622 Phil. 431
CARPIO, J.:
I repeat, Mr. President. PNCC has agreed in a compromise agreement dated 17 August 2006 to transfer to Radstock Securities Limited P17,676,063,922, no small money, Mr. President, my dear colleagues, P17.6 billion.Aside from Senator Drilon, Senator Sergio S. Osmeña III also saw irregularities in the transactions involving the Marubeni loans, thus:
What does it consist of? It consists of the following: 19 pieces of real estate properties with an appraised value of P5,993,689,000. Do we know what is the bulk of this? An almost 13-hectare property right here in the Financial Center. As we leave the Senate, as we go out of this Hall, as we drive thru past the GSIS, we will see on the right a vacant lot, that is PNCC property. As we turn right on Diosdado Macapagal, we see on our right new buildings, these are all PNCC properties. That is 12.9 hectares of valuable asset right in this Financial Center that is worth P5,993,689.000.
What else, Mr. President? The 20% of the outstanding capital stock of PNCC with a par value of P2,300,000,000-- I repeat, 20% of the outstanding capital stock of PNCC worth P2,300 billion-- was assigned to Radstock.
In addition, Mr. President and my dear colleagues, please hold on to your seats because part of the agreement is 50% of PNCC's 6% share in the gross toll revenue of the Manila North Tollways Corporation for 27 years, from 2008 to 2035, is being assigned to Radstock. How much is this worth? It is worth P9,382,374,922. I repeat, P9,382,374,922.
x x x x
Mr. President, P17,676,000,000, however, was made to appear in the agreement to be only worth P6,196,156,488. How was this achieved? How was an aggregate amount of P17,676,000,000 made to appear to be only P6,196,156,488? First, the 19 pieces of real estate worth P5,993,689,000 were only assigned a value of P4,195,000,000 or only 70% of their appraised value.
Second, the PNCC shares of stock with a par value of P2.3 billion were marked to market and therefore were valued only at P713 million.
Third, the share of the toll revenue assigned was given a net present value of only P1,287,000,000 because of a 15% discounted rate that was applied.
In other words, Mr. President, the toll collection of P9,382,374,922 for 27 years was given a net present value of only P1,287,000,000 so that it is made to appear that the compromise agreement is only worth P6,196,000,000.
Mr. President, my dear colleagues, this agreement will substantially wipe out all the assets of PNCC. It will be left with nothing else except, probably, the collection for the next 25 years or so from the North Luzon Expressway. This agreement brought PNCC to the cleaners and literally cleaned the PNCC of all its assets. They brought PNCC to the cleaners and cleaned it to the tune of P17,676,000,000.
x x x x
Mr. President, are we not entitled, as members of the Committee, to know who is Radstock Securities Limited?
Radstock Securities Limited was allegedly incorporated under the laws of the British Virgin Islands. It has no known board of directors, except for its recently appointed attorney-in-fact, Mr. Carlos Dominguez.
Mr. President, are the members of the Committee not entitled to know why 20 years after the account to Marubeni Corporation, which gave rise to the compromise agreement 20 years after the obligation was allegedly incurred, PNCC suddenly recognized this obligation in its books when in fact this obligation was not found in its books for 20 years?
In other words, Mr. President, for 20 years, the financial statements of PNCC did not show any obligation to Marubeni, much less, to Radstock. Why suddenly on October 20, 2000, P10 billion in obligation was recognized? Why was it recognized?
During the hearing on December 18, Mr. President, we asked this question to the Asset Privatization Trust (APT) trustee, Atty. Raymundo Francisco, and he was asked: "What is the basis of your recommendation to recognize this?" He said: "I based my recommendation on a legal opinion of Feria and Feria." I asked him: "Who knew of this opinion?" He said: "Only me and the chairman of PNCC, Atty. Renato Valdecantos." I asked him: "Did you share this opinion with the members of the board who recognized the obligation of P10 billion?" He said: "No." "Can you produce this opinion now?" He said: "I have no copy."
Mysteriously, Mr. President, an obligation of P10 billion based on a legal opinion which, even Mr. Arthur Aguilar, the chairman of PNCC, is not aware of, none of the members of the PNCC board on October 20, 2000 who recognized this obligation had seen this opinion. It is mysterious.
Mr. President, are the members of our Committee not entitled to know why Radstock Securities Limited is given preference over all other creditors notwithstanding the fact that this is an unsecured obligation? There is no mortgage to secure this obligation.
More importantly, Mr. President, equally recognized is the obligation of PNCC to the Philippine government to the tune of P36 billion. PNCC owes the Philippine government P36 billion recognized in its books, apart from P3 billion in taxes. Why in the face of all of these is Radstock given preference? Why is it that Radstock is given preference to claim P17.676 billion of the assets of PNCC and give it superior status over the claim of the Philippine government, of the Filipino people to the extent of P36 billion and taxes in the amount of P3 billion? Why, Mr. President? Why is Radstock given preference not only over the Philippine government claims of P39 billion but also over other creditors including a certain best merchant banker in Asia, which has already a final and executory judgment against PNCC for about P300 million? Why, Mr. President? Are we not entitled to know why the compromise agreement assigned P17.676 billion to Radstock? Why was it executed?[5] (Emphasis supplied)
SEN. OSMEÑA. Ah okay. Good.
Now, I'd like to point out to the Committee that - it seems that this was a politically driven deal like IMPSA. Because the acceptance of the 10 billion or 13 billion debt came in October 2000 and the Radstock assignment was January 10, 2001. Now, why would Marubeni sell for $2 million three months after there was a recognition that it was owed P10 billion. Can you explain that, Mr. Dominguez?
MR. DOMINGUEZ. Your Honor, I am not aware of the decision making process of Marubeni. But my understanding was, the Japanese culture is not a litigious one and they didn't want to get into a, you know, a court situation here in the Philippines having a lot of other interest, et cetera.
SEN. OSMEÑA. Well, but that is beside the point, Mr. Dominguez. All I am asking is does it stand to reason that after you get an acceptance by a debtor that he owes you 10 billion, you sell your note for 100 million.
Now, if that had happened a year before, maybe I would have understood why he sold for such a low amount. But right after, it seems that this was part of an orchestrated deal wherein with certain powerful interest would be able to say, "Yes, we will push through. We'll fix the courts. We'll fix the board. We'll fix the APT. And we will be able to do it, just give us 55 percent of whatever is recovered," am I correct?
MR. DOMINGUEZ. As I said, Your Honor, I am not familiar with the decision making process of Marubeni. But my understanding was, as I said, they didn't want to get into a ...
SEN. OSMEÑA. All right.
MR. DOMINGUEZ. ...litigious situation.[6]
x x x x
SEN. OSMEÑA. All of these financial things can be arranged. They can hire a local bank, Filipino, to be trustee for the real estate. So ...
SEN. DRILON. Well, then, that's a dummy relationship.
SEN. OSMEÑA. In any case, to me the main point here is that a third party, Radstock, whoever owns it, bought Marubeni's right for $2 million or P100 million. Then, they are able to go through all these legal machinations and get awarded with the consent of PNCC of 6 billion. That's a 100 million to 6 billion. Now, Mr. Aguilar, you have been in the business for such a long time. I mean, this hedge funds whether it's Radstock or New Bridge or Texas Pacific Group or Carlyle or Avenue Capital, they look at their returns. So if Avenue Capital buys something for $2 million and you give him $4 million in one year, it's a 100 percent return. They'll walk away and dance to their stockholders. So here in this particular case, if you know that Radstock only bought it for $2 million, I would have gotten board approval and say, "Okay, let's settle this for $4 million." And Radstock would have jumped up and down. So what looks to me is that this was already a scheme. Marubeni wrote it off already. Marubeni wrote everything off. They just got a $2 million and they probably have no more residual rights or maybe there's a clause there, a secret clause, that says, "I want 20 percent of whatever you're able to eventually collect." So $2 million. But whatever it is, Marubeni practically wrote it off. Radstock's liability now or exposure is only $2 million plus all the lawyer fees, under-the-table, etcetera. All right. Okay. So it's pretty obvious to me that if anybody were using his brain, I would have gone up to Radstock and say, "Here's $4 million. Here's P200 million. Okay." They would have walked away. But evidently, the "ninongs" of Radstock - See, I don't care who owns Radstock. I want to know who is the ninong here who stands to make a lot of money by being able to get to courts, the government agencies, OGCC, or whoever else has been involved in this, to agree to 6 billion or whatever it was. That's a lot of money. And believe me, Radstock will probably get one or two billion and four billion will go into somebody else's pocket. Or Radstock will turn around, sell that claim for P4 billion and let the new guy just collect the payments over the years.
x x x x[7]
SEN. OSMEÑA. x x x I just wanted to know is CDCP Mining a 100 percent subsidiary of PNCC?
MR. AGUILAR. Hindi ho. Ah, no.
SEN. OSMEÑA. If they're not a 100 percent, why would they sign jointly and severally? I just want to plug the loopholes.
MR. AGUILAR. I think it was - if I may just speculate. It was just common ownership at that time.
SEN. OSMEÑA. Al right. Now - Also, the ...
MR. AGUILAR. Ah, 13 percent daw, Your Honor.
SEN. OSMEÑA. Huh?
MR. AGUILAR. Thirteen percent ho.
SEN. OSMEÑA. What's 13 percent?
MR. AGUILAR. We owned ...
x x x x
SEN. OSMEÑA. x x x CDCP Mining, how many percent of the equity of CDCP Mining was owned by PNCC, formerly CDCP?
MS. PASETES. Thirteen percent.
SEN. OSMEÑA. Thirteen. And as a 13 percent owner, they agreed to sign jointly and severally?
MS. PASETES. Yes.
SEN. OSMEÑA. One-three? So poor PNCC and CDCP got taken to the cleaners here. They sign for a 100 percent and they only own 13 percent.
x x x x[8] (Emphasis supplied)
RESOLUTION NO. BD-092-2000
RESOLVED, That the Board recognizes, acknowledges and confirms PNCC's obligations as of September 30, 1999 with the following entities, exclusive of the interests and other charges that may subsequently accrue and still become due therein, to wit:
a). the Government of the Republic of the Philippines in the amount of P36,023,784,751.00; and
b). Marubeni Corporation in the amount of P10,743,103,388.00. (Emphasis supplied)
RESOLUTION NO. BD-099-2000
RESOLVED, That the Board hereby amends its Resolution No. BD-092-2000 dated October 20, 2000 so as to read as follows:
RESOLVED, That the Board recognizes, acknowledges and confirms its obligations as of September 30, 1999 with the following entities, exclusive of the interests and other charges that may subsequently accrue and still due thereon, subject to the final determination by the Commission on Audit (COA) of the amount of obligation involved, and subject further to the declaration of the legality of said obligations by the Office of the Government Corporate Counsel (OGCC), to wit:
a). the Government of the Republic of the Philippines in the amount of P36,023,784,751.00; and
b). Marubeni Corporation in the amount of P10,743,103,388.00. (Emphasis supplied)
WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiff and the defendant is directed to pay the total amount of Thirteen Billion One Hundred Fifty One Million Nine Hundred Fifty Six thousand Five Hundred Twenty Eight Pesos (P13,151,956,528.00) with interest from October 15, 2001 plus Ten Million Pesos (P10,000,000.00) as attorney's fees.
SO ORDERED.[16]
WHEREFORE, the petition is partly GRANTED and insofar as the Motion to Set Aside the Order and/or Discharge the Writ of Attachment is concerned, the Decision of the Court of Appeals on August 30, 2002 and its Resolution of January 22, 2003 in CA-G.R. SP No. 66654 are REVERSED and SET ASIDE. The attachments over the properties by the writ of preliminary attachment are hereby ordered LIFTED effective upon the finality of this Decision. The Decision and Resolution of the Court of Appeals are AFFIRMED in all other respects. The Temporary Restraining Order is DISSOLVED immediately and the Court of Appeals is directed to PROCEED forthwith with the appeal filed by PNCC.
No costs.
SO ORDERED.[17]
- Does the Compromise Agreement violate public policy?
- Does the subject matter involve an assumption by the government of a private entity's obligation in violation of the law and/or the Constitution? Is the PNCC Board Resolution of 20 October 2000 defective or illegal?
- Is the Compromise Agreement viable in the light of the non-renewal of PNCC's franchise by Congress and its inclusion of all or substantially all of PNCC's assets?
- Is the Decision of the Court of Appeals annullable even if final and executory on grounds of fraud and violation of public policy and the Constitution?
SECTION 2. Time to intervene.- The motion to intervene may be filed at any time before rendition of judgment by the trial court. A copy of the pleading-in-intervention shall be attached to the motion and served on the original parties.The rule is not absolute. The rule on intervention, like all other rules of procedure, is intended to make the powers of the Court completely available for justice.[19] It is aimed to facilitate a comprehensive adjudication of rival claims, overriding technicalities on the timeliness of the filing of the claims.[20] This Court has ruled:
[A]llowance or disallowance of a motion for intervention rests on the sound discretion of the court after consideration of the appropriate circumstances. Rule 19 of the Rules of Court is a rule of procedure whose object is to make the powers of the court fully and completely available for justice. Its purpose is not to hinder or delay but to facilitate and promote the administration of justice. Thus, interventions have been allowed even beyond the prescribed period in the Rule in the higher interest of justice. Interventions have been granted to afford indispensable parties, who have not been impleaded, the right to be heard even after a decision has been rendered by the trial court, when the petition for review of the judgment was already submitted for decision before the Supreme Court, and even where the assailed order has already become final and executory. In Lim v. Pacquing (310 Phil. 722 (1995)], the motion for intervention filed by the Republic of the Philippines was allowed by this Court to avoid grave injustice and injury and to settle once and for all the substantive issues raised by the parties.[21]In Collado v. Court of Appeals,[22] this Court reiterated that exceptions to Section 2, Rule 12 could be made in the interest of substantial justice. Citing Mago v. Court of Appeals,[23] the Court stated:
It is quite clear and patent that the motions for intervention filed by the movants at this stage of the proceedings where trial had already been concluded x x x and on appeal x x x the same affirmed by the Court of Appeals and the instant petition for certiorari to review said judgments is already submitted for decision by the Supreme Court, are obviously and, manifestly late, beyond the period prescribed under x x x Section 2, Rule 12 of the Rules of Court.Concededly, STRADEC has no legal interest in the subject matter of the Compromise Agreement. Section 1, Rule 19 of the 1997 Rules of Civil Procedure states:
But Rule 12 of the Rules of Court, like all other Rules therein promulgated, is simply a rule of procedure, the whole purpose and object of which is to make the powers of the Court fully and completely available for justice. The purpose of procedure is not to thwart justice. Its proper aim is to facilitate the application of justice to the rival claims of contending parties. It was created not to hinder and delay but to facilitate and promote the administration of justice. It does not constitute the thing itself which courts are always striving to secure to litigants. It is designed as the means best adopted to obtain that thing. In other words, it is a means to an end.
SECTION 1. Who may intervene. - A person who has a legal interest in the matter in litigation, or in the success of either of the parties, or an interest against both, or is so situated as to be adversely affected by a distribution or other disposition of property in the custody of the court or of an officer thereof may, with leave of court, be allowed to intervene in the action. The Court shall consider whether or not the intervention will unduly delay or prejudice the adjudication of the rights of the original parties, and whether or not the intervenor's rights may be fully protected in a separate proceeding.STRADEC's interest is dependent on the outcome of Civil Case No. 05-882. Unless STRADEC can show that RTC Branch 146 had already decided in its favor, its legal interest is simply contingent and expectant.
Unquestionably, the Court has the power to suspend procedural rules in the exercise of its inherent power, as expressly recognized in the Constitution, to promulgate rules concerning `pleading, practice and procedure in all courts.' In proper cases, procedural rules may be relaxed or suspended in the interest of substantial justice, which otherwise may be miscarried because of a rigid and formalistic adherence to such rules. x x x
We have made similar rulings in other cases, thus:
Be it remembered that rules of procedure are but mere tools designed to facilitate the attainment of justice. Their strict and rigid application, which would result in technicalities that tend to frustrate rather than promote substantial justice, must always be avoided. x x x Time and again, this Court has suspended its own rules and excepted a particular case from their operation whenever the higher interests of justice so require.
IV.The PNCC Board Acted in Bad Faith and with Gross Negligence
in Directing the Affairs of PNCC
SEN. DRILON. x x x And so, PNCC itself did not recognize this as an obligation but the board suddenly recognized it as an obligation. It was on that basis that the case was filed, is that correct? In fact, the case hinges on - they knew that this claim has prescribed but because of that board resolution which recognized the obligation they filed their complaint, is that correct?
MR. CIMAFRANCA. Apparently, it's like that, Senator, because the filing of the case came after the acknowledgement.
SEN. DRILON. Yes. In fact, the filing of the case came three months after the acknowledgement.
MR. CIMAFRANCA. Yes. And that made it difficult to handle on our part.
SEN. DRILON. That is correct. So, that it was an obligation which was not recognized in the financial statements of PNCC but revived - in the financial statements because it has prescribed but revived by the board effectively. That's the theory, at least, of the plaintiff. Is that correct? Who can answer that?
Ms. Pasetes, yes.
MS. PASETES. It is not an obligation of PNCC that is why it is not reflected in the financial statements.[39] (Emphasis supplied)
Notably, during the oral arguments before this Court, the Government Corporate Counsel admitted the PNCC's huge negative net worth, thus:
JUSTICE CARPIO
x x x what is the net worth now of PNCC? Negative what? Negative 6 Billion at least[?]
