31, or any other $ivil a$tion under the Civil Code or other existin% la.s, in $onne$tion .ith ,said E" Nos. 1 and '- +ay be filed separately fro+ and pro$eed independently of any $ri+inal pro$eedin%s and +ay be proved by preponderan$e of eviden$e.
9
%epublic v. Court "ppeals, '&: SCRA 10&.
Before the Court are these five ,9- separate petitions to nullify and set aside $ertain issuan$es of the Sandi%anbayan, )ourth ivision, in C1615 Ca(& No. 0002, a $o+plaint for re$onveyan$e, reversion, a$$ountin%, restitution and da+a%es thereat instituted by the R&'u+51; o4 )3& !3151''1n&( /R&'u+51; -, throu%h the!r&(1*&n)1a5 Co221((1on on Goo* Go6&rn2&n) /!CGG0. Per its en banc Resolution of *ar$h :, '&&?,1 the Court ordered the $onsolidation of these five ,9- petitions, e+anatin%, as they all do, fro+ the sa+e $ase.
Corporation CASES Based on the Syllabus of Fr. Agustin ". THE UN ERLY"NG CASEB C"$"L CASE NO. 0002 C1615 Ca(& No. 0002, one of several suits involvin% ill-%otten or unexplained .ealth that the Republic, throu%h thePCGG, initiated .ith the Sandi%anbayan pursuant to Exe$utive "rder ,E"- Nos. 1 and ' in relation to E" No. 1:, all series of 1120, ' see5s the re$overy of ill-%otten .ealth fro+ for+er !r&(1*&n) F&r*1nan* E. %ar;o( ,Pres. Marcos, hereafter-, later substituted by his Estate, his .ife, their three ,?- $hildren ,Marcos family, or Marcoses, $olle$tively- and their alle%ed $ronies. A+on% the properties identified as parta5in% the nature of ( ill gotten wealth(, as the ter+ is $ontextually understood, are shares of sto$5 in !3151''1n& T&5&;o22un1;a)1on( "n6&()2&n) Cor'ora)1on ,PTIC! for short- .hi$h, in turn, $overed over t.o ,'- +illion shares in !3151''1n& Lon@ 1()an;& T&5&'3on& Co2'any, "n;. ,PLDT-. #he Republic see5s to re$over the $overed P< # shares fro+"2&5*a O. Co?uan@;o, the E()a)& o4 Ra2on U. Co?uan@;o, represented by its ad+inistratrix !+elda ". Co8uan%$o ,$olle$tively, ( Cojuangcos(-, and !r12& Ho5*1n@(, "n;. ,PHI-, as part of the alle%ed (ill gotten wealth( of the *ar$os fa+ily. SubseIuently, petitioner A54on(o T. Yu;3&n@;o , uc!engco-, 8oined later by his ally, Y R&a5)y Cor'ora)1on , Real"y-, intervened, $lai+in% they are the ri%htful o.ners of P;!Cs :0= shareholdin% in P#!C. #hey .ould assert that their $lai+ for re$overy of the property alle%edly un8ustly ta5en fro+ the+ is superior to the forfeiture $lai+ of the Republi$. A$tin% on a )ebruary 1110 +otion of the Cojuangcos, the Sandi%anbayan .ould later resolve to sever the P< #-share-o.nership issue fro+ the other $lai+s involved in Civil Case No. &&&', and allo.ed a separate trial .ith respe$t only to the issue related to the P< # shares. !n the $ourse of the separate trial, the Sandi%anbayan ,)ourth ivision- issued $ertain orders and resolutions, infra, that are no. sub8e$t to $hallen%e in either one of the herein five ,9- $onsolidated petitions. #hree ,?- of these petitions, i.e., G.R. No. 1,0-6., G.R. No. 149802 and G. R. No. 1,0-20, are for certiorariunder Rule 09 of the Rules of Court, the first filed by Republic and the re+ainin% t.o, by Yu;3&n@;oLY R&a5)y /$olle$tively, the uc!engcos-. #hese re$ourses si+ilarly assail as havin% been issued in %rave abuse of dis$retion or in ex$ess or la$5 of 8urisdi$tion, ergo null and void, $ertain resolutions and orders issued by the %raft $ourt in Civil Case &&&'. As ea$h petitioner in these three ,?- petitions alle%ed, the resolutions and orders adverted to effe$tively deny the+ due pro$ess of la.. A$$ordin%ly, they pray that .rits of $ertiorari issue .ith the end in vie. of en8oinin% respondent Sandi%anbayan to allo. the+ additional trial dates for purposes of presentin% their respe$tive eviden$e in the separate trial belo..
19
"n the other hand, G.R. No. 1,-4,9 and G.R. No. 1,-20., filed by Republic and the uc!engcos! respe$tively, under Rule :9 of the Rules of Court, ea$h see5s a revie. and the settin% aside, alle%edly for not bein% in a$$ord .ith the eviden$e addu$ed belo., and for bein% $ontrary to la. and settled 8urispruden$e, the Sandi%anbayanCs!ar)1a5 &;1(1on? on the P< # issue dated A'r15 2,, 2002, but pro+ul%ated on %ay 6, 2002 ,si+ply !ar)1a5 &;1(1on, hereafter-. #he Partial e$ision, .hi$h .as rendered after the three ,?- afore+entioned petitions forcertiorari had been filed, disposes, as follo.s6 @;ERE)"RE, pre+ises $onsidered, the $o+plaint of the plaintiff Republi$ of the Philippines on the P< # shares sub8e$t of separate trial is hereby !S*!SSE for la$5 of +erit. #he *otion for Su++ary /ud%+ent is hereby 4RAN#E , and the Co+plaint-in!ntervention !S*!SSE . S" "R ERE . #he ar%u+ents and $ounter-ar%u+ents of the herein four ,:- +ain sets of liti%ants ,the Republic, the Marcoses,the Cojuangcos and the uc!engcos- on a +enu of issues presently pressed in pleadin%s after pleadin%s are as nu+erous as they are extensive. @hat is +ore, the parties, alon% the .ay, sIueeHed the rules of pro$edure to the hilt, thus addin% in$idental +atters to an already $o+plex pro$eedin%s. So as not to be sidetra$5ed, or, .orse still, .aylaid thereby and thus ne%le$t, if not alto%ether +iss, the proverbial tree for the forest, the Court shall li+it itself and shall a$$ord parti$ular fo$us only to .hat it per$eives to be +aterial deter+inative fa$ts and +atters .hi$h led to the filin% of the instant petitions. #o.ards the sa+e end, the Court shall $ondense the several issues raised into t.o ,'- $ore Iuestions for resolution! to .it& 1. .hether or not petitioners in G.R. No(. 149802, 1,0-20 and 1,0-6. .ere denied due pro$ess .hen the respondent $ourt in effe$t dire$ted the+ to ter+inate the presentation of their respe$tive eviden$eD and '. .hether or not the $hallen%ed Partial e$ision, sub8e$t of the petitions for revie. in G.R. No(. 1,-4,9 an* 1,-20., $onfor+s to the eviden$e presented, the la. andEor settled 8urispruden$e. "". THE !ART"ES M THE"R !R"NC"!AL CLA"% 1n C"$"L CASE No. 0002 A. Pe"i"ioner Republic
Nazareno
Corporation CASES Based on the Syllabus of Fr. Agustin #he ori%inal $o+plaint in Civil Case No. &&&', filed on /uly 10, 1123 by the Republic, thru the PCGG, na+ed, as defendants, Pres. *ar$os and !+elda R. *ar$os , Mrs. Marcos, hereafter-, their three ,?- $hildren, and seven ,3- other individuals. As the $ase pro%ressed, the Republic su$$essively a+ended its ori%inal $o+plaint to in$lude other alle%ed ille%ally a$Iuired assets andEor i+plead other parties. A+on% the properties sou%ht to be re$overed as part of the alle%ed ill-%otten .ealth of the *ar$os fa+ily are, as indi$ated earlier, shares of sto$5 in P#!C and P< #. #he Republic#s #hird A+ended Co+plaint ,(A+ended Co+plaint(-, dated April '&, 111&,: i+pleaded, as additional party-defendants, the herein respondents Cojuangcos$PHI, and, as to the+, the A+ended Co+plaint pertinently avers6 1. #his is a $ivil a$tion a%ainst efendants )erdinand E. *ar$os, !+elda R. *ar$os, . . . !+elda Co8uan%$o, the Estate of Ra+on Co8uan%$o, and Pri+e ;oldin%s, !n$. to re$over fro+ the+ ill-%otten .ealth $onsistin% of funds and other property .hi$h they . . . had a$Iuired and a$$u+ulated in fla%rant brea$h of trust and of their fidu$iary obli%ations as publi$ offi$ers, . . . thus resultin% in their un8ust enri$h+ent durin% efendant )erdinand E. *ar$osC '& years of rule . . . . '. #he .ron%s $o++itted by efendants, a$tin% sin%ly or $olle$tively and in unla.ful $on$ert .ith one another. . . in$lude the +isappropriation and theft of publi$ funds, plunder of the nationCs .ealth, extortion, bla$5+ail, bribery, e+beHHle+ent and other a$ts of $orruption, betrayal and publi$ trust . . . . xxx xxx xxx 13. A+on% the assets a$Iuired by efendants in the +anner abovedes$ribed . . . are funds and other property listed in Annex (A( hereof and +ade an inte%ral part of this Co+plaint, Ain$ludin%, but not li+ited to the follo.in%B6 xxx xxx xxx $. Sto$5s Shares of sto$5s in nu+erous $orporations . . ., in$ludin% about '.: +illion shares of . . . AP< #B valued, at $urrent +ar5et pri$es, approxi+ately P1.0 Billion pesos and $overed by shares of sto$5 in . . . ,P#!C- re%istered in the na+es of Pri+e ;oldin%s !n$. ,P;!-, Ra+on Co8uan%$o and the latterCs asso$iates.
10
urin% his lifeti+e, Ra+on 7. Co8uan%$o held 30,331 shares of sto$5 in P#!C, .hile !+elda ". Co8uan%$o held '1,9'9 shares of sto$5 in her o.n na+e, the benefi$ial and a$tual o.nership of .hi$h is that of defendants )erdinand *ar$os and his fa+ily. efendant Pri+e ;oldin%s, !n$. ,P;!- held 111,:19 shares .hi$h in truth and in fa$t belon% to defendants )erdinand E. *ar$os and his fa+ily. #his sto$5holdin% of defendants *ar$os and his fa+ily in P#!C, throu%h Ra+on 7. Co8uan%$o and P;!, $onstitutes the +a8ority sto$5holdin% in P#!C. P#!C, in turn, is the bi%%est sto$5holder of P< # shares. !n the +anner above stated, defendants *ar$os and his fa+ily effe$tively $ontrolled P< #. ,7nders$orin% in the "ri%inalD @ords in bra$5et, addedAs +ay thus be %athered fro+ the above aver+ents, petitioner Republic% as plaintiff a 'uo, see5s to re$over fro+ respondents Cojuangcos$PHI! the follo.in% P#!C shares of sto$5, vi(6 ,1- the 111,:19 shares in P;!Cs na+eD ,'- the 30,331 and the '1,9'9 shares in the na+e of Ra+on 7. Co8uan%$o and !+elda ". Co8uan%$o, respe$tively.#he desired re$overy is predi$ated on the postulate that the three, as defendants a 'uo, are +ere du++iesEno+ineesE$onduits of the *ar$os fa+ily in the $ontrol of P< #. #. Respon&en"s Cojuangcos an& PHI !n its Ans.er dated /une 9, 111&, 9 to the Republi$Cs A+ended Co+plaint, PHI belied alle%ations that the *ar$os fa+ily is the benefi$ial o.ner of its 111,:19 P#!C shares, statin% in this re%ards, as follo.s6 11. Ans.erin% defendant P;! spe$ifi$ally denies the alle%ations $ontained in para%raphs '& ,a- and '& ,b- of plaintiffCs Co+plaint. !nsofar as the fa$ts alle%ed in para%raph '& ,$- thereof, defendant P;! respe$tfully alle%es that6 ,a- efendant P;! is the re%istered sto$5holder of 111,:19 shares in . . . ,P#!C-D that (durin% his lifeti+e( Ra+on 7. Co8uan%$o held 30,331 shares of sto$5 in P#!CD that !+elda ". Co8uan%$o held '1,9'9 shares of sto$5 (in her na+e(, but ans.erin% defendant spe$ifi$ally denies that these shares re%istered in said na+es are o.ned, a$tually andEor benefi$ially, by )erdinand E. *ar$os and his fa+ily. xxx xxx xxx #he truth of the +atter is that the +e+bers of the fa+ily of the late Ra+on 7. Co8uan%$o o.n all the outstandin% shares in P;! in full le%al and benefi$ial o.nership .... Respondent Cojuangcos) Ans.er dated /une 1, 111&,0 to the sa+e A+ended Co+plaint $ontains virtually the sa+e +aterial aver+ents as those in P;!Cs ans.er.
Nazareno
Corporation CASES Based on the Syllabus of Fr. Agustin And li5e P;!, the Cojuangcos also pray for the dis+issal, as to the+, of the A+ended Co+plaint. C. Respon&en" Imel&a R. Marcos As its +ost essential, %r(. %ar;o(C Ans.er .ith Counter$lai+ dated Nove+ber '', 111?,3 $onfir+ed theRepublic#s alle%ation about the *ar$osesC o.nership over the P< # shares in $ontroversy, but .ith the Iualifi$ation that these shares .ere le%iti+ate a$Iuisitions. Gery +u$h later, ho.ever, *rs. *ar$os, by +otion dated /anuary '', 1111, sou%ht leave to a+end ans.er for the purpose of pursuin% a $ross$lai+ a%ainst Co8uan%$osEP;!. #he respondent $ourt, ho.ever, denied her +otion, holdin% that the proferred A+ended Ans.er .ith Cross-Clai+ thus atta$hed to her +otion varied her theory of defense, in that, .hile she asserted in her ori%inal ans.er that the late Pres. *ar$os had la.fully a$Iuired and thus o.ned the P< # shares in Iuestion, she, in the intended a+ended ans.er .ith $ross-$lai+, traversed the alle%ations of the Republi$Cs A+ended Co+plaint by pleadin% la$5 of 5no.led%e of fa$ts suffi$ient to for+ a belief as to the truth thereof. Nonetheless, the respondent $ourt allo.ed *rs. *ar$os to file a pleadin% to $ontain her $ross-$lai+ a%ainst Co8uan%$osEP;!. A$$ordin%ly, *rs. *ar$os filed a Cross-Clai+ dated April '1, 1111 2 a%ainst Co8uan%$osEP;!, alle%in%, inter alia, the follo.in%6 '. #he . . . ,P< #-, . . . is one of the assets listed in Annex (A( of the #hird A+ended Co+plaint Aof the Republi$B . . . . ?. #he Philippine #ele$o++uni$ations !nvest+ent Corp. ,P#!C- .as or%aniHed . . . .ith the pri+ary purpose to ( . . . other.ise deal in all se$urities, shares of sto$5s and bonds of the AP< #B.( x x x . P#!C is the sin%le bi%%est $orporate sto$5holder of P< #. ?.1. P#!CCs $apital sto$5 .ere ori%inally subs$ribed by . . ., a+on% others6 defendants Ra+on Co8uan%$o and !+elda Co8uan%$o both of .ho+ held shares of sto$5 in their respe$tive na+es as trustees . . .for and in behalf of the late President )erdinand E. *ar$os, . . . and fa+ily . . . . All shares of sto$5 in P#!C a$Iuired and re%istered in their respe$tive na+es subseIuent to the in$orporation .ere li5e.ise a$Iuired and held for and behalf of said prin$ipals. ?.'. "n 3 e$e+ber 1103, defendant Ra+on Co8uan%$o and *r. <uis #. Rivilla,. . . exe$uted an a%ree+ent .hereby . . . ,03,?1'- shares of P#!C, .hi$h .ere held in their na+es .ere transferred, . . . unto defendant !+elda R. *ar$os in $onsideration of the extin%uish+ent of AtheirB loan of . . .,P?,:&&,&&&.&&- . . . . xxx xxx xxx
13
Nazareno
?.:. *rs. *ar$os subseIuently authoriHed *essrs. Co8uan%$o and Rivilla, their assi%ns, . . . to hold said 03,?1' P#!C shares for and in her behalf on the understandin%, a%ree+ent and re$o%nition of her true, la.ful and benefi$ial o.nership thereof. :. So+eti+e in 1133, defendants Ra+on Co8uan%$o and !+elda Co8uan%$o li5e.ise a$Iuired for and in behalf of *r. and *rs. *ar$os and their fa+ily approxi+ately . . . ,9:,?:1- fully paid shares of sto$5 in P#!C fro+ 4eneral #elephone and Ele$troni$s, !n$. ,4#E-, an A+eri$an $o+pany. A%ain, this share a$Iuisition .as on the understandin%, a%ree+ent and re$o%nition that defendant Co8uan%$os .ere +ere trusteesEno+inees of *r. and *rs. *ar$os and their fa+ily. xxx xxx xxx 9. All the shares of sto$5 of P#!C re%istered in the na+e of defendants Ra+on Co8uan%$o, !+elda Co8uan%$o, their assi%ns, no+inees and representatives, . . ., .ere never a$Iuired and held in their o.n ri%ht, . . . sin$e they have al.ays been held by the+ as trusteesEno+inees for and in behalf of *r. and *rs. *ar$os and fa+ily F the true, la.ful and benefi$ial o.ners thereof. xxx xxx xxx 0. "n &9 "$tober 1133, . . .. ,P;!- .as or%aniHed . . . as an invest+ent and holdin% $o+pany. P;!Cs prin$ipal asset at present is the . . . ,111,:19- P#!C shares of sto$5 re%istered and held in P#!C. 0.1 P;! .as in$orporated to serve as the holdin% $o+pany of all the P#!C shares o.ned by *r. and *rs. *ar$os and fa+ily, in addition to those bein% held by trusteesEno+inees . . . . )or this purpose, P;! .as or%aniHed .ith the follo.in% as in$orporators A/ose . Ca+pos, Rolando C. 4apud, Renato E. <irio, 4ervaso #. 4aviola and Ernesto S. Abalos, .ith :&& shares ea$hB, all of .ho+ are the trusteesEno+inees of the *ar$oses6 xxx xxx xxx 0.? !n 1132, . . . ,111,:19- shares of sto$5 in P#!C .ere transferred and re%istered in the na+e of P;!. #hese P#!C shares $a+e fro+ various sour$es, in$ludin% fro+ re%istered sto$5holders of P#!C. xxx xxx xxx ,@ords in bra$5et added.-
Corporation CASES Based on the Syllabus of Fr. Agustin "n the basis of the fore%oin% aver+ents, *rs. *ar$os, for her o.n behalf and that of her fa+ily, prayed that 8ud%+ent be rendered orderin% the Co8uan%$osEP;!, their assi%nees and a%ents, to transfer in her favor ,i- the aforesaid shares of sto$5 in P#!C bein% held by the+ as trusteesEno+inees of the *ar$os fa+ily, and ,ii- all the t.o thousand ,',&&&- shares of sto$5 in P;! bein% held by the+ as su$h trusteesEno+inees, to%ether .ith all the fruits a$$ruin% fro+ the ti+e that they .ere $onstituted or a$ted as su$h trusteesEno+inees. !n fine, *rs. *ar$os +aintained that all P#!C shares re%istered in the na+es of Co8uan%$osEP;! as .ell as the P;! shares .hi$h are re%istered in the na+e of its in$orporators have al.ays been held by the+ as trustees andEor no+inees of the *ar$os spouses and their fa+ily .ho are the la.ful and benefi$ial o.ners thereof. She assu+ed the sa+e posture in her Pre-trial Brief dated April ':, 1111 1 as .ell in her Ans.er to petitioner Republi$Cs ReIuest for Ad+ission.1& *ia a Resolution pro+ul%ated on )ebruary '', '&&&, 11 the respondent $ourt dis+issed *rs. *ar$osC Cross-$lai+ (for being barred and for failure to state a cause of action .( ;er +otion for re$onsideration .as denied in another Resolution of *ay '?, '&&&.1' . !&)1)1on&r uc!engcos Petitioner uc!engco filed his Co+plaint-in-!ntervention and his A+ended Co+plaint-in-!ntervention in Au%ust 1122 and *ay 111?, respe$tively, both of .hi$h the Sandi%anbayan ,#hird ivision- ad+itted. ;e asserted o.nership over a $ertain nu+ber of P#!C shares and ne$essarily a portion of the disputed P< # shares. Real"ylater 8oined >u$hen%$o in his Se$ond A+ended Co+plaint-in-!ntervention and, to the extent of their $o+bined $lai+ over the disputed P< # shares, pitted the sa+e a%ainst that of either the Republic, the %ar;o( fa+ily, or the Cojuangcos$PHI. #he uc!engcos#s 8oint Se$ond A+ended Co+plaint-in-!ntervention dated Septe+ber '&, 111?1? - ad+itted on /une 11, 1119 - $ontained the ensuin% +aterial aver+ents6 )!RS# CA7SE ") AC#!"N 0. !n the early to +id-110&Cs, the lar%est blo$5 of sto$5 of . . . AP< #B .as held by 4eneral #elephone U Ele$troni$s Corporation ,(4#E(-, .hi$h held '2= of its outstandin% sto$5. !n 1103, 4#E de$ided to divest its shareholdin%s in P< #. . . . 4#E a%reed to sell its P< # shares to the Ra+on 7. Co8uan%$o %roup, .hi$h in$luded . . . )erdinand E. *ar$os andEor . . . !+elda R. *ar$os, Estate of Ra+on 7. Co8uan%$o and !+elda ". Co8uan%$o, and their no+inees.
12
#he Ra+on 7. Co8uan%$o %roup $aused. . . ,P#!C- to be for+ed for the purpose of pur$hasin% 4#ECs '2= sto$5holdin%s in P< #. xxx. 3. !n 1103, P#!C .as o.ned by the follo.in%6 4#E re$eived '9= of P#!C as part of the $onsideration for sellin% its shareholdin% in P< # to P#!C. Approxi+ately 93= of the P#!C sto$5 .as divided a+on% the Ra+on 7. Co8uan%$o %roup. 4re%orio Ro+ulo and <eonides Girata ea$h re$eived ?= of P#!C for their servi$es rendered . . . . #he re+ainin% 1'= of P#!C .as divided a+on% various persons. Plaintiff-inintervention >u$hen%$o - . . . .ho already $ontrolled 1&= of P< # F pur$hased 3.39= of the sto$5 in P#!C ,12,3'& shares- . . . . ;e pla$ed the 3.39= shares in the na+e of . . . > Realty Corporation. 2. So+e ti+e after P#!CCs a$Iuisition of '2= of P< #, 4re%orio Ro+ulo and <eonides Girata . . . approa$hed . . .>u$hen%$o and offered to sell their respe$tive ?= shareholdin%s in P#!C to hi+ for P?&&,&&&.&& ea$h. Plaintiff-inintervention >u$hen%$o a%reed to buy. 1. But, the Ra+on 7. Co8uan%$o %roup learned of the a%reed sale and sent Atty. Alberto *eer to . . . >u$hen%$oto infor+ hi+ that . . . President *ar$os ob8e$ted to his a$Iuirin% additional shares in P#!C. xxxx >u$hen%$o .as instru$ted to pay the pur$hase pri$e of P0&&,&&&.&& and to transfer the 0= sto$5holdin%s to the Ra+on 7. Co8uan%$o %roup. "ther.ise, . . . >u$hen%$o .as told, his business interests .ould suffer. 4re%orio Ro+ulo, upon findin% out, also strenuously ob8e$ted to sellin% to the Ra+on 7. Co8uan%$o %roup. But, . . . >u$hen%$o and 4re%orio Ro+ulo $o+plied as they $ould not do other.ise. xxx >u$hen%$o paid the P0&&,&&&.&& pri$e. #he 0= sto$5holdin%s of 4re%orio Ro+ulo and <eonides Girata .ere transferred to the Ra+on 7. Co8uan%$o %roup and eventually to. . .AP;!B. 1&. xxx Yu;3&n@;o =a( )3& 61;)12 o4 155&@a5 ;o&r;1on an* *ur&(( o4 )3& %ar;o( r&@12&. ;e .as ;o&r;&* 1n)o @161n@ u' 4re%orio Ro2u5oC( an* <eonides $1ra)aC( 6< shareholdin%s in P#!C . . . . xxx >u$hen%$o .as prevented by the sa+e ille%al $oer$ion and duress and by for$e ma+eure ,*artial <a.- fro+ see5in% 8udi$ial relief until after the ouster of the for+er re%i+e.
Nazareno
Corporation CASES Based on the Syllabus of Fr. Agustin 11. ConseIuently, . . . AP;!B holds the 0= sto$5holdin%s in P#!C, and all dividends and distributions attributable thereto, in $onstru$tive trust for . . . xxx xxx xxx SEC"N CA7SE ") AC#!"N xxx xxx xxx 1:. "n '' Nove+ber 1103 F at about the ti+e 4#E sold out its P< # shares to P#!C and re$eived '9= of P#!C F 4#E throu%h its . . ., /ohn /. ou%las, entered into a (put and $all( a%ree+ent .ith . . . >u$hen%$o for 4#ECs '9= sto$5holdin%s in P#!C. xxx 19. But, as .ith the <eonides Girata and 4re%orio Ro+ulo shares, O >u$hen%$o .as prevented fro+ a$Iuirin% 4#ECs '9= shares in P#!C by exer$ise of his (put and $all( a%ree+ent .ith 4#E. 10. !n )ebruary 1130, GTE =a( ;o2'&55&* by the Ra+on 7. Co8uan%$o %roup to .aive its '9= sto$5holdin%s in P#!C for free. At a +eetin% in #o5yo .ith #ed Brophy, . . . and Ra+on 7. Co8uan%$o, Aand ? othersB, Brophy .aived the '9= sto$5holdin%s, not.ithstandin% plaintiffCs (put and $all( a%ree+ent .ith 4#E. Said '9= sto$5holdin%s in P#!C .ere re-issued to the Ra+on 7. Co8uan%$o %roup for a no+inal a+ount and eventually transferred to . . . AP;!B. xxx xxx xxx 13. A%ain, . . . Yu;3&n@;o . . . =a( ;o&r;&* 1n)o no) &7&r;1(1n@ 31( J'u) an* ;a55J a@r&&2&n) =1)3 GTE for the latterCs '9= sto$5holdin%s in P#!C, .hen he .as other.ise ready, .illin% and able to do so. xxx. Plaintiff-in-intervention >u$hen%$o =a( 'r&6&n)&* +y )3& (a2& 155&@a5 ;o&r;1on an* *ur&(( and by for$e+a8eure ,*artial <a.- fro+ see5in% 8udi$ial relief until after the ouster of the for+er re%i+e. 12. ConseIuently, . . .AP;!B and the o.ners of . . . AP;!B F .hether they be ,a- the Estate of Ra+on 7. Co8uan%$o and !+elda ". Co8uan%$o ,b- plaintiff Republi$ and the PC44, or ,$- the Estate of )erdinand E. *ar$os and !+elda R. *ar$os F hold the '9= sto$5holdin%s in P#!C, and all dividends and distributions attributable thereto, in $onstru$tive trust for plaintiff-in-intervention >u$hen%$o, and should be $o+pelled to turn over the sa+e to hi+. A<#ERNA#!GE #;!R CA7SE ") AC#!"N xxx xxx xxx
11
Nazareno
'&. !n the event the ;onorable Court should ad8ud%e that . . . >u$hen%$o is not entitled to re$over, under the Se$ond Cause of A$tion, the '9= shareholdin%s in P#!C for+erly belon%in% to 4#E, then plaintiffs-in-interventionare at least entitled to re$over :.0= of said '9= shareholdin%s, as de+onstrated belo.. '&.1. xxx > Realty Corporation o.ns 3.3= of the sto$5 in P#!C, and . . . >u$hen%$o is entitled to re$over the 0= shareholdin%s for+erly belon%in% to 4re%orio Ro+ulo and <eonides Girata . . . F for a total of 1?.39=. '&.'. @hen 4#E .as $oer$ed by the Ra+on 7. Co8uan%$o %roup to .aive its '9= sto$5holdin%s in P#!C in )ebruary 1130, the re+ainin% sto$5holders of P#!C .ere entitled to a pro rata distribution of said '9= sto$5holdin%s F .hi$h .ere instead .holly re-issued to the Ra+on 7. Co8uan%$o %roup for a no+inal a+ount and eventually transferred to . . . AP;!B. '&.?. #hus, plaintiffs-in-intervention, .ith 1?.39= of the re+ainin% 39= sto$5, .ere entitled to :.0= of the '9= sto$5holdin%s for+erly belon%in% to 4#E.( A!t is thus prayedB F "n the first $ause of a$tion, ,a- xxx "rderin% . . . AP;!B to turn over the 0= P#!C shareholdin%s in$ludin% sto$5, $ash and other dividends and sto$5 splits thereon, to . . . >u$hen%$oD and ,b- Ad8ud%in% plaintiff-in-intervention >u$hen%$o to be the true o.ner of said 0= P#!C Afor+erly GirataCs and Ro+uloCsB, shareholdin%sD "n the se$ond $ause of a$tion ,a- "rderin% . . . AP;!B to turn over the '9= P#!C shareholdin%s ,for+erly of 4#E-, in$ludin% all . . . dividends and sto$5 splits thereon, to . . . >u$hen%$o Aas true o.ner thereofBD and xxx "n the alternative third $ause of a$tion, ,a- "rderin% defendant-in-intervention AP;!B to turn over :.0= of its P#!C shareholdin%s ,plaintiffs-in-interventionCspro rata share of 4#ECs for+er '9= shares-, in$ludin% all sto$5, $ash and other dividends and sto$5 splits thereon, to plaintiffs-ininterventionD and
Corporation CASES Based on the Syllabus of Fr. Agustin ,b- Ad8ud%in% plaintiffs-in-intervention to be the true o.ners of said :.0= P#!C shareholdin%s.( ,7nders$orin% as found in the ori%inalD E+phasis and .ords in bra$5et added-. !n their ans.er to the A+ended Co+plaint-in-!ntervention, .hi$h they later +anifested as servin% as their ans.er to the Se$ond A+ended Co+plaint-in!ntervention, respondents Cojuangcos$PHI set up, inter alia! by .ay of affir+ative defense, the follo.in% %rounds6 ,1- la$5 of $ause of a$tion, sin$e the P#!C and P;! shares of sto$5 in the na+e of the late Ra+on 7. Co8uan%$o and +e+bers of his fa+ily .ere la.fully a$Iuired by the+D ,'- neither of the *ar$os spouses .as a +e+ber of the Ra+on 7. Co8uan%$o %roup, so that they ,the *ar$os spouses- have no interest .hatsoever over any share in the said $orporationsD and ,?- no 8urisdi$tion has been a$Iuired by the Sandi%anbayan over the A+ended Co+plaint-in-!ntervention for non-pay+ent of the proper do$5et fees. """. THE !ET"T"ONS A. G.R. 'os. ()*+,- an& ()+.)/ 0Republic#s1 "n )ebruary 10, '&&1, petitioner Republic se$ured a subpoena ad testificandum1: for ,rs. ,arcos to testify as its .itness respe$tin% her $lai+ over the disputed P< # shareholdin%s. *rs. *ar$os, ho.ever, .asted no ti+e in +ovin% for the Iuashal of the subpoena, invo5in% in this re%ard her ri%ht a%ainst selfin$ri+ination. !n its opposition to +otion, petitioner Republic ar%ued that *rs. *ar$os has .aived su$h ri%ht .hen, in her Ans.er and subseIuent pleadin%s, she +ade 8udi$ial ad+issions and de$laration of the benefi$ial o.nership of the *ar$oses over the disputed P< # shares. #he respondent $ourt, per its "rder of *ay :, '&&1, denied her +otion to Iuash subpoena. 19 Another resolution of /uly 1, '&&1 .ould eventually follo. denyin% re$onsideration of the denial of her +otion to Iuash subpoena, alon% the follo.in% tenor6 Be that as it +ay, the prose$utionCs "pposition to *otion to Muash, dated ? April '&&1, spe$ifi$ally +entions only defendant !+elda *ar$osC ad+ission that )erdinand *ar$os a$Iuired the properties +entioned in para%raph 11 of the $o+plaintD hen$e, other than this fa$t, said prose$ution +ay not propound any Iuestion that +ay violate her ri%ht a%ainst self-in$ri+ination, upon proper and ti+ely ob8e$tion. xxx xxx xxx @;ERE)"RE, defendant !+elda *ar$osC *otion for Re$onsideration dated 11 /une '&&1, is hereby denied, and the subpoena earlier issued stand. ;o.ever, in lieu of the testi+ony of said defendant in $ourt, the plaintiff +ay, instead, +a5e use of the provisions in Rule '0 of the Revised Rules on Civil Pro$edure. 10
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!n the +eanti+e, petitioner Republic $ontinued presentin% other .itnesses, relyin% - as it .ould later $lai+ F on the oral assuran$e %iven by the %raft $ourt durin% the hearin% on %ar;3 26, 2001 that it .ould allo. the Republi$ to present *rs. *ar$os as its adverse or hostile .itness. At the *ay '2, '&&1 hearin%, the respondent $ourt dire$ted petitioner Republic to .rap up by *ay ?&, '&&1 the presentation of its eviden$e. #his pro+pted petitioner Republic to posthaste file its ( %espectful ,otion -or "dditional .ime .o Complete Presentation /f 0vidence (13therein prayin% for t.o ,'- additional settin%s to $o+plete the presentation of its eviden$e. But, in an open $ourt Or*&r *a)&* %ay -0, 2001,12 the respondent $ourt denied the said respe$tful +otionD the desired re$onsideration .as also denied per a R&(o5u)1on *a)&* Au@u() 2., 2001.11 *ean.hile, in the Septe+ber 9, '&&1 hearin%, PC44 Spe$ial Counsel #o+as Evan%elista, apparently una.are of the 2ugus" 3-% 3**( 4r&er adverted to, reiterated the Republi$Cs intention to present *rs. *ar$os as its .itness, only to be apprised by the respondent $ourt of its Au%ust '3, '&&1 "rder, supra. !n the end, Atty. Evan%elista reIuested that he be allo.ed thirty ,?&- days .ithin .hi$h to file the Republic#s for+al offer of do$u+entary eviden$e, .hi$h respondent $ourt in fa$t dire$ted hi+ to do via an Or*&r *a)&* S&')&2+&r ,, 2001'& . ;en$e, petitioner Republic filed on "$tober 0, '&&1 its (-ormal /ffer of 0vidence1 dated "$tober :, '&&1, follo.ed later by a ( Supplemental /ffer of 0vidence( dated Nove+ber 1?, '&&1'1 therein reservin% the ri%ht to present the testi+ony of *rs. *ar$os, as a hostile .itness re%ardin% her $ross-$lai+, should this Court %rant its petition for $ertiorari that it ,%epublic- intended to file. #he intended petition .as eventually filed and is presently do$5eted as G.R. No. 1,0-6.. *ia its petition in 4.R. No. 19&?03, petitioner Republic see5s to nullify the follo.in% issuan$es of the respondent $ourt, as des$ribed hereunder for better perspe$tive6 1- Or*&r *a)&* %ay -0, 2001,'' denyin% the Republi$Cs respe$tful +otion for additional ti+e to $o+plete the presentation of eviden$e and R&(o5u)1on o4 Au@u() 2., 2001,'? denyin% the +otion to re$onsider the *ay ?&, '&&1 orderD and '- Or*&r *a)&* S&')&2+&r ,, 2001,': dire$tin% the Republi$ to sub+it its offer of eviden$e .ithin ?& days fro+ that date. !t is the Republic#s sub+ission that the respondent $ourt %ravely abused its dis$retion .hen it issued the afore+entioned assailed orders and resolution $onsiderin% that6
Nazareno
Corporation CASES Based on the Syllabus of Fr. Agustin !. #;E ASSA!<E "R ERS . . . A*"7N# #" A EPR!GA#!"N ") #;E REP7B<!CCS S7BS#AN#!GE AN C"NS#!#7#!"NA<<> ENS;R!NE R!4;# #" #;E )7<< REC"GER> ") #;E *ARC"SESC !<<-4"##EN @EA<#;. !!. #;E ASSA!<E "R ERS B<A#AN#<> G!"<A#E #;E REP7B<!CCS R!4;# #" PR"CE 7RA< 7E PR"CESS ") <A@ @;EN #;E RESP"N EN# C"7R#, A)#ER !SS7!N4 AN S7S#A!N!N4 #;E GA<! !#> ") #;E S7BP"ENA #" !*E< A *ARC"S, EN!E PE#!#!"NERCS P<EA #" PRESEN# ;ER AS A GERSEE;"S#!<E @!#NESS AN #" C"*P<E#E #;E PRESEN#A#!"N ") #;E REP7B<!CCS EG! ENCE. A. B> !SS7!N4 #;E ASSA!<E "R ERS, #;E RESP"N EN# C"7R# G!"<A#E #;E REP7B<!CCS R!4;# #" 7E PR"CESS ") <A@ !NAS*7C; AS !# BARRE #;E REP7B<!C )R"* PRESEN#!N4 !*E< A *ARC"S AS A GERSEE;"S#!<E @!#NESS, N"#@!#;S#AN !N4 #;A# #;E REP7B<!C C"NS!S#EN#<> AN CA#E4"R!CA<<> ASSER#E !#S R!4;# #" PRESEN# ;ER AS S7C; @!#NESS. B. B> !SS7!N4 #;E ASSA!<E "R ERS, #;E RESP"N EN# C"7R# REN ERE N74A#"R> !#S "@N S7BP"ENA !REC#E #" !*E< A *ARC"S, @;"SE GA<! !#> #;E RESP"N EN# C"7R# ;A A<REA > S7S#A!NE @!#; )!NA<!#>. C. B> !SS7!N4 #;E ASSA!<E "R ERS, #;E RESP"N EN# C"7R# CAPR!C!"7S<> S7B"R !NA#E #;E PR"CESS ") <A@ #" ENPE !ENC> AN !SPA#C;. . B> !SS7!N4 #;E ASSA!<E "R ERS, #;E RESP"N EN# C"7R# EPR!GE #;E REP7B<!C ") 7E PR"CESS ") <A@ @;EN !# E))EC#!GE<> BARRE #;E REP7B<!C )R"* PRESEN#!N4, A*"N4 "#;ER EG! ENCE, !*E< A *ARC"S, A G!#A< AN *A#ER!A< @!#NESS @;"SE #ES#!*"N> @!#; RESPEC# #" ;ER CR"SS-C<A!* A4A!NS# #;E RESP"N EN#S C"/7AN4C"S @!<< B7##RESS #;E REP7B<!CCS CA7SE ") AC#!"N !N C!G!< CASE N". &&&' N"# "N<> A4A!NS# ;ER, B7# A<S" A4A!NS# #;E RESP"N EN#S C"/7AN4C"S. E. #;E ASSA!<E "R ERS BE#RA> #;E RESP"N EN# C"7R#CS 4<AR!N4, A<<-#""-#RANSPAREN# #7RNAB"7# !NAS*7C; AS #;E> !R"N!CA<<> S7PPRESSE #;E EN)"RCEAB!<!#> ") #;E RESP"N EN# C"7R#CS "@N S7BP"ENA #" !*E< A *ARC"S, EGEN AS #;E RESP"N EN# C"7R# ;A A<REA > S7S#A!NE #;E GA<! !#> ") #;A# S7BP"ENA.
'1
"n the basis of the fore%oin% ar%u+ents, petitioner Republic prays, by .ay of relief, that this Court, upon the annul+ent of the assailed "rders and Resolution sub8e$t of its petition in G.R. No. 1,0-6., dire$t the respondent $ourt to allo. the Republic to $o+plete its presentation of eviden$e, and $o+pel respondent *rs. *ar$os to ta5e the .itness stand. !n their $o++ent to the petition in 4.R. No. 19&?03, respondents Cojuangcos2PHI +aintained the $orre$tness of the assailed orders and resolution. Settin% parti$ular fo$us on Republic#s $lai+ of havin% been denied its day in $ourt, said respondents $ontend that an a%reed $alendar of hearin%s .as in pla$e, but petitioner Republic +oved to $an$el a nu+ber of trial dates for la$5 of preparedness or for .ant of ready .itnesses, .hi$h thus i+pelled the respondent $ourt to $o+e out .ith the assailed issuan$es. !n the li%ht of $onfli$tin% alle%ations thus +ade, the Court dee+s it appropriate to re$ite additional deter+inative ante$edents as +ay be %athered fro+ the re$ords. #hus F !t .ould appear that at the preli+inary $onferen$e held on Septe+ber '2, 1112, the parties a%reed to $ontinue the preli+inary $onferen$e and the pre-trial on /anuary 1:, 1111. )ollo.in% a series of postpone+ents, the pre-trial for the Republi$Cs A+ended Co+plaint .as finally $ondu$ted on *ay '9, '&&& and ter+inated on the sa+e day. #he Pre-trial "rder issued on that date sets the trial of the $ase, upon +utual a%ree+ent, to /uly 1&, 1:, ?1, Au%ust 11 and 12, '&&& at 26?& in the +ornin%. #hereafter, the respondent $ourt issued a Supple+ental Pre-#rial "rder dated /uly 1&, '&&&,'9 therein definin% the prin$ipal issue, as follo.s6 @hether the properties, assets, and funds sou%ht to be re$overed by the plaintiff are ill%otten or la.fully a$IuiredD SubseIuent events sho. that the s$heduled /uly 1&, '&&& hearin% .as $an$elled at the instan$e of petitioner Republi$Cs $ounsel. #he /uly 1:, '&&& hearin% .as also $an$elled and reset to /uly ?1, '&&&. #he /uly ?1, '&&& hearin% .as li5e.ise $an$elled but the parties a%reed, ho.ever, for the $ontinuation of trial on Au%ust 11 and 12, '&&& in the +ornin% and on Septe+ber 1?, 12, '& and '9, '&&&, +ornin% and afternoon sessions. Presented in the Au%ust 11, '&&& hearin% as petitioner Republi$Cs .itness .as Atty. )ran$is$o 4. de 4uH+an. #he Au%ust 12, '&&& hearin% - .hen petitioner Republi$ intended to present the PC44 re$ords $ustodian, *a. <ourdes *a%no - .as $an$elled. ".in% to the volu+inous re$ords she had to identify and testify on, the respondent $ourt ordered that *a%noCs testi+ony be ta5en before the Exe$utive Cler5 of Court on three trial dates to end on Septe+ber 9, '&&&.
Nazareno
Corporation CASES Based on the Syllabus of Fr. Agustin "n Septe+ber 9, '&&&, the respondent $ourt s$heduled four ,:- hearin%s for the re+ainin% days of the +onth of Septe+ber '&&&. ;o.ever, the first three ,?- settin%s, i.e.! Septe+ber 1?, 12 and '&, '&&&, .ere, upon petitioner Republi$Cs .ritten +otion dated Septe+ber 11, '&&&, and for reasons ran%in% fro+ its inability to lo$ate a +ispla$ed deposition to affordin% the ne. assi%ned Soli$itor ti+e to %o over the $ase re$ords, $an$elled. espite the develop+ents i++ediately adverted to above, the parties and their $ounsels nonetheless appeared for the Septe+ber 12, '&&& hearin%. #here, Atty. #anin%$o of the PC44 +anifested that the 4overn+ent panel is in the pro$ess of $o+pilin% the re$ords to support the Republi$Cs +otion for ad+ission, .hi$h, in turn, .ould serve as his basis for re$o++endin% the filin% of a +otion for su++ary 8ud%+ent. A$$ordin%ly, the respondent $ourt, in a bid to expedite an early $ase disposition, then blo$5ed off the follo.in% dates for the presentation of eviden$e6 )or petitioner Republic, e$e+ber 9, '&&&, /anuary '1, ?& and ?1, )ebruary 1 and ', '&&1D and for respondentsCojuangcos$PHI, *ar$h 1', 1?, 1:, 19, '0, '3 and '2, '&&1. @hat transpired next .ere the follo.in% events6 1. #he s$heduled hearin% on e$e+ber 9, '&&& .as $an$elled be$ause the Republi$Cs .itness .as not available. '. Petitioner Republi$ filed a +otion to reset the /anuary '1, ?& and ?1, '&&1 hearin%s, its Spe$ial Counsel havin% 8ust re$eived his assi%n+ent order for Civil Case No. &&&'. ?. "n /anuary '1, '&&1, petitioner Republi$ +anifested its intention to $all *rs. *ar$os on the .itness stand, but reIuested for additional hearin% dates, pleadin% that it .ill not be ready to present *rs. *ar$os .ithin its allotted ti+e. Respondents Co8uan%$osE P;! offered to stipulate on the testi+ony of the Republi$Cs intended .itness, one Atty. *anuel 4. *onte$illo. :. Respondent $ourt $an$elled the /anuary '1, '&&1 hearin% and reIuired the parties to +a5e an appearan$e at the next s$heduled hearin%, /anuary ?&, '&&1, as previously set. 9. #he /anuary ?&, '&&1 s$hedule .as $an$elled, as reIuested by petitioner Republi$, o.in% to la$5 of .itness. !n addition, the sa+e petitioner also as5ed for the $an$ellation of the three ,?- su$$eedin% s$heduled hearin%s, i.e., /anuary ?1, )ebruary 1 and ', '&&1, and instead reIuested for a )ebruary 1, '&&1 settin%, underta5in% to present *rs. *ar$os on that date, then rest its $ase, .ith or .ithout her testi+ony.
''
0. #he )ebruary 1, '&&1 settin% .as reset, o.in% to the unavailability on that day of the Republi$Cs intended .itness, *rs. *ar$os, .ho, Atty. Evan%elista of PC44 explained, .as physi$ally indisposed. A$tin% on the Republi$Cs reIuest for a +onth to present *rs. *ar$os, the respondent $ourt %ranted the desired resettin% to *ar$h 1', 1?, 1: and 19, '&&1, on the $ondition that the Republi$ .ill have to rest its $ase .ith or .ithout her testi+ony. 3. "n *ar$h 1', '&&1, the Republi$ reIuested to reset the s$heduled hearin%. Respondent $ourt %ave the Republi$ another opportunity to present its eviden$e and a$$ordin%ly reset the hearin%s to *ar$h '0, '3, and '2, '&&1, as previously s$heduled. 2. "n *ar$h '0, '&&1, the Republi$ presented <ourdes *a%no, the PC44 re$ord $ustodian. ;er dire$t, $ross and redire$t exa+inations .ere done that day. *s. *a%no .as follo.ed on *ar$h '3, '&&1, by Rosalie Sarthou of the B!R. Respondents Co8uan%$osEP;! +anifested that the Republi$ had until the next trial date to finish its presentation of eviden$e. 1. After the parties, in the *ar$h '2, '&&1 hearin%, .ere throu%h .ith *s. Sarthou, the Republi$ reIuested and .as %ranted five additional trial dates, i.e.! *ay 3, 1, 10, '2, and ?&, '&&1, for the presentation of further eviden$e. 1&. #he hearin% on *ay 3, '&&1 .as $an$elled and reset to *ay 1, '&&1. "n *ay 1, '&&1, Republi$ presented *r. anilo aniel, a PC44 ire$tor, after .hi$h the presentation of further eviden$e .as $ontinued to *ay '2, and ?&, '&&1. !t is upon the fore%oin% fa$tual ba$5drop that the respondent $ourt issued, in the *ay '2, '&&1 hearin%, its "rder of even date dire$tin% petitioner Republi$ to ter+inate the presentation of its eviden$e on the hearin% of *ay ?&, '&&1. #he *ay '2, '&&& "rder is, as earlier stated, .hat +oved petitioner Republi$ to file its (%espectful ,otion for "dditional .ime .o Complete Presentation /f 0vidence (.'0 !n the +eanti+e, pendin% resolution of 4.R. No. 19&?03, the separate trial $ontinued. After respondents Co8uan%$osEP;! have rested their $ase, the respondent $ourt rendered its !ar)1a5 &;1(1on, .hi$h, to reiterate, is the sub8e$t of petitioner Republi$Cs petition for revie., no. do$5eted as G.R. No. 1,-4,9, on the follo.in% supportin% %rounds6 #;E SAN !4ANBA>AN C"**!##E ,S!C- 4RAGE<> ERRE !N !#S PAR#!A< EC!S!"N A#E *A> 0, '&&' @;EN !# EC! E M7ES#!"NS ") S7BS#ANCE !N A @A> N"# !N ACC"R @!#; <A@ "R @!#; #;E APP<!CAB<E EC!S!"NS ") #;E ;"N"RAB<E C"7R# AN E"R ;AS
Nazareno
Corporation CASES Based on the Syllabus of Fr. Agustin EPAR#E )R"* #;E ACCEP#E AN PR"CEE !N4S C"NS! ER!N4 #;A#6 7S7A< C"7RSE ") /7 !C!A<
'?
!. #;E SAN !4ANBA>AN PAR#!A< EC!S!"N A#E *A> 0, '&&' "ES N"# C"*P<> @!#; #;E BAS!C REM7!RE*EN# 7N ER SEC#!"N 1:, AR#!C<E G!!! ") #;E 1123 C"NS#!#!"N #;A# (N" EC!S!"N S;A<< BE REN ERE B> AN> C"7R# @!#;"7# C<EAR<> AN !S#!NC#<> ENPRESS!N4 #;ERE!N #;E )AC#S AN #;E <A@ "N @;!C; !# !S BASE ,( ;ENCE, PE#!#!"NER @AS EPR!GE ") !#S R!4;# #" 7E PR"CESS ") <A@. !!. #;E SAN !4ANBA>AN R7<E !N !#S PAR#!A< EC!S!"N A#E *A> 0, '&&' A4A!NS# #;E A *!SS!B!<!#> ") #;E "C7*EN#AR> EG! ENCE A)#ER A *!##!N4 #;E SA*E !N EG! ENCE, #;EREB> EPR!G!N4 PE#!#!"NER ") !#S R!4;# #" 7E PR"CESS ") <A@. !!!. #;E PAR#!A< EC!S!"N A#E *A> 0, '&&' !S )A#A<<> )<A@E AS !# )A!<E "R "*!##E #" *EN#!"N G!#A< )AC#S AN RE)7SE #" C"NS! ER *A#ER!A< EG! ENCE PRESEN#E B> PE#!#!"NER #" S7PP"R# !#S C"*P<A!N# AN RE)7SE #" C"NS! ER EG! ENCE @;!C; #;E SAN !4ANBA>AN !#SE<) ;A !N )AC# A<REA > A *!##E . !G. PE#!#!"NER @AS EPR!GE ") #;E "PP"R#7N!#> #" PRESEN# RESP"N EN# !*E< A R. *ARC"S AS !#S A GERSEE;"S#!<E @!#NESS, A<S" !N A *ANNER G!"<A#!GE ") PE#!#!"NERCS )7N A*EN#A< R!4;# #" PR"CE 7RA< AN S7BS#AN#!GE 7E PR"CESS ") <A@. G. #;E SAN !4ANBA>AN !SRE4AR E #;E EC<ARA#!"NS 7N ER "A#;E/7 !C!A< A *!SS!"NS ") RESP"N EN# !*E< A *ARC"S P"S!#!GE<> ! EN#!)>!N4 AN C<A!*!N4 "@NERS;!P "GER #;E S7B/EC# S;ARES !N P< #, @;!C; EC<ARA#!"N <!RE@!SE C"NC<7S!GE<> ES#AB<!S;ES AN C"N)!R*S #;E AC#7A< AN BENE)!C!A< "@NERS;!P B> RESP"N EN#S *ARC"S ") SA! S;ARES "R, #;E!R PR!NC!PA<-N"*!NEE RE<A#!"NS;!P. G!. #;E SAN !4ANBA>AN C"**!##E 7N 7E ;AS#E !N EC! !N4 #;E CASE, !N 7##ER !SRE4AR ") !#S *AN A#E 7#> #" ASCER#A!N #;E #R7#; !N A<< *A##ERS !N C"N#R"GERS>.(
Petitioner Republic thus pray for a 8ud%+ent6 ,1- reversin% and settin% aside the Partial e$ision dated April '9, '&&'D and ,'- orderin% respondents Co8uan%$osEP;!, their assi%nees, no+inees, and a%ents to RE#7RN and REC"NGE> to the Republi$ 13a4 the 111!516 P.IC shares in the name of Prime 7oldings! Incorporated 3P7I4 ceded and conve8ed b8 %amon 9. Co+uangco and :uis .. %ivilla to P7I; 3b4 the <=!<<> P.IC shares in the name of %amon 9. Co+uangco; and 3c4 the ?1!6?6 P.IC shares in the name of Imelda /. Co+uangco! for being I:: G/..0@ A0":.7 of -erdinand 0. ,arcos and his famil81.'3 #his brin%s us to the Yu;3&n@;o(C petitions. B. G.R. 'os. (./5*3% ()*+3* an& ()+3*- F uc!engcos#G As already else.here herein +entioned, petitioner Yu;3&n@;o( intervened in Civil Case No. &&&' to re$over o.nership of a portion of the disputed P< # shares the forfeiture of .hi$h petitioner Republi$ itself is pursuin% o.in% to their bein% ( ill gotten wealth1. *r. >u$hen%$oCs ori%inal Co+plaint-in-!ntervention .as filed on Au%ust 11, 1122D the A+ended Co+plaint-in-!ntervention, on *ay ?1 111?, and the Se$ond A+ended Co+plaint-in-!ntervention, on Septe+ber '', 111?, this ti+e 8oined by Y R&a5)y. !n a Resolution dated "$tober 1, 1110, the respondent $ourt dis+issed the A+ended Co+plaint-in-!ntervention for non-pay+ent of do$5et fees, a+on% other %rounds, and denied the >u$hen%$osC *otion to Ad+it Se$ond A+ended Co+plaint, posthaste sendin% the >u$hen%$os to this Court on earlier separate petitions for revie. on $ertiorari. ;o.ever, *r. >u$hen%$oCs intervention .as effe$tively reinstated and his and > RealtyCs Se$ond A+ended Co+plaint-in-!ntervention ad+itted by the respondent $ourt pursuant to the e$ision rendered by this Court in 4.R. No. 1?11'3, , Buchengco vs. %epublic! et al.4, on /une 2, '&&&,'2 in relation to a $o+panion e$ision dated *ar$h 1?, '&&1,'1 in 4.R. No. 1?19?&, ,B %ealt8 Corporation vs. 7on. Sandiganba8an4. !n its e$ision in 4.R. No. 1?11'3, this Court ordered petitioner >u$hen%$o 1to submit to public respondent Sandiganba8an the value of the properties he see$s to recover and to pa8 the proper doc$et fees therefor within thirt8 3CD4 da8s upon determination thereof either b8 the Sandiganba8an or its cler$ of court! which in turn is directed to act with dispatch on the matter.1 )ollo.in% another round of le%al s5ir+ish on our 8ud%+ents in 4.R. No. 1?11'3 and 4.R. No. 1?19?&, the respondent $ourt assessed the >u$hen%$os the do$5et fees due on the Se$ond A+ended Co+plaint-in-!ntervention in the a+ount of P2,3'1,129.&&, .hi$h the latter paid on April :, '&&1.
Nazareno
Corporation CASES Based on the Syllabus of Fr. Agustin Barely a +onth after, the >u$hen%$os filed .ith the respondent $ourt an ( 9rgent ,otion .o Suspend .rial Pending #iscover8 Proceedings ( dated April ?&, '&&1,?& follo.ed by a (Supplement1 thereto dated *ay 3, '&&1?1. #hereat, they prayed for the $an$ellation of the separate trial settin%s already +ade and a%reed upon until they shall have fully underta5en pre-trial dis$overy pro$eedin%s under the provisions of Rule '? of the Rules of Court, a ri%ht they alle%edly are entitled to, but .ere unable to exer$ise due to the erroneous dis+issal by the respondent $ourt of their A+ended Co+plaint-in-!ntervention. #he >u$hen%$os $o++en$ed .ith the dis$overy pro$ess by filin% and servin% noti$es for the deposition-ta5in% of Atty. )ran$is$o e 4uH+an, for+er P;! Corporate Se$retary, and Atty. #eresa *er$ado- )errer, then Corporate Se$retary of P#!C on *ay 19, '&&1 and *ay 13, '&&1, respe$tively, .ith a reIuest for the issuan$e of subpoenafor the+. "n *ay 19, '&&1, ho.ever, they filed a+ended noti$es res$hedulin% the deposition ta5in% of Attys. e 4uH+an and *er$ado-)errer for *ay ?1, '&&1 and /une 1, '&&1, respe$tively. #he >u$hen%$os .ould later reIuest another res$hedulin% and issuan$e of the $orrespondin% subpoenas for the /une 11 and 1', '&&1 deposition ta5in% of both individuals. #he deposition ta5in% of Atty. e 4uH+an pro$eeded as s$heduled F and .as $o+pleted - on /une 1', '&&1. #he s$heduled deposition ta5in% of Atty. *er$ado-)errer on /une 11, '&&1, ho.ever, .as deferred upon her reIuest for a '-.ee5 ti+e to prepare therefor. ;er deposition .as finally ta5en on /uly 0 and $o+pleted on /uly 1?, '&&1. !n the +eanti+e, the respondent $ourt, via a R&(o5u)1on *a)&* %ay 24, 2001,?' as reiterated in an Or*&r %iven in open $ourt on Ju5y 12, 2001, denied the >u$hen%$osC (9rgent ,otion .o Suspend .rial Pending #iscover8 ( and its (Supplement1, for the reason that6 ,a- Rule '? of the Rules of Court does not authoriHe the suspension of trial o.in% alone to the fa$t that a party .ishes, in the interi+, to avail itself of a +ode of dis$overyD ,b- petitioners .ere not bein% deprived of their ri%ht of dis$overy, as they have in fa$t ta5en the deposition of *r. 4re%orio Ro+ulo in 1123D and ,$- the %round relied upon .as not a+on% the instan$es $allin% for the suspension of trial under Se$tion 2, Rule ?& of the Rules of Court. ?? #he >u$hen%$os .ould re$eive a $opy of the denyin% resolution on /une 3, '&&1. Respondent $ourt .ould, in a R&(o5u)1on of S&')&2+&r ,, 2001,?: deny the >u$hen%$osC +otion for re$onsideration Afiled on Au%ust 13B of the aforesaid *ay ':, '&&1 order. At the hearin% of *ay ?&, '&&1 for the $ontinuation of the re$eption of the Republi$Cs eviden$e, respondent $ourt issued an order to refle$t that the parties a%reed on the follo.in% settin%s, vi(6 ,1- /uly 1', '&&1 for the pre-trial $onferen$e vis E vis the >u$hen%$osC $o+plaint-in-intervention, and /uly ?& and Au%ust 3, '&&1 for the re$eption of their eviden$eD and ,'- Au%ust '1 and Septe+ber 1', '&&1, for the re$eption of the eviden$e for respondents Co8uan%$os and P;!.?9
':
!n the pre-trial $onferen$e for the $o+plaint-in-intervention $ondu$ted on /uly 1', '&&1, the >u$hen%$os orally +oved for the resettin% of the s$heduled pre-trial as .ell as the trial dates previously a%reed upon. #hey li5e.ise +oved to $han%e the order of trial vis E vis respondents Co8uan%$osEP;!, su$h that they ,>u$hen%$os- shall be presentin% their eviden$e as plaintiffs-in-intervention only after Co8uan%$osEP;! shall have presented their defense eviden$e in relation to the Republi$Cs A+ended Co+plaint. Both +otions .ere denied in open $ourt. #he parties thereupon a%reed on their trial dates. #he dispositive portion of the Ju5y 12, 2001 !r&8Tr1a5 Or*&r reads6 @;ERE)"RE, .ith this Pretrial "rder, the pretrial sta%e of this $ase .ith respe$t to plaintiff-in-intervention > Realty Corporation is hereby ter+inated. As a%reed upon by all the parties, let the trial on the +erits be set on /uly '0 and ?&, '&&1 for the re$eption of eviden$e for said plaintiff-intervenor, and on Au%ust 3, '1, '&&1 and Septe+ber 9 and 1', '&&1 for the turn of the defendants-intervenors to present their eviden$e. ?0 At the initial s$heduled hearin% on /uly '0, '&&1 for the presentation of their eviden$e as plaintiffs-in-intervention, the >u$hen%$os .ere unable to present any .itness to testify on their behalf. <i5e.ise, on /uly ?&, '&&1, the >u$hen%$os +anifested that the subpoenaed Atty. de 4uH+an and Atty. *er$ado-)errer .ere not in $ourt. #his develop+ent pro+pted respondents Co8uan%$osEP;! to $ounter-+anifest that e 4uH+anCs and *er$ado-)errerCs testi+onies need not be ta5en any+ore, both havin% already been deposed and sub8e$ted to $ross-exa+ination, for .hi$h reason they ,Co8uan%$osE P;!- have .aived their ri%ht to $ross-exa+ine. At the next hearin% session F Au%ust 3, '&&1 - the >u$hen%$os a%ain +oved for the $an$ellation and resettin% of the hearin% on the %round that the .itness they intended to present on that day F one Nene #ra8ano - .as unavailable. #he respondent $ourt denied the +otion to $an$el, and, in an open $ourt order, dee+ed the >u$hen%$os as havin% .aived their ri%ht to present eviden$e, rationaliHin% as follo.s6 @hen this $ase .as $alled for hearin% today, Atty. <auren$e Arroyo appeared for the plaintiffs-in-intervention, . . ., and +oved for the $an$ellation of todayCs hearin% as his . . . .itnesses are not present in Court. #he Court re+inded the plaintiffs-in-intervention that pre$isely the parties a%reed on the trial dates for the+ to present and ter+inate the presentation of their respe$tive eviden$e! i.e.! the hearin%s for plaintiffs-in-intervention .ere set on /uly '0, ?&, and Au%ust 3, '&&1 and for defendants-in-intervention on Au%ust '1, Septe+ber 9 and 1'. !t appears that the plaintiffs-in-intervention failed to present their eviden$e on /uly '0, ?&, and in todayCs hearin%.
Nazareno
Corporation CASES Based on the Syllabus of Fr. Agustin !n vie. thereof, the plaintiffs-in-intervention are hereby dee+ed to have .aived their ri%ht to present further eviden$e and let the re$eption of eviden$e by the defendants-inintervention be set on Au%ust '1, Septe+ber 9, and 1', '&&1 at 26?& in the +ornin%, as previously s$heduled and a%reed upon by the parties. ?3 "n Au%ust 19, '&&1, the >u$hen%$os +oved for a re$onsideration of the respondent $ourtCs Resolution of %ay 24, 2001, as reiterated in the open-$ourt "rder de$reed on /uly 1', '&&1. #he desired re$onsideration .as, ho.ever, denied per the respondent $ourtCs R&(o5u)1on *a)&* S&')&2+&r ,, 2001.?2 #he >u$hen%$os re$eived a $opy of the for+al "rder of Au%ust 3, '&&1, on Au%ust 19, '&&1 and too5 due noti$e of the denyin% Septe+ber 9 Resolution on Septe+ber 12, '&&1. 7nable to a$$ept these denials, the >u$hen%$os $a+e to us via their present petition in G.R. No. 149802, on the sin%ular %round that RESP"N EN# SAN !4ANBA>AN C"**!##E 4RAGE AB7SE ") !SCRE#!"N, "R AC#E @!#;"7# "R !N ENCESS ") !#S /7R!S !C#!"N, !N !SS7!N4 #;E M7ES#!"NE RES"<7#!"NS AN "R ER, A<< ") @;!C; C"NS#!#7#E AN ARB!#RAR> EN!A< ") PE#!#!"NERCS R!4;# #" PRE#R!A< !SC"GER>. !n the +eanti+e, on Au%ust '1, '&&1, the >u$hen%$os +oved for a re$onsideration of the "rder of Au%ust 3, '&&1, ?1 but their +otion for re$onsideration .as li5e.ise denied by the respondent $ourt per its R&(o5u)1on *a)&* S&')&2+&r 28, 2001,:& sayin%6 xxx it appearin% that the $ourt, in various instan$es, had a$$orded plaintiffs-inintervention the opportunities to present their eviden$e but failed alto%ether to do so, thus effe$tively delayin% the early disposition of the instant $ase .hi$h has been pendin% for the last fourteen ,1:- years. #he >u$hen%$os re$eived their $opy of the Resolution of Septe+ber '2, '&&1 on "$tober 2, '&&1. "n "$tober 1', '&&1, the respondent $ourt re8e$ted the >u$hen%$osC further reIuests for the issuan$e ofsubpoenae to !+elda ". Co8uan%$o, her son, Antonio, and three ,?other individuals. )or, as explained by the respondent $ourt, su$h reIuest is an atte+pt on the part of the >u$hen%$os to set to nau%ht its earlier "rder $onsiderin% the+ as havin% .aived their ri%ht to present further eviden$e.
'9
;en$e, the >u$hen%$osC se$ond petition for certiorari, no. do$5eted as G.R. No. 1,0-20, in .hi$h they as$ribe to the respondent $ourt the $o++ission of %rave abuse of dis$retion or of an a$t in ex$ess of its 8urisdi$tion in issuin% the "rder and Resolution dated Au%ust 3, '&&1 and Septe+ber '2, '&&1, respe$tively. Pressin% on, the >u$hen%$os ar%ue that they !. xxx @ERE EPR!GE ") #;E!R R!4;# #" PRESEN# EG! ENCE AN #;E!R A> !N C"7R# !N G!"<A#!"N ") 7E PR"CESS. !!. xxx S;"7< N"# ;AGE BEEN C"*P<E<<E #" PRESEN# EG! ENCE @;EN RESP"N EN#S REP7B<!CEPC44 ;A N"# >E# )"R*A<<> "))ERE #;E!R EG! ENCE AN RES#E #;E!R CASE. !!!. xxx S;"7< N"# ;AGE BEEN C"*PE<<E #" PRESEN# EG! ENCE BE)"RE RESP"N EN#S , E)EN AN#SP;!EC"/7AN4C"S. !G. xxx @ERE 7NREAS"NAB<> B"7N #" #;E SC;E 7<E ") #R!A< !N #;E ?& *A> '&&1 "R ER, C"NS!S#!N4 ") *ERE<> ? #R!A< A#ES SPANN!N4 1? A>S. G. RESP"N EN# SAN !4ANBA>AN ERR"NE"7S<> )"7N #;A# PE#!#!"NERS )A!<E #" PRESEN# EG! ENCE "N '0 AN ?& /7<> AN 3 A747S# '&&1. ,Petition, 4.R. No. 19&?'&, p. '0#o su++ariHe, assailed and sou%ht to be nullified by the >u$hen%$os in their $ertiorari petitions in G.R. No. 149802 and G.R. No. 1,0-20, are the follo.in% related issuan$es of the respondent $ourt6 ,1- R&(o5u)1on *a)&* %ay 24, 2001, denyin% their (9rgent ,otion .o Suspend .rial Pending #iscover81and its Supple+entD ,'- Or*&r *a)&* Ju5y 12, 2001, denyin% their verbal +otions for the resettin% of the a%reed pre-trial and trial dates insofar as their $o+plaint-inintervention is $on$erned or, in the alternative, for a $han%e in the order of trial so that Co8uan%$osE P;! be +ade to present their eviden$e in relation to the $o+plaint of petitioner Republi$ ahead of the+ ,>u$hen%$os-, and the R&(o5u)1on *a)&* S&')&2+&r ,, 2001, denyin% re$onsideration of the R&(o5u)1on *a)&* %ay 24, 2001 and of the Or*&r o4 Ju5y 12, 2001D and ,?- R&(o5u)1on *a)&* Au@u() ., 2001, de$larin% the+ as bein% dee+ed to have .aived their ri%ht to present eviden$e, and the R&(o5u)1on *a)&*
Nazareno
Corporation CASES Based on the Syllabus of Fr. Agustin S&')&2+&r 28, 2001, denyin% re$onsideration of theR&(o5u)1on o4 Au@u() ., 2001. Apropos the >u$hen%$osC Se$ond A+ended Co+plaint-in-!ntervention, respondent Co8uan%$osEP;! filed on Septe+ber '&, '&&1 a ( ,otion -or Summar8 Judgment1.:1 #hey $ontended that the pleadin%s and affidavits on re$ord failed to tender any %enuine issue on the alle%ed $oer$ion and duress alle%edly exerted by the late Pres. *ar$os andEor the Co8uan%$o %roup. A$$ordin% to the+, the desired re$overy of P< # shares sou%ht under the Se$ond A+ended Co+plaint-in!ntervention is an$hored on su$h $oer$ion and duress e+ployed. #o this +otion for su++ary 8ud%+ent, the >u$hen%$os interposed an opposition, follo.ed by a supple+ent to opposition. "n the basis of the fore%oin% ante$edents, and a$tin% on the +otion for su++ary 8ud%+ent, the respondent $ourt rendered its assailed !ar)1a5 &;1(1on.:' )eelin% a%%rieved, 8ust li5e the Republi$, over the dis+issal of their P< # shares $lai+s, the >u$hen%$os have $hallen%ed in their petition in G.R. No. 1,-20. the aforesaid !ar)1a5 &;1(1on, raisin% the follo.in% issues for resolution6 !. #he Sandi%anbayan %ravely erred .hen it insisted on renderin% the Iuestioned Partial e$ision despite the penden$y of 4.R. Nos. 1:12&' and 19&?'&. !!. #he Sandi%anbayan %ravely erred in $onfinin% the presentation of petitionersC eviden$e to three ,?- hearin% dates spannin% less than t.o ,'.ee5s. !!!. #he Sandi%anbayan %ravely erred in P;!ECo8uan%$osC *otion for Su++ary /ud%+ent. %rantin% respondents La"eness an& Moo"ness of the Petition in G.R. '4. (./5*3
'0
Nazareno
A revie. of the re$ords $learly indi$ates that the >u$hen%$osC petition for $ertiorari in G.R. No. 149802 .as filed out of ti+e. As it .ere, there $an hardly be any Iuibblin% that the Resolution of *ay ':, '&&1 assailed thereby is interlo$utory in $hara$ter. )or, respondent $ourtCs refusal to suspend trial until the >u$hen%$os shall have $o+pleted their dis$overy did not ter+inate the $ase. )urther pro$eedin%s .ere still reIuired, su$h as the further re$eption of eviden$e for all parties, in$lusive of the >u$hen%$os. !n his ponencia in Investments! Inc. vs. Court of "ppeals,:? then /usti$e and later Chief /usti$e Andres Narvasa explained the nature of an interlo$utory order and ho. it differs .ith one that is final6 #he $on$ept of 1final +udgment(, as distin%uished fro+ one .hi$h has (be$o+e final( ,or (exe$utory( as of ri%ht Afinal and exe$utoryB-, is definite and settled. A (final( 8ud%+ent or order is one that finally disposes of a $ase, leavin% nothin% +ore to be done by the Court in respe$t thereto, e.g., an ad8udi$ation on the +erits .hi$h, on the basis of the eviden$e presented at the trial, de$lares $ate%ori$ally .hat the ri%hts and obli%ations of the parties are and .hi$h party is in the ri%htD or a 8ud%+ent or order that dis+isses an a$tion on the %round, for instan$e, of res +udicata or pres$ription. "n$e rendered, the tas5 of the Court is ended, as far as de$idin% the $ontroversy or deter+inin% the ri%hts and liabilities of the liti%ants is $on$erned. Nothin% +ore re+ains to be done by the Court ex$ept to a.ait the partiesC next +ove . . . and ulti+ately, of $ourse, to $ause the exe$ution of the 8ud%+ent on$e it be$o+es 1final( or, to use the established and +ore distin$tive ter+, (final and eFecutor8(. xxx xxx xxx Conversely, an order that does not finally dispose of the $ase, and does not end the CourtCs tas5 of ad8udi$atin% the partiesC $ontentions and deter+inin% their ri%hts and liabilities as re%ards ea$h other, but obviously indi$ates that other thin%s re+ain to be done by the Court, is (interlo$utory(, e.g., an order denyin% a +otion to dis+iss under Rule 10 of the Rules, . . . . 7nli5e a ( final1 8ud%+ent or order, .hi$h is appealable, as above pointed out, an Kinterlo$utoryC order +ay not be Iuestioned on appeal ex$ept only as part of an appeal that +ay eventually be ta5en fro+ the final 8ud%+ent rendered in the $ase. ,at pp. ??1-?:&)ollo.in% Investments! Inc., the re+edy of an appeal fro+ the interlo$utory *ay ':, '&&1 "rder .as unavailin% to the >u$hen%$os, thus the propriety of their $o+in% to this Court, .ith respe$t to that order, in G.R. No. 149802 viaa spe$ial a$tion for $ertiorari under Rule 09 of the Rules of the Court. !t +ay be re$alled, ho.ever, that prior to the filin% of their petition in 4.R. No. 1:12&', the >u$hen%$os first ur%ed the respondent $ourt for a re$onsideration of its %ay 24, 2001 R&(o5u)1on, a $opy of .hi$h they re$eived, by their o.n ad+ission,
!G. #he Sandi%anbayan %ravely erred in findin% that the sub8e$t P#!C shares do not parta5e of the $hara$ter of ill-%otten .ealth. ,Petition, 4.R. No. 19?'&3, pp. ??-?:"$. THE COURTCS RUL"NG As a +atter of sound and lon% appellate pra$ti$e, the Court, before $onsiderin% the +erits of a petition before it, loo5s into the +atter of ti+eliness and a$$ordin%ly .ould dis+iss or other.ise deny further due $ourse to petitions for non-$o+plian$e .ith the 8urisdi$tional caveat on ti+eliness of filin%. #he threshold Iuestion, therefore, is .hether or not all the five ,9- petitions at bar .ere ti+ely filed.
Corporation CASES Based on the Syllabus of Fr. Agustin on /une 3, '&&1. #he $orrespondin% +otion filed on Au@u() 1,, 2001 also sou%ht the re$onsideration of the open-$ourt Or*&r *a)&* Ju5y 12, 2001. 4iven these definin% dates, there is a need to loo5 into the ti+eliness of the said +otion as a preli+inary step to deter+ine the ti+eliness of the >u$hen%$osC petition in G.R. No. 149802 itself. #he rule on the filin% of petitions for $ertiorari is e+bodied in Se$tion :, Rule 09 of the Rules of Court, partly readin% SEC. :. Ahen and where petition filed. F #he petition +ay be filed not later than sixty ,0&- days fro+ noti$e of the 8ud%+ent, order or resolution. !n $ase a +otion for re$onsideration or ne. trial is ti+ely filed, .hether su$h +otion is reIuired or not, the sixty ,0&- day period shall be $ounted fro+ noti$e of the denial of said +otion. :: As the rule no. thus stands, the 0&-day re%le+entary period .ithin .hi$h to file a petition for $ertiorari shall be re$5oned fro+ noti$e of the resolution or order sou%ht to be nullified, save .hen a +otion for re$onsideration isti+ely filed in .hi$h $ase the 0&-day period shall start fro+ re$eipt of the denial of su$h +otion. A $orollary rule, subsu+ed in the sa+e Se$tion : of Rule 09, applies in the event it is deter+ined that a +otion for re$onsideration is not ti+ely. !n su$h a situation, a party see5in% to avail hi+self of the re+edy of $ertiorari under the sa+e Rule 09, does not have a ne. 0&-day period fro+ re$eipt of the denial of the +otion for re$onsideration, .ithin .hi$h to file the petition. As su$h, the ti+eliness of the petition +ust be re$5oned fro+ the date of noti$e or re$eipt of the order or resolution assailed, as if no +otion for re$onsideration .as filed. 4iven the follo.in% seIuen$e of events6 a $opy of the *ay ':, '&&1 resolution .as re$eived on /une 3D the +otion for re$onsideration thereof .as filed on Au%ust 19, .ith a $opy of the resolvin% issuan$e dated Septe+ber 9 re$eived on Septe+ber 12, the Iuestion that no. $o+es to fore is6 *is a vis the *ay ':, '&&1 resolution, .as the +otion for its re$onsideration filed on Au%ust 19, '&&1 ti+ely, so that the >u$hen%$os $an validly re$5on, as they in fa$t did, the 0&-day period fro+ their re$eipt on Septe+ber 12, '&&1 of the Septe+ber 9, '&&1 Resolution denyin% re$onsideration of the Resolution of *ay ':, '&&1 8ointly .ith the "rder of /uly 1', '&&1L #o ans.er the poser, a deter+ination +ust first be +ade as to .hen should a +otion for re$onsideration of an interlo$utory order be filed. !n #enso 3Phils.4! Inc. vs. .he Intermediate "ppellate Court! et al.!:9this Court ruled that a +otion for re$onsideration of an interlo$utory order is not sub8e$t to the usual li+itin% fifteen-day period of appeal pres$ribed for final 8ud%+ents or orders. #he #enso rulin%, ho.ever, stopped short of dire$tly addressin% the issue of pre$isely .hen should a party file a +otion for re$onsideration of an interlo$utory order. )or, apart fro+ sayin% that su$h +otion is not sub8e$t to the 19-day-appeal-period rule, it +erely held that +ovin% for
'3
re$onsideration after the lapse of a ?2-day period after re$eipt of the assailed order is not unreasonable. @hile the Rules of Court has no spe$ifi$ provision dealin% dire$tly .ith the Iuestion, Se$tion : of Rule 09 provides a lo%i$al ans.er. #a5en in its proper perspe$tive, the $lause (not sub8e$t to the li+itin% 19-day period for appeal pres$ribed for final 8ud%+ents or orders( $annot plausibly be stret$hed to +ean that the period to as5 for re$onsideration of an interlo$utory order $an ex$eed the 0&-day threshold pres$ribed under the Se$tion : of Rule 09 for filin% a petition for $ertiorari. Else, a le%al aberration .ould ensue .here a party .ho has +erely 0& days fro+ noti$e of an adverse interlo$utory order to interpose a spe$ial a$tion for $ertiorari .ould be allo.ed a lon%er period to +ove for re$onsideration of su$h order. @ithal, the filin% of the >u$hen%$osC +otion for re$onsideration of the Resolution of *ay ':, '&&1 on Au%ust 19, '&&1, .hi$h is the 69)3 *ay fro+ noti$e of the said Resolution on /une 3, '&&1, is beyond the 0&-day period pres$ribed under the present Se$tion : of Rule 09, and is, therefore, late. Perfor$e, and as dis$ussed earlier , their petition in G.R. No. 149802 itself .as belatedly filed. !n fine, for la$5 of a ti+ely +otion for re$onsideration of the *ay ':, '&&1 Resolution, the sa+e has, in a +anner of spea5in%, thereby be$o+e final and exe$utory. Certiorari, insofar as the said resolution is $on$erned, is no lon%er available. Apropos the "rder of /uly 1', '&&1, this Court is of the vie. that the sa+e petition in 4.R. No. 1:12&' has, .ith respe$t to su$h order, be$o+e +oot and a$ade+i$. As .e loo5 ba$5 at the in$idents sub8e$t of the stated order, the >u$hen%$os had +oved that the trial be suspended to a.ait the $o+pletion of their dis$overy pro$edure or, in the alternative, for respondents Co8uan%$osEP;! to present their eviden$e, vis-V-vis the $lai+ of petitioner Republi$, ahead of the+ ,>u$hen%$os-. By this desired variation of the order of trial, the >u$hen%$os .ere, as .e see it, a$tually hopin% to be %iven additional trial dates for presentation of eviden$e on top of those dates allotted the+ but did not utiliHe. ".in%, ho.ever, to the pro+ul%ation of the !ar)1a5 &;1(1on dated April '9, '&&', .e $an assu+e that durin% the penden$y of the petition in G.R. No. 149802, petitioner Republi$ and respondent Co8uan%$osEP;! had, in the separate trial on the P< # shares, already finished .ith the presentation of their eviden$e and have rested their $ase, the latter in relation to both the Republi$Cs A+ended Co+plaint and the >u$hen%$osC Co+plaint-in-!ntervention. !n net effe$t, the $han%e in the order of presentation of eviden$e veritably sou%ht in G.R. No. 149802 $an no lon%er be %ranted, or, if %ranted, $an no lon%er be i+ple+ented. !t is, therefore, futile to belabor, let alone rule, on the +erits of this parti$ular petition insofar as it relates to the Or*&r o4 Ju5y 12, 2001. #i+e and a%ain, .e have said that $ourts exist to de$ide a$tual $ontroversies, and do not render opinions on +oot $ases. .he Due Process Issue in
Nazareno
Corporation CASES Based on the Syllabus of Fr. Agustin G.R. '46. ()*+3* an& ()*+,#he Court shall first pass upon the issue of due pro$ess, or la$5 of it, to be pre$ise, unifor+ly invo5ed in G.R. No(. 1,0-20 and 1,0-6.. !f non-observan$e of the reIuire+ents of due pro$ess indeed tainted the separate trial belo., then the resolution on the issue of the substantive $orre$tness of the !ar)1a5 &;1(1on raised in petitions for revie. in G.R. No. 1,-4,9 and G.R. No. 1,-20. should be $lear, si+ple and unavoidable. )or, a 8ud%+ent arrived at after a trial +arred by la$5 of due pro$ess deserves to be i++ediately stru$5 do.n as a nullity. !t +ay be .ell to revisit the various issuan$es sou%ht to be annulled under Rule 09 of the Rules of Court on due pro$edural %round. Spe$ifi$ally, petitioner Republi$ assails, in G.R. No.1,0-6., the respondent $ourtCs Or*&r*a)&* %ay -0, 2001 denyin% its +otion for additional ti+e to present its eviden$e, as .ell as the Or*&r *a)&*S&')&2+&r ,, 2001 reIuirin% the sa+e petitioner to file and ter+inate its for+al offer of eviden$e .ithin ?& days. "n the other hand, in G.R. No. 1,0-20, the >u$hen%$os ur%e the annul+ent of the Au@u() ., 2001 andS&')&2+&r 28, 2001 R&(o5u)1on( in .hi$h they .ere dee+ed by the respondent $ourt to have .aived their ri%ht to present further eviden$e. At botto+, respondent $ourt issued these assailed orders andEor resolutions o.in% to both petitionersC failure to $o+plete the presentation of their respe$tive eviden$e .ithin the a%reed trial dates, a failure .hi$h, if allo.ed to $ontinue, .ould, in the eyes of that $ourt, further derail the early disposition of Civil Case No. &&&'. !t $ould have been that the respondent $ourt .as, in the end, a$tuated by the desire to resolve a $ase that has been pendin% for the last fourteen ,1:- years. And this, in hindsi%ht, is not an idle spe$ulation on our part as respondent $ourt .ould later .rite in its !ar)1a5 &;1(1on, $itin% %epublic vs. Sandiganba8an!:0 the follo.in%6 @e stress that the resolution of the $o+plaint-in-intervention, alon% .ith the prin$ipal $ase, is lon% overdue. @hat the Supre+e Court has said in this re%ard four years a%o has a$Iuired even %reater ur%en$y today F Kxxx Eleven years have passed sin$e the %overn+ent started its sear$h for and reversion of su$h alle%ed ill-%otten .ealth. #he definitive resolution of su$h $ases on the +erits is thus lon% overdue. !f there is adeIuate proof of ille%al a$Iuisition, a$$u+ulation, +isappropriation, fraud or illi$it $ondu$t, let it be brou%ht no. . . .C !t $annot be %ainsaid that the respondent $ourt +erely exer$ised its dis$retion to order F and to be %uided by su$h order - the ter+ination of the respe$tive presentation of eviden$e by both petitioners >u$hen%$os and Republi$ or to set a li+itin% ti+etable for su$h presentation. @e are loathe to disturb su$h exer$ise of 8udi$ial dis$retion .hi$h has spa.ned the petitions for $ertiorari in G.R. No. 1,0-20 and G.R. No. 1,0-6.. )or, 8urispruden$e tea$hes that $ertiorari lies only .hen the tribunal a$ts .ithout or oversteps its 8urisdi$tion, or %ravely abuses its dis$retion, :3 as .hen the
'2
po.er is exer$ised in an arbitrary or despoti$ +anner by reason of passion, pre8udi$e or personal hostility. :2 #he abuse +ust, in fine, be of su$h de%ree as to a+ount to an evasion of positive duty, or a virtual refusal to perfor+ a duty en8oined, or to a$t at all, in $onte+plation of la., as to be eIuivalent to havin% a$ted .ithout 8urisdi$tion.:1 @hat .e said in :ee! et al. vs. People9&is also apropos, vi(.6 xxx Certiorari +ay not be availed of .here it is not sho.n that the respondent $ourt la$5ed or ex$eeded its 8urisdi$tion over the $ase even if its findin%s are not $orre$t. !n other .ords, $ertiorari .ill issue only to $orre$t errors or 8urisdi$tion and not to $orre$t errors of pro$edure or +ista5es in the $ourtCs findin%s and $on$lusions. An interlo$utory order +ay be assailed by $ertiorari only .hen it is sho.n that the $ourt a$ted .ithout or in ex$ess of 8urisdi$tion or .ith %rave abuse of dis$retion. ;o.ever, this Court %enerally fro.ns upon this re+edial +easure as re%ards interlo$utory orders. #o tolerate the pra$ti$e of allo.in% interlo$utory orders to be the sub8e$t of revie. by $ertiorari .ill not only delay the ad+inistration of 8usti$e but .ill also unduly burden the $ourts. ,At pp. :&'-&?Co+ple+entin% :ee is "mpelo'uio! Sr. vs. Court of "ppeals91.here .e .rote6 xxx !f every error $o++itted by the trial $ourt .ere to be a proper ob8e$t of revie. by $ertiorari, the trial .ould never $o+e to an end and the appellate $ourtsC do$5ets .ould be $lo%%ed ad infinitum .ith the a%%rieved parties-liti%ants filin% petitions a%ainst every interlo$utory order of the trial $ourt. Su$h a situation $ould only under+ine the proper $ondu$t of liti%ation before the $ourts and ou%ht not to be tolerated if .e are to enhan$e the pro+pt ad+inistration of 8usti$e at every level of the 8udi$ial hierar$hy. !n the li%ht of the fore%oin% do$trinal holdin%s, .e $an say .ithout fear of $ontradi$tion that not every erroneous interlo$utory order, if that be the $ase, is $orre$tible by $ertiorari. @e %rant $ertiorari only upon $lear sho.in% that the trial $ourt issued its $hallen%ed interlo$utory order .ithout or in ex$ess of 8urisdi$tion or in %rave abuse of dis$retion a+ountin% to la$5 of 8urisdi$tion. Conversely, absent the vitiatin% ele+ent of .ant or ex$ess of 8urisdi$tion, $ertiorari is unavailin% as a re+edy. @e thus sustain as defensible, nay $orre$t, under the obtainin% fa$tual +ilieu and $ertainly .ithin the 8urisdi$tion of the respondent $ourt, the issuan$e of the assailed orders and resolutions respe$tin% the presentation of eviden$e. As it .ere, petitioners Republi$Cs and >u$hen%$osC respe$tive $ertiorari petitions basi$ally rest on the postulate that the respondent $ourt violated their ri%ht to due pro$ess of la. .hen it refused to %rant the+ .hat basi$ally .ere reIuests for further postpone+ents to further re$eive their respe$tive eviden$e.
Nazareno
Corporation CASES Based on the Syllabus of Fr. Agustin <est it be overloo5ed, the +atter of %rantin% or denyin% a plea for $ontinuan$e or postpone+ent is, as a rule, addressed to the sound dis$retion of the trial $ourt. 9' !n 1110, or so+e ei%hty nine ,21- years a%o, the land+ar5 $ase of :ino :una vs. "rcenas!9?expounded on the 8uridi$al $on$ept of (discretion( in the follo.in% .ise6 !n its very nature, the dis$retionary $ontrol $onferred upon the trial 8ud%e over the pro$eedin%s had before hi+ i+plies the absen$e of any hard-and-fast rule by .hi$h it is to be exer$ised, and in a$$ordan$e .ith .hi$h it +ay be revie.ed. But the dis$retion $onferred upon the $ourts is not a .illful, arbitrary, $apri$ious and un$ontrolled dis$retion. !t is a sound, 8udi$ial dis$retion .hi$h should al.ays be exer$ised .ith due re%ard to the ri%hts of the parties and the de+ands of eIuity and 8usti$e. As .as said in the $ase of #he Styria vs. *or%an ,120 7.S., 1, 1-6 (#he establish+ent of a $learly defined rule of a$tion .ould be the end of dis$retion, and yet dis$retion should not be a .ord for arbitrary .ill or in$onsiderate a$tion.( So in the $ase of 4ood.in vs. Pri+e ,1' *e., ?99-, it .as said that (dis$retion i+plies that in the absen$e of positive la. or fixed rule the 8ud%e is to de$ide by his vie. of expedien$y or by the de+ands of eIuity and 8usti$e.( #here bein% no (positive la. or fixed rule( to %uide the 8ud%e in the $ourt belo. in su$h $ases, there is no (positive la. or fixed rule( to %uide a $ourt of appeal in revie.in% his a$tion in the pre+ises, and su$h $ourts .ill not therefore atte+pt to $ontrol the exer$ise of dis$retion by the $ourt belo. unless it plainly appears that there .as (in$onsiderate a$tion( or the exer$ise of +ere (arbitrary .ill,( or in other .ords that his a$tion in the pre+ises a+ounted to (an abuse of dis$retion.( But the ri%ht of an appellate $ourt to revie. 8udi$ial a$ts .hi$h lie in the dis$retion of inferior $ourts +ay properly be invo5ed upon a sho.in% of a stron% and $lear $ase of abuse of po.er to the pre8udi$e of the appellant, or that the rulin% ob8e$ted to rested on an erroneous prin$iple of la. not vested in dis$retion. #he do$trine, supported by nu+erous $itations of authority, is thus stated in the En$y$lopedia of Pleadin% and Pra$ti$e ,vol. ', pp. :10, :12-6 "buse of discretion. - A$$ordin%ly, .here the po.er is so exer$ised as to deprive a party of a le%al ri%ht, or unduly benefit one party at the expense of the other, or .here, %enerally, the in8usti$e or inexpedien$y of the a$t is so $lear as to sho. beyond a reasonable doubt the violation of eIuitable $onsiderations, the a$t of de$ision is al.ays revie.able in so+e for+ on appeal, as an abuse of po.er. KPresumption. - #he presu+ption on appeal that the exer$ise of dis$retionary po.ers .as sound is very stron%. #he appellant +ust rebut it by sho.in% a stron% and $lear $ase of abuse of po.er to his pre8udi$e, or that the de$ision belo. rested on an erroneous prin$iple of la. not vested in dis$retion. A +ere +ista5e of 8ud%+ent, or a differen$e in opinion bet.een the appellate and the trial $ourt, is not suffi$ient.C
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!t $annot be stressed enou%h that postpone+ents have a .ay of $ausin% delays of the vexatious 5ind. @ith this in +ind and .ith respe$t to the spe$ifi$ issue before us, .e are no. $onfronted .ith the tas5 of har+oniHin% t.o ,'- basi$, but not ne$essarily irre$on$ilable, ri%hts et$hed no less in the Bill of Ri%hts. @e refer to the ri%ht to due pro$ess, on one hand, and the ri%ht to speedy trial, on the other. #his underta5in% be$o+es all the +ore +ade diffi$ult by the star5 reality that these petitions involve (ill gotten wealth1 reputedly a+assed by the *ar$os fa+ily, their friends and for+er business asso$iates .here, as in several li5e $ases, the Court itself di$tated a resolution in (utmost dispatch(, albeit a$5no.led%in% in the sa+e breath that ( over and above the eFigencies of recovering ill gotten wealth! we must carr8 out the more pressing constitutional tas$ of seeing to it that all parties are afforded due processes and substantial +ustice1! stressin% that this burden extends 1G0Hven to those suspected . . . of having ac'uired and2or accumulated ill gotten wealthI1 9: !t is, therefore, .ell-ni%h apropos to har5 on 8udi$ial pre$edents on the t.o $onstitutional ri%hts adverted to above. !n the abstra$t (due process( has been des$ribed as nothin% +ore and nothin% less than (the embodiment of the sporting idea of fair pla8 .(99 !ts irredu$ible +ini+u+ reIuire+ents are noti$e and hearin%, 90 the ri%ht to be heard bein% its +ost basi$ tenet.93 !n PCIB vs. Court of "ppeals!92.e held that the essen$e of due pro$ess is that a party is afforded a reasonable opportunity to be heard in support of his $aseD .hat the la. abhors and prohibits is the absolute absen$e of the opportunity to be heard. ;en$e, a party $annot fei%n denial of due pro$ess .hen, havin% been afforded the opportunity to present his side, $hooses, for .hatever reason, not to be heard.91 "n the other hand, the ri%ht to speedy trial, as an ad8un$t to the ri%ht of all persons to a speedy disposition of their $ases before 8udi$ial, Iuasi-8udi$ial, or ad+inistrative bodies, reIuires that $ourt pro$eedin%s should be $ondu$ted a$$ordin% to fixed rules and +ust be free fro+ vexatious, $apri$ious and oppressive delays. 0& !n the deter+ination of .hether or not the ri%ht to speedy trial has been violated, the fa$tors that +ay be $onsidered and balan$ed are len%th of delay, reason for the delay, assertion of the ri%ht or failure to assert it, and pre8udi$e to $ounsel by the delay. 01 4iven the fore%oin% perspe$tive, it .as in 5eepin% .ith the i+peratives of speedy trial for the respondent $ourt, in the exer$ise of its dis$retion, to issue the ordersEresolutions assailed in G.R. No. 1,0-20 and G.R. No. 1,0-6. as a ne$essary $onseIuen$e to its denial of petitionersC innu+erable +otions for postpone+ent. An old but still %ood de$isional la. holds that the postpone+ent of the hearin% of a $ase, .hi$h had been previously set .ith due noti$e to the parties and their attorneys, is not an absolute ri%ht of the liti%ants nor of their $ounsel. 0' ".in%, ho.ever, to the pra$ti$e that persists to this day, .e a$5no.led%ed the stubborn reality that $ontinuan$es and postpone+ents for+ part of the pro$edural syste+ of dispensin%
Nazareno
Corporation CASES Based on the Syllabus of Fr. Agustin 8usti$e.0? But even so, the Court has already ta5en +easures to $leanse the syste+ of this pra$ti$e .hi$h, .hen abused, as it has often been abused, leads to ( the wheels of +ustice grinding to a halt1 . "ne refor+ative step is the +andatory $ontinuous trial s$he+e pres$ribed under Supre+e Court ,SC- Ad+inistrative "rder No.:, series of 1122, in relation to SC Cir$ular No. 1-21. 7nder this s$he+e, ( trials are to be held on the scheduled dates without needless postponements! the factual issues for trial well defined at pre trial and the whole proceedings terminated and read8 for +udgment within ninet8 3>D4 da8s from the date of the initial hearing! unless! for meritorious reasons! an eFtension is permitted (. )ollo.in% a trial period involvin% the parti$ipation of desi%nated pilot $ourts, the Court issued Ad+inistrative Cir$ular ,AC- No. ?-1&, series of 111&, de$reein% the adoption of the +andatory $ontinuous trial syste+ startin% )ebruary 19, 111&, in all trial $ourts. Not to be overloo5ed as another +easure to.ards a speedy disposition of $ases is the issuan$e of SC Ad+inistrative Cir$ular No. ?-11 pres$ribin% %uidelines on effe$tive +ana%e+ent of $ases to ensure their speedy disposition. So+e hi%hli%hts6 B. .rial ,9- #he 8ud%e shall $ondu$t trial .ith ut+ost dispat$h, .ith 8udi$ious exer$ise of the $ourtCs po.er to $ontrol trial pro$eedin%s to avoid delay. xxx xxx xxx ,3- #he trial shall be ter+inated .ithin ninety ,1&- days fro+ initial hearin%. Appropriate dis$iplinary san$tions +ay be i+posed on the 8ud%e and the la.yers for failure to $o+ply .ith this reIuire+ent due to $auses attributable to the+. ,2- Ea$h party is bound to $o+plete the presentation of his eviden$e .ithin the trial dates assi%ned to hi+. After the lapse of said dates, the party is dee+ed to have $o+pleted the presentation of eviden$e. ;o.ever, upon verified +otion based on $o+pellin% reasons, the 8ud%e +ay allo. a party additional trial dates in the afternoonD provided that said extension .ill not %o beyond the three-+onth li+it $o+puted fro+ the first trial date ex$ept .hen authoriHed in .ritin% by the Court Ad+inistrator, Supre+e Court. !t is thus abundantly $lear that the +andatory $ontinuous trial s$he+e, the %uidelines on trial, and, to a si%nifi$ant level, the ideal arti$ulated in %epublic 3PCGG4 vs. Sandiganba8an0:to resolve (ill gotten wealth cases1 .ith ut+ost dispat$h, $ir$u+s$ribed, in a .ay, the respondent $ourtCs other.ise .ide latitude in the $ondu$t of its pro$eedin%s. At botto+, then, respondent $ourt a$ted .ith so+e de%ree of $ir$u+spe$tion and, doubtless, .ell .ithin its authority .hen, in its assailed issuan$es in G.R. No. 1,0-6., it refused to a$$o++odate petitioner Republi$ .ith additional trial dates and ordered it to file its for+al offer of exhibits and rest its $ase. #he sa+e
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$on$lusion applies to petitioner >u$hen%$os in G.R. No. 1,0-20. 4rave abuse of dis$retion $annot be as$ribed on the respondent $ourt in ,i- pro$eedin% to hear the eviden$e of the >u$hen%$os on the a%reed trial dates of /uly '0 and ?& and Au%ust 3, '&&1, ,ii- refusin% to reset the hearin%s to later dates, and ,iii- de$larin% the+ to have effe$tively .aived their ri%ht to present further eviden$e .hen they .ere still .ithout eviden$e or .itness on the last trial date. #here is hardly any dispute that these .ere trial dates previously a%reed upon and to .hi$h the >u$hen%$os $o++itted to abide. And under the $ited 4uidelines on #rial, petitioner >u$hen%$os .ere bound to $o+plete the presentation of their eviden$e .ithin the trial dates assi%ned to the+. <i5e.ise, at the end of the trial dates, they .ere dee+ed to have $o+pleted .ith the presentation of their eviden$e. !t .ould be an aberration for the Court to fault and reverse the %raft $ourt for follo.in% .hat it has en8oined the latter to observe in the first pla$e. As to petitioner Republi$, it .as %iven, per our o.n $ount, no less than t.enty ,'&trial dates. #here .ere, in fa$t, +ore trial settin%s than those a%reed upon and dire$ted in the pre-trial of *ay '9, '&&&. #he a$$o++odatin% attitude of the %raft $ourt to.ards petitioner Republi$ did not es$ape petitioner >u$hen%$osC noti$e. @hile perhaps a bit exa%%erated, petitioner >u$hen%$os state+ent in pa%e 22 of their (Consolidated *e+orandu+( that 1not once did Gthe Sandiganba8anH den8 their 3%epublic)s4 re'uests to cancel scheduled hearings ( belies the Republi$Cs la+ent that the respondent $ourt did not a$$ord it ( fair! ade'uate and reasonable opportunit8 to present all evidence the8 consider vital1. #he proble+ lies not in the alle%ed unreasonable refusal of the respondent $ourt to %rant the Republi$ +ore trial dates, but, as the respondent $ourt aptly su%%ested, in the Republi$Cs innu+erable reIuests for $an$ellation and resettin% of hearin%s, on one pretext after another, .hi$h, at the end of the day, refle$ted on the unpreparedness of its set of $ounsels and the see+in% unavailability of ad+issible +aterial eviden$e. @ith the vie. .e ta5e of the $ase, petitioner Republi$ sou%ht, but in vain, to present respondent *rs. *ar$os, it bein% its posture that her testi+ony - after she had announ$ed to the four .inds that the *ar$os fa+ily o.ns the disputed P< # shares in the na+e of respondent Co8uan%$osEP;! - .ould have been vital to its $ase. !roni$al as it +ay sound, petitioner Republi$ see+s to i+ply by its $onsu+in% bid to have *rs. *ar$os on the .itness stand that it $annot adeIuately prove its $ase .ithout her testi+ony. )or, ho. else explain the fa$t that it footnoted its )or+al "ffer of Eviden$e .ith the reservation to have her testify, if so allo.ed by this CourtL #o be sure, .e have ta5en note of petitioner Republi$Cs assertion that respondent $ourt %ave its .ord durin% the *ar$h '0, '&&1 hearin% that it $an present *rs. *ar$os after all of its intended .itnesses shall have testified. #his assuran$e, if indeed %iven, $annot be ta5en to +ean, ho.ever, that the $ourt has to forever a.ait her testi+ony. #he refusal to %rant petitioner Republi$ additional trial dates 8ust to have the un.illin% *rs. *ar$os testify is understandable, .hen ta5en in the perspe$tive of vexatious
Nazareno
Corporation CASES Based on the Syllabus of Fr. Agustin delays 8uxtaposed .ith the Republi$Cs $ounselCs $o++it+ent %iven in one of the hearin%s to finish .ith the presentation of eviden$e .ith or .ithout her testi+ony. As .e refer to the re$ords, .e see that the first ti+e petitioner Republi$ +anifested its intention to present *rs. *ar$os as its hostile .itness .as durin% the hearin% of /anuary '1, '&&1. But the su$$eedin% s$heduled hearin% dates, i.e, /anuary ?& and ?1, '&&1, )ebruary 1, ', and 1, *ar$h 1', 1?, 1:, 19, '0, '3, and '2, *ay 3, 1, 10 and '2, '&&1 $a+e and .ent .ithout *rs. *ar$os testifyin% as a .itness of petitioner Republi$. !t is in fa$t not a+iss to say that all these s$heduled hearin%s .ere, at the instan$e of petitioner Republi$, $an$elled or reset to other dates, either be$ause of the unavailability of the intended .itness or the %overn+ent handlin% $ounsel .as ill prepared for trial. #he >u$hen%$os .ere no better. #hey a%reed to present their eviden$e on $ertain trial dates, but .ere unable to do so in any of those trial dates, in$lusive of the last s$heduled hearin%. !n any event, the depositions of Attys. de 4uH+an and *er$ado)errer, to%ether .ith that of 4re%orio Ro+ulo, .ere re$eived in eviden$e for said petitioners over the ob8e$tions of the adverse parties. *oreover, petitioner >u$hen%$os .asted their trial dates by their unyieldin% insisten$e on presentin% .itnesses .ho have already been deposed, and even after respondents Co8uan%$osEP;! anti$ipatorily +anifested their intention to .aive their ri%ht to further $ross-exa+ine the deponents. @hile perhaps a bit anti-$li+a$ti$ to state at this 8un$ture, there .as no atte+pt to present petitioner >u$hen%$o hi+self, .hen it .ould see+ that he .as in the best of position to testify on his andEor > Realty CorporationCs $lai+ over the P#!C and P< # shares or on the alle%ed duress exerted on hi+ by the *ar$oses or the Co8uan%$o %roup. Neither do .e find persuasive $o%en$y in the >u$hen%$osC posture that the separate trial should have been suspended to a.ait the $o+pletion of their dis$overy efforts. )or, su$h arran%e+ent, if allo.ed and put in +otion, .ould have veritably provided said petitioners .ith tools to $ause the indefinite suspension of the separate trial by the $onvenient plea of inadeIuate avail+ent of dis$overy. Besides, .e are at loss to understand the >u$hen%$osC $ontention about their inability to underta5e dis$overy pro$edure until this Court reinstated their A+ended Co+plaint-in-!ntervention heretofore dis+issed by the respondent $ourt. #here is no rule, and the >u$hen%$os have $ited none F pre$ludin% the+ fro+ underta5in% su$h dis$overy pro$edure prior to the reinstate+ent a$tion of this Court. Neither is there any rule reIuirin% the suspension of trial 8ust to allo. a party-liti%ant to $o+plete dis$overy pro$edure. And, .hen .e ta5e into sto$5 of respondent $ourtCs $onstant re+inders to the $ontendin% parties to observe the trial s$hedule in vie. of the len%th of ti+e that Civil Case No. &&&' has been pendin%, petitioners Republi$ and >u$hen%$os have, in the final re$5onin%, only the+selves to point at for their present pli%ht. #he re$orded fa$ts indi$ate that they .ere not denied the opportunity to be heard.
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)inally, .e $annot .rite finis to the due pro$ess issue .ithout resolvin% the Iuestion of .hether the respondent $ourt, throu%h the use of its $oer$ive po.ers, $ould have had $o+pelled *rs. *ar$os to be petitioner Republi$Cs hostile .itness and testify on the $ir$u+stan$es surroundin% their ,the *ar$os fa+ily- $lai+ed a$Iuisition and o.nership of the disputed P< # and P#!C shares. #he Court only has to re$all that .hen *rs. *ar$os refused to +a5e a $ourt appearan$e for petitioner Republi$, she invo5ed her ri%ht a%ainst self-in$ri+ination under Arti$le !!!, Se$tion 13 of the Constitution.09 She .as $orre$t. She $annot be $o+pelled to testify .ithout violatin% her $onstitutional ri%ht a%ainst selfin$ri+ination. As she aptly observed, Civil Case No. &&&', .hile basi$ally a $ivil suit, is penal in nature, sin$e it is, for all intents and purposes, a forfeiture pro$eedin%, ta5en under and pursuant to E" Nos. 1 and ', series of 1120. 00 #hese t.in issuan$es indeed see5, as ulti+ate ob8e$tive, the ( recover8 of all ill gotten wealth accumulated b8 former President -erdinand 0. ,arcos! his immediate famil8! relatives! subordinates and close associates1, and the properties bein% $onte+plated to be re$overed bein% those (funds! mone8s! assets and properties illegall8 ac'uired or misappropriated ( by said persons F thus, sta+pin% upon the $ivil suit the $hara$teristi$s of a forfeiture pro$eedin%s. #he su%%estion that the ri%ht a%ainst $o+pulsory self-in$ri+ination +ay be invo5ed only in $ri+inal pro$eedin%s is valid to a $ertain extent, but not enou%h 8ustifi$ation to $o+pel *rs. *ar$os to testify a%ainst her volition, %iven the penal $hara$teristi$s of Civil Case No. &&&'. #his is be$ause Rule 119, Se$tion 1,e- of the Rules of Court a$$ords the a$$used at a trial the ri%ht (to be eFempt from being compelled to be witness against himself (. #he 5ernel of this privile%e is testi+onial $o+pulsion, or si+ply a prohibition a%ainst le%al pro$ess to extra$t fro+ a personCs o.n lips an ad+ission of %uilt a%ainst his .ill. 03 As this Court has further explained in People vs. "8son02 #he ri%ht of a defendant in a $ri+inal $ase ,to be exe+pt fro+ bein% a .itness a%ainst hi+self- si%nifies that he $annot be $o+pelled to testify or produ$e eviden$e in the $ri+inal $ases in .hi$h he is the a$$used, or one of the a$$used. ;e $annot be $o+pelled to do so even b8 subpoena or other pro$ess or order of the Court. ;e $annot be reIuired to be a .itness either for the prose$ution, or for a $o-a$$used, or even for hi+self. !n other .ords F unli5e an ordinary .itness ,or a party in a $ivil a$tion- .ho +ay be $o+pelled to testify by subpoena, havin% only the ri%ht to refuse to ans.er a parti$ular in$ri+inatory Iuestion at the ti+e it is put to hi+ F the defendant in a criminal action can refuse to testif8 altogether. 7e can refuse to ta$e the witness stand! be sworn! answer an8 'uestion . And, as the la. $ate%ori$ally states, his ne%le$t or refusal to be a .itness shall not in any +anner pre8udi$e or be used a%ainst hi+. ,E+phasis supplied-
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Corporation CASES Based on the Syllabus of Fr. Agustin <est .e be +isunderstood, this CourtCs $on$urren$e .ith *rs. *ar$os is really nothin% +ore than bein% faithful .ith .hat .as tau%ht in the oft-$ited $ase of Cabal vs. Kapunan!01to .it6 !n a stri$t si%nifi$ation, a forfeiture is a divestiture of property .ithout $o+pensation, in $onseIuen$e of a default or an offense, and the ter+ is used in su$h a sense in this arti$le. A forfeiture, as thus defined, is i+posed by .ay of punishment not by the +ere $onvention of the parties, but by the la.+a5in% po.er, to insure a pres$ribed $ourse of $ondu$t. !t is a +ethod dee+ed ne$essary by the le%islature to restrain the commission of an offense and to aid in the prevention of such an offense . #he effe$t of su$h a forfeiture is to transfer the title to the spe$ifi$ thin% fro+ the o.ner to the soverei%n po.er. ,'? A+. /ur. 911, itali$s in the ori%inal!n Bla$5Cs <a. i$tionary a (forfeiture( is defined to be (the in$urrin% of a liability to pay a definite su+ of +oney as the $onseIuen$e of violatin% the provisions of so+e statute or refusal to $o+ply .ith so+e reIuire+ent of la.(. !t +ay be said to be a penalt8 i+posed for +is$ondu$t or brea$h of duty. ,Co+. vs. )ren$h, 11: S.@. '99As a $onseIuen$e, pro$eedin%s for forfeiture of property are dee+ed $ri+inal or penal, and, hen$e, the exe+ption of defendants in $ri+inal $ases fro+ the obli%ation to be .itnesses a%ainst the+selves is appli$able thereto. xxx xxx xxx #he rule prote$tin% a person fro+ bein% $o+pelled to furnish eviden$e .hi$h .ould in$ri+inate hi+ exists not only.hen he is liable $ri+inally to prose$ution and punish+ent, but also .hen his ans.er .ould tend to expose hi+ to a xxx forfeiture xxx.( ,A+. /ur. Se$. :?, p. :2- ,!tali$s in the ori%inalAssayed a%ainst the $ited 8urispruden$e, respondent *rs. *ar$os $an, as .as her bent, refuse to testify alto%ether, not.ithstandin% the express alle%ations she +ade in the pleadin%s adverted to by petitioner Republi$. .he Propriet8 of 67MM2R J7DGM8'T as "gainst the Buchengcos) Second "mended Complaint in Intervention 7nder Se$tion ?, Rule ?9, of the 1113 Rules of Civil Pro$edure, su++ary 8ud%+ent +ay be allo.ed .here, save for the a+ount of da+a%es, there is no %enuine issue as to any +aterial fa$t and the +ovin% party is entitled to a 8ud%+ent as a +atter of la.. Su++ary or a$$elerated 8ud%+ent is a pro$edural te$hniIue ai+ed at .eedin% out sha+ $lai+s or defenses at an early sta%e of the liti%ation, thereby avoidin% the expense and loss of ti+e involved in a trial. Even if the pleadin%s appear, on their fa$e,
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to raise issues, su++ary 8ud%+ent +ay still ensue as a +atter of la. if the affidavits, depositions and ad+issions sho. that su$h issues are not %enuine. 3& #he presen$e or absen$e of a %enuine issue as to any +aterial fa$t deter+ines, at botto+, the propriety of su++ary 8ud%+ent. A (%enuine issue(, as differentiated fro+ a fi$titious or $ontrived one, is an issue of fa$t that reIuires the presentation of eviden$e. #o the party .ho +oves for su++ary 8ud%+ent rests the onus of de+onstratin% $learly the absen$e of any %enuine issue of fa$t, or that the issue posed in the $o+plaint is patently unsubstantial so as not to $onstitute a %enuine issue for trial.31 4uided by the prin$iples above indi$ated, .e hold that, under the $ir$u+stan$es obtainin%, su++ary 8ud%+ent is proper and the respondent $ourt did not $o++it a reversible error in %rantin% the $orrespondin% +otion for su++ary 8ud%+ent filed by respondents Co8uan%$osEP;! on the Se$ond A+ended Co+plaint-in-!ntervention. As +ay be observed, petitioner >u$hen%$o an$hored his $lai+ over the disputed P< # shares on the proposition that the *ar$os re%i+e $oer$ed hi+ into %ivin% up 0= of P#!C shares for+erly o.ned by 4re%orio Ro+ulo and <eonides Girata .hi$h he paid for. Apart fro+ this 0= P#!C-share transa$tion, he alle%ed havin% entered into a (put and call( a%ree+ent .ith 4#E for the pur$hase of the latterCs '9= eIuity in P#!C, but that he .as a%ain $oer$ed into not exer$isin% his option to pur$hase, only to be apprised later that P;! a$Iuired the sa+e '9= sto$5holdin%s. !t $annot be overe+phasiHed, vis E vis the >u$hen%$osC $lai+ that, .hen respondents Co8uan%$osEP;! +oved for su++ary 8ud%+ent, the >u$hen%$os, $onseIuent to their havin% been dee+ed to have .aived their ri%ht to present their eviden$e, .ere effe$tively pre$luded fro+ pursuin% dis$overy pro$edure. !n net effe$t, the only fa$ts before the respondent $ourt at the ti+e of the filin% of the +otion for su++ary 8ud%+ent .ere those to be %athered fro+ the pleadin%s and the depositions of *r. Ro+ulo and Attys. de 4uH+an and *er$ado-)errer. No substantial proof of $oer$ion or duress, ho.ever, appears fro+ the depositions on file. "n the other hand, the only relevant fa$ts dedu$ible fro+ the deposition of Atty. *er$ado-)errer on the (put and call1 option, are6 ,1- the put option of petitioner Alfonso #. >u$hen%$o expired in 113'D and ,'- petitioner > Realty Corporation exe$uted a .aiver of its pre-e+ptive ri%ht on the transfer of the P#!C shares held by 4#E to *r. Ra+on 7. Co8uan%$o in 1132. #hus, if, by its o.n ter+s, the ( put and call1 option expired in 113', >u$hen%$oCs ri%ht had lon% lapsed .hen the assi%n+ent of the P#!C shares .ere +ade in favor of the late Ra+on 7. Co8uan%$o. *oreover, the .aiver > Realty Corporation exe$uted +ay be seen to $onfir+ petitioner >u$hen%$oCs assent to the aforesaid assi%n+ent of P#!C shares in favor of Ra+on Co8uan%$o. As to *r. 4re%orio follo.in%6 . Ro+ulo, his deposition ta5en on Au%ust ?, 1123 yields the
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Corporation CASES Based on the Syllabus of Fr. Agustin (A##>. M7!S7*B!N46 M6 And .ho .ere the +a8or sto$5holders in that $orporation i.e. AP#!CBL A6 #he sto$5holders involved is the 4entel .ho turned over their eIuity to P< # into the $orporation and it .as assu+ed that this $o+pany for+ed in the Baha+as .ould be the body a%ent of P< # .hi$h in turn .ould buy all those eIuip+ents fro+ 4entel throu%h the Baha+as $orporation payin% 4entel its share .ith a lar%e $o++ission, ! do not 5no.. M6 @hen you said 4entel, are you referrin% to 4eneral #elephone U Ele$troni$s Corporation you have +entionedL A6 >es, sir. M6 And O .ho held the interest in P#!C eventuallyL A6 @hat resulted, fro+ +y point of vie., .as .hile in *anila, ! re$eived .ord that ! .as the o.ner of ?= shares in P#!C, ! i++ediately .ired +y offi$e in Ne. >or5 and .anted to 5no. if ! $ould hold the shares in +y na+e or if they .anted to transfer to the+ but ! had the offer and ! .anted to 5no. definitely .hat .as the position of the ;eadIuarters .ith re%ards to this. M6 And .hat .as their positionL A6 "ur position .as the a$Iuired ?= do not +ean anythin% to us of a $o+pany that is fro+ P< #, at least one re%ular share of the P< # had no or rather !#U# had no interest in P< # ex$ept to a$Iuire if it $ould be a$Iuired and .e have Iuite to iron in the fire at that ti+e so ! donCt 5no. no.. M6 @ho else held sto$5holdin% interestL C"**!SS!"NER6 A6 ! .as infor+ed that <eo Girata had ?=, #ony *eer had ?=, "s$ar Afri$a had 1= or '= and the rest .ere distributed a+on% the relatives and in-la.s of Co8uan%$o, oh yes, *r. Alfonso >u$hen%$o. ! donCt 5no. if a.arded or allo.ed to possess the 3= of the ori%inal shares. A##>. )RANC!SC"6 ! .ould li5e to reIuest for the stri5in% of the testi+ony of the .itness fro+ the re$ord, that is hearsay be$ause he $lai+ed that he .as +erely infor+ed of the other interests. But the .itness +ay ans.er the Iuestion if he so desire. A##>. <EAN"6 ! adopt the +anifestation of $ounsel. xxx xxx xxx C"**!SS!"NER6 A<< ob8e$tions are re$orded. A##>. M7!S7*B!N46
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M6 id you subseIuently +a5e any $onfir+ation of the infor+ation that you re$eivedL A6 >es, but ! never sa. a pie$e of paper, ! .as told by Ra+on Co8uan%$o and Antonio *eer about this infor+ation after their return fro+ their trip abroad and that .e su$$essfully ne%otiated the pur$hase of P< #. M6 And .hat .as the role of then President *ar$os in this a$IuisitionL A##>. <EAN"6 No basis. A##>. )RANC!SC"6 <eadin%. xxx xxx xxx
A6 ! believe that ! $an ans.er the Iuestion by si+ply tellin% the Court ho. .e .ere infor+ed that P< # .as available apparently be$ause ! a+ only told this. #he person that found that this P< # .as %oin% to be sold to Ninoy AIuino .as his $ousin andin% Co8uan%$o, his $ousin told the President and the President as5ed A+bassador Roberto S. Benedi$to to %o to the offi$es of P< # and stop all .ays then he si%ned for *on$hin% Co8uan%$o be$ause he felt that a transa$tion of this nature, of this lar%e .as beyond the abilities of andin% . . . ! do not 5no. but that .as then trans+itted to us
Corporation CASES Based on the Syllabus of Fr. Agustin by *on$hin% Co8uan%$o, ! do not 5no. and ! $annot testify to the vera$ity of this story but .hat .e .ere told that in order to +eet us O A##>. )RANC!SC"6 ! +ove to stri5e out the ans.er of the .itness for bein% hearsay. A##>. PA<*A6 Counsel for Pri+e ;oldin% adopts the sa+e ob8e$tion. A##>. <EAN"6 )or *rs. Co8uan%$o, the sa+e ob8e$tion for bein% hearsay. C"**!SS!"NER6 All ob8e$tions re$orded. xxx xxx xxx A##>. M7!S7*B!N46 M6 So 4eneral #elephone and Ele$troni$s Corporation .as paid the +onthly fee and .ho +ade those pay+ent on the feesL A##>. <EAN"6 #he best eviden$e .ould be the pay+ent. A6 ! believe it .as already P< # that is bein% privy to the finan$ial +ethod, P< # is not ans.erin% definitely .ho $a+e, .ho held but +u$h later on, every interest then .as bou%ht up by at that ti+e Chair+an of the Board of the BP and that our friend Alfonso >u$hen%$o +ay eventually had P#!C but sin$e .e .ere, at least .as $o+pletely out of the pi$ture, ! did not 5no. .hether it .as true or not but sin$e <eo Girata .as still at that ti+e very +u$h involved .ith P< # be$ause of the %uarantee issued by BP durin% the ti+e of <i$aros, ! believe he has reason to at least suspe$t that the $o+pany of 4eneral #elephone had ne%otiated .ith *r. >u$hen%$o, ! do not 5no. if this is true, ! have not spo5en to *r. >u$hen%$o about this +atter, he has not as5ed +e to spea5 about this. ! de$ided this be$ause naturally it is al.ays a +atter of +otive, +y +otive is that lon% before Senator Salon%a +ade seIuestration, ! .as seIuestered and so .ith <eo Girata and ! felt +y repose had been dead a lon% ti+e that
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.hoever en8oyed the benefits of that seIuestration should at least be ta5en to proper authorities or in turn +a5e a+ends of the years that they have ille%ally en8oyed the re$ourse .hi$h is substantial and .hi$h at todayCs pri$es +ust be .orth an a.ful of +oney. M6 No., you +entioned <i$aros of the BP O A##>. <EAN"6 ! ob8e$t, +ay ! +ove for the stri5in% out of the ans.er for bein% hearsay. A##>. PA<*A6 Sa+e ob8e$tion for bein% hearsay. A##>. )RANC!SC"6 !t is not responsive to the Iuestion. A##>. <EAN"6 All his state+ents are hearsay, all his state+ents are +ere expression of opinion and under the la., the best eviden$e should be the do$u+ent. xxx xxx xxx C"**!SS!"NER6 All ob8e$tions are re$orded. A##>. M7!S7*B!N46 M6 >ou +entioned the ho.L BP and <i$aros, .ere they $onne$ted then at that ti+e and
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A6 !n the pur$hase of eventually of P< #, it reIuired the %uaranty of the BP that any future $o++it+ents +ade by this %roup .ill be %uaranteed by the Philippine %overn+ent. M6 @hat spe$ifi$ally .as %uaranteed by the BPL
Corporation CASES Based on the Syllabus of Fr. Agustin A6 "f +y 5no.led%e, it .as reIuired that the a%reed pur$hase pri$e be %uaranteed by BP to 4entel. M6 o you re+e+ber the fi%ureL And the %uarantee of the .ho+L BP .as %iven in favor of A##>. <EAN"6
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A6 !t .as released by order of *r. <i$aros in favor, ! believe of P#!C. M6 @hi$h is the P#!C, .hat did you +ean by P#!C, .hat fir+L A6 #hat P#!C is the Philippine #ele$o++uni$ations !nvest+ent Co+pany. M6 So the BP issued a %uaranty, %uaranteein% P#!C an obli%ation to .ho+L A6 #o 4entel. M6 @as there an inter+ediary ban5 involved in the 7.S.L A6 !n the later operation, ! only re+e+ber the !rvin% #rust lendin% W1+illion to Ra+on Co8uan%$o in order to pay the options of this %roup to pur$hase P< # fro+ 4entel. xxx xxx xxx M6 >ou spo5e of this seIuestration or rather the seIuestration of yours and of <eo Girata, .hat did you +ean by that, .ill you %ive us spe$ifi$sL A6 ! .ill %ive you the spe$ifi$s as ! 5no. it happened to +e personally. <eo Girata and ! de$ided to bail out be$ause .e did not li5e .hat .as %oin% on, .e offered our shares to Alfonso >u$hen%$o, he offered to pay the+ but bein% honorable, .e have to tell Ra+on Co8uan%$o and #ony *eer that in turn have a +eetin% in the ne. P< # buildin% .here a$ross fro+ the offi$e of #ony and Ra+on .as a lun$h and .e .ere told that our shares had to be %iven to Pasi%, no. .hat that +ean, ! do not 5no., there is approxi+ately no .ay to verify that. #hose .ords .ere enou%h for Ra+on, to tell *on$hin%, %o ahead and ta5e these t.o and you .ill be ta5en $ared of later on, he .as never paid, ! found out this. M6 @hile you say you do not 5no. exa$tly .hat Pasi% +eans, .ho used the .ord Pasi%L A6 *on$hin%, Ra+on Co8uan%$o. M6 @hat do you understand of Pasi%L
*ay ! +a5e another ob8e$tion insofar as the estate is $on$erned be$ause of the testi+ony of the .itness, .e .ould li5e to +anifest our $ontinuin% ob8e$tion to any and all Iuestions and +atters that .ould affe$t the estate of Ra+on Co8uan%$o, .e are +a5in% this ob8e$tion in behalf of the .ido. .ho+ .e are representin% in behalf of the estate. C"**!SS!"NER6 #he ob8e$tion is re$orded. A6 No., this is the .ay .e .ere told, and *r. Co8uan%$o, there .as a pre-lon% ne%otiation in that lun$h bet.een *r. Girata, +yself and later, *r. >u$hen%$o. ! do not 5no. ho. the thin% ter+inated be$ause ! .as as5ed by *r. Girata to %o ho+e be$ause ! %et very violent, ! did not li5e bein% treated that .ay by anybody and that is it, ! .ent ho+e and +u$h later on be$ause ! refused to dis$uss this .ith anybody, ! found out that *r. >u$hen%$o .as never paid but that he paid +e, ! 5no. he did be$ause ! used in +y na+e to pay a $orporate obli%ation to the RCBC ban5 .hi$h is ! believe .as his ban5. M6 No., you said that you %ot violently an%ry, so .hat did you understand by the .ord Pasi%L A6 ! $annot spe$ify be$ause in +y +ind, at that ti+e there .as a tur+oil, too +u$h ! understand .e have been drin5in% sin$e lun$h ti+e and this .as about :6&& in the afternoon, so .hat .as $onveyed to +e by the .ords Pasi%, ! $annot definitely say no. but ! do 5no. .hat it $onveyed in those days the lon% re%i+e of po.ers that .ere in $ontrol at that ti+e. M6 >ou said that you have never been treated that .ay before, you refer to your sellin%, to your offer to sell to >u$hen%$o but bein% for$ed to sell to anotherL A##>. <EAN"6 ;e never said that, +ay .e 8ust +a5e our ob8e$tion. M6 @hat .ere for$ed to do that +ade you an%ryL A6 @hat +ade +e an%ry .as, ! 5no. that the $o+pany had a tre+endous future, .hen *r. >u$hen%$o %ave +e a visit in the hospital seven years a%o on +y stro5e, not no., he +entioned the fa$t that he had never been rei+bursed of the +oney that he advan$ed to +e and that ! thou%ht that .as terrible.
Corporation CASES Based on the Syllabus of Fr. Agustin M6 No. let us %o ba$5 to your reasons as .ell as of the reasons <eo Girata in %ettin% rid of this ?= share ea$h in P#!C, .hat .ere those reasons exa$tly that +ade you de$ide to sell outL A6 Nor+ally, inspe$tion of the $orporation +eans to loo5 to the $orporation papers, ! never did, or they are si%ned by the in$orporators in ter+s of the ori%inal do$u+ents at the buyersC list, ! never sa. the+, .e understood that P#!C .as in operation, pay re%ular dividends, ! never sa. the+, so naturally ! as5ed the +an .ho %ot +e in to all this thin%s in the first pla$e, .hat happened, he said, ! do not 5no., ! have not re$eived anythin% either, so let us %et rid of this and .e have thou%ht +ost li5ely the buyer is *r. Alfonso >u$hen%$o. M6 @hat happened to your offer to >u$hen%$oL M6 *y last Iuestion only is, ho. +u$h is the fi%ure for the sale of this ?= A6 ;e a$$epted it, ! and <eo Girata arrived and .e de$ided to tell *on$hin% and #ony that .e had sold our shares to *r. >u$hen%$o. Apparently <eo told Ra+on this only and by the ti+e .e arrived in the P< # buildin%, he had already apparently $onsulted and .e .ere told that the Pasi% did not li5e and said %o ahead and you .ill be ta5en $ared of .hi$h +u$h later on told +e never happened. oon a5o na%alit, +asiyado nana% pa%-oonse. @ell, any.ay no., there is nothin% +ore de+andin% of persons at their state that bein% lo$5ed in a hospital roo+ for years and in the usual readin%, ! de$ided .hoever en8oyed those shares, better +a5e %ood and sin$e ! have read in the ne.spapers about investi%ation of P#!C .hi$h see+ to %et out the $loud, ! de$ided to do this, +aybe to %ive so+e $lue to the investi%ation of P#!C, ! donCt 5no.. M6 And .hat .as the fi%ure a%reed upon .ith *r. >u$hen%$oL A6 Apparently . . . A##>. <EAN" ! 8ust .ant to +a5e the sa+e ob8e$tion for bein% hearsay. A##>. M7!S7*B!N46 #hese ob8e$tions are to be used durin% the presentation of eviden$e not at the ta5in% of the deposition. /ust re+e+ber that. A##>.<EAN"6 But .e .ant to +a5e our ob8e$tion. xxx xxx xxx C"**!SS!"NER6 All ob8e$tions are re$orded.
?0
Nazareno
A6 ! do not 5no. any+ore that anybody else, after this +aybe stray bit of infor+ation .ill be re+e+bered later on but none ri%ht no. and ! .as revie.in% over +y +ind ti+e and a%ain, +y parti$ipation in the .hole affair, ! .as eventually and ! .as used in that .ay as a +eans to %et !#U# into their ne%otiation and let 4entel to the bar%ainin% if only to sho. that they $ould afford to buy 4entel, in effe$t, they .ere $losin% the deal, leavin% !#U# to for$e 4entel to sit do.n and ne%otiate .ith the+. #hat .as the idea be$ause unfortunately, !#U# did not .or5 for the+ but for this %roup apparently that ! do not 5no. any+ore.
A6 ! understand, .ell, ! used part of it to pay an obli%ation .orth P0?0,&&&.&&, it .as an obli%ation .ith the defun$t #./. @olfe that .as bou%ht by +e .hi$h appears in its boo5 that a+ount or a little bit +ore .ith RCBC, no. the balan$e +aybe used by *r. Girata for so+ethin% else, ! do not 5no.. x x x CR"SS ENA*!NA#!"N6 B> A##>. <EAN" xxx xxx xxx M6 @as #ony *eer present in that +eetin%L A6 ;e .as al.ays in the +eetin% . . . . ,#SN of the eposition of 4re%orio <. Ro+ulo, Au%ust ?, 1123 pp. 1' F?3-.3' As .e see it, *r. Ro+uloCs deposition is virtually a hearsay a$$ount and should, therefore, be disre%arded, bein% itself inad+issible in eviden$e. Supportin% and opposin% affidavits shall be based on personal 5no.led%e of the de$larant, shall set forth su$h fa$ts as .ould be ad+issible in eviden$e, and shall sho. affir+atively that the affiant is $o+petent to testify to the +atters stated therein. #herefore, in deter+inin% .hether su++ary 8ud%+ent is proper, state+ents $ontained in affidavits, .hi$h .ould be inad+issible in eviden$e ,su$h as state+ents of opinion, belief and hearsay- +ust be disre%arded. So it +ust be .ith the Ro+ulo deposition. "ne +inor point. Petitioner >u$hen%$os dre. attention to the penden$y of their petitions in G.R. No(. 149802 and1,0-20 .hen the !ar)1a5 &;1(1on .as rendered,
Corporation CASES Based on the Syllabus of Fr. Agustin su%%estin% doubtless that it .as error on the part of the respondent $ourt to pro$eed .ith the separate trial belo. .ithout a.aitin% the out$o+e of said petitions. @e are not persuaded. #he penden$y of the petitions in 4.R. Nos. 1:12&' and 19&?'& did not, .ithout +ore, dilute the validity of the assailed !ar)1a5 &;1(1on or di+inish the authority of the respondent $ourt to render the sa+e. Se$tion 3, Rule 09 of the Rules of Court says as +u$h6 SEC. 3. 0Fpediting proceedings; in+unctive relief. - #he $ourt in .hi$h the petition Afor $ertiorari, prohibition or +anda+usB is filed +ay issue orders expeditin% the pro$eedin%s, and it +ay also %rant a te+porary restrainin% order or a .rit of preli+inary in8un$tion for the preservation of the ri%hts of the parties pendin% su$h pro$eedin%s. #he petition shall not interrupt the $ourse of the prin$ipal $ase unless a te+porary restrainin% order or a .rit of preli+inary in8un$tion has been issued a%ainst the publi$ respondent fro+ further pro$eedin%s in the $ase. #he %overnin% rule, in fine, is that to arrest the $ourse of the prin$ipal a$tion durin% the penden$y of $ertiorari pro$eedin%s, there +ust be an interruptin% restrainin% order or a .rit of preli+inary in8un$tion fro+ the appellate $ourt dire$ted to the lo.er $ourt.3? #here .as none in the instant $ase. A$$ordin%ly, it .as in order for the respondent $ourt to pro$eed .ith the separate trial in Civil Case No. &&&' and ne$essarily in renderin% a 8ud%+ent, in this instan$e, the !ar)1a5 &;1(1on, .hi$h, in its esti+ation, is $alled for by the fa$ts and la. of the $ase. "S%"SSAL OF THE A%EN E CO%!LA"NT AGA"NST COJUANGCOSL!H" @e no. $o+e .hat, to us, is the $enter of the $ontroversy. @e refer to the Iuestion of .hether or not the disputed P< # shares, .hi$h are $overed by the eIually disputed P#!C shares of respondents Co8uan%$osEP;!, are indeed part of the (ill-%otten .ealth( of the *ar$os fa+ily - ergo to be forfeited in favor of the State - usin% the evidentiary standards and deter+inative indi$ia set out in Bataan Ship8ard J 0ngineering Co.! Inc. ,Base$o- vs. PCGG,3: and applied analo%ously in subseIuent $ases, 39 .hen$e the $on$lusion that the .ealth is (ill gotten( +ay be reasonably dedu$ed. Respondent $ourt $ited the ben$h+ar5 outlined in Baseco in support of its !ar)1a5 &;1(1on,30 to .it6 "ne, eviden$e indi$atin% +anifest partiality and favorable treat+ent by the for+er President to.ards the alle%ed trustees, as de+onstrated by a$tive interplay bet.een hi+ and su$h trustees andEor presidential interventions .hi$h have resulted in inexpli$able benefits to the trustees or to the $orporations held by hi+ throu%h su$h trusteesD and
?3
#.o, the existen$e of do$u+ents and re$ords in the possession of the for+er President .hi$h, throu%h indorse+ents andEor assi%n+ent +ade thereon in blan5 by his trustees, provide the le%al instru+entation for hi+ to assert, no. or in the future, o.nership or $ontrol over the properties held by his trustees andEor to re$over su$h properties fro+ the+. ,At p. '?#he respondent $ourt dis+issed the Republi$Cs A+ended Co+plaint as a%ainst the Co8uan%$osE P;! on the findin% that the for+er has not adeIuately dis$har%ed its burden of provin%, by the threshold preponderan$e of eviden$e reIuired in (ill-%otten .ealth( $ases, that the sub8e$t P< # shares are ill-%otten. @rote the respondent $ourt6 xxx the Republi$ has failed to provide su$h (proof of authenti$ity or reliability( of the do$u+ents offered by it in eviden$e. #hus al+ost all the do$u+ents offered by the Republi$ are photo$opies, and no effort .as underta5en . . . to sub+it the ori%inals of said do$u+ents, or to have the+ properly identified, or to other.ise 8ustify the ad+ission of +ere photo$opies. Not surprisin%ly, defendants . . . ob8e$ted to the ad+ission of the Republi$Cs do$u+entary exhibits, $itin% violation of the Best Eviden$e Rule ,Se$tion ?, Rule 1?& of the Revised Rules of Civil Pro$edure A(Rules(B, the Rules on Presentation of o$u+entary Eviden$e ,Se$tion '&, Rule 1?' of the Rules-, the ;earsay Eviden$e Rule, and the rule as to PurposeEs of o$u+entary Eviden$e ,Se$tion ?:, Rule 1?' of the Rules-.( ,at p. ?1Ex$eptin%, petitioner Republi$ ta%s the respondent $ourtCs deter+inative findin% as a (sweeping conclusion1 or (bare generali(ation(. Pressin% the point, petitioner Republi$ ar%ues that the !ar)1a5 &;1(1on did not identify .ith parti$ular spe$ifi$ity .hi$h eviden$e failed to hurdle the bar of ad+issibility for bein% ( mere photocopies1 or (are otherwise unidentified! unauthenticated! and constitutive of hearsa81.33 Petitioner Republi$Cs la+ent is, to a point, .ell ta5en. !ndeed, not all do$u+ents the Republi$ offered in eviden$e in the separate trial on the P< # shares suffer fro+ the infir+ity i+puted on the+ by the %raft $ourt. )or, as ar%ued .ith so+e +easure of +erit, +ost of these do$u+entary eviden$e have been identified and authenti$ated durin% the deposition ta5in% of the deponents .hose depositions .ere entered into eviden$e after the usual pro$edure of $o+parin% the ori%inals .ith the faithful reprodu$tions thereof .hi$h .ere those +ar5ed in eviden$e. And $ertainly not lost on this Court is the fa$t that so+e do$u+ents are $o++on exhibits, thus, there exists no tenable reason for any of the parties offerin% the+ as $o++on exhibits to ob8e$t to their ad+issibility. @ere .ant of proof of authenti$ity and reliability of the offered do$u+entary eviden$e .as, .ith respe$t to the Republi$Cs A+ended Co+plaint, the rationale behind the adverse !ar)1a5 &;1(1on, as it stri5es this Court to be, .e $an only say that su$h disposition is not in a$$ordan$e .ith Se$tion ? of E" No. 1: 32 .hi$h en8oins $ourts, in
Nazareno
Corporation CASES Based on the Syllabus of Fr. Agustin resolvin% suits filed in the re$overy efforts, not to stri$tly apply te$hni$al rules of eviden$e. Be that as it +ay, .e instead ta5e the $ourse of delvin% into the substan$e of the eviden$e on re$ord .hi$h petitioner Republi$ asserts to be (vital facts and material evidence(,31 and thereby deter+ine .hether or not the respondent $ourt indeed 8ustifiably i%nored the+ in arrivin% at the disputed holdin% dis+issin% the A+ended Co+plaint as a%ainst the Co8uan%$osEP;!. #o.ards this end, the Court shall first as$ertain .hat $ould be those asserted ( vital facts and material evidence1 be by loo5in% at the alle%ations of the Republi$ in its Petition. #hus, a$$ordin% to the Republi$Cs petition in G.R. No. 1,-4,9, to $ite pertinently6 1. P;! .as re%istered by /ose >. Ca+pos on Nove+ber 2, 1133 .ith a paidup $apital of a +easly )ifty #housand Pesos ,P9&,&&&.&&- and utiliHin% as pla$e of business the address of 7N!<AB, a $orporation o.ned and $ontrolled by /ose >. Ca+pos, and .ith 7N!<ABCs offi$ers and dire$tors, na+ely Rolando 4apud, Renato <irio, Aet$.B . . . and 4erva$io 4aviola +ana%in% P;! xxx albeit, said +ana%in% offi$ers and dire$tors had no finan$ial interest .hatsoever in P;!. '. "n *ay ', 1132, Ra+on 7. Co8uan%$o, $eded and $onveyed in favor of P;! by .ay of eed of Assi%n+ent dated *ay ', 1132, so+e ::,&'? shares of sto$5 of P#!C . . . . "n that sa+e date, also by .ay of eed of Assi%n+ent . . . Ra+on 7. Co8uan%$o $eded and $onveyed in favor of P;! another ??,010 shares of sto$5 of P#!C . . . . Also on the sa+e date, <uis #irso Rivilla $eded and $onveyed in favor of P;! another ??,010 shares . . . . Ra+on 7. Co8uan%$o and <uis #irso Rivilla .ere $o+pensated by P;! for said P#!C shares of sto$5 .hi$h all in all su+ up to 111,:19 shareholdin%s in the na+e of P;!. xxx ?. )ro+ the fore%oin% eviden$e, there is no doubt that respondent P;! is a $orporation .hi$h .as for+ed and or%aniHed and +aintained by the for+er di$tator, President )erdinand E. *ar$os throu%h $onfessed du++ies, /ose >ao Ca+pos and Rolando C. 4apud, .ho, in $onspira$y .ith Ra+on 7. Co8uan%$o and <uis #irso Rivilla, sou%ht to a$Iuire for the *ar$oses the sin%le bi%%est +a8ority shareholdin%s in P< #. :. #he fore%oin% is $onfir+ed by the de$larations of $onfessed no+ineesE$ronies of for+er President )erdinand E. *ar$os6 /ose >. Ca+pos, Roland C. 4apud and Atty. )ran$is$o de 4uH+an. xxx xxx xxx "n the basis of the fore%oin% eviden$e, respondents Co8uan%$os $annot la.fully a$Iuire o.nership of title over the P;! shares of sto$5s, be$ause the sa+e $onstitute
?2
the *ar$os ill-%otten .ealth, for+ed andEor a$Iuired in violation of the 113? Constitution. xx ,Petition, 4.R. No. 19?:91, pp. 01-1&!ndubitably, petitioner Republi$ $alls attention to the s.orn de$larations of *essrs. /ose >ao Ca+pos, Roland C. 4apud and Atty. )ran$is$o de 4uH+an ,Ca+pos, 4apud and de 4uH+an, respe$tively, hereafter- as alle%ed proof of its theory of the $ase, i.e.! that the disputed P< # shares are in fa$t o.ned by the *ar$os fa+ily and that respondents Co8uan%$osEP;! are but du++iesEno+ineesE$onduit for the *ar$os fa+ily to $ontrol P< #. !t is, hen$e, our tas5 to s$rutiniHe the s.orn de$larations of Ca+pos et al., to as$ertain if they indeed prove the fa$ts adverted to by petitioner Republi$, failin% .hi$h .ould naturally i+pel this Court to affir+ the !ar)1a5 &;1(1oninsofar as it dis+issed the Republi$Cs A+ended Co+plaint a%ainst the respondents Co8uan%$osEP;!. )ollo.in% are ex$erpts of the S.orn State+ent of *r. Ca+pos, dated *ar$h '1, 11202&6 (xxx a dis$ussion bet.een +e and *r. Ra+on iaH, a +e+ber of the Co++ission APC44T .ho inIuired about $ertain assets and properties that ! +i%ht be holdin% in favour ,si$- of $ertain benefi$iaries and .hi$h . . . are no. about to be $lai+ed by the Philippine 4overn+ent. 1. *y relationship .ith the then President )erdinand E. *ar$os dates ba$5 to the ti+e .hen he .as first ele$ted as Con%ress+an . . . AandB $ontinued .hen he .as then ele$ted President . . . . #hereafter ! assisted in the or%aniHation and a$Iuisition of so+e business ventures for the for+er President. )ollo.in% his dire$tive ! instru$ted +y la.yers and reIuested the assistan$e of +y other business asso$iates and offi$ers of the $o+pany to or%aniHe, establish and +ana%e these business ventures for and on behalf of the PresidentD '. #he $o+panies that .e have or%aniHed for and on behalf of for+er President *ar$os are listed in Annex (A( atta$hed here.ithD ?. !n the or%aniHation, ad+inistration and +ana%e+ent of the abovena+ed $orporations, it .as +y poli$y that .henever su$h a $orporation is or%aniHed for and on behalf of the intended benefi$iaries, ! exe$ute and ! reIuire all +y said business asso$iates to exe$ute a eed of #rust or eed of Assi%n+ent duly si%ned in favour ,si$- of an unna+ed benefi$iary and to deliver the ori%inal $opy thereof to the for+er President. !t is in fa$t +y poli$y and pro$edure that .e dis$lai+ $o+pletely any interest in any of su$h businesses and +a5e it $lear to the for+er President that .e hold su$h interests on his behalfD
Nazareno
Corporation CASES Based on the Syllabus of Fr. Agustin :. !n the latter part of 1131 ! suffered a severe heart atta$5 . . . . Be$ause of this . . ., ! reIuested for+er President *ar$os to relieve +e of +y responsibilities re%ardin% the businesses that have been entrusted to +e and follo.in% su$h reIuest, ! si%ned and delivered to hi+ a Certifi$ation dated /anuary 112&, atta$hed here.ith as Annex (B( to the effe$t that +y fa+ily in$ludin% +y .ife and $hildren expressly dis$lai+ed any interest in the businesses that ! have been holdin% in his behalf and they a$5no.led%ed the truthfulness, authenti$ity and validity of various eeds of #rust and eeds of Assi%n+ent .hi$h ! and +y business asso$iates si%ned and exe$uted as afore+entioned $overin% properties, interest and shares of sto$5 of the $orporations listed therein. 9. "$$asioned by the .ithdra.al of +y a$tive parti$ipation in the +ana%e+ent of the above na+ed $orporations, *r. Rolando C. 4apud .ho .as +y finan$ial $onsultant too5 over the dire$t responsibility of dire$tin%, +ana%in% and ad+inisterin% all the a$tivities of the said $orporation. ;o.ever, sin$e *r. 4apud did not have the ad+inistrative staff to effi$iently +ana%e the businesses, he reIuested +e that all the e+ployees and offi$ers involved in the or%aniHation should $ontinue to re+ain in the $o+panies even only in a no+inal $apa$ity $onsiderin% that they had previously dis$lai+ed any interest therein. !t is for this reason that Roland C. 4apud and +y business asso$iates, na+ely, . . . )ran$is$o 4. de 4uH+an, . . . Ernesto Abalos, 4ervasio #. 4aviola, . . ., Renato E. <irio, Rafael de 4uH+an, Aet$.B . . . $ontinued to be na+ed sto$5holders in these $orporations althou%h they did not have any finan$ial interest thereinD xxx xxx xxx A+on% the Philippine $orporations listed in ite+ X:.10 of Annex (A( of *r. Ca+posC aforesaid S.orn State+ent and held in trust by hi+ and his asso$iates .as ( Prime 7oldings Corporation1. *oreover, on the o$$asion of his deposition-ta5in% on e$e+ber 12, 1119 at the Philippine Consulate 4eneral, Gan$ouver, British Colu+bia, Canada *r. Ca+pos, respondin% to .ritten interro%atories, +ade the follo.in% de$larations in ans.er6 21 ('.' #he re$ords sho. that AP;!B o.ns approxi+ately :0= of the sto$5 of . . . ,P#!C.hi$h in turn o.ns approxi+ately '2= of Philippine <on% istan$e #elephone Co+pany ,P< #-. #he re$ords of this Civil Case No. &&&' sho. that PC44 has seIuestered 111,:19 shares of sto$5 in P#!C re%istered in the na+e of AP;!B. @as anythin% .ith respe$t to P#!C delivered to the PC44 by Atty. e 4uH+an or anyone else in your behalfL Please des$ribe .ith spe$ifi$ity the thin%s that .ere delivered. ANS@ER6 As ! said, ! donCt 5no. that Pri+e ;oldin%s has any holdin%s of P#!C.
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?. !n your S.orn State+ent, pa%e ', you stated that .ith respe$t to the $orporations you held in trust for President *ar$os, it .as your (poli$y( that .henever su$h a $orporation .as or%aniHed, you exe$uted, and you reIuired all your business asso$iates to exe$ute, a eed of #rust or eed of Assi%n+ent in favor of an (unna+ed benefi$iary(, and delivered the ori%inals thereof to President *ar$os. x x x. @as this (poli$y( follo.ed in the $ase of AP;!BL xxx ANS@ER6 All the $orporations that ! or%aniHed F that .as the standard poli$y F that .e surrendered dire$t to President *ar$os. ?.1. @as it also your poli$y to deliver to President *ar$os the sto$5 $ertifi$ates that you and your business asso$iates held in trust for hi+L ANS@ER6 >es, *aC+. ?.'. !f sto$5 $ertifi$ates that you and your business asso$iates held in trust for President *ar$os .ere delivered to hi+ .as it also your poli$y to have the sto$5 $ertifi$ates indorsed in blan5L @ere the sto$5 $ertifi$ates in AP;!B !n$. indorsed in blan5L ANS@ER6 !f there are $ertifi$ates issued in Pri+e ;oldin%s, it is the sa+e .ay it .as delivered to hi+. !f there is su$h $ertifi$ate issued, it is indorsed in blan5 and follo. the sa+e pattern for all the $orporations. @hatever .e have de$ided, .e deliver, si%n in blan5 and deliver to hi+. ?.? id you and your business asso$iates deliver to President *ar$os the sto$5 $ertifi$ates issued by AP;!BL !f not, .hat did you and your business asso$iates do .ith the sto$5 $ertifi$atesL ANS@ER6 !f Pri+e ;oldin%s $ertifi$ates have been issued, as ! said *aC+, it is delivered to the President. :. !n your S.orn State+ent, pa%e ', you also stated that (it is in fa$t +y poli$y and pro$edure that .e dis$lai+ $o+pletely any interest( in the businesses or%aniHed for President *ar$os and (+a5e it $lear to the for+er President that .e held su$h interests in his behalf(. xxx. @as this (poli$y and pro$edure( follo.ed in the $ase of AP;!BL xxx ANS@ER6 #he poli$y is follo.ed by every $orporation that .e or%aniHed for the President. :.1 id you and your business asso$iates also (dis$lai+ $o+pletely any interest( in . . . ,P#!C- and (+a5e it $lear to the for+er President that .e hold su$h interests on his behalf(L
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Corporation CASES Based on the Syllabus of Fr. Agustin ANS@ER6 *aC+, as ! said, ! donCt 5no. that Pri+e ;oldin%s has su$h holdin%s of the P#!C shares that you referred to. 9. #he re$ords of . . . ,P#!C- sho. that <uis #. Rivilla o.ned approxi+ately P:,909,39& .orth of shares of sto$5 in P#!C and that so+e ti+e in 1132-112&, he transferred approxi+ately P',1&?,30' .orth of su$h shares to AP;!B. @ho .as the true or benefi$ial o.ner of the shares of sto$5 in P#!C transferred by <uis #. Rivilla to AP;!B in 1132-112&L ANS@ER6 Any +atters that pertain to P#!C, ! donCt have any 5no.led%e of, *aCa+. xxx ANS@ER6 Consul *orales, 8ust to +a5e everythin% short, after +y heart atta$5 in 1131, *r. 4apud too5 over the +ana%e+ent of the $orporations that belon%ed to the President . . . ! did not parti$ipate any+ore in anythin% of the PresidentCs $orporations +ana%ed by *r. 4apud after +y heart atta$5 and after he too5 over the +ana%e+ent of those $orporations. !t is be$ause of health reasons that ! .as $o+pelled not only to relinIuish that to the President, but also +y o.n $o+panies and O xxx xxx xxx 1&. id you ever have any dis$ussions or $orresponden$e .ith anyone other than President *ar$os, Ra+on 7. Co8uan%$o or Rolando C. 4apud re%ardin% the benefi$ial o.nership by President *ar$os or any +e+ber of his fa+ily, dire$tly or indire$tly, of shares of sto$5 in P< #, P#!C, or Pri+e ;oldin%s, !n$.L ANS@ER6 No, *aCa+. xxx xxx xxx 11. !n your S.orn State+ent, pa%es '-?, you stated that be$ause of a heart atta$5 in the latter part of 1131, you reIuested President *ar$os to relieve you or your responsibilities re%ardin% the businesses entrusted to you, and that Rolando C. 4apud too5 over the dire$t responsibility of dire$tin%, +ana%in% and ad+inisterin% all the a$tivities of the said $orporations. xxx ANS@ER6 >es, *aC+. 11.1 Please des$ribe in detail the $ir$u+stan$es surroundin% the transfer, if any, of the dire$t responsibility of dire$tin%, +ana%in% and ad+inisterin% all the a$tivities of P;!B to *r. 4apudL
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ANS@ER6 As ! stated *aCa+, Pri+e ;oldin%s has been a holdin% $o+pany. #he only assets are the sto$5 $ertifi$ates and there is nothin%. ! thin5 F at that ti+e ! transferred F there is nothin% *r. 4apud has to +ana%e to do be$ause itCs a shared $orporation. ,@ords in bra$5et addedContextually, the only $on$lusion the Court $an plausibly atta$h to the above response of *r. Ca+pos is that he had no 5no.led%e about P;!Cs shareholdin%s in P#!C. ;is ans.ers, su$h as (,a)m! as I said I don)t $now that Prime 7oldings has such holdings of the P.IC shares that 8ou referred to1, and ("n8 matters that pertain to P.IC I don)t have an8 $nowledge1 say as +u$h. !t is also a fa$t dedu$ible fro+ *r. Ca+posC s.orn de$larations that he adhered to a set of pattern or pra$ti$e .hen he or%aniHed $orporations for then Pres. *ar$os. #hus, he de$lared that he, his fa+ily and his asso$iates exe$uted deeds of trust or assi%n+ent in favor of an unna+ed benefi$iary, and there dis$lai+ any interest in the $orporations that he ,*r. Ca+pos- or%aniHed for Pres. *ar$os. "r, they indorsed the sto$5 $ertifi$ates in blan5. And, all of su$h deeds or $ertifi$ates .ere delivered to the late President. >et, *r. Ca+pos .as unable to de$lare .ith $ertitude if these patterns and pra$ti$es .ere follo.ed vis-V-vis P;!. A$$ordin%ly, the Iuestion be%%in% an ans.er is .hether there truly exists, in respe$t to P;! shares, $ertifi$ates indorsed in blan5 or deeds of trust or assi%n+ent in favor of an unna+ed benefi$iary delivered to the late President. !f there is one person .ho $an provide a satisfa$tory ans.er to this Iuestion, it is *r. Ca+pos. But he is not sayin% anythin%. 7nder this s$enario, .e $annot see our .ay $lear on ho. the s.orn de$larations of *r. Ca+pos $ould have, as asserted by petitioner Republi$, proved that respondent P;! .as +erely in$orporated to hold the P#!C shares, that in turn .ould have proved that P;! to%ether .ith respondents Co8uan%$os .ere +ere du++ies of the *ar$os fa+ily to hold the $ontrollin% share of P< #. "n the other hand, *r. 4apudCs deposition - ta5en on "$tober 11, "$tober '& and e$e+ber 11, 1119 at the ;on% Ron% Philippine Consulate "ffi$e - +aterially reads6 (C"NS7< A47!<7C;"6 "n para%raph : of Exhibit (E(, *r. 4aviola stated6 K#hat ! have no personal 5no.led%e of the operation of Pri+e ;oldin%s, !n$. as *r. Rolando C. 4apud handled all the dire$tin%, +ana%in% and ad+inisterin% of all the a$tivities of the said $orporation.C Muestion6 Based on your personal 5no.led%e, do you affir+ or deny the $ontents of the said para%raph : of Exhibit (E(L *R. 4AP7 6 ! affir+. xxx
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Corporation CASES Based on the Syllabus of Fr. Agustin *ada+ Consul, ! .ould li5e to +a5e a $larifi$ation here. Be$ause *r. 4aviola says ! handled all the dire$tin% and +ana%in% and ad+inisterin% of all the a$tivities. Prior to the heart atta$5 of *r. Ca+pos ! re$all that he .as also involved in the ad+inistration of this $o+pany. So, .ith that $larifi$ation ! affir+ para%raph :. C"NS7< A47!<7C;"6 )or ho. lon% did you +ana%e AP;!BL *R. 4AP7 6 ! .ould esti+ate +aybe t.o or three years after *r. Ca+posC heart atta$5. C"NS7< A47!<7C;"6 o you 5no. anythin% about the . . . ,P#!C-, :0= of the $apital sto$5 of .hi$h is o.ned by AP;!BL *R. 4AP7 6 @ell, very little ex$ept for that .hi$h ! have read fro+ the ne.spapers. C"NS7< A47!<7C;"6 sto$5 of the . . . P< #L *R. 4AP7 6 >es. C"NS7< A47!<7C;" 6 o you 5no. the benefi$ial o.ner or o.ners of AP;!BL *R. 4AP7 6 @hat ! 5no. . . . is the shares of sto$5 andEor the assi%n+ents endorsed in blan5 .ere delivered to President *ar$os by *r. Ca+pos. C"NS7< A47!<7C;"6 #he heirs of Ra+on 7. Co8uan%$o, na+ely6 !+elda ". Co8uan%$o and her $hildren . . .$lai+ that they o.n . . .,2&=- per$ent of the outstandin% $apital sto$5 of AP;!B, .hile the Estate of Ra+on 7. Co8uan%$o alle%edly o.ns the re+ainin% t.enty ,'&=- per$ent. Muestion6 Based on your personal 5no.led%e, do you affir+ or deny the said alle%ationL *R. 4AP7 6 ! do not 5no.. ! $an neither affir+ or deny. C"NC7< A47!<7C;"6 #he said heirs also alle%ed that AP;!B .as in$orporated on 9 "$tober 1133 .ith the follo.in% sto$5holders, na+ely6 Rolando C. 4apud, Renato E. <irio, /ose . Ca+pos, /r., 4ervasio #. 4aviola and Ernesto S. Abalos, .ith :&& shares ea$h, . . . . Muestion6 Based on your personal 5no.led%e, do you affir+ or deny the said alle%ationL o you 5no. the P#!C o.ns '9= of the $o++on votin% *R. 4AP7 6 ! affir+.
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C"NC7< A47!<7C;"6 id you really o.n the :&& shares of the Pri+e ;oldin%sL *R. 4AP7 6 No. C"NS7< A47!<7C;"6 )or .ho+ did you hold those :&& sharesL *R. 4AP7 6 @ell, as ! said earlier the shares andEor assi%n+ent indorsed in blan5 .ere delivered by *r. Ca+pos to President *ar$os. C"NS7< A47!<7C;"6 #he sa+e heirs li5e.ise alle%ed6 (!n separate eeds of Assi%n+ent dated 12 )ebruary 1121, t.o ,'- of the in$orporators of Pri+e ;oldin%s, na+ely6 Rolando C. 4apud and /ose . Ca+pos, /r., assi%ned and $onveyed to *essrs. Ra+on 7. Co8uan%$o and "s$ar Afri$a, respe$tively, all their shareholdin%s in Pri+e, $onsistin% of four hundred ,:&&- shares of sto$5 ea$h, or t.enty ,'&=- per$ent ea$h of the shares of sto$5 of Pri+e ,Annexes (C( and (-1(-. Muestion6 Based on your personal 5no.led%e, do you affir+ or deny the said alle%ationL xxx *R. 4AP7 6 *ada+ Consul, ! thin5 ! $an only affir+ that .hi$h pertains to +e, na+ely6 the eed of Assi%n+ent that ! si%ned. ! .ill leave it to *r. Ca+pos to affir+ his eed of Assi%n+ent. A##>. *ANA<A>SA>6 *ada+ Consul 4eneral, in vie. of the identifi$ation by the .itness of the eed of Assi%n+ent, +ay .e reIuest that the sa+e be +ar5ed as our Exhibit (1( ,Co8uan%$oxxx xxx xxx ASS#. S"<!C!#"R 4ENERA< si%natureL *R. 4AP7 6 >es. xxx xxx xxx E< R"SAR!"6 o you identify this as your
Corporation CASES Based on the Syllabus of Fr. Agustin C"NS7< A47!<7C;"6 *ay .e $ontinueL Sho.in% you the said Annex (C( no. +ar5ed as Exhibit ()( for purposes of this pro$eedin%, do you affir+ or deny the authenti$ity of this do$u+entL *R. 4AP7 6 >es, ! affir+. C"NS7< A47!<7C;"6 !s it really true that you assi%ned your :&& shares to Ra+on 7. Co8uan%$oL *R. 4AP7 6 >es. C"NS7< A47!<7C;"6 ;o. +u$h did you re$eive as $onsideration for assi%nin% your shares to hi+L *R. 4AP7 6 #he $onsideration for the assi%n+ent .as that upon +y assi%n+ent, first, +y fidu$iary responsibilities as no+inee .ere extin%uished, and se$ondly, ! had transferred and extin%uished any and all liabilities under the subs$ription payable. C"NS7< A47!<7C;"6 o you 5no. if Ra+on 7. Co8uan%$o re$eived the said shares for hi+self or for anybody elseL *R. 4AP7 6 ! donCt 5no.. xxx xxx xxx.
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eed of Assi%n+ent dated /une 112? si%ned by RENA#" E. <!R!", $opy +ar5ed as EN;!B!# ()-'(D eed of Assi%n+ent dated /une 112? si%ned by 4ERGAC!" #. 4AG!"<A, $opy +ar5ed as EN;!B!# ()-?(D eed of Assi%n+ent dated /une 112? si%ned by ERNES#" S. ABA<"S, $opy +ar5ed EN;!B!# ()-:(D eed of Assi%n+ent dated /uly 112? si%ned by "SCAR #. A)R!CA, $opy +ar5ed EN;!B!# ()-9(D #he aforesaid eeds of Assi%n+ents obviously .ill be .ith the 5no.led%e and upon authoriHation and order of for+er President )erdinand E. *ar$os, is this $orre$tL A##>. *ANA<A>SA>6 >our ;onor, before the .itness ans.ers the Iuestion, .e .ould li5e to reiterate our ob8e$tion insofar as the Iuestion referrin% to *r. "s$ar #. Afri$a is $on$erned. @e are ob8e$tin% to the Iuestion on the %round that *r. 4apud .ould be in$o+petent to testify .ith respe$t to *r. Afri$a, $onsiderin% that *r. Afri$a is not a+on% the sto$5holders-no+inees +entioned by *r. Ca+pos or *r. 4apud as far as Pri+e ;oldin%s is $on$erned and *r. Afri$a is not a+on% the in$orporators of Pri+e ;oldin%s, !n$. xxx xxx xxx G!CE C"NS7< ;ERNAN EQ6 Can .e note your ob8e$tion and let *r. 4apud ans.erL So the aforesaid eeds of Assi%n+ents obviously .ill be .ith the 5no.led%e and upon authoriHation and order of for+er President )erdinand E. *ar$os, is this $orre$tL *R. 4AP7 6 Considerin% that AP;!B .as in$orporated upon the instru$tions of for+er President *ar$os, obviously all the no+inees .ould a$t only upon his authoriHation. #hatCs +y ans.er. 2? <i5e *r. Ca+pos before hi+, *r. 4apud also see+s to be .ithout personal 5no.led%e of .hether or not P;! o.ned shares in P#!C. ;e ad+its that .hatever he 5no.s about P;!Cs holdin% in P#!C, if there be any, is based only on .hat he has read fro+ the ne.spapers. #rue it is that he a$5no.led%ed not a$tually o.nin% the :&& P;!shares in his na+e. But .hen as5ed for .ho+ he held su$h shares, he hed%ed on his ans.er, sayin%6 (Aell! as I said earlier the shares and2or assignment indorsed in blan$ were delivered b8 ,r. Campos to President ,arcos1 . *r. 4apud, ho.ever, .ould later $ontradi$t hi+self .ith respe$t to the disposition of the said :&& P;!
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,7nders$orin% added-
Continuin% his deposition-ta5in% on e$e+ber 11, 1119, *r. 4apud also said6 (G!CE C"NS7< ;ERNAN EQ6 No. 9, re%ardin% AP;!B .hi$h .as one of the $o+panies or%aniHed for for+er President )erdinand E, *ar$os, as stated by deponent /ose >. Ca+pos in his S.orn State+ent ,EN;!B!# ( (- and affir+ed by you also, and the various eeds of Assi%n+ent of shares in Pri+e ;oldin%s, !n$. by the listed Sto$5holders-No+inees in favor of the late Ra+on 7. Co8uan%$o and his $hildren, respe$tively, na+ely6 eed of Assi%n+ent dated )ebruary 12, 1121 si%ned by you and +ar5ed EN;!B!# ()(D eed of Assi%n+ent dated )ebruary 12, 1121 si%ned by /"SE . CA*P"S, /R., $opy +ar5ed EN;!B!# ()-1(D
Corporation CASES Based on the Syllabus of Fr. Agustin shares .ith his state+ent that he assi%ned .hat on paper .as his P;! shares to the late Ra+on 7. Co8uan%$o. Clearly, it .ould have been i+plausible for hi+ to +a5e the assi%n+ent to *r. Co8uan%$o if the $overin% $ertifi$ates had previously been delivered to Pres. *ar$os. ;e also affir+ed that his assi%n+ent of P;! shares to *r. Co8uan%$o .as for a $onsideration, albeit this $onsisted of bein% freed fro+ his fidu$iary responsibilities as no+inee and of the extin%uish+ent of his liabilities on his subs$ription. #a5en as a pa$5a%e, *r. 4apudCs s.orn state+ents do not suffi$iently prove petitioner Republi$Cs theory of the $ase. #he s.orn state+ent of Atty. )ran$is$o de 4uH+an, for+er P;! $orporate se$retary, ta5en durin% his deposition on /une 1', '&&1, is hereunder pertinently reprodu$ed, vi(.6 A##>. M7!S7*B!N46 But as of 1132 . . . Pri+e ;oldin%s, !n$. AP;!B .as in$orporated on instru$tion of *r. /ose >ao Ca+pos in 1133, so as of 1132 AP;!B .as still a holdin% $o+pany of *r. Ca+posL xxx xxx xxx @itness6 Please repeat the Iuestion. Atty. Muisu+bin% 6#he re$ords in the Se$urities and Ex$han%e Co++ission indi$ate that AP;!B .as in$orporated in "$tober of 1133 and you already testified that AP;!B .as in$orporated on instru$tions of *r. Ca+posL @itness6 >es sir6 M6 And you also testified that Pri+e ;oldin%s is a holdin% $o+panyL A6 >es, sir. M6 "f *r. Ca+posL A6 ! said holdin% $o+pany, you as5ed +e .hat is the nature of the $o+pany and ! thin5 you $larified the Iuestion, a holdin% $o+pany is one that hold assets and ! said yes, sir, thatCs ho. ! understand a holdin% $o+pany. M6 And you testified that all of these five ,9- ori%inal sto$5holders of AP;!B .or5ed for *r. Ca+posL A6 >es, sir. M6 So, the follo.in% year of 1132 you .ere still Corporate Se$retary of AP;!BL A6 >es, sir.
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M6 And .ere you still ta5in% instru$tions fro+ *r. Ca+pos the follo.in% year 1132 .ith re%ard to AP;!BL A6 >es, sir. M6 And ho. lon% after that did you $ontinue to ta5e instru$tions fro+ *r. Ca+pos .ith re%ard to AP;!BL A6 xxx !C+ not too sure about this, but he distan$ed hi+self in +any operations even of 7nited <aboratories .hen he had a heart atta$5 in 1131, sir. M6 So you are sayin% that you too5 instru$tions fro+ *r. Ca+pos .ith re%ard to AP;!B until 1131 .hen *r. Ca+pos had a heart atta$5L A6 >es, that is the possibility of havin% instru$tions fro+ hi+ be$ause after that he really .as very ina$tive in all these $orporations and it .as then that *r. 4apud .ho too5 over, sir. M6 !n 1131L A6 >es, sir. M6 By the .ay, in 1131 after *r. Ca+pos suffered this heart atta$5 and ! believe that .as late 1131, did *r. Ca+pos also retire fro+ a$tive involve+ent in 7N!<ABL A6 >es, sir. xxx xxx xxx M6 After 1131 .hen *r. 4apud too5 over, are you a.are if there are any transfers of shares of sto$5s in AP;!B to other peopleL A6 >es, sir. M6 @ill you tell us about thatL A6 *y re$olle$tion is, *r. 4apud hi+self +ade a eed of Assi%n+ent but ! donCt re+e+ber to .ho+ the eed of Assi%n+ent, in .hose favor.
Corporation CASES Based on the Syllabus of Fr. Agustin M6 @hat year .as thatL A6 ! $annot re$all the year, sir. M6 But this .as in 1131L A6 ! suppose so, sir. M6 No., did *r. 4apud assi%n his four hundred shares to *r. Ra+on 7. Co8uan%$oL A6 >es, sir. A6 ! thin5 the do$u+ent .ill sho. be$ause ! $annot re$all as to the person .ho +ade the assi%n+ent, sir, !C+ sorry, ! donCt really have a sin%le paper of the re$ords, sir. xxx xxx xxx A6 >es, sir. M6 @as it the standard operatin% pro$edure in /ose >ao Ca+pos holdin%s $o+panies that the sto$5 $ertifi$ates of the sto$5holders .ould be endorsed in blan5L A6 >es, sir. A6 A $opy of .hi$h usually t.o ,'- $opies are +ade, sir. M6 And .ho .ould hold $ustody or possession of those blan5 endorsed sto$5 $ertifi$atesL A6 !n the $ase of +any of the $orporations ! thin5 in$ludin% AP;!B these are not fully paid shares and therefore, ! 5ne. that no sto$5 $ertifi$ates have been issued, sir. M6 So, spe$ifi$ally in the $ase of AP;!B there .ere no sto$5 $ertifi$ates issued be$ause the subs$riptions .ere not fully paidL A6 >es, sir. M6 #he re$ords of that parti$ular $o+panyL M6 o you 5no. if the sto$5holders of AP;!B, this is prior to 1121, had exe$uted of Assi%n+ent in blan5 for their subs$riptions to P;! sharesL eed A6 >es, sir, and the other one .e %ive it to the #reasurer. M6 "f that parti$ular $o+panyL A6 No, to *r. 4aviola, sir. M6 *r. 4aviola .as the #reasurer of AP;!B .asnCt heL M6 #.o ,'- ori%inalsL A6 No. M6 Nerox $opiesL A6 >es, sir.
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M6 >ou said eed of #rust, .ould there be a desi%nated trusteeL A6 No, sir. M6 So, these are eeds of Assi%n+ent or .ould be left blan5L eeds of #rust, the benefi$iary of .hi$h
M6 But the assi%nors or the trustees or %rantors .ould all si%n, .ould all exe$ute these eedsL
M6 @ho .ould have possession, you +entioned standard operatin% pro$edure or S"P, under that S"P .ho .ould hold the blan5 deedsL
A6 No, one ori%inal and one xerox $opy and the ori%inal .ill be in$luded in the re$ords, sir.
A6 >es, sir, in the standard operatin% pro$edure in the $o+panies of *r. Ca+pos is that all the subs$ribers .ould have either a eed of Assi%n+ent si%ned or a eed of #rust, sir. M6 And you are referrin% to these holdin% $o+panies that *r. Ca+pos, a nu+ber of holdin% $o+panies that *r. Ca+pos have $aused to be in$orporated, these are the $o+paniesL
Corporation CASES Based on the Syllabus of Fr. Agustin A6 ! thin5 he is be$ause he is al.ays, .as the #reasurer of +any of the $o+panies of *r. Ca+pos, sir. M6 So, there is the S"P also, *r. 4erva$io 4aviola is the #reasurer of AP;!BL A6 >es, sir. xxx xxx xxx M6 o you 5no., so .hat happened to those blan5 eeds of Assi%n+ent and eeds of #rust of AP;!B that .ere entrusted .ith the trusted la.yers of 7N!<ABL A6 @hen AP;!CsB re$ords .ere delivered, all those re$ords, all those papers are .ith the re$ords, sir. M6 So, you are referrin% to the 112' delivery to the representative of *r. Ra+on 7. Co8uan%$oL A6 >es, sir, ex$ept t.o ,'- eeds of Assi%n+ent .hi$h .ere ! thin5 +ade dire$tly after.ard .hen *r. 4apud and *r. /ose Ca+pos, /r. +ade the dire$t assi%n+ents to persons a$tually desi%nated in the eeds of Assi%n+ent, sir. M6 @ho .ere thoseL A6 #he shares of *r. 4apud .as %iven to *r. Ra+on 7. Co8uan%$o, *r. Ca+pos, /r. ! $anCt re+e+ber to .ho+ he +ade the assi%n+ent, sir. M6 oes the na+e Atty. Afri$a rin% a bellL A6 >es, sir. M6 @ould he be the person .ho .as the assi%nee of the shares of either *r. 4apud or *r. Ca+pos, /r.L A6 @ell, ! thin5 so, sir. M6 No., this .as in the year 1121, do you re$all thatL A6 No, sir. M6 o you re$all it +i%ht be 112'L A6 ! have no idea as to the year .hen this .as +ade, sir.
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M6 But you testified that there .as a $han%e of o.nership of AP;!B that led to the $han%e of offi$ers in$ludin% yourself in 112'L A6 ! didnCt say o.nership, sir. ! said that .hen there .as a $han%e .hen *r. Ra+on Co8uan%$o be$a+e the Chair+an, 8ust on ti+e .hen he said there .ill be a $han%e of offi$er that is .hy they %ot the re$ords fro+ +e. M6 So, are you sayin% that there .as no $han%e of o.nership in AP;!B in 1121, 112'L A6 Ex$ept the assi%n+ents +ade by the t.o ,'- persons, sir. #hat is .hat ! 5no.. xxx xxx xxx M6 >ou indi$ated earlier that those $han%e of offi$ers of AP;!B in 112', .ho .ere the ne. offi$ers that too5 overL A6 ! do not 5no., sir. xxx xxx xxx M6 @ho do you 5no. .as $han%ed a+on% the offi$ers of AP;!B ;oldin%s, !n$. A6 *r. 4apud as the Chair+an and President, sir. M6 @as repla$edL A6 @as repla$ed by *r. Co8uan%$o, sir. M6 By *r. Ra+on Co8uan%$oL A6 >es, sir. M6 And this is about 112'L A6 Possibly ! $annot re$all the exa$t date, sir. xxx xxx xxx Atty. Muisu+bin%6
Corporation CASES Based on the Syllabus of Fr. Agustin >ou testified earlier that *r. Co8uan%$o be$a+e the PresidentL @itness6 >es, sir. ! testified to that effe$t be$ause that .as the instru$tion %iven to +e that the su$$eedin% +inutes of the annual +eetin% *r. 4apud told +e that the ne. Chair+an and President .ill be, .as *r. Ra+on Co8uan%$o, sir. M6 And that .as the instru$tion of *r. 4apudL A6 >es, sir. M6 ;e .as the President and Chair+an before *r. Co8uan%$oL A6 >es, sir. M6 No., did you have any involve+ent in AP;!B after 112' A6 None, sir. M6 And you testified that all the re$ords that you .ere holdin% of AP;!B .ere ta5en fro+ you in 112' A6 >es, sir. M6 By *r. 4apudL A6 >es, sir. M6 o you 5no. .ho if ,sic- he retained those re$ords or if he turned it over to the ne. Chair+an and PresidentL A6 @ell, he told +e he .ill be turnin% it over to the Co8uan%$os, sir. M6 And those in$lude the blan5 eeds of Assi%n+ent and eeds of #rustL A6 ! suppose so, sir.2: ,7nders$orin% and the .ord (P;!( in bra$5et in lieu of the .ords (Pri+e ;oldin%s !n$.( added!n esse, Atty. 4uH+an +erely reiterated fa$ts dedu$ible fro+ the s.orn de$larations of *r. Ca+pos and *r. 4apud, fore+ost of .hi$h is that P;! .as a+on% the $orporations or%aniHed upon *r. Ca+posC instru$tions and that for all the $orporations of *r. Ca+pos, deeds of trust or assi%n+ent .ere exe$uted. Atty. e 4uH+anCs state+ents are also affir+atory of the fa$t that *r. 4apud assi%ned P;! shares in his
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na+e to *r. Co8uan%$o. !nterestin%ly, ho.ever, Atty. e 4uH+an dis$losed a detail about the for+ation and the runnin% of P;! not heretofore 5no.n, i.e., that there .ere t.o $opies of the deeds of trust or assi%n+ent, one a +a$hine $opy, and the other, the ori%inal, that .as 5ept in the re$ords of the $o+pany. But of parti$ular si%nifi$an$e fro+ this dis$losure is the a$tuality that until the ti+e that *r. Co8uan%$o assu+ed the $hair+anship and presiden$y of P;! and the re$ords .ere delivered to hi+ ,Co8uan%$o-, the deeds of trust or assi%n+ent .ere on file .ith the re$ords, ( eFcept two 3?4 #eeds of "ssignment which were FFF made directl8 afterward when ,r. Gapud and ,r. Jose Campos! Jr. made the direct assignments to persons actuall8 designated in the #eeds of "ssignments1. 4iven the above, it .ould appear that the exe$ution of the eeds of Assi%n+ent to Ra+on Co8uan%$o +ar5edly departs fro+ the set pattern usually follo.ed in the or%aniHation of $orporations on behalf of the late President *ar$os, respondent P;! in$luded. #he pattern, to repeat, $onsisted of6 the exe$ution of deeds of trust or assi%n+ent to an unna+ed benefi$iary, or to indorse in blan5 the sto$5 $ertifi$ates, and deliver the $orrespondin% deeds to the late President. !n the $ase of .hat for the non$e +ay be referred to as the (Co+uangco assignment1, the benefi$iary portion of the deeds .as not in blan5. !nstead, the na+e of *r. Ra+on Co8uan%$o spe$ifi$ally appeared therein. Possession of the deeds .ere .ith the respondents Co8uan%$os, not the *ar$oses, ne$essarily i+plyin% that nothin% .as delivered to the late President *ar$os in re%ards to the $overed P;! shares. And there $an be no serious ar%u+ent that petitioner Republi$ has not produ$ed any deed of assi%n+ent or trust exe$uted to an unna+ed benefi$iary or $ertifi$ates indorsed in blan5 .hi$h .ould have other.ise $orresponded to the disputed shareholdin%s of the Co8uan%$os in P< # by virtue of the P;! shares assi%ned to the+. 7pon the above observations and absent any positive testi+ony, even fro+ persons already extended by the PC44 state i++unity fro+ $ri+inal prose$ution and li5e privile%es, notably *essrs. Ca+pos, 4apud and e 4uH+an, provided they dis$lose, a+on% other thin%s, relevant infor+ation respe$tin% the alle%ed a$$u+ulated (ill%otten .ealth( of the *ar$oses, that respondents Co8uan%$os held their assi%ned shares on behalf of the late Pres. *ar$os, .e also hold as untenable petitioner Republi$Cs unyieldin% posture that the afore+entioned deeds of assi%n+ent to respondents Co8uan%$os are sha+ and fi$titious. !n all, this Court is unable to a$$ord $on$urren$e to petitioner Republi$Cs theory that the disputed P< # shares, $overed by the ne$essary P#!C sto$5 $ertifi$ates in the na+e of respondents Co8uan%$osEP;!, are part of the *ar$osesC ( ill gotten wealth(, for la$5 of dire$t and substantial proof thereof. Petitioner Republi$Cs re$overy efforts $annot be predi$ated on spe$ulations, sur+ises or va%ue inferen$es, as here. !n this sense, the respondent $ourt stood on solid le%al %round .hen it held that ( a claim or recover8 of properties alleged b8 the %epublic to have been ill gotten cannot proceed under the mere presumption that said properties are indeed ill gotten1.
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Corporation CASES Based on the Syllabus of Fr. Agustin "n another point, petitioner Republi$ has +ade +u$h of respondent $ourtCs failure to appre$iate in its favor the alle%ations, parta5in% of 8udi$ial ad+issions, +ade by respondent *rs. *ar$os in her Ans.er to its A+ended Co+plaint, Cross-$lai+ and other pleadin%s, bearin% on the *ar$osesC o.nership of the disputed P< # shares. !n this re%ard, suffi$e it to state that these ad+issions are eviden$e a%ainst the party .ho +ade the+ or, in appropriate $ase, their privies. 29 !n the $on$rete, the ad+issions adverted to +ade by *rs. *ar$os, even if they parta5e of 8udi$ial ad+issions, are bindin% and $on$lusive only as to her. #hey $annot bind or pre8udi$e respondents Co8uan%$osEP;! .ho have ta5en issue a%ainst *rs. *ar$os on her o.nership $lai+ over the P< # shares in Iuestion. #his brin%s us to .hat are 5no.n as the (4eneral #elephone U Ele$troni$s A4#EB o$u+ents(, .hi$h to petitioner Republi$ are li5e.ise +aterial evidentiary lin5 to prove that the disputed P< # shares for+ part of the *ar$osesC ( ill gotten wealth1, but .hi$h +erited s$ant $onsideration fro+, if not alto%ether i%nored by, the respondent $ourt. #.o ,'- letters $o+prise the 4#E o$u+ents6 one, purportedly fro+ <eslie ;. @ar5er of 4#E to *r. Ra+on Co8uan%$o $onfir+in% an appoint+ent .ith the latterCs (principal(D and the other, fro+ #heodore ). Brophy of 4#E to 7S Assistant Se$retary of State Eu%ene ;. Brader+an na+in% then Pres. *ar$os as the (Prin$ipal(. Per petitioner Republi$Cs a$$ount, photo-$opies of the 4#E o$u+ents .ere a+on% the papers and +aterials seiHed by the 7S Custo+s Servi$e fro+ the *ar$os fa+ily in )ebruary '0, 1120 in ;a.aii and subseIuently turned over to PC44. #he @ar5er letter under date of /une 12, 110320 reads in full, as follo.s6 *r. Ra+on Co8uan%$o #he Kprin$ipalC referred to in the /uly 12 letter is President *ar$os. *anila Philippine !slands ear *r. Co8uan%$o6 @e have re$eived your $able on /uly 12, 1103 to *r. ou%las in .hi$h you $onfir+ed that an appoint+ent had been se$ured for *r. Brophy to +eet .ith your prin$ipal durin% the .ee5 of Au%ust 1?, 1103, the date and hour to be finaliHed upon *r. BrophyCs arrival. Based on this assuran$e, the (Proposal .ith Respe$t to the Sale of 4eneral #elephone U Ele$troni$s CorporationCs Sto$5holdin%s in AP< #B to a Philippine 4roup( dated
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/une 0, 1103 .ill re+ain open until :6?& p.+. Ne. >or5 ti+e on Au%ust ?1, 1103, and unless a$$epted by that ti+e ,or further extended- .ill expire. Arti$le G!!!. letter. . of the proposal shall be dee+ed to be +odified in this respe$t by this
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! assure you of *r. BrophyCs $ooperation .ith you in pursuin% the proposal and hope that durin% your +eetin%s you .ill be able to rea$h a +utually satisfa$tory solution to any Iuestions .hi$h +ay arise. Sin$erely yours, ,S%d.- <ES<!E ;. @ARRER( #he Brophy letter to *r. Brader+an23 referred to above reads6 "$tober 1, 1103 ear *r. Brader+an6 !n a$$ordan$e .ith your reIuest to *r. Stratton Anderson of our @ashin%ton "ffi$e, ! a+ en$losin% a $opy of a (Proposal .ith Respe$t to the Sale of 4eneral #elephone U Ele$troni$s CorporationCs Sto$5holdin%s in AP< #B to a Philippine 4roup(, dated /une 0, 1103, to%ether .ith a letter of /uly 12, 1103 a+endin% the Proposal, and a $opy of a press release issued by this Corporation upon the $o+pletion of the step provided for in Arti$le G!!! E.P. of the proposal.
Sin$e the transa$tion has not been $o+pleted, and .e $annot be sure at this ti+e that it .ill be $o+pleted, .e .ould prefer not to sub+it a detailed +e+orandu+ $on$ernin% the ba$5%round of the Proposal. ! .ould, ho.ever, be %lad to dis$uss it .ith you on the telephone and ans.er any Iuestions you +ay have. Sin$erely yours, ,S%d.- #heodore ). Brophy( Petitioner Republi$ $ontends that the said 4#E o$u+ents are ( authori(ed public records of a private document1. As su$h, it ar%ues, $itin% Se$tion '3 of Rule 1?',22 that there .ould be no need to present the ori%inal $opies thereof, as they +ay be proved by a +ere $opy thereof, provided su$h $opy is attested by the le%al $ustodian of the
Corporation CASES Based on the Syllabus of Fr. Agustin re$ords, .ith an appropriate $ertifi$ate that su$h offi$er has the $ustody. A$$ordin% to said petitioner, the attestation of *s. <ourdes *a%no, PC44 Re$ord "ffi$er, .ith the $ertifi$ation that she has su$h $ustody .ould suffi$e for the purpose of authenti$atin% and provin% their %enuineness so as to have the 4#E do$u+ents re$eived in eviden$e. @e disa%ree. Not every sin%le paper or do$u+ent in the $ustody of PC44 in relation to its Iuest to re$over the (ill gotten wealth( of the *ar$os fa+ily has the $hara$ter and probative value of an (authori(ed public record1. Even the offi$ial seal of the PC44 on the t.o ,'- 4#E o$u+ents does not suffi$e to +a5e the+ ( authori(ed public records( of a private do$u+ent and thus enhan$e their ad+issibility. #he 4#E o$u+ents are still private .ritin%s. #he 4#E o$u+ents turned over by the 7S 4overn+ent in the hands of the PC44 are not self-authenti$atin%, for .hat is $ontextually $onsidered a publi$ do$u+ent is not the private .ritin%, but the publi$ re$ord thereof.21 #heir authenti$ity and due exe$ution, as $ondition sine 'ua non for their re$eption in eviden$e, .ith the evidentiary .ei%ht they +i%ht other.ise be entitled to, +ust first be proved under Se$tion '&, Rule 1?' of the Rules Court, .hi$h reads6 (SEC. '&. Proof of private do$u+ent. F Before any private do$u+ent offered as authenti$ is re$eived in eviden$e, its due exe$ution and authenti$ity +ust be proved either6 ,a- By anyone .ho sa. the do$u+ent exe$uted or .ritten, or ,b- By eviden$e of the %enuineness of the si%nature or hand.ritin% of the +a5er. Any other private do$u+ent need only be identified as that .hi$h it is $lai+ed to be.(lawphKl.net A $ontrary rulin% .ould other.ise put the re$overy suits beyond the pale of the la. on ad+issibility of eviden$e. #his $ould not have been the intention of then President CoraHon C. AIuino .hen she issued E" No. 1:, series of 1120, supra, providin% that (technical rules of procedure and evidence shall not be applied strictl8 to Gsaid ill gotten wealth casesH.1 !n %epublic vs. Sandiganba8an 3.hird #ivision4!1& the Court .rote6 xxx Eleven years have passed sin$e the %overn+ent initiated its sear$h for and reversion of su$h ill-%otten .ealth. #he definitive resolution of su$h $ases on the +erits is thus lon% overdue. !f there is proof of ille%al a$Iuisition, a$$u+ulation, +isappropriation, fraud of illi$it $ondu$t, let it be brou%ht out no.. <et the o.nership
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of these funds and other assets be finally deter+ined and resolved .ith dispat$h, free fro+ all the delayin% te$hni$alities and annoyin% pro$edural sidetra$5s. A little over six years ,0- later, in /uly '&&?, the Court, in %epublic vs. Sandiganba8an 11 repeated the sa+e +essa%e i+parted in the earlier %epublic $ase, althou%h the $lause (AABl+ost t.o de$ades have passed( .as used, and aptly so, in lieu of (AEBleven years have passed(. @hat .e said in both %epublic $ases is as sound and $o+pellin% as it is today. !t should not, ho.ever, be %iven a slant to +ean that the Court has laid do.n a poli$y that ea$h and every re$overy suit brou%ht by the PC44 shall be %overned by different nor+s of 8usti$e or fair play. )ar fro+ it. !f the reIuired Iuantu+ of proof obtains to establish ille%al a$Iuisition, a$$u+ulation, +isappropriation, fraud or illi$it $ondu$t, ours is the duty to affir+ the re$overy efforts of the Republi$. "n the other hand, should su$h proof be .antin%, .e have the eIually exa$tin% obli%ation to de$lare that it is so. Si+ple 8usti$e de+ands su$h attitude fro+ this Court. So does the %uarantee a%ainst deprivation of property .ithout due pro$ess, .hi$h, li5e other basi$ $onstitutional %uarantees, applies to all individuals, in$ludin% tyrants, $harlatans and s$oundrels of every stripe, to borro. fro+ /usti$e !sa%ani A. CruH in his dissent in ,arcos vs. ,anglapus.1' !t has been said that ea$h $ase, and ea$h liti%ious situation, +ust stand on its o.n pe$uliar set of fa$ts, 8ust as every $ase disposition +ust stand on the basis of su$h fa$ts established by relevant and $o+petent eviden$e in the li%ht of appli$able statutory and de$isional la.. "ther de$ided $ases +ay be appropriate as points of referen$e , but, in the ulti+ate analysis, oneCs $ause of a$tion shall su$$eed or fail on the basis of the superiority of his eviden$e, ta5in% into a$$ount the burden of proof assi%ned on ea$h party and the 'uantum of eviden$e reIuired by the $ir$u+stan$es. So it +ust be .ith ill-%otten .ealth re$overy $ases, !nsofar as the disputed P< # shares in underlyin% C1615 Ca(& No. 0002 are $on$erned, .e a%ree .ith the holdin% of the respondent $ourt that there is no satisfa$tory proof that they are indeed part of the ( ill gotten wealth1 bein% re$overed by the State. #he $ase for petitioner Republi$ falls short to satisfy the standards set +ainly inB"S0C/1? to establish a findin% of (ill-%otten .ealth(. @e thus lend $on$urren$e to respondent $ourtCs $on$lusion, that6 (;en$e, a $lai+ for re$overy of properties alle%ed by the Republi$ to have been ill%otten $annot pro$eed under the +ere presu+ption that said properties are indeed ill%otten. Before that $hara$teriHation $an be appended to the properties sou%ht to ,bere$overed, there +ust be proof of su$h $lai+. #he $hara$teriHation $annot arise on the basis of publi$ notoriety. !n the $ase at bar, the Republi$ failed to present the proof reIuired to $hara$teriHe the P< # shares as ill-%otten. As a ne$essary $onseIuen$e of this failure, its $lai+ for re$overy thereof $annot su$$eed.( ,at p. :1-
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Corporation CASES Based on the Syllabus of Fr. Agustin !n a+plifi$ation of the fore%oin%, ! reiterate .hat ! .rote in +y (C"**EN#( ,Annex (A( hereof- to the !SSEN#!N4 ,no. +a8ority- "P!N!"N of /usti$e *orales and +y (RE/"!N ER( ,Annex (B( hereof- to her reply to +y $o++ent. :HEREFORE, ! vote to ENY, for la$5 of +erit, the instant petitions and to AFF"R% the assailed issuan$es of the Sandi%anbayan ,:th ivision- in Civil Case No. &&&'. CANC"O Asso$iate /usti$e C. GARC"A
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Corporation CASES Based on the Syllabus of Fr. Agustin
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EN BANC G.R. No. 1.6,.9 Jun& 28, 2011
