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Republic of the Philippines Frankfurter, arising out of a specific problem, certain requirements of its by-laws before new inherent

s of its by-laws before new inherent in his duty to settle her estate and
SUPREME COURT addressed to the attainment of specific ends by stock certificates could be issued. Hence, its satisfy the claims of local creditors.5 As Justice
Manila the use of specific remedies, with full and ample appeal. Tuason speaking for this Court made clear, it is a
EN BANC support from legal doctrines of weight and As was made clear at the outset of this opinion, "general rule universally recognized" that
G.R. No. L-23145 November 29, 1968 significance. the appeal lacks merit. The challenged order administration, whether principal or ancillary,
TESTATE ESTATE OF IDONAH SLADE The facts will explain why. As set forth in the constitutes an emphatic affirmation of judicial certainly "extends to the assets of a decedent
PERKINS, deceased. RENATO D. brief of appellant Benguet Consolidated, Inc., authority sought to be emasculated by the wilful found within the state or country where it was
TAYAG, ancillary administrator-appellee, Idonah Slade Perkins, who died on March 27, conduct of the domiciliary administrator in granted," the corollary being "that an
vs. 1960 in New York City, left among others, two refusing to accord obedience to a court decree. administrator appointed in one state or country
BENGUET CONSOLIDATED, INC., oppositor- stock certificates covering 33,002 shares of How, then, can this order be stigmatized as has no power over property in another state or
appellant. appellant, the certificates being in the possession illegal? country."6
Cirilo F. Asperillo, Jr., for ancillary administrator- of the County Trust Company of New York, which As is true of many problems confronting the It is to be noted that the scope of the power of
appellee. as noted, is the domiciliary administrator of the judiciary, such a response was called for by the the ancillary administrator was, in an earlier
Ross, Salcedo, Del Rosario, Bito and Misa for estate of the deceased.2 Then came this portion realities of the situation. What cannot be ignored case, set forth by Justice Malcolm. Thus: "It is
oppositor-appellant. of the appellant's brief: "On August 12, 1960, is that conduct bordering on wilful defiance, if it often necessary to have more than one
FERNANDO, J.: Prospero Sanidad instituted ancillary had not actually reached it, cannot without administration of an estate. When a person dies
Confronted by an obstinate and adamant refusal administration proceedings in the Court of First undue loss of judicial prestige, be condoned or intestate owning property in the country of his
of the domiciliary administrator, the County Instance of Manila; Lazaro A. Marquez was tolerated. For the law is not so lacking in domicile as well as in a foreign country,
Trust Company of New York, United States of appointed ancillary administrator, and on flexibility and resourcefulness as to preclude administration is had in both countries. That
America, of the estate of the deceased Idonah January 22, 1963, he was substituted by the such a solution, the more so as deeper reflection which is granted in the jurisdiction of decedent's
Slade Perkins, who died in New York City on appellee Renato D. Tayag. A dispute arose would make clear its being buttressed by last domicile is termed the principal
March 27, 1960, to surrender to the ancillary between the domiciary administrator in New indisputable principles and supported by the administration, while any other administration is
administrator in the Philippines the stock York and the ancillary administrator in the strongest policy considerations. termed the ancillary administration. The reason
certificates owned by her in a Philippine Philippines as to which of them was entitled to It can truly be said then that the result arrived at for the latter is because a grant of administration
corporation, Benguet Consolidated, Inc., to the possession of the stock certificates in upheld and vindicated the honor of the judiciary does not ex proprio vigore have any effect
satisfy the legitimate claims of local creditors, question. On January 27, 1964, the Court of First no less than that of the country. Through this beyond the limits of the country in which it is
the lower court, then presided by the Honorable Instance of Manila ordered the domiciliary challenged order, there is thus dispelled the granted. Hence, an administrator appointed in a
Arsenio Santos, now retired, issued on May 18, administrator, County Trust Company, to atmosphere of contingent frustration brought foreign state has no authority in the
1964, an order of this tenor: "After considering "produce and deposit" them with the ancillary about by the persistence of the domiciliary [Philippines]. The ancillary administration is
the motion of the ancillary administrator, dated administrator or with the Clerk of Court. The administrator to hold on to the stock certificates proper, whenever a person dies, leaving in a
February 11, 1964, as well as the opposition filed domiciliary administrator did not comply with after it had, as admitted, voluntarily submitted country other than that of his last domicile,
by the Benguet Consolidated, Inc., the Court the order, and on February 11, 1964, the itself to the jurisdiction of the lower court by property to be administered in the nature of
hereby (1) considers as lost for all purposes in ancillary administrator petitioned the court to entering its appearance through counsel on June assets of the deceased liable for his individual
connection with the administration and "issue an order declaring the certificate or 27, 1963, and filing a petition for relief from a debts or to be distributed among his heirs."7
liquidation of the Philippine estate of Idonah certificates of stocks covering the 33,002 shares previous order of March 15, 1963. It would follow then that the authority of the
Slade Perkins the stock certificates covering the issued in the name of Idonah Slade Perkins by Thus did the lower court, in the order now on probate court to require that ancillary
33,002 shares of stock standing in her name in Benguet Consolidated, Inc., be declared [or] appeal, impart vitality and effectiveness to what administrator's right to "the stock certificates
the books of the Benguet Consolidated, Inc., (2) considered as lost."3 was decreed. For without it, what it had been covering the 33,002 shares ... standing in her
orders said certificates cancelled, and (3) directs It is to be noted further that appellant Benguet decided would be set at naught and nullified. name in the books of [appellant] Benguet
said corporation to issue new certificates in lieu Consolidated, Inc. admits that "it is immaterial" Unless such a blatant disregard by the Consolidated, Inc...." be respected is equally
thereof, the same to be delivered by said as far as it is concerned as to "who is entitled to domiciliary administrator, with residence beyond question. For appellant is a Philippine
corporation to either the incumbent ancillary the possession of the stock certificates in abroad, of what was previously ordained by a corporation owing full allegiance and subject to
administrator or to the Probate Division of this question; appellant opposed the petition of the court order could be thus remedied, it would the unrestricted jurisdiction of local courts. Its
Court."1 ancillary administrator because the said stock have entailed, insofar as this matter was shares of stock cannot therefore be considered in
From such an order, an appeal was taken to this certificates are in existence, they are today in the concerned, not a partial but a well-nigh complete any wise as immune from lawful court orders.
Court not by the domiciliary administrator, the possession of the domiciliary administrator, the paralysis of judicial authority. Our holding in Wells Fargo Bank and Union v.
County Trust Company of New York, but by the County Trust Company, in New York, U.S.A...."4 1. Appellant Benguet Consolidated, Inc. did not Collector of Internal Revenue8 finds application.
Philippine corporation, the Benguet It is its view, therefore, that under the dispute the power of the appellee ancillary "In the instant case, the actual situs of the shares
Consolidated, Inc. The appeal cannot possibly circumstances, the stock certificates cannot be administrator to gain control and possession of of stock is in the Philippines, the corporation
prosper. The challenged order represents a declared or considered as lost. Moreover, it all assets of the decedent within the jurisdiction being domiciled [here]." To the force of the
response and expresses a policy, to paraphrase would allege that there was a failure to observe of the Philippines. Nor could it. Such a power is above undeniable proposition, not even
appellant is insensible. It does not dispute it. Nor however, again to borrow from Frankfurter, conclusiveness and finality. Assuming that a powers and liberties is fixed by its
could it successfully do so even if it were so "that fictions which the law may rely upon in the contrariety exists between the above by-law and charter."19 Dean Pound's terse summary, a
minded. pursuit of legitimate ends have played an the command of a court decree, the latter is to be juristic person, resulting from an association of
2. In the face of such incontrovertible doctrines important part in its development."11 followed. human beings granted legal personality by the
that argue in a rather conclusive fashion for the Speaking of the common law in its earlier period, It is understandable, as Cardozo pointed out, that state, puts the matter neatly.20
legality of the challenged order, how does Cardozo could state fictions "were devices to the Constitution overrides a statute, to which, There is thus a rejection of
appellant, Benguet Consolidated, Inc. propose to advance the ends of justice, [even if] clumsy and however, the judiciary must yield deference, Gierke's genossenchaft theory, the basic theme of
carry the extremely heavy burden of persuasion at times offensive."12 Some of them have when appropriately invoked and deemed which to quote from Friedmann, "is the reality of
of precisely demonstrating the contrary? It persisted even to the present, that eminent applicable. It would be most highly unorthodox, the group as a social and legal entity,
would assign as the basic error allegedly jurist, noting "the quasi contract, the adopted however, if a corporate by-law would be independent of state recognition and
committed by the lower court its "considering as child, the constructive trust, all of flourishing accorded such a high estate in the jural order concession."21 A corporation as known to
lost the stock certificates covering 33,002 shares vitality, to attest the empire of "as if" today."13 He that a court must not only take note of it but Philippine jurisprudence is a creature without
of Benguet belonging to the deceased Idonah likewise noted "a class of fictions of another yield to its alleged controlling force. any existence until it has received the
Slade Perkins, ..."9 More specifically, appellant order, the fiction which is a working tool of The fear of appellant of a contingent liability imprimatur of the state according to law. It is
would stress that the "lower court could not thought, but which at times hides itself from with which it could be saddled unless the logically inconceivable therefore that it will have
"consider as lost" the stock certificates in view till reflection and analysis have brought it appealed order be set aside for its inconsistency rights and privileges of a higher priority than
question when, as a matter of fact, his Honor the to the light."14 with one of its by-laws does not impress us. Its that of its creator. More than that, it cannot
trial Judge knew, and does know, and it is What cannot be disputed, therefore, is the at obedience to a lawful court order certainly legitimately refuse to yield obedience to acts of
admitted by the appellee, that the said stock times indispensable role that fictions as such constitutes a valid defense, assuming that such its state organs, certainly not excluding the
certificates are in existence and are today in the played in the law. There should be then on the apprehension of a possible court action against it judiciary, whenever called upon to do so.
possession of the domiciliary administrator in part of the appellant a further refinement in the could possibly materialize. Thus far, nothing in As a matter of fact, a corporation once it comes
New York."10 catholicity of its condemnation of such judicial the circumstances as they have developed gives into being, following American law still of
There may be an element of fiction in the above technique. If ever an occasion did call for the substance to such a fear. Gossamer possibilities persuasive authority in our jurisdiction, comes
view of the lower court. That certainly does not employment of a legal fiction to put an end to the of a future prejudice to appellant do not suffice more often within the ken of the judiciary than
suffice to call for the reversal of the appealed anomalous situation of a valid judicial order to nullify the lawful exercise of judicial authority. the other two coordinate branches. It institutes
order. Since there is a refusal, persistently being disregarded with apparent impunity, this 4. What is more the view adopted by appellant the appropriate court action to enforce its right.
adhered to by the domiciliary administrator in is it. What is thus most obvious is that this Benguet Consolidated, Inc. is fraught with Correlatively, it is not immune from judicial
New York, to deliver the shares of stocks of particular alleged error does not carry implications at war with the basic postulates of control in those instances, where a duty under
appellant corporation owned by the decedent to persuasion. corporate theory. the law as ascertained in an appropriate legal
the ancillary administrator in the Philippines, 3. Appellant Benguet Consolidated, Inc. would We start with the undeniable premise that, "a proceeding is cast upon it.
there was nothing unreasonable or arbitrary in seek to bolster the above contention by its corporation is an artificial being created by To assert that it can choose which court order to
considering them as lost and requiring the invoking one of the provisions of its by-laws operation of law...."16 It owes its life to the state, follow and which to disregard is to confer upon it
appellant to issue new certificates in lieu thereof. which would set forth the procedure to be its birth being purely dependent on its will. As not autonomy which may be conceded but
Thereby, the task incumbent under the law on followed in case of a lost, stolen or destroyed Berle so aptly stated: "Classically, a corporation license which cannot be tolerated. It is to argue
the ancillary administrator could be discharged stock certificate; it would stress that in the event was conceived as an artificial person, owing its that it may, when so minded, overrule the state,
and his responsibility fulfilled. of a contest or the pendency of an action existence through creation by a sovereign the source of its very existence; it is to contend
Any other view would result in the compliance to regarding ownership of such certificate or power."17As a matter of fact, the statutory that what any of its governmental organs may
a valid judicial order being made to depend on certificates of stock allegedly lost, stolen or language employed owes much to Chief Justice lawfully require could be ignored at will. So
the uncontrolled discretion of the party or entity, destroyed, the issuance of a new certificate or Marshall, who in the Dartmouth College decision extravagant a claim cannot possibly merit
in this case domiciled abroad, which thus far has certificates would await the "final decision by [a] defined a corporation precisely as "an artificial approval.
shown the utmost persistence in refusing to court regarding the ownership [thereof]."15 being, invisible, intangible, and existing only in 5. One last point. In Viloria v. Administrator of
yield obedience. Certainly, appellant would not Such reliance is misplaced. In the first place, contemplation of law."18 Veterans Affairs,22 it was shown that in a
be heard to contend in all seriousness that a there is no such occasion to apply such by-law. It The well-known authority Fletcher could guardianship proceedings then pending in a
judicial decree could be treated as a mere scrap is admitted that the foreign domiciliary summarize the matter thus: "A corporation is not lower court, the United States Veterans
of paper, the court issuing it being powerless to administrator did not appeal from the order now in fact and in reality a person, but the law treats Administration filed a motion for the refund of a
remedy its flagrant disregard. in question. Moreover, there is likewise the it as though it were a person by process of certain sum of money paid to the minor under
It may be admitted of course that such alleged express admission of appellant that as far as it is fiction, or by regarding it as an artificial person guardianship, alleging that the lower court had
loss as found by the lower court did not concerned, "it is immaterial ... who is entitled to distinct and separate from its individual previously granted its petition to consider the
correspond exactly with the facts. To be more the possession of the stock certificates ..." Even if stockholders.... It owes its existence to law. It is deceased father as not entitled to guerilla
blunt, the quality of truth may be lacking in such such were not the case, it would be a legal an artificial person created by law for certain benefits according to a determination arrived at
a conclusion arrived at. It is to be remembered absurdity to impart to such a provision specific purposes, the extent of whose existence, by its main office in the United States. The
motion was denied. In seeking a reconsideration does not succeed. The deplorable consequences
of such order, the Administrator relied on an attendant on appellant prevailing attest to the
American federal statute making his decisions necessity of negative response from us. That is
"final and conclusive on all questions of law or what appellant will get.
fact" precluding any other American official to That is all then that this case presents. It is
examine the matter anew, "except a judge or obvious why the appeal cannot succeed. It is
judges of the United States always easy to conjure extreme and even
court."23 Reconsideration was denied, and the oppressive possibilities. That is not decisive. It
Administrator appealed. does not settle the issue. What carries weight
In an opinion by Justice J.B.L. Reyes, we and conviction is the result arrived at, the just
sustained the lower court. Thus: "We are of the solution obtained, grounded in the soundest of
opinion that the appeal should be rejected. The legal doctrines and distinguished by its
provisions of the U.S. Code, invoked by the correspondence with what a sense of realism
appellant, make the decisions of the U.S. requires. For through the appealed order, the
Veterans' Administrator final and conclusive imperative requirement of justice according to
when made on claims property submitted to him law is satisfied and national dignity and honor
for resolution; but they are not applicable to the maintained.
present case, where the Administrator is not WHEREFORE, the appealed order of the
acting as a judge but as a litigant. There is a great Honorable Arsenio Santos, the Judge of the Court
difference between actions against the of First Instance, dated May 18, 1964, is affirmed.
Administrator (which must be filed strictly in With costs against oppositor-appelant Benguet
accordance with the conditions that are imposed Consolidated, Inc.
by the Veterans' Act, including the exclusive Makalintal, Zaldivar and Capistrano, JJ., concur.
review by United States courts), and those Concepcion, C.J., Reyes, J.B.L., Dizon, Sanchez and
actions where the Veterans' Administrator seeks Castro, JJ., concur in the result.
a remedy from our courts and submits to their
jurisdiction by filing actions therein. Our
attention has not been called to any law or treaty
that would make the findings of the Veterans'
Administrator, in actions where he is a party,
conclusive on our courts. That, in effect, would
deprive our tribunals of judicial discretion and
render them mere subordinate instrumentalities
of the Veterans' Administrator."
It is bad enough as the Viloria decision made
patent for our judiciary to accept as final and
conclusive, determinations made by foreign
governmental agencies. It is infinitely worse if
through the absence of any coercive power by
our courts over juridical persons within our
jurisdiction, the force and effectivity of their
orders could be made to depend on the whim or
caprice of alien entities. It is difficult to imagine
of a situation more offensive to the dignity of the
bench or the honor of the country.
Yet that would be the effect, even if unintended,
of the proposition to which appellant Benguet
Consolidated seems to be firmly committed as
shown by its failure to accept the validity of the
order complained of; it seeks its reversal.
Certainly we must at all pains see to it that it
Republic of the Philippines ownership (Exhibit B) so as to extend the term of WHEREFORE, the judgment appealed from is
SUPREME COURT life of the partnership to another five years. affirmed, with costs.
Manila When the amended articles were presented for Bengzon, C.J., Padilla, Labrador, Concepcion,
EN BANC registration in the Office of the Securities & Barrera, Paredes, Regala and Makalintal, JJ.,
G.R. No. L-17295 July 30, 1962 Exchange Commission on April 16, 1958, concur.
ANG PUE & COMPANY, ET AL., plaintiffs- registration was refused upon the ground that Bautista Angelo and Reyes, J.B.L., JJ., took no part.
appellants, the extension was in violation of the aforesaid
vs. Act.
SECRETARY OF COMMERCE AND From the decision of the lower court dismissing
INDUSTRY, defendant-appellee. the action, with costs, the plaintiffs interposed
Felicisimo E. Escaran for plaintiffs-appellants. this appeal.
Office of the Solicitor General for defendant- The question before us is too clear to require an
appellee. extended discussion. To organize a corporation
DIZON, J.: or a partnership that could claim a juridical
Action for declaratory relief filed in the Court of personality of its own and transact business as
First Instance of Iloilo by Ang Pue & Company, such, is not a matter of absolute right but a
Ang Pue and Tan Siong against the Secretary of privilege which may be enjoyed only under such
Commerce and Industry to secure judgment terms as the State may deem necessary to
"declaring that plaintiffs could extend for five impose. That the State, through Congress, and in
years the term of the partnership pursuant to the the manner provided by law, had the right to
provisions of plaintiffs' Amendment to the enact Republic Act No. 1180 and to provide
Article of Co-partnership." therein that only Filipinos and concerns wholly
The answer filed by the defendant alleged, in owned by Filipinos may engage in the retail
substance, that the extension for another five business can not be seriously disputed. That this
years of the term of the plaintiffs' partnership provision was clearly intended to apply to
would be in violation of the provisions of partnership already existing at the time of the
Republic Act No. 1180. enactment of the law is clearly showing by its
It appears that on May 1, 1953, Ang Pue and Tan provision giving them the right to continue
Siong, both Chinese citizens, organized the engaging in their retail business until the
partnership Ang Pue & Company for a term of expiration of their term or life.
five years from May 1, 1953, extendible by their To argue that because the original articles of
mutual consent. The purpose of the partnership partnership provided that the partners could
was "to maintain the business of general extend the term of the partnership, the
merchandising, buying and selling at wholesale provisions of Republic Act 1180 cannot be
and retail, particularly of lumber, hardware and adversely affect appellants herein, is to
other construction materials for commerce, erroneously assume that the aforesaid provision
either native or foreign." The corresponding constitute a property right of which the partners
articles of partnership (Exhibit B) were can not be deprived without due process or
registered in the Office of the Securities & without their consent. The agreement contain
Exchange Commission on June 16, 1953. therein must be deemed subject to the law
On June 19, 1954 Republic Act No. 1180 was existing at the time when the partners came to
enacted to regulate the retail business. It agree regarding the extension. In the present
provided, among other things, that, after its case, as already stated, when the partners
enactment, a partnership not wholly formed by amended the articles of partnership, the
Filipinos could continue to engage in the retail provisions of Republic Act 1180 were already in
business until the expiration of its term. force, and there can be not the slightest doubt
On April 15, 1958 — prior to the expiration of that the right claimed by appellants to extend the
the five-year term of the partnership Ang Pue & original term of their partnership to another five
Company, but after the enactment of the years would be in violation of the clear intent
Republic Act 1180, the partners already and purpose of the law aforesaid.
mentioned amended the original articles of part
Republic of the Philippines CECILIO MIRANDA, FERNANDO APOSTOL, incurred an outstanding liability of expenses and for the payment of accrued
SUPREME COURT ANICETO R. NARCA, CARLOS B. LASMARIAS, P540,835,860.79. This order was opposed by wages and other benefits of personnel as
Manila RICARTE G. REYES, P.D. DELLOSON, LORETO the Union in a supplemental petition for approved by the liquidator court. This
EN BANC BANTONIO ERNESTO D. LLAGUNO, prohibition with preliminary injunction filed petition was docketed as G.R. No. 82337 and
CONSTANCIO SEBASTIAN, ELEUTERIO R. on September 25, 1985. On November consolidated with G.R. No. 67125.
