Philippine Supreme Court Resolutions


Philippine Supreme Court Resolutions > Year 2010 > February 2010 Resolutions > [G.R. No. 178158 : February 23, 2010] STRATEGIC ALLIANCE DEVELOPMENT CORPORATION V. RADSTOCK SECURITIES LIMITED AND PHILIPPINE NATIONAL CONSTRUCTION CORPORATION [G.R. NO. 180428] LUIS SISON V. PHILIPPINE NATIONAL CONSTRUCTION CORPORATION AND RADSTOCK SECURITIES LIMITED :




EN BANC

[G.R. No. 178158 : February 23, 2010]

STRATEGIC ALLIANCE DEVELOPMENT CORPORATION V. RADSTOCK SECURITIES LIMITED AND PHILIPPINE NATIONAL CONSTRUCTION CORPORATION

[G.R. NO. 180428]

LUIS SISON V. PHILIPPINE NATIONAL CONSTRUCTION CORPORATION AND RADSTOCK SECURITIES LIMITED


Sirs/Mesdames:

Quoted hereunder, for your information, is a resolution of the Court En Banc dated February 23, 2010

"G.R. No. 178158: STRATEGIC ALLIANCE DEVELOPMENT CORPORATION v. RADSTOCK SECURITIES LIMITED and PHILIPPINE NATIONAL CONSTRUCTION CORPORATION

G.R. No. 180428: LUIS SISON v. PHILIPPINE NATIONAL CONSTRUCTION CORPORATION and RADSTOCK SECURITIES LIMITED


RESOLUTION


The Court resolved, by a vote of 7-6, to DENY with FINALITY the motion for reconsideration filed by respondent Radstock Securities Limited for lack of merit, considering that the basic issues raised in the motion have already been passed upon and the motion contains no substantial argument or cogent reason to warrant reconsideration of the Decision dated 4 December 2009.

The Court likewise resolved to DENY the Urgent Omnibus Motion for Intervention and for Partial Reconsideration of the Decision dated December 4, 2009 filed by Atty. Raymundo T. Francisco for lack of merit.

The Comment and Opposition (to Radstock's Motion for Reconsideration) filed by petitioner Luis Sison is NOTED.

No further pleadings shall be entertained in these cases."

Those who voted to deny the the motion for reconsideration are: Chief Justice Reynato S. Puno, Justices Antonio T. Carpio, Conchita Carpio Morales, Teresita J. Leonardo De-Castro, Arturo D. Brion, Roberto A. Abad, and Martin S. Villarama, Jr. Justice Lucas P. Bersamin dissented, and the following joined him in his Dissenting Opinion: Justices Renato C. Corona, Presbitero J. Velasco, Jr., Antonio Eduardo B. Nachura, Jose P. Perez, and Jose C. Mendoza. Justices Diosdado M. Peralta and Mariano C. Del Castillo took no part.


Very truly yours,


(Sgd.) MA. LUISA D. VILLARAMA
Clerk of Court


(With Dissenting Opinion of Justice Bersamin)




 

D I S S E N T




BERSAMIN,,J.:



In these consolidated appeals, the issue presented is whether or not the compromise agreement entered into by Philippine National Construction Corporation (PNCC) and Radstock Securities Limited (Radstock) on August 17, 2006 is valid and legal.

The compromise agreement would be the instrument by which PNCC and Radstock would put an end to Radstock's action centering on PNCC's debt worth P10,743,103,388.00 to Marubeni Corporation (Marubeni), a Japanese corporation. Marubeni had assigned the debt of PNCC to Radstock for consideration, and Radstock brought suit in the Regional Trial Court (RTC) in Mandaluyong City. The RTC rendered judgment against PNCC, which appealed in due course. In the course of the appeal (C.A.-G. R. CV No. 87971), the Court of Appeals (CA) approved the compromise agreement on January 25, 2007.

The petitioners came to this Court to assail the approval of the compromise agreement on the ground that the compromise agreement was illegal, in fraud of PNCC's other creditors, and in violation of the prohibition under the Constitution against ownership of land by Radstock, a foreign corporation.

I believe that the Court should uphold the compromise agreement, and dismiss the petitions for review on certiorari. Hence, I vote to grant the motion for reconsideration of Radstock.


Background


In the period between 1978 and 1980, Marubeni extended two loan accommodations to PNCC, which was formerly known as the Construction Development Corporation of the Philippines (CDCP), for the following purposes: (1) the sum of US$5 million to finance the purchase of copper concentrates by CDCP Mining Corporation (a subsidiary of CDCP), which obligation CDCP guaranteed to pay jointly and severally up to the amount of P20 million; and (2) �5.46 billion, or its equivalent in Philippine Pesos of P2,099,192,619.00, to finance the completion of the expansion project of CDCP Mining Corporation in Basay, and as working capital, which obligation CDCP also guaranteed to pay jointly and severally.

In the meanwhile, in 1983, CDCP changed its corporate name to Philippine National Construction Corporation (PNCC) in order to reflect the magnitude of the equity investment of the National Government (including those of several government financial institutions).

The loans were not paid by CDCP/PNCC.

On October 20, 2000, the PNCC Board of Directors passed Board Resolution No. BD-092-2000 admitting PNCC's liability to Marubeni as of September 30, 1999 in the amount of P10,743,103,388, thus:


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.

On November 22, 2000, the PNCC Board of Directors passed Board Resolution No. BD-099-2000 (amending Board Resolution No. BD-092-2000), to wit:

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.

By a deed of assignment dated January 10, 2001, Marubeni assigned its credit to Radstock, a corporation organized under the laws of the British Virgin Islands, with office address at Suite 602, 76 Kennedy Road, Hong Kong.

On January 15, 2001, Radstock sued PNCC in the RTC in Mandaluyong City to recover the debt and consequential damages, praying for the issuance of a writ of preliminary attachment. The suit was docketed as Civil Case No. MC 01-1398.

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

Notwithstanding the pendency of C.A.-G.R. SP No. 66654, Civil Case No. MC 01-1398 proceeded in the RTC. In its answer in Civil Case No. MC 01-1398, PNCC reiterated the grounds of its motion to dismiss as affirmative defenses, namely: 1) that the plaintiff had no legal capacity to sue; 2) that the loan obligation had already prescribed because no valid demand had been made; and 3) that the letter of guarantee had been signed by a person not authorized to do so by a valid board resolution.

In C.A.-G.R. SP No. 66654, PNCC argued similar grounds to assail the denial of its motion to dismiss, to wit: 1) that the cause of action was barred by prescription; 2) that the pleading asserting the claim stated no cause of action; 3) that the condition precedent for filing of the instant suit had not been complied with; and 4) that the plaintiff had no legal capacity to sue. PNCC further argued that the RTC committed grave abuse of discretion in issuing the writ of attachment, for there had been no valid grounds to grant the writ.

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

Soon after the CA rendered its decision in C.A.-G.R. SP No. 66654, the RTC promulgated its judgment in Civil Case No. MC 01-1398, declaring PNCC liable to Radstock in the amount of P13,151,956,528, plus interest and attorney's fees. Also, the RTC rejected all of PNCC's affirmative defenses for being inconsistent with the evidence presented.

PNCC appealed the RTC judgment (C.A.-G.R. CV No. 87971).

Even with the main case (Civil Case No. MC 01-1398) being meanwhile decided, PNCC still appealed the CA decision in C.A.-G.R. SP No. 66654 by petition for review on certiorari (G.R. No. 156887), alleging that the CA gravely erred in holding that certiorari was not available against the denial of a motion to dismiss; and insisting that the RTC did not gravely abuse its discretion in issuing its assailed orders.

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

WHEREFORE, the petition is PARTLY GRANTED and insofar as the Motion to Set Aside the Order and/or Discharge the Writ of Attachment is concerned, the Decision of the Court of Appeals on August 30, 2002 and its Resolution of January 22, 2003 in CA-G.R. SP No. 66654 are REVERSED and SET ASIDE. The attachments over the properties by the writ of preliminary attachment are hereby ordered LIFTED effective upon the finality of this Decision. The Decision and Resolution of the Court of Appeals are AFFIRMED IN ALL OTHER RESPECTS. The Temporary Restraining Order is DISSOLVED immediately and the Court of Appeals is directed to PROCEED forthwith with the appeal filed by PNCC.

No costs.

SO ORDERED.

After receiving the decision in G.R. No. 156887, the representatives and counsel of PNCC and Radstock met for a number of times in order to discuss a possible settlement between them. They reached a final settlement on August 17, 2006, and executed the assailed compromise agreement, which they submitted to the Court on August 18, 2006 as an incident in G.R. No. 156887.[1] Essentially, PNCC and Radstock thereby agreed to reduce PNCC's adjudged liability as of July 31, 2006 from P17,040,843,968.00 to P6,185,000,000.

The compromise agreement reads as follows:

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) - Para�aque (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)-Para�aque (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) T-29716-Para�aque (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.

On December 4, 2006, the Court in G.R. No. 156887 referred the compromise agreement to the Commission on Audit (COA) for comment. In due time, COA submitted its compliance, whereby it recommended the approval of the compromise agreement.[2]

Nonetheless, on November 22, 2006, the Court required PNCC and Radstock to submit the compromise agreement to the CA, because the appeal of the RTC decision was still pending thereat.[3]

On January 25, 2007, the CA rendered its decision approving the compromise agreement.[4]

Alleging a claim against PNCC arising from the rejection of its bid during the bidding conducted in 2000 by the Privatization and Management Office (PMO) for the privatization of the Government's PNCC shares, [5] Strategic Alliance Development Corporation (STRADEC), the petitioner in G.R. No. 178158, sought reconsideration of the CA decision.

Rodolfo Cuenca, a stockholder of PNCC and also its former President and Chairman of its Board of Directors, filed a motion for intervention, maintaining that PNCC had no obligation to pay Radstock.[6]

On May 31, 2007, however, the CA denied STRADEC's motion for reconsideration and Cuenca's motion for intervention.[7]

In the meanwhile, on February 20, 2007, Luis Sison likewise joined the legal fray before the CA by filing his own petition for annulment of judgment approving the compromise agreement (C.A.-G.R. SP No. 97982).[8]

Asiavest Merchant Bankers Berhad (Asiavest), representing itself as a judgment creditor of PNCC, manifested its intention to participate in C.A.-G.R. SP No. 97982 through its urgent motion for leave to intervene and to file the attached opposition and motion-in-intervention.

On June 12, 2007, the CA (Ninth Division) promulgated a resolution in C.A.-G.R. SP No. 97982 dismissing Sison's petition for annulment of judgment approving the compromise agreement and denying Asiavest's urgent motion for leave to intervene.[9]

Sison moved for reconsideration of the dismissal, but the CA denied his motion for reconsideration.[10]

On June 20, 2007, STRADEC appealed to this Court via petition for review on certiorari (G.R. No. 178158), praying that the compromise agreement be declared void for violating the law and public policy. STRADEC sought a temporary restraining order or writ of preliminary injunction.[11]

Cuenca did not appeal.

On July 2, 2007, the Court directed PNCC and Radstock, their officers, agents, representatives and other persons acting under their orders to maintain the status quo ante.[12]

On September 21, 2007, Asiavest presented its urgent motion for leave to intervene and to file the attached opposition and motion-in-intervention in G.R. No. 178158.[13]

On November 26, 2007, Sison also appealed to the Court (G.R. No. 180428),[14] submitting in support of his petition:

  1. 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.

