EN BANC

[G.R. Nos. 84132-33 : December 10, 1990.]

purpose of salvaging this and the other Agrix companies that

the aforementioned decree was issued by President Marcos.

192 SCRA 257

NATIONAL DEVELOPMENT COMPANY AND NEW AGRIX,
INC., Petitioners, vs. PHILIPPINE VETERANS BANK, THE
EX-OFFICIO SHERIFF and GODOFREDO QUILING, in his
capacity as Deputy Sheriff of Calamba, Laguna, Respondents.

DECISION
CRUZ, J.:
This case involves the constitutionality of a presidential
decree which, like all other issuances of President Marcos
during his regime, was at that time regarded as sacrosanct. It
is only now, in a freer atmosphere, that his acts are being
tested by the touchstone of the fundamental law that even
then was supposed to limit presidential action.: rd

The particular enactment in question is Pres. Decree No.

1717, which ordered the rehabilitation of the Agrix Group of
Companies to be administered mainly by the National
Development Company. The law outlined the procedure for
filing claims against the Agrix companies and created a
Claims Committee to process these claims. Especially
relevant to this case, and noted at the outset, is Sec. 4(1)
thereof providing that "all mortgages and other liens
presently attaching to any of the assets of the dissolved
corporations are hereby extinguished."

Earlier, the Agrix Marketing, Inc. (AGRIX) had executed in

favor of private respondent Philippine Veterans Bank a real
estate mortgage dated July 7, 1978, over three (3) parcels of
land situated in Los Baos, Laguna. During the existence of
the mortgage, AGRIX went bankrupt. It was for the expressed

Pursuant thereto, the private respondent filed a claim with

the AGRIX Claims Committee for the payment of its loan
credit. In the meantime, the New Agrix, Inc. and the National
Development Company, petitioners herein, invoking Sec. 4
(1) of the decree, filed a petition with the Regional Trial Court
of Calamba, Laguna, for the cancellation of the mortgage lien
in favor of the private respondent. For its part, the private
respondent took steps to extrajudicially foreclose the
mortgage, prompting the petitioners to file a second case
with the same court to stop the foreclosure. The two cases
were consolidated.

After the submission by the parties of their respective

pleadings, the trial court rendered the impugned decision.
Judge Francisco Ma. Guerrero annulled not only the
challenged provision, viz., Sec. 4 (1), but the entire Pres.
Decree No. 1717 on the grounds that: (1) the presidential
exercise of legislative power was a violation of the principle
of separation of powers; (2) the law impaired the obligation
of contracts; and (3) the decree violated the equal protection
clause. The motion for reconsideration of this decision having
been denied, the present petition was filed.: rd

The petition was originally assigned to the Third Division of

this Court but because of the constitutional questions
involved it was transferred to the Court en banc. On August
30, 1988, the Court granted the petitioner's prayer for a
temporary restraining order and instructed the respondents
to cease and desist from conducting a public auction sale of
the lands in question. After the Solicitor General and the
private respondent had filed their comments and the
petitioners their reply, the Court gave due course to the
petition and ordered the parties to file simultaneous

memoranda. Upon compliance by the parties, the case was

deemed submitted.

aware of that reality and knew it had no choice under the

circumstances but to conform.: nad

The petitioners contend that the private respondent is now

estopped from contesting the validity of the decree. In
support of this contention, it cites the recent case of
Mendoza v. Agrix Marketing, Inc., 1 where the
constitutionality of Pres. Decree No. 1717 was also raised but
not resolved. The Court, after noting that the petitioners had
already filed their claims with the AGRIX Claims Committee
created by the decree, had simply dismissed the petition on
the ground of estoppel.

It is true that there were a few venturesome souls who dared

to question the dictator's decisions before the courts of
justice then. The record will show, however, that not a single
act or issuance of President Marcos was ever declared
unconstitutional, not even by the highest court, as long as he
was in power. To rule now that the private respondent is
estopped for having abided with the decree instead of boldly
assailing it is to close our eyes to a cynical fact of life during
that repressive time.

The petitioners stress that in the case at bar the private

respondent also invoked the provisions of Pres. Decree No.
1717 by filing a claim with the AGRIX Claims Committee.
Failing to get results, it sought to foreclose the real estate
mortgage executed by AGRIX in its favor, which had been
extinguished by the decree. It was only when the petitioners
challenged the foreclosure on the basis of Sec. 4 (1) of the
decree, that the private respondent attacked the validity of
the provision. At that stage, however, consistent with
Mendoza, the private respondent was already estopped from
questioning the constitutionality of the decree.

This case must be distinguished from Mendoza, where the

petitioners, after filing their claims with the AGRIX Claims
Committee, received in settlement thereof shares of stock
valued at P40,000.00 without protest or reservation. The
herein private respondent has not been paid a single centavo
on its claim, which was kept pending for more than seven
years for alleged lack of supporting papers. Significantly, the
validity of that claim was not questioned by the petitioner
when it sought to restrain the extrajudicial foreclosure of the
mortgage by the private respondent. The petitioner limited
itself to the argument that the private respondent was
estopped from questioning the decree because of its earlier
compliance with its provisions.

The Court does not agree that the principle of estoppel is

applicable.

It is not denied that the private respondent did file a claim

with the AGRIX Claims Committee pursuant to this decree. It
must be noted, however, that this was done in 1980, when
President Marcos was the absolute ruler of this country and
his decrees were the absolute law. Any judicial challenge to
them would have been futile, not to say foolhardy. The
private respondent, no less than the rest of the nation, was

Independently of these observations, there is the

consideration that an affront to the Constitution cannot be
allowed to continue existing simply because of procedural
inhibitions that exalt form over substance.

The Court is especially disturbed by Section 4(1) of the

decree, quoted above, extinguishing all mortgages and other
liens attaching to the assets of AGRIX. It also notes, with

equal concern, the restriction in Subsection (ii) thereof that

all "unsecured obligations shall not bear interest" and in
Subsection (iii) that "all accrued interests, penalties or
charges as of date hereof pertaining to the obligations,
whether secured or unsecured, shall not be recognized."

These provisions must be read with the Bill of Rights, where it

is clearly provided in Section 1 that "no person shall be
deprived of life, liberty or property without due course of law
nor shall any person be denied the equal protection of the
law" and in Section 10 that "no law impairing the obligation
of contracts shall be passed."

In defending the decree, the petitioners argue that property

rights, like all rights, are subject to regulation under the
police power for the promotion of the common welfare. The
contention is that this inherent power of the state may be
exercised at any time for this purpose so long as the taking
of the property right, even if based on contract, is done with
due process of law.

This argument is an over-simplification of the problem before

us. The police power is not a panacea for all constitutional
maladies. Neither does its mere invocation conjure an instant
and automatic justification for every act of the government
depriving a person of his life, liberty or property.

A legislative act based on the police power requires the

concurrence of a lawful subject and a lawful method. In more
familiar words, a) the interests of the public generally, as
distinguished from those of a particular class, should justify
the interference of the state; and b) the means employed are
reasonably necessary for the accomplishment of the purpose
and not unduly oppressive upon individuals. 2

Applying these criteria to the case at bar, the Court finds first
of all that the interests of the public are not sufficiently
involved to warrant the interference of the government with
the private contracts of AGRIX. The decree speaks vaguely of
the "public, particularly the small investors," who would be
prejudiced if the corporation were not to be assisted.
However, the record does not state how many there are of
such investors, and who they are, and why they are being
preferred to the private respondent and other creditors of
AGRIX with vested property rights.:-cralaw

The public interest supposedly involved is not identified or

explained. It has not been shown that by the creation of the
New Agrix, Inc. and the extinction of the property rights of
the creditors of AGRIX, the interests of the public as a whole,
as distinguished from those of a particular class, would be
promoted or protected. The indispensable link to the welfare
of the greater number has not been established. On the
contrary, it would appear that the decree was issued only to
favor a special group of investors who, for reasons not given,
have been preferred to the legitimate creditors of AGRIX.

Assuming there is a valid public interest involved, the Court

still finds that the means employed to rehabilitate AGRIX fall
far short of the requirement that they shall not be unduly
oppressive. The oppressiveness is patent on the face of the
decree. The right to property in all mortgages, liens,
interests, penalties and charges owing to the creditors of
AGRIX is arbitrarily destroyed. No consideration is paid for
the extinction of the mortgage rights. The accrued interests
and other charges are simply rejected by the decree. The
right to property is dissolved by legislative fiat without regard
to the private interest violated and, worse, in favor of another
private interest.

A mortgage lien is a property right derived from contract and

so comes under the protection of the Bill of Rights. So do

interests on loans, as well as penalties and charges, which

are also vested rights once they accrue. Private property
cannot simply be taken by law from one person and given to
another without compensation and any known public
purpose. This is plain arbitrariness and is not permitted under
the Constitution.

And not only is there arbitrary taking, there is discrimination

as well. In extinguishing the mortgage and other liens, the
decree lumps the secured creditors with the unsecured
creditors and places them on the same level in the
prosecution of their respective claims. In this respect, all of
them are considered unsecured creditors. The only
concession given to the secured creditors is that their loans
are allowed to earn interest from the date of the decree, but
that still does not justify the cancellation of the interests
earned before that date. Such interests, whether due to the
secured or the unsecured creditors, are all extinguished by
the decree. Even assuming such cancellation to be valid, we
still cannot see why all kinds of creditors, regardless of
security, are treated alike.

Under the equal protection clause, all persons or things

similarly situated must be treated alike, both in the privileges
conferred and the obligations imposed. Conversely, all
persons or things differently situated should be treated
differently. In the case at bar, persons differently situated are
similarly treated, in disregard of the principle that there
should be equality only among equals.- nad

One may also well wonder why AGRIX was singled out for
government help, among other corporations where the
stockholders or investors were also swindled. It is not clear
why other companies entitled to similar concern were not
similarly treated. And surely, the stockholders of the private
respondent, whose mortgage lien had been cancelled and
legitimate claims to accrued interests rejected, were no less

deserving of protection, which they did not get. The decree

operated, to use the words of a celebrated case, 3 "with an
evil eye and an uneven hand."

On top of all this, New Agrix, Inc. was created by special

decree notwithstanding the provision of Article XIV, Section 4
of the 1973 Constitution, then in force, that:

SEC. 4. The Batasang Pambansa shall not, except by general

law, provide for the formation, organization, or regulation of
private corporations, unless such corporations are owned or
controlled by the Government or any subdivision or
instrumentality thereof. 4

The new corporation is neither owned nor controlled by the

government. The National Development Corporation was
merely required to extend a loan of not more than
P10,000,000.00 to New Agrix, Inc. Pending payment thereof,
NDC would undertake the management of the corporation,
but with the obligation of making periodic reports to the Agrix
board of directors. After payment of the loan, the said board
can then appoint its own management. The stocks of the new
corporation are to be issued to the old investors and
stockholders of AGRIX upon proof of their claims against the
abolished corporation. They shall then be the owners of the
new corporation. New Agrix, Inc. is entirely private and so
should have been organized under the Corporation Law in
accordance with the above-cited constitutional provision.

The Court also feels that the decree impairs the obligation of
the contract between AGRIX and the private respondent
without justification. While it is true that the police power is
superior to the impairment clause, the principle will apply
only where the contract is so related to the public welfare
that it will be considered congenitally susceptible to change

by the legislature in the interest of the greater number. 5

Most present-day contracts are of that nature. But as already
observed, the contracts of loan and mortgage executed by
AGRIX are purely private transactions and have not been
shown to be affected with public interest. There was
therefore no warrant to amend their provisions and deprive
the private respondent of its vested property rights.

It is worth noting that only recently in the case of the

Development Bank of the Philippines v. NLRC, 6 we sustained
the preference in payment of a mortgage creditor as against
the argument that the claims of laborers should take
precedence over all other claims, including those of the
government. In arriving at this ruling, the Court recognized
the mortgage lien as a property right protected by the due
process and contract clauses notwithstanding the argument
that the amendment in Section 110 of the Labor Code was a
proper exercise of the police power.: nad

With the above pronouncements, we feel there is no more

need to rule on the authority of President Marcos to
promulgate Pres. Decree No. 1717 under Amendment No. 6
of the 1973 Constitution. Even if he had such authority, the
decree must fall just the same because of its violation of the
Bill of Rights.

WHEREFORE, the petition is DISMISSED. Pres. Decree No.

1717 is declared UNCONSTITUTIONAL. The temporary
restraining order dated August 30, 1988, is LIFTED. Costs
against the petitioners.- nad

SO ORDERED.

G.R. No. L-19118

The Court reaffirms and applies that ruling in the case at bar.

January 30, 1965

MARIANO A. ALBERT, plaintiff-appellant,

vs.

Our finding, in sum, is that Pres. Decree No. 1717 is an

invalid exercise of the police power, not being in conformity
with the traditional requirements of a lawful subject and a
lawful method. The extinction of the mortgage and other
liens and of the interest and other charges pertaining to the
legitimate creditors of AGRIX constitutes taking without due
process of law, and this is compounded by the reduction of
the secured creditors to the category of unsecured creditors
in violation of the equal protection clause. Moreover, the new
corporation, being neither owned nor controlled by the
Government, should have been created only by general and
not special law. And insofar as the decree also interferes with
purely private agreements without any demonstrated
connection with the public interest, there is likewise an
impairment of the obligation of the contract.

UNIVERSITY PUBLISHING CO., INC., defendantappellee.

Uy & Artiaga and Antonio M. Molina for plaintiff-appellant.
Aruego, Mamaril & Associates for defendant-appellees.

BENGZON, J.P., J.:

No less than three times have the parties here appealed to
this Court.
In Albert vs. University Publishing Co., Inc., L-9300, April 18,
1958, we found plaintiff entitled to damages (for breach of

contract) but reduced the amount from P23,000.00 to

P15,000.00.
Then in Albert vs. University Publishing Co., Inc., L-15275,
October 24, 1960, we held that the judgment for P15,000.00
which had become final and executory, should be executed
to its full amount, since in fixing it, payment already made
had been considered.
Now we are asked whether the judgment may be executed
against Jose M. Aruego, supposed President of University
Publishing Co., Inc., as the real defendant.
Fifteen years ago, on September 24, 1949, Mariano A. Albert
sued University Publishing Co., Inc. Plaintiff alleged inter alia
that defendant was a corporation duly organized and existing
under the laws of the Philippines; that on July 19, 1948,
defendant, through Jose M. Aruego, its President, entered into
a contract with plaintifif; that defendant had thereby agreed
to pay plaintiff P30,000.00 for the exclusive right to publish
his revised Commentaries on the Revised Penal Code and for
his share in previous sales of the book's first edition; that
defendant had undertaken to pay in eight quarterly
installments of P3,750.00 starting July 15, 1948; that per
contract failure to pay one installment would render the rest
due; and that defendant had failed to pay the second
installment.
Defendant admitted plaintiff's allegation of defendant's
corporate existence; admitted the execution and terms of the
contract dated July 19, 1948; but alleged that it was plaintiff
who breached their contract by failing to deliver his
manuscript. Furthermore, defendant counterclaimed for
damages.
Plaintiff died before trial and Justo R. Albert, his estate's
administrator, was substituted for him.
The Court of First Instance of Manila, after trial, rendered
decision on April 26, 1954, stating in the dispositive portion

IN VIEW OF ALL THE FOREGOING, the Court renders judgment

in favor of the plaintiff and against the defendant the
University Publishing Co., Inc., ordering the defendant to pay
the administrator Justo R. Albert, the sum of P23,000.00 with
legal [rate] of interest from the date of the filing of this
complaint until the whole amount shall have been fully paid.
The defendant shall also pay the costs. The counterclaim of
the defendant is hereby dismissed for lack of evidence.
As aforesaid, we reduced the amount of damages to
P15,000.00, to be executed in full. Thereafter, on July 22,
1961, the court a quo ordered issuance of an execution writ
against University Publishing Co., Inc. Plaintiff, however, on
August 10, 1961, petitioned for a writ of execution against
Jose M. Aruego, as the real defendant, stating, "plaintiff's
counsel and the Sheriff of Manila discovered that there is no
such entity as University Publishing Co., Inc." Plaintiff
annexed to his petition a certification from the securities and
Exchange Commission dated July 31, 1961, attesting: "The
records of this Commission do not show the registration of
UNIVERSITY PUBLISHING CO., INC., either as a corporation or
partnership." "University Publishing Co., Inc." countered by
filing, through counsel (Jose M. Aruego's own law firm), a
"manifestation" stating that "Jose M. Aruego is not a party to
this case," and that, therefore, plaintiff's petition should be
denied.
Parenthetically, it is not hard to decipher why "University
Publishing Co., Inc.," through counsel, would not want Jose M.
Aruego to be considered a party to the present case: should
a separate action be now instituted against Jose M. Aruego,
the plaintiff will have to reckon with the statute of limitations.
The court a quo denied the petition by order of September 9,
1961, and from this, plaintiff has appealed.
The fact of non-registration of University Publishing Co., Inc.
in the Securities and Exchange Commission has not been
disputed. Defendant would only raise the point that
"University Publishing Co., Inc.," and not Jose M. Aruego, is
the party defendant; thereby assuming that "University
Publishing Co., Inc." is an existing corporation with an
independent juridical personality. Precisely, however, on

account of the non-registration it cannot be considered a

corporation, not even a corporation de facto (Hall vs. Piccio,
86 Phil. 603). It has therefore no personality separate from
Jose M. Aruego; it cannot be sued independently.
The corporation-by-estoppel doctrine has not been invoked.
At any rate, the same is inapplicable here. Aruego
represented a non-existent entity and induced not only the
plaintiff but even the court to believe in such representation.
He signed the contract as "President" of "University
Publishing Co., Inc.," stating that this was "a corporation duly
organized and existing under the laws of the Philippines," and
obviously misled plaintiff (Mariano A. Albert) into believing
the same. One who has induced another to act upon his
wilful misrepresentation that a corporation was duly
organized and existing under the law, cannot thereafter set
up against his victim the principle of corporation by estoppel
(Salvatiera vs. Garlitos, 56 O.G. 3069).
"University Publishing Co., Inc." purported to come to court,
answering the complaint and litigating upon the merits. But
as stated, "University Publishing Co., Inc." has no
independent personality; it is just a name. Jose M. Aruego
was, in reality, the one who answered and litigated, through
his own law firm as counsel. He was in fact, if not, in name,
the defendant.
Even with regard to corporations duly organized and existing
under the law, we have in many a case pierced the veil of
corporate fiction to administer the ends of justice. * And in
Salvatiera vs. Garlitos, supra, p. 3073, we ruled: "A person
acting or purporting to act on behalf of a corporation which
has no valid existence assumes such privileges and
obligations and becomes personally liable for contracts
entered into or for other acts performed as such agent." Had
Jose M. Aruego been named as party defendant instead of, or
together with, "University Publishing Co., Inc.," there would
be no room for debate as to his personal liability. Since he
was not so named, the matters of "day in court" and "due
process" have arisen.
In this connection, it must be realized that parties to a suit
are "persons who have a right to control the proceedings, to

make defense, to adduce and cross-examine witnesses, and

to appeal from a decision" (67 C.J.S. 887) and Aruego was,
in reality, the person who had and exercised these rights.
Clearly, then, Aruego had his day in court as the real
defendant; and due process of law has been substantially
observed.
By "due process of law" we mean " "a law which hears before
it condemns; which proceeds upon inquiry, and renders
judgment only after trial. ... ." (4 Wheaton, U.S. 518, 581.)";
or, as this Court has said, " "Due process of law"
contemplates notice and opportunity to be heard before
judgment is rendered, affecting one's person or property"
(Lopez vs. Director of Lands, 47 Phil. 23, 32)." (Sicat vs.
Reyes, L-11023, Dec. 14, 1956.) And it may not be amiss to
mention here also that the "due process" clause of the
Constitution is designed to secure justice as a living reality;
not to sacrifice it by paying undue homage to formality. For
substance must prevail over form. It may now be trite, but
none the less apt, to quote what long ago we said in Alonso
vs. Villamor, 16 Phil. 315, 321-322:
A litigation is not a game of technicalities in which one, more
deeply schooled and skilled in the subtle art of movement
and position, entraps and destroys the other. It is, rather, a
contest in which each contending party fully and fairly lays
before the court the facts in issue and then, brushing side as
wholly trivial and indecisive all imperfections of form and
technicalities of procedure, asks that Justice be done upon
the merits. Lawsuits, unlike duels, are not to be won by a
rapier's thrust. Technicality, when it deserts its proper office
as an aid to justice and becomes its great hindrance and
chief enemy, deserves scant consideration from courts. There
should be no vested rights in technicalities.
The evidence is patently clear that Jose M. Aruego, acting as
representative of a non-existent principal, was the real party
to the contract sued upon; that he was the one who reaped
the benefits resulting from it, so much so that partial
payments of the consideration were made by him; that he
violated its terms, thereby precipitating the suit in question;
and that in the litigation he was the real defendant. Perforce,

in line with the ends of justice, responsibility under the

judgment falls on him.
We need hardly state that should there be persons who under
the law are liable to Aruego for reimbursement or
contribution with respect to the payment he makes under the
judgment in question, he may, of course, proceed against
them through proper remedial measures.
PREMISES CONSIDERED, the order appealed from is hereby
set aside and the case remanded ordering the lower court to
hold supplementary proceedings for the purpose of carrying
the judgment into effect against University Publishing Co.,
Inc. and/or Jose M. Aruego. So ordered.
G.R. No. 75885

May 27, 1987

BATAAN SHIPYARD & ENGINEERING CO., INC.

(BASECO), petitioner,
vs.
PRESIDENTIAL COMMISSION ON GOOD GOVERNMENT,
CHAIRMAN JOVITO SALONGA, COMMISSIONER MARY
CONCEPCION BAUTISTA, COMMISSIONER RAMON DIAZ,
COMMISSIONER RAUL R. DAZA, COMMISSIONER
QUINTIN S. DOROMAL, CAPT. JORGE B. SIACUNCO, et
al., respondents.

Apostol, Bernas, Gumaru, Ona and Associates for petitioner.

Vicente G. Sison for intervenor A.T. Abesamis.
NARVASA, J.:
Challenged in this special civil action of certiorari and
prohibition by a private corporation known as the Bataan
Shipyard and Engineering Co., Inc. are: (1) Executive Orders
Numbered 1 and 2, promulgated by President Corazon C.
Aquino on February 28, 1986 and March 12, 1986,
respectively, and (2) the sequestration, takeover, and other
orders issued, and acts done, in accordance with said

executive orders by the Presidential Commission on Good

Government and/or its Commissioners and agents, affecting
said corporation.

1.
The Sequestration, Takeover, and Other Orders
Complained of
a.

The Basic Sequestration Order

The sequestration order which, in the view of the petitioner

corporation, initiated all its misery was issued on April 14,
1986 by Commissioner Mary Concepcion Bautista. It was
addressed to three of the agents of the Commission,
hereafter simply referred to as PCGG. It reads as follows:

RE: SEQUESTRATION ORDER

By virtue of the powers vested in the Presidential
Commission on Good Government, by authority of the
President of the Philippines, you are hereby directed to
sequester the following companies.
1.
Bataan Shipyard and Engineering Co., Inc.
(Engineering Island Shipyard and Mariveles Shipyard)
2.