G.R. No. 67125 August 24 1990 VALENZUELA, ISIDRO A. BATHAN, LEON G. 26,1985, the Veterans Federation of the Earlier, on June 11, 1987, then Judge
PHILIPPINE VETERANS BANK EMPLOYEES NOLLIDO, in representation of the remainder Philippines entered the picture and filed with Abelardo M. Dayrit of the Regional Trial
UNION-NUBE, DOMINGO C. LOPEZ, HERMAN of the 510,000 veterans or their heirs, as leave of court a petition in intervention Court of Manila had ordered the payment of
B. PASILIAO FELIZARDO B. SARAPAT, LADY defined in R.A. 3518, and the PHILIPPINE which, besides echoing the original petition the claims of the employees amounting to
LYDIA B. CORNISTA, ELIZABETH S. KARASIG, VETERANS BANK, petitioners, in opposing the liquidation, asserted the P37,920,310.82. This was followed on
EDUARDO C. NIEVERA, NORMAN T. BAYODA, vs. additional claim that it was in the process of October 21, 1988, by another order issued by
REGINO V. TAGUIAM, ROMULO G. GARCIA, CENTRAL BANK OF THE PHILIPPINES, formulating plans for the rehabilitation and the same court for the payment of retirement
MANUEL A. LAMAN, EDUARDO SJ. BELMONTE, LIQUIDATOR OF THE PHILIPPINE VETERANS eventual expansion of the Bank. This was benefits to two former board members of the
HERNANI B. LIWANAG, EDUARDO P. CRUZ, BANK, THE LIQUIDATION COURT (RTC, followed by an ancillary petition for the Bank, namely, Agustin Marking and Jaime S.
DANILO N. MENDOZA, ELSA J. SILVERIO, BRANCH 39, MANILA), SECRETARY OF THE immediate payment of the wage or salary Mejia. Upon the representations of the
REGINO V. TAGUIAM, JR., ALBERT G. BUDGET and THE NATIONAL TREASURER, increase ordered by the NLRC in its petitioners, however, we prevented
MALAPIT, MANUEL B. GARCIA, and the Bank respondents. resolution dated September 17,1985. On enforcement of this order with our
Employees listed in Annex "A" of this March 26,1987, a writ of preliminary temporary restraining order dated January
Petition, petitioners, CRUZ, J.: injunction was issued by this Court reading 12, 1989.
vs. The Philippine Veterans Bank was created in as follows: On December 15, 1988, the writ of
THE PHILIPPINE VETERANS BANK Now 1963 with the hope that it would ensure the NOW THEREFORE, effective immediately and preliminary injunction dated March 26,1987,
renamed PHILIPPINE MILITARY AND economic future and perhaps even prosperity until further orders from this Court, you was amended "to exclude from its coverage
VETERANS BANK, GENERAL FABIAN VER in of the hundreds of thousands of war veterans (Respondent Central Bank of the Philippines, the sale or disposal by the Central Bank or
his capacity as Chairman of the Board of who were to be its stockholders. For a while and PVB Liquidator), your agents, the Bank Liquidator of the acquired assets of
Directors of the Philippine Veterans Bank, the vision grew, but in time it dimmed and representatives, and/or any person or the PVB." This was done in response to
and of the Board of Trustees of the Armed finally faded as the Bank found itself persons acting upon your orders or in your petitions filed by several persons seeking to
Forces of the Philippines Retirement and enmeshed in financial difficulties that place or stead, are hereby ENJOINED from redeem or repurchase the properties which
Separation Benefits System, and RAFAEL threatened its very survival. Now the dream liquidating the Phil. Veterans Bank and from had earlier been purchased by the Bank
ARNALDO in his capacity as President of the is in tatters. Efforts are at present being taking or pursuing any act or transaction in through foreclosure sales.1
Philippine Veterans Bank, respondents. taken to piece together its severed sinews but pursuance of such liquidation, including sales On August 25, 1989, another ancillary petition
it is doubtful if the Bank will ever be whole or other disposal of properties of whatever was filed for the immediate payment of
G.R. No. 82337 August 24,1990 again. kind, or disbursing PVB funds, except those backwages of the Bank personnel on the regular
SIMEON C. MEDALLA, GREGORIO I incurred in the course of ordinary payroll as of June 1985 equivalent to five
VENTURANZA, JOSE P. JUANILLO, RAMON P. The trouble began when on April 10, 1983, administration of the affairs of the bank, months' gross salary. On May 25, 1990, the City
MIRANDA, ENRIQUE H.R. ABILA, PEDRO the Bank was placed under receivership by including payment of accrued and unpaid Government of Davao filed a motion to lift the
ACIERTO, SILVINO AGUDO, SANTIAGO virtue of Resolution No. 334 of the Monetary claims of PVB Employees under the 1982- preliminary injunction dated March 26, 1987,
FERNANDEZ, JUAN P. ROSETE, MAXIMO G. Board of the Central Bank. The reason was 1985 CBA, all of which should be subject to with respect to its deposit of P3,700,000, which
AQUINO, GREGORIO C. DARROLES, ISMAEL T. the precarious condition of the Bank. A year the prior approval of the respondent it wanted to withdraw to finance several
ESPIRITU, ERNESTO Y. GUEVARRA, MARIANO later, on April 26, 1984, the Philippine liquidation court. programs and projects. And on June 11, 1990,
F. INFANTE, VENERANDO E. MANZO, VICENTE Veterans Bank Employees Union questioned On March 18,1988, an original petition for Dolores V. Molina filed her own motion to
G. VILLADOLID, GUILLERMO A. CRUZ, JORGE the retrenchment and reorganization restitution and for extraordinary and withdraw her deposit of P1,l00,000.00.
MARIANO, PASCUAL SARMIENTO, RAMON P. program of the Bank and, on the ground of equitable writs was filed by Simeon II
MENDOZA, PEDRO GABRIEL, ANTONIO A. LIM, security of tenure, prayed that the said Medalla et al. in their own right and "on The Court has purposely delayed resolution of
MIGUEL T. MARCOS, TOMAS T. NUFABLE, program be prohibited. In its petition, which behalf of the remaining 510,000 World War II these cases in the hope that it would not be
MARIANO ORTIZ, DOMINGO C. OCTAVO, was docketed as G.R. No. 67125, the Union veterans or their heirs." It sought inter alia a necessary to do so in view of the efforts being
MANUEL R. RAMOS, LEONCIO MANALO, also asked for a temporary restraining order, judicial declaration that the petitioners were taken by the Executive Department for the
DAYAN S. MAMACO, CORNELIO D. CAUNAR, which was issued on May 9, 1984. entitled to the ownership, possession and rehabilitation of the Bank. The agency in charge
MAURO DE LA CRUZ, FIDEL T. VIZMANOS, Subsequently, while the case was pending, control of the Bank and an order restraining of this matter is the Special Presidential
FELIPE L. VICENCIO, DAMIAN S. VITO CRUZ, the Monetary Board ordered the liquidation the Central Bank from disposing of the assets Committee on the Philippine Veterans Bank,
JUAN LOMBREDAS, MARINA BAUTISTA, of the Bank by Resolution No. 612 dated June of the Bank or making any disbursements which was created by Adm. Order No. 29 dated
SEGUNDO M. ROSALES, CECLONDO CIEGO, 7, 1985, after finding that the Bank had therefrom except for ordinary administrative July 10, 1987, and renewed by Adm. Order No.
62 dated February 23, 1988 and by Adm. Order Central Bank. Such authority is expressly operations, activities or Monetary Board to examine,
No. 90 dated September 2, 1988, to study the provided for in the Central Bank Act, as follows: transactions of the institution inquire or look into all
financial condition of the Bank and determine Sec. 25. Creation of the under examination. deposits of whatever nature
the feasibility of its rehabilitation. However, appropriate departments. — No restraining order or with banking institutions in
although we may assume that the Committee has In order to assure the injunction shall be issued by the Philippines including
been assiduously pursuing its objectives and observance of this Act and of the court enjoining the investments in debt
while there are optimistic statements every now other pertinent laws, and of Central Bank from examining instruments issued by the
and then that the Bank will be reopening soon, the rules and regulations of any institution subject to Government of the
that prospect does not really seem to be in sight the Monetary Board, the supervision or examination by Philippines, its political
yet. We have therefore decided to finally resolve Central Bank shall have the Central Bank, unless there subdivisions and its
these cases, applying a judicial solution which, appropriate supervising and is convincing proof that the instrumentalities, after being
when all is said and done, will still be less examining departments which action of the Central Bank is satisfied that there is
acceptable than a practical administrative shall be charged with the plainly arbitrary and made in reasonable ground to believe
settlement. supervision and periodic or bad faith and the petitioner or that a bank fraud or serious
III special examinations of plaintiff files with the clerk or irregularity has been or is
The basic issue in these petitions is whether the banking institutions operating judge of the court in which the being committed and that it is
Central Bank has the power to liquidate the in the Philippines, including action is pending a bond necessary to look into the
Philippine Veterans Bank. all Government credit executed, in favor of the deposit to establish such
The petitioners dispute this authority. In G.R. No. institutions, including their Central Bank, in an amount to fraud or irregularity.
67125, they claim that as the Bank was created subsidiaries and affiliates of be fixed by the court. The SEC. 28. Examination and fees.
by a special law, a contractual relationship now non-bank financial restraining order or — It shall be the duty of the
exists between the Government and the intermediaries, and injunction shall be refused or, head of the appropriate
stockholders of the Bank that cannot be subsidiaries and affiliates of if granted, shall be dissolved supervising and examining
disturbed without violation of the impairment non-bank financial upon filing by the Central department, personally or by
clause. The acceptance of the benefits of that law intermediaries performing Bank of a bond, which shall be deputy, at least once in every
by the petitioners had conferred a vested right quasi-banking functions: . . . in the form of cash or Central twelve months, and at such
on them that cannot now be withdrawn without The supervising and/or Bank cashier's check, in an other times as either he or the
their consent as this would constitute a examining departments shall amount twice the amount of Monetary Board may deem
deprivation of their property without due discharge their the bond of the petitioner or expedient, to make an
process of law. Assuming that such benefits responsibilities in accordance plaintiff conditioned that it examination of the books of
could be validly revoked, this cannot be done by with the instructions of the will pay the damages which every banking institution
the Central Bank only but by the legislature itself Monetary Board. the petitioner or plaintiff may within the purview of this Act
which conferred the franchise on the Bank in the The department heads and suffer by the refusal or the and make a report on the
first place. Moreover, the Central Bank cannot the examiners of the dissolution of the injunction. same to the Monetary Board.
exercise any authority over the Bank because the supervising and/or examining The provisions of Rule 58 of Every such institution shall
latter is itself also a government bank with the departments are hereby the New Rules of Court afford to the head of the
same status as the Development Bank of the authorized to administer insofar as they are applicable appropriate supervising and
Philippines, the Land Bank of the Philippines, oaths to any director, officer, and not inconsistent with the examining departments and
and the Philippine National Bank. The Central or employee of any institution provisions of this Section shall to his authorized deputies full
Bank has no control over these government under their respective govern the issuance and opportunity to examine its
lending institutions. supervision or subject to their dissolution of the restraining books, cash and available
We sustain the position of the respondents that examination and to compel order or injunction assets and general condition
these arguments are not well-taken. the presentation of all books, contemplated in this Section. at any time when requested
The mere fact that the Bank was created by documents, papers or records SEC. 25-A. — The department so to do by the Central
special law does not confer upon it extraordinary necessary in their judgment to heads and the examiners of Bank:Provided, however, That
privileges over and above those granted similar ascertain the facts relative to the supervising and none of the reports and other
charters like the Development Bank of the the true condition of any examining departments, in papers relative to such
Philippines and the Land Bank of the Philippines. institution as well as the the conduct of the periodic or examinations shall be open to
As a lending institution, it is part of the banking books and records of persons special examination of inspection by the public
system and therefore covered by the regulatory and entities relative to or in banking institutions may be except insofar as such
power exercised over such entities by the connection with the specifically authorized by the publicity is incidental to the
proceeding hereinafter responsible to the Monetary collect and gather all the approve a liquidation plan
authorized or is necessary for Board until such time as the assets and administer the which may, when warranted,
the prosecution of violations n Monetary Board is satisfied same for the benefit of its involve disposition of any or
connection with the business that the institution can creditors, and represent the all assets in consideration for
of such institutions. . . . continue to operate on its bank personally or through the assumption of equivalent
SEC. 28-A. Appointment of own and the conservatorship counsel as he may retain in all liabilities. The liquidator
conservator. — Whenever, on is no longer necessary. The actions or proceedings for or designated as hereunder
the basis of a report conservatorship shall likewise against the institution, provided shall, by the Solicitor
submitted by the appropriate be terminated should the exercising all the powers General, file a petition in the
supervising or examining Monetary Board, on the basis necessary for these purposes regional trial court reciting
department, the Monetary of the report of the including, but not limited to, the proceedings which have
Board finds that a bank or a conservator or of its own bringing and foreclosing been taken and praying the
non-bank financial findings, determine that the mortgages in the name of the assistance of the court in the
intermediary performing continuance in business of the bank or non-bank financial liquidation of such institution.
quasi-banking functions is in a institution would involve intermediary performing The court shall have
state of continuing inability or probable loss to its depositors quasi-banking functions. jurisdiction in the same
unwillingness to maintain a or creditors, in which case the The Monetary Board shall proceedings to assist in the
condition of liquidity deemed provision of Section 29 shall thereupon determine within adjudication of the disputed
adequate to protect the apply. sixty days whether the claims against the bank or
interest of depositors and SEC. 29. Proceedings upon institution may be recognized non-bank financial
creditors, the Monetary Board insolvency. — Whenever, upon or otherwise placed in such a intermediary performing
may appoint a conservator to examination by the head of condition so that it may be quasi-banking functions and
take charge of the assets, the appropriate supervising permitted to resume business in the enforcement of
liabilities, and the or examining department or with safety to its depositors individual liabilities of the
management of that his examiners or agents into and creditors and the general stockholders and do all that is
institution, collect all monies the condition of any bank or public and shall prescribe the necessary to preserve the
and debts due said institution non-bank financial conditions under which such assets of such institution and
and exercise all powers intermediary performing resumption of business shall to implement the liquidation
necessary to preserve the quasi-banking functions, it take place as well as the time plan approved by the
assets of the institution, shall be disclosed that the for fulfillment of such Monetary Board. The
reorganize the management condition of the same is one of conditions. In such case, the Monetary Board shall
thereof, and restore its insolvency, or that its expenses and fees in the designate an official of the
viability. He shall have the continuance in business collection and administration Central Bank or a person of
power to overrule or revoke would involve probable loss of the assets of the institution recognized competence in
the actions of the previous to its depositors or creditors, shall be determined by the banking or finance, as
management and board of it shall be the duty of the Board and shall be paid to the liquidator who shall take over
directors of the bank or non- department head concerned Central Bank out of the assets and continue the functions of
bank financial intermediary forthwith, in writing, to of such institution. the receiver previously
performing quasi-banking inform the Monetary Board of If the Monetary Board shall appointed by the Monetary
functions, any provision of the facts. The Board may, determine and confirm within Board under this Section. The
law to the contrary upon finding the statements the said period that the bank liquidator shall, with all
notwithstanding, and such of the department head to be or non-bank financial convenient speed, convert the
other powers as the Monetary true, forbid the institution to intermediary performing assets of the banking
Board shall deem necessary. do business in the Philippines quasi-banking functions is institution or non-bank
As much as practicable, the and designate an official of the insolvent or cannot resume financial intermediary
conservator should not be Central Bank or a person of business with safety to its performing quasi-banking
connected with the Central recognized competence in depositors, creditors and the functions to money or sell,
Bank but should be competent banking or finance as receiver general public, it shall, if the assign or otherwise dispose of
and knowledgeable in bank to immediately take charge of public interest requires, order the same to creditors and
operations and management. . its assets and liabilities, as its liquidation, indicate the other parties for the purpose
. . He shall report and be expeditiously as possible manner of its liquidation and of paying the debts of such
institution and he may, in the (10) days from the date the order or injunction The purpose of these provisions is to enable the
name of the bank or non-bank receiver takes charge of the contemplated in this Section. Central Bank, as the entity charged with the
financial intermediary assets and liabilities of the Insolvency, under this Act, responsibility of maintaining the stability of the
performing quasi- banking bank or non-bank financial shall be understood to mean banking and monetary systems of the country, to
functions and with the intermediary performing that the realizable assets of a take the necessary steps against any banking
assistance of counsel as he quasi-banking functions or, in bank or a non-bank financial institution whose continued operation may
may retain, institute such case of conservatorship or intermediary performing cause prejudice to its depositors and creditors,
actions as may be necessary liquidation, within ten (10) quasi-banking functions as and the general public as well.
in the appropriate court to days from receipt of notice by determined by the Central Even if it be conceded that the charter of the
collect and recover accounts the said majority stockholders Bank are insufficient to meet Rank constitutes a contract between the
and assets of such institution of said bank or non-bank its liabilities. Government and the stockholders of the Bank, it
or defend any action filed financial intermediary of the The appointment of a would not follow that the relationship cannot be
against the order of its placement under conservator under Section 28- altered without violating the impairment clause.
institution: Provided, however, conservatorship or A of this Act or the This is a too simplistic conclusion that loses sight
That after having reasonably liquidation. No restraining appointment of a receiver or of the vulnerability of this "precious little
established all claims against order or injunction shall be liquidator under this Section clause," as it is called, to the inherent powers of
the institution, the liquidator issued by any court enjoining shall be vested exclusively the State when the public interest demands their
may, with the approval of the the Central Bank from with the Monetary Board, the exercise. The clause, according to Corwin, "is
court, effect partial payments implementing its actions provision of any law, general lately of negligible importance, and might well be
of such claims for assets of the under this Section and the or special, to the contrary stricken from the Constitution. For most
institution in accordance with second paragraph of Section notwithstanding. practical purposes, in fact, it has been." 2
their legal priority. 34 of this Act in the absence of It is stressed that in Section 25 of the said Act, The undeniable fact is that the notion of public
The assets of an institution any convincing proof that the the Department of Supervision and Examination interest has made such considerable inroads into
under receivership or action of the Monetary Board is charged with the supervision and periodic the constitutional guaranty that one could validly
liquidation shall be deemed is plainly arbitrary and made examination of all banking institutions operating say now that it has become the exception rather
in custodia legis in the hands in bad faith and the petitioner in the Philippines, including all government than the rule. The impact of the modern society
of the receiver or liquidator or plaintiff files a bond, credit institutions. Assuming for the moment upon hitherto private agreements has left the
and shall, from the moment of executed in favor of the that the Bank is owned or controlled by the clause in a shambles, as it were, making
such receivership or Central Bank, in an amount to government, it is nevertheless not exempt from practically every contract susceptible to change
liquidation, be exempt from be fixed by the court. The but in fact expressly placed under the on behalf of the public. The modern
any order of garnishment, restraining order or jurisdiction of the Central Bank. understanding is that the contract is protected
levy, attachment, or injunction shall be refused or, More to the point, R.A. No. 3518 itself, which by the guaranty only if it does not affect public
execution. if granted, shall be dissolved created the Philippine Veterans Bank, provides interest, but there is hardly any contract now
The provisions of any law to upon filing by the Central in its Section 14 that the Bank shall be subject to that does not somehow or other affect public
the contrary notwithstanding, Bank of a bond, which shall be the authority of the Department of Supervision interest as not to come under the powers of the
the actions of the Monetary in the form of cash or Central and Examination. State. Part of that understanding therefore is
Board under this Section, Bank cashier's check, in an The said Section 14 reads as follows: that, conversely, the contract may be altered
Section 28-A, and the second amount twice the amount of Sec. 14. Inspection by validly if it involves the public interest, to which
paragraph of Section 34 of the bond of the petitioner or Department of Supervision and private interests must "yield as a postulate of the
this Act shall be final and plaintiff conditioned that it Examination of the Central existing social order."
executory, and can be set will pay the damages which Bank. — The Veterans Bank In the landmark case of Norman v.
aside by a court only if there the petitioner or plaintiff may shall be subject to inspection Baltimore, 3 the U.S. Supreme Court stressed that
is convincing proof, after suffer by the refusal or the by the Department of every contract involving the public interest
hearing, that the action is dissolution of the injunction. Supervision and Examination suffers a congenital infirmity, and that is its
plainly arbitrary and made in The provisions of Rule 58 of of the Central Bank in susceptibility to change whenever required by
bad faith: Provided, That the the New Rules of Court accordance with Republic Act the public interest. The police power can be
same is raised in an insofar as they are applicable Numbered Two hundred validly asserted to make that change to meet any
appropriate pleading filed by and not inconsistent with the sixty-five and Republic Act one of the several great public needs, such as, in
the stockholders of record provisions of this Section shall Numbered Three hundred that case, regulation of the value of money. In
representing the majority of govern the issuance and thirty-seven. upholding a legislative enactment providing for
the capital stock within ten dissolution of the restraining the payment of existing debts dollar for dollar in
the current legal tender, as against contracts owners could not be deprived of such property right to vote such common shares. The balance governed by the labor laws, under which in fact
calling for such payment in gold coin of specified under any circumstance no matter how justified. of about 49% was to be divided into preferred they have already been paid some of their claims.
weight and fineness the decision stressed: Nor is the charter subject to revocation only by shares which would be opened for subscription Applying the Labor Code, the Court rules that the
Contracts, however express, the legislature, as the petitioners also by any recognized veteran, widow, orphans or petitioners' claim for back wages must be
cannot fetter the erroneously contend. The mere circumstance compulsory heirs of said veteran at the rate of rejected. The reason is that the employees
constitutional authority of the that the charter was granted directly by one preferred share per veteran, on the making this claim have not been illegally
Congress. Contracts may Congress does not signify that only Congress can condition that in case of failure of any particular dismissed but lawfully separated as a result of
create rights of property, but modify or abrogate it by another enactment. In veteran to subscribe for any preferred share of the liquidation of the Bank on orders of higher
when contracts deal with a fact, the charter itself says that the Bank shall be stock so offered to him within thirty (30) days authority. This move was not the decision of the
subject matter which lies subject to regulation by the Central Bank which from the date of receipt of notice, said share of Bank; it was forced upon it by the resolution of
within the control of the is empowered inter alia, by express provision of stock shall be available for subscription to other the Monetary Board of the Central Bank. Back
Congress, they have a law, to order its liquidation. Also, by its own veterans in accordance with such rules or pay is awarded for work that could have been
congenital infirmity. Parties terms, the charter will automatically regulations as may be promulgated by the Board performed by the employee except that he was
cannot remove their become functus officio after fifty years and the of Directors. Moreover, under Sec. 6(a), the prevented from doing so because of his illegal
transactions from the reach of Bank itself will cease to exist unless its life is affairs of the Bank are managed by a board of dismissal by the employer. It is clearly not due in
dominant constitutional extended by positive act of the legislature. It may directors composed of eleven members, three of the case at bar to the employees whose services
power by making contracts also be noted that quo warranto proceedings whom are ex officio members, with the other were terminated as a result of the forcible
about them. may be filed against the Bank by the Solicitor eight being elected annually by the stockholders closure of the Bank.