:"LSON !. GA%#OA, Petitioner, vs. F"NANCE SECRETARY %ARGAR"TO #. TE$ES, F"NANCE UN ERSECRETARY JOHN !. SE$"LLA, AN CO%%"SS"ONER R"CAR O A#CE E OF THE !RES" ENT"AL CO%%"SS"ON ON GOO GO$ERN%ENT /!CGG0 "N THE"R CA!AC"T"ES AS CHA"R AN %E%#ERS, RES!ECT"$ELY, OF THE !R"$AT"AAT"ON COUNC"L, CHA"R%AN ANTHON" SAL"% OF F"RST !AC"F"C CO., LT . "N H"S CA!AC"TY AS "RECTOR OF %ETRO !AC"F"C ASSET HOL "NGS "NC., CHA"R%AN %ANUEL $. !ANG"L"NAN OF !H"L"!!"NE LONG "STANCE TELE!HONE CO%!ANY /!L T0 "N H"S CA!AC"TY AS %ANAG"NG "RECTOR OF F"RST !AC"F"C CO., LT ., !RES" ENT NA!OLEON L. NAAARENO OF !H"L"!!"NE LONG "STANCE TELE!HONE CO%!ANY, CHA"R FE #AR"N OF THE SECUR"T"ES ENCHANGE CO%%"SS"ON, an* !RES" ENT FRANC"S L"% OF THE !H"L"!!"NE STOC9 ENCHANGE, Respondents. !A#L"TO $. SAN" A an* ARNO $. SAN" A , Petitioners-in-!ntervention. EC!S!"N CAR!"O, J.: #he Case #his is an ori%inal petition for prohibition, in8un$tion, de$laratory relief and de$laration of nullity of the sale of shares of sto$5 of Philippine #ele$o++uni$ations !nvest+ent Corporation ,P#!C- by the %overn+ent of the Republi$ of the Philippines to *etro Pa$ifi$ Assets ;oldin%s, !n$. ,*PA;-, an affiliate of )irst Pa$ifi$ Co+pany <i+ited ,)irst Pa$ifi$-. T3& An)&;&*&n)( #he fa$ts, a$$ordin% to petitioner @ilson P. 4a+boa, a sto$5holder of Philippine <on% istan$e #elephone Co+pany ,P< #-, are as follo.s61 "n '2 Nove+ber 11'2, the Philippine <e%islature ena$ted A$t No. ?:?0 .hi$h %ranted P< # a fran$hise and the ri%ht to en%a%e in tele$o++uni$ations business. !n 1101, 4eneral #elephone and Ele$troni$s Corporation ,4#E-, an A+eri$an $o+pany
and a +a8or P< # sto$5holder, sold '0 per$ent of the outstandin% $o++on shares of P< # to P#!C. !n 1133, Pri+e ;oldin%s, !n$. ,P;!- .as in$orporated by several persons, in$ludin% Roland 4apud and /ose Ca+pos, /r. SubseIuently, P;! be$a+e the o.ner of 111,:19 shares of sto$5 of P#!C by virtue of three eeds of Assi%n+ent exe$uted by P#!C sto$5holders Ra+on Co8uan%$o and <uis #irso Rivilla. !n 1120, the 111,:19 shares of sto$5 of P#!C held by P;! .ere seIuestered by the Presidential Co++ission on 4ood 4overn+ent ,PC44-. #he 111,:19 P#!C shares, .hi$h represent about :0.1'9 per$ent of the outstandin% $apital sto$5 of P#!C, .ere later de$lared by this Court to be o.ned by the Republi$ of the Philippines. ' !n 1111, )irst Pa$ifi$, a Ber+uda-re%istered, ;on% Ron%-based invest+ent fir+, a$Iuired the re+ainin% 9: per$ent of the outstandin% $apital sto$5 of P#!C. "n '& Nove+ber '&&0, the !nter-A%en$y PrivatiHation Coun$il ,!PC- of the Philippine 4overn+ent announ$ed that it .ould sell the 111,:19 P#!C shares, or :0.1'9 per$ent of the outstandin% $apital sto$5 of P#!C, throu%h a publi$ biddin% to be $ondu$ted on : e$e+ber '&&0. SubseIuently, the publi$ biddin% .as reset to 2 e$e+ber '&&0, and only t.o bidders, Parallax Genture )und NNG!! ,Parallax- and Pan-Asia Presidio Capital, sub+itted their bids. Parallax .on .ith a bid of P'9.0 billion or 7SW91& +illion. #hereafter, )irst Pa$ifi$ announ$ed that it .ould exer$ise its ri%ht of first refusal as a P#!C sto$5holder and buy the 111,:19 P#!C shares by +at$hin% the bid pri$e of Parallax. ;o.ever, )irst Pa$ifi$ failed to do so by the 1 )ebruary '&&3 deadline set by !PC and instead, yielded its ri%ht to P#!C itself .hi$h .as then %iven by !PC until ' *ar$h '&&3 to buy the P#!C shares. "n 1: )ebruary '&&3, )irst Pa$ifi$, throu%h its subsidiary, *PA;, entered into a Conditional Sale and Pur$hase A%ree+ent of the 111,:19 P#!C shares, or :0.1'9 per$ent of the outstandin% $apital sto$5 of P#!C, .ith the Philippine 4overn+ent for the pri$e of P'9,'13,990,&&& or 7SW91&,92&,121. #he sale .as $o+pleted on '2 )ebruary '&&3. Sin$e P#!C is a sto$5holder of P< #, the sale by the Philippine 4overn+ent of :0.1'9 per$ent of P#!C shares is a$tually an indire$t sale of 1' +illion shares or about 0.? per$ent of the outstandin% $o++on shares of P< #. :1)3 )3& (a5&, F1r() !a;141;C( ;o22on (3ar&3o5*1n@( 1n !L T 1n;r&a(&* 4ro2 -0.. '&r;&n) )o -. '&r;&n), )3&r&+y 1n;r&a(1n@ )3& ;o22on (3ar&3o5*1n@( o4 4or&1@n&r( 1n !L T )o a+ou) 81.4. '&r;&n). #his violates Se$tion 11, Arti$le N!! of the 1123 Philippine Constitution .hi$h li+its forei%n o.nership of the $apital of a publi$ utility to not +ore than :& per$ent.? "n the other hand, publi$ respondents )inan$e Se$retary *ar%arito B. #eves, 7nderse$retary /ohn P. Sevilla, and PC44 Co++issioner Ri$ardo Ab$ede alle%e the follo.in% relevant fa$ts6
Nazareno
Corporation CASES Based on the Syllabus of Fr. Agustin "n 1 Nove+ber 1103, P#!C .as in$orporated and had sin$e en%a%ed in the business of invest+ent holdin%s. P#!C held '0,&?:,'0? P< # $o++on shares, or 1?.2:3 per$ent of the total P< # outstandin% $o++on shares. P;!, on the other hand, .as in$orporated in 1133, and be$a+e the o.ner of 111,:19 P#!C shares or :0.1'9 per$ent of the outstandin% $apital sto$5 of P#!C by virtue of three eeds of Assi%n+ent exe$uted by Ra+on Co8uan%$o and <uis #irso Rivilla. !n 1120, the 111,:19 P#!C shares held by P;! .ere seIuestered by the PC44, and subseIuently de$lared by this Court as part of the ill-%otten .ealth of for+er President )erdinand *ar$os. #he seIuestered P#!C shares .ere re$onveyed to the Republi$ of the Philippines in a$$ordan$e .ith this CourtCs de$ision : .hi$h be$a+e final and exe$utory on 2 Au%ust '&&0. #he Philippine 4overn+ent de$ided to sell the 111,:19 P#!C shares, .hi$h represent 0.: per$ent of the outstandin% $o++on shares of sto$5 of P< #, and desi%nated the !nter-A%en$y PrivatiHation Coun$il ,!PC-, $o+posed of the epart+ent of )inan$e and the PC44, as the disposin% entity. An invitation to bid .as published in seven different ne.spapers fro+ 1? to ': Nove+ber '&&0. "n '& Nove+ber '&&0, a pre-bid $onferen$e .as held, and the ori%inal deadline for biddin% s$heduled on : e$e+ber '&&0 .as reset to 2 e$e+ber '&&0. #he extension .as published in nine different ne.spapers. urin% the 2 e$e+ber '&&0 biddin%, Parallax Capital *ana%e+ent <P e+er%ed as the hi%hest bidder .ith a bid of P'9,'13,990,&&&. #he %overn+ent notified )irst Pa$ifi$, the +a8ority o.ner of P#!C shares, of the biddin% results and %ave )irst Pa$ifi$ until 1 )ebruary '&&3 to exer$ise its ri%ht of first refusal in a$$ordan$e .ith P#!CCs Arti$les of !n$orporation. )irst Pa$ifi$ announ$ed its intention to +at$h ParallaxCs bid. "n ?1 /anuary '&&3, the ;ouse of Representatives ,;R- Co++ittee on 4ood 4overn+ent $ondu$ted a publi$ hearin% on the parti$ulars of the then i+pendin% sale of the 111,:19 P#!C shares. Respondents #eves and Sevilla .ere a+on% those .ho attended the publi$ hearin%. #he ;R Co++ittee Report No. ''3& $on$luded that6 ,athe au$tion of the %overn+entCs 111,:19 P#!C shares bore due dili%en$e, transparen$y and $onfor+ity .ith existin% le%al pro$eduresD and ,b- F1r() !a;141;C( 1n)&n*&* a;>u1(1)1on o4 )3& @o6&rn2&n)C( 111,41, !T"C (3ar&( r&(u5)1n@ 1n F1r() !a;141;C( 100< o=n&r(31' o4 !T"C =155 no) 61o5a)& )3& 40 '&r;&n) ;on()1)u)1ona5 5121) on 4or&1@n o=n&r(31' o4 a 'u+51; u)151)y (1n;& !T"C 3o5*( on5y 1-.84. '&r;&n) o4 )3& )o)a5 ou)()an*1n@ ;o22on (3ar&( o4 !L T.9 "n '2 )ebruary '&&3, )irst Pa$ifi$ $o+pleted the a$Iuisition of the 111,:19 shares of sto$5 of P#!C. Respondent *anuel G. Pan%ilinan ad+its the follo.in% fa$ts6 ,a- the !PC $ondu$ted a publi$ biddin% for the sale of 111,:19 P#!C shares or :0 per$ent of the outstandin% $apital sto$5 of P#!C ,the re+ainin% 9: per$ent of P#!C shares .as already o.ned by )irst Pa$ifi$ and its affiliates-D ,b- Parallax offered the hi%hest bid a+ountin%
91
toP'9,'13,990,&&&D ,$- pursuant to the ri%ht of first refusal in favor of P#!C and its shareholders %ranted in P#!CCs Arti$les of !n$orporation, *PA;, a )irst Pa$ifi$ affiliate, exer$ised its ri%ht of first refusal by +at$hin% the hi%hest bid offered for P#!C shares on 1? )ebruary '&&3D and ,d- on '2 )ebruary '&&3, the sale .as $onsu++ated .hen *PA; paid !PC P'9,'13,990,&&& and the %overn+ent delivered the $ertifi$ates for the 111,:19 P#!C shares. Respondent Pan%ilinan denies the other alle%ations of fa$ts of petitioner. "n '2 )ebruary '&&3, petitioner filed the instant petition for prohibition, in8un$tion, de$laratory relief, and de$laration of nullity of sale of the 111,:19 P#!C shares. Petitioner $lai+s, a+on% others, that the sale of the 111,:19 P#!C shares .ould result in an in$rease in )irst Pa$ifi$Cs $o++on shareholdin%s in P< # fro+ ?&.3 per$ent to ?3 per$ent, and this, $o+bined .ith /apanese N## oCo*oCs $o++on shareholdin%s in P< #, .ould result to a total forei%n $o++on shareholdin%s in P< # of 91.90 per$ent .hi$h is over the :& per$ent $onstitutional li+it.0 Petitioner asserts6 !f and .hen the sale is $o+pleted, )irst Pa$ifi$Cs eIuity in P< # .ill %o up fro+ ?&.3 per$ent to ?3.& per$ent of its $o++on F or votin%- sto$5holdin%s, x x x. ;en$e, the $onsu++ation of the sale .ill put the t.o lar%est forei%n investors in P< # F )irst Pa$ifi$ and /apanCs N## oCo*o, .hi$h is the .orldCs lar%est .ireless tele$o++uni$ations fir+, o.nin% 91.90 per$ent of P< # $o++on eIuity. x x x @ith the $o+pletion of the sale, data $ulled fro+ the offi$ial .ebsite of the Ne. >or5 Sto$5 Ex$han%e ,....nyse.$o+- sho.ed that those forei%n entities, .hi$h o.n at least five per$ent of $o++on eIuity, .ill $olle$tively o.n 21.:3 per$ent of P< #Cs $o++on eIuity. x x x x x x as the annual dis$losure reports, also referred to as )or+ '&-R reports x x x .hi$h P< # sub+itted to the Ne. >or5 Sto$5 Ex$han%e for the period '&&?-'&&9, revealed that )irst Pa$ifi$ and several other forei%n entities brea$hed the $onstitutional li+it of :& per$ent o.nership as early as '&&?. x x x(3 Petitioner raises the follo.in% issues6 ,1- .hether the $onsu++ation of the then i+pendin% sale of 111,:19 P#!C shares to )irst Pa$ifi$ violates the $onstitutional li+it on forei%n o.nership of a publi$ utilityD ,'- .hether publi$ respondents $o++itted %rave abuse of dis$retion in allo.in% the sale of the 111,:19 P#!C shares to )irst Pa$ifi$D and ,?- .hether the sale of $o++on shares to forei%ners in ex$ess of :& per$ent of the entire subs$ribed $o++on $apital sto$5 violates the $onstitutional li+it on forei%n o.nership of a publi$ utility. 2 "n 1? Au%ust '&&3, Pablito G. Sanidad and Arno G. Sanidad filed a *otion for <eave to !ntervene and Ad+it Atta$hed Petition-in-!ntervention. !n the Resolution of '2 Au%ust '&&3, the Court %ranted the +otion and noted the Petition-in-!ntervention.
Nazareno
Corporation CASES Based on the Syllabus of Fr. Agustin Petitioners-in-intervention (8oin petitioner @ilson 4a+boa x x x in see5in%, a+on% others, to en8oin andEor nullify the sale by respondents of the 111,:19 P#!C shares to )irst Pa$ifi$ or assi%nee.( Petitioners-in-intervention $lai+ that, as P< # subs$ribers, they have a (sta5e in the out$o+e of the $ontroversy x x x .here the Philippine 4overn+ent is $o+pletin% the sale of %overn+ent o.ned assets in AP< #B, unIuestionably a publi$ utility, in violation of the nationality restri$tions of the Philippine Constitution.( T3& "((u& #his Court is not a trier of fa$ts. )a$tual Iuestions su$h as those raised by petitioner,1 .hi$h indisputably de+and a thorou%h exa+ination of the eviden$e of the parties, are %enerally beyond this CourtCs 8urisdi$tion. Adherin% to this .ell-settled prin$iple, the Court shall $onfine the resolution of the instant $ontroversy solely on the )3r&(3o5* an* 'ur&5y 5&@a5 1((u& of .hether the ter+ ($apital( in Se$tion 11, Arti$le N!! of the Constitution refers to the total $o++on shares only or to the total outstandin% $apital sto$5 ,$o+bined total of $o++on and non-votin% preferred sharesof P< #, a publi$ utility. T3& Ru51n@ o4 )3& Cour) #he petition is partly +eritorious. Pe"i"ion for &eclara"ory relief "rea"e& as pe"i"ion for man&amus At the outset, petitioner is fa$ed .ith a pro$edural barrier. A+on% the re+edies petitioner see5s, only the petition for prohibition is .ithin the ori%inal 8urisdi$tion of this $ourt, .hi$h ho.ever is not ex$lusive but is $on$urrent .ith the Re%ional #rial Court and the Court of Appeals. #he a$tions for de$laratory relief, 1& in8un$tion, and annul+ent of sale are not e+bra$ed .ithin the ori%inal 8urisdi$tion of the Supre+e Court. "n this %round alone, the petition $ould have been dis+issed outri%ht. @hile dire$t resort to this Court +ay be 8ustified in a petition for prohibition, 11 the Court shall nevertheless refrain fro+ dis$ussin% the %rounds in support of the petition for prohibition sin$e on '2 )ebruary '&&3, the Iuestioned sale .as $onsu++ated .hen *PA; paid !PC P'9,'13,990,&&& and the %overn+ent delivered the $ertifi$ates for the 111,:19 P#!C shares. ;o.ever, sin$e the threshold and purely le%al issue on the definition of the ter+ ($apital( in Se$tion 11, Arti$le N!! of the Constitution has far-rea$hin% i+pli$ations to the national e$ono+y, the Court treats the petition for de$laratory relief as one for +anda+us.1'
9'
!n Salvacion v. Central Ban$ of the Philippines,1? the Court treated the petition for de$laratory relief as one for +anda+us $onsiderin% the %rave in8usti$e that .ould result in the interpretation of a ban5in% la.. !n that $ase, .hi$h involved the $ri+e of rape $o++itted by a forei%n tourist a%ainst a )ilipino +inor and the exe$ution of the final 8ud%+ent in the $ivil $ase for da+a%es on the touristCs dollar deposit .ith a lo$al ban5, the Court de$lared Se$tion 11? of Central Ban5 Cir$ular No. 10&, exe+ptin% forei%n $urren$y deposits fro+ atta$h+ent, %arnish+ent or any other order or pro$ess of any $ourt, inappli$able due to the pe$uliar $ir$u+stan$es of the $ase. #he Court held that (in8usti$e .ould result espe$ially to a $itiHen a%%rieved by a forei%n %uest li5e a$$used x x x( that .ould (ne%ate Arti$le 1& of the Civil Code .hi$h provides that Kin $ase of doubt in the interpretation or appli$ation of la.s, it is presu+ed that the la.+a5in% body intended ri%ht and 8usti$e to prevail.C( #he Court therefore reIuired respondents Central Ban5 of the Philippines, the lo$al ban5, and the a$$used to $o+ply .ith the .rit of exe$ution issued in the $ivil $ase for da+a%es and to release the dollar deposit of the a$$used to satisfy the 8ud%+ent. !n "lliance of Government Aor$ers v. ,inister of :abor ,1: the Court si+ilarly brushed aside the pro$edural infir+ity of the petition for de$laratory relief and treated the sa+e as one for +anda+us. !n "lliance, the issue .as .hether the %overn+ent unla.fully ex$luded petitioners, .ho .ere %overn+ent e+ployees, fro+ the en8oy+ent of ri%hts to .hi$h they .ere entitled under the la.. Spe$ifi$ally, the Iuestion .as6 (Are the bran$hes, a%en$ies, subdivisions, and instru+entalities of the 4overn+ent, in$ludin% %overn+ent o.ned or $ontrolled $orporations in$luded a+on% the four Ke+ployersC under Presidential e$ree No. 291 .hi$h are reIuired to pay their e+ployees x x x a thirteenth ,1?th- +onth pay x x x L( #he Constitutional prin$iple involved therein affe$ted all %overn+ent e+ployees, $learly 8ustifyin% a relaxation of the te$hni$al rules of pro$edure, and $ertainly reIuirin% the interpretation of the assailed presidential de$ree. !n short, it is .ell-settled that this Court +ay treat a petition for de$laratory relief as one for +anda+us if the issue involved has far-rea$hin% i+pli$ations. As this Court held in Salvacion& #he Court has no ori%inal and ex$lusive 8urisdi$tion over a petition for de$laratory relief. Ho=&6&r, &7;&')1on( )o )31( ru5& 3a6& +&&n r&;o@n1H&*. T3u(, =3&r& )3& '&)1)1on 3a( 4ar8r&a;31n@ 12'51;a)1on( an* ra1(&( >u&()1on( )3a) (3ou5* +& r&(o56&*, 1) 2ay +& )r&a)&* a( on& 4or 2an*a2u(.19 ,E+phasis supplied!n the present $ase, petitioner see5s pri+arily the interpretation of the ter+ ($apital( in Se$tion 11, Arti$le N!! of the Constitution. ;e prays that this Court de$lare that the ter+ ($apital( refers to $o++on shares only, and that su$h shares $onstitute (the sole basis in deter+inin% forei%n eIuity in a publi$ utility.( Petitioner further as5s this Court to de$lare any rulin% in$onsistent .ith su$h interpretation un$onstitutional.
Nazareno
Corporation CASES Based on the Syllabus of Fr. Agustin #he interpretation of the ter+ ($apital( in Se$tion 11, Arti$le N!! of the Constitution has far-rea$hin% i+pli$ations to the national e$ono+y. !n fa$t, a resolution of this issue .ill deter+ine .hether )ilipinos are +asters, or se$ond $lass $itiHens, in their o.n $ountry. @hat is at sta5e here is .hether )ilipinos or forei%ners .ill have effec"i9e con"rol of the national e$ono+y. !ndeed, if ever there is a le%al issue that has farrea$hin% i+pli$ations to the entire nation, and to future %enerations of )ilipinos, it is the threshhold le%al issue presented in this $ase. #he Court first en$ountered the issue on the definition of the ter+ ($apital( in Se$tion 11, Arti$le N!! of the Constitution in the $ase of -ernande( v. Co+uangco! do$5eted as 4.R. No. 193?0&.10 #hat $ase involved the sa+e publi$ utility ,P< #- and substantially the sa+e private respondents. espite the i+portan$e and novelty of the $onstitutional issue raised therein and despite the fa$t that the petition involved a purely le%al Iuestion, the Court de$lined to resolve the $ase on the +erits, and instead denied the sa+e for disre%ardin% the hierar$hy of $ourts. 13 #here, petitioner )ernandeH assailed on a pure Iuestion of la. the Re%ional #rial CourtCs e$ision of '1 )ebruary '&&? via a petition for revie. under Rule :9. #he CourtCs Resolution, denyin% the petition, be$a+e final on '1 e$e+ber '&&:. #he instant petition therefore presents the Court .ith another opportunity to finally settle this 'ur&5y 5&@a5 1((u&.hi$h is of trans$endental i+portan$e to the national e$ono+y and a funda+ental reIuire+ent to a faithful adheren$e to our Constitution. #he Court +ust forth.ith seiHe su$h opportunity, not only for the benefit of the liti%ants, but +ore si%nifi$antly for the benefit of the entire )ilipino people, to ensure, in the .ords of the Constitution, (a self-reliant and independent national e$ono+y &44&;)16&5y ;on)ro55&* by )ilipinos.(12 Besides, in the li%ht of va%ue and $onfusin% positions ta5en by %overn+ent a%en$ies on this purely le%al issue, present and future forei%n investors in this $ountry deserve, as a +atter of basi$ fairness, a $ate%ori$al rulin% fro+ this Court on the extent of their parti$ipation in the $apital of publi$ utilities and other nationaliHed businesses. espite its far-rea$hin% i+pli$ations to the national e$ono+y, this purely le%al issue has re+ained unresolved for over 39 years sin$e the 11?9 Constitution. #here is no reason for this Court to evade this ever re$urrin% funda+ental issue and delay a%ain definin% the ter+ ($apital,( .hi$h appears not only in Se$tion 11, Arti$le N!! of the Constitution, but also in Se$tion ', Arti$le N!! on $o-produ$tion and 8oint venture a%ree+ents for the develop+ent of our natural resour$es, 11 in Se$tion 3, Arti$le N!! on o.nership of private lands, '& in Se$tion 1&, Arti$le N!! on the reservation of $ertain invest+ents to )ilipino $itiHens,'1 in Se$tion :,'-, Arti$le N!G on the o.nership of edu$ational institutions,'' and in Se$tion 11,'-, Arti$le NG! on the o.nership of advertisin% $o+panies.'? Pe"i"ioner !as locus s"an&i
9?
#here is no dispute that petitioner is a sto$5holder of P< #. As su$h, he has the ri%ht to Iuestion the sub8e$t sale, .hi$h he $lai+s to violate the nationality reIuire+ent pres$ribed in Se$tion 11, Arti$le N!! of the Constitution. !f the sale indeed violates the Constitution, then there is a possibility that P< #Cs fran$hise $ould be revo5ed, a dire $onseIuen$e dire$tly affe$tin% petitionerCs interest as a sto$5holder. *ore i+portantly, there is no Iuestion that the instant petition raises +atters of trans$endental i+portan$e to the publi$. #he funda+ental and threshold le%al issue in this $ase, involvin% the national e$ono+y and the e$ono+i$ .elfare of the )ilipino people, far out.ei%hs any per$eived i+pedi+ent in the le%al personality of the petitioner to brin% this a$tion. !n Chave( v. PCGG,': the Court upheld the ri%ht of a $itiHen to brin% a suit on +atters of trans$endental i+portan$e to the publi$, thus6 !n .aLada v. .uvera, the Court asserted that =3&n )3& 1((u& ;on;&rn( a 'u+51; r1@3) an* )3& o+?&;) o4 2an*a2u( 1( )o o+)a1n )3& &n4or;&2&n) o4 a 'u+51; *u)y, )3& '&o'5& ar& r&@ar*&* a( )3& r&a5 'ar)1&( 1n 1n)&r&()I an* +&;au(& 1) 1( (u441;1&n) )3a) '&)1)1on&r 1( a ;1)1H&n an* a( (u;3 1( 1n)&r&()&* 1n )3& &7&;u)1on o4 )3& 5a=(, 3& n&&* no) (3o= )3a) 3& 3a( any 5&@a5 or ('&;1a5 1n)&r&() 1n )3& r&(u5) o4 )3& a;)1on . !n the aforesaid $ase, the petitioners sou%ht to enfor$e their ri%ht to be infor+ed on +atters of publi$ $on$ern, a ri%ht then re$o%niHed in Se$tion 0, Arti$le !G of the 113? Constitution, in $onne$tion .ith the rule that la.s in order to be valid and enfor$eable +ust be published in the "ffi$ial 4aHette or other.ise effe$tively pro+ul%ated. !n rulin% for the petitionersC le%al standin%, the Court de$lared that the ri%ht they sou%ht to be enfor$ed Kis a publi$ ri%ht re$o%niHed by no less than the funda+ental la. of the land.C :egaspi v. Civil Service Commission , .hile reiteratin% #aPada, further de$lared that K=3&n a 2an*a2u( 'ro;&&*1n@ 1n6o56&( )3& a((&r)1on o4 a 'u+51; r1@3), )3& r&>u1r&2&n) o4 '&r(ona5 1n)&r&() 1( (a)1(41&* +y )3& 2&r& 4a;) )3a) '&)1)1on&r 1( a ;1)1H&n an*, )3&r&4or&, 'ar) o4 )3& @&n&ra5 O'u+51;C =31;3 'o((&((&( )3& r1@3).C )urther, in "lbano v. %e8es, .e said that .hile expenditure of publi$ funds +ay not have been involved under the Iuestioned $ontra$t for the develop+ent, +ana%e+ent and operation of the *anila !nternational Container #er+inal, K'u+51; 1n)&r&() F=a(G *&41n1)&5y 1n6o56&* ;on(1*&r1n@ )3& 12'or)an) ro5& Fo4 )3& (u+?&;) ;on)ra;)G . . . 1n )3& &;ono21; *&6&5o'2&n) o4 )3& ;oun)ry an* )3& 2a@n1)u*& o4 )3& 41nan;1a5 ;on(1*&ra)1on 1n6o56&*.C @e $on$luded that, as a $onseIuen$e, the dis$losure provision in the Constitution .ould $onstitute suffi$ient authority for upholdin% the petitionerCs standin%. ,E+phasis suppliedClearly, sin$e the instant petition, brou%ht by a $itiHen, involves +atters of trans$endental publi$ i+portan$e, the petitioner has the reIuisite locus standi.
Nazareno
Corporation CASES Based on the Syllabus of Fr. Agustin Defini"ion of "!e Term 6ec"ion ((% 2r"icle ;II of "!e (/5- Cons"i"u"ion :Capi"al: in
9:
sub8e$t to a+end+ent, alteration, or repeal by the Con%ress .hen the publi$ interest so reIuires. ,E+phasis supplied)ather /oaIuin 4. Bernas, S./., a leadin% +e+ber of the 1120 Constitutional Co++ission, re+inds us that the )ilipiniHation provision in the 1123 Constitution is one of the produ$ts of the spirit of nationalis+ .hi$h %ripped the 11?9 Constitutional Convention.'9 #he 1123 Constitution (provides for the )ilipiniHation of publi$ utilities by reIuirin% that any for+ of authoriHation for the operation of publi$ utilities should be %ranted only to K$itiHens of the Philippines or to $orporations or asso$iations or%aniHed under the la.s of the Philippines at least sixty per $entu+ of .hose $apital is o.ned by su$h $itiHens.C T3& 'ro61(1on 1( Fan &7'r&((G r&;o@n1)1on o4 )3& (&n(1)16& an* 61)a5 'o(1)1on o4 'u+51; u)151)1&( +o)3 1n )3& na)1ona5 &;ono2y an* 4or na)1ona5 (&;ur1)y.J'0 #he evident purpose of the $itiHenship reIuire+ent is to prevent aliens fro+ assu+in% $ontrol of publi$ utilities, .hi$h +ay be ini+i$al to the national interest.'3 #his spe$ifi$ provision expli$itly reserves to )ilipino $itiHens $ontrol of publi$ utilities, pursuant to an overridin% e$ono+i$ %oal of the 1123 Constitution6 to ($onserve and develop our patri+ony( '2 and ensure (a self-reliant and independent national e$ono+y effec"i9ely con"rolle& by )ilipinos.('1 Any $itiHen or 8uridi$al entity desirin% to operate a publi$ utility +ust therefore +eet the +ini+u+ nationality reIuire+ent pres$ribed in Se$tion 11, Arti$le N!! of the Constitution. ;en$e, for a $orporation to be %ranted authority to operate a publi$ utility, at least 0& per$ent of its ($apital( +ust be o.ned by )ilipino $itiHens. #he $rux of the $ontroversy is the definition of the ter+ ( ;a'1)a5.( oes the ter+ ($apital( in Se$tion 11, Arti$le N!! of the Constitution refer to $o++on shares or to the total outstandin% $apital sto$5 ,$o+bined total of $o++on and non-votin% preferred shares-L Petitioner sub+its that the :& per$ent forei%n eIuity li+itation in do+esti$ publi$ utilities refers only to $o++on shares be$ause su$h shares are entitled to vote and it is throu%h votin% that $ontrol over a $orporation is exer$ised. Petitioner posits that the ter+ ($apital( in Se$tion 11, Arti$le N!! of the Constitution refers to (the o.nership of $o++on $apital sto$5 subs$ribed and outstandin%, .hi$h $lass of shares alone, under the $orporate set-up of P< #, $an vote and ele$t +e+bers of the board of dire$tors.( !t is undisputed that P< #Cs non-votin% preferred shares are held +ostly by )ilipino $itiHens.?& #his arose fro+ Presidential e$ree No. '13,?1 issued on 10 /une 113? by then President )erdinand *ar$os, reIuirin% every appli$ant of a P< # telephone line to subs$ribe to non-votin% preferred shares to pay for the invest+ent $ost of installin% the telephone line.?' Petitioners-in-intervention basi$ally reiterate petitionerCs ar%u+ents and adopt petitionerCs definition of the ter+ ($apital.( ?? Petitioners-in-intervention alle%e that (the approxi+ate forei%n o.nership of $o++on $apital sto$5 of P< # x x x already
Nazareno
Se$tion 11, Arti$le N!! ,National E$ono+y and Patri+ony- of the 1123 Constitution +andates the )ilipiniHation of publi$ utilities, to .it6 Se$tion 11. No 4ran;31(&, ;&r)141;a)&, or any o)3&r 4or2 o4 au)3or1Ha)1on 4or )3& o'&ra)1on o4 a 'u+51; u)151)y (3a55 +& @ran)&* &7;&') )o ;1)1H&n( o4 )3& !3151''1n&( or )o ;or'ora)1on( or a((o;1a)1on( or@an1H&* un*&r )3& 5a=( o4 )3& !3151''1n&(, a) 5&a() (17)y '&r ;&n)u2 o4 =3o(& ;a'1)a5 1( o=n&* +y (u;3 ;1)1H&n( D nor shall su$h fran$hise, $ertifi$ate, or authoriHation be ex$lusive in $hara$ter or for a lon%er period than fifty years. Neither shall any su$h fran$hise or ri%ht be %ranted ex$ept under the $ondition that it shall be sub8e$t to a+end+ent, alteration, or repeal by the Con%ress .hen the $o++on %ood so reIuires. #he State shall en$oura%e eIuity parti$ipation in publi$ utilities by the %eneral publi$. #he parti$ipation of forei%n investors in the %overnin% body of any publi$ utility enterprise shall be li+ited to their proportionate share in its $apital, and all the exe$utive and +ana%in% offi$ers of su$h $orporation or asso$iation +ust be $itiHens of the Philippines. ,E+phasis supplied#he above provision substantially reiterates Se$tion 9, Arti$le N!G of the 113? Constitution, thus6 S&;)1on ,. No 4ran;31(&, ;&r)141;a)&, or any o)3&r 4or2 o4 au)3or1Ha)1on 4or )3& o'&ra)1on o4 a 'u+51; u)151)y (3a55 +& @ran)&* &7;&') )o ;1)1H&n( o4 )3& !3151''1n&( or )o ;or'ora)1on( or a((o;1a)1on( or@an1H&* un*&r )3& 5a=( o4 )3& !3151''1n&( a) 5&a() (17)y '&r ;&n)u2 o4 )3& ;a'1)a5 o4 =31;3 1( o=n&* +y (u;3 ;1)1H&n( , nor shall su$h fran$hise, $ertifi$ate, or authoriHation be ex$lusive in $hara$ter or for a lon%er period than fifty years. Neither shall any su$h fran$hise or ri%ht be %ranted ex$ept under the $ondition that it shall be sub8e$t to a+end+ent, alteration, or repeal by the National Asse+bly .hen the publi$ interest so reIuires. #he State shall en$oura%e eIuity parti$ipation in publi$ utilities by the %eneral publi$. #he parti$ipation of forei%n investors in the %overnin% body of any publi$ utility enterprise shall be li+ited to their proportionate share in the $apital thereof. ,E+phasis supplied#he fore%oin% provision in the 113? Constitution reprodu$ed Se$tion 2, Arti$le N!G of the 11?9 Constitution, vi(6 S&;)1on 8. No 4ran;31(&, ;&r)141;a)&, or any o)3&r 4or2 o4 au)3or1Ha)1on 4or )3& o'&ra)1on o4 a 'u+51; u)151)y (3a55 +& @ran)&* &7;&') )o ;1)1H&n( o4 )3& !3151''1n&( or )o ;or'ora)1on( or o)3&r &n)1)1&( or@an1H&* un*&r )3& 5a=( o4 )3& !3151''1n&( (17)y '&r ;&n)u2 o4 )3& ;a'1)a5 o4 =31;3 1( o=n&* +y ;1)1H&n( o4 )3& !3151''1n&(, nor shall su$h fran$hise, $ertifi$ate, or authoriHation be ex$lusive in $hara$ter or for a lon%er period than fifty years. No fran$hise or ri%ht shall be %ranted to any individual, fir+, or $orporation, ex$ept under the $ondition that it shall be
Corporation CASES Based on the Syllabus of Fr. Agustin a+ounts to at least 0?.9:= of the total outstandin% $o++on sto$5,( .hi$h +eans that forei%ners exer$ise si%nifi$ant $ontrol over P< #, patently violatin% the :& per$ent forei%n eIuity li+itation in publi$ utilities pres$ribed by the Constitution. Respondents, on the other hand, do not offer any definition of the ter+ ($apital( in Se$tion 11, Arti$le N!! of the Constitution. *ore i+portantly, private respondents NaHareno and Pan%ilinan of P< # do not dispute that +ore than :& per$ent of the $o++on shares of P< # are held by forei%ners. !n parti$ular, respondent NaHarenoCs *e+orandu+, $onsistin% of 3? pa%es, harps +ainly on the pro$edural infir+ities of the petition and the supposed violation of the due pro$ess ri%hts of the (affe$ted forei%n $o++on shareholders.( Respondent NaHareno does not deny petitionerCs alle%ation of forei%nersC do+inatin% the $o++on shareholdin%s of P< #. NaHareno stressed +ainly that the petition ( (&&D( )o *16&() 4or&1@n ;o22on (3ar&3o5*&r( 'ur'or)&*5y &7;&&*1n@ 40< o4 )3& )o)a5 ;o22on (3ar&3o5*1n@( 1n !L T o4 )3&1r o=n&r(31' o6&r )3&1r (3ar&( .( #hus, (the forei%n natural and 8uridi$al P< # shareholders +ust be i+pleaded in this suit so that they $an be heard.(?: Essentially, NaHareno invo5es denial of due pro$ess on behalf of the forei%n $o++on shareholders. @hile NaHareno does not introdu$e any definition of the ter+ ($apital,( he states that (a2on@ )3& 4a;)ua5 a((&r)1on( )3a) n&&* )o +& &()a+51(3&* )o ;oun)&r '&)1)1on&rC( a55&@a)1on( 1( )3& un14or2 1n)&r'r&)a)1on +y @o6&rn2&n) a@&n;1&( /(u;3 a( )3& SEC0, 1n()1)u)1on( an* ;or'ora)1on( /(u;3 a( )3& !3151''1n& Na)1ona5 O15 Co2'any8En&r@y &6&5o'2&n) Cor'ora)1on or !NOC8E C0 o4 1n;5u*1n@ +o)3 'r&4&rr&* (3ar&( an* ;o22on (3ar&( 1n J;on)ro551n@ 1n)&r&()J 1n 61&= o4 )&()1n@ ;o2'51an;& =1)3 )3& 40< ;on()1)u)1ona5 5121)a)1on on 4or&1@n o=n&r(31' 1n 'u+51; u)151)1&(.(?9 Si+ilarly, respondent *anuel G. Pan%ilinan does not define the ter+ ($apital( in Se$tion 11, Arti$le N!! of the Constitution. Neither does he refute petitionerCs $lai+ of forei%ners holdin% +ore than :& per$ent of P< #Cs $o++on shares. !nstead, respondent Pan%ilinan fo$uses on the pro$edural fla.s of the petition and the alle%ed violation of the due pro$ess ri%hts of forei%ners. Respondent Pan%ilinan e+phasiHes in his *e+orandu+ ,1- the absen$e of this CourtCs 8urisdi$tion over the petitionD ,'petitionerCs la$5 of standin%D ,?- +ootness of the petitionD ,:- non-availability of de$laratory reliefD and ,9- the denial of due pro$ess ri%hts. *oreover, respondent Pan%ilinan alle%es that the issue should be .hether (o.ners of shares in P< # as .ell as o.ners of shares in $o+panies holdin% shares in P< # +ay be reIuired to relinIuish their shares in P< # and in those $o+panies .ithout any la. reIuirin% the+ to surrender their shares and also .ithout noti$e and trial.( Respondent Pan%ilinan further asserts that ( S&;)1on 11, FAr)1;5& N"" o4 )3& Con()1)u)1onG 12'o(&( no na)1ona51)y r&>u1r&2&n) on )3& (3ar&3o5*&r( o4 )3&
99
u)151)y ;o2'any a( a ;on*1)1on 4or D&&'1n@ )3&1r (3ar&( 1n )3& u)151)y ;o2'any. ( A$$ordin% to hi+, (Se$tion 11 does not authoriHe ta5in% one personCs property ,the shareholderCs sto$5 in the utility $o+pany- on the basis of another partyCs alle%ed failure to satisfy a reIuire+ent that is a $ondition only for that other partyCs retention of another pie$e of property ,the utility $o+pany bein% at least 0&= )ilipino-o.ned to 5eep its fran$hise-.(?0 #he "S4, representin% publi$ respondents Se$retary *ar%arito #eves, 7nderse$retary /ohn P. Sevilla, Co++issioner Ri$ardo Ab$ede, and Chair+an )e Barin, is li5e.ise silent on the definition of the ter+ ($apital.( !n its *e+orandu+ ?3 dated ': Septe+ber '&&3, the "S4 also li+its its dis$ussion on the supposed pro$edural defe$ts of the petition, i.e. la$5 of standin%, la$5 of 8urisdi$tion, non-in$lusion of interested parties, and la$5 of basis for in8un$tion. #he "S4 does not present any definition or interpretation of the ter+ ($apital( in Se$tion 11, Arti$le N!! of the Constitution. #he "S4 $ontends that (the petition a$tually parta5es of a $ollateral atta$5 on P< #Cs fran$hise as a publi$ utility,( .hi$h in effe$t reIuires a (full-blo.n trial .here all the parties in interest are %iven their day in $ourt.(?2 Respondent )ran$is$o Ed <i+, i+pleaded as President and Chief Exe$utive "ffi$er of the Philippine Sto$5 Ex$han%e ,PSE-, does not also define the ter+ ($apital( and see5s the dis+issal of the petition on the follo.in% %rounds6 ,1- failure to state a $ause of a$tion a%ainst <i+D ,'- the PSE alle%edly i+ple+ented its rules and reIuired all listed $o+panies, in$ludin% P< #, to +a5e proper and ti+ely dis$losuresD and ,?- the reliefs prayed for in the petition .ould adversely i+pa$t the sto$5 +ar5et. !n the earlier $ase of -ernande( v. Co+uangco, petitioner )ernandeH .ho $lai+ed to be a sto$5holder of re$ord of P< #, $ontended that the ter+ ($apital( in the 1123 Constitution refers to shares entitled to vote or the $o++on shares. )ernandeH explained thus6 #he forty per$ent ,:&=- forei%n eIuity li+itation in publi$ utilities pres$ribed by the Constitution refers to o.nership of shares of sto$5 entitled to vote, i.e., $o++on shares, $onsiderin% that it is throu%h votin% that $ontrol is bein% exer$ised. x x x "bviously, the intent of the fra+ers of the Constitution in i+posin% li+itations and restri$tions on fully nationaliHed and partially nationaliHed a$tivities is for )ilipino nationals to be al.ays in $ontrol of the $orporation underta5in% said a$tivities. "ther.ise, if the #rial CourtCs rulin% upholdin% respondentsC ar%u+ents .ere to be %iven $reden$e, it .ould be possible for the o.nership stru$ture of a publi$ utility $orporation to be divided into one per$ent ,1=- $o++on sto$5s and ninety-nine per$ent ,11=- preferred sto$5s. )ollo.in% the #rial CourtCs rulin% adoptin% respondentsC ar%u+ents, the $o++on shares $an be o.ned entirely by forei%ners thus $reatin% an absurd situation .herein forei%ners, .ho are supposed to be +inority shareholders, $ontrol the publi$ utility $orporation.
Nazareno
Corporation CASES Based on the Syllabus of Fr. Agustin xxxx #hus, the :&= forei%n o.nership li+itation should be interpreted to apply to both the benefi$ial o.nership and the $ontrollin% interest. xxxx Clearly, therefore, the forty per$ent ,:&=- forei%n eIuity li+itation in publi$ utilities pres$ribed by the Constitution refers to o.nership of shares of sto$5 entitled to vote, i.e., $o++on shares. )urther+ore, o.nership of re$ord of shares .ill not suffi$e but it +ust be sho.n that the le%al and benefi$ial o.nership rests in the hands of )ilipino $itiHens. ConseIuently, in the $ase of petitioner P< #, sin$e it is already ad+itted that the votin% interests of forei%ners .hi$h .ould %ain entry to petitioner P< # by the a$Iuisition of S*AR# shares throu%h the Muestioned #ransa$tions is eIuivalent to 2'.11=, and the no+inee arran%e+ents bet.een the forei%n prin$ipals and the )ilipino o.ners is li5e.ise ad+itted, there is, therefore, a violation of Se$tion 11, Arti$le N!! of the Constitution. Parentheti$ally, the "pinions dated )ebruary 19, 1122 and April 1:, 1123 $ited by the #rial Court to support the proposition that the +eanin% of the .ord ($apital( as used in Se$tion 11, Arti$le N!! of the Constitution alle%edly refers to the su+ total of the shares subs$ribed and paid-in by the shareholder and it alle%edly is i++aterial ho. the sto$5 is $lassified, .hether as $o++on or preferred, $annot stand in the fa$e of a $lear le%islative poli$y as stated in the )!A .hi$h too5 effe$t in 1111 or .ay after said opinions .ere rendered, and as $larified by the above-Iuoted A+end+ents. !n this re%ard, suffi$e it to state that as bet.een the la. and an opinion rendered by an ad+inistrative a%en$y, the la. indubitably prevails. *oreover, said "pinions are +erely advisory and $annot prevail over the $lear intent of the fra+ers of the Constitution. !n the sa+e vein, the SECCs $onstru$tion of Se$tion 11, Arti$le N!! of the Constitution is at best +erely advisory for it is the $ourts that finally deter+ine .hat a la. +eans.?1 "n the other hand, respondents therein, Antonio ". Co8uan%$o, *anuel G. Pan%ilinan, Carlos A. Arellano, ;elen >. ee, *a%dan%al B. El+a, *ariles Ca$ho-Ro+ulo, )r. Bienvenido ). Nebres, Ray C. Espinosa, Napoleon <. NaHareno, Albert ). el Rosario, and "rlando B. Gea, ar%ued that the ter+ ($apital( in Se$tion 11, Arti$le N!! of the Constitution in$ludes preferred shares sin$e the Constitution does not distin%uish a+on% $lasses of sto$5, thus6 10. #he Constitution applies its forei%n o.nership li+itation on the $orporationCs ($apital,( .ithout distin$tion as to $lasses of shares. x x x
90
!n this $onne$tion, the Corporation Code F .hi$h .as already in for$e at the ti+e the present ,1123- Constitution .as drafted F defined outstandin% $apital sto$5 as follo.s6 Se$tion 1?3. "utstandin% $apital sto$5 defined. F #he ter+ (outstandin% $apital sto$5(, as used in this Code, +eans the total shares of sto$5 issued under bindin% subs$ription a%ree+ents to subs$ribers or sto$5holders, .hether or not fully or partially paid, ex$ept treasury shares. Se$tion 1?3 of the Corporation Code also does not distin%uish bet.een $o++on and preferred shares, nor ex$lude either $lass of shares, in deter+inin% the outstandin% $apital sto$5 ,the ($apital(- of a $orporation. ConseIuently, petitionerCs su%%estion to re$5on P< #Cs forei%n eIuity only on the basis of P< #Cs outstandin% $o++on shares is .ithout le%al basis. #he lan%ua%e of the Constitution should be understood in the sense it has in $o++on use. xxxx 13. But even assu+in% that resort to the pro$eedin%s of the Constitutional Co++ission is ne$essary, there is nothin% in the Re$ord of the Constitutional Co++ission ,Gol. !!!F .hi$h petitioner +isleadin%ly $ited in the Petition x x x F .hi$h supports petitionerCs vie. that only $o++on shares should for+ the basis for $o+putin% a publi$ utilityCs forei%n eIuity. xxxx 12. !n addition, the SEC F the %overn+ent a%en$y pri+arily responsible for i+ple+entin% the Corporation Code, and .hi$h also has the responsibility of ensurin% $o+plian$e .ith the ConstitutionCs forei%n eIuity restri$tions as re%ards nationaliHed a$tivities x x x F has $ate%ori$ally ruled that both $o++on and preferred shares are properly $onsidered in deter+inin% outstandin% $apital sto$5 and the nationality $o+position thereof.:& @e a%ree .ith petitioner and petitioners-in-intervention. #he ter+ ($apital( in Se$tion 11, Arti$le N!! of the Constitution refers only to shares of sto$5 entitled to vote in the ele$tion of dire$tors, and thus in the present $ase only to $o++on shares, :1 and not to the total outstandin% $apital sto$5 $o+prisin% both $o++on and non-votin% preferred shares. #he Corporation Code of the Philippines :' $lassifies shares as $o++on or preferred, thus6 Se$. 0. Classification of shares. - #he shares of sto$5 of sto$5 $orporations +ay be divided into $lasses or series of shares, or both, any of .hi$h $lasses or series of shares
Nazareno
Corporation CASES Based on the Syllabus of Fr. Agustin +ay have su$h ri%hts, privile%es or restri$tions as +ay be stated in the arti$les of in$orporation6 Provided, T3a) no (3ar& 2ay +& *&'r16&* o4 6o)1n@ r1@3)( &7;&') )3o(& ;5a((141&* an* 1((u&* a( J'r&4&rr&*J or Jr&*&&2a+5&J (3ar&(, un5&(( o)3&r=1(& 'ro61*&* 1n )31( Co*& 6 Provided, further, #hat there shall al.ays be a $lass or series of shares .hi$h have $o+plete votin% ri%hts. Any or all of the shares or series of shares +ay have a par value or have no par value as +ay be provided for in the arti$les of in$orporation6 Provided, ho.ever, #hat ban5s, trust $o+panies, insuran$e $o+panies, publi$ utilities, and buildin% and loan asso$iations shall not be per+itted to issue no-par value shares of sto$5. Preferred shares of sto$5 issued by any $orporation +ay be %iven preferen$e in the distribution of the assets of the $orporation in $ase of liIuidation and in the distribution of dividends, or su$h other preferen$es as +ay be stated in the arti$les of in$orporation .hi$h are not violative of the provisions of this Code6 Provided, #hat preferred shares of sto$5 +ay be issued only .ith a stated par value. #he Board of ire$tors, .here authoriHed in the arti$les of in$orporation, +ay fix the ter+s and $onditions of preferred shares of sto$5 or any series thereof6 Provided, #hat su$h ter+s and $onditions shall be effe$tive upon the filin% of a $ertifi$ate thereof .ith the Se$urities and Ex$han%e Co++ission. Shares of $apital sto$5 issued .ithout par value shall be dee+ed fully paid and nonassessable and the holder of su$h shares shall not be liable to the $orporation or to its $reditors in respe$t thereto6 ProvidedD #hat shares .ithout par value +ay not be issued for a $onsideration less than the value of five ,P9.&&- pesos per share6 Provided, further, #hat the entire $onsideration re$eived by the $orporation for its no-par value shares shall be treated as $apital and shall not be available for distribution as dividends. A $orporation +ay, further+ore, $lassify its shares for the purpose of insurin% $o+plian$e .ith $onstitutional or le%al reIuire+ents. Ex$ept as other.ise provided in the arti$les of in$orporation and stated in the $ertifi$ate of sto$5, ea$h share shall be eIual in all respe$ts to every other share. @here the arti$les of in$orporation provide for non-votin% shares in the $ases allo.ed by this Code, the holders of su$h shares shall nevertheless be entitled to vote on the follo.in% +atters6 1. A+end+ent of the arti$les of in$orporationD '. Adoption and a+end+ent of by-la.sD
93
?. Sale, lease, ex$han%e, +ort%a%e, pled%e or other disposition of all or substantially all of the $orporate propertyD :. !n$urrin%, $reatin% or in$reasin% bonded indebtednessD 9. !n$rease or de$rease of $apital sto$5D 0. *er%er or $onsolidation of the $orporation .ith another $orporation or other $orporationsD 3. !nvest+ent of $orporate funds in another $orporation or business in a$$ordan$e .ith this CodeD and 2. issolution of the $orporation. Ex$ept as provided in the i++ediately pre$edin% para%raph, the vote ne$essary to approve a parti$ular $orporate a$t as provided in this Code shall be dee+ed to refer only to sto$5s .ith votin% ri%hts. !ndisputably, one of the ri%hts of a sto$5holder is the ri%ht to parti$ipate in the $ontrol or +ana%e+ent of the $orporation.:? #his is exer$ised throu%h his vote in the ele$tion of dire$tors be$ause it is the board of dire$tors that $ontrols or +ana%es the $orporation.:: !n the absen$e of provisions in the arti$les of in$orporation denyin% votin% ri%hts to preferred shares, preferred shares have the sa+e votin% ri%hts as $o++on shares. ;o.ever, preferred shareholders are often ex$luded fro+ any $ontrol, that is, deprived of the ri%ht to vote in the ele$tion of dire$tors and on other +atters, on the theory that the preferred shareholders are +erely investors in the $orporation for in$o+e in the sa+e +anner as bondholders. :9 !n fa$t, under the Corporation Code only preferred or redee+able shares $an be deprived of the ri%ht to vote. :0 Co++on shares $annot be deprived of the ri%ht to vote in any $orporate +eetin%, and any provision in the arti$les of in$orporation restri$tin% the ri%ht of $o++on shareholders to vote is invalid.:3 Considerin% that $o++on shares have votin% ri%hts .hi$h translate to $ontrol, as opposed to preferred shares .hi$h usually have no votin% ri%hts, the ter+ ($apital( in Se$tion 11, Arti$le N!! of the Constitution refers only to $o++on shares. ;o.ever, if the preferred shares also have the ri%ht to vote in the ele$tion of dire$tors, then the ter+ ($apital( shall in$lude su$h preferred shares be$ause the ri%ht to parti$ipate in the $ontrol or +ana%e+ent of the $orporation is exer$ised throu%h the ri%ht to vote in the ele$tion of dire$tors. "n (3or), )3& )&r2 J;a'1)a5J 1n S&;)1on 11, Ar)1;5& N"" o4 )3& Con()1)u)1on r&4&r( on5y )o (3ar&( o4 ()o;D )3a) ;an 6o)& 1n )3& &5&;)1on o4 *1r&;)or(.
Nazareno
Corporation CASES Based on the Syllabus of Fr. Agustin #his interpretation is $onsistent .ith the intent of the fra+ers of the Constitution to pla$e in the hands of )ilipino $itiHens the $ontrol and +ana%e+ent of publi$ utilities. As revealed in the deliberations of the Constitutional Co++ission, ($apital( refers to the votin% sto$5 or ;on)ro551n@ 1n)&r&() of a $orporation, to .it6 *R. N"<<E ". !n Se$tions ?, 1 and 19, the Co++ittee stated lo$al or )ilipino eIuity and forei%n eIuityD na+ely, 0&-:& in Se$tion ?, 0&-:& in Se$tion 1 and 'E?-1E? in Se$tion 19. *R. G!<<E4AS. #hat is ri%ht. *R. N"<<E ". !n tea$hin% la., .e are al.ays fa$ed .ith this Iuestion6 (@here do .e base the eIuity reIuire+ent, is it on the authoriHed $apital sto$5, on the subs$ribed $apital sto$5, or on the paid-up $apital sto$5 of a $orporation(L @ill the Co++ittee please enli%hten +e on thisL *R. G!<<E4AS. @e have 8ust had a lon% dis$ussion .ith the +e+bers of the tea+ fro+ the 7P <a. Center .ho provided us a draft. T3& '3ra(& )3a) 1( ;on)a1n&* 3&r& =31;3 =& a*o')&* 4ro2 )3& U! *ra4) 1( J60 '&r;&n) o4 6o)1n@ ()o;D.J *R. N"<<E ". #hat +ust be based on the subs$ribed $apital sto$5, be$ause unless de$lared delinIuent, unpaid $apital sto$5 shall be entitled to vote. *R. G!<<E4AS. #hat is ri%ht. *R. N"<<E ". #han5 you. @ith respe$t to an invest+ent by one $orporation in another $orporation, say, a $orporation .ith 0&-:& per$ent eIuity invests in another $orporation .hi$h is per+itted by the Corporation Code, does the Co++ittee adopt the %randfather ruleL *R. G!<<E4AS. >es, that is the understandin% of the Co++ittee. *R. N"<<E ". #herefore, .e need additional )ilipino $apitalL *R. G!<<E4AS. >es.:2 xxxx *R. AQC7NA. *ay ! be $larified as to that portion that .as a$$epted by the Co++ittee.
92
*R. G!<<E4AS. #he portion a$$epted by the Co++ittee is the deletion of the phrase (votin% sto$5 or $ontrollin% interest.( *R. AQC7NA. ;en$e, .ithout the avide a+end+ent, the $o++ittee report .ould read6 ($orporations or asso$iations at least sixty per$ent of .hose CAP!#A< is o.ned by su$h $itiHens.( *R. G!<<E4AS. >es. *R. AQC7NA. So if the avide a+end+ent is lost, .e are stu$5 .ith 0& per$ent of the $apital to be o.ned by $itiHens. *R. G!<<E4AS. #hat is ri%ht. %R. AACUNA. #u) )3& ;on)ro5 ;an +& =1)3 )3& 4or&1@n&r( &6&n 14 )3&y ar& )3& 21nor1)y. L&) u( (ay 40 '&r;&n) o4 )3& ;a'1)a5 1( o=n&* +y )3&2, +u) 1) 1( )3& 6o)1n@ ;a'1)a5, =3&r&a(, )3& F151'1no( o=n )3& non6o)1n@ (3ar&(. So =& ;an 3a6& a (1)ua)1on =3&r& )3& ;or'ora)1on 1( ;on)ro55&* +y 4or&1@n&r( *&('1)& +&1n@ )3& 21nor1)y +&;au(& )3&y 3a6& )3& 6o)1n@ ;a'1)a5. T3a) 1( )3& ano2a5y )3a) =ou5* r&(u5) 3&r&. %R. #ENGAON. No, )3& r&a(on =& &5121na)&* )3& =or* J()o;DJ a( ()a)&* 1n )3& 19.- an* 19-, Con()1)u)1on( 1( )3a) a;;or*1n@ )o Co221((1on&r Ro*r1@o, )3&r& ar& a((o;1a)1on( )3a) *o no) 3a6& ()o;D(. T3a) 1( =3y =& (ay JCA!"TAL.J %R. AACUNA. :& (3ou5* no) &5121na)& )3& '3ra(& J;on)ro551n@ 1n)&r&().J %R. #ENGAON. "n )3& ;a(& o4 ()o;D ;or'ora)1on(, 1) 1( a((u2&*. :1 ,E+phasis supplied#hus, 0& per$ent of the ($apital( assu+es, or should result in, (;on)ro551n@ 1n)&r&()( in the $orporation. Reinfor$in% this interpretation of the ter+ ($apital,( as referrin% to $ontrollin% interest or shares entitled to vote, is the definition of a (Philippine national( in the )orei%n !nvest+ents A$t of 1111,9& to .it6 SEC. ?. #efinitions. - As used in this A$t6 a. #he ter+ (Philippine national1 shall +ean a $itiHen of the PhilippinesD or a do+esti$ partnership or asso$iation .holly o.ned by $itiHens of the PhilippinesD or a ;or'ora)1on or@an1H&* un*&r )3& 5a=( o4 )3& !3151''1n&( o4 =31;3 a) 5&a() (17)y '&r;&n) /60<0 o4 )3& ;a'1)a5 ()o;D ou)()an*1n@ an* &n)1)5&* )o 6o)& 1( o=n&* an* 3&5* +y ;1)1H&n( o4 )3& !3151''1n&( D or a $orporation or%aniHed abroad and re%istered as doin% business in the Philippines under the Corporation Code of .hi$h one hundred
Nazareno
Corporation CASES Based on the Syllabus of Fr. Agustin per$ent ,1&&=- of the $apital sto$5 outstandin% and entitled to vote is .holly o.ned by )ilipinos or a trustee of funds for pension or other e+ployee retire+ent or separation benefits, .here the trustee is a Philippine national and at least sixty per$ent ,0&=- of the fund .ill a$$rue to the benefit of Philippine nationals6 Provided, #hat .here a $orporation and its non-)ilipino sto$5holders o.n sto$5s in a Se$urities and Ex$han%e Co++ission ,SEC- re%istered enterprise, at least sixty per$ent ,0&=- of the $apital sto$5 outstandin% and entitled to vote of ea$h of both $orporations +ust be o.ned and held by $itiHens of the Philippines and at least sixty per$ent ,0&=- of the +e+bers of the Board of ire$tors of ea$h of both $orporations +ust be $itiHens of the Philippines, in order that the $orporation, shall be $onsidered a (Philippine national.( ,E+phasis supplied!n explainin% the definition of a (Philippine national,( the !+ple+entin% Rules and Re%ulations of the )orei%n !nvest+ents A$t of 1111 provide6 b. (Philippine national1 shall +ean a $itiHen of the Philippines or a do+esti$ partnership or asso$iation .holly o.ned by the $itiHens of the PhilippinesD or a ;or'ora)1on or@an1H&* un*&r )3& 5a=( o4 )3& !3151''1n&( o4 =31;3 a) 5&a() (17)y '&r;&n) F60<G o4 )3& ;a'1)a5 ()o;D ou)()an*1n@ an* &n)1)5&* )o 6o)& 1( o=n&* an* 3&5* +y ;1)1H&n( o4 )3& !3151''1n&( D or a trustee of funds for pension or other e+ployee retire+ent or separation benefits, .here the trustee is a Philippine national and at least sixty per$ent A0&=B of the fund .ill a$$rue to the benefit of the Philippine nationalsD Provided! that .here a $orporation its non-)ilipino sto$5holders o.n sto$5s in a Se$urities and Ex$han%e Co++ission ASECB re%istered enterprise, at least sixty per$ent A0&=B of the $apital sto$5 outstandin% and entitled to vote of both $orporations +ust be o.ned and held by $itiHens of the Philippines and at least sixty per$ent A0&=B of the +e+bers of the Board of ire$tors of ea$h of both $orporation +ust be $itiHens of the Philippines, in order that the $orporation shall be $onsidered a Philippine national. #he $ontrol test shall be applied for this purpose. Co2'51an;& =1)3 )3& r&>u1r&* F151'1no o=n&r(31' o4 a ;or'ora)1on (3a55 +& *&)&r21n&* on )3& +a(1( o4 ou)()an*1n@ ;a'1)a5 ()o;D =3&)3&r 4u55y 'a1* or no), +u) on5y (u;3 ()o;D( =31;3 ar& @&n&ra55y &n)1)5&* )o 6o)& ar& ;on(1*&r&*. For ()o;D( )o +& *&&2&* o=n&* an* 3&5* +y !3151''1n& ;1)1H&n( or !3151''1n& na)1ona5(, 2&r& 5&@a5 )1)5& 1( no) &nou@3 )o 2&&) )3& r&>u1r&* F151'1no &>u1)y. Fu55 +&n&41;1a5 o=n&r(31' o4 )3& ()o;D(, ;ou'5&* =1)3 a''ro'r1a)& 6o)1n@ r1@3)( 1( &((&n)1a5. T3u(, ()o;D(, )3& 6o)1n@ r1@3)( o4 =31;3 3a6& +&&n a((1@n&* or )ran(4&rr&* )o a51&n( ;anno) +& ;on(1*&r&* 3&5* +y !3151''1n& ;1)1H&n( or !3151''1n& na)1ona5(. "n*161*ua5( or ?ur1*1;a5 &n)1)1&( no) 2&&)1n@ )3& a4or&2&n)1on&* >ua5141;a)1on( ar& ;on(1*&r&* a( non8!3151''1n& na)1ona5(. ,E+phasis supplied-
91
*ere le%al title is insuffi$ient to +eet the 0& per$ent )ilipino-o.ned ($apital( reIuired in the Constitution. )ull benefi$ial o.nership of 0& per$ent of the outstandin% $apital sto$5, $oupled .ith 0& per$ent of the votin% ri%hts, is reIuired. #he le%al and benefi$ial o.nership of 0& per$ent of the outstandin% $apital sto$5 +ust rest in the hands of )ilipino nationals in a$$ordan$e .ith the $onstitutional +andate. "ther.ise, the $orporation is ($onsidered as non-Philippine nationalAsB.( 7nder Se$tion 1&, Arti$le N!! of the Constitution, Con%ress +ay (reserve to $itiHens of the Philippines or to $orporations or asso$iations at least sixty per centum of .hose $apital is o.ned by su$h $itiHens, or su$h hi%her per$enta%e as Con%ress +ay pres$ribe, $ertain areas of invest+ents.( #hus, in nu+erous la.s Con%ress has reserved $ertain areas of invest+ents to )ilipino $itiHens or to $orporations at least sixty per$ent of the (;a'1)a5( of .hi$h is o.ned by )ilipino $itiHens. So+e of these la.s are6 ,1- Re%ulation of A.ard of 4overn+ent Contra$ts or R.A. No. 912?D ,'Philippine !nventors !n$entives A$t or R.A. No. ?29&D ,?- *a%na Carta for *i$ro, S+all and *ediu+ Enterprises or R.A. No. 0133D ,:- Philippine "verseas Shippin% evelop+ent A$t or R.A. No. 3:31D ,9- o+esti$ Shippin% evelop+ent A$t of '&&: or R.A. No. 1'19D ,0- Philippine #e$hnolo%y #ransfer A$t of '&&1 or R.A. No. 1&&99D and ,3- Ship *ort%a%e e$ree or P. . No. 19'1. ;en$e, the ter+ ( ;a'1)a5( in Se$tion 11, Arti$le N!! of the Constitution is also used 1n )3& (a2& ;on)&7) 1n nu2&rou( 5a=( reservin% $ertain areas of invest+ents to )ilipino $itiHens. #o $onstrue broadly the ter+ ($apital( as the total outstandin% $apital sto$5, in$ludin% both $o++on and non voting preferred shares, %rossly $ontravenes the intent and letter of the Constitution that the (State shall develop a self-reliant and independent national e$ono+y effec"i9ely con"rolle& by )ilipinos.( A broad definition un8ustifiably disre%ards .ho o.ns the all-i+portant votin% sto$5, .hi$h ne$essarily eIuates to $ontrol of the publi$ utility. @e shall illustrate the %larin% ano+aly in %ivin% a broad definition to the ter+ ($apital.( <et us assu+e that a $orporation has 1&& $o++on shares o.ned by forei%ners and 1,&&&,&&& non-votin% preferred shares o.ned by )ilipinos, .ith both $lasses of share havin% a par value of one peso ,P1.&&- per share. 7nder the broad definition of the ter+ ($apital,( su$h $orporation .ould be $onsidered $o+pliant .ith the :& per$ent $onstitutional li+it on forei%n eIuity of publi$ utilities sin$e the over.hel+in% +a8ority, or +ore than 11.111 per$ent, of the total outstandin% $apital sto$5 is )ilipino o.ned. #his is obviously absurd. !n the exa+ple %iven, only the forei%ners holdin% the $o++on shares have votin% ri%hts in the ele$tion of dire$tors, even if they hold only 1&& shares. #he forei%ners, .ith a +inus$ule eIuity of less than &.&&1 per$ent, exer$ise $ontrol over the publi$ utility. "n the other hand, the )ilipinos, holdin% +ore than 11.111 per$ent of the eIuity, $annot vote in the ele$tion of dire$tors and hen$e, have no $ontrol over the publi$ utility. #his star5ly $ir$u+vents the intent of the fra+ers of the Constitution, as
Nazareno
Corporation CASES Based on the Syllabus of Fr. Agustin .ell as the $lear lan%ua%e of the Constitution, to pla$e the $ontrol of publi$ utilities in the hands of )ilipinos. !t also renders illusory the State poli$y of an independent national e$ono+y effec"i9ely con"rolle& by )ilipinos. #he exa+ple %iven is not theoreti$al but $an be found in the real .orld, an& in fac" e<is"s in "!e presen" case. ;olders of P< # preferred shares are expli$itly denied of the ri%ht to vote in the ele$tion of dire$tors. P< #Cs Arti$les of !n$orporation expressly state that ( )3& 3o5*&r( o4 S&r1a5 !r&4&rr&* S)o;D (3a55 no) +& &n)1)5&* )o 6o)& a) any 2&&)1n@ o4 )3& ()o;D3o5*&r( 4or )3& &5&;)1on o4 *1r&;)or( or 4or any o)3&r 'ur'o(& or other.ise parti$ipate in any a$tion ta5en by the $orporation or its sto$5holders, or to re$eive noti$e of any +eetin% of sto$5holders.(91 "n the other hand, holders of $o++on shares are %ranted the ex$lusive ri%ht to vote in the ele$tion of dire$tors. P< #Cs Arti$les of !n$orporation 9' state that (ea$h holder of Co++on Capital Sto$5 shall have one vote in respe$t of ea$h share of su$h sto$5 held by hi+ on all +atters voted upon by the sto$5holders, and )3& 3o5*&r( o4 Co22on Ca'1)a5 S)o;D (3a55 3a6& )3& &7;5u(16& r1@3) )o 6o)& 4or )3& &5&;)1on o4 *1r&;)or( an* 4or a55 o)3&r 'ur'o(&(.(9? !n short, only holders of $o++on shares $an vote in the ele$tion of dire$tors, +eanin% only $o++on shareholders exer$ise $ontrol over P< #. Conversely, holders of preferred shares, .ho have no votin% ri%hts in the ele$tion of dire$tors, do not have any $ontrol over P< #. !n fa$t, under P< #Cs Arti$les of !n$orporation, holders of $o++on shares have votin% ri%hts for all purposes, .hile holders of preferred shares have no votin% ri%ht for any purpose .hatsoever. !t +ust be stressed, and r&('on*&n)( *o no) *1('u)&, that forei%ners hold a +a8ority of the $o++on shares of P< #. !n fa$t, based on P< #Cs '&1& 4eneral !nfor+ation Sheet ,4!S-,9: .hi$h is a do$u+ent reIuired to be sub+itted annually to the Se$urities and Ex$han%e Co++ission,99 forei%ners hold 1'&,&:0,01& $o++on shares of P< # .hereas )ilipinos hold only 00,39&,0'' $o++on shares. 90 !n other .ords, forei%ners hold 0:.'3= of the total nu+ber of P< #Cs $o++on shares, .hile )ilipinos hold only ?9.3?=. Sin$e holdin% a +a8ority of the $o++on shares eIuates to $ontrol, it is $lear that forei%ners exer$ise $ontrol over P< #. Su$h a+ount of $ontrol un+ista5ably ex$eeds the allo.able :& per$ent li+it on forei%n o.nership of publi$ utilities expressly +andated in Se$tion 11, Arti$le N!! of the Constitution. *oreover, the ividend e$larations of P< # for '&&1,93 as sub+itted to the SEC, sho.s that per share the S!P92preferred shares earn a pittan$e in dividends $o+pared to the $o++on shares. P< # de$lared dividends for the $o++on shares at P3&.&& per share, .hile the de$lared dividends for the preferred shares a+ounted to a +easlyP1.&& per share.91 So the preferred shares not only $annot vote in the ele$tion of
0&
dire$tors, they also have very little and obviously ne%li%ible dividend earnin% $apa$ity $o+pared to $o++on shares. As sho.n in P< #Cs '&1& 4!S, 0& as sub+itted to the SEC, the par value of P< # $o++on shares is P9.&& per share, .hereas the par value of preferred shares is P1&.&& per share. !n other .ords, preferred shares have t.i$e the par value of $o++on shares but $annot ele$t dire$tors and have only 1E3& of the dividends of $o++on shares. *oreover, 11.::= of the preferred shares are o.ned by )ilipinos .hile forei%ners o.n only a +inus$ule &.90= of the preferred shares. 01 @orse, preferred shares $onstitute 33.29= of the authoriHed $apital sto$5 of P< # .hile $o++on shares $onstitute only ''.19=.0' #his undeniably sho.s that benefi$ial interest in P< # is not .ith the non-votin% preferred shares but .ith the $o++on shares, blatantly violatin% the $onstitutional reIuire+ent of 0& per$ent )ilipino $ontrol and )ilipino benefi$ial o.nership in a publi$ utility. #he le%al and benefi$ial o.nership of 0& per$ent of the outstandin% $apital sto$5 +ust rest in the hands of )ilipinos in a$$ordan$e .ith the $onstitutional +andate. )ull benefi$ial o.nership of 0& per$ent of the outstandin% $apital sto$5, $oupled .ith 0& per$ent of the votin% ri%hts, is $onstitutionally reIuired for the StateCs %rant of authority to operate a publi$ utility. #he undisputed fa$t that the P< # preferred shares, 11.::= o.ned by )ilipinos, are non-votin% and earn only 1E3& of the dividends that P< # $o++on shares earn, %rossly violates the $onstitutional reIuire+ent of 0& per$ent )ilipino $ontrol and )ilipino benefi$ial o.nership of a publi$ utility. "n (3or), F151'1no( 3o5* 5&(( )3an 60 '&r;&n) o4 )3& 6o)1n@ ()o;D, an* &arn 5&(( )3an 60 '&r;&n) o4 )3& *161*&n*(, o4 !L T. #his dire$tly $ontravenes the express $o++and in Se$tion 11, Arti$le N!! of the Constitution that (AnBo fran$hise, $ertifi$ate, or any other for+ of authoriHation for the operation of a publi$ utility shall be %ranted ex$ept to x x x $orporations x x x or%aniHed under the la.s of the Philippines, a) 5&a() (17)y '&r ;&n)u2 o4 =3o(& ;a'1)a5 1( o=n&* +y (u;3 ;1)1H&n( 7 7 7.( #o repeat, ,1- forei%ners o.n 0:.'3= of the $o++on shares of P< #, .hi$h $lass of shares exer$ises the (o5&ri%ht to vote in the ele$tion of dire$tors, and thus exer$ise $ontrol over P< #D ,'- )ilipinos o.n only ?9.3?= of P< #Cs $o++on shares, $onstitutin% a +inority of the votin% sto$5, and thus do not exer$ise $ontrol over P< #D ,?- preferred shares, 11.::= o.ned by )ilipinos, have no votin% ri%htsD ,:preferred shares earn only 1E3& of the dividends that $o++on shares earnD 0? ,9preferred shares have t.i$e the par value of $o++on sharesD and ,0- preferred shares $onstitute 33.29= of the authoriHed $apital sto$5 of P< # and $o++on shares only ''.19=. #his 5ind of o.nership and $ontrol of a publi$ utility is a +o$5ery of the Constitution. !n$identally, the fa$t that P< # $o++on shares .ith a par value of P9.&& have a $urrent sto$5 +ar5et value ofP',?'2.&& per share,0: .hile P< # preferred shares .ith
Nazareno
Corporation CASES Based on the Syllabus of Fr. Agustin a par value of P1&.&& per share have a $urrent sto$5 +ar5et value ran%in% fro+ only P1&.1' to P11.&0 per share,09 is a %larin% $onfir+ation by the +ar5et that $ontrol and benefi$ial o.nership of P< # rest .ith the $o++on shares, not .ith the preferred shares. !ndisputably, $onstruin% the ter+ ($apital( in Se$tion 11, Arti$le N!! of the Constitution to in$lude both votin% and non-votin% shares .ill result in the ab8e$t surrender of our tele$o++uni$ations industry to forei%ners, a+ountin% to a $lear abdi$ation of the StateCs $onstitutional duty to li+it $ontrol of publi$ utilities to )ilipino $itiHens. Su$h an interpretation $ertainly runs $ounter to the $onstitutional provision reservin% $ertain areas of invest+ent to )ilipino $itiHens, su$h as the exploitation of natural resour$es as .ell as the o.nership of land, edu$ational institutions and advertisin% businesses. #he Court should never open to forei%n $ontrol .hat the Constitution has expressly reserved to )ilipinos for that .ould be a betrayal of the Constitution and of the national interest. #he Court +ust perfor+ its sole+n duty to defend and uphold the intent and letter of the Constitution to ensure, in the .ords of the Constitution, (a self-reliant and independent national e$ono+y effectivel8 controlled by )ilipinos.( Se$tion 11, Arti$le N!! of the Constitution, li5e other provisions of the Constitution expressly reservin% to )ilipinosspecific areas of invest+ent, su$h as the develop+ent of natural resour$es and o.nership of land, edu$ational institutions and advertisin% business, is self=e<ecu"ing. #here is no need for le%islation to i+ple+ent these selfexe$utin% provisions of the Constitution. #he rationale .hy these $onstitutional provisions are self-exe$utin% .as explained in ,anila Prince 7otel v. GSIS,00 thus6 x x x ;en$e, unless it is expressly provided that a le%islative a$t is ne$essary to enfor$e a $onstitutional +andate, the presu+ption no. is that all provisions of the $onstitution are self-exe$utin%. !f the $onstitutional provisions are treated as reIuirin% le%islation instead of self-exe$utin%, the le%islature .ould have the po.er to i%nore and pra$ti$ally nullify the +andate of the funda+ental la.. #his $an be $ata$lys+i$. #hat is .hy the prevailin% vie. is, as it has al.ays been, that J . . . in $ase of doubt, the Constitution should be $onsidered self-exe$utin% rather than non-self-exe$utin%. . . .Un5&(( )3& ;on)rary 1( ;5&ar5y 1n)&n*&*, )3& 'ro61(1on( o4 )3& Con()1)u)1on (3ou5* +& ;on(1*&r&* (&548&7&;u)1n@, a( a ;on)rary ru5& =ou5* @16& )3& 5&@1(5a)ur& *1(;r&)1on )o *&)&r21n& =3&n, or =3&)3&r, )3&y (3a55 +& &44&;)16& . #hese provisions .ould be subordinated to the .ill of the la.+a5in% body, .hi$h $ould +a5e the+ entirely +eanin%less by si+ply refusin% to pass the needed i+ple+entin% statute. ,E+phasis supplied!n ,anila Prince 7otel, even the issentin% "pinion of then Asso$iate /usti$e Reynato S. Puno, later Chief /usti$e, a%reed that $onstitutional provisions are presu+ed to be self-exe$utin%. /usti$e Puno stated6
01
Courts as a rule $onsider the provisions of the Constitution as self-exe$utin%, rather than as reIuirin% future le%islation for their enfor$e+ent. #he reason is not diffi$ult to dis$ern. For 14 )3&y ar& no) )r&a)&* a( (&548&7&;u)1n@, )3& 2an*a)& o4 )3& 4un*a2&n)a5 5a= ra)141&* +y )3& (o6&r&1@n '&o'5& ;an +& &a(15y 1@nor&* an* nu55141&* +y Con@r&((. Su44u(&* =1)3 =1(*o2 o4 )3& a@&( 1( )3& uny1&5*1n@ ru5& )3a) 5&@1(5a)16& a;)1on( 2ay @16& +r&a)3 )o ;on()1)u)1ona5 r1@3)( +u) ;on@r&((1ona5 1na;)1on (3ou5* no) (u44o;a)& )3&2. #hus, .e have treated as self-exe$utin% the provisions in the Bill of Ri%hts on arrests, sear$hes and seiHures, the ri%hts of a person under $ustodial investi%ation, the ri%hts of an a$$used, and the privile%e a%ainst self-in$ri+ination. !t is re$o%niHed that le%islation is unne$essary to enable $ourts to effe$tuate $onstitutional provisions %uaranteein% the funda+ental ri%hts of life, liberty and the prote$tion of property. #he sa+e treat+ent is a$$orded to $onstitutional provisions forbiddin% the ta5in% or da+a%in% of property for publi$ use .ithout 8ust $o+pensation. ,E+phasis supplied#hus, in nu+erous $ases, 03 this Court, even in the absen$e of i+ple+entin% le%islation, applied dire$tly the provisions of the 11?9, 113? and 1123 Constitutions li+itin% land o.nership to )ilipinos. !n Soriano v. /ng 7oo,02this Court ruled6 x x x As the Constitution is silent as to the effe$ts or $onseIuen$es of a sale by a $itiHen of his land to an alien, and as both the $itiHen and the alien have violated the la., none of the+ should have a re$ourse a%ainst the other, and it should only be the State that should be allo.ed to intervene and deter+ine .hat is to be done .ith the property sub8e$t of the violation. @e have said that .hat the State should do or $ould do in su$h +atters is a +atter of publi$ poli$y, entirely beyond the s$ope of 8udi$ial authority. , in%lasan, et al. vs. <ee Bun #in%, et al., 0 4. R. No. <-9110, /une '3, 1190.- :315& )3& 5&@1(5a)ur& 3a( no) *&41n1)&5y *&;1*&* =3a) 'o51;y (3ou5* +& 4o55o=&* 1n ;a(&( o4 61o5a)1on( a@a1n() )3& ;on()1)u)1ona5 'ro31+1)1on, ;our)( o4 ?u()1;& ;anno) @o +&yon* +y *&;5ar1n@ )3& *1('o(1)1on )o +& nu55 an* 6o1* a( 61o5a)16& o4 )3& Con()1)u)1on. x x x ,E+phasis supplied#o treat Se$tion 11, Arti$le N!! of the Constitution as not self-exe$utin% .ould +ean that sin$e the 11?9 Constitution, or over the last 39 years, not one of the $onstitutional provisions expressly reservin% spe$ifi$ areas of invest+ents to $orporations, at least 0& per$ent of the ($apital( of .hi$h is o.ned by )ilipinos, .as enfor$eable. !n short, the fra+ers of the 11?9, 113? and 1123 Constitutions +iserably failed to effe$tively reserve to )ilipinos spe$ifi$ areas of invest+ent, li5e the operation by $orporations of publi$ utilities, the exploitation by $orporations of +ineral resour$es, the o.nership by $orporations of real estate, and the o.nership of edu$ational institutions. All the le%islatures that $onvened sin$e 11?9 also +iserably failed to ena$t le%islations to i+ple+ent these vital $onstitutional provisions that deter+ine .ho .ill effe$tively $ontrol the national e$ono+y, )ilipinos or forei%ners. #his Court $annot allo. su$h an absurd interpretation of the Constitution.
Nazareno
Corporation CASES Based on the Syllabus of Fr. Agustin #his Court has held that the SEC (has both re%ulatory and ad8udi$ative fun$tions.(01 7nder its re%ulatory fun$tions, the SEC $an be $o+pelled by +anda+us to perfor+ its statutory duty .hen it unla.fully ne%le$ts to perfor+ the sa+e. 7nder its ad8udi$ative or Iuasi-8udi$ial fun$tions, the SEC $an be also be $o+pelled by +anda+us to hear and de$ide a possible violation of any la. it ad+inisters or enfor$es .hen it is +andated by la. to investi%ate su$h violation.1awphi1 7nder Se$tion 13,:-3& of the Corporation Code, the SEC has the re%ulatory fun$tion to re8e$t or disapprove the Arti$les of !n$orporation of any $orporation .here J)3& r&>u1r&* '&r;&n)a@& o4 o=n&r(31' o4 )3& ;a'1)a5 ()o;D )o +& o=n&* +y ;1)1H&n( o4 )3& !3151''1n&( 3a( no) +&&n ;o2'51&* =1)3 a( r&>u1r&* +y &71()1n@ 5a=( or )3& Con()1)u)1on.J #hus, the SEC is the %overn+ent a%en$y tas5ed .ith the statutory duty to enfor$e the nationality reIuire+ent pres$ribed in Se$tion 11, Arti$le N!! of the Constitution on the o.nership of publi$ utilities. #his Court, in a petition for de$laratory relief that is treated as a petition for +anda+us as in the present $ase, $an dire$t the SEC to perfor+ its statutory duty under the la., a duty that the SEC has apparently unla.fully ne%le$ted to do based on the '&1& 4!S that respondent P< # sub+itted to the SEC. 7nder Se$tion 9,+- of the Se$urities Re%ulation Code, 31 the SEC is vested .ith the (po.er and fun$tion( to ((u('&n* or r&6oD&, a4)&r 'ro'&r no)1;& an* 3&ar1n@, )3& 4ran;31(& or ;&r)141;a)& o4 r&@1()ra)1on o4 ;or'ora)1on(, 'ar)n&r(31'( or a((o;1a)1on(, u'on any o4 )3& @roun*( 'ro61*&* +y 5a=. ( #he SEC is +andated under Se$tion 9,d- of the sa+e Code .ith the (po.er and fun$tion( to ( 1n6&()1@a)& 7 7 7 )3& a;)161)1&( o4 '&r(on( )o &n(ur& ;o2'51an;& ( .ith the la.s and re%ulations that SEC ad+inisters or enfor$es. #he 4!S that all $orporations are reIuired to sub+it to SEC annually should put the SEC on %uard a%ainst violations of the nationality reIuire+ent pres$ribed in the Constitution and existin% la.s. #his Court $an $o+pel the SEC, in a petition for de$laratory relief that is treated as a petition for +anda+us as in the present $ase, to hear and de$ide a possible violation of Se$tion 11, Arti$le N!! of the Constitution in vie. of the o.nership stru$ture of P< #Cs votin% shares, as ad+itted by respondents and as stated in P< #Cs '&1& 4!S that P< # sub+itted to SEC. :HEREFORE, .e !ARTLY GRANT the petition and rule that the ter+ ($apital( in Se$tion 11, Arti$le N!! of the 1123 Constitution refers only to shares of sto$5 entitled to vote in the ele$tion of dire$tors, and thus in the present $ase only to $o++on shares, and not to the total outstandin% $apital sto$5 ,$o++on and non-votin% preferred shares-. Respondent Chairperson of the Se$urities and Ex$han%e Co++ission is "RECTE to apply this definition of the ter+ ($apital( in deter+inin% the extent of allo.able forei%n o.nership in respondent Philippine <on% istan$e #elephone Co+pany, and if there is a violation of Se$tion 11, Arti$le N!! of the Constitution, to i+pose the appropriate san$tions under the la.. SO OR ERE .
0'
Nazareno
Corporation CASES Based on the Syllabus of Fr. Agustin EN BANC G.R. No. 1.6,.9 O;)o+&r 9, 2012
P
0?
jus"ify
I. >ar=reac!ing implica"ions of "!e legal "rea"men" of pe"i"ion for &eclara"ory relief as one for man&amus.
Nazareno
issue
HE"RS OF :"LSON !. GA%#OA, Petitioners, vs. F"NANCE SECRETARY%ARGAR"TO #. TE$ES, F"NANCE UN ERSECRETARYJOHN !. SE$"LLA, AN CO%%"SS"ONER R"CAR O A#CE E OF THE !RES" ENT"AL CO%%"SS"ON ON GOO GO$ERN%ENT/!CGG0 "N THE"R CA!AC"T"ES AS CHA"R AN %E%#ERS, RES!ECT"$ELY, OF THE !R"$AT"AAT"ON COUNC"L, CHA"R%AN ANTHON" SAL"% OF F"RST !AC"F"C CO., LT . "N H"S CA!AC"TY AS "RECTOR OF %ETRO !AC"F"C ASSET HOL "NGS "NC., CHA"R%AN %ANUEL $. !ANG"L"NAN OF !H"L"!!"NE LONG "STANCE TELE!HONE CO%!ANY /!L T0 "N H"S CA!AC"TY AS %ANAG"NG "RECTOR OF F"RST !AC"F"C CO., LT ., !RES" ENT NA!OLEON L. NAAARENO OF !H"L"!!"NE LONG "STANCE TELE!HONE CO%!ANY, CHA"R FE #AR"N OF THE SECUR"T"ES AN ENCHANGE CO%%"SS"ON, an* !RES" ENT FRANC"S L"% OF THE !H"L"!!"NE STOC9 ENCHANGE, Respondents. !A#L"TO $. SAN" A an* ARNO $. SAN" A , Petitioner-in-!ntervention. RES"<7#!"N CAR!"O, J.: #his resolves the +otions for re$onsideration of the '2 /une '&11 e$ision filed by ,1the Philippine Sto$5 Ex$han%eYs ,PSE- President, 1 ,'- *anuel G. Pan%ilinan ,Pan%ilinan-,' ,?- Napoleon <. NaHareno ,NaHareno -, ?and , :- the Se$urities and Ex$han%e Co++ission ,SEC-: ,$olle$tively, +ovants -. #he "ffi$e of the Soli$itor 4eneral ,"S4- initially filed a +otion for re$onsideration on behalfofthe SEC,9 assailin% the '2 /une '&11 e$ision. ;o.ever, it subseIuently filed a Consolidated Co++ent on behalf of the State, 0de$larin% expressly that it a%rees .ith the CourtYs definition of the ter+ ($apital( in Se$tion 11, Arti$le N!! of the Constitution. urin% the "ral Ar%u+ents on '0 /une '&1', the "S4 reiterated its position $onsistent .ith the CourtYs '2 /une '&11 e$ision. @e deny the +otions for re$onsideration.
As .e e+phati$ally stated in the '2 /une '&11 e$ision, the interpretation of the ter+ ($apital( in Se$tion 11, Arti$le N!! of the Constitution has far-rea$hin% i+pli$ations to the national e$ono+y. !n fa$t, a resolution of this issue .ill deter+ine .hether )ilipinos are +asters, or se$ond-$lass $itiHens, in their o.n $ountry. @hat is at sta5e here is .hether )ilipinos or forei%ners .ill have effec"i9e con"rol of the Philippine national e$ono+y. !ndeed, if ever there is a le%al issue that has far-rea$hin% i+pli$ations to the entire nation, and to future %enerations of )ilipinos, it is the threshold le%al issue presented in this $ase. Contrary to Pan%ilinanCs narro. vie., the serious e$ono+i$ $onseIuen$es resultin% in the interpretation of the ter+ ($apital( in Se$tion 11, Arti$le N!! of the Constitution undoubtedly de+and an i++ediate ad8udi$ation of this issue. S12'5y 'u), )3& 4ar8 r&a;31n@ 12'51;a)1on( o4 )31( 1((u& ?u()14y )3& )r&a)2&n) o4 )3& '&)1)1on a( on& 4or 2an*a2u(.3 !n :u(on Stevedoring Corp. v. "nti #umm8 Board,2 the Court dee+ed it .ise and expedient to resolve the $ase althou%h the petition for de$laratory relief $ould be outri%htly dis+issed for bein% pro$edurally defe$tive. #here, appellant ad+ittedly had already $o++itted a brea$h of the Publi$ Servi$e A$t in relation to the Anti- u++y <a. sin$e it had been e+ployin% non- A+eri$an aliens lon% before the de$ision in a prior si+ilar $ase. ;o.ever, the +ain issue in :u(on Stevedoring .as of trans$endental i+portan$e, involvin% the exer$ise or en8oy+ent of ri%hts, fran$hises, privile%es, properties and businesses .hi$h only )ilipinos and Iualified $orporations $ould exer$ise or en8oy under the Constitution and the statutes. *oreover, the sa+e issue $ould be raised by appellant in an appropriate a$tion. #hus, in :u(on Stevedoring the Court dee+ed it ne$essary to finally dispose of the $ase for the %uidan$e of all $on$erned, despite the apparent pro$edural fla. in the petition. #he $ir$u+stan$es surroundin% the present $ase, su$h as the supposed pro$edural defe$t of the petition and the pivotal le%al issue involved, rese+ble those in :u(on Stevedoring. ConseIuently, in the interest of substantial 8usti$e and faithful adheren$e to the Constitution, .e opted to resolve this $ase for the %uidan$e of the publi$ and all $on$erned parties. II. 'o c!ange of any "!us% no re&efini"ion of "!e "erm :capi"al.:
long=s"an&ing
rule?
*ovants $ontend that the ter+ ($apital( in Se$tion 11, Arti$le N!! of the Constitution has lon% been settled and defined to refer to the total outstandin% shares of sto$5,
Corporation CASES Based on the Syllabus of Fr. Agustin .hether votin% or non-votin%. !n fa$t, +ovants $lai+ that the SEC, .hi$h is the ad+inistrative a%en$y tas5ed to enfor$e the 0&-:& o.nership reIuire+ent in favor of )ilipino $itiHens in the Constitution and various statutes, has $onsistently adopted this parti$ular definition in its nu+erous opinions. *ovants point out that .ith the '2 /une '&11 e$ision, the Court in effe$t introdu$ed a (ne.( definition or (+idstrea+ redefinition(1 of the ter+ ($apital( in Se$tion 11, Arti$le N!! of the Constitution. #his is e%re%ious error. )or +ore than 39 years sin$e the 11?9 Constitution, the Court has no" interpreted or defined the ter+ ($apital( found in various e$ono+i$ provisions of the 11?9, 113? and 1123 Constitutions. #here has never been a 8udi$ial pre$edent interpretin% the ter+ ($apital( in the 11?9, 113? and 1123 Constitutions, until no.. ;en$e, it is patently .ron% and utterly baseless to $lai+ that the Court in definin% the ter+ ($apital( in its '2 /une '&11 e$ision +odified, reversed, or set aside the purported lon%-standin% definition of the ter+ ($apital,( .hi$h supposedly refers to the total outstandin% shares of sto$5, .hether votin% or non-votin%. #o repeat, until the present $ase there has never been a Court rulin% $ate%ori$ally definin% the ter+ ($apital( found in the various e$ono+i$ provisions of the 11?9, 113? and 1123 Philippine Constitutions. #he opinions of the SEC, as .ell as of the epart+ent of /usti$e , "/-, on the definition of the ter+ ($apital( as referrin% to both votin% and non-votin% shares ,$o+bined total of $o++on and preferred shares- are, in the first pla$e, $onfli$tin% and in$onsistent. #here is no basis .hatsoever to the $lai+ that the SEC and the "/ have $onsistently and unifor+ly adopted a definition of the ter+ ($apital( $ontrary to the definition that this Court adopted in its '2 /une '&11 e$ision. !n "/ "pinion No. 1?&, s. 1129,1& dated 3 "$tober 1129, the s$ope of the ter+ ($apital( in Se$tion 1, Arti$le N!G of the 113? Constitution .as raised, that is, .hether the ter+ ($apital( in$ludes (both preferred and $o++on sto$5s.( #he issue .as raised in relation to a sto$5-s.ap transa$tion bet.een a )ilipino and a /apanese $orporation, both sto$5holders of a do+esti$ $orporation that o.ned lands in the Philippines. #hen *inister of /usti$e Estelito P. *endoHa ruled that the resultin% o.nership stru$ture of the $orporation .ould beun;on()1)u)1ona5 be$ause 0&= of the votin% sto$5 .ould be o.ned by /apanese .hile )ilipinos .ould o.n only :&= of the votin% sto$5, althou%h .hen the non-votin% sto$5 is added, )ilipinos .ould o.n 0&= of the $o+bined votin% and non-votin% sto$5. T31( o=n&r(31' ()ru;)ur& 1( r&2arDa+5y (1215ar )o )3& ;urr&n) o=n&r(31' ()ru;)ur& o4 !L T. *inister *endoHa ruled6 xxxx #hus, the )ilipino %roup still o.ns sixty ,0&=- of the entire subs$ribed $apital sto$5 ,$o++on and preferred- .hile the /apanese investors $ontrol sixty per$ent ,0&=- of the $o++on ,votin%- shares.
0:
") 1( your 'o(1)1on )3a) 7 7 7 (1n;& S&;)1on 9, Ar)1;5& N"$ o4 )3& Con()1)u)1on u(&( )3& =or* J;a'1)a5,J =31;3 1( ;on()ru&* J)o 1n;5u*& +o)3 'r&4&rr&* an* ;o22on (3ar&(J an* J)3a) =3&r& )3& 5a= *o&( no) *1()1n@u1(3, )3& ;our)( (3a55 no) *1()1n@u1(3.J xxxx !n li%ht of the fore%oin% 8urispruden$e, 1) 1( 2y o'1n1on )3a) )3& ()o;D8(=a' )ran(a;)1on 1n >u&()1on 2ay no) +& ;on()1)u)1ona55y u'3&5* . @hile it +ay be ordinary $orporate pra$ti$e to $lassify $orporate shares into $o++on votin% shares and preferred non-votin% shares, any arran%e+ent .hi$h atte+pts to defeat the $onstitutional purpose should be es$he.ed. T3u(, )3& r&(u5)an) &>u1)y arran@&2&n) =31;3 =ou5* '5a;& o=n&r(31' o4 60< 11 o4 )3& ;o22on /6o)1n@0 (3ar&( 1n )3& Ja'an&(& @rou', =315& r&)a1n1n@ 60< o4 )3& )o)a5 '&r;&n)a@& o4 ;o22on an* 'r&4&rr&* (3ar&( 1n F151'1no 3an*( =ou5* a2oun) )o ;1r;u26&n)1on o4 )3& 'r1n;1'5& o4 ;on)ro5 +y !3151''1n& ()o;D3o5*&r( )3a) 1( 12'51;1) 1n )3& 60< !3151''1n& na)1ona51)y r&>u1r&2&n) 1n )3& Con()1)u)1on. ,E+phasis supplied!n short, *inister *endoHa ;a)&@or1;a55y r&?&;)&* the theory that the ter+ ($apital( in Se$tion 1, Arti$le N!G of the 113? Constitution in$ludes (both preferred and $o++on sto$5s( treated as the sa+e $lass of shares re%ardless of differen$es in votin% ri%hts and privile%es. *inister *endoHa stressed that the 0&-:& o.nership reIuire+ent in favor of )ilipino $itiHens in the Constitution is not $o+plied .ith unless the $orporation ((a)1(41&( )3& ;r1)&r1on o4 +&n&41;1a5 o=n&r(31'( and that in applyin% the sa+e ( )3& 'r12or*1a5 ;on(1*&ra)1on 1( (1)u( o4 ;on)ro5 .( "n the other hand, in "pinion No. '?-1& dated 12 Au%ust '&1&, addressed to Castillo <a+an #an Pantaleon U San /ose, then SEC 4eneral Counsel Gernette 4. 7+ali-Pa$o applied the $o)1n@ Con)ro5 T&(), that is, usin% only the votin% sto$5 to deter+ine .hether a $orporation is a Philippine national. #he "pinion states6 Applyin% the fore%oin%, 'ar)1;u5ar5y )3& Con)ro5 T&(), *<RC is dee+ed as a Philippine national be$ause6 ,1- sixty per$ent ,0&=- of its ou)()an*1n@ ;a'1)a5 ()o;D en"i"le& "o 9o"e is o.ned by a Philippine national, the #rusteeD and ,'- at least sixty per$ent ,0&=- of the ER) .ill a$$rue to the benefit of Philippine nationals. S)155 'ur(uan) )o )3& Con)ro5 T&(), %LRCC( 1n6&()2&n) 1n 60< o4 #F CC( ou)()an*1n@ ;a'1)a5 ()o;D en"i"le& "o 9o"e (3a55 +& *&&2&* a( o4 !3151''1n& na)1ona51)y, )3&r&+y >ua514y1n@ #F C )o o=n 'r16a)& 5an*. )urther, under, and for purposes of, the )!A, *<RC and B) C are both Philippine nationals, $onsiderin% that6 ,1- sixty per$ent ,0&=- of their respe$tive ou)()an*1n@ ;a'1)a5 ()o;D en"i"le& "o 9o"e is o.ned by a Philippine national ,i.e., by the #rustee, in the $ase of *<RCD and by *<RC, in the $ase of B) C-D and ,'- at least 0&= of their
Nazareno
Corporation CASES Based on the Syllabus of Fr. Agustin respe$tive board of dire$tors are )ilipino $itiHens. ,Boldfa$in% and itali$iHation suppliedClearly, these "/ and SEC opinions are $o+patible .ith the CourtCs interpretation of the 0&-:& o.nership reIuire+ent in favor of )ilipino $itiHens +andated by the Constitution for $ertain e$ono+i$ a$tivities. At the sa+e ti+e, these opinions hi%hli%ht the $onfli$tin%, $ontradi$tory, and in$onsistent positions ta5en by the "/ and the SEC on the definition of the ter+ ($apital( found in the e$ono+i$ provisions of the Constitution. #he opinions issued by SEC le%al offi$ers do not have the for$e and effe$t of SEC rules and re%ulations be$ause only the SEC en banc $an adopt rules and re%ulations. As expressly provided in Se$tion :.0 of the Se$urities Re%ulation Code, 1' the SEC $annot dele%ate to any of its individual Co++issioner or staff the po.er to adopt any rule or re%ulation. )urther, un*&r S&;)1on ,.1 o4 )3& (a2& Co*&, 1) 1( "!e 68C as a collegial bo&y, an* no) any o4 1)( 5&@a5 o441;&r(, )3a) 1( &2'o=&r&* )o 1((u& opinions an* a''ro6& ru5&( an* r&@u5a)1on(. #hus6 :.0. #he Co++ission +ay, for purposes of effi$ien$y, dele%ate any of its fun$tions to any depart+ent or offi$e of the Co++ission, an individual Co++issioner or staff +e+ber of the Co++ission &7;&')its revie. or appellate authority and 1)( 'o=&r )o a*o'), a5)&r an* (u''5&2&n) any ru5& or r&@u5a)1on. #he Co++ission +ay revie. upon its o.n initiative or upon the petition of any interested party any a$tion of any depart+ent or offi$e, individual Co++issioner, or staff +e+ber of the Co++ission. SEC. 9. Powers and -unctions of the Commission. 9.1. #he Co++ission shall a$t .ith transparen$y and shall have the po.ers and fun$tions provided by this Code, Presidential e$ree No. 1&'-A, the Corporation Code, the !nvest+ent ;ouses <a., the )inan$in% Co+pany A$t and other existin% la.s. Pursuant thereto the Co++ission shall have, a+on% others, the follo.in% po.ers and fun$tions6 xxxx /@0 !r&'ar&, a''ro6&, a2&n* or r&'&a5 ru5&(, r&@u5a)1on( an* or*&r(, an* 1((u& opinionsan* 'ro61*& @u1*an;& on an* (u'&r61(& ;o2'51an;& =1)3 (u;3 ru5&(, r&@u5a)1on( an* or*&r(I x x x x ,E+phasis supplied#hus, the a$t of the individual Co++issioners or le%al offi$ers of the SEC in issuin% opinions that have the effe$t of SEC rules or re%ulations is ultra vires. 7nder Se$tions
09
:.0 and 9.1,%- of the Code, only the SEC en banc $an (issue opinions( that have the for$e and effe$t of rules or re%ulations. Se$tion :.0 of the Code bars the SEC en banc fro+ dele%atin% to any individual Co++issioner or staff the po.er to adopt rules or re%ulations. "n (3or), any o'1n1on o4 1n*161*ua5 Co221((1on&r( or SEC 5&@a5 o441;&r( *o&( no) ;on()1)u)& a ru5& or r&@u5a)1on o4 )3& SEC. #he SEC ad+its durin% the "ral Ar%u+ents that only the SEC en banc, and not any of its individual $o++issioners or le%al staff, is e+po.ered to issue opinions .hi$h have the sa+e bindin% effe$t as SEC rules and re%ulations, thus6 /7S#!CE CARP!"6 So, under the la., it is the Co++ission En Ban$ that $an issue an SEC "pinion, $orre$tL C"**!SS!"NER 4A!#E61? #hatCs $orre$t, >our ;onor. /7S#!CE CARP!"6 Can the Co++ission En Ban$ dele%ate this fun$tion to an SEC offi$erL C"**!SS!"NER 4A!#E6 >es, >our ;onor, .e have dele%ated it to the 4eneral Counsel. /7S#!CE CARP!"6 !t $an be dele%ated. @hat $annot be dele%ated by the Co++ission En Ban$ to a $o++issioner or an individual e+ployee of the Co++issionL C"**!SS!"NER 4A!#E6 Novel opinions that AhaveB to be de$ided by the En Ban$... /7S#!CE CARP!"6 @hat $annot be dele%ated, a+on% others, is the po.er to adopt or a+end rules and re%ulations, $orre$tL
Nazareno
Corporation CASES Based on the Syllabus of Fr. Agustin C"**!SS!"NER 4A!#E6 #hatCs $orre$t, >our ;onor. JUST"CE CAR!"OB So, you ;o2+1n& )3& )=o /20, )3& SEC o441;&r, 14 *&5&@a)&* )3a) 'o=&r, ;an 1((u& an o'1n1on +u) )3a) o'1n1on *o&( no) ;on()1)u)& a ru5& or r&@u5a)1on, ;orr&;)E CO%%"SS"ONER GA"TEB Corr&;), Your Honor. JUST"CE CAR!"OB So, a55 o4 )3&(& o'1n1on( )3a) you 2&n)1on&* )3&y ar& no) ru5&( an* r&@u5a)1on(, ;orr&;)E CO%%"SS"ONER GA"TEB T3&y ar& no) ru5&( an* r&@u5a)1on(. /7S#!CE CARP!"6 !f they are not rules and re%ulations, they apply only to that parti$ular situation and .ill not $onstitute a pre$edent, $orre$tL C"**!SS!"NER 4A!#E6 >es, >our ;onor.1: ,E+phasis suppliedSi%nifi$antly, the SEC en banc, .hi$h is the $olle%ial body statutorily e+po.ered to issue rules and opinions on behalf of the SEC, has adopted even the 4randfather Rule in deter+inin% $o+plian$e .ith the 0&-:& o.nership reIuire+ent in favor of )ilipino $itiHens +andated by the Constitution for $ertain e$ono+i$ a$tivities. #his prevailin% SEC rulin%, .hi$h the SEC $orre$tly adopted to th.art any $ir$u+vention of the reIuired )ilipino (o=n&r(31' an* ;on)ro5,( is laid do.n in the '9 *ar$h '&1& SEC en banc rulin% in %edmont Consolidated ,ines! Corp. v. ,c"rthur ,ining! Inc.! et al.,19 to .it6
00
#he avo.ed purpose of the Constitution is to pla$e in the hands of )ilipinos the exploitation of our natural resour$es. N&;&((ar15y, )3&r&4or&, )3& Ru5& 1n)&r'r&)1n@ )3& ;on()1)u)1ona5 'ro61(1on (3ou5* no) *121n1(3 )3a) r1@3) )3rou@3 )3& 5&@a5 41;)1on o4 ;or'ora)& o=n&r(31' an* ;on)ro5 . But the $onstitutional provision, as interpreted and pra$ti$ed via the 1103 SEC Rules, has favored forei%ners $ontrary to the $o++and of the Constitution. Hence% "!e Gran&fa"!er Rule mus" be applie& "o accura"ely &e"ermine "!e ac"ual par"icipa"ion% bo"! &irec" an& in&irec"% of foreigners in a corpora"ion engage& in a na"ionali@e& ac"i9i"y or business. Co+plian$e .ith the $onstitutional li+itation,s- on en%a%in% in nationaliHed a$tivities +ust be deter+ined by as$ertainin% if 0&= of the investin% $orporationCs outstandin% $apital sto$5 is o.ned by ()ilipino $itiHens(, or as interpreted, by natural or individual )ilipino $itiHens. !f su$h investin% $orporation is in turn o.ned to so+e extent by another investin% $orporation, the sa+e pro$ess +ust be observed. "ne +ust not stop until the $itiHenships of the individual or natural sto$5holders of layer after layer of investin% $orporations have been established, the very essen$e of the 4randfather Rule. La()5y, 1) =a( )3& 1n)&n) o4 )3& 4ra2&r( o4 )3& 198. Con()1)u)1on )o a*o') )3& Gran*4a)3&r Ru5&. !n one of the dis$ussions on .hat is no. Arti$le N!! of the present Constitution, the fra+ers +ade the follo.in% ex$han%e6 *R. N"<<E ". !n Se$tions ?, 1 and 19, the Co++ittee stated lo$al or )ilipino eIuity and forei%n eIuityD na+ely, 0&-:& in Se$tion ?, 0&-:& in Se$tion 1, and 'E?-1E? in Se$tion 19. *R. G!<<E4AS. #hat is ri%ht. *R. N"<<E ". !n tea$hin% la., .e are al.ays fa$ed .ith the Iuestion6 K@here do .e base the eIuity reIuire+ent, is it on the authoriHed $apital sto$5, on the subs$ribed $apital sto$5, or on the paid-up $apital sto$5 of a $orporationCL @ill the Co++ittee please enli%hten +e on thisL *R. G!<<E4AS. @e have 8ust had a lon% dis$ussion .ith the +e+bers of the tea+ fro+ the 7P <a. Center .ho provided us a draft. #he phrase that is $ontained here .hi$h .e adopted fro+ the 7P draft is K0& per$ent of votin% sto$5.C *R. N"<<E ". #hat +ust be based on the subs$ribed $apital sto$5, be$ause unless de$lared delinIuent, unpaid $apital sto$5 shall be entitled to vote. *R. G!<<E4AS. #hat is ri%ht.
Nazareno
Corporation CASES Based on the Syllabus of Fr. Agustin *R. N"<<E ". #han5 you. @ith respe$t to an invest+ent by one $orporation in another $orporation, say, a $orporation .ith 0&-:& per$ent eIuity invests in another $orporation .hi$h is per+itted by the Corporation Code, does the Co++ittee adopt the %randfather ruleL *R. G!<<E4AS. >es, that is the understandin% of the Co++ittee. *R. N"<<E ". #herefore, .e need additional )ilipino $apitalL *R. G!<<E4AS. >es. ,Boldfa$in% and unders$orin% suppliedD itali$iHation in the ori%inal#his SEC en banc rulin% $onfor+s to our '2 /une '&11 e$ision that the 0&-:& o.nership reIuire+ent in favor of )ilipino $itiHens in the Constitution to en%a%e in $ertain e$ono+i$ a$tivities applies not only to votin% $ontrol of the $orporation, but a5(o )o )3& +&n&41;1a5 o=n&r(31' o4 )3& ;or'ora)1on . #hus, in our '2 /une '&11 e$ision .e stated6 *ere le%al title is insuffi$ient to +eet the 0& per$ent )ilipinoo.ned ($apital( reIuired in the Constitution. Fu55 +&n&41;1a5 o=n&r(31' o4 60 '&r;&n) o4 )3& ou)()an*1n@ ;a'1)a5 ()o;D, ;ou'5&* =1)3 60 '&r;&n) o4 )3& 6o)1n@ r1@3)(, 1( r&>u1r&* . #he le%al and benefi$ial o.nership of 0& per$ent of the outstandin% $apital sto$5 +ust rest in the hands of )ilipino nationals in a$$ordan$e .ith the $onstitutional +andate. "ther.ise, the $orporation is ($onsidered as non-Philippine nationalAsB.( ,E+phasis suppliedBoth the Gotin% Control #est and the Benefi$ial ".nership #est +ust be applied to deter+ine .hether a $orporation is a (Philippine national.( #he interpretation by le%al offi$ers of the SEC of the ter+ ($apital,( e+bodied in various opinions .hi$h respondents relied upon, is +erely preli+inary and an opinion only of su$h offi$ers. #o repeat, any su$h opinion does not $onstitute an SEC rule or re%ulation. !n fa$t, +any of these opinions $ontain a dis$lai+er .hi$h expressly states6 (x x x )3& 4or&@o1n@ o'1n1on is based solely on fa$ts dis$losed in your Iuery and relevant only to the parti$ular issue raised therein and (3a55 no) +& u(&* 1n )3& na)ur& o4 a ()an*1n@ ru5& +1n*1n@ u'on )3& Co221((1on 1n o)3&r ;a(&( =3&)3&r o4 (1215ar or *1((1215ar ;1r;u2()an;&( .(10 #hus, the opinions $learly +a5e a caveat that they do not $onstitute bindin% pre$edents on any one, not even on the SEC itself. <i5e.ise, the opinions of the SEC en banc, as .ell as of the "/, interpretin% the la. are neither $on$lusive nor $ontrollin% and thus, do not bind the Court. !t is hornboo5 do$trine that any interpretation of the la. that ad+inistrative or Iuasi-8udi$ial a%en$ies +a5e is only preli+inary, never $on$lusive on the Court. #he po.er to +a5e a final
03
interpretation of the la., in this $ase the ter+ ($apital( in Se$tion 11, Arti$le N!! of the 1123 Constitution, lies .ith this Court, not .ith any other %overn+ent entity. !n his +otion for re$onsideration, the PSE President $ites the $ases of @ational .elecommunications Commission v. Court of "ppeals 13 and Philippine :ong #istance .elephone Compan8 v. @ational .elecommunications Commission12 in ar%uin% that the Court has already defined the ter+ ($apital( in Se$tion 11, Arti$le N!! of the 1123 Constitution.11 #he PSE President is %rossly +ista5en. !n both $ases of @ational .elecommunications v. Court of "ppeals'& andPhilippine :ong #istance .elephone Compan8 v. @ational .elecommunications Commission!'1 the Court did not define the ter+ ($apital( as found in Se$tion 11, Arti$le N!! of the 1123 Constitution. "n 4a;), )3&(& )=o ;a(&( n&6&r 2&n)1on&*, *1(;u((&* or ;1)&* S&;)1on 11, Ar)1;5& N"" o4 )3& Con()1)u)1on or any o4 1)( &;ono21; 'ro61(1on( , an* )3u( ;anno) (&r6& a( 'r&;&*&n) 1n )3& 1n)&r'r&)a)1on o4 S&;)1on 11, Ar)1;5& N"" o4 )3& Con()1)u)1on . #hese t.o $ases dealt solely .ith the deter+ination of the $orre$t re%ulatory fees under Se$tion :&,e- and ,fof the Publi$ Servi$e A$t, to .it6 ,e- )or annual rei+burse+ent of the expenses in$urred by the Co++ission in the supervision of other publi$ servi$es andEor in the re%ulation or fixin% of their rates, t.enty $entavos for ea$h one hundred pesos or fra$tion thereof, of the ;a'1)a5 ()o;D (u+(;r1+&* or 'a1*, or if no shares have been issued, of the $apital invested, or of the property and eIuip+ent .hi$hever is hi%her. ,f- )or the issue or in$rease of ;a'1)a5 ()o;D, t.enty $entavos for ea$h one hundred pesos or fra$tion thereof, of the in$reased $apital. ,E+phasis supplied#he CourtCs interpretation in these t.o $ases of the ter+s ($apital sto$5 subs$ribed or paid,( ($apital sto$5( and ($apital( does not pertain to, and $annot $ontrol, the definition of the ter+ ($apital( as used in Se$tion 11, Arti$le N!! of the Constitution, or any of the e$ono+i$ provisions of the Constitution .here the ter+ ($apital( is found. #he definition of the ter+ ($apital( found in the Constitution +ust not be ta5en out of $ontext. A $areful readin% of these t.o $ases reveals that the ter+s ($apital sto$5 subs$ribed or paid,( ($apital sto$5( and ($apital( .ere defined solely to deter+ine the basis for $o+putin% the supervision and re%ulation fees under Se$tion :&,e- and ,f- of the Publi$ Servi$e A$t. III. >ilipini@a"ion of Public 7"ili"ies #he Prea+ble of the 1123 Constitution, as the prolo%ue of the supre+e la. of the land, e+bodies the ideals that the Constitution intends to a$hieve.'' #he Prea+ble reads6
Nazareno
Corporation CASES Based on the Syllabus of Fr. Agustin @e, the soverei%n )ilipino people, i+plorin% the aid of Al+i%hty 4od, in order to build a 8ust and hu+ane so$iety, and establish a 4overn+ent that shall e+body our ideals and aspirations, pro+ote the $o++on %ood, ;on(&r6& an* *&6&5o' our 'a)r12ony, and se$ure to ourselves and our posterity, the blessin%s of independen$e and de+o$ra$y under the rule of la. and a re%i+e of truth, 8usti$e, freedo+, love, eIuality, and pea$e, do ordain and pro+ul%ate this Constitution. ,E+phasis suppliedConsistent .ith these ideals, Se$tion 11, Arti$le !! of the 1123 Constitution de$lares as State poli$y the develop+ent of a national e$ono+y ( effec"i9ely con"rolle&( by )ilipinos6 Se$tion 11. #he State shall develop a self-reliant and independent national e$ono+y effec"i9ely con"rolle& by >ilipinos. )ortifyin% the State poli$y of a )ilipino-$ontrolled e$ono+y, the Constitution de$rees6 Se$tion 1&. #he Con%ress shall, upon re$o++endation of the e$ono+i$ and plannin% a%en$y, .hen the national interest di$tates, reserve to $itiHens of the Philippines or to $orporations or asso$iations at least sixty per centum of .hose $apital is o.ned by su$h $itiHens, or su$h hi%her per$enta%e as Con%ress +ay pres$ribe, $ertain areas of invest+ents. #he Con%ress shall ena$t +easures that .ill en$oura%e the for+ation and operation of enterprises .hose $apital is .holly o.ned by )ilipinos. !n the %rant of ri%hts, privile%es, and $on$essions $overin% the national e$ono+y and patri+ony, the State shall %ive preferen$e to Iualified )ilipinos. #he State shall re%ulate and exer$ise authority over forei%n invest+ents .ithin its national 8urisdi$tion and in a$$ordan$e .ith its national %oals and priorities. '? 7nder Se$tion 1&, Arti$le N!! of the 1123 Constitution, Con%ress +ay (reserve to $itiHens of the Philippines or to $orporations or asso$iations at least sixty per centum of .hose $apital is o.ned by su$h $itiHens, or su$h hi%her per$enta%e as Con%ress +ay pres$ribe, $ertain areas of invest+ents.( #hus, in nu+erous la.s Con%ress has reserved $ertain areas of invest+ents to )ilipino $itiHens or to $orporations at least sixty per$ent of the ( ;a'1)a5( of .hi$h is o.ned by )ilipino $itiHens. So+e of these la.s are6 ,1- Re%ulation of A.ard of 4overn+ent Contra$ts or R.A. No. 912?D ,'- Philippine !nventors !n$entives A$t or R.A. No. ?29&D ,?- *a%na Carta for *i$ro, S+all and *ediu+ Enterprises or R.A. No. 0133D ,:- Philippine "verseas Shippin% evelop+ent A$t or R.A. No. 3:31D ,9- o+esti$ Shippin% evelop+ent A$t of '&&: or R.A. No. 1'19D ,0- Philippine #e$hnolo%y #ransfer A$t of '&&1 or R.A. No. 1&&99D and ,3- Ship *ort%a%e e$ree or P. . No. 19'1. @ith respe$t to publi$ utilities, the 1123 Constitution spe$ifi$ally ordains6
02
Se$tion 11. No 4ran;31(&, ;&r)141;a)&, or any o)3&r 4or2 o4 au)3or1Ha)1on 4or )3& o'&ra)1on o4 a 'u+51; u)151)y (3a55 +& @ran)&* &7;&') )o ;1)1H&n( o4 )3& !3151''1n&( or )o ;or'ora)1on( or a((o;1a)1on( or@an1H&* un*&r )3& 5a=( o4 )3& !3151''1n&(, a) 5&a() (17)y per cen"um o4 =3o(& ;a'1)a5 1( o=n&* +y (u;3 ;1)1H&n(I nor shall su$h fran$hise, $ertifi$ate, or authoriHation be ex$lusive in $hara$ter or for a lon%er period than fifty years. Neither shall any su$h fran$hise or ri%ht be %ranted ex$ept under the $ondition that it shall be sub8e$t to a+end+ent, alteration, or repeal by the Con%ress .hen the $o++on %ood so reIuires. #he State shall en$oura%e eIuity parti$ipation in publi$ utilities by the %eneral publi$. #he parti$ipation of forei%n investors in the %overnin% body of any publi$ utility enterprise shall be li+ited to their proportionate share in its $apital, and all the exe$utive and +ana%in% offi$ers of su$h $orporation or asso$iation +ust be $itiHens of the Philippines. ,E+phasis supplied#his provision, .hi$h +andates the )ilipiniHation of publi$ utilities, reIuires that any for+ of authoriHation for the operation of publi$ utilities shall be %ranted only to ($itiHens of the Philippines or to $orporations or asso$iations or%aniHed under the la.s of the Philippines at least sixty per $entu+ of .hose $apital is o.ned by su$h $itiHens.( (T3& 'ro61(1on 1( Fan &7'r&((G r&;o@n1)1on o4 )3& (&n(1)16& an* 61)a5 'o(1)1on o4 'u+51; u)151)1&( +o)3 1n )3& na)1ona5 &;ono2y an* 4or na)1ona5 (&;ur1)y.J': #he 1123 Constitution reserves the o.nership and operation of publi$ utilities ex$lusively to ,1- )ilipino $itiHens, or ,'- $orporations or asso$iations at least 0& per$ent of .hose ($apital( is o.ned by )ilipino $itiHens. ;en$e, in the $ase of individuals, only )ilipino $itiHens $an validly o.n and operate a publi$ utility. !n the $ase of $orporations or asso$iations, at least 0& per$ent of their ($apital( +ust be o.ned by )ilipino $itiHens. "n o)3&r =or*(, un*&r S&;)1on 11, Ar)1;5& N"" o4 )3& 198. Con()1)u)1on, )o o=n an* o'&ra)& a 'u+51; u)151)y a ;or'ora)1onC( ;a'1)a5 2u() a) 5&a() +& 60 '&r;&n) o=n&* +y P!ilippine na"ionals. IA. Defini"ion of :P!ilippine 'a"ional: Pursuant to the express +andate of Se$tion 11, Arti$le N!! of the 1123 Constitution, Con%ress ena$ted Republi$ A$t No. 3&:' or the -oreign Investments "ct of 1>>1 ,)!A-, as a+ended, .hi$h defined a (!3151''1n& na)1ona5( as follo.s6 SEC. ?. efinitions. - As used in this A$t6 a. #he ter+ (Philippine national1 shall +ean a $itiHen of the PhilippinesD or a do+esti$ partnership or asso$iation .holly o.ned by $itiHens of the PhilippinesD or a ;or'ora)1on or@an1H&* un*&r )3& 5a=( o4 )3& !3151''1n&( o4 =31;3 a) 5&a() (17)y '&r;&n) /60<0 o4 )3& ;a'1)a5 ()o;D ou)()an*1n@ an& en"i"le& "o 9o"e 1( o=n&* an* 3&5* +y ;1)1H&n( o4 )3& !3151''1n&( D or a $orporation or%aniHed abroad and re%istered
Nazareno
Corporation CASES Based on the Syllabus of Fr. Agustin as doin% business in the Philippines under the Corporation Code of .hi$h one hundred per$ent ,1&&=- of the $apital sto$5 outstandin% and entitled to vote is .holly o.ned by )ilipinos or a trustee of funds for pension or other e+ployee retire+ent or separation benefits, .here the trustee is a Philippine national and at least sixty per$ent ,0&=- of the fund .ill a$$rue to the benefit of Philippine nationals6 Provided, #hat .here a $orporation and its non-)ilipino sto$5holders o.n sto$5s in a Se$urities and Ex$han%e Co++ission ,SEC- re%istered enterprise, at least sixty per$ent ,0&=- of the $apital sto$5 outstandin% and entitled to vote of ea$h of both $orporations +ust be o.ned and held by $itiHens of the Philippines and at least sixty per$ent ,0&=- of the +e+bers of the Board of ire$tors of ea$h of both $orporations +ust be $itiHens of the Philippines, in order that the $orporation, shall be $onsidered a (Philippine national.( ,Boldfa$in%, itali$iHation and unders$orin% supplied#hus, the )!A $learly and uneIuivo$ally defines a ( !3151''1n& na)1ona5( as a Philippine $itiHen, or a do+esti$ $orporation at least ( 60< o4 )3& ;a'1)a5 ()o;D ou)()an*1n@ an* en"i"le& "o 9o"e( is o.ned by Philippine $itiHens. #he definition of a (Philippine national( in the )!A reiterated the +eanin% of su$h ter+ as provided in its prede$essor statute, Exe$utive "rder No. ''0 or the /mnibus Investments Code of 1>M<,'9 .hi$h .as issued by then President CoraHon C. AIuino. Arti$le 19 of this Code states6 Arti$le 19. (Philippine national( shall +ean a $itiHen of the Philippines or a diplo+ati$ partnership or asso$iation .holly-o.ned by $itiHens of the PhilippinesD or a ;or'ora)1on or@an1H&* un*&r )3& 5a=( o4 )3& !3151''1n&( o4 =31;3 a) 5&a() (17)y '&r ;&n) /60<0 o4 )3& ;a'1)a5 ()o;D ou)()an*1n@ an& en"i"le& "o 9o"e 1( o=n&* an* 3&5* +y ;1)1H&n( o4 )3& !3151''1n&( D or a trustee of funds for pension or other e+ployee retire+ent or separation benefits, .here the trustee is a Philippine national and at least sixty per $ent ,0&=- of the fund .ill a$$rue to the benefit of Philippine nationals6 Provided, #hat .here a $orporation and its non-)ilipino sto$5holders o.n sto$5 in a re%istered enterprise, at least sixty per $ent ,0&=- of the $apital sto$5 outstandin% and entitled to vote of both $orporations +ust be o.ned and held by the $itiHens of the Philippines and at least sixty per $ent ,0&=- of the +e+bers of the Board of ire$tors of both $orporations +ust be $itiHens of the Philippines in order that the $orporation shall be $onsidered a Philippine national. ,Boldfa$in%, itali$iHation and unders$orin% supplied7nder Arti$le :2,?-'0 of the "+nibus !nvest+ents Code of 1123, (no $orporation x x x .hi$h is not a KPhilippine nationalC x x x shall do business x x x in the Philippines x x x .ithout first se$urin% fro+ the Board of !nvest+ents a .ritten $ertifi$ate to the effe$t that su$h business or e$ono+i$ a$tivity x x x .ould no) $onfli$t .ith the Constitution or la.s of the Philippines.( '3#hus, a (nonPhilippine national( $annot o.n and operate a reserved e$ono+i$ a$tivity li5e a publi$
01
utility. #his +eans, of $ourse, that only a (Philippine national( $an o.n and operate a publi$ utility. !n turn, the definition of a (Philippine national( under Arti$le 19 of the "+nibus !nvest+ents Code of 1123 .as a reiteration of the +eanin% of su$h ter+ as provided in Arti$le 1: of the /mnibus Investments Code of 1>M1,'2 to .it6 Arti$le 1:. (Philippine national( shall +ean a $itiHen of the PhilippinesD or a do+esti$ partnership or asso$iation .holly o.ned by $itiHens of the PhilippinesD or a ;or'ora)1on or@an1H&* un*&r )3& 5a=( o4 )3& !3151''1n&( o4 =31;3 a) 5&a() (17)y '&r ;&n) /60<0 o4 )3& ;a'1)a5 ()o;D ou)()an*1n@ an& en"i"le& "o 9o"e 1( o=n&* an* 3&5* +y ;1)1H&n( o4 )3& !3151''1n&(I or a trustee of funds for pension or other e+ployee retire+ent or separation benefits, .here the trustee is a Philippine national and at least sixty per $ent ,0&=- of the fund .ill a$$rue to the benefit of Philippine nationals6 Provided, #hat .here a $orporation and its non-)ilipino sto$5holders o.n sto$5 in a re%istered enterprise, at least sixty per $ent ,0&=- of the $apital sto$5 outstandin% and entitled to vote of both $orporations +ust be o.ned and held by the $itiHens of the Philippines and at least sixty per $ent ,0&=- of the +e+bers of the Board of ire$tors of both $orporations +ust be $itiHens of the Philippines in order that the $orporation shall be $onsidered a Philippine national. ,Boldfa$in%, itali$iHation and unders$orin% supplied7nder Arti$le 01,?- of the "+nibus !nvest+ents Code of 1121, (no $orporation x x x .hi$h is not a KPhilippine nationalC x x x shall do business x x x in the Philippines x x x .ithout first se$urin% a .ritten $ertifi$ate fro+ the Board of !nvest+ents to the effe$t that su$h business or e$ono+i$ a$tivity x x x .ould no) $onfli$t .ith the Constitution or la.s of the Philippines.('1 #hus, a (non-Philippine national( $annot o.n and operate a reserved e$ono+i$ a$tivity li5e a publi$ utility. A%ain, this +eans that only a (Philippine national( $an o.n and operate a publi$ utility. Prior to the "+nibus !nvest+ents Code of 1121, Republi$ A$t No. 9120 ?& or the Investment Incentives "ct! .hi$h too5 effe$t on 10 Septe+ber 1103, $ontained a si+ilar definition of a (Philippine national,( to .it6 ,f- (Philippine National( shall +ean a $itiHen of the PhilippinesD or a partnership or asso$iation .holly o.ned by $itiHens of the PhilippinesD or a ;or'ora)1on or@an1H&* un*&r )3& 5a=( o4 )3& !3151''1n&( o4 =31;3 a) 5&a() (17)y '&r ;&n) o4 )3& ;a'1)a5 ()o;D ou)()an*1n@ an& en"i"le& "o 9o"e 1( o=n&* an* 3&5* +y ;1)1H&n( o4 )3& !3151''1n&(D or a trustee of funds for pension or other e+ployee retire+ent or separation benefits, .here the trustee is a Philippine National and at least sixty per $ent of the fund .ill a$$rue to the benefit of Philippine Nationals6 Provided, #hat .here a $orporation and its non-)ilipino sto$5holders o.n sto$5 in a re%istered enterprise, at least sixty per $ent of the $apital sto$5 outstandin% and entitled to vote of both $orporations +ust be o.ned and held by the $itiHens of the Philippines and at least
Nazareno
Corporation CASES Based on the Syllabus of Fr. Agustin sixty per $ent of the +e+bers of the Board of ire$tors of both $orporations +ust be $itiHens of the Philippines in order that the $orporation shall be $onsidered a Philippine National. ,Boldfa$in%, itali$iHation and unders$orin% supplied7nder Se$tion ? of Republi$ A$t No. 9:99 or the -oreign Business %egulations "ct, .hi$h too5 effe$t on ?& Septe+ber 1102, if the invest+ent in a do+esti$ enterprise by non-Philippine nationals ex$eeds ?&= of its outstandin% $apital sto$5, su$h enterprise +ust obtain prior approval fro+ the Board of !nvest+ents before a$$eptin% su$h invest+ent. Su$h approval shall no) be %ranted if the invest+ent (.ould $onfli$t .ith existin% $onstitutional provisions and la.s re%ulatin% the de%ree of reIuired o.nership by Philippine nationals in the enterprise.( ?1 A (non-Philippine national( $annot o.n and operate a reserved e$ono+i$ a$tivity li5e a publi$ utility. A%ain, this +eans that only a (Philippine national( $an o.n and operate a publi$ utility. #he )!A, liBe all i"s pre&ecessor s"a"u"es , $learly defines a (!3151''1n& na)1ona5( as a )ilipino $itiHen, or a*o2&()1; ;or'ora)1on Ja) 5&a() (17)y '&r;&n) /60<0 o4 )3& ;a'1)a5 ()o;D ou)()an*1n@ an& en"i"le& "o 9o"eJis o.ned by )ilipino $itiHens. A do+esti$ $orporation is a (Philippine national( only if at least 0&= of its 9o"ing s"ocB is o.ned by )ilipino $itiHens. #his definition of a (Philippine national( is $ru$ial in the present $ase be$ause the )!A reiterates and $larifies Se$tion 11, Arti$le N!! of the 1123 Constitution, .hi$h li+its the o.nership and operation of publi$ utilities to )ilipino $itiHens or to $orporations or asso$iations at least 0&= )ilipino-o.ned. #he )!A is the basi$ la. %overnin% forei%n invest+ents in the Philippines, irrespe$tive of the nature of business and area of invest+ent. #he )!A spells out the pro$edures by .hi$h non-Philippine nationals $an invest in the Philippines. A+on% the 5ey features of this la. is the $on$ept of a ne%ative list or the )orei%n !nvest+ents Ne%ative <ist.?' Se$tion 2 of the la. states6 SEC. 2. Lis" of In9es"men" 2reas Reser9e& "o P!ilippine 'a"ionals G-oreign Investment @egative :istH. - #he )orei%n !nvest+ent Ne%ative <ist shall have t.o ' $o+ponent lists6 " and B6 a. Lis" 2 (3a55 &nu2&ra)& )3& areas of ac"i9i"ies reser9e& "o P!ilippine na"ionals by man&a"e of "!e Cons"i"u"ion an* ('&;141; 5a=(. b. :ist B shall $ontain the areas of a$tivities and enterprises re%ulated pursuant to la.6 1. .hi$h are defense-related a$tivities, reIuirin% prior $learan$e and authoriHation fro+ the epart+ent of National efense A N B to en%a%e in su$h a$tivity, su$h as the +anufa$ture, repair, stora%e andEor distribution of firear+s, a++unition, lethal .eapons, +ilitary ordinan$e, explosives, pyrote$hni$s and si+ilar +aterialsD unless su$h +anufa$turin% or repair a$tivity is spe$ifi$ally authoriHed, .ith a substantial export $o+ponent, to a non-Philippine national by the Se$retary of National or
3&
efenseD
Nazareno
'. .hi$h have i+pli$ations on publi$ health and +orals, su$h as the +anufa$ture and distribution of dan%erous dru%sD all for+s of %a+blin%D ni%ht$lubs, bars, beer houses, dan$e halls, sauna and stea+ bathhouses and +assa%e $lini$s. ,Boldfa$in%, unders$orin% and itali$iHation suppliedSe$tion 2 of the )!A enu+erates the invest+ent areas (reserved to Philippine nationals.( For&1@n "n6&()2&n) N&@a)16& L1() A ;on(1()( o4 J areas of ac"i9i"ies reser9e& "o P!ilippine na"ionals by man&a"e of "!e Cons"i"u"ion an& specific laCs ,J =3&r& 4or&1@n &>u1)y 'ar)1;1'a)1on 1n any &n)&r'r1(& (3a55 +& 5121)&* )o )3& 2a712u2 '&r;&n)a@& &7'r&((5y 'r&(;r1+&* +y )3& Con()1)u)1on an* o)3&r ('&;141; 5a=(. "n (3or), )o o=n an* o'&ra)& a 'u+51; u)151)y 1n )3& !3151''1n&( on& 2u() +& a J!3151''1n& na)1ona5J a( *&41n&* 1n )3& F"A. T3& F"A 1( a+un*an) no)1;& )o 4or&1@n 1n6&()or( )o =3a) &7)&n) )3&y ;an 1n6&() 1n 'u+51; u)151)1&( 1n )3& !3151''1n&(. #o repeat, a+on% the areas of invest+ent $overed by the )orei%n !nvest+ent Ne%ative <ist A is the o.nership and operation of publi$ utilities, .hi$h the Constitution expressly reserves to )ilipino $itiHens and to $orporations at least 0&= o.ned by )ilipino $itiHens. "n o)3&r =or*(, N&@a)16& L1() A o4 )3& F"A r&(&r6&( )3& o=n&r(31' an* o'&ra)1on o4 'u+51; u)151)1&( on5y )o J!3151''1n& na)1ona5(,J *&41n&* 1n S&;)1on -/a0 o4 )3& F"A a( (,1- a $itiHen of the PhilippinesD x x x or ,?- a ;or'ora)1on or@an1H&* un*&r )3& 5a=( o4 )3& !3151''1n&( o4 =31;3 a) 5&a() (17)y '&r;&n) /60<0 o4 )3& ;a'1)a5 ()o;D ou)()an*1n@ an& en"i"le& "o 9o"e 1( o=n&* an* 3&5* +y ;1)1H&n( o4 )3& !3151''1n&(D or ,:- a $orporation or%aniHed abroad and re%istered as doin% business in the Philippines under the Corporation Code of .hi$h one hundred per$ent ,1&&=- of the $apital sto$5 outstandin% and entitled to vote is .holly o.ned by )ilipinos or a trustee of funds for pension or other e+ployee retire+ent or separation benefits, .here the trustee is a Philippine national and at least sixty per$ent ,0&=- of the fund .ill a$$rue to the benefit of Philippine nationals.( Clearly, fro+ the effe$tivity of the !nvest+ent !n$entives A$t of 1103 to the adoption of the "+nibus !nvest+ents Code of 1121, to the ena$t+ent of the "+nibus !nvest+ents Code of 1123, and to the passa%e of the present )orei%n !nvest+ents A$t of 1111, or 4or 2or& )3an 4our *&;a*&(, )3& ()a)u)ory *&41n1)1on o4 )3& )&r2 J!3151''1n& na)1ona5J 3a( +&&n un14or2 an* ;on(1()&n)B 1) 2&an( a F151'1no ;1)1H&n, or a *o2&()1; ;or'ora)1on a) 5&a() 60< o4 )3& 9o"ing s"ocB 1( o=n&* +y F151'1no(. L1D&=1(&, )3&(& (a2& ()a)u)&( 3a6& un14or25y an* ;on(1()&n)5y r&>u1r&* )3a) on5y J!3151''1n& na)1ona5(J ;ou5* o=n an* o'&ra)& 'u+51; u)151)1&( 1n )3& !3151''1n&(. #he follo.in% ex$han%e durin% the "ral Ar%u+ents is revealin%6 /7S#!CE CARP!"6
Corporation CASES Based on the Syllabus of Fr. Agustin Counsel, ! have so+e Iuestions. >ou are a.are of the )orei%n !nvest+ents A$t of 1111, x x xL And the )!A of 1111 too5 effe$t in 1111, $orre$tL #hatCs over t.enty ,'&- years a%o, $orre$tL C"**!SS!"NER 4A!#E6 Corre$t, >our ;onor. /7S#!CE CARP!"6 And Se$tion 2 of the )orei%n !nvest+ents A$t of 1111 states that ABonly Philippine nationals $an o.n and operate publi$ utilitiesAB, $orre$tL C"**!SS!"NER 4A!#E6 >es, >our ;onor. /7S#!CE CARP!"6 And the sa+e )orei%n !nvest+ents A$t of 1111 defines a (Philippine national( either as a $itiHen of the Philippines, or if it is a $orporation at least sixty per$ent ,0&=- of the votin% sto$5 is o.ned by $itiHens of the Philippines, $orre$tL C"**!SS!"NER 4A!#E6 Corre$t, >our ;onor. /7S#!CE CARP!"6 And, you are also a.are that under the prede$essor la. of the )orei%n !nvest+ents A$t of 1111, the "+nibus !nvest+ents A$t of 1123, the sa+e provisions apply6 x x x only Philippine nationals $an o.n and operate a publi$ utility and the Philippine national, if it is a $orporation, x x x sixty per$ent ,0&=- of the $apital sto$5 of that $orporation +ust be o.ned by $itiHens of the Philippines, $orre$tL C"**!SS!"NER 4A!#E6 Corre$t, >our ;onor. /7S#!CE CARP!"6
31
And even prior to the "+nibus !nvest+ents A$t of 1123, under the "+nibus !nvest+ents A$t of 1121, the sa+e rules apply6 x x x only a Philippine national $an o.n and operate a publi$ utility and a Philippine national, if it is a $orporation, sixty per$ent ,0&=- of its x x x votin% sto$5, +ust be o.ned by $itiHens of the Philippines, $orre$tL C"**!SS!"NER 4A!#E6 Corre$t, >our ;onor. /7S#!CE CARP!"6 And even prior to that, under AtheB1103 !nvest+ents !n$entives A$t and the )orei%n Co+pany A$t of 1102, the sa+e rules applied, $orre$tL C"**!SS!"NER 4A!#E6 Corre$t, >our ;onor. JUST"CE CAR!"OB So, 4or )3& 5a() 4our /40 *&;a*&(, 7 7 7, )3& 5a= 3a( +&&n 6&ry ;on(1()&n) K on5y a !3151''1n& na)1ona5 ;an o=n an* o'&ra)& a 'u+51; u)151)y, an* a !3151''1n& na)1ona5, 14 1) 1( a ;or'ora)1on, 7 7 7 a) 5&a() (17)y '&r;&n) /60<0 o4 )3& 6o)1n@ ()o;D 2u() +& o=n&* +y ;1)1H&n( o4 )3& !3151''1n&(, ;orr&;)E CO%%"SS"ONER GA"TEB Corr&;), Your Honor.?? ,E+phasis supplied4overn+ent a%en$ies li5e the SEC $annot si+ply i%nore Se$tions ?,a- and 2 of the )!A .hi$h $ate%ori$ally pres$ribe that $ertain e$ono+i$ a$tivities, li5e the o.nership and operation of publi$ utilities, are reserved to $orporations (at least sixty per$ent ,0&=- of the $apital sto$5 outstandin% an& en"i"le& "o 9o"e is o.ned and held by $itiHens of the Philippines.( )orei%n !nvest+ent Ne%ative <ist A refers to (a$tivities reserved to Philippine nationals by +andate of the Constitution and spe$ifi$ la.s.( T3& F"A 1( )3& +a(1; ()a)u)& r&@u5a)1n@ 4or&1@n 1n6&()2&n)( 1n )3& !3151''1n&(. 4overn+ent a%en$ies tas5ed .ith re%ulatin% or +onitorin% forei%n invest+ents, as .ell as $ounsels of forei%n investors, should start .ith the )!A in deter+inin% to .hat extent a parti$ular forei%n invest+ent is allo.ed in the Philippines. )orei%n investors and their $ounsels .ho i%nore the )!A do so at their
Nazareno
Corporation CASES Based on the Syllabus of Fr. Agustin o.n peril. )orei%n investors and their $ounsels .ho rely on opinions of SEC le%al offi$ers that obviously $ontradi$t the )!A do so also at their o.n peril. "$$asional opinions of SEC le%al offi$ers that obviously $ontradi$t the )!A should i++ediately raise a red fla%. #here are already nu+erous opinions of SEC le%al offi$ers that $ite the definition of a (Philippine national( in Se$tion ?,a- of the )!A in deter+inin% .hether a parti$ular $orporation is Iualified to o.n and operate a nationaliHed or partially nationaliHed business in the Philippines. #his sho.s that SEC le%al offi$ers are not only a.are of, but also rely on and invo5e, the provisions of the )!A in as$ertainin% the eli%ibility of a $orporation to en%a%e in partially nationaliHed industries. #he follo.in% are so+e of su$h opinions6 1. "pinion of '? *ar$h 111?, addressed to *r. )ran$is ). ;o.D '. "pinion of 1: April 111?, addressed to ire$tor An%eles #. @on% of the Philippine "verseas E+ploy+ent Ad+inistrationD ?. "pinion of '? Nove+ber 111?, addressed to *essrs. and Renato S. Cal+aD o+inador Al+eda
3'
Both are desperately %raspin% at stra.s. #he )!A does not %rant tax or fis$al in$entives to any enterprise. #ax and fis$al in$entives to invest+ents are %ranted separately under the "+nibus !nvest+ents Code of 1123, not under the )!A. !n fa$t, the )!A expressly repealed Arti$les :: to 90 of Boo5 !! of the "+nibus !nvest+ents Code of 1123, .hi$h arti$les previously re%ulated forei%n invest+ents in nationaliHed or partially nationaliHed industries. #he )!A is the appli$able la. re%ulatin% forei%n invest+ents in nationaliHed or partially nationaliHed industries. #here is nothin% in the )!A, or even in the "+nibus !nvest+ents Code of 1123 or its prede$essor statutes, that states, expressly or i+pliedly, that the )!A or its prede$essor statutes do not apply to enterprises not availin% of tax and fis$al in$entives under the Code. #he )!A and its prede$essor statutes apply to invest+ents in all do+esti$ enterprises, .hether or not su$h enterprises en8oy tax and fis$al in$entives under the "+nibus !nvest+ents Code of 1123 or its prede$essor statutes. T3& r&a(on 1( >u1)& o+61ou( K 2&r& non8a6a152&n) o4 )a7 an* 41(;a5 1n;&n)16&( +y a non8!3151''1n& na)1ona5 ;anno) &7&2') 1) 4ro2 S&;)1on 11, Ar)1;5& N"" o4 )3& Con()1)u)1on r&@u5a)1n@ 4or&1@n 1n6&()2&n)( 1n 'u+51; u)151)1&(. !n fa$t, the Board of !nvest+entsC !r12&r on "n6&()2&n) !o51;1&( 1n )3& !3151''1n&(,?: .hi$h is %iven out to forei%n investors, provides6 !ART """. FORE"GN "N$EST%ENTS :"THOUT "NCENT"$ES !nvestors .ho do not see5 in$entives andEor .hose $hosen a$tivities do not Iualify for in$entives, ,i.e., the a$tivity is not listed in the !PP, and they are not exportin% at least 3&= of their produ$tion- +ay %o ahead and +a5e the invest+ents .ithout see5in% in$entives. T3&y on5y 3a6& )o +& @u1*&* +y )3& For&1@n "n6&()2&n)( N&@a)16& L1() /F"NL0. #he )!N< $learly defines invest+ent areas reIuirin% at least 0&= )ilipino o.nership. All other areas outside of this list are fully open to forei%n investors. ,E+phasis suppliedA. Rig!" "o elec" &irec"ors% "ransla"es "o effec"i9e con"rol.
Nazareno
:. "pinion of 3 e$e+ber 111?, addressed to Ro$o Buna% Rapunan *i%allos U /ardeleHaD 9. SEC "pinion No. :1-&:, addressed to Ro+ulo *abanta Buenaventura Sayo$ U e <os An%elesD 0. SEC-"4C "pinion No. 13-&3, addressed to *r. Reynaldo 4. avidD and 3. SEC-"4C "pinion No. &?-&2, addressed to Attys. Ruby Rose /. >usi and Rudyard S. Arbolado. #he SEC le%al offi$ersC o$$asional but blatant disre%ard of the definition of the ter+ (Philippine national( in the )!A si%nifies their la$5 of inte%rity and $o+peten$e in resolvin% issues on the 0&-:& o.nership reIuire+ent in favor of )ilipino $itiHens in Se$tion 11, Arti$le N!! of the Constitution. #he PSE President ar%ues that the ter+ (Philippine national( defined in the )!A should be li+ited and interpreted to refer to $orporations see5in% to avail of tax and fis$al in$entives under invest+ent in$entives la.s and $annot be eIuated .ith the ter+ ($apital( in Se$tion 11, Arti$le N!! of the 1123 Constitution. Pan%ilinan si+ilarly $ontends that the )!A and its prede$essor statutes do not apply to ($o+panies .hi$h have not re%istered and obtained spe$ial in$entives under the s$he+es established by those la.s.(
couple&
Ci"!
beneficial
oCners!ip%
#he '2 /une '&11 e$ision de$lares that the 0& per$ent )ilipino o.nership reIuired by the Constitution to en%a%e in $ertain e$ono+i$ a$tivities applies not only to votin% $ontrol of the $orporation, but a5(o )o )3& +&n&41;1a5 o=n&r(31' o4 )3& ;or'ora)1on . #o repeat, .e held6 *ere le%al title is insuffi$ient to +eet the 0& per$ent )ilipino-o.ned ($apital( reIuired in the Constitution. Fu55 +&n&41;1a5 o=n&r(31' o4 60 '&r;&n) o4 )3& ou)()an*1n@ ;a'1)a5 ()o;D, ;ou'5&* =1)3 60 '&r;&n) o4 )3& 6o)1n@ r1@3)(, 1( r&>u1r&* . #he le%al
Corporation CASES Based on the Syllabus of Fr. Agustin and benefi$ial o.nership of 0& per$ent of the outstandin% $apital sto$5 +ust rest in the hands of )ilipino nationals in a$$ordan$e .ith the $onstitutional +andate. "ther.ise, the $orporation is ($onsidered as non-Philippine nationalAsB.( ,E+phasis supplied#his is $onsistent .ith Se$tion ? of the )!A .hi$h provides that .here 1&&= of the $apital sto$5 is held by (a trustee of funds for pension or other e+ployee retire+ent or separation benefits,( the trustee is a Philippine national if (at least sixty per$ent ,0&=of the fund .ill a$$rue to the benefit of Philippine nationals.( <i5e.ise, Se$tion 1,bof the !+ple+entin% Rules of the )!A provides that (for sto$5s to be dee+ed o.ned and held by Philippine $itiHens or Philippine nationals, +ere le%al title is not enou%h to +eet the reIuired )ilipino eIuity. Fu55 +&n&41;1a5 o=n&r(31' o4 )3& ()o;D(, ;ou'5&* =1)3 a''ro'r1a)& 6o)1n@ r1@3)(, 1( &((&n)1a5.J Sin$e the $onstitutional reIuire+ent of at least 0& per$ent )ilipino o.nership applies not only to votin% $ontrol of the $orporation but also to the benefi$ial o.nership of the $orporation, it is therefore i+perative that su$h reIuire+ent apply unifor+ly and a$ross the board to all $lasses of shares, re%ardless of no+en$lature and $ate%ory, $o+prisin% the $apital of a $orporation. 7nder the Corporation Code, $apital sto$5?9 $onsists of all $lasses of shares issued to sto$5holders, that is, $o++on shares as .ell as preferred shares, .hi$h +ay have different ri%hts, privile%es or restri$tions as stated in the arti$les of in$orporation.?0 #he Corporation Code allo.s denial of the ri%ht to vote to preferred and redee+able shares, but disallo.s denial of the ri%ht to vote in spe$ifi$ $orporate +atters. #hus, $o++on shares have the ri%ht to vote in the ele$tion of dire$tors, .hile preferred shares +ay be denied su$h ri%ht. Nonetheless, preferred shares, even if denied the ri%ht to vote in the ele$tion of dire$tors, are entitled to vote on the follo.in% $orporate +atters6 ,1- a+end+ent of arti$les of in$orporationD ,'- in$rease and de$rease of $apital sto$5D ,?- in$urrin%, $reatin% or in$reasin% bonded indebtednessD ,:- sale, lease, +ort%a%e or other disposition of substantially all $orporate assetsD ,9- invest+ent of funds in another business or $orporation or for a purpose other than the pri+ary purpose for .hi$h the $orporation .as or%aniHedD ,0- adoption, a+end+ent and repeal of by-la.sD ,3- +er%er and $onsolidationD and ,2- dissolution of $orporation. ?3 Sin$e a spe$ifi$ $lass of shares +ay have ri%hts and privile%es or restri$tions different fro+ the rest of the shares in a $orporation, the 0&-:& o.nership reIuire+ent in favor of )ilipino $itiHens in Se$tion 11, Arti$le N!! of the Constitution +ust apply not only to shares .ith votin% ri%hts but also to shares .ithout votin% ri%hts. Preferred shares, denied the ri%ht to vote in the ele$tion of dire$tors, are any.ay still entitled to vote on the ei%ht spe$ifi$ $orporate +atters +entioned above. T3u(, 14 a ;or'ora)1on, &n@a@&* 1n a 'ar)1a55y na)1ona51H&* 1n*u()ry, 1((u&( a 217)ur& o4 ;o22on an* 'r&4&rr&* non86o)1n@ (3ar&(, a) 5&a() 60 '&r;&n) o4 )3& ;o22on (3ar&( an* a) 5&a() 60 '&r;&n) o4 )3& 'r&4&rr&* non86o)1n@ (3ar&( 2u() +& o=n&* +y F151'1no(. "f $ourse, if a $orporation issues only a sin%le $lass of shares, at least 0& per$ent of su$h
3?
shares +ust ne$essarily be o.ned by )ilipinos. "n (3or), )3& 60840 o=n&r(31' r&>u1r&2&n) 1n 4a6or o4 F151'1no ;1)1H&n( 2u() a''5y (&'ara)&5y )o &a;3 ;5a(( o4 (3ar&(, =3&)3&r ;o22on, 'r&4&rr&* non86o)1n@, 'r&4&rr&* 6o)1n@ or any o)3&r ;5a(( o4 (3ar&(. #his unifor+ appli$ation of the 0&-:& o.nership reIuire+ent in favor of )ilipino $itiHens $learly breathes life to the $onstitutional $o++and that the o.nership and operation of publi$ utilities shall be reserved ex$lusively to $orporations at least 0& per$ent of .hose $apital is )ilipino-o.ned. Applyin% unifor+ly the 0&-:& o.nership reIuire+ent in favor of )ilipino $itiHens to ea$h $lass of shares, re%ardless of differen$es in votin% ri%hts, privile%es and restri$tions, %uarantees effe$tive )ilipino $ontrol of publi$ utilities, as +andated by the Constitution. *oreover, su$h unifor+ appli$ation to ea$h $lass of shares insures that the ($ontrollin% interest( in publi$ utilities al.ays lies in the hands of )ilipino $itiHens. #his addresses and extin%uishes Pan%ilinanCs .orry that forei%ners, o.nin% +ost of the non-votin% shares, .ill exer$ise %reater $ontrol over funda+ental $orporate +atters reIuirin% t.o-thirds or +a8ority vote of all shareholders. AI. In"en" of "!e framers of "!e Cons"i"u"ion @hile /usti$e Gelas$o Iuoted in his issentin% "pinion ?2 a portion of the deliberations of the Constitutional Co++ission to support his $lai+ that the ter+ ($apital( refers to the total outstandin% shares of sto$5, .hether votin% or non-votin%, the follo.in% ex$erpts of the deliberations reveal other.ise. !t is $lear fro+ the follo.in% ex$han%e that the ter+ ($apital( refers to ;on)ro551n@ 1n)&r&() of a $orporation, thus6 *R. N"<<E ". !n Se$tions ?, 1 and 19, the Co++ittee stated lo$al or )ilipino eIuity and forei%n eIuityD na+ely, 0&-:& in Se$tion ?, 0&-:& in Se$tion 1 and 'E?-1E? in Se$tion 19. *R. G!<<E4AS. #hat is ri%ht. *R. N"<<E ". !n tea$hin% la., .e are al.ays fa$ed .ith this Iuestion6 (@here do .e base the eIuity reIuire+ent, is it on the authoriHed $apital sto$5, on the subs$ribed $apital sto$5, or on the paid-up $apital sto$5 of a $orporation(L @ill the Co++ittee please enli%hten +e on thisL *R. G!<<E4AS. @e have 8ust had a lon% dis$ussion .ith the +e+bers of the tea+ fro+ the 7P <a. Center .ho provided us a draft. T3& '3ra(& )3a) 1( ;on)a1n&* 3&r& =31;3 =& a*o')&* 4ro2 )3& U! *ra4) 1( J60 '&r;&n) o4 6o)1n@ ()o;D.J
Nazareno
Corporation CASES Based on the Syllabus of Fr. Agustin *R. N"<<E ". #hat +ust be based on the subs$ribed $apital sto$5, be$ause unless de$lared delinIuent, unpaid $apital sto$5 shall be entitled to vote. *R. G!<<E4AS. #hat is ri%ht. %R. AACUNA. :& (3ou5* no) &5121na)& )3& '3ra(& J;on)ro551n@ 1n)&r&().J *R. N"<<E ". #han5 you. @ith respe$t to an invest+ent by one $orporation in another $orporation, say, a $orporation .ith 0&-:& per$ent eIuity invests in another $orporation .hi$h is per+itted by the Corporation Code, does the Co++ittee adopt the %randfather ruleL *R. G!<<E4AS. >es, that is the understandin% of the Co++ittee. *R. N"<<E ". #herefore, .e need additional )ilipino $apitalL *R. G!<<E4AS. >es.?1 xxxx *R. AQC7NA. *ay ! be $larified as to that portion that .as a$$epted by the Co++ittee. *R. G!<<E4AS. #he portion a$$epted by the Co++ittee is the deletion of the phrase (votin% sto$5 or $ontrollin% interest.( *R. AQC7NA. ;en$e, .ithout the avide a+end+ent, the $o++ittee report .ould read6 ($orporations or asso$iations at least sixty per$ent of .hose CAP!#A< is o.ned by su$h $itiHens.( *R. G!<<E4AS. >es. *R. AQC7NA. So if the avide a+end+ent is lost, .e are stu$5 .ith 0& per$ent of the $apital to be o.ned by $itiHens. *R. G!<<E4AS. #hat is ri%ht. %R. AACUNA. #u) )3& ;on)ro5 ;an +& =1)3 )3& 4or&1@n&r( &6&n 14 )3&y ar& )3& 21nor1)y. L&) u( (ay 40 '&r;&n) o4 )3& ;a'1)a5 1( o=n&* +y )3&2, +u) 1) 1( )3& 6o)1n@ ;a'1)a5, =3&r&a(, )3& F151'1no( o=n )3& non6o)1n@ (3ar&(. So =& ;an 3a6& a (1)ua)1on =3&r& )3& ;or'ora)1on 1( ;on)ro55&* +y 4or&1@n&r( *&('1)& +&1n@ )3& 21nor1)y +&;au(& )3&y 3a6& )3& 6o)1n@ ;a'1)a5. T3a) 1( )3& ano2a5y )3a) =ou5* r&(u5) 3&r&.
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%R. #ENGAON. No, )3& r&a(on =& &5121na)&* )3& =or* J()o;DJ a( ()a)&* 1n )3& 19.- an* 19-, Con()1)u)1on( 1( )3a) a;;or*1n@ )o Co221((1on&r Ro*r1@o, )3&r& ar& a((o;1a)1on( )3a) *o no) 3a6& ()o;D(. T3a) 1( =3y =& (ay JCA!"TAL.J
Nazareno
%R. #ENGAON. "n )3& ;a(& o4 ()o;D ;or'ora)1on(, 1) 1( a((u2&*. :& ,Boldfa$in% and unders$orin% supplied#hus, 0& per$ent of the ($apital( a((u2&(, or should result in, a ( ;on)ro551n@ 1n)&r&()( in the $orporation. #he use of the ter+ ($apital( .as intended to repla$e the .ord (sto$5( be$ause asso$iations .ithout sto$5s $an operate publi$ utilities as lon% as they +eet the 0&-:& o.nership reIuire+ent in favor of )ilipino $itiHens pres$ribed in Se$tion 11, Arti$le N!! of the Constitution. ;o.ever, this did not $han%e the intent of the fra+ers of the Constitution to reserve ex$lusively to Philippine nationals the ( ;on)ro551n@ 1n)&r&()( in publi$ utilities. urin% the draftin% of the 11?9 Constitution, e$ono+i$ prote$tionis+ .as (the battle$ry of the nationalists in the Convention.( :1 #he sa+e battle-$ry resulted in the nationaliHation of the publi$ utilities.:' #his is also the sa+e intent of the fra+ers of the 1123 Constitution .ho adopted the exa$t for+ulation e+bodied in the 11?9 and 113? Constitutions on forei%n eIuity li+itations in partially nationaliHed industries. #he "S4, in its o.n behalf and as $ounsel for the State, :? a%rees fully .ith the CourtCs interpretation of the ter+ ($apital.( !n its Consolidated Co++ent, the "S4 explains that the deletion of the phrase ($ontrollin% interest( and repla$e+ent of the .ord (sto$5( .ith the ter+ ($apital( .ere intended spe$ifi$ally to extend the s$ope of the entities Iualified to operate publi$ utilities to in$lude asso$iations .ithout sto$5s. #he fra+ersC o+ission of the phrase ($ontrollin% interest( did not +ean the in$lusion of all shares of sto$5, .hether votin% or non-votin%. #he "S4 reiterated essentially the CourtCs de$laration that the Constitution reserved ex$lusively to Philippine nationals the o.nership and operation of publi$ utilities $onsistent .ith the StateCs poli$y to (develop a self-reliant and independent national e$ono+y effec"i9ely con"rolle& by >ilipinos.( As .e held in our '2 /une '&11 e$ision, to $onstrue broadly the ter+ ($apital( as the total outstandin% $apital sto$5, treated as a single $lass re%ardless of the a$tual $lassifi$ation of shares, %rossly $ontravenes the intent and letter of the Constitution that the (State shall develop a self-reliant and independent national e$ono+yeffec"i9ely con"rolle& by )ilipinos.( @e illustrated the %larin% ano+aly .hi$h .ould result in definin% the ter+ ($apital( as the total outstandin% $apital sto$5 of a
Corporation CASES Based on the Syllabus of Fr. Agustin $orporation, treated as a single $lass of shares re%ardless of the a$tual $lassifi$ation of shares, to .it6 <et us assu+e that a $orporation has 1&& $o++on shares o.ned by forei%ners and 1,&&&,&&& non-votin% preferred shares o.ned by )ilipinos, .ith both $lasses of share havin% a par value of one peso ,P 1.&&- per share. 7nder the broad definition of the ter+ ($apital,( su$h $orporation .ould be $onsidered $o+pliant .ith the :& per$ent $onstitutional li+it on forei%n eIuity of publi$ utilities sin$e the over.hel+in% +a8ority, or +ore than 11.111 per$ent, of the total outstandin% $apital sto$5 is )ilipino o.ned. #his is obviously absurd. !n the exa+ple %iven, only the forei%ners holdin% the $o++on shares have votin% ri%hts in the ele$tion of dire$tors, even if they hold only 1&& shares. #he forei%ners, .ith a +inus$ule eIuity of less than &.&&1 per$ent, exer$ise $ontrol over the publi$ utility. "n the other hand, the )ilipinos, holdin% +ore than 11.111 per$ent of the eIuity, $annot vote in the ele$tion of dire$tors and hen$e, have no $ontrol over the publi$ utility. #his star5ly $ir$u+vents the intent of the fra+ers of the Constitution, as .ell as the $lear lan%ua%e of the Constitution, to pla$e the $ontrol of publi$ utilities in the hands of )ilipinos. x x x )urther, even if forei%ners .ho o.n +ore than forty per$ent of the votin% shares ele$t an all-)ilipino board of dire$tors, this situation does not %uarantee )ilipino $ontrol and does not in any .ay $ure the violation of the Constitution. #he independen$e of the )ilipino board +e+bers so ele$ted by su$h forei%n shareholders is hi%hly doubtful. As the "S4 pointed out, Iuotin% /usti$e 4eor%e SutherlandCs .ords in 7umphre8)s 0Fecutor v. 9S!:: (x x x it is Iuite evident that one .ho holds his offi$e only durin% the pleasure of another $annot be depended upon to +aintain an attitude of independen$e a%ainst the latterCs .ill.( Allo.in% forei%n shareholders to ele$t a $ontrollin% +a8ority of the board, even if all the dire$tors are )ilipinos, %rossly $ir$u+vents the letter and intent of the Constitution and defeats the very purpose of our nationaliHation la.s. AII. Las" sen"ence of 6ec"ion ((% 2r"icle ;II of "!e Cons"i"u"ion #he last senten$e of Se$tion 11, Arti$le N!! of the 1123 Constitution reads6 #he parti$ipation of forei%n investors in the %overnin% body of any publi$ utility enterprise shall be li+ited to their proportionate share in its $apital, and all the exe$utive and +ana%in% offi$ers of su$h $orporation or asso$iation +ust be $itiHens of the Philippines. urin% the "ral Ar%u+ents, the "S4 e+phasiHed that there .as never a Iuestion on the intent of the fra+ers of the Constitution to li+it forei%n o.nership, and assure +a8ority )ilipino o.nership and $ontrol of publi$ utilities. #he "S4 ar%ued, (.hile
39
the dele%ates disa%reed as to the per$enta%e threshold to adopt, x x x the re$ords sho. they $learly understood that )ilipino $ontrol of the publi$ utility $orporation $an only be and is obtained only throu%h the ele$tion of a +a8ority of the +e+bers of the board.( !ndeed, the only point of $ontention durin% the deliberations of the Constitutional Co++ission on '? Au%ust 1120 .as the extent of +a8ority )ilipino $ontrol of publi$ utilities. #his is evident fro+ the follo.in% ex$han%e6 #;E PRES! EN#. Co++issioner /a+ir is re$o%niHed. *R. /A*!R. *ada+ President, +y proposed a+end+ent on lines '& and '1 is to delete the phrase (t.o thirds of .hose votin% sto$5 or $ontrollin% interest,( and instead substitute the .ords (S!N#> PERCEN# ") @;"SE CAP!#A<( so that the senten$e .ill read6 (No fran$hise, $ertifi$ate, or any other for+ of authoriHation for the operation of a publi$ utility shall be %ranted ex$ept to $itiHens of the Philippines or to $orporations or asso$iations or%aniHed under the la.s of the Philippines at least S!N#> PERCEN# ") @;"SE CAP!#A< is o.ned by su$h $itiHens.( xxxx #;E PRES! EN#6 @ill Co++issioner /a+ir first explainL *R. /A*!R. >es, in this Arti$le on National E$ono+y and Patri+ony, there .ere t.o previous se$tions in .hi$h .e fixed the )ilipino eIuity to 0& per$ent as a%ainst :& per$ent for forei%ners. !t is only in this Se$tion 19 .ith respe$t to publi$ utilities that the $o++ittee proposal .as in$reased to t.o-thirds. ! thin5 it .ould be better to har+oniHe this provision by providin% that even in the $ase of publi$ utilities, the +ini+u+ eIuity for )ilipino $itiHens should be 0& per$ent. *R. R"*7<". *ada+ President. #;E PRES! EN#. Co++issioner Ro+ulo is re$o%niHed. *R. R"*7<". *y reason for supportin% the a+end+ent is based on the dis$ussions ! have had .ith representatives of the )ilipino +a8ority o.ners of the international re$ord $arriers, and the subseIuent +e+oranda they sub+itted to +e. x x x #heir se$ond point is that under the Corporation Code, the +ana%e+ent and $ontrol of a $orporation is vested in the board of dire$tors, not in the offi$ers but in the board of dire$tors. #he offi$ers are only a%ents of the board. And they believe that .ith 0& per$ent of the eIuity, the )ilipino +a8ority sto$5holders undeniably $ontrol the board.
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Corporation CASES Based on the Syllabus of Fr. Agustin "nly on i+portant $orporate a$ts $an the :&-per$ent forei%n eIuity exer$ise a veto, x x x. x x x x:9 *S. R"SAR!" BRA! . *ada+ President. #;E PRES! EN#. Co++issioner Rosario Braid is re$o%niHed. *S. R"SAR!" BRA! . >es, in the interest of eIual ti+e, +ay ! also read fro+ a +e+orandu+ by the spo5es+an of the Philippine Cha+ber of Co++uni$ations on .hy they .ould li5e to +aintain the present eIuity, ! a+ referrin% to the 00 'E?. #hey .ould prefer to have a 39-'9 ratio but .ould settle for 00 'E?. x x x xxxx #;E PRES! EN#. /ust to $larify, .ould Co++issioner Rosario Braid support the proposal of t.o-thirds rather than the 0& per$entL *S. R"SAR!" BRA! . ! have added a $lause that .ill put +ana%e+ent in the hands of )ilipino $itiHens. x x x x:0 @hile they had differin% vie.s on the per$enta%e of )ilipino o.nership of $apital, it is $lear that the fra+ers of the Constitution intended publi$ utilities to be majori"y )ilipino-o.ned and $ontrolled. #o ensure that )ilipinos $ontrol publi$ utilities, the fra+ers of the Constitution approved, as additional safe%uard, the in$lusion of the last senten$e of Se$tion 11, Arti$le N!! of the Constitution $o++andin% that (AtBhe parti$ipation of forei%n investors in the %overnin% body of any publi$ utility enterprise shall be li+ited to their proportionate share in its $apital, and all the exe$utive and +ana%in% offi$ers of su$h $orporation or asso$iation +ust be $itiHens of the Philippines.( !n other .ords, the last senten$e of Se$tion 11, Arti$le N!! of the Constitution +andates that ,1- the parti$ipation of forei%n investors in the %overnin% body of the $orporation or asso$iation shall be li+ited to their proportionate share in the $apital of su$h entityD and ,'- all offi$ers of the $orporation or asso$iation +ust be )ilipino $itiHens. Co++issioner Rosario Braid proposed the in$lusion of the phrase reIuirin% the +ana%in% offi$ers of the $orporation or asso$iation to be )ilipino $itiHens spe$ifi$ally to prevent +ana%e+ent $ontra$ts, .hi$h .ere desi%ned pri+arily to $ir$u+vent the )ilipiniHation of publi$ utilities, and to assure )ilipino $ontrol of publi$ utilities, thus6
30
*S. R"SAR!" BRA! . x x x #hey also li5e to su%%est that .e a+end this provision by addin% a phrase .hi$h states6 (#;E *ANA4E*EN# B" > ") EGER> C"RP"RA#!"N "R ASS"C!A#!"N S;A<< !N A<< CASES BE C"N#R"<<E B> C!#!QENS ") #;E P;!<!PP!NES.( ! have .ith +e their position paper. #;E PRES! EN#. #he Co++issioner +ay pro$eed. *S. R"SAR!" BRA! . #he three +a8or international re$ord $arriers in the Philippines, .hi$h Co++issioner Ro+ulo +entioned F Philippine 4lobal Co++uni$ations, Eastern #ele$o++uni$ations, 4lobe *a$5ay Cable F are :&-per$ent o.ned by forei%n +ultinational $o+panies and 0&-per$ent o.ned by their respe$tive )ilipino partners. All three, ho.ever, also have +ana%e+ent $ontra$ts .ith these forei%n $o+panies F Phil$o+ .ith RCA, E#P! .ith Cable and @ireless P<C, and 4*CR .ith !##. 7p to the present ti+e, the %eneral +ana%ers of these $arriers are forei%ners. @hile the forei%ners in these $o++on $arriers are only +inority o.ners, the forei%n +ultinationals are the ones +ana%in% and $ontrollin% their operations by virtue of their +ana%e+ent $ontra$ts and by virtue of their stren%th in the %overnin% bodies of these $arriers.:3 xxxx *R. "P<E. ! thin5 a nu+ber of us have a%reed to as5 Co++issioner Rosario Braid to propose an a+end+ent .ith respe$t to the operatin% +ana%e+ent of publi$ utilities, and in this a+end+ent, .e are asso$iated .ith )r. Bernas, Co++issioners Nieva and Rodri%o. Co++issioner Rosario Braid .ill state this a+end+ent no.. #han5 you. *S. R"SAR!" BRA! . *ada+ President. #;E PRES! EN#. #his is still on Se$tion 19. *S. R"SAR!" BRA! . >es. *R. G!<<E4AS. >es, *ada+ President. xxxx *S. R"SAR!" BRA! . *ada+ President, ! propose a ne. se$tion to read6 K#;E *ANA4E*EN# B" > ") EGER> C"RP"RA#!"N "R ASS"C!A#!"N S;A<< !N A<< CASES BE C"N#R"<<E B> C!#!QENS ") #;E P;!<!PP!NES.(
Nazareno
Corporation CASES Based on the Syllabus of Fr. Agustin T31( =155 'r&6&n) 2ana@&2&n) ;on)ra;)( an* a((ur& ;on)ro5 +y F151'1no ;1)1H&n(. @ill the $o++ittee assure us that this a+end+ent .ill insure that past a$tivities su$h as +ana%e+ent $ontra$ts .ill no lon%er be possible under this a+end+entL xxxx )R. BERNAS. *ada+ President. #;E PRES! EN#. Co++issioner Bernas is re$o%niHed. )R. BERNAS. @ill the $o++ittee a$$ept a refor+ulation of the first partL *R. BEN4Q"N. <et us hear it. )R. BERNAS. #he refor+ulation .ill be essentially the for+ula of the 113? Constitution .hi$h reads6 (#;E PAR#!C!PA#!"N ") )"RE!4N !NGES#"RS !N #;E 4"GERN!N4 B" > ") AN> P7B<!C 7#!<!#> EN#ERPR!SE S;A<< BE <!*!#E #" #;E!R PR"P"R#!"NA#E S;ARE !N #;E CAP!#A< #;ERE") AN ...( *R. G!<<E4AS. (A<< #;E ENEC7#!GE AN *ANA4!N4 "))!CERS ") S7C; C"RP"RA#!"NS AN ASS"C!A#!"NS *7S# BE C!#!QENS ") #;E P;!<!PP!NES.( *R. BEN4Q"N. @ill Co++issioner Bernas read the .hole thin% a%ainL )R. BERNAS. (#;E PAR#!C!PA#!"N ") )"RE!4N !NGES#"RS !N #;E 4"GERN!N4 B" > ") AN> P7B<!C 7#!<!#> EN#ERPR!SE S;A<< BE <!*!#E #" #;E!R PR"P"R#!"NA#E S;ARE !N #;E CAP!#A< #;ERE")...( ! do not have the rest of the $opy. *R. BEN4Q"N. (AN A<< #;E ENEC7#!GE AN *ANA4!N4 "))!CERS ") S7C; C"RP"RA#!"NS "R ASS"C!A#!"NS *7S# BE C!#!QENS ") #;E P;!<!PP!NES.( !s that $orre$tL *R. G!<<E4AS. >es. *R. BEN4Q"N. *ada+ President, ! thin5 that .as said in a +ore ele%ant lan%ua%e. @e a$$ept the a+end+ent. !s that all ri%ht .ith Co++issioner Rosario BraidL *S. R"SAR!" BRA! . >es. xxxx
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*R. E <"S RE>ES. #he %overnin% body refers to the board of dire$tors and trustees. *R. G!<<E4AS. #hat is ri%ht. *R. BEN4Q"N. >es, the %overnin% body refers to the board of dire$tors. *R. RE4A<A ". !t is a$$epted. *R. RA*A. #he body is no. ready to vote, *ada+ President. G"#!N4 xxxx #he results sho. '1 votes in favor and none a%ainstD so the proposed a+end+ent is approved. xxxx #;E PRES! EN#. All ri%ht. Can .e pro$eed no. to vote on Se$tion 19L *R. RA*A. >es, *ada+ President. #;E PRES! EN#. @ill the $hair+an of the $o++ittee please read Se$tion 19L *R. G!<<E4AS. #he entire Se$tion 19, as a+ended, reads6 (No fran$hise, $ertifi$ate, or any other for+ of authoriHation for the operation of a publi$ utility shall be %ranted ex$ept to $itiHens of the Philippines or to $orporations or asso$iations or%aniHed under the la.s of the Philippines at least 0& PERCEN# ") @;"SE CAP!#A< is o.ned by su$h $itiHens.( *ay ! reIuest Co++issioner Ben%Hon to please $ontinue readin%. *R. BEN4Q"N. (#;E PAR#!C!PA#!"N ") )"RE!4N !NGES#"RS !N #;E 4"GERN!N4 B" > ") AN> P7B<!C 7#!<!#> EN#ERPR!SE S;A<< BE <!*!#E #" #;E!R PR"P"R#!"NA#E S;ARE !N #;E CAP!#A< #;ERE") AN A<< #;E ENEC7#!GE AN *ANA4!N4 "))!CERS ") S7C; C"RP"RA#!"NS "R ASS"C!A#!"NS *7S# BE C!#!QENS ") #;E P;!<!PP!NES.(
Corporation CASES Based on the Syllabus of Fr. Agustin *R. G!<<E4AS. (N"R S;A<< S7C; )RANC;!SE, CER#!)!CA#E "R A7#;"R!QA#!"N BE ENC<7S!GE !N C;ARAC#ER "R )"R A PER!" <"N4ER #;AN #@EN#>-)!GE >EARS RENE@AB<E )"R N"# *"RE #;AN #@EN#>-)!GE >EARS. Neither shall any su$h fran$hise or ri%ht be %ranted ex$ept under the $ondition that it shall be sub8e$t to a+end+ent, alteration, or repeal by Con%ress .hen the $o++on %ood so reIuires. #he State shall en$oura%e eIuity parti$ipation in publi$ utilities by the %eneral publi$.( G"#!N4 xxxx #he results sho. '1 votes in favor and : a%ainstD Se$tion 19, as a+ended, is approved.:2 ,E+phasis supplied#he last senten$e of Se$tion 11, Arti$le N!! of the 1123 Constitution, parti$ularly the provision on the li+ited parti$ipation of forei%n investors in the %overnin% body of publi$ utilities, is a reiteration of the last senten$e of Se$tion 9, Arti$le N!G of the 113? Constitution,:1 si%nifyin% its i+portan$e in reservin% o.nership and $ontrol of publi$ utilities to )ilipino $itiHens. AIII. T!e un&ispu"e& fac"s #here is no dispute, and respondents do not $lai+ the $ontrary, that ,1- forei%ners o.n 0:.'3= of the $o++on shares of P< #, .hi$h $lass of shares exer$ises the (o5& ri%ht to vote in the ele$tion of dire$tors, and thus forei%ners $ontrol P< #D ,'- )ilipinos o.n only ?9.3?= of P< #Cs $o++on shares, $onstitutin% a +inority of the votin% sto$5, and thus )ilipinos do not $ontrol P< #D ,?- preferred shares, 11.::= o.ned by )ilipinos, have no votin% ri%htsD ,:- preferred shares earn only 1E3& of the dividends that $o++on shares earnD9& ,9- preferred shares have t.i$e the par value of $o++on sharesD and ,0- preferred shares $onstitute 33.29= of the authoriHed $apital sto$5 of P< # and $o++on shares only ''.19=. espite the fore%oin% fa$ts, the Court did not de$ide, and in fa$t refrained fro+ rulin% on the Iuestion of .hether P< # violated the 0&-:& o.nership reIuire+ent in favor of )ilipino $itiHens in Se$tion 11, Arti$le N!! of the 1123 Constitution. Su$h Iuestion indisputably $alls for a presentation and deter+ination of eviden$e throu%h a hearin%, .hi$h is %enerally outside the provin$e of the CourtCs 8urisdi$tion, but .ell .ithin the SECCs statutory po.ers. #hus, for obvious reasons, the Court li+ited its de$ision on the purely le%al and threshold issue on the definition of the ter+ ($apital( in Se$tion 11, Arti$le N!! of the Constitution and dire$ted the SEC to apply su$h definition in deter+inin% the exa$t per$enta%e of forei%n o.nership in P< #. I;. PLDT is no" 68C is implea&e& in "!is case.
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par"y?
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an in&ispensable
!n his petition, 4a+boa prays, a+on% others6 xxxx 9. )or the ;onorable Court to issue a de$laratory relief that o.nership of $o++on or votin% shares is the sole basis in deter+inin% forei%n eIuity in a publi$ utility and that any other %overn+ent rulin%s, opinions, and re%ulations in$onsistent .ith this de$laratory relief be de$lared un$onstitutional and a violation of the intent and spirit of the 1123 ConstitutionD 0. )or the ;onorable Court to de$lare null and void all sales of $o++on sto$5s to forei%ners in ex$ess of :& per$ent of the total subs$ribed $o++on shareholdin%sD and 3. )or the ;onorable Court )o *1r&;) )3& S&;ur1)1&( an* E7;3an@& Co221((1on and Philippine Sto$5 Ex$han%e )o r&>u1r& !L T )o 2aD& a 'u+51; *1(;5o(ur& o4 a55 o4 1)( 4or&1@n (3ar&3o5*1n@( an* )3&1r a;)ua5 an* r&a5 +&n&41;1a5 o=n&r(. "ther relief,s- 8ust and eIuitable are li5e.ise prayed for. ,E+phasis suppliedAs $an be %leaned fro+ his prayer, 4a+boa $learly as5s this Court to $o+pel the SEC to perfor+ its statutory duty to investi%ate .hether (the reIuired per$enta%e of o.nership of the $apital sto$5 to be o.ned by $itiHens of the Philippines has been $o+plied .ith Aby P< #B as reIuired by x x x the Constitution.( 91 Su$h plea $learly ne%ates SECCs ar%u+ent that it .as not i+pleaded. 4rantin% that only the SEC Chair+an .as i+pleaded in this $ase, the Court has a+ple po.ers to order the SECCs $o+plian$e .ith its dire$tive $ontained in the '2 /une '&11 e$ision in vie. of the far-rea$hin% i+pli$ations of this $ase. !n #omingo v. Scheer,9' the Court dispensed .ith the a+end+ent of the pleadin%s to i+plead the Bureau of Custo+s $onsiderin% ,1- the uniIue ba$5drop of the $aseD ,'- the ut+ost need to avoid further delaysD and ,?- the issue of publi$ interest involved. #he Court held6 #he Court +ay be $urin% the defe$t in this $ase by addin% the B"C as party-petitioner. #he petition should not be dis+issed be$ause the se$ond a$tion .ould only be a repetition of the first. !n Salvador! et al.! v. Court of "ppeals! et al., .e held that this Court has full po.ers, apart fro+ that po.er and authority .hi$h is inherent, to a+end the pro$esses, pleadin%s, pro$eedin%s and de$isions by substitutin% as party-plaintiff the real party-in-interest. T3& Cour) 3a( )3& 'o=&r )o a6o1* *&5ay 1n )3& *1('o(1)1on
Corporation CASES Based on the Syllabus of Fr. Agustin o4 )31( ;a(&, )o or*&r 1)( a2&n*2&n) a( )o 12'5&a* )3& #OC a( 'ar)y8r&('on*&n). "n*&&*, 1) 2ay no 5on@&r +& n&;&((ary )o *o (o )aD1n@ 1n)o a;;oun) )3& un1>u& +a;D*ro' 1n )31( ;a(&, 1n6o561n@ a( 1) *o&( an 1((u& o4 'u+51; 1n)&r&(). After all, the "ffi$e of the Soli$itor 4eneral has represented the petitioner in the instant pro$eedin%s, as .ell as in the appellate $ourt, and +aintained the validity of the deportation order and of the B"CCs "+nibus Resolution. !t $annot, thus, be $lai+ed by the State that the B"C .as not afforded its day in $ourt, si+ply be$ause only the petitioner, the Chairperson of the B"C, .as the respondent in the CA, and the petitioner in the instant re$ourse. !n "lonso v. *illamor! .e had the o$$asion to state6 T3&r& 1( no)31n@ (a;r&* a+ou) 'ro;&((&( or '5&a*1n@(, )3&1r 4or2( or ;on)&n)(. T3&1r (o5& 'ur'o(& 1( )o 4a;151)a)& )3& a''51;a)1on o4 ?u()1;& )o )3& r16a5 ;5a12( o4 ;on)&n*1n@ 'ar)1&(. #hey .ere $reated, not to hinder and delay, but to fa$ilitate and pro+ote, the ad+inistration of 8usti$e. #hey do not $onstitute the thin% itself, .hi$h $ourts are al.ays strivin% to se$ure to liti%ants. #hey are desi%ned as the +eans best adapted to obtain that thin%. !n other .ords, they are a +eans to an end. @hen they lose the $hara$ter of the one and be$o+e the other, the ad+inistration of 8usti$e is at fault and $ourts are $orrespondin%ly re+iss in the perfor+an$e of their obvious duty.9? ,E+phasis supplied"n any &6&n), )3& SEC 3a( &7'r&((5y 2an14&()&* 9: )3a) 1) =155 a+1*& +y )3& Cour)C( *&;1(1on an* *&4&r )o )3& Cour)C( *&41n1)1on o4 )3& )&r2 J;a'1)a5J 1n S&;)1on 11, Ar)1;5& N"" o4 )3& Con()1)u)1on. Fur)3&r, )3& SEC &n)&r&* 1)( ('&;1a5 a''&aran;& 1n )31( ;a(& an* ar@u&* *ur1n@ )3& Ora5 Ar@u2&n)(, 1n*1;a)1n@ 1)( (u+21((1on )o )3& Cour)C( ?ur1(*1;)1on. ") 1( ;5&ar, )3&r&4or&, )3a) )3&r& &71()( no 5&@a5 12'&*12&n) a@a1n() )3& 'ro'&r an* 122&*1a)& 12'5&2&n)a)1on o4 )3& Cour)C( *1r&;)16& )o )3& SEC. P< # is an indispensable party only insofar as the other issues, parti$ularly the fa$tual Iuestions, are $on$erned. !n other .ords, P< # +ust be i+pleaded in order to fully resolve the issues on ,1- .hether the sale of 111,:19 P#!C shares to )irst Pa$ifi$ violates the $onstitutional li+it on forei%n o.nership of P< #D ,'- .hether the sale of $o++on shares to forei%ners ex$eeded the :& per$ent li+it on forei%n eIuity in P< #D and ,?- .hether the total per$enta%e of the P< # $o++on shares .ith votin% ri%hts $o+plies .ith the 0&-:& o.nership reIuire+ent in favor of )ilipino $itiHens under the Constitution for the o.nership and operation of P< #. #hese issues indisputably $all for an exa+ination of the partiesC respe$tive eviden$e, and thus are $learly .ithin the 8urisdi$tion of the SEC. !n short, P< # +ust be i+pleaded, and +ust ne$essarily be heard, in the pro$eedin%s before the SEC .here the fa$tual issues .ill be thorou%hly threshed out and resolved. No)a+5y, )3& 4or&@o1n@ 1((u&( =&r& 5&4) un)ou;3&* +y )3& Cour) . #he Court did not rule on the fa$tual issues raised by 4a+boa, ex$ept the sin%le and purely le%al issue on the definition of the ter+ ($apital( in Se$tion 11, Arti$le N!! of the Constitution. #he
31
Court $onfined the resolution of the instant $ase to this threshold le%al issue in deferen$e to the fa$t-findin% po.er of the SEC. Needless to state, the Court $an validly, properly, and fully dispose of the funda+ental le%al issue in this $ase even .ithout the parti$ipation of P< # sin$e definin% the ter+ ($apital( in Se$tion 11, Arti$le N!! of the Constitution does not, in any .ay, depend on .hether P< # .as i+pleaded. Si+ply put, P< # is not indispensable for a $o+plete resolution of the purely le%al Iuestion in this $ase. 99 !n fa$t, the Court, by treatin% the petition as one for +anda+us,90 +erely dire$ted the SEC to apply the CourtCs definition of the ter+ ($apital( in Se$tion 11, Arti$le N!! of the Constitution in deter+inin% .hether P< # $o++itted any violation of the said $onstitutional provision. T3& *1('o(1)16& 'or)1on o4 )3& Cour)C( ru51n@ 1( a**r&((&* no) )o !L T +u) (o5&5y )o )3& SEC, =31;3 1( )3& a*21n1()ra)16& a@&n;y )a(D&* )o &n4or;& )3& 608 40 o=n&r(31' r&>u1r&2&n) 1n 4a6or o4 F151'1no ;1)1H&n( 1n S&;)1on 11, Ar)1;5& N"" o4 )3& Con()1)u)1on. Sin$e the Court li+ited its resolution on the purely le%al issue on the definition of the ter+ ($apital( in Se$tion 11, Arti$le N!! of the 1123 Constitution, and dire$ted the SEC to investi%ate any violation by P< # of the 0&-:& o.nership reIuire+ent in favor of )ilipino $itiHens under the Constitution,93 there is no deprivation of P< #Cs property or denial of P< #Cs ri%ht to due pro$ess, $ontrary to Pan%ilinan and NaHarenoCs +isi+pression. ue pro$ess .ill be afforded to P< # .hen it presents proof to the SEC that it $o+plies, as it $lai+s here, .ith Se$tion 11, Arti$le N!! of the Constitution. ;. >oreign In9es"men"s in "!e P!ilippines *ovants fear that the '2 /une '&11 e$ision .ould spell disaster to our e$ono+y, as it +ay result in a sudden fli%ht of existin% forei%n investors to (friendlier( $ountries and si+ultaneously deterrin% ne. forei%n investors to our $ountry. !n parti$ular, the PSE $lai+s that the '2 /une '&11 e$ision +ay result in the follo.in%6 ,1- loss of +ore than P 0?& billion in forei%n invest+ents in PSE-listed sharesD ,'- +assive de$rease in forei%n tradin% transa$tionsD ,?- lo.er PSE Co+posite !ndexD and ,:- lo$al investors not investin% in PSE-listed shares. 92 r. Bernardo *. Gille%as, one of the amici curiae in the "ral Ar%u+ents, shared +ovantsC apprehension. @ithout providin% spe$ifi$ details, he pointed out the depressin% state of the Philippine e$ono+y $o+pared to our nei%hborin% $ountries .hi$h boast of %ro.in% e$ono+ies. )urther, r. Gille%as explained that the solution to our e$ono+i$ .oes is for the %overn+ent to (ta5e-over( strate%i$ industries, su$h as the publi$ utilities se$tor, thus6 /7S#!CE CARP!"6
Nazareno
Corporation CASES Based on the Syllabus of Fr. Agustin ! .ould li5e also to %et fro+ you r. Gille%as if you have additional infor+ation on .hether this hi%h ) !91 $ountries in East Asia have allo.ed forei%ners x x x $ontrol AofB their publi$ utilities, so that .e $an $o+pare apples .ith apples. R. G!<<E4AS6 Corre$t, but let +e 8ust +a5e a $o++ent. @hen these nei%hbors of ours find an industry strate%i$, their solution is not to ()ilipiniHe( or (Gietna+iHe( or (Sin%aporiHe.( T3&1r (o5u)1on 1( )o 2aD& (ur& )3a) )3o(& 1n*u()r1&( ar& 1n )3& 3an*( o4 ()a)& &n)&r'r1(&(. So, 1n )3&(& ;oun)r1&(, na)1ona51Ha)1on 2&an( )3& @o6&rn2&n) )aD&( o6&r. An* +&;au(& )3&1r @o6&rn2&n)( ar& ;o2'&)&n) an* 3on&() &nou@3 )o )3& 'u+51;, )3a) 1( )3& (o5u)1on. x x x 0& ,E+phasis supplied!f %overn+ent o.nership of publi$ utilities is the solution, then forei%n invest+ents in our publi$ utilities serve no purpose. "bviously, there $an never be forei%n invest+ents in publi$ utilities if, as r. Gille%as $lai+s, the (solution is to +a5e sure that those industries are in the hands of state enterprises.( r. Gille%asCs ar%u+ent that forei%n invest+ents in tele$o++uni$ation $o+panies li5e P< # are badly needed to save our ailin% e$ono+y $ontradi$ts his o.n theory that the solution is for %overn+ent to ta5e over these $o+panies. r. Gille%as is bar5in% up the .ron% tree sin$e State o.nership of publi$ utilities and forei%n invest+ents in su$h industries are dia+etri$ally opposed $on$epts, .hi$h $annot possibly be re$on$iled. !n any event, the experien$e of our nei%hborin% $ountries $annot be used as ar%u+ent to de$ide the present $ase differently for t.o reasons. )irst, the %overn+ents of our nei%hborin% $ountries have, as $lai+ed by r. Gille%as, ta5en over o.nership and $ontrol of their strate%i$ publi$ utilities li5e the tele$o++uni$ations industry. Se$ond, our Constitution has spe$ifi$ provisions li+itin% forei%n o.nership in publi$ utilities .hi$h the Court is s.orn to uphold re%ardless of the experien$e of our nei%hborin% $ountries. !n our 8urisdi$tion, the Constitution expressly reserves the o.nership and operation of publi$ utilities to )ilipino $itiHens, or $orporations or asso$iations at least 0& per$ent of .hose $apital belon%s to )ilipinos. )ollo.in% r. Gille%asCs $lai+, the Philippines appears to be +ore liberal in allo.in% forei%n investors to o.n :& per$ent of publi$ utilities, unli5e in other Asian $ountries .hose %overn+ents o.n and operate su$h industries. ;I. Prospec"i9e 2pplica"ion of 6anc"ions !n its *otion for Partial Re$onsideration, the SEC sou%ht to $larify the re$5onin% period of the appli$ation and i+position of appropriate san$tions a%ainst P< # if found violatin% Se$tion 11, Arti$le N!! of the Constitution.1avvphi1
2&
As dis$ussed, the Court has dire$ted the SEC to investi%ate and deter+ine .hether P< # violated Se$tion 11, Arti$le N!! of the Constitution. #hus, there is no dispute that it is only after the SEC has deter+ined P< #Cs violation, if any exists at the ti+e of the $o++en$e+ent of the ad+inistrative $ase or investi%ation, that the SEC +ay i+pose the statutory san$tions a%ainst P< #. !n other .ords, on$e the '2 /une '&11 e$ision be$o+es final, the SEC shall i+pose the appropriate san$tions only if it finds after due hearin% that, at the start of the ad+inistrative $ase or investi%ation, there is an existin% violation of Se$tion 11, Arti$le N!! of the Constitution. 7nder prevailin% 8urispruden$e, publi$ utilities that fail to $o+ply .ith the nationality reIuire+ent under Se$tion 11, Arti$le N!! and the )!A $an $ure their defi$ien$ies prior to the start of the ad+inistrative $ase or investi%ation.01 ;II. >inal Dor& #he Constitution expressly de$lares as State poli$y the develop+ent of an e$ono+y (effec"i9ely con"rolle&( by )ilipinos. Consistent .ith su$h State poli$y, the Constitution expli$itly reserves the o.nership and operation of publi$ utilities to Philippine nationals, .ho are defined in the )orei%n !nvest+ents A$t of 1111 as )ilipino $itiHens, or $orporations or asso$iations at least 0& per$ent of .hose $apital Ci"! 9o"ing rig!"s belon%s to )ilipinos. #he )!ACs i+ple+entin% rules explain that (AfBor sto$5s to be dee+ed o.ned and held by Philippine $itiHens or Philippine nationals, +ere le%al title is not enou%h to +eet the reIuired )ilipino eIuity. Fu55 +&n&41;1a5 o=n&r(31' o4 )3& ()o;D(, ;ou'5&* =1)3 a''ro'r1a)& 6o)1n@ r1@3)( 1( &((&n)1a5.( !n effe$t, the )!A $larifies, reiterates and $onfir+s the interpretation that the ter+ ($apital( in Se$tion 11, Arti$le N!! of the 1123 Constitution refers to s!ares Ci"! 9o"ing rig!"s% as Cell as Ci"! full beneficial oCners!ip . #his is pre$isely be$ause the ri%ht to vote in the ele$tion of dire$tors, $oupled .ith full benefi$ial o.nership of sto$5s, translates to effe$tive $ontrol of a $orporation. Any other $onstru$tion of the ter+ ($apital( in Se$tion 11, Arti$le N!! of the Constitution $ontravenes the letter and intent of the Constitution. Any other +eanin% of the ter+ ($apital( openly invites alien do+ination of e$ono+i$ a$tivities reserved ex$lusively to Philippine nationals. #herefore, respondentsC interpretation .ill ulti+ately result in handin% over effe$tive $ontrol of our national e$ono+y to forei%ners in patent violation of the Constitution, +a5in% )ilipinos se$ond-$lass $itiHens in their o.n $ountry. )ilipinos have only to re+ind the+selves of ho. this $ountry .as exploited under the Parity A+end+ent, .hi$h %ave A+eri$ans the sa+e ri%hts as )ilipinos in the exploitation of natural resour$es, and in the o.nership and $ontrol of publi$ utilities, in the Philippines. #o do this the 11?9 Constitution, .hi$h $ontained the sa+e 0& per$ent )ilipino o.nership and $ontrol reIuire+ent as the present 1123 Constitution, had to be a+ended to %ive A+eri$ans parity ri%hts .ith )ilipinos. #here .as bitter opposition to
Nazareno
Corporation CASES Based on the Syllabus of Fr. Agustin the Parity A+end+ent0' and +any )ilipinos ea%erly a.aited its expiration. !n late 1102, P< # .as one of the A+eri$an-$ontrolled publi$ utilities that be$a+e )ilipino$ontrolled .hen the $ontrollin% A+eri$an sto$5holders divested in anti$ipation of the expiration of the Parity A+end+ent on ? /uly 113:. 0? No e$ono+i$ sui$ide happened .hen $ontrol of publi$ utilities and +inin% $orporations passed to )ilipinosC hands upon expiration of the Parity A+end+ent. *ovantsC interpretation of the ter+ ($apital( .ould brin% us ba$5 to the sa+e evils spa.ned by the Parity A+end+ent, effec"i9ely gi9ing foreigners pari"y rig!"s Ci"! >ilipinos% bu" "!is "ime e9en Ci"!ou" any amen&men" "o "!e presen" Cons"i"u"ion . @orse, +ovantsC interpretation opens up our national e$ono+y to effec"i9e con"rol not only by A+eri$ans but also by a55 4or&1@n&r(, +& )3&y "n*on&(1an(, %a5ay(1an( or C31n&(&, &6&n 1n )3& a+(&n;& o4 r&;1'ro;a5 )r&a)y arran@&2&n)( . At least the Parity A+end+ent, as i+ple+ented by the <aurel-<an%ley A%ree+ent, %ave the $apitalstarved )ilipinos theoreti$al parity F the sa+e ri%hts as A+eri$ans to exploit natural resour$es, and to o.n and $ontrol publi$ utilities, in the 9nited States of "merica . ;ere, +ovantsC interpretation .ould effe$tively +ean a unila"eral openin% up of our national e$ono+y to all forei%ners, Ci"!ou" any reciprocal arrangemen"s. #hat .ould +ean that !ndonesians, *alaysians and Chinese nationals $ould effe$tively $ontrol our +inin% $o+panies and publi$ utilities .hile )ilipinos, even if they have the $apital, $ould not $ontrol si+ilar $orporations in these $ountries. #he 11?9, 113? and 1123 Constitutions have the sa+e 0& per$ent )ilipino o.nership and $ontrol reIuire+ent for publi$ utilities li5e P<"#. Any deviation fro+ this reIuire+ent ne$essitates an a+end+ent to the Constitution as exe+plified by the Parity A+end+ent. #his Court has no po.er to a+end the Constitution for its po.er and duty is only to faithfully apply and interpret the Constitution. :HEREFORE, =& ENY the +otions for re$onsideration :"TH F"NAL"TY. No further pleadin%s shall be entertained. S" "R ERE . ANTON"O Asso$iate /usti$e @E C"NC7R6 %AR"A Chief /usti$e LOUR ES !.A. SERENO Foo)no)&(
Z
21
Nazareno
Asso$iate /usti$e CASTRO Asso$iate /usti$e
ARTURO Asso$iate /usti$e
#R"ON
"OS A O %. Asso$iate /usti$e
!ERALTA
LUCAS !. Asso$iate /usti$e
#ERSA%"N
%AR"ANO C. Asso$iate /usti$e
EL CAST"LLO
RO#ERTO Asso$iate /usti$e
A.
A#A
%ART"N S. $"LLARA%A, JR. Asso$iate /usti$e
JOSE !ORTUGAL Asso$iate /usti$e
!EREA
JOSE C. Asso$iate /usti$e
%EN OAA
#"EN$EN" O Asso$iate /usti$e
L.
REYES
ESTELA %. !ERLAS8#ERNA#E Asso$iate /usti$e
CER#!)!CA#!"N Pursuant to Se$tion 1?, Arti$le G!!! of the Constitution, ! $ertify that the $on$lusions in the above Resolution had been rea$hed in $onsultation before the $ase .as assi%ned to the .riter of the opinion of the Court. %AR"A Chief /usti$e LOUR ES !.A. SERENO
T.
CAR!"O
!RES#"TERO J. $ELASCO, JR.
TERES"TA J. LEONAR O8 E
#he ;eirs of @ilson P. 4a+boa substituted petitioner @ilson P. 4a+boa per Resolution dated 13 April '&1' .hi$h noted the *anifestation of <auro 4a+boa dated 1' April '&1'.