  2. RESOLVING THE JURISDICTION ISSUES PRESENTED IN THIS CASE WILL ENRICH JURISPRUDENCE.

  3. PETITIONER HAS A MERITORIOUS CAUSE OF ACTION, AND THE INSTANT PETITION WARRANTS JUDICIAL REVIEW DUE TO COMPELLING REASONS.

On their part, Radstock and PNCC similarly argued in their respective memoranda that:[15]

  1. THE COMPROMISE AGREEMENT DOES NOT VIOLATE PUBLIC POLICY.

  2. THE SUBJECT MATTER DOES NOT INVOLVE AN ASSUMPTION BY THE GOVERNMENT OF A PRIVATE ENTITY'S OBLIGATION IN VIOLATION OF THE LAW AND/OR THE CONSTITUTION.

  3. THE PNCC BOARD RESOLUTION OF OCTOBER 20, 2000 IS NOT DEFECTIVE OR ILLEGAL.

  4. THE COMPROMISE AGREEMENT IS VIABLE AND DOES NOT INCLUDE ALL OR SUBSTANTIALLY ALL OF PNCC'S ASSETS.

  5. THE DECISION OF THE COURT OF APPEALS IS NOT ANNULLABLE AS THERE WAS NO FRAUD PRACTICED HERE.

On February 18, 2008, G.R. No. 180428 and G.R. No. 178158 were consolidated.[16]

On January 13, 2009, the Court held oral arguments limited to the following the matters:

  1. Does the Compromise Agreement violate public policy?

  2. Does the subject matter involve an assumption by the government of a private   entity's obligation in violation of the law and/or the Constitution? Is the PNCC Board Resolution of October 20, 2000 defective or illegal?

  3. Is the Compromise Agreement viable in light of the non-renewal of PNCC's franchise by Congress and its inclusion of all or substantially all of PNCC s assets?

  4. Is the Decision of the Court of Appeals annullable even if final and executory on   the grounds of fraud,  public policy and the Constitution?[17]

On December 4, 2009, the Court, by a vote of eight Members in the majority,[18] four Members in the minority,[19] and two Members taking no part, promulgated a decision, disposing:

WHEREFORE, we GRANT the petition in G.R. No. 180428. We SET ASIDE the Decision dated 25 January 2007 and the Resolutions dated 12 June 2007 and 5 November 2007 of the Court of Appeals. We DECLARE (1) PNCC Board Resolution Nos. BD-092-2000 and BD-099-2000 admitting liability for the Marubeni loans VOID AB INITIO for causing undue injury to the Government and giving unwarranted benefits to a private party, constituting a corrupt practice and unlawful act under Section 3(e) of the Anti-Graft and Corrupt Practices Act, and (2) the Compromise Agreement between the Philippine National Construction Corporation and Radstock Securities Limited INEXISTENT AND VOID AB INITIO for being contrary to Section 29(1), Article VI and Sections 3 and 7, Article XII of the Constitution; Section 20(1), Chapter IV, Subtitle B, Title I, Book V of the Administrative Code of 1987; Sections 4(2), 79, 84(1), and 85 of the Government Auditing Code; and Articles 2241, 2242, 2243 and 2244 of the Civil Code.

We GRANT the intervention of Asiavest Merchant Bankers Berhad in G.R. No. 178158 but DECLARE that Strategic Alliance Development Corporation has no legal standing to sue.

SO ORDERED.

On December 28, 2009, Radstock filed its motion for reconsideration, stating the following grounds, to wit:

  1. The  Court was  improperly influenced by the privilege speeches delivered by Senators on the floor of the Senate, and by the testimonies of resource persons given in the fact-finding or investigative hearings into finding Radstock and Philippine National Construction Corporation (PNCC) guilty of "pillage of public coffers," in violation of their right to due process under the Constitution;

  2. The Court misconstmed the actions taken by the members of the Board of Directors of PNCC, and thus erred in ruling that the members had acted in bad faith and with gross negligence in directing the affairs of PNCC;

  3. In finding that the obligation of PNCC towards Radstock/Marubeni Corporation had already prescribed, the Court overlooked the documentary evidence showing that the running of the prescriptive period had been interrupted;

  4. In holding that the PNCC Board of Directors had no power to compromise the P6.196 billion liability, the Court failed to consider:

    1. That the claim of Radstock had not yet been settled, and, therefore, Section 20, Chapter 4, Subtitle B, Title 1, Book 5, of Executive Order (EO) 292 did not apply; and

    2. That PNCC was a private corporation, and that the obligations under the letter of guarantee were contracted by a private entity in favor of another private entity;

  5. PNCC's obligation to cede rights over several parcels of land to qualified assignees would not amount to transfer of the ownership of land to Radstock as to violate the Constitutional prohibition;

  6. Asiavest was not a prejudiced creditor; hence, declaring that the compromise agreement was a transaction in fraud of Asiavest as a creditor was unfounded and unwarranted. Moreover, were the compromise agreement enforced, PNCC would not be disposing of all or substantially all of its assets, considering that PNCC continued to have substantial assets and would remain a going concern with significant cash balances;

  7. The express findings of the Commission on Audit (COA) that the terms of the compromise agreement were reasonable and above board must be respected, and should be given more weight than the mere suspicions generated during the Senate proceedings, there being no basis for the contrary; and

  8. PNCC continued to have the right to the revenues from the toll operations being conducted by authority of the toll operation certificate (TOC) duly issued by the Toll Regulatory Board (TRB).


Submissions


As I earlier declared, I vote to grant Radstock's motion for reconsideration, and to dismiss the petitions for review on the ground that the compromise agreement is valid and legal. There are compelling reasons for the Court to reverse the decision dated December 4, 2009.


I
Preliminary Statement on the
Decision dated December 4, 2009


The reversal of the decision of December 4, 2009 can only be beneficial to PNCC, in particular, and to the National Government, in general. The approval of the compromise agreement will mean that PNCC's liabilities will be settled at the much reduced amount of P6,196,000,000.00, instead of P13,151,956,528.00, with interest from October 15, 2001, plus P10 Million as attorney's fees, as the RTC adjudged. The settlement of the liability will be through dacion en pago involving certain real properties of PNCC not directly devoted to the tollway operations, plus the transfer to Radstock of common shares of the capital stock of PNCC issued at par value comprising 20% of PNCC's outstanding capital stock (with the assigned value of P713,000,000.00 under the compromise agreement), and 50% of PNCC's 6% share in the gross toll revenue of the Manila North Tollways Corporation (MNTC) with a net value of P1,287,000,000.00 under the compromise agreement.

However, the non-reversal of the decision can expectedly result in the affirmance of the RTC decision, not its reversal. Thereby, the judgment award of P13,151,956,528.00, with interest from October 15, 2001, plus P10 Million as attorney's fees, will have ballooned to over P20 Billion as of today by reason of the imposition of interest from October 15, 2001, per the judgment.

Upholding the decision dated December 4, 2009 can also produce some unwanted consequences that are mostly unintended, but not entirely unforeseen, like: (a) establishing the twin bad precedents of admitting legislators' privilege speeches as evidence and giving weight to them for purposes of all judicial adjudications; and of according probative value to the extrajudicial testimonies of resource persons during congressional fact-finding or investigative hearings, contrary to the established rules on admissibility and on weight of extrajudicial statements; (b) declaring PNCC as already in a state of technical insolvency without following the procedures laid down by the Insolvency Law,[21] thereby causing its forced dissolution without first extending to PNCC and its creditors and partners the right to be heard thereon; (c) putting in limbo the operation of the North Luzon Expressway (NLEX) and other toll operations in which PNCC had a stake; (d) allowing congressional events other than the due passage of legislation to negate proceedings before the courts of law, and undo the outcome of such judicial proceedings; and (e) tolerating litigants' abuse of the restrictive direct access to the Supreme Court to ventilate issues that ought to be brought first before the trial courts (like insolvency proceedings, and stockholder's derivative suits).


II
Proof that PNCC Board of Directors
Acted in Bad Faith did not Exist


The prologue of the decision dated December 4, 2009 perorated:

This case is an anatomy of a P6.185 billion pillage of the public coffers that ranks among one of the most brazen and hideous in the history of this country. This case answers the question why our Government perennially runs out of funds to provide basic services to our people, why the great masses of the Filipino people wallow in poverty, and why a very select few amass unimaginable wealth at the expense of the Filipino people.

The prologue shows where the decision dated December 4, 2009 was coming from. While loud in its avowal of a passion for the welfare of our country and people, the decision was short in evidence to support its sweeping conclusions of fact. The Court would thereby whimsically accord credence to the petitioners' unsubstantiated allegations that the PNCC Board of Directors had acted with bad faith and fraud, contrary to our duty and responsibility as judges to determine controversies with detachment and dispassion and by relying on admissible and competent evidence.

It is clear, however, that the conclusions about bad faith and fraud imputed to the PNCC Board of Directors for recognizing and confirming the Marubeni loan through the assailed resolutions of October 20, 2000 and November 22, 2000 lacked competent factual and legal basis.

Firstly: The speeches of Senators on the floor of the Senate and the statements of resource persons daring the Senate inquiries were unduly used in the decision dated December 4, 2009 to support the sweeping conclusory statement that bad faith motivated the PNCC Board of Directors' passing of the assailed resolutions recognizing and confirming PNCC's debt to Marubeni.

Such speeches and statements were introduced into these cases for the first time only in the decision dated December 4, 2009, which means that they were not at all brought to the attention of any of the lower courts having anything to do with the issues between Radstock and PNCC. It was not clear then and now how they could be a factor to tilt the balance in favor of the petitioners, who did not even resort to the only regular way of admitting evidence for judicial consideration through an offer of evidence coupled with the purpose of the offer.[22]A formal offer is necessary, because judges must base their findings of fact and judgment only, and strictly, upon the evidence offered by the parties at the trial.[23] Courts will consider as evidence only that which has been formally offered; otherwise, the opposing party would be denied due process of law by depriving him of the chance to examine the documents and to object to their admissibility. On the other hand, the appellate court will have difficulty reviewing documents not previously scrutinized by the court below.[24]

Being inherently extrajudicial material, too, the speeches of legislators delivered on the floor and the testimonies of resource persons given in congressional committee hearings cannot be considered or recognized as competent evidence under the Rules of Court. Even the rule on judicial notice embodied in Section 1,[25] Rule 129, of the Rules of Court does not include such speeches and testimonies, because the rule limits itself to the official acts of the Legislative Department. The term official acts, in its general sense, may encompass all activities of the Congress, like the laws enacted and resolutions adopted, but by no stretch of legal comprehension may the statements of the legislators and testimonies of resource be regarded as the "official act of the legislative department." At best, the courts can only take judicial notice of the fact that such speeches or statements were made by whoever made them, or of the fact that such hearings were conducted.

The testimonies or statements of the persons during the hearings or sessions, being hearsay, cannot take the place of actual testimony in court as the means of ascertaining the truth of a disputed fact in a judicial proceeding, unless they are shown to come within any of the established exceptions to the hearsay rule. Obviously, none of the petitioners made a showing towards that end. The rule of fairness to the adverse parties engrafted in the Rules of Court has thus been sidelined without prior notice by a reliance on such testimonies or statements.

Secondly: It was unreasonable for the majority to conclude or presume that the PNCC Board of Directors acted in bad faith in issuing the assailed Resolution No. BD-092-2000 on October 20, 2000 (admitting PNCC's liability as of September 30, 1999 to Marubeni in the amount of P10,743,103,388) and Resolution No. BD-099-2000 on November 22, 2000 (amending Board Resolution No. BD-092-2000).