The need in the case at bar is no less compelling, General on behalf of the Republic of the in the manner prescribed by the Corporation As regards the claims of Marking and Mejia for
to wit, the preservation of the integrity and Philippines pursuant to the Rules of Court on any Law. Significantly, Sec. 28 also provides as the payment of their retirement benefits, which
stability of our banking system. Unless adequate of the grounds enumerated in Rule 66 thereof. follows: we restrained temporarily on January 12, 1989,
and determined efforts are taken by the All these can be done without the necessity of Sec. 28. Articles of we find with the public respondents that such
government against distressed and mismanaged direct legislative action and, no less importantly, incorporation. — This Act, payment is in order. We so hold, considering that
banks, public faith in the banking system is without violation of the legislative will. upon its approval, shall be although the said retirees are members of the
certain to deteriorate to the prejudice of the There is also the practical difficulty of Congress deemed and accepted to all board of directors, they are nevertheless covered
national economy itself, not to mention the itself decreeing liquidation, presumably to be legal intents and purposes as by the Retirement Plan of the Bank per the
losses suffered by the bank depositors, creditors, made after examination of the financial condition the statutory articles of following pertinent provisions:
and stockholders, who all deserve the protection of the Bank. In effect, the legislature, through its incorporation or Charter of Article II, Section 1. — The
of the government. The government cannot corresponding appropriate committees, will be the Philippine Veterans' Bank; following words and phrases,
simply cross its arms while the assets of a bank undertaking the function purposely assigned by and that, notwithstanding the as used herein shall have the
are being depleted through mismanagement or law to the Department of Examination and provisions of any existing law meaning indicated, unless a
irregularities. It is the duty of the Central Bank in Supervision of the Central Bank. This is an to the contrary, said Bank different meaning is plainly
such an event to step in and salvage the intricate administrative function wisely shall be deemed registered required by the text:
remaining resources of the bank so that they entrusted by Congress to the said body, from and duly authorized to do ...
may not continue to be dissipated or plundered which the petitioners would now recall it for its business and operate as a c) "Employee" means any
by those entrusted with their management. direct exercise by the lawmaking body. Such a commercial bank as of the person who is employed by
The petitioners' argument that by accepting the procedure would bring us back to square one, so date of approval of this Act. the Bank on a regular and
stocks granted to them by the law, the same have to speak, and revoke the authority confided by This point is important because the Constitution permanent basis, including
become their inalienable and irrevocable Congress to the Central Bank in recognition of its provides in its Article IX-B, Section 2(1) that "the officers; and such members of
property is clearly untenable. These established expertise in the regulation of banks. Civil Service embraces all branches, subdivisions, the Board of Director and
stockholdings do not enjoy any special immunity Coming now to the ownership of the Bank, we instrumentalities, and agencies of the other hired workers not
over and above shares of stock in any other find it is not a government bank, as claimed by Government, including government-owned or employed on a regular and
corporation, which are always subject to the the petitioners. The fact is that under Section controlled corporations with original charters." permanent basis but who,
vicissitudes of business. Their value may 3(b) of its charter, while 51% of the capital stock As the Bank is not owned or controlled by the because of their extended
appreciate or decline or the stocks may become of the Bank was initially fully subscribed by the Government although it does have an original service, would qualify under
worthless altogether. Like any other property, Republic of the Philippines for and in behalf of charter in the form of R.A. No. 3518, it clearly the retirement categories
they do not have a fixed but a fluctuating price. the veterans, their widows, orphans or does not fall under the Civil Service and should under Article IV hereof and
Certainly, the mere acceptance of these shares of compulsory heirs, the corresponding shares of be regarded as an ordinary commercial who for purposes of this Plan,
stock by the petitioners did not create any legal stock were to be turned over within 5 years from corporation. Section 28 of the said law so shall be deemed employees.
assurance from the Government that their the organization by the Bank to the said provides. The consequence is that the relations Article III, Section 1 —
original value would be preserved and that the beneficiaries who would thereafter have the of the Bank with its employees should be Eligibility at Effective Date
All employees as herein We agree with the Solicitor General that there is Liquidator to do certain Fernan (C.J.), Narvasa, Melencio-Herrera,
defined shall automatically be a procedural flaw in the petition, in that- specific acts. Unfortunately, Gancayco, Pacalla, Bidin, Cortes, Griño-Aquino,
eligible to participate in the The Rules of Court, the the facts hereof do not Medialdea and Regalado, concur.
Plan, as of its effective date. Judiciary Reorganization Act present a case where such Gutierrez, Jr., J., in the results.
(Emphasis supplied) of 1980 and the Interim Rules offices and officials are, by Paras, J., took no part.
However, for purposes of the application of of Court quite clearly law, mandated to do the Feliciano J., took no part.
Article 110 of the Labor Code, the said directors delineate the jurisdiction of adverted acts, even less, that Sarmiento, J., is on leave.
must be considered managerial employees, or the Supreme Court in civil they have neglected to
officers, and so not entitled to the preference of cases as encompassing a perform them.
claims granted thereunder to workers in general review on appeal only on Moreover, from what has already been said of
or the rank-and-file employees. The claims of questions of law as well as the power of the Central Bank to regulate
these workers must be accorded priority over all original petitions in certain commercial banks, and to order their liquidation
other claims, including those of the said special civil actions like whenever warranted, it would seem that the
directors, and indeed even of the Government certiorari, prohibition and affairs of the Bank are best entrusted to the
itself." This provision, as amended by Republic mandamus. liquidator court at this time rather than managed
Act No. 6715, reads as follows: The present petition does not directly by the petitioners. This is no reflection
Article 110. Worker preference come under any of the above. on their competence and sincerity, not to
in case of bankruptcy. In the Obviously, the petition is not mention their genuine concern for the Bank, of
event of bankruptcy or an appeal from the decision of which they are the intended beneficiaries and
liquidation of an employer's any lower court or quasi- owners. It is only that, considering the expertise
business, his workers shall judicial body, as in fact, the of the Central Bank oh this matter, and the
enjoy first preference as same is indeed an original familiarity of the liquidator court with the
regards their unpaid wages petition for restitution. Also, ramifications of the problem at hand, we feel it is
and other monetary claims, the present petition is advisable that they be allowed, as long as the
any provision of law to the certainly not one for administration has not yet adopted its own
contrary certiorari, prohibition or plans, to devise the proper steps to relieve the
notwithstanding. Such unpaid mandamus because there is Bank of its present difficulties.
wages and monetary claims no tribunal, board or officer III
shall be paid in full before the that has acted without or in The Court reiterates its hope that the
claims of the Government and excess of jurisdiction or with administrative authorities may still find a way to
other creditors may be grave abuse of discretion, or rehabilitate the Bank even at this late hour. This
paid. (Amendments has neglected the is still possible even with this decision, for all we
italicized). performance of an act which are saying here is that the Central Bank has the
Focusing now on G.R. No. 82337, the Court notes the law enjoins as a duty, and power to liquidate the Bank under existing laws
that the petitioners therein are asking that the from-whose acts or and that, in the present circumstances, its
ownership and management of the Bank be negligence the petitioners liquidation may be undertaken under the control
turned over to them in accordance with R.A. No. were supposed to have been of the liquidator court in accordance with the
3518. They point out that the deficit incurred by aggrieved thereby. On the procedure prescribed by R.A. No. 265 and the
the Bank when its liquidation was ordered by the basis alone of jurisdiction, the guidelines herein laid down. Such rehabilitation
Central Bank in 1985 is not imputable to them petition at bar should be may still be ordered by the President of the
and suggest they can do better in rehabilitating dismissed. Philippines if she sees fit, without violation of the
the Bank, given the proper support from the A reading of the instant import of this decision or of the pertinent laws
Government. For this reason, they ask the Court petition would show, here interpreted and applied.
to order inter alia the Central Bank to grant them however, that the same WHEREFORE, judgment is hereby rendered: (a)
the necessary loans and other facilities, the partakes of the nature of DISMISSING the petitions in G.R. Nos. 67125 and
Secretary of the Budget to certify as mandamus because it seeks 82337; and (b) LIFTING the writ of preliminary
appropriated the amount needed to fully pay all judgment directing and injunction dated March 26, 1987, and the
common and preferred shares of the Bank, and commanding the Secretary of temporary restraining order dated January 21,
the National Treasurer to release such amounts Budget, the National 1989. Costs against the petitioners.
to the Bank. Treasurer, the CB, the SO ORDERED.
Monetary Board and the PVB
Republic of the Philippines 2) WHEREAS, the DEFENDANTS bind 1962, a Notice of Sale of the "whole capital stocks Insurance, Inc., for P10,000.00, which was the
SUPREME COURT themselves, jointly and severally, and of the defendants JRS Business Corporation, the highest bid offered. Immediately after the sale,
Manila hereby promise to pay their business name, right of operation, the whole respondent Insurance Company took possession
EN BANC aforementioned obligation to the assets, furnitures and equipments, the total of the proper ties and started running the affairs
G.R. No. L-19891 July 31, 1964 PLAINTIFF at its business address at liabilities, and Net Worth, books of accounts, etc., and operating the business of the JRS Business
J.R.S. BUSINESS CORPORATION, J.R. DA SILVA 301-305 Banquero St., (Ground Floor), etc." of the petitioner corporation was, handed Corporation. Hence, the present appeal.
and A.J. BELTRAN, petitioners, Regina Building, Escolta, Manila, within down. On June 9, the petitioner, thru counsel, It would seem that the matters which need
vs. sixty (60) days from March 16, 1962 or presented an "Urgent Petition for Postponement determination are (1) whether the respondent
IMPERIAL INSURANCE, INC., MACARIO M. on or before May 14, 1962; of Auction Sale and for Release of Levy on the Judge acted without or in excess of his
OFILADA, Sheriff of Manila and 3) WHEREAS, in the event the Business Name and Right to Operate of jurisdiction or with grave abuse of discretion in
HON. AGUSTIN MONTESA, Judge of the Court DEFENDANTS FAIL to pay in full the Defendant JRS Business Corporation", stating promulgating the Order of June 21, 1962,
of First Instance of Manila, respondents. total amount of PESOS SIXTY ONE that petitioners were busy negotiating for a loan denying the motion for postponement of the
Felipe N. Aurea for petitioners. THOUSAND ONE HUNDRED SEVENTY with which to pay the judgment debt; that the scheduled sale at public auction, of the
Tañada, Teehankee and Carreon for respondent TWO & 32/100 (P61,172.32), judgment was for money only and, therefore, properties of petitioner; and (2) whether the
Imperial Insurance, Inc. Philippine Currency, for any reason plaintiff (respondent Insurance Company) was business name or trade name, franchise (right to
PAREDES, J.: whatsoever, on May 14, 1962, the not authorized to take over and appropriate for operate) and capital stocks of the petitioner are
Petitioner J. R. Da Silva, is the President of the PLAINTIFF shall be entitled, as a matter its own use, the business name of the properties or property rights which could be the
J.R.S. Business Corporation, an establishment of right, to move for the execution of defendants; that the right to operate under the subject of levy, execution and sale.
duly franchised by the Congress of the the decision to be rendered in the franchise, was not transferable and could not be The respondent Court's act of postponing the
Philippines, to conduct a messenger and delivery above-entitled case by this Honorable considered a personal or immovable, property, scheduled sale was within the discretion of
express service. On July 12, 1961, the respondent Court based on this COMPROMISE subject to levy and sale. On June 10, 1962, a respondent Judge, the exercise of which, one way
Imperial Insurance, Inc., presented with the CFI AGREEMENT. Supplemental Motion for Release of Execution, or the other, did not constitute grave abuse of
of Manila a complaint (Civ. Case No. 47520), for On March 17, 1962, the lower court rendered was filed by counsel of petitioner JRS Business discretion and/or excess of jurisdiction. There
sum of money against the petitioner corporation. judgment embodying the contents of the said Corporation, claiming that the capital stocks was a decision rendered and the corresponding
After the defendants therein have submitted compromise agreement, the dispositive portion thereof, could not be levied upon and sold under writ of execution was issued. Respondent Judge
their Answer, the parties entered into a of which reads — execution. Under date of June 20, 1962, had jurisdiction over the matter and erroneous
Compromise Agreement, assisted by their WHEREFORE, the Court hereby petitioner's counsel presented a pleading conclusions of law or fact, if any, committed in
respective counsels, the pertinent portions of approves the above-quoted captioned "Very Urgent Motion for the exercise of such jurisdiction are merely
which recite: compromise agreement and renders Postponement of Public Auction Sale and for errors of judgment, not correctible
1) WHEREAS, the DEFENDANTS admit judgment in accordance therewith, Ruling on Motion for Release of Levy on by certiorari (Villa Rey Transit v. Bello, et al., L-
and confess their joint and solidary enjoining the parties to comply the Business Name, Right to Operate and Capital 18957, April 23, 1963, and cases cited therein.)
indebtedness to the PLAINTIFF in the faithfully and strictly with the terms Stocks of JRS Business Corporation". The auction The corporation law, on forced sale of franchises,
full sum of PESOS SIXTY ONE and conditions thereof, without special sale was set for June 21, 1962. In said motion, provides —
THOUSAND ONE HUNDRED SEVENTY- pronouncement as to costs. petitioners alleged that the loan they had applied Any franchise granted to a corporation
TWO & 32/100 (P61,172.32), Wherefore, the parties respectfully for, was to be secured within the next ten (10) to collect tolls or to occupy, enjoy, or
Philippine Currency, itemized as pray that the foregoing stipulation of days, and they would be able to discharge the use public property or any portion of
follows: facts be admitted and approved by this judgment debt. Respondents opposed the said the public domain or any right of way
Honorable Court, without prejudice to motion and on June 21, 1962, the lower court over public property or the public
a) Principal P50,000.00
the parties adducing other evidence to denied the motion for postponement of the domain, and any rights and privileges
b) Interest at prove their case not covered by this auction sale. acquired under such franchise may be
5,706.14 stipulation of facts. 1äwphï1.ñët In the sale which was conducted in the premises levied upon and sold under execution,
12% per annum
On May 15, 1962, one day after the date fixed in of the JRS Business Corporation at 1341 Perez together with the property necessary
c) Liquidated the compromise agreement, within which the St., Paco, Manila, all the properties of said for the enjoyment, the exercise of the
damages at 7% 3,330.58 judgment debt would be paid, but was not, corporation contained in the Notices of Sale powers, and the receipt of the proceeds
per annum respondent Imperial Insurance Inc., filed a dated May 26, 1962, and June 2, 1962 (the latter of such franchise or right of way, in the
"Motion for the Insurance of a Writ of notice being for the whole capital stocks of the same manner and with like effect as
d) Costs of suit 135.60 Execution". On May 23, 1962, a Writ of Execution defendant, JRS Business Corporation, the any other property to satisfy any
was issued by respondent Sheriff of Manila and business name, right of operation, the whole judgment against the
e) Attorney's on May 26, 1962, Notices of Sale were sent out assets, furnitures and equipments, the total corporation: Provided, That the sale of
2,000.00
fees for the auction of the personal properties of the liabilities and Net Worth, books of accounts, etc., the franchise or right of way and the
petitioner J.R.S. Business Corporation. On June 2, etc.), were bought by respondent Imperial property necessary for the enjoyment,
the exercise of the powers, and the Adams v. Railroad, supra; 2 Fletcher's trade name or business name and its capital
receipt of the proceeds of said franchise Cyclopedia Corp. Secs. 1153, 1158; 3 stock. Incidentally, the trade name or business
or right of way is especially decreed and Thompson on Corporations 2d Ed.] name corresponds to the initials of the President
ordered in the judgment: And provided, Secs. 2863, 2864),and cannot be of the petitioner corporation and there can be no
further, That the sale shall not become conveyed in the absence of a legislative serious dispute regarding the fact that a trade
effective until confirmed by the court authority so to do (14A CJ. 543, 577; 1 name or business name and capital stock are
after due notice. (Sec. 56, Corporation Fletcher's Cyc. Corp. Sec. 1224; necessarily included in the enjoyment of the
Law.) Memphis & L.R.R. Co. v. Berry 5 S. Ct. franchise. Like that of a franchise, the law
In the case of Gulf Refining Co. v. Cleveland Trust 299, 112 U.S. 609, 28 L.E.d. 837; mandates, that property necessary for the
Co., 108 So., 158, it was held — Vicksburg Waterworks Co. v. Vicksburg, enjoyment of said franchise, can only be sold to
The first question then for decision is 26 S. Ct. 660, 202 U.S. 453, 50 L.E.d. satisfy a judgment debt if the decision especially
the meaning of the word "franchise" in 1102, 6 Ann. Cas. 253; Arthur v. so provides. As We have stated heretofore, no
the statute. Commercial & Railroad Bank, 9 Smedes such directive appears in the decision. Moreover,
"A franchise is a special & M. 394, 48 Am. Dec. 719), but the a trade name or business name cannot be sold
privilege conferred by specify or secondary franchises of a separately from the franchise, and the capital
governmental authority, and corporation are vested in the stock of the petitioner corporation or any other
which does not belong to corporation and may ordinarily be corporation, for the matter, represents the
citizens of the country conveyed or mortgaged under a general interest and is the property of stockholders in
generally as a matter of power granted to a corporation to the corporation, who can only be deprived
common right. ... Its meaning dispose of its property (Adams v. thereof in the manner provided by law (Therbee
depends more or less upon Railroad,supra; 14A C.J. 542, 557; 3 v. Baker, 35 N.E. Eq. [8 Stew.] 501, 505; In re
the connection in which the Thompson on Corp. [2nd Ed.] Sec. Wells' Estate, 144 N.W. 174, 177, Wis. 294, cited
word is employed and the 2909), except such special or secondary in 6 Words and Phrases, 109).
property and corporation to franchises as are charged with a public It, therefore, results that the inclusion of the
which it is applied. It may use (2 Fletcher's Cyc. Corp. see. 1225; franchise, the trade name and/or business name
have different significations. 14A C.J. 544; 3 Thompson on Corp. [2d and the capital stock of the petitioner
"For practical purposes, Ed.] sec. 2908; Arthur v. Commercial & corporation, in the sale of the properties of the
franchises, so far as relating to R.R. Bank, supra; McAllister v. Plant, 54 JRS Business Corporation, has no justification.
corporations, are divisible Miss. 106). The sale of the properties of petitioner
into (1) corporate or general The right to operate a messenger and express corporation is set aside, in so far as it authorizes
franchises; and (2) special or delivery service, by virtue of a legislative the levy and sale of its franchise, trade name and
secondary franchises. The enactment, is admittedly a secondary franchise capital stocks. Without pronouncement as to
former is the franchise to (R.A. No. 3260, entitled "An Act granting the JRS costs.
exist as a corporation, while Business Corporation a franchise to conduct a Bengzon, C.J., Padilla, Bautista Angelo,
the latter are certain rights messenger and express service)" and, as such, Concepcion, Reyes, J.B.L., Regala and Makalintal,
and privileges conferred upon under our corporation law, is subject to levy and JJ., concur.
existing corporations, such as sale on execution together and including all the
the right to use the streets of a property necessary for the enjoyment thereof.
municipality to lay pipes or The law, however, indicates the procedure under
tracks, erect poles or string which the same (secondary franchise and the
wires." 2 Fletcher's properties necessary for its enjoyment) may be
Cyclopedia Corp. See. 1148; sold under execution. Said franchise can be sold
14 C.J. p. 160; Adams v. Yazon under execution, when such sale is especially
& M. V. R. Co., 24 So. 200, 317, decreed and ordered in the judgment and it
28 So. 956, 77 Miss. 253, 60 becomes effective only when the sale is
L.R.A. 33 et seq. confirmed by the Court after due notice (Sec. 56,
The primary franchise of a corporation Corp. Law). The compromise agreement and the
that is, the right to exist as such, is judgment based thereon, do not contain any
vested "in the individuals who compose special decree or order making the franchise
the corporation and not in the answerable for the judgment debt. The same
corporation itself" (14 C.J. pp. 160, 161; thing may be stated with respect to petitioner's
Republic of the Philippines interest either personal or thru publication to this case, since the complaint is signed by the law maintaining his action or defense upon
SUPREME COURT defendant and/or predecessors in interest." The firm of Araneta and Araneta, "counsel for the merits. The court may grant a
Manila answer therefore prays that the complaint be plaintiff" and commences with the statement continuance to enable the objecting
EN BANC dismissed with costs and plaintiff required to "comes now plaintiff, through its undersigned party to meet such evidence.