ATTY. AGRA
Yes, your Honor.[43] (Emphasis supplied)
SEN. DRILON. ... the prescription period is 10 years and there were no payments - the last demands were made, when? The last demands for payment?Besides prescription, the Office of the Government Corporate Counsel (OGCC) originally believed that PNCC had another formidable legal weapon against Radstock, that is, the lack of authority of Alfredo Asuncion, then Executive Vice-President of PNCC, to sign the letter of guarantee on behalf of CDCP. During the Senate hearings, the following exchange reveals the OGCC's original opinion:
MS. OGAN. It was made January 2001 prior to the filing of the case.
SEN. DRILON. Yes, all right. Before that, when was the last demand made? By the time they filed the complaint more than 10 years already lapsed.
MS. OGAN. On record, Mr. Chairman, we have demands starting from - - a series of demands which started from May 23, 1984, letter from Marubeni to PNCC, demand payment. And we also have the letter of September 3, 1986, letter of Marubeni to then PNCC Chair Mr. Jaime. We have the June 24, 1986 letter from Marubeni to the PNCC Chairman. Also the March 4, 1988 letter...
SEN. DRILON. The March 4, 1988 letter is not a demand letter.
MS. OGAN. It is exactly addressed to the Asset Privatization Trust.
SEN. DRILON. It is not a demand letter? Okay.
MS. OGAN. And we have also...
SEN. DRILON. Anyway...
THE CHAIRMAN. Please answer when you are asked, Ms. Ogan. We want to put it on the record whether it is "yes" or "no".
MS. OGAN. Yes, sir.
SEN. DRILON. So, even assuming that all of those were demand letters, the 10 years prescription set in and it should have prescribed in 1998, whatever is the date, or before the case was filed in 2001.
MR. CIMAFRANCA. The 10-year period for - if the contract is written, it's 10 years and it should have prescribed in 10 years and we did raise that in our answer, in our motion to dismiss.
SEN. DRILON. I know. You raised this in your motion to dismiss and you raised this in your answer. Now, we are not saying that you were negligent in not raising that. What we are just putting on the record that indeed there is basis to argue that these claims have prescribed.
Now, the reason why there was a colorable basis on the complaint filed in 2001 was that somehow the board of PNCC recognized the obligation in a special board meeting on October 20, 2000. Hindi ba ganoon 'yon?
MS. OGAN. Yes, that is correct.
SEN. DRILON. Why did the PNCC recognize this obligation in 2000 when it was very clear that at that point more than 10 years have lapsed since the last demand letter?
MR. AGUILAR. May I volunteer an answer?
SEN. DRILON. Please.
MR. AGUILAR. I looked into that, Mr. Chairman, Your Honor. It was as a result of and I go to the folder letter "N." In our own demand research it was not period, Your Honor, that Punongbayan in the big folder, sir, letter "N" it was the period where PMO was selling PNCC and Punongbayan and Araullo Law Office came out with an investment brochure that indicated liabilities both to national government and to Marubeni/Radstock. So, PMO said, "For good order, can you PNCC board confirm that by board resolution?" That's the tone of the letter.
SEN. DRILON. Confirm what? Confirm the liabilities that are contained in the Punongbayan investment prospectus both to the national government and to PNCC. That is the reason at least from the record, Your Honor, how the PNCC board got to deliberate on the Marubeni.
THE CHAIRMAN. What paragraph? Second to the last paragraph?
MR. AGUILAR. Yes. Yes, Mr. Chairman. Ito po 'yong - that"s to our recollection, in the records, that was the reason.
SEN. DRILON. Is that the only reason why ...
MR. AGUILAR. From just the records, Mr. Chairman, and then interviews with people who are still around.
SEN. DRILON. You mean, you acknowledged a prescribed obligation because of this paragraph?
MR. AGUILAR. I don't know what legal advice we were following at that time, Mr. Chairman.[46] (Emphasis supplied)
THE CHAIRMAN. What was the opinion of the Office of the Government Corporate Counsel?Clearly, PNCC had strong defenses against the collection suit filed by Radstock, as originally opined by the OGCC. It is quite puzzling, therefore, that the PNCC Board, which had solid grounds to refute the legitimacy of the Marubeni loans, admitted its liability and entered into a Compromise Agreement that is manifestly and grossly prejudicial to PNCC.
MS. OGAN. The opinion of the Office of the Government Corporate Counsel is that PNCC should exhaust all means to resist the case using all defenses available to a guarantee and a surety that there is a valid ground for PNCC's refusal to honor or make good the alleged guarantee obligation. It appearing that from the documents submitted to the OGCC that there is no board authority in favor or authorizing Mr. Asuncion, then EVP, to sign or execute the letter of guarantee in behalf of CDCP and that said letter of guarantee is not legally binding upon or enforceable against CDCP as principals, your Honors.[47]
x x x x
SEN. DRILON. Now that we have read this, what was the opinion of the Government Corporate Counsel, Mr. Cimafranca?
MR. CIMAFRANCA. Yes, Senator, we did issue an opinion upon the request of PNCC and our opinion was that there was no valid obligation, no valid guarantee. And we incorporated that in our pleadings in court.[48] (Emphasis supplied)
THE CHAIRMAN. x x x You were the one who wrote this letter or rather this memorandum dated 17 October 2000 to Atty. Valdecantos. Can you tell us the background why you wrote the letter acknowledging a debt which is non-existent?Atty. Francisco's act of recommending to the PNCC Board the acknowledgment of the Marubeni loans based only on an opinion of a private law firm, without consulting the OGCC and without showing this opinion to the members of the PNCC Board except to Atty. Valdecantos, reflects how shockingly little his concern was for PNCC, contrary to his claim that "he only had the interest of PNCC at heart." In fact, if what was involved was his own money, Atty. Francisco would have preferred not just two, but at least three different opinions on how to deal with the matter, and he would have maintained his non-liability.
MR. FRANCISCO. I was appointed as the trustee in charge of the privatization of the PNCC at that time, sir. And I was tasked to do a study and engage the services of financial advisors as well as legal advisors to do a legal audit and financial study on the position of PNCC. I bidded out these engagements, the financial advisership went to Punongbayan and Araullo. The legal audit went to the Feria Law Offices.
THE CHAIRMAN. Spell it. Boy Feria?
MR. FRANCISCO. Feria-- Feria.
THE CHAIRMAN. Lugto?
MR. FRANCISCO. Yes. Yes, Your Honor. And this was the findings of the Feria Law Office - that the Marubeni account was a legal obligation.
So, I presented this to our board. Based on the findings of the legal audit conducted by the Ferial Law Offices, sir.
THE CHAIRMAN. Why did you not ask the government corporate counsel? Why did you have to ask for the opinion of an outside counsel?
MR. FRANCISCO. That was the - that was the mandate given to us, sir, that we have to engage the ...
THE CHAIRMAN. Mandate given by whom?
MR. FRANCISCO. That is what we usually do, sir, in the APT.
THE CHAIRMAN. Ah, you get outside counsel?
MR. FRANCISCO. Yes, we...
THE CHAIRMAN. Not necessarily the government corporate counsel?
MR. FRANCISCO. No, sir.
THE CHAIRMAN. So, on the basis of the opinion of outside counsel, private, you proceeded to, in effect, recognize an obligation which is not even entered in the books of the PNCC? You probably resuscitated a non-existing obligation anymore?
MR. FRANCISCO. Sir, I just based my recommendation on the professional findings of the law office that we engaged, sir.
THE CHAIRMAN. Did you not ask for the opinion of the government corporate counsel?
MR. FRANCISCO. No, sir.
THE CHAIRMAN. Why?
MR. FRANCISCO. I felt that the engagements of the law office was sufficient, anyway we were going to raise it to the Committee on Privatization for their approval or disapproval, sir.
THE CHAIRMAN. The COP?
MR. FRANCISCO. Yes, sir.
THE CHAIRMAN. That's a cabinet level?
MR. FRANCISCO. Yes, sir. And we did that, sir.
THE CHAIRMAN. Now... So you sent your memo to Atty. Renato B. Valdecantos, who unfortunately is not here but I think we have to get his response to this. And as part of the minutes of special meeting with the board of directors on October 20, 2000, the board resolved in its Board Resolution No. 092-2000, the board resolved to recognize, acknowledge and confirm PNCC's obligations as of September 30, 1999, etcetera, etcetera. (A), or rather (B), Marubeni Corporation in the amount of P10,740,000.
Now, we asked to be here because the franchise of PNCC is hanging in a balance because of the - on the questions on this acknowledgement. So we want to be educated.
Now, the paper trail starts with your letter. So, that's it - that's my kuwan, Frank.
Yes, Senator Drilon.
SEN. DRILON. Thank you, Mr. Chairman.
Yes, Atty. Francisco, you have a copy of the minutes of October 20, 2000?
MR. FRANCISCO. I'm sorry, sir, we don't have a copy.
SEN. DRILON. May we ask the corporate secretary of PNCC to provide us with a copy?
Okay naman andiyan siya.
(Ms. Ogan handing the document to Mr. Francisco.)
You have familiarized yourselves with the minutes, Atty. Francisco?
MR. FRANCISCO. Yes, sir.
SEN. DRILON. Now, mention is made of a memorandum here on line 8, page 3 of this board's minutes. It says, "Director Francisco has prepared a memorandum requesting confirmation, acknowledgement, and ratification of this indebtedness of PNCC to the national government which was determined by Bureau of Treasury as of September 30, 1999 is 36,023,784,751. And with respect to PNCC's obligation to Marubeni, this has been determined to be in the total amount of 10,743,103,388, also as of September 30, 1999; that there is need to ratify this because there has already been a representation made with respect to the review of the financial records of PNCC by Punongbayan and Araullo, which have been included as part of the package of APT's disposition to the national government's interest in PNCC."
You recall having made this representation as found in the minutes, I assume, Atty. Francisco?
MR. FRANCISCO. Yes, sir. But I'd like to be refreshed on the memorandum, sir, because I don't have a copy.
SEN. DRILON. Yes, this memorandum was cited earlier by Senator Arroyo, and maybe the secretary can give him a copy? Give him a copy?
MS. OGAN. (Handing the document to Mr. Francisco.)
MR. FRANCISCO. Your Honor, I have here a memorandum to the PNCC board through Atty. Valdecantos, which says that - in the last paragraph, if I may read? "May we request therefore, that a board resolution be adopted, acknowledging and confirming the aforementioned PNCC obligations with the national government and Marubeni as borne out by the due diligence audit."
SEN. DRILON. This is the memorandum referred to in these minutes. This memorandum dated 17 October 2000 is the memorandum referred to in the minutes.
MR. FRANCISCO. I would assume, Mr. Chairman.
SEN. DRILON. Right.
Now, the Punongbayan representative who was here yesterday, Mr...
THE CHAIRMAN. Navarro.
SEN. DRILON. ... Navarro denied that he made this recommendation.
THE CHAIRMAN. He asked for opinion, legal opinion.
SEN. DRILON. He said that they never made this representation and the transcript will bear us out. They said that they never made this representation that the account of Marubeni should be recognized.
MR. FRANCISCO. Mr. Chairman, in the memorandum, I only mentioned here the acknowledgement and confirmation of the PNCC obligations. I was not asking for a ratification. I never mentioned ratification in the memorandum. I just based my memo based on the due diligence audit of the Feria Law Offices.
SEN. DRILON. Can you say that again? You never asked for a ratification...
MR. FRANCISCO. No. I never mentioned in my memorandum that I was asking for a ratification. I was just - in my memo it says, "acknowledging and confirming the PNCC obligation." This was what ...
SEN. DRILON. Isn't it the same as ratification? I mean, what's the difference?
MR. FRANCISCO. I - well, my memorandum was meant really just to confirm the findings of the legal audit as ...
SEN. DRILON. In your mind as a lawyer, Atty. Francisco, there's a difference between ratification and - what's your term? -- acknowledgment and confirmation?
MR. FRANCISCO. Well, I guess there's no difference, Mr. Chairman.
SEN. DRILON. Right.
Anyway, just of record, the Punongbayan representatives here yesterday said that they never made such representation.
In any case, now you're saying it's the Feria Law Office who rendered that opinion? Can we - you know, yesterday we were asking for a copy of this opinion but we were never furnished one. The ... no less than the Chairman of this Committee was asking for a copy.
THE CHAIRMAN. Well, copy of the opinion...
MS. OGAN. Yes, Mr. Chairman, we were never furnished a copy of this opinion because it's opinion rendered for the Asset Privatization Trust which is its client, not the PNCC, Mr. Chairman.
THE CHAIRMAN. All right. The question is whether - but you see, this is a memorandum of Atty. Francisco to the Chairman of the Asset Privatization Trust. You say now that you were never furnished a copy because that's supposed to be with the Asset ...
MS. OGAN. Yes, Mr. Chairman.
THE CHAIRMAN. ... but yet the action of - or rather the opinion of the Feria Law Offices was in effect adopted by the board of directors of PNCC in its minutes of October 20, 2000 where you are the corporate secretary, Ms. Ogan.
MS. OGAN. Yes, Mr. Chairman.
THE CHAIRMAN. So, what I am saying is that this opinion or rather the opinion of the Feria Law Offices of which you don't have a copy?
MS. OGAN. Yes, sir.
THE CHAIRMAN. And the reason being that, it does not concern the PNCC because that's an opinion rendered for APT and not for the PNCC.
MS. OGAN. Yes, Mr. Chairman, that was what we were told although we made several requests to the APT, sir.
THE CHAIRMAN. All right. Now, since it was for the APT and not for the PNCC, I ask the question why did PNCC adopt it? That was not for the consumption of PNCC. It was for the consumption of the Asset Privatization Trust. And that is what Atty. Francisco says and it's confirmed by you saying that this was a memo - you don't have a copy because this was sought for by APT and the Feria Law Offices just provided an opinion - provided the APT with an opinion. So, as corporate secretary, the board of directors of PNCC adopted it, recognized the Marubeni Corporation.
You read the minutes of the October 20, 2000 meeting of the board of directors on Item V. The resolution speaks of .. so, go ahead.
MS. OGAN. I gave my copies. Yes, sir.
THE CHAIRMAN. In effect the Feria Law Offices' opinion was for the consumption of the APT.
MS. OGAN. That was what we were told, Mr. Chairman.
THE CHAIRMAN. And you were not even provided with a copy.
THE CHAIRMAN. Yet you adopted it.
MS. OGAN. Yes, sir.
SEN DRILON. Considering you were the corporate secretary.
THE CHAIRMAN. She was the corporate secretary.
SEN. DRILON. She was just recording the minutes.
THE CHAIRMAN. Yes, she was recording.
Now, we are asking you now why it was taken up?
MS. OGAN. Yes, sir, Mr. Chairman, this was mentioned in the memorandum of Atty. Francisco, memorandum to the board.
SEN. DRILON. Mr. Chairman, Mr. Francisco represented APT in the board of PNCC. And is that correct, Mr. Francisco?
THE CHAIRMAN. You're an ex-officio member.
SEN. DRILON. Yes.
MR. FRANCISCO. Ex-officio member only, sir, as trustee in charge of the privatization of PNCC.
SEN. DRILON. With the permission of Mr. Chair, may I ask a question...
THE CHAIRMAN. Oh, yes, Senator Drilon.
SEN. DRILON. Atty. Francisco, you sat in the PNCC board as APT representative, you are a lawyer, there was a legal opinion of Feria, Feria, Lugto, Lao Law Offices which you cited in your memorandum. Did you discuss - first, did you give a copy of this opinion to PNCC?
MR. FRANCISCO. I gave a copy of this opinion, sir, to our chairman who was also a member of the board of PNCC, Mr. Valdecantos, sir.
SEN. DRILON. And because he was...
MR. FRANCISCO. Because he was my immediate boss in the APT.
SEN. DRILON. Apparently, [it] just ended up in the personal possession of Mr. Valdecantos because the corporate secretary, Glenda Ogan, who is supposed to be the custodian of the records of the board never saw a copy of this.
MR. FRANCISCO. Well, sir, my - the copy that I gave was to Mr. Valdecantos because he was the one sitting in the PNCC board, sir.
SEN. DRILON. No, you sit in the board.
MR. FRANCISCO. I was just an ex-officio member. And all my reports were coursed through our Chairman, Mr. Valdecantos, sir.
SEN. DRILON. Now, did you ever tell the board that there is a legal position taken or at least from the documents it is possible that the claim has prescribed?
MR. FRANCISCO. I took this up in the board meeting of the PNCC at that time and I told them about this matter, sir.
SEN. DRILON. No, you told them that the claim could have, under the law, could have prescribed?
MR. FRANCISCO. No, sir.
SEN. DRILON. Why? You mean, you didn't tell the board that it is possible that this liability is no longer a valid liability because it has prescribed?
MR. FRANCISCO. I did not dwell into the findings anymore, sir, because I found the professional opinion of the Feria Law Office to be sufficient.[49] (Emphasis supplied)
SEN. OSMEÑA. x x xThis is a clear admission by Atty. Francisco of bad faith in directing the affairs of PNCC - that he would not have recognized the Marubeni loans if his own funds were involved or if he were the owner of PNCC.
All right. And lastly, just to clear our minds, there has always been this finger-pointing, of course, whenever - this is typical Filipino. When they're caught in a bind, they always point a finger, they pretend they don't know. And it just amazes me that you have been appointed trustees, meaning, representatives of the Filipino people, that's what you were at APT, right? You were not Erap's representatives, you were representative of the Filipino people and you were tasked to conserve the assets that that had been confiscated from various cronies of the previous administration. And here, you are asked to recognize the P10 billion debt and you point only to one law firm. If you have cancer, don't you to a second opinion, a second doctor or a third doctor? This is just a question. I am just asking you for your opinion if you would take the advice of the first doctor who tells you that he's got to open you up.
