Digest Author: Aileene Alfaro

PCGG V SANDIGANBAYAN
Petitioner: Presidential Commission On Good Government, Oceanic Wireless Network, Inc., David M.
Castro, Maximo A. Maceren, Caesar Parlade, Melquiades C. Gutierrez, Eduardo M. Villanueva, and
Edilberto S. Alejandro
Respondents: Honorable Sandiganbayan (Third Division), Jose L. Africa, Manuel H. Nieto, Jr., Andres
L. Africa, Aerocom Investors And Managers Inc., Polygon Investors and Managers, Inc., and Belgor
Investment Corporation
Ponente: Pardo
Date: September 21, 2001
Facts
On August 28, 1990, PCGG sent Corporate Secretary Victor A. Africa of Oceanic Wireless
Network, Inc. (OWNI), a letter dated August 3, 1990, directing him to send notices to all stockholders of
record of OWNI for special stockholders' meeting. On September 17, 1990,during the special
stockholders' meeting of OWNI, PCGG voted all the Class "A" shares in the election of directors and
elected to the board of directors Commissioners Maceren, Parlade and Gutierrez representing the Class
"A" shares and Brooker and Miller representing Class "B" and "C" shares. None of the registered Class
"A" shareholders of OWNI was present in that, specialstockholders meeting. PCGG sequestered the Class
"A" shareholding about 60% of theoutstanding capital stock, and PCGG voted all the Class "A" shares.
On October 9, 1990, Corporate Secretary Africa wrote the SEC questioning the electionof PCGG
nominees as directors of the OWNI board on the ground that they were not stockholders of OWNI.
On January 27, 1991, the special stockholders' meeting of OWNI took place.Stockholders owning
63,573 Class "A" shares were represented. An election of directors for Class "A" shares was held. Nieto,
Jr., J. Africa and A. Africa were elected as directors for Class"A" shares for 1991 until their successors are
elected and qualified. Class "B" and "C"shareholders did not attend the meeting. No new directors for
them were elected.
On July 29, 1991, PCGG, acting for itself and in behalf of OWNI, filed with theSandiganbayan a
complaint for injunction with damages against V. Africa, J. Africa, Nieto, Jr. and Ocampo. PCGG sought
to enjoin the defendants from interfering with PCGG's management of OWNI and/or representing
themselves as director.
Issue
Whether or not the PCGG's takeover of OWNI is legal.
Held and Ratio
NO. In PCGG v. Cojuanco, Jr ., the Court ruled that who should vote the sequestered shares
requires the determination of the ill-gotten character of those shares and consequently the rightful
ownership thereof. The issue was still pending in the main case in the Sandiganbayan. This is only an
incident of the main case and is limited to the stockholders' meeting held on September 17, 1990. This is
without prejudice to the final disposition of the merits of the main suit. The ownership of the shares is still
under litigation. It is not known whether the shares are part of the ill-gotten wealth of former President
Marcos and his "cronies."
We find the writ of sequestration issued against OWNI not valid because the suit in Civil Case
No. 0009 against Nieto, Jr. and J. Africa as shareholders in OWNI is not a suit against OWNI. This Court
has held that "failure to implead these corporations as defendants and merely annexing a list of such

Digest Author: Aileene Alfaro

corporations to the complaints is a violation of their right to due process for it would in effect be
disregarding their distinct and separate personality without a hearing.
Furthermore, PCGG issued the writs of sequestration on August 3, 1988, which was beyond the
period set by the Constitution. Article XVIII, Section 26, of the 1987 Constitution provides.
Sec. 26.The authority to issue sequestration or freeze orders under Proclamation No. 3dated
March 25, 1986 in relation to the recovery of ill-gotten wealth shall 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.
The sequestration orders issued against respondents shall be deemed automatically lifted due to
the failure of PCGG to commence the proper judicial action or to implead the respondents therein within
the period prescribed by Article XVIII, Section 26 of the 1987 Constitution.
The lifting of the writs of sequestration will not necessarily be fatal to the main case since the
lifting of the subject orders does not ipso facto mean that the sequestered property are not ill-gotten. The
effect of the lifting of the sequestration against OWNI will merely be the termination of the role of the
government as conservator thereof. In other words, the PCGG may no longer exercise administrative or
housekeeping powers and its nominees may no longer vote the sequestered shares to enable them to sit on
the corporate board of the subject firm.