The truth is that only good faith motivated the issuance of the assailed resolutions, as the following events leading to their issuance bear out.

On September 24, 2000, the Asset Privatization Trust (APT) - whose principal purpose was to see to the expeditious disposition and privatization of certain government corporations and/or their assets[26] - publicly announced the invitation to bidders for the sale of the National Government's shares in PNCC (including receivables) on an as-is, where-is basis[27] At the time, the APT was the largest shareholder of PNCC, holding 47.20% of PNCC's shares,[28] followed by the Government Service Insurance System with 21.4%, Presidential Commission on Good Government, with 11.2%, and Land Bank of the Philippines, with .3%.

For purposes of the bidding, APT was required to disclose PNCC's total liabilities, notwithstanding that the bidding rules subsequently adopted granted interested and qualified bidders a 30-day period from September 28, 2000 (until October 28, 2000) within which to conduct their own due diligence inquiries. Consistent with its authority to engage external expertise,[29] APT, through the Development Bank of the Philippines and Philippine National Bank, had engaged the Feria Law Office to conduct a legal audit of PNCC (and its liabilities) even prior to the public announcement of the bidding for the PNCC shares of the National Government. The Feria Law Office rendered a legal opinion confirming the validity of the Marubeni loans.

Due to the prospective bidders' rightful need for a clear and unequivocal disclosure of PNCC's total liabilities (including the Marubeni loans), the PNCC Board of Directors, comprised mostly of the representatives from APT and other government agencies with shares in PNCC, convened to address the issue frontally. Thus did the PNCC Board of Directors, relying on the Feria legal opinion, come to issue Resolution No. BD-092-2000 on October 20, 2000, to recognize and confirm the Marubeni obligation, among others.

It is clear that the recognition and confirmation of the Marubeni loans through Resolution No. BD-092-2000 came about only because PNCC had to make a full and accurate disclosure of its liabilities to the prospective bidders of the National Government's shares in PNCC. The issuance was not intended to resurrect a "dead claim," as the December 4, 2009 decision incorrectly and unfairly characterized the issuance, but to enable the soonest implementation of the clear policy of the National Government to privatize its assets.

The second assailed resolution - Resolution No. BD-099-2000 issued on November 22, 2000 - came in the aftermath of the failure of the bidding. The purpose of its issuance was to add the condition "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)" thereby opening a line of defense to PNCC should a subsequent action be taken in reliance upon the information contained in the prior resolution.[30]

The assailed resolutions were evidently designed only to comply with the need for frank disclosures of PNCC's existing liabilities in order to pave the way towards its soonest privatization pursuant to existing government policies.

Incidentally, Radstock had nothing to do with the issuance of the assailed resolutions. The assignment of the Marubeni claim to Radstock by means of the deed of assignment occurred only on January 10, 2001.

Thirdly: The PNCC Board of Directors' decision to settle the liability with Radstock was not attended or tainted by bad faith or fraud. That decision came after PNCC had already lost in the RTC, and its appeal was already pending in the CA. The primary intention for settling with Radstock was to lay the groundwork for the extension by Congress of PNCC's legislative franchise. Congress (House of Representatives) made it known to PNCC that the extension would not be "entertained" unless PNCC first cleared its liabilities and settled "all pending court cases." This intention was apparent on the face of PNCC's Board Resolution No. BD-040-2006 (a copy of which was attached to the joint motion for judgment based on compromise agreement), viz:

WHEREAS, the undersigned members of the Board of Directors are aware that the franchise granted to PNCC by virtue of PD 1113 will be expiring on April 30, 2007;

WHEREAS, in several hearings conducted by Congress in connection with PNCC's franchises, the issue of PNCC's huge financial liabilities had always been raised by members of the Franchise Committee;

WHEREAS, the Board is likewise aware that during the hearings on the various committees of the House of Representatives, the latter has made it known to PNCC that its Franchise will not be entertained without PNCC cleaning its liabilities and settling all pending court cases;


WHEREAS, to address the above Congressional conditions in order for the franchise extension to be entertained and with the end view of presenting a clean balance sheet through a global settlement of all its obligations, PNCC Board approved an over-all plan on Strategic Restructuring wherein Franchise Extension is considered crucial to enhancing the recovery of National Government's financial exposure in PNCC in the form of Php7B to the Privatization Management Office (PMO) and another of Php6.3B to the Toll Regulatory Board (TRB), Bureau of Treasury (BTR) and the National Development Company (NDC):

WHEREAS, in line with cleaning up of the balance sheet, the Board is also addressing PNCC's Song standing problem of its debts to PNB totaling Php2.358B;

WHEREAS, the Board is thus aware, in light of the above conditions set by various Committees of the Congress for franchise extension, of the need to settle/resolve cases in court where billions of pesos of liabilities have been adjudged against PNCC which have to be resolved prior to the expiration of the franchise;

WHEREAS, the Board took cognizance of the fact that the biggest among the cases pending against PNCC is the Radstock case, which had been decided against PNCC by the Regional Trial Court xxx;
[31]

Fourthly. A strong proof that PNCC did not simply fold up its arms and easily surrender vis-a-vis the Marubeni claim was PNCC's sincere resistance to Radstock's suit upon the claim.

It cannot be denied that PNCC defended against the collection suit of Radstock from the outset and until the Court of Appeals (CA), first filing its motion to dismiss in the RTC, and then, upon denial of the motion to dismiss, assailing the denial before the CA, and, later on, appealing before the Supreme Court itself (G.R. No. 156887) the CA's affirmance of the RTC. Next, after the RTC, as trial court, rendered judgment against it, PNCC vigilantly appealed to the CA. Thirdly, PNCC explored and considered the possibility and advisability of entering into an amicable settlement with Radstock only after deliberating on its slim chances of winning its appeal in light of the factual findings of the RTC and the ruling of the Court in G.R. No. 156887. Fourthly, PNCC first sought the opinion of the Office of the Government Corporate Counsel (OGCC) before deciding on entering into the compromise agreement on August 17, 2006. And, finally, the compromise agreement ultimately merited the favorable endorsement of the Commission on Audit (COA).

Fifthly: The decision of December 4, 2009 concluded that "[f]or almost two decades, the PNCC Board has consistently refused to admit liability for the Marubeni loans because of the absence of a PNCC Board resolution authorizing the issuance of the letters guarantee;[33] that "PNCC never admitted liability for these debts in the past" because "[t]here is also no dispute that it was only on 20 October 2000 when the PNCC Board approved a resolution expressly admitting PNCC's liability for the Marubeni loans;"[34] that "[i]n short, after two decades of consistently refuting its liability for the Marubeni loans, the PNCC Board suddenly and inexplicably reversed itself by admitting in October 2000 liability for the Marubeni loans;"[35] that "the PNCC Board revived what appeared to have been a dead claim by abandoning one of PNCC's strong defenses, which is the prescription of the action to collect the Marubeni loans;"[36] and that "based on the records, the extrajudicial demands to pay the loans appear to have been made only in 1984 and 1986" and that "the written acknowledgment of the debt, in the form of Board Resolution No. BD-092-2000, was issued only on 20 October 2000."[37]

However, the foregoing were mere conclusory statements that did not rest on any competent and credible evidence. It was simply not true, as the decision of December 4, 2009 represented in its page 24, that "based on the records, the extrajudicial demands to pay the loans appear to have been made only in 1984 and 1986." On the contrary, the records of the trial court reveal that Radstock adduced before the RTC competent and credible documentary evidence proving that the Marubeni claims had not yet prescribed due to the series of demand letters made by Marubeni as well as the acknowledgments of the obligation on the part of APT and PNCC.

In that regard, Radstock's motion for reconsideration included such evidence, as follows:

  1. Exhibit M - Letter dated May 8, 1987, showing that Marubeni sent a demand letter to Mr. David SyCip of APT which itemized the outstanding  obligation of PNCC to Marubeni;

  2. Exhibit N - Memorandum dated November 4, 1987 of the APT to the Committee on Privatization, showing that APT recognized Marubeni as one of the creditors of PNCC, and that the obligation had been included in the privatization plan for PNCC;

  3. Exhibit O - Letter dated February 24, 1988 of Edgardo Olaguer, President of PNCC, informing Marubeni of the approval by the Committee on Privatization of the privatization  plan for PNCC. To be noted is that the privatization plan included the obligation in favor  of Marubeni. This letter was an acknowledgment by PNCC through APT of the outstanding obligation to Marubeni as of February 19, 1988;

  4. Exhibit P - Letter dated March 1988 of Marubeni to APT, inquiring on the status of the rehabilitation plan of PNCC, indicating the continuing demand for payment by Marubeni;

  5. Exhibit Q - Reply letter dated March 4, 1988 of Mr. David SyCip to Marubeni, telling that although the rehabilitation plan for PNCC had been approved, it was necessary for its rehabilitation that the creditors and shareholders allowed a plan for recovery leading to a sharing formula. This letter shows that APT recognized PNCC's obligation to Marubeni.

  6. Exhibit R - Letter dated June 2, 1993 of Marubeni to APT inquiring on the current status of the privatization plan of PNCC, including the sale of PNCC equipment. The letter continued the demand of Marubeni for payment.

  7. Exhibit S - Reply letter dated June 9, 1993 of APT to Marubeni, showing that APT continued to acknowledge the outstanding obligation of PNCC to Marubeni by informing the latter of the revision of the rehabilitation plan (with Marubeni being listed as one of the creditors), and by furnishing Marubeni a list of the on-going projects of PNCC;

  8. Exhibit T - Letter dated July 2, 1996 of Marubeni to PNCC, requesting information on the present status of rehabilitation plan of PNCC and the repayment of creditors, and proposing debt-to-equity swaps, sales of debts to third parties, or repayment from cash flow proceeds. The letter constituted a continuing demand of Marubeni to PNCC;

  9. Exhibit U - Reply letter sent on July 25, 1996 by PNCC to Marubeni, stating that Marubeni was among the entities to benefit from PNCC's rehabilitation-plan. The letter showed that PNCC acknowledged its obligation towards Marubeni.

  10. Exhibit V - Letter sent on September 15, 1999 by Marubeni to Mr. Armando Samia of the DBP, seeking a summary of PNCC's financial obligation towards Marubeni, and demanding that the obligation be taken into consideration in the rehabilitation and privatization of PNCC. The letter indicates that Marubeni continued to demand payment from PNCC through DBP, one of the financial institutions that had foreclosed some of the assets of PNCC.[38]

Relevantly, the RTC held as follows:

More significantly (sic), is the fact that these obligations have been acknowledged by PNCC in its Special Meeting of its Board of Directors on October 20, 2000, otherwise it would not have been done had the same were not true.

x x x

Third, Radstock has sufficiently established that its causes of action have not yet prescribed.

PNCC argues that since the loan agreement was executed in 1980 and the Advance Payment Agreement in 1978, the right of action to collect under these documents should have expired ten (10) years from said execution or, at the very least, on or before 1990 and that therefore the present action filed in 2001 by Radstock has prescribed.

This argument is belied by the numerous documentary evidence presented by Radstock to show that: (1) written demands were sent to PNCC by Marubeni; and (2) PNCC has acknowledged its obligation in favor of Marubeni
.[39]

x x x
Pursuant to Article 1144(1), Civil Code, Radstock's action for collection, being based on a written contract, would prescribe after ten years from the time the right of action arose. The written extrajudicial demands interrupted the running of the prescriptive period, and the period of prescription commenced anew from the receipt of the demand.[40] Hence, as of January 15, 2001, when Radstock commenced its action in the RTC, the claim had not yet prescribed, even if the period of prescription were reckoned from July 25, 1996, the date when PNCC sent its reply letter (Exhibit U, No. 9 supra) to Marubeni.