Baseco Quarry

3.

Philippine Jai-Alai Corporation

4.

Fidelity Management Co., Inc.

5.

Romson Realty, Inc.

6.

Trident Management Co.

7.

New Trident Management

8.

Bay Transport

9.

And all affiliate companies of Alfredo "Bejo" Romualdez

You are hereby ordered:

1. To implement this sequestration order with a minimum
disruption of these companies' business activities.
2. To ensure the continuity of these companies as going
concerns, the care and maintenance of these assets until
such time that the Office of the President through the
Commission on Good Government should decide otherwise.

2.5. Minutes of the Executive Committee Meetings from 1973

to 1986
2.6. Existing contracts with suppliers/contractors/others.
3. Yearly list of stockholders with their corresponding
share/stockholdings from 1973 to 1986 duly certified by the
Corporate Secretary.
4. Audited Financial Statements such as Balance Sheet, Profit
& Loss and others from 1973 to December 31, 1985.

3. To report to the Commission on Good Government

periodically.

5. Monthly Financial Statements for the current year up to

March 31, 1986.

Further, you are authorized to request for Military/Security

Support from the Military/Police authorities, and such other
acts essential to the achievement of this sequestration order.
1

6. Consolidated Cash Position Reports from January to April

15, 1986.

b. Order for Production of Documents

8. Updated schedule of Accounts Receivable and Accounts

Payable.

On the strength of the above sequestration order, Mr. Jose M.

Balde, acting for the PCGG, addressed a letter dated April 18,
1986 to the President and other officers of petitioner firm,
reiterating an earlier request for the production of certain
documents, to wit:

1. Stock Transfer Book

2. Legal documents, such as:

2.1. Articles of Incorporation

2.2. By-Laws

7. Inventory listings of assets up dated up to March 31, 1986.

9. Complete list of depository banks for all funds with the

authorized signatories for withdrawals thereof.
10. Schedule of company investments and placements. 2

The letter closed with the warning that if the documents were
not submitted within five days, the officers would be cited for
"contempt in pursuance with Presidential Executive Order
Nos. 1 and 2."

c. Orders Re Engineer Island

(1) Termination of Contract for Security Services

2.3. Minutes of the Annual Stockholders Meeting from 1973

to 1986
2.4. Minutes of the Regular and Special Meetings of the Board
of Directors from 1973 to 1986

A third order assailed by petitioner corporation, hereafter

referred to simply as BASECO, is that issued on April 21, 1986

by a Capt. Flordelino B. Zabala, a member of the task force

assigned to carry out the basic sequestration order. He sent a
letter to BASECO's Vice-President for Finance, 3 terminating
the contract for security services within the Engineer Island
compound between BASECO and "Anchor and FAIRWAYS" and
"other civilian security agencies," CAPCOM military personnel
having already been assigned to the area,

(2) Change of Mode of Payment of Entry Charges

On July 15, 1986, the same Capt. Zabala issued a
Memorandum addressed to "Truck Owners and Contractors,"
particularly a "Mr. Buddy Ondivilla National Marine
Corporation," advising of the amendment in part of their
contracts with BASECO in the sense that the stipulated
charges for use of the BASECO road network were made
payable "upon entry and not anymore subject to monthly
billing as was originally agreed upon." 4

d. Aborted Contract for Improvement of Wharf at Engineer

Island

BASECO Management Team," advised Deltamarine by letter

dated July 30, 1986 that "the new management is not in a
position to honor the said contract" and thus "whatever
improvements * * (may be introduced) shall be deemed
unauthorized * * and shall be at * * (Deltamarine's) own risk."
6

e. Order for Operation of Sesiman Rock Quarry, Mariveles,

Bataan

By Order dated June 20, 1986, Commissioner Mary Bautista

first directed a PCGG agent, Mayor Melba O. Buenaventura,
"to plan and implement progress towards maximizing the
continuous operation of the BASECO Sesiman Rock Quarry * *
by conventional methods;" but afterwards, Commissioner
Bautista, in representation of the PCGG, authorized another
party, A.T. Abesamis, to operate the quarry, located at
Mariveles, Bataan, an agreement to this effect having been
executed by them on September 17, 1986. 7

f.
On July 9, 1986, a PCGG fiscal agent, S. Berenguer, entered
into a contract in behalf of BASECO with Deltamarine
Integrated Port Services, Inc., in virtue of which the latter
undertook to introduce improvements costing approximately
P210,000.00 on the BASECO wharf at Engineer Island,
allegedly then in poor condition, avowedly to "optimize its
utilization and in return maximize the revenue which would
flow into the government coffers," in consideration of
Deltamarine's being granted "priority in using the improved
portion of the wharf ahead of anybody" and exemption "from
the payment of any charges for the use of wharf including
the area where it may install its bagging equipments" "until
the improvement remains in a condition suitable for port
operations." 5 It seems however that this contract was never
consummated. Capt. Jorge B. Siacunco, "Head- (PCGG)

Order to Dispose of Scrap, etc.

By another Order of Commissioner Bautista, this time dated

June 26, 1986, Mayor Buenaventura was also "authorized to
clean and beautify the Company's compound," and in this
connection, to dispose of or sell "metal scraps" and other
materials, equipment and machineries no longer usable,
subject to specified guidelines and safeguards including audit
and verification. 8

g. The TAKEOVER Order

By letter dated July 14, 1986, Commissioner Ramon A. Diaz

decreed the provisional takeover by the PCGG of BASECO,
"the Philippine Dockyard Corporation and all their affiliated
companies." 9 Diaz invoked the provisions of Section 3 (c) of
Executive Order No. 1, empowering the Commission

* * To provisionally takeover in the public interest or to

prevent its disposal or dissipation, business enterprises and
properties taken over by the government of the Marcos
Administration or by entities or persons close to former
President Marcos, until the transactions leading to such
acquisition by the latter can be disposed of by the
appropriate authorities.

A management team was designated to implement the order,

headed by Capt. Siacunco, and was given the following
powers:

1.
Conducts all aspects of operation of the subject
companies;
2.
Installs key officers, hires and terminates personnel as
necessary;
3. Enters into contracts related to management and
operation of the companies;
4. Ensures that the assets of the companies are not
dissipated and used effectively and efficiently; revenues are
duly accounted for; and disburses funds only as may be
necessary;
5. Does actions including among others, seeking of military
support as may be necessary, that will ensure compliance to
this order;

6. Holds itself fully accountable to the Presidential

Commission on Good Government on all aspects related to
this take-over order.
h. Termination of Services of BASECO Officers
Thereafter, Capt. Siacunco, sent letters to Hilario M. Ruiz,
Manuel S. Mendoza, Moises M. Valdez, Gilberto Pasimanero,
and Benito R. Cuesta I, advising of the termination of their
services by the PCGG. 10
2.

Petitioner's Plea and Postulates

It is the foregoing specific orders and acts of the PCGG and

its members and agents which, to repeat, petitioner BASECO
would have this Court nullify. More particularly, BASECO
prays that this Court1)
declare unconstitutional and void Executive Orders
Numbered 1 and 2;
2)
annul the sequestration order dated April- 14, 1986,
and all other orders subsequently issued and acts done on
the basis thereof, inclusive of the takeover order of July 14,
1986 and the termination of the services of the BASECO
executives. 11

a. Re Executive Orders No. 1 and 2, and the Sequestration

and Takeover Orders

While BASECO concedes that "sequestration without

resorting to judicial action, might be made within the context
of Executive Orders Nos. 1 and 2 before March 25, 1986
when the Freedom Constitution was promulgated, under the
principle that the law promulgated by the ruler under a
revolutionary regime is the law of the land, it ceased to be
acceptable when the same ruler opted to promulgate the
Freedom Constitution on March 25, 1986 wherein under

Section I of the same, Article IV (Bill of Rights) of the 1973

Constitution was adopted providing, among others, that "No
person shall be deprived of life, liberty and property without
due process of law." (Const., Art. I V, Sec. 1)." 12

It declares that its objection to the constitutionality of the

Executive Orders "as well as the Sequestration Order * * and
Takeover Order * * issued purportedly under the authority of
said Executive Orders, rests on four fundamental
considerations: First, no notice and hearing was accorded * *
(it) before its properties and business were taken over;
Second, the PCGG is not a court, but a purely investigative
agency and therefore not competent to act as prosecutor and
judge in the same cause; Third, there is nothing in the
issuances which envisions any proceeding, process or
remedy by which petitioner may expeditiously challenge the
validity of the takeover after the same has been effected;
and Fourthly, being directed against specified persons, and in
disregard of the constitutional presumption of innocence and
general rules and procedures, they constitute a Bill of
Attainder." 13

b.

Re Order to Produce Documents

It argues that the order to produce corporate records from

1973 to 1986, which it has apparently already complied with,
was issued without court authority and infringed its
constitutional right against self-incrimination, and
unreasonable search and seizure. 14

c. Re PCGG's Exercise of Right of Ownership and

Management

BASECO further contends that the PCGG had unduly

interfered with its right of dominion and management of its
business affairs by

1)
terminating its contract for security services with
Fairways & Anchor, without the consent and against the will
of the contracting parties; and amending the mode of
payment of entry fees stipulated in its Lease Contract with
National Stevedoring & Lighterage Corporation, these acts
being in violation of the non-impairment clause of the
constitution; 15
2)
allowing PCGG Agent Silverio Berenguer to enter into
an "anomalous contract" with Deltamarine Integrated Port
Services, Inc., giving the latter free use of BASECO premises;
16
3)
authorizing PCGG Agent, Mayor Melba Buenaventura,
to manage and operate its rock quarry at Sesiman, Mariveles;
17
4)
authorizing the same mayor to sell or dispose of its
metal scrap, equipment, machinery and other materials; 18
5)
authorizing the takeover of BASECO, Philippine
Dockyard Corporation, and all their affiliated companies;
6)
terminating the services of BASECO executives:
President Hilario M. Ruiz; EVP Manuel S. Mendoza; GM Moises
M. Valdez; Finance Mgr. Gilberto Pasimanero; Legal Dept. Mgr.
Benito R. Cuesta I; 19
7)

planning to elect its own Board of Directors; 20

8)
allowing willingly or unwillingly its personnel to take,
steal, carry away from petitioner's premises at Mariveles * *
rolls of cable wires, worth P600,000.00 on May 11, 1986; 21
9)
allowing "indiscriminate diggings" at Engineer Island to
retrieve gold bars supposed to have been buried therein. 22

3.
Doubts, Misconceptions regarding Sequestration,
Freeze and Takeover Orders

Many misconceptions and much doubt about the matter of

sequestration, takeover and freeze orders have been
engendered by misapprehension, or incomplete
comprehension if not indeed downright ignorance of the law
governing these remedies. It is needful that these
misconceptions and doubts be dispelled so that uninformed
and useless debates about them may be avoided, and
arguments tainted b sophistry or intellectual dishonesty be
quickly exposed and discarded. Towards this end, this opinion
will essay an exposition of the law on the matter. In the
process many of the objections raised by BASECO will be
dealt with.

4.

The Governing Law

a. Proclamation No. 3

The impugned executive orders are avowedly meant to carry

out the explicit command of the Provisional Constitution,
ordained by Proclamation No. 3, 23 that the President-in the
exercise of legislative power which she was authorized to
continue to wield "(until a legislature is elected and convened
under a new Constitution" "shall give priority to measures
to achieve the mandate of the people," among others to
(r)ecover ill-gotten properties amassed by the leaders and
supporters of the previous regime and protect the interest of
the people through orders of sequestration or freezing of
assets or accounts." 24

Executive Order No. 1 stresses the "urgent need to recover

all ill-gotten wealth," and postulates that "vast resources of
the government have been amassed by former President
Ferdinand E. Marcos, his immediate family, relatives, and
close associates both here and abroad." 25 Upon these
premises, the Presidential Commission on Good Government
was created, 26 "charged with the task of assisting the
President in regard to (certain specified) matters," among
which was precisely-

* * The recovery of all in-gotten wealth accumulated by

former President Ferdinand E. Marcos, his immediate family,
relatives, subordinates and close associates, whether located
in the Philippines or abroad, including the takeover or
sequestration of all business enterprises and entities owned
or controlled by them, during his administration, directly or
through nominees, by taking undue advantage of their public
office and/or using their powers, authority, influence,
connections or relationship. 27

In relation to the takeover or sequestration that it was

authorized to undertake in the fulfillment of its mission, the
PCGG was granted "power and authority" to do the following
particular acts, to wit:

1. To sequester or place or cause to be placed under its

control or possession any building or office wherein any illgotten wealth or properties may be found, and any records
pertaining thereto, in order to prevent their destruction,
concealment or disappearance which would frustrate or
hamper the investigation or otherwise prevent the
Commission from accomplishing its task.

b. Executive Order No. 1

2. To provisionally take over in the public interest or to
prevent the disposal or dissipation, business enterprises and

properties taken over by the government of the Marcos

Administration or by entities or persons close to former
President Marcos, until the transactions leading to such
acquisition by the latter can be disposed of by the
appropriate authorities.

3. To enjoin or restrain any actual or threatened commission

of acts by any person or entity that may render moot and
academic, or frustrate or otherwise make ineffectual the
efforts of the Commission to carry out its task under this
order. 28

So that it might ascertain the facts germane to its objectives,

it was granted power to conduct investigations; require
submission of evidence by subpoenae ad testificandum and
duces tecum; administer oaths; punish for contempt. 29 It
was given power also to promulgate such rules and
regulations as may be necessary to carry out the purposes of
* * (its creation). 30

c. Executive Order No. 2

Executive Order No. 2 gives additional and more specific data

and directions respecting "the recovery of ill-gotten
properties amassed by the leaders and supporters of the
previous regime." It declares that:

1) * * the Government of the Philippines is in possession of

evidence showing that there are assets and properties
purportedly pertaining to former Ferdinand E. Marcos, and/or
his wife Mrs. Imelda Romualdez Marcos, their close relatives,
subordinates, business associates, dummies, agents or
nominees which had been or were acquired by them directly
or indirectly, through or as a result of the improper or illegal

use of funds or properties owned by the government of the

Philippines or any of its branches, instrumentalities,
enterprises, banks or financial institutions, or by taking
undue advantage of their office, authority, influence,
connections or relationship, resulting in their unjust
enrichment and causing grave damage and prejudice to the
Filipino people and the Republic of the Philippines:" and

2) * * said assets and properties are in the form of bank

accounts, deposits, trust accounts, shares of stocks,
buildings, shopping centers, condominiums, mansions,
residences, estates, and other kinds of real and personal
properties in the Philippines and in various countries of the
world." 31

Upon these premises, the President-

1) froze "all assets and properties in the Philippines in which

former President Marcos and/or his wife, Mrs. Imelda
Romualdez Marcos, their close relatives, subordinates,
business associates, dummies, agents, or nominees have any
interest or participation;

2) prohibited former President Ferdinand Marcos and/or his

wife * *, their close relatives, subordinates, business
associates, duties, agents, or nominees from transferring,
conveying, encumbering, concealing or dissipating said
assets or properties in the Philippines and abroad, pending
the outcome of appropriate proceedings in the Philippines to
determine whether any such assets or properties were
acquired by them through or as a result of improper or illegal
use of or the conversion of funds belonging to the
Government of the Philippines or any of its branches,
instrumentalities, enterprises, banks or financial institutions,
or by taking undue advantage of their official position,

authority, relationship, connection or influence to unjustly

enrich themselves at the expense and to the grave damage
and prejudice of the Filipino people and the Republic of the
Philippines;

be proved by a preponderance of evidence;" and that,

moreover, the "technical rules of procedure and evidence
shall not be strictly applied to* * (said)civil cases." 36

5.
3)
prohibited "any person from transferring, conveying,
encumbering or otherwise depleting or concealing such
assets and properties or from assisting or taking part in their
transfer, encumbrance, concealment or dissipation under
pain of such penalties as are prescribed by law;" and

4) required "all persons in the Philippines holding such assets

or properties, whether located in the Philippines or abroad, in
their names as nominees, agents or trustees, to make full
disclosure of the same to the Commission on Good
Government within thirty (30) days from publication of * (the)
Executive Order, * *. 32

d. Executive Order No. 14

A third executive order is relevant: Executive Order No. 14,

33 by which the PCGG is empowered, "with the assistance of
the Office of the Solicitor General and other government
agencies, * * to file and prosecute all cases investigated by it
* * as may be warranted by its findings." 34 All such cases,
whether civil or criminal, are to be filed "with the
Sandiganbayan which shall have exclusive and original
jurisdiction thereof." 35 Executive Order No. 14 also
pertinently provides that civil suits for restitution, reparation
of damages, or indemnification for consequential damages,
forfeiture proceedings provided for under Republic Act No.
1379, or any other civil actions under the Civil Code or other
existing laws, in connection with * * (said Executive Orders
Numbered 1 and 2) may be filed separately from and
proceed independently of any criminal proceedings and may

Contemplated Situations

The situations envisaged and sought to be governed are selfevident, these being:

1) that "(i)ll-gotten properties (were) amassed by the leaders

and supporters of the previous regime"; 37

a) more particularly, that ill-gotten wealth (was) accumulated

by former President Ferdinand E. Marcos, his immediate
family, relatives, subordinates and close associates, * *
located in the Philippines or abroad, * * (and) business
enterprises and entities (came to be) owned or controlled by
them, during * * (the Marcos) administration, directly or
through nominees, by taking undue advantage of their public
office and/or using their powers, authority, influence,
Connections or relationship; 38

b) otherwise stated, that "there are assets and properties

purportedly pertaining to former President Ferdinand E.
Marcos, and/or his wife Mrs. Imelda Romualdez Marcos, their
close relatives, subordinates, business associates, dummies,
agents or nominees which had been or were acquired by
them directly or indirectly, through or as a result of the
improper or illegal use of funds or properties owned by the
Government of the Philippines or any of its branches,
instrumentalities, enterprises, banks or financial institutions,
or by taking undue advantage of their office, authority,
influence, connections or relationship, resulting in their

unjust enrichment and causing grave damage and prejudice

to the Filipino people and the Republic of the Philippines"; 39

c) that "said assets and properties are in the form of bank

accounts. deposits, trust. accounts, shares of stocks,
buildings, shopping centers, condominiums, mansions,
residences, estates, and other kinds of real and personal
properties in the Philippines and in various countries of the
world;" 40 and

2) that certain "business enterprises and properties (were)

taken over by the government of the Marcos Administration
or by entities or persons close to former President Marcos. 41

6.
Government's Right and Duty to Recover All Ill-gotten
Wealth

There can be no debate about the validity and eminent

propriety of the Government's plan "to recover all ill-gotten
wealth."

Neither can there be any debate about the proposition that

assuming the above described factual premises of the
Executive Orders and Proclamation No. 3 to be true, to be
demonstrable by competent evidence, the recovery from
Marcos, his family and his dominions of the assets and
properties involved, is not only a right but a duty on the part
of Government.

But however plain and valid that right and duty may be, still
a balance must be sought with the equally compelling
necessity that a proper respect be accorded and adequate

protection assured, the fundamental rights of private

property and free enterprise which are deemed pillars of a
free society such as ours, and to which all members of that
society may without exception lay claim.

* * Democracy, as a way of life enshrined in the Constitution,

embraces as its necessary components freedom of
conscience, freedom of expression, and freedom in the
pursuit of happiness. Along with these freedoms are included
economic freedom and freedom of enterprise within
reasonable bounds and under proper control. * * Evincing
much concern for the protection of property, the Constitution
distinctly recognizes the preferred position which real estate
has occupied in law for ages. Property is bound up with every
aspect of social life in a democracy as democracy is
conceived in the Constitution. The Constitution realizes the
indispensable role which property, owned in reasonable
quantities and used legitimately, plays in the stimulation to
economic effort and the formation and growth of a solid
social middle class that is said to be the bulwark of
democracy and the backbone of every progressive and happy
country. 42

a. Need of Evidentiary Substantiation in Proper Suit

Consequently, the factual premises of the Executive Orders

cannot simply be assumed. They will have to be duly
established by adequate proof in each case, in a proper
judicial proceeding, so that the recovery of the ill-gotten
wealth may be validly and properly adjudged and
consummated; although there are some who maintain that
the fact-that an immense fortune, and "vast resources of the
government have been amassed by former President
Ferdinand E. Marcos, his immediate family, relatives, and
close associates both here and abroad," and they have
resorted to all sorts of clever schemes and manipulations to
disguise and hide their illicit acquisitions-is within the realm

of judicial notice, being of so extensive notoriety as to

dispense with proof thereof, Be this as it may, the
requirement of evidentiary substantiation has been expressly
acknowledged, and the procedure to be followed explicitly
laid down, in Executive Order No. 14.

b. Need of Provisional Measures to Collect and Conserve

Assets Pending Suits

Nor may it be gainsaid that pending the institution of the

suits for the recovery of such "ill-gotten wealth" as the
evidence at hand may reveal, there is an obvious and
imperative need for preliminary, provisional measures to
prevent the concealment, disappearance, destruction,
dissipation, or loss of the assets and properties subject of the
suits, or to restrain or foil acts that may render moot and
academic, or effectively hamper, delay, or negate efforts to
recover the same.

7.

a. Sequestration

By the clear terms of the law, the power of the PCGG to

sequester property claimed to be "ill-gotten" means to place
or cause to be placed under its possession or control said
property, or any building or office wherein any such property
and any records pertaining thereto may be found, including
"business enterprises and entities,"-for the purpose of
preventing the destruction, concealment or dissipation of,
and otherwise conserving and preserving, the same-until it
can be determined, through appropriate judicial proceedings,
whether the property was in truth will- gotten," i.e., acquired
through or as a result of improper or illegal use of or the
conversion of funds belonging to the Government or any of
its branches, instrumentalities, enterprises, banks or financial
institutions, or by taking undue advantage of official position,
authority relationship, connection or influence, resulting in
unjust enrichment of the ostensible owner and grave damage
and prejudice to the State. 44 And this, too, is the sense in
which the term is commonly understood in other
jurisdictions. 45

Provisional Remedies Prescribed by Law

b. "Freeze Order"

To answer this need, the law has prescribed three (3)

provisional remedies. These are: (1) sequestration; (2) freeze
orders; and (3) provisional takeover.