1
2'
RolEo,Gol.lll-,pp.l:?1-1:91. ated !! /uly'&11. !d. at 190?-101?. ated 1: /uly '&11. !d. at 1:9:-19?3. ated 19 /uly '&11.
10
'
!d. at 1001-102&. #hrou%h its "ffi$e of the 4eneral Counsel and Co++issioner *anuel llubeiio B. 4aite. !n its *anifestation and "+nibus *otion dated '1 /uly '& !!, the SEC +anifested that the position of the "S4 on the +eanin% of the ter+ ($apital( does not refle$t the vie. of the SEC. #he SEC sou%ht a partial re[onsideration prayin% that the state+ent on SECYs unla.ful ne%le$t of its statutory duty be expun%ed and for $larifi$ation on the re$5onin% period of the i+position of any san$tions a%ainst P<"#.
9
SEC "pinion No. :1-&:, Re6 Corporations $onsidered as Philippine Nationals, dated '' e$e+ber '&&:, addressed to Ro+ulo *abanta Buenaventura Sayo$ U e <os An%eles and si%ned by 4eneral Counsel Gernette 4. 7+ali-Pa$oD SEC-"4C "pinion No. &?-&2, dated 19 /anuary '&&2, addressed to Attys. Ruby Rose /. >usi and Rudyard S. Arbolado and si%ned by 4eneral Counsel Gernette 4. 7+ali-Pa$oD SEC-"4C "pinion No. &1-&1, dated '2 April '&&1, addressed to GillaraHa CruH *ar$elo An%an%$o and si%ned by 4eneral Counsel Gernette 4. 7+ali-Pa$oD SEC"4C "pinion No. &2-1&, dated 2 )ebruary '&1&, addressed to *r. #eodoro B. Mui8ano and si%ned by 4eneral Counsel Gernette 4. 7+ali-Pa$oD SEC-"4C "pinion No. '?-1&, dated 12 Au%ust '&1&, addressed to Castillo <a+an #an Pantaleon and San /ose and si%ned by 4eneral Counsel Gernette 4. 7+ali-Pa$oD SEC-"4C "pinion No. 12-&3, dated '2 Nove+ber '&&3, addressed to *r. Rafael C. Bueno, /r. and si%ned by 4eneral Counsel Gernette 4. 7+ali-Pa$o. !n SEC "pinion No. ?'-&?, dated ' /une '&&?, addressed to National #ele$o++uni$ations Co++issioner Ar+i /ane R. Bor8e, SEC 4eneral Counsel Gernette 4. 7+ali-Pa$o stated6 !n this li%ht, it is i+perative that .e reiterate the poli$y of this Co++ission ,SEC- in refrainin% fro+ renderin% opinions that +i%ht pre8udi$e or affe$t the out$o+e of a $ase, .hi$h is sub8e$t to present liti%ation before the $ourts, or any other foru+ for that +atter. #he opinion, .hi$h +ay be rendered thereon, .ould not be bindin% upon any party .ho .ould in all probability, if the opinion happens to be adverse to his or its interest, ta5e issue there.ith and $ontest it before the proper venue. #he Co++ission, therefore, has to refrain fro+ %ivin% $ate%ori$al ans.ers to your Iuery.
13
Nazareno
!d. at 101:-10'3. ated 1? /uly '&11. "n behalfofthe SEC, by spe$ial appearan$e. #he "S4 prayed that the CourtYs de$ision (be $ured of its pro$edural defe$t .hi$h ho.ever should not prevail over the substantive aspe$t of the e$ision.(
0
! d. at '1&'-'1':. )iled on 19 e$e+ber '& !!. Salvacion v. Central Ban$ of the Philippines! ?:? Phil. 9?1 ,1113-. 19&-B Phil. ?2& ,113'-. %ollo ,Gol. !!!-, p. 192?. Addressed to 4ov. <ilia Bautista of the Board of !nvest+ents. A typo%raphi$al error in "/ "pinion No. 1?& .here it states 2&=. Republi$ A$t No. 2311.
?3& Phil. 9?2 ,1111-. 4.R. No. 19'029, : e$e+ber '&&3, 9?1 SCRA ?09. %ollo ,Gol. !!!-, pp. 1?1'-1?1?. Supra. Supra. "N #;E P;!<!PP!NE
1&
12
11
11
1'
'&
1?
4eneral Counsel and Co++issioner *anuel ;uberto B. 4aite of the Se$urities and Ex$han%e Co++ission.
1:
'1
#SN ,"ral Ar%u+ents-, '0 /une '&1', pp. 21-2?. E+phasis supplied. SEC En Ban$ Case No. &1-&1-133, '9 *ar$h '&1&.
''
e <eon, ;e$tor S., #EN#B""R C"NS#!#7#!"N, '&&9 Edition, pp. ?', ??.
'?
19
Se$tion 1&, Arti$le N!! of the 1123 Constitution.