Similarly, the Court itself declared in G.R. No. 15688741 that the claim of Marubeni had not yet prescribed "in light of the several demand letters and correspondences exchanged by the parties up to July 25, 1996" viz:

We have carefully reviewed the Motion to Dismiss and the action taken by the court a quo and we find nothing that may constitute a grave abuse. The Order of April 19, 2001 which first denied the Motion to Dismiss meticulously explained the legal and factual basis for the trial court's rejection of the four grounds raised by PNCC:

With respect to the first issue of whether or not the instant action had already been barred by prescription, the Court, after judicious examination of the environmental circumstances of this case and upon examination of the pertinent jurisprudence, is inclined to rule in the NEGATIVE. The averment on the pleadings submitted by the parties had so far revealed that the above-entitled case instituted by plaintiff Radstock Securities Limited for a sum of money and damages against defendant Philippine National Construction Corporation is not barred by prescription in light of the several demand letters and correspondences exchanged by the parties up to July 25, 1996. Further, it is interesting to note that defendant had, in the Board meeting held last October 20, 2000, clearly acknowledged the subject indebtedness to Marubeni....

x x x

This pronouncement on prescription in G.R. No. 156887 became the law of the case, which the Court should follow and apply herein. Verily, the Court, having previously ruled by final judgment that the claim had not yet prescribed, should not now rule differently. Law of the case means that whatever is once irrevocably established as the controlling legal rule between the same parties in the same case continues to be the law of the case, whether correct on general principles or not, so long as the facts on which such decision was predicated continue to be facts of the case before the court. In People v. Pinuila,[42] we held that:

"Law of the case" has been defined as the opinion delivered on a former appeal. More specifically, it means that whatever is once irrevocably established as the controlling legal rule of decision between the same parties in the same case continues to be the law of the case, whether correct on general principles or not, so long as the facts on which such decision was predicated continue to be the facts of the case before the court.

It may be stated as a rule of general application that, where the evidence on a second or succeeding appeal is substantially the same as that on the first or preceding appeal, all matters, questions, points, or issues adjudicated on the prior appeal are the law of the case on all subsequent appeals and will not be considered or readjudicated therein.

x x x

As a general rule a decision on a prior appeal of the same case is held to be the law of the case whether that decision is right or wrong, the remedy of the party deeming himself aggrieved being to seek a rehearing.

Questions necessarily involved in the decision on a former appeal will be regarded as the law of the case on a subsequent appeal, although the questions are not expressly treated in the opinion of the court, as the presumption is that all the facts in the case bearing on the point decided have received due consideration whether all or none of them are mentioned in the opinion.

In fine, Radstock competently and convincingly established Marubeni's continuing demands, and APT's acknowledgement of the outstanding obligation of PNCC, thereby preventing the claim from being barred by prescription.

Sixthly: According to the December 4, 2009 decision, PNCC's defenses were "strong" and "solid," which did not explain why the PNCC Board of Directors "admitted [PNCC's] liability and entered into a Compromise Agreement that is manifestly and grossly prejudicial to PNCC."[43]

That PNCC's defenses were "strong" or "solid" did not justify the conclusion that the PNCC Board of Directors acted in a manner that was "manifestly and grossly prejudicial to PNCC."[44] The established fact is that the compromise agreement was entered into only after the RTC had decided the collection suit, rejecting PNCC's "strong" or "solid" defenses, and when the appeal of PNCC was already before the CA. Also, the RTC found the letter of guarantee executed by PNCC to be valid and genuine, turning away PNCC's defense of the supposed lack of authority of Alfredo Asuncion to sign the letter as bereft of merit. Such treatment of PNCC's other defenses was similarly upheld in G.R. No. 156887,[45] viz:

x x x

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....

x x x

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.

x x x

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.

Seventhly: Worthy to note is that the assailed resolutions also recognized and confirmed PNCC's liability in favor of the National Government. It is unreasonable for the petitioners, therefore, to be so quick in rejecting PNCC's recognition and confirmation of the Marubeni loans, but unquestioning in accepting PNCC's recognition of its debt to the National Government through the same resolutions.


III
Reliance on Privilege Speeches of Senators
and on Testimonies of Senate's Resource Persons
sets bad precedent and encourages disregard
of the Rules of Court and Jurisprudence


The decision dated December 4, 2009 relied too much on the privilege speeches of Senators and on the transcripts of testimonies of resource persons in the Senate inquiries to buttress the conclusion that the compromise agreement was entered into in bad faith and in fraud of the Government. Such reliance is borne out by the volume of the excerpts lifted from the transcripts of privilege speeches and of testimonies given in the Senate inquiry, which filled nearly a third of the length of the December 4, 2009 decision (i.e., 28 out of the total 90 pages). The obvious thrust of such reliance was to heighten the perception of a "pillage of the public coffers." Without the excerpts, nothing remained to bolster the contention of bad faith and fraud.

Yet, unless the decision of December 4, 2009 was reversed, judges hereafter stand to be concluded by whatever the Senators and Congressmen say in their privilege speeches, or find in their congressional inquiries. Therein lurks the quiet but greatest danger to judicial adjudications, because the decision of December 4, 2009 would hereafter be cited as precedent and relied upon in the courts. The looming danger should sufficiently alert us against permitting the politicking or grandstanding in the political arena, where only party lines and political platforms - not strict justice and equity - hold sway,[46] to influence the future judicial adjudications.

The reversal of the December 4, 2009 decision is, therefore, warranted and necessary. We should not suffer the unwanted and bad precedent of admitting legislators' privilege speeches and resource persons' testimonies as means of establishing the truth in disputes before our courts of law. Such result should be avoided, and, better yet, outrightly disallowed, for such speeches and testimonies are extrajudicial and the veracity of the facts they represent are not rigorously tested pursuant to the Rules of Court. Such speeches and testimonies are mere opinions, unreliable hearsays, unilateral declarations, and self-serving statements; hence, bereft of probative value.

Moreover, the Senate inquiries, having been held only in the last part of 2006, could not alter or affect the outcome of a still pending suit earlier decided by the RTC on December 10, 2002. To allow otherwise is to accord to such congressional inquiries and the plainly inadmissible statements generated in them undue and undeserved primacy over the legal and factual findings regularly reached by a court of law after a full-blown trial on the merits in this judicial controversy between PNCC and Radstock. Even worse, we would be nullifying on-going judicial processes of a pending action, which can only mean that the Court is abdicating its unique sovereign responsibility of discharging judicial power under the tri-partite system ordained by the Constitution, whose Article VIII clearly provides, viz:

Section 1. The judicial power shall be vested in one Supreme Court and in such lower courts as may be established by law.

Judicial power includes the duty of the courts of justice to settle actual controversies involving rights which are legally demandable and enforceable, and to determine whether or not there has been a grave abuse of discretion amounting to lack or excess of jurisdiction on the part of any branch or instrumentality of the Government.

IV
PNCC has the Power to Compromise

The PNCC Board of Directors had the power to compromise the Marubeni claim without presidential or congressional approval.

Firstly: Under Section 20 (1) Chapter IV, Subtitle B, Title I, Book V of Executive Order (EO) No. 292,[47] a presidential approval is required to compromise or to release a "settled claim or liability" in an amount exceeding P10,000.00 but not exceeding P100,000.00; while congressional approval is required to compromise or to release a "settled claim or liability" inexcess of P100,000.00.

A settled claim or liability means that the claim or liability is already definite and undisputed.

The cited law did not apply to the Marubeni claim. Although the RTC had already determined the claim, such determination did not render the claim settled within the context of the law. PNCC's appeal left the RTC's determination still open to review and revision, which means that the claim remained indefinite, particularly its amount. The appeal can either uphold, or reduce, or increase the amount.

It is not correct to regard the express recognition and confirmation of the Marubeni claim in the amount of P10,743,103,388.00 through the first assailed resolution issued on October 20, 2000 as rendering the obligation of PNCC a settled claim within the context of the cited law. To insist so is to be blind to the reality that, one, the PNCC Board of Directors subsequently revoked the recognition and confirmation, and, two, the RTC rendered a decision in favor of Radstock adjudging PNCC liable in the larger amount of P13,151,956,528.00 (plus interest from October 15, 2001 and attorney's fees worth P10 Million). As earlier stated, the appeal could still modify the amount of the claim.

The applicability of the cited law only to a settled claim or liability is no longer in doubt. In Benedicto v. Board of Administrators of Television Stations and Guingona, Jr. v. PCGG,[48] the Court said:

Prior congressional approval is not required for the PCGG to enter into a compromise agreement with persons against whom it has filed actions for recovery of ill-gotten wealth. Section 20, Chapter 4, Subtitle B, Title I, Book V of the Revised Administrative Code of 1987 (E.O. No. 292) cited by Senator Guingona is inapplicable as it refers to a settled claim or liability. The provision reads:

Section 20. Power to Compromise Claims. -

(1) When the interest of the Government so requires, the Commission may compromise or release, in whole or in part, any settled claim or liability to any government agency not exceeding ten thousand pesos arising out of any matter or case before it or within its jurisdiction, and with the written approval of the President, it may likewise compromise or release any similar claim or liability not exceeding one hundred thousand pesos. In case the claim or liability exceeds one hundred thousand pesos, the application for relief therefrom shall be submitted, through the Commission and the President, with their recommendations, to the Congress;

x x x


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)

Secondly: Prior presidential or congressional approval of the compromise agreement was not also required, because PNCC remained a private corporation despite the National Government becoming its owner. Such private corporate character of PNCC was judicially declared in Philippine National Construction Corporation v. Pabion,[49] where the Court categorically ruled:

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, 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

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.

Having owed its creation to the Corporation Code, not to some charter or special law, PNCC's powers are those enumerated in the Corporation Code [50] and its articles of incorporation. Under such circumstances, PNCC is an autonomous entity, and undoubtedly holds and wields just like any other private corporation organized under the Corporation Code the power to compromise as well as the power to enter into a settlement through its Board of Directors. To maintain the contrary is to ignore the character of PNCC as a coiporate entity organized and vested under the Corporation Code with a personality and identity distinct and separate from those of its stockholders or members.[51]

Consequently, PNCC's decision to enter into the compromise agreement with Radstock is not even subject to judicial review, for as long as it is shown not to be wasteful, to be made on an informed basis, to be in good faith, to be in the best interests of the corporation, and not to involve self-interest.[52] Accepting the inscrutability of PNCC Board of Directors'decision is conformable with the business judgment rule,[53] under which the courts are not to interfere with or supplant the decision of the Board of Directors on corporate and management matters unless there is some allegation of conduct that the Directors violated their duty of care to manage the corporation to the best of their ability. Indeed, questions of policy and of management are best left to the honest decision of the officers and directors of a corporation, and the courts are without authority to substitute their judgment for the judgment of the Board of Directors, which is the business manager of the corporation.[54]

Lastly: The fact that PNCC is now a government-owned corporation does not necessarily mean that all its properties and funds automatically became public funds.