Sequestration and freezing are remedies applicable generally

to unearthed instances of "ill-gotten wealth." The remedy of
"provisional takeover" is peculiar to cases where "business
enterprises and properties (were) taken over by the
government of the Marcos Administration or by entities or
persons close to former President Marcos." 43

A "freeze order" prohibits the person having possession or

control of property alleged to constitute "ill-gotten wealth"
"from transferring, conveying, encumbering or otherwise
depleting or concealing such property, or from assisting or
taking part in its transfer, encumbrance, concealment, or
dissipation." 46 In other words, it commands the possessor to
hold the property and conserve it subject to the orders and
disposition of the authority decreeing such freezing. In this
sense, it is akin to a garnishment by which the possessor or
ostensible owner of property is enjoined not to deliver,
transfer, or otherwise dispose of any effects or credits in his
possession or control, and thus becomes in a sense an
involuntary depositary thereof. 47

c. Provisional Takeover

In providing for the remedy of "provisional takeover," the law

acknowledges the apparent distinction between "ill gotten"
"business enterprises and entities" (going concerns,
businesses in actual operation), generally, as to which the
remedy of sequestration applies, it being necessarily inferred
that the remedy entails no interference, or the least possible
interference with the actual management and operations
thereof; and "business enterprises which were taken over by
the government government of the Marcos Administration or
by entities or persons close to him," in particular, as to which
a "provisional takeover" is authorized, "in the public interest
or to prevent disposal or dissipation of the enterprises." 48
Such a "provisional takeover" imports something more than
sequestration or freezing, more than the placing of the
business under physical possession and control, albeit
without or with the least possible interference with the
management and carrying on of the business itself. In a
"provisional takeover," what is taken into custody is not only
the physical assets of the business enterprise or entity, but
the business operation as well. It is in fine the assumption of
control not only over things, but over operations or on- going
activities. But, to repeat, such a "provisional takeover" is
allowed only as regards "business enterprises * * taken over
by the government of the Marcos Administration or by
entities or persons close to former President Marcos."

in the public interest the disappearance or dissipation of

property or business, and conserve it pending adjudgment in
appropriate proceedings of the primary issue of whether or
not the acquisition of title or other right thereto by the
apparent owner was attended by some vitiating anomaly.
None of the remedies is meant to deprive the owner or
possessor of his title or any right to the property
sequestered, frozen or taken over and vest it in the
sequestering agency, the Government or other person. This
can be done only for the causes and by the processes laid
down by law.

That this is the sense in which the power to sequester, freeze

or provisionally take over is to be understood and exercised,
the language of the executive orders in question leaves no
doubt. Executive Order No. 1 declares that the sequestration
of property the acquisition of which is suspect shall last "until
the transactions leading to such acquisition * * can be
disposed of by the appropriate authorities." 49 Executive
Order No. 2 declares that the assets or properties therein
mentioned shall remain frozen "pending the outcome of
appropriate proceedings in the Philippines to determine
whether any such assets or properties were acquired" by
illegal means. Executive Order No. 14 makes clear that
judicial proceedings are essential for the resolution of the
basic issue of whether or not particular assets are "illgotten," and resultant recovery thereof by the Government is
warranted.

d. No Divestment of Title Over Property Seized

e. State of Seizure Not To Be Indefinitely Maintained; The

Constitutional Command

It may perhaps be well at this point to stress once again the

provisional, contingent character of the remedies just
described. Indeed the law plainly qualifies the remedy of
take-over by the adjective, "provisional." These remedies
may be resorted to only for a particular exigency: to prevent

There is thus no cause for the apprehension voiced by

BASECO 50 that sequestration, freezing or provisional
takeover is designed to be an end in itself, that it is the
device through which persons may be deprived of their
property branded as "ill-gotten," that it is intended to bring

about a permanent, rather than a passing, transitional state

of affairs. That this is not so is quite explicitly declared by the
governing rules.

Be this as it may, the 1987 Constitution should allay any

lingering fears about the duration of these provisional
remedies. Section 26 of its Transitory Provisions, 51 lays
down the relevant rule in plain terms, apart from extending
ratification or confirmation (although not really necessary) to
the institution by presidential fiat of the remedy of
sequestration and freeze orders:

SEC. 26. The authority to issue sequestration or freeze orders

under Proclamation No. 3 dated March 25, 1986 in relation to
the recovery of ill-gotten wealth shag remain operative for
not more than eighteen months after the ratification of this
Constitution. However, in the national interest, as certified by
the President, the Congress may extend said period.

A sequestration or freeze order shall be issued only upon

showing of a prima facie case. The order and the list of the
sequestered or frozen properties shall forthwith be registered
with the proper court. For orders issued before the ratification
of this Constitution, the corresponding judicial action or
proceeding shall be filed within six months from its
ratification. For those issued after such ratification, the
judicial action or proceeding shall be commenced within six
months from the issuance thereof.

The sequestration or freeze order is deemed automatically

lifted if no judicial action or proceeding is commenced as
herein provided. 52

f. Kinship to Attachment Receivership

As thus described, sequestration, freezing and provisional

takeover are akin to the provisional remedy of preliminary
attachment, or receivership. 53 By attachment, a sheriff
seizes property of a defendant in a civil suit so that it may
stand as security for the satisfaction of any judgment that
may be obtained, and not disposed of, or dissipated, or lost
intentionally or otherwise, pending the action. 54 By
receivership, property, real or personal, which is subject of
litigation, is placed in the possession and control of a receiver
appointed by the Court, who shall conserve it pending final
determination of the title or right of possession over it. 55 All
these remedies sequestration, freezing, provisional,
takeover, attachment and receivership are provisional,
temporary, designed for-particular exigencies, attended by
no character of permanency or finality, and always subject to
the control of the issuing court or agency.

g. Remedies, Non-Judicial

Parenthetically, that writs of sequestration or freeze or

takeover orders are not issued by a court is of no moment.
The Solicitor General draws attention to the writ of distraint
and levy which since 1936 the Commissioner of Internal
Revenue has been by law authorized to issue against
property of a delinquent taxpayer. 56 BASECO itself declares
that it has not manifested "a rigid insistence on sequestration
as a purely judicial remedy * * (as it feels) that the law should
not be ossified to a point that makes it insensitive to
change." What it insists on, what it pronounces to be its
"unyielding position, is that any change in procedure, or the
institution of a new one, should conform to due process and
the other prescriptions of the Bill of Rights of the
Constitution." 57 It is, to be sure, a proposition on which
there can be no disagreement.

h.

Orders May Issue Ex Parte

Like the remedy of preliminary attachment and receivership,

as well as delivery of personal property in replevin suits,
sequestration and provisional takeover writs may issue ex
parte. 58 And as in preliminary attachment, receivership, and
delivery of personality, no objection of any significance may
be raised to the ex parte issuance of an order of
sequestration, freezing or takeover, given its fundamental
character of temporariness or conditionality; and taking
account specially of the constitutionally expressed "mandate
of the people to recover ill-gotten properties amassed by the
leaders and supporters of the previous regime and protect
the interest of the people;" 59 as well as the obvious need to
avoid alerting suspected possessors of "ill-gotten wealth" and
thereby cause that disappearance or loss of property
precisely sought to be prevented, and the fact, just as selfevident, that "any transfer, disposition, concealment or
disappearance of said assets and properties would frustrate,
obstruct or hamper the efforts of the Government" at the just
recovery thereof. 60

8.

Requisites for Validity

What is indispensable is that, again as in the case of

attachment and receivership, there exist a prima facie factual
foundation, at least, for the sequestration, freeze or takeover
order, and adequate and fair opportunity to contest it and
endeavor to cause its negation or nullification. 61

Both are assured under the executive orders in question and

the rules and regulations promulgated by the PCGG.

a. Prima Facie Evidence as Basis for Orders

Executive Order No. 14 enjoins that there be "due regard to

the requirements of fairness and due process." 62 Executive
Order No. 2 declares that with respect to claims on allegedly
"ill-gotten" assets and properties, "it is the position of the
new democratic government that President Marcos * * (and
other parties affected) be afforded fair opportunity to contest
these claims before appropriate Philippine authorities." 63
Section 7 of the Commission's Rules and Regulations
provides that sequestration or freeze (and takeover) orders
issue upon the authority of at least two commissioners,
based on the affirmation or complaint of an interested party,
or motu proprio when the Commission has reasonable
grounds to believe that the issuance thereof is warranted. 64
A similar requirement is now found in Section 26, Art. XVIII of
the 1987 Constitution, which requires that a "sequestration
or freeze order shall be issued only upon showing of a prima
facie case." 65

b. Opportunity to Contest

And Sections 5 and 6 of the same Rules and Regulations lay

down the procedure by which a party may seek to set aside a
writ of sequestration or freeze order, viz:

SECTION 5. Who may contend.-The person against whom a

writ of sequestration or freeze or hold order is directed may
request the lifting thereof in writing, either personally or
through counsel within five (5) days from receipt of the writ
or order, or in the case of a hold order, from date of
knowledge thereof.

SECTION 6. Procedure for review of writ or order.-After due

hearing or motu proprio for good cause shown, the
Commission may lift the writ or order unconditionally or

subject to such conditions as it may deem necessary, taking

into consideration the evidence and the circumstance of the
case. The resolution of the commission may be appealed by
the party concerned to the Office of the President of the
Philippines within fifteen (15) days from receipt thereof.

Parenthetically, even if the requirement for a prima facie

showing of "ill- gotten wealth" were not expressly imposed by
some rule or regulation as a condition to warrant the
sequestration or freezing of property contemplated in the
executive orders in question, it would nevertheless be
exigible in this jurisdiction in which the Rule of Law prevails
and official acts which are devoid of rational basis in fact or
law, or are whimsical and capricious, are condemned and
struck down. 66

9.

Constitutional Sanction of Remedies

If any doubt should still persist in the face of the foregoing

considerations as to the validity and propriety of
sequestration, freeze and takeover orders, it should be
dispelled by the fact that these particular remedies and the
authority of the PCGG to issue them have received
constitutional approbation and sanction. As already
mentioned, the Provisional or "Freedom" Constitution
recognizes the power and duty of the President to enact
"measures to achieve the mandate of the people to * * *
(recover ill- gotten properties amassed by the leaders and
supporters of the previous regime and protect the interest of
the people through orders of sequestration or freezing of
assets or accounts." And as also already adverted to, Section
26, Article XVIII of the 1987 Constitution 67 treats of, and
ratifies the "authority to issue sequestration or freeze orders
under Proclamation No. 3 dated March 25, 1986."

The institution of these provisional remedies is also premised

upon the State's inherent police power, regarded, as t lie
power of promoting the public welfare by restraining and
regulating the use of liberty and property," 68 and as "the
most essential, insistent and illimitable of powers * * in the
promotion of general welfare and the public interest," 69 and
said to be co-extensive with self-protection and * * not
inaptly termed (also) the'law of overruling necessity." " 70

10.

PCGG not a "Judge"; General Functions

It should also by now be reasonably evident from what has

thus far been said that the PCGG is not, and was never
intended to act as, a judge. Its general function is to conduct
investigations in order to collect evidence establishing
instances of "ill-gotten wealth;" issue sequestration, and such
orders as may be warranted by the evidence thus collected
and as may be necessary to preserve and conserve the
assets of which it takes custody and control and prevent their
disappearance, loss or dissipation; and eventually file and
prosecute in the proper court of competent jurisdiction all
cases investigated by it as may be warranted by its findings.
It does not try and decide, or hear and determine, or
adjudicate with any character of finality or compulsion, cases
involving the essential issue of whether or not property
should be forfeited and transferred to the State because "illgotten" within the meaning of the Constitution and the
executive orders. This function is reserved to the designated
court, in this case, the Sandiganbayan. 71 There can
therefore be no serious regard accorded to the accusation,
leveled by BASECO, 72 that the PCGG plays the perfidious
role of prosecutor and judge at the same time.

11.

Facts Preclude Grant of Relief to Petitioner

Upon these premises and reasoned conclusions, and upon

the facts disclosed by the record, hereafter to be discussed,
the petition cannot succeed. The writs of certiorari and
prohibition prayed for will not be issued.

The facts show that the corporation known as BASECO was

owned or controlled by President Marcos "during his
administration, through nominees, by taking undue
advantage of his public office and/or using his powers,
authority, or influence, " and that it was by and through the
same means, that BASECO had taken over the business
and/or assets of the National Shipyard and Engineering Co.,
Inc., and other government-owned or controlled entities.

12.

Organization and Stock Distribution of BASECO

BASECO describes itself in its petition as "a shiprepair and

shipbuilding company * * incorporated as a domestic private
corporation * * (on Aug. 30, 1972) by a consortium of Filipino
shipowners and shipping executives. Its main office is at
Engineer Island, Port Area, Manila, where its Engineer Island
Shipyard is housed, and its main shipyard is located at
Mariveles Bataan." 73 Its Articles of Incorporation disclose
that its authorized capital stock is P60,000,000.00 divided
into 60,000 shares, of which 12,000 shares with a value of
P12,000,000.00 have been subscribed, and on said
subscription, the aggregate sum of P3,035,000.00 has been
paid by the incorporators. 74 The same articles Identify the
incorporators, numbering fifteen (15), as follows: (1) Jose A.
Rojas, (2) Anthony P. Lee, (3) Eduardo T. Marcelo, (4) Jose P.
Fernandez, (5) Generoso Tanseco, (6) Emilio T. Yap, (7)
Antonio M. Ezpeleta, (8) Zacarias Amante, (9) Severino de la
Cruz, (10) Jose Francisco, (11) Dioscoro Papa, (12) Octavio
Posadas, (13) Manuel S. Mendoza, (14) Magiliw Torres, and
(15) Rodolfo Torres.

By 1986, however, of these fifteen (15) incorporators, six (6)

had ceased to be stockholders, namely: (1) Generoso
Tanseco, (2) Antonio Ezpeleta, (3) Zacarias Amante, (4)
Octavio Posadas, (5) Magiliw Torres, and (6) Rodolfo Torres.
As of this year, 1986, there were twenty (20) stockholders
listed in BASECO's Stock and Transfer Book. 75 Their names
and the number of shares respectively held by them are as
follows:

1. Jose A. Rojas

1,248 shares

2. Severino G. de la Cruz

1,248 shares

3. Emilio T. Yap

2,508 shares

4. Jose Fernandez

1,248 shares

5. Jose Francisco

128 shares

7,412 shares

6. Manuel S. Mendoza

12. United Phil. Lines

96 shares

1,240 shares

7. Anthony P. Lee

13. Renato M. Tanseco

1,248 shares

8 shares

8. Hilario M. Ruiz

14. Fidel Ventura

32 shares

8 shares

9. Constante L. Farias

15. Metro Bay Drydock

8 shares

136,370 shares

10. Fidelity Management, Inc.

16. Manuel Jacela

65,882 shares

1 share

11. Trident Management

17. Jonathan G. Lu

1 share

18. Jose J. Tanchanco

1 share

19. Dioscoro Papa

future negotiation all its structures, buildings, shops,

quarters, houses, plants, equipment and facilities, in stock or
in transit. This it did in virtue of a "Contract of Purchase and
Sale with Chattel Mortgage" executed on February 13, 1973.
The price was P52,000,000.00. As partial payment thereof,
BASECO delivered to NASSCO a cash bond of
P11,400,000.00, convertible into cash within twenty-four (24)
hours from completion of the inventory undertaken pursuant
to the contract. The balance of P41,600,000.00, with interest
at seven percent (7%) per annum, compounded semiannually, was stipulated to be paid in equal semi-annual
installments over a term of nine (9) years, payment to
commence after a grace period of two (2) years from date of
turnover of the shipyard to BASECO. 76

128 shares
14.

Subsequent Reduction of Price; Intervention of Marcos

20. Edward T. Marcelo

4 shares

TOTAL

218,819 shares.

13

Acquisition of NASSCO by BASECO

Barely six months after its incorporation, BASECO acquired

from National Shipyard & Steel Corporation, or NASSCO, a
government-owned or controlled corporation, the latter's
shipyard at Mariveles, Bataan, known as the Bataan National
Shipyard (BNS), and except for NASSCO's Engineer Island
Shops and certain equipment of the BNS, consigned for

Unaccountably, the price of P52,000,000.00 was reduced by

more than one-half, to P24,311,550.00, about eight (8)
months later. A document to this effect was executed on
October 9, 1973, entitled "Memorandum Agreement," and
was signed for NASSCO by Arturo Pacificador, as Presiding
Officer of the Board of Directors, and David R. Ines, as
General Manager. 77 This agreement bore, at the top right
corner of the first page, the word "APPROVED" in the
handwriting of President Marcos, followed by his usual full
signature. The document recited that a down payment of
P5,862,310.00 had been made by BASECO, and the balance
of P19,449,240.00 was payable in equal semi-annual
installments over nine (9) years after a grace period of two
(2) years, with interest at 7% per annum.

15.
Acquisition of 300 Hectares from Export Processing
Zone Authority

On October 1, 1974, BASECO acquired three hundred (300)

hectares of land in Mariveles from the Export Processing
Zone Authority for the price of P10,047,940.00 of which, as
set out in the document of sale, P2,000.000.00 was paid
upon its execution, and the balance stipulated to be payable
in installments. 78

16.
Acquisition of Other Assets of NASSCO; Intervention of
Marcos

Some nine months afterwards, or on July 15, 1975, to be

precise, BASECO, again with the intervention of President
Marcos, acquired ownership of the rest of the assets of
NASSCO which had not been included in the first two (2)
purchase documents. This was accomplished by a deed
entitled "Contract of Purchase and Sale," 79 which, like the
Memorandum of Agreement dated October 9, 1973 supra
also bore at the upper right-hand corner of its first page, the
handwritten notation of President Marcos reading,
"APPROVED, July 29, 1973," and underneath it, his usual full
signature. Transferred to BASECO were NASSCO's "ownership
and all its titles, rights and interests over all equipment and
facilities including structures, buildings, shops, quarters,
houses, plants and expendable or semi-expendable assets,
located at the Engineer Island, known as the Engineer Island
Shops, including all the equipment of the Bataan National
Shipyards (BNS) which were excluded from the sale of NBS to
BASECO but retained by BASECO and all other selected
equipment and machineries of NASSCO at J. Panganiban
Smelting Plant." In the same deed, NASSCO committed itself
to cooperate with BASECO for the acquisition from the
National Government or other appropriate Government entity
of Engineer Island. Consideration for the sale was set at
P5,000,000.00; a down payment of P1,000,000.00 appears to
have been made, and the balance was stipulated to be paid
at 7% interest per annum in equal semi annual installments
over a term of nine (9) years, to commence after a grace
period of two (2) years. Mr. Arturo Pacificador again signed

for NASSCO, together with the general manager, Mr. David R.

Ines.

17.

Loans Obtained

It further appears that on May 27, 1975 BASECO obtained a

loan from the NDC, taken from "the last available Japanese
war damage fund of $19,000,000.00," to pay for "Japanese
made heavy equipment (brand new)." 80 On September 3,
1975, it got another loan also from the NDC in the amount of
P30,000,000.00 (id.). And on January 28, 1976, it got still
another loan, this time from the GSIS, in the sum of
P12,400,000.00. 81 The claim has been made that not a
single centavo has been paid on these loans. 82

18.

Reports to President Marcos

In September, 1977, two (2) reports were submitted to

President Marcos regarding BASECO. The first was contained
in a letter dated September 5, 1977 of Hilario M. Ruiz,
BASECO president. 83 The second was embodied in a
confidential memorandum dated September 16, 1977 of
Capt. A.T. Romualdez. 84 They further disclose the fine hand
of Marcos in the affairs of BASECO, and that of a Romualdez,
a relative by affinity.

a. BASECO President's Report

In his letter of September 5, 1977, BASECO President Ruiz

reported to Marcos that there had been "no orders or
demands for ship construction" for some time and expressed
the fear that if that state of affairs persisted, BASECO would

not be able to pay its debts to the Government, which at the

time stood at the not inconsiderable amount of
P165,854,000.00. 85 He suggested that, to "save the
situation," there be a "spin-off (of their) shipbuilding activities
which shall be handled exclusively by an entirely new
corporation to be created;" and towards this end, he
informed Marcos that BASECO was

* * inviting NDC and LUSTEVECO to participate by converting

the NDC shipbuilding loan to BASECO amounting to
P341.165M and assuming and converting a portion of
BASECO's shipbuilding loans from REPACOM amounting to
P52.2M or a total of P83.365M as NDC's equity contribution in
the new corporation. LUSTEVECO will participate by
absorbing and converting a portion of the REPACOM loan of
Bay Shipyard and Drydock, Inc., amounting to P32.538M. 86

b. Romualdez' Report

Capt. A.T. Romualdez' report to the President was submitted

eleven (11) days later. It opened with the following caption:

Like Ruiz, Romualdez wrote that BASECO faced great

difficulties in meeting its loan obligations due chiefly to the
fact that "orders to build ships as expected * * did not
materialize."

He advised that five stockholders had "waived and/or

assigned their holdings inblank," these being: (1) Jose A.
Rojas, (2) Severino de la Cruz, (3) Rodolfo Torres, (4) Magiliw
Torres, and (5) Anthony P. Lee. Pointing out that "Mr. Magiliw
Torres * * is already dead and Mr. Jose A. Rojas had a major
heart attack," he made the following quite revealing, and it
may be added, quite cynical and indurate recommendation,
to wit:

* * (that) their replacements (be effected) so we can register

their names in the stock book prior to the implementation of
your instructions to pass a board resolution to legalize the
transfers under SEC regulations;

2.
By getting their replacements, the families cannot
question us later on; and

MEMORANDUM:
3.

We will owe no further favors from them. 87

FOR : The President

SUBJECT:
An Evaluation and Re-assessment of a
Performance of a Mission

FROM: Capt. A.T. Romualdez.

He also transmitted to Marcos, together with the report, the

following documents: 88

1.
Stock certificates indorsed and assigned in blank with
assignments and waivers; 89

2.
The articles of incorporation, the amended articles,
and the by-laws of BASECO;

3.
Deed of Sales, wherein NASSCO sold to BASECO four
(4) parcels of land in "Engineer Island", Port Area, Manila;

4. Transfer Certificate of Title No. 124822 in the name of

BASECO, covering "Engineer Island";

5.
Contract dated October 9, 1973, between NASSCO and
BASECO re-structure and equipment at Mariveles, Bataan;

6.
Contract dated July 16, 1975, between NASSCO and
BASECO re-structure and equipment at Engineer Island, Port
Area Manila;

11. GSIS loan to BASECO dated January 28, 1976 of

P12,400,000.00 for the housing facilities for BASECO's rankand-file employees. 90

Capt. Romualdez also recommended that BASECO's loans be

restructured "until such period when BASECO will have
enough orders for ships in order for the company to meet
loan obligations," and that

An LOI may be issued to government agencies using floating

equipment, that a linkage scheme be applied to a certain
percent of BASECO's net profit as part of BASECO's
amortization payments to make it justifiable for you, Sir. 91

It is noteworthy that Capt. A.T. Romualdez does not appear to

be a stockholder or officer of BASECO, yet he has presented a
report on BASECO to President Marcos, and his report
demonstrates intimate familiarity with the firm's affairs and
problems.

7.
Contract dated October 1, 1974, between EPZA and
BASECO re 300 hectares of land at Mariveles, Bataan;
19. Marcos' Response to Reports
8.

List of BASECO's fixed assets;

9.
Loan Agreement dated September 3, 1975, BASECO's
loan from NDC of P30,000,000.00;

President Marcos lost no time in acting on his subordinates'

recommendations, particularly as regards the "spin-off" and
the "linkage scheme" relative to "BASECO's amortization
payments."