':
2?
Bernas, /oaIuin 4., S./., #;E 1123 C"NS#!#7#!"N ") #;E REP7B<!C ") #;E P;!<!PP!NES6 A C"**EN#AR>, 1110 Edition, p. 1&::, $itin% Smith! Bell and Co. v. @atividad , :& Phil. 1?0, 1:2 ,1111-D :u(on Stevedoring Corporation v. "nti #umm8 Board , 19&-B Phil. ?2&, :&?-:&: ,113'-.
'9
xxxx
Nazareno
,?- #hat su$h business or e$ono+i$ a$tivity by the appli$ant .ould not $onfli$t .ith the Constitution or la.s of the PhilippinesD xxxx
?&
!ssued on 13 /uly 1123.
'0
Arti$les :: to 90 of the "+nibus !nvest+ents Code of 1123 .ere later repealed by the )orei%n !nvest+ents A$t of 1111. See infra, p. '0.
'3
An A$t Pres$ribin% !n$entives And 4uarantees #o !nvest+ents !n #he Philippines, Creatin% A Board "f !nvest+ents, Appropriatin% #he Ne$essary )unds #herefor And )or "ther Purposes.
?1
Arti$le :2. "uthorit8 to #o Business. No alien, and no fir+ asso$iation, partnership, $orporation or any other for+ of business or%aniHation for+ed, or%aniHed, $hartered or existin% under any la.s other than those of the Philippines, or .hi$h is not a Philippine national, or +ore than forty per$ent ,:&=- of the outstandin% $apital of .hi$h is o.ned or $ontrolled by aliens shall do business or en%a%e in any e$ono+i$ a$tivity in the Philippines or be re%istered, li$ensed, or per+itted by the Se$urities and Ex$han%e Co++ission or by any other bureau, offi$e, a%en$y, politi$al subdivision or instru+entality of the %overn+ent, to do business, or en%a%e in any e$ono+i$ a$tivity in the Philippines .ithout first se$urin% a .ritten $ertifi$ate fro+ the Board of !nvest+ents to the effe$t6 xxxx ,?- #hat su$h business or e$ono+i$ a$tivity by the appli$ant .ould not $onfli$t .ith the Constitution or la.s of the PhilippinesD xxxx
'2
Se$tion ? of RA No. 9:99 states6
Se$tion ?. Permissible Investments. !f an invest+ent by a non-Philippine national in an enterprise not re%istered under the !nvest+ent !n$entives A$t is su$h that the total parti$ipation by non-Philippine nationals in the outstandin% $apital thereof shall ex$eed thirty per $ent, the enterprise +ust obtain prior authority fro+ the Board of !nvest+ents, .hi$h authority shall be %ranted unless the proposed invest+ent ,a- @ould $onfli$t .ith existin% $onstitutional provisions and la.s re%ulatin% the de%ree of reIuired o.nership by Philippine nationals in the enterpriseD or ,b- @ould pose a $lear and present dan%er of pro+otin% +onopolies or $o+binations in restraint of tradeD or ,$- @ould be +ade in an enterprise en%a%ed in an area adeIuately bein% exploited by Philippine nationalsD or ,d- @ould $onfli$t or be in$onsistent .ith the !nvest+ents Priorities Plan in for$e at the ti+e the invest+ent is sou%ht to be +adeD or ,e- @ould not $ontribute to the sound and balan$ed develop+ent of the national e$ono+y on a self-sustainin% basis. xxxx
?'
Presidential e$ree No. 1321.
'1
Arti$le 01. "uthorit8 to #o Business. No alien, and no fir+, asso$iation, partnership, $orporation or any other for+ of business or%aniHation for+ed, or%aniHed, $hartered or existin% under any la.s other than those of the Philippines, or .hi$h is not a Philippine national, or +ore than thirty ,?&=per $ent of the outstandin% $apital of .hi$h is o.ned or $ontrolled by aliens shall do business or en%a%e in any e$ono+i$ a$tivity in the Philippines, or be re%istered, li$ensed, or per+itted by the Se$urities and Ex$han%e Co++ission or by any other bureau, offi$e, a%en$y, politi$al subdivision or instru+entality of the %overn+ent, to do business, or en%a%e in any e$ono+i$ a$tivity in the Philippines, .ithout first se$urin% a .ritten $ertifi$ate fro+ the Board of !nvest+ents to the effe$t6
Exe$utive "rder No. 292, Pro+ul%atin% the Ei%hth Re%ular )orei%n !nvest+ent Ne%ative <ist, si%ned on 9 )ebruary '&1&, http6EE....boi.%ov.phEpdfEla.sEeoEE"='&292.pdf ,a$$essed 13 Au%ust '&11-.