We have always sustained the view that a government-owned or government-controlled corporation (GOCC) has a personality of its own, distinct and separate from that of the Government; and that a GOCC possesses all the powers of a corporation under the Corporation Law pursuant to which it has been established.[55] The Court has observed in National Coal Company v. Collector of Internal Revenue [56] and Government of the Philippine Islands v. Springer[57] that a government-owned or government-controlled corporation was a private corporation, even if created by legislation. For, as the Court explained in Philippine National Bank v. Court of Industrial Relations:[58]

xxx In a 1941 decision, Manila Hotel Employees Association v. Manila Hotel Company,[59] this Court, through Justice Ozaeta, held: "On the other hand, it is well settled that when the government enters into commercial business, it abandons its sovereign capacity and is to be treated like any other corporation. (Bank of the United States v. Planters' Bank, 9 Wheat, 904, 6 L.ed. 244).By engaging in a particular business thru the instrumentality of a corporation, the government divests itself pro hac vice of its sovereign character, so as to render the corporation subject to the rules of law governing private corporations."

To accord with our precedent rulings, we declare that PNCC's funds are not beyond reach of its private creditors.[60]


V
Only Private Funds Are Involved
in the Compromise Agreement


A

Section 9 of Presidential Decree (PD) No. 1113 provides that, upon termination of the franchise period of PNCC, its "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."[61] Section 2 (e) of PD No. 1894,[62] which amended PD No. 1113, stipulates that only "toll facilities and all equipment directly related thereto" were to be turned over to the National Government.[63]

The provisions of these laws signified that not all of PNCC's assets and facilities were automatically turned over to the National Government at no cost upon the expiration of its franchise by April 30, 2007; and that, conversely, the turnover did not result in the National Government already owning all of PNCC's assets and facilities, including the revenues derived from the toll assets and fees.

For sure, PNCC had other business apart from its toll operations, and also owned properties not directly related to the toll operations that it can validly dispose without restriction The properties with which PNCC would pay its obligation to Radstock under the terms of the compromise agreement are precisely those not directly related to the operations of the tollways. As such, no public assets would be used in PNCC's compliance with the compromise agreement, as the Government Corporate Counsel made clear enough during the oral arguments:

As a corporate entity pursuing a commercial undertaking, PNCC is obligated to settle liabilities and guarantees, which it entered into in the course of operations. While PNCC has refuted its obligation to Marubeni, now Rodstock (sic), the Regional Trial Court has ruled otherwise. PNCC, like other government corporations, cannot renege on its contractual obligations because when government enters into a commercial business; it abandons its sovereign capacity and its (sic) treated like any other corporation.

The settlement of PNCC's obligations shall be drawn from its operationally-sourced funds and not from the National Government.

No sovereign guarantee was undertaken by the National Government, no funds from the general appropriations will be used to settle the obligation of PNCC, and no funds drawn from taxes will be utilized in this settlement.
[64]

The flaw of the decision of December 4, 2009 was to assume that all of PNCC's properties as of the expiration of its legislative franchise by April 30, 2007 were directly related to the toll operations. They were not. We need to correct the error, because it definitely violates the right to due process of PNCC's private creditors. We would thereby excuse Sison from discharging his duty as the assailer of the compromise agreement to first establish in appropriate proceedings his generalization that all properties of PNCC were directly related to the operation of and maintenance of the tollways covered by the expired secondary franchise. His theory about PNCC then becoming a trustee of the National Government vis-a-vis such properties, being unsubstantiated, is dismissed instead.


B


The decision of December 4, 2009 held that the "government's ownership of PNCC's toll assets and facilities invariably results in the government's ownership of the toll fees and the net income derived from these toll assets and facilities." The majority was referring to the part of the compromise agreement requiring the assignment by PNCC of 50% of its 6% share in the gross toll revenue of the Manila North Tollways Corporation (MNTC), which would effectively be an assignment of half of the share of PNCC in the gross revenues of the North Luzon Expressway (NLEX).

This ruling of the majority, that the toll fees collected by PNCC through MNTC were public funds, was erroneous and should be rectified.

Public funds are the moneys belonging to the State or to any political subdivision of the State, specifically taxes, customs duties, and moneys raised by operation of law for the support of the Government or for the discharge of its obligations.[65]

The toll fees being collected by PNCC through MNTC do not constitute taxes, customs duties, or moneys raised by law to enable the Government to discharge its functions. They are not public funds, but simply the consideration continuously paid to PNCC as its share for undertaking the joint venture with Metro Pacific Group for the rehabilitation of the NLEX. They are thus subject to the free disposal of PNCC.

We cannot disregard the fact that the Toll Regulatory Board (TRB) had granted a Toll Operation Certificate (TOC) to MNTC, the joint venture corporation between PNCC and the Metro Pacific Group. The TOC authorized MNTC to operate and maintain the NLEX from 2005 to 2035 through the Tollway Management Corporation. As the result of the extension of its authority to operate the NLEX, PNCC should not yet turn over to the National Government the assets and property directly related to the NLEX. Accordingly, PNCC could assign and dispose of the toll fees from the operations of the NLEX in favor of Radstock in accordance with the compromise agreement.


C


That TRB had the power under the law to issue the TOC, which was merely an authority to operate a toll facility, is undisputed.

It cannot be denied that PD No. 1112 [66] invested TRB  with the following powers, among others:

Section 3. Powers and Duties of the Board. The Board shall have in addition to its general powers of administration the following powers and duties:

(a) Subject to the approval of the President of the Philippines, to enter into contracts in behalf of the Republic of the Philippines with persons, natural or juridical, for the construction, operation and maintenance of toll facilities such as but not limited to national highways, roads, bridges, and public thoroughfares. Said contract shall be open to citizens of the Philippines and/or to corporations or associations qualified under the Constitution and authorized by law to engage in toll operations;

(b) Determine and decide the kind, type and nature of public improvement that will be constructed and/or operated as toll facilities;

xxx

(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:[67]

xxx

In addition, PD No. 1894,[68] amending PD No. 1113, granted to TRB the jurisdiction and supervision over PNCC as the grantee with respect to the Expressways, and the toll facilities necessarily appurtenant thereto. Section 4 of PD No. 1894 states:

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.

TRB's issuance of the TOC was, plainly enough, its exercise of the express powers under PD No. 1112. Such issuance did not constitute an extension of PNCC's legislative franchise, which TRB could not legally extend. The issuance was not ultra vires, although its effect was to enable PNCC to continue to operate the toll facilities through MNTC even beyond April 30, 2007. Relevantly, Section 1 and Section 2 of PD No. 1894 state:

Section 1. Any provision of law to the contrary notwithstanding, there is hereby granted to the Philippine National Construction Corporation, a corporation duly organized and existing under by the virtue of Philippine laws (hereinafter called the "GRANTEE"), the right, privilege and authority to construct, maintain and operate the following expressways (hereinafter collectively called "the Expressways"), together with the toll facilities appurtenant thereto:

(a) the North Luzon Expressway from Balintawak (Station 9 + 563) to Carmen, Rosales, Pangasinan;

(b) the South Luzon Expressway from Nichols, Pasay City (Station 10 + 540) to Lucena, Quezon;

(c) the Metro Manila Expressway, from Bicutan, Paranaque, Metro Manila (Station 18 +720) to Meycauayan, Bulacan (approximate Station 63 + 290) with an approximate length of 44.570 km., to serve as an artery in the transportation of trade and commerce in the Metropolitan Manila area.

The GRANTEE is hereby further granted the right, privilege and authority to construct, maintain and operate any and all such extensions, linkages or stretches, together with the toll facilities appurtenant thereto, from any part of the North Luzon Expressway, South Luzon Expressway and/or Metro Manila Expressway and/or to divert the original route and change the original end-points of the North Luzon Expressway and/or South Luzon Expressway as may be approved by the Toll Regulatory Board (any and all such extensions, linkages, stretches and diversions hereinafter deemed included in the term "Expressways").

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
.[69]

The TOC thus issued referred to a new project (the rehabilitation of the NLEX, completed in 2005 [70]), which was entirely different from the project covered by PNCC's expired legislative franchise under PD No. 1113. The rehabilitation of the NLEX pursuant to the TOC entailed very substantial investments by PNCC and its partner, the Metro Pacific Group. The authority to collect reasonable toll fees from the users of the rehabilitated NLEX from 2005 until 2035 was the consideration given to the MNTC as the tollway operator to ensure the recoupment of such substantial investments. As such, the funds and revenues generated from PNCC's toll operations as a partner in MNTC are private in character, despite the expiration date of its legislative franchise under PD No. 1113.


D


The assailed decision's sweeping declarations, that the TOC was invalid and that all the toll fees collected were public funds, definitely prejudiced the Metro Pacific Group, PNCC's partner in MNTC, because obvious effects of the declarations were: (a) the unilateral reversion to the National Government of the rehabilitated NLEX road and facilities; (b) PNCC became thereby disabled from operating the rehabilitated NLEX through MNTC; and (c) the Metro Pacific Group was deprived of its substantial investments without due process.

I respectfully insist that the Court owed it to the fundamental ideal of doing justice to everyone to have first required the inclusion of the Metro Pacific Group as a party, or, at the very least, to have given it the proper opportunity to be heard before invalidating the TOC.


E

Whether an administrative agency like TRB can issue operating permits, such as the TOC, is long settled and recognized in this jurisdiction. In Philippine Airlines v. Civil Aeronautics Board,[71] this Court upheld the authority of the Civil Aeronautics Board (CAB) to issue certificates of public convenience and temporary operating permits to domestic carriers, which, though not possessing legislative franchises, met all the other requirements prescribed by law. It was noted therein that Congress delegated such authority to government agencies (such as the CAB) because they had the particular specialization for their respective areas of public service. Likewise, in Metropolitan Cebu Water District v. Adala,[72] the Court, citing Philippine Airlines v. Civil Aeronautics Board, held:

Moreover, this Court, in Philippine Airlines, Inc. vs. Civil Aeronautics Board, has construed the term "franchise" broadly so as to include, not only authorizations issuing directly from Congress in the form of statute, but also those granted by administrative agencies to which the power to grant franchises has been delegated by Congress, to wit:

Congress has granted certain administrative agencies the power to grant licenses for, or to authorize the operation of certain public utilities. With the growing complexity of modem 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 approval of the practice by the courts. It is 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 a legislative 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.[73]

Even the Executive Department of the Government has recognized the power of TRB to issue the TOC to PNCC independently of the legislative franchise that expired on May 1, 2007. In the opinion dated November 24, 1995, then Justice Secretary Teofisto T. Guingona, Jr. opined;[74]

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.P. No. 1112 (TRB Charter) to grant PNCC and its joint venture partner the authority to operate the existing toll facility of the NSLE and to issue therefore the necessary "Toll Operation Certificate" for a period coinciding with the term of the proposed Metro Manila Skyway.

xxx

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.[75]

VI
Radstock's qualification to own land
in the Philippines is irrelevant


Paragraph 2.4 of the compromise agreement expressly provided that the real properties involved shall be assigned to a qualified third party:

PNCC shall assign to a third party 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.

This provision of the compromise agreement did not violate the constitutional prohibition of foreign ownership of real properties, notwithstanding that Radstock, as the assignor, is not itself qualified to own land in the Philippines, because it will be the assignee of the real properties of PNCC that will acquire ownership of the real properties.

Radstock is admittedly a foreign corporation, having been incorporated under the laws of the British Virgin Islands. This reality caused the parties to stipulate in Paragraph 2.4, supra, that title to the real properties involved would not be transferred in the name of Radstock but to a third-party assignee fully qualified to own real property in the Philippines; and that Radstock would merely exercise the right to designate the assignee that PNCC would transfer the real properties to.

The compromise agreement nowhere states that the lands involved will at any time be owned by or transferred to Radstock. It only stipulates that the transfer of the lands involved will be to an assignee duly-qualified to own land under the Constitution. Thereby, Radstock will only exercise the power to choose and to designate such qualified assignee. In the meanwhile, PNCC remains as the owner. The assignment will take place between PNCC and the qualified assignee. Radstock will not itself be assigning the lands.