MR. FRANCISCO. I would go to three or more doctors, sir.
SEN. OSMEÑA. Three or more. Yeah, that's right. And in this case the APT did not do so.
MR. FRANCISCO. We relied on the findings of the ...
SEN. OSMEÑA. If these were your money, would you have gone also to obtain a second, third opinion from other law firms. Kung pera mo itong 10 billion na ito. Siguro you're not gonna give it up that easily ano, 'di ba?
MR. FRANCISCO. Yes, sir.
SEN. OSMEÑA. You'll probably keep it in court for the next 20 years.
x x x x[50] (Emphasis supplied)
SECTION 1. All legal matters pertaining to government-owned or controlled corporations, their subsidiaries, other corporate off-springs and government acquired asset corporations (GOCCs) shall be exclusively referred to and handled by the Office of the Government Corporate Counsel (OGCC). (Emphasis supplied)The PNCC Board acted in bad faith in relying on the opinion of a private lawyer knowing that PNCC is required to rely "exclusively" on the OGCC's opinion. Worse, the PNCC Board, in admitting liability for P10.743 billion, relied on the recommendation of a private lawyer whose opinion the PNCC Board members have not even seen.
x x x It was the Asset Privatization Trust A-P-T that was tasked to sell the company. The A-P-T, for purposes of disclosure statements, tasked the Feria Law Office to handle the documentation and the study of all legal issues that had to be resolved or clarified for the information of prospective bidders and or buyers. In the performance of its assigned task the Feria Law Office came upon the Marubeni claim and mentioned that the APTC and/or PNCC must disclose that there is a claim by Marubeni against PNCC for purposes of satisfying the requirements of full disclosure. This seemingly innocent statement or requirement made by the Feria Law Office was then taken by two officials of the Asset Privatization Trust and with malice aforethought turned it into the basis for a multi-billion peso debt by the now government owned and/or controlled PNCC. x x x.[51] (Emphasis supplied)While the PNCC Board passed Board Resolution No. BD-099-2000 amending Board Resolution No. BD-092-2000, such amendment merely added conditions for the recognition of the Marubeni loans, namely, subjecting the recognition to a final determination by COA of the amount involved and to the declaration by OGCC of the legality of PNCC's liability. However, the PNCC Board reiterated and stood firm that it "recognizes, acknowledges and confirms its obligations" for the Marubeni loans. Apparently, Board Resolution No. BD-099-2000 was a futile attempt to "revoke" Board Resolution No. BD-092-2000. Atty. Alfredo Laya, Jr., a former PNCC Director, spoke on his protests against Board Resolution No. BD-092-2000 at the Senate hearings, thus:
MR. LAYA. Mr. Chairman, if I can ...In other words, despite Atty. Laya's objections to PNCC's admitting liability for the Marubeni loans, the PNCC Board still admitted the same and merely imposed additional conditions to temper somehow the devastating effects of Board Resolution No. BD-092-2000.
THE CHAIRMAN. Were you also at the board?
MR. LAYA. At that time, yes, sir.
THE CHAIRMAN. Okay, go ahead.
MR. LAYA. That's why if - maybe this can help clarify the sequence. There was this meeting on October 20. This matter of the Marubeni liability or account was also discussed. Mr. Macasaet, if I may try to refresh. And there was some discussion, sir, and in fact, they were saying even at that stage that there should be a COA or an OGCC audit. Now, that was during the discussion of October 20. Later on, the minutes came out. The practice, then, sir, was for the minutes to come out at the start of the meeting of the subsequent. So the minutes of October 20 came out on November 22 and then we were going over it. And that is in the subsequent minutes of the meeting ...
THE CHAIRMAN. May I interrupt. You were taking up in your November 22 meeting the October 20 minutes?
MR. LAYA. Yes, sir.
THE CHAIRMAN. This minutes that we have?
MR. LAYA. Yes, sir.
THE CHAIRMAN. All right, go ahead.
MR. LAYA. Now, in the November 22 meeting, we noticed this resolution already for confirmation of the board - proceedings of October 20. So immediately we made - actually, protest would be a better term for that - we protested the wording of the resolution and that's why we came up with this resolution amending the October 20 resolution.
SEN. DRILON. So you are saying, Mr. Laya, that the minutes of October 20 did not accurately reflect the decisions that you made on October 20 because you were saying that this recognition should be subject to OGCC and COA? You seem to imply and we want to make it - and I want to get that for the record. You seem to imply that there was no decision to recognize the obligation during that meeting because you wanted it to subject it to COA and OGCC, is that correct?
MR. LAYA. Yes, your Honor.
SEN. DRILON. So how did...
MR. LAYA. That's my understanding of the proceedings at that time, that's why in the subsequent November 22 meeting, we raised this point about obtaining a COA and OGCC opinion.
SEN. DRILON. Yes. But you know, the November 22 meeting repeated the wording of the resolution previously adopted only now you are saying subject to final determination which is completely of different import from what you are saying was your understanding of the decision arrived at on October 20.
MR. LAYA. Yes, sir. Because our thinking then...
SEN. DRILON. What do you mean, yes, sir?
MR. LAYA. It's just a claim under discussion but then the way it is translated, as the minutes of October 20 were not really verbatim.
SEN. DRILON. So, you never intended to recognize the obligation.
MR. LAYA. I think so, sir. That was our - personally, that was my position.
SEN. DRILON. How did it happen, Corporate Secretary Ogan, that the minutes did not reflect what the board ...
THE CHAIRMAN. Ms. Pasetes ...
MS. PASETES. Yes, Mr. Chairman.
THE CHAIRMAN. ... you are the chief financial officer of PNCC.
MS. PASETES. Your Honor, before that November 22 board meeting, management headed by Mr. Rolando Macasaet, myself and Atty. Ogan had a discussion about the recognition of the obligations of 10 billion of Marubeni and 36 billion of the national government on whether to recognize this as an obligation in our books or recognize it as an obligation in the pro forma financial statement to be used for the privatization of PNCC because recognizing both obligations in the books of PNCC would defeat our going concern status and that is where the position of the president then, Mr. Macasaet, stemmed from and he went back to the board and moved to reconsider the position of October 20, 2000, Mr. Chair.[52] (Emphasis supplied)
SEC. 31. Liability of directors, trustees or officers. -- Directors or trustees who willfully and knowingly vote for or assent to patently unlawful acts of the corporation or who are guilty of gross negligence or bad faith in directing the affairs of the corporation or acquire any personal or pecuniary interest in conflict with their duty as such directors or trustees shall be liable jointly and severally for all damages resulting therefrom suffered by the corporation, its stockholders or members and other persons.Soon after the short-lived Estrada Administration, the PNCC Board revoked its previous admission of liability for the Marubeni loans. During the oral arguments, Atty. Sison narrated to the Court:
When a director, trustee or officer attempts to acquire or acquires, in violation of his duty, any interest adverse to the corporation in respect of any matter which has been reposed in him in confidence, as to which equity imposes a disability upon him to deal in his own behalf, he shall be liable as a trustee for the corporation and must account for the profits which otherwise would have accrued to the corporation.
x x x After President Estrada was ousted, I was appointed as President and Chairman of PNCC in April of 2001, this particular board resolution was brought to my attention and I immediately put the matter before the board. I had no problem in convincing them to reverse the recognition as it was illegal and had no basis in fact. The vote to overturn that resolution was unanimous. Strange to say that some who voted to overturn the recognition were part of the old board that approved it. Stranger still, Renato Valdecantos who was still a member of the Board voted in favor of reversing the resolution he himself instigated and pushed. Some of the board members who voted to recognize the obligation of Marubeni even came to me privately and said "pinilit lang kami." x x x.[53] (Emphasis supplied)In approving PNCC Board Resolution Nos. BD-092-2000 and BD-099-2000, the PNCC Board caused undue injury to the Government and gave unwarranted benefits to Radstock, through manifest partiality, evident bad faith or gross inexcusable negligence of the PNCC Board. Such acts are declared under Section 3(e) of RA 3019 or the Anti-Graft and Corrupt Practices Act, as "corrupt practices xxx and xxx unlawful." Being unlawful and criminal acts, these PNCC Board Resolutions are void ab initio and cannot be implemented or in any way given effect by the Executive or Judicial branch of the Government.
x x x While the case was pending in the Court of Appeals, Radstock in a rare display of extreme generosity, conveniently convinced the Board of PNCC to enter into a compromise agreement for ½ the amount of the judgment rendered by the RTC or P6.5 Billion Pesos. This time the OGCC, under the leadership of now Solicitor General Agnes Devanadera, approved the compromise agreement abandoning the previous OGCC position that PNCC had a meritorious case and would be hard press to lose the case. What is strange is that although the compromise agreement we seek to stop ostensibly is for P6.5 Billion only, truth and in fact, the agreement agrees to convey to Radstock all or substantially all of the assets of PNCC worth P18 Billion Pesos. There are three items that are undervalued here, the real estate that was turned over as a result of the controversial agreement, the toll revenues that were being assigned and the value of the new shares of PNCC the difference is about P12 Billion Pesos. x x x (Emphasis supplied)
Under the Compromise Agreement, PNCC shall pay Radstock the reduced amount of P6,185,000,000.00 in full settlement of PNCC's guarantee of CDCP Mining's debt allegedly totaling P17,040,843,968.00 as of 31 July 2006. To satisfy its reduced obligation, PNCC undertakes to (1) "assign to a third party assignee to be designated by Radstock all its rights and interests" to the listed real properties therein; (2) issue to Radstock or its assignee common shares of the capital stock of PNCC issued at par value which shall comprise 20% of the outstanding capital stock of PNCC; and (3) assign to Radstock or its assignee 50% of PNCC's 6% share, for the next 27 years (2008-2035), in the gross toll revenues of the Manila North Tollways Corporation.COMPROMISE AGREEMENT
KNOW ALL MEN BY THESE PRESENTS:
This Agreement made and entered into this 17th day of August 2006, in Mandaluyong City, Metro Manila, Philippines, by and between:
PHILIPPINE NATIONAL CONSTRUCTION CORPORATION, a government acquired asset corporation, created and existing under the laws of the Republic of the Philippines, with principal office address at EDSA corner Reliance Street, Mandaluyong City, Philippines, duly represented herein by its Chairman ARTHUR N. AGUILAR, pursuant to a Board Resolution attached herewith as Annex "A" and made an integral part hereof, hereinafter referred to as PNCC;- and -
RADSTOCK SECURITIES LIMITED, a private corporation incorporated in the British Virgin Islands, with office address at Suite 1402 1 Duddell Street, Central Hongkong duly-represented herein by its Director, CARLOS G. DOMINGUEZ, pursuant to a Board Resolution attached herewith as Annex "B" and made an integral part hereof, hereinafter referred to as RADSTOCK.
WITNESSETH:
WHEREAS, on January 15, 2001, RADSTOCK, as assignee of Marubeni Corporation, filed a complaint for sum of money and damages with application for a writ of preliminary attachment with the Regional Trial Court (RTC), Mandaluyong City, docketed as Civil Case No. MC-01-1398, to collect on PNCC's guarantees on the unpaid loan obligations of CDCP Mining Corporation as provided under an Advance Payment Agreement and Loan Agreement;
WHEREAS, on December 10, 2002, the RTC of Mandaluyong rendered a decision in favor of plaintiff RADSTOCK directing PNCC to pay the total amount of Thirteen Billion One Hundred Fifty One Million Nine Hundred Fifty-Six Thousand Five Hundred Twenty-Eight Pesos (P13,151,956,528.00) with interest from October 15, 2001 plus Ten Million Pesos (P10,000,000.00) as attorney's fees.
WHEREAS, PNCC had elevated the case to the Court of Appeals (CA-G.R. SP No. 66654) on Certiorari and thereafter, to the Supreme Court (G.R. No. 156887) which Courts have consistently ruled that the RTC did not commit grave abuse of discretion when it denied PNCC's Motion to Dismiss which sets forth similar or substantially the same grounds or defenses as those raised in PNCC's Answer;
WHEREAS, the case has remained pending for almost six (6) years even after the main action was appealed to the Court of Appeals;
WHEREAS, on the basis of the RTC Decision dated December 10, 2002, the current value of the judgment debt against PNCC stands at P17,040,843,968.00 as of July 31, 2006 (the "Judgment Debt");
WHEREAS, RADSTOCK is willing to settle the case at the reduced Compromise Amount of Six Billion One Hundred Ninety-Six Million Pesos (P6,196,000,000.00) which may be paid by PNCC, either in cash or in kind to avoid the trouble and inconvenience of further litigation as a gesture of goodwill and cooperation;
WHEREAS, it is an established legal policy or principle that litigants in civil cases should be encouraged to compromise or amicably settle their claims not only to avoid litigation but also to put an end to one already commenced (Articles 2028 and 2029, Civil Code);
WHEREAS, this Compromise Agreement has been approved by the respective Board of Directors of both PNCC and RADSTOCK, subject to the approval of the Honorable Court;
NOW, THEREFORE, for and in consideration of the foregoing premises, and the mutual covenants, stipulations and agreements herein contained, PNCC and RADSTOCK have agreed to amicably settle the above captioned Radstock case under the following terms and conditions:
1. RADSTOCK agrees to receive and accept from PNCC in full and complete settlement of the Judgment Debt, the reduced amount of Six Billion, One Hundred Ninety-Six Million Pesos (P6,196,000,000.00) (the "Compromise Amount").
2. This Compromise Amount shall be paid by PNCC to RADSTOCK in the following manner:
a. PNCC shall assign to a third party assignee to be designated by RADSTOCK all its rights and interests to the following real properties provided the assignee shall be duly qualified to own real properties in the Philippines;
(1) PNCC's rights over that parcel of land located in Pasay City with a total area of One Hundred Twenty-Nine Thousand Five Hundred Forty-Eight (129,548) square meters, more or less, and which is covered by and more particularly described in Transfer Certificate of Title No. T-34997 of the Registry of Deeds for Pasay City. The transfer value is P3,817,779,000.00.
PNCC's rights and interests in Transfer Certificate of Title No. T-34997 of the Registry of Deeds for Pasay City is defined and delineated by Administrative Order No. 397, Series of 1998, and RADSTOCK is fully aware and recognizes that PNCC has an undertaking to cede at least 2 hectares of this property to its creditor, the Philippine National Bank; and that furthermore, the Government Service Insurance System has also a current and existing claim in the nature of boundary conflicts, which undertaking and claim will not result in the diminution of area or value of the property. Radstock recognizes and acknowledges the rights and interests of GSIS over the said property.
(2) T-452587 (T-23646) - Parañaque (5,123 sq. m.) subject to the clarification of the Privatization and Management Office (PMO) claims thereon. The transfer value is P45,000,900.00.
(3) T-49499 (529715 including T-68146-G (S-29716) (1,9747-A)-Parañaque (107 sq. m.) (54 sq. m.) subject to the clarification of the Privatization and Management Office (PMO) claims thereon. The transfer value is P1,409,100.00.
(4) 5-29716-Parañaque (27,762 sq. m.) subject to the clarification of the Privatization and Management Office (PMO) claims thereon. The transfer value is P242,917,500.00.
(5) P-169 - Tagaytay (49,107 sq. m.). The transfer value is P13,749,400.00.
(6) P-170 - Tagaytay (49,100 sq. m.). The transfer value is P13,749,400.00.
(7) N-3320 - Town and Country Estate, Antipolo (10,000 sq. m.). The transfer value is P16,800,000.00.
(8) N-7424 - Antipolo (840 sq. m.). The transfer value is P940,800.00.
(9) N-7425 - Antipolo (850 sq. m.). The transfer value is P952,000.00.
(10) N-7426 - Antipolo (958 sq. m.). The transfer value is P1,073,100.00.
(11) T-485276 - Antipolo (741 sq. m.). The transfer value is P830,200.00.
(12) T-485277 - Antipolo (680 sq. m.). The transfer value is P761,600.00.
(13) T-485278 - Antipolo (701 sq. m.). The transfer value is P785,400.00.
(14) T-131500 - Bulacan (CDCP Farms Corp.) (4,945 sq, m.). The transfer value is P6,475,000.00.
(15) T-131501 - Bulacan (678 sq. m.). The transfer value is P887,600.00.
(16) T-26,154 (M) - Bocaue, Bulacan (2,841 sq. m.). The transfer value is P3,779,300.00.
(17) T-29,308 (M) - Bocaue, Bulacan (733 sq. m.). The transfer value is P974,400.00.
(18) T-29,309 (M) Bocaue, Bulacan (1,141 sq. m.). The transfer value is P1,517,600.00.
(19) T-260578 (R. Bengzon) Sta. Rita, Guiguinto, Bulacan (20,000 sq. m.). The transfer value is P25,200,000.00.
The transfer values of the foregoing properties are based on 70% of the appraised value of the respective properties.
b. PNCC shall issue to RADSTOCK or its assignee common shares of the capital stock of PNCC issued at par value which shall comprise 20% of the outstanding capital stock of PNCC after the conversion to equity of the debt exposure of the Privatization Management Office (PMO) and the National Development Company (NDC) and other government agencies and creditors such that the total government holdings shall not fall below 70% voting equity subject to the approval of the Securities and Exchange Commission (SEC) and ratification of PNCC's stockholders, if necessary. The assigned value of the shares issued to RADSTOCK is P713 Million based on the approximate last trading price of PNCC shares in the Philippine Stock Exchange as the date of this agreement, based further on current generally accepted accounting standards which stipulates the valuation of shares to be based on the lower of cost or market value.