10.

a. Instructions re "Spin-Off"

BASECO-REPACOM Agreement dated May 27, 1975;

Under date of September 28, 1977, he addressed a

Memorandum to Secretary Geronimo Velasco of the

Philippine National Oil Company and Chairman Constante

Farias of the National Development Company, directing
them "to participate in the formation of a new corporation
resulting from the spin-off of the shipbuilding component of
BASECO along the following guidelines:

a.
Equity participation of government shall be through
LUSTEVECO and NDC in the amount of P115,903,000
consisting of the following obligations of BASECO which are
hereby authorized to be converted to equity of the said new
corporation, to wit:

1.
NDC P83,865,000 (P31.165M loan & P52.2M
Reparation)

2.

LUSTEVECO P32,538,000 (Reparation)

b. Equity participation of government shall be in the form of

non- voting shares.

For immediate compliance. 92

Mr. Marcos' guidelines were promptly complied with by his

subordinates. Twenty-two (22) days after receiving their
president's memorandum, Messrs. Hilario M. Ruiz, Constante
L. Farias and Geronimo Z. Velasco, in representation of their
respective corporations, executed a PRE-INCORPORATION
AGREEMENT dated October 20, 1977. 93 In it, they undertook
to form a shipbuilding corporation to be known as "PHIL-ASIA
SHIPBUILDING CORPORATION," to bring to realization their
president's instructions. It would seem that the new

corporation ultimately formed was actually named "Philippine

Dockyard Corporation (PDC)." 94

b.

Letter of Instructions No. 670

Mr. Marcos did not forget Capt. Romualdez' recommendation

for a letter of instructions. On February 14, 1978, he issued
Letter of Instructions No. 670 addressed to the Reparations
Commission REPACOM the Philippine National Oil Company
(PNOC), the Luzon Stevedoring Company (LUSTEVECO), and
the National Development Company (NDC). What is
commanded therein is summarized by the Solicitor General,
with pithy and not inaccurate observations as to the effects
thereof (in italics), as follows:

* * 1) the shipbuilding equipment procured by BASECO

through reparations be transferred to NDC subject to
reimbursement by NDC to BASECO (of) the amount of s
allegedly representing the handling and incidental expenses
incurred by BASECO in the installation of said equipment (so
instead of NDC getting paid on its loan to BASECO, it was
made to pay BASECO instead the amount of P18.285M); 2)
the shipbuilding equipment procured from reparations
through EPZA, now in the possession of BASECO and BSDI
(Bay Shipyard & Drydocking, Inc.) be transferred to
LUSTEVECO through PNOC; and 3) the shipbuilding
equipment (thus) transferred be invested by LUSTEVECO,
acting through PNOC and NDC, as the government's equity
participation in a shipbuilding corporation to be established
in partnership with the private sector.

xxx

xxx

xxx

And so, through a simple letter of instruction and

memorandum, BASECO's loan obligation to NDC and
REPACOM * * in the total amount of P83.365M and BSD's
REPACOM loan of P32.438M were wiped out and converted
into non-voting preferred shares. 95

20.

after the sudden flight of President Marcos, were certificates

corresponding to more than ninety-five percent (95%) of all
the outstanding shares of stock of BASECO, endorsed in
blank, together with deeds of assignment of practically all
the outstanding shares of stock of the three (3) corporations
above mentioned (which hold 95.82% of all BASECO stock),
signed by the owners thereof although not notarized. 97

Evidence of Marcos'

Ownership of BASECO

It cannot therefore be gainsaid that, in the context of the

proceedings at bar, the actuality of the control by President
Marcos of BASECO has been sufficiently shown.

Other evidence submitted to the Court by the Solicitor

General proves that President Marcos not only exercised
control over BASECO, but also that he actually owns well nigh
one hundred percent of its outstanding stock.

It will be recalled that according to petitioner- itself, as of

April 23, 1986, there were 218,819 shares of stock
outstanding, ostensibly owned by twenty (20) stockholders.
96 Four of these twenty are juridical persons: (1) Metro Bay
Drydock, recorded as holding 136,370 shares; (2) Fidelity
Management, Inc., 65,882 shares; (3) Trident Management,
7,412 shares; and (4) United Phil. Lines, 1,240 shares. The
first three corporations, among themselves, own an
aggregate of 209,664 shares of BASECO stock, or 95.82% of
the outstanding stock.

Now, the Solicitor General has drawn the Court's attention to

the intriguing circumstance that found in Malacanang shortly

More specifically, found in Malacanang (and now in the

custody of the PCGG) were:

1) the deeds of assignment of all 600 outstanding shares of

Fidelity Management Inc. which supposedly owns as
aforesaid 65,882 shares of BASECO stock;

2)
the deeds of assignment of 2,499,995 of the 2,500,000
outstanding shares of Metro Bay Drydock Corporation
which allegedly owns 136,370 shares of BASECO stock;

3) the deeds of assignment of 800 outstanding shares of

Trident Management Co., Inc. which allegedly owns 7,412
shares of BASECO stock, assigned in blank; 98 and

4) stock certificates corresponding to 207,725 out of the

218,819 outstanding shares of BASECO stock; that is, all but
5 % all endorsed in blank. 99

While the petitioner's counsel was quick to dispute this

asserted fact, assuring this Court that the BASECO
stockholders were still in possession of their respective stock
certificates and had "never endorsed * * them in blank or to
anyone else," 100 that denial is exposed by his own prior and

subsequent recorded statements as a mere gesture of

defiance rather than a verifiable factual declaration.

By resolution dated September 25, 1986, this Court granted

BASECO's counsel a period of 10 days "to SUBMIT, as
undertaken by him, * * the certificates of stock issued to the
stockholders of * * BASECO as of April 23, 1986, as listed in
Annex 'P' of the petition.' 101 Counsel thereafter moved for
extension; and in his motion dated October 2, 1986, he
declared inter alia that "said certificates of stock are in the
possession of third parties, among whom being the
respondents themselves * * and petitioner is still endeavoring
to secure copies thereof from them." 102 On the same day
he filed another motion praying that he be allowed "to secure
copies of the Certificates of Stock in the name of Metro Bay
Drydock, Inc., and of all other Certificates, of Stock of
petitioner's stockholders in possession of respondents." 103

In a Manifestation dated October 10, 1986,, 104 the Solicitor

General not unreasonably argued that counsel's aforestated
motion to secure copies of the stock certificates "confirms
the fact that stockholders of petitioner corporation are not in
possession of * * (their) certificates of stock," and the reason,
according to him, was "that 95% of said shares * * have been
endorsed in blank and found in Malacaang after the former
President and his family fled the country." To this
manifestation BASECO's counsel replied on November 5,
1986, as already mentioned, Stubbornly insisting that the
firm's stockholders had not really assigned their stock. 105

In view of the parties' conflicting declarations, this Court

resolved on November 27, 1986 among other things "to
require * * the petitioner * * to deposit upon proper receipt
with Clerk of Court Juanito Ranjo the originals of the stock
certificates alleged to be in its possession or accessible to it,
mentioned and described in Annex 'P' of its petition, (and
other pleadings) * * within ten (10) days from notice." 106 In

a motion filed on December 5, 1986, 107 BASECO's counsel

made the statement, quite surprising in the premises, that "it
will negotiate with the owners (of the BASECO stock in
question) to allow petitioner to borrow from them, if
available, the certificates referred to" but that "it needs a
more sufficient time therefor" (sic). BASECO's counsel
however eventually had to confess inability to produce the
originals of the stock certificates, putting up the feeble
excuse that while he had "requested the stockholders to
allow * * (him) to borrow said certificates, * * some of * *
(them) claimed that they had delivered the certificates to
third parties by way of pledge and/or to secure performance
of obligations, while others allegedly have entrusted them to
third parties in view of last national emergency." 108 He has
conveniently omitted, nor has he offered to give the details
of the transactions adverted to by him, or to explain why he
had not impressed on the supposed stockholders the
primordial importance of convincing this Court of their
present custody of the originals of the stock, or if he had
done so, why the stockholders are unwilling to agree to some
sort of arrangement so that the originals of their certificates
might at the very least be exhibited to the Court. Under the
circumstances, the Court can only conclude that he could not
get the originals from the stockholders for the simple reason
that, as the Solicitor General maintains, said stockholders in
truth no longer have them in their possession, these having
already been assigned in blank to then President Marcos.

21.
Facts Justify Issuance of Sequestration and Takeover
Orders

In the light of the affirmative showing by the Government

that, prima facie at least, the stockholders and directors of
BASECO as of April, 1986 109 were mere "dummies,"
nominees or alter egos of President Marcos; at any rate, that
they are no longer owners of any shares of stock in the
corporation, the conclusion cannot be avoided that said
stockholders and directors have no basis and no standing
whatever to cause the filing and prosecution of the instant

proceeding; and to grant relief to BASECO, as prayed for in

the petition, would in effect be to restore the assets,
properties and business sequestered and taken over by the
PCGG to persons who are "dummies," nominees or alter egos
of the former president.

Neither will this Court sustain the theory that the executive
orders in question are a bill of attainder. 110 "A bill of
attainder is a legislative act which inflicts punishment
without judicial trial." 111 "Its essence is the substitution of a
legislative for a judicial determination of guilt." 112

From the standpoint of the PCGG, the facts herein stated at

some length do indeed show that the private corporation
known as BASECO was "owned or controlled by former
President Ferdinand E. Marcos * * during his administration, *
* through nominees, by taking advantage of * * (his) public
office and/or using * * (his) powers, authority, influence * *,"
and that NASSCO and other property of the government had
been taken over by BASECO; and the situation justified the
sequestration as well as the provisional takeover of the
corporation in the public interest, in accordance with the
terms of Executive Orders No. 1 and 2, pending the filing of
the requisite actions with the Sandiganbayan to cause
divestment of title thereto from Marcos, and its adjudication
in favor of the Republic pursuant to Executive Order No. 14.

In the first place, nothing in the executive orders can be

reasonably construed as a determination or declaration of
guilt. On the contrary, the executive orders, inclusive of
Executive Order No. 14, make it perfectly clear that any
judgment of guilt in the amassing or acquisition of "ill-gotten
wealth" is to be handed down by a judicial tribunal, in this
case, the Sandiganbayan, upon complaint filed and
prosecuted by the PCGG. In the second place, no punishment
is inflicted by the executive orders, as the merest glance at
their provisions will immediately make apparent. In no sense,
therefore, may the executive orders be regarded as a bill of
attainder.

23.
No Violation of Right against Self-Incrimination and
Unreasonable Searches and Seizures
As already earlier stated, this Court agrees that this
assessment of the facts is correct; accordingly, it sustains the
acts of sequestration and takeover by the PCGG as being in
accord with the law, and, in view of what has thus far been
set out in this opinion, pronounces to be without merit the
theory that said acts, and the executive orders pursuant to
which they were done, are fatally defective in not according
to the parties affected prior notice and hearing, or an
adequate remedy to impugn, set aside or otherwise obtain
relief therefrom, or that the PCGG had acted as prosecutor
and judge at the same time.

22.

Executive Orders Not a Bill of Attainder

BASECO also contends that its right against self incrimination

and unreasonable searches and seizures had been
transgressed by the Order of April 18, 1986 which required it
"to produce corporate records from 1973 to 1986 under pain
of contempt of the Commission if it fails to do so." The order
was issued upon the authority of Section 3 (e) of Executive
Order No. 1, treating of the PCGG's power to "issue
subpoenas requiring * * the production of such books,
papers, contracts, records, statements of accounts and other
documents as may be material to the investigation
conducted by the Commission, " and paragraph (3),
Executive Order No. 2 dealing with its power to "require all
persons in the Philippines holding * * (alleged "ill-gotten")
assets or properties, whether located in the Philippines or
abroad, in their names as nominees, agents or trustees, to

make full disclosure of the same * *." The contention lacks

merit.

It is elementary that the right against self-incrimination has

no application to juridical persons.

While an individual may lawfully refuse to answer

incriminating questions unless protected by an immunity
statute, it does not follow that a corporation, vested with
special privileges and franchises, may refuse to show its
hand when charged with an abuse ofsuchprivileges * * 113

Relevant jurisprudence is also cited by the Solicitor General.

114

* * corporations are not entitled to all of the constitutional

protections which private individuals have. * * They are not
at all within the privilege against self-incrimination, although
this court more than once has said that the privilege runs
very closely with the 4th Amendment's Search and Seizure
provisions. It is also settled that an officer of the company
cannot refuse to produce its records in its possession upon
the plea that they will either incriminate him or may
incriminate it." (Oklahoma Press Publishing Co. v. Walling,
327 U.S. 186; emphasis, the Solicitor General's).

* * The corporation is a creature of the state. It is presumed

to be incorporated for the benefit of the public. It received
certain special privileges and franchises, and holds them
subject to the laws of the state and the limitations of its
charter. Its powers are limited by law. It can make no contract
not authorized by its charter. Its rights to act as a corporation
are only preserved to it so long as it obeys the laws of its
creation. There is a reserve right in the legislature to

investigate its contracts and find out whether it has

exceeded its powers. It would be a strange anomaly to hold
that a state, having chartered a corporation to make use of
certain franchises, could not, in the exercise of sovereignty,
inquire how these franchises had been employed, and
whether they had been abused, and demand the production
of the corporate books and papers for that purpose. The
defense amounts to this, that an officer of the corporation
which is charged with a criminal violation of the statute may
plead the criminality of such corporation as a refusal to
produce its books. To state this proposition is to answer it.
While an individual may lawfully refuse to answer
incriminating questions unless protected by an immunity
statute, it does not follow that a corporation, vested with
special privileges and franchises may refuse to show its hand
when charged with an abuse of such privileges. (Wilson v.
United States, 55 Law Ed., 771, 780 [emphasis, the Solicitor
General's])

At any rate, Executive Order No. 14-A, amending Section 4 of

Executive Order No. 14 assures protection to individuals
required to produce evidence before the PCGG against any
possible violation of his right against self-incrimination. It
gives them immunity from prosecution on the basis of
testimony or information he is compelled to present. As
amended, said Section 4 now provides that

xxx

xxx

xxx

The witness may not refuse to comply with the order on the
basis of his privilege against self-incrimination; but no
testimony or other information compelled under the order (or
any information directly or indirectly derived from such
testimony, or other information) may be used against the
witness in any criminal case, except a prosecution for
perjury, giving a false statement, or otherwise failing to
comply with the order.

The constitutional safeguard against unreasonable searches

and seizures finds no application to the case at bar either.
There has been no search undertaken by any agent or
representative of the PCGG, and of course no seizure on the
occasion thereof.

24.

Equally evident is that the resort to the provisional remedies

in question should entail the least possible interference with
business operations or activities so that, in the event that the
accusation of the business enterprise being "ill gotten" be not
proven, it may be returned to its rightful owner as far as
possible in the same condition as it was at the time of
sequestration.

Scope and Extent of Powers of the PCGG

b. PCGG Has Only Powers of Administration

One other question remains to be disposed of, that

respecting the scope and extent of the powers that may be
wielded by the PCGG with regard to the properties or
businesses placed under sequestration or provisionally taken
over. Obviously, it is not a question to which an answer can
be easily given, much less one which will suffice for every
conceivable situation.

a.

PCGG May Not Exercise Acts of Ownership

One thing is certain, and should be stated at the outset: the

PCGG cannot exercise acts of dominion over property
sequestered, frozen or provisionally taken over. AS already
earlier stressed with no little insistence, the act of
sequestration; freezing or provisional takeover of property
does not import or bring about a divestment of title over said
property; does not make the PCGG the owner thereof. In
relation to the property sequestered, frozen or provisionally
taken over, the PCGG is a conservator, not an owner.
Therefore, it can not perform acts of strict ownership; and
this is specially true in the situations contemplated by the
sequestration rules where, unlike cases of receivership, for
example, no court exercises effective supervision or can upon
due application and hearing, grant authority for the
performance of acts of dominion.

The PCGG may thus exercise only powers of administration

over the property or business sequestered or provisionally
taken over, much like a court-appointed receiver, 115 such
as to bring and defend actions in its own name; receive rents;
collect debts due; pay outstanding debts; and generally do
such other acts and things as may be necessary to fulfill its
mission as conservator and administrator. In this context, it
may in addition enjoin or restrain any actual or threatened
commission of acts by any person or entity that may render
moot and academic, or frustrate or otherwise make
ineffectual its efforts to carry out its task; punish for direct or
indirect contempt in accordance with the Rules of Court; and
seek and secure the assistance of any office, agency or
instrumentality of the government. 116 In the case of
sequestered businesses generally (i.e., going concerns,
businesses in current operation), as in the case of
sequestered objects, its essential role, as already discussed,
is that of conservator, caretaker, "watchdog" or overseer. It is
not that of manager, or innovator, much less an owner.

c. Powers over Business Enterprises Taken Over by Marcos or

Entities or Persons Close to him; Limitations Thereon

Now, in the special instance of a business enterprise shown

by evidence to have been "taken over by the government of
the Marcos Administration or by entities or persons close to
former President Marcos," 117 the PCGG is given power and
authority, as already adverted to, to "provisionally take (it)
over in the public interest or to prevent * * (its) disposal or
dissipation;" and since the term is obviously employed in
reference to going concerns, or business enterprises in
operation, something more than mere physical custody is
connoted; the PCGG may in this case exercise some measure
of control in the operation, running, or management of the
business itself. But even in this special situation, the intrusion
into management should be restricted to the minimum
degree necessary to accomplish the legislative will, which is
"to prevent the disposal or dissipation" of the business
enterprise. There should be no hasty, indiscriminate,
unreasoned replacement or substitution of management
officials or change of policies, particularly in respect of viable
establishments. In fact, such a replacement or substitution
should be avoided if at all possible, and undertaken only
when justified by demonstrably tenable grounds and in line
with the stated objectives of the PCGG. And it goes without
saying that where replacement of management officers may
be called for, the greatest prudence, circumspection, care
and attention - should accompany that undertaking to the
end that truly competent, experienced and honest managers
may be recruited. There should be no role to be played in this
area by rank amateurs, no matter how wen meaning. The
road to hell, it has been said, is paved with good intentions.
The business is not to be experimented or played around
with, not run into the ground, not driven to bankruptcy, not
fleeced, not ruined. Sight should never be lost sight of the
ultimate objective of the whole exercise, which is to turn over
the business to the Republic, once judicially established to be
"ill-gotten." Reason dictates that it is only under these
conditions and circumstances that the supervision,
administration and control of business enterprises
provisionally taken over may legitimately be exercised.

d. Voting of Sequestered Stock; Conditions Therefor

So, too, it is within the parameters of these conditions and

circumstances that the PCGG may properly exercise the
prerogative to vote sequestered stock of corporations,
granted to it by the President of the Philippines through a
Memorandum dated June 26, 1986. That Memorandum
authorizes the PCGG, "pending the outcome of proceedings
to determine the ownership of * * (sequestered) shares of
stock," "to vote such shares of stock as it may have
sequestered in corporations at all stockholders' meetings
called for the election of directors, declaration of dividends,
amendment of the Articles of Incorporation, etc." The
Memorandum should be construed in such a manner as to be
consistent with, and not contradictory of the Executive
Orders earlier promulgated on the same matter. There should
be no exercise of the right to vote simply because the right
exists, or because the stocks sequestered constitute the
controlling or a substantial part of the corporate voting
power. The stock is not to be voted to replace directors, or
revise the articles or by-laws, or otherwise bring about
substantial changes in policy, program or practice of the
corporation except for demonstrably weighty and defensible
grounds, and always in the context of the stated purposes of
sequestration or provisional takeover, i.e., to prevent the
dispersion or undue disposal of the corporate assets.
Directors are not to be voted out simply because the power
to do so exists. Substitution of directors is not to be done
without reason or rhyme, should indeed be shunned if at an
possible, and undertaken only when essential to prevent
disappearance or wastage of corporate property, and always
under such circumstances as assure that the replacements
are truly possessed of competence, experience and probity.

In the case at bar, there was adequate justification to vote

the incumbent directors out of office and elect others in their
stead because the evidence showed prima facie that the
former were just tools of President Marcos and were no
longer owners of any stock in the firm, if they ever were at

all. This is why, in its Resolution of October 28, 1986; 118 this
Court declared that

Petitioner has failed to make out a case of grave abuse or

excess of jurisdiction in respondents' calling and holding of a
stockholders' meeting for the election of directors as
authorized by the Memorandum of the President * * (to the
PCGG) dated June 26, 1986, particularly, where as in this
case, the government can, through its designated directors,
properly exercise control and management over what appear
to be properties and assets owned and belonging to the
government itself and over which the persons who appear in
this case on behalf of BASECO have failed to show any right
or even any shareholding in said corporation.

It must however be emphasized that the conduct of the

PCGG nominees in the BASECO Board in the management of
the company's affairs should henceforth be guided and
governed by the norms herein laid down. They should never
for a moment allow themselves to forget that they are
conservators, not owners of the business; they are
fiduciaries, trustees, of whom the highest degree of diligence
and rectitude is, in the premises, required.

25.

that of the PCGG in these individual transactions. It is clear

however, that as things now stand, the petitioner cannot be
said to have established the correctness of its submission
that the acts of the PCGG in question were done without or in
excess of its powers, or with grave abuse of discretion.

WHEREFORE, the petition is dismissed. The temporary

restraining order issued on October 14, 1986 is lifted.

Yap, Fernan, Paras, Gancayco and Sarmiento, JJ., concur.

Separate Opinions

No Sufficient Showing of Other Irregularities

TEEHANKEE, CJ., concurring:

As to the other irregularities complained of by BASECO, i.e.,

the cancellation or revision, and the execution of certain
contracts, inclusive of the termination of the employment of
some of its executives, 119 this Court cannot, in the present
state of the evidence on record, pass upon them. It is not
necessary to do so. The issues arising therefrom may and will
be left for initial determination in the appropriate action. But
the Court will state that absent any showing of any important
cause therefor, it will not normally substitute its judgment for

I fully concur with the masterly opinion of Mr. Justice Narvasa.

In the process of disposing of the issues raised by petitioner
BASECO in the case at bar, it comprehensively discusses the
laws and principles governing the Presidential Commission on
Good Government (PCGG) and defines the scope and extent
of its powers in the discharge of its monumental task of
recovering the "ill-gotten wealth, accumulated by former
President Ferdinand E. Marcos, his immediate family,

relatives, subordinates and close associates, whether located

in the Philippines or abroad (and) business enterprises and
entities owned or controlled by them during I . . .(the Marcos)
administration, directly or through nominees, by taking
undue advantage of their public office and/or using their
powers, authority, influence, connections or relationship." 1

The Court is unanimous insofar as the judgment at bar

upholds the imperative need of recovering the ill-gotten
properties amassed by the previous regime, which "deserves
the fullest support of the judiciary and all sectors of society."
2 To quote the pungent language of Mr. Justice Cruz, "(T)here
is no question that all lawful efforts should be taken to
recover the tremendous wealth plundered from the people by
the past regime in the most execrable thievery perpetrated
in all history. No right-thinking Filipino can quarrel with this
necessary objective, and on this score I am happy to concur
with the ponencia." 3

The Court is likewise unanimous in its judgment dismissing

the petition to declare unconstitutional and void Executive
Orders Nos. 1 and 2 to annul the sequestration order of April
14, 1986. For indeed, the 1987 Constitution overwhelmingly
adopted by the people at the February 2, 1987 plebiscite
expressly recognized in Article XVIII, section 26 thereof 4 the
vital functions of respondent PCGG to achieve the mandate
of the people to recover such ill-gotten wealth and properties
as ordained by Proclamation No. 3 promulgated on March 25,
1986.