The Government Corporate Counsel confirmed this arrangement during oral arguments:

Atty. Agra: Yes, Your Honor. But in this particular case, the condition, the Compromise agreement is subject to certain conditions precedent Your Honor. One of which would be the actual deeds of conveyances, implementing agreements, compliance with regulations of the Securities and Exchange Commission, so, there are other requirements post approval of the Compromise agreement, Your Honor.

Associate Justice Carpio: So in the meantime, that there is no qualified beneficiary, you are saying, it's still owned by PNCC?

Atty. Agra: Yes, your Honor.[76]

Although the Constitution prohibits the ownership of land by a foreigner, the prohibition does not extend to the ownership of rights involving land. The arrangement whereby a foreigner may validiy hold certain real rights or interests in real properties is legally permissible in this jurisdiction. In fact, we have laws allowing alien individuals and foreign corporations to acquire and hold real rights and real interests over real properties to a certain extent. For instance, alien individuals and foreign corporations may exercise acts of ownership short of owning the land, such as taking possession of mortgaged properties after default and for the sole purpose of foreclosure of mortgage, receivership, enforcement or other proceeding for a period of not more than 5 years from actual possession. Republic Act (RA) No. 133, as amended by RA No. 4882, provides, viz:

Section 1. Any provision of law to the contrary notwithstanding, private real property may be mortgaged in favor of any individual, corporation, or association, but the mortgagee or his success or-in-interest, if disqualified to acquire or hold lands of the public domain in the Philippines, shall not take possession of the mortgaged property during the existence of the mortgage and shall not take possession of mortgaged property except after default and for the sole purpose of foreclosure, receivership, enforcement or other proceedings and in no case for a period of more than five years from actual possession and shall not bid or take part in any sale of such real property in case of foreclosure: Provided, That said mortgagee or successor-in-interest may take possession of said property after default in accordance with the prescribed judicial procedures for foreclosure and receivership and in no case exceeding five years from actual possession.

Another law is the Special Purpose Vehicle Act of 2002,[77] which allows foreign corporations acting as fund managers to invest in or acquire non-performing assets such as real properties owned or acquired by financial institutions. These foreign fund managers are even allowed to enter into dacion en pago, to foreclose said properties, and to settle debts.

In Hulst v. PR Builders, Inc.,[78] the execution of a contract to sell entered into by a foreigner buyer involving a piece of land in the Philippines was upheld. The Court ruled that a mere contract to sell did not yet transfer ownership to the foreigner, and was not void per se. There is more reason to side with Radstock, considering that the assignment of the real properties to a qualified third-party assignee is not illegal or unconstitutional due to the ownership not passing to Radstock. As the Court observed in Hulst:

It is significant to note that the agreement executed by the parties in this case is a Contract to Sell and not a contract of sale. A distinction between the two is material in the determination of when ownership is deemed to have been transferred to the buyer or vendee and, ultimately, the resolution of the question on whether the constitutional proscription has been breached.

In a contract of sale, the title passes to the buyer upon the delivery of the thing sold. The vendor has lost and cannot recover the ownership of the property until and unless the contract of sale is itself resolved and set aside. On the other hand, a contract to sell is akin to a conditional sale where the efficacy or obligatory force of the vendor's obligation to transfer title is subordinated to the happening of a future and uncertain event, so that if the suspensive condition does not take place, the parties would stand as if the conditional obligation had never existed. In other words, in a contract to sell, the prospective seller agrees to transfer ownership of the property to the buyer upon the happening of an event, which normally is the full payment of the purchase price. But even upon the fulfillment of the suspensive condition, ownership does not automatically transfer to the buyer. The prospective seller still has to convey title to the prospective buyer by executing a contract of absolute sale.

Since the contract involved here is a Contract to Sell, ownership has not yet transferred to the petitioner when he filed the suit for rescission. While the intent to circumvent the constitutional proscription on aliens owning real propeity was evident by virtue of the execution of the Contract to Sell, such violation of the law did not materialize because petitioner caused the rescission of the contract before the execution of the final deed transferring ownership.


VII
Disposal of PNCC Properties
does not require Public Bidding


As a general rule, any disposal of government property should be undertaken primarily through public bidding. The word bidding in its comprehensive sense means making an offer or an invitation to prospective contractors whereby the Government manifests its intention to make proposals for the purchase of supplies, materials and equipment for official business or public use, or for public works or repair. The three principles in public bidding are: the offer to the public; an opportunity for competition; and a basis for exact comparison of bids. The distinctive character of the system is destroyed and the purpose of its adoption is thwarted when a regulation thereon excludes any of these principles.[79] Public bidding of government contracts and for the disposition of government assets should have the same principles and objectives. Their only difference, if at all, is that in the public bidding for public contracts, the award is generally given to the lowest bidder, while in the disposition of government assets, the award is to the highest bidder,[80] for the terra public bidding imports a sale to the highest bidder with absolute freedom for competitive bidding.[81]

While public bidding is the general rule, there are exceptions, such as when public bidding is not the most advantageous means to dispose of its properties on the part of the Government.

According to the decision of December 4, 2009, a public bidding (or public auction) is required for the disposal of the properties of PNCC pursuant to the compromise agreement. The decision cites COA Circular No. 89-296 dated January 27, 1989, which pertinently provides that:

Conformably to existing state policy, the divestment or disposal of government property as contemplated herein shall be undertaken primarily thru public auction.

I submit that COA Circular No. 89-296 is not applicable.

Firstly: The purpose of the requirement of public bidding (or public auction) is to ensure transparency as well as to guard against disadvantage to the National Government.

Yet, even assuming, arguendo, that all the properties and funds covered by the compromise agreement were assets of the Government, the compromise by PNCC of its debt for a substantially reduced liability was nonetheless advantageous. PNCC was then faced with the bleak prospect of losing in its appeal, and of being resultantly ordered to pay a gargantuan liability. The compromise agreement would reduce PNCC's liability to only P6.185 Billion from the already judicially determined liability of P13,151,956,528.00, with interest from October 15, 2001, plus attorney's fees worth P10,000,000.00. The PNCC Board of Directors apparently exercised its business judgment on the matter. Thus, the reason for requiring a public bidding did not exist.

On the other hand, had the PNCC Board of Directors opted to wait for the decision on the appeal (thus balking at the opportunity to agree to the lesser liability), and the RTC decision was affirmed, PNCC would be ordered to pay P13,151,956,528.00, plus interest from October 15, 2001, instead of only P6.185 Billion. That liability could balloon to over P20 Billion by reason of the imposition of interest from October 15, 2001, which amount, based on the COA Report of 2005, was more than double the assets of PNCC valued at P8,493,619,000.00. If thus compelled to satisfy the P20 Billion judgment debt, PNCC would be unable to continue its operations.

Obviously, the PNCC Board of Directors exercised a sound business judgment in preferring the compromise agreement to waiting for the resolution of the appeal in due course. The reversal of the decision dated December 4, 2009 would restore to PNCC the position to pay the much-reduced liability. However, because of the non-reversal, Radstock can simply sit back and await the favorable decision on the appeal, conformably with item no. 9 of the compromise agreement, unless the parties enter into and submit another compromise agreement similar to the present one. In light of the pronouncements in the decision dated December 4, 2009, however, a similar compromise agreement is doubtful.

Secondly: The COA recommended the approval of the compromise agreement, opining that public bidding as contemplated under COA Circular No. 89-296 was not required given the exceptional nature of the controversy between PNCC and Radstock.

COA Circular No. 89-296 (dated January 27, 1989) embodies the audit guidelines to be observed in the divestment or disposal of property and other assets of all government entities or instrumentalities, whether national, local or corporate, including their subsidiaries. It relevantly states:

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.[82]

In its compliance dated October 3, 2006,[83] the COA recommended the approval of the compromise agreement, stating:

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

Sec. 501. Authority or responsibility for property disposal/divestment. - The full and sole authority and responsibility for the divestment and disposal of property and other assets owned by the national government agencies or instrumentalities, local government units and government-owned and/or controlled corporations and their subsidiaries shall be lodged in the heads of the departments, bureaus, and offices of the national government, the local government units and the governing bodies or managing heads of government-owned or controlled corporations and their subsidiaries conformably to their respective corporate charters or articles of incorporation, who shall constitute the appropriate committee or body to undertake the same.

The sale or disposal of the properties of the government is based on their assessed value and not just on a percentage thereof. Admittedly, and as discussed earlier, the audit guidelines under COA Circular No. 89-296 as reiterated in the Government Accounting and Auditing Manual are not applicable in the herein case. Nonetheless, consistent with the objective of public bidding, COA favors the disposal of government properties in the amount most advantageous to the government. It is noted that the transfer value of 70% of assessed value still falls within the standards set by government financial institutions which invariably range from 70% to 100% of the appraised value for properties situated in urban areas. The maximum percentage prescribed in Section 37 of Republic Act No. 8791, the Banking Law of 2000, provides that loans and other credit accommodations against real estate shall not exceed 75% of the appraised value of the respective real estate security. Taking this into account and the declared policy that the authority to dispose its assets is lodged with the head of the entity, COA deems the herein transfer valuation reasonable.

Under the regular procedure involving disposal of government property, COA would have initially conducted an appraisal of the property to determine its valuation. However, considering the exceptional circumstances in the instant case, the appraisals performed by the established independent appraisers are allowable. The parties engaged the services of Royal Asia Appraisal Corporation, Cuervo Appraisers, Inc., Asian Appraisal Co., Inc. and Valencia Appraisal Corporation which are reputable appraisal firms. Even COA has had occasions to engage the services of the last three independent appraisers mentioned above to help ensure that the government will not be disadvantaged in any manner. Hence, COA finds no reason to doubt the reasonableness of their appraisal.

The other terms and conditions of the compromise agreement appear to be fair and above board and COA finds no compelling grounds to oppose the same. Accordingly, COA recommends the approval of the parties' compromise agreement appended in their "Joint Motion for Judgment Based on Compromise.
"[84]

The COA recommendation for approval of the compromise agreement was reasonable, because the audit guidelines under COA Circular No. 89-296 did not apply to the compromise agreement due to its being akin to a dacion en pago, and because the valuation of the assets involved arrived at by the established and reputable independent appraisers engaged by Radstock and PNCC (i.e., Royal Asia Appraisal Corporation, Cuervo Appraisers, Inc., Asian Appraisal Co., Inc., and Valencia Appraisal Corporation). Hence, it must be respected, in.the absence of any credible and competent showing that COA erred.[85]

Under Article 1245 of the Civil Code, a dacion en pago or a dation in payment involves the alienation of property to the creditor in satisfaction of a debt in money. The modem concept of dation in payment considers it as a novation by change of the object.[86] Thus, the compromise agreement is a dacion en pago, in that a novation by a change of the object takes place due to the original obligation of PNCC to pay its liability (adjudged at P13,151,956,528) being thereby converted into another obligation whereby PNCC instead transfers the real properties listed in the compromise agreement to the qualified assignee nominated by Radstock. Regardless of the pegging of the values of the listed properties at specified amounts, the transfer to Radstock's assignees will already constitute a performance of PNCC's obligation, that is, the obligation of PNCC will be deemed performed, regardless of whether Radstock realizes a lesser value from the assignee for the properties.