G.R. No. L-4935 May 28, 1954 reconvey the land to defendant or pay its value. counsel." It is true that the complaint also states Under this provision amendment is not even
J. M. TUASON & CO., INC., represented by it After trial, the lower court rendered judgment that the plaintiff is "represented herein by its necessary for the purpose of rendering judgment
Managing PARTNER, GREGORIA ARANETA, for plaintiff, declaring defendant to be without Managing Partner Gregorio Araneta, Inc.", on issues proved though not alleged. Thus,
INC., plaintiff-appellee, any right to the land in question and ordering another corporation, but there is nothing against commenting on the provision, Chief Justice
vs. him to restore possession thereof to plaintiff and one corporation being represented by another Moran says in this Rules of Court:
QUIRINO BOLAÑOS, defendant-appellant. to pay the latter a monthly rent of P132.62 from person, natural or juridical, in a suit in court. The Under this section, American courts
Araneta and Araneta for appellee. January, 1940, until he vacates the land, and also contention that Gregorio Araneta, Inc. can not act have, under the New Federal Rules of
Jose A. Buendia for appellant. to pay the costs. as managing partner for plaintiff on the theory Civil Procedure, ruled that where the
REYES, J.: Appealing directly to this court because of the that it is illegal for two corporations to enter into facts shown entitled plaintiff to relief
This is an action originally brought in the Court value of the property involved, defendant makes a partnership is without merit, for the true rule other than that asked for, no
of First Instance of Rizal, Quezon City Branch, to the following assignment or errors: is that "though a corporation has no power to amendment to the complaint is
recover possesion of registered land situated in I. The trial court erred in not dismissing enter into a partnership, it may nevertheless necessary, especially where defendant
barrio Tatalon, Quezon City. the case on the ground that the case enter into a joint venture with another where the has himself raised the point on which
Plaintiff's complaint was amended three times was not brought by the real property in nature of that venture is in line with the business recovery is based, and that the
with respect to the extent and description of the interest. authorized by its charter." (Wyoming-Indiana Oil appellate court treat the pleadings as
land sought to be recovered. The original II. The trial court erred in admitting the Gas Co. vs. Weston, 80 A. L. R., 1043, citing 2 amended to conform to the evidence,
complaint described the land as a portion of a lot third amended complaint. Fletcher Cyc. of Corp., 1082.) There is nothing in although the pleadings were not
registered in plaintiff's name under Transfer III. The trial court erred in denying the record to indicate that the venture in which actually amended. (I Moran, Rules of
Certificate of Title No. 37686 of the land record defendant's motion to strike. plaintiff is represented by Gregorio Araneta, Inc. Court, 1952 ed., 389-390.)
of Rizal Province and as containing an area of 13 IV. The trial court erred in including in as "its managing partner" is not in line with the Our conclusion therefore is that specification of
hectares more or less. But the complaint was its decision land not involved in the corporate business of either of them. error II, III, and IV are without merit..
amended by reducing the area of 6 hectares, litigation. Errors II, III, and IV, referring to the admission of Let us now pass on the errors V and VI.
more or less, after the defendant had indicated V. The trial court erred in holding that the third amended complaint, may be answered Admitting, though his attorney, at the early stage
the plaintiff's surveyors the portion of land the land in dispute is covered by by mere reference to section 4 of Rule 17, Rules of the trial, that the land in dispute "is that
claimed and occupied by him. The second transfer certificates of Title Nos. 37686 of Court, which sanctions such amendment. It described or represented in Exhibit A and in
amendment became necessary and was allowed and 37677. reads: Exhibit B enclosed in red pencil with the name
following the testimony of plaintiff's surveyors Vl. The trial court erred in not finding Sec. 4. Amendment to conform to Quirino Bolaños," defendant later changed his
that a portion of the area was embraced in that the defendant is the true and evidence. — When issues not raised by lawyer and also his theory and tried to prove
another certificate of title, which was plaintiff's lawful owner of the land. the pleadings are tried by express or that the land in dispute was not covered by
Transfer Certificate of Title No. 37677. And still VII. The trial court erred in finding that implied consent of the parties, they plaintiff's certificate of title. The evidence,
later, in the course of trial, after defendant's the defendant is liable to pay the shall be treated in all respects, as if they however, is against defendant, for it clearly
surveyor and witness, Quirino Feria, had plaintiff the amount of P132.62 had been raised in the pleadings. Such establishes that plaintiff is the registered owner
testified that the area occupied and claimed by monthly from January, 1940, until he amendment of the pleadings as may be of lot No. 4-B-3-C, situate in barrio Tatalon,
defendant was about 13 hectares, as shown in vacates the premises. necessary to cause them to conform to Quezon City, with an area of 5,297,429.3 square
his Exhibit 1, plaintiff again, with the leave of VIII. The trial court erred in not the evidence and to raise these issues meters, more or less, covered by transfer
court, amended its complaint to make its ordering the plaintiff to reconvey the may be made upon motion of any party certificate of title No. 37686 of the land records
allegations conform to the evidence. land in litigation to the defendant. at my time, even of the trial of these of Rizal province, and of lot No. 4-B-4, situated in
Defendant, in his answer, sets up prescription As to the first assigned error, there is nothing to issues. If evidence is objected to at the the same barrio, having an area of 74,789 square
and title in himself thru "open, continuous, the contention that the present action is not trial on the ground that it is not within meters, more or less, covered by transfer
exclusive and public and notorious possession brought by the real party in interest, that is, by J. the issues made by the pleadings, the certificate of title No. 37677 of the land records
(of land in dispute) under claim of ownership, M. Tuason and Co., Inc. What the Rules of Court court may allow the pleadings to be of the same province, both lots having been
adverse to the entire world by defendant and his require is that an action be brought in the name amended and shall be so freely when originally registered on July 8, 1914 under
predecessor in interest" from "time in- of, but not necessarily by, the real party in the presentation of the merits of the original certificate of title No. 735. The identity
memorial". The answer further alleges that interest. (Section 2, Rule 2.) In fact the practice is action will be subserved thereby and of the lots was established by the testimony of
registration of the land in dispute was obtained for an attorney-at-law to bring the action, that is the objecting party fails to satisfy the Antonio Manahan and Magno Faustino,
by plaintiff or its predecessors in interest thru to file the complaint, in the name of the plaintiff. court that the admission of such witnesses for plaintiff, and the identity of the
"fraud or error and without knowledge (of) or That practice appears to have been followed in evidence would prejudice him in portion thereof claimed by defendant was
established by the testimony of his own witness, for he has been asserting all along that the
Quirico Feria. The combined testimony of these premises in question 'have always been since
three witnesses clearly shows that the portion time immemorial in open, continuous, exclusive
claimed by defendant is made up of a part of lot and public and notorious possession and under
4-B-3-C and major on portion of lot 4-B-4, and is claim of ownership adverse to the entire world
well within the area covered by the two transfer by defendant and his predecessors in interest.'
certificates of title already mentioned. This fact This assignment of error is thus clearly without
also appears admitted in defendant's answer to merit.
the third amended complaint. Error No. VIII is but a consequence of the other
As the land in dispute is covered by plaintiff's errors alleged and needs for further
Torrens certificate of title and was registered in consideration.
1914, the decree of registration can no longer be During the pendency of this case in this Court
impugned on the ground of fraud, error or lack of appellant, thru other counsel, has filed a motion
notice to defendant, as more than one year has to dismiss alleging that there is pending before
already elapsed from the issuance and entry of the Court of First Instance of Rizal another action
the decree. Neither court the decree be between the same parties and for the same cause
collaterally attacked by any person claiming title and seeking to sustain that allegation with a copy
to, or interest in, the land prior to the of the complaint filed in said action. But an
registration proceedings. (Soroñgonvs. examination of that complaint reveals that
Makalintal,1 45 Off. Gaz., 3819.) Nor could title to appellant's allegation is not correct, for the
that land in derogation of that of plaintiff, the pretended identity of parties and cause of action
registered owner, be acquired by prescription or in the two suits does not appear. That other case
adverse possession. (Section 46, Act No. 496.) is one for recovery of ownership, while the
Adverse, notorious and continuous possession present one is for recovery of possession. And
under claim of ownership for the period fixed by while appellant claims that he is also involved in
law is ineffective against a Torrens title. that order action because it is a class suit, the
(Valiente vs. Judge of CFI of Tarlac,2 etc., 45 Off. complaint does not show that such is really the
Gaz., Supp. 9, p. 43.) And it is likewise settled that case. On the contrary, it appears that the action
the right to secure possession under a decree of seeks relief for each individual plaintiff and not
registration does not prescribed. (Francisco vs. relief for and on behalf of others. The motion for
Cruz, 43 Off. Gaz., 5105, 5109-5110.) A recent dismissal is clearly without merit.
decision of this Court on this point is that Wherefore, the judgment appealed from is
rendered in the case of Jose Alcantara et al., vs. affirmed, with costs against the plaintiff.
Mariano et al., 92 Phil., 796. This disposes of the Paras, C.J., Pablo, Bengzon, Montemayor, Jugo,
alleged errors V and VI. Bautista Angelo, Labrador, and Concepcion,
As to error VII, it is claimed that `there was no JJ., concur.
evidence to sustain the finding that defendant
should be sentenced to pay plaintiff P132.62
monthly from January, 1940, until he vacates the
premises.' But it appears from the record that
that reasonable compensation for the use and
occupation of the premises, as stipulated at the
hearing was P10 a month for each hectare and
that the area occupied by defendant was 13.2619
hectares. The total rent to be paid for the area
occupied should therefore be P132.62 a month.
It is appears from the testimony of J. A. Araneta
and witness Emigdio Tanjuatco that as early as
1939 an action of ejectment had already been
filed against defendant. And it cannot be
supposed that defendant has been paying rents,
Republic of the Philippines nominees; that, on the other hand, the Filipino shall consist of nine who in turn nominated Mr. Charles Chamsay.
SUPREME COURT stockholders can nominate only six (6) individuals. As long as The chairman, Baldwin Young ruled the last two
Manila candidates and in the event they cannot agree on American-Standard shall own nominations out of order on the basis of section
THIRD DIVISION the six (6) nominees, they shall vote only among at least 30% of the 5 (a) of the Agreement, the consistent practice of
G.R. No. 75875 December 15, 1989 themselves to determine who the six (6) outstanding stock of the the parties during the past annual stockholders'
WOLRGANG AURBACH, JOHN GRIFFIN, DAVID nominees will be, with cumulative voting to be Corporation, three of the nine meetings to nominate only nine persons as
P. WHITTINGHAM and CHARLES allowed but without interference from ASI. directors shall be designated nominees for the nine-member board of
CHAMSAY, petitioners, The antecedent facts can be summarized as by American-Standard, and directors, and the legal advice of Saniwares' legal
vs. follows: the other six shall be counsel. The following events then, transpired:
SANITARY WARES MANUFACTURING In 1961, Saniwares, a domestic corporation was designated by the other ... There were protests against
CORPORATOIN, ERNESTO V. LAGDAMEO, incorporated for the primary purpose of stockholders of the the action of the Chairman
ERNESTO R. LAGDAMEO, JR., ENRIQUE R. manufacturing and marketing sanitary wares. Corporation. (pp. 51 & 53, and heated arguments
LAGDAMEO, GEORGE F. LEE, RAUL A. BONCAN, One of the incorporators, Mr. Baldwin Young Rollo of 75875) ensued. An appeal was made
BALDWIN YOUNG and AVELINO V. went abroad to look for foreign partners, At the request of ASI, the agreement contained by the ASI representative to
CRUZ, respondents. European or American who could help in its provisions designed to protect it as a minority the body of stockholders
G.R. No. 75951 December 15, 1989 expansion plans. On August 15, 1962, ASI, a group, including the grant of veto powers over a present that a vote be taken
SANITARY WARES MANUFACTURING foreign corporation domiciled in Delaware, number of corporate acts and the right to on the ruling of the Chairman.
CORPORATION, ERNESTO R. LAGDAMEO, United States entered into an Agreement with designate certain officers, such as a member of The Chairman, Baldwin
ENRIQUE B. LAGDAMEO, GEORGE FL .EE RAUL Saniwares and some Filipino investors whereby the Executive Committee whose vote was Young, declared the appeal
A. BONCAN, BALDWIN YOUNG and AVELINO V. ASI and the Filipino investors agreed to required for important corporate transactions. out of order and no vote on
CRUX, petitioners, participate in the ownership of an enterprise Later, the 30% capital stock of ASI was increased the ruling was taken. The
vs. which would engage primarily in the business of to 40%. The corporation was also registered Chairman then instructed the
THE COURT OF APPEALS, WOLFGANG manufacturing in the Philippines and selling here with the Board of Investments for availment of Corporate Secretary to cast all
AURBACH, JOHN GRIFFIN, DAVID P. and abroad vitreous china and sanitary wares. incentives with the condition that at least 60% of the votes present and
WHITTINGHAM, CHARLES CHAMSAY and The parties agreed that the business operations the capital stock of the corporation shall be represented by proxy equally
LUCIANO SALAZAR, respondents. in the Philippines shall be carried on by an owned by Philippine nationals. for the 6 nominees of the
G.R. Nos. 75975-76 December 15, 1989 incorporated enterprise and that the name of the The joint enterprise thus entered into by the Philippine Investors and the 3
LUCIANO E. SALAZAR, petitioner, corporation shall initially be "Sanitary Wares Filipino investors and the American corporation nominees of ASI, thus
vs. Manufacturing Corporation." prospered. Unfortunately, with the business effectively excluding the 2
SANITARY WARES MANUFACTURING The Agreement has the following provisions successes, there came a deterioration of the additional persons
CORPORATION, ERNESTO V. LAGDAMEO, relevant to the issues in these cases on the initially harmonious relations between the two nominated, namely, Luciano
ERNESTO R. LAGDAMEO, JR., ENRIQUE R. nomination and election of the directors of the groups. According to the Filipino group, a basic E. Salazar and Charles
LAGDAMEO, GEORGE F. LEE, RAUL A. BONCAN, corporation: disagreement was due to their desire to expand Chamsay. The ASI
BALDWIN YOUNG, AVELINO V. CRUZ and the 3. Articles of Incorporation the export operations of the company to which representative, Mr. Jaqua
COURT OF APPEALS, respondents. (a) The Articles of ASI objected as it apparently had other protested the decision of the
Belo, Abiera & Associates for petitioners in 75875. Incorporation of the subsidiaries of joint joint venture groups in the Chairman and announced that
Sycip, Salazar, Hernandez & Gatmaitan for Corporation shall be countries where Philippine exports were all votes accruing to ASI
Luciano E. Salazar. substantially in the form contemplated. On March 8, 1983, the annual shares, a total of 1,329,695 (p.
annexed hereto as Exhibit A stockholders' meeting was held. The meeting 27, Rollo, AC-G.R. SP No.
GUTIERREZ, JR., J.: and, insofar as permitted was presided by Baldwin Young. The minutes 05617) were being
These consolidated petitions seek the review of under Philippine law, shall were taken by the Secretary, Avelino Cruz. After cumulatively voted for the
the amended decision of the Court of Appeals in specifically provide for disposing of the preliminary items in the agenda, three ASI nominees and
CA-G.R. SP Nos. 05604 and 05617 which set (1) the stockholders then proceeded to the election Charles Chamsay, and
aside the earlier decision dated June 5, 1986, of Cumulative of the members of the board of directors. The ASI instructed the Secretary to so
the then Intermediate Appellate Court and voting for group nominated three persons namely; vote. Luciano E. Salazar and
directed that in all subsequent elections for directors: Wolfgang Aurbach, John Griffin and David P. other proxy holders
directors of Sanitary Wares Manufacturing xxx xxx xxx Whittingham. The Philippine investors announced that all the votes
Corporation (Saniwares), American Standard 5. Management nominated six, namely; Ernesto Lagdameo, Sr., owned by and or represented
Inc. (ASI) cannot nominate more than three (3) (a) The management of the Raul A. Boncan, Ernesto R. Lagdameo, Jr., George by them 467,197 shares (p.
directors; that the Filipino stockholders shall not Corporation shall be vested in F. Lee, and Baldwin Young. Mr. Eduardo R, 27, Rollo, AC-G.R. SP No.
interfere in ASI's choice of its three (3) a Board of Directors, which Ceniza then nominated Mr. Luciano E. Salazar, 05617) were being voted
cumulatively in favor of Salazar and other Group and dismissing the quo warranto petition CANNOT LEGALLY DO. (p. 17,
Luciano E. Salazar. The stockholders, allegedly of Salazar and Chamsay. The ASI Group and Rollo-75875)
Chairman, Baldwin Young, representing 53 or 54% of the Salazar appealed the decision to the SEC en banc Petitioner Luciano E. Salazar in G.R. Nos. 75975-
nevertheless instructed the shares of Saniwares, decided which affirmed the hearing officer's decision. 76 assails the amended decision on the following
Secretary to cast all votes to continue the meeting at the The SEC decision led to the filing of two separate grounds:
equally in favor of the three elevator lobby of the appeals with the Intermediate Appellate Court 11.1.
ASI nominees, namely, American Standard Building. by Wolfgang Aurbach, John Griffin, David ThatAmendedDecisionwoulds
Wolfgang Aurbach, John The continued meeting was Whittingham and Charles Chamsay (docketed as anctiontheCA'sdisregard of
Griffin and David presided by Luciano E. AC-G.R. SP No. 05604) and by Luciano E. Salazar binding contractual
Whittingham and the six Salazar, while Andres (docketed as AC-G.R. SP No. 05617). The agreements entered into by
originally nominated by Gatmaitan acted as Secretary. petitions were consolidated and the appellate stockholders and the
Rogelio Vinluan, namely, On the basis of the cumulative court in its decision ordered the remand of the replacement of the conditions
Ernesto Lagdameo, Sr., Raul votes cast earlier in the case to the Securities and Exchange Commission of such agreements with
Boncan, Ernesto Lagdameo, meeting, the ASI Group with the directive that a new stockholders' terms never contemplated by
Jr., Enrique Lagdameo, George nominated its four nominees; meeting of Saniwares be ordered convoked as the stockholders but merely
F. Lee, and Baldwin Young. Wolfgang Aurbach, John soon as possible, under the supervision of the dictated by the CA .
The Secretary then certified Griffin, David Whittingham Commission. 11.2. The Amended decision
for the election of the and Charles Chamsay. Luciano Upon a motion for reconsideration filed by the would likewise sanction the
following Wolfgang Aurbach, E. Salazar voted for himself, appellees Lagdameo Group) the appellate court deprivation of the property
John Griffin, David thus the said five directors (Court of Appeals) rendered the questioned rights of stockholders without
Whittingham Ernesto were certified as elected amended decision. Petitioners Wolfgang due process of law in order
Lagdameo, Sr., Ernesto directors by the Acting Aurbach, John Griffin, David P. Whittingham and that a favored group of
Lagdameo, Jr., Enrique Secretary, Andres Gatmaitan, Charles Chamsay in G.R. No. 75875 assign the stockholders may be illegally
Lagdameo, George F. Lee, Raul with the explanation that following errors: benefitted and guaranteed a
A. Boncan, Baldwin Young. there was a tie among the I. THE COURT OF APPEALS, IN continuing monopoly of the
The representative of ASI then other six (6) nominees for the EFFECT, UPHELD THE control of a corporation. (pp.
moved to recess the meeting four (4) remaining positions ALLEGED ELECTION OF 14-15, Rollo-75975-76)
which was duly seconded. of directors and that the body PRIVATE RESPONDENTS AS On the other hand, the petitioners in G.R. No.