??
2:
#SN ,"ral Ar%u+ents-, '0 /une '&1', pp. 31-3:.
?:
Published by the Board of !nvest+ents. )or on-line $opy, see http6EE....fdi.netEdo$u+entsE@orldBan5EdatabasesEphilippinesEpri+er.ht+ ,a$$essed ? Septe+ber '&1'?9
of sto$5 or any series thereof6 Provided, #hat su$h ter+s and $onditions shall be effe$tive upon the filin% of a $ertifi$ate thereof .ith the Se$urities and Ex$han%e Co++ission. Shares of $apital sto$5 issued .ithout par value shall be dee+ed fully paid and non-assessable and the holder of su$h shares shall not be liable to the $orporation or to its $reditors in respe$t thereto6 ProvidedD #hat shares .ithout par value +ay not be issued for a $onsideration less than the value of five ,P 9.&&- pesos per share6 Provided, further, #hat the entire $onsideration re$eived by the $orporation for its no-par value shares shall be treated as $apital and shall not be available for distribution as dividends. A $orporation +ay, further+ore, $lassify its shares for the purpose of insurin% $o+plian$e .ith $onstitutional or le%al reIuire+ents. Ex$ept as other.ise provided in the arti$les of in$orporation and stated in the $ertifi$ate of sto$5, ea$h share shall be eIual in all respe$ts to every other share. xxxx
Nazareno
!n his boo5, )let$her explains6 #he ter+ (sto$5( has been used in the sa+e sense as ($apital sto$5( or ($apital,( and it has been said that (tis pri+ary +eanin% is $apital, in .hatever for+ it +ay be invested. *ore $o++only, it is no. bein% used to desi%nate shares of the sto$5 in the hands of the individual shareholders, or the $ertifi$ates issued by the $orporation to the+. ,)let$her Cy$lopedia of the <a. of Private Corporations, 1119 Revised Golu+e, Gol. 11, \ 9&31, p. 1?D $itations o+itted-.
?0
SEC#!"N 1?3. "utstandin% $apital sto$5 defined. - #he ter+ (outstandin% $apital sto$5( as used in this Code, +eans the total shares of sto$5 issued to subs$ribers or sto$5holders, .hether or not fully or partially paid, ex$ept treasury shares. SEC. 0. Classification of shares. - #he shares of sto$5 of sto$5 $orporations +ay be divided into $lasses or series of shares, or both, any of .hi$h $lasses or series of shares +ay have su$h ri%hts, privile%es or restri$tions as +ay be stated in the arti$les of in$orporation6 Provided, #hat no share +ay be deprived of votin% ri%hts ex$ept those $lassified and issued as (preferred( or (redee+able( shares, unless other.ise provided in this Code6 Provided, further, #hat there shall al.ays be a $lass or series of shares .hi$h have $o+plete votin% ri%hts. Any or all of the shares or series of shares +ay have a par value or have no par value as +ay be provided for in the arti$les of in$orporation6 Provided, ho.ever, #hat ban5s, trust $o+panies, insuran$e $o+panies, publi$ utilities, and buildin% and loan asso$iations shall not be per+itted to issue nopar value shares of sto$5. Preferred shares of sto$5 issued by any $orporation +ay be %iven preferen$e in the distribution of the assets of the $orporation in $ase of liIuidation and in the distribution of dividends, or su$h other preferen$es as +ay be stated in the arti$les of in$orporation .hi$h are not violative of the provisions of this Code6 Provided, #hat preferred shares of sto$5 +ay be issued only .ith a stated par value. #he board of dire$tors, .here authoriHed in the arti$les of in$orporation, +ay fix the ter+s and $onditions of preferred shares
?3
7nder Se$tion 0 of the Corporation Code. issentin% "pinion to the '2 /une '&11 e$ision. Re$ord of the Constitutional Co++ission, Gol. !!!, pp. '99-'90. !d. at ?0&. ") #;E P;!<!PP!NE
?2
?1
:&
:1
Arue%o, /ose *., #;E )RA*!N4 C"NS#!#7#!"N, Gol. !!, 11?0, p. 092.
:'
!d.
:?
#he "S4 stated, (!t +ust be stressed that .hen the "S4 stated its $on$urren$e .ith the ;onorable CourtCs rulin% on the proper definition of $apital, it did so, not on behalf of the SEC, its individual $lient in this $ase. Rather, the "S4 did so in the exer$ise of its dis$retion not only in its $apa$ity as statutory $ounsel of the SEC but as $ounsel for no less than the State itself.(