In other words, the dispositions made in the compromise agreement do not require public bidding. This conclusion accords with the holding in Uy v. Sandiganbayan,[87] where the Court sustained the argument of PCGG to the effect that the dacion en pago transactions were beyond the ambit of COA Circular No. 89-296.


VIII
PNCC is not technically insolvent


The need to reverse the decision of December 4, 2009 becomes all the more compelling due to its declaration that PNCC was technically insolvent. Such a declaration was unwarranted and unfounded; hence, we need to reverse the decision of December 4, 2009 in the interest of fairness.

The judicial declaration that a natural or juridical person is insolvent produces legal effects, particularly on the disposition of the insolvent's assets. But a state of insolvency for any debtor is still legally insignificant as far as the debtor's capacity to dispose of properties are concerned until and unless the judicial declaration of insolvency is made in the appropriate insolvency proceeding. In the specific case of PNCC, no proceeding for its insolvency has ever been filed by any of its creditors. Yet, the decision of December 4, 2009 would prematurely declare PNCC technically insolvent.

The Court should not bend over too much and believe the unfounded urging of Sison that PNCC was already technically insolvent. Under Act No. 1956 (Insolvency Law), the distinct proceedings by which to declare a person insolvent may either be the voluntary or debtor-initiated proceedings;[88] or the involuntary or creditor-initiated proceedings, which require that the petition be filed by three or more creditors.[89] I doubt whether Sison could initiate such a proceeding vis-a-vis PNCC; otherwise, he would have already done so himself in the proper forum.

There are remedies for the creditor in case any disposition of the debtor's assets is in fraud of creditors. Should any creditor not feel that an insolvency or even rehabilitation proceeding (in the case of corporations like PNCC) is appropriate, the decision to desist from commencing such proceeding is a business judgment that fully lies within such creditor's discretion. Without any proper proceeding being initiated in accordance with the Insolvency Law by either the debtor or the creditors, no court, including the Court, has the power to declare the debtor as insolvent and to bring to bear upon him the severe legal consequences of the Insolvency Law. A court that does so risks meddling in business affairs or policies that are best left to those who know the appropriate actions to take and decide what action or actions to take. A unilateral court intervention can result in a premature cessation of business that can produce untoward and unexpected effects on either or both the debtor and the creditors.

I respectfully urge that in these consolidated cases the Court should distance itself from even trying to determine whether PNCC was insolvent or not (whether technically or otherwise). The state of being technically insolvent as gratuitously applied to PNCC by Sison cannot and should not even be competently herein. For one, the original jurisdiction to take cognizance of such issue does not pertain to the Court, but to the Regional Trial Court. Also, the Court would act unfairly if it would settle the matter despite the issue of insolvency being one for a trial court, which the Court is not. For Sison to even submit the issue of PNCC's insolvency only through his proposed intervention, long after the collection case had been determined by the trial court and only after the compromise agreement had been entered into, was a rank irregularity that we should not tolerate or acquiesce in.


IX
Right of Intervention and Legal Standing
of Sison and Asiavest, Erroneously Decided


The majority held that Sison and Asiavest had the legal standing to intervene and assail the compromise agreement.

As to Sison, the decision of December 4, 2009 said:

Sison has legal standing to challenge the Compromise Agreement. Although there was no allegation that Sison filed the case as a derivative suit in the name of PNCC, it could be fairly deduced that Sison was assailing the Compromise Agreement as a stockholder of PNCC. In such a situation, a stockholder of PNCC can sue on behalf of PNCC to annul the Compromise Agreement.

A derivative action is a suit by a stockholder to enforce a corporate cause of action. Under the Corporation Code, where a corporation is an injured party, its power to sue is lodged with its board of directors or trustees. However, an individual stockholder may file a derivative suit on behalf of the corporation to protect or vindicate corporate rights whenever the officials of the corporation refuse to sue, or are the ones to be sued, or hold control of the corporation. In such actions, the corporation is the real party-in-interest while the suing stockholder, on behalf of the corporation, is only a nominal party.

In this case, the PNCC Board cannot conceivably be expected to attack the validity of the Compromise Agreement since the PNCC Board itself approved the Compromise Agreement. In fact, the PNCC Board steadfastly defends the Compromise Agreement for allegedly being advantageous to PNCC.

Besides, the circumstances in this case are peculiar. Sison, as former PNCC President and Chairman of the PNCC Board, was responsible for the approval of the Board Resolution issued on 19 June 2001 revoking the previous Board Resolution admitting PNCC's liability for the Marubeni loans. Such revocation, however, came after Radstock had filed an action for collection and damages against PNCC on 15 January 2001. Then, when the trial court rendered its decision on 10 December 2002 in favor of Radstock, Sison was no longer the PNCC President and Chairman, although he remains a stockholder of PNCC.

When the case was on appeal before the Court of Appeals, there was no need for Sison to avail of any remedy, until PNCC and Radstock entered into the Compromise Agreement, which disposed of all or substantially all of PNCC's assets. Sison came to know of the Compromise Agreement only in December 2006. PNCC and Radstock submitted the Compromise Agreement to the Court of Appeals for approval on 10 January 2007. The Court of Appeals approved the Compromise Agreement on 25 January 2007. To require Sison at this stage to exhaust all the remedies within the corporation will render such remedies useless as the Compromise Agreement had already been approved by the Court of Appeals. PNCC's assets are in danger of being dissipated in favor of a private foreign corporation. Thus, Sison had no recourse but to avail of an extraordinary remedy to protect PNCC's assets.

Besides, in the interest of substantial justice and for compelling reasons, such as the nature and importance of the issues raised in this case, this Court must take cognizance of Sison's action. This Court should exercise its prerogative to set aside technicalities in the Rules, because after all, the power of this Court to suspend its own rules whenever the interest of justice requires is well recognized. In Solicitor General v. The Metropolitan Manila Authority, this Court held:

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, xxx

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.[90]

As to Asiavest, the decision of December 4, 2009 said:

Asiavest has a direct and material interest in the approval or disapproval of the Compromise Agreement. 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. Asiavest's interest is actual and material, direct and immediate characterized by either gain or loss from the judgment that this Court may render. Considering that the Compromise Agreement involves the disposition of all or substantially all of the assets of PNCC, Asiavest, as PNCC's judgment creditor, will be greatly prejudiced if the Compromise Agreement is eventually upheld.[91]

I maintain that neither Sison nor Asiavest had the legal standing to intervene in order to assail the compromise agreement.

In his case, Sison admitted during the oral arguments that a stockholder's derivative suit was the proper remedy for him to challenge the acts of the PNCC Board of Directors, to wit:

Associate Justice Tinga:

Yes. What is the proper remedy of a stockholder if the corporation does not want to protect itself?

Atty. Sison:

I guess the proper remedy would be to file a petition in the Regional Trial Court that's because this involves shareholder disputes, I think it could involve a shareholder dispute.

Associate Justice Tinga:

You are referring to a derivative suit?

Atty. Sison:

I beg your pardon?

Associate Justice Tinga:

You are referring to a stockholder's derivative suit?

Atty. Sison:

Yes, Your Honor.[92]

For one to file a stockholder's derivative suit, however, he must satisfy the requisites set in Section 1 of Rule 8 of the Interim Rules of Procedure Governing Corporate Controversies,[93] as follows:

  1. That he is a stockholder or member at the time the acts or transactions subject of the action occurred and at the time the action is filed;

  2. That he exerted all reasonable efforts to exhaust all remedies available under the articles of incorporation, by-laws, laws or rules governing the corporation or partnership to obtain the relief he desires, and alleges the efforts with particularity in the complaint;

  3. No appraisal rights are available for the act or acts complained of; and

  4. The suit is not a nuisance or harassment suit.

Yet, Sison's petition herein could not even pass for and did not resemble a derivative suit, much less be considered as one. To begin with, he did not allege anywhere in his submissions 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 had been available for the act or acts complained of.

We should not forget that a stockholder's suit is always one in equity; hence, the suit cannot prosper without first complying with the legal requisites for its institution.[94] For this reason, I hold that the CA correctly disallowed Sison's petition. I regard the majority's overly generous treatment of his petition as a derivative suit to be, therefore, outrightly unreasonable and totally unprocedural.

As for Asiavest, the majority held that it had legal standing to assail the compromise agreement from its being a judgment creditor of PNCC.

First of all, to subscribe to the majority's holding that all properties or funds of PNCC were now public funds would be to render any judgment in favor of Asiavest issued elsewhere an empty judgment. This would be the absurd result of the majority's imposing the requirement for presidential or legislative approval on Asiavest's execution of judgment against PNCC.

Secondly, PNCC had already submitted a list of properties[95] in the trial court issuing the writ of execution in favor of Asiavest. The trial court found the listed properties to be "more than sufficient to satisfy the judgment award." Such submission by PNCC of the list of properties meant that PNCC had exercised its option under Section 9, Rule 39, of the Rules of Court, thereby satisfying the writ of execution upon Asiavest's money judgment. In this regard, the rule pertinently provides:

Section 9. Execution of judgments for money, how enforced.- (a) Immediate payment on demand.- xxx

xxx

(b) Satisfaction by levy.- If the judgment obligor cannot pay all or part of the obligation in cash, certified bank check or other mode of payment acceptable to the judgment obligee, the officer shall levy upon the properties of the judgment obligor of every kind and nature whatsoever which may be disposed of for value and not otherwise exempt from execution giving the latter the option to immediately choose which property or part thereof may be levied upon, sufficient to satisfy the judgment. If the judgment obligor does not exercise the option, the officer shall first levy on the personal properties, if any, and then on the real properties if the personal properties are insufficient to answer for the judgment.

xxx

Thirdly, the compromise agreement between PNCC and Radstock would not affect the properties already earmarked for Asiavest's benefit. Hence, Asiavest's intervention will be superfluous.

Finally, Asiavest had no direct and material interest in the compromise agreement between Radstock and PNCC, or in the subject of the action between them. Specifically, Asiavest was a total stranger to the compromise agreement; its judgment award did not emanate from or was not related to the Marubeni claim.

Besides, the question of whether a third party may intervene in a proceeding in which the parties already executed a compromise agreement was settled in Spouses Magat v. Delizo.[96] Therein, the Court denied a third party's attempt to intervene after the trial court had approved a compromise agreement entered into by the parties and which was already in the process of being enforced.

IN VIEW OF ALL THE FOREGOING CONSIDERATIONS, I vote to reverse the December 4, 2009 decision and to dismiss the petitions; and to declare the compromise agreement as valid and legal.
 
 
(Sgd.) LUCIO P. BERSAMIN
Associate Justice

Endnotes:


[1] Rollo, G.R. No. 178158, p. 416.

[2] Id., pp. 259-271.

[3]  Id., p. 270.

[4]  Id., pp. 31-43 (The decision of the CA was penned by Justice Mariano del Castillo (now a Member of the Court), and was concurred in by then Presiding Justice Ruben T. Reyes (now retired Member of the Court) and Justice Arcangelita Romilla-Lontok.

[5] Id., pp. 113-117.

[6]  Id., p. 48.

[7]  Id., pp. 46-54.

[8] Rollo, G.R. No. 180428, pp. 107-140.

[9] Rollo, G.R. No. 180428, at pp. 45-46 (Penned by Justice Normandie B. Pizarro, and concurred in by Justice Edgardo Cruz (retired) and Justice Fernanda Lampas-Peralta).

[10]  Id., pp. 47-49.

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

[12]  Id., pp. 142-145.

[13] Id., pp. 237-241.