Subject to the procurement of any and all necessary approvals from the relevant governmental authorities, PNCC shall deliver to RADSTOCK an instrument evidencing an undertaking of the Privatization and Management Office (PMO) to give RADSTOCK or its assignee the right to match any offer to buy the shares of the capital stock and debts of PNCC held by PMO, in the event the same shares and debt are offered for privatization.
c. PNCC shall assign to RADSTOCK or its assignee 50% of the PNCC's 6% share in the gross toll revenue of the Manila North Tollways Corporation (MNTC), with a Net Present Value of P1.287 Billion computed in the manner outlined in Annex "C" herein attached as an integral part hereof, that shall be due and owing to PNCC pursuant to the Joint Venture Agreement between PNCC and First Philippine Infrastructure Development Corp. dated August 29, 1995 and other related existing agreements, commencing in 2008. It shall be understood that as a result of this assignment, PNCC shall charge and withhold the amounts, if any, pertaining to taxes due on the amounts assigned.
SECTION 36. Power to Compromise Claims. -- (1) When the interest of the government so requires, the Commission may compromise or release in whole or in part, any claim or settled liability to any government agency not exceeding ten thousand pesos and with the written approval of the Prime Minister, it may likewise compromise or release any similar claim or liability not exceeding one hundred thousand pesos, the application for relief therefrom shall be submitted, through the Commission and the Prime Minister, with their recommendations, to the National Assembly.The Dissenting Opinion asserts that since PNCC is incorporated under the Corporation Code, the PNCC Board has all the powers granted to the governing boards of corporations incorporated under the Corporation Code, which includes the power to compromise claims or liabilities.
(2) The respective governing bodies of government-owned or controlled corporations, and self-governing boards, commissions or agencies of the government shall have the exclusive power to compromise or release any similar claim or liability when expressly authorized by their charters and if in their judgment, the interest of their respective corporations or agencies so requires. When the charters do not so provide, the power to compromise shall be exercised by the Commission in accordance with the preceding paragraph. (Emphasis supplied)
Section 20. Power to Compromise Claims. - (1) When the interest of the Government so requires, the Commission may compromise or release in whole or in part, any settled claim or liability to any government agency not exceeding ten thousand pesos arising out of any matter or case before it or within its jurisdiction, and with the written approval of the President, it may likewise compromise or release any similar claim or liability not exceeding one hundred thousand pesos. In case the claim or liability exceeds one hundred thousand pesos, the application for relief therefrom shall be submitted, through the Commission and the President, with their recommendations, to the Congress[.] x x x (Emphasis supplied)Under this provision,[54] the authority to compromise a settled claim or liability exceeding P100,000.00 involving a government agency, as in this case where the liability amounts to P6.185 billion, is vested not in COA but exclusively in Congress. Congress alone has the power to compromise the P6.185 billion purported liability of PNCC. Without congressional approval, the Compromise Agreement between PNCC and Radstock involving P6.185 billion is void for being contrary to Section 20(1), Chapter IV, Subtitle B, Title I, Book V of the Administrative Code of 1987.
Agency of the Government refers to any of the various units of the Government, including a department, bureau, office, instrumentality, or government-owned or controlled corporation, or a local government or a distinct unit therein. (Boldfacing supplied)Thus, Section 20(1), Chapter IV, Subtitle B, Title I, Book V of the Administrative Code of 1987 applies to PNCC, which indisputably is a government owned or controlled corporation.
Not being a government corporation created by special law, PNCC does not owe its creation to some charter or special law, but to the Corporation Code. Its powers are enumerated in the Corporation Code and its articles of incorporation. As an autonomous entity, it undoubtedly has the power to compromise, and to enter into a settlement through its Board of Directors, just like any other private corporation organized under the Corporation Code. To maintain otherwise is to ignore the character of PNCC as a corporate entity organized under the Corporation Code, by which it was vested with a personality and identity distinct and separate from those of its stockholders or members. (Boldfacing and underlining supplied)The Dissenting Opinion is woefully wide off the mark. The PNCC is not "just like any other private corporation" precisely because it is not a private corporation but indisputably a government owned corporation. Neither is PNCC "an autonomous entity" considering that PNCC is under the Department of Trade and Industry, over which the President exercises control. To claim that PNCC is an "autonomous entity" is to say that it is a lost command in the Executive branch, a concept that violates the President's constitutional power of control over the entire Executive branch of government.[56]
SECTION 2. (1) The Commission on Audit shall have the power, authority, and duty to examine, audit, and settle all accounts pertaining to the revenue and receipts of, and expenditures or uses of funds and property, owned or held in trust by, or pertaining to, the Government, or any of its subdivisions, agencies, or instrumentalities, including government-owned or controlled corporations with original charters, and on a post-audit basis: (a) constitutional bodies, commissions and offices that have been granted fiscal autonomy under this Constitution; (b) autonomous state colleges and universities; (c) other government-owned or controlled corporations and their subsidiaries; and (d) such non-governmental entities receiving subsidy or equity, directly or indirectly, from or through the Government, which are required by law or the granting institution to submit to such audit as a condition of subsidy or equity. However, where the internal control system of the audited agencies is inadequate, the Commission may adopt such measures, including temporary or special pre-audit, as are necessary and appropriate to correct the deficiencies. It shall keep the general accounts of the Government and, for such period as may be provided by law, preserve the vouchers and other supporting papers pertaining thereto.In explaining the extent of the jurisdiction of COA over government owned or controlled corporations, this Court declared in Feliciano v. Commission on Audit:[58]
(2) The Commission shall have exclusive authority, subject to the limitations in this Article, to define the scope of its audit and examination, establish the techniques and methods required therefor, and promulgate accounting and auditing rules and regulations, including those for the prevention and disallowance of irregular, unnecessary, excessive, extravagant, or unconscionable expenditures, or uses of government funds and properties. (Emphasis supplied)
The COA's audit jurisdiction extends not only to government "agencies or instrumentalities," but also to "government-owned and controlled corporations with original charters" as well as "other government-owned or controlled corporations" without original charters.Clearly, the COA's audit jurisdiction extends to government owned or controlled corporations incorporated under the Corporation Code. Thus, the COA must apply the Government Auditing Code in the audit and examination of the accounts of such government owned or controlled corporations even though incorporated under the Corporation Code. This means that Section 20(1), Chapter IV, Subtitle B, Title I, Book V of the Administrative Code of 1987 on the power to compromise, which superseded Section 36 of the Government Auditing Code, applies to the present case in determining PNCC's power to compromise. In fact, the COA has been regularly auditing PNCC on a post-audit basis in accordance with Section 2, Article IX-D of the Constitution, the Government Auditing Code, and COA rules and regulations.
x x x x
Petitioner forgets that the constitutional criterion on the exercise of COA's audit jurisdiction depends on the government's ownership or control of a corporation. The nature of the corporation, whether it is private, quasi-public, or public is immaterial.
The Constitution vests in the COA audit jurisdiction over "government-owned and controlled corporations with original charters," as well as "government-owned or controlled corporations" without original charters. GOCCs with original charters are subject to COA pre-audit, while GOCCs without original charters are subject to COA post-audit. GOCCs without original charters refer to corporations created under the Corporation Code but are owned or controlled by the government. The nature or purpose of the corporation is not material in determining COA's audit jurisdiction. Neither is the manner of creation of a corporation, whether under a general or special law.
Section 1. Any provision of law to the contrary notwithstanding, there is hereby granted to the Construction and Development Corporation of the Philippines (CDCP), a corporation duly organized and registered under the laws of the Philippines, hereinafter called the GRANTEE, for a period of thirty (30) years from May 1, 1977 the right, privilege and authority to construct, operate and maintain toll facilities covering the expressways from Balintawak (Station 9 + 563) to Carmen, Rosales, Pangasinan and from Nichols, Pasay City (Station 10 + 540) to Lucena, Quezon, hereinafter referred to collectively as North Luzon Expressway, respectively.Section 2 of PD 1894,[60] which amended PD 1113 to include in PNCC's franchise the Metro Manila expressway, also provides:
The franchise herein granted shall include the right to collect toll fees at such rates as may be fixed and/or authorized by the Toll Regulatory Board hereinafter referred to as the Board created under Presidential Decree No. 1112 for the use of the expressways above-mentioned. (Emphasis supplied)
Section 2. The term of the franchise provided under Presidential Decree No. 1113 for the North Luzon Expressway and the South Luzon Expressway which is thirty (30) years from 1 May 1977 shall remain the same; provided that, the franchise granted for the Metro Manila Expressway and all extensions linkages, stretches and diversions that may be constructed after the date of approval of this decree shall likewise have a term of thirty (30) years commencing from the date of completion of the project. (Emphasis supplied)Based on these provisions, the franchise of the PNCC expired on 1 May 2007 or thirty years from 1 May 1977.
Section 2 [of PD 1113]. In consideration of this franchise, the GRANTEE shall:The TRB does not have the power to give back to PNCC the toll assets and facilities which were automatically turned over to the Government, by operation of law, upon the expiration of the franchise of the PNCC on 1 May 2007. Whatever power the TRB may have to grant authority to operate a toll facility or to issue a "Tollway Operation Certificate," such power does not obviously include the authority to transfer back to PNCC ownership of National Government assets, like the toll assets and facilities, which have become National Government property upon the expiry of PNCC's franchise. Such act by the TRB would repeal Section 5 of PD 1894 which automatically vested in the National Government ownership of PNCC's toll assets and facilities upon the expiry of PNCC's franchise. The TRB obviously has no power to repeal a law. Further, PD 1113, as amended by PD 1894, granting the franchise to PNCC, is a later law that must necessarily prevail over PD 1112 creating the TRB. Hence, the provisions of PD 1113, as amended by PD 1894, are controlling.
(e) Turn over the toll facilities and all equipment directly related thereto to the government upon expiration of the franchise period without cost.
Section 9 [of PD 1113]. For the purposes of this franchise, the Government, shall turn over to the GRANTEE (PNCC) not later than April 30, 1977 all physical assets and facilities including all equipment and appurtenances directly related to the operations of the North and South Toll Expressways: Provided, That, the extensions of such Expressways shall also be turned over to GRANTEE upon completion of their construction or of functional sections thereof: Provided, However, That upon termination of the franchise period, said physical assets and facilities including improvements thereon, together with equipment and appurtenances directly related to their operations, shall be turned over to the Government without any cost or obligation on the part of the latter. (Emphasis supplied)
Section 5 [of PD No. 1894]. In consideration of this franchise, the GRANTEE shall:
(a) Construct, operate and maintain at its own expense the Expressways; and
(b) Turn over, without cost, the toll facilities and all equipment, directly related thereto to the Government upon expiration of the franchise period. (Emphasis supplied)
ASSOCIATE JUSTICE CARPIO:Forming part of the General Fund, the toll fees can only be disposed of in accordance with the fundamental principles governing financial transactions and operations of any government agency, to wit: (1) no money shall be paid out of the Treasury except in pursuance of an appropriation made by law, as expressly mandated by Section 29(1), Article VI of the Constitution; and (2) government funds or property shall be spent or used solely for public purposes, as expressly mandated by Section 4(2) of PD 1445 or the Government Auditing Code.[65]
Okay. Now, when the franchise of PNCC expired on May 7, 2007, under the terms of the franchise under PD 1896, all the assets, toll way assets, equipment, etcetera of PNCC became owned by government at no cost, correct, under the franchise?
DEAN AGABIN:
Yes, Your Honor.
ASSOCIATE JUSTICE CARPIO:
Okay. So this is now owned by the national government. [A]ny income from these assets of the national government is national government income, correct?
DEAN AGABIN:
Yes, Your Honor.[62]
x x x x
ASSOCIATE JUSTICE CARPIO:
x x x My question is very simple x x x Is the income from these assets of the national government (interrupted)
DEAN AGABIN:
Yes, Your Honor.[63]
x x x x
ASSOCIATE JUSTICE CARPIO:
So, it's the government [that] decides whether it goes to the general fund or another fund. [W]hat is that other fund? Is there another fund where revenues of the government go?
DEAN AGABIN:
It's the same fund, Your Honor, except that (interrupted)
ASSOCIATE JUSTICE CARPIO:
So it goes to the general fund?
DEAN AGABIN:
Except that it can be categorized as a private fund in a commercial sense, and it can be categorized as a public fund in a Public Law sense.
ASSOCIATE JUSTICE CARPIO:
Okay. So we agree that, okay, it goes to the general fund. I agree with you, but you are saying it is categorized still as a private funds?
DEAN AGABIN:
Yes, Your Honor.
ASSOCIATE JUSTICE CARPIO:
But it's part of the general fund. Now, if it is part of the general fund, who has the authority to spend that money?
DEAN AGABIN:
Well, the National Government itself.
ASSOCIATE JUSTICE CARPIO:
Who in the National Government, the Executive, Judiciary or Legislative?
DEAN AGABIN:
Well, the funds are usually appropriated by the Congress.
ASSOCIATE JUSTICE CARPIO:
x x x you mean to say there are exceptions that money from the general fund can be spent by the Executive without going t[hrough] Congress, or xxx is [that] the absolute rule?
DEAN AGABIN:
Well, in so far as the general fund is concerned, that is the absolute rule set aside by the National Government.
ASSOCIATE JUSTICE CARPIO:
x x x you are saying this is general fund money - the collection from the assets[?]
DEAN AGABIN:
Yes.[64] (Emphasis supplied)
Section 29(1). No money shall be paid out of the Treasury except in pursuance of an appropriation made by law.The power to appropriate money from the General Funds of the Government belongs exclusively to the Legislature. Any act in violation of this iron-clad rule is unconstitutional.
Section 84. Disbursement of government funds.Section 86 of PD 1445, on the other hand, requires that the proper accounting official must certify that funds have been appropriated for the purpose.[66] Section 87 of PD 1445 provides that any contract entered into contrary to the requirements of Sections 85 and 86 shall be void, thus:
1. Revenue funds shall not be paid out of any public treasury or depository except in pursuance of an appropriation law or other specific statutory authority.
x x x x
Section 85. Appropriation before entering into contract.
1. No contract involving the expenditure of public funds shall be entered into unless there is an appropriation therefor, the unexpended balance of which, free of other obligations, is sufficient to cover the proposed expenditure.
x x x x
Section 87. Void contract and liability of officer. Any contract entered into contrary to the requirements of the two immediately preceding sections shall be void, and the officer or officers entering into the contract shall be liable to the government or other contracting party for any consequent damage to the same extent as if the transaction had been wholly between private parties. (Emphasis supplied)Applying Section 29(1), Article VI of the Constitution, as implanted in Sections 84 and 85 of the Government Auditing Code, a law must first be enacted by Congress appropriating P6.185 billion as compromise money before payment to Radstock can be made.[67] Otherwise, such payment violates a prohibitory law and thus void under Article 5 of the Civil Code which states that "[a]cts executed against the provisions of mandatory or prohibitory laws shall be void, except when the law itself authorizes their validity."
Petitioners are justified in refusing to formalize the contract with PHOTOKINA. Prudence dictated them not to enter into a contract not backed up by sufficient appropriation and available funds. Definitely, to act otherwise would be a futile exercise for the contract would inevitably suffer the vice of nullity. In Osmeña vs. Commission on Audit, this Court held:Significantly, Radstock's counsel admits that an appropriation law is needed before PNCC can use toll fees to pay Radstock, thus:
The Auditing Code of the Philippines (P.D. 1445) further provides that no contract involving the expenditure of public funds shall be entered into unless there is an appropriation therefor and the proper accounting official of the agency concerned shall have certified to the officer entering into the obligation that funds have been duly appropriated for the purpose and the amount necessary to cover the proposed contract for the current fiscal year is available for expenditure on account thereof. Any contract entered into contrary to the foregoing requirements shall be VOID.
Clearly then, the contract entered into by the former Mayor Duterte was void from the very beginning since the agreed cost for the project (P,368,920.00) was way beyond the appropriated amount (P,419,180.00) as certified by the City Treasurer. Hence, the contract was properly declared void and unenforceable in COA's 2nd Indorsement, dated September 4, 1986. The COA declared and we agree, that:
The prohibition contained in Sec. 85 of PD 1445 (Government Auditing Code) is explicit and mandatory. Fund availability is, as it has always been, an indispensable prerequisite to the execution of any government contract involving the expenditure of public funds by all government agencies at all levels. Such contracts are not to be considered as final or binding unless such a certification as to funds availability is issued (Letter of Instruction No. 767, s. 1978). Antecedent of advance appropriation is thus essential to government liability on contracts (Zobel vs. City of Manila, 47 Phil. 169). This contract being violative of the legal requirements aforequoted, the same contravenes Sec. 85 of PD 1445 and is null and void by virtue of Sec. 87.
Verily, the contract, as expressly declared by law, is inexistent and void ab initio. This is to say that the proposed contract is without force and effect from the very beginning or from its incipiency, as if it had never been entered into, and hence, cannot be validated either by lapse of time or ratification. (Emphasis supplied)
ASSOCIATE JUSTICE CARPIO:Without an appropriation law, the use of the toll fees to pay Radstock would constitute malversation of public funds. Even counsel for Radstock expressly admits that the use of the toll fees to pay Radstock constitutes malversation of public funds, thus:
Okay, I agree with you. Now, you are saying that money can be paid out of the general fund only through an appropriation by Congress, correct? That's what you are saying.
DEAN AGABIN:
Yes, Your Honor.
ASSOCIATE JUSTICE CARPIO:
I agree with you also. Okay, now, can PNCC xxx use this money to pay Radstock without Congressional approval?
DEAN AGABIN:
Well, I believe that that may not be necessary. Your Honor, because earlier, the government had already decreed that PNCC should be properly paid for the reclamation works which it had done. And so (interrupted)
ASSOCIATE JUSTICE CARPIO:
No. I am talking of the funds.
DEAN AGABIN:
And so it is like a foreign obligation.