There was also a motion to decided not to break the tie. MEMBERS OF THE BOARD OF 75951 contend that:
adjourn (p. 28, Rollo, AC-G.R. (pp. 37-39, Rollo of 75975-76) DIRECTORS OF SANIWARES I
SP No. 05617). This motion to These incidents triggered off the filing of WHEN IN FACT THERE WAS THE AMENDED DECISION OF
adjourn was accepted by the separate petitions by the parties with the NO ELECTION AT ALL. THE RESPONDENT COURT,
Chairman, Baldwin Young, Securities and Exchange Commission (SEC). The II. THE COURT OF APPEALS WHILE RECOGNIZING THAT
who announced that the first petition filed was for preliminary injunction PROHIBITS THE THE STOCKHOLDERS OF
motion was carried and by Saniwares, Emesto V. Lagdameo, Baldwin STOCKHOLDERS FROM SANIWARES ARE DIVIDED
declared the meeting Young, Raul A. Bonean Ernesto R. Lagdameo, Jr., EXERCISING THEIR FULL INTO TWO BLOCKS, FAILS TO
adjourned. Protests against Enrique Lagdameo and George F. Lee against VOTING RIGHTS FULLY ENFORCE THE BASIC
the adjournment were Luciano Salazar and Charles Chamsay. The case REPRESENTED BY THE INTENT OF THE AGREEMENT
registered and having been was denominated as SEC Case No. 2417. The NUMBER OF SHARES IN AND THE LAW.
ignored, Mr. Jaqua the ASI second petition was for quo warranto and SANIWARES, THUS II
representative, stated that the application for receivership by Wolfgang DEPRIVING PETITIONERS THE AMENDED DECISION
meeting was not adjourned Aurbach, John Griffin, David Whittingham, AND THE CORPORATION DOES NOT CATEGORICALLY
but only recessed and that the Luciano E. Salazar and Charles Chamsay against THEY REPRESENT OF THEIR RULE THAT PRIVATE
meeting would be reconvened the group of Young and Lagdameo (petitioners in PROPERTY RIGHTS WITHOUT PETITIONERS HEREIN WERE
in the next room. The SEC Case No. 2417) and Avelino F. Cruz. The case DUE PROCESS OF LAW. THE DULY ELECTED
Chairman then threatened to was docketed as SEC Case No. 2718. Both sets of III. THE COURT OF APPEALS DIRECTORS DURING THE 8
have the stockholders who parties except for Avelino Cruz claimed to be the IMPOSES CONDITIONS AND MARCH 1983 ANNUAL
did not agree to the decision legitimate directors of the corporation. READS PROVISIONS INTO STOCKHOLDERS MEETING OF
of the Chairman on the casting The two petitions were consolidated and tried THE AGREEMENT OF THE SANTWARES. (P. 24, Rollo-
of votes bodily thrown out. jointly by a hearing officer who rendered a PARTIES WHICH WERE NOT 75951)
The ASI Group, Luciano E. decision upholding the election of the Lagdameo THERE, WHICH ACTION IT
The issues raised in the petitions are Evidence of written contrary to the evident Agreement with ASI in behalf
interrelated, hence, they are discussed jointly. agreements-When the terms intention of the parties, the of the Philippine nationals. He
The main issue hinges on who were the duly of an agreement have been latter shall prevail over the testified that ASI agreed to
elected directors of Saniwares for the year 1983 reduced to writing, it is to be former (Art. 1370, New Civil accept the role of minority
during its annual stockholders' meeting held on considered as containing all Code). The various vis-a-vis the Philippine
March 8, 1983. To answer this question the such terms, and therefore, stipulations of a contract shall National group of investors,
following factors should be determined: (1) the there can be, between the be interpreted together on the condition that the
nature of the business established by the parties parties and their successors in attributing to the doubtful Agreement should contain
whether it was a joint venture or a corporation interest, no evidence of the ones that sense which may provisions to protect ASI as
and (2) whether or not the ASI Group may vote terms of the agreement other result from all of them taken the minority.
their additional 10% equity during elections of than the contents of the jointly (Art. 1374, New Civil An examination of the
Saniwares' board of directors. writing, except in the Code). Moreover, in order to Agreement shows that certain
The rule is that whether the parties to a following cases: judge the intention of the provisions were included to
particular contract have thereby established (a) Where a mistake or contracting parties, their protect the interests of ASI as
among themselves a joint venture or some other imperfection of the writing, or contemporaneous and the minority. For example, the
relation depends upon their actual intention its failure to express the true subsequent acts shall be vote of 7 out of 9 directors is
which is determined in accordance with the rules intent and agreement of the principally considered. (Art. required in certain
governing the interpretation and construction of parties or the validity of the 1371, New Civil Code). (Part I, enumerated corporate acts
contracts. (Terminal Shares, Inc. v. Chicago, B. agreement is put in issue by Original Records, SEC Case [Sec. 3 (b) (ii) (a) of the
and Q.R. Co. (DC MO) 65 F Supp 678; Universal the pleadings. No. 2417) Agreement]. ASI is
Sales Corp. v. California Press Mfg. Co. 20 Cal. (b) When there is an intrinsic It has been ruled: contractually entitled to
2nd 751, 128 P 2nd 668) ambiguity in the writing. In an action at law, where designate a member of the
The ASI Group and petitioner Salazar (G.R. Nos. Contrary to ASI Group's stand, the Lagdameo and there is evidence tending to Executive Committee and the
75975-76) contend that the actual intention of Young Group pleaded in their Reply and Answer prove that the parties joined vote of this member is
the parties should be viewed strictly on the to Counterclaim in SEC Case No. 2417 that the their efforts in furtherance of required for certain
"Agreement" dated August 15,1962 wherein it is Agreement failed to express the true intent of the an enterprise for their joint transactions [Sec. 3 (b) (i)].
clearly stated that the parties' intention was to parties, to wit: profit, the question whether The Agreement also requires
form a corporation and not a joint venture. xxx xxx xxx they intended by their a 75% super-majority vote for
They specifically mention number 16 4. While certain provisions of agreement to create a joint the amendment of the articles
under Miscellaneous Provisions which states: the Agreement would make it adventure, or to assume some and by-laws of Saniwares
xxx xxx xxx appear that the parties other relation is a question of [Sec. 3 (a) (iv) and (b) (iii)].
c) nothing herein contained thereto disclaim being fact for the jury. (Binder v. ASI is also given the right to
shall be construed to partners or joint venturers Kessler v 200 App. Div. 40,192 designate the president and
constitute any of the parties such disclaimer is directed at N Y S 653; Pyroa v. Brownfield plant manager [Sec. 5 (6)].
hereto partners or joint third parties and is not (Tex. Civ. A.) 238 SW 725; The Agreement further
venturers in respect of any inconsistent with, and does Hoge v. George, 27 Wyo, 423, provides that the sales policy
transaction hereunder. (At P. not preclude, the existence of 200 P 96 33 C.J. p. 871) of Saniwares shall be that
66, Rollo-GR No. 75875) two distinct groups of In the instant cases, our examination of which is normally followed by
They object to the admission of other evidence stockholders in Saniwares one important provisions of the Agreement as well as ASI [Sec. 13 (a)] and that
which tends to show that the parties' agreement of which (the Philippine the testimonial evidence presented by the Saniwares should not export
was to establish a joint venture presented by the Investors) shall constitute the Lagdameo and Young Group shows that the "Standard" products
Lagdameo and Young Group on the ground that majority, and the other ASI parties agreed to establish a joint venture and otherwise than through ASI's
it contravenes the parol evidence rule under shall constitute the minority not a corporation. The history of the Export Marketing Services
section 7, Rule 130 of the Revised Rules of Court. stockholder. In any event, the organization of Saniwares and the unusual [Sec. 13 (6)]. Under the
According to them, the Lagdameo and Young evident intention of the arrangements which govern its policy making Agreement, ASI agreed to
Group never pleaded in their pleading that the Philippine Investors and ASI body are all consistent with a joint venture and provide technology and
"Agreement" failed to express the true intent of in entering into the not with an ordinary corporation. As stated by know-how to Saniwares and
the parties. Agreement is to enter into the SEC: the latter paid royalties for
The parol evidence Rule under Rule 130 ajoint venture enterprise, and According to the unrebutted the same. (At p. 2).
provides: if some words in the testimony of Mr. Baldwin xxx xxx xxx
Agreement appear to be Young, he negotiated the
It is pertinent to note that the partners or joint venturers in respect of any agree, or as determined in accordance with a Legal Status of Joint Venture Corporations", 11
provisions of the Agreement transaction hereunder" was merely to obviate procedure agreed upon by them. Vand Law Rev. p. 680,1958). These American
requiring a 7 out of 9 votes of the possibility of the enterprise being treated as Appellants contend that the above provision is cases dealt with legal questions as to the extent
the board of directors for partnership for tax purposes and liabilities to included in the Corporation Code's chapter on to which the requirements arising from the
certain actions, in effect gave third parties. close corporations and Saniwares cannot be a corporate form of joint venture corporations
ASI (which designates 3 Quite often, Filipino entrepreneurs in their close corporation because it has 95 stockholders. should control, and the courts ruled that
directors under the desire to develop the industrial and Firstly, although Saniwares had 95 stockholders substantial justice lay with those litigants who
Agreement) an effective veto manufacturing capacities of a local firm are at the time of the disputed stockholders meeting, relied on the joint venture agreement rather
power. Furthermore, the constrained to seek the technology and these 95 stockholders are not separate from than the litigants who relied on the orthodox
grant to ASI of the right to marketing assistance of huge multinational each other but are divisible into groups principles of corporation law.
designate certain officers of corporations of the developed world. representing a single Identifiable interest. For As correctly held by the SEC Hearing Officer:
the corporation; the super- Arrangements are formalized where a foreign example, ASI, its nominees and lawyers count for It is said that participants in a joint
majority voting requirements group becomes a minority owner of a firm in 13 of the 95 stockholders. The YoungYutivo venture, in organizing the
for amendments of the exchange for its manufacturing expertise, use of family count for another 13 stockholders, the joint venture deviate from the
articles and by-laws; and most its brand names, and other such assistance. Chamsay family for 8 stockholders, the Santos traditional pattern of
significantly to the issues of However, there is always a danger from such family for 9 stockholders, the Dy family for 7 corporation management. A
tms case, the provision that arrangements. The foreign group may, from the stockholders, etc. If the members of one family noted authority has pointed out that
ASI shall designate 3 out of start, intend to establish its own sole or and/or business or interest group are just as in close corporations,
the 9 directors and the other monopolistic operations and merely uses the considered as one (which, it is respectfully shareholders' agreements in joint
stockholders shall designate joint venture arrangement to gain a foothold or submitted, they should be for purposes of venture corporations often contain
the other 6, clearly indicate test the Philippine waters, so to speak. Or the determining how closely held Saniwares is there provisions which do one or more of the
that there are two distinct covetousness may come later. As the Philippine were as of 8 March 1983, practically only 17 following: (1) require greater than
groups in Saniwares, namely firm enlarges its operations and becomes stockholders of Saniwares. (Please refer to majority vote for shareholder and
ASI, which owns 40% of the profitable, the foreign group undermines the discussion in pp. 5 to 6 of appellees' Rejoinder director action; (2) give certain
capital stock and the local majority ownership and actively tries to Memorandum dated 11 December 1984 and shareholders or groups of shareholders
Philippine National completely or predominantly take over the Annex "A" thereof). power to select a specified number of
stockholders who own the entire company. This undermining of joint Secondly, even assuming that Saniwares is directors; (3) give to the shareholders
balance of 60%, and that 2) ventures is not consistent with fair dealing to say technically not a close corporation because it has control over the selection and retention
ASI is given certain the least. To the extent that such subversive more than 20 stockholders, the undeniable fact is of employees; and (4) set up a
protections as the minority actions can be lawfully prevented, the courts that it is a close-held corporation. Surely, procedure for the settlement of
stockholder. should extend protection especially in industries appellants cannot honestly claim that Saniwares disputes by arbitration (See I O' Neal,
Premises considered, we where constitutional and legal requirements is a public issue or a widely held corporation. Close Corporations, 1971 ed., Section
believe that under the reserve controlling ownership to Filipino In the United States, many courts have taken a 1.06a, pp. 15-16) (Decision of SEC
Agreement there are two citizens. realistic approach to joint venture corporations Hearing Officer, P. 16)
groups of stockholders who The Lagdameo Group stated in their appellees' and have not rigidly applied principles of
established a corporation brief in the Court of Appeal corporation law designed primarily for public Thirdly paragraph 2 of Sec. 100 of the
with provisions for a special In fact, the Philippine issue corporations. These courts have indicated Corporation Code does not necessarily imply
contractual relationship Corporation Code itself that express arrangements between corporate that agreements regarding the exercise of voting
between the parties, i.e., ASI recognizes the right of joint ventures should be construed with less rights are allowed only in close corporations. As
and the other stockholders. stockholders to enter into emphasis on the ordinary rules of law usually Campos and Lopez-Campos explain:
(pp. 4-5) agreements regarding the applied to corporate entities and with more Paragraph 2 refers to pooling and voting
Section 5 (a) of the agreement uses the word exercise of their voting rights. consideration given to the nature of the agreements in particular. Does this provision
"designated" and not "nominated" or "elected" in Sec. 100. Agreements by agreement between the joint venturers (Please necessarily imply that these agreements can be
the selection of the nine directors on a six to stockholders.- see Wabash Ry v. American Refrigerator Transit valid only in close corporations as defined by the
three ratio. Each group is assured of a fixed xxx xxx xxx Co., 7 F 2d 335; Chicago, M & St. P. Ry v. Des Code? Suppose that a corporation has twenty
number of directors in the board. 2. An agreement between two or more Moines Union Ry; 254 Ass'n. 247 US. 490'; five stockholders, and therefore cannot qualify as
Moreover, ASI in its communications referred to stockholders, if in writing and signed by the Seaboard Airline Ry v. Atlantic Coast Line Ry; a close corporation under section 96, can some
the enterprise as joint venture. Baldwin Young parties thereto, may provide that in exercising 240 N.C. 495,.82 S.E. 2d 771; Deboy v. Harris, of them enter into an agreement to vote as a unit
also testified that Section 16(c) of the Agreement any voting rights, the shares held by them shall 207 Md., 212,113 A 2d 903; Hathway v. Porter in the election of directors? It is submitted that
that "Nothing herein contained shall be be voted as therein provided, or as they may Royalty Pool, Inc., 296 Mich. 90, 90, 295 N.W. there is no reason for denying stockholders of
construed to constitute any of the parties hereto 571; Beardsley v. Beardsley, 138 U.S. 262; "The corporations other than close ones the right to
enter into not voting or pooling agreements to prepared to hold that any agreement which seats, a result which is clearly contrary to the (Gates v. Megargel, 266 Fed.
protect their interests, as long as they do not curtails in any way cumulative voting should be contractual intent of the parties. 811 [1920]) It is in fact hardly
intend to commit any wrong, or fraud on the struck down, even if such agreement has been distinguishable from the
other stockholders not parties to the agreement. freely entered into by experienced businessmen Such a ruling will give effect to both the partnership, since their
Of course, voting or pooling agreements are and do not prejudice those who are not parties allocation of the board seats and the elements are similar
perhaps more useful and more often resorted to thereto. It may well be that it would be more stockholder's right to cumulative voting. community of interest in the
in close corporations. But they may also be found cogent to hold, as the Securities and Exchange Moreover, this ruling will also give due business, sharing of profits
necessary even in widely held corporations. Commission has held in the decision appealed consideration to the issue raised by the appellees and losses, and a mutual right
Moreover, since the Code limits the legal from, that cumulative voting rights may be on possible violation or circumvention of the of control. Blackner v. Mc
meaning of close corporations to those which voluntarily waived by stockholders who enter Anti-Dummy Law (Com. Act No. 108, as Dermott, 176 F. 2d. 498,
comply with the requisites laid down by section into special relationships with each other to amended) and the nationalization requirements [1949]; Carboneau v.
96, it is entirely possible that a corporation pursue and implement specific purposes, as in of the Constitution and the laws if ASI is allowed Peterson, 95 P. 2d., 1043
which is in fact a close corporation will not come joint venture relationships between foreign and to nominate more than three directors. (Rollo- [1939]; Buckley v. Chadwick,
within the definition. In such case, its local stockholders, so long as such agreements 75875, pp. 38-39) 45 Cal. 2d. 183, 288 P. 2d. 12
stockholders should not be precluded from do not adversely affect third parties. The ASI Group and petitioner Salazar, now 289 P. 2d. 242 [1955]). The
entering into contracts like voting agreements if reiterate their theory that the ASI Group has the main distinction cited by most
these are otherwise valid. (Campos & Lopez- In any event, it is believed that we are not here right to vote their additional equity pursuant to opinions in common law
Campos, op cit, p. 405) called upon to make a general rule on this Section 24 of the Corporation Code which gives jurisdictions is that the
In short, even assuming that sec. 5(a) of the question. Rather, all that needs to be done is to the stockholders of a corporation the right to partnership contemplates a
Agreement relating to the designation or give life and effect to the particular contractual cumulate their votes in electing directors. general business with some
nomination of directors restricts the right of the rights and obligations which the parties have Petitioner Salazar adds that this right if granted degree of continuity, while the
Agreement's signatories to vote for directors, assumed for themselves. to the ASI Group would not necessarily mean a joint venture is formed for the
such contractual provision, as correctly held by violation of the Anti-Dummy Act execution of a single
the SEC, is valid and binding upon the signatories On the one hand, the clearly established minority (Commonwealth Act 108, as amended). He cites transaction, and is thus of a
thereto, which include appellants. (Rollo No. position of ASI and the contractual allocation of section 2-a thereof which provides: temporary nature. (Tufts v.
75951, pp. 90-94) board seats Cannot be disregarded. On the other And provided finally that the Mann 116 Cal. App. 170, 2 P.
In regard to the question as to whether or not hand, the rights of the stockholders to election of aliens as members 2d. 500 [1931]; Harmon v.
the ASI group may vote their additional equity cumulative voting should also be protected. of the board of directors or Martin, 395 111. 595, 71 NE
during elections of Saniwares' board of directors, governing body of 2d. 74 [1947]; Gates v.
the Court of Appeals correctly stated: In our decision sought to be reconsidered, we corporations or associations Megargel 266 Fed. 811
opted to uphold the second over the first. Upon engaging in partially [1920]). This observation is
As in other joint venture companies, the extent of further reflection, we feel that the proper and nationalized activities shall be not entirely accurate in this
ASI's participation in the management of the just solution to give due consideration to both allowed in proportion to their jurisdiction, since under the
corporation is spelled out in the Agreement. factors suggests itself quite clearly. This Court allowable participation or Civil Code, a partnership may
Section 5(a) hereof says that three of the nine should recognize and uphold the division of the share in the capital of such be particular or universal, and
directors shall be designated by ASI and the stockholders into two groups, and at the same entities. (amendments a particular partnership may
remaining six by the other stockholders, i.e., the time uphold the right of the stockholders within introduced by Presidential have for its object a specific
Filipino stockholders. This allocation of board each group to cumulative voting in the process of Decree 715, section 1, undertaking. (Art. 1783, Civil
seats is obviously in consonance with the determining who the group's nominees would promulgated May 28, 1975) Code). It would seem
minority position of ASI. be. In practical terms, as suggested by appellant The ASI Group's argument is correct within the therefore that under
Luciano E. Salazar himself, this means that if the context of Section 24 of the Corporation Code. Philippine law, a joint venture
Having entered into a well-defined contractual Filipino stockholders cannot agree who their six The point of query, however, is whether or not is a form of partnership and
relationship, it is imperative that the parties nominees will be, a vote would have to be taken that provision is applicable to a joint venture should thus be governed by
should honor and adhere to their respective among the Filipino stockholders only. During with clearly defined agreements: the law of partnerships. The
rights and obligations thereunder. Appellants this voting, each Filipino stockholder can The legal concept of ajoint Supreme Court has however
seem to contend that any allocation of board cumulate his votes. ASI, however, should not be venture is of common law recognized a distinction
seats, even in joint venture corporations, are null allowed to interfere in the voting within the origin. It has no precise legal between these two business
and void to the extent that such may interfere Filipino group. Otherwise, ASI would be able to definition but it has been forms, and has held that
with the stockholder's rights to cumulative designate more than the three directors it is generally understood to mean although a corporation cannot
voting as provided in Section 24 of the allowed to designate under the Agreement, and an organization formed for enter into a partnership
Corporation Code. This Court should not be may even be able to get a majority of the board some temporary purpose. contract, it may however
engage in a joint venture with board seats and the On the other hand, the Lagdameo and Young MODIFIED in that Messrs. Wolfgang Aurbach
others. (At p. 12, Tuazon v. stockholder's right to Group (petitioners in G.R. No. 75951) object to a John Griffin, David Whittingham Emesto V.