::
29
'19 7.S. 0&', 99 S.Ct. 201, 7.S. 11?9 ,'3 *ay 11?9-.
:9
Re$ord of the Constitutional Co++ission, Gol. ?, pp. 09&-091 ,'? Au%ust 1120-.
:0
,:- T3a) )3& '&r;&n)a@& o4 o=n&r(31' o4 )3& ;a'1)a5 ()o;D )o +& o=n&* +y ;1)1H&n( o4 )3& !3151''1n&( 3a( no) +&&n ;o2'51&* =1)3 a( r&>u1r&* +y &71()1n@ 5a=( or )3& Con()1)u)1on . ,E+phasis suppliedSe$tion 9 of R.A. No. 2311 provides6 Se$tion 9. Powers and -unctions of the Commission .F 9.1. #he Co++ission shall a$t .ith transparen$y and shall have the po.ers and fun$tions provided by this Code, Presidential e$ree No. 1&'-A, the Corporation Code, the !nvest+ent ;ouses <a., the )inan$in% Co+pany A$t and other existin% la.s. Pursuant thereto the Co++ission shall have, a+on% others, the follo.in% po.ers and fun$tions6 ,a- ;ave 8urisdi$tion and supervision over all $orporations, partnerships or asso$iations .ho are the %rantees of pri+ary fran$hises andEor a li$ense or a per+it issued by the 4overn+entD xxxx ,$- Approve, re8e$t, suspend, revo5e or reIuire a+end+ents to re%istration state+ents, and re%istration and li$ensin% appli$ationsD xxxx ,f- !+pose san$tions for the violation of la.s and the rules, re%ulations and orders, issued pursuant theretoD xxxx ,i- !ssue $ease and desist orders to prevent fraud or in8ury to the investin% publi$D xxxx ,+- Suspend, or revo5e, after proper noti$e and hearin% the fran$hise or $ertifi$ate of re%istration of $orporations, partnership or asso$iations, upon any of the %rounds provided by la.D and ,n- Exer$ise su$h other po.ers as +ay be provided by la. as .ell as those .hi$h +ay be i+plied fro+, or .hi$h are ne$essary or
Nazareno
Re$ord of the Constitutional Co++ission, Gol. ?, pp. 09'-09? ,'? Au%ust 1120-.
:3
Re$ord of the Constitutional Co++ission, Gol. ?, p. 09' ,'? Au%ust 1120-.
:2
Re$ord of the Constitutional Co++ission, Gol. ?, pp. 009-003 ,'? Au%ust 1120-.
:1
Se$tion 9, Arti$le N!G of the 113? Constitution provides6 Se$tion 9. No fran$hise, $ertifi$ate, or any other for+ of authoriHation for the operation of a publi$ utility shall be %ranted ex$ept to $itiHens of the Philippines or to $orporations or asso$iations or%aniHed under the la.s of the Philippines at least sixty per $entu+ of the $apital of .hi$h is o.ned by su$h $itiHens, nor shall su$h fran$hise, $ertifi$ate, or authoriHation be ex$lusive in $hara$ter or for a lon%er period than fifty years. Neither shall any su$h fran$hise or ri%ht be %ranted ex$ept under the $ondition that it shall be sub8e$t to a+end+ent, alteration, or repeal by the National Asse+bly .hen the publi$ interest so reIuires. #he State shall en$oura%e eIuity parti$ipation in publi$ utilities by the %eneral publi$. T3& 'ar)1;1'a)1on o4 4or&1@n 1n6&()or( 1n )3& @o6&rn1n@ +o*y o4 any 'u+51; u)151)y &n)&r'r1(& (3a55 +& 5121)&* )o )3&1r 'ro'or)1ona)& (3ar& 1n )3& ;a'1)a5 )3&r&o4.,E+phasis supplied-
9&
)or the year '&&1.
91
SEC. 13. Grounds when articles of incorporation or amendment ma8 be re+ected or disapproved. F #he Se$urities and Ex$han%e Co++ission +ay re8e$t the arti$les of in$orporation or disapprove any a+end+ent thereto if the sa+e is not in $o+plian$e .ith the reIuire+ents of this Code6 Provided, T3a) )3& Co221((1on (3a55 @16& )3& 1n;or'ora)or( a r&a(ona+5& )12& =1)31n =31;3 )o ;orr&;) or 2o*14y )3& o+?&;)1ona+5& 'or)1on( o4 )3& ar)1;5&( or a2&n*2&n). #he follo.in% are %rounds for su$h re8e$tion or disapproval6 xxxx
Corporation CASES Based on the Syllabus of Fr. Agustin in$idental to the $arryin% out of, the express po.ers %ranted the Co++ission to a$hieve the ob8e$tives and purposes of these la.s.
9' 93
20
:00 Phil. '?9 ,'&&:-. !d. at '00-'03.
See :ucman v. ,alawi, supra, .here the Court referred to the epart+ent of !nterior and <o$al 4overn+ent ,thou%h not i+pleaded- for investi%ation and appropriate a$tion the +atter re%ardin% the .ithdra.als of deposits representin% the $on$erned baran%aysC !nternal Revenue Allot+ents.
92
Nazareno
9?
%ollo ,Gol. !!!-, pp. 1:::-1::9. )orei%n ire$t !nvest+ents. #SN ,"ral Ar%u+ents-, '0 /une '&1', p. 113.
9:
!n its *anifestation and "+nibus *otion dated '1 /uly '&11, the SEC stated6 (#he Co++ission respe$tfully +anifests that the position of the "ffi$e of the Soli$itor 4eneral ,K"S4C- on the +eanin% of the ter+ ($apital( does not refle$t the vie. of the Co++ission. #he Co++issionCs position has been laid do.n in $ountless opinions that needs no reiteration. T3& Co221((1on, 3o=&6&r, =ou5* (u+21) )o =3a)&6&r =ou5* +& )3& 41na5 *&;1(1on o4 )31( Honora+5& Cour) on )3& 2&an1n@ o4 )3& )&r2 J;a'1)a5.J ,E+phasis suppliedD $itations o+itted!n its *e+orandu+, the SEC stated6 (!n the event that this ;onorable Court rules .ith finality on the +eanin% of ($apital(, the SEC .ill yield to the Court and follo. its interpretation.(
99
91
0&
01
See 7alili v. Court of "ppeals, ?9& Phil. 1&0 ,1112-D 9nited Church Board for Aorld ,inistries v. Sebastian, ':' Phil. 2:2 ,1122-.
0'
7rbano A. Qafra, .he :aurel :angle8 "greement and the Philippine 0conom8, p. :? ,113?-. See also,abanag v. :ope( *ito, 32 Phil. 1 ,11:3-.
0?
!n :ucman v. ,alawi, 9:& Phil. '21 ,'&&0-, the Court defined indispensable parties as parties ininterest .ithout .ho+ there $an be no final deter+ination of an a$tion.
90
See ;adi Salehi Esfahani, .he Political 0conom8 of the Philippines) .elecommunications Sector, @orld Ban5 Poli$y Resear$h epart+ent ,111:-.
Se$tion ?, Rule 09 of the Rules of Court states6 SEC. ?. Petition for mandamus. F @hen any tribunal, $orporation, board, offi$er or person unla.fully ne%le$ts the perfor+an$e of an a$t .hi$h the la. spe$ifi$ally en8oins as a duty resultin% fro+ an offi$e, trust, or station, or unla.fully ex$ludes another fro+ the use and en8oy+ent of a ri%ht or offi$e to .hi$h su$h other is entitled, and there is no other plain, speedy and adeIuate re+edy in the ordinary $ourse of la., the person a%%rieved thereby +ay file a verified petition in the proper $ourt, alle%in% the fa$ts .ith $ertainty and prayin% that 8ud%+ent be rendered $o++andin% the respondent, i++ediately or at so+e other ti+e to be spe$ified by the $ourt, to do the a$t reIuired to be done to prote$t the ri%hts of the petitioner and to pay the da+a%es sustained by the petitioner by reason of the .ron%ful a$ts of the respondent. xxxx Respondents *anuel G. Pan%ilinan ,Pan%ilinan- and Napoleon <.NaHare no ,NaHareno- separately +oved for re$onsideration on pro$edural and substantive
"SSENT"NG O!"N"ON $ELASCO, JR., J.: Before 7s are separate +otions for re$on[ideration of the CourtYs /une '2, '&11 e$ision, 1 .hi$h partially %ranted the petition for prohibition, in8un$tion and de$laratory relief interposed by @ilson P. 4a+boa ,petitioner or 4a+boa-. Gery si+ply, the Court held that the ter+ ($apital( appearin% in Se$tion 11, Arti$le N!! of the 1123 Constitution refers only to $o++on shares or shares of sto$5 entitled to vote in the ele$tion of the +e+bers of the board of dire$tors of a publi$ utility, and not to the total outstandin% $apital sto$5.
Corporation CASES Based on the Syllabus of Fr. Agustin %rounds, but reserved their +ain ar%u+ents a%ainst the +a8orityYs holdin% on the +eanin% of ($apital.( #he "ffi$e of the Soli$itor 4eneral ,"S4-, .hi$h initially represent<6d the Se$urities and Ex$han%e Co++ission ,SEC-, also reIuested re$on[it5ratiun even as it +anifested a%ree+ent .ith the +a8orityYs $onstrual $tY the ]Gord ($apital.( 7nable to 8oin the "S4Ys stand on the deter+inative issue of $apital, the SEC sou%ht leave to 8oin the fray on its +vn. fn its Jtdotion to "dmit "1anifestation and /mnibus ,otion, the SEC stated that the "S4Cs position on said issue does not refle$t its o.n and in fa$t diver%es fro+ .hat the Co++ission has $onsistently adopted prior to this $ase . And be$ause the de$ision in Iuestion has a penalty $o+ponent .hi$h it is tas5ed to i+pose, SEC reIuested $larifi$ation as to =3&n )3& r&;Don1n@ '&r1o* o4 a''51;a)1on o4 )3& a''ro'r1a)& (an;)1on( 2ay +& 12'o(&* on !3151''1n& Lon@ 1()an;& T&5&'3on& Co2'any /!L T0 1n ;a(& )3& SEC *&)&r21n&( )3a) 1) 3a( 61o5a)&* S&;. 11, Ar). N"" o4 )3& Con()1)u)1on. #o the fore%oin% +otions, the +ain petitioner, no. de$eased, filed his Comment and2or /pposition to ,otions for %econsideration. A$tin% on the various +otions and $o++ent, the Court $ondu$ted and heard the parties in oral ar%u+ents on April 13 and /une '0, '&1'. After $onsiderin% the partiesC positions as arti$ulated durin% the oral ar%u+ents and in their pleadin%s and respe$tive +e+oranda, ! vote to %rant re$onsideration. #his disposition is $onsistent .ith +y dissent, on pro$edural and substantive %rounds, to the /une '2, '&11 +a8ority e$ision. Con('&;)u( #he $ore issue is the +eanin% of the .ord ($apital( in the openin% senten$e of Se$. 11, Art. N!! of the 1123 Constitution .hi$h reads6 S&;)1on 11. No 4ran;31(&, ;&r)141;a)&, or any o)3&r 4or2 o4 au)3or1Ha)1on 4or )3& o'&ra)1on o4 a 'u+51; u)151)y (3a55 +& @ran)&* &7;&') )o ;1)1H&n( o4 )3& !3151''1n&( or )o ;or'ora)1on( or a((o;1a)1on( or@an1H&* un*&r )3& 5a=( o4 )3& !3151''1n&(, a) 5&a() (17)y '&r ;&n)u2 o4 =3o(& ;a'1)a5 1( o=n&* +y (u;3 ;1)1H&n(I nor shall su$h fran$hise, $ertifi$ate, or authoriHation be ex$lusive in $hara$ter or for a lon%er period than fifty years. Neither shall any su$h fran$hise or ri%ht be %ranted ex$ept under the $ondition that it shall be sub8e$t to a+end+ent, alteration, or repeal by the Con%ress .hen the $o++on %ood so reIuires. #he State shall en$oura%e eIuity parti$ipation in publi$ utilities by the %eneral publi$. T3& 'ar)1;1'a)1on o4 4or&1@n 1n6&()or( 1n )3& @o6&rn1n@ +o*y o4 any 'u+51; u)151)y &n)&r'r1(& (3a55 +& 5121)&* )o )3&1r 'ro'or)1ona)& (3ar& 1n 1)( ;a'1)a5, an* a55 )3& &7&;u)16& an* 2ana@1n@ o441;&r( o4 (u;3 ;or'ora)1on or a((o;1a)1on 2u() +& ;1)1H&n( o4 )3& !3151''1n&( . ,E+phasis supplied.-
23
)or an easier $o+prehension of the t.o $ontrastin% positions on the $ontentious +eanin% of the .ord ($apital,( as found in the first senten$e of the aforeIuoted provision, allo. +e to present a brief $o+parative analysis sho.in% the dissi+ilarities. #he +a8ority, in the /une '2, '&11 e$ision, as reiterated in the draft resolution, is of the vie. that the .ord ($apital( in the first senten$e of Se$. 11, Art. N!! refers to $o++on shares or votin% shares on5yD thus li+itin% forei%n o.nership of su$h shares to :&=. #he rationale, as stated in the basi$ ponencia, is that this interpretation ensures that $ontrol of the Board of ire$tors stays in the hands of )ilipinos, sin$e forei%ners $an only o.n a +axi+u+ of :&= of said shares and, a$$ordin%ly, $an only ele$t the eIuivalent per$enta%e of dire$tors. As a ne$essary $orollary, )ilipino sto$5holders $an al.ays ele$t 0&= of the Board of ire$tors .hi$h, to the +a8ority, translates to $ontrol over the $orporation. #he opposite vie. is that the .ord ($apital( in the first senten$e refers to the entire $apital sto$5 of the $orporation or both votin% and non-votin% shares and N"# solely to $o++on shares. )ro+ this standpoint, 0&= $ontrol over the $apital sto$5 or the sto$5holders o.nin% both votin% and non-votin% shares is assured to )ilipinos and, as a $onseIuen$e, over $orporate +atters voted upon and de$isions rea$hed durin% sto$5holdersC +eetin%s. "n the other hand, the last senten$e of Se$. 11, Art. N!!, .ith the .ord ($apital( e+bedded in it, is the provision that ensures )ilipino $ontrol over the Board of ire$tors and its de$isions. #o resolve the $onfli$tin% interpretations of the .ord ($apital,( the first senten$e of Se$. 11, Art. N!! +ust be read and $onsidered in $on8un$tion .ith the last senten$e of said Se$. 11 .hi$h pres$ribes that (the parti$ipation of forei%n investors in the %overnin% body of any publi$ utility enterprise shall be li+ited to their proportionate share in its $apital.( After all, it is an established prin$iple in $onstitutional $onstru$tion that provisions in the Constitution +ust be har+oniHed. !t has been +ade very $lear durin% the oral ar%u+ents and even by the partiesC .ritten sub+issions that $ontrol by )ilipinos over the publi$ utility enterprise exists on three ,?- levels, na+ely6 1. Sixty per$ent ,0&=- $ontrol of )ilipinos over the $apital sto$5 .hi$h $overs both votin% and non-votin% shares and inevitably over the sto$5holders. #his level of $ontrol is e+bodied in the first senten$e of Se$. 11, Art. N!! .hi$h reads6 S&;)1on 11. No 4ran;31(&, ;&r)141;a)&, or any o)3&r 4or2 o4 au)3or1Ha)1on 4or )3& o'&ra)1on o4 a 'u+51; u)151)y (3a55 +& @ran)&* &7;&') )o ;1)1H&n( o4 )3& !3151''1n&( or )o ;or'ora)1on( or a((o;1a)1on( or@an1H&* un*&r )3& 5a=( o4 )3& !3151''1n&(, a) 5&a() (17)y '&r ;&n)u2 o4 =3o(& ;a'1)a5 1( o=n&* +y (u;3 ;1)1H&n( 7 7 7.
Nazareno
Corporation CASES Based on the Syllabus of Fr. Agustin #he .ord ($apital( in the above provision refers to $apital sto$5 or both votin% and non-votin% shares. Sixty per$ent ,0&=- $ontrol over the $apital sto$5 translates to $ontrol by )ilipinos over al+ost all de$isions by the sto$5holders durin% sto$5holdersC +eetin%s in$ludin% ratifi$ation of the de$isions and a$ts of the Board of ire$tors. urin% said +eetin%s, votin% and even non-votin% shares are entitled to vote. #he exer$ise by non-votin% shares of votin% ri%hts over +a8or $orporate de$isions is expressly provided in Se$. 0 of the Corporation Code .hi$h reads6 Se$. 0. x x x x @here the arti$les of in$orporation provide for non-votin% shares in the $ases allo.ed by this Code, the holders of su$h shares shall nevertheless be entitled to vote on the follo.in% +atters6 1. A+end+ent of the arti$les of in$orporationD '. Adoption and a+end+ent of by-la.sD ?. Sale, lease, ex$han%e, +ort%a%e, pled%e or other disposition of all or substantially all of the $orporate propertyD :. !n$urrin%, $reatin% or in$reasin% bonded indebtednessD 9. !n$rease or de$rease of $apital sto$5D 0. *er%er or $onsolidation of the $orporation .ith another $orporation or other $orporationsD 3. !nvest+ent of $orporate funds in another $orporation or business in a$$ordan$e .ith this CodeD and 2. issolution of the $orporation. Construin% the .ord ($apital( in the first senten$e of Se$. 11, Art. N!! of the Constitution as $apital sto$5 .ould ensure )ilipino $ontrol over the publi$ utility .ith respe$t to +a8or $orporate de$isions. !f .e adopt the vie. espoused by /usti$e Carpio that the .ord ($apital( +eans only $o++on shares or votin% shares, then forei%ners $an o.n even up to 1&&= of the non-votin% shares. !n su$h a situation, forei%ners +ay very .ell exer$ise $ontrol over all +a8or $orporate de$isions as their o.nership of the nonvotin% shares re+ains unfettered by the :&= $ap laid do.n in the first senten$e of Se$. 11, Art. N!!. #his .ill spa.n an even %reater ano+aly be$ause it .ould %ive the forei%ners the opportunity to a$Iuire o.nership of the net assets of the $orporation upon its dissolution to in$lude .hat the Constitution en8oinsFFland o.nership possibly
22
throu%h du++y $orporations. @ith the vie. of /usti$e Carpio, )ilipinos .ill definitely lose $ontrol over +a8or $orporate de$isions .hi$h are de$ided by sto$5holders o.nin% the +a8ority of the non-votin% shares. '. Sixty per$ent ,0&=- $ontrol by )ilipinos over the $o++on shares or votin% shares and ne$essarily over the Board of ire$tors of the publi$ utility. Control on this level is %uaranteed by the last senten$e of Se$. 11, Art. N!! .hi$h reads6 T3& 'ar)1;1'a)1on o4 4or&1@n 1n6&()or( 1n )3& @o6&rn1n@ +o*y o4 any 'u+51; u)151)y &n)&r'r1(& (3a55 +& 5121)&* )o )3&1r 'ro'or)1ona)& (3ar& 1n 1)( J;a'1)a5J x x x. !n its ordinary si%nifi$ation, (parti$ipation( $onnotes (the a$tion or state of ta5in% part .ith others in an a$tivity.( '#his parti$ipation in its de$ision-+a5in% fun$tion $an only be the ri%ht to ele$t board dire$tors. ;en$e, )3& 5a() (&n)&n;& o4 S&;. 11, Ar). N"" o4 )3& Con()1)u)1on &44&;)16&5y r&()r1;)( )3& r1@3) o4 4or&1@n&r( )o &5&;) *1r&;)or( )o )3& +oar* 1n 'ro'or)1on )o )3& 5121) on )3&1r )o)a5 (3ar&3o5*1n@(. Sin$e the first part of Se$. 11, Art. N!! of the Constitution spe$ifies a :&= li+it of forei%n o.nership in the total $apital of the publi$ utility $orporation, then the ri%hts of forei%ners to be ele$ted to the board of dire$tors, is li5e.ise li+ited to :& percent. !f the forei%n o.nership of $o++on shares is lo.er than :&=, the parti$ipation of forei%ners is li+ited to their proportionate share in the $apital sto$5. !n the hi%hly hypotheti$al publi$ utility $orporation .ith 1&& $o++on shares and 1,&&&,&&& preferred non-votin% shares, or a total of 1,&&&,1&& shares $ited in the /une '2, '&11 e$ision, forei%ners $an thus only o.n up to :&&,&:& shares of the $orporation, $onsistin% of the 2a712u2 :& ,out of the 1&&- votin% shares and :&&,&&& non-votin% shares. And, assu+in% a 1&- +e+ber board, the forei%ners $an ele$t only : +e+bers of the boardu(1n@ )3& 40 6o)1n@ (3ar&( )3&y ar& a55o=&* )o o=n. Fo55o=1n@, 1n 41n&, )3& *1;)a)&( o4 S&;. 11, Ar). N"", a( ;ou;3&*, )3& 4or&1@n (3ar&3o5*&r(C r1@3) )o &5&;) 2&2+&r( o4 )3& @o6&rn1n@ +oar* o4 a @16&n 'u+51; u)151)y ;or'ora)1on 1( 'ro'or)1ona5 on5y )o )3&1r r1@3) )o 3o5* a 'ar) o4 )3& )o)a5 (3ar&3o5*1n@( o4 )3a) &n)1)y. Sin$e forei%ners $an only o.n, in the +axi+u+, up to :&= of the total shareholdin%s of the $o+pany, then )3&1r 6o)1n@ &n)1)5&2&n) a( )o )3& nu2&r1;a5 ;o2'o(1)1on o4 )3& +oar* =ou5* *&'&n* on )3& 5&6&5 o4 )3&1r (3ar&3o5*1n@ 1n r&5a)1on )o )3& ;a'1)a5 ()o;D, +u) 1n no ;a(& (3a55 1) &7;&&* )3& 40< )3r&(3o5*. Contrary to the vie. of /usti$e Carpio that the ob8e$tive behind the first senten$e of Se$. 11, Art. N!! is to ensure $ontrol of )ilipinos over the Board of ire$tors by li+itin% forei%n o.nership of the $o++on shares or votin% shares up to :&=, 1) 1( a;)ua55y )3& 41r() 'ar) o4 )3& a4or&>uo)&* 5a() (&n)&n;& o4 S&;. 11, Ar). N"" )3a) 5121)( )3& r1@3)( o4 4or&1@n&r( )o &5&;) no) 2or& )3an 40< o4 )3& +oar* (&a)( thus ensurin% a $lear +a8ority in the Board of ire$tors to )ilipinos. !f .e follo. the line of
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Corporation CASES Based on the Syllabus of Fr. Agustin reasonin% of /usti$e Carpio on the +eanin% of the .ord ($apital( in the first senten$e, then there is no need for the fra+ers of the Constitution to in$orporate the last senten$e in Se$. 11, Art. N!! on the :&= +axi+u+ parti$ipation of the forei%ners in the Board of ire$tors. #he last senten$e .ould be a useless redundan$y, a situation doubtless unintended by the fra+ers of the Constitution. A $onstru$tion that renders a part of the la. or Constitution bein% $onstrued superfluous is an aberration, ? for it is at all ti+es presu+ed that ea$h .ord used in the la. is intentional and has a parti$ular and spe$ial role in the approxi+ation of the poli$y sou%ht to be attained, ut magis valeat 'uam pereat. ?. #he third level of $ontrol pro$eeds fro+ the reIuire+ent tu$5ed in the se$ond part of the ulti+ate senten$e that (a55 )3& &7&;u)16& an* 2ana@1n@ o441;&r( o4 )3& ;or'ora)1on 2u() +& ;1)1H&n( o4 )3& !3151''1n&(.( #his assures full )ilipino $ontrol, at all ti+es, over the +ana%e+ent of the publi$ utility. #o su++ariHe, the Constitution, as ena$ted, establishes not 8ust one but a three-tiered $ontrol-enhan$in%-and-lo$5in% +e$hanis+ in Se$. 11, Arti$le N!! to ensure that )ilipinos .ill al.ays have full benefi$ial o.nership and $ontrol of publi$ utility $orporations6 1. :&= $eilin% on forei%n o.nership in the $apital sto$5 that ensures sixty per$ent ,0&=- )ilipino $ontrol over the $apital sto$5 .hi$h $overs both votin% and non-votin% shares. As a $onseIuen$e, )ilipino $ontrol over the sto$5holders is assured. ,)irst senten$e of Se$. 11, Art. N!!-. #hus, forei%ners $an o.n only up to :&= of the $apital sto$5. '. :&= $eilin% on the ri%ht of forei%ners to ele$t board dire$tors that %uarantees sixty per$ent ,0&=- )ilipino $ontrol over the Board of ire$tors. ,)irst part of last senten$e of Se$. 11, Art. N!!-. ?. Reservation to )ilipino $itiHens of the exe$utive and +ana%in% offi$ers, re%ardless of the level of alien eIuity o.nership to se$ure total )ilipino $ontrol over the +ana%e+ent of the publi$ utility enterprise ,Se$ond part of last senten$e of Se$. 11, Art. N!!-. #hus, all exe$utive and +ana%in% offi$ers +ust be )ilipinos. 1(;u((1on 7ndoubtedly there is a $lash of $onfli$tin% opinions as to .hat ($apital( in the first senten$e of Se$. 11, Art. N!! +eans. #he +a8ority says it refers only to $o++on or votin% shares. #he +inority says it in$ludes both votin% and non-votin% shares. A resort to $onstitutional $onstru$tion is unavoidable.
21
!t is settled thou%h that the (pri+ary sour$e fro+ .hi$h to as$ertain $onstitutional intent or purpose is the lan%ua%e of the $onstitution itself.( : #o this end, )3& =or*( u(&* +y )3& Con()1)u)1on (3ou5* a( 2u;3 a( 'o((1+5& +& un*&r()oo* 1n )3&1r or*1nary 2&an1n@ as the Constitution is not a la.yerCs do$u+ent. 9 #his approa$h, other.ise 5no.n as )3& 9erba legis ru5&, (3ou5* +& a''51&* (a6& =3&r& )&;3n1;a5 )&r2( ar& &2'5oy&*.0 T3& '5a1n 2&an1n@ o4 J;a'1)a5J (&n)&n;& o4 S&;. 11, Ar). N"" o4 1n;5u*&( +o)3 6o)1n@ an* non86o)1n@ (3ar&( 1n )3& )3& 41r() Con()1)u)1on
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J.,. .uason J Co.! Inc. v. :and .enure "dministration illustrates the verba legis rule. #here, the Court $autions a%ainst departin% fro+ the $o++only understood +eanin% of ordinary .ords used in the Constitution, vi(.6 @e loo5 to the lan%ua%e of the do$u+ent itself in our sear$h for its +eanin%. @e do not of $ourse stop there, but that is .here .e be%in. !t is to be assu+ed that the =or*( 1n =31;3 ;on()1)u)1ona5 'ro61(1on( ar& ;ou;3&* &7'r&(( )3& o+?&;)16& (ou@3) )o +& a))a1n&*. #hey are to be %iven their ordinary +eanin% ex$ept .here te$hni$al ter+s are e+ployed in .hi$h $ase the si%nifi$an$e thus atta$hed to the+ prevails . As the Constitution is not pri+arily a la.yerYs do$u+ent, it bein% essential for the rule of la. to obtain that it should ever be present in the peopleYs $ons$iousness, 1)( 5an@ua@& a( 2u;3 a( 'o((1+5& (3ou5* +& un*&r()oo* 1n )3& (&n(& )3&y 3a6& 1n ;o22on u(& . @hat it says a$$ordin% to the text of the provision to be $onstrued $o+pels a$$eptan$e and ne%ates the po.er of the $ourts to alter it, based on the postulate that the fra+ers and the people +ean .hat they say. #hus, there are $ases .here the need for $onstru$tion is redu$ed to a +ini+u+.3 ,E+phasis supplied.#he pri+ary reason for the verba legis approa$h, as pointed out by )r. /oaIuin Bernas durin% the /une '0, '&1' ar%u+ents, is that the people .ho ratified the Constitution voted on their understandin% of the .ord $apital in its everyday +eanin%. )r. Bernas elu$idated thus6 x x x "ver the years, fro+ the 11?9 to the 113? and finally even under the 1123 Constitution, the prevailin% pra$ti$e has been to base the 0&-:& proportion on total outstandin% $apital sto$5, that is, the $o+bined total of $o++on and non-votin% preferred shares. #his is .hat o$$asioned the $ase under $onsideration. @hat is the $onstitutional relevan$e of this $ontinuin% pra$ti$eL ! su%%est that it is relevant for deter+inin% .hat the people in the street voted for .hen they ratified the Constitution. :3&n )3& *ra4) o4 a Con()1)u)1on 1( 'r&(&n)&* )o )3& '&o'5& 4or ra)141;a)1on, =3a) )3& '&o'5& 6o)& on 1( no) )3& *&+a)&( 1n )3& ;on()1)u&n) +o*y +u) )3& )&7) o4 )3& *ra4). Con;r&)&5y, =3a) )3& &5&;)ora)& 6o)&* on =a( )3&1r un*&r()an*1n@ o4 )3& =or* ;a'1)a5 1n 1)( &6&ry*ay 2&an1n@ )3&y &n;oun)&r 1n
Corporation CASES Based on the Syllabus of Fr. Agustin *a15y 514&. @e $annot attribute to the voters a 8uristCs sophisti$ated +eanin% of $apital and its brea5do.n into $o++on and preferred. @hat they vote on is .hat they see. Nor do they vote on .hat the drafters sa. as assu+ed +eanin%, to use Ben%HonCs explanation. !n the lan%ua%e of the sophisti$ates, .hat 6o)&r( 1n a '5&+1(;1)& 6o)& on 1( 9erba legis an* no) anima legis a+ou) =31;3 )ra1n&* ?ur1()( *&+a)&. @hat then does it +a5e of the $onte+porary understandin% by SEC et$. !s the $onte+porary understandin% un$onstitutional or $onstitutionalL ! hesitate to $hara$teriHe it as $onstitutional or un$onstitutional. ! .ould +erely $hara$teriHe it as popular. @hat ! +ean is it refle$ts the $o++on understandin% of the ordinary populi, $o++on but in$o+plete.2 ,E+phasis supplied.(Capital( in the first senten$e of Se$. 11, Art. N!! +ust then be a$$orded a +eanin% a$$epted, understood, and used by an ordinary person not versed in the te$hni$alities of la.. As defined in a non-le%al di$tionary, $apital sto$5 or $apital is ordinarily ta5en to +ean (the ou)()an*1n@ (3ar&( of a 8oint sto$5 $o+pany $onsidered as an a%%re%ate(1 or (the o=n&r(31' &5&2&n) of a $orporation divided into shares and represented by $ertifi$ates.(1& #he ter+ ($apital( in$ludes all the outstandin% shares of a $o+pany that represent (the proprietary $lai+ in a business.(11 ") *o&( no) *1()1n@u1(3 +a(&* on )3& 6o)1n@ 4&a)ur& o4 )3& ()o;D( +u) r&4&r( )o a55 (3ar&(, +& )3&y 6o)1n@ or non86o)1n@ . Neither is the ter+ li+ited to the +ana%e+ent aspe$t of the $orporation but $learly refers to the separate aspe$t of o=n&r(31' of the $orporate shares thereby en$o+passin% all shares representin% the eIuity of the $orporation. #his plain +eanin%, as understood, a$$epted, and used in ordinary parlan$e, he.s .ith the definition %iven by Bla$5 .ho eIuates $apital to $apital sto$5 1' and defines it as (the total nu+ber of shares of sto$5 that a $orporation +ay issue under its $harter or arti$les of in$orporation, 1n;5u*1n@ +o)3 ;o22on ()o;D an* 'r&4&rr&* ()o;D .(1? #his +eanin% is also refle$ted in le%al $o++entaries on the Corporation Code. #he respe$ted $o++entator Ruben E. A%palo defines ($apital( as the (+oney, property or +eans $ontributed by sto$5holders for the business or enterprise for .hi$h the $orporation .as for+ed and %enerally i+plies that su$h +oney or property or +eans have been $ontributed in pay+ent for sto$5 issued to the $ontributors.( 1: *ean.hile, ($apital sto$5( is ()3& a@@r&@a)& o4 )3& (3ar&( a;)ua55y (u+(;r1+&* AorB the a+ount subs$ribed and paid-in and upon .hi$h the $orporation is to $ondu$t its operations, or the a+ount paid-in by its sto$5holders in +oney, property or servi$es .ith .hi$h it is to $ondu$t its business.(19 #his definition has been e$hoed by nu+erous other experts in the field of $orporation la.. ean Gillanueva .rote, thus6
1&
!n definin% the relationship bet.een the $orporation and its sto$5holders, the $apital sto$5 represents the proportional standin% of the sto$5holders .ith respe$t to the $orporation and $orporate +atters, su$h as their ri%hts to vote and to re$eive dividends. !n finan$ial ter+s, )3& ;a'1)a5 ()o;D o4 )3& ;or'ora)1on a( r&45&;)&* 1n )3& 41nan;1a5 ()a)&2&n) o4 )3& ;or'ora)1on r&'r&(&n)( )3& 41nan;1a5 or 'ro'r1&)ary ;5a12( o4 )3& ()o;D3o5*&r( )o )3& n&) a((&)( o4 )3& ;or'ora)1on u'on *1((o5u)1on. !n addition, the $apital sto$5 represents the totality of the portion of the $orporationCs assets and re$eivables .hi$h are $overed by the trust fund do$trine and provide for the a+ount of assets and re$eivables of the $orporation .hi$h are dee+ed prote$ted for the benefit of the $orporate $reditors and fro+ .hi$h the $orporation $annot de$lare any dividends. 10 ,E+phasis supplied.Si+ilarly, reno.ned author ;e$tor S. de <eon defines ($apital( and ($apital sto$5( in the follo.in% +anner6 Capital is used broadly to indi$ate the entire property or assets of the $orporation. !t in$ludes the a+ount invested by the sto$5holders plus the undistributed earnin%s less losses and expenses. !n the stri$t sense, the ter+ refers to that portion of the net assets paid by the sto$5holders as $onsideration for the shares issued to the+, .hi$h is utiliHed for the prose$ution of the business of the $orporation. !t in$ludes all balan$es or instal+ents due the $orporation for shares of sto$5 sold by it and all unpaid subs$ription for shares. xxxx #he ter+ is also used synony+ously .ith the .ords ($apital sto$5,( as +eanin% the a+ount subs$ribed and paid-in and upon .hi$h the $orporation is to $ondu$t its operation ,11 )let$her Cy$. Corp., p. 19 A1120 ed.B- and 1) 1( 122a)&r1a5 3o= )3& ()o;D 1( ;5a((141&*, =3&)3&r a( ;o22on or 'r&4&rr&* .13 ,E+phasis and unders$orin% supplied.;en$e, follo.in% the verba legis approa$h, ! see no reason to stray a.ay fro+ .hat appears to be a $o++on and settled a$$eptation of the .ord ($apital,( %iven that, as used in the $onstitutional provision in Iuestion, 1) ()an*( un>ua5141&* by any restri$tive or expansive .ord as to reasonably 8ustify a distin$tion or a deli+itation of the +eanin% of the .ord. 9bi leF non distinguit nos distinguere debemus , .hen the la. does not distin%uish, .e +ust not distin%uish. 12 7sin% this plain +eanin% of ($apital( .ithin the $ontext of Se$. 11, Art. N!!, forei%ners are entitled to o.n no) 2or& )3an 40< o4 )3& ou)()an*1n@ ;a'1)a5 ()o;D , .hi$h .ould in$lude both votin% and non-votin% shares. E7)ran&ou( a1*( )o 4&rr&) ou) ;on()1)u)1ona5 1n)&n)
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Corporation CASES Based on the Syllabus of Fr. Agustin @hen the see+in% a+bi%uity on the +eanin% of ($apital( $annot be threshed out by loo5in% at the lan%ua%e of the Constitution, then resort to extraneous aids has be$o+e i+perative. #he Court $an utiliHe the follo.in% extraneous aids, to .it6 ,1- pro$eedin%s of the $onventionD ,'- $han%es in phraseolo%yD ,?- history or realities existin% at the ti+e of the adoption of the ConstitutionD ,:- prior la.s and 8udi$ial de$isionsD ,9$onte+poraneous $onstru$tionD and ,0- $onseIuen$es of alternative interpretations. 11 ! sub+it that all these aids of $onstitutional $onstru$tion affir+ that the only a$$eptable $onstru$tion of ($apital( in the first senten$e of Se$. 11, Art. N!! of the 1123 Constitution is that it refers to a55 shares of a $orporation, both votin% and non-votin%. &51+&ra)1on( o4 )3& Con()1)u)1ona5 o4 1986 *&2on()ra)& )3a) ;a'1)a5 6o)1n@ an* non86o)1n@ (3ar&( /1() &7)r1n(1; a1*0 Co221((1on 2&an( +o)3
11
SEC. ?. x x x #he exploration, develop+ent, and utiliHation of natural resour$es shall be under the full $ontrol and supervision of the State. Su$h a$tivities +ay be dire$tly underta5en by the State, or it +ay enter into $o-produ$tion, 8oint venture, produ$tionsharin% a%ree+ents .ith )ilipino $itiHens or ;or'ora)1on( or a((o;1a)1on( a) 5&a() (17)y '&r;&n) o4 =3o(& 6o)1n@ ()o;D or ;on)ro551n@ 1n)&r&() 1( o=n&* +y (u;3 ;1)1H&n(. x x x xxxx SEC. 1. #he Con%ress shall reserve to $itiHens of the Philippines or to $orporations or asso$iations a) 5&a() (17)y '&r ;&n) o4 =3o(& 6o)1n@ ()o;D or ;on)ro551n@ 1n)&r&() is o.ned by su$h $itiHens or su$h hi%her per$enta%e as Con%ress +ay pres$ribe, $ertain areas of invest+ents .hen the national interest so di$tates. xxxx SEC. 19. No fran$hise, $ertifi$ate, or any other for+ of authoriHation for the operation of a publi$ utility shall be %ranted ex$ept to $itiHens of the Philippines or to $orporations or asso$iations or%aniHed under the la.s of the Philippines a) 5&a() )=o8 )31r*( o4 =3o(& 6o)1n@ ()o;D or ;on)ro551n@ 1n)&r&() 1( o=n&* +y (u;3 ;1)1H&n(. Neither shall any su$h fran$hise or ri%ht be %ranted ex$ept under the $ondition that it shall be sub8e$t to a+end+ent, alteration, or repeal by Con%ress .hen the $o++on %ood so reIuires. #he State shall en$oura%e eIuity parti$ipation in publi$ utilities by the %eneral publi$. ,"ri%in of Se$. 11, Arti$le N!!xxxx *R. N"<<E ". !n Se$tions ?, 1 and 19, the Co++ittee stated lo$al or )ilipino eIuity and forei%n eIuityD na+ely, 0&-:& in Se$tion ?, 0&-:& in Se$tion 1, and 'E?-1E? in Se$tion 19. *R. G!<<E4AS. #hat is ri%ht. *R. N"<<E ". !n tea$hin% la., .e are al.ays fa$ed .ith this Iuestion6 (@here do .e base the eIuity reIuire+ent, is it on the authoriHed $apital sto$5, on the subs$ribed $apital sto$5, or on the paid-up $apital sto$5 of a $orporationL( @ill the Co++ittee please enli%hten +e on thisL *R. G!<<E4AS. @e have 8ust had a lon% dis$ussion .ith the +e+bers of the tea+ fro+ the 7P <a. Center .ho provided us a draft. #he phrase that is $ontained here .hi$h .e adopted fro+ the 7P draft is (0& per$ent of votin% sto$5.(
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#he pro$eedin%s of the 1120 Constitutional Co++ission that drafted the 1123 Constitution .ere a$$urately re$orded in the Re$ords of the Constitutional Co++ission. #o brin% to li%ht the true +eanin% of the .ord ($apital( in the first line of Se$. 11, Art. N!!, one +ust peruse, disse$t and analyHe the entire deliberations of the Constitutional Co++ission pertinent to the arti$le on national e$ono+y and patri+ony, as Iuoted belo.6 Au%ust 1?, 1120, @ednesday PR"P"SE RES"<7#!"N N". :10 RES"<7#!"N #" !NC"RP"RA#E !N #;E NE@ C"NS#!#7#!"N AN AR#!C<E "N NA#!"NA< EC"N"*> AN PA#R!*"N> Be it resolved as it is hereb8 resolved b8 the Constitutional Commission in session assembled! #o in$orporate the National E$ono+y and Patri+ony of the ne. Constitution, the follo.in% provisions6 AR#!C<E^^^^ NA#!"NA< EC"N"*> AN PA#R!*"N> SEC#!"N 1. #he State shall develop a self-reliant and independent national e$ono+y. xxx xxxx
Corporation CASES Based on the Syllabus of Fr. Agustin *R. N"<<E ". #hat +ust be based on the subs$ribed $apital sto$5, be$ause unless de$lared delinIuent, unpaid $apital sto$5 shall be entitled to vote. *R. G!<<E4AS. #hat is ri%ht. *R. N"<<E ". #han5 you. @ith respe$t to an invest+ent by one $orporation in another $orporation, say, a $orporation .ith 0&-:& per$ent eIuity invests in another $orporation .hi$h is per+itted by the Corporation Code, does the Co++ittee adopt the %randfather ruleL *R. G!<<E4AS. >es, that is the understandin% of the Co++ittee. *R. N"<<E ". #herefore, .e need additional )ilipino $apitalL *R. G!<<E4AS. >es.'& Au%ust 1:, 1120, #hursday *R. )"Q. *r. Gi$e-President, in Se$tions ? and 1, the provision on eIuity is both 0& per$ent, but ! noti$e that this is no. different fro+ the provision in the 113? Constitution in that the basis for the eIuity provision is votin% sto$5 or $ontrollin% interest instead of the usual $apital per$enta%e as provided for in the 113? Constitution. @e .ould li5e to 5no. .hat the differen$e .ould be bet.een the previous and the proposed provisions re%ardin% eIuity interest. *R. G!<<E4AS. Co++issioner SuareH .ill ans.er that. *R. S7AREQ. #han5 you. As a +atter of fa$t, this parti$ular portion is still bein% revie.ed by this Co++ittee. !n Se$tion 1, Arti$le N!!! of the 11?9 Constitution, the .ordin% is that the per$enta%e should be based on the $apital .hi$h is o.ned by su$h $itiHens. !n the proposed draft, this phrase .as proposed6 (votin% sto$5 or $ontrollin% interest.( #his .as a plan sub+itted by the 7P <a. Center. #hree days a%o, .e had an early +ornin% brea5fast $onferen$e .ith the +e+bers of the 7P <a. Center and pre$isely, .e .ere see5in% $larifi$ation re%ardin% the differen$e. @e .ould have three $riteria to %o by6 "ne .ould be based on $apital, .hi$h is $apital sto$5 of the $orporation, authoriHed, subs$ribed or paid up, as e+ployed under the 11?9 and the 113? Constitution. #he idea behind the introdu$tion of the phrase (votin% sto$5 or $ontrollin% interest( .as pre$isely to avoid the
1'
perpetration of du++ies, )ilipino du++ies of +ultinationals. !t is theoreti$ally possible that a situation +ay develop .here these +ultinational interests .ould not really be only :& per$ent but .ill extend beyond that in the +atter of votin% be$ause they $ould enter into .hat is 5no.n as a votin% trust or votin% a%ree+ent .ith the rest of the sto$5holders and, therefore, not.ithstandin% the fa$t that on re$ord their $apital extent is only up to :&-per$ent interest in the $orporation, a$tually, they .ould be +ana%in% and $ontrollin% the entire $o+pany. #hat is .hy the 7P <a. Center +e+bers su%%ested that .e utiliHe the .ords (votin% interest( .hi$h .ould pre$lude +ultinational $ontrol in the +atter of votin%, independent of the $apital stru$ture of the $orporation. And then they also added the phrase ($ontrollin% interest( .hi$h up to no. they have not been able to su$$essfully define the exa$t +eanin% of. But they +entioned the situation .here theoreti$ally the board .ould be $ontrolled by these +ultinationals, su$h that instead of, say, three )ilipino dire$tors out of five, there .ould be three forei%n dire$tors and, therefore, they .ould be $ontrollin% the +ana%e+ent of the $o+pany .ith forei%n interest. #hat is .hy they volunteered to flesh out this parti$ular portion .hi$h .as sub+itted by the+, but up to no., they have not $o+e up .ith a $onstru$tive rephrasin% of this portion. And as far as ! a+ $on$erned, ! a+ not spea5in% in behalf of the Co++ittee, " =ou5* 4&&5 2or& ;o24or)a+5& 14 =& @o +a;D )o )3& =or*1n@ o4 )3& 19-, an* )3& 19.- Con()1)u)1on, )3a) 1( )o (ay, )3& 60840 '&r;&n)a@& ;ou5* +& +a(&* on )3& ;a'1)a5 ()o;D o4 )3& ;or'ora)1on. *R. )"Q. ! understand that that .as the sa+e vie. of ean Carale .ho does not a%ree .ith the others on this panel at the 7P <a. Center re%ardin% the per$enta%e of the ratio. *R. S7AREQ. #hat is ri%ht. ean Carale shares +y senti+ent about this +atter. *R. BEN4Q"N. ! also share the senti+ent of Co++issioner SuareH in that respe$t. So there are already t.o in the Co++ittee .ho .ant to %o ba$5 to the .ordin% of the 11?9 and the 113? Constitution.'1 Au%ust 19, 1120, )riday *R. *AA*B"N4. ! as5 that Co++issioner #rePas be re$o%niHed for an a+end+ent on line 1:. #;E PRES! EN#. Co++issioner #rePas is re$o%niHed. *R. #RE_AS. *ada+ President, +ay ! propose an a+end+ent on line 1: of Se$tion ? by deletin% therefro+ (.hose votin% sto$5 and $ontrollin% interest.( An* 1n 51&u )3&r&o4, 1n(&r) )3& CA!"TAL (o )3& 51n& (3ou5* r&a*B Ja((o;1a)1on( a) 5&a() (17)y '&r;&n) o4 )3& CA!"TAL 1( o=n&* +y (u;3 ;1)1H&n(.
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Corporation CASES Based on the Syllabus of Fr. Agustin %R. $"LLEGAS. :& a;;&') )3& a2&n*2&n). %R. TREQAS. T3anD you. THE !RES" ENT. T3& a2&n*2&n) o4 Co221((1on&r Tr&Ra( on 51n& 14 3a( +&&n a;;&')&* +y )3& Co221))&&. "( )3&r& any o+?&;)1onE / 6ilence0 T3& C3a1r 3&ar( non&I )3& a2&n*2&n) 1( a''ro6&*. xxxx #;E PRES! EN#. Co++issioner SuareH is re$o%niHed. *R. S7AREQ. #han5 you, *ada+ President. #.o points a$tually are bein% raised by Co++issioner avideCs proposed a+end+ent. "ne has referen$e to the per$enta%e of holdin%s and the other one is the basis for that per$enta%e. @ould the body have any ob8e$tion if .e split it into t.o portions be$ause there +ay be several Co++issioners .ho .ould be .illin% to a$$ept the Co++issionerCs proposal on $apital sto$5 in $ontradistin$tion to a votin% sto$5 for $ontrollin% interestL *R. G!<<E4AS. #he proposal has been a$$epted already. *R. AG! E. >es, but it .as 0& per$ent. %R. A$" E. CA!"TAL STOC9E *R. G!<<E4AS. #hat is ri%ht. %R. SUAREA. Y&(, 1) 1( JCA!"TAL STOC9.( *R. S7AREQ. So, it is no. 0& per$ent as a%ainst .holly o.nedL S7SPENS!"N ") SESS!"N *R. AG! E. >es. "t 5&5? p.m.! the session was resumed. *R. S7AREQ. !s the Co++issioner not insistin% on the votin% $apital sto$5 be$ause that .as already a$$epted by the Co++itteeL *R. AG! E. @ould it +ean that it .ould be 1&&-per$ent votin% $apital sto$5L *R. S7AREQ. No, under the Co++issionerCs proposal it is 8ust (CAP!#A<( not (sto$5.( THE !RES" ENT. T3& (&((1on 1( r&(u2&*. Co221((1on&r a61*& 1( )o ;5ar14y 31( 'o1n).
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%R. A$" E. No, " =an) 1) )o +& 6&ry ;5&ar. :3a) 1( )3& a5)&rna)16& 'ro'o(a5 o4 )3& Co221))&&E Ho= (3a55 1) r&a*E %R. SUAREA. ") =155 on5y r&a* (o2&)31n@ 51D&B J)3& CA!"TAL OF :H"CH "S FULLY o=n&*.J %R. $"LLEGAS. L&) 2& r&a* 51n&( 12 )o 14 =31;3 ()a)&B S &n)&r 1n)o ;o8'ro*u;)1on, ?o1n) 6&n)ur&, 'ro*u;)1on (3ar1n@ a@r&&2&n)( =1)3 F151'1no ;1)1H&n( or ;or'ora)1on( or a((o;1a)1on( a) 5&a() 60 '&r;&n) o4 =3o(& CA!"TAL 1( o=n&* +y (u;3 ;1)1H&n(. :& ar& @o1n@ +a;D )o )3& 19-, an* 19.- 4or2u5a)1on(. %R. A$" E. " ;anno) a;;&') )3& 'ro'o(a5 +&;au(& )3& =or* CA!"TAL (3ou5* no) r&a55y +& )3& @u1*1n@ 'r1n;1'5&. ") 1( )3& o=n&r(31' o4 )3& ;or'ora)1on. ") 2ay +& 6o)1n@ or no) 6o)1n@, +u) )3a) 1( no) )3& @u1*1n@ 'r1n;1'5&. %R. SUAREA. So, )3& Co221((1on&r 1( 1n(1()1n@ on )3& u(& o4 )3& )&r2 JCA!"TAL STOC9JE %R. A$" E. Y&(, )o +& 4o55o=&* +y )3& '3ra(& J:HOLLY o=n&*.J %R. SUAREA. Y&(, +u) =& ar& on5y ;on;&n)ra)1n@ on )3& 41r() 'o1n) K JCA!"TAL STOC9J or 2&r&5y JCA!"TAL.J
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%R. $"LLEGAS. Y&(, Co221((1on&r a61*& 3a( a;;&')&* )3& =or* JCA!"TALJ 1n '5a;& o4 J6o)1n@ ()o;D or ;on)ro551n@ 1n)&r&().J T31( 1( an a2&n*2&n) a5r&a*y a;;&')&* +y )3& Co221))&&.
Corporation CASES Based on the Syllabus of Fr. Agustin @e .ould li5e to $all for a vote on 1&&-per$ent )ilipino versus 0&- per$ent )ilipino. *R. A<"N#". !s it 0& per$entL *R. G!<<E4AS. Sixty per$ent, yes. *R. 4ASC"N. *ada+ President, shall .e vote on the proposed a+end+ent of Co++issioner avide of ("NE ;7N RE PERCEN#L( *R. G!<<E4AS. >es. *R. 4ASC"N. Assu+in% that it is lost, that does not pre8udi$e any other Co++issioner to +a5e any re$o++endations on other per$enta%esL *R. G!<<E4AS. ! .ould su%%est that .e vote on (sixty,( .hi$h is indi$ated in the $o++ittee report. *R. 4ASC"N. !t is the a+end+ent of Co++issioner not the $o++ittee report. *R. G!<<E4AS. >es, it is all ri%ht. *R. AQC7NA. *ada+ President. THE !RES" ENT. Co221((1on&r AH;una 1( r&;o@n1H&*. %R. AACUNA. %ay " +& ;5ar141&* a( )o )3a) 'or)1on )3a) =a( a;;&')&* +y )3& Co221))&&E %R. $"LLEGAS. T3& 'or)1on a;;&')&* +y )3& Co221))&& 1( )3& *&5&)1on o4 )3& '3ra(& J6o)1n@ ()o;D or ;on)ro551n@ 1n)&r&().J %R. AACUNA. H&n;&, =1)3ou) )3& a61*& a2&n*2&n), )3& ;o221))&& r&'or) =ou5* r&a*B J;or'ora)1on( or a((o;1a)1on( a) 5&a() (17)y '&r;&n) o4 =3o(& CA!"TAL 1( o=n&* +y (u;3 ;1)1H&n(.J %R. $"LLEGAS. Y&(. %R. AACUNA. So 14 )3& a61*& a2&n*2&n) 1( 5o(), =& ar& ()u;D =1)3 60 '&r;&n) o4 )3& ;a'1)a5 )o +& o=n&* +y ;1)1H&n(E %R. $"LLEGAS. T3a) 1( r1@3). avide that .e should vote on,
1:
*R. AQC7NA. But the $ontrol $an be .ith the forei%ners even if they are the +inority. <et us say :& per$ent of the $apital is o.ned by the+, but it is the votin% $apital, .hereas, the )ilipinos o.n the nonvotin% shares. So .e $an have a situation .here the $orporation is $ontrolled by forei%ners despite bein% the +inority be$ause they have the votin% $apital. #hat is the ano+aly that .ould result there. *R. BEN4Q"N. No, the reason .e eli+inated the .ord (sto$5( as stated in the 113? and 11?9 Constitutions is that a$$ordin% to Co++issioner Rodri%o, there are asso$iations that do not have sto$5s. #hat is .hy .e say (CAP!#A<.( *R. AQC7NA. @e should not eli+inate the phrase ($ontrollin% interest.( *R. BEN4Q"N. !n the $ase of sto$5 $orporations, it is assu+ed. *R. AQC7NA. >es, but .hat ! +ean is that the $ontrol should be .ith the )ilipinos. *R. BEN4Q"N. >es, that is understood. *R. AQC7NA. >es, be$ause if .e 8ust say (sixty per$ent of .hose $apital is o.ned by the )ilipinos,( the $apital +ay be votin% or nonvotin%. *R. BEN4Q"N. #hat is $orre$t. *R. AQC7NA. *y $on$ern is the situation .here there is a votin% sto$5. !t is a sto$5 $orporation. @hat the Co++ittee reIuires is that 0& per$ent of the $apital should be o.ned by )ilipinos. But that .ould not assure $ontrol be$ause that 0& per$ent +ay be non-votin%. *S. AM7!N". *ada+ President. *R. R"*7<". *ay .e vote on the per$enta%e firstL #;E PRES! EN#. Before .e vote on this, .e .ant to be $larified first. *S. AM7!N". *ada+ President. #;E PRES! EN#. Co++issioner AIuino is re$o%niHed. *S. AM7!N". ! .ould su%%est that .e vote on the avide a+end+ent .hi$h is 1&&per$ent $apital, and if it is voted do.n, then .e refer to the ori%inal draft .hi$h is ($apital sto$5( not 8ust ($apital.(
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Corporation CASES Based on the Syllabus of Fr. Agustin *R. AQC7NA. #he phrase ($ontrollin% interest( is an i+portant $onsideration. #;E PRES! EN#. <et us pro$eed to vote then. %R. !A "LLA. %a*a2 !r&(1*&n). THE !RES" ENT. T3& $1;&8!r&(1*&n), Co221((1on&r !a*155a, 1( r&;o@n1H&*. %R. !A "LLA. T3& Tr&Ra( a2&n*2&n) 3a( a5r&a*y +&&n a''ro6&*. T3& on5y on& 5&4) 1( )3& a61*& a2&n*2&n) =31;3 1( (u+()1)u)1n@ )3& J(17)y '&r;&n)J )o J:HOLLY o=n&* +y F151'1no(.( ,#he #rePas a+end+ent deleted the phrase (.hose votin% sto$5s and $ontrollin% interest( and inserted the .ord ($apital.( !t approved the phrase (asso$iations at least sixty per$ent of the CAP!#A< is o.ned by su$h $itiHens.,see pa%e 10*ada+ President, ! a+ a%ainst the proposed a+end+ent of Co++issioner avide be$ause that is an ideal situation .here do+esti$ $apital is available for the exploration, develop+ent and utiliHation of these natural resour$es, espe$ially +inerals, petroleu+ and other +ineral oils. #hese are not only ris5y business but they also involve substantial $apital. "bviously, it is an ideal situation but it is not pra$ti$al. And if .e adopt the 1&&-per$ent $apital of )ilipino $itiHens, ! a+ afraid that these natural resour$es, parti$ularly these +inerals and oil, et $etera, +ay re+ain hidden in our lands, or in other offshore pla$es .ithout anyone bein% able to explore, develop or utiliHe the+. !f it .ere possible to have a 1&&-per$ent )ilipino $apital, ! .ould prefer that rather than the 0& per$ent, but if .e adopt the 1&& per$ent, +y fear is that .e .ill never be able to explore, develop and utiliHe our natural resour$es be$ause .e do not have the do+esti$ resour$es for that. *R. AG! E. *ada+ President, +ay ! be allo.ed to rea$tL #;E PRES! EN#. Co++issioner avide is re$o%niHed. *R. AG! E. ! a+ very %lad that Co++issioner Padilla e+phasiHed +inerals, petroleu+ and +ineral oils. #he Co++ission has 8ust approved the possible forei%n entry into the develop+ent, exploration and utiliHation of these +inerals, petroleu+ and other +ineral oils by virtue of the /a+ir a+end+ent. ! voted in favour of the /a+ir a+end+ent be$ause it .ill eventually %ive .ay to vestin% in ex$lusively )ilipino $itiHens and $orporations .holly o.ned by )ilipino $itiHens the ri%ht to utiliHe the other natural resour$es. #his +eans that as a +atter of poli$y, natural resour$es should be utiliHed and exploited only by )ilipino $itiHens or $orporations .holly o.ned by su$h $itiHens. But by virtue of the /a+ir a+end+ent, sin$e .e feel that )ilipino $apital +ay not be enou%h for the develop+ent and utiliHation of +inerals, petroleu+ and other +ineral oils, the President $an enter into servi$e $ontra$ts .ith forei%n
19
$orporations pre$isely for the develop+ent and utiliHation of su$h resour$es. And so, there is nothin% to fear that .e .ill sta%nate in the develop+ent of +inerals, petroleu+, and +ineral oils be$ause .e no. allo. servi$e $ontra$ts. !t is, therefore, .ith +ore reason that at this ti+e .e +ust provide for a 1&&-per$ent )ilipiniHation %enerally to all natural resour$es. *R. G!<<E4AS. ! thin5 .e are ready to vote, *ada+ President. #;E PRES! EN#. #he A$tin% )loor <eader is re$o%niHed. *R. *AA*B"N4. *ada+ President, .e as5 that the +atter be put to a vote. #;E PRES! EN#. @ill Co++issioner a+end+ent. avide please read lines 1: and 19 .ith his
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*R. AG! E. <ines 1: and 19, Se$tion ?, as a+ended, .ill read6 (asso$iations .hose CAP!#A< sto$5 is @;"<<> o.ned by su$h $itiHens.( G"#!N4 #;E PRES! EN#. As +any as are in favour of this proposed a+end+ent of Co++issioner avide on lines 1: and 19 of Se$tion ?, please raise their hand. , -ew ,embers raised their hand.As +any as are a%ainst the a+end+ent, please raise their hand. , Several ,embers raised their hand.#he results sho. 10 votes in favour and '' a%ainstD the a+end+ent is lost. *R. *AA*B"N4. *ada+ President, ! as5 that Co++issioner avide be re$o%niHed on$e +ore for further a+end+ents. #;E PRES! EN#. Co++issioner avide is re$o%niHed. *R. AG! E. #han5 you, *ada+ President. #his is 8ust an insertion of a ne. para%raph bet.een lines ': and '9 of Se$tion ? of the sa+e pa%e. !t .ill read as follo.s6 #;E 4"GERN!N4 AN *ANA4!N4 B"AR S ") S7C; C"RP"RA#!"NS S;A<< BE GES#E ENC<7S!GE<> !N C!#!QENS ") #;E P;!<!PP!NES. *R. G!<<E4AS. @hi$h $orporations is the Co++issioner referrin% toL
Corporation CASES Based on the Syllabus of Fr. Agustin *R. AG! E. #his refers to $orporations 0& per$ent of .hose $apital is o.ned by su$h $itiHens. *R. G!<<E4AS. A%ain the a+end+ent .ill readO *R. AG! E. (#;E 4"GERN!N4 AN *ANA4!N4 B" !ES ") S7C; C"RP"RA#!"NS S;A<< BE GES#E ENC<7S!GE<> !N C!#!QENS ") #;E P;!<!PP!NES.( REG. R!4"S. *ada+ President. #;E PRES! EN#. Co++issioner Ri%os is re$o%niHed. REG. R!4"S. ! .onder if Co++issioner i++ediately after ($itiHens( on line 19. avide .ould a%ree to put that senten$e
10
only the :& per$ent but $o++ensurately they .ere represented in the board and +ana%e+ent only to the extent of their eIuity interest, .hi$h is :& per$ent. #he +ana%e+ent of a $o+pany is lod%ed in the boardD so if the 0& per$ent, .hi$h is $o+posed of )ilipinos, $ontrols the board, then the )ilipino part has $ontrol of the $o+pany. ! thin5 it is rather unfair to say6 (>ou +ay have :& per$ent of the $o+pany, but that is all. >ou $annot +ana%e, you $annot sit in the board.( #hat .ould dis$oura%e invest+ents. #hen it is li5e havin% a one hundredper$ent o.nershipD ! +ean, either .e allo. a 0&-:& .ith full ri%hts to the :& per$ent, li+ited as it is as to a +inority, or .e do not allo. the+ at all. #his +eans if it is allo.edD .e $annot have it both .ays. *R. AG! E. #he aliens $annot also have everythin%. @hile they +ay be %iven entry into subs$riptions of the $apital sto$5 of the $orporation, it does not ne$essarily follo. that they $annot be deprived of the ri%ht of +e+bership in the +ana%in% or in the %overnin% board of a parti$ular $orporation. But it .ill not totally deprive the+ of a say be$ause they $an still exer$ise the ordinary ri%hts of sto$5holders. #hey $an sub+it their proposal and they $an be heard. *R. R"*7<". >es, but they have no vote. #hat is li5e bein% represented in the Con%ress but not bein% allo.ed to vote li5e our old resident Co++issioners in the 7nited States. #hey $an be heardD they $an be seen but they $annot vote. *R. AG! E. !f that .as allo.ed under that situation, .hy $an .e not do it no. in respe$t to our natural resour$esL #his is a very $riti$al and deli$ate issue. *R. R"*7<". Pre$isely, .e used to $o+plain ho. unfair that .as. "ne $an be seen and heard but he $annot vote. *R. AG! E. @e 5no. that under the $orporation la., .e have the ri%hts of the +inority sto$5holders. #hey $an be heard. As a +atter of fa$t, they $an probably allo. a proxy to vote for the+ and, therefore, they still retain that spe$ifi$ prero%ative to parti$ipate 8ust li5e .hat .e did in the Arti$le on So$ial /usti$e. *R. R"*7<". #hat .ould en$oura%e du++ies if .e %ive the+ proxies. *R. AG! E. As a +atter of fa$t, .hen it $o+es to en$oura%in% du++ies, by allo.in% :&-per$ent o.nership to $o+e in .e .ill expe$t the proliferation of $orporations a$tually o.ned by aliens usin% du++ies. *R. R"*7<". No, be$ause :& per$ent is a substantial and fair share and, therefore, the bona fide forei%n investor is satisfied .ith that proportion. ;e does not have to loo5 for du++ies. !n fa$t, that is .hat assures a %enuine invest+ent if .e %ive a
Nazareno
*R. R"*7<". *ay ! as5 a Iuestion. Presu+ably, it is 0&-:&L *R. AG! E. >es. *R. R"*7<". @hat about the :& per$entL @ould they not be entitled to a proportionate seat in the boardL *R. AG! E. 7nder +y proposal, they should not be allo.ed to sit in the board. *R. R"*7<". #hen the Co++issioner is really proposin% 1&& per$ent .hi$h is the opposite .ayL *R. AG! E. Not ne$essarily, be$ause if :& per$ent of the $apital sto$5 .ill be o.ned by aliens .ho +ay sit in the board, they $an still exer$ise their ri%ht as ordinary sto$5holders and $an sub+it the ne$essary proposal for, say, a poli$y to be underta5en by the board. *R. R"*7<". But that is part of the sto$5holderCs ri%ht F to sit in the board of dire$tors. *R. AG! E. #hat +ay be allo.ed but this is a very unusual and abnor+al situation so the Constitution itself $an prohibit the+ to sit in the board. *R. R"*7<". But it .ould be pointless to allo. the+ :& per$ent .hen they $annot sit in the board nor have a say in the +ana%e+ent of the $o+pany. <i5e.ise, that .ould be extraordinary be$ause both the 11?9 and the 113? Constitutions allo.ed not
Corporation CASES Based on the Syllabus of Fr. Agustin forei%n investor the :& per$ent and all the ri%hts that %o .ith it. "ther.ise, .e are either dis$oura%in% the invest+ent alto%ether or .e are en$oura%in% $ir$u+vention. <et us be fair. !f it is 0&-:&, then .e %ive hi+ the ri%ht, li+ited as to his +inority position. *R. *AA*B"N4. *ada+ President, the body .ould li5e to 5no. the position of the Co++ittee so that .e $an put the +atter to a vote. *R. G!<<E4AS. #he Co++ittee does not a$$ept the a+end+ent. #;E PRES! EN#. #he Co++ittee does not a$$ept. @ill Co++issioner avide insist on his a+end+entL *R. AG! E. @e reIuest a vote. #;E PRES! EN#. @ill Co++issioner avide state his proposed a+end+ent a%ainL *R. AG! E. #he proposed a+end+ent .ould be the insertion of a ne. para%raph to Se$tion ?, bet.een lines ': and '9, pa%e ', .hi$h reads6 (#;E 4"GERN!N4 AN *ANA4!N4 B" !ES ") S7C; C"RP"RA#!"NS S;A<< BE GES#E ENC<7S!GE<> !N C!#!QENS ") #;E P;!<!PP!NES.( *R. PA !<<A. *ada+ President. #;E PRES! EN#. Co++issioner Padilla is re$o%niHed. *R. PA !<<A. *ada+ President, +ay ! 8ust say that this Se$tion ? spea5s of ($oprodu$tion, 8oint venture, produ$tion sharin% a%ree+ents .ith )ilipino $itiHens.( !f the forei%n share of, say, :& per$ent .ill not be represented in the board or in +ana%e+ent, ! .onder if there .ould be any forei%n investor .ho .ill a$$ept puttin% $apital but .ithout any voi$e in +ana%e+ent. ! thin5 that +i%ht +a5e the provision on ($oprodu$tion, 8oint venture and produ$tion sharin%( illusory. G"#!N4 #;E PRES! EN#. !f the Chair is not +ista5en, that .as the sa+e point expressed by Co++issioner Ro+ulo, a +e+ber of the Co++ittee. As +any as are in favour of the ,embers raised their hand.avide a+end+ent, please raise their hand. , -ew
13
As +any as are a%ainst, please raise their hand. ,Several ,embers raised their hand.As +any as are abstainin%, please raise their hand. ,/ne ,ember raised his hand.xxxx #;E PRES! EN#. Co++issioner 4ar$ia is re$o%niHed. %R. GARC"A. %y a2&n*2&n) 1( on S&;)1on -, )3& (a2& 1)&2 =31;3 Co221((1on&r a61*& )r1&* )o a2&n*. ") 1( +a(1;a55y on )3& (3ar& o4 60 '&r;&n). " =ou5* 51D& )o 'ro'o(& )3a) =& ra1(& )3& 60 '&r;&n) )o SE$ENTY8F"$E !ERCENT (o )3& 51n& =ou5* r&a*B JSE$ENTY8F"$E !ERCENT o4 =3o(& CA!"TAL 1( o=n&* +y (u;3 ;1)1H&n(.( #;E PRES! EN#. @hat does the Co++ittee sayL S7SPENS!"N ") SESS!"N *R. G!<<E4AS. #he Co++ittee insists on stayin% .ith the 0& per$ent F 0&-:&. *ada+ President, +ay .e as5 for a suspension of the session. #;E PRES! EN#. #he session is suspended. It was 6&D< p.m. RES7*P#!"N ") SESS!"N "t 6&C1 p.m.! the session was resumed. #;E PRES! EN#. #he session is resu+ed. *R. SAR*!EN#". *ada+ President. #;E PRES! EN#. #he A$tin% )loor <eader, Co++issioner Sar+iento, is re$o%niHed. *R. SAR*!EN#"6 Co++issioner 4ar$ia still has the floor. *ay ! as5 that he be re$o%niHed. #;E PRES! EN#. Co++issioner 4ar$ia is re$o%niHed.
Nazareno
Corporation CASES Based on the Syllabus of Fr. Agustin %R. GARC"A. T3anD you 6&ry 2u;3, %a*a2 !r&(1*&n). " =ou5* 51D& )o 'ro'o(& )3& 4o55o=1n@ a2&n*2&n) on S&;)1on -, 51n& 14 on 'a@& 2. " 'ro'o(& )o ;3an@& )3& =or* J(17)yJ )o SE$ENTY8F"$E. So, )31( =155 r&a*B Jor 1) 2ay &n)&r 1n)o ;o8'ro*u;)1on, ?o1n) 6&n)ur&, 'ro*u;)1on (3ar1n@ a@r&&2&n)( =1)3 F151'1no ;1)1H&n( or ;or'ora)1on( or a((o;1a)1on( a) 5&a() SE$ENTY8F"$E '&r;&n) o4 =3o(& CA!"TAL ()o;D or ;on)ro551n@ 1n)&r&() 1( o=n&* +y (u;3 ;1)1H&n(.J %R. $"LLEGAS. T31( 1( ?u() a ;orr&;)1on. " )31nD Co221((1on&r AH;una 1( no) 1n(1()1n@ on )3& r&)&n)1on o4 )3& '3ra(& J;on)ro551n@ 1n)&r&(),J (o =& =155 r&)a1n JCA!"TALJ )o @o +a;D r&a55y )o )3& 19-, an* 19.- 4or2u5a)1on(. *R. BENNA4EN. *ay ! su%%est that .e retain the phrase ($ontrollin% interest(L *R. G!<<E4AS. >es, .e .ill retain it. ,#he state+ent of Co++issioner Gille%as is possibly erroneous $onsiderin% his $onsistent state+ent, espe$ially durin% the oral ar%u+ents, that the Constitutional Co++ission re8e$ted the 7P Proposal to use the phrase ($ontrollin% interest.(#;E PRES! EN#. Are .e no. ready to voteL *R. SAR*!EN#". >es, *ada+ President. G"#!N4 *R. PA !<<A. *ada+ President. #;E PRES! EN#. As +any as are in favour of the proposed a+end+ent of Co++issioner 4ar$ia for (SEGEN#>-)!GE( per$ent, please raise their hand. , -ew ,embers raised their hand.As +any as are a%ainst the a+end+ent, please raise their hand. , Several ,embers raised their hand.As +any as are abstainin%, please raise their hand. ,/ne ,ember raised his hand.T3& r&(u5)( (3o= 16 6o)&( 1n 4a6our, 18 a@a1n() an* 1 a+()&n)1onI )3& Gar;1a a2&n*2&n) 1( 5o(). *R. SAR*!EN#". *ada+ President, +ay ! as5 that Co++issioner )oH be re$o%niHed. #;E PRES! EN#. Co++issioner )oH is re$o%niHed. #;E PRES! EN#. Co++issioner Padilla is re$o%niHed.
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*R. )"Q. After losin% by only t.o votes, ! suppose that this next proposal .ill finally %et the vote of the +a8ority. #he a+end+ent is to provide for at least #@"-#;!R S. *R. S7AREQ. !t is eIuivalent to 00 'E?. #;E PRES! EN#. @ill the Co++issioner repeatL %R. FOA. " 'ro'o(& JT:O8TH"R S o4 =3o(& CA!"TAL 1( o=n&* +y (u;3 ;1)1H&n(.J %a*a2 !r&(1*&n), =& ar& r&4&rr1n@ )o )3& (a2& 'ro61(1on )o =31;3 )3& 'r&61ou( a2&n*2&n)( 3a6& +&&n (u@@&()&*. F1r(), =& ;a55&* 4or a 1008'&r;&n) o=n&r(31'I an* )3&n, (&;on*, =& ;a55&* 4or a .,8'&r;&n) o=n&r(31' +y F151'1no ;1)1H&n(. So +y proposal is to provide for at least #@"-#;!R S of the $apital to be o.ned by )ilipino $itiHens. ! .ould li5e to $all the attention of the body that the sa+e ratio or eIuity reIuire+ent is provided in the $ase of publi$ utilities. And if .e are .illin% to provide su$h eIuity reIuire+ents in the $ase of publi$ utilities, .e should at least li5e.ise provide the sa+e eIuity ratio in the $ase of natural resour$es. *R. G!<<E4AS. Co++issioner Ro+ulo .ill respond. *R. R"*7<". ! 8ust .ant to point out that there is an a+end+ent here filed to also redu$e the ratio in Se$tion 19 to 0&-:&.
Nazareno
*R. PA !<<A. #he 0& per$ent .hi$h appears in the $o++ittee report has been repeatedly upheld in various votin%s. "ne proposal .as .hole F 1&& per$entD another one .as 39 per$ent and no. it is 00 'E? per$ent. !s not the de$ision of this Co++ission in votin% to uphold the per$enta%e in the $o++ittee report already a de$ision on this issueL *R. )"Q. "ur a+end+ent has been previously brou%ht to the attention of the body. *R. G!<<E4AS. #he Co++ittee does not a$$ept the Co++issionerCs a+end+ent. #his has been dis$ussed fully and, .ith only one-third of the vote, it is li5e havin% nothin% at all in de$ision-+a5in%. !t $an be $o+pletely vetoed. *R. R" R!4". *ada+ President.
Corporation CASES Based on the Syllabus of Fr. Agustin #;E PRES! EN#. Co++issioner Rodri%o is re$o%niHed. *R. R" R!4". #his is an extraordinary su%%estion. But $onsiderin% the $ir$u+stan$es that the proposals fro+ the 1&& per$ent to 39 per$ent lost, and no. it .ent do.n to 00 'E? per$ent, .e +i%ht %o do.n to 09 per$ent next ti+e. So ! su%%est that .e vote bet.een 00 'E? and 0& per$ent. @hi$h does the body .antL #hen that should be the end of itD other.ise, this is ridi$ulous. After this, if the 00 'E? per$ent .ill lose, then so+ebody $an say6 (@ell, ho. about 09 per$entL( #;E PRES! EN#. #he Chair .as +ade to understand that Co++issioner )oHC proposal is the last proposal on this parti$ular line. @ill Co++issioner )oH restate his proposalL *R. )"Q. *y proposal is (#@"-#;!R S of .hose CAP!#A< or $ontrollin% interest is o.ned by su$h $itiHens.( G"#!N4 THE !RES" ENT. :& no= 'u) Co221((1on&r FoHC a2&n*2&n) )o a 6o)&. As +any as are in favour of the a+end+ent of Co++issioner )oH, please raise their hand. ,-ew ,embers raised their hand.As +any as are a%ainst, please raise their hand. ,Several ,embers raised their hand.T3& r&(u5)( (3o= 1. 6o)&( 1n 4a6our, 20 a@a1n(), an* no) a+()&n)1onI )3& a2&n*2&n) 1( 5o().'' xxxx Au%ust '', 1120, )riday #;E PRES! EN#. Co++issioner Nolledo is re$o%niHed. %R. NOLLE O. T3anD you, %a*a2 !r&(1*&n). " =ou5* 51D& )o 'ro'oun* (o2& >u&()1on( )o )3& ;3a1r2an an* 2&2+&r( o4 )3& ;o221))&&. " 3a6& 3&r& a ;o'y o4 )3& a''ro6&* 'ro61(1on( on Ar)1;5& on )3& Na)1ona5 E;ono2y an* !a)r12ony. On 'a@& 2, )3& 41r() )=o 51n&( ar& =1)3 r&('&;) )o )3& F151'1no an* 4or&1@n &>u1)y an* " (a1*B JA) 5&a() (17)y '&r;&n) o4 =3o(& ;a'1)a5 or ;on)ro551n@ 1n)&r&() 1( o=n&* +y (u;3 ;1)1H&n(.J
11
" no)1;& )3a) )31( 'ro61(1on =a( a2&n*&* +y Co221((1on&r a61*& +y ;3an@1n@ J6o)1n@ ()o;D(J )o JCA!"TAL,J +u) " ()155 no)1;& )3a) )3&r& a''&ar( )3& )&r2 J;on)ro551n@ 1n)&r&()J =31;3 (&&2( )o r&4&r )o a((o;a1)1on( o)3&r )3an ;or'ora)1on( an* 1) 1( 2&r&5y ,0 '&r;&n) '5u( on& '&r;&n) =31;3 1( 5&(( )3an 60 '&r;&n). #&(1*&(, )3& =or*1n@( 2ay 1n*1;a)& )3a) )3& 60 '&r;&n) 2ay +& +a(&* no) on5y on ;a'1)a5 +u) a5(o on ;on)ro551n@ 1n)&r&()I 1) ;ou5* 2&an 60 '&r;&n) or ,1 '&r;&n). #&4or& " 'ro'oun* )3& 41na5 >u&()1on, " =ou5* 51D& )o 2aD& a ;o22&n) 1n r&5a)1on )o S&;)1on 1, (1n;& )3&y ar& r&5a)&* )o &a;3 o)3&r. " no)1;& )3a) 1n S&;)1on 1,, )3&r& ()155 a''&ar( )3& '3ra(& J6o)1n@ ()o;D or ;on)ro551n@ 1n)&r&().J T3& )&r2 J6o)1n@ ()o;D(J a( )3& +a(1( o4 )3& F151'1no &>u1)y 2&an( )3a) 14 60 '&r;&n) o4 )3& 6o)1n@ ()o;D( +&5on@ )o F151'1no(, 4or&1@n&r( 2ay no= o=n 2or& )3an 40 '&r;&n) o4 )3& ;a'1)a5 a( 5on@ a( )3& 40 '&r;&n) or )3& &7;&(( )3&r&o4 =155 ;o6&r non6o)1n@ ()o;D. T31( 1( a(1*& 4ro2 )3& 4a;) )3a) un*&r )3& Cor'ora)1on Co*&, &6&n non6o)1n@ (3ar&( ;an 6o)& on ;&r)a1n 1n()an;&(. Con)ro5 o6&r 1n6&()2&n)( 2ay ;o6&r a('&;)( o4 2ana@&2&n) an* 'ar)1;1'a)1on 1n )3& 4ru1)( o4 'ro*u;)1on or &7'5o1)a)1on. So, " 3o'& )3& ;o221))&& =155 ;on(1*&r 4a6ora+5y 2y r&;o22&n*a)1on )3a) 1n()&a* o4 u(1n@ J;on)ro551n@ 1n)&r&()(,J =& ?u() u(& JCA!"TALJ un14or25y 1n ;a(&( =3&r& 4or&1@n &>u1)y 1( '&r21))&* +y 5a=, +&;au(& )3& 'ur'o(& 1( r&a55y )o 3&5' )3& F151'1no( 1n )3& &7'5o1)a)1on o4 na)ura5 r&(our;&( an* 1n )3& o'&ra)1on o4 'u+51; u)151)1&(. " Dno= )3& ;o221))&&, a) 1)( o=n 1n()an;&, ;an 2aD& )3& a2&n*2&n). :3a) *o&( )3& ;o221))&& (ayE %R. $"LLEGAS. :& ;o2'5&)&5y a@r&& =1)3 )3& Co221((1on&rC( 61&=(. A;)ua55y, 1) =a( r&a55y an o6&r(1@3). :& *1* *&;1*& on )3& =or* JCA!"TAL.J " )31nD 1) =a( )3& o'1n1on o4 )3& 2a?or1)y )3a) )3& '3ra(& J;on)ro551n@ 1n)&r&()J 1( a2+1@uou(. So, =& *o a;;&') )3& Co221((1on&rC( 'ro'o(a5 )o &5121na)& )3& '3ra(& Jor ;on)ro551n@ 1n)&r&()J 1n a55 )3& 'ro61(1on( )3a) )a5D a+ou) 4or&1@n 'ar)1;1'a)1on. %R. NOLLE O. No) on5y 1n S&;)1on -, +u) a5(o =1)3 r&('&;) )o S&;)1on 1,. #han5 you very +u$h. *R. *AA*B"N4. *ada+ President. #;E PRES! EN#. Co++issioner *aa+bon% is re$o%niHed. *R. *AA*B"N4. !n vie. of the +anifestation of the $o++ittee, ! .ould li5e to be $larified on the use of the .ord (CAP!#A<.(
Nazareno
Corporation CASES Based on the Syllabus of Fr. Agustin *R. G!<<E4AS. >es, that .as the .ord used in the 113? and 11?9 Constitutions. %R. %AA%#ONG. L&) u( *&5121) our(&56&( )o )3a) =or* JCA!"TALJ. "n )3& Cor'ora)1on La=, 14 " r&2&2+&r ;orr&;)5y, =& 3a6& )3r&& )y'&( o4 ;a'1)a5B )3& au)3or1H&* ;a'1)a5 ()o;D, )3& (u+(;r1+&* ;a'1)a5 ()o;D an* )3& 'a1*8u' ;a'1)a5 ()o;D. T3& au)3or1H&* ;a'1)a5 ()o;D ;ou5* +& 1n)&r'r&)&* a( )3& ;a'1)a5 o4 )3& ;or'ora)1on 1)(&54 +&;au(& )3a) 1( )3& )o)a51)y o4 )3& 1n6&()2&n) o4 )3& ;or'ora)1on a( ()a)&* 1n )3& ar)1;5&( o4 1n;or'ora)1on. :3&n =& r&4&r )o 60 '&r;&n), ar& =& r&4&rr1n@ )o )3& au)3or1H&* ;a'1)a5 ()o;D or )3& 'a1*8u' ;a'1)a5 ()o;D (1n;& )3& *&)&r21nan) a( )o =3o o=n( )3& ;or'ora)1on, a( 4ar a( &>u1)y 1( ;on;&rn&*, 1( )3& (u+(;r1')1on o4 )3& '&r(onE " )31nD =& (3ou5* *&5121) our(&56&( a5(o )o =3a) =& 2&an +y 60 '&r;&n). Ar& =& r&4&rr1n@ )o )3& au)3or1H&* ;a'1)a5 ()o;D or )o )3& (u+(;r1+&* ;a'1)a5 ()o;D, +&;au(& )3& *&)&r21na)1on, a( " (a1*, on )3& ;on)ro551n@ 1n)&r&() o4 a ;or'ora)1on 1( +a(&* on )3& (u+(;r1+&* ;a'1)a5 ()o;DE " =ou5* 51D& a r&'5y on )3a). *R. G!<<E4AS. Co++issioner SuareH, a +e+ber of the $o++ittee, .ould li5e to ans.er that. #;E PRES! EN#. Co++issioner SuareH is re$o%niHed. *R. S7AREQ. #han5 you, *ada+ President. @e stated this be$ause there +i%ht be a +isunderstandin% re%ardin% the interpretation of the ter+ (CAP!#A<( as no. used as the basis for the per$enta%e of forei%n invest+ents in appropriate instan$es and the interpretation attributed to the .ord is that it should be based on the paidup $apital. @e eli+inated the use the phrase (votin% sto$5 or $ontrollin% interest( be$ause that is only used in $onne$tion .ith the +atter of votin%. As a +atter of fa$t, in the de$laration of dividends for private $orporations, it is usually based on the paid-up $apitaliHation. So, .hat is really the do+inant fa$tor to be $onsidered in +atters of deter+inin% the 0&-:& per$enta%e should really be the paid-up $apital of the $orporation. *R. *AA*B"N4. ! .ould li5e to %et $larifi$ation on this. !f ! re+e+ber +y $orporation la. $orre$tly, .e usually use a deter+inant in order to find out .hat the ratio of o.nership is, not really on the paid-up $apital sto$5 but on the subs$ribed $apital sto$5.
1&&
)or exa+ple, if the .hole authoriHed $apital sto$5 of the $orporation is P 1 +illion, if the subs$ription is 0& per$ent of P 1 +illion .hi$h is P 0&&,&&&, then that is supposed to be the deter+inant .hether there is a sharin% of 0& per$ent of )ilipinos or not. !t is not really on the paid-up $apital be$ause on$e a person subs$ribes to a $apital sto$5 then .hether that $apital sto$5 is paid up or not, does not really +atter, as far as the boo5s of the $orporation are $on$erned. #he subs$ribed $apital sto$5 is supposed to be o.ned by the person .ho +a5es the subs$ription. #here are so +any la.s on ho. to $olle$t the delinIuen$y and so on. ! vie. of the Co++issionerCs ans.er, ! .ould li5e to 5no. .hether he is deter+ined to put on the re$ord that in order to deter+ine the 0&-:& per$ent sharin%, .e have to deter+ine .hether .e .ill use a deter+inant .hi$h is the subs$ribed $apital sto$5 or the paid-up $apital sto$5. *R S7AREQ. @e are prin$ipally $on$erned about the interpretation .hi$h .ould be atta$hed to itD that is, it should be li+ited to authoriHed $apital sto$5, not to subs$ribed $apital sto$5. ! .ill %ive the Co++issioner an illustration of .hat he is explainin% to the Co++ission. *R. *AA*B"N4. >es, than5 you. *R. S7AREQ. <et us say the authoriHed $apital sto$5 is P 1 +illion. 7nder the present rules in the Se$urities and Ex$han%e Co++ission, at least '9 per$ent of that a+ount +ust be subs$ribed and at least '9 per$ent of this subs$ribed $apital +ust be paid up. No., let us dis$uss the basis of 0&-:&. #o illustrate the +atter further, let us say that 0& per$ent of the subs$riptions .ould be allo$ated to )ilipinos and :& per$ent of the subs$ribed $apital .ould be held by forei%ners. #hen .e $o+e to the paid-up $apitaliHation. 7nder the present rules in the Se$urities and Ex$han%e Co++ission, a forei%n $orporation is supposed to subs$ribe to a :&-per$ent share .hi$h +ust be fully paid up. "n the other hand, the 0& per$ent allo$ated to )ilipinos need not be paid up. ;o.ever, at least '9 per$ent of the subs$ription +ust be paid up for purposes of $o+plyin% .ith the Corporation <a.. @e $an illustrate the +atter further by sayin% that the $o+plian$e of '9 per$ent paid-up of the subs$ribed $apital .ould be fulfilled by the full pay+ent of the :& per$ent by the forei%ners. So, .e have a situation .here the )ilipino per$enta%e of 0& +ay not even $o+ply .ith the '9-per$ent reIuire+ent be$ause of the totality due to the fully pay+ent of the :&-
Nazareno
Corporation CASES Based on the Syllabus of Fr. Agustin per$ent of the forei%n investors, the pay+ent of '9 per$ent paid-up on the subs$ription .ould have been $onsidered fulfilled. #hat is exa$tly .hat .e are tryin% to avoid. *R. *AA*B"N4 ! appre$iate very +u$h the explanation but ! .onder if the $o++ittee .ould subs$ribe to that vie. be$ause ! .ill sti$5 to +y thin5in% that in the $o+putation of the 0&-:& ratio, the basis should be on the subs$ription. !f the subs$ription is bein% done by 0& per$ent )ilipinos, .hether it is paid-up or not and the subs$ription is a$$epted by the $orporation, ! thin5 that is the proper deter+inant. !f .e base the 0&-:& on the paid-up $apital sto$5, .e have a proble+ here .here the :& per$ent is fully paid up and the 0& per$ent is not fully paid up F this +ay be $ontrary to the provisions of the Constitution. So ! .ould li5e to as5 for the proper advise+ent fro+ the Co++ittee as to .hat should be the proper interpretation be$ause this .ill $ause havo$ on the interpretation of our Corporation <a.. *R. R"*7<". *ada+ President. #;E PRES! EN#. Co++issioner Ro+ulo is re$o%niHed. *R. R"*7<". @e %o by the established rule .hi$h ! believe is unifor+ly held. !t is based on the subs$ribed $apital. ! 5no. only of one possible ex$eption and that is .here the byla.s prohibit the subs$riber fro+ votin%. But that is a very rare provision in byla.s. "ther.ise, +y infor+ation and belief is that it is based on the subs$ribed $apital. *R. *AA*B"N4. !t is, therefore, the understandin% of this *e+ber that the Co++issioner is so+e.hat revisin% the ans.er of Co++issioner SuareH to that extentL *R. R"*7<". No, ! do not thin5 .e $ontradi$t ea$h other. ;e is tal5in% really of the instan$e .here the subs$riber is a non-resident and, therefore, +ust fully pay. #hat is ho. ! understand his position. *R. *AA*B"N4. *y understandin% is that in the $o+putation of the 0&-:& sharin% under the present for+ulation, the deter+inant is the paid-up $apital sto$5 to .hi$h ! disa%ree. %R. RO%ULO. A) 5&a(), 4ro2 2y 'o1n) o4 61&=, 1) 1( )3& (u+(;r1+&* ;a'1)a5 ()o;D. %R. %AA%#ONG. T3&n )3a) 1( ;5ar141&*.'? xxxx Au%ust '?, 1120, Saturday
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*S. R"SAR!" BRA! . *ada+ President, ! propose a ne. se$tion to read6 (#;E *ANA4E*EN# B" > ") EGER> C"RP"RA#!"N "R ASS"C!A#!"N S;A<< !N A<< CASES BE C"N#R"<<E B> C!#!QENS ") #;E P;!<!PP!NES.( #his .ill prevent +ana%e+ent $ontra$ts and assure $ontrol by )ilipino $itiHens. @ill the $o++ittee assure us that this a+end+ent .ill insure that past a$tivities su$h as +ana%e+ent $ontra$ts .ill no lon%er be possible under this a+end+entL *R. R"*7<". *ada+ President, if ! +ay reply. #;E PRES! EN#. Co++issioner Ro+ulo is re$o%niHed. *R. R"*7<". *ay ! as5 the proponent to read the a+end+ent a%ain. *S. R"SAR!" BRA! . #he a+end+ent reads6 (#;E *ANA4E*EN# B" > ") EGER> C"RP"RA#!"N "R ASS"C!A#!"N S;A<< !N A<< CASES BE C"N#R"<<E B> C!#!QENS ") #;E P;!<!PP!NES.( *R. E <"S RE>ES. *ada+ President, .ill Co++issioner Rosario Braid a%ree to a refor+ulation of her a+end+ent for it to be +ore $o+prehensive and all-e+bra$in%L #;E PRES! EN#. Co++issioner de los Reyes is re$o%niHed. *R. E <"S RE>ES. #his is an a+end+ent ! sub+itted to the $o++ittee .hi$h reads6 (*A/"R!#> ") #;E !REC#"RS "R #R7S#EES AN A<< #;E ENEC7#!GE AN *ANA4!N4 "))!CERS ") S7C; C"RP"RA#!"N "R ASS"C!A#!"N *7S# BE C!#!QENS ") #;E P;!<!PP!NES.( #his a+end+ent is +ore dire$t be$ause it refers to parti$ular offi$ers to be all-)ilipino $itiHens. *R. BEN4Q"N. *ada+ President. #;E PRES! EN#. Co++issioner Ben%Hon is re$o%niHed. *R. BEN4Q"N. #he $o++ittee sittin% out here a$$epts the a+end+ent of Co++issioner de los Reyes .hi$h subsu+es the a+end+ent of Co++issioner Rosario Braid. #;E PRES! EN#. So this .ill be a 8oint a+end+ent no. of Co++issioners Rosario Braid, de los Reyes and others.
Nazareno
Corporation CASES Based on the Syllabus of Fr. Agustin *R. RE4A<A ". *ada+ President, ! 8oin in that a+end+ent .ith the reIuest that it .ill be the last senten$e of Se$tion 19 be$ause .e intend to put an anterior a+end+ent. ;o.ever, that parti$ular senten$e .hi$h subsu+es also the proposal of Co++issioner Rosario Braid $an 8ust be pla$ed as the last senten$e of the arti$le. #;E PRES! EN#. !s that a$$eptable to the $o++itteeL %S. ROSAR"O #RA" . Y&(. *R. G!<<E4AS. >es, *ada+ President. *S. R"SAR!" BRA! . #han5 you. *R. RA*A, #he body is no. ready to vote on the a+end+ent. )R. BERNAS. *ada+ President. %R. $"LLEGAS. T3a) 1( r1@3). #;E PRES! EN#. Co++issioner Bernas is re$o%niHed. %R. $"LLEGAS. Y&(.
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Nazareno
%R. #ENGAON. %a*a2 !r&(1*&n), " )31nD )3a) =a( (a1* 1n a 2or& &5&@an) 5an@ua@&. :& a;;&') )3& a2&n*2&n). "( )3a) a55 r1@3) =1)3 Co221((1on&r Ro(ar1o #ra1*E
THE !RES" ENT. T3& or1@1na5 au)3or( o4 )31( a2&n*2&n) ar& Co221((1on&r( Ro(ar1o #ra1*, *& 5o( R&y&(, R&@a5a*o, Na)161*a*, Gu1n@ona an* Fr. #&rna(. %R. E LOS REYES. T3& @o6&rn1n@ +o*y r&4&r( )o )3& +oar* o4 *1r&;)or( an* )ru()&&(.
%R. #ENGAON. Y&(, )3& @o6&rn1n@ +o*y r&4&r( )o )3& +oar* o4 *1r&;)or(. )R. BERNAS. @ill the $o++ittee a$$ept a refor+ulation of the first partL %R. REGALA O. ") 1( a;;&')&*. *R. BEN4Q"N. <et us hear it. %R. RA%A. T3& +o*y 1( no= r&a*y )o 6o)&, %a*a2 !r&(1*&n). FR. #ERNAS. T3& r&4or2u5a)1on =155 +& &((&n)1a55y )3& 4or2u5a o4 )3& 19.Con()1)u)1on =31;3 r&a*(B JTHE !ART"C"!AT"ON OF FORE"GN "N$ESTORS "N THE GO$ERN"NG #O Y OF ANY !U#L"C UT"L"TY ENTER!R"SE SHALL #E L"%"TE TO THE"R !RO!ORT"ONATE SHARE "N THE CA!"TAL THEREOF AN SJ %R. $"LLEGAS. JALL THE ENECUT"$E AN %ANAG"NG OFF"CERS OF SUCH COR!ORAT"ONS AN ASSOC"AT"ONS %UST #E C"T"AENS OF THE !H"L"!!"NES.J %R. #ENGAON. :155 Co221((1on&r #&rna( r&a* )3& =3o5& )31n@ a@a1nE FR. #ERNAS. JTHE !ART"C"!AT"ON OF FORE"GN "N$ESTORS "N THE GO$ERN"NG #O Y OF ANY !U#L"C UT"L"TY ENTER!R"SE SHALL #E L"%"TE TO THE"R !RO!ORT"ONATE SHARE "N THE CA!"TAL THEREOFSJ " *o no) 3a6& )3& r&() o4 )3& ;o'y. %R. #ENGAON. JAN ALL THE ENECUT"$E AN %ANAG"NG OFF"CERS OF SUCH COR!ORAT"ONS OR ASSOC"AT"ONS %UST #E C"T"AENS OF THE !H"L"!!"NES.J "( )3a) ;orr&;)E G"#!N4 #;E PRES! EN#. As +any as are in favour of this proposed a+end+ent .hi$h should be the last senten$e of Se$tion 19 and has been a$$epted by the $o++ittee, pleas raise their hand. ,"ll ,embers raised their hand.As +any as are a%ainst, please raise their hand. ,@o ,ember raised his hand.T3& r&(u5)( (3o= 29 6o)&( 1n 4a6our an* non& a@a1n()I (o )3& 'ro'o(&* a2&n*2&n) 1( a''ro6&*.': !t $an be $on$luded that the vie. advan$ed by /usti$e Carpio is in$orre$t as the deliberations easily reveal that)3& 1n)&n) o4 )3& 4ra2&r( =a( no) )o 5121) )3& *&41n1)1on o4 )3& =or* J;a'1)a5J a( 2&an1n@ 6o)1n@ (3ar&(L()o;D( . #he +a8ority in the ori%inal de$ision reprodu$ed the C"NC"* deliberations held on Au%ust 1? and Au%ust 19, 1120, but ne%le$ted to Iuote the other pertinent portions of the deliberations that .ould have shed li%ht on the true intent of the fra+ers of the Constitution.
Corporation CASES Based on the Syllabus of Fr. Agustin !t is $on$eded that Proposed Resolution No. :10 on the lan%ua%e of .hat .ould be Art. N!! of the Constitution $ontained the phrase (votin% sto$5 or $ontrollin% interest,( viH6 PR"P"SE RES"<7#!"N N". :10 RES"<7#!"N #" !NC"RP"RA#E !N #;E NE@ C"NS#!#7#!"N AN AR#!C<E "N NA#!"NA< EC"N"*> AN PA#R!*"N> Be it resolved as it is hereb8 resolved b8 the Constitutional Commission in session assembled! #o in$orporate the National E$ono+y and Patri+ony of the ne. Constitution, the follo.in% provisions6 AR#!C<E^^^^ NA#!"NA< EC"N"*> AN PA#R!*"N> xxxx SEC. 19. No fran$hise, $ertifi$ate, or any other for+ of authoriHation for the operation of a publi$ utility shall be %ranted ex$ept to $itiHens of the Philippines or to $orporations or asso$iations or%aniHed under the la.s of the Philippines a) 5&a() )=o8 )31r*( o4 =3o(& 6o)1n@ ()o;D or ;on)ro551n@ 1n)&r&() 1( o=n&* +y (u;3 ;1)1H&n(. Neither shall any su$h fran$hise or ri%ht be %ranted ex$ept under the $ondition that it shall be sub8e$t to a+end+ent, alteration, or repeal by Con%ress .hen the $o++on %ood so reIuires. #he State shall en$oura%e eIuity parti$ipation in publi$ utilities by the %eneral publi$.'9 ,#his be$a+e Se$. 11, Art. N!!-,E+phasis supplied.#he aforeIuoted deliberations dis$lose that )3& Co221((1on &6&n)ua55y an* un&>u16o;a55y *&;1*&* )o u(& J;a'1)a5,J =31;3 r&4&r( )o )3& ;a'1)a5 ()o;D o4 )3& ;or'ora)1on, Ja( =a( &2'5oy&* 1n )3& 19-, an* 19.- Con()1)u)1on,J 1n()&a* o4 )3& 'ro'o(&* J6o)1n@ ()o;D or ;on)ro551n@ 1n)&r&()J a( )3& +a(1( 4or )3& '&r;&n)a@& o4 o=n&r(31' a55o=&* )o 4or&1@n&r( . #he follo.in% ex$han%es a+on% Co++issioners )oH, SuareH and Ben%Hon refle$t this de$ision, but the +a8ority opinion in the /une '2, '&11 e$ision left their state+ents out6 *R. )"Q. *r. Gi$e-President, in Se$tions ? and 1, '0 )3& 'ro61(1on on &>u1)y 1( +o)3 60 '&r;&n), +u) ! noti$e that )31( 1( no= *144&r&n) 4ro2 the provision in )3& 19.Con()1)u)1on 1n )3a) )3& +a(1( 4or )3& &>u1)y 'ro61(1on 1( 6o)1n@ ()o;D or ;on)ro551n@ 1n)&r&() 1n()&a* o4 )3& u(ua5 ;a'1)a5 per$enta%e as provided for in the 113? Constitution. :& =ou5* 51D& )o Dno= =3a) )3& *144&r&n;& =ou5* +& +&)=&&n )3& 'r&61ou( an* )3& 'ro'o(&* 'ro61(1on( r&@ar*1n@ &>u1)y 1n)&r&(). xxxx
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*R. S7AREQ. x x x As a +atter of fa$t, this parti$ular portion is still bein% revie.ed x x x. !n Se$tion 1, Arti$le N!!! of the 19-, Con()1)u)1on, the .ordin% is that )3& '&r;&n)a@& (3ou5* +& +a(&* on )3& ;a'1)a5 =31;3 1( o=n&* +y (u;3 ;1)1H&n(. "n )3& 'ro'o(&* *ra4), )31( '3ra(& =a( 'ro'o(&*B J6o)1n@ ()o;D or ;on)ro551n@ 1n)&r&().J #his .as a plan (u+21))&* +y )3& U! La= C&n)&r. x x x @e .ould 3a6& )3r&& ;r1)&r1a to %o by6 On& =ou5* +& +a(&* on ;a'1)a5, =31;3 1( ;a'1)a5 ()o;D o4 )3& ;or'ora)1on, au)3or1H&*, (u+(;r1+&* or 'a1* u', a( &2'5oy&* un*&r )3& 19-, an* )3& 19.- Con()1)u)1on . #he idea behind the introdu$tion of the phrase (votin% sto$5 or $ontrollin% interest( .as pre$isely to avoid the perpetration of du++ies, )ilipino du++ies of +ultinationals. !t is theoreti$ally possible that a situation +ay develop .here these +ultinational interests .ould not really be only :& per$ent but .ill extend beyond that in the +atter of votin% be$ause they $ould enter into .hat is 5no.n as a votin% trust or votin% a%ree+ent .ith the rest of the sto$5holders and, therefore, not.ithstandin% the fa$t that on re$ord their $apital extent is only up to :&- per$ent interest in the $orporation, a$tually, they .ould be +ana%in% and $ontrollin% the entire $o+pany. #hat is .hy the 7P <a. Center +e+bers su%%ested that .e utiliHe the .ords (votin% interest( .hi$h .ould pre$lude +ultinational $ontrol in the +atter of votin%, independent of the $apital stru$ture of the $orporation. And then )3&y a5(o a**&* )3& '3ra(& J;on)ro551n@ 1n)&r&() ( .hi$h up to no. they have not been able to su$$essfully define the exa$t +eanin% of. x x x And as far as ! a+ $on$erned, ! a+ not spea5in% in behalf of the Co++ittee, ! .ould feel +ore ;o24or)a+5& 14 =& @o +a;D )o the .ordin% of )3& 19-, an* )3& 19.Con()1)u)1on, )3a) 1( )o (ay, )3& 60840 '&r;&n)a@& ;ou5* +& +a(&* on )3& ;a'1)a5 ()o;D o4 )3& ;or'ora)1on. xxxx *R. BEN4Q"N. ! also share the senti+ent of Co++issioner SuareH in that respe$t. So there are already t.o in the Co++ittee .ho .ant to %o ba$5 to the .ordin% of the 11?9 and the 113? Constitution.'3 !n fa$t, in another portion of the C"NC"* deliberations $onveniently %lossed over by the /une '2, '&11 e$ision, then Co++issioner avide stron%ly resisted the retention of the ter+ ($apital( as used in the 11?9 and 113? Constitution on the %round that the ter+ refers to both votin% and nonvotin%. Eventually, ho.ever, he $a+e around to a$$ept the use of (CAP!#A<( alon% .ith the +a8ority of the +e+bers of the Co++ittee on Natural E$ono+y and Patri+ony in the afternoon session held on Au%ust 19, 11206 %R. TREQAS. x x x 2ay " 'ro'o(& an a2&n*2&n) on line 1: of Se$tion ? +y *&5&)1n@ )3&r&4ro2 J=3o(& 6o)1n@ ()o;D an* ;on)ro551n@ 1n)&r&().J And 1n 51&u )3&r&o4, 1n(&r) )3& CA!"TAL (o )3& 51n& (3ou5* r&a*B Ja((o;1a)1on( a) 5&a() (17)y '&r;&n) o4 )3& CA!"TAL 1( o=n&* +y (u;3 ;1)1H&n(.
Nazareno
Corporation CASES Based on the Syllabus of Fr. Agustin %R. $"LLEGAS. :& a;;&') )3& a2&n*2&n). %R. TREQAS. T3anD you. THE !RES" ENT. T3& a2&n*2&n) o4 Co221((1on&r Tr&Ra( on 51n& 14 3a( +&&n a;;&')&* +y )3& Co221))&&. "( )3&r& any o+?&;)1onE / 6ilence0 T3& C3a1r 3&ar( non&I )3& a2&n*2&n) 1( a''ro6&*.'2 xxxx *R. S7AREQ. x x x #.o points are bein% raised by Co++issioner avideCs proposed a+end+ent. "ne has referen$e to the per$enta%e of holdin%s and the other one is the basis for the per$enta%e x x x x "( )3& Co221((1on&r no) 1n(1()1n@ on )3& 6o)1n@ ;a'1)a5 ()o;D +&;au(& )3a) =a( a5r&a*y a;;&')&* +y )3& Co221))&&E *R. AG! E. @ould it +ean that it .ould be 1&&-per$ent votin% $apital sto$5L *R. S7AREQ. No, under the Co++issionerCs proposal it is 8ust (CAP!#A<( not (sto$5.( *R. AG! E. No, ! .ant it to be very $lear. @hat is the alternative proposal of the Co++itteeL ;o. shall it readL *R. S7AREQ. !t .ill only read so+ethin% li5e6 (the CAP!#A< ") @;!C; !S )7<<> o.ned.( *R. G!<<E4AS. <et +e read lines 1' to 1: .hi$h state6 O enter into $o-produ$tion, 8oint venture, produ$tion sharin% a%ree+ents .ith )ilipino $itiHens or $orporations or asso$iations at least 0& per$ent of .hose CAP!#A< is o.ned by su$h $itiHens. @e are %oin% ba$5 to the 11?9 and 113? for+ulations. %R. A$" E. " ;anno) a;;&') )3& 'ro'o(a5 +&;au(& )3& =or* CA!"TAL (3ou5* no) r&a55y +& )3& @u1*1n@ 'r1n;1'5&. ") 1( )3& o=n&r(31' o4 )3& ;or'ora)1on. ") 2ay +& 6o)1n@ or no) 6o)1n@, +u) )3a) 1( no) )3& @u1*1n@ 'r1n;1'5&. xxxx #;E PRES! EN#O. Co++issioner avide is to $larify his point.
1&:
Nazareno
%R. $"LLEGAS. Y&(, Co221((1on&r a61*& 3a( a;;&')&* )3& =or* JCA!"TALJ 1n '5a;& o4 J6o)1n@ ()o;D or ;on)ro551n@ 1n)&r&().J T31( 1( an a2&n*2&n) a5r&a*y a;;&')&* +y )3& Co221))&&.'1 #he above ex$han%e pre$edes the $larifi$ations +ade by then Co++issioner AH$una, .hi$h .ere $ited in the /une '2, '&11 e$ision. *oreover, the state+ents +ade subseIuent to the portion Iuoted in the /une '2, '&11 e$ision e+phasiHe the C"NC"*Cs a.areness of the plain +eanin% of the ter+ ($apital( .ithout the Iualifi$ation espoused in the +a8orityCs de$ision6 *R. AQC7NA. *ay ! be $larified as to A.hatB .as a$$epted x x x. *R. G!<<E4AS. #he portion a$$epted by the Co++ittee is the *&5&)1on o4 )3& '3ra(& J6o)1n@ ()o;D or ;on)ro551n@ 1n)&r&() .( *R. AQC7NA. ;en$e, .ithout the avide a+end+ent, the $o++ittee report .ould read6 ($orporations or asso$iations at least sixty per$ent of .hose CAP!#A< is o.ned by su$h $itiHens.( *R. G!<<E4AS. >es. *R. AQC7NA. So 14 )3& a61*& a2&n*2&n) 1( 5o(), =& ar& ()u;D =1)3 60 '&r;&n) o4 )3& ;a'1)a5 )o +& o=n&* +y ;1)1H&n(E *R. G!<<E4AS. #hat is ri%ht. *R. AQC7NA. But the $ontrol $an be .ith the forei%ners even if they are the +inority. <et us say :& per$ent of the $apital is o.ned by the+, but it is the votin% $apital, .hereas, the )ilipinos o.n the nonvotin% shares. So .e $an have a situation .here the $orporation is $ontrolled by forei%ners despite bein% the +inority be$ause they have the votin% $apital. #hat is the ano+aly that .ould result here. *R. BEN4Q"N. No, the reason .e eli+inated the .ord (sto$5( as stated in the 113? and 11?9 Constitutions is that xxx there are asso$iations that do not have sto$5s. #hat is .hy .e say (CAP!#A<.( *R. AQC7NA. @e should not eli+inate the phrase ($ontrollin% interest.( *R. BEN4Q"N. !n the $ase of sto$5 $orporation, it is assu+ed.
Corporation CASES Based on the Syllabus of Fr. Agustin *R. AQC7NA. >es, but .hat ! +ean is that the $ontrol should be .ith the )ilipinos. *R. BEN4Q"N. >es, that is understood. %R. AACUNA. Y&(, +&;au(& 14 =& ?u() (ay J(17)y '&r;&n) o4 =3o(& ;a'1)a5 1( o=n&* +y )3& F151'1no(,J )3& ;a'1)a5 2ay +& 6o)1n@ or non86o)1n@. %R. #ENGAON. T3a) 1( ;orr&;).?& *ore i+portantly, on the very sa+e Au%ust 19, 1120 session, Co++issioner AH$una no lon%er insisted on retainin% the deli+itin% phrase ($ontrollin% interest(6 *R. 4ARC!A. #han5 you very +u$h, *ada+ President. ! .ould li5e to propose the follo.in% a+end+ent on Se$tion ?, line 1: on pa%e '. ! propose to $han%e the .ord (sixty( to SEGEN#>-)!GE. So, this .ill read6 (or it +ay enter into $o-produ$tion, 8oint venture, produ$tion sharin% a%ree+ents .ith )ilipino $itiHens or $orporations or asso$iations at least SEGEN#>-)!GE per$ent of .hose CAP!#A< sto$5 or $ontrollin% interest is o.ned by su$h $itiHens.( *R. G!<<E4AS. #his is 8ust a $orre$tion . " )31nD Co221((1on&r AH;una 1( no) 1n(1()1n@ on )3& r&)&n)1on o4 )3& '3ra(& J;on)ro551n@ 1n)&r&(),J (o =& =155 r&)a1n JCA!"TALJ )o @o +a;D r&a55y )o )3& 19-, an* 19.- 4or2u5a)1on( .?1 ,E+phasis supplied.#he later deliberations held on Au%ust '', 1120 further unders$ore the fra+ersC true intent to in$lude both votin% and non-votin% shares as $o+in% .ithin the pale of the .ord ($apital.( #he 7P <a. Center atte+pted to li+it the s$ope of the .ord alon% the line then and no. adopted by the +a8ority, but, as $an be %leaned fro+ the follo.in% dis$ussion, )3& 4ra2&r( o')&* no) )o a*o') )3& 'ro'o(a5 o4 )3& U! La= C&n)&r )o a** )3& 2or& 'ro)&;)1on1() '3ra(& J6o)1n@ ()o;D or ;on)ro551n@ 1n)&r&()J 6 *R. N"<<E ". x x x ! .ould li5e to propound so+e Iuestions xxx. ! have here a $opy of the approved provisions on Arti$le on the National E$ono+y and Patri+ony. x xx ! noti$e that this provision .as a+ended by Co++issioner avide by $han%in% (votin% sto$5s( to (CAP!#A<,( but ! still noti$e that there appears the ter+ ($ontrollin% interest( x x x. Besides, the .ordin%s +ay indi$ate that the 0& per$ent +ay be based not only on $apital but also on $ontrollin% interestD it $ould +ean 0& per$ent or 91 per$ent.
1&9
Before ! propound the final Iuestion, ! .ould li5e to +a5e a $o++ent in relation to Se$tion 19 sin$e they are related to ea$h other. ! noti$e that in Se$tion 19, there still appears the phrase (votin% sto$5 or $ontrollin% interest.( #he ter+ (votin% sto$5s( as the basis of the )ilipino eIuity +eans that if 0& per$ent of the votin% sto$5s belon% to )ilipinos, forei%ners +ay no. o.n +ore than :& per$ent of the $apital as lon% as the :& per$ent or the ex$ess thereof .ill $over nonvotin% sto$5. #his is aside fro+ the fa$t that under the Corporation Code, even nonvotin% shares $an vote on $ertain instan$es.Con)ro5 o6&r 1n6&()2&n)( 2ay ;o6&r a('&;)( o4 2ana@&2&n) an* 'ar)1;1'a)1on 1n )3& 4ru1)( o4 'ro*u;)1on or &7'5o1)a)1on. So, " 3o'& )3& ;o221))&& =155 ;on(1*&r 4a6ora+5y 2y r&;o22&n*a)1on )3a) 1n()&a* o4 u(1n@ J;on)ro551n@ 1n)&r&()(,J =& ?u() u(& JCA!"TALJ un14or25y 1n ;a(&( =3&r& 4or&1@n &>u1)y 1( '&r21))&* +y 5a=, +&;au(& )3& 'ur'o(& 1( r&a55y )o 3&5' )3& F151'1no( 1n )3& &7'5o1)a)1on o4 na)ura5 r&(our;&( an* 1n )3& o'&ra)1on o4 'u+51; u)151)1&(. x x x @hat does the $o++ittee sayL %R. $"LLEGAS. :& ;o2'5&)&5y a@r&& .ith the Co++issionerCs vie.s . A$tually, it .as really an oversi%ht. :& *1* *&;1*& on )3& =or* JCA!"TAL.J " )31nD 1) =a( )3& o'1n1on o4 )3& 2a?or1)y )3a) )3& '3ra(& J;on)ro551n@ 1n)&r&()J 1( a2+1@uou(. So, =& *o a;;&') )3& Co221((1on&rC( 'ro'o(a5 )o &5121na)& )3& '3ra(& Jor ;on)ro551n@ 1n)&r&()J 1n a55 )3& 'ro61(1on( )3a) )a5D a+ou) 4or&1@n 'ar)1;1'a)1on. *R. N"<<E ". Not only in Se$tion ?, but also .ith respe$t to Se$tion 19.?' ,E+phasis supplied.!n fa$t, on the very sa+e day of deliberations, the Co++issioners $larified that the proper and +ore spe$ifi$ (interpretation( that should be atta$hed to the .ord ($apital( is that it refers to the (subs$ribed $apital,( a $orporate $on$ept defined as (that portion of the authoriHed $apital sto$5 that is $overed by subs$ription a%ree+ents .hether fully paid or not(?? and refers to both votin% and non-votin% shares6 %R. %AA%#ONG. x x x " =ou5* 51D& )o +& ;5ar141&* on )3& u(& o4 )3& =or* JCA!"TAL.J %R. $"LLEGAS. Y&(, )3a) =a( )3& =or* u(&* 1n )3& 19.- an* )3& 19-, Con()1)u)1on(. *R. *AA*B"N4. <et us deli+it ourselves to that .ord (CAP!#A<.( !n the Corporation <a., if ! re+e+ber $orre$tly, .e have three types of $apital6 the authoriHed $apital sto$5, the subs$ribed $apital sto$5 and the paid-up $apital sto$5.
Nazareno
Corporation CASES Based on the Syllabus of Fr. Agustin xxxx ! .ould li5e to %et $larifi$ation on this. "4 " r&2&2+&r 2y ;or'ora)1on 5a= ;orr&;)5y, =& u(ua55y u(& a *&)&r21nan) 1n or*&r )o 41n* ou) =3a) )3& ra)1o o4 o=n&r(31' 1(, no) r&a55y on )3& 'a1*8u' ;a'1)a5 ()o;D +u) on )3& (u+(;r1+& ;a'1)a5 ()o;D. xxxx x x x ! .ould li5e to 5no. .hether ,Co++issioner SuareH- is deter+ined to put on the re$ord that in order to deter+ine the 0&-:& per$ent sharin%, .e have to deter+ine .hether .e .ill use a deter+inant .hi$h is the subs$ribed $apital sto$5 or the paid-up $apital sto$5. %R. SUAREA. :& ar& 'r1n;1'a55y ;on;&rn&* a+ou) )3& 1n)&r'r&)a)1on =31;3 =ou5* +& a))a;3&* )o 1), )3a) 1(, 1) (3ou5* +& 5121)&* )o au)3or1H&* ;a'1)a5 ()o;D, no) )o (u+(;r1+&* ;a'1)a5 ()o;D. ! .ill %ive the Co++issioner an illustration of .hat he is explainin% to the Co++ission. xxxx <et us say authoriHed $apital sto$5 is P 1 +illion. 7nder the present rules in the ASECB, at least '9 per$ent of that a+ount +ust be subs$ribed and at least '9 per$ent of this subs$ribed $apital +ust be paid up. No., let us dis$uss the basis of 0&-:&. #o illustrate the +atter further, let us say that 0& per$ent of the subs$riptions .ould be allo$ated to )ilipinos and :& per$ent of the subs$ribed $apital sto$5 .ould be held by forei%ners. #hen .e $o+e to the paid-up $apitaliHation. 7nder the present rules in the ASECB, a forei%n $orporation is supposed to subs$ribe to :&-per$ent share .hi$h +ust be fully paid up. "n the other hand, the 0& per$ent allo$ated to )ilipinos need not be paid up. ;o.ever, at least '9 per$ent of the subs$ription +ust be paid up for purposes of $o+plyin% .ith the Corporation <a.. @e $an illustrate the +atter further by sayin% that the $o+plian$e of '9 per$ent paid-up of the subs$ribed $apital .ould be fulfilled by the full pay+ent of the :& per$ent by the forei%ners. So, .e have a situation .here the )ilipino per$enta%e of 0& +ay not even $o+ply .ith the '9-per$ent reIuire+ent be$ause of the totality due to the full pay+ent of the :&per$ent of the forei%n investors, the pay+ent of '9 per$ent paid-up on the subs$ription .ould have been $onsidered fulfilled. #hat is exa$tly .hat .e are tryin% to avoid.
1&0
*R. *AA*B"N4. ! appre$iate very +u$h the explanation but ! .onder if the $o++ittee .ould subs$ribe to that vie. be$ause ! .ill sti$5 to +y thin5in% that in the $o+putation of the 0&-:& ratio, the basis should be on the subs$ription. x x x xxxx *R. R"*7<". :& @o +y )3& &()a+51(3&* ru5& =31;3 " +&51&6& 1( un14or25y 3&5*. ") 1( +a(&* on )3& (u+(;r1+&* ;a'1)a5. x x x xxxx ! do not thin5 that .e $ontradi$t ea$h other. ,Co++isioner SuareH- is tal5in% really of the instan$e .here the subs$riber is a non-resident and, therefore, +ust fully pay. #hat is ho. ! understand his position. *R. *AA*B"N4. *y understandin% is that in the $o+putation of the 0&-:& sharin% under the present for+ulation, the deter+inant is the paid-up $apital sto$5 to .hi$h ! disa%ree. *R . R"*7<". At least, fro+ +y point of vie., 1) 1( )3& (u+(;r1+&* ;a'1)a5 ()o;D.(?: Clearly, .hile the $on$ept of votin% $apital as the nor+ to deter+ine the 0&-:& )ilipino-alien ratio .as initially debated upon as a result of the 'ro'o(a5 to use (at least two thirds of whose voting stoc$ or controlling interest is owned b8 such citi(ens!(?9 in .hat .ould eventually be Se$. 11, Art. N!! of the Constitution, that proposal .as eventually *1(;ar*&*. And no.here in the re$ords of the C"NC"* $an it be dedu$ed that the idea of full o.nership of votin% sto$5s presently parlayed by the +a8ority .as earnestly, if at all, $onsidered. !n fa$t, the fra+ers de$ided that the ter+ ($apital,( as used in the 11?9 and 113? Constitutions, should be properly interpreted as the (subs$ribed $apital,( .hi$h, a%ain, does not distin%uish sto$5s based on their board-+e+bership votin% features. !ndeed, the phrase (voting stoc$ or controlling interest( .as su%%ested for and in fa$t deliberated, but .as si+ilarly dropped in the approved draft provisions on National E$ono+y and Patri+ony, parti$ularly in .hat .ould be$o+e Se$tions ' ?0 and 1&,?3 Arti$le N!! of the 1123 Constitution. ;o.ever, the fra+ers expressed preferen$e to the for+ulation of the provision in Iuestion in the 11?9 and 113? Constitutions, both of .hi$h e+ployed the .ord ($apital( alone. #his .as very apparent in the afore+entioned deliberations and affir+ed by amicus curiae r. Bernardo Gille%as, Chair of the Co++ittee on the National E$ono+y and Patri+ony in $har%e of draftin% Se$tion 11 and the rest of Arti$le N!! of the Constitution. urin% the /une '0, '&1' oral ar%u+ents, r. Gille%as +anifested that6
Nazareno
Corporation CASES Based on the Syllabus of Fr. Agustin x x x /usti$e Abad .as ri%ht. A!f iBt .as not in the +inds of the Co++issioners to define $apital broadly, these additional provisions .ould be +eanin%less. And it .ould have been really +ore or less expressin% so+e 5ind of a $ontradi$tion in ter+s. So, that is .hy ! .as pleasantly surprised that one of the +ost pro-)ilipino +e+bers of the Co++ission, Atty. /ose SuareH, .ho a$tually voted (N"( to the entire Constitution has only said, .as one of the first to insist, durin% one of the plenary sessions that .e should re8e$t the 7P <a. Center re$o++endation. "n 31( =or*(, " >uo)& J" =ou5* 4&&5 2or& ;o24or)a+5& 14 =& @o +a;D )o )3& =or*1n@ o4 )3& 19-, an* 19.0 Con()1)u)1on( )3a) 1( )o (ay )3& 60840 '&r;&n)a@& ;ou5* +& +a(&* on )3& ;a'1)a5 ()o;D o4 )3& ;or'ora)1on.J #he final +otion .as +ade by Co++issioner Efren #rePas, in the sa+e plenary session .hen he +oved, (*ada+ President, +ay ! propose an a+end+ent on line 1: of Se$tion ? by deletin% therefro+ K.hose votin% sto$5 and $ontrollin% interestC and in lieu thereof, insert $apital, so the line should read6 (asso$iations of at least sixty per$ent ,0&=- of the $apital is o.ned by su$h $itiHens.( A4)&r " a;;&')&* )3& a2&n*2&n) (1n;& " =a( )3& ;3a1r2an o4 )3& Na)1ona5 E;ono2y Co221))&&, 1n )3& na2& o4 )3& Co221))&&, )3& !r&(1*&n) o4 )3& Co221((1on a(D&* 4or any o+?&;)1on. :3&n no on& o+?&;)&*, )3& !r&(1*&n) (o5&2n5y announ;&* )3a) )3& a2&n*2&n) 3a* +&&n a''ro6&* +y )3& !5&nary. ") 1( ;5&ar, )3&r&4or&, )3a) 1n )3& 21n*( o4 )3& Co221((1on&r( )3& =or* J;a'1)a5J 1n S&;)1on 11 o4 Ar)1;5& N"" r&4&r(, no) )o 6o)1n@ ()o;D, +u) )o )o)a5 (u+(;r1+&* ;a'1)a5, +o)3 ;o22on an* 'r&4&rr&*.?2 ,E+phasis supplied.T3&r& =a( no ;3an@& 1n '3ra(&o5o@y 4ro2 )3& 19-, an* 19.Con()1)u)1on(, or a )ran(1)ory 'ro61(1on )3a) (1@na5( (u;3 ;3an@&, =1)3 r&('&;) )o 4or&1@n o=n&r(31' 1n 'u+51; u)151)y ;or'ora)1on( /2n* &7)r1n(1; a1*0 !f the fra+ers .anted the .ord ($apital( to +ean votin% $apital sto$5, their ter+inolo%y .ould have $ertainly been un+ista5ably li+itin% as to leave no doubt about their intention. But )3& 4ra2&r( ;on(;1ou(5y an* 'ur'o(&5y &7;5u*&* r&()r1;)16& '3ra(&(, su$h as (votin% sto$5s( or ($ontrollin% interest,( in the approved final draft, the proposal of the 7P <a. Center, Co++issioner avide and Co++issioner AH$una not.ithstandin%. !nstead, they retained ($apital( as (used in the 11?9 and 113? Constitutions.(?1 #here .as, therefore, a $ons$ious desi%n to avoid strin%ent .ords that .ould li+it the +eanin% of ($apital( in a sense insisted upon by the +a8ority. Cassus omissus pro omisso habendus estFFa person, ob8e$t, or thin% o+itted +ust have been o+itted intentionally. *ore i+portantly, by usin% the .ord ($apital,( the intent of the fra+ers of the Constitution .as to in$lude a55 types of shares, .hether votin% or nonvotin%, .ithin the a+bit of the .ord. H1()ory or r&a51)1&( or ;1r;u2()an;&( *ra4)1n@ o4 )3& Con()1)u)1on 6a51*a)& )3& 2&an1n@ o4 JCa'1)a5J /-r* &7)r1n(1; a1*0 'r&6a151n@ *ur1n@ )3& a*o')1on o4 )3& '5a1n
1&3
#his plain, non-ex$lusive interpretation of ($apital( also $o+es to li%ht $onsiderin% the e$ono+i$ ba$5drop of the 1120 C"NC"* .hen the $ountry .as still startin% to rebuild the finan$ial +ar5ets and re%ain the forei%n investorsC $onfiden$e follo.in% the $han%es $aused by the topplin% of the *artial <a. re%i+e. As previously pointed out, the Court, in $onstruin% the Constitution, +ust ta5e into $onsideration the ai+s of its fra+ers and the evils they .ished to avoid and address. !n Ci9il Liber"ies 7nion 9. 8<ecu"i9e 6ecre"ary,:& @e held6 A foolproof yardsti$5 in $onstitutional $onstru$tion is the intention underlyin% the provision under $onsideration. #hus, it has been held that )3& Cour) 1n ;on()ru1n@ a Con()1)u)1on (3ou5* +&ar 1n 21n* )3& o+?&;) (ou@3) )o +& a;;o2'51(3&* +y 1)( a*o')1on, an* )3& &615(, 14 any, (ou@3) )o +& 'r&6&n)&* or r&2&*1&* . A doubtful provision .ill be exa+ined in the li%ht of the history of the ti+es, and the $ondition and $ir$u+stan$es under .hi$h the Constitution .as fra+ed. T3& o+?&;) 1( )o a(;&r)a1n )3& r&a(on =31;3 1n*u;&* )3& 4ra2&r( o4 )3& Con()1)u)1on )o &na;) )3& 'ar)1;u5ar 'ro61(1on an* )3& 'ur'o(& (ou@3) )o +& a;;o2'51(3&* )3&r&+y, 1n or*&r )o ;on()ru& )3& =3o5& a( )o 2aD& )3& =or*( ;on(onan) )o )3a) r&a(on an* ;a5;u5a)&* )o &44&;) )3a) 'ur'o(&. ,E+phasis supplied.!t is, thus, proper to revisit the $ir$u+stan$es prevailin% durin% the draftin% period. !n an astute observation of the e$ono+i$ realities in 1120, Iuoted by respondent Pan%ilinan, 7niversity of the Philippines S$hool of E$ono+i$s Professor r. E++anuel S. de ios exa+ined the nationCs dire need for forei%n invest+ents and forei%n ex$han%e durin% the ti+e .hen the fra+ers deliberated on .hat .ould eventually be the National E$ono+y and Patri+ony provisions of the Constitution6 T3& '&r1o* 122&*1a)&5y a4)&r )3& 1986 E SA R&6o5u)1on 1( =&55 Dno=n )o 3a6& =1)n&((&* )3& ;oun)ryC( *&&'&() &;ono21; ;r1(1( (1n;& )3& S&;on* :or5* :ar. "ffi$ial data readily sho. this period .as $hara$terised by the hi%hest une+ploy+ent, hi%hest interest rates, and lar%est $ontra$tions in output the Philippine e$ono+y experien$ed in the post.ar period. At the start of the AIuino ad+inistration in 1120, total output had already $ontra$ted by +ore than seven per$ent annually for t.o $onse$utive years ,112: and 1129-, inflation .as runnin% at an avera%e of ?9 per$ent, une+ploy+ent +ore than 11 per$ent, and the $urren$y devalued by ?9 per$ent. T3& 'ro712a)& r&a(on 4or )31( =a( )3& 2ora)or1u2 on 4or&1@n*&+) 'ay2&n)( )3& ;oun)ry 3a* ;a55&* 1n 5a)& 198-, &44&;)16&5y ;u))1n@ o44 )3& ;oun)ryC( a;;&(( )o 1n)&rna)1ona5 ;r&*1) 2arD&)( ,for a deeper $onte+porary analysis of .hat led to the debt $risis, see de ios 112:-. T3& ;oun)ry )3&r&4or& 3a* )o (u+(1() on5y on 1)( ;urr&n) &arn1n@( 4ro2 &7'or)(, =31;3 2&an) )3&r& =a( a ;r1)1;a5 (3or)a@& o4 4or&1@n &7;3an@&. "2'or)( &('&;1a55y o4 ;a'1)a5 @oo*( an* 1n)&r2&*1a)& @oo*( )3&r&4or& 3a* )o +& *ra()1;a55y ;ur)a15&* x x x.
Nazareno
Corporation CASES Based on the Syllabus of Fr. Agustin )or the sa+e reasons, obviously, ne. forei%n invest+ents .ere unli5ely to be forth$o+in%. #his is re$orded by Bautista '&&?6192, .ho .rites6 <on%-ter+ $apital inflo.s have been risin% at double-di%it rates sin$e 112&, &7;&') *ur1n@ 198681990, a )12& o4 @r&a) 'o51)1;a5 an* &;ono21; un;&r)a1n)y 4o55o=1n@ )3& '&r1o* o4 2ar)1a5 5a= un*&r !r&(1*&n) %ar;o(. #he forei%n-ex$han%e $ontrols then effe$tively in pla$e .ill have +ade i+portin% inputs diffi$ult for ne. enterprises, parti$ularly forei%n investors ,espe$ially /apaneseinterested in relo$atin% so+e of theirexport-oriented but i+port-dependent operations to the Philippines. x x x #he sa+e forei%n-ex$han%e restri$tions .ould have +ade the freedo+ to re+it profits a di$ey affairs. )inally, ho.ever, the period .as also $hara$terised by extre+e politi$al un$ertainty, .hi$h did not $ease even after the *ar$os re%i+e .as toppled.:1 x x x Surely, it .as far fro+ the +inds of the fra+ers to alienate and disenfran$hise forei%n investors by i+posin% an indire$t restri$tion that only exa$erbates the di$hoto+y bet.een +ana%e+ent and o.nership .ithout the a$tual %uarantee of %ivin% $ontrol and prote$tion to the )ilipino investors. !nstead, it $an be fairly assu+ed that the fra+ers intended to avoid further e$ono+i$ +eltdo.n and so $hose to attra$t forei%n investors by allo.in% the+ to :&= eIuity o.nership of the entirety of the $orporate shareholdin%s but, .isely, i+posin% li+its on their parti$ipation in the %overnin% body to ensure that the effe$tive $ontrol and ulti+ate e$ono+i$ benefits still re+ained .ith the )ilipino shareholders. Ju*1;1a5 *&;1(1on( an* 'r1or 5a=( J;a'1)a5J a( J;a'1)a5 ()o;DJ /4)3 &7)r1n(1; a1*0 u(& an*Lor )r&a)
1&2
servi$e proposed and the authoriHation to do business .ill pro+ote the publi$ interest in a proper and suitable +anner. Provided, #hat thereafter, ;&r)141;a)&( o4 'u+51; ;on6&n1&n;& an* ;&r)141;a)&( o4 'u+51; ;on6&n1&n;& an* n&;&((1)y =155 +& @ran)&* on5y )o $itiHens of the Philippines or of the 7nited States or to ;or'ora)1on(, ;o8'ar)n&r(31'(, a((o;1a)1on( or ?o1n)8()o;D ;o2'an1&( ;on()1)u)&* an* or@an1H&* un*&r )3& 5a=( o4 )3& !3151''1n&(I !ro61*&*, T3a) (17)y '&r ;&n)u2 o4 )3& ()o;D or 'a1*8u' ;a'1)a5 o4 any (u;3 ;or'ora)1on(, ;o8'ar)n&r(31', a((o;1a)1on or ?o1n)8()o;D ;o2'any 2u() +&5on@ &n)1r&5y )o ;1)1H&n( o4 )3& !3151''1n&( or of the 7nited States6 Provided, further, #hat no su$h $ertifi$ates shall be issued for a period of +ore than fifty years. ,E+phasis supplied.#he headin% of Se$. ' of Co++on.ealth A$t No. ,CA- 1&2, or the Anti- u++y <a., .hi$h .as approved on "$tober ?&, 11?0, si+ilarly $onveys the idea that the ter+ ($apital( is eIuivalent to ($apital sto$5(::6 Se$tion '. 6imula"ion of minimum capi"al s"ocB J "n a55 ;a(&( 1n =31;3 a ;on()1)u)1ona5 or 5&@a5 'ro61(1on r&>u1r&( )3a), 1n or*&r )3a) a ;or'ora)1on or a((o;1a)1on 2ay &7&r;1(& or &n?oy a r1@3), 4ran;31(& or 'r1615&@&, no) 5&(( )3an a ;&r)a1n '&r ;&n)u2 o4 1)( ;a'1)a5 2u() +& o=n&* +y ;1)1H&n( o4 )3& !3151''1n&( or of any other spe$ifi$ $ountry, it shall be unla.ful to falsely si+ulate the existen$e of su$h 21n12u2 ()o;D or ;a'1)a5 as o.ned by su$h $itiHens, for the purpose of evadin% said provision. #he president or +ana%ers and dire$tors or trustees of $orporations or asso$iations $onvi$ted of a violation of this se$tion shall be punished by i+prison+ent of not less than five nor +ore than fifteen years, and by a fine not less than the value of the ri%ht, fran$hise or privile%e, en8oyed or a$Iuired in violation of the provisions hereof but in no $ase less than five thousand pesos.:9 ,E+phasis and unders$orin% supplied.Pursuant to these le%islative a$ts and under the ae%is of the Constitutional nationality reIuire+ent of publi$ utilities then in for$e, Con%ress %ranted various fran$hises upon the understandin% that the ($apital sto$5( of the %rantee is at least 0&= )ilipino. !n 110:, Con%ress, via Republi$ A$t No. ,RA- :1:3, :0 %ranted )ilipinas "rient Air.ay, !n$. a le%islative fran$hise to operate an air $arrier upon the understandin% that its ($apital sto$5( .as 0&= per$ent )ilipino-o.ned. Se$tion 1: of RA :1:3, provided6 Se$. 1:. #his fran$hise is %ranted .ith the understandin% that )3& @ran)&& 1( a ;or'ora)1on (17)y '&r ;&n) o4 )3& ;a'1)a5 ()o;D o4 =31;3 1( )3& +ona 41*& 'ro'&r)y o4 ;1)1H&n( o4 )3& !3151''1n&( and that the interest of su$h $itiHens in its $apital sto$5 or in the $apital of the Co+pany .ith .hi$h it +ay +er%e shall at no ti+e be allo.ed to fall belo. su$h per$enta%e, under the penalty of the $an$ellation of this fran$hise. ,E+phasis and unders$orin% supplied.-
Nazareno
#hat the ter+ ($apital( in Se$. 11, Art. N!! is eIuivalent to ($apital sto$5,( .hi$h en$o+passes all $lasses of shares re%ardless of their no+en$lature or votin% $apa$ity, is easily deter+ined by a revie. of various la.s passed prior to the ratifi$ation of the 1123 Constitution. !n 11?0, for instan$e, the Publi$ Servi$e A$t :' established the nationality reIuire+ent for $orporations that +ay be %ranted the authority to operate a (publi$ servi$e,(:? .hi$h in$lude +ost of the present-day publi$ utilities, by referrin% to the paid-up ($apital sto$5( of a $orporation, viH6 Se$. 10. Pro$eedin%s of the Co++ission, upon noti$e and hearin%. F #he Co++ission shall have po.er, upon proper noti$e and hearin% in a$$ordan$e .ith the rules and provisions of this A$t, sub8e$t to the li+itations and ex$eptions +entioned and savin% provisions to the $ontrary6 ,a- #o issue $ertifi$ates .hi$h shall be 5no.n as $ertifi$ates of publi$ $onvenien$e, authoriHin% the operation of publi$ servi$e .ithin the Philippines .henever the Co++ission finds that the operation of the publi$
Corporation CASES Based on the Syllabus of Fr. Agustin #he %rant of a publi$ utility fran$hise to Air *anila. !n$. to establish and +aintain air transport in the $ountry a year later pursuant to RA :9&1 :3 $ontained exa$tly the sa+e )ilipino $apitaliHation reIuire+ent i+posed in RA :1:36 Se$. 1:. #his fran$hise is %ranted .ith the understandin% that the %rantee is a $orporation, (17)y '&r ;&n) o4 )3& ;a'1)a5 ()o;D o4 =31;3 1( o=n&* or )3& +ona 41*& 'ro'&r)y o4 ;1)1H&n( o4 )3& !3151''1n&( and that the interest of su$h $itiHens in its $apital sto$5 or in the $apital of the $o+pany .ith .hi$h it +ay +er%e shall at no ti+e be allo.ed to fall belo. su$h per$enta%e, under the penalty of the $an$ellation of this fran$hise. ,E+phasis and unders$orin% supplied.!n li5e +anner, RA 991:,:2 .hi$h %ranted a fran$hise to the Philippine Co++uni$ations Satellite Corporation in 1101, reIuired of the %rantee to exe$ute +ana%e+ent $ontra$ts only .ith $orporations .hose ($apital or $apital sto$5( are at least 0&= )ilipino6 Se$. 1. #he %rantee shall not lease, transfer, %rant the usufru$t of, sell or assi%n this fran$hise to any person or entity, ex$ept any bran$h or instru+entality of the 4overn+ent, .ithout the previous approval of the Con%ress of the Philippines6 Provided, #hat the %rantee +ay enter into +ana%e+ent $ontra$t .ith any person or entity, .ith the approval of the President of the Philippines6 Provided, further, #hat su$h person or entity .ith .ho+ the %rantee +ay enter into +ana%e+ent $ontra$t shall be a $itiHen of the Philippines and in $ase of an entity or a ;or'ora)1on, a) 5&a() (17)y '&r ;&n)u2 o4 )3& ;a'1)a5 or ;a'1)a5 ()o;D o4 =31;3 1( o=n&* +y ;1)1H&n( o4 )3& !3151''1n&(. ,E+phasis supplied.!n 1102, RA 9'&3,:1 other.ise 5no.n as the (Ato+i$ Ener%y Re%ulatory A$t of 1102,( $onsidered a $orporation sixty per$ent of .hose $apital sto$5 as do+esti$6 Se$. 1. C1)1H&n(31' R&>u1r&2&n). No li$ense to a$Iuire, o.n, or operate any ato+i$ ener%y fa$ility shall be issued to an alien, or any $orporation or other entity .hi$h is o.ned or $ontrolled by an alien, a forei%n $orporation, or a forei%n %overn+ent. )or purposes of this A$t, a $orporation or entity is no) o=n&* or ;on)ro55&* +y an a51&n, a forei%n $orporation of a forei%n %overn+ent 14 a) 5&a() (17)y '&r;&n) /60<0 o4 1)( ;a'1)a5 ()o;D 1( o=n&* +y F151'1no ;1)1H&n(. ,E+phasis supplied.Anent pertinent 8udi$ial de$isions, this Court has used the very sa+e definition of $apital as eIuivalent to the entire $apital sto$5holdin%s in a $orporation in resolvin% various other issues. !n 'a"ional Telecommunica"ions Commission 9. Cour" of 2ppeals,9& this Court, thus, held6
1&1
T3& )&r2 J;a'1)a5J an* o)3&r )&r2( u(&* )o *&(;r1+& )3& ;a'1)a5 ()ru;)ur& o4 a ;or'ora)1on ar& o4 un16&r(a5 a;;&')an;&, an* )3&1r u(a@&( 3a6& 5on@ +&&n &()a+51(3&* 1n ?ur1('ru*&n;&. Briefly, ;a'1)a5 r&4&r( )o )3& 6a5u& o4 )3& 'ro'&r)y or a((&)( o4 a ;or'ora)1on. T3& ;a'1)a5 (u+(;r1+&* 1( )3& )o)a5 a2oun) o4 )3& ;a'1)a5 )3a) '&r(on( /(u+(;r1+&r( or (3ar&3o5*&r(0 3a6& a@r&&* )o )aD& an* 'ay 4or, =31;3 n&&* no) n&;&((ar15y +&, an* ;an +& 2or& )3an, )3& 'ar 6a5u& o4 )3& (3ar&(. "n 41n&, 1) 1( )3& a2oun) )3a) )3& ;or'ora)1on r&;&16&(, 1n;5u(16& o4 )3& 'r&21u2( 14 any, 1n ;on(1*&ra)1on o4 )3& or1@1na5 1((uan;& o4 )3& (3ar&(. !n the $ase of sto$5 dividends, it is the a+ount that the $orporation transfers fro+ its surplus profit a$$ount to its $apital a$$ount. !t is the sa+e a+ount that $an loosely be ter+ed as the (trust fund( of the $orporation. #he (#rust )und( do$trine $onsiders this subs$ribed $apital as a trust fund for the pay+ent of the debts of the $orporation, to .hi$h the $reditors +ay loo5 for satisfa$tion. 7ntil the liIuidation of the $orporation, no part of the subs$ribed $apital +ay be returned or released to the sto$5holder ,ex$ept in the rede+ption of redee+able shares- .ithout violatin% this prin$iple. #hus, dividends +ust never i+pair the subs$ribed $apitalD subs$ription $o++it+ents $annot be $ondoned or re+ittedD nor $an the $orporation buy its o.n shares usin% the subs$ribed $apital as the $onsideration therefor.91 #his is si+ilar to the holdin% in Eanco >ilipino 9. Mone"ary Eoar& 9' .here the Court treated the ter+ ($apital( as in$ludin% both $o++on and preferred sto$5, .hi$h are usually deprived of votin% ri%hts6 !t is $lear fro+ the la. that a solvent ban5 is one in .hi$h its assets ex$eed its liabilities. !t is a basi$ a$$ountin% prin$iple that assets are $o+posed of liabilities and $apital. #he ter+ (assets( in$ludes $apital and surplus( ,Exley v. ;arris, '03 p. 13&, 13?, 1'0 Ran., ?&'-. "n the other hand, )3& )&r2 J;a'1)a5J 1n;5u*&( ;o22on an* 'r&4&rr&* ()o;D, (ur'5u( r&(&r6&(, (ur'5u( an* un*161*&* 'ro41)( . ,*anual of Exa+ination Pro$edures, Report of Exa+ination on epart+ent of Co++er$ial and Savin%s Ban5s, p. ?-C-. !f valuation reserves .ould be dedu$ted fro+ these ite+s, the result .ould +erely be the net.orth or the uni+paired $apital and surplus of the ban5 applyin% Se$. 9 of RA ??3 but not the total finan$ial $ondition of the ban5. !n Commissioner of In"ernal Re9enue 9. Cour" of 2ppeals ,9? the Court alluded to the do$trine of eIuality of shares in resolvin% the issue therein and held that all shares $o+prise the $apital sto$5 of a $orporation6 A $o++on sto$5 represents the residual o.nership interest in the $orporation. !t is a basi$ $lass of sto$5 ordinarily and usually issued .ithout extraordinary ri%hts or privile%es and entitles the shareholder to a pro rata division of profits. Preferred sto$5s are those .hi$h entitle the shareholder to so+e priority on dividends and asset distribution. #o)3 (3ar&( ar& 'ar) o4 )3& ;or'ora)1onC( ;a'1)a5 ()o;D. #o)3 ()o;D3o5*&r( ar& no *144&r&n) 4ro2 or*1nary 1n6&()or( =3o )aD& on )3& (a2& 1n6&()2&n) r1(D(. !r&4&rr&* an* ;o22on (3ar&3o5*&r( 'ar)1;1'a)& 1n )3& (a2&
Nazareno
Corporation CASES Based on the Syllabus of Fr. Agustin 6&n)ur&, =1551n@ )o (3ar& 1n )3& 'ro41) an* 5o((&( o4 )3& &n)&r'r1(&. %or&o6&r, un*&r )3& *o;)r1n& o4 &>ua51)y o4 (3ar&( 888 a55 ()o;D( 1((u&* +y )3& ;or'ora)1on ar& 'r&(u2&* &>ua5 =1)3 )3& (a2& 'r1615&@&( an* 51a+151)1&( , provided that the Arti$les of !n$orporation is silent on su$h differen$es. 9: ,E+phasis supplied.T3& SEC 3a( r&45&;)&* )3& 'o'u5ar ;on)&2'oran&ou( ;on()ru;)1on o4 ;a'1)a5 1n ;o2'u)1n@ )3& na)1ona51)y r&>u1r&2&n) +a(&* on )3& )o)a5 ;a'1)a5 ()o;D, no) on5y )3& 6o)1n@ ()o;D, o4 a ;or'ora)1on /,)3 &7)r1n(1; a1*0 #he SEC has $onfir+ed that, as an institution, it has al.ays interpreted and applied the :&= +axi+u+ forei%no=n&r(31' li+it for publi$ utilities to the total $apital sto$5, and not 8ust its total votin% sto$5. !n its /uly '1, '&11 *anifestation and "+nibus *otion, the SEC reaffir+ed its lon%standin% pra$ti$e and history of enfor$e+ent of the :&= +axi+u+ forei%n o.nership li+it for publi$ utilities, viH6 9. #he Co++ission respe$tfully sub+its that it has al.ays perfor+ed its duty under Se$tion 13,:- of the Corporation Code to enfor$e the forei%n eIuity restri$tions under Se$tion 11, Arti$le N!! of the Constitution on the o.nership of publi$ utilities. xxxx 2. #hus, in *&)&r21n1n@ ;o2'51an;& =1)3 )3& Con()1)u)1ona5 r&()r1;)1on( on 4or&1@n &>u1)y, )3& Co221((1on ;on(1()&n)5y ;on()ru&* an* a''51&* )3& )&r2 J;a'1)a5J 1n 1)( ;o22on5y a;;&')&* u(a@&, )3a) 1( K )3& (u2 )o)a5 o4 )3& (3ar&( (u+(;r1+&* 1rr&('&;)16& o4 )3&1r no2&n;5a)ur& an* =3&)3&r or no) )3&y ar& 6o)1n@ or non8 6o)1n@ ,E+phasis supplied-. 1. #his $o++only a$$epted usa%e of the ter+ K$apitalC is based on persuasive authorities su$h as the .idely estee+ed -letcher C8clopedia of the :aw of Private Corporations, and do$trines fro+ A+eri$an /urispruden$e. #o illustrate, in its /pinion dated )ebruary 19, 1122 addresses to 4oHon, )ernandeH, efensor and Asso$iates, the Co++ission dis$ussed ho. the ter+ K$apitalC is $o++only used6 (Anent thereto, please be infor+ed that the ter+ K$apitalC as applied to $orporations, refers to the +oney, property or +eans $ontributed by sto$5holders as the for+ or basis for the business or enterprise for .hi$h the $orporation .as for+ed and %enerally i+plies that su$h +oney or property or +eans have been $ontributed in pay+ent for sto$5 issued to the $ontributors. ,7nited 4ro$ers, <td. v. 7nited States ). Supp. 2?:, $ited in 11 )let$her, Cy$. Corp., 1120, rev. vol., se$. 9&2& at 12-. As further ruled by the $ourt, K$apital of a $orporation is )3& 4un* or o)3&r 'ro'&r)y, a;)ua55y or
11&
'o)&n)1a55y 1n 1)( 'o((&((1on, *&r16&* or )o +& *&r16&* 4ro2 )3& (a5& +y 1) o4 (3ar&( o4 1)( ()o;D or 31( &7;3an@& +y 1) 4or 'ro'&r)y o)3&r )3an 2on&y . #his fund in$ludes not only +oney or other property re$eived by the $orporation for shares of sto$5 but all balan$es of pur$hase +oney, or instal+ents, due the $orporation for shares of sto$5 sold by it, and all unpaid subs$riptions for shares.C( ,@illia+s v. Bro.nstein, 1). 'd :3&, $ited in 11 )let$her, Cy$. Corp., 1&92 rev. vol., se$. 9&2&, p. '1-. #he ter+ K$apitalC is also used synony+ously .ith the .ords K$apital sto$5C, as +eanin% the a+ount subs$ribed and paidin and upon .hi$h the $orporation is to $ondu$t its operation. ,11 )let$her, Cy$. Corp. 1120, rev. vol., se$. 9&2& at 19-. And, as held by the $ourt in ;a%%ard v. <exin%ton 7tilities Co., ,'0& Ry '91, 2: S@ 'd 2:, $ited in 11 )let$her, Cy$. Corp., 1192 rev. vol., se$. 9&31 at 13-, K#he $apital sto$5 of a $orporation is the a+ount paidin by its sto$5holders in +oney, property or servi$es .ith .hi$h it is to $ondu$t its business, and i" is imma"erial !oC "!e s"ocB is classifie&% C!e"!er as common or preferre& .) #he Co++ission, in a previous opinion, ruled that the ter+ K$apitalC denotes the su+ total of the shares subs$ribed and paid by the shareholders or served to be paid, irrespe$tive of their no+en$lature. ,<etter to Supre+e #e$hnotroni$s Corporation, dated April 1:, 1123-.( ,E+phasis ours1&. )urther, in adoptin% this $o++on usa%e of the ter+ K$apital,C the Co++ission believed in %ood faith and .ith sound reasons that it .as $onsistent .ith the intent and purpose of the Constitution. !n an /pinion dated '3 e$e+ber 1119 addressed to /oaIuin Cunanan U Co. the Co++ission observed that6 (#o $onstrue the 0&-:&= eIuity reIuire+ent as +erely based on the votin% shares, disre%ardin% the preferred non-votin% share, not on the total outstandin% subs$ribed $apital sto$5, .ould %ive rise to a situation .here the a$tual forei%n interest .ould not really be only :&= but +ay extend beyond that be$ause they $ould also o.n even the entire preferred non-votin% shares. !n this situation, )ilipinos +ay have the $ontrol in the operation of the $orporation by .ay of votin% ri%hts, but have no effe$tive o.nership of the $orporate assets .hi$h in$ludes lands, be$ause the a$tual )ilipino eIuity $onstitutes only a +inority of the entire outstandin% $apital sto$5. T3&r&4or&, 1n &((&n;&, )3& ;o2'any, a5)3ou@3 ;on)ro55&* +y F151'1no(, 1( +&n&41;1a55y o=n&* +y 4or&1@n&r( (1n;& )3& a;)ua5 o=n&r(31' o4 a) 5&a() 60< o4 )3& &n)1r& ou)()an*1n@ ;a'1)a5 ()o;D( =ou5* +& 1n )3& 3an*( o4 4or&1@n&r(. A55o=1n@ )31( (1)ua)1on =ou5* o'&n )3& 45oo*@a)&( )o ;1r;u26&n)1on o4 )3& 1n)&n) o4 )3& 5a= )o 2aD& )3& F151'1no( )3& 'r1n;1'a5 +&n&41;1ar1&( 1n )3& o=n&r(31' o4 a51&na+5& 5an*(.J ,E+phasis ours11. #he fore%oin% settled prin$iples and estee+ed authorities relied upon by the Co++ission sho. that its interpretation of the ter+ K$apitalC is reasonable.
Nazareno
Corporation CASES Based on the Syllabus of Fr. Agustin 1'. And, it is .ell settled that $ourts +ust %ive due deferen$e to an ad+inistrative a%en$yCs reasonable interpretation of the statute it enfor$es.99 !t should be borne in +ind that the SEC is the %overn+ent a%en$y invested .ith the 8urisdi$tion to deter+ine at the first instan$e the observan$e by a publi$ utility of the $onstitutional nationality reIuire+ent pres$ribed vis-V-vis the o.nership of publi$ utilities90 and to interpret le%islative a$ts, li5e the )!A. #he rationale behind the do$trine of pri+ary 8urisdi$tion lies on the postulate that su$h ad+inistrative a%en$y has the (spe$ial 5no.led%e, experien$e and tools to deter+ine te$hni$al and intri$ate +atters of fa$tO(93 #hus, the deter+ination of the SEC is afforded %reat respe$t by other exe$utive a%en$ies, li5e the epart+ent of /usti$e , "/-,92 and by the $ourts. Gerily, .hen as5ed as early as 1122F (@ould it be le%al for forei%ners to o.n in a publi$ utility entity +ore than :&= of the $o++on shares but not +ore than :&= of the total outstandin% $apital sto$5 .hi$h .ould in$lude both $o++on and non-votin% preferred sharesL( Fthe SEC, $itin% )let$her, invariably ans.ered in the affir+ative, .hether the poser .as +ade in li%ht of the present or previous Constitutions6 #he pertinent provision of the Philippine Constitution under Arti$le N!!, Se$tion 3, reads in part thus6 (No fran$hise, $ertifi$ate, or any for+ of authoriHation for the operation of a publi$ utility shall be %ranted ex$ept to $itiHens of the Philippines, or to $orporations or asso$iations or%aniHed under the la.s of the Philippines at least sixty per $entu+ of .hose $apital is o.ned by su$h $itiHens. . .( x x x T3& 1((u& ra1(&* on your 5&))&r H&ro&( 1n on )3& 2&an1n@ o4 )3& =or* J;a'1)a5J a( u(&* 1n )3& a+o6& ;on()1)u)1ona5 'ro61(1on. Anent thereto, please be infor+ed that the ter+ ($apital( as applied to $orporations, refers to the +oney, property or +eans $ontributed by sto$5holders as the for+ or basis for the business or enterprise for .hi$h the $orporation .as for+ed and %enerally i+plies that su$h +oney or property or +eans have been $ontributed in pay+ent for sto$5 issued to the $ontributors. ,7nited 4ro$ers, <td. v. 7nited States ). Supp. 2?:, $ited in 11 )let$her, Cy$. Corp., 1120, rev. vol., se$. 9&2& at 12-. As further ruled by the $ourt, ($apital of a $orporation is the fund or other property, a$tually or potentially in its possession, derived or to be derived fro+ the sale by it of shares of its sto$5 or his ex$han%e by it for property other than +oney. #his fund in$ludes not only +oney or other property re$eived by the $orporation for shares of sto$5 but all balan$es of pur$hase +oney, or install+ents, due the $orporation for shares of sto$5 sold by it, and all unpaid subs$riptions for shares.( ,@illia+s v. Bro.nstein, 1). 'd :3&, $ited in 11 )let$her, Cy$. Corp., 1&92 rev. vol., se$. 9&2&, p. '1-. #he ter+ ($apital( is also used synony+ously .ith the .ords ($apital sto$5(, as +eanin% the a+ount subs$ribed and paid-in and upon .hi$h the $orporation is to
111
$ondu$t its operation. ,11 )let$her, Cy$. Corp. 1120, rev. vol., se$. 9&2& at 19-. And, as held by the $ourt in ;a%%ard v. <exin%ton 7tilities Co., ,'0& Ry '91, 2: S@ 'd 2:, $ited in 11 )let$her, Cy$. Corp., 1192 rev. vol., se$. 9&31 at 13-, JT3& ;a'1)a5 ()o;D o4 a ;or'ora)1on 1( )3& a2oun) 'a1*81n +y 1)( ()o;D3o5*&r( 1n 2on&y, 'ro'&r)y or (&r61;&( =1)3 =31;3 1) 1( )o ;on*u;) 1)( +u(1n&((, an* 1) 1( 122a)&r1a5 3o= )3& ()o;D 1( ;5a((141&*, =3&)3&r a( ;o22on or 'r&4&rr&*.J T3& Co221((1on, 1n a 'r&61ou( o'1n1on, ru5&* )3a) )3& )&r2 O;a'1)a5C *&no)&( )3& (u2 )o)a5 o4 )3& (3ar&( (u+(;r1+&* an* 'a1* +y )3& (3ar&3o5*&r( or (&r6&* )o +& 'a1*, 1rr&('&;)16& o4 )3&1r no2&n;5a)ur&. ,<etter to Supre+e #e$hnotroni$s Corporation, dated April 1:, 1123-. ;en$e, your Iuery is ans.ered in the affir+ative.91 ,E+phasis supplied.As it .ere, the SEC has held on the sa+e positive response lon% before the 1123 Constitution $a+e into effe$t, a +atter of fa$t .hi$h has re$eived due a$5no.led%+ent fro+ this Court. !n People 9. Fuas!a,0& a $ase de$ided under the 11?9 Constitution, this Court narrated that in 11:0 the SEC approved the in$orporation of a $o++on $arrier, a publi$ utility, .here )ilipinos, .hile not holdin% the $ontrollin% vote, o.ned the +a8ority of the $apital, viH6 #he essential fa$ts are not in dispute. "n Nove+ber :, 11:0, the Pa$ifi$ Air.ays Corporation re%istered its arti$les of in$orporation .ith the ASECB. #he arti$les .ere prepared and the re%istration .as effe$ted by the a$$used, .ho .as in fa$t the or%aniHer of the $orporation. #he arti$les stated that the pri+ary purpose of the $orporation .as to $arry on the business of a $o++on $arrier by air, land, or .ater, that its ;a'1)a5 ()o;D =a( ! 1,000,000, r&'r&(&n)&* +y 9,000 'r&4&rr&* an* 100,000 ;o22on (3ar&(, &a;3 'r&4&rr&* (3ar& +&1n@ o4 )3& 'ar 6a5u& o4 ! 100 an* &n)1)5&* )o 1L- 6o)& an* &a;3 ;o22on (3ar&, o4 )3& 'ar 6a5u& o4 ! 1 an* &n)1)5&* )o on& 6o)&D that the a+ount of $apital sto$5 a$tually subs$ribed .as P '&&,&&&, and the na+es of the subs$riber .ere Arsenio Baylon, Eruin E. Shannahan, Albert @. "nstott, /a+es "Cbannon, enHel /. Cavin, and @illia+ ;. Muasha, )3& 41r() +&1n@ a F151'1no an* )3& o)3&r 416& a55 A2&r1;an(I that BaylonCs subs$ription .as for 1,1:9 preferred shares, of the total value of P 11:,9&& and 0,9&& $o++on shares, of the total par value of P 0,9&&, .hile the a%%re%ate subs$riptions of the A+eri$an subs$ribers .ere for '&& preferred shares, of the total par value of P '&,&&& and 91,&&& $o++on shares, of the total par value of P 91,&&&D and that Baylon and the A+eri$an subs$ribers had already paid '9 per$ent of their respe$tive subs$riptions. O()&n(1+5y )3& o=n&r o4, or (u+(;r1+&r )o, 60.00, '&r ;&n) o4 )3& (u+(;r1+&* ;a'1)a5 ()o;D o4 )3& ;or'ora)1on, #ay5on, *1* no) 3a6& )3& ;on)ro551n@ 6o)& +&;au(& o4 )3& *144&r&n;& 1n 6o)1n@ 'o=&r +&)=&&n )3& 'r&4&rr&* (3ar&( an* )3& ;o22on (3ar&(. S)155, =1)3 )3& ;a'1)a5 ()ru;)ur& a( 1) =a(, )3& ar)1;5&( o4 1n;or'ora)1on =&r& a;;&')&* 4or r&@1()ra)1on an* a ;&r)141;a)& o4 1n;or'ora)1on =a( 1((u&* +y )3& FSECG . ,E+phasis supplied.-
Nazareno
Corporation CASES Based on the Syllabus of Fr. Agustin #he SEC has, throu%h the years, stood by this interpretation. !n an "pinion dated Nove+ber '1, 1121, the SEC held that the basis of the $o+putation for the nationality reIuire+ent is the total outstandin% $apital sto$5, to .it6 As to the basis of $o+putation of the 0&-:& per$enta%e nationality reIuire+ent under existin% la.s ,.hether it should be based on the nu+ber of shares or the a%%re%ate a+ount in pesos of the par value of the shares-, the follo.in% definitions of $orporate ter+s are .orth +entionin%. (#he ter+ $apital sto$5 si%nifies the a%%re%ate of the shares a$tually subs$ribed(. ,11 )let$her, Cy$. Corps. ,1131 Rev. Gol.- se$. 9&2', $itin% 4oodno. v. A+eri$an @ritin% Paper Co., 3? N/ EI. 01', 01 A 1&1: affY% 3' N/ EI. 0:9, 00 A, 0&3-. (Capital sto$5 +eans the $apital subs$ribed ,the share $apital-(. ,!bid., e+phasis supplied-. (!n its pri+ary sense a share of sto$5 is si+ply one of the proportionate inte%ers or units, the su+ of .hi$h $onstitutes the $apital sto$5 of $orporation. ,)let$her, se$. 9&2?-. #he eIuitable interest of the shareholder in the property of the $orporation is represented by the ter+ sto$5, and the extent of his interest is des$ribed by the ter+ shares. #he expression shares of sto$5 .hen Iualified by .ords indi$atin% nu+ber and o.nership expresses the extent of the o.nerYs interest in the $orporate property ,!bid, Se$. 9&2?, e+phasis supplied-. <i5e.ise, in all provisions of the Corporation Code the sto$5holdersC ri%ht to vote and re$eive dividends is al.ays deter+ined and based on the (outstandin% $apital sto$5(, defined as follo.s6 (SEC#!"N 1?3. "utstandin% $apital sto$5 defined. J #he ter+ (outstandin% $apital sto$5( as used in this Code, +eans the total shares of sto$5 issued to subs$ribers or sto$5holders, .hether or not fully or partially paid ,as lon% as there is a bindin% subs$ription a%ree+ent, ex$ept treasury shares.( #he $o+putation, therefore, should be based on the total outstandin% $apital sto$5, irrespe$tive of the a+ount of the par value of the shares. #hen $a+e SEC-"4C "pinion No. &2-1: dated /une &', '&&26 #he instant Iuery no. $enters on .hether both votin% and nonvotin% shares are in$luded in the $o+putation of the reIuired per$enta%e of )ilipino eIuity, As a rule, the 1123 Constitution does not distin%uish bet.een votin% and non-votin% shares .ith
11'
re%ard to the $o+putation of the per$enta%e interest by )ilipinos and non-)ilipinos in a $o+pany. "n o)3&r =or*(, non86o)1n@ (3ar&( (3ou5* +& 1n;5u*&* 1n )3& ;o2'u)a)1on o4 )3& 4or&1@n o=n&r(31' 5121) 4or *o2&()1; ;or'ora)1on. #his .as the rule applied Ain SEC "pinion No. &:-?& x x x !t .as opined therein that the o.nership of the shares of sto$5 of a $orporation is based on the total outstandin% or subs$ribedEissued $apital sto$5 re%ardless of .hether they are $lassified as $o++on votin% shares or preferred shares .ithout votin% ri%hts. #his is in line .ith the poli$y of the State to develop an independent national e$ono+y effe$tively $ontrolled by )ilipinos. x x x ,E+phasis added.#he SEC a%ain e$hoed the sa+e interpretation in an "pinion issued last April 11, '&11 .herein it stated, thus6 #his is, thus, the %eneral rule, su$h that .hen the provision +erely uses the ter+ ($apital( .ithout Iualifi$ation ,as in Se$tion 11, Arti$le N!! of the 1123 Constitution, .hi$h deals .ith eIuity stru$ture in a publi$ utility $o+pany-, the sa+e should be interpreted to refer to the su+ total of the outstandin% $apital sto$5, irrespe$tive of the no+en$lature or $lassifi$ation as $o++on, preferred, votin% or non-votin%. 01 #he above $onstrual is in har+ony .ith the letter and spirit of Se$. 11, Art. N!! of the Constitution and its $ounterpart provisions in the 11?9 and 113? Constitution and, thus, is entitled to respe$tful $onsideration. As the Court de$lared in P!ilippine Global Communica"ions% Inc. 9. Relo9a60' x x x As far ba$5 as !n re Allen, ,' Phil. 0?&- a 11&? de$ision, /usti$e *$ onou%h, as ponente, $ited this ex$erpt fro+ the leadin% A+eri$an $ase of Pennoyer v. *$Connau%hy, de$ided in 12116 (T3& 'r1n;1'5& )3a) )3& ;on)&2'oran&ou( ;on()ru;)1on o4 a ()a)u)& +y )3& &7&;u)16& o441;&r( o4 )3& @o6&rn2&n), =3o(& *u)y 1) 1( )o &7&;u)& 1), 1( &n)1)5&* )o @r&a) r&('&;), an* (3ou5* or*1nar15y ;on)ro5 )3& ;on()ru;)1on o4 )3& ()a)u)& +y )3& ;our)(, is so fir+ly e+bedded in our 8urispruden$e that no authorities need be $ited to support it.C x x x #here .as a paraphrase by /usti$e *al$ol+ of su$h a pronoun$e+ent in *olina v. Rafferty, ,?3 Phil. 9:9- a 1112 de$ision6( Courts .ill and should respe$t the $onte+poraneous $onstru$tion pla$ed upon a statute by the exe$utive offi$ers .hose duty it is to enfor$e it, and unless su$h interpretation is $learly erroneous .ill ordinarily be $ontrolled thereby. ,!bid, 999Sin$e then, su$h a do$trine has been reiterated in nu+erous de$isions. 0? ,E+phasis supplied.La<amana 9. Eal"a@ar0: restates this lon%-standin% di$tu+6 (A.Bhere a statute has re$eived a $onte+poraneous and pra$ti$al interpretation and the statute as interpreted is re-ena$ted, the pra$ti$al interpretation is a$$orded %reater .ei%ht than it ordinarily re$eives, and is re%arded as presu+ptively the $orre$t interpretation of the la.. #he rule here is based upon the theory that the le%islature is a$Iuainted .ith the $onte+poraneous interpretation of a statute, espe$ially .hen +ade by an
Nazareno
Corporation CASES Based on the Syllabus of Fr. Agustin ad+inistrative body or exe$utive offi$ers $har%ed .ith the duty of ad+inisterin% or enfor$in% the la., and therefore i+pliedly adopts the interpretation upon reena$t+ent.(09 ;en$e, it $an be safely assu+ed that the fra+ers, in the $ourse of deliberatin% the 1123 Constitution, 5ne. of the adverted SEC interpretation. Parentheti$ally, it is i++aterial .hether the SEC opinion .as rendered by the banc or by the SEC-"ffi$e of the 4eneral Counsel ,"4C- $onsiderin% that the latter has been %iven the authority to issue opinions on the la.s that the SEC i+ple+ents under SECENS. Res. No. 1&0, Series of '&&'. 00 #he $onfer+ent does not violate Se$. :.0 03of the Se$urities and Re%ulation Code ,SRC- that pros$ribes the non-dele%ation of the le%islative rule +a5in% po.er of the SEC, .hi$h is in the nature of subordinate le%islation. As +ay be noted, the sa+e Se$. :.0 does not +ention the SECCs po.er to issue interpretative (opinions and provide %uidan$e on and supervise $o+plian$e .ith su$h rules,(02 .hi$h is in$idental to the SECCs enfor$e+ent fun$tions. A le%islative rule and an interpretative rule are t.o different $on$epts and the distin$tion bet.een the t.o is established in ad+inistrative la.. 01 ;en$e, the various opinions issued by the SEC-"4C deserve as +u$h respe$t as the opinions issued by the SEC en banc. Nonetheless, the estee+ed ponente posits that the SEC, $ontrary to its $lai+, has been less than $onsistent in its $onstrual of ($apital.( urin% the oral ar%u+ents, he dre. attention to various SEC "pinions, nine ,1- to be pre$ise, that purportedly $onsider ($apital( as referrin% only to votin% sto$5s. Refutin% this position, the SEC in its *e+orandu+ dated /uly '9, '&1' explained in so+e detail that )3& Co221((1on 3a( +&&n ;on(1()&n) 1n a''5y1n@ )3& )&r2 J;a'1)a5J )o )3& )o)a5 ou)()an*1n@ ;a'1)a5 ()o;D, =3&)3&r 6o)1n@ or non86o)1n@ . #he SEC "pinions referred to by /usti$e Carpio, .hi$h $ited the provisions of the )!A, is not, ho.ever, pertinent or de$isive of the issue on the +eanin% of ($apital.( #he said SEC *e+orandu+ states6 urin% the oral ar%u+ents held on '0 /une '&1', the SEC .as dire$ted to explain nine ,1- of its "pinions in relation to the definition of ($apital( as used in Se$tion 11, Arti$le N!! of the Constitution, na+ely6 ,1- "pinion dated ? *ar$h 111? for *r. )ran$is ). ;o.D ,'- "pinion dated 1: April 111? for ire$tor An%eles #. @on%D ,?"pinion dated '? Nove+ber 111? for *ssrs. o+inador Al+eda and Renato S. Cal+aD ,:- "pinion dated 3 e$e+ber 111? for Ro$o BuPa% Rapunan *i%allos U /ardeleHa <a. "ffi$esD ,9- "pinion dated '' e$e+ber '&&: for Ro+ulo *abanta Buenaventura Sayo$ U e <os An%elesD ,0- "pinion dated '3 Septe+ber '&&3 for Reynaldo 4. avidD ,3- "pinion dated '2 Nove+ber '&&3 for Santia%o U Santia%o la. "ffi$esD ,2- "pinion dated 19 /anuary '&&2 for Attys. Ruby Rose /. >usi and Rudyard S. ArboladoD and ,1- "pinion dated 12 Au%ust '&1& for Castillo <a+an #an Pantaleon U San /ose. xxxx
11?
:1)3 *u& r&('&;), )3& 1((u& o4 =3&)3&r J;a'1)a5J r&4&r( )o ou)()an*1n@ ;a'1)a5 ()o;D or on5y 6o)1n@ ()o;D( =a( n&6&r ra1(&* 1n )3& r&>u&()( 4or )3&(& o'1n1on( . !n fa$t, the definition of ($apital( $ould not have been a relevant andEor a +aterial issue in so+e of these opinions be$ause the $o++on and preferred shares involved have the sa+e votin% ri%hts. Also, so+e "pinions +entioned the )!A to e+phasiHe that the said la. +andates the appli$ation of the Control #est. *oreover, these "pinions state they are based solely on the fa$ts dis$losed and relevant only to the issues raised therein. )or one, the "pinion dated ? *ar$h 111? for *r. )ran$is ). ;o. *o&( no) *1(;u(( =3&)3&r J;a'1)a5J r&4&r( )o )o)a5 ou)()an*1n@ ;a'1)a5 ()o;D or on5y 6o)1n@ ()o;D( . !nstead, it tal5s about the appli$ation of the Control test in a +inin% $orporation by loo5in% into the nationality of its investors. T3& F"A 1( no) 2&n)1on&* )o 'ro61*& a *&41n1)1on o4 J;a'1)a5,J +u) )o &7'5a1n )3& na)1ona51)y r&>u1r&2&n) '&r)1n&n) )o 1n6&()or( o4 a 21n1n@ ;or'ora)1on. #he "pinion dated 1: April 111? for ir. An%eles #. @on% also *o&( no) *&41n& J;a'1)a5J a( r&4&rr1n@ )o )o)a5 ou)()an*1n@ ;a'1)a5 or on5y )o 6o)1n@ (3ar&(, +u) )a5D( a+ou) )3& a''51;a)1on o4 )3& Con)ro5 T&() x x x. #he )!A is a%ain +entioned only to explain the nationality reIuired of investors of a $orporation en%a%ed in overseas re$ruit+ent. #he "pinion dated '? Nove+ber 111? for *ssrs. o+inador Al+eda and Renato S. Cal+a*1()1n@u1(3&( +&)=&&n )3& na)1ona51)y o4 a ;or'ora)1on a( an 1n6&()1n@ &n)1)y an* )3& na)1ona51)y o4 a ;or'ora)1on a( an 1n6&()&& ;or'ora)1on. T3& F"A 1( 2&n)1on&* on5y 1n )3& *1(;u((1on o4 )3& na)1ona51)y o4 )3& 1n6&()or( o4 a ;or'ora)1on o=n1n@ 5an* 1n )3& !3151''1n&(, $o+posed of a trustee for pension or other e+ployee retire+ent or separation benefits, .here the trustee is a Philippine national and at least sixty per$ent ,0&=- of the fund .ill a$$rue to the benefit of Philippine nationals, and another do+esti$ $orporation .hi$h is 1&&= forei%n o.ned. 7nli5e the #ecision rendered by this ;onorable Court on '2 /une '&11, the "pinion dated &3 e$e+ber 111? for Ro$o BuPa% Rapunan *i%allos U /ardeleHa *o&( no) 'ar5&y on )3& 1((u& o4 )3& 'ro'&r 1n)&r'r&)a)1on o4 J;a'1)a5J +&;au(& 1) 1( no) a r&5&6an) an*Lor a 2a)&r1a5 1((u& 1n )31( o'1n1on xxx. T3& F"A 1( 2&n)1on&* on5y )o &7'5a1n )3& a''51;a)1on o4 )3& ;on)ro5 )&(). Note, ho.ever, that +anufa$turin% fertiliHer is neither a nationaliHed or partly nationaliHed a$tivity, .hi$h is another reason .hy this "pinion has no relevan$e in this $ase. #he "pinion dated '' e$e+ber '&&: for Ro+ulo *abanta Buenaventura Sayo$ U e <os An%eles fo$uses on the nationality of the investors of a $orporation that .ill a$Iuire land .herein one of the investors is a foundation. ") ;on41r2( )3& 61&= )3a) )3& )&() 4or ;o2'51an;& =1)3 )3& na)1ona51)y r&>u1r&2&n) 1( +a(&* on )3& )o)a5 ou)()an*1n@ ;a'1)a5 ()o;D 1rr&('&;)16& o4 )3& a2oun) o4 )3& 'ar 6a5u& o4 (3ar&(. #he )!A is used +erely to 8ustify the appli$ation of the Control #est as
Nazareno
Corporation CASES Based on the Syllabus of Fr. Agustin adopted in the epart+ent of /usti$e "pinion, No. 12, Series of 1121, dated 11 /anuary 1121+ vi( N xxxx #he "pinion dated '3 Septe+ber '&&3 for *r. Reynaldo 4. avid, li5e.ise, *o&( no) *1(;u(( =3&)3&r J;a'1)a5J r&4&r( )o )o)a5 ou)()an*1n@ ;a'1)a5 ()o;D or on5y )o 6o)1n@ ()o;D(, +u) ra)3&r =3&)3&r )3& Con)ro5 T&() 1( a''51;a+5& 1n *&)&r21n1n@ )3& na)1ona51)y o4 )3& 'ro'o(&* ;or'ora)& +1**&r or +uy&r o4 !NOC8E C (3ar&( . x x x #he )!A .as $ited only to e+phasiHe that the said la. +andates the appli$ation of the Control #est. #he "pinion dated '2 Nove+ber '&&3 for Santia%o U Santia%o <a. "ffi$es 2a1n)a1n( an* (u''or)( )3& 'o(1)1on o4 )3& Co221((1on )3a) S&;)1on 11, Ar)1;5& N"" o4 )3& Con()1)u)1on 2aD&( no *1()1n;)1on +&)=&&n ;o22on an* 'r&4&rr&* (3ar&(, )3u(, +o)3 (3ar&( (3ou5* +& 1n;5u*&* 1n )3& ;o2'u)a)1on o4 )3& 4or&1@n &>u1)y ;a' 4or *o2&()1; ;or'ora)1on( . Si+ply put, the total outstandin% $apital sto$5, .ithout re%ard to ho. the shares are $lassified, should be used as the basis in deter+inin% the $o+plian$e by publi$ utilities .ith the nationality reIuire+ent as provided for in Se$tion 11, Arti$le N!! of the Constitution. Notably, all shares of the sub8e$t $orporation, Pilipinas )irst, have votin% ri%hts, .hether $o++on or preferred. ;en$e, the issue on .hether ($apital( refers to total outstandin% $apital sto$5 or only to votin% sto$5s has no relevan$e in this "pinion. !n the sa+e .ay, the "pinion dated 19 /anuary '&&2 for Attys. Ruby Rose /. >usi and Rudyard S. Arbolada n&6&r *1(;u((&* =3&)3&r J;a'1)a5J r&4&r( )o ou)()an*1n@ ;a'1)a5 ()o;D or on5y )o 6o)1n@ ()o;D(, +u) ra)3&r =3&)3&r )3& Con)ro5 T&() 1( a''51;a+5& or no). #he )!A .as used +erely to 8ustify the appli$ation of the Control #est. *ore i+portantly, the ter+ ($apital( $ould not have been relevant andEor +aterial issue in this "pinion be$ause the $o++on and preferred shares involved have the sa+e votin% ri%hts. #he "pinion dated 12 Au%ust '&1& for Castillo <a+an #an Pantaleon U San /ose r&1)&ra)&( )3a) )3& )&() 4or ;o2'51an;& =1)3 )3& na)1ona51)y r&>u1r&2&n) 1( +a(&* on )3& )o)a5 ou)()an*1n@ ;a'1)a5 ()o;D, 1rr&('&;)16& o4 )3& a2oun) o4 )3& 'ar 6a5u& o4 )3& (3ar&(. T3& F"A 1( 2&n)1on&* on5y )o &7'5a1n )3& a''51;a)1on o4 )3& Con)ro5 T&() an* )3& Gran*4a)3&r Ru5& in a $orporation o.nin% land in the Philippines by loo5in% into the nationality of its investors. ,E+phasis supplied-. 3& !n vie. of the fore%oin%, it is sub+itted that the lon%-established interpretation and +ode of $o+putin% by the SEC of the total $apital sto$5 stron%ly re$o%niHe the intent of the fra+ers of the Constitution to allo. a$$ess to +u$h-needed forei%n invest+ents $onfined to :&= of the $apital sto$5 of publi$ utilities. -ilipino shareholders will control the fundamental matters nor own the economic benefits of the utilit8 corporation. Con(&>u&n;&( o4 a5)&rna)16& 1n)&r'r&)a)1onB &44&;)( o4 )3& ;on()ru;)1on 'ro'o(&* 1n )3& (u()a1n&* 1n )3& Jun& 28, 2011 &;1(1on. /6)3 &7)r1n(1; a1*0
11:
Nazareno
21(;31&6ou( '&)1)1on an*
not corporate ma+orit8 public
!ndeed, if the Court persists in adherin% to the rationale underlyin% the +a8orityCs ori%inal interpretation of ($apital( found in the first senten$e of Se$tion 11, Arti$le N!!, @e +ay perhaps be allo.in% )ilipinos to dire$t and $ontrol the daily business of our publi$ utilities, but .ould 1rr&6o;a+5y an* 1n?u*1;1ou(5y *&'r16& )3&2 o4 &44&;)16& J;on)ro5J o6&r )3& 2a?or an* &>ua55y 12'or)an) ;or'ora)& *&;1(1on( an* )3& &6&n)ua5 +&n&41;1a5 o=n&r(31' o4 )3& ;or'ora)& a((&)( )3a) ;ou5* 1n;5u*&, a2on@ o)3&r(, ;5a12 o6&r our (o15KKour 5an* . #his under+ines the $lear textual $o++it+ent under the Constitution that reserves o.nership of disposable lands to )ilipino $itiHens. #he interplay of the ensuin% provisions of Arti$le N!! is un+ista5able6 SEC#!"N '. All lands of the publi$ do+ain x x x forests or ti+ber, .ildlife, flora and fauna, and other natural resour$es are o.ned by the State. @ith the ex$eption of a%ri$ultural lands, all other natural resour$es shall not be alienated. T3& &7'5ora)1on, *&6&5o'2&n), an* u)151Ha)1on o4 na)ura5 r&(our;&( (3a55 +& un*&r )3& 4u55 ;on)ro5 an* (u'&r61(1on o4 )3& S)a)&. x x x xxxx SEC#!"N ?. <ands of the publi$ do+ain are $lassified into a%ri$ultural, forest or ti+ber, +ineral lands, and national par5s. A%ri$ultural lands of the publi$ do+ain +ay be further $lassified by la. a$$ordin% to the uses .hi$h they +ay be devoted. Alienable lands of the publi$ do+ain shall be li+ited to a%ri$ultural lands. Private $orporations or asso$iations +ay not hold su$h alienable lands ex$ept by lease, for a period not ex$eedin% t.enty-five years, rene.able for not +ore than t.enty-five years, and not to ex$eed one thousand he$tares in area. CitiHens of the Philippines +ay lease not +ore than five hundred he$tares, or a$Iuire not +ore than t.elve he$tares thereof by pur$hase, ho+estead or %rant. xxxx SEC#!"N 3. Save in $ases of hereditary su$$ession, no 'r16a)& 5an*( (3a55 +& )ran(4&rr&* or ;on6&y&* &7;&') )o 1n*161*ua5(, ;or'ora)1on( or a((o;1a)1on( >ua5141&* )o a;>u1r& or 3o5* 5an*( o4 )3& 'u+51; *o2a1n. ,E+phasis supplied.-
Corporation CASES Based on the Syllabus of Fr. Agustin Consider the hypotheti$al $ase presented in the ori%inal ponencia6 <et us assu+e that a $orporation has 1&& $o++on shares o.ned by forei%ners and 1,&&&,&&& non-votin% preferred shares o.ned by )ilipinos, .ith both $lasses of share havin% a par value of one peso ,P 1.&&- per share. 7nder the broad definition of the ter+ ($apital,( su$h $orporation .ould be $onsidered $o+pliant .ith the :& per$ent $onstitutional li+it on forei%n eIuity of publi$ utilities sin$e the over.hel+in% +a8ority, or +ore than 11.111 per$ent, of the total outstandin% $apital sto$5 is )ilipino o.ned. #his is obviously absurd. Albeit tryin% not to appear to, the +a8ority a$tually finds fault in the .isdo+ of, or +otive behind, the provision in Iuestion throu%h (hi%hly unli5ely s$enarios of $lini$al extre+es,( to borro. fro+ *eterans -ederation Part8 v. C/,0:0C. 31 !t is sub+itted that the flip side of the ponenciaCs hypotheti$al illustration, .hi$h .ill be exhaustively elu$idated in this opinion, is +ore ano+alous and pre8udi$ial to )ilipino interests. )or instan$e, let us suppose that the authoriHed $apital sto$5 of a publi$ utility $orporation is divided into 1&& $o++on shares and 1,&&&,&&& non-votin% preferred shares. Sin$e, a$$ordin% to the CourtCs /une '2, '&11 e$ision, the .ord ($apital( in Se$. 11, Art. N!! refers only to the votin% shares, then the :&= $ap on forei%n o.nership applies only to the 1&& $o++on shares. )orei%ners $an, therefore, o.n 1&&= of the 1,&&&,&&& nonvotin% preferred shares. But then a%ain, the ponencia $ontinues, at least, the ($ontrol( rests .ith the )ilipinos be$ause the 0&= )ilipino-o.ned $o++on shares .ill ne$essarily ordain the +a8ority in the %overnin% body of the publi$ utility $orporation, the board of dire$torsEtrustees. ;en$e, )ilipinos are assured of $ontrol over the day-to-day a$tivities of the publi$ utility $orporation. <et us, ho.ever, ta5e this $orporate s$enario a little bit farther and $onsider the irresistible i+pli$ations of $han%es and $ir$u+stan$es that are inevitable and $o++on in the business .orld. Consider the si+ple +atter of a possible invest+ent of $orporate funds in another $orporation or business, or a +er%er of the publi$ utility $orporation, or a possible dissolution of the publi$ utility $orporation. :3o 3a( )3& J;on)ro5J o6&r )3&(& 61)a5 an* 12'or)an) ;or'ora)& 2a))&r(E #he last para%raph of Se$. 0 of the Corporation Code provides6 @here the arti$les of in$orporation provide for non-votin% shares in the $ases allo.ed by this Code,)3& 3o5*&r( o4 (u;3 /non86o)1n@0 (3ar&( (3a55 n&6&r)3&5&(( +& &n)1)5&* )o 6o)& on )3& 4o55o=1n@ 2a))&r(6 1. A+end+ent of the arti$les of in$orporationD '. Adoption and a+end+ent of by-la.sD
119
?. Sale, lease, ex$han%e, +ort%a%e, pled%e or other disposition of all or substantially all of the $orporate propertyD :. !n$urrin%, $reatin% or in$reasin% bonded indebtednessD 9. !n$rease or de$rease of $apital sto$5D 0. *er%er or $onsolidation of the $orporation .ith another $orporation or other $orporationsD 3. !nvest+ent of $orporate funds in another $orporation or business in a$$ordan$e .ith this CodeD and 2. issolution of the $orporation.(,E+phasis and unders$orin% supplied.!n our hypotheti$al $ase, all 1,&&&,1&& ,votin% and non-votin%- shares are entitled to vote in $ases involvin% funda+ental and +a8or $han%es in the $orporate stru$ture, su$h as those listed in Se$. 0 of the Corporation Code. ;en$e, .ith only 0& out of the 1,&&&,1&& shares in the hands of the )ilipino shareholders, $ontrol is definitely in the hands of the forei%ners. #he forei%ners $an opt to invest in other businesses and $orporations, in$rease its bonded indebtedness, and even dissolve the publi$ utility $orporation a%ainst the interest of the )ilipino holders of the +a8ority votin% shares. #his $annot plausibly be the $onstitutional intent. Consider further a situation .here the +a8ority holders of the total outstandin% $apital sto$5, both votin% and non-votin%, de$ide to dissolve our hypotheti$al publi$ utility $orporation. :3o =155 &6&n)ua55y a;>u1r& )3& +&n&41;1a5 o=n&r(31' o4 )3& ;or'ora)& a((&)( u'on *1((o5u)1on an* 51>u1*a)1onE Note that Se$. 1'' of the Corporation Code states6 Se$tion 1''. Corporate liIuidation.FEvery $orporation .hose $harter expires by its o.n li+itation or is annulled by forfeiture or other.ise, or .hose $orporate existen$e for other purposes is ter+inated in any other +anner, shall nevertheless be $ontinued as a body $orporate for three ,?- yearsO )o *1('o(& o4 an* ;on6&y 1)( 'ro'&r)y an* )o *1()r1+u)& 1)( a((&)(, but not for the purpose of $ontinuin% the business for .hi$h it .as established. At any ti+e durin% said three ,?- years, the $orporation is authoriHed and e+po.ered to $onvey all of its property to trustees 4or )3& +&n&41) o4 ()o;D3o5*&r(, 2&2+&r(, $reditors, and other persons in interest. )ro+ and after any su$h $onveyan$e by the $orporation of its property in trust for the benefit of its sto$5holders, +e+bers, $reditors and others in interest, a55 1n)&r&() =31;3 )3& ;or'ora)1on 3a* 1n )3& 'ro'&r)y )&r21na)&(, the le%al interest vests in the trustees, and )3& +&n&41;1a5
Nazareno
Corporation CASES Based on the Syllabus of Fr. Agustin 1n)&r&() 1n )3& ()o;D3o5*&r(, 2&2+&r( , ;r&*1)or( or o)3&r '&r(on( 1n 1n)&r&(). ,E+phasis and unders$orin% supplied.Clearly then, the bul5 of the assets of our i+a%inary publi$ utility $orporation, .hi$h +ay in$lude private lands, .ill %o to the benefi$ial o.nership of the forei%ners .ho $an hold up to :& out of the 1&& $o++on shares and the entire 1,&&&,&&& preferred non-votin% shares of the $orporation. #hese forei%n shareholders .ill en8oy the bul5 of the pro$eeds of the sale of the $orporate lands, or .orse, exer$ise $ontrol over these lands behind the fa`ade of $orporations no+inally o.ned by )ilipino shareholders. Bluntly, .hile the Constitution expressly prohibits the transfer of land to aliens, forei%n sto$5holders +ay resort to s$he+es or arran%e+ents .here su$h land .ill be $onveyed to their du++ies or no+inees. !s this not $ir$u+vention, if not an outri%ht violation, of the funda+ental Constitutional tenet that only )ilipinos $an o.n Philippine landL A $onstru$tion of ($apital( as referrin% to the total shareholdin%s of the $o+pany is an a$5no.led%+ent of the existen$e of nu+erous $orporate $ontrol-enhan$in% +e$hanis+s, besides o.nership of votin% ri%hts, that li+its the proportion bet.een the separate and distin$t $on$epts of &;ono21; r1@3) to the $ash flo. of the $orporation an*the ri%ht to $orporate ;on)ro5 ,hen$e, they are also referred to as proportionality-li+itin% +easures-. #his $orporate reality is refle$ted in SRC Rule ?,Eof the A+ended !+ple+entin% Rules and Re%ulations ,!RR- of the SRC and Se$. ?,%of #he Real Estate !nvest+ent #rust A$t ,RE!#- of '&&1,3' .hi$h both provide that $ontrol $an exist r&@ar*5&(( o4 o=n&r(31' o4 6o)1n@ (3ar&(. #he SRC !RR states6 Con)ro5 1( )3& 'o=&r )o @o6&rn the 41nan;1a5 and o'&ra)1n@ 'o51;1&( of an enterprise so as to obtain benefits fro+ its a$tivities. Control is presu+ed to exist .hen the parent o.ns, dire$tly or indire$tly throu%h subsidiaries, +ore than one half of the votin% po.er of an enterprise unless, in ex$eptional $ir$u+stan$es, it $an be $learly de+onstrated that su$h o.nership does not $onstitute $ontrol. Con)ro5 a5(o &71()( &6&n =3&n )3& 'ar&n) o=n( on& 3a54 or 5&(( o4 )3& 6o)1n@ 'o=&r o4 an &n)&r'r1(& =3&n )3&r& 1(6 i. !o=&r o6&r 2or& )3an on& 3a54 o4 )3& 6o)1n@ r1@3)( by virtue of an a@r&&2&n) .ith other investorsD ii. !o=&r )o @o6&rn )3& 41nan;1a5 an* o'&ra)1n@ 'o51;1&( of the enterprise under a statute or an a@r&&2&ntD iii. !o=&r )o a''o1n) or r&2o6& )3& 2a?or1)y o4 )3& 2&2+&r( o4 )3& +oar* of dire$tors or eIuivalent %overnin% bodyD iv. !o=&r )o ;a() )3& 2a?or1)y o4 6o)&( at +eetin%s of the board of dire$tors or eIuivalent %overnin% body. ,E+phasis and unders$orin% supplied.-
110
As sho.n above, o=n&r(31' o4 6o)1n@ (3ar&( or 'o=&r a5on& =1)3ou) &;ono21; ;on)ro5 o4 )3& ;o2'any *o&( no) n&;&((ar15y &>ua)& )o ;or'ora)& ;on)ro5 . A shareholder)s agreement $an effe$tively $lip the votin% po.er of a shareholder holdin% votin% shares. !n the sa+e .ay, a voting right ceiling, .hi$h is (a restri$tion prohibitin% shareholders to vote above a $ertain threshold irrespe$tive of the nu+ber of votin% shares they hold,(3? $an li+it the $ontrol that +ay be exerted by a person .ho o.ns votin% sto$5s but .ho does not have a substantial e$ono+i$ interest over the $o+pany. So also does the use of financial derivatives .ith atta$hed $onditions to ensure the a$Iuisition of $orporate $ontrol separately fro+ the o.nership of votin% shares, or the use of superma+orit8 provisions in the byla.s and arti$les of in$orporation or asso$iation. !ndeed, there are innu+erable .ays and +eans, both expli$it and i+pli$it, by .hi$h the control of a corporation can be attained and retained even with ver8 limited voting shares , i.e.., there are a nu+ber of .ays by .hi$h $ontrol $an be disproportionately in$reased $o+pared to o.nership 3: so lon% as e$ono+i$ ri%hts over the +a8ority of the assets and eIuity of the $orporation are +aintained. ;en$e, if @e follo. the $onstru$tion of ($apital( in Se$. 11, Art. N!! stated in the ponencia of /une '2, '&11 and turn a blind eye to these realities of the business .orld, )31( Cour) 2ay 3a6& 6&r1)a+5y 'u) a 5121) on )3& 4or&1@n o=n&r(31' o4 ;o22on (3ar&( +u) 3a6& 1n*1r&;)5y a55o=&* 4or&1@n&r( )o a;>u1r& @r&a)&r &;ono21; r1@3) )o )3& ;a(3 45o= o4 'u+51; u)151)y ;or'ora)1on( , .hi$h is a levera%e to bar%ain for far %reater $ontrol throu%h the various enhan$in% +e$hanis+s or proportionality-li+itin% +easures available in the business .orld. !n our extre+ely hypotheti$al publi$ utility $orporation .ith the eIuity stru$ture as thus des$ribed, sin$e the +a8ority re$o%niHed only the 1&& $o++on shares as the ($apital( referred to in the Constitution, the entire e$ono+i$ ri%ht to the $ash flo. arisin% fro+ the 1,&&&,&&& non-votin% preferred shares $an be a$Iuired by forei%ners. @ith this e$ono+i$ po.er, the forei%n holders of the +inority $o++on shares .ill, as they easily $an, bar%ain .ith the holders of the +a8ority $o++on shares for +ore $orporate $ontrol in order to prote$t their e$ono+i$ interest and redu$e their e$ono+i$ ris5 in the publi$ utility $orporation. )or instan$e, they $an easily de+and the ri%ht to $ast the +a8ority of votes durin% the +eetin% of the board of dire$tors. After all, +oney $o++ands $ontrol. #he $ourt $annot, and ou%ht not, a$$ept as $orre$t a holdin% that routinely disre%ards le%al and pra$ti$al $onsiderations as si%nifi$ant as above indi$ated. Co++ittin% an error is bad enou%h, persistin% in it is .orse. -oreigners can nationali(ed industries be owners of full8
Nazareno
Corporation CASES Based on the Syllabus of Fr. Agustin <est it be overloo5ed, ($apital( is an oft-used ter+ in the Constitution and various le%islative a$ts that re%ulate $orporate entities. ;en$e, the +eanin% assi%ned to it .ithin the $ontext of a $onstitutional provision li+itin% forei%n o.nership in $orporations $an affe$t $orporations .hose o.nership is reserved to )ilipinos, or .hose forei%n eIuity is li+ited by la. pursuant to Se$. 1&, Art. N!! of the Constitution .hi$h states6 SEC#!"N 1&. #he Con%ress shall, upon re$o++endation of the e$ono+i$ and plannin% a%en$y, .hen the national interest di$tates, r&(&r6& )o ;1)1H&n( o4 )3& !3151''1n&( or )o ;or'ora)1on( or a((o;1a)1on( a) 5&a() (17)y '&r ;&n)u2 o4 =3o(& ;a'1)a5 1( o=n&* +y (u;3 ;1)1H&n(, or (u;3 31@3&r '&r;&n)a@& a( Con@r&(( 2ay 'r&(;r1+&, ;&r)a1n ar&a( o4 1n6&()2&n)(. T3& Con@r&(( (3a55 &na;) 2&a(ur&( )3a) =155 &n;oura@& )3& 4or2a)1on an* o'&ra)1on o4 &n)&r'r1(&( =3o(& ;a'1)a5 1( =3o55y o=n&* +y F151'1no(. ,E+phasis supplied-. )or instan$e, Republi$ A$t No. 3&:', also 5no.n as the -oreign Investments "ct of 1>>139 ,)!A-, provides for the for+ation of a Re%ular )orei%n !nvest+ent Ne%ative <ist ,R)!N<- $overin% invest+ent areasEa$tivities that are partially or entirely reserved to )ilipinos. #he 2th R)!N<30 provides that (No )orei%n EIuity( is allo.ed in the follo.in% areas of invest+entsEa$tivities6 1. *ass *edia ex$ept re$ordin% ,Arti$le NG!, Se$tion 1 of the Constitution and Presidential *e+orandu+ dated *ay :, 111:-D '. Pra$ti$e of all professions ,Arti$le N!!, Se$tion 1: of the Constitution and Se$tion 1, RA 9121-D33 ?. Retail trade enterprises .ith paid-up $apital of less than W',9&&,&&& ,Se$tion 9, RA 230'-D :. Cooperatives ,Chapter !!!, Arti$le '0, RA 01?2-D 9. Private Se$urity A%en$ies ,Se$tion :, RA 9:23-D 0. S+all-s$ale *inin% ,Se$tion ?, RA 3&303. 7tiliHation of *arine Resour$es in ar$hipela%i$ .aters, territorial sea, and ex$lusive e$ono+i$ Hone as .ell as s+all s$ale utiliHation of natural resour$es in rivers, la5es, bays, and la%oons ,Arti$le N!!, Se$tion ' of the Constitution-D 2. ".nership, operation and +ana%e+ent of $o$5pits ,Se$tion 9, P ::1-D
113
1. *anufa$ture, repair, sto$5pilin% andEor distribution of nu$lear .eapons ,Arti$le !!, Se$tion 2 of the Constitution-D 1&. *anufa$ture, repair, sto$5pilin% andEor distribution of biolo%i$al, $he+i$al and radiolo%i$al .eapons and anti-personnel +ines ,Garious treaties to .hi$h the Philippines is a si%natory and $onventions supported by the Philippines-D 11. *anufa$ture of fire $ra$5ers and other pyrote$hni$ devi$es ,Se$tion 9, RA 312?-. !f the $onstru$tion of ($apital,( as espoused by the /une '2, '&11 e$ision, .ere to be sustained, the reservation of the full o.nership of $orporations in the fore%oin% industries to )ilipinos $ould easily be ne%ated by the si+ple expedien$e of issuin% and +a5in% available non-votin% shares to forei%ners. After all, these non-votin% shares do not, follo.in% the /une '2, '&11 e$ision, for+ part of the ($apital( of these supposedly fully nationaliHed industries. ConseIuently, .hile )ilipinos $an o$$upy all of the seats in the board of dire$tors of $orporations in fully nationaliHed industries, it is possible for forei%ners to o.n the +a8ority of the eIuity of the $orporations throu%h (non-votin%( shares, .hi$h are nonetheless allo.ed to deter+ine funda+ental $orporate +atters re$o%niHed in Se$. 0 of the Corporation Code. )ilipinos +ay therefore be un.ittin%ly deprived of the (effe$tive( o.nership of $orporations supposedly reserved to the+ by the Constitution and various la.s. T3& For&1@n "n6&()2&n)( no) >ua514y or r&()r1;) 1n S&;. 11, Ar). N"" o4 )3& Con()1)u)1on. A;) )3& o4 2&an1n@ 1991 *o&( o4 J;a'1)a5J
Nazareno
Nonetheless, /usti$e Carpio parlays the thesis that the )!A, and its prede$essors, the !nvest+ents !n$entives A$t of 1103 ,(1103 !!A(-, 32 "+nibus !nvest+ents Code of 1121 ,(1121 "!C(-,31 and the "+nibus !n$entives Code of 1123 ,(1123 "!C(-,2& ,$olle$tively, (!nvest+ent !n$entives <a.s(- +ore parti$ularly their definition of the ter+ (Philippine National,( $onstitutes a %ood %uide for as$ertainin% the intent behind the use of the ter+ ($apital( in Se$. 11, Art. N!!Jthat it refers only to votin% shares of publi$ utility $orporations. ! $annot share this posture. T3& Con()1)u)1on 2ay on5y +& a2&n*&* )3rou@3 )3& 'ro;&*ur& ou)51n&* 1n )3& +a(1; *o;u2&n) 1)(&54 .21 An a2&n*2&n) ;anno), )3&r&4or&, +& 2a*& )3rou@3 )3& &7'&*1&n;& o4 a 5&@1(5a)16& a;)1on )3a) *1a@ona55y o''o(&( )3& ;5&ar 'ro61(1on( o4 )3& Con()1)u)1on. !ndeed, the ;on()1)u)1ona5 1n)&n) on the eIuity pres$ribed by Se$. 11, Art. N!! ;anno) '5au(1+5y +& 45&(3&* ou) +y a 5ooD )3rou@3 )3& 'r1(2 o4 &;ono21; ()a)u)&( 'a((&* a4)&r )3& a*o')1on o4 )3& Con()1)u)1on, su$h as the $ited )!A, the ,agna Carta for *i$ro, S+all and *ediu+ !ndustries ,Republi$ A$t No. 0133- and other 5indred la.s envisa%ed to )ilipiniHe $ertain areas of invest+ent. !t should be the other .ay around.
Corporation CASES Based on the Syllabus of Fr. Agustin Surely, the definition of a (Philippine National( in the )!A, or for that +atter, the 1123 "!C2' $ould not have influen$ed the +inds of the 1120 C"NC"* or the people .hen they ratified the Constitution. As heretofore dis$ussed, the pri+ary sour$e .hen$e to as$ertain $onstitutional intent or purpose is the $onstitutional text, or, to be +ore pre$ise, the lan%ua%e of the provision itself, 2? as inIuiry on any $ontroversy arisin% out of a $onstitutional provision ou%ht to start and end as +u$h as possible .ith the provision itself.2: L&@1(5a)16& &na;)2&n)( on ;o22&r;&, )ra*& an* na)1ona5 &;ono2y 2u() +& (o ;on()ru&*, =3&n a''ro'r1a)&, )o *&)&r21n& =3&)3&r )3& 'ur'o(& un*&r5y1n@ )3&2 1( 1n a;;or* =1)3 )3& 'o51;1&( an* o+?&;)16&( 5a1* ou) 1n )3& Con()1)u)1on. Sur&5y, a 5a= ;anno) 6a51*5y +roa*&n or r&()r1;) )3& )3ru() o4 a ;on()1)u)1ona5 'ro61(1on un5&(( &7'r&((5y (an;)1on&* +y )3& Con()1)u)1on 1)(&54 . And the Court +ay not read into the Constitution an intent or purpose that is not there. Any atte+pt to enlar%e the breadth of $onstitutional li+itations beyond .hat its provision di$tates should be stri$5en do.n. !n fa$t, it is obvious fro+ the )!A itself that its fra+ers dee+ed it ne$essary to Iualify the ter+ ($apital( .ith the phrase (sto$5 outstandin% and entitled to vote( in definin% a (Philippine National( in Se$. ?,a-. #his only supports the $onstrual that the ter+ ($apital,( standin% alone as in Se$. 11, Art. N!! of the Constitution, applies to all shares, .hether $lassified as votin% or non-votin%, and )31( 1( )3& 1n)&r'r&)a)1on 1n 3ar2ony =1)3 )3& Con()1)u)1on. !n passin% the )!A, the le%islature $ould not have plausibly intended to restri$t the :&= forei%n o.nership li+it i+posed by the Constitution on all $apital sto$5 to only votin% sto$5. Pre$isely, Con%ress ena$ted the )!A to liberaliHe the la.s on forei%n invest+ents. Su$h intent is at on$e apparent in the very title of the statute, i.e., (An A$t to Pro+ote )orei%n !nvest+ents,( and the poli$y6 (attra$t, pro+ote and .el$o+e produ$tive invest+ents fro+ forei%n individuals, partnerships, $orporations, and %overn+ent,(29 expresses the sa+e. #he Senate, throu%h then Senator Gi$ente Paterno, $ate%ori$ally stated that the )!A is ai+ed at (liberaliHin% forei%n invest+ents( 20 be$ause ()ilipino invest+ent is not %oin% to be enou%h AandB .e need the support and the assistan$e of forei%n investors x x x.(23 #he senator +ade $lear that (the ter+ KPhilippine nationalC( +eans either )ilipino $itiHens or enterprises of .hi$h the ( total )ilipino o=n&r(31'( is 0& percent or %reater, thus6 S&na)or !a)&rno. *ay ! first say that )3& )&r2 J!3151''1n& na)1ona5J 2&an( &1)3&r F151'1no ;1)1H&n( or &n)&r'r1(&( o4 =31;3 )3& )o)a5 F151'1no o=n&r(31' 1( 60 '&r;&n) or @r&a)&r. !n other .ords, .e are not ex$ludin% forei%n parti$ipation in do+esti$ +ar5et enterprises .ith total assets of less than P '9 +illion. @e are +erely li+itin% forei%n parti$ipation to not +ore than :& per$ent in this definition.22