ASSOCIATE JUSTICE CARPIO:
Counsel, I'm talking of the general funds, collection from the toll fees. Okay. You said, they go to the general fund. You also said, money from the general fund can be spent only if there is an appropriation law by Congress.
DEAN AGABIN:
Yes, Your Honor.
There is no law.
DEAN AGABIN:
Yes, except that, Your Honor, this fund has not yet gone to the general fund.
ASSOCIATE JUSTICE CARPIO:
No. It's being collected everyday. As of May 7, 2007, national government owned those assets already. All those x x x collections that would have gone to PNCC are now national government owned. It goes to the general fund. And any body who uses that without appropriation from Congress commits malversation, I tell you.
DEAN AGABIN:
That is correct, Your Honor, as long as it has already gone into the general fund.
ASSOCIATE JUSTICE CARPIO:
Oh, you mean to say that it's still being held now by the agent, PNCC. It has not been remitted to the National Government?
DEAN AGABIN:
Well, if PNCC (interrupted)
ASSOCIATE JUSTICE CARPIO:
But if (interrupted)
DEAN AGABIN:
If this is the share that properly belongs to PNCC as a private entity (interrupted)
ASSOCIATE JUSTICE CARPIO:
No, no. I am saying that - You just agreed that all those collections now will go to the National Government forming part of the general fund. If, somehow, PNCC is holding this money in the meantime, it holds xxx it in trust, correct? Because you said, it goes to the general fund, National Government. So it must be holding this in trust for the National Government.
DEAN AGABIN:
Yes, Your Honor.
ASSOCIATE JUSTICE CARPIO:
Okay. Can the person holding in trust use it to pay his private debt?
DEAN AGABIN:
No, Your Honor.
ASSOCIATE JUSTICE CARPIO:
Cannot be.
DEAN AGABIN:
But I assume that there must be some portion of the collections which properly pertain to PNCC.
ASSOCIATE JUSTICE CARPIO:
If there is some portion that xxx may be [for] operating expenses of PNCC. But that is not
DEAN AGABIN:
Even profit, Your Honor.
ASSOCIATE JUSTICE CARPIO:
Yeah, but that is not the six percent. Out of the six percent, that goes now to PNCC, that's entirely national government. But the National Government and the PNCC can agree on service fees for collecting, to pay toll collectors.
DEAN AGABIN:
Yes, Your Honor.
ASSOCIATE JUSTICE CARPIO:
But those are expenses. We are talking of the net income. It goes to the general fund. And it's only Congress that can authorize that expenditure. Not even the Court of Appeals can give its stamp of approval that it goes to Radstock, correct?
DEAN AGABIN:
Yes, Your Honor.[69] (Emphasis supplied)
ASSOCIATE JUSTICE CARPIO:Indisputably, funds held in trust by PNCC for the National Government cannot be used by PNCC to pay a private debt of CDCP Mining to Radstock, otherwise the PNCC Board will be liable for malversation of public funds.
x x x As of May 7, 2007, [the] national government owned those assets already. All those x x x collections that would have gone to PNCC are now national government owned. It goes to the general fund. And any body who uses that without appropriation from Congress commits malversation, I tell you.
DEAN AGABIN:
That is correct, Your Honor, as long as it has already gone into the general fund.
ASSOCIATE JUSTICE CARPIO:
Oh, you mean to say that it's still being held now by the agent, PNCC. It has not been remitted to the National Government?
DEAN AGABIN:
Well, if PNCC (interrupted)
ASSOCIATE JUSTICE CARPIO:
But if (interrupted)
DEAN AGABIN:
If this is the share that properly belongs to PNCC as a private entity (interrupted)
ASSOCIATE JUSTICE CARPIO:
No, no. I am saying that - You just agreed that all those collections now will go to the National Government forming part of the general fund. If, somehow, PNCC is holding this money in the meantime, it holds x x x it in trust, correct? Because you said, it goes to the general fund, National Government. So it must be holding this in trust for the National Government.
DEAN AGABIN:
Yes, Your Honor.[70] (Emphasis supplied)
Section 4. Fundamental Principles. x x x (2) Government funds or property shall be spent or used solely for public purposes. (Emphasis supplied)There is no question that the subject of the Compromise Agreement is CDCP Mining's private debt to Marubeni, which Marubeni subsequently assigned to Radstock. Counsel for Radstock admits that Radstock holds a private debt of CDCP Mining, thus:
ASSOCIATE JUSTICE CARPIO:CDCP Mining obtained the Marubeni loans when CDCP Mining and PNCC (then CDCP) were still privately owned and managed corporations. The Government became the majority stockholder of PNCC only because government financial institutions converted their loans to PNCC into equity when PNCC failed to pay the loans. However, CDCP Mining have always remained a majority privately owned corporation with PNCC owning only 13% of its equity as admitted by former PNCC Chairman Arthur N. Aguilar and PNCC SVP Finance Miriam M. Pasetes during the Senate hearings, thus:
So your client is holding a private debt of CDCP Mining, correct?
DEAN AGABIN:
Correct, Your Honor.[72] (Emphasis supplied)
SEN. OSMEÑA. x x x - I just wanted to know is CDCP Mining a 100 percent subsidiary of PNCC?PNCC cannot use public funds, like toll fees that indisputably form part of the General Fund, to pay a private debt of CDCP Mining to Radstock. Such payment cannot qualify as expenditure for a public purpose. The toll fees are merely held in trust by PNCC for the National Government, which is the owner of the toll fees.
MR. AGUILAR. Hindi ho. Ah, no.
SEN. OSMEÑA. If they're not a 100 percent, why would they sign jointly and severally? I just want to plug the loopholes.
MR. AGUILAR. I think it was - if I may just speculate. It was just common ownership at that time.
SEN. OSMEÑA. Al right. Now - Also, the ...
MR. AGUILAR. Ah, 13 percent daw, your Honor.
SEN. OSMEÑA. Huh?
MR. AGUILAR. Thirteen percent ho.
SEN. OSMEÑA. What's 13 percent?
MR. AGUILAR. We owned ...
MS. PASETES. Thirteen percent of ...
SEN. OSMEÑA. PNCC owned ...
MS. PASETES. (Mike off) CDCP ...
SEN. DRILON. Use the microphone, please.
MS. PASETES. Sorry. Your Honor, the ownership of CDCP of CDCP Basay Mining ...
SEN. OSMEÑA. No, no, the ownership of CDCP. CDCP Mining, how many percent of the equity of CDCP Mining was owned by PNCC, formerly CDCP?
MS. PASETES. Thirteen percent.
SEN. OSMEÑA. Thirteen. And as a 13 percent owner, they agreed to sign jointly and severally?
MS. PASETES. Yes.
SEN. OSMEÑA. One-three?
So poor PNCC and CDCP got taken to the cleaners here. They sign for a 100 percent and they only own 13 percent.
x x x x[73] (Emphasis supplied)
Section. 3. Lands of the public domain are classified into agricultural, forest or timber, mineral lands, and national parks. Agricultural lands of the public domain may be further classified by law according to the uses to which they may be devoted. Alienable lands of the public domain shall be limited to agricultural lands. Private corporations or associations may not hold such lands of the public domain except by lease, for a period not exceeding twenty-five years, renewable for not more than twenty-five years, and not to exceed one hundred thousand hectares in area. Citizens of the Philippines may lease not more than five hundred hectares, or acquire not more than twelve hectares thereof by purchase, homestead, or grant.The OGCC admits that Radstock cannot own lands in the Philippines. However, the OGCC claims that Radstock can own the rights to ownership of lands in the Philippines, thus:
Taking into account the requirements of conservation, ecology, and development, and subject to the requirements of agrarian reform, the Congress shall determine, by law, the size of lands of the public domain which may be acquired, developed, held, or leased and the conditions therefor.
x x x x
Section 7. Save in cases of hereditary succession, no private lands shall be transferred or conveyed except to individuals, corporations, or associations qualified to acquire or hold lands of the public domain.
ASSOCIATE JUSTICE CARPIO:There is no dispute that Radstock is disqualified to own lands in the Philippines. Consequently, Radstock is also disqualified to own the rights to ownership of lands in the Philippines. Contrary to the OGCC's claim, Radstock cannot own the rights to ownership of any land in the Philippines because Radstock cannot lawfully own the land itself. Otherwise, there will be a blatant circumvention of the Constitution, which prohibits a foreign private corporation from owning land in the Philippines. In addition, Radstock cannot transfer the rights to ownership of land in the Philippines if it cannot own the land itself. It is basic that an assignor or seller cannot assign or sell something he does not own at the time the ownership, or the rights to the ownership, are to be transferred to the assignee or buyer.[75]
Under the law, a foreigner cannot own land, correct?
ATTY. AGRA:
Yes, Your Honor.
ASSOCIATE JUSTICE CARPIO:
Can a foreigner who xxx cannot own land assign the right of ownership to the land?
ATTY. AGRA:
Again, Your Honor, at that particular time, it will be PNCC, not through Radstock, that chain of events should be, there's a qualified nominee (interrupted)
ASSOCIATE JUSTICE CARPIO:
Yes, xxx you said, Radstock will assign the right of ownership to the qualified assignee[.] So my question is, can a foreigner own the right to ownership of a land when it cannot own the land itself?
ATTY. AGRA:
The foreigner cannot own the land, Your Honor.
ASSOCIATE JUSTICE CARPIO:
But you are saying it can own the right of ownership to the land, because you are saying, the right of ownership will be assigned by Radstock.
ATTY. AGRA:
The rights over the properties, Your Honors, if there's a valid assignment made to a qualified party, then the assignment will be made.
ASSOCIATE JUSTICE CARPIO:
Who makes the assignment?
ATTY. AGRA:
It will be Radstock, Your Honor.
ASSOCIATE JUSTICE CARPIO:
So, if Radstock makes the assignment, it must own its rights, otherwise, it cannot assign it, correct?
ATTY. AGRA:
Pursuant to the compromise agreement, once approved, yes, Your Honors.
ASSOCIATE JUSTICE CARPIO:
So, you are saying that Radstock can own the rights to ownership of the land?
ATTY. AGRA:
Yes, Your Honors.
ASSOCIATE JUSTICE CARPIO:
Yes?
ATTY. AGRA:
The premise, Your Honor, you mentioned a while ago was, if this Court approves said compromise (interrupted)
ASSOCIATE JUSTICE CARPIO:
No, no. Whether there is such a compromise agreement - - It's an academic question I am asking you, can a foreigner assign rights to ownership of a land in the Philippines?
ATTY. AGRA:
Under the Compromise Agreement, Your Honors, these rights should be respected.
ASSOCIATE JUSTICE CARPIO:
So, it can?
ATTY. AGRA:
It can. Your Honor. But again, this right must, cannot be perfected or cannot be, could not take effect.
ASSOCIATE JUSTICE CARPIO:
But if it cannot - - It's not perfected, how can it assign?
ATTY. AGRA:
Not directly, Your Honors. Again, there must be a qualified nominee assigned by Radstock.
ASSOCIATE JUSTICE CARPIO:
It's very clear, it's an indirect way of selling property that is prohibited by law, is it not?
ATTY. AGRA:
Again, Your Honor, know, believe this is a Compromise Agreement. This is a dacion en pago.
ASSOCIATE JUSTICE CARPIO:
So, dacion en pago is an exception to the constitutional prohibition.
ATTY. AGRA:
No, Your Honor. PNCC, will still hold on to the property, absent a valid assignment of properties.
ASSOCIATE JUSTICE CARPIO:
But what rights will PNCC have over that land when it has already signed the compromise? It is just waiting for instruction xxx from Radstock what to do with it? So, it's a trustee of somebody, because it does not, it cannot, [it] has no dominion over it anymore? It's just holding it for Radstock. So, PNCC becomes a dummy, at that point, of Radstock, correct?
ATTY. AGRA:
No, Your Honor, I believe it (interrupted)
ASSOCIATE JUSTICE CARPIO:
Yeah, but it does not own the land, but it still holding the land in favor of the other party to the Compromise Agreement
ATTY. AGRA:
Pursuant to the compromise agreement, that will happen.
ASSOCIATE JUSTICE CARPIO:
Okay. May I (interrupted)
ATTY. AGRA:
Again, Your Honor, if the compromise agreement ended with a statement that Radstock will be the owner of the property (interrupted)
ASSOCIATE JUSTICE CARPIO:
Yeah. Unfortunately, it says, to a qualified assignee.
ATTY. AGRA:
Yes, Your Honor.
ASSOCIATE JUSTICE CARPIO:
And at this point, when it is signed and execut[ed] and approved, PNCC has no dominion over that land anymore. Who has dominion over it?
ATTY. AGRA:
Pending the assignment to a qualified party, Your Honor, PNCC will hold on to the property.
ASSOCIATE JUSTICE CARPIO:
Hold on, but who x x x can exercise acts of dominion, to sell it, to lease it?
ATTY. AGRA:
Again, Your Honor, without the valid assignment to a qualified nominee, the compromise agreement in so far as the transfer of these properties will not become effective. It is subject to such condition. Your Honor.[74] (Emphasis supplied)
V. MODE OF DISPOSAL/DIVESTMENT: -Under the Compromise Agreement, PNCC shall dispose of substantial parcels of land, by way of dacion en pago, in favor of Radstock. Citing Uy v. Sandiganbayan,[79] PNCC argues that a dacion en pago is an exception to the requirement of a public bidding.
This Commission recognizes the following modes of disposal/divestment of assets and property of national government agencies, local government units and government-owned or controlled corporations and their subsidiaries, aside from other such modes as may be provided for by law.
1. Public Auction
Conformably to existing state policy, the divestment or disposal of government property as contemplated herein shall be undertaken primarily thru public auction. Such mode of divestment or disposal shall observe and adhere to established mechanics and procedures in public bidding, viz:
a. adequate publicity and notification so as to attract the greatest number of interested parties; (vide, Sec. 79, P.D. 1445)
b. sufficient time frame between publication and date of auction;
c. opportunity afforded to interested parties to inspect the property or assets to be disposed of;
d. confidentiality of sealed proposals;
e. bond and other prequalification requirements to guarantee performance; and
f. fair evaluation of tenders and proper notification of award.
It is understood that the Government reserves the right to reject any or all of the tenders. (Emphasis supplied)
We do not see any infirmity in either the MOA or the SSA executed between PIEDRAS and respondent banks. By virtue of its shareholdings in OPMC, PIEDRAS was entitled to subscribe to 3,749,906,250 class "A" and 2,499,937,500 class "B" OPMC shares. Admittedly, it was financially sound for PIEDRAS to exercise its pre-emptive rights as an existing shareholder of OPMC lest its proportionate shareholdings be diluted to its detriment. However, PIEDRAS lacked the necessary funds to pay for the additional subscription. Thus, it resorted to contract loans from respondent banks to finance the payment of its additional subscription. The mode of payment agreed upon by the parties was that the payment would be made in the form of part of the shares subscribed to by PIEDRAS. The OPMC shares therefore were agreed upon by the parties to be equivalent payment for the amount advanced by respondent banks. We see the wisdom in the conditions of the loan transaction. In order to save PIEDRAS and/or the government from the trouble of selling the shares in order to raise funds to pay off the loans, an easier and more direct way was devised in the form of the dacion en pago agreements.Suffice it to state that in Uy, neither PIEDRAS[81] nor the government suffered any loss in the dacion en pago transactions, unlike here where the government stands to lose at least P6.185 billion worth of assets.
Moreover, we agree with the Sandiganbayan that neither PIEDRAS nor the government sustained any loss in these transactions. In fact, after deducting the shares to be given to respondent banks as payment for the shares, PIEDRAS stood to gain about 1,540,781,554 class "A" and 710,550,000 class "B" OPMC shares virtually for free. Indeed, the question that must be asked is whether or not PIEDRAS, in the exercise of its pre-emptive rights, would have been able to acquire any of these shares at all if it did not enter into the financing agreements with the respondent banks.[80]
Dacion en pago, according to Manresa, is the transmission of the ownership of a thing by the debtor to the creditor as an accepted equivalent of the performance of obligation. Indacion en pago, as a special mode of payment, the debtor offers another thing to the creditor who accepts it as equivalent of payment of an outstanding debt. The undertaking really partakes in one sense of the nature of sale, that is, the creditor is really buying the thing or property of the debtor, payment for which is to be charged against the debtor's debt.As such, the essential elements of a contract of sale, namely, consent, object certain, and cause or consideration must be present. In its modern concept, what actually takes place indacion en pagois an objective novation of the obligation where the thing offered as an accepted equivalent of the performance of an obligation is considered as the object of the contract of sale, while the debt is considered as the purchase price. In any case, common consent is an essential prerequisite, be it sale or innovation to have the effect of totally extinguishing the debt or obligation.[83] (Emphasis supplied)E. PNCC must follow rules on preference of credit.
SEN. OSMEÑA. All right. Now, second question is, the management of PNCC also recognize the obligation to the national government of 36 billion. It is part of the board resolution.In giving priority and preference to Radstock, the Compromise Agreement is certainly in fraud of PNCC's other creditors, including the National Government, and violates the provisions of the Civil Code on concurrence and preference of credits.
MS. OGAN. Yes, sir, it is part of the October 20 board resolution.
SEN. OSMEÑA. All right. So if you owe the national government 36 billion and you owe Marubeni 10 billion, you know, I would just declare bankruptcy and let an orderly disposition of assets be done. What happened in this case to the claim, the 36 billion claim of the national government? How was that disposed of by the PNCC? Mas malaki ang utang ninyo sa national government, 36 billion. Ang gagawin ninyo, babayaran lahat ang utang ninyo sa Marubeni without any assets left to satisfy your obligations to the national government. There should have been, at least, a pari passu payment of all your obligations, 'di ba?