The Court is likewise unanimous as to the general rule set

forth in the main opinion that "the PCGG cannot exercise acts
of dominion over property sequestered, frozen or
provisionally taken over" and "(T)he PCGG may thus exercise
only powers of administration over the property or business
sequestered or provisionally taken over, much like a courtappointed receiver, such as to bring and defend actions in its

own name; receive rents; collect debts due; pay outstanding

debts; and generally do such other acts and things as may be
necessary to fulfill its mission as conservator and
administrator. In this context, it may in addition enjoin or
restrain any actual or threatened commission of acts by any
person or entity that may render moot and academic, or
frustrate or otherwise make ineffectual its efforts to carry out
its task; punish for direct or indirect contempt in accordance
with the Rules of Court; and seek and secure the assistance
of any office, agency or instrumentality of the government. In
the case of sequestered businesses generally (i.e. going
concerns, business in current operation), as in the case of
sequestered objects, its essential role, as already discussed,
is that of conservator, caretaker, 'watchdog' or overseer. It is
not that of manager, or innovator, much less an owner." 5

Now, the case at bar involves one where the third and most
encompassing and rarely invoked of provisional remedies, 6
the provisional takeover of the Baseco properties and
business operations has been availed of by the PCGG, simply
because the evidence on hand, not only prima facie but
convincingly with substantial and documentary evidence of
record establishes that the corporation known as petitioner
BASECO "was owned or controlled by President Marcos
'during his administration, through nominees, by taking
undue advantage of his public office and/or using his powers,
authority, or influence;' and that it was by and through the
same means, that BASECO had taken over the business
and/or assets of the [government-owned] National Shipyard
and Engineering Co., Inc., and other government-owned or
controlled entities." The documentary evidence shows that
petitioner BASECO (read Ferdinand E. Marcos) in successive
transactions all directed and approved by the former
President-in an orgy of what according to the PCGG's then
chairman, Jovito Salonga, in his statement before the 1986
Constitutional Commission, "Mr. Ople once called 'organized
pillage' "-gobbled up the government corporation National
Shipyard & Steel Corporation NASSCO its shipyard at
Mariveles, 300 hectares of land in Mariveles from the Export
Processing Zone Authority, Engineer Island itself in Manila

and its complex of equipment and facilities including

structures, buildings, shops, quarters, houses, plants and
expendable or semi-expendable assets and obtained huge
loans of $19,000,000.00 from the last available Japanese war
damage fund, P30,000,000.00 from the NDC and
P12,400,000.00 from the GSIS. The sordid details are set
forth in detail in Paragraphs 1 1 to 20 of the main opinion.
They include confidential reports from then BASECO
president Hilario M. Ruiz and the deposed President's brotherin- law, then Captain (later Commodore) Alfredo Romualdez,
who although not on record as an officer or stockholder of
BASECO reported directly to the deposed President on its
affairs and made the recommendations, all approved by the
latter, for the gobbling up by BASECO of all the choice
government assets and properties.

All this evidence has been placed of record in the case at bar.
And petitioner has had all the time and opportunity to refute
it, submittals to the contrary notwithstanding, but has
dismally failed to do so. To cite one glaring instance: as
stated in the main opinion, the evidence submitted to this
Court by the Solicitor General "proves that President Marcos
not only exercised control over BASECO, but also that he
actually owns well nigh one hundred percent of its
outstanding stock." It cites the fact that three corporations,
evidently front or dummy corporations, among twenty
shareholders, in name, of BASECO, namely Metro Bay
Drydock, Fidelity Management, Inc. and Trident Management
hold 209,664 shares or 95.82%, of BASECO's outstanding
stock. Now, the Solicitor General points out further than
BASECO certificates "corresponding to more than ninety-five
percent (95%) of all the outstanding shares of stock of
BASECO, endorsed in blank, together with deeds of
assignment of practically all the outstanding shares of stock
of the three (3) corporations above mentioned (which hold
95.82% of all BASECO stock), signed by the owners thereof
although not notarized" 7 were found in Malacaang shortly
after the deposed President's sudden flight from the country
on the night of February 25, 1986. Thus, the main opinion's
unavoidable conclusion that "(W)hile the petitioner's counsel

was quick to dispute this asserted fact, assuring this Court

that the BASECO stockholders were still in possession of their
respective stock certificates and had 'never endorsed * * *
them in blank or to anyone else,' that denial is exposed by
his own prior and subsequent recorded statements as a mere
gesture of defiance rattler than a verifiable factual
declaration . . . . Under the circumstances, the Court can only
conclude that he could not get the originals from the
stockholders for the simple reason that as the Solicitor
General maintains, said stockholders in truth no longer have
them in their possession, these having already been assigned
in blank to President Marcos." 8

With this strong unrebutted evidence of record in this Court,

Justice Melencio-Herrera, joined by Justice Feliciano,
expressly concurs with the main opinion upholding the
commission's take-over, stating that "(I) have no objection to
according the right to vote sequestered stock in case of a
takeover of business actually belonging to the government or
whose capitalization comes from public funds but which,
somehow, landed in the hands of private persons, as in the
case of BASECO." They merely qualify their concurrence with
the injunction that such takeovers be exercised with "caution
and prudence" pending the determination of "the true and
real ownership" of the sequestered shares. Suffice it to say in
this regard that each case has to be judged from the
pertinent facts and circumstances and that the main opinion
emphasizes sufficiently that it is only in the special instances
specified in the governing laws grounded on the superior
national interest and welfare and the practical necessity of
preserving the property and preventing its loss or disposition
that the provisional remedy of provisional take-over is
exercised.

Here, according to the dissenting opinion, "the PCGG

concludes that sequestered property is ill-gotten wealth and
proceeds to exercise acts of ownership over said
properties . . . . and adds that "the fact of ownership must be
established in a proper suit before a court of justice"-which

this Court has preempted with its finding that "in the context
of the proceedings at bar, the actuality of the control by
President Marcos of BASECO has been sufficiently shown."

But BASECO who has instituted this action to set aside the
sequestration and take-over orders of respondent
commission has chosen to raise these very issues in this
Court. We cannot ostrich-like hide our head in the sand and
say that it has not yet been established in the proper court
that what the PCGG has taken over here are government
properties, as a matter of record and public notice and
knowledge, like the NASSCO, its Engineer Island and
Mariveles Shipyard and entire complex, which have been
pillaged and placed in the name of the dummy or front
company named BASECO but from all the documentary
evidence of record shown by its street certificates all found in
Malacanang should in reality read "Ferdinand E. Marcos"
and/or his brother-in-law. Such take-over can in no way be
termed "lawless usurpation," for the government does not
commit any act of usurpation in taking over its own
properties that have been channeled to dummies, who are
called upon to prove in the proper court action what they
have failed to do in this Court, that they have lawfully
acquired ownership of said properties, contrary to the
documentary evidence of record, which they must likewise
explain away. This Court, in the exercise of its jurisdiction on
certiorari and as the guardian of the Constitution and
protector of the people's basic constitutional rights, has
entertained many petitions on the part of parties claiming to
be adversely affected by sequestration and other orders of
the PCGG, This Court set the criterion that such orders should
issue only upon showing of a prima facie case, which
criterion was adopted in the 1987 Constitution. The Court's
judgment cannot be faulted if much more than a prima facie
has been shown in this case, which the faceless figures
claiming to represent BASECO have failed to refute or
disprove despite all the opportunity to do so.

The record plainly shows that petitioner BASECO which is but

a mere shell to mask its real owner did not and could not
explain how and why they received such favored and
preferred treatment with tailored Letters of Instruction and
handwritten personal approval of the deposed President that
handed it on a silver platter the whole complex and
properties of NASSCO and Engineer Island and the Mariveles
Shipyard.

It certainly would be the height of absurdity and helplessness

if this government could not here and now take over the
possession and custody of its very own properties and assets
that had been stolen from it and which it had pledged to
recover for the benefit and in the greater interest of the
Filipino people, whom the past regime had saddled with a
huge $27-billion foreign debt that has since ballooned to
$28.5-billion.

Thus, the main opinion correctly concludes that "(I)n the light
of the affirmative showing by the Government that, prima
facie at least, the stockholders and directors of BASECO as of
April, 1986 were mere 'dummies,' nominees or alter egos of
President Marcos; at any rate, that they are no longer owners
of any shares of stock in the corporation, the conclusion
cannot be avoided that said stockholders and directors have
no basis and no standing whatever to cause the filing and
prosecution of the instant proceeding; and to grant relief to
BASECO, as prayed for in the petition, would in effect be to
restore the assets, properties and business sequestered and
taken over by the PCGG to persons who are 'dummies'
nominees or alter egos of the former President." 9

And Justice Padilla in his separate concurrence "called a

spade a spade," citing the street certificates representing 95
% of BASECO's outstanding stock found in Malacaang after
Mr. Marcos' hasty flight in February, 1986 and the extent of
the control he exercised over policy decisions affecting

BASECO and concluding that "Consequently, even ahead of

judicial proceedings, I am convinced that the Republic of the
Philippines, thru the PCGG, has the right and even the duty to
take over full control and supervision of BASECO."

Indeed, the provisional remedies available to respondent

commission are rooted in the police power of the State, the
most pervasive and the least limitable of the powers of
Government since it represents "the power of sovereignty,
the power to govern men and things within the limits of its
domain." 10 Police power has been defined as the power
inherent in the State "to prescribe regulations to promote the
health, morals, education, good order or safety, and general
welfare of the people." 11 Police power rests upon public
necessity and upon the right of the State and of the public to
self-protection. 12 "Salus populi suprema est lex" or "the
welfare of the people is the Supreme Law." 13 For this
reason, it is co-extensive with the necessities of the case and
the safeguards of public interest. 14 Its scope expands and
contracts with changing needs. 15 "It may be said in a
general way that the police power extends to all the great
public needs. It may be put forth in aid of what is sanctioned
by usage, or held by the prevailing morality or strong and
preponderant opinion to be greatly and immediately
necessary to the public welfare." 16 That the public interest
or the general welfare is subserved by sequestering the
purported ill-gotten assets and properties and taking over
stolen properties of the government channeled to dummy or
front companies is stating the obvious. The recovery of these
ill-gotten assets and properties would greatly aid our
financially crippled government and hasten our national
economic recovery, not to mention the fact that they
rightfully belong to the people. While as a measure of selfprotection, if, in the interest of general welfare, police power
may be exercised to protect citizens and their businesses in
financial and economic matters, it may similarly be exercised
to protect the government itself against potential financial
loss and the possible disruption of governmental functions.
17 Police power as the power of self-protection on the part of
the community bears the same relation to the community

that the principle of self-defense bears to the individual. 18

Truly, it may be said that even more than self- defense, the
recovery of ill-gotten wealth and of the government's own
properties involves the material and moral survival of the
nation, marked as the past regime was by the obliteration of
any line between private funds and the public treasury and
abuse of unlimited power and elimination of any
accountability in public office, as the evidence of record
amply shows.

It should be mentioned that the tracking down of the

deposed President's actual ownership of the BASECO shares
was fortuitously facilitated by the recovery of the street
certificates in Malacaang after his hasty flight from the
country last year. This is not generally the case.

For example, in the ongoing case filed by the government to

recover from the Marcoses valuable real estate holdings in
New York and the Lindenmere estate in Long Island, former
PCGG chairman Jovito Salonga has revealed that their names
"do not appear on any title to the property. Every building in
New York is titled in the name of a Netherlands Antilles
corporation, which in turn is purportedly owned by three
Panamanian corporations, with bearer shares. This means
that the shares of this corporation can change hands any
time, since they can be transferred, under the law of
Panama, without previous registration on the books of the
corporation. One of the first documents that we discovered
shortly after the February revolution was a declaration of
trust handwritten by Mr. Joseph Bernstein on April 4, 1982 on
a Manila Peninsula Hotel stationery stating that he would act
as a trustee for the benefit of President Ferdinand Marcos and
would act solely pursuant to the instructions of Marcos with
respect to the Crown Building in New York." 19

This is just to stress the difficulties of the tasks confronting

respondent PCGG, which nevertheless has so far

commendably produced unprecedented positive results. As

stated by then chairman Salonga:

PCGG has turned over to the Office of the President around 2

billion pesos in cash, free of any lien. It has also delivered to
the President-as a result of a compromise settlement-around
200 land titles involving vast tracks of land in Metro Manila,
Rizal, Laguna, Cavite, and Bataan, worth several billion
pesos. These lands are now available for low-cost housing
projects for the benefit of the poor and the dispossessed
amongst our people.

In the legal custody of the Commission as a result of

sequestration proceedings, are expensive jewelry amounting
to 310 million pesos, 42 aircraft amounting to 718 million
pesos, vessels amounting to 748 million pesos, and shares of
stock amounting to around 215 million pesos.

But, as I said, the bulk of the ill-gotten wealth is located

abroad, not in the Philippines. Through the efforts of the
PCGG, we have caused the freezing or sequestration of
properties, deposits, and securities probably worth many
billions of pesos in New York, New Jersey, Hawaii, California,
and more importantly-in Switzerland. Due to favorable
developments in Switzerland, we may expect, according to
our Swiss lawyers, the first deliveries of the Swiss deposits in
the foreseeable future, perhaps in less than a year's time. In
New York, PCGG through its lawyers who render their services
free of cost to the Philippine government, succeeded in
getting injunctive relief against Mr. and Mrs. Marcos and their
nominees and agents. There is now an offer for settlement
that is being studied and explored by our lawyers there.

If we succeed in recovering not an (since this is impossible)

but a substantial part of the ill-gotten wealth here and in

various countries of the world something the revolutionary

governments of China, Ethiopia, Iran and Nicaragua were not
able to accomplish at all with respect to properties outside
their territorial boundaries the Presidential Commission on
Good Government, which has undertaken the difficult and
thankless task of trying to undo what had been done so
secretly and effectively in the last twenty years, shall have
more than justified its existence. 20

The misdeeds of some PCGG volunteers and personnel cited

in the dissenting opinion do not detract at an from the
PCGG's accomplishments, just as no one would do away with
newspapers because of some undesirable elements. The
point is that all such misdeeds have been subject to public
exposure and as stated in the dissent itself, the erring PCGG
representatives have been forthwith dismissed and replaced.

The magnitude of the tasks that confront respondent PCGG

with its limited resources and staff support and volunteers
should be appreciated, together with the assistance that
foreign governments and lawyers have spontaneously given
the commission.

A word about the PCGG's firing of the BASECO lawyers who

filed the present petition challenging its questioned orders,
filing a motion to withdraw the petition, after it had put in
eight of its representatives as directors of the BASECO board
of directors. This was entirely proper and in accordance with
the Court's Resolution of October 28, 1986, which denied
BASECO's motion for the issuance of a restraining order
against such take-over and declared that "the government
can, through its designated directors, properly exercise
control and management over what appear to be properties
and assets owned and belonging to the government itself
and over which the persons who appear in this case on
behalf of BASECO have failed to show any eight or even any
shareholding in said corporation." In other words, these

dummies or fronts cannot seek to question the government's

right to recover the very properties and assets that have
been stolen from it by using the very same stolen properties
and funds derived therefrom. If they wish to pursue their own
empty claim, they must do it on their own, after first
establishing that they indeed have a lawful right and/or
shareholding in BASECO.

Under the 1987 Constitution, the PCGG is called upon to file

the judicial proceedings for forfeiture and recovery of the
sequestered or frozen properties covered by its orders issued
before the ratification of the Constitution on February 2,
1987, within six months from such ratification, or by August
2, 1987. (For those orders issued after such ratification, the
judicial action or proceeding must be commenced within six
months from the issuance thereof.) The PCGG has not really
been given much time, considering the magnitude of its
tasks. It is entitled to some forbearance, in availing of the
maximum time granted it for the filing of the corresponding
judicial action with the Sandiganbayan.

Under ordinary circumstances, I would deny the PCGG the

authority to change and elect the members of BASECO's
Board of Directors. However, under the facts as disclosed by
the records, it appears that the certificates of stock
representing about ninety-five (95%) per cent of the total
ownership in BASECO's capital stock were found endorsed in
blank in Malacanang (presumably in the possession and
control of Mr. Marcos) at the time he and his family fled in
February 1986. This circumstance let alone the extent of the
control Mr. Marcos exercised, while in power, over policy
decisions affecting BASECO, entirely satisfies my mind that
BASECO was owned and controlled by Mr. Marcos. This is
calling a spade a spade. I am also entirely satisfied in my
mind that Mr. Marcos could not have acquired the ownership
of BASECO out of his lawfully-gotten wealth.

Consequently, even ahead of judicial proceedings, I am

convinced that the Republic of the Philippines, through the
PCGG, has the right and even the duty to take-over full
control and supervision of BASECO.

PADILLA, J., concurring:

MELENCIO-HERRERA, J., concurring:

The majority opinion penned by Mr. Justice Narvasa maintains

and upholds the valid distinction between acts of
conservation and preservation of assets and acts of
ownership. Sequestration, freeze and temporary take-over
encompass the first type of acts. They do not include the
second type of acts which are reserved only to the rightful
owner of the assets or business sequestered or temporarily
taken over.

I would like to qualify my concurrence in so far as the voting

of sequestered stork is concerned.

The removal and election of members of the board of

directors of a corporate enterprise is, to me, a clear act of
ownership on the part of the shareholders of the corporation.

The voting of sequestered stock is, to my mind, an exercise

of an attribute of ownership. It goes beyond the purpose of a
writ of sequestration, which is essentially to preserve the
property in litigation (Article 2005, Civil Code). Sequestration
is in the nature of a judicial deposit (ibid.).

I have no objection to according the right to vote sequestered

stock in case of a take-over of business actually belonging to

the government or whose capitalization comes from public

funds but which, somehow, landed in the hands of private
persons, as in the case of BASECO. To my mind, however,
caution and prudence should be exercised in the case of
sequestered shares of an on-going private business
enterprise, specially the sensitive ones, since the true and
real ownership of said shares is yet to be determined and
proven more conclusively by the Courts.

Feliciano, J., concur.

GUTIERREZ, JR., J., concurring and dissenting:

It would be more in keeping with legal norms if forfeiture
proceedings provided for under Republic Act No. 1379 be
filed in Court and the PCGG seek judicial appointment as a
receiver or administrator, in which case, it would be
empowered to vote sequestered shares under its custody
(Section 55, Corporation Code). Thereby, the assets in
litigation are brought within the Court's jurisdiction and the
presence of an impartial Judge, as a requisite of due process,
is assured. For, even in its historical context, sequestration is
a judicial matter that is best handled by the Courts.

I consider it imperative that sequestration measures be

buttressed by judicial proceedings the soonest possible in
order to settle the matter of ownership of sequestered shares
and to determine whether or not they are legally owned by
the stockholders of record or are "ill-gotten wealth" subject to
forfeiture in favor of the State. Sequestration alone, being
actually an ancillary remedy to a principal action, should not
be made the basis for the exercise of acts of dominion for an
indefinite period of time.

Sequestration is an extraordinary, harsh, and severe remedy.

It should be confined to its lawful parameters and exercised,
with due regard, in the words of its enabling laws, to the
requirements of fairness, due process (Executive Order No.
14, palay 7, 1986), and Justice (Executive Order No. 2, March
12, 1986).

I concur, in part, in the erudite opinion penned for the Court

by my distinguished colleague Mr. Justice Andres R. Narvasa.
I agree insofar as it states the principles which must govern
PCGG sequestrations and emphasizes the limitations in the
exercise of its broad grant of powers.

I concur in the general propositions embodied in or implied

from the majority opinion, among them:

(1)
The efforts of Government to recover ill-gotten
properties amassed by the previous regime deserve the
fullest support of the judiciary and all sectors of society. I
believe, however, that a nation professing adherence to the
rule of law and fealty to democratic processes must adopt
ways and means which are always within the bounds of
lawfully granted authority and which meet the tests of due
process and other Bill of Rights protections.

(2)
Sequestration is intended to prevent the destruction,
concealment, or dissipation of ill-gotten wealth. The object is
conservation and preservation. Any exercise of power beyond
these objectives is lawless usurpation.

(3)
The PCGG exercises only such powers as are granted
by law and not proscribed by the Constitution. The remedies
it enforces are provisional and contingent. Whether or not
sequestered property is indeed ill-gotten must be-determined
by a court of justice. The PCGG has absolutely no power to
divest title over sequestered property or to act as if its
findings are final.

(4)
The PCGG does not own sequestered property. It
cannot and must not exercise acts of ownership. To quote the
majority opinion, "one thing is certain ..., the PCGG cannot
exercise acts of dominion."

(5)
The provisional takeover in a sequestration should not
be indefinitely maintained. It is the duty of the PCGG to
immediately file appropriate criminal or civil cases once the
evidence has been gathered.

It is the difference between what the Court says and what the
PCGG does which constrains me to dissent. Even as the Court
emphasizes principles of due process and fair play, it has
unfortunately validated ultra vires acts violative of those very
same principles. While we stress the rules which must govern
the PCGG in the exercise of its powers, the Court has failed to
stop or check acts which go beyond the power of
sequestration given by law to the PCGG.

We are all agreed in the Court that the PCGG is not a judge. It
is an investigator and prosecutor. Sequestration is only a
preliminary or ancillary remedy. There must be a principal
and independent suit filed in court to establish the true
ownership of sequestered properties. The factual premise
that a sequestered property was ill-gotten by former
President Marcos, his family, relatives, subordinates, and

close associates cannot be assumed. The fact of ownership

must be established in a proper suit before a court of justice.

But what has the Court, in effect, ruled?

Pages 21 to 33 of the majority opinion are dedicated to a

statement of facts which conclusively and indubitably shows
that BASECO is owned by President Marcos-and that it was
acquired and vastly enlarged by the former President's taking
undue advantage of his public office and using his powers,
authority, or influence.

There has been no court hearing, no trial, and no

presentation of evidence. All that we have is what the PCGG
has given us. The petitioner has not even been allowed to
see the evidence, much less refute it.

What the PCGG has gathered in the course of its seizures and
investigations may be gospel truth. However, that truth must
be properly established in a trial court, not unilaterally
determined by the PCGG or declared by this Court in a
special proceeding which only asks us to set aside or enjoin
an illegal exercise of power. After this decision, there is
nothing more for a trial court to ascertain. Certainly, no lower
court would dare to arrive at findings contrary to this Court's
conclusions, no matter how insistent we may be in labelling
such conclusions as "prima facie." To me, this is the basic
flaw in PCGG procedures that the Court is, today, unwittingly
legitimating. Even before the institution of a court case, the
PCGG concludes that sequestered property is ill-gotten
wealth and proceeds to exercise acts of ownership over said
properties. It treats sequestered property as its own even
before the oppositor-owners have been divested of their
titles.

The Court declares that a state of seizure is not to be

indefinitely maintained. This means that court proceedings to
either forfeit the sequestered properties or clear the names
and titles of the petitioners must be filed as soon as possible.

This case is a good example of disregard or avoidance of this

requirement. With the kind of evidence which the PCGG
professes to possess, the forfeiture case could have been
filed simultaneously with the issuance of sequestration
orders or shortly thereafter.