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

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

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

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

[18] Justice Antonio T. Carpio (ponente), joined by Chief Justice Reynato S. Puno, Justice Conchita Carpio Morales (who penned a concurring opinion), Justice Minita V. Chico-Nazario, Justice Teresita J. Leonardo-De Castro (who submitted a separate concurring opinion), Justice Arturo D. Brion (who joined Justice De Castro's separate concurring opinion), Justice Roberto A. Abad, and Justice Martin S. Villarama, Jr.

[19] Justice Lucas P. Bersamin, whose dissent was joined by Justice Renato C. Corona, Justice Presbitero J. Velasco, Jr., and Justice Antonio Eduardo B. Nachura.

[20] Justice Diosdado M. Peralta (for the reason that his wife, Justice Fernanda Lampas-Peralta, had a prior action in the Court of Appeals in connection with the matter involved in G.R. No. 180428), and Justice Mariano C. Del Castillo (for being the ponente in the Court of Appeals relative to the approval of the compromise agreement subject of these petitions).

[21] Act No. 1956.

[22] Rule 132, Rules of Court, provides:

Sec. 34. Offer of evidence. - The court shall consider no evidence which has not been formally offered. The purpose for which the evidence is offered must be specified. (35)
 
[23] Heirs of Emilio Santioque v. Heirs of Emilia Calma, G.R. No. 160832, October 27, 2006, 505 SCRA 665, 682; Pigao v. Rabanillo, G.R. No.  150712, May 2, 2006, 488 SCRA 546, 557; Ong v. Court of Appeals, G.R. No. 117103, January 21, 1999, 301 SCRA 387.

[24] Candido v. Court of Appeals, G.R. No. 107493, February 1, 1996; 253 SCRA 78, 82-83.

[25] Section 1. Judicial notice, when mandatory. - A court shall take judicial notice, without the introduction of evidence, of the existence and territorial extent of states, their political history, forms of government and symbols of nationality, the Saw of nations, the admiralty and maritime courts of the world and their seals, the political constitution and history of the Philippines, the official acts of the legislative, executive and judicial departments of the Philippines, the laws of nature, the measure of time, and the geographical divisions, (1a)

[26] Proclamation 50 of President Aquino entitled Proclaiming and Launching a Program for the Expeditious Disposition and Privatization of Certain Government Corporations and/or the Assets Thereof and Creating the Committee on Privatization and the Asset Privatization Trust.

[27]. The copy of the APT invitation to bid is Annex 1, Radstock's motion for
reconsideration
.

[28] Under Section 12(6), Proclamation 50, APT was given with respect to the corporations and their assets held by it the power to exercise in behalf of the National Government and to the extent authorized by the Committee on Privatization all the rights, powers, and privileges of ownership, including the ability to compromise and to release claims, or to settle liabilities, as well as to do and perform any and all acts
necessary or proper to carry out the purposes of Proclamation 50.

[29] Section 12(5), Proclamation 50.

[30] Radstock's motion for reconsideration, p. 10, rollo, G.R. No. 178158, p. 1129.

[31] Court of Appeals rollo, p. 162.

[32] PNCC and Radstock submitted the compromise agreement to the Supreme Court on August 18, 2006.

[33] Rollo, G.R. No. 178158, p. 645.

[34]  Id.

[35]  Id., p. 646.

[36]  Id., p. 647.

[37]  Id.,p. 648.

[38]  Id., pp. 1146-1149.

[39] Original Records, Vol. V, p. 1544.

[40] Art. 1155, Civil Code; Gonzalo Puyat & Sons, Inc. v. City of Manila, G.R. No. L-17447, April 30, 1963, 7 SCRA 970; Philippine National Bank v. Fernandez, L-20086, July 10, 1967, 20 SCRA 645, 648; Harden v. Harden, L-22174, July 21, 1967, 20 SCRA 706, 711

[41] Philippine National Construction Corporation v. Dy, G.R. No. 156887, October 3, 2005, 472 SCRA 1, 8-9.

[42] 103 Phil. 992, 999 (1958).

[43] Decision of December 4, 2009, p. 27.

[44]  Id.

[45] Philippine National Construction Corporation v. Dy, G.R. No. 156887, October 3, 2005, 472 SCRA 1, 8-9.

[46] See the concurring opinion of Justice Tinga, in Neri v. Senate Blue Ribbon Committee, G.R. No. 180643, March 25, 2008, 549 SCRA 77, where the following statement is made:

xxx Investigations are viable avenues for legislators to exploit the headlines of the day for political capital, whether they may concern rising oil prices, the particular diplomatic ties with one or some nations, or the spectacle of Filipina actresses making entertainment trips to Brunei. For as long as the political majority exists only the innate good sense of our legislators may inhibit the inquiry, and certainly it is beyond the province of the courts to prevent Congress from conducting inquiries on any or all matters.

[47] Revised Administrative Code of 1987.

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

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

[50] Section 36, Corporation Code, enumerates some of the powers of a private corporation: Sec. 36. Corporate powers and capacity. - Every corporation incorporated under this Code has the power and capacity;

1. To sue and be sued in its corporate name;

2. Of succession by its corporate name for the period of time stated in the articles of incorporation and the certificate of incorporation;

3. To adopt and use a corporate seal;

4. To amend its articles of incorporation in accordance with the provisions of this Code;

5. To adopt by-laws, not contrary to law, morals, or public policy, and to amend or repeal the same in accordance with this Code;

6. In case of stock corporations, to issue or sell stocks to subscribers and to sell stocks to subscribers and to sell treasury stocks in accordance with the provisions of this Code; and to admit members to the corporation if it be a non-stock corporation;

7. To purchase, receive, take or grant, hold, convey, sell, lease, pledge, mortgage and otherwise deal with such real and personal property, including securities and bonds of other corporations, as the transaction of the lawful business of the corporation may reasonably and necessarily require, subject to the limitations prescribed by law and the Constitution;

8. To enter into merger or consolidation with other corporations as provided in this Code;

9. To make reasonable donations, including those for the public welfare or for hospital, charitable, cultural, scientific, civic, or similar purposes: Provided, That no corporation, domestic or foreign, shall give donations in aid of any political party or candidate or for purposes of partisan political activity;

10. To establish pension, retirement, and other plans for the benefit of its directors, trustees, officers and employees; and

11. To exercise such other powers as may be essential or necessary to carry out its purpose or purposes as stated in the articles of incorporation.
 
[51] Section 2, Corporation Code, provides:

Sec. 2. Corporation defined. - A corporation is an artificial being created by operation of law, having the right of succession and the powers, attributes and properties expressly authorized by law or incident to its existence.
 
[52] Grobow v. Perot, 539 A. 2d. 180 (Dei. 1988).

[53] The business judgment rule is an American case law-derived concept in corporation law, whereby the "directors of a corporation xxx are clothed with [the] presumption, which the law accords to them, of being [motivated] in their conduct by a bona fide regard for the interests of the corporation whose affairs the stockholders have committed to their charge." See Gimbel v. Signal Cos., 316 A.2d 599, 608 (Del. Ch. 1974).

[54] Sales v. Securities and Exchange Commission, G.R. No. 54330, January 13, 1989, 169 SCRA 109.

[55] Philippine National Construction Corpration v. Pabion, supra, at footnote 22; also National Shipyard &. Steel Corporation v. Court of Industrial Relations, G.R. No. L-17874, August 31, 1963, 8 SCRA 781; Ramos v. Court of Industrial Relations, L-22753, December 18, 1967, 21 SCRA 1283.

[56] 46 Phil. 583 (1924).

[57] 50 Phil. 259 (1927).

[58] G.R. No. L-32667, January 31, 1978, 81 SCRA 314.

[59] 73 Phil. 374 (1941).

[60] National Shipyard &. Steel Corporation v. Court of Industrial Relations, supra.

[61] Italicization is made for emphasis.

[62] Entitled Amending the Franchise of the Philippine National Construction Corporation to Construct, Maintain and Operate Toll Facilities in the North Luzon and South Luzon Expressways to include the Metro Manila Expressway to serve as an Additional Artery in the Transportation of Trade and Commerce in Metro Manila.

[63] Italicization is made for emphasis.

[64] TSN, Oral Arguments, January 13, 2009, pp. 244-246.

[65] Republic v. COCOFED, G.R. Nos. 147062-147064, December 14, 2001, 372 SCRA 462.

[66] Entitled Authorizing the Establishment of Toll Facilities on Public Improvements, Creating a Board for the Regulation thereof and for other purposes.

[67] Underlines supplied for emphasis.

[68] Entitled An Act Amending the Franchise of the Philippine National Construction Corporation to Construct, Maintain and Operate Toll Facilities in the North Luzon and South Luzon Expressways to Include the Metro Manila Expressway to Serve as an Additional Artery in the Transportation of Trade and Commerce in the Metro Manila Area.

[69] Bold emphasis and underlines are supplied.

[70] Under Section 2 of PD No. 1894, PNCC's authority to operate and maintain toll facilities expires in 2035, or 30 years from the completion in 2005 of the extension linkages, stretches and diversions constructed after the date of the approval of PD No. 1894.

[71] G.R. No. 119528, March 26, 1997, 270 SCRA 538, 550-551.

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

[73] Underlines supplied for emphasis.

[74] DOJ Opinion No. 122, s. 1995.

[75] Underlines supplied for emphasis.

[76] TSN, Oral Arguments, January 13, 2009, p. 465.

[77] R.A. No. 9182 (December 23. 2002).

[78] G.R. No. 156364, September 3, 2007, 532 SCRA 74.
 
[79] Malaga v. Penachos, Jr., G.R. No. 86695, September 3, 1992, 213 SCRA 516, 526.

[80] Danville Maritime, Inc. v. Commission on Audit, G.R. No. 85285, July 28, 1989, 175 SCRA 701, 711.

[81] Ibid., p. 712.

[82] Underline supplied for emphasis.

[83] Rollo, G.R. No. 178158, pp. 265-269.

[84] Underline supplied for emphasis.

[85] The proceedings during the Senate inquiries, and the privilege speeches delivered on the Senate floor might have generated suspicions about the disadvantageousness of the disposal of PNCC's properties through the compromise agreement. However, the Court should not allow itself to be swayed, least of all persuaded, by such suspicions, for, as earlier pointed out, such inquiries and speeches were not even competent evidence of the facts stated on the Senate floor.

[86] IV Tolentino, Civil Code of the Philippines, p. 293 (1997).

[87] G.R. No. 111544, July 6, 2004, 433 SCRA 424,

[88] Section 14, Act No. 1956.

[89] Section 20, Act No. 1956.

[90] Decision, pp. 17-18; rollo, pp. 641-642.

[91] Decision, p. 17; rollo, p. 641.

[92] TSN, Oral arguments, January 13, 2009, pp. 149-151.

[93] SECTION 1. Derivative action.-   A stockholder or member may bring an action in the name of a corporation or association, as the case may be, provided, that:

(1) He was a stockholder or member at the time the acts or transactions subject of the action occurred and at the time the action was filed;
 
(2) He exerted all reasonable efforts, and alleges the same with particularity in the complaint, to exhaust all remedies available under the articles of incorporation, by-laws, laws or rules governing the corporation or partnership to obtain the relief he desires;
 
(3) No appraisal rights are available for the act or acts complained of; and
 
(4) The suit is not a nuisance or harassment suit.

In case of nuisance or harassment suit, the court shall forthwith dismiss the case.
 
[94] Yu v. Yukayguan, G.R. No. 177549, June 18, 2009.

[95] Annex 13, motion for reconsideration.

[96] G.R. No. 135199, July 5, 2001, 360 SCRA 508.



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