Bolanos, 95 Phil. 906 [1954]) cumulative voting. Moreover, cumulative voting during the election of the Lagdameo, Baldwin Young, Raul A. Boncan,
(Campos and Lopez-Campos this ruling will also give due board of directors of the enterprise as ruled by Ernesto R. Lagdameo, Jr., Enrique Lagdameo, and
Comments, Notes and consideration to the issue the appellate court and submits that the six (6) George F. Lee are declared as the duly elected
Selected Cases, Corporation raised by the appellees on directors allotted the Filipino stockholders directors of Saniwares at the March 8,1983
Code 1981) possible violation or should be selected by consensus pursuant to annual stockholders' meeting. In all other
Moreover, the usual rules as regards the circumvention of the Anti- section 5 (a) of the Agreement which uses the respects, the questioned decision is AFFIRMED.
construction and operations of contracts Dummy Law (Com. Act No. word "designate" meaning "nominate, delegate Costs against the petitioners in G.R. Nos. 75975-
generally apply to a contract of joint venture. (O' 108, as amended) and the or appoint." 76 and G.R. No. 75875.
Hara v. Harman 14 App. Dev. (167) 43 NYS 556). nationalization requirements SO ORDERED.
Bearing these principles in mind, the correct of the Constitution and the They also stress the possibility that the ASI Fernan, C.J., (Chairman), Bidin and Cortes, JJ.,
view would be that the resolution of the question laws if ASI is allowed to Group might take control of the enterprise if the concur.
of whether or not the ASI Group may vote their nominate more than three Filipino stockholders are allowed to select their Feliciano, J., took no part.
additional equity lies in the agreement of the directors. (At p. 39, Rollo, nominees separately and not as a common slot
parties. 75875) determined by the majority of their group.
Necessarily, the appellate court was correct in Equally important as the consideration of the Section 5 (a) of the Agreement which uses the
upholding the agreement of the parties as contractual intent of the parties is the word designates in the allocation of board
regards the allocation of director seats under consideration as regards the possible directors should not be interpreted in isolation.
Section 5 (a) of the "Agreement," and the right of domination by the foreign investors of the This should be construed in relation to section 3
each group of stockholders to cumulative voting enterprise in violation of the nationalization (a) (1) of the Agreement. As we stated earlier,
in the process of determining who the group's requirements enshrined in the Constitution and section 3(a) (1) relates to the manner of
nominees would be under Section 3 (a) (1) of the circumvention of the Anti-Dummy Act. In this voting for these nominees which is cumulative
"Agreement." As pointed out by SEC, Section 5 regard, petitioner Salazar's position is that the voting while section 5(a) relates to the manner
(a) of the Agreement relates to the manner of Anti-Dummy Act allows the ASI group to elect of nominating the members of the board of
nominating the members of the board of board directors in proportion to their share in directors. The petitioners in G.R. No. 75951
directors while Section 3 (a) (1) relates to the the capital of the entity. It is to be noted, agreed to this procedure, hence, they cannot now
manner of voting for these nominees. however, that the same law also limits the impugn its legality.
This is the proper interpretation of the election of aliens as members of the board of The insinuation that the ASI Group may be able
Agreement of the parties as regards the election directors in proportion to their allowance to control the enterprise under the cumulative
of members of the board of directors. participation of said entity. In the instant case, voting procedure cannot, however, be ignored.
To allow the ASI Group to vote their additional the foreign Group ASI was limited to designate The validity of the cumulative voting procedure
equity to help elect even a Filipino director who three directors. This is the allowable is dependent on the directors thus elected being
would be beholden to them would obliterate participation of the ASI Group. Hence, in future genuine members of the Filipino group, not
their minority status as agreed upon by the dealings, this limitation of six to three board voters whose interest is to increase the ASI share
parties. As aptly stated by the appellate court: seats should always be maintained as long as the in the management of Saniwares. The joint
... ASI, however, should not be joint venture agreement exists considering that venture character of the enterprise must always
allowed to interfere in the in limiting 3 board seats in the 9-man board of be taken into account, so long as the company
voting within the Filipino directors there are provisions already agreed exists under its original agreement. Cumulative
group. Otherwise, ASI would upon and embodied in the parties' Agreement to voting may not be used as a device to enable ASI
be able to designate more protect the interests arising from the minority to achieve stealthily or indirectly what they
than the three directors it is status of the foreign investors. cannot accomplish openly. There are substantial
allowed to designate under With these findings, we the decisions of the SEC safeguards in the Agreement which are intended
the Agreement, and may even Hearing Officer and SEC which were impliedly to preserve the majority status of the Filipino
be able to get a majority of the affirmed by the appellate court declaring Messrs. investors as well as to maintain the minority
board seats, a result which is Wolfgang Aurbach, John Griffin, David P status of the foreign investors group as earlier
clearly contrary to the Whittingham, Emesto V. Lagdameo, Baldwin discussed. They should be maintained.
contractual intent of the young, Raul A. Boncan, Emesto V. Lagdameo, Jr., WHEREFORE, the petitions in G.R. Nos. 75975-76
parties. Enrique Lagdameo, and George F. Lee as the duly and G.R. No. 75875 are DISMISSED and the
Such a ruling will give effect elected directors of Saniwares at the March petition in G.R. No. 75951 is partly GRANTED.
to both the allocation of the 8,1983 annual stockholders' meeting. The amended decision of the Court of Appeals is
Republic of the Philippines The Act of Congress of April 29, 1908, repealing SEC. 10. That while this Act provides residing in the Philippine Islands;
SUPREME COURT the Shipping Act of April 30, 1906 but reenacting that the Philippine government shall (c) any corporation or company
Manila a portion of section 3 of this Law, and still in have the authority to enact a tariff law composed wholly of citizens of the
EN BANC force, provides in its section 1: the trade relations between the islands Philippine Islands or of the United States
G.R. No. 15574 September 17, 1919 That until Congress shall have and the United States shall continue to or of both, created under the laws of the
SMITH, BELL & COMPANY (LTD.), petitioner, authorized the registry as vessels of the be governed exclusively by laws of the United States, or of any State thereof, or
vs. United States of vessels owned in the Congress of the United States: Provided, of thereof, or the managing agent or
JOAQUIN NATIVIDAD, Collector of Customs of Philippine Islands, the Government of That tariff acts or acts amendatory to master of the vessel resides in the
the port of Cebu, respondent. the Philippine Islands is hereby the tariff of the Philippine Islands shall Philippine Islands
Ross and Lawrence for petitioner. authorized to adopt, from time to time, not become law until they shall receive Any vessel of more than fifteen gross
Attorney-General Paredes for respondent. and enforce regulations governing the the approval of the President of the tons which on February eighth,
MALCOLM, J.: transportation of merchandise and United States, nor shall any act of the nineteen hundred and eighteen, had a
A writ of mandamus is prayed for by Smith, Bell passengers between ports or places in Philippine Legislature affecting certificate of Philippine register under
& Co. (Ltd.), against Joaquin Natividad, Collector the Philippine Archipelago. (35 Stat. at immigration or the currency or coinage existing law, shall likewise be deemed a
of Customs of the port of Cebu, Philippine L., 70; Section 3912, U. S. Comp Stat. laws of the Philippines become a law vessel of domestic ownership so long as
Islands, to compel him to issue a certificate of [1916]; 7 Pub. Laws, 364.) until it has been approved by the there shall not be any change in the
Philippine registry to the petitioner for its motor The Act of Congress of August 29, 1916, President of the United States: Provided ownership thereof nor any transfer of
vessel Bato. The Attorney-General, acting as commonly known as the Jones Law, still in force, further, That the President shall stock of the companies or corporations
counsel for respondent, demurs to the petition provides in section 3, (first paragraph, first approve or disapprove any act owning such vessel to person not
on the general ground that it does not state facts sentence), 6, 7, 8, 10, and 31, as follows. mentioned in the foregoing proviso included under the last preceding
sufficient to constitute a cause of action. While SEC. 3. That no law shall be enacted in within six months from and after its paragraph.
the facts are thus admitted, and while, moreover, said Islands which shall deprive any enactment and submission for his Sections 2 and 3 of Act No. 2761 amended
the pertinent provisions of law are clear and person of life, liberty, or property approval, and if not disapproved within sections 1176 and 1202 of the Administrative
understandable, and interpretative American without due process of law, or deny to such time it shall become a law the Code to read as follows:
jurisprudence is found in abundance, yet the any person therein the equal protection same as if it had been specifically SEC. 1176. Investigation into character
issue submitted is not lightly to be resolved. The of the laws. . . . approved. of vessel. — No application for a
question, flatly presented, is, whether Act. No. SEC. 6. That the laws now in force in the SEC. 31. That all laws or parts of laws certificate of Philippine register shall be
2761 of the Philippine Legislature is valid — or, Philippines shall continue in force and applicable to the Philippines not in approved until the collector of customs is
more directly stated, whether the Government of effect, except as altered, amended, or conflict with any of the provisions of satisfied from an inspection of the
the Philippine Islands, through its Legislature, modified herein, until altered, this Act are hereby continued in force vessel that it is engaged or destined to
can deny the registry of vessels in its coastwise amended, or repealed by the legislative and effect." (39 Stat at L., 546.) be engaged in legitimate trade and that
trade to corporations having alien stockholders. authority herein provided or by Act of On February 23, 1918, the Philippine Legislature it is of domestic ownership as such
FACTS. Congress of the United States. enacted Act No. 2761. The first section of this law ownership is defined in section eleven
Smith, Bell & Co., (Ltd.), is a corporation SEC. 7. That the legislative authority amended section 1172 of the Administrative hundred and seventy-two of this Code.
organized and existing under the laws of the herein provided shall have power, Code to read as follows: The collector of customs may at any
Philippine Islands. A majority of its stockholders when not inconsistent with this Act, by SEC. 1172. Certificate of Philippine time inspect a vessel or examine its
are British subjects. It is the owner of a motor due enactment to amend, alter modify, register. — Upon registration of a owner, master, crew, or passengers in
vessel known as the Bato built for it in the or repeal any law, civil or criminal, vessel of domestic ownership, and of order to ascertain whether the vessel is
Philippine Islands in 1916, of more than fifteen continued in force by this Act as it may more than fifteen tons gross, a engaged in legitimate trade and is
tons gross The Bato was brought to Cebu in the from time to time see fit certificate of Philippine register shall entitled to have or retain the certificate
present year for the purpose of transporting This power shall specifically extend be issued for it. If the vessel is of of Philippine register.
plaintiff's merchandise between ports in the with the limitation herein provided as domestic ownership and of fifteen tons SEC. 1202. Limiting number of foreign
Islands. Application was made at Cebu, the home to the tariff to all laws relating to gross or less, the taking of the officers and engineers on board vessels.
port of the vessel, to the Collector of Customs for revenue provided as to the tariff to all certificate of Philippine register shall — No Philippine vessel operating in the
a certificate of Philippine registry. The Collector laws relating to revenue and taxation in be optional with the owner. coastwise trade or on the high seas
refused to issue the certificate, giving as his effect in the Philippines. "Domestic ownership," as used in this shall be permitted to have on board
reason that all the stockholders of Smith, Bell & SEC. 8. That general legislative power, section, means ownership vested in more than one master or one mate and
Co., Ltd., were not citizens either of the United except as otherwise herein provided, is some one or more of the following one engineer who are not citizens of
States or of the Philippine Islands. The instant hereby granted to the Philippine classes of persons: (a) Citizens or the United States or of the Philippine
action is the result. Legislature, authorized by this Act. native inhabitants of the Philippine Islands, even if they hold licenses under
LAW. Islands; (b) citizens of the United States section one thousand one hundred and
ninety-nine hereof. No other person repeated again in the first paragraph of the Mining Co. vs. Pennsylvania [1888],.125 U. S., 181 public works by, or for, the State or a
who is not a citizen of the United States Philippine Bill of Rights as set forth in the Jones Covington & L. Turnpike Road Co.vs. Sandford municipality to citizens of the United States.)
or of the Philippine Islands shall be an Law, provides "That no law shall be enacted in [1896], 164 U. S., 578.) Classification with the One of the exceptions to the general rule, most
officer or a member of the crew of such said Islands which shall deprive any person of end in view of providing diversity of treatment persistent and far reaching in influence is, that
vessel. Any such vessel which fails to life, liberty, or property without due process of may be made among corporations, but must be neither the Fourteenth Amendment to the United
comply with the terms of this section law, or deny to any person therein the equal based upon some reasonable ground and not be States Constitution, broad and comprehensive as
shall be required to pay an additional protection of the laws." Counsel says that Act No. a mere arbitrary selection (Gulf, Colorado & it is, nor any other amendment, "was designed to
tonnage tax of fifty centavos per net ton 2761 denies to Smith, Bell & Co., Ltd., the equal Santa Fe Railway Co. vs. Ellis [1897],.165 U. S., interfere with the power of the State, sometimes
per month during the continuance of protection of the laws because it, in effect, 150.) Examples of laws held unconstitutional termed its `police power,' to prescribe
said failure. prohibits the corporation from owning vessels, because of unlawful discrimination against aliens regulations to promote the health, peace, morals,
ISSUES. and because classification of corporations based could be cited. Generally, these decisions relate education, and good order of the people, and
Predicated on these facts and provisions of law, on the citizenship of one or more of their to statutes which had attempted arbitrarily to legislate so as to increase the industries of the
the issues as above stated recur, namely, stockholders is capricious, and that Act No. 2761 forbid aliens to engage in ordinary kinds of State, develop its resources and add to its wealth
whether Act No 2761 of the Philippine deprives the corporation of its properly without business to earn their living. and prosperity. From the very necessities of
Legislature is valid in whole or in part — due process of law because by the passage of the (State vs. Montgomery [1900], 94 Maine, 192, society, legislation of a special character, having
whether the Government of the Philippine law company was automatically deprived of peddling — but see. Commonwealth vs. Hana these objects in view, must often be had in
Islands, through its Legislature, can deny the every beneficial attribute of ownership in [1907], 195 Mass., 262; Templar vs. Board of certain districts." (Barbier vs. Connolly [1884],
registry of vessel in its coastwise trade to the Batoand left with the naked title to a boat it Examiners of Barbers [1902], 131 Mich., 254, 113 U.S., 27; New Orleans Gas Co. vs.Lousiana
corporations having alien stockholders . could not use . barbers; Yick Wo vs.Hopkins [1886], 118 U. Light Co. [1885], 115 U.S., 650.) This is the same
OPINION. The guaranties extended by the Congress of the S.,.356, discrimination against Chinese; police power which the United States Supreme
1. Considered from a positive standpoint, there United States to the Philippine Islands have been Truax vs. Raich [1915], 239 U. S., 33; In reParrott Court say "extends to so dealing with the
can exist no measure of doubt as to the power of used in the same sense as like provisions found [1880], 1 Fed , 481; Fraser vs. McConway & conditions which exist in the state as to bring out
the Philippine Legislature to enact Act No. 2761. in the United States Constitution. While the "due Torley Co. [1897], 82 Fed , 257; Juniata of them the greatest welfare in of its people."
The Act of Congress of April 29, 1908, with its process of law and equal protection of the laws" Limestone Co. vs.Fagley [1898], 187 Penn., 193, (Bacon vs. Walker [1907], 204 U.S., 311.) For
specific delegation of authority to the clause of the Philippine Bill of Rights is couched all relating to the employment of aliens by quite similar reasons, none of the provision of
Government of the Philippine Islands to regulate in slightly different words than the private corporations.) the Philippine Organic Law could could have had
the transportation of merchandise and corresponding clause of the Fourteenth A literal application of general principles to the the effect of denying to the Government of the
passengers between ports or places therein, the Amendment to the United States Constitution, facts before us would, of course, cause the Philippine Islands, acting through its Legislature,
liberal construction given to the provisions of the the first should be interpreted and given the inevitable deduction that Act No. 2761 is the right to exercise that most essential,
Philippine Bill, the Act of Congress of July 1, same force and effect as the latter. (Kepner vs. unconstitutional by reason of its denial to a insistent, and illimitable of powers, the sovereign
1902, by the courts, and the grant by the Act of U.S. [1904], 195 U. S., 100; Sierra vs. Mortiga corporation, some of whole members are police power, in the promotion of the general
Congress of August 29, 1916, of general [1907], 204 U. S.,.470; U. S. vs. Bull [1910], 15 foreigners, of the equal protection of the laws. welfare and the public interest. (U. S. vs. Toribio
legislative power to the Philippine Legislature, Phil., 7.) The meaning of the Fourteenth Like all beneficient propositions, deeper [1910], 15 Phil., 85; Churchill and
are certainly superabundant authority for such a Amendment has been announced in classic research discloses provisos. Examples of a denial Tait vs. Rafferty [1915], 32 Phil., 580;
law. While the Act of the local legislature may in decisions of the United States Supreme Court. of rights to aliens notwithstanding the provisions Rubi vs. Provincial Board of Mindoro [1919], 39
a way be inconsistent with the Act of Congress Even at the expense of restating what is so well of the Fourteenth Amendment could be cited. Phil., 660.) Another notable exception permits of
regulating the coasting trade of the Continental known, these basic principles must again be set (Tragesser vs. Gray [1890], 73 Md., 250, licenses the regulation or distribution of the public
United States, yet the general rule that only such down in order to serve as the basis of this to sell spirituous liquors denied to persons not domain or the common property or resources of
laws of the United States have force in the decision. citizens of the United States; the people of the State, so that use may be
Philippines as are expressly extended thereto, The guaranties of the Fourteenth Amendment Commonwealth vs. Hana [1907], 195 Mass , 262, limited to its citizens. (Ex parte Gilleti [1915], 70
and the abnegation of power by Congress in and so of the first paragraph of the Philippine Bill excluding aliens from the right to peddle; Fla., 442; McCready vs. Virginia [1876], 94 U. S.,
favor of the Philippine Islands would leave no of Rights, are universal in their application to all Patsone vs. Commonwealth of Pennsylvania 391; Patsone vs.Commonwealth of Pennsylvania
starting point for convincing argument. As a person within the territorial jurisdiction, without [1914], 232 U. S. , 138, prohibiting the killing of [1914], 232U. S., 138.) Still another exception
matter of fact, counsel for petitioner does not regard to any differences of race, color, or any wild bird or animal by any unnaturalized permits of the limitation of employment in the
assail legislative action from this direction nationality. The word "person" includes aliens. foreign-born resident; Ex parte Gilleti [1915], 70 construction of public works by, or for, the State
(See U. S. vs. Bull [1910], 15 Phil., 7; (Yick Wo vs. Hopkins [1886], 118 U. S., 356; Fla., 442, discriminating in favor of citizens with or a municipality to citizens of the United States
Sinnot vs.Davenport [1859] 22 How., 227.) Truax vs. Raich [1915], 239 U. S., 33.) Private reference to the taking for private use of the or of the State. (Atkin vs. Kansas [1903],191 U. S.,
2. It is from the negative, prohibitory standpoint corporations, likewise, are "persons" within the common property in fish and oysters found in 207; Heim vs. McCall [1915], 239 U.S., 175;
that counsel argues against the constitutionality scope of the guaranties in so far as their property the public waters of the State; Heim vs. McCall Cranevs. New York [1915], 239 U. S., 195.) Even
of Act No. 2761. The first paragraph of the is concerned. (Santa Clara County vs. Southern [1915], 239 U. S.,.175, and Crane vs. New York as to classification, it is admitted that a State may
Philippine Bill of Rights of the Philippine Bill, Pac. R. R. Co. [1886], 118.U. S., 394; Pembina [1915], 239 U. S., 195, limiting employment on classify with reference to the evil to be
prevented; the question is a practical one, public use. (Book II, Tit. IV, Ch. I, Civil Code; might be considered to define those coastwise trade, and might thus furnish valuable
dependent upon experience. Spanish Law of Waters of August 3, 1866, arts 1, from whom the evil mainly is to be aid by which to ascertain and, if possible,
(Patsone vs.Commonwealth of Pennsylvania 2, 3.) Common carriers which in the Philippines feared, it properly may be picked out. A effectuate legislative intention.