And yet, the records show that the PCGG appears to

concentrate more on the means rather than the ends, in
running the BASECO, taking over the board of directors and
management, getting rid of security guards, disposing of
scrap, entering into new contracts and otherwise behaving as
if it were already the owner. At this late date and with all the
evidence PCGG claims to have, no court case has been filed.

Among the interesting items elicited during the oral

arguments or found in the records of this petition are:

(1)
Upon sequestering BASECO, some PCGG personnel lost
no time in digging up paved premises with jack hammers in a
frantic search for buried gold bars.

(2)
Two top PCGG volunteers charged each other with
stealing properties under their custody. The PCGG had to step
in, dismiss the erring representatives, and replace them with
new ones.

(3)
The petitioner claims that the lower bid of a rock
quarry operator was accepted even as a higher and more
favorable bid was offered. When the questionable deal was
brought to our attention, the awardee allegedly raised his bid
to the level of the better offer. The successful bidder later
submitted a comment in intervention explaining his side.
Whoever is telling the truth, the fact remains that multimillion peso contracts involving the operations of
sequestered companies should be entered into under the
supervision of a court, not freely executed by the PCGG even
when the petitioner-owners question the propriety and
integrity of those transactions.

(4)
The PCGG replaced eight out of eleven members of the
BASECO board of directors with its own men. Upon taking
over full control of the corporation, the newly installed board
reversed the efforts of the former owners to protect their
interests. The new board fired the BASECO lawyers who
instituted the instant petition. It then filed a motion to
withdraw this very same petition we are now deciding. In
other words, the "new owners" did not want the Supreme
Court to continue poking into the legality of their acts. They
moved to abort the petition filed with us.

Any suspicion of impropriety would have been avoided if the

PCGG had filed the required court proceedings and exercised
its acts of management and control under court supervision.
The requirements of due process would have been met.

One other matter I wish to discuss in this separate opinion is

PCGG's selection of eight out of the eleven members of the
BASECO board of directors.

The election of the members of a board of directors is

distinctly and unqualifiedly an act of ownership. When

stockholders of a corporation elect or remove members of a

board of directors, they exercise their right of ownership in
the company they own, By no stretch of the imagination can
the revamp of a board of directors be considered as a mere
act of conserving assets or preventing the dissipation of
sequestered assets. The broad powers of a sequestrator are
more than enough to protect sequestered assets. There is no
need and no legal basis to reach out further and exercise
ultimate acts of ownership.

Under the powers which PCGG has assumed and wields, it

can amend the articles and by-laws of a sequestered
corporation, decrease the capital stock, or sell substantially
all corporate assets without any effective check from the
owners not yet divested of their titles or from a court of
justice. The PCGG is tasked to preserve assets but when it
exercises the acts of an owner, it could also very well destroy.
I hope that the case of the Philippine Daily Express, a major
newspaper closed by the PCGG, is an isolated example.
Otherwise, banks, merchandizing firms, investment
institutions, and other sensitive businesses will find
themselves in a similar quandary.

Bidin and Cortes, JJ., concur and dissent.

CRUZ, J., dissenting:

My brother Narvasa has written a truly outstanding decision

that bespeaks a penetrating and analytical mind and a
masterly grasp of the serious problem we are asked to
resolve. He deserves and I offer him my sincere admiration.

There is no question that all lawful efforts should be taken to

recover the tremendous wealth plundered from the people by
the past regime in the most execrable thievery perpetrated
in all history. No right-thinking Filipino can quarrel with this
necessary objective, and on this score I am happy to concur
with the ponencia.

I join the PCGG and all right thinking Filipinos in condemning

the totalitarian acts which made possible the accumulation of
ill-gotten wealth. I, however, dissent when authoritarian and
ultra vires methods are used to recover that stolen wealth.
One wrong cannot be corrected by the employment of
another wrong.

But for all my full agreement with the basic thesis of the
majority, I regret I find myself unable to support its
conclusions in favor Of the respondent PCGG. My view is that
these conclusions clash with the implacable principles of the
free society. foremost among which is due process. This
demands our reverent regard.

I, therefore, vote to grant the petition. Pending the filing of an

appropriate case in court, the PCGG must be enjoined from
exercising any and all acts of ownership over the sequestered
firm.

Due process protects the life, liberty and property of every

person, whoever he may be. Even the most despicable
criminal is entitled to this protection. Granting this distinction
to Marcos, we are still not justified in depriving him of this
guaranty on the mere justification that he appears to own the
BASECO shares.

I am convinced and so submit that the PCGG cannot at this

time take over the BASECO without any court order and
exercise thereover acts of ownership without court
supervision. Voting the shares is an act of ownership.
Reorganizing the board of directors is an act of ownership.
Such acts are clearly unauthorized. As the majority opinion
itself stresses, the PCGG is merely an administrator whose
authority is limited to preventing the sequestered properties
from being dissipated or clandestinely transferred.

The court action prescribed in the Constitution is not

inadequate and is available to the PCGG. The advantage of
this remedy is that, unlike the ad libitum measures now being
take it is authorized and at the same time also limited by the
fundamental law. I see no reason why it should not now be
employed by the PCGG, to remove all doubts regarding the
legality of its acts and all suspicions concerning its motives.

Separate Opinions

TEEHANKEE, CJ., concurring:

I fully concur with the masterly opinion of Mr. Justice Narvasa.

In the process of disposing of the issues raised by petitioner
BASECO in the case at bar, it comprehensively discusses the
laws and principles governing the Presidential Commission on
Good Government (PCGG) and defines the scope and extent
of its powers in the discharge of its monumental task of

recovering the "ill-gotten wealth, accumulated by former

President Ferdinand E. Marcos, his immediate family,
relatives, subordinates and close associates, whether located
in the Philippines or abroad (and) business enterprises and
entities owned or controlled by them during I . . .(the Marcos)
administration, directly or through nominees, by taking
undue advantage of their public office and/or using their
powers, authority, influence, connections or relationship." 1

The Court is unanimous insofar as the judgment at bar

upholds the imperative need of recovering the ill-gotten
properties amassed by the previous regime, which "deserves
the fullest support of the judiciary and all sectors of society."
2 To quote the pungent language of Mr. Justice Cruz, "(T)here
is no question that all lawful efforts should be taken to
recover the tremendous wealth plundered from the people by
the past regime in the most execrable thievery perpetrated
in all history. No right-thinking Filipino can quarrel with this
necessary objective, and on this score I am happy to concur
with the ponencia." 3

The Court is likewise unanimous in its judgment dismissing

the petition to declare unconstitutional and void Executive
Orders Nos. 1 and 2 to annul the sequestration order of April
14, 1986. For indeed, the 1987 Constitution overwhelmingly
adopted by the people at the February 2, 1987 plebiscite
expressly recognized in Article XVIII, section 26 thereof 4 the
vital functions of respondent PCGG to achieve the mandate
of the people to recover such ill-gotten wealth and properties
as ordained by Proclamation No. 3 promulgated on March 25,
1986.

The Court is likewise unanimous as to the general rule set

forth in the main opinion that "the PCGG cannot exercise acts
of dominion over property sequestered, frozen or
provisionally taken over" and "(T)he PCGG may thus exercise
only powers of administration over the property or business

sequestered or provisionally taken over, much like a courtappointed receiver, such as to bring and defend actions in its
own name; receive rents; collect debts due; pay outstanding
debts; and generally do such other acts and things as may be
necessary to fulfill its mission as conservator and
administrator. In this context, it may in addition enjoin or
restrain any actual or threatened commission of acts by any
person or entity that may render moot and academic, or
frustrate or otherwise make ineffectual its efforts to carry out
its task; punish for direct or indirect contempt in accordance
with the Rules of Court; and seek and secure the assistance
of any office, agency or instrumentality of the government. In
the case of sequestered businesses generally (i.e. going
concerns, business in current operation), as in the case of
sequestered objects, its essential role, as already discussed,
is that of conservator, caretaker, 'watchdog' or overseer. It is
not that of manager, or innovator, much less an owner." 5

Mariveles, 300 hectares of land in Mariveles from the Export

Processing Zone Authority, Engineer Island itself in Manila
and its complex of equipment and facilities including
structures, buildings, shops, quarters, houses, plants and
expendable or semi-expendable assets and obtained huge
loans of $19,000,000.00 from the last available Japanese war
damage fund, P30,000,000.00 from the NDC and
P12,400,000.00 from the GSIS. The sordid details are set
forth in detail in Paragraphs 1 1 to 20 of the main opinion.
They include confidential reports from then BASECO
president Hilario M. Ruiz and the deposed President's brotherin- law, then Captain (later Commodore) Alfredo Romualdez,
who although not on record as an officer or stockholder of
BASECO reported directly to the deposed President on its
affairs and made the recommendations, all approved by the
latter, for the gobbling up by BASECO of all the choice
government assets and properties.

Now, the case at bar involves one where the third and most
encompassing and rarely invoked of provisional remedies, 6
the provisional takeover of the Baseco properties and
business operations has been availed of by the PCGG, simply
because the evidence on hand, not only prima facie but
convincingly with substantial and documentary evidence of
record establishes that the corporation known as petitioner
BASECO "was owned or controlled by President Marcos
'during his administration, through nominees, by taking
undue advantage of his public office and/or using his powers,
authority, or influence;' and that it was by and through the
same means, that BASECO had taken over the business
and/or assets of the [government-owned] National Shipyard
and Engineering Co., Inc., and other government-owned or
controlled entities." The documentary evidence shows that
petitioner BASECO (read Ferdinand E. Marcos) in successive
transactions all directed and approved by the former
President-in an orgy of what according to the PCGG's then
chairman, Jovito Salonga, in his statement before the 1986
Constitutional Commission, "Mr. Ople once called 'organized
pillage' "-gobbled up the government corporation National
Shipyard & Steel Corporation NASSCO its shipyard at

All this evidence has been placed of record in the case at bar.
And petitioner has had all the time and opportunity to refute
it, submittals to the contrary notwithstanding, but has
dismally failed to do so. To cite one glaring instance: as
stated in the main opinion, the evidence submitted to this
Court by the Solicitor General "proves that President Marcos
not only exercised control over BASECO, but also that he
actually owns well nigh one hundred percent of its
outstanding stock." It cites the fact that three corporations,
evidently front or dummy corporations, among twenty
shareholders, in name, of BASECO, namely Metro Bay
Drydock, Fidelity Management, Inc. and Trident Management
hold 209,664 shares or 95.82%, of BASECO's outstanding
stock. Now, the Solicitor General points out further than
BASECO certificates "corresponding to more than ninety-five
percent (95%) of all the outstanding shares of stock of
BASECO, endorsed in blank, together with deeds of
assignment of practically all the outstanding shares of stock
of the three (3) corporations above mentioned (which hold
95.82% of all BASECO stock), signed by the owners thereof
although not notarized" 7 were found in Malacaang shortly
after the deposed President's sudden flight from the country

on the night of February 25, 1986. Thus, the main opinion's

unavoidable conclusion that "(W)hile the petitioner's counsel
was quick to dispute this asserted fact, assuring this Court
that the BASECO stockholders were still in possession of their
respective stock certificates and had 'never endorsed * * *
them in blank or to anyone else,' that denial is exposed by
his own prior and subsequent recorded statements as a mere
gesture of defiance rattler than a verifiable factual
declaration . . . . Under the circumstances, the Court can only
conclude that he could not get the originals from the
stockholders for the simple reason that as the Solicitor
General maintains, said stockholders in truth no longer have
them in their possession, these having already been assigned
in blank to President Marcos." 8

With this strong unrebutted evidence of record in this Court,

Justice Melencio-Herrera, joined by Justice Feliciano,
expressly concurs with the main opinion upholding the
commission's take-over, stating that "(I) have no objection to
according the right to vote sequestered stock in case of a
takeover of business actually belonging to the government or
whose capitalization comes from public funds but which,
somehow, landed in the hands of private persons, as in the
case of BASECO." They merely qualify their concurrence with
the injunction that such takeovers be exercised with "caution
and prudence" pending the determination of "the true and
real ownership" of the sequestered shares. Suffice it to say in
this regard that each case has to be judged from the
pertinent facts and circumstances and that the main opinion
emphasizes sufficiently that it is only in the special instances
specified in the governing laws grounded on the superior
national interest and welfare and the practical necessity of
preserving the property and preventing its loss or disposition
that the provisional remedy of provisional take-over is
exercised.

Here, according to the dissenting opinion, "the PCGG

concludes that sequestered property is ill-gotten wealth and
proceeds to exercise acts of ownership over said

properties . . . . and adds that "the fact of ownership must be

established in a proper suit before a court of justice"-which
this Court has preempted with its finding that "in the context
of the proceedings at bar, the actuality of the control by
President Marcos of BASECO has been sufficiently shown."

But BASECO who has instituted this action to set aside the
sequestration and take-over orders of respondent
commission has chosen to raise these very issues in this
Court. We cannot ostrich-like hide our head in the sand and
say that it has not yet been established in the proper court
that what the PCGG has taken over here are government
properties, as a matter of record and public notice and
knowledge, like the NASSCO, its Engineer Island and
Mariveles Shipyard and entire complex, which have been
pillaged and placed in the name of the dummy or front
company named BASECO but from all the documentary
evidence of record shown by its street certificates all found in
Malacanang should in reality read "Ferdinand E. Marcos"
and/or his brother-in-law. Such take-over can in no way be
termed "lawless usurpation," for the government does not
commit any act of usurpation in taking over its own
properties that have been channeled to dummies, who are
called upon to prove in the proper court action what they
have failed to do in this Court, that they have lawfully
acquired ownership of said properties, contrary to the
documentary evidence of record, which they must likewise
explain away. This Court, in the exercise of its jurisdiction on
certiorari and as the guardian of the Constitution and
protector of the people's basic constitutional rights, has
entertained many petitions on the part of parties claiming to
be adversely affected by sequestration and other orders of
the PCGG, This Court set the criterion that such orders should
issue only upon showing of a prima facie case, which
criterion was adopted in the 1987 Constitution. The Court's
judgment cannot be faulted if much more than a prima facie
has been shown in this case, which the faceless figures
claiming to represent BASECO have failed to refute or
disprove despite all the opportunity to do so.

The record plainly shows that petitioner BASECO which is but

a mere shell to mask its real owner did not and could not
explain how and why they received such favored and
preferred treatment with tailored Letters of Instruction and
handwritten personal approval of the deposed President that
handed it on a silver platter the whole complex and
properties of NASSCO and Engineer Island and the Mariveles
Shipyard.

It certainly would be the height of absurdity and helplessness

if this government could not here and now take over the
possession and custody of its very own properties and assets
that had been stolen from it and which it had pledged to
recover for the benefit and in the greater interest of the
Filipino people, whom the past regime had saddled with a
huge $27-billion foreign debt that has since ballooned to
$28.5-billion.

Thus, the main opinion correctly concludes that "(I)n the light
of the affirmative showing by the Government that, prima
facie at least, the stockholders and directors of BASECO as of
April, 1986 were mere 'dummies,' nominees or alter egos of
President Marcos; at any rate, that they are no longer owners
of any shares of stock in the corporation, the conclusion
cannot be avoided that said stockholders and directors have
no basis and no standing whatever to cause the filing and
prosecution of the instant proceeding; and to grant relief to
BASECO, as prayed for in the petition, would in effect be to
restore the assets, properties and business sequestered and
taken over by the PCGG to persons who are 'dummies'
nominees or alter egos of the former President." 9

And Justice Padilla in his separate concurrence "called a

spade a spade," citing the street certificates representing 95
% of BASECO's outstanding stock found in Malacaang after

Mr. Marcos' hasty flight in February, 1986 and the extent of

the control he exercised over policy decisions affecting
BASECO and concluding that "Consequently, even ahead of
judicial proceedings, I am convinced that the Republic of the
Philippines, thru the PCGG, has the right and even the duty to
take over full control and supervision of BASECO."

Indeed, the provisional remedies available to respondent

commission are rooted in the police power of the State, the
most pervasive and the least limitable of the powers of
Government since it represents "the power of sovereignty,
the power to govern men and things within the limits of its
domain." 10 Police power has been defined as the power
inherent in the State "to prescribe regulations to promote the
health, morals, education, good order or safety, and general
welfare of the people." 11 Police power rests upon public
necessity and upon the right of the State and of the public to
self-protection. 12 "Salus populi suprema est lex" or "the
welfare of the people is the Supreme Law." 13 For this
reason, it is co-extensive with the necessities of the case and
the safeguards of public interest. 14 Its scope expands and
contracts with changing needs. 15 "It may be said in a
general way that the police power extends to all the great
public needs. It may be put forth in aid of what is sanctioned
by usage, or held by the prevailing morality or strong and
preponderant opinion to be greatly and immediately
necessary to the public welfare." 16 That the public interest
or the general welfare is subserved by sequestering the
purported ill-gotten assets and properties and taking over
stolen properties of the government channeled to dummy or
front companies is stating the obvious. The recovery of these
ill-gotten assets and properties would greatly aid our
financially crippled government and hasten our national
economic recovery, not to mention the fact that they
rightfully belong to the people. While as a measure of selfprotection, if, in the interest of general welfare, police power
may be exercised to protect citizens and their businesses in
financial and economic matters, it may similarly be exercised
to protect the government itself against potential financial
loss and the possible disruption of governmental functions.

17 Police power as the power of self-protection on the part of

the community bears the same relation to the community
that the principle of self-defense bears to the individual. 18
Truly, it may be said that even more than self- defense, the
recovery of ill-gotten wealth and of the government's own
properties involves the material and moral survival of the
nation, marked as the past regime was by the obliteration of
any line between private funds and the public treasury and
abuse of unlimited power and elimination of any
accountability in public office, as the evidence of record
amply shows.

It should be mentioned that the tracking down of the

deposed President's actual ownership of the BASECO shares
was fortuitously facilitated by the recovery of the street
certificates in Malacaang after his hasty flight from the
country last year. This is not generally the case.

For example, in the ongoing case filed by the government to

recover from the Marcoses valuable real estate holdings in
New York and the Lindenmere estate in Long Island, former
PCGG chairman Jovito Salonga has revealed that their names
"do not appear on any title to the property. Every building in
New York is titled in the name of a Netherlands Antilles
corporation, which in turn is purportedly owned by three
Panamanian corporations, with bearer shares. This means
that the shares of this corporation can change hands any
time, since they can be transferred, under the law of
Panama, without previous registration on the books of the
corporation. One of the first documents that we discovered
shortly after the February revolution was a declaration of
trust handwritten by Mr. Joseph Bernstein on April 4, 1982 on
a Manila Peninsula Hotel stationery stating that he would act
as a trustee for the benefit of President Ferdinand Marcos and
would act solely pursuant to the instructions of Marcos with
respect to the Crown Building in New York." 19

This is just to stress the difficulties of the tasks confronting

respondent PCGG, which nevertheless has so far
commendably produced unprecedented positive results. As
stated by then chairman Salonga:

PCGG has turned over to the Office of the President around 2

billion pesos in cash, free of any lien. It has also delivered to
the President-as a result of a compromise settlement-around
200 land titles involving vast tracks of land in Metro Manila,
Rizal, Laguna, Cavite, and Bataan, worth several billion
pesos. These lands are now available for low-cost housing
projects for the benefit of the poor and the dispossessed
amongst our people.

In the legal custody of the Commission as a result of

sequestration proceedings, are expensive jewelry amounting
to 310 million pesos, 42 aircraft amounting to 718 million
pesos, vessels amounting to 748 million pesos, and shares of
stock amounting to around 215 million pesos.

But, as I said, the bulk of the ill-gotten wealth is located

abroad, not in the Philippines. Through the efforts of the
PCGG, we have caused the freezing or sequestration of
properties, deposits, and securities probably worth many
billions of pesos in New York, New Jersey, Hawaii, California,
and more importantly-in Switzerland. Due to favorable
developments in Switzerland, we may expect, according to
our Swiss lawyers, the first deliveries of the Swiss deposits in
the foreseeable future, perhaps in less than a year's time. In
New York, PCGG through its lawyers who render their services
free of cost to the Philippine government, succeeded in
getting injunctive relief against Mr. and Mrs. Marcos and their
nominees and agents. There is now an offer for settlement
that is being studied and explored by our lawyers there.

If we succeed in recovering not an (since this is impossible)

but a substantial part of the ill-gotten wealth here and in
various countries of the world-something the revolutionary
governments of China, Ethiopia, Iran and Nicaragua were not
able to accomplish at all with respect to properties outside
their territorial boundaries-the Presidential Commission on
Good Government, which has undertaken the difficult and
thankless task of trying to undo what had been done so
secretly and effectively in the last twenty years, shall have
more than justified its existence. 20

The misdeeds of some PCGG volunteers and personnel cited

in the dissenting opinion do not detract at an from the
PCGG's accomplishments, just as no one would do away with
newspapers because of some undesirable elements. The
point is that all such misdeeds have been subject to public
exposure and as stated in the dissent itself, the erring PCGG
representatives have been forthwith dismissed and replaced.

The magnitude of the tasks that confront respondent PCGG

with its limited resources and staff support and volunteers
should be appreciated, together with the assistance that
foreign governments and lawyers have spontaneously given
the commission.

A word about the PCGG's firing of the BASECO lawyers who

filed the present petition challenging its questioned orders,
filing a motion to withdraw the petition, after it had put in
eight of its representatives as directors of the BASECO board
of directors. This was entirely proper and in accordance with
the Court's Resolution of October 28, 1986, which denied
BASECO's motion for the issuance of a restraining order
against such take-over and declared that "the government
can, through its designated directors, properly exercise
control and management over what appear to be properties
and assets owned and belonging to the government itself
and over which the persons who appear in this case on

behalf of BASECO have failed to show any eight or even any

shareholding in said corporation." In other words, these
dummies or fronts cannot seek to question the government's
right to recover the very properties and assets that have
been stolen from it by using the very same stolen properties
and funds derived therefrom. If they wish to pursue their own
empty claim, they must do it on their own, after first
establishing that they indeed have a lawful right and/or
shareholding in BASECO.

Under the 1987 Constitution, the PCGG is called upon to file

the judicial proceedings for forfeiture and recovery of the
sequestered or frozen properties covered by its orders issued
before the ratification of the Constitution on February 2,
1987, within six months from such ratification, or by August
2, 1987. (For those orders issued after such ratification, the
judicial action or proceeding must be commenced within six
months from the issuance thereof.) The PCGG has not really
been given much time, considering the magnitude of its
tasks. It is entitled to some forbearance, in availing of the
maximum time granted it for the filing of the corresponding
judicial action with the Sandiganbayan.

PADILLA, J., concurring:

The majority opinion penned by Mr. Justice Narvasa maintains

and upholds the valid distinction between acts of
conservation and preservation of assets and acts of
ownership. Sequestration, freeze and temporary take-over
encompass the first type of acts. They do not include the
second type of acts which are reserved only to the rightful
owner of the assets or business sequestered or temporarily
taken over.