MS. PASETES. Mr. Chairman...
SEN. OSMEÑA. Yes.
MS. PASETES. PNCC still carries in its books an equity account called equity adjustments arising from transfer of obligations to national government - - 5.4 billion - - in addition to shares held by government amounting to 1.2 billion.
SEN. OSMEÑA. What is the 36 billion?
THE CHAIRMAN. Ms. Pasetes...
SEN. OSMEÑA. Wait, wait, wait.
THE CHAIRMAN. Baka ampaw yun eh.
SEN. OSMEÑA. Teka muna. What is the 36 billion that appear in the resolution of the board in September 2000 (sic)? This is the same resolution that recognizes, acknowledges and confirms PNCC's obligations to Marubeni. And subparagraph (a) says "Government of the Philippines, in the amount of 36,023,784,000 and change. And then (b) Marubeni Corporation in the amount of 10,743,000,000. So, therefore, in the same resolution, you acknowledged that had something like P46.7 billion in obligations. Why did PNCC settle the 10 billion and did not protect the national government's 36 billion? And then, number two, why is it now in your books, the 36 billion is now down to five? If you use that ratio, then Marubeni should be down to one.
MS. PASETES. Sir, the amount of 36 billion is principal plus interest and penalties.
SEN. OSMEÑA. And what about Marubeni? Is that just principal only?
MS. PASETES. Principal and interest.
SEN. OSMEÑA. So, I mean, you know, it's equal treatment. Ten point seven billion is principal plus penalties plus interest, hindi ba?
MS. PASETES. Yes, sir. Yes, Your Honor.
SEN. OSMEÑA. All right. So now, what you are saying is that you gonna pay Marubeni 6 billion and change and the national government is only recognizing 5 billion. I don't think that's protecting the interest of the national government at all.[86]
Alienations by onerous title are also presumed fraudulent when made by persons against whom some judgment has been rendered in any instance or some writ of attachment has been issued. The decision or attachment need not refer to the property alienated, and need not have been obtained by the party seeking rescission. (Emphasis supplied)As stated earlier, Asiavest is a judgment creditor of PNCC in G.R. No. 110263 and a court has already issued a writ of execution in its favor. Thus, when PNCC entered into the Compromise Agreement conveying several prime lots in favor of Radstock, by way of dacion en pago, there is a legal presumption that such conveyance is fraudulent under Article 1387 of the Civil Code.[92] This presumption is strengthened by the fact that the conveyance has virtually left PNCC's other creditors, including the biggest creditor - the National Government - with no other asset to garnish or levy.
1. The fact that the consideration of the conveyance is fictitious or is inadequate.Among the circumstances indicating fraud is a transfer of all or nearly all of the debtor's assets, especially when the debtor is greatly embarrassed financially. Accordingly, neither a declaration of insolvency nor the institution of insolvency proceedings is a condition sine qua non for a transfer of all or nearly all of a debtor's assets to be regarded in fraud of creditors. It is sufficient that a debtor is greatly embarrassed financially.
2. A transfer made by a debtor after suit has begun and while it is pending against him.
3. A sale upon credit by an insolvent debtor.
4. Evidence of large indebtedness or complete insolvency.
5. The transfer of all or nearly all of his property by a debtor, especially when he is insolvent or greatly embarrassed financially.
6. The fact that the transfer is made between father and son, when there are present other of the above circumstances.
7. The failure of the vendee to take exclusive possession of all the property. (Emphasis supplied)
SEN. ROXAS. Thank you, Mr. Chairman.In addition, PNCC's 2006 Audit Report by COA states as follows:
Mr. PNCC Chairman, could you describe for us the composition of your debt of about five billion - there are in thousands, so this looks like five and half billion. Current portion of long-term debt, about five billion. What is this made of?
MS. PASETES. The five billion is composed of what is owed the Bureau of Treasury and the Toll Regulatory Board for concession fees that's almost three billion and another 2.4 billion owed Philippine National Bank.
SEN. ROXAS. So, how much is the Bureau of Treasury?
MS. PASETES. Three billion.
SEN. ROXAS. Three - Why do you owe the Bureau of Treasury three billion?
MS. PASETES. That represents the concession fees due Toll Regulatory Board principal plus interest, Your Honor.
x x x x[94] (Emphasis supplied)
TAX MATTERSClearly, PNCC owes the National Government substantial taxes and fees amounting to billions of pesos.
The Company was assessed by the Bureau of Internal Revenue (BIR) of its deficiencies in various taxes. However, no provision for any liability has been made yet in the Company's financial statements.
- 1980 deficiency income tax, deficiency contractor's tax and deficiency documentary stamp tax assessments by the BIR totaling P212.523 Million.
x x x x
- Deficiency business tax of P64 Million due the Belgian Consortium, PNCC's partner in its LRT Project.
- 1992 deficiency income tax, deficiency value-added tax and deficiency expanded withholding tax of P1.04 Billion which was reduced to P709 Million after the Company's written protest.
x x x x
- 2002 deficiency internal revenue taxes totaling P72.916 Million.
x x x x.[95] (Emphasis supplied)
SEN. OSMEÑA. Teka muna. What is the 36 billion that appear in the resolution of the board in September 2000 (sic)? This is the same resolution that recognizes, acknowledges and confirms PNCC's obligations to Marubeni. And subparagraph (a) says "Government of the Philippines, in the amount of 36,023,784,000 and change. And then (b) Marubeni Corporation in the amount of 10,743,000,000. So, therefore, in the same resolution, you acknowledged that had something like P46.7 billion in obligations. Why did PNCC settle the 10 billion and did not protect the national government's 36 billion? And then, number two, why is it now in your books, the 36 billion is now down to five? If you use that ratio, then Marubeni should be down to one.PNCC failed to explain satisfactorily why in its books the obligation to the National Government was reduced when no payment to the National Government appeared to have been made. PNCC failed to justify why it made it appear that the obligation to the National Government was less than the obligation to Marubeni. It is another obvious ploy to justify the preferential treatment given to Radstock to the great prejudice of the National Government.
MS. PASETES. Sir, the amount of 36 billion is principal plus interest and penalties.
SEN. OSMEÑA. And what about Marubeni? Is that just principal only?
MS. PASETES. Principal and interest.
SEN. OSMEÑA. So, I mean, you know, it's equal treatment. Ten point seven billion is principal plus penalties plus interest, hindi ba?
MS. PASETES. Yes, sir. Yes, Your Honor.
SEN. OSMEÑA. All right. So now, what you are saying is that you gonna pay Marubeni 6 billion and change and the national government is only recognizing 5 billion. I don't think that's protecting the interest of the national government at all.[100]
ASSOCIATE JUSTICE CARPIO:This Court is not, and should never be, a rubber stamp for litigants hankering to pocket public funds for their selfish private gain. This Court is the ultimate guardian of the public interest, the last bulwark against those who seek to plunder the public coffers. This Court cannot, and must never, bring itself down to the level of legitimizer of violations of the Constitution, existing laws or public policy.
If there is no agreement, they better remit all of that to the National Government. They cannot just hold that. They are holding that [in] trust, as you said, x x x you agree, for the National Government.
DEAN AGABIN:
Yes, that's why, they are asking the Honorable Court to approve the compromise agreement.
ASSOCIATE JUSTICE CARPIO:
We cannot approve that if the power to authorize the expenditure [belongs] to Congress. How can we usurp x x x the power of Congress to authorize that expenditure[?] It's only Congress that can authorize the expenditure of funds from the general funds.
DEAN AGABIN:
But, Your Honor, if the Honorable Court would approve of this compromise agreement, I believe that this would be binding on Congress.
ASSOCIATE JUSTICE CARPIO:
Ignore the Constitutional provision that money shall be paid out of the National Treasury only pursuant to an appropriation by law. You want us to ignore that[?]
DEAN AGABIN:
Not really, Your Honor, but I suppose that Congress would have no choice, because this is a final judgment of the Honorable Court. [101]
x x x x
ASSOCIATE JUSTICE CARPIO:
So, if Radstock makes the assignment, it must own its rights, otherwise, it cannot assign it, correct?
ATTY. AGRA:
Pursuant to the compromise agreement, once approved, yes, Your Honors.
ASSOCIATE JUSTICE CARPIO:
So, you are saying that Radstock can own the rights to ownership of the land?
ATTY. AGRA:
Yes, Your Honors.
ASSOCIATE JUSTICE CARPIO:
Yes?
ATTY. AGRA:
The premise, Your Honor, you mentioned a while ago was, if this Court approves said compromise (interrupted).[102] (Emphasis supplied)
Art. 1409. The following contracts are inexistent and void from the beginning:The Compromise Agreement is indisputably contrary to the Constitution, existing laws and public policy. Under Article 1409, the Compromise Agreement is expressly declared void and "cannot be ratified." No court, not even this Court, can ratify or approve the Compromise Agreement. This Court must perform its duty to defend and uphold the Constitution, existing laws, and fundamental public policy. This Court must not shirk in declaring the Compromise Agreement inexistent and void ab initio.
(1) Those whose cause, object or purpose is contrary to law, morals, good customs, public order or public policy;
x x x
(7) Those expressly prohibited or declared void by law.
These contracts cannot be ratified. x x x. (Emphasis supplied)
WHEREFORE, the petition is partly GRANTED and insofar as the Motion to Set Aside the Order and/or Discharge the Writ of Attachment is concerned, the Decision of the Court of Appeals on August 30, 2002 and its Resolution of January 22, 2003 in CA-G.R. SP No. 66654 are REVERSED and SET ASIDE. The attachments over the properties by the writ of preliminary attachment are hereby ordered LIFTED effective upon the finality of this Decision. The Decision and Resolution of the Court of Appeals are AFFIRMED in all other respects. The Temporary Restraining Order is DISSOLVED immediately and the Court of Appeals is directed to PROCEED forthwith with the appeal filed by PNCC.
No costs.
SO ORDERED.
In G.R. No. 180428, Sison submits the following arguments in support of his petition:[33]
- The Court of Appeals not only committed serious reversible error but may have also gravely abused its discretion in refusing to allow petitioner STRADEC to intervene in the case.
- The Compromise Agreement between respondents Radstock and PNCC is void for being contrary to law and public policy.
- In the event the Compromise Agreement between respondents Radstock and PNCC is upheld, said Compromise Agreement should be made subject to the outcome of Civil Case No. 05-882.
On their part, Radstock and PNCC similarly argued in their respective memoranda that:[34]
- An action to annul a final and executory judgment of the Court of Appeals where such judgment was procured through fraud, and without fault, negligence or participation of the party concerned, can be filed and maintained before the Court of Appeals. Hence, the Court of Appeals gravely erred in dismissing the petition for annulment of judgment for supposed lack of jurisdiction.
- Resolving the jurisdiction issues presented in this case will enrich jurisprudence.
- Petitioner has a meritorious cause of action, and the instant petition warrants judicial review due to compelling reasons.
On January 13, 2009, the Court conducted oral arguments in both appeals, and limited the matters to be covered to the following:
- The Compromise Agreement does not violate public policy.
- The subject matter does not involve an assumption by the government of a private entity's obligation in violation of the law and/or the Constitution.
- The PNCC Board Resolution of October 20, 2000 is not defective or illegal.
- The Compromise Agreement is viable and does not include all oR substantially all of PNCC's assets.
- The Decision of the Court of Appeals is not annullable as there was no fraud practiced here.
- Does the Compromise Agreement violate public policy?
- Does the subject matter involve an assumption by the government of a private entity's obligation in violation of the law and/or the Constitution? Is the PNCC Board Resolution of October 20, 2000 defective or illegal?
- Is the Compromise Agreement viable in light of the non-renewal of PNCC's franchise by Congress and its inclusion of all or substantially all of PNCC's assets?
- Is the Decision of the Court of Appeals annullable even if final and executory on the grounds of fraud, public policy and the Constitution?[35]
Section 1. Who may intervene. -- A person who has a legal interest in the matter in litigation, or in the success of either of the parties, or an interest against both, or is so situated as to be adversely affected by a distribution or other disposition of property in the custody of the court or of an officer thereof may, with leave of court, be allowed to intervene in the action. The court shall consider whether or not the intervention will unduly delay or prejudice the adjudication of the rights of the original parties, and whether or not the intervenor's rights may be fully protected in a separate proceeding. (2[a], [b]a, R12)To be able to intervene in an action, therefore, the prospective intervenor must show an interest in the litigation that is of such direct and material character that he will either gain or lose by the direct legal operation and effect of judgment.[37]
Stripped to its barest essential, the petition should be dismissed. The Court of Appeals has no jurisdiction to annul its own final and executory judgment.
The Court's jurisdiction over actions for annulment of judgment, as in the instant case, pertains only to those rendered by the Regional Trial Courts (Sec. 9[2], BP Blg. 129; Sec. 1 Rule 47, 1997 Rules of Civil Procedure).
Section 1. Coverage. - This Rule shall govern the annulment by the Court of Appeals of judgments or final orders and resolutions in civil actions of Regional Trial Courts for which the ordinary remedies of new trial, appeal, petition for relief or other appropriate remedies are no longer available through no fault of the petitioner.Explaining the coverage of the procedure under Rule 47 in Grande v. University of the Philippines,[46] the Court definitely ruled out the application of Rule 47 to the nullification of a decision of the CA, viz:
The annulment of judgments, as a recourse, is equitable in character, allowed only in exceptional cases, as where there is no available or other adequate remedy. It is generally governed by Rule 47 of the 1997 Rules of Civil Procedure. Section 1 thereof expressly states that the Rule "shall govern the annulment by the Court of Appeals of judgments of final orders and resolutions in civil action of Regional Trial Courts for which the ordinary remedies of new trial, appeal, petition for relief or other appropriate remedies are no longer available through no fault of the petitioner." Clearly, Rule 47 applies only to petitions for the nullification of judgments rendered by regional trial courts filed with the Court of Appeals. It does not pertain to the nullification of decisions of the Court of Appeals.Still, Sison supports his choice of remedy by citing the ruling in Conde v. Intermediate Appellate Court.[47]
Sison's petition did not qualify as a stockholder's suit. To begin with, he did not allege that he had exhausted all remedies available under the articles of incorporation, by-laws, or rules governing the corporation to obtain the relief he desired. And, secondly, he did not allege that no appraisal rights were available for the act or acts complained of.
- That he was a stockholder or member at the time the acts or transactions subject of the action occurred and at the time the action was filed;
- That he exerted all reasonable efforts to exhaust all remedies available under the articles of incorporation, by-laws, laws or rules governing the corporation or partnership to obtain the relief he desires, and alleges the same with particularity in the complaint;
- No appraisal rights are available for the act or acts complained of; and
- The suit is not a nuisance or harassment suit.
We have carefully reviewed the Motion to Dismiss and the action taken by the court a quo and we find nothing that may constitute a grave abuse. The Order of April 19, 2001 which first denied the Motion to Dismiss meticulously explained the legal and factual basis for the trial court's rejection of the four grounds raised by PNCC:With its affirmative defenses thus disposed of, the settlement by means of the compromise agreement would surely work to the benefit of PNCC and its stockholders.
With respect to the first issue of whether or not the instant action had already been barred by prescription, the Court, after judicious examination of the environmental circumstances of this case and upon examination of the pertinent jurisprudence, is inclined to rule in the NEGATIVE.The averment on the pleadings submitted by the parties had so far revealed that the above-entitled case instituted by plaintiff Radstock Securities Limited for a sum of money and damages against defendant Philippine National Construction Corporation is not barred by prescription in light of the several demand letters and correspondences exchanged by the parties up to July 25, 1996. Further, it is interesting to note that defendant had, in the Board meeting held last October 20, 2000, clearly acknowledged the subject indebtedness to Marubeni. . . .xxx
Regarding the issue of whether or not the plaintiff has a valid cause of action against the defendant, the Court notes that the defendant heavily relies on the argument that the subject letter of guarantee executed by Alfredo Asuncion is void for lack of authority from the PNCC Board of Directors. This is misplaced in light of the fact that when a corporation such as the defendant in this case presents an officer to be the duly authorized signatory to a document coupled with submission of a duly notarized Secretary's Certificate said third party has every right to rely on the regularity of actions done by said corporation. . . .xxx
As regards the issue of whether or not the condition precedent for filing the instant suit has not been complied with, the [C]ourt finds the contention asserted by defendant to be bereft of merit. In setting up this ground of prematurity, defendant argues that plaintiff failed to comply with the provisions on arbitration embodied in the advance agreement executed on August 9, 1978 and loan Agreement executed on May 19, 1980. Apparently however, this case is being filed against defendant PNCC under the letters of guarantee [sic]. [P]laintiff is not filing this case against CDCP-M under the loan agreement and the advance payment agreement entered between Marubeni and CDPM wherein [sic] arbitration clauses are provided.xxx
Lastly, the defendant contended that the plaintiff has no legal capacity to sue and in support thereof it claims that RADSTOCK is engaged in business in the Philippines without any proof that it has a required license. This argument is erroneous. The plaintiff in this case is suing on an isolated transaction.... As correctly stated by the Plaintiff, it does not intend to engage in any other business in the Philippines except to sue and collect what has been assigned to it by Marubeni Corporation.
If error had been committed by the trial court, it was not of the character of grave abuse that relief through the extraordinary remedy of certiorari may be availed. Indeed, the grounds relied upon by PNCC are matters that are better threshed out during the trial since they can only be considered after evidence has been adduced and weighed.