[1914], 232 U. S., 138.) as in the United States and other countries are, lack of abstract symmetry does not 3. The power to regulate commerce,
To justify that portion of Act no. 2761 which as Lord Hale said, "affected with a public matter. The question is a practical one, expressly delegated to the Congress by
permits corporations or companies to obtain a interest," can only be permitted to use these dependent upon experience. . . . the Constitution, includes the power to
certificate of Philippine registry only on public waters as a privilege and under such The question therefore narrows itself nationalize ships built and owned in
condition that they be composed wholly of conditions as to the representatives of the to whether this court can say that the the United States by registries and
citizens of the Philippine Islands or of the United people may seem wise. (See De Villata vs. Stanley legislature of Pennsylvania was not enrollments, and the recording of the
States or both, as not infringing Philippine [1915], 32 Phil., 541.) warranted in assuming as its premise muniments of title of American vessels.
Organic Law, it must be done under some one of In Patsone vs. Commonwealth of Pennsylvania for the law that resident unnaturalized The Congress "may encourage or it may
the exceptions here mentioned This must be ([1913], 232 U.S., 138), a case herein before aliens were the peculiar source of the entirely prohibit such commerce, and it
done, moreover, having particularly in mind mentioned, Justice Holmes delivering the opinion evil that it desired to prevent. may regulate in any way it may see fit
what is so often of controlling effect in this of the United States Supreme Court said: (Barrett vs. Indiana,. 229 U.S., 26, 29; 57 between these two extremes."
jurisdiction — our local experience and our This statute makes it unlawful for any L. ed., 1050, 1052; 33 Sup. Ct. Rep., (U.S. vs. Craig [1886], 28 Fed., 795;
peculiar local conditions. unnaturalized foreign-born resident to 692.) Gibbons vs. Ogden [1824], 9 Wheat., 1;
To recall a few facts in geography, within the kill any wild bird or animal except in Obviously the question, so stated, is one The Passenger Cases [1849], 7 How.,
confines of Philippine jurisdictional limits are defense of person or property, and `to of local experience, on which this court 283.)
found more than three thousand islands. that end' makes it unlawful for such ought to be very slow to declare that Acting within the purview of such power, the
Literally, and absolutely, steamship lines are, for foreign-born person to own or be the state legislature was wrong in its first Congress of the United States had not been
an Insular territory thus situated, the arteries of possessed of a shotgun or rifle; with a facts (Adams vs. Milwaukee, 228 U.S., long convened before it enacted on September 1,
commerce. If one be severed, the life-blood of the penalty of $25 and a forfeiture of the 572, 583; 57 L. ed., 971,.977; 33 Sup. Ct. 1789, "An Act for Registering and Clearing
nation is lost. If on the other hand these arteries gun or guns. The plaintiff in error was Rep., 610.) If we might trust popular Vessels, Regulating the Coasting Trade, and for
are protected, then the security of the country found guilty and was sentenced to pay speech in some states it was right; but other purposes." Section 1 of this law provided
and the promotion of the general welfare is the abovementioned fine. The judgment it is enough that this court has no such that for any ship or vessel to obtain the benefits
sustained. Time and again, with such conditions was affirmed on successive appeals. knowledge of local conditions as to be of American registry, it must belong wholly to a
confronting it, has the executive branch of the (231 Pa., 46; 79 Atl., 928.) He brings the able to say that it was manifestly citizen or citizens of the United States "and no
Government of the Philippine Islands, always case to this court on the ground that wrong. . . . other." (1 Stat. at L., 55.) That Act was shortly
later with the sanction of the judicial branch, the statute is contrary to the 14th Judgment affirmed. after repealed, but the same idea was carried
taken a firm stand with reference to the presence Amendment and also is in We are inclined to the view that while Smith, Bell into the Acts of Congress of December 31, 1792
of undesirable foreigners. The Government has contravention of the treaty between the & Co. Ltd., a corporation having alien and February 18, 1793. (1 Stat. at L., 287,
thus assumed to act for the all-sufficient and United States and Italy, to which latter stockholders, is entitled to the protection 305.).Section 4 of the Act of 1792 provided that
primitive reason of the benefit and protection of country the plaintiff in error belongs . afforded by the due-process of law and equal in order to obtain the registry of any vessel, an
its own citizens and of the self-preservation and Under the 14th Amendment the protection of the laws clause of the Philippine oath shall be taken and subscribed by the owner,
integrity of its dominion. (In rePatterson [1902], objection is twofold; unjustifiably Bill of Rights, nevertheless, Act No. 2761 of the or by one of the owners thereof, before the
1 Phil., 93; Forbes vs. Chuoco, Tiaco and depriving the alien of property, and Philippine Legislature, in denying to officer authorized to make such registry,
Crossfield [1910], 16 Phil., 534;.228 U.S., 549; In discrimination against such aliens as a corporations such as Smith, Bell &. Co. Ltd., the declaring, "that there is no subject or citizen of
reMcCulloch Dick [1918], 38 Phil., 41.) Boats class. But the former really depends right to register vessels in the Philippines any foreign prince or state, directly or indirectly,
owned by foreigners, particularly by such solid upon the latter, since it hardly can be coastwise trade, does not belong to that vicious by way of trust, confidence, or otherwise,
and reputable firms as the instant claimant, disputed that if the lawful object, the species of class legislation which must always be interested in such vessel, or in the profits or
might indeed traverse the waters of the protection of wild life condemned, but does fall within authorized issues thereof." Section 32 of the Act of 1793
Philippines for ages without doing any particular (Geer vs. Connecticut, 161 U.S., 519; 40 exceptions, notably, within the purview of the even went so far as to say "that if any licensed
harm. Again, some evilminded foreigner might L. ed., 793; 16 Sup. Ct. Rep., 600), police power, and so does not offend against the ship or vessel shall be transferred to any person
very easily take advantage of such lavish warrants the discrimination, the, constitutional provision. who is not at the time of such transfer a citizen of
hospitality to chart Philippine waters, to obtain means adopted for making it effective This opinion might well be brought to a close at and resident within the United States, ... every
valuable information for unfriendly foreign also might be adopted. . . . this point. It occurs to us, however, that the such vessel with her tackle, apparel, and
powers, to stir up insurrection, or to prejudice The discrimination undoubtedly legislative history of the United States and the furniture, and the cargo found on board her,
Filipino or American commerce. Moreover, presents a more difficult question. But Philippine Islands, and, probably, the legislative shall be forefeited." In case of alienation to a
under the Spanish portion of Philippine law, the we start with reference to the evil to be history of other countries, if we were to take the foreigner, Chief Justice Marshall said that all the
waters within the domestic jurisdiction are prevented, and that if the class time to search it out, might disclose similar privileges of an American bottom were ipso
deemed part of the national domain, open to discriminated against is or reasonably attempts at restriction on the right to enter the facto forfeited. (U.S. vs. Willings and Francis
[1807], 4 Cranch, 48.) Even as late as 1873, the of the original Customs Administrative Act which upon the revenue in the trade which will best carry legislative intention into
Attorney-General of the United States was of the in turn was merely a reflection of the statutory coastwise, that this whole system is effect.
opinion that under the provisions of the Act of language of the first American Congress. projected. With full consciousness of the importance of the
December 31, 1792, no vessel in which a Provisions such as those in Act No. 2761, which The United States Congress in assuming its grave question, we nevertheless are clearly of the
foreigner is directly or indirectly interested can deny to foreigners the right to a certificate of responsibility of legislating wisely for a new opinion that the limitation of domestic
lawfully be registered as a vessel of the United. Philippine registry, are thus found not to be as country did so imbued with a spirit of ownership for purposes of obtaining a certificate
States. (14 Op. Atty.-Gen. [U.S.], 340.) radical as a first reading would make them Americanism. Domestic navigation and trade, it of Philippine registry in the coastwise trade to
These laws continued in force without contest, appear. decreed, could only be carried on by citizens of citizens of the Philippine Islands, and to citizens
although possibly the Act of March 3, 1825, may Without any subterfuge, the apparent purpose of the United States. If the representatives of the of the United States, does not violate the
have affected them, until amended by the Act of the Philippine Legislature is seen to be to enact American people acted in this patriotic manner provisions of paragraph 1 of section 3 of the Act
May 28, 1896 (29 Stat. at L., 188) which an anti-alien shipping act. The ultimate purpose to advance the national policy, and if their action of Congress of August 29, 1916 No treaty right
extended the privileges of registry from vessels of the Legislature is to encourage Philippine was accepted without protest in the courts, who relied upon Act No. 2761 of the Philippine
wholly owned by a citizen or citizens of the ship-building. This, without doubt, has, likewise, can say that they did not enact such beneficial Legislature is held valid and constitutional .
United States to corporations created under the been the intention of the United States Congress laws under the all-pervading police power, with The petition for a writ of mandamus is denied,
laws of any of the states thereof. The law, as in passing navigation or tariff laws on different the prime motive of safeguarding the country with costs against the petitioner. So ordered.
amended, made possible the deduction that a occasions. The object of such a law, the United and of promoting its prosperity? Quite similarly, Arellano, C.J., Torres, Johnson, Araullo, Street,
vessel belonging to a domestic corporation was States Supreme Court once said, was to the Philippine Legislature made up entirely of Avanceña and Moir, JJ., concur.
entitled to registry or enrollment even though encourage American trade, navigation, and ship- Filipinos, representing the mandate of the
some stock of the company be owned by aliens. building by giving American ship-owners Filipino people and the guardian of their rights,
The right of ownership of stock in a corporation exclusive privileges. (Old Dominion Steamship acting under practically autonomous powers,
was thereafter distinct from the right to hold the Co. vs. Virginia [1905], 198 U.S., 299; Kent's and imbued with a strong sense of Philippinism,
property by the corporation Commentaries, Vol. 3, p. 139.) has desired for these Islands safety from foreign
(Humphreys vs. McKissock [1890], 140 U.S., 304; In the concurring opinion of Justice Johnson in interlopers, the use of the common property
Queen vs. Arnaud [1846], 9 Q. B., 806; 29 Op. Gibbons vs. Ogden ([1824], 9 Wheat., 1) is found exclusively by its citizens and the citizens of the
Atty.-Gen. [U.S.],188.) the following: United States, and protection for the common
On American occupation of the Philippines, the Licensing acts, in fact, in legislation, are good of the people. Who can say, therefore,
new government found a substantive law in universally restraining acts; as, for especially can a court, that with all the facts and
operation in the Islands with a civil law history example, acts licensing gaming houses, circumstances affecting the Filipino people
which it wisely continued in force Article fifteen retailers of spirituous liquors, etc. The before it, the Philippine Legislature has erred in
of the Spanish Code of Commerce permitted any act, in this instance, is distinctly of that the enactment of Act No. 2761?
foreigner to engage in Philippine trade if he had character, and forms part of an Surely, the members of the judiciary are not
legal capacity to do so under the laws of his extensive system, the object of which is expected to live apart from active life, in
nation. When the Philippine Commission came to to encourage American shipping, and monastic seclusion amidst dusty tomes and
enact the Customs Administrative Act (No. 355) place them on an equal footing with the ancient records, but, as keen spectators of
in 1902, it returned to the old American policy of shipping of other nations. Almost every passing events and alive to the dictates of the
limiting the protection and flag of the United commercial nation reserves to its own general — the national — welfare, can incline
States to vessels owned by citizens of the United subjects a monopoly of its coasting the scales of their decisions in favor of that
States or by native inhabitants of the Philippine trade; and a countervailing privilege in solution which will most effectively promote the
Islands (Sec. 117.) Two years later, the same favor of American shipping is public policy. All the presumption is in favor of
body reverted to the existing Congressional law contemplated, in the whole legislation the constitutionally of the law and without good
by permitting certification to be issued to a of the United States on this subject. It is and strong reasons, courts should not attempt to
citizen of the United States or to a corporation or not to give the vessel an American nullify the action of the Legislature. "In
company created under the laws of the United character, that the license is granted; construing a statute enacted by the Philippine
States or of any state thereof or of the Philippine that effect has been correctly attributed Commission (Legislature), we deem it our duty
Islands (Act No. 1235, sec. 3.) The two to the act of her enrollment. But it is to not to give it a construction which would be
administration codes repeated the same confer on her American privileges, as repugnant to an Act of Congress, if the language
provisions with the necessary amplification of contradistinguished from foreign; and of the statute is fairly susceptible of another
inclusion of citizens or native inhabitants of the to preserve the. Government from construction not in conflict with the higher law."
Philippine Islands (Adm. Code of 1916, sec. fraud by foreigners, in surreptitiously (In re Guariña [1913], 24. Phil., 36; U.S. vs. Ten Yu
1345; Adm. Code of 1917, sec. 1172). And now intruding themselves into the American [1912], 24 Phil., 1.) That is the true construction
Act No. 2761 has returned to the restrictive idea commercial marine, as well as frauds
Republic of the Philippines as "the subject of the offense; stolen or On March 22, 1962, this Court issued the writ of rights of the other defendants. Next, it is
SUPREME COURT embezzled and proceeds or fruits of the offense," preliminary injunction prayed for in the petition. clear that a question of the lawfulness
Manila or "used or intended to be used as the means of However, by resolution dated June 29, 1962, the of a seizure can be raised onlyby
EN BANC committing the offense," which is described in writ was partially lifted or dissolved, insofar as one whose rights have been invaded.
G.R. No. L-19550 June 19, 1967 the applications adverted to above as "violation the papers, documents and things seized from Certainly, such a seizure, if unlawful,
HARRY S. STONEHILL, ROBERT P. BROOKS, of Central Bank Laws, Tariff and Customs Laws, the offices of the corporations above mentioned could not affect the constitutional
JOHN J. BROOKS and KARL BECK, petitioners, Internal Revenue (Code) and the Revised Penal are concerned; but, the injunction was rights of defendants whose property
vs. Code." maintained as regards the papers, documents had not been seized or the privacy of
HON. JOSE W. DIOKNO, in his capacity as Alleging that the aforementioned search and things found and seized in the residences of whose homes had not been disturbed;
SECRETARY OF JUSTICE; JOSE LUKBAN, in his warrants are null and void, as contravening the petitioners herein.7 nor could they claim for themselves the
capacity as Acting Director, National Bureau Constitution and the Rules of Court — Thus, the documents, papers, and things seized benefits of the Fourth Amendment,
of Investigation; SPECIAL PROSECUTORS because, inter alia: (1) they do not describe with under the alleged authority of the warrants in when its violation, if any, was with
PEDRO D. CENZON, EFREN I. PLANA and particularity the documents, books and things to question may be split into two (2) major groups, reference to the rights
MANUEL VILLAREAL, JR. and ASST. FISCAL be seized; (2) cash money, not mentioned in the namely: (a) those found and seized in the offices of another. Remus vs. United
MANASES G. REYES; JUDGE AMADO ROAN, warrants, were actually seized; (3) the warrants of the aforementioned corporations, and (b) States (C.C.A.)291 F. 501, 511. It
Municipal Court of Manila; JUDGE ROMAN were issued to fish evidence against the those found and seized in the residences of follows, therefore, that the question of
CANSINO, Municipal Court of Manila; JUDGE aforementioned petitioners in deportation cases petitioners herein. the admissibility of the evidence based
HERMOGENES CALUAG, Court of First filed against them; (4) the searches and seizures As regards the first group, we hold that on an alleged unlawful search and
Instance of Rizal-Quezon City Branch, and were made in an illegal manner; and (5) the petitioners herein have no cause of action to seizure does not extend to the personal
JUDGE DAMIAN JIMENEZ, Municipal Court of documents, papers and cash money seized were assail the legality of the contested warrants and defendants but
Quezon City, respondents. not delivered to the courts that issued the of the seizures made in pursuance thereof, for embraces only thecorporation whose
Paredes, Poblador, Cruz and Nazareno and Meer, warrants, to be disposed of in accordance with the simple reason that said corporations have property was taken. . . . (A
Meer and Meer and Juan T. David for petitioners. law — on March 20, 1962, said petitioners filed their respective personalities, separate and Guckenheimer & Bros. Co. vs. United
Office of the Solicitor General Arturo A. Alafriz, with the Supreme Court this original action distinct from the personality of herein States, [1925] 3 F. 2d. 786, 789,
Assistant Solicitor General Pacifico P. de Castro, for certiorari, prohibition, mandamusand petitioners, regardless of the amount of shares of Emphasis supplied.)
Assistant Solicitor General Frine C. Zaballero, injunction, and prayed that, pending final stock or of the interest of each of them in said With respect to the documents, papers and
Solicitor Camilo D. Quiason and Solicitor C. Padua disposition of the present case, a writ of corporations, and whatever the offices they hold things seized in the residences of petitioners
for respondents. preliminary injunction be issued restraining therein may be.8 Indeed, it is well settled that the herein, the aforementioned resolution of June 29,
CONCEPCION, C.J.: Respondents-Prosecutors, their agents and /or legality of a seizure can be contested only by the 1962, lifted the writ of preliminary injunction
Upon application of the officers of the representatives from using the effects seized as party whose rights have been impaired previously issued by this Court, 12 thereby, in
government named on the margin1 — aforementioned or any copies thereof, in the thereby,9 and that the objection to an unlawful effect, restraining herein Respondents-
hereinafter referred to as Respondents- deportation cases already adverted to, and that, search and seizure ispurely personal and cannot Prosecutors from using them in evidence against
Prosecutors — several judges2 — hereinafter in due course, thereafter, decision be rendered be availed of by third parties. 10 Consequently, petitioners herein.
referred to as Respondents-Judges — issued, on quashing the contested search warrants and petitioners herein may not validly object to the In connection with said documents, papers and
different dates,3 a total of 42 search warrants declaring the same null and void, and use in evidence against them of the documents, things, two (2) important questions need be
against petitioners herein4 and/or the commanding the respondents, their agents or papers and things seized from the offices and settled, namely: (1) whether the search warrants
corporations of which they were representatives to return to petitioners herein, premises of the corporations adverted to above, in question, and the searches and seizures made
officers,5 directed to the any peace officer, to in accordance with Section 3, Rule 67, of the since the right to object to the admission of said under the authority thereof, are valid or not, and
search the persons above-named and/or the Rules of Court, the documents, papers, things papers in evidence belongs exclusively to the (2) if the answer to the preceding question is in
premises of their offices, warehouses and/or and cash moneys seized or confiscated under the corporations, to whom the seized effects belong, the negative, whether said documents, papers
residences, and to seize and take possession of search warrants in question. and may not be invoked by the corporate officers and things may be used in evidence against
the following personal property to wit: In their answer, respondents-prosecutors in proceedings against them in their individual petitioners herein.1äwphï1.ñët
Books of accounts, financial records, alleged, 6 (1) that the contested search warrants capacity. 11 Indeed, it has been held: Petitioners maintain that the aforementioned
vouchers, correspondence, receipts, are valid and have been issued in accordance . . . that the Government's action in search warrants are in the nature of general
ledgers, journals, portfolios, credit with law; (2) that the defects of said warrants, if gaining possession of papers belonging warrants and that accordingly, the seizures
journals, typewriters, and other any, were cured by petitioners' consent; and (3) to the corporation did not relate to nor effected upon the authority there of are null and
documents and/or papers showing all that, in any event, the effects seized are did it affect the personal defendants. If void. In this connection, the
business transactions including admissible in evidence against herein these papers were unlawfully seized Constitution 13 provides:
disbursements receipts, balance sheets petitioners, regardless of the alleged illegality of and thereby the constitutional rights of The right of the people to be secure in
and profit and loss statements and the aforementioned searches and seizures. or any one were invaded, they were the their persons, houses, papers, and
Bobbins (cigarette wrappers). rights of the corporation and not the effects against unreasonable searches
and seizures shall not be violated, and outlaw the so-called general warrants. It is not was in line with the American common law rule, those great principles established by
no warrants shall issue but upon difficult to imagine what would happen, in times that the criminal should not be allowed to go free years of endeavor and suffering which
probable cause, to be determined by of keen political strife, when the party in power merely "because the constable has have resulted in their embodiment in the
the judge after examination under oath feels that the minority is likely to wrest it, even blundered," 16 upon the theory that the fundamental law of the land.19
or affirmation of the complainant and though by legal means. constitutional prohibition against unreasonable This view was, not only reiterated, but, also,
the witnesses he may produce, and Such is the seriousness of the irregularities searches and seizures is protected by means broadened in subsequent decisions on the same
particularly describing the place to be committed in connection with the disputed other than the exclusion of evidence unlawfully Federal Court. 20After reviewing previous
searched, and the persons or things to search warrants, that this Court deemed it fit to obtained, 17 such as the common-law action for decisions thereon, said Court held, in Mapp vs.