The removal and election of members of the board of

directors of a corporate enterprise is, to me, a clear act of
ownership on the part of the shareholders of the corporation.
Under ordinary circumstances, I would deny the PCGG the
authority to change and elect the members of BASECO's
Board of Directors. However, under the facts as disclosed by
the records, it appears that the certificates of stock
representing about ninety-five (95%) per cent of the total
ownership in BASECO's capital stock were found endorsed in
blank in Malacanang (presumably in the possession and
control of Mr. Marcos) at the time he and his family fled in
February 1986. This circumstance let alone the extent of the
control Mr. Marcos exercised, while in power, over policy
decisions affecting BASECO, entirely satisfies my mind that
BASECO was owned and controlled by Mr. Marcos. This is
calling a spade a spade. I am also entirely satisfied in my
mind that Mr. Marcos could not have acquired the ownership
of BASECO out of his lawfully-gotten wealth.

Consequently, even ahead of judicial proceedings, I am

convinced that the Republic of the Philippines, through the
PCGG, has the right and even the duty to take-over full
control and supervision of BASECO.

MELENCIO-HERRERA, J., concurring:

I would like to qualify my concurrence in so far as the voting

of sequestered stork is concerned.

The voting of sequestered stock is, to my mind, an exercise

of an attribute of ownership. It goes beyond the purpose of a
writ of sequestration, which is essentially to preserve the
property in litigation (Article 2005, Civil Code). Sequestration
is in the nature of a judicial deposit (ibid.).

I have no objection to according the right to vote sequestered

stock in case of a take-over of business actually belonging to
the government or whose capitalization comes from public
funds but which, somehow, landed in the hands of private
persons, as in the case of BASECO. To my mind, however,
caution and prudence should be exercised in the case of
sequestered shares of an on-going private business
enterprise, specially the sensitive ones, since the true and
real ownership of said shares is yet to be determined and
proven more conclusively by the Courts.

It would be more in keeping with legal norms if forfeiture

proceedings provided for under Republic Act No. 1379 be
filed in Court and the PCGG seek judicial appointment as a
receiver or administrator, in which case, it would be
empowered to vote sequestered shares under its custody
(Section 55, Corporation Code). Thereby, the assets in
litigation are brought within the Court's jurisdiction and the
presence of an impartial Judge, as a requisite of due process,
is assured. For, even in its historical context, sequestration is
a judicial matter that is best handled by the Courts.

I consider it imperative that sequestration measures be

buttressed by judicial proceedings the soonest possible in
order to settle the matter of ownership of sequestered shares
and to determine whether or not they are legally owned by
the stockholders of record or are "ill-gotten wealth" subject to
forfeiture in favor of the State. Sequestration alone, being
actually an ancillary remedy to a principal action, should not
be made the basis for the exercise of acts of dominion for an
indefinite period of time.

Sequestration is an extraordinary, harsh, and severe remedy.

It should be confined to its lawful parameters and exercised,
with due regard, in the words of its enabling laws, to the
requirements of fairness, due process (Executive Order No.

14, palay 7, 1986), and Justice (Executive Order No. 2, March

12, 1986).

(4)
The PCGG does not own sequestered property. It
cannot and must not exercise acts of ownership. To quote the
majority opinion, "one thing is certain ..., the PCGG cannot
exercise acts of dominion."

Feliciano, J., concur.

(5)
The provisional takeover in a sequestration should not
be indefinitely maintained. It is the duty of the PCGG to
immediately file appropriate criminal or civil cases once the
evidence has been gathered.

GUTIERREZ, JR., J., concurring and dissenting:

I concur, in part, in the erudite opinion penned for the Court
by my distinguished colleague Mr. Justice Andres R. Narvasa.
I agree insofar as it states the principles which must govern
PCGG sequestrations and emphasizes the limitations in the
exercise of its broad grant of powers.

I concur in the general propositions embodied in or implied

from the majority opinion, among them:

(1)
The efforts of Government to recover ill-gotten
properties amassed by the previous regime deserve the
fullest support of the judiciary and all sectors of society. I
believe, however, that a nation professing adherence to the
rule of law and fealty to democratic processes must adopt
ways and means which are always within the bounds of
lawfully granted authority and which meet the tests of due
process and other Bill of Rights protections.
(2)
Sequestration is intended to prevent the destruction,
concealment, or dissipation of ill-gotten wealth. The object is
conservation and preservation. Any exercise of power beyond
these objectives is lawless usurpation.
(3)
The PCGG exercises only such powers as are granted
by law and not proscribed by the Constitution. The remedies
it enforces are provisional and contingent. Whether or not
sequestered property is indeed ill-gotten must be-determined
by a court of justice. The PCGG has absolutely no power to
divest title over sequestered property or to act as if its
findings are final.

It is the difference between what the Court says and what the
PCGG does which constrains me to dissent. Even as the Court
emphasizes principles of due process and fair play, it has
unfortunately validated ultra vires acts violative of those very
same principles. While we stress the rules which must govern
the PCGG in the exercise of its powers, the Court has failed to
stop or check acts which go beyond the power of
sequestration given by law to the PCGG.

We are all agreed in the Court that the PCGG is not a judge. It
is an investigator and prosecutor. Sequestration is only a
preliminary or ancillary remedy. There must be a principal
and independent suit filed in court to establish the true
ownership of sequestered properties. The factual premise
that a sequestered property was ill-gotten by former
President Marcos, his family, relatives, subordinates, and
close associates cannot be assumed. The fact of ownership
must be established in a proper suit before a court of justice.

But what has the Court, in effect, ruled?

Pages 21 to 33 of the majority opinion are dedicated to a
statement of facts which conclusively and indubitably shows
that BASECO is owned by President Marcos-and that it was
acquired and vastly enlarged by the former President's taking
undue advantage of his public office and using his powers,
authority, or influence.

There has been no court hearing, no trial, and no

presentation of evidence. All that we have is what the PCGG
has given us. The petitioner has not even been allowed to
see the evidence, much less refute it.

What the PCGG has gathered in the course of its seizures and
investigations may be gospel truth. However, that truth must
be properly established in a trial court, not unilaterally
determined by the PCGG or declared by this Court in a
special proceeding which only asks us to set aside or enjoin
an illegal exercise of power. After this decision, there is
nothing more for a trial court to ascertain. Certainly, no lower
court would dare to arrive at findings contrary to this Court's
conclusions, no matter how insistent we may be in labelling
such conclusions as "prima facie." To me, this is the basic
flaw in PCGG procedures that the Court is, today, unwittingly
legitimating. Even before the institution of a court case, the
PCGG concludes that sequestered property is ill-gotten
wealth and proceeds to exercise acts of ownership over said
properties. It treats sequestered property as its own even
before the oppositor-owners have been divested of their
titles.

The Court declares that a state of seizure is not to be

indefinitely maintained. This means that court proceedings to
either forfeit the sequestered properties or clear the names
and titles of the petitioners must be filed as soon as possible.

This case is a good example of disregard or avoidance of this

requirement. With the kind of evidence which the PCGG
professes to possess, the forfeiture case could have been
filed simultaneously with the issuance of sequestration
orders or shortly thereafter.

And yet, the records show that the PCGG appears to

concentrate more on the means rather than the ends, in
running the BASECO, taking over the board of directors and
management, getting rid of security guards, disposing of
scrap, entering into new contracts and otherwise behaving as
if it were already the owner. At this late date and with all the
evidence PCGG claims to have, no court case has been filed.

Among the interesting items elicited during the oral

arguments or found in the records of this petition are:
(1)
Upon sequestering BASECO, some PCGG personnel lost
no time in digging up paved premises with jack hammers in a
frantic search for buried gold bars.
(2)
Two top PCGG volunteers charged each other with
stealing properties under their custody. The PCGG had to step
in, dismiss the erring representatives, and replace them with
new ones.
(3)
The petitioner claims that the lower bid of a rock
quarry operator was accepted even as a higher and more
favorable bid was offered. When the questionable deal was
brought to our attention, the awardee allegedly raised his bid
to the level of the better offer. The successful bidder later
submitted a comment in intervention explaining his side.
Whoever is telling the truth, the fact remains that multimillion peso contracts involving the operations of
sequestered companies should be entered into under the
supervision of a court, not freely executed by the PCGG even
when the petitioner-owners question the propriety and
integrity of those transactions.
(4)
The PCGG replaced eight out of eleven members of the
BASECO board of directors with its own men. Upon taking
over full control of the corporation, the newly installed board
reversed the efforts of the former owners to protect their
interests. The new board fired the BASECO lawyers who
instituted the instant petition. It then filed a motion to
withdraw this very same petition we are now deciding. In
other words, the "new owners" did not want the Supreme

Court to continue poking into the legality of their acts. They

moved to abort the petition filed with us.

institutions, and other sensitive businesses will find

themselves in a similar quandary.

Any suspicion of impropriety would have been avoided if the

PCGG had filed the required court proceedings and exercised
its acts of management and control under court supervision.
The requirements of due process would have been met.

I join the PCGG and all right thinking Filipinos in condemning

the totalitarian acts which made possible the accumulation of
ill-gotten wealth. I, however, dissent when authoritarian and
ultra vires methods are used to recover that stolen wealth.
One wrong cannot be corrected by the employment of
another wrong.

One other matter I wish to discuss in this separate opinion is

PCGG's selection of eight out of the eleven members of the
BASECO board of directors.

The election of the members of a board of directors is

distinctly and unqualifiedly an act of ownership. When
stockholders of a corporation elect or remove members of a
board of directors, they exercise their right of ownership in
the company they own, By no stretch of the imagination can
the revamp of a board of directors be considered as a mere
act of conserving assets or preventing the dissipation of
sequestered assets. The broad powers of a sequestrator are
more than enough to protect sequestered assets. There is no
need and no legal basis to reach out further and exercise
ultimate acts of ownership.

Under the powers which PCGG has assumed and wields, it

can amend the articles and by-laws of a sequestered
corporation, decrease the capital stock, or sell substantially
all corporate assets without any effective check from the
owners not yet divested of their titles or from a court of
justice. The PCGG is tasked to preserve assets but when it
exercises the acts of an owner, it could also very well destroy.
I hope that the case of the Philippine Daily Express, a major
newspaper closed by the PCGG, is an isolated example.
Otherwise, banks, merchandizing firms, investment

I, therefore, vote to grant the petition. Pending the filing of an

appropriate case in court, the PCGG must be enjoined from
exercising any and all acts of ownership over the sequestered
firm.

Bidin and Cortes, JJ., concur and dissent.

CRUZ, J., dissenting:
My brother Narvasa has written a truly outstanding decision
that bespeaks a penetrating and analytical mind and a
masterly grasp of the serious problem we are asked to
resolve. He deserves and I offer him my sincere admiration.
There is no question that all lawful efforts should be taken to
recover the tremendous wealth plundered from the people by
the past regime in the most execrable thievery perpetrated
in all history. No right-thinking Filipino can quarrel with this
necessary objective, and on this score I am happy to concur
with the ponencia.
But for all my full agreement with the basic thesis of the
majority, I regret I find myself unable to support its
conclusions in favor Of the respondent PCGG. My view is that
these conclusions clash with the implacable principles of the
free society. foremost among which is due process. This
demands our reverent regard.
Due process protects the life, liberty and property of every
person, whoever he may be. Even the most despicable
criminal is entitled to this protection. Granting this distinction
to Marcos, we are still not justified in depriving him of this

guaranty on the mere justification that he appears to own the

BASECO shares.

Tomas Besa, Jose B. Galang and Juan C. Jimenez for

petitioner.

I am convinced and so submit that the PCGG cannot at this

time take over the BASECO without any court order and
exercise thereover acts of ownership without court
supervision. Voting the shares is an act of ownership.
Reorganizing the board of directors is an act of ownership.
Such acts are clearly unauthorized. As the majority opinion
itself stresses, the PCGG is merely an administrator whose
authority is limited to preventing the sequestered properties
from being dissipated or clandestinely transferred.

San Juan, Africa & Benedicto for respondents.

The court action prescribed in the Constitution is not

inadequate and is available to the PCGG. The advantage of
this remedy is that, unlike the ad libitum measures now being
take it is authorized and at the same time also limited by the
fundamental law. I see no reason why it should not now be
employed by the PCGG, to remove all doubts regarding the
legality of its acts and all suspicions concerning its motives.

G.R. No. L-26001

October 29, 1968

CONCEPCION, C.J.:
The Philippine National Bank hereinafter referred to as the
PNB seeks the review by certiorari of a decision of the
Court of Appeals, which affirmed that of the Court of First
Instance of Manila, dismissing plaintiff's complaint against
the Philippine Commercial and Industrial Bank hereinafter
referred to as the PCIB for the recovery of P57,415.00.
A partial stipulation of facts entered into by the parties and
the decision of the Court of Appeals show that, on about
January 15, 1962, one Augusto Lim deposited in his current
account with the PCIB branch at Padre Faura, Manila, GSIS
Check No. 645915- B, in the sum of P57,415.00, drawn
against the PNB; that, following an established banking
practice in the Philippines, the check was, on the same date,
forwarded, for clearing, through the Central Bank, to the PNB,
which did not return said check the next day, or at any other
time, but retained it and paid its amount to the PCIB, as well
as debited it against the account of the GSIS in the PNB; that,
subsequently, or on January 31, 1962, upon demand from the
GSIS, said sum of P57,415.00 was re-credited to the latter's
account, for the reason that the signatures of its officers on
the check were forged; and that, thereupon, or on February
2, 1962, the PNB demanded from the PCIB the refund of said
sum, which the PCIB refused to do. Hence, the present action
against the PCIB, which was dismissed by the Court of First
Instance of Manila, whose decision was, in turn, affirmed by
the Court of Appeals.

PHILIPPINE NATIONAL BANK, petitioner,

vs.
THE COURT OF APPEALS and PHILIPPINE COMMERCIAL
AND INDUSTRIAL BANK, respondents.

It is not disputed that the signatures of the General Manager

and the Auditor of the GSIS on the check, as drawer thereof,
are forged; that the person named in the check as its payee
was one Mariano D. Pulido, who purportedly indorsed it to

one Manuel Go; that the check purports to have been

indorsed by Manuel Go to Augusto Lim, who, in turn,
deposited it with the PCIB, on January 15, 1962; that,
thereupon, the PCIB stamped the following on the back of the
check: "All prior indorsements and/or Lack of Endorsement
Guaranteed, Philippine Commercial and Industrial Bank,"
Padre Faura Branch, Manila; that, on the same date, the PCIB
sent the check to the PNB, for clearance, through the Central
Bank; and that, over two (2) months before, or on November
13, 1961, the GSIS had notified the PNB, which
acknowledged receipt of the notice, that said check had been
lost, and, accordingly, requested that its payment be
stopped.
In its brief, the PNB maintains that the lower court erred: (1)
in not finding the PCIB guilty of negligence; (2) in not finding
that the indorsements at the back of the check are forged;
(3) in not finding the PCIB liable to the PNB by virtue of the
former's warranty on the back of the check; (4) in not holding
that "clearing" is not "acceptance", in contemplation of the
Negotiable Instruments law; (5) in not finding that, since the
check had not been accepted by the PNB, the latter is
entitled to reimbursement therefor; and (6) in denying the
PNB's right to recover from the PCIB.
The first assignment of error will be discussed later, together
with the last,with which it is interrelated.
As regards the second assignment of error, the PNB argues
that, since the signatures of the drawer are forged, so must
the signatures of the supposed indorsers be; but this
conclusion does not necessarily follow from said premise.
Besides, there is absolutely no evidence, and the PNB has not
even tried to prove that the aforementioned indorsements
are spurious. Again, the PNB refunded the amount of the
check to the GSIS, on account of the forgery in the
signatures, not of the indorsers or supposed indorsers, but of
the officers of the GSIS as drawer of the instrument. In other
words, the question whether or not the indorsements have
been falsified is immaterial to the PNB's liability as a drawee,
or to its right to recover from the PCIB,1 for, as against the
drawee, the indorsement of an intermediate bank does not

guarantee the signature of the drawer,2 since the forgery of

the indorsement is not the cause of the loss.3
With respect to the warranty on the back of the check, to
which the third assignment of error refers, it should be noted
that the PCIB thereby guaranteed "all prior indorsements,"
not the authenticity of the signatures of the officers of the
GSIS who signed on its behalf, because the GSIS is not an
indorser of the check, but its drawer.4 Said warranty is
irrelevant, therefore, to the PNB's alleged right to recover
from the PCIB. It could have been availed of by a subsequent
indorsee5 or a holder in due course6 subsequent to the PCIB,
but, the PNB is neither.7 Indeed, upon payment by the PNB,
as drawee, the check ceased to be a negotiable instrument,
and became a mere voucher or proof of payment.8
Referring to the fourth and fifth assignments of error, we
must bear in mind that, in general, "acceptance", in the
sense in which this term is used in the Negotiable
Instruments Law9 is not required for checks, for the same are
payable on demand.10 Indeed, "acceptance" and "payment"
are, within the purview of said Law, essentially different
things, for the former is "a promise to perform an act,"
whereas the latter is the "actual performance" thereof.11 In
the words of the Law,12 "the acceptance of a bill is the
signification by the drawee of his assent to the order of the
drawer," which, in the case of checks, is the payment, on
demand, of a given sum of money. Upon the other hand,
actual payment of the amount of a check implies not only an
assent to said order of the drawer and a recognition of the
drawer's obligation to pay the aforementioned sum, but, also,
a compliance with such obligation.

Let us now consider the first and the last assignments of

error. The PNB maintains that the lower court erred in not
finding that the PCIB had been guilty of negligence in not
discovering that the check was forged. Assuming that there
had been such negligence on the part of the PCIB, it is
undeniable, however, that the PNB has, also, been negligent,
with the particularity that the PNB had been guilty of a
greater degree of negligence, because it had a previous and

formal notice from the GSIS that the check had been lost,
with the request that payment thereof be stopped. Just as
important, if not more important and decisive, is the fact that
the PNB's negligence was the main or proximate cause for
the corresponding loss.

Lastly, Section 62 of Act No. 2031 provides:

In this connection, it will be recalled that the PCIB did not

cash the check upon its presentation by Augusto Lim; that
the latter had merely deposited it in his current account with
the PCIB; that, on the same day, the PCIB sent it, through the
Central Bank, to the PNB, for clearing; that the PNB did not
return the check to the PCIB the next day or at any other
time; that said failure to return the check to the PCIB implied,
under the current banking practice, that the PNB considered
the check good and would honor it; that, in fact, the PNB
honored the check and paid its amount to the PCIB; and that
only then did the PCIB allow Augusto Lim to draw said
amount from his aforementioned current account.

(a)
The existence of the drawer, the genuineness of his
signature, and his capacity and authority to draw the
instrument; and

Thus, by not returning the check to the PCIB, by thereby

indicating that the PNB had found nothing wrong with the
check and would honor the same, and by actually paying its
amount to the PCIB, the PNB induced the latter, not only to
believe that the check was genuine and good in every
respect, but, also, to pay its amount to Augusto Lim. In other
words, the PNB was the primary or proximate cause of the
loss, and, hence, may not recover from the PCIB.13
It is a well-settled maxim of law and equity that when one of
two (2) innocent persons must suffer by the wrongful act of a
third person, the loss must be borne by the one whose
negligence was the proximate cause of the loss or who put it
into the power of the third person to perpetrate the wrong.14

Then, again, it has, likewise, been held that, where the

collecting (PCIB) and the drawee (PNB) banks are equally at
fault, the court will leave the parties where it finds them.15

The acceptor by accepting the instrument engages that he

will pay it according to the tenor of his acceptance; and
admits:

(b)
The existence of the payee and his then capacity to
indorse.

The prevailing view is that the same rule applies in the case
of a drawee who pays a bill without having previously
accepted it.16
WHEREFORE, the decision appealed from is hereby affirmed,
with costs against the Philippine National Bank. It is so
ordered.

[G.R. No. 116123. March 13, 1997]

SERGIO F. NAGUIAT, doing business under the name
and style SERGIO F. NAGUIAT ENT., INC., & CLARK
FIELD TAXI, INC., petitioners, vs. NATIONAL LABOR
RELATIONS COMMISSION (THIRD DIVISION), NATIONAL
ORGANIZATION OF WORKINGMEN and its members,
LEONARDO T. GALANG, et al., respondents.
DECISION
PANGANIBAN, J.:
Are private respondent-employees of petitioner Clark Field
Taxi, Inc., who were separated from service due to the
closure of Clark Air Base, entitled to separation pay and, if so,
in what amount? Are officers of corporations ipso facto liable
jointly and severally with the companies they represent for
the payment of separation pay?

These questions are answered by the Court in resolving this

petition for certiorari under Rule 65 of the Rules of Court
assailing the Resolutions of the National Labor Relations
Commission (Third Division)[1] promulgated on February 28,
1994,[2] and May 31, 1994.[3] The February 28, 1994
Resolution affirmed with modifications the decision[4] of
Labor Arbiter Ariel C. Santos in NLRC Case No. RAB-III-122477-91. The second Resolution denied the motion for
reconsideration of herein petitioners.

The NLRC modified the decision of the labor arbiter by

granting separation pay to herein individual respondents in
the increased amount of US$120.00 for every year of service
or its peso equivalent, and holding Sergio F. Naguiat
Enterprises, Inc., Sergio F. Naguiat and Antolin T. Naguiat,
jointly and severally liable with Clark Field Taxi, Inc. ("CFTI").

The Facts
The following facts are derived from the records of the case:

Petitioner CFTI held a concessionaire's contract with the Army

Air Force Exchange Services ("AAFES") for the operation of
taxi services within Clark Air Base. Sergio F. Naguiat was
CFTI's president, while Antolin T. Naguiat was its vicepresident. Like Sergio F. Naguiat Enterprises, Incorporated
("Naguiat Enterprises"), a trading firm, it was a family-owned
corporation.

Individual respondents were previously employed by CFTI as

taxicab drivers. During their employment, they were required
to pay a daily "boundary fee" in the amount of US$26.50 for
those working from 1:00 a.m. to 12:00 noon, and US$27.00
for those working from 12:00 noon to 12:00 midnight. All

incidental expenses for the maintenance of the vehicles they

were driving were accounted against them, including
gasoline expenses.

The drivers worked at least three to four times a week,

depending on the availability of taxicabs. They earned not
less than US$15.00 daily. In excess of that amount, however,
they were required to make cash deposits to the company,
which they could later withdraw every fifteen days.

Due to the phase-out of the US military bases in the

Philippines, from which Clark Air Base was not spared, the
AAFES was dissolved, and the services of individual
respondents were officially terminated on November 26,
1991.

The AAFES Taxi Drivers Association ("drivers' union"), through

its local president, Eduardo Castillo, and CFTI held
negotiations as regards separation benefits that should be
awarded in favor of the drivers. They arrived at an
agreement that the separated drivers will be given P500.00
for every year of service as severance pay. Most of the
drivers accepted said amount in December 1991 and January
1992. However, individual respondents herein refused to
accept theirs.

Instead, after disaffiliating themselves from the drivers'

union, individual respondents, through the National
Organization of Workingmen ("NOWM"), a labor organization
which they subsequently joined, filed a complaint[5] against
"Sergio F. Naguiat doing business under the name and style
Sergio F. Naguiat Enterprises, Inc., Army-Air Force Exchange
Services (AAFES) with Mark Hooper as Area Service Manager,
Pacific Region, and AAFES Taxi Drivers Association with
Eduardo Castillo as President," for payment of separation pay

due to termination/phase-out. Said complaint was later

amended[6] to include additional taxi drivers who were
similarly situated as complainants, and CFTI with Antolin T.
Naguiat as vice president and general manager, as party
respondent.