Prior congressional approval is not required for the PCGG to enter into a compromise agreement with persons against whom it has filed actions for recovery of ill-gotten wealth. Section 20, Chapter 4, Subtitle B, Title I, Book V of the Revised Administrative Code of 1987 (E.O. No. 292) cited by Senator Guingona is inapplicable as it refers to a settled claim or liability. The provision reads:The exception of a compromise or release of a claim or liability yet to be settled from the requirement for presidential and congressional approval is realistic and practical. In a settlement by compromise agreement, the negotiating party must have the freedom to negotiate and bargain with the other party. Otherwise, tying the hands of the Government representative by requiring him to submit each step of the negotiation to the President and to Congress will unduly hinder him from effectively entering into any compromise agreement.
Section 20. Power to Compromise Claims. -
(1) When the interest of the Government so requires, the Commission may compromise or release, in whole or in part, any settled claim or liability to any government agency not exceeding ten thousand pesos arising out of any matter or case before it or within its jurisdiction, and with the written approval of the President, it may likewise compromise or release any similar claim or liability not exceeding one hundred thousand pesos. In case the claim or liability exceeds one hundred thousand pesos, the application for relief therefrom shall be submitted, through the Commission and the President, with their recommendations, to the Congress;xxx xxx xxx
The Government's claim against Benedicto is not yet settled, and the ownership of the alleged ill-gotten assets is still being litigated in the Sandiganbayan. Hence, the PCGG's compromise agreement with Benedicto need not be submitted to the Congress for approval. (Underline supplied for emphasis)
For practical purposes, franchises, so far as relating to corporations, are divisible into (1) corporate or general franchises; and (2) special or secondary franchises. The former is the franchise to exist as a corporation, while the latter are certain rights and privileges conferred upon existing corporations, such as the right to use the streets of a municipality to lay pipes or tracks, erect poles or string wires.The distinction between the two franchises of a corporation should always be delineated. The primary franchise (or the right to exist as such) is vested in the individuals composing the corporation, not in the corporation itself, and cannot be conveyed in the absence of a legislative authority to do so; but the special or secondary franchise of a corporation is vested in the corporation itself, and may ordinarily be conveyed or mortgaged under a general power granted to the corporation to dispose of its property, except such special or secondary franchises as are charged with a public use.[59]
xxx GOCCs may either be (1) with original charter or created by special law; or (2) incorporated under general law, via either the Old Corporation Code or the New Corporation Code.xxx xxx xxx
xxx, we have no doubt that over GOCCs established or organized under the Corporation Code, SEC can exercise jurisdiction. These GOCCs are regarded as private corporations despite common misconceptions. That the government may own the controlling shares in the corporation does not diminish the fact that the latter owes its existence to the Corporation Code. More pointedly, Section 143 of the Corporation Code gives SEC the authority and power to implement its provisions, specifically for the purpose of regulating the entities created pursuant to such provisions. These entities include corporations in which the controlling shares are owned by the government or its agencies.
Glaringly erroneous, therefore, is petitioner's reliance on Quimpo v. Tanodbayan and its theory that it is immaterial "whether a corporation is acquired by purchase or through the conversion of the loans of the GFIs into equity in a corporation [because] such corporation loses its status as a private corporation and attains a new status as a GOCC." First, based on the discussion above, PNCC does not "lose" its status as a private corporation, even if we were to assume that it is a GOCC. Second, neither would such loss of status prevent it from being further classified into an acquired asset corporation, as will be discussed below.xxx xxx xxx
Lest the focus of our disposition of this case be lost in the maze of arguments strewn before us, we stress that PNCC is a corporation created in accordance with the general corporation statute. Hence, it is essentially a private corporation, notwithstanding the government's interest therein through the debt-to-equity conversion imposed by PD 1295. Being a private corporation, PNCC is subject to SEC regulation and jurisdiction.
The Government Accounting and Auditing Manual (GAAM) Volume I, prescribed under COA Circular No. 91-368 dated January 1, 1992, specifically under Title 7, Chapter 3 thereof, primarily governs the disposal/divestment of government assets. Section 501 of the said Chapter states:COA Circular No. 89-296 (dated January 27, 1989) relevantly provides:Sec. 501. Authority or responsibility for property disposal/divestment. - The full and sole authority and responsibility for the divestment and disposal of property and other assets owned by the national government agencies or instrumentalities, local government units and government-owned and/or controlled corporations and their subsidiaries shall be lodged in the heads of the departments, bureaus, and offices of the national government, the local government units and the governing bodies or managing heads of government-owned or controlled corporations and their subsidiaries conformably to their respective corporate charters or articles of incorporation, who shall constitute the appropriate committee or body to undertake the same.The sale or disposal of the properties of the government is based on their assessed value and not just on a percentage thereof. Admittedly, and as discussed earlier, the audit guidelines under COA Circular No. 89-296 as reiterated in the Government Accounting and Auditing Manual are not applicable in the herein case. Nonetheless, consistent with the objective of public bidding, COA favors the disposal of government properties in the amount most advantageous to the government. It is noted that the transfer value of 70% of assessed value still falls within the standards set by government financial institutions which invariably range from 70% to 100% of the appraised value for properties situated in urban areas. The maximum percentage prescribed in Section 37 of Republic Act No. 8791, the Banking Law of 2000, provides that loans and other credit accommodations against real estate shall not exceed 75% of the appraised value of the respective real estate security. Taking this into account and the declared policy that the authority to dispose its assets is lodged with the head of the entity, COA deems the herein transfer valuation reasonable.
Under the regular procedure involving disposal of government property, COA would have initially conducted an appraisal of the property to determine its valuation. However, considering the exceptional circumstances in the instant case, the appraisals performed by the established independent appraisers are allowable. The parties engaged the services of Royal Asia Appraisal Corporation, Cuervo Appraisers, Inc., Asian Appraisal Co., Inc. and Valencia Appraisal Corporation which are reputable appraisal firms. Even COA has had occasions to engage the services of the last three independent appraisers mentioned above to help ensure that the government will not be disadvantaged in any manner. Hence, COA finds no reason to doubt the reasonableness of their appraisal.
The other terms and conditions of the compromise agreement appear to be fair and above board and COA finds no compelling grounds to oppose the same. Accordingly, COA recommends the approval of the parties' compromise agreement appended in their "Joint Motion for Judgment Based on Compromise." [66]
III. DEFINITION AND SCOPE: - These audit guidelines shall be observed and adhered to in the divestment or disposal of property and other assets of all government entities/instrumentalities, whether national, local or corporate, including the subsidiaries thereof but shall not apply to the disposal of merchandise or inventory held for sale in the regular course of business nor to the disposal by government financial institutions of foreclosed assets or collaterals acquired in the regular course of business and not transferred to the National Government under Proclamation No. 50. They shall not also cover dation in payment as contemplated under Article 1245 of the New Civil Code. [67]In this regard, it is well to point out that the majority also invoke COA Circular No. 89-296, citing Part V thereof entitled Modes of Disposal/Divestment.
Section 5. In consideration of this franchise, the GRANTEE shall:
(a) Construct, operate and maintain at its own expense the Expressways; and
(b) Turn over, without cost, the toll facilities and all equipment, directly related thereto to the Government upon expiration of the franchise period.[71]
Section 2.The term of the franchise provided under Presidential Decree No. 1113 for the North Luzon Expressway and the South Luzon Expressway which is thirty (30) years from 1 May 1977 shall remain the same; provided that, the franchise granted for the Metro Manila Expressway and all extensions linkages, stretches and diversions that may be constructed after the date of approval of this decree shall likewise have a term of thirty (30) years commencing from the date of completion of the project.
Rather than generalizing that all the aforecited properties reverted to the National Government upon the expiration of PNCC's legislative franchise, Sison should first establish in proceedings appropriate for the purpose a premise for his jealously argued interpretation that such properties were directly related to the operation and maintenance of the tollways covered by its expired secondary franchise. Before that is done, it is not reasonable to generalize on the matter. Consequently, Sison's insistence that PNCC became a mere trustee of the National Government upon the expiration of the legislative franchise is dismissed for being unfounded.
- PNCC's right over that parcel of land located in Pasay City with a total area of 129,548 square meters, more or less, particularly described in Transfer Certificate of Title No. T-34997 of the Registry of Deeds for Pasay City. The transfer value is P3,817,779,000.00;
- T-452587 (T-23646) - Parañaque (5,123 square meters) subject to the clarification of the PMO claims thereon. The transfer value is P45,000,900.00;
- T-49499 (529715 including T-68146-G (S-29716) (1,9747-A)-Parañaque (107 square meters) (54 square meters) subject to the clarification of the PMO claims thereon. The transfer value is P1,409,100.00;
- 5(sic)-29716-Parañaque (27,762 square meters) subject to the clarification of the PMO claims thereon. The transfer value is P242,917,500.00;
- P-169 - Tagaytay (49,107 square meters). The transfer value is P13,749,400.00;
- P-170 - Tagaytay (49,100 square meters). The transfer value is P13,749,400.00;
- N-3320-Town and Country Estate; Antipolo (10,000 square meters). The transfer value is P16,800,000.00;
- N-7424 - Antipolo (840 square meters). The transfer value is P940,800.00;
- N-7425 - Antipolo (850 square meters) The transfer value is P952,000.00;
- N-7426 - Antipolo (958 square meters). The transfer value is P1,073,100.00;
- T-485276 - Antipolo (741 square meters) The transfer value is P830,200.00;
- T-485277 - Antipolo (741 square meters). The transfer value is P761,600.00;
- T-485278 - Antipolo (701 square meters). The transfer value is P785,400.00;
- T-131500-Bulacan (CDCP Farms Corp.) (4,945 square meters). The transfer value is P6,475,000.00;
- T-131501-Bulacan (678 square meters). The transfer value is P887,600.00;
- T-26,154 (M) - Bocaue, Bulacan (2,841 square meters) The transfer value is P3,779,300.00;
- T-29,308 (M) - Bocaue, Bulacan (733 square meters). The transfer value is P974,400.00;
- T-29,309 (M) - Bocaue, Bulacan (1,141 square meters). The transfer value is P1,517,600.00; and
- T- 260578 (R. Bengzon) Sta. Rita, Guiguinto, Bulacan (20,000 square meters). The transfer value is P25,2000,0000.00.
Section 3. Powers and Duties of the Board. The Board shall have in addition to its general powers of administration the following powers and duties:Undoubtedly, TRB had the statutory authority to enter in behalf of the National Government into a contract for the construction, operation and maintenance of toll facilities; to determine and decide the kind, type, and nature of public improvement to be constructed and operated as toll facilities; and to issue a TOC to authorize a grantee to operate a toll facility.
(a) Subject to the approval of the President of the Philippines, to enter into contracts in behalf of the Republic of the Philippines with persons, natural or juridical, for the construction, operation and maintenance of toll facilities such as but not limited to national highways, roads, bridges, and public thoroughfares. Said contract shall be open to citizens of the Philippines and/or to corporations or associations qualified under the Constitution and authorized by law to engage in toll operations;
(b) Determine and decide the kind, type and nature of public improvement that will be constructed and/or operated as toll facilities;xxx xxx xxx
(e) To grant authority to operate a toll facility and to issue therefore the necessary "Toll Operation Certificate" subject to such conditions as shall be imposed by the Board including inter alia the following:[78]xxx xxx xxx
Section 4. The Toll Regulatory Board is hereby given jurisdiction and supervision over the GRANTEE with respect to the Expressways, the toll facilities necessarily appurtenant thereto and, subject to the provisions of Section 8 and 9 hereof, the toll that the GRANTEE will charge the users thereof.By its issuance of the TOC, therefore, TRB was simply exercising its powers under P.D. No. 1112. It did not thereby extend PNCC's legislative franchise, which it could not legally do. Its issuance of the TOC was proper, not ultra vires, even if the effect was to permit PNCC, through MNTC, to continue to operate the toll facilities.
Given the foregoing postulates, we find that the Civil Aeronautics Board has the authority to issue a Certificate of Public Convenience and Necessity, or Temporary Operating Permit to a domestic air transport operator, who, though not possessing a legislative franchise, meets all the other requirements prescribed by law. Such requirements were enumerated in Section 21 of R.A. 776.Likewise, we said in Metropolitan Cebu Water District v. Adala:[81]
There is nothing in the law nor in the Constitution, which indicates that a legislative franchise is an indispensable requirement for an entity to operate as a domestic air transport operator. Although Section 11 of Article XII recognizes Congress' control over any franchise, certificate or authority to operate a public utility, it does not mean Congress has exclusive authority to issue the same. Franchises issued by Congress are not required before each and every public utility may operate. In many instances, Congress has seen it fit to delegate this function to government agencies, specialized particularly in their respective areas of public service.
A reading of Section 10 of the same reveals the clear intent of Congress to delegate the authority to regulate the issuance of a license to operate domestic air transport services:SECTION 10. Powers and Duties of the Board. (A) Except as otherwise provided herein, the Board shall have the power to regulate the economic aspect of air transportation, and shall have general supervision and regulation of, the carriers, general sales agents, cargo sales agents, and air freight forwarders as well as their property rights, equipment, facilities and franchise, insofar as may be necessary for the purpose of carrying out the provision of this Act.[80]
Moreover, this Court, in Philippine Airlines, Inc. vs. Civil Aeronautics Board, has construed the term "franchise" broadly so as to include, not only authorizations issuing directly from Congress in the form of statute, but also those granted by administrative agencies to which the power to grant franchises has been delegated by Congress, to wit:For its part, the Executive Department has also recognized the power of TRB to issue the TOC to PNCC independently of the legislative franchise that was due to expire on May 1, 2007. This recognition was reflected in the opinion dated November 24, 1995 of then Justice Secretary Teofisto T. Guingona, Jr., to wit:[83]Congress has granted certain administrative agencies the power to grant licenses for, or to authorize the operation of certain public utilities. With the growing complexity of modern life, the multiplication of the subjects of governmental regulation, and the increased difficulty of administering the laws, there is constantly growing tendency towards the delegation of greater powers by the legislature, and towards the generally recognized that a franchise may be derived indirectly from the state through a duly designated agency, and to this extent, the power to grant franchises has frequently been delegated, even to agencies other than those of legislative in nature. In pursuance of this, it has been held that privileges conferred by grant by local authorities as agents for the state constitute as much a legislative franchise as though the grant had been made by an act of the Legislature. [82]
Upon re-examination of P.D. No. 1113 (PNCC Charter), as amended by P.D. No. 1894, we reiterate the view expressed in Opinion No. 45, s. 1995 that TRB has no authority to extend the legislative franchise of PNCC over the existing NSLE. However, TRB is not precluded under Section 3(e) of P.D. No. 1112 (TRB Charter) to grant PNCC and its joint venture partner the authority to operate the existing toll facility of the NSLE and to issue therefore the necessary "Toll Operation Certificate" for a period coinciding with the term of the proposed Metro Manila Skyway.It serves well to note, too, that the TOC was not for the same project covered by PNCC's legislative franchise under P.D. No. 1894, but for a new project, the rehabilitation of the NLEX, which was completed in 2005. In the effort to rehabilitate the NLEX, the MNTC incurred substantial costs. The authority to collect reasonable toll fees from users of that expressway was the consideration given to the MNTC as the tollway operator to enable it to recoup the investment.xxx xxx xxx
It should be noted that the existing franchise of PNCC over the NSLE, which will expire on May 1, 2007, gives it the "right, privilege and authority to construct, maintain and operate" the NSLE. The Toll Operation Certificate which TRB may issue to the PNCC and its joint venture partner after the expiration of its franchise on May 1, 2007 is an entirely new authorization, this time for the operation and maintenance of the NSLE, which is already an existing toll facility. In other words, the right of PNCC and its joint venture partner, after May 1, 2007, to operate and maintain the existing NSLE will no longer be founded on its legislative franchise which is not thereby extended, but on the new authorization to be granted by the TRB pursuant to Section 3(e), abovequoted, of P.D. 1112. [84]
xxx A preference of credit bestows upon the preferred creditor an advantage of having his credit satisfied first ahead of other claims which may be established against the debtor. Logically, it becomes material only when the properties and assets of the debtor are insufficient to pay his debts in full; for if the debtor is amply able to pay his various creditors in full, how can the necessity exist to determine which of his creditors shall be paid first or whether they shall be paid out of the proceeds of the sale of the debtor's specific property? Indubitably, the preferential right of credit attains significance only after the properties of the debtor have been inventoried and liquidated, and the claims held by his various creditors have been established.Nor will it be automatic for the National Government to be preferred as to the assets of any individual or corporation in financial straits. In In Re: Petition for Assistance in the Liquidation of the Rural Bank of Bokod (Benguet), Inc., Philippine Deposit Insurance Corporation v. Bureau of Internal Revenue,[88] the Court clarifies:
In this jurisdiction, bankruptcy, insolvency and general judicial liquidation proceedings provide the only proper venue for the enforcement of a creditor's preferential right xxx for these are in rem proceedings binding against the whole world where all persons having interest in the assets of the debtors are given the opportunity to establish their respective credits.[87]
xxx The Government, in this case, cannot generally claim preference of credit, and receive payments ahead of the other creditors of RBBI. Duties, taxes, and fees due the Government enjoy priority only when they are with reference to a specific movable property, under Article 2241 (1) of the Civil Code, or immovable property, under Article 2242 (1) of the same Code. However, with reference to the other real and personal property of the debtor, sometimes referred to as "free property," the taxes and assessments due the National Government, other than those in Articles 2241(1) and 2242 (1) of the Civil Code will come only in ninth place in the order of the preference.[89]Verily, any creditor who may feel aggrieved by the compromise agreement (such that his rights over PNCC's assets may be prejudiced by the compromise agreement) should initiate the proper proceedings to protect his rights. Yet, no bankruptcy, insolvency, or general judicial liquidation proceedings have been initiated or filed by any of PNCC's creditors. With none, including the Government, having done so as yet, it is improper and premature for Sison to cry fraud against the Government.