112
Even %rantin%, arguendo! that the definition of a (Philippine National( in the )!A .as lifted fro+ the !nvest+ent !n$entives <a.s issued in 1103, 1121, and 1123 that defined (Philippine National( as a $orporation 0&= of .hose votin% sto$5s is o.ned by )ilipino $itiHens, su$h definition does not li+it or Iualify the nationality reIuire+ent pres$ribed for publi$ utility $orporations by Se$. 11, Art. N!! of the 1123 Constitution. #he latter does not refer to the definition of a (Philippine National.( !nstead, Se$. 11, Art. N!! reiterates the use of the un>ua5141&* )&r2 J;a'1)a5J in the 11?9 and 113? Constitutions. !n fa$t, neither the 113? Constitutional Convention nor the 1120 C"NC"* alluded to the !nvest+ent !n$entives <a.s in their deliberations on the nationality reIuire+ent of publi$ utility $orporations. @ith the uneIuivo$al re8e$tion of the 7P <a. Center proposal to use the Iualifyin% (votin% sto$5 or $ontrollin% interest,( the non-$onsideration of the !nvest+ent !n$entives <a.s +eans that these la.s are not pertinent to the issue of the )ilipino-forei%n $apital ratio in publi$ utility $orporations. Besides, none of the !nvest+ent !n$entives <a.s definin% a (Philippine National( has sou%ht to expand or +odify the definition of ($apital,( as used in the Constitutions then existin%. #he definition of a (Philippine National( in these la.s .as, to stress, only intended to identify the $orporations Iualified for re%istration to avail of the in$entives pres$ribed therein. #he definition .as not +eant to find $ontext outside the s$ope of the various !nvest+ent !n$entives <a.s, +u$h less to +odify a nationality reIuire+ent set by the then existin% Constitution. #his +u$h is obvious in the very headin% of the first of these !nvest+ent !n$entives <a.s, 1103 !!A 6 SECT"ON -. &41n1)1on o4 T&r2(. 8 For 'ur'o(&( o4 )31( A;) 6 xxxx ,f- (Philippine National( shall +ean a $itiHen of the PhilippinesD or a partnership or asso$iation .holly o.ned by $itiHens of the PhilippinesD or a $orporation or%aniHed and existin% under the la.s of the Philippines of .hi$h at least sixty per $ent of the $apital sto$5 outstandin% and entitled to vote is o.ned and held by $itiHens of the Philippines xxxx ,E+phasis and unders$orin% supplied.!ndeed, the definition of a (Philippine National( in the )!A $annot apply to the o.nership stru$ture of enterprises applyin% for, and those %ranted, a fran$hise to operate as a publi$ utility under Se$. 11, Art. N!! of the Constitution. As aptly observed by the SEC, the definition of a (Philippine National( provided in the )!A refers only to a $orporation that is per+itted to invest in an enterprise as a Philippine $itiHen ,investorcorporation-. T3& F"A *o&( no) 'r&(;r1+& )3& &>u1)y o=n&r(31' ()ru;)ur& o4 )3& &n)&r'r1(& @ran)&* )3& 4ran;31(& or )3& 'o=&r )o o'&ra)& 1n a 4u55y or 'ar)1a55y na)1ona51H&* 1n*u()ry ,investee corporation-. #his is apparent fro+ the )!A itself, .hi$h also defines the a$t of an (invest+ent( and (forei%n invest+ent(6
Nazareno
Corporation CASES Based on the Syllabus of Fr. Agustin Se$tion ?. efinitions. F As used in this A$t6 a- #he ter+ (Philippine national( shall +ean a $itiHen of the Philippines, or a do+esti$ partnership or asso$iation .holly o.ned by $itiHens of the PhilippinesD or a $orporation or%aniHed under the la.s of the Philippines of .hi$h at least sixty per$ent A0&=B of the $apital sto$5 outstandin% and entitled to vote is o.ned and held by $itiHens of the Philippines x x x b- #he ter+ (1n6&()2&n)( shall +ean &>u1)y 'ar)1;1'a)1on in any enterprise or%aniHed or existin% the la.s of the PhilippinesD $- #he ter+ J4or&1@n 1n6&()2&n)J shall +ean as &>u1)y 1n6&()2&n) +ade by a nonPhilippine national in the for+ of forei%n ex$han%e andEor other assets a$tually transferred to the Philippines and duly re%istered .ith the Central Ban5 .hi$h shall assess and appraise the value of su$h assets other than forei%n ex$han%e. !n fa$t, Se$. 3 of the )!A, as a+ended, allo.s aliens or non-Philippine nationals to o=n an enterprise up to the extent provided by the Constitution, existin% la.s or the )!N<6 Se$. 3. )orei%n invest+ents in do+esti$ +ar5et enterprises. F Non- Philippine nationals +ay o=n up to one hundred per$ent A1&&=B of do+esti$ +ar5et enterprises unless forei%n o.nership therein is prohibited or li+ited by the Constitution and existin% la.s or the )orei%n !nvest+ent Ne%ative <ist under Se$tion 2 hereof. ,E+phasis supplied.;en$e, pursuant to the Ei%ht Re%ular )!N<, <ist A, the forei%n ( eGui"y( is up to :&= in enterprises en%a%ed in the operation and +ana%e+ent of publi$ utilities .hile the re+ainin% 0&= of the (eGui"y( is reserved to )ilipino $itiHens and (Philippine Nationals( as defined in Se$. ?,a- of the )!A. Notably, the ter+ (eIuity( refers to the (o=n&r(31'interest inO a business(21 or a (share in a publi$ly traded $o+pany,( 1& and not to the ($ontrollin%( or (+ana%e+ent( interest in a $o+pany. !t ne$essarily in$ludes all and every share in a $orporation, .hether votin% or non-votin%. A%ain, @e +ust re$o%niHe the distin$tion of the separate $on$epts of (o.nership( and ($ontrol( in +odern $orporate %overnan$e in order to realiHe the intent of the fra+ers of our Constitution to reserve for )ilipinos the ulti+ate and all-en$o+passin% $ontrol of publi$ utility entities fro+ their daily ad+inistration to the a$ts of o.nership enu+erated in Se$. 0 of the Corporation Code.11 As elu$idated, by eIuatin% the .ord ($apital( in Se$. 11, Art. N!! to the li+ited aspe$t of the ri%ht to $ontrol the $o+position of the board of dire$tors, the Court $ould very .ell be deprivin% )ilipinos of the +a8ority e$ono+i$ interest in the publi$ utility $orporation and, thus, the effe$tive $ontrol and o.nership of su$h $orporation. T3& Cour) 3a( no ?ur1(*1;)1on o6&r ()o;D3o5*&r( =3o ar& 1n*1('&n(a+5& 'ar)1&( 1n 1n)&r&() !L T
111
4or&1@n
Nazareno
an*
*ore i+portantly, this Court $annot apply a ne. do$trine adopted in a pre$edentsettin% de$ision to parties that have never been %iven the $han$e to present their o.n vie.s on the substantive and fa$tual issues involved in the pre$edent-settin% $ase. #o re$all, the instant $ontroversy arose out of an ori%inal petition filed in )ebruary '&&3 for, a+on% others,*&;5ara)ory r&51&4 on Se$. 11, Art. N!! of the 1123 Constitution (to $larify the intent of the Constitutional Co++ission that $rafted the 1123 Constitution to deter+ine the very nature of su$h li+itation on forei%n o.nership.(1' #he petition i+pleaded the follo.in% personalities as the respondents6 ,1- *ar%arito B. #eves, then Se$retary of )inan$e and Chair of the PrivatiHation Coun$ilD ,'- /ohn P. Sevilla, then underse$retary for privatiHation of the epart+ent of )inan$eD ,?Ri$ardo Ab$ede, $o++issioner of the Presidential Co++ission on 4ood 4overn+entD ,:- Anthoni Sali+, $hair of )irst Pa$ifi$ Co. <td. and dire$tor of *etro Pa$ifi$ Asset ;oldin%s, !n$. ,*PA;-D ,9- *anuel G. Pan%ilinan, $hair+an of the board of P< #D ,0- Napoleon <. NaHareno, the president of P< #D ,3- )e Barin ,Barin-, then $hair of the SECD and ,2- )ran$is <i+ ,<i+-, then president of the PSE. Notably, neither P< # itself nor any of its sto$5holders .ere na+ed as respondents in the petition, albeit it sou%ht fro+ the Court the follo.in% +ain reliefs6 9. x x x to issue a de$laratory relief that o.nership of $o++on or votin% shares is the sole basis in deter+inin% forei%n eIuity in a publi$ utility and that any other %overn+ent rulin%s, opinions, and re%ulations in$onsistent .ith this de$laratory relief be de$lared as un$onstitutional and a violation of the intent and spirit of the 1123 ConstitutionD 0. x x x to de$lare null and void all sales of $o++on sto$5s to forei%ners in ex$ess of :& per$ent of the total subs$ribed $o++on shareholdin%sD and 3. x x x to dire$t the ASECB and APSEB to reIuire P< # to +a5e a publi$ dis$losure of all of its forei%n shareholdin%s and their a$tual and real benefi$ial o.ners.( Clearly, the petition see5s a 8ud%+ent that $an adversely affe$t P< # and its forei%n shareholders. !f this Court .ere to a$$o++odate the petitionCs prayer, as the +a8ority did in the /une '2, '&11 e$ision and proposes to do presently, P< # stands to lose its fran$hise, .hile the forei%n sto$5holders .ill be $o+pelled to divest their votin% shares in ex$ess of :&= of P< #Cs votin% sto$5, if any, even at a loss. !t $annot, therefore, be %ainsaid that P< # and its forei%n shareholders are indispensable parties
Corporation CASES Based on the Syllabus of Fr. Agustin to the instant $ase under the ter+s of Se$s. ' and 3, Rule ? of the Rules of Civil Pro$edure, .hi$h read6 Se$tion '. Parties in interest.FEvery a$tion +ust be prose$uted and defended in the na+e of the real party in interest. All persons havin% an interest in the sub8e$t of the a$tion and in obtainin% the relief de+anded shall be 8oined as plaintiffs. All persons .ho $lai+ an interest in the $ontroversy or the sub8e$t thereof adverse to the plaintiff, or .ho are ne$essary to a $o+plete deter+ination or settle+ent of the Iuestions involved therein, shall be 8oined as defendants. xxxx Se$tion 3. Co+pulsory 8oinder of indispensable parties.F Parties in interest .ithout .ho+ no final deter+ination $an be had of an a$tion shall be 8oined either as plaintiffs or defendants. >et, a%ain, P< # and its forei%n shareholders have not been %iven noti$e of this petition to appear before, +u$h less heard by, this Court. Nonetheless, the +a8ority has allo.ed su$h irre%ularity in $ontravention of the settled 8urispruden$e that an a$tion $annot pro$eed unless indispensable parties are 8oined1? sin$e the non-8oinder of these indispensable parties deprives the $ourt the 8urisdi$tion to issue a de$ision bindin% on the indispensable parties that have not been 8oined or i+pleaded. !n other .ords, if an indispensable party is not i+pleaded, any personal 8ud%+ent .ould have no effe$tiveness1: as to the+ for the tribunalCs .ant of 8urisdi$tion. !n 2rcelona 9. Cour" of 2ppeals,19 @e explained that the basi$ notions of due pro$ess reIuire the observan$e of this rule that refuses the effe$tivity of a de$ision that .as rendered despite the non-8oinder of indispensable parties6 Basi$ $onsiderations of due pro$ess, ho.ever, i+pel a si+ilar holdin% in $ases involvin% 8urisdi$tion over the persons of indispensable parties .hi$h a $ourt +ust a$Iuire before it $an validly pronoun$e 8ud%+ents personal to said defendants. Courts a$Iuire 8urisdi$tion over a party plaintiff upon the filin% of the $o+plaint. "n the other hand, 8urisdi$tion over the person of a party defendant is assured upon the servi$e of su++ons in the +anner reIuired by la. or other.ise by his voluntary appearan$e. As a rule, if a defendant has not been su++oned, the $ourt a$Iuires no 8urisdi$tion over his person, and a personal 8ud%+ent rendered a%ainst su$h defendant is null and void. A *&;1(1on )3a) 1( nu55 an* 6o1* 4or =an) o4 ?ur1(*1;)1on on )3& 'ar) o4 )3& )r1a5 ;our) 1( no) a *&;1(1on 1n )3& ;on)&2'5a)1on o4 5a= an*, 3&n;&, 1) ;an n&6&r +&;o2& 41na5 an* &7&;u)ory. Rule ?, Se$tion 3 of the Rules of Court, defines indispensable parties as parties-ininterest .ithout .ho+ there $an be no final deter+ination of an a$tion. As su$h, they +ust be 8oined either as plaintiffs or as defendants. T3& @&n&ra5 ru5& =1)3 r&4&r&n;&
1'&
)o )3& 2aD1n@ o4 'ar)1&( 1n a ;1615 a;)1on r&>u1r&(, o4 ;our(&, )3& ?o1n*&r o4 a55 n&;&((ary 'ar)1&( =3&r& 'o((1+5&, an* )3& ?o1n*&r o4 a55 1n*1('&n(a+5& 'ar)1&( un*&r any an* a55 ;on*1)1on(, )3&1r 'r&(&n;& +&1n@ a (1n& >ua non 4or )3& &7&r;1(& o4 ?u*1;1a5 'o=&r. ") 1( 'r&;1(&5y J=3&n an 1n*1('&n(a+5& 'ar)y 1( no) +&4or& )3& ;our) /)3a)0 )3& a;)1on (3ou5* +& *1(21((&*.J T3& a+(&n;& o4 an 1n*1('&n(a+5& 'ar)y r&n*&r( a55 (u+(&>u&n) a;)1on( o4 )3& ;our) nu55 an* 6o1* 4or =an) o4 au)3or1)y )o a;), no) on5y a( )o )3& a+(&n) 'ar)1&( +u) &6&n a( )o )3o(& 'r&(&n). 10 ;en$e, the /une '2, '&11 e$ision havin% been rendered in a $ase .here the indispensable parties have not been i+pleaded, +u$h less su++oned or heard, $annot be %iven any effe$t and is, thus, null and void. 0rgo, the assailed /une '2, '&11 e$ision is virtually a useless 8ud%+ent, at least insofar as it tends to penaliHe P< # and its forei%n sto$5holders. !t $annot bind and affe$t P< # and the forei%n sto$5holders or be enfor$ed and exe$uted a%ainst the+. !t is settled that ;our)( o4 5a= J(3ou5* no) r&n*&r ?u*@2&n)( =31;3 ;anno) +& &n4or;&* +y any 'ro;&(( Dno=n )o )3& 5a=,J13 hen$e, this Court should have refused to %ive $o%niHan$e to the petition. #he ineffe$tivity $aused by the non-8oinder of the indispensable parties, the deprivation of their day in $ourt, and the denial of their ri%ht to due pro$ess, $annot be $ured by the sophisti$ expedien$e of na+in% P< # in the fallo of the de$ision as a respondent. #he dispositive portion of the /une '2, '&11 e$ision all the +ore only hi%hli%hts the unenfor$eability of the +a8orityCs disposition and serves as an i+plied ad+ission of this CourtCs la$5 of 8urisdi$tion over the persons of P< # and its forei%n sto$5holders .hen it did not dire$tly order the latter to dispose the $o++on shares in ex$ess of the :&= li+it. !nstead, it too5 the $ir$uitous route of orderin% the SEC, in the fallo of the assailed de$ision, (to apply this definition of the ter+ K$apitalC in deter+inin% the extent of allo.able o.nership in respondent P< # and, if there is a violation of Se$. 11, Art. N!! of the Constitution, to i+pose the appropriate san$tions under the la..(12 C5&ar5y, (1n;& !L T an* )3& 4or&1@n ()o;D3o5*&r( =&r& no) 12'5&a*&* a( 1n*1('&n(a+5& 'ar)1&( )o )3& ;a(&, )3& 2a?or1)y =ou5* =an) )o 1n*1r&;)5y &7&;u)& 1)( *&;1(1on =31;3 1) ;ou5* no) &7&;u)& *1r&;)5y. T3& Cour) 2ay +& ;r1)1;1H&* 4or 61o5a)1n@ )3& 6&ry ru5&( 1) 'ro2u5@a)&* an* 4or )r&n;31n@ )3& 'ro61(1on( o4 S&;. ,, Ar). $""" o4 )3& Con()1)u)1on, =31;3 *&41n&( )3& 'o=&r( an* ?ur1(*1;)1on o4 )31( Cour). !t is apropos to stress, as a re+inder, that the Rules of Court is not a +ere body of te$hni$al rules that $an be disre%arded at .ill .henever $onvenient. !t for+s an inte%ral part of the basi$ notion of fair play as expressed in this Constitutional $aveat6 (No person shall be deprived of life, liberty or property .ithout due pro$ess of la.,(11and obli%es this Court, as .ell as other $ourts and tribunals, to hear a person first before renderin% a 8ud%+ent for or a%ainst hi+. As aniel @ebster explained, (due pro$ess of la. is +ore $learly intended the %eneral la., a la. .hi$h hears before
Nazareno
Corporation CASES Based on the Syllabus of Fr. Agustin it $onde+nsD .hi$h pro$eeds upon enIuiry, and renders 8ud%+ent only after trial.(1&& #he prin$iple of due pro$ess of la. ($onte+plates noti$e and opportunity to be heard before 8ud%+ent is rendered, affe$tin% oneCs person or property.( 1&1 #hus, this Court has stressed the stri$t observan$e of the follo.in% reIuisites of pro$edural due pro$ess in 8udi$ial pro$eedin%s in order to $o+ply .ith this honored prin$iple6 ,1- #here +ust be a $ourt or tribunal $lothed .ith 8udi$ial po.er to hear and deter+ine the +atter before itD ,'- /urisdi$tion +ust be la.fully a$Iuired over the person of the defendant or over the property .hi$h is the sub8e$t of the pro$eedin%sD ,?- #he defendant +ust be %iven an opportunity to be heardD and ,:- /ud%+ent +ust be rendered upon la.ful hearin%.
1&'
1'1
#he Philippine %overn+entCs a$t of pushin% for and approvin% the sale of the P#!C shares, .hi$h is eIuivalent to 1' +illion P< # $o++on shares, to forei%n investors pre$ludes it fro+ assertin% that the pur$hase violates the Constitutional li+it on forei%n o.nership of publi$ utilities so that the forei%n investors +ust no. divest the $o++on P< # shares bou%ht. #he ele+entary prin$iple that a person is prevented fro+ %oin% ba$5 on his o.n a$t or representation to the pre8udi$e of another .ho relied thereon1&3 finds appli$ation in the present $ase. Art. 1:?1 of the Civil Code provides that an (ad+ission or representation is rendered $on$lusive upon the person +a5in% it, and $annot be denied or disproved as a%ainst a person relyin% thereon.( #his rule is supported by Se$tion ',a- of Rule 1?1 of the Rules of Court on the burden of proof and presu+ptions, .hi$h states6 Se$tion '. Con$lusive presu+ptions. F #he follo.in% are instan$es of $on$lusive presu+ptions6 ,a- @henever a party has, by his o.n de$laration, a$t, or o+ission, intentionally and deliberately led another to believe a parti$ular thin% true, and to a$t upon su$h belief, he $annot, in any liti%ation arisin% out of su$h de$laration, a$t or o+ission, be per+itted to falsify it. #he %overn+ent $annot plausibly hide behind the +antle of its %eneral i++unity to resist the appli$ation of this eIuitable prin$iple for (the rule on non-estoppel of the %overn+ent is not desi%ned to perpetrate an in8usti$e.( 1&2;en$e, this Court has allo.ed several ex$eptions to the rule on the %overn+entCs non-estoppel. As su$$in$tly explained in Republic of "!e P!ilippines 9. Cour" of 2ppeals61&1 #he %eneral rule is that the State $annot be put in estoppel by the +ista5es or errors of its offi$ials or a%ents. ;o.ever, li5e all %eneral rules, this is also sub8e$t to ex$eptions, viH.6 (Estoppel a%ainst the publi$ are little favored. #hey should not be invo5ed ex$ept in rare and unusual $ir$u+stan$es and +ay not be invo5ed .here they .ould operate to defeat the effe$tive operation of a poli$y adopted to prote$t the publi$. #hey +ust be applied .ith $ir$u+spe$tion and should be applied only in those spe$ial $ases .here the interests of 8usti$e $learly reIuire it. Nevertheless, )3& @o6&rn2&n) 2u() no) +& a55o=&* )o *&a5 *1(3onora+5y or ;a'r1;1ou(5y =1)3 1)( ;1)1H&n(, an* 2u() no) '5ay an 1@no+5& 'ar) or *o a (3a++y )31n@I an* (u+?&;) )o 5121)a)1on( . . ., )3& *o;)r1n& o4 &>u1)a+5& &()o''&5 2ay +& 1n6oD&* a@a1n() 'u+51; au)3or1)1&( as .ell as a%ainst private individuals.( !n %epublic v. Sandiganba8an, the %overn+ent, in its effort to re$over ill-%otten .ealth, tried to s5irt the appli$ation of estoppel a%ainst it by invo5in% a spe$ifi$ $onstitutional provision. #he Court $ountered6
Nazareno
Apparently, not one of these reIuisites has been $o+plied .ith before the /une '2, '&11 e$ision .as rendered. !nstead, P< # and its forei%n sto$5holders .ere not %iven their day in $ourt, even .hen they stand to lose their properties, their shares, and even the fran$hise to operate as a publi$ utility. #his stands $ounter to our dis$ussion in 2gabon 9. 'LRC,1&? .here @e e+phasiHed that the prin$iple of due pro$ess $o+ports .ith the si+plest notions of .hat is fair and 8ust6 #o be sure, the ue Pro$ess Clause in Arti$le !!!, Se$tion 1 of the Constitution e+bodies a syste+ of ri%hts based on +oral prin$iples so deeply i+bedded in the traditions and feelin%s of our people as to be dee+ed funda+ental to a $iviliHed so$iety as $on$eived by our entire history. u& 'ro;&(( 1( )3a) =31;3 ;o2'or)( =1)3 )3& *&&'&() no)1on( o4 =3a) 1( 4a1r an* r1@3) an* ?u() . ") 1( a ;on()1)u)1ona5 r&()ra1n) on )3& le%islative as .ell as on the exe$utive and ?u*1;1a5 'o=&r( o4 )3& @o6&rn2&n) 'ro61*&* +y )3& #155 o4 R1@3)(.1&: Parentheti$ally, the present petition parta5es of a $ollateral atta$5 on P< #Cs fran$hise as a publi$ utility. 4ivin% due $ourse to the re$ourse is $ontrary to the CourtCs rulin% in PLDT 9. 'a"ional Telecommunica"ions Commission ,1&9 .here @e de$lared a fran$hise to be a property ri%ht that $an only be Iuestioned in a dire$t pro$eedin%.1&0 @orse, the /une '2, '&11 e$ision 4a;151)a)&( an* @uaran)&&( )3& (u;;&(( o4 )3a) un5a=4u5 a))a;D by allo.in% it to be underta5en in the absen$e of P< #. T3& !3151''1n& Go6&rn2&n) 1( +arr&* +y or*&r1n@ 4or&1@n 1n6&()or( )o *16&() 1n 'u+51; u)151)1&( 1n &7;&(( o4 )3& 40 '&r;&n) ;a' &()o''&5 6o)1n@ 4ro2 (3ar&(
Corporation CASES Based on the Syllabus of Fr. Agustin (@e a%ree .ith the state+ent that the State is i++une fro+ estoppel, but this $on$ept is understood to refer to a$ts and +ista5es of its offi$ials espe$ially those .hi$h are irre%ular ,Sharp !nternational *ar5etin% vs. Court of Appeals, '&1 SCRA '11D ?&0 1111D Republi$ v. AIuino, 1'& SCRA 120 112?-, .hi$h pe$uliar $ir$u+stan$es are absent in the $ase at bar. Althou%h the StateYs ri%ht of a$tion to re$over ill-%otten .ealth is not vulnerable to estoppelADB it is non seIuitur to su%%est that a ;on)ra;), 4r&&5y an* 1n @oo* 4a1)3 &7&;u)&* +&)=&&n )3& 'ar)1&( )3&r&)o 1( (u(;&')1+5& )o *1()ur+an;& a* 1n41n1)u2. A *144&r&n) 1n)&r'r&)a)1on =155 5&a* )o )3& a+(ur* (;&nar1o o4 '&r21))1n@ a 'ar)y )o un15a)&ra55y ?&))1(on a ;o2'ro21(& a@r&&2&n) =31;3 1( (u''o(&* )o 3a6& )3& au)3or1)y o4 r&( ?u*1;a)a /Ar)1;5& 20-., N&= C1615 Co*&0, an* 51D& any o)3&r ;on)ra;), 3a( )3& 4or;& o4 5a= +&)=&&n 'ar)1&( )3&r&)o ,Arti$le 1191, Ne. Civil CodeD ;ernaeH vs. Rao, 13 SCRA '10 1100D 0 Padilla, Civil Code Annotated, 3th ed., 1123, p. 311D ? AIuino, Civil Code, 111& ed., p. :0?- . . .( #he Court further de$lared that (,t-he real offi$e of the eIuitable nor+ of estoppel is li+ited to supplyAin%B defi$ien$y in the la., but it should not supplant positive la..(11& ,E+phasis supplied.Si+ilarly, in Ramos 9. Cen"ral EanB of "!e P!ilippines ,111 this Court berated the %overn+ent for rene%in% on its representations and ur%ed it to 5eep its .ord, viH6 Even in the absen$e of $ontra$t, the re$ord plainly sho.s that the CB ACentral Ban5B +ade express representations to petitioners herein that it .ould support the "B* A"verseas Ban5 of *anilaB, and avoid its liIuidation if the petitioners .ould exe$ute ,a- the Gotin% #rust A%ree+ent turnin% over the +ana%e+ent of "B* to the CB or its no+inees, and ,b- +ort%a%e or assi%n their properties to the Central Ban5 to $over the overdraft balan$e of "B*. #he petitioners havin% $o+plied .ith these $onditions and parted .ith value to the profit of the CB ,.hi$h thus a$Iuired additional se$urity for its o.n advan$es-, the CB +ay not no. rene%e on its representations and liIuidate the "B*, to the detri+ent of its sto$5holders, depositors and other $reditors, under the rule of pro+issory estoppel ,11 A+. /ur., pa%es 093-092D '2 A+. /ur. 'd, 090-093D Ed. Note, 119 A<R, 193-. (#he broad %eneral rule to the effe$t that a pro+ise to do or not to do so+ethin% in the future does not .or5 an estoppel +ust be Iualified, sin$e there are nu+erous $ases in .hi$h an estoppel has been predi$ated on pro+ises or assuran$es as to future $ondu$t. #he do$trine of Kpro+issory estoppelC is by no +eans ne., althou%h the na+e has been adopted only in $o+paratively re$ent years. A$$ordin% to that do$trine, an estoppel +ay arise fro+ the +a5in% of a pro+ise even thou%h .ithout $onsideration, if it .as intended that the pro+ise should be relied upon and in fa$t it .as relied upon, and if a refusal to enfor$e it .ould be virtually to san$tion the perpetration of fraud or .ould result in other in8usti$e. !n this respe$t, the relian$e by the pro+ises is %enerally eviden$ed by a$tion or forbearan$e on his part, and the idea has been expressed that
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su$h a$tion or forbearan$e .ould reasonably have been expe$ted by the pro+isor. *ere o+ission by the pro+isee to do .hatever the pro+isor pro+ised to do has been held insuffi$ient Kforbearan$eC to %ive rise to a pro+issory estoppel.( ,11 A+. /ur., lo$. $it.#he ex$eption established in the fore%oin% $ases is parti$ularly appropriate presently sin$e the (indire$t( sale of P< # $o++on shares to forei%n investors partoo5 of a propriety business transa$tion of the %overn+ent .hi$h .as not underta5en as an in$ident to any of its %overn+ental fun$tions. A$$ordin%ly, the %overn+ent, by $on$ludin% the sale, has des$ended to the level of an ordinary $itiHen and stripped itself of the vesti%es of i++unity that is available in the perfor+an$e of %overn+ental a$ts.11' Er%o, the %overn+ent is vulnerable to, and $annot hold off, the appli$ation of the prin$iple of estoppel that the forei%n investors $an very .ell invo5e in $ase they are $o+pelled to divest the votin% shares they have previously a$Iuired throu%h the indu$e+ent of no less the %overn+ent. !n other .ords, the %overn+ent is pre$luded fro+ penaliHin% these alien investors for an a$t perfor+ed upon its %uarantee, throu%h its fa$ilities, and .ith its i+pri+atur. Un*&r )3& J4a1r an* &>u1)a+5& )r&a)2&n)J ;5au(& o4 our +15a)&ra5 1n6&()2&n) )r&a)1&( an* 4a1r )ra*& a@r&&2&n)(, 4or&1@n 1n6&()or( 3a6& )3& r1@3) )o r&5y on )3& (a2& 5&@a5 4ra2&=orD &71()1n@ a) )3& )12& )3&y 2a*& )3&1r 1n6&()2&n)( Not only is the %overn+ent put in estoppel by its a$ts and representations durin% the sale of the P#!C shares to *PA;, it is li5e.ise bound by its %uarantees in the Bilateral !nvest+ent #reaties ,B!#s- and )ree #rade A%ree+ents ,)#As- .ith other $ountries. #o date, the Philippines has $on$luded nu+erous B!#s and )#As to en$oura%e and fa$ilitate forei%n dire$t invest+ents in the $ountry. #hese B!#s and )#As invariably $ontain %uarantees $al$ulated to ensure the safety and stability of these forei%n invest+ents. )ore+ost of these is the $o++it+ent to %ive fair and eIuitable treat+ent ,)E#- to the forei%n investors and invest+ents in the $ountry. #a5e for instan$e the B!# $on$luded bet.een the Philippines and China, 11? Arti$le ?,1thereof provides that (invest+ents and a$tivities asso$iated .ith su$h invest+ents of investors of either Contra$tin% Party (3a55 +& a;;or*&* &>u1)a+5& )r&a)2&n) an* (3a55 &n?oy 'ro)&;)1on in the territory of the other Contra$tin% Party.( 11:#he sa+e assuran$e is in the A%ree+ent on !nvest+ent of the )ra+e.or5 A%ree+ent on Co+prehensive E$ono+i$ Cooperation Bet.een the Asso$iation of Southeast Asian Nations and the PeopleCs Republi$ of China ,ASEAN-China !nvest+ent A%ree+ent-119 .here the Philippines assured Chinese investors that the $ountry (shall a$$ord to Athe+B 4a1r an* &>u1)a+5& )r&a)2&n) and full prote$tion and se$urity.( 110 !n
Nazareno
Corporation CASES Based on the Syllabus of Fr. Agustin the sa+e +anner, the Philippines a%reed to (a$$ord invest+ents A+ade by /apanese investorsB treat+ent in a$$ordan$e .ith international la., in$ludin% 4a1r an* &>u1)a+5& )r&a)2&n) and full prote$tion and se$urity( 113 in the A%ree+ent bet.een the Republi$ of the Philippines and /apan for E$ono+i$ Partnership ,/PEPA-.112 Si+ilar provisions are found in the ASEAN Co+prehensive !nvest+ent A%ree+ent ,AC!A-111 and the B!#s $on$luded by the Philippines .ith, a+on% others, the Ar%entine Republi$,1'& Australia,1'1 Austria,1''Ban%ladesh,1'? Bel%iu+,1': Ca+bodia,1'9 Canada,1'0 Chile,1'3 the CHe$h Republi$,1'2 en+ar5,1'1)inland,1?& )ran$e,1?1 4er+any, 1?' !ndia,1?? !ndonesia,1?: !ran,1?9 !taly, 1?0 *on%olia,1?3 *yan+ar,1?2Netherlands,1?1 Pa5istan,1:& Portu%uese Republi$,1:1 Ro+ania,1:' Russia,1:? Saudi Arabia,1:: Spain,1:9S.eden,1:0 S.itHerland,1:3 #hailand,1:2 #ur5ey, 1:1 7nited Rin%do+,19& and Gietna+.191 Explainin% the )E# as a standard $on$ordant .ith the rule of la., Professor Gandevelde .rote that it reIuires the host $ounty to treat forei%n invest+ents .ith $onsisten$y, se$urity, non-dis$ri+ination and reasonableness6 #he thesis is that the a.ards issued to date i+pli$itly have interpreted the fair and eIuitable treat+ent standard as reIuirin% treat+ent in a$$ordan$e .ith the $on$ept of the rule of la.. #hat is, )3& ;on;&') o4 5&@a51)y 1( )3& un14y1n@ )3&ory +&31n* )3& 4a1r an* &>u1)a+5& )r&a)2&n) ()an*ar*. xxxx #hus, international arbitral a.ards interpretin% the fair and eIuitable treat+ent standard have in$orporated the substantive and pro$edural prin$iples of the rule of la. into that standard. T3& 4a1r an* &>u1)a+5& )r&a)2&n) ()an*ar* 1n #"T( 3a( +&&n 1n)&r'r&)&* a( r&>u1r1n@ )3a) ;o6&r&* 1n6&()2&n) or 1n6&()or( r&;&16& )r&a)2&n) )3a) 1( r&a(ona+5&, ;on(1()&n), non8*1(;r121na)ory, )ran('ar&n), an* 1n a;;or*an;& =1)3 *u& 'ro;&((. As .ill be seen, these prin$iples explain virtually all of the a.ards applyin% the fair and eIuitable treat+ent standard. No a.ard is in$onsistent .ith this theory of the standard. 7nderstandin% fair and eIuitable treat+ent as le%ality is $onsistent .ith the purposes of the B!#s. B!#s essentially are instru+ents that i+pose le%al restraints on the treat+ent of $overed invest+ents and investors by host states. #he very essen$e of a B!# is a partial subordination of the soverei%nYs po.er to the le%al $onstraints of the treaty. )urther, individual B!# provisions are the+selves a refle$tion of the prin$iples of the rule of la.. ,E+phasis and unders$orin% supplied.-19'
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"n the reIuire+ent of $onsisten$y, the !nternational Centre for the Settle+ent of !nvest+ent isputes ,!CS! - explained in Tecnicas Me&ioambien"ales Tecme& 6.2. 9. T!e uni"e& Me<ican 6"a"es19? that the host $ountry +ust +aintain a ()a+5& and 'r&*1;)a+5& 5&@a5 an* +u(1n&(( &n61ron2&n) to a$$ord a fair and eIuitable treat+ent to forei%n investors. 19?. #he Arbitral #ribunal finds that t3& ;o221)2&n) o4 4a1r an* &>u1)a+5& )r&a)2&n) in$luded in Arti$le :,1- of the A%ree+ent 1( an &7'r&((1on an* 'ar) o4 )3& bona fi&e 'r1n;1'5& r&;o@n1H&* 1n 1n)&rna)1ona5 5a=, althou%h bad faith fro+ the State is not reIuired for its violation6 #o the +odern eye, .hat is unfair or ineIuitable need not eIuate .ith the outra%eous or the e%re%ious. !n parti$ular, a State +ay treat forei%n invest+ent unfairly and ineIuitably .ithout ne$essarily a$tin% in bad faith. 19:. #he Arbitral #ribunal $onsiders that )31( 'ro61(1on of the A%ree+ent, in li%ht of the %ood faith prin$iple established by international la., r&>u1r&( )3& Con)ra;)1n@ !ar)1&( )o 'ro61*& )o 1n)&rna)1ona5 1n6&()2&n)( )r&a)2&n) )3a) *o&( no) a44&;) )3& +a(1; &7'&;)a)1on( )3a) =&r& )aD&n 1n)o a;;oun) +y )3& 4or&1@n 1n6&()or )o 2aD& )3& 1n6&()2&n). T3& 4or&1@n 1n6&()or &7'&;)( )3& 3o() S)a)& )o a;) 1n a ;on(1()&n) 2ann&r, 4r&& 4ro2 a2+1@u1)y an* )o)a55y )ran('ar&n)5y 1n 1)( r&5a)1on( =1)3 )3& 4or&1@n 1n6&()or, (o )3a) 1) 2ay Dno= +&4or&3an* any an* a55 ru5&( an* r&@u5a)1on( )3a) =155 @o6&rn 1)( 1n6&()2&n)(, a( =&55 a( )3& @oa5( o4 )3& r&5&6an) 'o51;1&( an* a*21n1()ra)16& 'ra;)1;&( or *1r&;)16&(, )o +& a+5& )o '5an 1)( 1n6&()2&n) an* ;o2'5y =1)3 (u;3 r&@u5a)1on(. Any and all State a$tions $onfor+in% to su$h $riteria should relate not only to the %uidelines, dire$tives or reIuire+ents issued, or the resolutions approved thereunder, but also to the %oals underlyin% su$h re%ulations. T3& 4or&1@n 1n6&()or a5(o &7'&;)( )3& 3o() S)a)& )o a;) ;on(1()&n)5y, 1.&. =1)3ou) ar+1)rar15y r&6oD1n@ any 'r&&71()1n@ *&;1(1on( or '&r21)( 1((u&* +y )3& S)a)& )3a) =&r& r&51&* u'on +y )3& 1n6&()or )o a((u2& 1)( ;o221)2&n)( a( =&55 a( )o '5an an* 5aun;3 1)( ;o22&r;1a5 an* +u(1n&(( a;)161)1&( . T3& 1n6&()or a5(o &7'&;)( )3& S)a)& )o u(& )3& 5&@a5 1n()ru2&n)( )3a) @o6&rn )3& a;)1on( o4 )3& 1n6&()or or )3& 1n6&()2&n) 1n ;on4or21)y =1)3 )3& 4un;)1on u(ua55y a((1@n&* )o (u;31n()ru2&n)(, an* no) )o *&'r16& )3& 1n6&()or o4 1)( 1n6&()2&n) =1)3ou) )3& r&>u1r&* ;o2'&n(a)1on. !n fa$t, failure by the host State to $o+ply .ith su$h pattern of $ondu$t .ith respe$t to the forei%n investor or its invest+ents affe$ts the investorCs ability to +easure the treat+ent and prote$tion a.arded by the host State and to deter+ine .hether the a$tions of the host State $onfor+ to the fair and eIuitable treat+ent prin$iple. #herefore, ;o2'51an;& +y )3& 3o() S)a)& =1)3 (u;3 'a))&rn o4 ;on*u;) 1( ;5o(&5y r&5a)&* )o )3& a+o6&82&n)1on&* 'r1n;1'5&, )o )3& a;)ua5 ;3an;&( o4 &n4or;1n@ (u;3 'r1n;1'5&, an* )o &7;5u*1n@ )3& 'o((1+151)y )3a) ()a)& a;)1on +& ;3ara;)&r1H&* a( ar+1)raryD i.e. as presentin% insuffi$ien$ies that .ould be re$o%niHed (Oby any reasonable and i+partial +an,( or, althou%h not in violation of spe$ifi$ re%ulations, as bein% $ontrary to the la. be$ause6
Nazareno
Corporation CASES Based on the Syllabus of Fr. Agustin ...,it- sho$5s, or at least surprises, a sense of 8uridi$al propriety. ,E+phasis and unders$orin% supplied added.T3& !3151''1n&(, )3&r&4or&, ;anno), =1)3ou) (o 2u;3 a( a no)1;& o4 'o51;y (314), a5)&r an* ;3an@& )3& 5&@a5 an* +u(1n&(( &n61ron2&n) 1n =31;3 )3& 4or&1@n 1n6&()2&n)( 1n )3& ;oun)ry =&r& 2a*& 1n )3& 41r() '5a;&. #hese investors obviously +ade the de$ision to $o+e in after studyin% the $ountryCs le%al fra+e.or5-its restri$tions and in$entivesFFand so, as a +atter of fairness, they +ust be a$$orded the ri%ht to expe$t that the sa+e le%al $li+ate and the sa+e substantive set of rules .ill re+ain durin% the period of their invest+ents. #he representation that forei%ners $an invest up to :&= of the entirety of the total sto$5holdin%s, and not 8ust the votin% shares, of a publi$ utility $orporation is an i+plied $ovenant that the Philippines $annot rene%e .ithout violatin% the )E# %uarantee. Espe$ially in this $ase .here the Philippines +ade spe$ifi$ $o++it+ents to $ountries li5e /apan and China that their investin% nationals $an o.n up to :&= of the &>u1)y of a publi$ utility li5e a tele$o++uni$ations $orporation. !n the table $ontained in S$hedule 1,B-, Annex 0 of the /PEPA, the Philippines $ate%ori$ally represented that /apanese investorsC entry into the Philippine tele$o++uni$ations industry, spe$ifi$ally $orporations offerin% (voi$e telephone servi$es,( is sub8e$t to only the follo.in% reIuire+ents and $onditions6 A. )ran$hise fro+ Con%ress of the Philippines B. Certifi$ate of Publi$ Convenien$e and Ne$essity ,CPCN- fro+ the National #ele$o++uni$ations Co++ission C. For&1@n &>u1)y 1( '&r21))&* u' )o 40 '&r;&n). . x x x19: ,E+phasis supplied.#he sa+e representation is +ade in the PhilippinesC S$hedule of Spe$ifi$ Co++it+ents appended to the ASEAN-China A%ree+ent on #rade in Servi$es. 199 )urther, as previously pointed out, it .as the Philippine %overn+ent that pushed for and approved the sale of the 111,:19 P#!C shares to *PA;, thereby indire$tly transferrin% the o.nership of 0.? percent of the outstandin% $o++on shares of P< #, to a forei%n fir+ and so in$reasin% the forei%n votin% shareholdin% in P< #. ;en$e, the presen$e of %ood faith +ay not be $onvin$in%ly ar%ued in favour of the Philippine %overn+ent in a suit for violation of its )E# %uarantee. !n fa$t, it has been held that a bona fide $han%e in poli$y by a bran$h of %overn+ent does not ex$use $o+plian$e .ith the )E# obli%ations. !n 4cci&en"al 8<plora"ion an&
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Pro&uc"ion Company 048PC1 9. "!e Republic of 8cua&or ,190 the 7nited Nations Co++ission on !nternational #rade <a. ,7NC!#RA<- ruled that E$uador violated the 7SEE$uador B!# by denyin% "EPC fair and eIuitable treat+ent .hen it failed to provide a predi$table fra+e.or5 for its invest+ent plannin%. Rulin% thus, the tribunal $ited E$uadorCs $han%e in tax la. and its tax authorityCs unsatisfa$tory and va%ue response to "EPCCs consulta, viH6 12?. x x x #he stability of the le%al and business fra+e.or5 is thus an essential ele+ent of fair and eIuitable treat+ent. 12:. #he tribunal +ust note 1n )31( ;on)&7) )3a) )3& 4ra2&=orD un*&r =31;3 )3& 1n6&()2&n) =a( 2a*& an* o'&ra)&( 3a( +&&n ;3an@&* 1n an 12'or)an) 2ann&r +y a;)1on( a*o')&* +y F)3& E;ua*or1an )a7 au)3or1)yG. O #he $larifi$ations that "EPC sou%ht on the appli$ability of GA# by +eans of ($onsulta( +ade to Athe E$uadorian tax authorityB re$eived a .holly unsatisfa$tory and thorou%hly va%ue ans.er. T3& )a7 5a= =a( ;3an@&* =1)3ou) 'ro61*1n@ any ;5ar1)y a+u) 1)( 2&an1n@ an* &7)&n* an* )3& 'ra;)1;& an* r&@u5a)1on( =&r& a5(o 1n;on(1()&n) =1)3 (u;3 ;3an@&(. 129. Garious arbitral tribunals have re$ently insisted on the need for this stability. #he tribunal in,etalcad held that the Respondent (failed to ensure a transparent and predi$table fra+e.or5 for *etal$adCs business plannin% and invest+ent. #he totality of these $ir$u+stan$es de+onstrate a la$5 of orderly pro$ess and ti+ely disposition in relation to an investor of a Party a$tin% in the expe$tation that it .ould be treated fairly and 8ustlyO( x x x 120. !t is Iuite $lear fro+ the re$ord of this $ase and fro+ the events dis$ussed in this )inal A.ard that su$h reIuire+ents .ere not +et by E$uador. *oreover, )31( 1( an o+?&;)16& r&>u1r&2&n) )3a) *o&( no) *&'&n* on =3&)3&r )3& R&('on*&n) 3a( 'ro;&&*&* 1n @oo* 4a1)3 or no). 123. #he #ribunal a$$ordin%ly holds that the Respondent has brea$hed its obli%ations to a$$ord fair and eIuitable treat+ent under Arti$le !! ,?,a- of the #reaty. x x x xxxx 111. #he relevant Iuestion for international la. in this dis$ussion is not .hether there is an obli%ation to refund GA#, .hi$h is the point on .hi$h the parties have ar%ued +ost intensely, but rather=3&)3&r )3& 5&@a5 an* +u(1n&(( 4ra2&=orD 2&&)( )3& r&>u1r&2&n)( o4 ()a+151)y an* 'r&*1;)a+151)y un*&r 1n)&rna)1ona5 5a=. !t .as earlier $on$luded that there is not a GA# refund obli%ation under international la., ex$ept in the spe$ifi$ $ase of the Andean Co++unity <a., .hi$h provides for the option of
Nazareno
Corporation CASES Based on the Syllabus of Fr. Agustin either $o+pensation or refund, but )3&r& 1( ;&r)a1n5y an o+51@a)1on no) )o a5)&r )3& 5&@a5 an* +u(1n&(( &n61ron2&n) 1n =31;3 )3& 1n6&()2&n) 3a( +&&n 2a*&. "n )31( ;a(& 1) 1( )3& 5a))&r >u&()1on )3a) )r1@@&r( a )r&a)2&n) )3a) 1( no) 4a1r an* &>u1)a+5&. ,E+phasis supplied.#o +aintain the )E# %uarantee $ontained in the various B!#s and )#As $on$luded by the $ountry and avert a delu%e of investor suits before the !CS! , the 7NC!#RA< or other fora, any *&;1(1on o4 )31( ;our) )3a) )&n*( )o *ra()1;a55y a5)&r )3& 4or&1@n 1n6&()or(C +a(1; &7'&;)a)1on( =3&n )3&y 2a*& )3&1r 1n6&()2&n)( , ta5in% into a$$ount the $onsistent SEC "pinions and the exe$utive and le%islative bran$hesC Spe$ifi$ Co++it+ents, 2u() +& a''51&* 'ro('&;)16&5y. #his Court $annot turn oblivious to the fa$t that if @e diver%e fro+ the prospe$tivity rule and i+ple+ent the resolution on the present issue i++ediately and, .ithout %ivin% due deferen$e to the forei%n investorsC ri%hts to due pro$ess and the eIual prote$tion of the la.s, $o+pel the forei%n sto$5holders to divest their votin% shares a%ainst their .ishes at pri$es lo.er than the a$Iuisition $osts, these forei%n investors +ay very .ell shy a.ay fro+ Philippine sto$5s and avoid investin% in the Philippines. Not to +ention, the validity of the fran$hise %ranted to P< # and si+ilarly situated publi$ utilities .ill be put under a $loud of doubt. Su$h un$ertainty and the unfair treat+ent of forei%n investors .ho +erely relied in %ood faith on the poli$ies, rules and re%ulations of the PSE and the SEC .ill li5ely upset the volatile $apital +ar5et as it .ould have a ne%ative i+pa$t on the value of these $o+panies that .ill dis$oura%e investors, both lo$al and forei%n, fro+ pur$hasin% their shares. !n .hi$h $ase, forei%n dire$t invest+ents ,) !s- in the $ountry ,.hi$h already la%s behind our Asian nei%hbors- .ill ta5e a nosedive. !ndeed, it $annot be %ainsaid that a sudden and unexpe$ted deviation fro+ the a$$epted and $onsistent $onstru$tion of the ter+ ($apital( .ill $reate a do+ino effe$t that +ay $ripple our $apital +ar5ets. #herefore, in applyin% the ne. $o+prehensive interpretation of Se$. 11, Art. N!! of the Constitution, the $urrent votin% shares of the forei%n investors in publi$ utilities in ex$ess of the :&= $apital shall be +aintained and honored. "ther.ise the due pro$ess %uarantee under the Constitution and the lon% established pre$epts of 8usti$e, eIuity and fair play .ould be i+paired. !ro('&;)16& a''51;a)1on o4 n&= 5a=( or ;3an@&( 1n 1n)&r'r&)a)1on #he /une '2, '&11 e$ision $onstrued ($apital( in the first senten$e of Se$tion 11, Arti$le N!! of the Constitution as (full benefi$ial o.nership of 0& per$ent of the outstandin% $apital sto$5s $oupled .ith 0& per$ent of the votin% ri%hts.( !n the Resolution denyin% the +otions for re$onsideration, it further a+plified the s$ope of the .ord ($apital( by $larifyin% that (the 0&- :& o.nership reIuire+ent in favor of )ilipino $itiHens +ust apply separately to ea$h $lass of shares .hether $o++on, preferred, preferred votin% or any other $lass of shares.( #his is a radi$al departure
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fro+ the $lear intent of the fra+ers of the 1123 Constitution and the lon% established interpretation as$ribed to said .ord by the Se$urities and Ex$han%e Co++issionJthat ($apital( in the first senten$e of Se$. 11, Art. N!! +eans $apital sto$5 or B"#; votin% and non-votin% shares. #he re$ent interpretation enun$iated in the /une '2, '&11 and in the Resolution at hand $an only be applied PR"SPEC#!GE<>. !t $annot be applied retroa$tively to $orporations su$h as P< # and its investors su$h as its shareholders .ho have all alon% relied on the $onsistent readin% of ($apital( by SEC and the Philippine %overn+ent to apply it to a publi$ utilityCs total $apital sto$5. :eF prospicit! non respicit F (la.s have no retroa$tive effe$t unless the $ontrary is provided.(193 As a ne$essary $orollary, 8udi$ial rulin%s should not be a$$orded retroa$tive effe$t sin$e (8udi$ial de$isions applyin% or interpretin% the la.s or the Constitution shall for+ part of the le%al syste+ of the Philippines.( 192 !t has been the $onstant holdin% of the Court that a 8udi$ial de$ision settin% a ne. do$trine or prin$iple ,(pre$edent-settin% de$ision(- shall not retroa$tively apply to parties .ho relied in %ood faith on the prin$iples and do$trines standin% prior to the pro+ul%ation thereof ,(old prin$iplesEdo$trines(-, espe$ially .hen a retroa$tive appli$ation of the pre$edent-settin% de$ision .ould i+pair the ri%hts and obli%ations of the parties. So it is that as early as 11:&, the Court has refused to apply the ne. do$trine of +us sanguinis to persons .ho relied in %ood faith on the prin$iple of +us soli adopted inRoa 9. Collec"or of Cus"oms.191 Si+ilarly, in Co 9. Cour" of 2ppeals,10& the Court sustained petitioner CoCs bona fide relian$e on the *inister of /usti$eCs "pinion dated e$e+ber 19, 1121 that the delivery of a (rubber( $he$5 as %uarantee for an obli%ation is not a punishable offense despite the CourtCs pronoun$e+ent on Septe+ber '1, 1123 in Fue 9. People that Batas Pambansa Blg. ,BP- '' nonetheless $overs a $he$5 issued to %uarantee the pay+ent of an obli%ation. !n so rulin%, the Court Iuoted various de$isions applyin% pre$edent-settin% de$isions prospe$tively. @e held6 Ju*1;1a5 *&;1(1on( a''5y1n@ or 1n)&r'r&)1n@ )3& 5a=( or )3& Con()1)u)1on (3a55 4or2 a 'ar) o4 )3& 5&@a5 (y()&2 o4 )3& !3151''1n&(,J a;;or*1n@ )o Ar)1;5& 8 o4 )3& C1615 Co*&. JLa=( (3a55 3a6& no r&)roa;)16& &44&;), un5&(( )3& ;on)rary 1( 'ro61*&*,J *&;5ar&( Ar)1;5& 4 o4 )3& (a2& Co*& , a de$laration that is e$hoed by Arti$le '' of the Revised Penal Code6 (Penal la.s shall have a retroa$tive effe$t insofar as they favor the person %uilty of a felony, .ho is not a habitual $ri+inal . . .( xxxx T3& 'r1n;1'5& o4 'ro('&;)161)y 3a( a5(o +&&n a''51&* )o ?u*1;1a5 *&;1(1on( =31;3, Ja5)3ou@3 1n )3&2(&56&( no) 5a=(, ar& n&6&r)3&5&(( &61*&n;& o4 =3a) )3& 5a=( 2&an, . . . /)31( +&1n@0 )3& r&a(on =3y un*&r Ar)1;5& 8 o4 )3& N&= C1615 Co*&, TJu*1;1a5 *&;1(1on( a''5y1n@ or 1n)&r'r&)1n@ )3& 5a=( or )3& Con()1)u)1on (3a55 4or2 a 'ar) o4 )3& 5&@a5 (y()&2 . . .T ( So did this Court hold, for exa+ple, in Peo. v. Jabinal, 99 SCRA 0&3, 0116
Nazareno
Corporation CASES Based on the Syllabus of Fr. Agustin xxxx So, too, did the Court rule in Spouses Gauvain and Bernardita Ben(onan v. Court of "ppeals! et al.,4.R. No. 1313?- and #evelopment Ban$ of the Philippines v. Court of "ppeals! et al. ,4.R. No 13112-, /an. '3, 111', '&9 SCRA 919, 9'3-9'26 xxxx A $o+pellin% rationaliHation of the prospe$tivity prin$iple of 8udi$ial de$isions is .ell set forth in the oft-$ited $ase of Chicot Count8 #rainage #ist. v. BaFter States Ban$ , ?&2 7S ?31, ?3: 11:&. #he Chi$ot do$trine advo$ates )3& 12'&ra)16& n&;&((1)y )o )aD& a;;oun) o4 )3& a;)ua5 &71()&n;& o4 a ()a)u)& 'r1or )o 1)( nu55141;a)1on, a( an o'&ra)16& 4a;) n&@a)1n@ a;;&')an;& o4 Ja 'r1n;1'5& o4 a+(o5u)& r&)roa;)16& 1n6a51*1)y.( xxxx *u$h earlier, in #e "gba8ani v. P@B, ?2 SCRA :'1 xxx the Court +ade substantially the sa+e observationsO xxxx A%ain, treatin% of the effe$t that should be %iven to its de$ision in /laguer v. ,ilitar8 Commission @o C5! J de$larin% invalid $ri+inal pro$eedin%s $ondu$ted durin% the +artial la. re%i+e a%ainst $ivilians, .hi$h had resulted in the $onvi$tion and in$ar$eration of nu+erous persons J this Court, in .an vs. Barrios, 11& SCRA 020, at p. 3&&, ruled as follo.s6 ("n )3& 1n)&r&() o4 ?u()1;& an* ;on(1()&n;y, =& 3o5* )3a) O5a@u&r (3ou5*, 1n 'r1n;1'5&, +& a''51&* 'ro('&;)16&5y on5y )o 4u)ur& ;a(&( an* ;a(&( ()155 on@o1n@ or no) y&) 41na5 =3&n )3a) *&;1(1on =a( 'ro2u5@a)&*. x x x( !t .ould see+, then, that the .ei%ht of authority is de$idedly in favor of the proposition )3a) )3& Cour)C( *&;1(1on o4 S&')&2+&r 21, 198. in Oue v. People, 19: SCRA 10& ,1123- J i.e., that a $he$5 issued +erely to %uarantee the perfor+an$e of an obli%ation is nevertheless $overed by B.P. Bl%. '' J (3ou5* no) +& @16&n r&)ro('&;)16& &44&;) )o )3& 'r&?u*1;& o4 )3& '&)1)1on&r an* o)3&r '&r(on( (1215ar5y (1)ua)&*, =3o r&51&* on )3& o441;1a5 o'1n1on o4 )3& %1n1()&r o4 Ju()1;& that su$h a $he$5 did not fall .ithin the s$ope of B.P. Bl%. ''. ,E+phasis supplied-. !ndeed, pursuant to the do$trine of prospe$tivity, ne. do$trines and prin$iples +ust be applied only to a$ts and events transpirin% a4)&r the pre$edent-settin% 8udi$ial de$ision,
1'0
and not to those that o$$urred and .ere $aused by persons .ho relied on the (old( do$trine and a$ted on the faith thereof. Not $ontent .ith $han%in% the rule in the +iddle of the %a+e, the +a8ority, in the /une '2, '&11 e$ision, .ent a little further by orderin% respondent SEC Chairperson (to apply this definition of the ter+ K$apitalC in deter+inin% the extent of allo.able forei%n o.nership in respondent Philippine <on% istan$e #elephone Co+pany, and if there is a violation of Se$tion 11, Arti$le N!! of the Constitution, to i+pose the appropriate san$tions under the la..( #his +ay be vie.ed as unreasonable and arbitrary. #he Court in the $hallen%ed /une '2, '&11 e$ision already +ade a findin% that forei%ners hold 0:.'3= of the total nu+ber of P< # $o++on shares .hile )ilipinos hold only ?9.3?=.101 !n this fa$tual settin%, P< # .ill, as $lear as day, fa$e san$tions sin$e its present $apital stru$ture is presently in brea$h of the rule on the :&= $ap on forei%n o.nership of votin% shares even .ithout need of a SEC investi%ation. !n ans.erin% the SECCs Iuery re%ardin% the proper period of appli$ation and i+position of appropriate san$tions a%ainst P< #, /usti$e Carpio tersely stated that (on$e the '2 /une '&11 e$ision be$o+es final, the SEC shall i+pose the appropriate san$tions only if it finds after due hearin% that, at the start of the ad+inistrative $ases or investi%ation, there is an existin% violation of Se$. 11, Art. N!! of the Constitution.(10' As basis therefor, /usti$e Carpio $ited 7alili v. Court of "ppeals10? and 9nited Church Board for Aorld ,inistries 39CBA,4 v. Sebastian.10: ;o.ever, these $ases do not provide a 8urisprudential foundation to this +andate that +ay very .ell deprive P< # forei%n shareholders of their votin% shares. !n fa$t, 9CBA, v. Sebastian respe$ted the voluntary transfer in a .ill by an A+eri$an of his shares of sto$5s in a land-holdin% $orporation. !n the sa+e +anner, 7alili v. Court of "ppeals sustained as valid the .aiver by an alien of her ri%ht of inheritan$e over a pie$e of land in favour of her son. No.here in these $ases did this Court order the involuntary dispossession of $orporate sto$5s by alien sto$5holders. At +ost, these t.o $ases only re$o%niHed the prin$iple validatin% the transfer of land to an alien .ho, after the transfer, subseIuently be$o+es a Philippine $itiHen or transfers the land to a )ilipino $itiHen. #hey do not en$o+pass the situation that .ill eventually ensue after the investi%ation $ondu$ted by the SEC in a$$ordan$e .ith the /une '2, '&11 and the present resolution. #hey do not 8ustify the $o+pulsory deprivation of votin% shares in publi$ utility $orporations fro+ forei%n sto$5holders .ho had le%ally a$Iuired these sto$5s in the first instan$e. #he abrupt appli$ation of the $onstru$tion of Se$. 11, Art. N!! of the Constitution to forei%ners $urrently holdin% votin% shares in a publi$ utility $orporation is not only $onstitutionally proble+ati$D it is li5e.ise replete .ith pra%+ati$ diffi$ulties that $ould hinder the real-.orld translation of this CourtCs Resolution. Althou%h apparently benevolent, the +a8orityCs $on$ession to allo. (publi$ utilities that fail to $o+ply .ith the nationality reIuire+ent under Se$tion 11, Arti$le N!! and the )!A AtoB ;ur& )3&1r *&41;1&n;1&( 'r1or )o )3& ()ar) o4 )3& a*21n1()ra)16& ;a(& or 1n6&()1@a)1on (109 $ould
Nazareno
Corporation CASES Based on the Syllabus of Fr. Agustin indire$tly o$$asion a $o+pulsory deprivation of the publi$ utilitiesC forei%n sto$5holders of their votin% shares. Certainly, these publi$ utilities +ust i++ediately pare do.n their forei%n-o.ned votin% shares to avoid the i+posable san$tions. #his holds true espe$ially for P< # .hose 0:.'3= of its $o++on votin% shares are forei%n-subs$ribed and held. P< # is, therefore, for$ed to i++ediately deprive, or at the very least, dilute the property ri%hts of their forei%n sto$5holders before the $o++en$e+ent of the ad+inistrative pro$eedin%s, .hi$h .ould be a +ere far$e $onsiderin% the transparen$y of the publi$ utility fro+ the onset. Even .ith the $han$e %ranted to the publi$ utilities to re+edy their supposed defi$ien$y, the nebulous ti+e-fra+e %iven by the +a8ority, i.e., (prior to the start of the ad+inistrative $ase or investi%ation,( 100 +ay very .ell prove too short for these publi$ utilities to raise the ne$essary a+ount of +oney to in$rease the nu+ber of their authoriHed $apital sto$5 in order to dilute the property ri%hts of their forei%n sto$5holders holdin% votin% shares. 103 Si+ilarly, if they indu$e their forei%n sto$5holders to transfer the ex$ess votin% shares to Iualified Philippine nationals, this period before the filin% of the ad+inistrative +ay not be suffi$ient for these sto$5holders to find Philippine nationals .illin% to pur$hase these votin% shares at the +ar5et pri$e. #his Court $annot i%nore the fa$t that the votin% shares of Philippine publi$ utilities li5e P< # are listed and sold at lar%e in forei%n $apital +ar5ets. ;en$e, forei%ners .ho have previously pur$hased their votin% shares in these +ar5ets .ill not have a ready Philippine +ar5et to i++ediately transfer their shares. *ore than li5ely, these forei%n sto$5holders .ill be for$ed to sell their votin% shares at a loss to the fe. Philippine nationals .ith +oney to spare, or the publi$ utility itself .ill be $onstrained to a$Iuire these votin% shares to the pre8udi$e of its retained earnin%s. 102 @hatever +eans the publi$ utilities $hoose to e+ploy in order to $ut do.n the forei%n sto$5holdin%s of votin% shares, it is ne$essary to deter+ine .ho a+on% the forei%n sto$5holders of these publi$ utilities +ust bear the burden of unloadin% the votin% shares or the dilution of their property ri%hts. !n a situation li5e this, there is at present no settled rule on .ho should be deprived of their property ri%hts. @ill it be the forei%n sto$5holders .ho bou%ht the latest issuan$esL "r the first forei%n sto$5holders of the publi$ utility $orporationsL #his issue $annot be realisti$ally settled .ithin the ti+e-fra+e %iven by the +a8ority .ithout raisin% +ore disputes. @ith these loose ends, the +a8ority $annot penaliHe the publi$ utilities if they should fail to $o+ply .ith the dire$tive of $o+plyin% .ith the (nationality reIuire+ent under Se$tion 11, Arti$le N!! and the )!A( .ithin the unreasonably nebulous and li+ited period (prior to the start of the ad+inistrative $ase or investi%ation.(101 !n the li%ht of the ne. pronoun$e+ent of the Court that publi$ utilities that fail to $o+ply .ith the nationality reIuire+ent under Se$tion 11, Arti$le N!! of the Constitution CAN C7RE #;E!R E)!C!ENC!ES prior to the start of the ad+inistrative $ase or investi%ation, ! sub+it that affe$ted $o+panies li5e P< # should be %iven reasonable ti+e to underta5e the ne$essary +easures to +a5e their
1'3
respe$tive $apital stru$ture $o+pliant, and the SEC, as the re%ulatory authority, should $o+e up .ith the appropriate %uidelines on the pro$ess and supervise the sa+e. SEC should li5e.ise adopt the ne$essary rules and re%ulations to i+ple+ent the prospe$tive $o+plian$e by all affe$ted $o+panies .ith the ne. rulin% re%ardin% the interpretation of the provision in Iuestion. Su$h rules and re%ulations +ust respe$t the due pro$ess ri%hts of all affe$ted $orporations and define a reasonable period for the+ to $o+ply .ith the /une '2, '&11 e$ision. A final note. >ear in and year out, the %overn+entCs trade +ana%ers attend e$ono+i$ su++its $ourtin% business+en to invest in the $ountry, doubtless pro+isin% the+ a playin% field .here the rules are friendly as they are predi$table. So it .ould appear odd if a bran$h of %overn+ent .ould +a5e business life $o+pli$ated for investors .ho are already here. !ndeed, stability and predi$tability are the 5ey pillars on .hi$h our le%al syste+ +ust be founded and run to %uarantee a business environ+ent $ondu$ive to the $ountryCs sustainable e$ono+i$ %ro.th. ;en$e, it behoves this Court to respe$t the basi$ expe$tations ta5en into a$$ount by the investors at the ti+e they +ade the invest+ents. !n other .ords, it is the duty of this Court to stand %uard a%ainst any unto.ard $han%e of the rules in the +iddle of the %a+e. !, therefore, vote to GRANT the +otions for re$onsideration and a$$ordin%ly RE$ERSE and SET AS" E the /une '2, '&11 e$ision. #he Court should de$lare that the .ord ($apital( in the first senten$e of Se$tion 11, Arti$le Nll of the 1123 Constitution +eans the entire $apital sto$5 or both votin% and non-votin% shares. Sin$e the /une '2, '&11 e$ision .as ho.ever sustained, ! sub+it that said de$ision should ta5e effe$t only on the date of its finality and should be applied 'ro('&;)16&5y. P< # should be %iven ti+e to u+5rta5e the ne$[ssary +east1res to +a5e its $apital stru$ture $o+pliant, and th[ Se$urities and Ex$han%e Co++ission should for+ulal$ appropriate %uidelines and supervise the pro$ess. Said Co++ission should also adopt ru5s and re%ulations to i+ple+ent the prospe$tive $o+plian$e by all affe$ted $o+panies .ith the ne. rulin% on the interpretation of Se$. 11, Art. N!! of the Constitution. Su$h rules and re%ulations +ust respe$t the due pro$ess ri%hts of all affe$ted $orporations and provide a reasonable period for the+ to $o+ pi y .ith the /une '2, '&11 e$ision. #he ri%hts of forei%ners over the votin% shares they presently o.n in ex$ess of :&= of said shares should, in the +eanti+e, be respe$ted. !RES#"TERO Asso$iate /usti$e J. $ELASCO, JR.
Nazareno
Corporation CASES Based on the Syllabus of Fr. Agustin )!RS# !G!S!"N G.R. NOS. 1.44,.8,9 EN!RESS "N$EST%ENTS """ !R"$ATE LT . AN EN!ORT E$ELO!%ENT CANA A, Petitioner, vs. AYAN TELECO%%UN"CAT"ONS, "NC., THE #AN9 OF NE: YOR9 /AS TRUSTEE FOR THE HOL ERS OF THE USU200,000,000 1-.,< SEN"OR NOTES OF AYAN TELECO%%UN"CAT"ONS, "NC.0 AN ATTY. RE%"G"O A. NO$AL /AS THE COURT8A!!O"NTE REHA#"L"TAT"ON RECE"$ER OF #AYANTEL0, Respondents. x---------------x $"LLARA%A, JR., J.: G.R. No(. 1.,418820 "N THE %ATTER OFB THE COR!ORATE REHA#"L"TAT"ON OF AYAN TELECO%%UN"CAT"ONS, "NC. !URSUANT TO THE "NTER"% RULES OF !ROCE URE ON COR!ORATE REHA#"L"TAT"ON /A.%. NO. 00888108SC0 THE #AN9 OF NE: YOR9 AS TRUSTEE FOR THE HOL ERS OF THE USU200,000,000 1-.,< SEN"OR NOTES OF AYAN TELECO%%UN"CAT"ONS, "NC. UE 2006 ACT"NG ON THE "NSTRUCT"ONS OF THE "NFOR%AL STEER"NG CO%%"TTEEB A$ENUE AS"A "N$EST%ENTS, L.!., A$ENUE AS"A "NTERNAT"ONAL, LT ., A$ENUE AS"A S!EC"AL S"TUAT"ONS FUN "", L.!. AN A$ENUE AS"A CA!"TAL !ARTNERS, L.!., Petitioner, vs. AYAN TELECO%%UN"CAT"ONS, "NC., Respondents. x---------------x "N THE %ATTER OFB THE COR!ORATE REHA#"L"TAT"ON OF #AY AN TELECO%%UN"CAT"ONS, "NC. !URSUANT TO THE "NTER"% RULES OF !ROCE URE ON COR!ORATE REHA#"L"TAT"ON /A.%. NO. 00888108SC0 A$ENUE AS"A "N$EST%ENTS, L.!., A$ENUE AS"A "NTERNAT"ONAL, LT ., A$ENUE AS"A S!EC"AL S"TUAT"ONS FUN "", L.!., A$ENUE AS"A CA!"TAL !ARTNERS, L.!. AN A$ENUE AS"A S!EC"AL S"TUAT"ONS FUN """, L.!., Petitioner, vs. AYAN TELECO%%UN"CAT"ONS, "NC., Respondents. x---------------x G.R. No. 1..2.0 &;&2+&r ,, 2012
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THE #AN9 OF NE: YOR9 AS TRUSTEE FOR THE HOL ERS OF THE USU200,000,000 1-.,< SEN"OR NOTES OF #AY AN TELECO%%UN"CAT"ONS, "NC., Petitioner, vs. #AY AN TELECO%%UN"CAT"ONS, "NC., Respondents. EC!S!"N
Before us are seven $onsolidated petitions for revie. on $ertiorari filed + $onne$tion .ith the $orporate rehabilitation of Bayan #ele$o++uni$ations, !n$. ,Bayantel-. #he Petition for Partial Revie. on Certiorari 1 in 4.R. Nos. 13::93-91 .as filed by Express !nvest+ents !!! Private <td. and Export evelop+ent Canada to assail the Au%ust 12, '&&0 e$ision' of the Court of Appeals in CA-4.R. SP No. 23'&?. "n the other hand, the Petition for Revie. on Certiorari ? in 4.R. Nos. 139:12-'& .as filed by #he Ban5 of Ne. >or5D Avenue Asia !nvest+ents, <.P.D Avenue Asia !nternational, <td.D Avenue Asia Spe$ial Situations )und !!, <.P.D Avenue Asia Capital Partners, <.P. and Avenue Asia Spe$ial Situations )und !!!, <.P. Said petition Iuestions as .ell the said Au%ust 12, '&&0 Court of Appeals e$ision, and also the Nove+ber 2, '&&0 Resolution : of the Court of Appeals in CA-4.R. SP Nos. 231&& and 23111 affir+in% the /une '2, '&&: e$ision 9 of the Re%ional #rial Court ,R#C- of Pasi% City, Bran$h 192, in SEC Case No. &?-'9. *ean.hile, the Petition for Revie. on Certiorari 0 in 4.R. No. 133'3& .as filed by #he Ban5 of Ne. >or5, in its $apa$ity as trustee for the holders of the 7SW'&& +illion 1?.9= Senior Notes of Bayantel and upon the instru$tions of the !nfor+al Steerin% Co++ittee, to $ontest the e$ision 3 and Resolution2 of the Court of Appeals in CA4.R. SP No. 2121: .hi$h nullified the Nove+ber 1, '&&: and *ar$h 19, '&&9 "rders of the Pasi% R#C, Bran$h 192, in SEC Case No. &?-'9 insofar as it defined the po.ers and fun$tions of the *onitorin% Co++ittee. #he fa$ts, as $ulled fro+ the re$ords of these $ases, follo.6
Corporation CASES Based on the Syllabus of Fr. Agustin Respondent Bayantel is a duly or%aniHed do+esti$ $orporation en%a%ed in the business of providin% tele$o++uni$ation servi$es. !t is 12.0= o.ned by Bayan #ele$o++uni$ations ;oldin%s Corporation ,B#;C-, .hi$h in turn is 29.:= o.ned by the <opeH 4roup of Co+panies and Benpres ;oldin%s Corporation. "n various dates bet.een the years 1119 and '&&1, Bayantel entered into several $redit a%ree+ents .ith Express !nvest+ents !!! Private <td. And Export evelop+ent Canada ,petitioners in 4.R. Nos. 13::93-91-, Asian )inan$e and !nvest+ent Corporation, Bayeris$he <andesban5 ,Sin%apore Bran$h- and Clear.ater Capital Partners Sin%apore Pte <td., as a%ent for Credit !ndustriel et Co++er$ial ,Sin%apore-, euts$he Ban5 A4, EIuitable PC! Ban5, /P *or%an Chase Ban5, *etropolitan Ban5 and #rust Co., P.#. Ban5 Ne%ara !ndonesia ,Persero-, #BR, ;on% Ron% Bran$h, RiHal Co++er$ial Ban5in% Corporation and Standard Chartered Ban5. #o se$ure said loans, Bayantel exe$uted an "+nibus A%ree+ent dated Septe+ber 11, 1119 and an EG#E<C" *ort%a%e #rust !ndenture1 dated e$e+ber 1', 1113.1& Pursuant to the "+nibus A%ree+ent, Bayantel exe$uted an Assi%n+ent A%ree+ent in favor of the lenders under the "+nibus A%ree+ent ,hereinafter, "+nibus Creditors, Ban5 Creditors, or se$ured $reditors-. !n the Assi%n+ent A%ree+ent, Bayantel bound itself to assi%n, $onvey and transfer to the Collateral A%ent, the follo.in% properties as $ollateral se$urity for the pro+pt and $o+plete pay+ent of its obli%ations to the "+nibus Creditors6 ,i- all +onies payable to Bayantel under the Pro8e$t o$u+ents ,as the ter+ is defined by the "+nibus A%ree+ent-D ,ii- all Pro8e$t o$u+ents and all Contra$t Ri%hts arisin% thereunderD ,iii- all re$eivablesD ,iv- all %eneral intan%iblesD ,v- ea$h of the A$$ounts ,as the ter+ is defined by the "+nibus A%ree+ent-D ,vi- all a+ounts +aintained in the A$$ounts and all +onies, se$urities and instru+ents deposited or reIuired to be deposited in the A$$ountsD ,vii- all other $hattel paper and do$u+entsD ,viii- all other property, assets and revenues of Bayantel, .hether tan%ible or intan%ibleD and ,ix- all pro$eeds and produ$ts of any and all of the fore%oin%.11
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!n /uly 1111, Bayantel issued 7SW'&& +illion .orth of 1?.9= Senior Notes pursuant to an !ndenture1' dated /uly '', 1111 that it entered into .ith #he Ban5 of Ne. >or5 ,petitioner in 4.R. Nos. 139:12-'&- as trustee for the holders of said notes. Pursuant to the said !ndenture, the notes are due in '&&0 and Bayantel shall pay interest on the+ se+i-annually. Bayantel +ana%ed to +a5e t.o interest pay+ents, on /anuary 19, '&&& and /uly 19, '&&&, before it defaulted on its obli%ation. )oreseein% the i+possibility of further +eetin% its obli%ations, Bayantel sent, in "$tober '&&1, a proposal for the restru$turin% of its debts to the Ban5 Creditors and the ;olders of Notes. #o fa$ilitate the ne%otiations bet.een Bayantel and its $reditors, an !nfor+al Steerin% Co++ittee .as for+ed $o+posed of Avenue Asia !nvest+ents, <.P., Avenue Asia !nternational, <td., Avenue Asia Spe$ial Situations )und !!, <.P., Avenue Asia Capital Partners, <.P. ,petitioners in 4.R. Nos. 139:12-'&- and Gan E$5 4lobal "pportunity *asterfund, <td. #he +e+bers of the !nfor+al Steerin% Co++ittee are the assi%nees of the unse$ured $redits extended to Bayantel by /.P. *or%an Europe, <td., Bayeris$he <andesban5 Sin%apore Bran$h and euts$he Ban5 A4, <ondon in the total prin$ipal a+ount of 7SW1?,0?3,:29.'&. #hey are holders, as .ell, of the Notes issued by Bayantel pursuant to the !ndenture dated /uly '', 1111. !n its initial proposal $alled the ()irst #er+ Sheet,( Bayantel su%%ested a '9= .riteoff of the prin$ipal o.in% to the ;olders of Notes. #he !nfor+al Steerin% Co++ittee re8e$ted the idea, but a$$epted BayantelCs proposal to pay the restru$tured debt, pari passu,1? out of its $ash flo.. #his pari passu or eIual treat+ent of debts, ho.ever, .as opposed by the Ban5 Creditors .ho invo5ed their se$urity interest under the Assi%n+ent A%ree+ent. Bayantel $ontinued to pay redu$ed interest on its debt to the Ban5 Creditors but stopped payin% the ;olders of Notes startin% /uly 13, '&&&. By *ay ?1, '&&?, BayantelCs total indebtedness had rea$hed 7SW03: +illion or P?9.1'2 billion in unpaid prin$ipal and interest, based on the prevailin% $onversion rate of 7SW1 a P9?.'2'. "ut of its total liabilities, Bayantel alle%edly o.es :?.'= or 7SW'11 +illion ,P19.9?1 billion- to the ;olders of the Notes. "n /uly '9, '&&?, #he Ban5 of Ne. >or5, as trustee for the ;olders of the Notes, .rote Bayantel an A$$eleration <etter de$larin% i++ediately due and payable the prin$ipal, pre+iu+ interest, and other +onetary obli%ations on all outstandin% Notes. #hen, on /uly ?&, '&&?, #he Ban5 of Ne. >or5 filed a petition 1: for the $orporate rehabilitation of Bayantel upon the instru$tions of the !nfor+al Steerin% Co++ittee. "n Au%ust 2, '&&?, the Pasi% R#C, Bran$h 192, issued a Stay "rder 19 .hi$h dire$ted, a+on% others, the suspension of all $lai+s a%ainst Bayantel and reIuired the latterCs $reditors and other interested parties to file a $o++ent or opposition to the petition. #he $ourt appointed r. Con$hita <. *anabat to a$t as rehabilitation re$eiver but the
Nazareno
Corporation CASES Based on the Syllabus of Fr. Agustin latter de$lined.10 !n her stead, the $ourt appointed Atty. Re+i%io A. Noval ,Atty. Noval- .ho too5 his oath and posted a bond on Septe+ber '0, '&&?.13 "n Nove+ber '2, '&&?, the Rehabilitation Court %ave due $ourse to the petition and dire$ted the Rehabilitation Re$eiver to sub+it his re$o++endations to the $ourt .ithin 1'& days fro+ the initial hearin%. 12 After several extensions, Atty. Noval filed on *ar$h '', '&&: a Co+plian$e and Sub+ission of the Report as Co+pellin% Eviden$e that Bayantel +ay be Su$$essfully Rehabilitated.11 !n his report, Atty. Noval $lassified BayantelCs debts into three6 ,1- those o.ed to se$ured Ban5 Creditors pursuant to the "+nibus A%ree+ents ,"+nibus Creditors- in the total a+ount of 7SW??: +illion or P13.321 billionD ,'- those o.ed to ;olders of the Senior Notes and Ban5 Creditors $o+bined ,Chattel Creditors-, $o+prisin% 7SW0'9 +illion, of .hi$h 7SW:3? +illion ,P'9.'1: billion- is prin$ipal and 7SW19' +illion ,P2.1&0 billion- is a$$rued unpaid interestD and ,?- those that Bayantel o.ed to persons other than )inan$ial CreditorsEunse$ured $reditors in the a+ount of 7SW:1 +illion or P'.0&2 billion. A$$ordin% to #he Ban5 of Ne. >or5, out of the 7SW03: +illion that respondent o.es its $reditors under %roups ' and ? above, the a+ount outstandin% under the Senior Notes represent :?.'= of its liabilities as of *ay ?1, '&&?. SubseIuently, ne%otiations for the restru$turin% of BayantelCs debt rea$hed an i+passe .hen the !nfor+al Steerin% Co++ittee insisted on a pari passu treat+ent of the $lai+s of both se$ured and unse$ured $reditors. *ean.hile, on /anuary '&, '&&:, Bayantel filed a (*otion to !n$lude Radio Co++uni$ations Philippines, !n$. ARCP!B and Na%a #elephone Co+pany ANa%atelB as ebtor-Corporations for Rehabilitation x x x.('& #he Rehabilitation Court denied said +otion in an "rder '1 dated April 11, '&&:. #he fallo of said order reads6 @;ERE)"RE, the Court resolves the pendin% in$idents as follo.s6 1. #he 7r%ent *otion to Resolve of petitioner is hereby %ranted. #he $reditors of Bayantel, .hether se$ured or unse$ured, should be treated eIually and on the sa+e footin% or pari passu until the rehabilitation pro$eedin%s is ter+inated in a$$ordan$e .ith the !nteri+ RulesD '. #he *otion of Bayantel to !n$lude RCP! and Na%atel in the present rehabilitation pro$eedin%s as debtor-$orporations is deniedD
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?. #he *otion of Bayantel to Exe+pt fro+ the Stay "rder the pay+ent of the $o+pensation pa$5a%e of its for+er e+ployees per Annex (A( atta$hed to said +otion is %ranted, sub8e$t to the verifi$ation and $onfir+ation of the ite+s therein by the Rehabilitation Re$eiverD :. #he *otion of Petitioner to Stri5e "ut the proposed rehabilitation plan of Bayantel is denied. S" "R ERE .'' "n /une '2, '&&:, the Pasi% R#C, Bran$h 192, a$tin% as a Rehabilitation Court, approved the Report and Re$o++endations'? atta$hed by the Re$eiver to his (Sub+ission .ith Prayer for )urther 4uidan$e fro+ the ;onorable Court,( ': sub8e$t to the follo.in% $larifi$ations andEor a+end+ents6 1. #he rulin% on the pari passu treat+ent of all $reditors .hose $lai+s are sub8e$t to restru$turin% shall be +aintained and shall extend to all pay+ent ter+s and treat+ent of past due interest. '. ue re%ard shall be %iven to the ri%hts of the se$ured $reditors and no $han%es in the se$urity positions of the $reditors shall be %ranted as a result of the rehabilitation plan as a+ended and approved herein. ?. #he level of sustainable debt of the rehabilitation plan, as a+ended, shall be redu$ed to the a+ount of A7SBW?'9,&&&,&&& for a period of 11 years. :. 7nsustainable debt shall be $onverted into an appropriate instru+ent that shall not be a finan$ial burden for Bayantel. 9. All provisions relatin% to eIuity in the rehabilitation plan, as approved and a+ended, +ust stri$tly $onfor+ to the reIuire+ents of the Constitution li+itin% forei%n o.nership to :&=. 0. A *onitorin% Co++ittee shall be for+ed $o+posed of representatives fro+ all $lasses of the restru$tured debt. #he Rehabilitation Re$eiverCs role shall be li+ited to the po.ers of +onitorin% and oversi%ht as provided in the !nteri+ Rules. All po.ers provided for in the Report and Re$o++endations, .hi$h ex$eed the +onitorin% and oversi%ht fun$tions +andated by the !nteri+ Rules shall be a+ended a$$ordin%ly. S" "R ERE .'9
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Corporation CASES Based on the Syllabus of Fr. Agustin issatisfied, #he Ban5 of Ne. >or5 filed a Noti$e of Appeal '0 on Au%ust 0, '&&:. So did Avenue Asia !nvest+ents, <.P., Avenue Asia !nternational, <td., Avenue Asia Spe$ial Situations )und !!, <.P., Avenue Asia Capital Partners, <.P., and Avenue Asia Spe$ial Situations )und !!!, <.P. .hi$h filed a /oint Re$ord on Appeal '3 on Au%ust 1, '&&:. "n Septe+ber '2, '&&:, Bayantel sub+itted an !+ple+entin% #er+ Sheet to the Rehabilitation Court and the Re$eiver. Clai+in% that said #er+ Sheet .as inadeIuate to prote$t the interest of the $reditors, #he Ban5 of Ne. >or5 ,petitioner in 4.R. No. 133'3&- filed a *anifestation'2 dated "$tober 19, '&&: prayin% for the $onstitution of a *onitorin% Co++ittee and the $reation of a $onvertible debt instru+ent to $over the unsustainable portion of the restru$tured debt. "n Nove+ber 1, '&&:, the Rehabilitation Court issued an "rder '1 dire$tin% the $reation of a *onitorin% Co++ittee to be $o+posed of one +e+ber ea$h fro+ the %roup of "+nibus Creditors and unse$ured $reditors, and a third +e+ber to be $hosen by the unani+ous vote of the first t.o +e+bers. !n the sa+e "rder, the $ourt defined the s$ope of the *onitorin% Co++itteeCs authority, as follo.s6 x x x #he *onitorin% Co++ittee shall parti$ipate .ith the Re$eiver in +onitorin% and overseein% the a$tions of the Board of ire$tors of Bayantel and +ay, by +a8ority vote, adopt, +odify, revise or substitute, any of the follo.in% ite+s6 ,1- any proposed Annual "PEN Bud%etsD ,'- any proposed Annual CAPEN Bud%etsD ,?- any proposed Res$heduleD ,:- any proposed a$tions by the Re$eiver on a pay+ent defaultD ,9- ter+s of *ana%e+ent !n$entivisation S$he+e and *ana%e+ent #ar%etsD ,0- the EB!# AERevenue ratios set by the Bayantel Board of ire$torsD and ,3- any other proposed a$tions by the Bayantel Board of ire$tors in$ludin%, .ithout li+itation, issuan$e of ne. shares, sale of $ore and non$ore assets, $han%e of business, et$. that .ill +aterially affe$t the ter+s and $onditions of the rehabilitation plan and its i+ple+entation. !n $ase of disa%ree+ent bet.een the *onitorin% Co++ittee and the Board of ire$tors of Bayantel on any of the fore%oin% +atters, the sa+e shall be sub+itted to the Court for resolution.?&
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"n Nove+ber 10, '&&:, #he Ban5 of Ne. >or5 filed a Petition for Revie. ?1 before the Court of Appeals. #he petition .as do$5eted as CA4. R. SP No. 231&& in the )ifteenth ivision of the Court of Appeals. "n even date, Avenue Asia !nvest+ents, <.P., Avenue Asia !nternational, <td., Avenue Asia Spe$ial Situations )und !!, <.P., Avenue Asia Capital Partners, <.P., and Avenue Asia Spe$ial Situations )und !!!, <.P ,Avenue Asia Capital 4roup- filed a si+ilar petition ?' .hi$h .as do$5eted as CA-4.R. SP No. 23111 in the Se$ond ivision of the Court of Appeals. Both petitions $ontest the Rehabilitation CourtCs /une '2, '&&: e$ision for, a+on% others, fixin% the level of BayantelCs sustainable debt at 7SW?'9 +illion to be paid in 11 years. #hereafter, on Nove+ber ?&, '&&:, petitioners Express !nvest+ents !!! Private <td. and Export evelop+ent Canada alon% .ith Bayeris$he <andesban5 ,Sin%apore Bran$h-, Credit !ndustriel et Co++er$ial, euts$he Ban5 A4, P.#. Ban5 Ne%ara !ndonesia ,Persero-, #BR, ;on% Ron% Bran$h and RiHal Co++er$ial Ban5in% Corporation filed a Petition for Revie. ?? .hi$h .as do$5eted as CA-4.R. No. 23'&? in the #enth ivision of the Court of Appeals. #he se$ured $reditors li5e.ise assailed the Rehabilitation CourtCs /une '2, '&&: e$ision insofar as it ordered the pari passu treat+ent of all $lai+s a%ainst Bayantel. Said petitioners invo5e a lien over the $ash flo. and re$eivables of Bayantel by virtue of the Assi%n+ent A%ree+ent. "n e$e+ber '?, '&&:, Bayantel filed an "+nibus *otion ?: for the $onsolidation of CA-4.R. SP Nos. 23111 and CA-4.R. SP No. 23'&? .ith CA-4.R. SP No. 231&&, the lo.est-nu+bered $ase. !n a Resolution dated /anuary '&, '&&9, the Court of Appeals, )ifteenth ivision, ordered the $onsolidation of CA-4.R. SP No. 23'&? .ith CA-4.R. SP No. 231&&. #his .as a$$epted by the Court of Appeals, Seventh ivision, in a Resolution ?9 dated *ar$h '1, '&&9. #hen, in the Resolution ?0 dated /une 1&, '&&9, the Court of Appeals, )irst ivision, ordered the $onsolidation of CA-4.R. SP No. 23111 .ith 231&& and the trans+ittal of the re$ords of the three $ases to the Seventh ivision. *ean.hile, on /anuary 1&, '&&9, Atty. Noval sub+itted to the Rehabilitation Court an !+ple+entin% #er+ Sheet?3to serve as a %uide for BayantelCs Rehabilitation. #he sa+e .as approved in an "rder ?2 dated *ar$h 19, '&&9. !n the sa+e "rder, the Rehabilitation Court appointed Avenue Asia !nvest+ents <.P. and Export evelop+ent Canada to represent the unse$ured and se$ured $reditors, respe$tively, in the *onitorin% Co++ittee. "n *ay '0, '&&9, Bayantel filed a petition for $ertiorari and Prohibition ?1 do$5eted as CA-4.R. SP No. 2121: in the Court of Appeals. Said petition assailed the Rehabilitation CourtCs "rders dated Nove+ber 1, '&&: and *ar$h 19, '&&9, for purportedly $onferrin% upon the *onitorin% Co++ittee, po.ers of +ana%e+ent and $ontrol over its operations.
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Corporation CASES Based on the Syllabus of Fr. Agustin T!e Cour" of 2ppeals Decision in C2=G.R. 'os. 5-(**% 5-((( an& 5-3*+ !n the assailed Au%ust 12, '&&0 e$ision, the Court of Appeals dis+issed the petitions in CA-4.R. SP Nos. 231&&, 23111 and 23'&? for la$5 of +erit. #he appellate $ourt upheld the Rehabilitation CourtCs deter+ination of BayantelCs sustainable debt at 7SW?'9 +illion payable in 11 years. !t re8e$ted the Re$eiverCs proposal to set the sustainable debt at 7SW?3& +illion payable in 19 years, and the proposal of the Avenue Asia Capital 4roup to set it at 7SW:31 +illion payable in 1' years. #he Court of Appeals a%reed .ith the Rehabilitation Court that it is reasonable to adopt a level of sustainable debt that approxi+ates respondent BayantelCs proposal be$ause the latter is in the best position to deter+ine the level of sustainable debt that it $an +ana%e. !t found BayantelCs proposal +ore $redible $onsiderin% that it .as prepared usin% (updated finan$ial infor+ation .ith realisti$ $ash flo. fi%ures.(A40B #he appellate $ourt noted that BayantelCs proposal .as drafted .ithout re%ard for its status as a (ni$he player( in the tele$o++uni$ations +ar5et and after fa$torin% the $ost of reor%aniHation. !n $ontrast, it expressed $on$ern that the proposals sub+itted by Avenue Asia Capital 4roup and the Re$eiver +i%ht eventually leave Bayantel .ith an un.or5able finan$ial debt-to-revenue ratio. #he Court of Appeals also $onfir+ed the Rehabilitation CourtCs authority to approve, re8e$t, substitute, or even $han%e the rehabilitation plans sub+itted by the Re$eiver and the parties. !t upheld the trial $ourt in adoptin% the Re$eiverCs re$o++endation to li+it the eIuity $onversion of BayantelCs unsustainable debt to :&= of its paid-up $apital. #his per$enta%e, the appellate $ourt explains, is $onsistent .ith the $onstitutional li+itation on the allo.able forei%n eIuity in )ilipino $orporations. !t also +aintained the .rite-off of penalties and default interest and re$o+putation of BayantelCs past due interest, as a valid exer$ise of dis$retion by the Rehabilitation Court under the !nteri+ Rules of Pro$edure on Corporate Rehabilitation ,!nteri+ Rules-. #he appellate $ourt ne%ated any violation of the pari passu prin$iple .ith the use of these +easures sin$e they shall apply to all $lasses of $reditors. As to the $lai+ of the se$ured $reditors in CA-4.R. SP No. 23'&?, the Court of Appeals ruled that .hile rehabilitation is on%oin%, the sole $ontrol over the se$urity on the re$eivables and $ash flo. of Bayantel is vested in the Rehabilitation Court. #o allo. other.ise .ould not only violate the Stay "rder but interfere as .ell .ith the duty of the Re$eiver to (ta5e possession, $ontrol and $ustody of the debtorCs assets.( :1 7lti+ately, the Court of Appeals ruled that preferen$e in pay+ent $annot be a$$orded the se$ured $reditors sin$e preferen$e applies only in liIuidation pro$eedin%s. is$ontented, #he Ban5 of Ne. >or5 and the Avenue Asia Capital 4roup ,petitioners in CA-4.R. SP Nos. 231&& and 23111- filed a *otion for Partial
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Re$onsideration.:' Said +otion .as, ho.ever, denied in the Resolution dated Nove+ber 2, '&&0. !n the +eanti+e, Express !nvest+ents !!! Private <td. and Export evelop+ent Canada had filed before this Court a Petition for Partial Revie. on Certiorari of the Court of Appeals e$ision do$5eted as 4.R. Nos. 13::93-91. A$$ordin% to petitioners, the other se$ured $reditors .ho .ere also petitioners in CA-4.R. SP No. 23'&? had not re+ained in $onta$t .ith the+ and had not authoriHed the+ to file further petitions on their behalf. "n e$e+ber '2, '&&0, #he Ban5 of Ne. >or5 and the Avenue Asia Capital 4roup also filed their o.n Petition for Revie. on Certiorari .hi$h .as do$5eted as 4.R. Nos. 139:12-'&. T!e Cour" of 2ppeals Decision in C2=G.R. 6P 'o. 5/5/. !n CA-4.R. SP No. 2121:, the Court of Appeals rendered the assailed e$ision dated "$tober '3, '&&0 de$larin% null and void the Nove+ber 1, '&&: and *ar$h 19, '&&9 "rders of the Rehabilitation Court insofar as they defined the po.ers and fun$tions of the *onitorin% Co++ittee. #he appellate $ourt found %rave abuse of dis$retion on the part of the Rehabilitation Court for $onferrin% upon the *onitorin% Co++ittee the po.er to +odify, reverse or overrule the proposals of BayantelCs Board of ire$tors relative to operations. !t stressed that the Co++itteeCs fun$tions are $onfined to +onitorin% and overseein% the operations of Bayantel to ensure its $o+plian$e .ith the ter+s and $onditions of the Rehabilitation Plan. #o $onfor+ there.ith, the appellate $ourt restated the Co++itteeCs po.ers as follo.s6 #he *onitorin% Co++ittee shall parti$ipate .ith the Re$eiver in +onitorin% and overseein% the operations of Bayantel to ensure $o+plian$e by Bayantel .ith the ter+s and $onditions of the Rehabilitation Plan. !n the event Bayantel fails to +eet any of the +ilestones under the Rehabilitation Plan or fails to $o+ply .ith any +aterial provision thereunder, the *onitorin% Co++ittee +ay, by +a8ority vote, r&;o22&n* +odifi$ations, revisions and substitutions of the follo.in% ite+s6 x x x x:? ,E+phasis supplied#he Court of Appeals li5e.ise approved of the !+ple+entin% #er+ Sheet, $larifyin% that the sa+e is not intended to address every $ontin%en$y that +ay arise in the i+ple+entation of the Plan. !t assured that any doubt in the interpretation of the #er+ Sheet shall be resolved by the Rehabilitation Court.
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Corporation CASES Based on the Syllabus of Fr. Agustin <astly, the appellate $ourt affir+ed the $reation of a $onvertible debt instru+ent to $over the unsustainable portion of respondentCs debt. !t per$eives su$h instru+ent as a tool to %enerate surplus $ash to satisfy BayantelCs debt under #ran$he B. As .ell, it serves as a buy-ba$5 s$he+e for the assi%n+ent and transfer of $redits by the )inan$ial Creditors in a +anner that .ill not unduly burden Bayantel. Issues T!e Par"ies# 2rgumen"s "n "$tober 11, '&&0, Express !nvest+ents !!! Private <td. and Export evelop+ent Canada :: filed a Petition for Partial Revie. on Certiorari .hi$h .as do$5eted as 4.R. Nos. 13::93-91. Said petition, .hi$h see5s the reversal of the Au%ust 12, '&&0 e$ision of the Court of Appeals insofar as it dis+issed the petition of the se$ured $reditors in CA-4.R. SP No. 23'&?, essentially proffers the follo.in% issues for resolution6 ,1- .hether the $lai+s of se$ured and unse$ured $reditors should be treated pari passu durin% rehabilitationD ,'- .hether the pari passutreat+ent of $reditors durin% rehabilitation i+pairs the Assi%n+ent A%ree+ent bet.een respondent and petitionersD ,?- .hether an i+pair+ent in the se$urity position of petitioners $an be 8ustified as a valid exer$ise of poli$e po.er. "n the other hand, #he Ban5 of Ne. >or5 and the Avenue Asia Capital 4roup filed a Petition for Revie. on Certiorari do$5eted as 4.R. Nos. 139:12-'&, to Iuestion the appellate $ourtCs Au%ust 12, '&&0 e$ision as .ell as its Nove+ber 2, '&&0 Resolution in CA-4.R. SP Nos. 231&& and 23111. #his se$ond $onsolidated petition raises the follo.in% issues6 ,1- .hether the Court of Appeals erred in settin% BayantelCs sustainable debt at 7SW?'9 +illion, payable in 11 yearsD ,'- .hether a debtor +ay sub+it a rehabilitation plan in a $reditor-initiated rehabilitationD ,?.hether the $onversion of debt to eIuity in ex$ess of :&= of the outstandin% $apital sto$5 in favor of petitioners violates the $onstitutional li+it on forei%n o.nership of a publi$ utilityD ,:- .hether the .rite-off of respondentCs penalties and default interest and re$o+putation of its past due interest violate the pari passuprin$ipleD and ,9.hether petitioners are entitled to $osts. "n )ebruary '', '&&3, respondent Bayantel +oved for the $onsolidation of 4.R. Nos. 13::93-91 .ith 4.R. Nos. 139:12-'&. !n a Resolution :9 dated April '?, '&&3, .e dire$ted the ivision Cler5 of Court to study the feasibility of $onsolidatin% said $ases. !n a *e+orandu+ Report:0 dated *ay 13, '&&3, the )irst ivision Cler5 of Court re$o++ended the $onsolidation of 4.R. Nos. 13::93-91 .ith 4.R. Nos. 139:12-'&. "n *ay '1, '&&3, #he Ban5 of Ne. >or5, as trustee for the ;olders of the Senior Notes, filed a Petition for Revie. on Certiorari, do$5eted as 4.R. No. 133'3&, to assail the "$tober '3, '&&0 e$ision and *ar$h '?, '&&3 Resolution of the Court of Appeals in CA-4.R. SP No. 2121:. A+plified, the petition presents the lone issue of .hether the *onitorin% Co++ittee in this $ase +ay exer$ise $ontrol over BayantelCs operations. In G.R. 'os. (-..)-=)/
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!n a Resolution:3 dated /une 0, '&&3, .e dire$ted the ivision Cler5 of Court to study the feasibility of $onsolidatin% 4.R. No. 133'3& .ith 4.R. Nos. 13::93-91 and 4.R. Nos. 139:12-'&. #o avoid $onfli$tin% de$isions on related $ases, the Assistant Cler5 of Court re$o++ended the $onsolidation of the three $ases. By Resolution :2dated /uly 11, '&&3, the Court ordered the $onsolidation of 4.R. No. 133'3& .ith 4.R. Nos. 13::9391 and 4.R. Nos. 139:12-'&.
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#he petitionersEse$ured $reditors ar%ue pri+arily that the pari passu treat+ent of $reditors durin% rehabilitation has no basis in la.. A$$ordin% to petitioners, all that Presidential e$ree No. 1&'-A:1 ,P 1&'-A- provides is the suspension of all $lai+s a%ainst the debtor $orporation durin% rehabilitation so that the Re$eiver $an exer$ise his po.ers free fro+ 8udi$ial or extra8udi$ial interferen$e. !f the eIuity poli$y is to be $onsidered at all, they believe that the eIuity poli$y should be $onstrued to a$$ord $reditors .ith si+ilar ri%hts or unifor+ treat+ent. !n line .ith this, petitioners assert priority under the Assi%n+ent A%ree+ent to re$eive fro+ BayantelCs surplus $ash flo. and to be paid in full, ahead of all other $reditors. #he petitionersEse$ured $reditors $ontend that the pari passu treat+ent of $lai+s i+pairs the "+nibus A%ree+ent and the Assi%n+ent A%ree+ent. Su$h i+pair+ent, they posit, $annot be 8ustified as a proper exer$ise of poli$e po.er for three reasons6 first, there is no la. .hi$h authoriHes the eIual treat+ent of $lai+sD second, there is no enablin% la.D and third, it is not reasonably ne$essary for the su$$ess of the rehabilitation. Petitioners point out that the !nteri+ Rules +andates instead that the rehabilitation plan shall %ive due re%ard to the interest of the se$ured $reditors. )or petitioners, the preservation of BayantelCs $hattels alone is inadeIuate to +eet said reIuire+ent sin$e the value thereof depre$iates over ti+e. #hey %o on to invo5e international pra$ti$es on ban5rupt$y and rehabilitation .hi$h purportedly re$o%niHe the distin$tion bet.een the ri%hts of se$ured and unse$ured $reditors. Petitioners .arn of dire $onseIuen$es to the international $redit standin% of the Philippines, the finan$ial +ar5et, and the influx of forei%n invest+ents if the pari passu prin$iple .ould be upheld. )inally, petitioners +aintain that a (#ri%%er Event(9& had o$$urred .hi$h rendered respondentCs obli%ations due and de+andable. #hus, despite their failure to notify respondent of the alle%ed Events of efault, petitioners believe that they $an ri%htfully pro$eed a%ainst the se$urities. )or its part, respondent Bayantel reasons that enfor$in% preferen$e in pay+ent at this sta%e of the rehabilitation .ould only disrupt the pro%ress it has +ade so far. !t assures petitioners that their se$urity ri%hts are adeIuately prote$ted in $ase the $ollateral
Corporation CASES Based on the Syllabus of Fr. Agustin assets are disposed. Respondent adds that no sin%le pay+ent s$he+e is appli$able in all rehabilitation pro$eedin%s and the pe$uliar $ir$u+stan$es of its $ase .arrant the pari passutreat+ent of its $reditors. In G.R. 'os. (-).(5=3* *ainly, petitioners Ban5 of Ne. >or5 and Avenue Asia Capital 4roup i+pute error on the Court of Appeals for affir+in% the Rehabilitation CourtCs de$ision .hi$h adopted the sustainable debt level Bayantel proposed. #he $ourt a 'uo fixed respondentCs sustainable debt at 7SW?'9 +illion payable .ithin 11 years a%ainst the Re$eiverCs proposal of 7SW?3& +illion payable in 19 years. Petitioners dispute BayantelCs finan$ial pro8e$tions as unreliable and $ontrived, desi%ned to bear out a redu$ed level of sustainable debt and 8ustify a substantial .rite-off of its debts. !n order to arrive at a reasonable level of sustainable debt, they believe that the prospe$tive $ash flo. of Bayantel +ust be re$5oned a%ainst industry standards. Petitioners point out that the !nteri+ Rules only allo.s the debtor, in a $reditorinitiated petition for $orporate rehabilitation, to file a $o++ent or opposition but not to sub+it its o.n rehabilitation plan. #hey .arn that if the fulfill+ent of the obli%ation .ould be +ade to depend on the sole .ill of Bayantel, the entire obli%ation .ould be void. Petitioners fault the trial $ourt for basin% the sustainable debt on the state of the tele$o++uni$ations industry in the $ountry rather than $onsultin% the finan$ial pro8e$tions and business +odels sub+itted by petitioners and the Re$eiver. #hey stress that the state of the tele$o++uni$ations industry is not a+on% those .hi$h the $ourt +ay ta5e 8udi$ial noti$e of by dis$retion. Petitioners +aintain that $onvertin% the unsustainable debt to 33.3= eIuity in Bayantel .ill not violate the nationality reIuire+ent of the 1123 Constitution. #hey aver that the debts to do+esti$ ban5 $reditors 91 a$$ount is 7SW:3? +illion or 3&.12= of BayantelCs total liabilities. Considerin% the substantial .rite-off of penalties and default interest in the a+ount of 7SW?:,&::,99?.&& and past due interest of 7SW'9,':?,?21.&3, petitioners believe that it is only fair to a$$ord the )inan$ial Creditors %reater eIuity in Bayantel to $o+pensate for said losses. *oreover, it is the petitionersC vie. that the .rite-off $ontravenes the pari passu prin$iple be$ause they .ould suffer %reater losses than the "+nibus Creditors. A$$ordin% to petitioners, approxi+ately 2'= of the penalties and interests shall be borne by the unse$ured $reditors and the ;olders of Notes. !n the sa+e vein, petitioners protest the re$o+putation of past due interest in a$$ordan$e .ith the rate proposed by the Re$eiver. #hey $lai+ that re$o+putation .ould result in the $ondonation of 21= of the a$$rued interest o.in% the+. #he Re$eiverCs report sho.s that as of the filin% of the present petition, the total a$$rued interest a+ounts to 7SW1&0,&9:,113.00, of .hi$h, 7SW11,1&&,&&& are due the ;olders of Notes.
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)inally, petitioners reiterate their $lai+ for $osts. !n its "rder dated *ar$h 19, '&&9, the Rehabilitation Court a.arded $osts of suit to petitioner Ban5 of Ne. >or5. !n parti$ular, it %ranted the latterCs prayer for the pay+ent of filin% fees, $osts of publi$ation and professional fees. Even then, petitioner ban5 $lai+s that a hu%e a+ount of its expenses for the professional fees of $ounsels and advisers re+ain unpaid. *ore i+portantly, it asserts pre$eden$e in pay+ent over the preferred $reditors. !n the alternative, the Ban5 of Ne. >or5 prays that the $osts of suit be in$orporated in the a.ard to the nonfinan$ial or trade $reditors. Si+ilarly, the Avenue Asia Capital 4roup see5s rei+burse+ent for the do$5et fees, publi$ation expenses and the professional fees it has paid its $ounsels and finan$ial adviser. !t invo5es Arti$le ''&2 of the Civil Code and the provisions of the !ndenture as le%al bases therefor. *ean.hile, the se$ured $reditors in 4.R. Nos. 13::93-91 filed a *e+orandu+ 9' dated April ?&, '&&1 .ith a prayer for the dis+issal of the bondholdersC petition in 4.R. Nos. 139:12-'&. )or the se$ured $reditors, the sustainable debt set by the Courts of Appeals is a +ore +ana%eable and realisti$ underta5in% $o+pared to herein petitionersC proposal. #hey add that the fa$t that BayantelCs a$tual revenues are lo.er than its $ash flo. pro8e$tions belies any s$he+e to avoid payin% its debts in full. #he se$ured $reditors a%ree .ith the appellate $ourt in li+itin% the $onversion of the unsustainable debt to a +axi+u+ of :&= shares in Bayantel as +ore in 5eepin% .ith the Constitution. )urther, the se$ured $reditors point out that there is nothin% in the !nteri+ Rules .hi$h prohibits a debtor $o+pany fro+ sub+ittin% an alternative rehabilitation plan in $reditor-initiated pro$eedin%s. !n support of this, they $ite Se$tion '', 9? Rule : of said rules .hi$h per+its the debtor to +odify its proposed plan or sub+it a revised or substitute plan. A$$ordin% to the+, BayantelCs su%%estion as to the ter+s of pay+ent does not $onstitute a potestative $ondition that .ould render the obli%ation void. #he se$ured $reditors, ho.ever, 8oin petitioners in protestin% the $ondonation of penalties and default interest. Rather than observin% absolute eIuality, they insist that the pari passu prin$iple should be applied su$h that $reditors .ithin the sa+e $lass are treated ali5e. !n response, respondent Bayantel sub+itted on *ay '1, '&&1, a Consolidated *e+orandu+9: in 4.R. Nos. 139:12-'& and 4.R. No. 133'3&. !t pra$ti$ally e$hoed the ratio decidendi of the Court of Appeals in dis+issin% both petitions. !n 4.R. Nos. 139:12-'&, Bayantel defends the Rehabilitation Court for adoptin% the sustainable debt level it proposed. Su$h approval by the $ourt alone, Bayantel reasons, did not +a5e the pay+ent of its debt a $ondition .hose fulfill+ent rests on its sole .ill, as to render the obli%ation void under Arti$le 112' 99 of the Civil Code. Respondent +aintains that a+on% the sta5eholders, it is in the best position to deter+ine the level of debt that it $an pay. *oreover, it believes that a +a8ority of the
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Corporation CASES Based on the Syllabus of Fr. Agustin se$ured $reditors are $o+fortable .ith the approved sustainable debt sin$e only t.o of the+ appealed. Respondent insists that alterin% the sustainable debt at this point .ould be $ounterprodu$tive. Respondent eIually opposes the BondholdersC proposal to redu$e the $o+panyCs $apital expenditures to bet.een 1= and 11= to +a5e +ore funds available for debt servi$in%. #his approa$h, a$$ordin% to Bayantel, i%nores its need to +a5e si%nifi$ant invest+ents in ne. infrastru$ture in order to $ope .ith $o+petitors. Respondent disputes the value of petitionersC pro8e$tions .hi$h .ere derived by ben$h+ar5in% BayantelCs in$o+e, as a $o+pany under rehabilitation, a%ainst those of the +a8or players, P< # and i%itel. )urther+ore, respondent +aintains that its rehabilitation plan .as based on a$$urate finan$ial data and operation reports. !t insists that the !nteri+ Rules allo.s a debtor, in $reditor-initiated rehabilitation pro$eedin%s, to sub+it an alternative plan. !t a%rees .ith the Rehabilitation CourtCs de$ision to restri$t $onversion of the unsustainable debt to :&= of fully paid-up $apital in Bayantel. Respondent believes that the .aiver of penalties and default interest and the re$o+putation of past due interest .ill not violate the pari passu prin$iple be$ause said +easures shall apply eIually to all $reditors. <astly, respondent ad+its li+ited liability for $osts pursuant to the Assi%n+ent A%ree+ent but not for those in$urred by petitioners under (non-$onsensual s$enarios.( In G.R. 'o. (--3-* !n this petition for revie., the Ban5 of Ne. >or5, as trustee for the holders of the 1?.9= Senior Notes of respondent Bayantel, $hallen%es the Court of Appeals de$ision nullifyin% the *onitorin% Co++itteeCs po.er to +odify, reverse or overrule the de$ision of BayantelCs Board of ire$tors on $ertain +atters. !t invo5es Se$tion '?,90 Rule : of the !nteri+ Rules as le%al basis to 8ustify the Rehabilitation CourtCs %rant of extensive po.ers to the *onitorin% Co++ittee. #he pertinent portion of said Rule states6 !n approvin% the rehabilitation plan, the $ourt shall issue the ne$essary orders or pro$esses for its i++ediate and su$$essful i+ple+entation. !t +ay i+pose su$h ter+s, $onditions, or restri$tions as the effe$tive i+ple+entation and +onitorin% thereof +ay reasonably reIuire, or for the prote$tion and preservation of the interests of the $reditors should the plan fail. Petitioner $ontends that the +a%nitude and $o+plexity of respondentCs business ne$essitate $lose +onitorin% of its operations to ensure su$$essful rehabilitation. Spe$ifi$ally, the Ban5 of Ne. >or5 expresses $on$ern over BayantelCs ta$iturn disposition as re%ards its bud%et and expansion $osts. Petitioner believes that su$h la$5 of transparen$y $an be addressed by e+po.erin% the *onitorin% Co++ittee to approve +easures that .ill ulti+ately affe$t respondentCs ability to settle its debts.
1?9
*oreover, petitioner assures that the !+ple+entin% #er+ Sheet provides safe%uards a%ainst the i+provident disapproval by the *onitorin% Co++ittee of proposed +easures. Petitioner is of the vie. that the fun$tions of the *onitorin% Co++ittee .ould be rendered illusory if all disa%ree+ents on 5ey areas .ould have to be heard by the Rehabilitation Court. Petitioner explains that the *onitorin% Co++itteeCs po.ers do not in any .ay supplant those of the Board of ire$tors. #he Ban5 of Ne. >or5 $lai+s that it is $usto+ary to allo. $reditors to +onitor and supervise the debtorCs operations as de+onstrated by the restru$turin% experien$es of $ertain Asian $ountries. Petitioner sub+its that the Rehabilitation Court did not intend to %ive the *onitorin% Co++ittee po.ers that are $on$urrent .ith those of the Re$eiver on a$$ount of the differin% interests that they represent in rehabilitation. !t ar%ues that if at all, the $ourt a 'uo $o++itted a +ere error of 8ud%+ent not $orre$tible by $ertiorari. Petitioner adds that even if a petition for $ertiorari .as proper, the 0&-day re%le+entary period provided by the Rules of Court had already lapsed .hen Bayantel filed its petition on *ay '3, '&&9. !t $ontends that BayantelCs *anifestation and *otion for Clarifi$ation dated e$e+ber 19, '&&: .as in truth a +otion for re$onsideration .hi$h is a prohibited pleadin% under Se$tion 1, 93 Rule ? of the !nteri+ Rules. Petitioner $on$ludes that su$h pleadin%s did not toll the period for filin% a petition and, therefore, the Rehabilitation CourtCs de$ision had be$o+e final. !n its Consolidated *e+orandu+ dated *ay '1, '&&1, Bayantel $ounters that Se$tion '?, Rule : of the !nteri+ Rules should be understood as delineatin% the purpose of the $ourtCs orders and pro$esses to +ere i+ple+entation and +onitorin% of the plan. Respondent opposes any interpretation of said provision .hi$h authoriHes the Co++ittee to substitute its 8ud%+ent for those of the Board or vest it .ith po.ers %reater than those of the Re$eiver. !t ar%ues that vestin% the Co++ittee .ith veto po.er over $ertain de$isions of the Board .ould effe$tively %ive it $ontrol and +ana%e+ent over BayantelCs operations. #he ne$essary effe$t, a$$ordin% to Bayantel, is that every disa%ree+ent bet.een the Co++ittee and the Board .ould have to be settled in $ourt. Respondent points out that petitioner failed to $ite proof of its $lai+ that it is $usto+ary a+on% Asian $ountries to allo. the *onitorin% Co++ittee a$tive parti$ipation durin% rehabilitation. Bayantel per$eive the instant petition as an underhanded atte+pt by petitioner to $reate a *ana%e+ent Co++ittee .ithout satisfyin% the reIuisites therefor. !t reiterates that the fun$tions of the *onitorin% Co++ittee are $onfined to ensurin% that Bayantel +eets the debt redu$tion +ilestones under the plan. Respondent avers that even .ithout a *onitorin% Co++ittee, it is obli%ed under the Plan to $o+ply .ith $ertain infor+ation $ovenants and reportorial reIuire+ents. !t adds that the Plan provides a +e$hanis+ for dispute resolution throu%h .hi$h $reditors $an enfor$e $o+plian$e. Penulti+ately, respondent assails the validity of the "rder dated Nove+ber 1, '&&: for la$5 of noti$e. Alle%edly, Bayantel learned of said "rder only after petitioner furnished
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Corporation CASES Based on the Syllabus of Fr. Agustin it a $opy of its Co+plian$e to .hi$h the sa+e .as +ade an atta$h+ent. #hus, respondent insists that the re%le+entary period to file an appeal or a petition for $ertiorari did not run a%ainst it. T!e Cour"#s Ruling In G.R. 'os. (-..)-=)/ Rehabilitation is an atte+pt to $onserve and ad+inister the assets of an insolvent $orporation in the hope of its eventual return fro+ finan$ial stress to solven$y. 92 !t $onte+plates the $ontinuan$e of $orporate life and a$tivities in an effort to restore and reinstate the $orporation to its for+er position of su$$essful operation and liIuidity. #he purpose of rehabilitation pro$eedin%s is pre$isely to enable the $o+pany to %ain a ne. lease on life and thereby allo. $reditors to be paid their $lai+s fro+ its earnin%s. 91 Rehabilitation shall be underta5en .hen it is sho.n that the $ontinued operation of the $orporation is e$ono+i$ally feasible and its $reditors $an re$over, by .ay of the present value of pay+ents pro8e$ted in the plan, +ore, if the $orporation $ontinues as a %oin% $on$ern than if it is i++ediately liIuidated.0& #he la. %overnin% rehabilitation and suspension of a$tions for $lai+s a%ainst $orporations is P 1&'-A, as a+ended. "n e$e+ber 19, '&&&, the Court pro+ul%ated A.*. No. &&-2-1&-SC or the !nteri+ Rules of Pro$edure on Corporate Rehabilitation, .hi$h applies to petitions for rehabilitation filed by $orporations, partnerships and asso$iations pursuant to P 1&'-A. !n /anuary '&&:, Republi$ A$t No. 2311 ,RA 2311-, other.ise 5no.n as the Se$urities Re%ulation Code, a+ended Se$tion 9 of P 1&'-A, and transferred to the Re%ional #rial Courts the 8urisdi$tion of the Se$urities and Ex$han%e Co++ission ,SEC- over petitions of $orporations, partnerships or asso$iations to be de$lared in the state of suspension of pay+ents in $ases .here the $orporation, partnership or asso$iation possesses property to $over all its debts but foresees the i+possibility of +eetin% the+ .hen they respe$tively fall due or in $ases .here the $orporation, partnership or asso$iation has no suffi$ient assets to $over its liabilities, but is under the +ana%e+ent of a rehabilitation re$eiver or a +ana%e+ent $o++ittee. !n order to effe$tively exer$ise su$h 8urisdi$tion, Se$tion 0,$-, P 1&'-A e+po.ers the Re%ional #rial Court to appoint one or +ore re$eivers of the property, real and personal, .hi$h is the sub8e$t of the pendin% a$tion before the Co++ission .henever ne$essary in order to preserve the ri%hts of the parties-liti%ants andEor prote$t the interest of the investin% publi$ and $reditors.
1?0
7nder Se$tion 0, Rule : of the !nteri+ Rules, if the $ourt finds the petition to be suffi$ient in for+ and substan$e, it shall issue, not later than five ,9- days fro+ the filin% of the petition, an "rder .ith the follo.in% pertinent effe$ts6 ,a- appointin% a Rehabilitation Re$eiver and fixin% his bondD /+0 ()ay1n@ &n4or;&2&n) o4 a55 ;5a12(, =3&)3&r 4or 2on&y or o)3&r=1(& an* =3&)3&r (u;3 &n4or;&2&n) 1( +y ;our) a;)1on or o)3&r=1(&, a@a1n() )3& *&+)or, 1)( @uaran)or( an* (ur&)1&( no) (o51*ar15y 51a+5& =1)3 )3& *&+)orI ,$- prohibitin% the debtor fro+ sellin%, en$u+berin%, transferrin%, or disposin% in any +anner any of its properties ex$ept in the ordinary $ourse of businessD ,d- prohibitin% the debtor fro+ +a5in% any pay+ent of its liabilities outstandin% as at the date of filin% of the petitionD x x x ,E+phasis supplied#he stay order shall be effe$tive fro+ the date of its issuan$e until the dis+issal of the petition or the ter+ination of the rehabilitation pro$eedin%s. 01 7nder the !nteri+ Rules, the petition shall be dis+issed if no rehabilitation plan is approved by the $ourt upon the lapse of 12& days fro+ the date of the initial hearin%. #he $ourt +ay %rant an extension beyond this period only if it appears by $onvin$in% and $o+pellin% eviden$e that the debtor +ay su$$essfully be rehabilitated. !n no instan$e, ho.ever, shall the period for approvin% or disapprovin% a rehabilitation plan ex$eed 12 +onths fro+ the date of filin% of the petition.0' "n the other hand, Se$tion '3, Rule : of the !nteri+ Rules provides .hen the rehabilitation pro$eedin%s is dee+ed ter+inated6 SEC. '3. Termina"ion of Procee&ings. F !n $ase of the failure of the debtor to sub+it the rehabilitation plan, or the disapproval thereof by the $ourt, or the failure of the rehabilitation of the debtor be$ause of failure to a$hieve the desired tar%ets or %oals as set forth therein, or the failure of the said debtor to perfor+ its obli%ations under the said plan, or a deter+ination that the rehabilitation plan +ay no lon%er be i+ple+ented in a$$ordan$e .ith its ter+s, $onditions, restri$tions, or assu+ptions, the $ourt shall upon +otion, motu proprio, or upon the re$o++endation of the Rehabilitation Re$eiver, ter+inate the pro$eedin%s. T3& 'ro;&&*1n@( (3a55 a5(o )&r21na)& u'on )3& (u;;&((4u5 12'5&2&n)a)1on o4 )3& r&3a+151)a)1on '5an. ,E+phasis supplied;en$e, unless the petition is dis+issed for any reason, the stay order shall be effe$tive until the rehabilitation plan has been su$$essfully i+ple+ented. !n the +eanti+e, the debtor is prohibited fro+ payin% any of its outstandin% liabilities as of the date of the
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Corporation CASES Based on the Syllabus of Fr. Agustin filin% of the petition ex$ept those authoriHed in the plan under Se$tion ':,$-, Rule : of the !nteri+ Rules. !n this $ase, in an "rder dated April 11, '&&:, the Rehabilitation Court held that (AtBhe $reditors of Bayantel, .hether se$ured or unse$ured, should be treated eIually and on the sa+e footin% or pari passu until the rehabilitation pro$eedin%s is ter+inated in a$$ordan$e .ith the !nteri+ Rules.(0? #he $ourt reiterated this pronoun$e+ent in its e$ision dated /une '2, '&&:. Before us, petitioners $ontend that su$h pari passu treat+ent of $lai+s violates not only the (due re%ard( provision in the !nteri+ Rules but also the Contra$t Clause in the 1123 Constitution. Petitioners assert pre$eden$e in the pay+ent of $lai+s durin% rehabilitation by virtue of the Assi%n+ent A%ree+ent dated Septe+ber 11, 1119. 7nder said A%ree+ent, Bayantel assi%ned, $har%ed, $onveyed and transferred to a Collateral A%ent, the follo.in% properties as $ollateral for the pro+pt and $o+plete pay+ent of its obli%ations to se$ured $reditors6 ,i- All land, buildin%s, +a$hinery and eIuip+ent $urrently o.ned, and to be a$Iuired in the future by BayantelD ,ii- All +onies payable to Bayantel under the Pro8e$t is defined by the "+nibus A%ree+ent-D o$u+ents ,as the ter+
1?3
!n parti$ular, petitioners refer to Se$tion :.&' of the Assi%n+ent A%ree+ent as basis for de+andin% full pay+ent, ahead of other $reditors, out of respondentCs revenue fro+ operations durin% rehabilitation. #he relevant provision reads6 Se$tion :.&'. Pay+ents 7nder Contra$ts and Re$eivables. !f durin% the $ontinuan$e of a #ri%%er Event the Co+pany shall re$eive dire$tly fro+ any party to any Assi%ned A%ree+ent or fro+ any a$$ount debtor or other obli%or under any Re$eivable, any pay+ents under su$h a%ree+ents or the Re$eivables, )3& Co2'any (3a55 r&;&16& (u;3 'ay2&n)( 1n a ;on()ru;)16& )ru() 4or )3& +&n&41) o4 )3& S&;ur&* !ar)1&(, shall se%re%ate su$h pay+ents fro+ its other funds, and shall forth.ith trans+it and deliver su$h pay+ents to the Collateral A%ent in the sa+e for+ as so re$eived ,.ith any ne$essary endorse+ent- alon% .ith a des$ription of the sour$es of su$h pay+ents. All a+ounts re$eived by the Collateral A%ent pursuant to this Se$tion :.&' shall be applied as set forth in Part < and in the A!nter-$reditorB A%ree+ent.09,7nders$orin% in the ori%inalD e+phasis supplied#he resolution of the issue at hand rests on a deter+ination of .hether se$ured $reditors +ay enfor$e preferen$e in pay+ent durin% rehabilitation by virtue of a $ontra$tual a%ree+ent. Se$tion 0,$-, P 1&'-A provides that upon the appoint+ent of a +ana%e+ent $o++ittee, rehabilitation re$eiver, board or body, all a$tions for $lai+s a%ainst $orporations, partnerships or asso$iations under +ana%e+ent or re$eivership pendin% before any $ourt, tribunal, board or body shall be suspended a$$ordin%ly. 00 #he suspension of a$tion for $lai+s a%ainst the $orporation under a rehabilitation re$eiver or +ana%e+ent $o++ittee e+bra$es all phases of the suit, be it before the trial $ourt or any tribunal or before this Court.03 #he 8ustifi$ation for suspension of a$tions for $lai+s is to enable the +ana%e+ent $o++ittee or rehabilitation re$eiver to effe$tively exer$ise itsEhis po.ers free fro+ any 8udi$ial or extra8udi$ial interferen$e that +i%ht unduly hinder or prevent the (res$ue( of the debtor $o+pany. 02 !t is intended to %ive enou%h breathin% spa$e for the +ana%e+ent $o++ittee or rehabilitation re$eiver to +a5e the business viable a%ain .ithout havin% to divert attention and resour$es to liti%ation in various fora. 01 !n the 111& $ase of "lemar)s Sibal J Sons! Inc. v. Judge 0lbinias! 3& the Court first enun$iated the prevailin% prin$iple .hi$h %overns the relationship a+on% $reditors durin% rehabilitation. !n said $ase, 4.A. >upan%$o sou%ht the issuan$e of a .rit of exe$ution to i+ple+ent a final and exe$utory default 8ud%+ent in its favor and after Ale+arCs Sibal U Sons, !n$. .as pla$ed under rehabilitation. !n orderin% the stay of exe$ution, the Court held6
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,iii- All Pro8e$t o$u+ents and all Contra$t Ri%hts arisin% thereunderD ,iv- All re$eivablesD ,v- Ea$h of the A$$ounts ,as the ter+ is defined by the "+nibus A%ree+ent-D ,vi- All a+ounts +aintained in the A$$ounts and all +onies, se$urities and instru+ents deposited or reIuired to be deposited in the A$$ountsD ,vii- All other Chattel Paper and o$u+entsD ,viii- All other property, assets and revenues of Bayantel, .hether tan%ible or intan%ibleD ,ix- All 4eneral !ntan%iblesD and ,x- All pro$eeds and produ$ts of any and all of the fore%oin%.0:
Corporation CASES Based on the Syllabus of Fr. Agustin ur1n@ r&3a+151)a)1on r&;&16&r(31', )3& a((&)( ar& 3&5* 1n )ru() 4or )3& &>ua5 +&n&41) o4 a55 ;r&*1)or( )o 'r&;5u*& on& 4ro2 o+)a1n1n@ an a*6an)a@& or 'r&4&r&n;& o6&r ano)3&r +y )3& &7'&*1&n;y o4 an a))a;32&n), &7&;u)1on or o)3&r=1(& . )or .hat .ould prevent an alert $reditor, upon learnin% of the re$eivership, fro+ rushin% posthaste to the $ourts to se$ure 8ud%+ents for the satisfa$tion of its $lai+s to the pre8udi$e of the less alert $reditors. A( +&)=&&n )3& ;r&*1)or(, )3& D&y '3ra(& 1( J&>ua51)y 1( &>u1)y.J :3&n a ;or'ora)1on )3r&a)&n&* +y +anDru');y 1( )aD&n o6&r +y a r&;&16&r, a55 )3& ;r&*1)or( (3ou5* ()an* on &>ua5 4oo)1n@. No) anyon& o4 )3&2 (3ou5* +& @16&n any 'r&4&r&n;& +y 'ay1n@ on& or (o2& o4 )3&2 a3&a* o4 )3& o)3&r( . #his is pre$isely the reason for the suspension of all pendin% $lai+s a%ainst the $orporation under re$eivership. !nstead of $reditors vexin% the $ourts .ith suits a%ainst the distressed fir+, they are dire$ted to file their $lai+s .ith the re$eiver .ho is a duly appointed offi$er of the SEC.31 ,E+phasis suppliedSin$e then, the prin$iple of eIuality in eIuity has been $ited as the basis for pla$in% se$ured and unse$ured $reditors in eIual footin% or in pari passu .ith ea$h other durin% rehabilitation. !n le%al parlan$e, pari passu is used espe$ially of $reditors .ho, in +arshalin% assets, are entitled to re$eive out of the sa+e fund .ithout any pre$eden$e over ea$h other.3' !n %i(al Commercial Ban$ing Corporation v. Intermediate "ppellate Court , 3? the Court disallo.ed the fore$losure of the debtor $o+panyCs property after the latter had filed a Petition for Rehabilitation and e$laration of Suspension of Pay+ents .ith the SEC. @e ruled that .henever a distressed $orporation as5s the SEC for rehabilitation and suspension of pay+ents, preferred $reditors +ay no lon%er assert preferen$e but shall stand on eIual footin% .ith other $reditors. )ore$losure shall be disallo.ed so as not to pre8udi$e other $reditors, or $ause dis$ri+ination a+on% the+. !n 1111, the Court Iualified this rulin% by statin% that preferred $reditors of distressed $orporations shall stand on eIual footin% .ith all other $reditors only after a rehabilitation re$eiver or +ana%e+ent $o++ittee has been appointed. 3: *ore i+portantly, the Court laid the %uidelines for the treat+ent of $lai+s a%ainst $orporations under%oin% rehabilitation6 1. All $lai+s a%ainst $orporations, partnerships, or asso$iations that are pendin% before any $ourt, tribunal, or board, .ithout distin$tion as to .hether or not a $reditor is se$ured or unse$ured, shall be suspended effe$tive upon the appoint+ent of a +ana%e+ent $o++ittee, rehabilitation re$eiver, board, or body in a$$ordan$e .ith the provisions of Presidential e$ree No. 1&'-A. '. S&;ur&* ;r&*1)or( r&)a1n )3&1r 'r&4&r&n;& o6&r un(&;ur&* ;r&*1)or(, +u) &n4or;&2&n) o4 (u;3 'r&4&r&n;& 1( &>ua55y (u('&n*&* u'on )3& a''o1n)2&n) o4 a 2ana@&2&n) ;o221))&&, r&3a+151)a)1on r&;&16&r, +oar*, or +o*y. !n the event that the assets of the $orporation, partnership, or
1?2
asso$iation are finally liIuidated, ho.ever, se$ured and preferred $redits under the appli$able provisions of the Civil Code .ill definitely have preferen$e over unse$ured ones.39 ,E+phasis suppliedBasi$ally, on$e a +ana%e+ent $o++ittee or rehabilitation re$eiver has been appointed in a$$ordan$e .ith P 1&'-A, no a$tion for $lai+s +ay be initiated a%ainst a distressed $orporation and those already pendin% in $ourt shall be suspended in .hatever sta%e they +ay be. Not.ithstandin%, se$ured $reditors shall $ontinue to have preferred status but the enfor$e+ent thereof is li5e.ise held in abeyan$e. ;o.ever, if the $ourt later deter+ines that the rehabilitation of the distressed $orporation is no lon%er feasible and its assets are liIuidated, se$ured $lai+s shall en8oy priority in pay+ent. @e per$eive no %ood reason to depart fro+ established 8urispruden$e. @hile Se$tion ':,d-, Rule : of the !nteri+ Rules states that $ontra$ts and other arran%e+ents bet.een the debtor and its $reditors shall be interpreted as $ontinuin% to apply, this holds true only to the extent that they do not $onfli$t .ith the provisions of the plan. ;ere, the stipulation in the Assi%n+ent A%ree+ent to the effe$t that respondent Bayantel shall pay petitioners in full and ahead of other $reditors out of its $ash flo. durin% rehabilitation dire$tly i+pin%es on the provision of the approved Rehabilitation Plan that (AtBhe $reditors of Bayantel, .hether se$ured or unse$ured, should be treated eIually and on the sa+e footin% or pari passu until the rehabilitation pro$eedin%s is ter+inated in a$$ordan$e .ith the !nteri+ Rules.( urin% rehabilitation, the only pay+ents san$tioned by the !nteri+ Rules are those +ade to $reditors in a$$ordan$e .ith the provisions of the plan. Pertinent to this is Se$tion 9,b-, Rule : of the !nteri+ Rules .hi$h states that the ter+s and $onditions of the rehabilitation plan shall in$lude the +anner of its i+ple+entation, giving due regard to the interests of secured $reditors. #his very phrase is .hat petitioners invo5e as basis for de+andin% priority in pay+ent out of respondentCs $ash flo.. But petitionersC relian$e thereon is +ispla$ed. By definition, due re%ard +eans $onsideration in a de%ree appropriate to the de+ands of a parti$ular $ase.30 "n the other hand, se$urity interest is a for+ of interest in property .hi$h provides that the property +ay be sold on default in order to satisfy the obli%ation for .hi$h the se$urity interest is %iven. "ften, the ter+ (lien( is used as a synony+, althou%h lien +ost $o++only refers only to interests providin% se$urity that are $reated by operation of la., not throu%h a%ree+ent of the debtor and $reditor. !n $ontrast, the ter+ (se$urity interest( +eans any interest in property a$Iuired by $ontra$t for the purpose of se$urin% pay+ent or perfor+an$e of an obli%ation or inde+nifyin% a%ainst loss or liability. 33
Nazareno
Corporation CASES Based on the Syllabus of Fr. Agustin 7nder the !nteri+ Rules, the only pertinent referen$e to $reditor se$urity is found in Se$tion 1', Rule : on relief fro+, +odifi$ation or ter+ination of stay order. Said provision states that the $reditor is re%arded as la$5in% adeIuate prote$tion if it $an be sho.n that6 ,a- the debtor fails or refuses to honor a pre-existin% a%ree+ent .ith the $reditor to 5eep the property insuredD ,b- the debtor fails or refuses to ta5e $o++er$ially reasonable steps to +aintain the propertyD or ,$- the property has depre$iated to an extent that the $reditor is underse$ured. 7pon a sho.in% that the $reditor is la$5in% in prote$tion, the $ourt shall order the rehabilitation re$eiver to ta5e steps to ensure that the property is insured or +aintained or to +a5e pay+ent or provide repla$e+ent se$urity su$h that the obli%ation is fully se$ured. !f su$h arran%e+ents are not feasible, the $ourt +ay allo. the se$ured $reditor to enfor$e its $lai+ a%ainst the debtor. Nonetheless, the $ourt +ay deny the $reditor the fore%oin% re+edies if allo.in% so .ould prevent the $ontinuation of the debtor as a %oin% $on$ern or other.ise prevent the approval and i+ple+entation of a rehabilitation plan.32 !n the $ontext of the fore%oin% provisions, (%ivin% due re%ard to the interests of se$ured $reditors( pri+arily entails ensurin% that the property $o+prisin% the $ollateral is insured, +aintained or repla$e+ent se$urity is provided su$h that the obli%ation is fully se$ured. #he reason for this rule is si+ple, in the event that the $ourt ter+inates the pro$eedin%s for reasons other than the su$$essful i+ple+entation of the plan, the se$ured $reditors +ay fore$lose the se$urities and the pro$eeds thereof applied to the satisfa$tion of their preferred $lai+s. @hen the Rules of Pro$edure on Corporate Rehabilitation too5 effe$t on /anuary 10, '&&1, the (due re%ard( provision .as a+ended to read6 SEC. 12. %ehabilitation Plan. F #he rehabilitation plan shall in$lude ,a- the desired business tar%ets or %oals and the duration and $overa%e of the rehabilitationD ,b- the ter+s and $onditions of su$h rehabilitation .hi$h shall in$lude the +anner of its i+ple+entation, %ivin% due re%ard to the interests of se$ured $reditors su$h as, +u) no) 5121)&*, )o )3& non812'a1r2&n) o4 )3&1r (&;ur1)y 51&n( or 1n)&r&()( D x x x. ,E+phasis suppliedespite the additional phrase, ho.ever, it is our vie. that the a+end+ent si+ply a+plifies the +eanin% of the (due re%ard provision( in the !nteri+ Rules. )irst, the a+end+ent exe+plifies .hat %ivin% (due re%ard to the interests of se$ured $reditors( $onte+plates, +ainly, the noni+pair+ent of se$urities. At the sa+e ti+e, the spe$ifi$ referen$e to (se$urity liens( and (interests,( separated by the dis8un$tive (or,( des$ribes .hat (the interests of se$ured $reditors( $onsist of. A%ain, lien pertains only to interests providin% se$urity that are $reated by operation of la. .hile se$urity interests in$lude those a$Iuired by $ontra$t for the purpose of se$urin% pay+ent or perfor+an$e of an obli%ation or inde+nifyin% a%ainst loss or liability. <astly, the
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addition of the phrase (but not li+ited( in the a+end+ent shuns a ri%id appli$ation of the provision by re$o%niHin% that (%ivin% due re%ard to the interest of se$ured $reditors( +ay be rendered in other .ays than ta5in% $are that the se$urity liens and interests of se$ured $reditors are adeIuately prote$ted. !n this $ase, petitioners Express !nvest+ents !!! Private <td. And Export evelop+ent Canada are $on$erned, not so +u$h .ith the adeIua$y of the se$urities offered by respondent, but .ith the devaluation of su$h se$urities over ti+e. Petitioners fear that the pro$eeds of respondentCs $ollateral .ould be insuffi$ient to $over their $lai+s in the event of liIuidation. "n this point, suffi$e it to state that petitioners are not .ithout any re+edy to address a defi$ien$y in se$urities, if and .hen it $o+es about. 7nder Se$tion 1', Rule : of the !nteri+ Rules, a se$ured $reditor +ay file a +otion .ith the Rehabilitation Court for the +odifi$ation or ter+ination of the stay order. !f petitioners $an sho. that arran%e+ents to insure or +aintain the property or to +a5e pay+ent or provide additional se$urity therefor is not feasible, the $ourt shall +odify the stay order to allo. petitioners to enfor$e their $lai+ b that is, to fore$lose the +ort%a%e and apply the pro$eeds thereof to their $lai+s. Be that as it +ay, the $ourt +ay deny the $reditor this re+edy if allo.in% so .ould prevent the $ontinuation of the debtor as a %oin% $on$ern or other.ise prevent the approval and i+ple+entation of a rehabilitation plan. !ndeed, neither the (due re%ard provision( nor $ontra$tual arran%e+ents $an sha$5le the Rehabilitation Court in deter+inin% the best +eans of rehabilitatin% a distressed $orporation. #ruth be told, the Rehabilitation Court +ay approve a rehabilitation plan even over the opposition of $reditors holdin% a +a8ority of the total liabilities of the debtor if, in its 8ud%+ent, the rehabilitation of the debtor is feasible and the opposition of the $reditors is +anifestly unreasonable. !n deter+inin% .hether or not the opposition of the $reditors is +anifestly unreasonable, the $ourt shall $onsider the follo.in%6 ,a- #hat the plan .ould li5ely provide the ob8e$tin% $lass of $reditors .ith $o+pensation %reater than that .hi$h they .ould have re$eived if the assets of the debtor .ere sold by a liIuidator .ithin a three-+onth periodD ,b- #hat the shareholders or o.ners of the debtor lose at least their $ontrollin% interest as a result of the planD and ,$- #he Rehabilitation Re$eiver has re$o++ended approval of the plan.31 A$$ordin% to the <iIuidation Analysis 2& prepared by RP*4 at the reIuest of the Re$eiver, the )air *ar5et Galue of respondentCs fixed assets is P12.3 billion .hile its )or$ed <iIuidation Galue is P1.? billion. #o%ether .ith $ash and re$eivables in the a+ount of P111 +illion, respondentCs total liIuidation assets are valued at P1&.' billion. )ro+ this a+ount, the esti+ated liIuidation return to the "+nibus Creditors is P0,1&',19&,&&& or approxi+ately 9'.1= of their $lai+s in the a+ount of P11,9?1,330,&&&. *ean.hile, Chattel Creditors $an re$oup 01= of its $lai+s. As re%ards the 7nse$ured Creditors, they .ill share in the pool of assets that respondents have a$Iuired sin$e 1112, .hi$h .ere not spe$ifi$ally re%istered under the "+nibus
Nazareno
Corporation CASES Based on the Syllabus of Fr. Agustin A%ree+ent *ort%a%e Supple+ents. Said assets are esti+ated to have a value of P?.9 Billion. #his a$$ounts for 1&.3= of the 7nse$ured CreditorsC $lai+s. Re$5oned fro+ these fi%ures, the Re$eiver $on$luded that the shareholders shall re$eive nothin% on respondentCs liIuidation .hile the latterCs $reditors $an expe$t si%nifi$antly less than full repay+ent. *oreover, re%ardless of .hether the shareholders .ill lose at least their $ontrollin% interest as a result of the plan, petitioners, in their *e+orandu+ dated April ?&, '&&1, have si%nified their $onfor+ity .ith the Court of Appeals de$ision to li+it the $onversion of the unsustainable debt to a +axi+u+ of :&= of the fully-paid up $apital of respondent $orporation. <astly, the Re$eiver not only re$o++ended the approval of the Plan by the Rehabilitation Court, he, hi+self, prepared it. #he $on$urren$e of these $onditions renders the opposition of petitioners +anifestly unreasonable. As re%ards the se$ond issue, petitioners sub+it that the pari passu treat+ent of $lai+s offends the Contra$t Clause under the 1123 Constitution. Arti$le !!!, Se$tion 1& of the Constitution +andates that no la. i+pairin% the obli%ation of $ontra$ts shall be passed. Any la. .hi$h enlar%es, abrid%es, or in any +anner $han%es the intention of the parties, ne$essarily i+pairs the $ontra$t itself. And even .hen the $han%e in the $ontra$t is done by indire$tion, there is i+pair+ent nonetheless. 21 At this point, it bears stressin% that the non-i+pair+ent $lause is a li+itation on the exer$ise of le%islative po.er and not of 8udi$ial or Iuasi8udi$ial po.er. !n :im! Sr. v. Secretar8 of "griculture J @atural %esources! et al.,2' .e held6 x x x. )or it is .ell-settled that a la. .ithin the +eanin% of this $onstitutional provision has referen$e pri+arily to statutes and ordinan$es of +uni$ipal $orporations. Exe$utive orders issued by the President .hether derived fro+ his $onstitutional po.ers or valid statutes +ay li5e.ise be $onsidered as su$h. !t does not $over, therefore, the exer$ise of the Iuasi-8udi$ial po.er of a depart+ent head even if affir+ed by the President. #he ad+inistrative pro$ess in su$h a $ase parta5es +ore of an ad8udi$atory $hara$ter. !t is bereft of any le%islative si%nifi$an$e. !t falls outside the s$ope of the non-i+pair+ent $lause. x x x.2? #he prohibition e+bra$es ena$t+ents of a %overn+ental la.-+a5in% body pertainin% to its le%islative fun$tions. Stri$tly spea5in%, it does not $over the exer$ise by su$h la.-+a5in% body of Iuasi-8udi$ial po.er. Gerily, the e$ision dated /une '2, '&&: of the Rehabilitation Court is not a proper sub8e$t of the Non-i+pair+ent Clause. !n vie. of the fore%oin%, .e find no need to dis$uss the third issue posed in this petition In G.R. 'os. (-).(5=3*
1:&
Nazareno
Prefatorily, .e restate the ti+e honored prin$iple that in a petition for revie. on certiorari under Rule :9 of the Rules of Court, only Iuestions of la. +ay be raised. #hus, in a petition for revie. on $ertiorari, the s$ope of the Supre+e CourtYs 8udi$ial revie. is li+ited to revie.in% only errors of la., not of fa$t. 2: !t is not our fun$tion to .ei%h all over a%ain eviden$e already $onsidered in the pro$eedin%s belo., our 8urisdi$tion is li+ited to revie.in% only errors of la. that +ay have been $o++itted by the lo.er $ourt.29 Before us, petitioners Ban5 of Ne. >or5 and Avenue Asia Capital 4roup raise a Iuestion of fa$t .hi$h is not proper in a petition for revie. on certiorari. A Iuestion of la. arises .hen there is doubt as to .hat the la. is on a $ertain state of fa$ts, .hile there is a Iuestion of fa$t .hen the doubt arises as to the truth or falsity of the alle%ed fa$ts. )or a Iuestion to be one of la., the sa+e +ust not involve an exa+ination of the probative value of the eviden$e presented by the liti%ants or any of the+. #he resolution of the issue +ust rest solely on .hat the la. provides on the %iven set of $ir$u+stan$es. "n$e it is $lear that the issue invites a revie. of the eviden$e presented, the Iuestion posed is one of fa$t.20 @hether the Court of Appeals erred in affir+in% the sustainable debt fixed by the Rehabilitation Court is a Iuestion of fa$t that $alls for a re$alibration of the eviden$e presented by the parties before the trial $ourt. !n order to resolve said issue, petitioners .ould have this Court reassess the state of respondent BayantelCs finan$es at the onset of rehabilitation and %au%e the pra$ti$al value of the plans sub+itted by the parties visV-vis the finan$ial +odels prepared by the experts en%a%ed by the+. #hese tas5s are $ertainly not for this Court to a$$o+plish. #he resolution of fa$tual issues is the fun$tion of lo.er $ourts, .hose findin%s on these +atters are re$eived .ith respe$t.23 #his is espe$ially true in rehabilitation pro$eedin%s .here $ertain $ourts are desi%nated to hear the $ase on a$$ount of their expertise and spe$ialiHed 5no.led%e on the sub8e$t +atter. #hou%h this do$trine ad+its of several ex$eptions, 22 none is appli$able in the $ase at bar Notably, the !nteri+ Rules is silent on the +anner by .hi$h the sustainable debt of the debtor shall be deter+ined. >et, Se$tion ' of the !nteri+ Rules pres$ribe that the Rules shall be liberally $onstrued to $arry out the ob8e$tives of Se$tions 9,d-, 21 0,$-1& and 0,d-11 of P 1&'-A. Se$tion 9,d-, P 1&'-A vested 8urisdi$tion upon the SEC over petitions for rehabilitation. <ater, RA 2311 or the Se$urities Re%ulation Code, a+ended Se$tion 9,d- of P 1&'-A by transferrin% SECCs 8urisdi$tion over said petitions to the R#C. *ean.hile, Se$tion 0,$- of P 1&'-A provides for the appoint+ent of a re$eiver of the sub8e$t property .henever ne$essary in order to preserve the ri%hts of the parties and to prote$t the interest of the investin% publi$ and the $reditors. 7pon the appoint+ent
Corporation CASES Based on the Syllabus of Fr. Agustin of su$h re$eiver, all a$tions for $lai+s a%ainst the $orporation pendin% before any $ourt, tribunal, board or body shall be suspended a$$ordin%ly. "n the other hand, Se$tion 9,d-, P 1&'-A expands the po.er of the Co++ission to allo. the $reation and appoint+ent of a +ana%e+ent $o++ittee to underta5e the +ana%e+ent of the $orporation .hen there is i++inent dan%er of dissipation, loss, .asta%e or destru$tion of assets or other properties or paralyHation of the business of the $orporation .hi$h +ay be pre8udi$ial to the interest of +inority sto$5holders, parties-liti%ants or the %eneral publi$. #he underlyin% ob8e$tive behind these provisions is to foster the rehabilitation of the debtor by insulatin% it a%ainst $lai+s, preservin% its assets and ta5in% steps to ensure that the ri%hts of all parties $on$erned are adeIuately prote$ted. #his Court is $onvin$ed that the Court of Appeals ruled in a$$ord .ith this poli$y .hen it upheld the Rehabilitation CourtCs deter+ination of respondentCs sustainable debt. @e find the sustainable debt of 7SW?'9 +illion, spread over 11 years, to be a +ore realisti$ally a$hievable a+ount $onsiderin% respondentCs +odest revenue pro8e$tions. Bayantel pro8e$ted a $onstant rise in its revenues at the ran%e of 1.10=:.11= .ith periodi$ reverses every t.o years. 1' "n the other hand, petitionerCs proposal of a sustainable debt of 7SW:31 +illion to be paid in 1' years and the Re$eiverCs proposal of 7SW?3& +illion to be paid in 19 years betray an over opti+is+ that $ould leave Bayantel .ith nothin% to spend for its operations. Next, petitioners $ontest the ad+ission of respondentCs rehabilitation plan for bein% filed in violation of the !nteri+ Rules. !t is petitionerCs vie. that in a $reditor-initiated petition for rehabilitation, the debtor +ay only sub+it either a $o++ent or opposition but not its o.n rehabilitation plan. @e $annot a%ree. Rule : of the !nteri+ Rules treats of rehabilitation in %eneral, .ithout distin$tion as to .ho bet.een the debtor and the $reditor initiated the petition. No.here in said Rule is there any provision that prohibits the debtor in a $reditor-initiated petition to file its o.n rehabilitation plan for $onsideration by the $ourt. Muite the reverse, one of the fun$tions and po.ers of the rehabilitation re$eiver under Se$tion 1:,+- of said Rule is to study the rehabilitation plan proposed b8 the debtor or any rehabilitation plan sub+itted durin% the pro$eedin%s, to%ether .ith any $o++ents +ade thereon. #his provision +a5es parti$ular referen$e to a debtor-initiated pro$eedin% in .hi$h the debtor prin$ipally files a rehabilitation plan. !n su$h $ase, the re$eiver is tas5ed, a+on% other thin%s, to study the rehabilitation plan presented by the debtor alon% .ith any rehabilitation plan sub+itted durin% the pro$eedin%s. #his i+plies that the $reditors of the distressed $orporation, and even the re$eiver, +ay file their respe$tive rehabilitation plans. @e per$eive no %ood reason .hy the sa+e option should not be
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available, by analo%y, to a debtor in $reditor-initiated pro$eedin%s, .hi$h is also found in Rule : of the !nteri+ Rules. #hird, petitioners fault the Court of Appeals for rulin% that the debt-toeIuity $onversion rate of 33.3=, as proposed by #he Ban5 of Ne. >or5, violates the )ilipiniHation provision of the Constitution. Petitioners explain that the a$Iuisition of shares by forei%n "+nibus and )inan$ial Creditors shall be done, both dire$tly and indire$tly in order to +eet the $ontrol test prin$iple under RA 3&:' 1? or the )orei%n !nvest+ents A$t of 1111. 7nder the proposed stru$ture, said $reditors shall o.n :&= of the outstandin% $apital sto$5 of the tele$o++uni$ations $o+pany on a dire$t basis, .hile the re+ainin% :&= of shares shall be re%istered to a holdin% $o+pany that shall retain, on a dire$t basis, the other 0&= eIuity reserved for )ilipino $itiHens. *oreover, petitioners +aintain that it is only fair to i+pose upon the "+nibus and )inan$ial Creditors a bi%%er eIuity $onversion in Bayantel $onsiderin% that petitioners .ill bear the bul5 of the a$$rued interests and penalties to be .ritten off. !nitially, the Rehabilitation Court approved the Re$eiverCs re$o++endation to .rite-off interests and penalties in the a+ount of 7SW?:,&::,99?.&&. #he Rehabilitation Court li5e.ise ordered a re-$o+putation of past due interest in a$$ordan$e .ith the rate proposed by the Re$eiver. )ollo.in% this, petitioners esti+ate the total unpaid a$$rued interest of Bayantel as of /uly ?&, '&&? to be at 7SW1:&,&12,39&.00 .hile the Rehabilitation Court arrived at the total a+ount of past due interest and penalties of 7SW11:,299,?01.91 upon re$o+putation. #his +a5es for a differen$e of 7SW'9,':?,?21.&3 .hi$h, petitioners $lai+, represents an additional .rite-off to be borne by the+ for a total .rite-off of 7SW91,'23,1?:.&3. #he provision adverted to is Arti$le N!!, Se$tion 11 of the 1123 Constitution .hi$h states6 SEC. 11. No fran$hise, $ertifi$ate, or any other for+ of authoriHation for the operation of a publi$ utility shall be %ranted ex$ept to $itiHens of the Philippines or to $orporations or asso$iations or%aniHed under the la.s of the Philippines at least sixty per centum of .hose $apital is o.ned by su$h $itiHens, nor shall su$h fran$hise, $ertifi$ate or authoriHation be ex$lusive in $hara$ter or for a lon%er period than fifty years. Neither shall any su$h fran$hise or ri%ht be %ranted ex$ept under the $ondition that it shall be sub8e$t to a+end+ent, alteration, or repeal by the Con%ress .hen the $o++on %ood so reIuires. #he State shall en$oura%e eIuity parti$ipation in publi$ utilities by the %eneral publi$. #he parti$ipation of forei%n investors in the %overnin% body of any publi$ utility enterprise shall be li+ited to their proportionate share in its $apital, and all the exe$utive and +ana%in% offi$ers of su$h $orporation or asso$iation +ust be $itiHens of the Philippines. #his provision expli$itly reserves to )ilipino $itiHens $ontrol over publi$ utilities, pursuant to an overridin% e$ono+i$ %oal of the 1123 Constitution6 to ($onserve and
Nazareno
Corporation CASES Based on the Syllabus of Fr. Agustin develop our patri+ony( and ensure (a selfreliant and independent national e$ono+y effec"i9ely con"rolle& by )ilipinos.(1: !n the re$ent $ase of Gamboa v. .eves!19 the Court settled on$e and for all the +eanin% of ($apital( in the above-Iuoted Constitutional provision li+itin% forei%n o.nership in publi$ utilities. !n said $ase, .e held that $onsiderin% that $o++on shares have votin% ri%hts .hi$h translate to $ontrol as opposed to preferred shares .hi$h usually have no votin% ri%hts, the ter+ ($apital( in Se$tion 11, Arti$le N!! of the Constitution refers only to $o++on shares. ;o.ever, if the preferred shares also have the ri%ht to vote in the ele$tion of dire$tors, then the ter+ ($apital( shall in$lude su$h preferred shares be$ause the ri%ht to parti$ipate in the $ontrol or +ana%e+ent of the $orporation is exer$ised throu%h the ri%ht to vote in the ele$tion of dire$tors. !n short, the ter+ ($apital( in Se$tion 11, Arti$le N!! of the Constitution refers only to shares of sto$5 that $an vote in the ele$tion of dire$tors. Applyin% this, t.o steps +ust be follo.ed in order to deter+ine .hether the $onversion of debt to eIuity in ex$ess of :&= of the outstandin% $apital sto$5 violates the $onstitutional li+it on forei%n o.nership of a publi$ utility6 -irst!identify into .hi$h $lass of shares the debt shall be $onverted, .hether $o++on shares, preferred shares that have the ri%ht to vote in the ele$tion of dire$tors or non-votin% preferred sharesD Second! deter+ine the nu+ber of shares .ith votin% ri%ht held by forei%n entities prior to $onversion. !f upon $onversion, the total nu+ber of shares held by forei%n entities ex$eeds :&= of the $apital sto$5 .ith votin% ri%hts, the $onstitutional li+it on forei%n o.nership is violated. "ther.ise, the $onversion shall be respe$ted. !n its Rehabilitation Plan, 10 a+on% the +aterial finan$ial $o++it+ents +ade by respondent Bayantel is that its shareholders shall (relinIuish the a%reed-upon a+ount of $o++on sto$5AsB as pay+ent to 7nse$ured Creditors as per the #er+ Sheet.( 13 Evidently, the parties intend to $onvert the unsustainable portion of respondentYs debt into $o++on sto$5s, .hi$h have votin% ri%hts. !f .e indul%e petitioners on their proposal, the "+nibus Creditors .hi$h are forei%n $orporations, shall have $ontrol over 33.3= of Bayantel, a publi$ utility $o+pany. #his is pre$isely the s$enario pros$ribed by the )ilipiniHation provision of the Constitution. #herefore, the Court of Appeals a$ted $orre$tly in sustainin% the :&= debt-to-eIuity $eilin% on $onversion. As to the fourth issue, petitioners insist that the .rite-off of the default interest and penalties alon% .ith the re-$o+putation of past due interest violate the pari passu treat+ent of $reditors. PetitionerCs ar%u+ent la$5s +erit. Se$tion 9,d-, Rule : of the !nteri+ Rules provides that the rehabilitation plan shall in$lude the +eans for the exe$ution of the rehabilitation plan, .hi$h +ay in$lude
1:'
$onversion of the debts or any portion thereof to eIuity, restru$turin% of the debts, dacion en pago, or sale of assets or of the $ontrollin% interest. ebt restru$turin% +ay involve $onversion of the debt or any portion thereof to eIuity, sale of the assets of the distressed $o+pany and appli$ation of the pro$eeds to the obli%ation, dacion en pago, debt relief or redu$tion, +odifi$ation of the ter+s of the loan or a $o+bination of these s$he+es. !n this $ase, the approved Rehabilitation Plan provided for a lon%er period of pay+ent, the $onversion of debt to :&= eIuity in respondent $o+pany, +odifi$ation of interest rates on the restru$tured debt and a$$rued interest and a .rite-off or relief fro+ penalties and default interest. #hese re$o++endations by the Re$eiver are perfe$tly .ithin the po.ers of the Rehabilitation Court to adopt and approve, as it did adopt and approve. !n so doin%, no reversible error $an be attributed to the Rehabilitation Court. #he pertinent portion of the fallo of said $ourtCs e$ision dated /une '2, '&&: states6 1. #he rulin% on )3& 'ar1 'a((u )r&a)2&n) o4 a55 ;r&*1)or( .hose $lai+s are sub8e$t to restru$turin% shall be +aintained and (3a55 &7)&n* )o a55 'ay2&n) )&r2( an* )r&a)2&n) o4 'a() *u& 1n)&r&().F12 ,E+phasis supplied#hus, the $ourt a 'uo provided for a unifor+ appli$ation of the pari passu prin$iple a+on% $reditor $lai+s and the ter+s by .hi$h they shall be paid, in$ludin% past due interest. #his is $onsistent .ith the interpretation a$$orded by 8urispruden$e to the pari passu prin$iple that durin% rehabilitation, the assets of the distressed $orporation are held in trust for the eIual benefit of all $reditors to pre$lude one fro+ obtainin% an advanta%e or preferen$e over another. All $reditors should stand on eIual footin%. Not any one of the+ should be %iven preferen$e by payin% one or so+e of the+ ahead of the others.11 As applied to this $ase, the pari passu treat+ent of $lai+s durin% rehabilitation entitles all $reditors, .hether se$ured or unse$ured, to re$eive pay+ent out of BayantelCs $ash flo.. espite their preferred position, therefore, the se$ured $reditors shall not be paid ahead of the unse$ured $reditors but shall re$eive pay+ent only in the proportion o.in% to the+. !n any event, the debt restru$turin% s$he+es $o+plained of shall be i+ple+ented a+on% all $reditors re%ardless of $lass. Both se$ured and unse$ured $reditors shall suffer a .rite-off of penalties and default interest and the es$alatin% interest rates shall be eIually i+posed on the+. @e repeat, the $o++it+ent e+bodied in the pari passu prin$iple only %oes so far as to ensure that the assets of the distressed $orporation are held in trust for the eIual benefit of all $reditors. !t does not espouse absolute eIuality in all aspe$ts of debt restru$turin%.
Nazareno
Corporation CASES Based on the Syllabus of Fr. Agustin As re%ards petitionersC $lai+s for $osts, petitioner Ban5 of Ne. >or5 filed before the Rehabilitation Court a Noti$e of Clai+1&& dated )ebruary 11, '&&: for the pay+ent of 7SW1,'99,291.?&, representin% filin% fee, deposit for expenses and the professional fees of its $ounsels and finan$ial advisers. Earlier, said ban5 had filed a $lai+ for the pay+ent of 7SW20?,2'1.12 for professional fees of its $ounsels and professional advisers and P',29&,?&9.&& for do$5et fees and publi$ation expenses. "n its end, the Avenue Asia Capital 4roup $lai+s a total of 7SW9?9,&39.0: to defray the professional fees of its finan$ial adviser, Pri$e @aterhouse U Cooper and the Bondholder Co++uni$ations 4roup. !n an "rder1&1 dated *ar$h 19, '&&9, the Rehabilitation Court approved the $lai+s for $osts of petitioner Ban5 of Ne. >or5 as follo.s6 i. filin% fees of P',3&1,39&.&& as eviden$ed by ".R. Nos. 12:0?112, 12:00'20 and &:2&':0 all dated Au%ust 1?, '&&? of the Re%ional #rial Court ,of Pasi% City-D ii. $osts of publi$ation of the Stay "rder in the a+ount of P:3,99&.&& as eviden$ed by ".R. No. 20?2: dated Au%ust 1?, '&&? of the Peoples !ndependent *edia, !n$., the sa+e bein% 8udi$ial $osts authoriHed under Se$. 1, Rule 1:' of the Rules of CourtD iii. pay+ents of professional fees to its Philippine Counsel, Belo 4oHon El+a Parel Asun$ion U <u$ila, in the total a+ount of 7SW19',32:.?' as eviden$ed by the Affidavit of Atty. Roberto Rafael G. <u$ila and the State+ents of A$$ount atta$hed theretoD .hi$h the Court $onsiders to be reasonable and finds authoriHed under Se$. 0.11 and 0.1' of the !ndenture atta$hed as Annex (E( to the PetitionD #he Re$eiver is hereby dire$ted to $ause the settle+ent of pay+ent of the a$$ounts .ithin a period of sixteen ,10- +onths fro+ re$eipt of this "rder.1&' #he trial $ourt +ade no pronoun$e+ent on the $lai+s for $ost of petitioner Avenue Asia Capital 4roup, either in the sa+e "rder or in a subseIuent order. Before us, petitioners reiterate their $lai+s for $osts based on Se$tions 0.11 1&? and 0.1'1&: of the !ndenture1&9dated /uly '', 1111, .hi$h .as exe$uted by respondent in their favor. !t bears stressin% at this point that the sub8e$t of petitionersC appeal before the Court of Appeals .as the Rehabilitation CourtCs e$ision dated /une '2, '&&:. Said e$ision, ho.ever, bore no dis$ussion on either petitionersC $lai+ for $osts fro+ .hi$h they
1:?
+ay appeal. Notably, the assailed "rder of the Rehabilitation Court .as pro+ul%ated on *ar$h 19, '&&9 or four ,:- +onths after petitioners had appealed the e$ision dated /une '2, '&&: to the Court of Appeals on Nove+ber 10, '&&:. Evidently, the appellate $ourt $ould not have a$Iuired 8urisdi$tion to revie. said "rder. Nonetheless, .e doubt the propriety of the Rehabilitation CourtCs a.ard for $osts. A perusal of the "rder dated *ar$h 19, '&&9 reveals that the a.ard to petitioner Ban5 of Ne. >or5 .as +ade pursuant to Se$tion 1, Rule 1:' of the Rules of Court, .hi$h states6 SEC#!"N 1. Costs ordinaril8 follow results of suit .- 7nless other.ise provided in these Rules, ;o()( (3a55 +& a55o=&* )o )3& 'r&6a151n@ 'ar)y as a +atter of $ourse, but the $ourt shall have po.er, for spe$ial reasons, to ad8ud%e that either party shall pay the $osts of an a$tion, or that the sa+e be divided, as +ay be eIuitable. No $osts shall be allo.ed a%ainst the Republi$ of the Philippines unless other.ise provided by la.. ,E+phasis supplied;o.ever, there is no prevailin% party in rehabilitation pro$eedin%s .hi$h is nonadversarial in nature.1&0 7nli5e in adversarial pro$eedin%s, the $ourt in rehabilitation pro$eedin%s appoints a re$eiver to study the best +eans to revive the debtor and to ensure that the value of the debtorCs property is reasonably +aintained pendin% the deter+ination of .hether or not the debtor should be rehabilitated, as .ell as i+ple+ent the rehabilitation plan after its approval. 1&3 #he +ain thrust of rehabilitation is not to ad8udi$ate opposin% $lai+s but to restore the debtor to a position of su$$essful operation and solven$y. 7nder the !nteri+ Rules, reasonable fees and expenses are allo.ed the Re$eiver and the persons hired by hi+, 1&2 for those expenses in$urred in the ordinary $ourse of business of the debtor after the issuan$e of the stay order but ex$ludin% interest to $reditors.1&1 *oreover, .hile it is true that the !ndenture bet.een petitioners and respondent $orporation authoriHes the #rustee to file proofs of $lai+ for the pay+ent of reasonable expenses and disburse+ents of the #rustee, its a%ents and $ounsel, a$$ountants and experts, su$h re+edy is available only in $ases .here the #rustee files a $olle$tion suit a%ainst respondent $o+pany. !ndubitably, the rehabilitation pro$eedin%s in the $ase at bar is not a $olle$tion suit, .hi$h is adversarial in nature. In G.R. 'o. (--3-* At issue in this petition for revie. on $ertiorari is the extent of po.er that the *onitorin% Co++ittee $an exer$ise. #he pertinent portion of the fallo of the e$ision dated /une '2, '&&: provides6
Nazareno
Corporation CASES Based on the Syllabus of Fr. Agustin 0. A *onitorin% Co++ittee shall be for+ed $o+posed of representatives fro+ all $lasses of the restru$tured debt. #he Rehabilitation Re$eiverCs role shall be li+ited to the po.ers of +onitorin% and oversi%ht as provided in the !nteri+ Rules. All po.ers provided for in the Report and Re$o++endations, .hi$h ex$eed the +onitorin% and oversi%ht fun$tions +andated by the !nteri+ Rules shall be a+ended a$$ordin%ly. 11& "n "$tober 19, '&&:, petitioner Ban5 of Ne. >or5 filed a *anifestation .ith the Rehabilitation Court for the $reation of a +onitorin% $o++ittee in a$$ordan$e .ith the aforeIuoted pronoun$e+ent. Petitioner espouses the vie. that it is essential to (provide for a stron% and effe$tive *onitorin% Co++ittee x x x .hi$h %ives the )inan$ial Creditors +eanin%ful and substantial parti$ipation in Bayantel.( 111 !t .ent on to propose the po.ers that the *onitorin% Co++ittee should possess, spe$ifi$ally6 #he role of the *onitorin% Co++ittee shall be to .or5 .ith the Re$eiver ,on pre$ise ter+s to be a%reed as dis$ussed belo.- to "versee the a$tions of the B#! Ne. Board of ire$tors, +a5in% 5ey e$isions anda''ro61n@, a+on%st other thin%s, ,i- Any proposed Events of Res$hedulin%D ,ii- Any other proposed a$tions by the re$eiver on a pay+ent defaultD ,iii- "peratin% Expenses Bud%etsD ,iv- Capital Expenditure Bud%etsD ,v- Asset Sales Pro%ra+sD and xxxx ,vi- #er+s of !n$entive S$he+e for Ne. *ana%e+ent and *ana%e+ent #ar%ets.11' SubseIuently, in an "rder11? dated Nove+ber 1, '&&:, the Rehabilitation Court adopted petitionerCs proposal by $onstitutin% a *onitorin% Co++ittee that shall parti$ipate .ith the Re$eiver in +onitorin% and overseein% the a$tions of the Board of ire$tors of Bayantel and +ay, by +a8ority vote, a*o'), 2o*14y, r&61(& or (u+()1)u)& any of the follo.in% ite+s6 ,1- any proposed Annual "PEN Bud%etsD ,'- any proposed Annual CAPEN Bud%etsD ,?- any proposed Res$heduleD ,:- any proposed a$tions by the Re$eiver on a pay+ent defaultD
1::
Nazareno
,9- ter+s of *ana%e+ent !n$entivisation S$he+e and *ana%e+ent #ar%etsD /60 )3& E#"T ALR&6&nu& ra)1o( (&) +y )3& #ayan)&5 #oar* o4 an*, 1r&;)or(I
/.0 any o)3&r 'ro'o(&* a;)1on( +y )3& #ayan)&5 #oar* o4 1r&;)or( 1n;5u*1n@, =1)3ou) 5121)a)1on, 1((uan;& o4 n&= (3ar&(, (a5& o4 ;or& an* non8;or& a((&)(, ;3an@& o4 +u(1n&((, &);. )3a) =155 2a)&r1a55y a44&;) )3& )&r2( an* ;on*1)1on( o4 )3& r&3a+151)a)1on '5an an* 1)( 12'5&2&n)a)1on.11:,E+phasis supplied)ro+ said "rder, respondent Bayantel filed a *anifestation and *otion for Clarifi$ation .hile the se$ured $reditors +oved for an in$rease in the +e+bership of the +onitorin% $o++ittee fro+ three to five +e+bers. )or his part, the Re$eiver sub+itted a Co+plian$e and *anifestation dated /anuary 1&, '&&9. !n an "rder119 dated *ar$h 19, '&&9, the Rehabilitation Court affir+ed the $reation of a +onitorin% $o++ittee but denied the +otion for the appoint+ent of additional +e+bers therein. !t also +ade the follo.in% dispositions relative to the fun$tions of the *onitorin% Co++ittee6 ,d- to approve the !+ple+entin% #er+ Sheet sub+itted by the Re$eiver sub8e$t to the follo.in% $onditions6
ii. )3& R&;&16&r (3a55 *&(1@n an* 4or2u5a)& =1)3 )3& 'ar)1;1'a)1on o4 )3& %on1)or1n@ Co221))&& an* #ayan)&5 )3& ;on6&r)1+5& *&+) 1n()ru2&n) , as dire$ted of hi+ in the earlier "rder of Nove+ber 1, '&&:, for the unsustainable portion of the restru$tured debt of Bayantel and sub+it the sa+e to the Court .ithin thirty ,?&- days fro+ re$eipt of this "rder. Costs, expenses and taxes that +ay be due on the exe$ution of the $onvertible debt instru+ent shall be $har%ed to Bayantel as $osts of the rehabilitation pro$eedin%sD xxxx iv. the Re$eiver shall devise a +ode or pro$edure .hereby )3& %on1)or1n@ Co221))&& ;an 3a6& 122&*1a)& an* *1r&;) a;;&(( )o any 1n4or2a)1on that the Re$eiver has obtained or re$eived fro+ Bayantel or the *onitorin% A$$ountant 1n r&@ar* )o )3& 2ana@&2&n) an* +u(1n&(( o'&ra)1on( o4 #ayan)&5 D
Corporation CASES Based on the Syllabus of Fr. Agustin v. the tradin% of debt +entioned in the !+ple+entin% #er+ Sheet shall be %overned by the pre-petition do$u+ents .hi$h do not $onfli$t .ith the e$ision of this Court and provided that no transfer shall be +ade to the Bayantel 4roup Co+panies, or any $ontrollin% shareholders thereof in$ludin% Bayan #ele$o++uni$ations ;oldin%s Corporation ,(B#;C(-D ho.ever, any (buy ba$5( s$he+e a( 2ay +& a''ro6&* +y )3& %on1)or1n@ Co221))&&and Bayantel shall be open to all $reditors .hether se$ured or unse$uredD110 ,E+phasis supplied"n appeal, the Court of Appeals nullified the "rders dated Nove+ber 1, '&&: and *ar$h 19, '&&9 insofar as they defined the po.ers and fun$tions of the *onitorin% Co++ittee. #he appellate $ourt ruled that the Rehabilitation Court $o++itted %rave abuse of dis$retion in vestin% the *onitorin% Co++ittee .ith po.ers beyond +onitorin% and overseein% BayantelCs operations. Before us, petitioner $ontends that the Rehabilitation Court intended for the *onitorin% Co++ittee to exer$ise po.ers %reater than those of the Re$eiver. @e find no +erit in petitionerCs ar%u+ent. !n the e$ision dated /une '2, '&&:, the Rehabilitation Court dis$ussed the $ir$u+stan$es surroundin% the $reation of the +onitorin% $o++ittee, thus6 Both Bayantel and the "pposin% Creditors $ontend that the Rehabilitation Re$eiver, under his Report and Re$o++endations, appear to be vested .ith too +u$h dis$retion in the i+ple+entation of his proposed rehabilitation plan. Bayantel and the "pposin% Creditors for one, ar%ue a%ainst the po.er of the Rehabilitation Re$eiver to be able to further restru$ture Restru$tured ebt as .ell as the Rehabilitation Re$eiverYs po.er relatin% to +atters of BayantelCs bud%et. #he A$Bourt .ishes to stress that the !nteri+ Rules prohibit the Rehabilitation Re$eiver fro+ ta5in% over the +ana%e+ent and $ontrol of the $o+pany under rehabilitation, and li+it his role to +erely overseein% and +onitorin% the operations of the $o+pany ,Se$tion 1:, Rule :, !nteri+ Rules-. ;o.ever, the A$Bourt also appre$iates that the Rehabilitation Re$eiver +ust oversee the i+ple+entation of the rehabilitation plan as approved by the A$Bourt. !n line .ith petitionerCs proposal, )3& ;r&a)1on o4 a %on1)or1n@ Co221))&& ;o2'o(&* o4 r&'r&(&n)a)16&( 4ro2 a55 ;5a((&( o4 )3& r&()ru;)ur&* *&+) a**r&((&( )3& ;on;&rn( ra1(&* +y )3& ;r&*1)or( .113 ,E+phasis supplied!t $an be %leaned fro+ the fore%oin% that the Rehabilitation CourtCs de$ision to for+ a +onitorin% $o++ittee .as borne out of $reditorsC $on$erns over the possession of vast po.ers by the Re$eiver. @hile the Rehabilitation Court .as Iui$5 to delineate the Re$eiverCs authority, it nevertheless, unders$ored the value of his role in overseein% the i+ple+entation of the Plan. !t .as on this pre+ise that the Rehabilitation Court
1:9
appointed the *onitorin% Co++ittee - to (AaddressB the $on$erns raised by the $reditors.( >et, in its "rders dated Nove+ber 1, '&&: and *ar$h 19, '&&9, the Rehabilitation Court eIuipped the *onitorin% Co++ittee .ith po.ers .ell beyond those of the Re$eiverCs. Apart fro+ $ontrol over respondentCs bud%et, the *onitorin% Co++ittee +ay also adopt, +odify, revise or even substitute any other proposed a$tions by respondentCs Board of ire$tors, in$ludin%, .ithout li+itation issuan$e of ne. shares, sale of $ore and non-$ore assets, $han%e of business and others that .ill +aterially affe$t the ter+s and $onditions of the rehabilitation plan and its i+ple+entation. !roni$ally, the $ourt a 'uo diluted the see+in% $on$entration of po.er in the hands of the Re$eiver but appointed a Co++ittee possessed of even .ider dis$retion over respondentCs operations. )ro+ all indi$ations, ho.ever, the tenor of the Rehabilitation CourtCs e$ision dated /une '2, '&&: does not $onte+plate the $reation of a *onitorin% Co++ittee .ith broader po.ers than the Re$eiver. As the na+e of the *onitorin% Co++ittee itself su%%ests, its 8ob is (to .at$h, observe or $he$5 espe$ially for a spe$ial purpose.( 112 !n the $ontext of the e$ision dated /une '2, '&&:, the funda+ental tas5 of the *onitorin% Co++ittee herein is to oversee the i+ple+entation of the rehabilitation plan as approved by the $ourt. #his should not be $onfused .ith the fun$tions of the Re$eiver under the !nteri+ Rules or a +ana%e+ent $o++ittee under P 1&'-A. 7nder Se$tion 1:, Rule : of the !nteri+ Rules, the Re$eiver shall not ta5e over the +ana%e+ent and $ontrol of the debtor but shall $losely oversee and +onitor its operations durin% the penden$y of the rehabilitation pro$eedin%. #he Rehabilitation Re$eiver shall be $onsidered an offi$er of the $ourt and his $ore duty is to assess ho. best to rehabilitate the debtor and to preserve its assets pendin% the deter+ination of .hether or not it should be rehabilitated and to i+ple+ent the approved plan. !t is a basi$ pre$ept in Corporation <a. that the $orporate po.ers of all $orporations for+ed under Batas Pambansa Blg. 02 or the Corporation Code shall be exer$ised, all business $ondu$ted and all property of su$h $orporations $ontrolled and held by the board of dire$tors or trustees. Nonetheless, P 1&'-A presents an ex$eption to this rule. Se$tion 0,d-111 of P 1&'-A e+po.ers the Rehabilitation Court to $reate and appoint a +ana%e+ent $o++ittee to underta5e the +ana%e+ent of $orporations .hen there is i++inent dan%er of dissipation, loss, .asta%e or destru$tion of assets or other properties or paralyHation of business operations of su$h $orporations .hi$h +ay be pre8udi$ial to the interest of +inority sto$5holders, parties-liti%ants or the %eneral publi$. !n the $ase of $orporations supervised or re%ulated by %overn+ent a%en$ies, su$h as ban5s and insuran$e $o+panies, the appoint+ent shall be +ade upon the reIuest of the %overn+ent a%en$y $on$erned. "ther.ise, the Rehabilitation Court +ay, upon petition or motu proprio, appoint su$h +ana%e+ent $o++ittee.
Nazareno
Corporation CASES Based on the Syllabus of Fr. Agustin #he +ana%e+ent $o++ittee or rehabilitation re$eiver, board or body shall have the follo.in% po.ers6 ,1- to ta5e $ustody of, and $ontrol over, all the existin% assets and property of the distressed $orporationD ,'- to evaluate the existin% assets and liabilities, earnin%s and operations of the $orporationD ,?- to deter+ine the best .ay to salva%e and prote$t the interest of the investors and $reditorsD ,:- to study, revie. and evaluate the feasibility of $ontinuin% operations and restru$ture and rehabilitate su$h entities if deter+ined to be feasible by the Rehabilitation CourtD and ,9- it +ay overrule or revo5e the a$tions of the previous +ana%e+ent and board of dire$tors of the entity or entities under +ana%e+ent not.ithstandin% any provision of la., arti$les of in$orporation or by-la.s to the $ontrary. 1Pwphi1 !n this $ase, petitioner neither filed a petition for the appoint+ent of a +ana%e+ent $o++ittee nor presented eviden$e to sho. that there is i++inent dan%er of dissipation, loss, .asta%e or destru$tion of assets or other properties or paralyHation of business operations of respondent $orporation .hi$h +ay be pre8udi$ial to the interest of the +inority sto$5holders, the $reditors or the publi$. 7nless petitioner satisfies these reIuisites, .e $annot san$tion the exer$ise by the *onitorin% Co++ittee of po.ers that .ill a+ount to +ana%e+ent of respondentCs operations. :HEREFORE, the Court hereby RESOL$ES to dispose of these $onsolidated petitions, as follo.s6 ,1- #he petition for revie. on $ertiorari in 4.R. Nos. 13::93-91 is EN"E . #he e$ision dated Au%ust 12, '&&0 of the Court of Appeals in CA-4.R. SP No. 23'&? is AFF"R%E I ,'- #he petition for revie. on $ertiorari in 4.R. Nos. 139:12-'& is EN"E . #he e$ision dated Au%ust 12, '&&0 and Resolution dated Nove+ber 2, '&&0 of the Court of Appeals in CA-4.R. SP Nos. 231&& and 23111 are AFF"R%E I and ,?- #he petition for revie. on $ertiorari in 4.R. No. 133'3& is EN"E . #he e$ision dated "$tober '3, '&&0 and Resolution dated *ar$h '?, '&&3 of the Court of Appeals in CA-4.R. SP No. 2121: areAFF"R%E . No pronoun$e+ent as to $osts. S" "R ERE . %ART"N Asso$iate /usti$e @E C"NC7R6 S. $"LLARA%A, JR. TERES"TA Asso$iate A$tin% Chairperson LUCAS !. Asso$iate /usti$e J. LEONAR O8 E
1:0
CASTRO /usti$e
Nazareno
#ERSA%"N JOSE !ORTUGAL Asso$iate /usti$e
!EREAZ
#"EN$EN" O Asso$iate /usti$e A##ES#A#!"N
L.
REYES
! attest that the $on$lusions in the above e$ision had been rea$hed in $onsultation before the $ase .as assi%ned to the .riter of the opinion of the CourtYs ivision. TERES"TA J. Asso$iate "cting Chairperson! -irst #ivision CER#!)!CA#!"N Pursuant to Se$tion 1?, Arti$le G!!! of the 1123 Constitution and the ivision A$tin% ChairpersonYs Attestation, ! $ertify that the $on$lusions in the above e$ision had been rea$hed in $onsultation before the $ase .as assi%ned to the .riter of the opinion of the CourtYs ivision. ANTON"O A$tin% Chief /usti$e T. CAR!"O LEONAR O8 E CASTRO /usti$e