In their complaint, herein private respondents alleged that

they were regular employees of Naguiat Enterprises,
although their individual applications for employment were
approved by CFTI. They claimed to have been assigned to
Naguiat Enterprises after having been hired by CFTI, and that
the former thence managed, controlled and supervised their
employment. They averred further that they were entitled to
separation pay based on their latest daily earnings of
US$15.00 for working sixteen (16) days a month.

In their position paper submitted to the labor arbiter, herein

petitioners claimed that the cessation of business of CFTI on
November 26, 1991, was due to "great financial losses and
lost business opportunity" resulting from the phase-out of
Clark Air Base brought about by the Mt. Pinatubo eruption
and the expiration of the RP-US military bases agreement.
They admitted that CFTI had agreed with the drivers' union,
through its President Eduardo Castillo who claimed to have
had blanket authority to negotiate with CFTI in behalf of
union members, to grant its taxi driver-employees separation
pay equivalent to P500.00 for every year of service.

The labor arbiter, finding the individual complainants to be

regular workers of CFTI, ordered the latter to pay them
P1,200.00 for every year of service "for humanitarian
consideration," setting aside the earlier agreement between
CFTI and the drivers' union of P500.00 for every year of
service. The labor arbiter rejected the allegation of CFTI that
it was forced to close business due to "great financial losses
and lost business opportunity" since, at the time it ceased
operations, CFTI was profitably earning and the cessation of

its business was due to the untimely closure of Clark Air

Base. In not awarding separation pay in accordance with the
Labor Code, the labor-arbiter explained:

"To allow respondents exemption from its (sic) obligation to

pay separation pay would be inhuman to complainants but to
impose a monetary obligation to an employer whose
profitable business was abruptly shot (sic) down by force
majeure would be unfair and unjust to say the least."[7]

and thus, simply awarded an amount for "humanitarian

consideration."

Herein individual private respondents appealed to the NLRC.

In its Resolution, the NLRC modified the decision of the labor
arbiter by granting separation pay to the private
respondents. The concluding paragraphs of the NLRC
Resolution read:

"The contention of complainant is partly correct. One-half

month salary should be US$120.00 but this amount can not
be paid to the complainant in U.S. Dollar which is not the
legal tender in the Philippines. Paras, in commenting on Art.
1249 of the New Civil Code, defines legal tender as 'that
which a debtor may compel a creditor to accept in payment
of the debt. The complainants who are the creditors in this
instance can be compelled to accept the Philippine peso
which is the legal tender, in which case, the table of
conversion (exchange rate) at the time of payment or
satisfaction of the judgment should be used. However, since
the choice is left to the debtor, (respondents) they may
choose to pay in US dollar.' (Phoenix Assurance Co. vs.
Macondray & Co. Inc., L-25048, May 13, 1975)

In discharging the above obligations, Sergio F. Naguiat

Enterprises, which is headed by Sergio F. Naguiat and Antolin
Naguiat, father and son at the same time the President and
Vice-President and General Manager, respectively, should be
joined as indispensable party whose liability is joint and
several. (Sec. 7, Rule 3, Rules of Court)"[8]

As mentioned earlier, the motion for reconsideration of

herein petitioners was denied by the NLRC. Hence, this
petition with prayer for issuance of a temporary restraining
order. Upon posting by the petitioners of a surety bond, a
temporary restraining order[9] was issued by this Court
enjoining execution of the assailed Resolutions.

Issues
The petitioners raise the following issues before this Court for
resolution:
"I. Whether or not public respondent NLRC (3rd Div.)
committed grave abuse of discretion amounting to lack of
jurisdiction in issuing the appealed resolution;
II. Whether or not Messrs. Teofilo Rafols and Romeo N. Lopez
could validly represent herein private respondents; and,
III. Whether or not the resolution issued by public respondent
is contrary to law."[10]

Petitioners also submit two additional issues by way of a

supplement[11] to their petition, to Wit: that Petitioners
Sergio F. Naguiat and Antolin Naguiat were denied due
process; and that petitioners were not furnished copies of
private respondents' appeal to the NLRC. As to the
procedural lapse of insufficient copies of the appeal, the
proper forum before which petitioners should have raised it is
the NLRC. They, however, failed to question this in their
motion for reconsideration. As a consequence, they are

deemed to have waived the same and voluntarily submitted

themselves to the jurisdiction of the appellate body.

Anent the first issue raised in their original petition,

petitioners contend that NLRC committed grave abuse of
discretion amounting to lack or excess of jurisdiction in
unilaterally increasing the amount of severance pay granted
by the labor arbiter. They claim that this was not supported
by substantial evidence since it was based simply on the selfserving allegation of respondents that their monthly takehome pay was not lower than $240.00.

On the second issue, petitioners aver that NOWM cannot

make legal representations in behalf of individual
respondents who should, instead, be bound by the decision
of the union (AAFES Taxi Drivers Association) of which they
were members.

As to the third issue, petitioners incessantly insist that Sergio

F. Naguiat Enterprises, Inc. is a separate and distinct juridical
entity which cannot be held jointly and severally liable for the
obligations of CFTI. And similarly, Sergio F. Naguiat and
Antolin Naguiat were merely officers and stockholders of CFTI
and, thus, could not be held personally accountable for
corporate debts.

Lastly, Sergio and Antolin Naguiat assail the Resolution of

NLRC holding them solidarily liable despite not having been
impleaded as parties to the complaint.

Individual respondents filed a comment separate from that of

NOWM. In sum, both aver that petitioners had the
opportunity but failed to refute, the taxi drivers' claim of
having an average monthly earning of $240.00; that

individual respondents became members of NOWM after

disaffiliating themselves from the AAFES Taxi Drivers
Association which, through the manipulations of its President
Eduardo Castillo, unconscionably compromised their
separation pay; and that Naguiat Enterprises, being their
indirect employer, is solidarily liable under the law for
violation of the Labor Code, in this case, for nonpayment of
their separation pay.

The Solicitor General unqualifiedly supports the allegations of

private respondents. In addition, he submits that the
separate personalities of respondent corporations and their
officers should be disregarded and considered one and the
same as these were used to perpetrate injustice to their
employees.

The Court's Ruling

As will be discussed below, the petition is partially
meritorious.

First Issue: Amount of Separation Pay

Firmly, we reiterate the rule that in a petition for certiorari

filed pursuant to Rule 65 of the Rules of Court, which is the
only way a labor case may reach the Supreme Court, the
petitioner/s must clearly show that the NLRC acted without or
in excess of jurisdiction or with grave abuse of discretion.[12]

Long-standing and well-settled in Philippine jurisprudence is

the judicial dictum that findings of fact of administrative
agencies and quasi-judicial bodies, which have acquired
expertise because their jurisdiction is confined to specific
matters, are generally accorded not only great respect but

even finality; and are binding upon this Court unless there is
a showing of grave abuse of discretion, or where it is clearly
shown that they were arrived at arbitrarily or in disregard of
the evidence on record.[13]

Nevertheless, this Court carefully perused the records of the

instant case if only to determine whether public respondent
committed grave abuse of discretion, amounting to lack of
jurisdiction, in granting the clamor of private respondents
that their separation pay should be based on the amount of
$240.00, allegedly their minimum monthly earnings as taxi
drivers of petitioners.

In their amended complaint before the Regional Arbitration

Branch in San Fernando, Pampanga, herein private
respondents set forth in detail the work schedule and
financial arrangement they had with their employer.
Therefrom they inferred that their monthly take-home pay
amounted to not less than $240.00. Herein petitioners did
not bother to refute nor offer any evidence to controvert said
allegations. Remaining undisputed, the labor arbiter adopted
such facts in his decision. Petitioners did not even appeal
from the decision of the labor arbiter nor manifest any error
in his findings and conclusions. Thus, petitioners are in
estoppel for not having questioned such facts when they had
all opportunity to do so. Private respondents, like petitioners,
are bound by the factual findings of Respondent Commission.

Petitioners also claim that the closure of their taxi business

was due to great financial losses brought about by the
eruption of Mt. Pinatubo which made the roads practically
impassable to their taxicabs. Likewise well-settled is the rule
that business losses or financial reverses, in order to sustain
retrenchment of personnel or closure of business and warrant
exemption from payment of separation pay, must be proved
with clear and satisfactory evidence.[14] The records,
however, are devoid of such evidence.

The labor arbiter; as affirmed by NLRC, correctly found that

petitioners stopped their taxi business within Clark Air Base
because of the phase-out of U.S. military presence thereat. It
was not due to any great financial loss because petitioners'
taxi business was earning profitably at the time of its closure.

With respect to the amount of separation pay that should be

granted, Article 283 of the Labor Code provides:

arbiter. But petitioners who were party-respondents in said

complaint did not assail the juridical personality of NOWM
and the validity of its representations in behalf of the
complaining taxi drivers before the quasi-judicial bodies.
Therefore, they are now estopped from raising such question
before this Court. In any event, petitioners acknowledged
before this Court that the taxi drivers allegedly represented
by NOWM, are themselves parties in this case.[16]

Third Issue: Liability of PetitionerCorporations and Their Respective Officers

"x x x In case of retrenchment to prevent losses and in cases

of closures or cessation of operations of establishment or
undertaking not due to serious business losses or financial
reverses, the separation pay shall be equivalent to one (1)
month pay or at least one-half () month pay for every year of
service, whichever is higher. A fraction of at least six (6)
months shall be considered one (1 ) whole year."

Considering the above, we find that NLRC did not commit

grave abuse of discretion in ruling that individual
respondents were entitled to separation pay[15] in the
amount $120.00 (one-half of $240.00 monthly pay) or its
peso equivalent for every year of service.

Second Issue: NOWM's Personality to

The resolution of this issue involves another factual finding

that Naguiat Enterprises actually managed, supervised and
controlled employment terms of the taxi drivers, making it
their indirect employer. As adverted to earlier, factual
findings of quasi-judicial bodies are binding upon the court in
the absence of a showing of grave abuse of discretion.

Unfortunately, the NLRC did not discuss or give any

explanation for holding Naguiat Enterprises and its officers
jointly and severally liable in discharging CFTI's liability for
payment of separation pay. We again remind those
concerned that decisions, however concisely written, must
distinctly and clearly set forth the facts and law upon which
they are based.[17] This rule applies as well to dispositions
by quasi-judicial and administrative bodies.

Represent Individual Respondents-Employees

Naguiat Enterprises Not Liable
On the question of NOWM's authority to represent private
respondents, we hold petitioners in estoppel for not having
seasonably raised this issue before the labor arbiter or the
NLRC. NOWM was already a party-litigant as the organization
representing the taxi driver-complainants before the labor

In impleading Naguiat Enterprises as solidarily liable for the

obligations of CFTI, respondents rely on Articles 106,[18]
107[19] and 109[20] of the Labor Code.

Based on factual submissions of the parties, the labor arbiter,

however, found that individual respondents were regular
employees of CFTI who received wages on a boundary or
commission basis.

We find no reason to make a contrary finding. Labor-only

contracting exists where: (1) the person supplying workers to
an employer does not have substantial capital or investment
in the form of tools, equipment, machinery, and work
premises, among others; and (2) the workers recruited and
placed by such person are performing activities which are
directly related to the principal business of the employer.[21]
Independent contractors, meanwhile, are those who exercise
independent employment, contracting to do a piece of work
according to their own methods without being subject to
control of their employer except as to the result of their work.
[22]

Private respondents failed to substantiate their claim that

Naguiat Enterprises managed, supervised and controlled
their employment. It appears that they were confused on the
personalities of Sergio F. Naguiat as an individual who was
the president of CFTI, and Sergio F. Naguiat Enterprises, Inc.,
as a separate corporate entity with a separate business. They
presumed that Sergio F. Naguiat, who was at the same time a
stockholder and director[27] of Sergio F. Naguiat Enterprises,
Inc., was managing and controlling the taxi business on
behalf of the latter. A closer scrutiny and analysis of the
records, however, evince the truth of the matter: that Sergio
F. Naguiat, in supervising the-taxi drivers and determining
their employment terms, was rather carrying out his
responsibilities as president of CFTI. Hence, Naguiat
Enterprises as a separate corporation does not appear to be
involved at all in the taxi business.

To illustrate further, we refer to the testimony of a driverclaimant on cross examination.

"Atty. Suarez

From the evidence proffered by both parties, there is no

substantial basis to hold that Naguiat Enterprises is an
indirect employer of individual respondents much less a labor
only contractor. On the contrary, petitioners submitted
documents such as the drivers' applications for employment
with CFTI,[23] and social security remittances[24] and
payroll[25] of Naguiat Enterprises showing that none of the
individual respondents were its employees. Moreover, in the
contract[26] between CFTI and AAFES, the former, as
concessionaire, agreed to purchase from AAFES for a certain
amount within a specified period a fleet of vehicles to be
"ke(pt) on the road" by CFTI, pursuant to their
concessionaire's contract. This indicates that CFTI became
the owner of the taxicabs which became the principal
investment and asset of the company.

Is it not true that you applied not with Sergio F. Naguiat but
with Clark Field Taxi?

Witness
I applied for (sic) Sergio F. Naguiat

Atty. Suarez
Sergio F. Naguiat as an individual or the corporation?

Witness
'Sergio F. Naguiat na tao.'

Atty. Suarez

But do you also know that Sergio F. Naguiat is the President

of Clark Field Taxi, Incorporated?

Who is Sergio F. Naguiat?

Witness
Witness
He is the one managing the Sergio F. Naguiat Enterprises and
he is the one whom we believe as our employer.

Atty. Suarez
What is exactly the position of Sergio F. Naguiat with the
Sergio F. Naguiat Enterprises?

Yes. sir.

Atty. Suarez
How about Mr. Antolin Naguiat what is his role in the taxi
services, the operation of the Clark Field Taxi, Incorporated?

Witness
He is the vice president."[28]

Witness
He is the owner, sir.

And, although the witness insisted that Naguiat Enterprises

was his employer, he could not deny that he received his
salary from the office of CFTI inside the base.[29]

Atty. Suarez
How about with Clark Field Taxi Incorporated what is the
position of Mr. Naguiat?

Another driver-claimant admitted, upon the prodding of

counsel for the corporations, that Naguiat Enterprises was in
the trading business while CFTI was in taxi services.[30]

Witness
What I know is that he is a concessionaire.

xxx xxx xxx

Atty. Suarez

In addition, the Constitution[31] of CFTI-AAFES Taxi Drivers

Association which, admittedly, was the union of individual
respondents while still working at Clark Air Base, states that
members thereof are the employees of CFTI and "(f)or
collective bargaining purposes, the definite employer is the
Clark Field Taxi Inc."

From the foregoing, the ineludible conclusion is that CFTI was

the actual and direct employer of individual respondents, and
that Naguiat Enterprises was neither their indirect employer
nor labor-only contractor. It was not involved at all in the taxi
business.

their individual, private and personal capacities, who were

not parties in the case where the judgment was rendered?"
The NLRC answered in the negative, on the ground that
officers of a corporation are not liable personally for official
acts unless they exceeded the scope of their authority.

CFTI president solidarily liable

On certiorari, this Court reversed the NLRC and upheld the

labor arbiter. In imposing joint and several liability upon the
company president, the Court, speaking through Mme. Justice
Ameurfina Melencio-Herrera, ratiocinated this wise:

Petitioner-corporations would likewise want to avoid the

solidary liability of their officers. To bolster their position,
Sergio F. Naguiat and Antolin T. Naguiat specifically aver that
they were denied due process since they were not parties to
the complaint below.[32] In the broader interest of justice,
we, however, hold that Sergio F. Naguiat, in his capacity as
president of CFTI, cannot be exonerated from joint and
several liability in the payment of separation pay to
individual respondents.

A.C. Ransom Labor Union-CCLU vs. NLRC[33] is the case in

point. A.C. Ransom Corporation was a family corporation, the
stockholders of which were members of the Hernandez
family. In 1973, it filed an application for clearance to close or
cease operations, which was duly granted by the Ministry of
Labor and Employment, without prejudice to the right of
employees to seek redress of grievance, if any. Backwages of
22 employees, who engaged in a strike prior to the closure,
were subsequently computed at P164,984.00. Up to
September 1976, the union filed about ten (10) motions for
execution against the corporation, but none could be
implemented, presumably for failure to find leviable assets of
said corporation. In its last motion for execution, the union
asked that officers and agents of the company be held
personally liable for payment of the backwages. This was
granted by the labor arbiter. In the corporation's appeal to
the NLRC, one of the issues raised was: "Is the judgment
against a corporation to reinstate its dismissed employees
with backwages, enforceable against its officer and agents, in

"(b) How can the foregoing (Articles 265 and 273 of the Labor
Code) provisions be implemented when the employer is a
corporation? The answer is found in Article 212(c) of the
Labor Code which provides:

'(c) 'Employer' includes any person acting in the interest of

an employer, directly or indirectly. The term shall not include
any labor organization or any of its officers or agents except
when acting as employer.'

The foregoing was culled from Section 2 of RA 602, the

Minimum Wage Law. Since RANSOM is an artificial person, it
must have an officer who can be presumed to be the
employer, being the 'person acting in the interest of (the)
employer' RANSOM. The corporation, only in the technical
sense, is the employer.

The responsible officer of an employer corporation can be

held personally, not to say even criminally, liable for
nonpayment of back wages. That is the policy of the law. x x
x

(c) If the policy of the law were otherwise, the corporation

employer can have devious ways for evading payment of
back wages. x x x

(d) The record does not clearly identify 'the officer or officers'
of RANSOM directly responsible for failure to pay the back
wages of the 22 strikers. In the absence of definite proof in
that regard, we believe it should be presumed that the
responsible officer is the President of the corporation who can
be deemed the chief operation officer thereof. Thus, in RA
602, criminal responsibility is with the 'Manager or in his
default, the person acting as such.' In RANSOM, the President
appears to be the Manager." (Underscoring supplied.)

Sergio F. Naguiat, admittedly, was the president of CFTI who

actively managed the business. Thus, applying the ruling in
A. C. Ransom, he falls within the meaning of an "employer"
as contemplated by the Labor Code, who may be held jointly
and severally liable for the obligations of the corporation to
its dismissed employees.

Moreover, petitioners also conceded that both CFTI and

Naguiat Enterprises were "close family corporations"[34]
owned by the Naguiat family. Section 100, paragraph 5,
(under Title XII on Close Corporations) of the Corporation
Code, states:

"(5) To the extent that the stockholders are actively

engage(d) in the management or operation of the business
and affairs of a close corporation, the stockholders shall be
held to strict fiduciary duties to each other and among
themselves. Said stockholders shall be personally liable for
corporate torts unless the corporation has obtained
reasonably adequate liability insurance." (underscoring
supplied)

Nothing in the records show whether CFTI obtained

"reasonably adequate liability insurance;" thus, what remains
is to determine whether there was corporate tort.

Our jurisprudence is wanting as to the definite scope of

"corporate tort." Essentially, "tort" consists in the violation of
a right given or the omission of a duty imposed by law.[35]
Simply stated, tort is a breach of a legal duty.[36] Article 283
of the Labor Code mandates the employer to grant
separation pay to employees in case of closure or cessation
of operations of establishment or undertaking not due to
serious business losses or financial reverses, which is the
condition obtaining at bar. CFTI failed to comply with this lawimposed duty or obligation. Consequently, its stockholder
who was actively engaged in the management or operation
of the business should be held personally liable.

Furthermore, in MAM Realty Development vs. NLRC,[37] the

Court recognized that a director or officer may still be held
solidarily liable with a corporation by specific provision of law.
Thus:

"x x x A corporation, being a juridical entity, may act only

through its directors, officers and employees. Obligations
incurred by them, acting as such corporate agents, are not
theirs but the direct accountabilities of the corporation they
represent. True, solidary liabilities may at times be incurred
but only when exceptional circumstances warrant such as,
generally, in the following cases: Scl-aw

xxx xxx xxx

4. When a director, trustee or officer is made, by specific

provision of law, personally liable for his corporate action."
(footnotes omitted)

In this light, he cannot be held solidarily liable for the

obligations of CFTI and Sergio Naguiat to the private
respondents.

As pointed out earlier, the fifth paragraph of Section 100 of

the Corporation Code specifically imposes personal liability
upon the stockholder actively managing or operating the
business and affairs of the close corporation.

Fourth Issue: No Denial of Due Process

In fact, in posting the surety bond required by this Court for

the issuance of a temporary restraining order enjoining the
execution of the assailed NLRC Resolutions, only Sergio F.
Naguiat, in his individual and personal capacity, principally
bound himself to comply with the obligation thereunder, i.e.,
"to guarantee the payment to private respondents of any
damages which they may incur by reason of the issuance of
a temporary restraining order sought, if it should be finally
adjudged that said principals were not entitled thereto."[38]

The Court here finds no application to the rule that a

corporate officer cannot be held solidarily liable with a
corporation in the absence of evidence that he had acted in
bad faith or with malice.[39] In the present case, Sergio
Naguiat is held solidarily liable for corporate tort because he
had actively engaged in the management and operation of
CFTI, a close corporation.

Lastly, in petitioners' Supplement to their original petition,

they assail the NLRC Resolution holding Sergio F. Naguiat and
Antolin T. Naguiat jointly and severally liable with petitionercorporations in the payment of separation pay, averring
denial of due process since the individual Naguiats were not
impleaded as parties to the complaint.

We advert to the case of A.C. Ransom once more. The

officers of the corporation were not parties to the case when
the judgment in favor of the employees was rendered. The
corporate officers raised this issue when the labor arbiter
granted the motion of the employees to enforce the
judgment against them. In spite of this, the Court held the
corporation president solidarily liable with the corporation.

Furthermore, Sergio and Antolin Naguiat voluntarily

submitted themselves to the jurisdiction of the labor arbiter
when they, in their individual capacities, filed a position
paper[40] together with CFTI, before the arbiter. They cannot
now claim to have been denied due process since they
availed of the opportunity to present their positions.

Antolin Naguiat not personally liable

Antolin T. Naguiat was the vice president of the CFTI.

Although he carried the title of "general manager" as well, it
had not been shown that he had acted in such capacity.
Furthermore, no evidence on the extent of his participation in
the management or operation of the business was proffered.

WHEREFORE, the foregoing premises considered, the petition

is PARTLY GRANTED. The assailed February 28, 1994
Resolution of the NLRC is hereby MODIFIED as follows:

(1) Petitioner Clark Field Taxi, Incorporated, and Sergio F.

Naguiat, president and co-owner thereof, are ORDERED to
pay, jointly and severally, the individual respondents their
separation pay computed at US$120.00 for every year of
service, or its peso equivalent at the time of payment or
satisfaction of the judgment;

(2) Petitioner Sergio F. Naguiat Enterprises, Incorporated, and

Antolin T. Naguiat are ABSOLVED from liability in the payment
of separation pay to individual respondents.
SO ORDERED.