Sec. 40. Sale or other disposition of assets. - Subject to the provisions of existing laws on illegal combinations and monopolies, a corporation may, by a majority vote of its board of directors or trustees, sell, lease, exchange, mortgage, pledge or otherwise dispose of all or substantially all of its property and assets, including its goodwill, upon such terms and conditions and for such consideration, which may be money, stocks, bonds or other instruments for the payment of money or other property or consideration, as its board of directors or trustees may deem expedient, when authorized by the vote of the stockholders representing at least two-thirds (2/3) of the outstanding capital stock, or in case of non-stock corporation, by the vote of at least to two-thirds (2/3) of the members, in a stockholder's or member's meeting duly called for the purpose. Written notice of the proposed action and of the time and place of the meeting shall be addressed to each stockholder or member at his place of residence as shown on the books of the corporation and deposited to the addressee in the post office with postage prepaid, or served personally: Provided, That any dissenting stockholder may exercise his appraisal right under the conditions provided in this Code.The law defines a sale or disposition of substantially all assets and property as one by which the corporation "would be rendered incapable of continuing the business or accomplishing the purpose for which it was incorporated." Any disposition short of this will not need stockholder action.[101] The text and tenor of Section 40, supra, are clear and do not require interpretation, that the Court must not read any other meaning to the law.
A sale or other disposition shall be deemed to cover substantially all the corporate property and assets if thereby the corporation would be rendered incapable of continuing the business or accomplishing the purpose for which it was incorporated.
After such authorization or approval by the stockholders or members, the board of directors or trustees may, nevertheless, in its discretion, abandon such sale, lease, exchange, mortgage, pledge or other disposition of property and assets, subject to the rights of third parties under any contract relating thereto, without further action or approval by the stockholders or members.
Nothing in this section is intended to restrict the power of any corporation, without the authorization by the stockholders or members, to sell, lease, exchange, mortgage, pledge or otherwise dispose of any of its property and assets if the same is necessary in the usual and regular course of business of said corporation or if the proceeds of the sale or other disposition of such property and assets be appropriated for the conduct of its remaining business.
In non-stock corporations where there are no members with voting rights, the vote of at least a majority of the trustees in office will be sufficient authorization for the corporation to enter into any transaction authorized by this section. (28 1/2a) [100]
It is the assessment of the Government Corporate Counsel that PNCC has only a 50-50 chance of winning the case, thus, entering into a compromise agreement will spare the corporation from losing at least P13 billion of its assets. COA shares the view that with this settlement, the PNCC, armed with its remaining assets can start anew and pursue its plans to revitalize its operations. [106]Also, the investing corporation assumes risks in every business venture. There may be many factors affecting the business that may force the corporation to reduce or downsize its operations in the meanwhile. Nonetheless, the downsizing of the operations does not mean the abandonment of the business for which the corporation has been organized. Accordingly, the wisdom of the execution of the compromise agreement should not be questioned, absent any clear and convincing proof establishing that the compromise agreement would truly render PNCC incapable of continuing its business.
G
Compromise Agreement Does Not Violate
Constitutional Ban on Foreign Ownership of Land
2. This Compromise amount shall be paid by PNCC to RADSTOCK in the following manner:Sison holds that this provision in the compromise agreement would vest in Radstock, a foreign corporation, the rights of ownership over the 19 parcels of land listed in the compromise agreement and thereby violate the constitutional provision prohibiting ownership by foreign entities of land in the Philippines; that the right to assign rights and interests in real property is an attribute of ownership; that Radstock would be, for all intents and purposes, the beneficial owner of the real properties during the period from the execution of the compromise agreement until the actual transfer of the ownership of the properties to third parties designated by Radstock; and that in the meantime PNCC would be holding the properties only in trust.
a. PNCC shall assign to a third party assignee to be designated by RADSTOCK all its rights and interests to the following real properties provided the assignees shall be duly qualified to own real properties in the Philippines:xxx
Section 7. Save in cases of hereditary succession, no private lands shall be transferred or conveyed except to individuals, corporations, or associations qualified to acquire or hold lands of the public domain.Sison's submissions are unacceptable.
We look to the language of the document itself in search for its meaning. We do not of course stop there, but that is where we begin. It is to be assumed that the words in which constitutional provisions are couched express the objective sought to be attained. They are to be given their ordinary meaning except where technical terms are employed in which case the significance thus attached to them prevails. As the Constitution is not primarily a lawyer's document, it being essential for the rule of law to obtain that it should ever be present in the people's consciousness, its language, as much as possible, should be understood in the sense they have in common use. What it says according to the text of the provision construed compels acceptance and negates the power of the courts to alter it, based on the postulate that the framers and the people mean what they say. Thus there are cases where the need for construction is reduced to a minimum.Well-settled principles of constitutional construction are also firm guides for interpretation. These principles are reiterated in Francisco v. The House of Representatives,[108] to wit:
First, verba legis, that is, wherever possible, the words used in the Constitution must be given their ordinary meaning except where technical terms are employed. xxx.A plain reading of the aforecited provision of the Constitution and the compromise agreement does not support the conclusion that the latter violates the former. The compromise agreement nowhere stated that any lands or real properties are to be transferred to Radstock, or any non-qualified person. Indeed, the transfer of any lands or real properties contemplated by the compromise agreement is in favor of a party duly qualified to own and hold real properties under the Constitution. The arrangement would not give to Radstock any right other than to designate qualified assignees, who should only be a Filipino citizen, or a corporation organized under the Philippine law, but with at least 60% Filipino equity. During the time that Radstock would be looking for qualified assignees, ownership over the real properties subject of the compromise agreement would not be transferred to it, but would remain with PNCC.xxx xxx xxx
Second, where there is ambiguity, ratio legis et anima. The words of the Constitution should be interpreted in accordance with the intent of the framers. xxx.
Finally, ut magis valeat quam pereat. The Constitution is to be interpreted as a whole.
Petitioners sniff at the citation of Chavez v. Public Estates Authority, and Halili v. C.A., claiming that the doctrines in these cases are wholly inapplicable to the instant case.The situation herein is even more favorable than that in La Bugal. Firstly, the compromise agreement does not attempt to transfer any of the subject real properties to any non-qualified person. The title or ownership of the lands is to be transferred only upon designation by Radstock of a qualified assignee, and the transfer is to be effected by PNCC directly to the assignee, without the title passing to Radstock in the interim. Secondly, the compromise agreement does not attempt to create any kind of title over the properties in favor of Radstock. It simply allows Radstock to designate a qualified assignee to whom the properties may be assigned or transferred. It does not give any other right to Radstock. Thirdly, the arrangement may even be more beneficial to PNCC, considering that PNCC gets to settle its much lessened obligation for a definite and sure amount of 75% of the assessed values of the subject properties, regardless of the price that Radstock gets from its designated assignee. Incidentally, this is a better bargain for PNCC (and ultimately for the Government), compared to a bidding out of the properties in which there are ever-present risks of recovering a much lower value). Fourthly, the arrangement transfers from PNCC to Radstock the obligation and task of looking for a qualified assignee of the properties. And, lastly, the present case involves a series of interrelated and dependent transactions that will always result in a situation not inconsistent with the Constitution, considering that the assignee will always be a qualified person or entity.
Chavez clearly teaches: "Thus, the Court has ruled consistently that where a Filipino citizen sells land to an alien who later sells land to a Filipino, the invalidity of the first transfer is corrected by the subsequent sale to a citizen. Similarly, where the alien who buys the land subsequently acquires Philippine citizenship, the sale is validated since the purpose of the constitutional ban to limit land ownership to Filipinos has been achieved. In short, the law disregards the constitutional disqualification of the buyer to hold land if the land is subsequently transferred to a qualified party, or the buyer himself becomes a qualified party."
In their Comment, petitioners contend that in Chavez and Halili, the object of the transfer (the land) was not what was assailed for alleged unconstitutionality. Rather, it was the transaction that was assailed; hence subsequent compliance with constitutional provisions would cure its infirmity. In contrast, the instant case it is the FTAA itself, the object of the transfer, that is being assailed as invalid and unconstitutional. So, petitioners claim that the subsequent transfer of a void FTAA to a Filipino corporation would not cure the defect.
Petitioners are confusing themselves. The present Petition has been filed, precisely because the grantee of the FTAA was a wholly owned subsidiary of a foreign corporation. It cannot be gainsaid that anyone would have asserted that the same FTAA was void if it had at the outset been issued to a Filipino corporation. The FTAA, therefore, is not per se defective or unconstitutional. It was questioned only because it has been issued to an allegedly non-qualified, foreign-owned corporation.
We believe that this case is clearly analogous to Halili, in which the land acquired by a non-Filipino was re-conveyed to a qualified vendee and the original transaction was thereby cured. Paraphrasing Halili, the same rationale applies to the instant case: assuming arguendo the invalidity of its prior grant to a foreign corporation, the disputed FTAA - being now held by a Filipino corporation - can no longer be assailed; the objective of the constitutional provision - to keep the exploration, development and utilization of our natural resources in Filipino hands - has been served.
More accurately speaking, the present situation is one degree better than obtaining in Halili, in which the original sale to a non-Filipino was clearly and indisputably violative of the constitutional prohibition and thus void ab initio. In the present case, the issuance/grant of the subject FTAA to the foreign-owned WMCP was not illegal, void or unconstitutional at the time. The matter had to be brought to court, precisely for adjudication as to whether the FTAA and the Mining Law had indeed violated the Constitution. Since up to this point, the decision of this Court declaring the FTAA void has yet to become final, to all intents and purposes, the FTAA must be deemed valid and constitutional.
The general rule, nakedly and badly put, is that legal conclusions announced on a first appeal, whether on the general law or the law as applied to the concrete facts, not only prescribe the duty and limit the power of the trial court to strict obedience and conformity thereto, but they become and remain the law of the case in all after steps below or above on subsequent appeal. The rule is grounded on convenience, experience, and reason. Without the rule there would be no end to criticism, re-agitation, re-examination, and reformulation. In short, there would be endless litigation. It would be intolerable if parties litigant were allowed to speculate on changes in the personnel of a court, or on the change of our rewriting propositions once gravely ruled on solemn argument and handed down as the law of a given case. An itch to reopen questions foreclosed on a first appeal would result in the foolishness of the inquisitive youth who pulled up his corn to see how it grew. Courts are allowed, if they so choose, to act like ordinary sensible persons. The administration of justice is a practical affair. The rule is a practical and a good one of frequent and beneficial use.Resultantly, the liability of PNCC to Radstock was established, rendering the decision to enter into a compromise agreement a wise move on the part of PNCC. The same result cannot be contemplated if the nullification of the compromise agreement were decreed herein, because PNCC would probably lose by an adjudgment against it of a larger liability.
RESOLUTION NO. BD-09202000
RESOLVED, That the Board recognizes, acknowledges and confirms PNCC's obligations as of September 30, 1999 with the following entities, exclusive of interests and other charges that may subsequently accrue and still become due therein, to wit:
a). the Government of the Republic of the Philippines in the amount of P36,023,784,751.00; and
b). Marubeni Corporation in the amount of P10,743,103,388.00.
In fine, for the respondent [Senate Blue Ribbon] Committee to probe and inquire into that same justiciable controversy already before the Sandiganbayan, would be an encroachment into the exclusive domain of judicial jurisdiction that had much earlier set in. In Baremblatt v. United States, it was held that:Indeed, the distinctions between court proceedings, on one hand, and legislative investigations in aid of legislation, on the other hand, derive from their different purposes. Courts conduct hearings to settle, through the application of law, actual controversies arising between adverse litigants and involving demandable rights.[121] In court proceedings, the person's rights to life, liberty and property may be directly and adversely affected. The Rules of Court prescribes procedural safeguards consistent with the principles of due process and equal protection guaranteed by the Constitution. The manner in which disputed matters can be proven in judicial proceedings as provided in the Rules of Court must be followed. In contrast, the legislative bodies conduct their inquiries under less safeguards and restrictions, because inquiries in aid of legislation are undertaken as tools to gather information, in order to enable the legislators to act wisely and effectively, and in order to determine whether there is a need to improve existing laws, or to enact new or remedial legislation.[122]Broad as it is, the power is not, however, without limitations. Since Congress may only investigate into those areas in which it may potentially legislate or appropriate, it cannot inquire into matters which are within the exclusive province of one of the other branches of the government. Lacking the judicial power given to the Judiciary, it cannot inquire into matters that are exclusively the concern of the Judiciary. Neither can it supplant the Executive in what exclusively belongs to the Executive. xxx.
Finally, the respondent Congressmen assert that at least two (2) committee reports by the House of Representatives found the PIATCO contracts valid and contend that this Court, by taking cognizance of the cases at bar, reviewed an action of a co-equal body. They insist that the Court must respect the findings of the said committees of the House of Representatives. With due respect, we cannot subscribe to their submission. There is a fundamental difference between a case in court and an investigation of a congressional committee. The purpose of a judicial proceeding is to settle the dispute in controversy by adjudicating the legal rights and obligations of the parties to the case. On the other hand, a congressional investigation is conducted in aid of legislation. Its aim is to assist and recommend to the legislature a possible action that the body may take with regard to a particular issue, specifically as to whether or not to enact a new law or amend an existing one. Consequently, this Court cannot treat the findings in a congressional committee report as binding because the facts elicited in congressional hearings are not subject to the rigors of the Rules of Court on admissibility of evidence. The Court in assuming jurisdiction over the petitions at bar simply performed its constitutional duty as the arbiter of legal disputes properly brought before it, especially in this instance when public interest requires nothing less.
. . . PNCC knowing that it is bankrupt and that it does not have enough assets to meet its existing obligations is now offering for sale its assets as shown in the reports published in newspapers of general circulation.[2] (emphasis and underscoring supplied)
. . . the fact that PNCC has insufficient assets to cover its obligations is no indication of fraud even if PNCC attempts to sell them because it is quite possible that PNCC was entering into a bona fide . . . sale where at least fair market value for the assets will be received. In such a situation, Marubeni[-predecessor-in-interest of Radstock] would not be in a worse position than before as the assets will still be there but just liquidated.[3](italics in the original; emphasis and underscoring supplied)
Section 20. Power to Compromise Claims. - (1) When the interest of the Government so requires, the Commission [on Audit] may compromise or release in whole or in part, >any settled claim or liability to any government agency not exceeding ten thousand pesos arising out of any matter or case before it or within its jurisdiction, and with the written approval of the President, it may likewise compromise or release any similar claim or liability not exceeding one hundred thousand pesos. In case the claim or liability exceeds one hundred thousand pesos, the application for relief therefrom shall be submitted, through the Commission and the President, with their recommendations, to the Congress x x x.[5] (emphasis and underscoring supplied)
The exception of a compromise or release of a claim or liability yet to be settled from the requirement for presidential or congressional approval is realistic and practical. In a settlement by compromise agreement, the negotiating party must have the freedom to negotiate and bargain with the other party. Otherwise, tying the hands of the Government representative by requiring him to submit each step of the negotiation to the President and to Congress will unduly hinder him from effectively entering into any compromise agreement. (italics in the original omitted)
[It] was precisely enacted to prevent government agencies from admitting liabilities against the government, then compromising such "settled" liabilities. The present case is exactly what the law seeks to prevent, a compromise agreement on a creditor's claim settled through admission by a government agency without the approval of Congress for amounts exceeding P100,000.00. What makes the application of the law even more necessary is that the PNCC Board's twin moves are manifestly and grossly disadvantageous to the Government. x x x (emphasis in the original omitted)
Section 36. Power to compromise claims. - (1) When the interest of the Government so requires, the Commission may compromise or release in whole or in part, any settled claim or liability to any government agency not exceeding ten thousand pesos arising out of any matter or case before it or within its jurisdiction, and with the written approval of the President, it may likewise compromise or release any similar claim or liability not exceeding one hundred thousand pesos. In case the claim or liability exceeds one hundred thousand pesos, the application for relief therefrom shall be submitted, through the Commission and the President, with their recommendations, to the Congress; and
(2) The Commission may, in the interest of the Government, authorize the charging or crediting to an appropriate account in the National Treasury, small discrepancies (overage or shortage) in the remittances to, and disbursements of, the National Treasury, subject to the rules and regulations as it may prescribe. (emphasis supplied)
Section 35. Collection of Indebtedness Due to the Government. - The Commission shall, through proper channels, assist in the collection and enforcement of all debts and claims, and the restitution of all funds or the replacement or payment as a reasonable price of property, found to be due the Government, or any of its subdivisions, agencies or instrumentalities, or any government-owned or controlled corporation or self-governing board, commission or agency of the Government, in the settlement and adjustment of its accounts. If any legal proceeding is necessary to that end, the Commission shall refer the case to the Solicitor General, the Government Corporate Counsel, or the Legal Staff of the Creditor Government Office or agency concerned to institute such legal proceeding. The Commission shall extend full support in the litigation. All such moneys due and payable shall bear interest at the legal rate from the date of written demand by the Commission. (emphasis supplied)
Section 4. Fundamental Principles. - Financial transactions and operations of any government agency shall be governed by the fundamental principles set forth hereunder, to wit:
1. No money shall be paid out of any public treasury or depository except in pursuance of an appropriation law or other specific statutory authority.
2. Government funds or property shall be spent or used solely for public purposes. xxx xxx xxx (emphasis supplied)
If error had been committed by the trial court, it was not of the character of grave abuse that relief through the extraordinary remedy of certiorari may be availed. Indeed, the grounds relied upon by PNCC are matters that are better threshed out during the trial since they can only be considered after evidence has been adduced and weighed.[4] (emphasis supplied)