Corporation CASES Sandiganbayan ruling on Marcos ill-gotten wealth case

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Corporation CASES Sandiganbayan ruling on Marcos ill-gotten wealth case

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Corporation CASES Based on the Syllabus of Fr. Agustin EN BANC G.R. No.

149802 January 20, 2006

Pilar #evelopment Corp. vs. I"C, No. <-3''2?, SCRA '19.

e$e+ber 1', 1120, 1:0

#he <a.phil Pro8e$t - Arellano <a. )oundation

RO%EO Asso$iate /usti$e

%epublic v. Court "ppeals, '&: SCRA 10&.

#he <a.phil Pro8e$t - Arellano <a. )oundation

Corporation CASES Based on the Syllabus of Fr. Agustin

EN BANC G.R. No. 1.6,.9 Jun& 28, 2011

ARTURO Asso$iate /usti$e

"OS A O %. Asso$iate /usti$e

LUCAS !. Asso$iate /usti$e

%AR"ANO C. Asso$iate /usti$e

RO#ERTO Asso$iate /usti$e

%ART"N S. $"LLARA%A, JR. Asso$iate /usti$e

JOSE !ORTUGAL Asso$iate /usti$e

JOSE C. Asso$iate /usti$e

#"EN$EN" O Asso$iate /usti$e

ESTELA %. !ERLAS8#ERNA#E Asso$iate /usti$e

!RES#"TERO J. $ELASCO, JR.

Corporation CASES Based on the Syllabus of Fr. Agustin

Se$tion 1&, Arti$le N!! of the 1123 Constitution.

Corporation CASES Based on the Syllabus of Fr. Agustin

!ssued on 13 /uly 1123.

Se$tion ? of RA No. 9:99 states6

Presidential e$ree No. 1321.

Corporation CASES Based on the Syllabus of Fr. Agustin

#SN ,"ral Ar%u+ents-, '0 /une '&1', pp. 31-3:.

Corporation CASES Based on the Syllabus of Fr. Agustin

Re$ord of the Constitutional Co++ission, Gol. ?, p. 09' ,'? Au%ust 1120-.

)or the year '&&1.

:00 Phil. '?9 ,'&&:-. !d. at '00-'03.

#he <a.phil Pro8e$t - Arellano <a. )oundation

21(;31&6ou( '&)1)1on an*

not corporate ma+orit8 public

#ERSA%"N JOSE !ORTUGAL Asso$iate /usti$e

#"EN$EN" O Asso$iate /usti$e A##ES#A#!"N

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