be seized. amend Section 3 of Rule 122 of the former Rules damages against the searching officer, against Ohio (supra.):
Two points must be stressed in connection with of Court 14 by providing in its counterpart, under the party who procured the issuance of the . . . Today we once again examine the
this constitutional mandate, namely: (1) that no the Revised Rules of Court 15 that "a search search warrant and against those assisting in the Wolf's constitutional documentation of
warrant shall issue but upon probable cause, to warrant shall not issue but upon probable execution of an illegal search, their criminal the right of privacy free from
be determined by the judge in the manner set causein connection with one specific offense." Not punishment, resistance, without liability to an unreasonable state intrusion, and after
forth in said provision; and (2) that the warrant satisfied with this qualification, the Court added unlawful seizure, and such other legal remedies its dozen years on our books, are led by
shall particularly describe the things to be seized. thereto a paragraph, directing that "no search as may be provided by other laws. it to close the only courtroom door
None of these requirements has been complied warrant shall issue for more than one specific However, most common law jurisdictions have remaining open to evidence secured by
with in the contested warrants. Indeed, the same offense." already given up this approach and eventually official lawlessness in flagrant abuse of
were issued upon applications stating that the The grave violation of the Constitution made in adopted the exclusionary rule, realizing that this that basic right, reserved to all persons
natural and juridical person therein named had the application for the contested search warrants is the only practical means of enforcing the as a specific guarantee against that very
committed a "violation of Central Ban Laws, was compounded by the description therein constitutional injunction against unreasonable same unlawful conduct. We hold that
Tariff and Customs Laws, Internal Revenue made of the effects to be searched for and seized, searches and seizures. In the language of Judge all evidence obtained by searches and
(Code) and Revised Penal Code." In other words, to wit: Learned Hand: seizures in violation of the Constitution
no specific offense had been alleged in said Books of accounts, financial records, As we understand it, the reason for the is, by that same authority, inadmissible
applications. The averments thereof with respect vouchers, journals, correspondence, exclusion of evidence competent as in a State.
to the offense committed were abstract. As a receipts, ledgers, portfolios, credit such, which has been unlawfully Since the Fourth Amendment's right of
consequence, it was impossible for the judges journals, typewriters, and other acquired, is that exclusion is the only privacy has been declared enforceable
who issued the warrants to have found the documents and/or papers showing all practical way of enforcing the against the States through the Due
existence of probable cause, for the same business transactions including constitutional privilege. In earlier times Process Clause of the Fourteenth, it is
presupposes the introduction of competent disbursement receipts, balance sheets the action of trespass against the enforceable against them by the same
proof that the party against whom it is sought and related profit and loss statements. offending official may have been sanction of exclusion as it used against
has performed particular acts, or Thus, the warrants authorized the search for and protection enough; but that is true no the Federal Government. Were it
committed specific omissions, violating a given seizure of records pertaining to all business longer. Only in case the prosecution otherwise, then just as without the
provision of our criminal laws. As a matter of transactions of petitioners herein, regardless of which itself controls the seizing Weeks rule the assurance against
fact, the applications involved in this case do not whether the transactions were legal or illegal. officials, knows that it cannot profit by unreasonable federal searches and
allege any specific acts performed by herein The warrants sanctioned the seizure of all their wrong will that wrong be seizures would be "a form of words,"
petitioners. It would be the legal heresy, of the records of the petitioners and the repressed.18 valueless and underserving of mention
highest order, to convict anybody of a "violation aforementioned corporations, whatever their In fact, over thirty (30) years before, the Federal in a perpetual charter of inestimable
of Central Bank Laws, Tariff and Customs Laws, nature, thus openly contravening the explicit Supreme Court had already declared: human liberties, so too, without that
Internal Revenue (Code) and Revised Penal command of our Bill of Rights — that the things If letters and private documents can rule the freedom from state invasions of
Code," — as alleged in the aforementioned to be seized be particularly described — as well thus be seized and held and used in privacy would be so ephemeral and so
applications — without reference to any as tending to defeat its major objective: the evidence against a citizen accused of an neatly severed from its conceptual nexus
determinate provision of said laws or elimination of general warrants. offense, the protection of the 4th with the freedom from all brutish means
To uphold the validity of the warrants in Relying upon Moncado vs. People's Court (80 Phil. Amendment, declaring his rights to be of coercing evidence as not to permit this
question would be to wipe out completely one of 1), Respondents-Prosecutors maintain that, even secure against such searches and Court's high regard as a
the most fundamental rights guaranteed in our if the searches and seizures under consideration seizures, is of no value, and, so far as freedom "implicit in the concept of
Constitution, for it would place the sanctity of were unconstitutional, the documents, papers those thus placed are concerned, might ordered liberty." At the time that the
the domicile and the privacy of communication and things thus seized are admissible in evidence as well be stricken from the Court held in Wolf that the amendment
and correspondence at the mercy of the whims against petitioners herein. Upon mature Constitution. The efforts of the courts was applicable to the States through
caprice or passion of peace officers. This is deliberation, however, we are unanimously of and their officials to bring the guilty to the Due Process Clause, the cases of
precisely the evil sought to be remedied by the the opinion that the position taken in the punishment, praiseworthy as they are, this Court as we have seen, had
constitutional provision above quoted — to Moncado case must be abandoned. Said position are not to be aided by the sacrifice of steadfastly held that as to federal
officers the Fourth Amendment like effect as other basic rights secured party for whose benefit the illegality had been matter open for determination in appropriate
included the exclusion of the evidence by its Due Process Clause, we can no committed. cases in the future.
seized in violation of its provisions. longer permit it to be revocable at the In their Motion for Reconsideration and We hold, therefore, that the doctrine adopted in
Even Wolf "stoutly adhered" to that whim of any police officer who, in the Amendment of the Resolution of this Court dated the Moncado case must be, as it is hereby,
proposition. The right to when name of law enforcement itself, chooses June 29, 1962, petitioners allege that Rooms Nos. abandoned; that the warrants for the search of
conceded operatively enforceable to suspend its enjoyment. Our decision, 81 and 91 of Carmen Apartments, House No. three (3) residences of herein petitioners, as
against the States, was not susceptible founded on reason and truth, gives to the 2008, Dewey Boulevard, House No. 1436, specified in the Resolution of June 29, 1962, are
of destruction by avulsion of the individual no more than that which the Colorado Street, and Room No. 304 of the Army- null and void; that the searches and seizures
sanction upon which its protection and Constitution guarantees him to the Navy Club, should be included among the therein made are illegal; that the writ of
enjoyment had always been deemed police officer no less than that to which premises considered in said Resolution as preliminary injunction heretofore issued, in
dependent under the Boyd, Weeks and honest law enforcement is entitled, and, residences of herein petitioners, Harry S. connection with the documents, papers and
Silverthorne Cases. Therefore, in to the courts, that judicial integrity so Stonehill, Robert P. Brook, John J. Brooks and other effects thus seized in said residences of
extending the substantive protections necessary in the true administration of Karl Beck, respectively, and that, furthermore, herein petitioners is hereby made permanent;
of due process to all constitutionally justice. (emphasis ours.) the records, papers and other effects seized in that the writs prayed for are granted, insofar as
unreasonable searches — state or Indeed, the non-exclusionary rule is contrary, the offices of the corporations above referred to the documents, papers and other effects so
federal — it was logically and not only to the letter, but also, to the spirit of the include personal belongings of said petitioners seized in the aforementioned residences are
constitutionally necessarily that the constitutional injunction against unreasonable and other effects under their exclusive concerned; that the aforementioned motion for
exclusion doctrine — an essential part searches and seizures. To be sure, if the possession and control, for the exclusion of Reconsideration and Amendment should be, as it
of the right to privacy — be also applicant for a search warrant has competent which they have a standing under the latest is hereby, denied; and that the petition herein is
insisted upon as an essential ingredient evidence to establish probable cause of the rulings of the federal courts of federal courts of dismissed and the writs prayed for denied, as
of the right newly recognized by the commission of a given crime by the party against the United States. 22 regards the documents, papers and other effects
Wolf Case. In short, the admission of the whom the warrant is intended, then there is no We note, however, that petitioners' theory, seized in the twenty-nine (29) places, offices and
new constitutional Right by Wolf could reason why the applicant should not comply regarding their alleged possession of and control other premises enumerated in the same
not tolerate denial of its most important with the requirements of the fundamental law. over the aforementioned records, papers and Resolution, without special pronouncement as to
constitutional privilege, namely, the Upon the other hand, if he has no such effects, and the alleged "personal" nature costs.
exclusion of the evidence which an competent evidence, then it is not possible for the thereof, has Been Advanced, notin their petition It is so ordered.
accused had been forced to give by Judge to find that there is probable cause, and, or amended petition herein, but in the Motion for Reyes, J.B.L., Dizon, Makalintal, Bengzon, J.P.,
reason of the unlawful seizure. To hold hence, no justification for the issuance of the Reconsideration and Amendment of the Zaldivar and Sanchez, JJ., concur.
otherwise is to grant the right but in warrant. The only possible explanation (not Resolution of June 29, 1962. In other words, said CASTRO, J., concurring and dissenting:
reality to withhold its privilege and justification) for its issuance is the necessity theory would appear to be readjustment of that From my analysis of the opinion written by Chief
enjoyment. Only last year the Court of fishing evidence of the commission of a crime. followed in said petitions, to suit the approach Justice Roberto Concepcion and from the import
itself recognized that the purpose of the But, then, this fishing expedition is indicative of intimated in the Resolution sought to be of the deliberations of the Court on this case, I
exclusionary rule to "is to deter — to the absence of evidence to establish a probable reconsidered and amended. Then, too, some of gather the following distinct conclusions:
compel respect for the constitutional cause. the affidavits or copies of alleged affidavits 1. All the search warrants served by the
guaranty in the only effectively available Moreover, the theory that the criminal attached to said motion for reconsideration, or National Bureau of Investigation in this
way — by removing the incentive to prosecution of those who secure an illegal search submitted in support thereof, contain either case are general warrants and are
disregard it" . . . . warrant and/or make unreasonable searches or inconsistent allegations, or allegations therefore proscribed by, and in
The ignoble shortcut to conviction left seizures would suffice to protect the inconsistent with the theory now advanced by violation of, paragraph 3 of section 1 of
open to the State tends to destroy the constitutional guarantee under consideration, petitioners herein. Article III (Bill of Rights) of the
entire system of constitutional overlooks the fact that violations thereof are, in Upon the other hand, we are not satisfied that Constitution;
restraints on which the liberties of the general, committed By agents of the party in the allegations of said petitions said motion for 2. All the searches and seizures
people rest. Having once recognized power, for, certainly, those belonging to the reconsideration, and the contents of the conducted under the authority of the
that the right to privacy embodied in minority could not possibly abuse a power they aforementioned affidavits and other papers said search warrants were
the Fourth Amendment is enforceable do not have. Regardless of the handicap under submitted in support of said motion, have consequently illegal;
against the States, and that the right to which the minority usually — but, sufficiently established the facts or conditions 3. The non-exclusionary rule
be secure against rude invasions of understandably — finds itself in prosecuting contemplated in the cases relied upon by the enunciated in Moncado vs. People, 80
privacy by state officers is, therefore agents of the majority, one must not lose sight of petitioners; to warrant application of the views Phil. 1, should be, and is declared,
constitutional in origin, we can no the fact that the psychological and moral effect of therein expressed, should we agree thereto. At abandoned;
longer permit that right to remain an the possibility 21 of securing their conviction, is any rate, we do not deem it necessary to express 4. The search warrants served at the
empty promise. Because it is watered down by the pardoning power of the our opinion thereon, it being best to leave the three residences of the petitioners
enforceable in the same manner and to are expressly declared null and void the
searches and seizures therein made searches and seizures made thereunder. the petitioners in all the other search warrants will be secure from an unreasonable
are expressly declared illegal; and the Whether or not the petitioners possess legal directed against the petitioners and/or "the search or an unreasonable seizure. So it
writ of preliminary injunction standing the said warrants are void and remain President and/or General Manager" of the was that the Fourth Amendment could
heretofore issued against the use of the void, and the searches and seizures were illegal particular corporation. (see pages 5-24 of not tolerate the warrantless search of
documents, papers and effect seized in and remain illegal. No inference can be drawn Petitioners' Reply of April 2, 1962). The searches the hotel room in Jeffers, the purloining
the said residences is made permanent; from the words of the Constitution that "legal and seizures were to be made, and were actually of the petitioner's private papers
and standing" or the lack of it is a determinant of the made, in the in Gouled, or the surreptitious
5. Reasoning that the petitioners have nullity or validity of a search warrant or of the "office/house/warehouse/premises" owned by electronic surveilance in Silverman.
not in their pleadings satisfactorily lawfulness or illegality of a search or seizure. or under the control of the petitioners. Countless other cases which have come
demonstrated that they have legal On the question of legal standing, I am of the Ownership of matters seized gives "standing." to this Court over the years have
standing to move for the suppression of conviction that, upon the pleadings submitted to Ownership of the properties seized alone entitles involved a myriad of differing factual
the documents, papers and effects this Court the petitioners have the requisite legal the petitioners to bring a motion to return and contexts in which the protections of the
seized in the places other than the standing to move for the suppression and return suppress, and gives them standing as persons Fourth Amendment have been
three residences adverted to above, the of the documents, papers and effects that were aggrieved by an unlawful search and seizure appropriately invoked. No doubt, the
opinion written by the Chief seized from places other than their family regardless of their location at the time of future will bring countless others. By
Justice refrains fromexpressly declaring residences. seizure. Jones vs. United States, 362 U.S. 257, 261 nothing we say here do we either
as null and void the such warrants Our constitutional provision on searches and (1960) (narcotics stored in the apartment of a foresee or foreclose factual situations
served at such other places and as seizures was derived almost verbatim from the friend of the defendant); Henzel vs. United States, to which the Fourth Amendment may
illegal the searches and seizures made Fourth Amendment to the United States 296 F. 2d. 650, 652-53 (5th Cir. 1961), (personal be applicable. (Hoffa vs. U.S., 87 S. Ct.
therein, and leaves "the matter open for Constitution. In the many years of judicial and corporate papers of corporation of which the 408 (December 12, 1966). See also U.S.
determination in appropriate cases in construction and interpretation of the said defendant was president), United States vs. vs. Jeffers, 342 U.S. 48, 72 S. Ct. 93
the future." constitutional provision, our courts have Jeffers, 342 U.S. 48 (1951) (narcotics seized in an (November 13, 1951). (Emphasis
It is precisely the position taken by the Chief invariably regarded as doctrinal the apartment not belonging to the supplied).
Justice summarized in the immediately pronouncement made on the Fourth Amendment defendant); Pielow vs. United States, 8 F. 2d 492, Control of premises searched gives "standing."
preceding paragraph (numbered 5) with which I by federal courts, especially the Federal Supreme 493 (9th Cir. 1925) (books seized from the Independent of ownership or other personal
am not in accord. Court and the Federal Circuit Courts of Appeals. defendant's sister but belonging to the interest in the records and documents seized, the
I do not share his reluctance or unwillingness to The U.S. doctrines and pertinent cases on defendant); Cf. Villano vs. United States, 310 F. 2d petitioners have standing to move for return and
expressly declare, at this time, the nullity of the standing to move for the suppression or return 680, 683 (10th Cir. 1962) (papers seized in desk suppression by virtue of their proprietary or
search warrants served at places other than the of documents, papers and effects which are the neither owned by nor in exclusive possession of leasehold interest in many of the premises
three residences, and the illegibility of the fruits of an unlawful search and seizure, may be the defendant). searched. These proprietary and leasehold
searches and seizures conducted under the summarized as follows; (a) ownership of In a very recent case (decided by the U.S. interests have been sufficiently set forth in their
authority thereof. In my view even the documents, papers and effects gives "standing;" Supreme Court on December 12, 1966), it was motion for reconsideration and need not be
exacerbating passions and prejudices (b) ownership and/or control or possession — held that under the constitutional provision recounted here, except to emphasize that the
inordinately generated by the environmental actual or constructive — of premises searched against unlawful searches and seizures, a person petitioners paid rent, directly or indirectly, for
political and moral developments of this case gives "standing"; and (c) the "aggrieved person" places himself or his property within a practically all the premises searched (Room 91,
should not deter this Court from forthrightly doctrine where the search warrant and the constitutionally protected area, be it his home or 84 Carmen Apts; Room 304, Army & Navy Club;
laying down the law not only for this case but as sworn application for search warrant are his office, his hotel room or his automobile: Premises 2008, Dewey Boulevard; 1436
well for future cases and future "primarily" directed solely and exclusively Where the argument falls is in its Colorado Street); maintained personal offices
generations. All the search warrants, without against the "aggrieved person," gives "standing." misapprehension of the fundamental within the corporate offices (IBMC, USTC); had
exception, in this case are admittedly general, An examination of the search warrants in this nature and scope of Fourth made improvements or furnished such offices; or
blanket and roving warrants and are therefore case will readily show that, excepting three, all Amendment protection. What the had paid for the filing cabinets in which the
admittedly and indisputably outlawed by the were directed against the petitioners personally. Fourth Amendment protects is the papers were stored (Room 204, Army & Navy
Constitution; and the searches and seizures In some of them, the petitioners were named security a man relies upon when Club); and individually, or through their
made were therefore unlawful. That the personally, followed by the designation, "the heplaces himself or his property within a respective spouses, owned the controlling stock
petitioners, let us assume in gratia argumente, President and/or General Manager" of the constitutionally protected area, be it his of the corporations involved. The petitioners'
have no legal standing to ask for the suppression particular corporation. The three warrants home or his office, his hotel room or his proprietary interest in most, if not all, of the
of the papers, things and effects seized from excepted named three corporate defendants. But automobile. There he is protected from premises searched therefore independently
places other than their residences, to my mind, the "office/house/warehouse/premises" unwarranted governmental intrusion. gives them standing to move for the return and
cannot in any manner affect, alter or otherwise mentioned in the said three warrants were also And when he puts some thing in his suppression of the books, papers and affects
modify the intrinsic nullity of the search the same "office/house/warehouse/premises" filing cabinet, in his desk drawer, or in seized therefrom.
warrants and the intrinsic illegality of the declared to be owned by or under the control of his pocket, he has the right to know it
In Jones vs. United States, supra, the U.S. Supreme own or the corporation's was entitled to seizure." It tells us that appellant The latest United States decision squarely in
Court delineated the nature and extent of the protection against unreasonable search should not have been precluded from point is United States vs. Birrell, 242 F. Supp. 191
interest in the searched premises necessary to and seizure. Under the circumstances objecting to the Postal Inspector's (1965, U.S.D.C. S.D.N.Y.). The defendant had
maintain a motion to suppress. After reviewing in the case at bar, the search and search and seizure of the corporation's stored with an attorney certain files and papers,
what it considered to be the unduly technical seizure were unreasonable and books and records merely because the which attorney, by the name of Dunn, was not, at
standard of the then prevailing circuit court unlawful. The motion for the return of appellant did not show ownership or the time of the seizing of the records, Birrell's
decisions, the Supreme Court said (362 U.S. 266): seized article and the suppression of possession of the books and records or attorney. * Dunn, in turn, had stored most of the
We do not lightly depart from this the evidence so obtained should be a substantial possessory interest in the records at his home in the country and on a farm
course of decisions by the lower courts. granted. (Emphasis supplied). invade premises . . . (Henzel vs. United which, according to Dunn's affidavit, was under
We are persuaded, however, that it is Time was when only a person who had property States, 296 F. 2d at 651). . his (Dunn's) "control and management." The
unnecessarily and ill-advised to import in interest in either the place searched or the Henzel was soon followed by Villano vs. United papers turned out to be private, personal and
into the law surrounding the articles seize had the necessary standing to States, 310 F. 2d 680, 683, (10th Cir. 1962). business papers together with corporate books
constitutional right to be free from invoke the protection of the exclusionary rule. In Villano, police officers seized two notebooks and records of certain unnamed corporations in
unreasonable searches and seizures But in MacDonald vs. Unite States, 335 U.S. 461 from a desk in the defendant's place of which Birrell did not even claim ownership. (All
subtle distinctions, developed and (1948), Justice Robert Jackson joined by Justice employment; the defendant did not claim of these type records were seized in the case at
refined by the common law in evolving Felix Frankfurter, advanced the view that "even a ownership of either; he asserted that several bar). Nevertheless, the search in Birrell was held
the body of private property law which, guest may expect the shelter of the rooftree he is employees (including himself) used the invalid by the court which held that even though
more than almost any other branch of under against criminal intrusion." This view notebooks. The Court held that the employee had Birrell did not own the premises where the
law, has been shaped by distinctions finally became the official view of the U.S. a protected interest and that there also was an records were stored, he had "standing" to move
whose validity is largely historical. Supreme Court and was articulated in United invasion of privacy. for the return of all the papers and properties
Even in the area from which they States vs. Jeffers, 432 U.S 48 (1951). Nine years Both Henzel andVillano considered also the fact seized. The court, relying on Jones vs.
derive, due consideration has led to the later, in 1960, in Jones vs. Unite States, 362 U.S. that the search and seizure were "directed at" U.S.,supra; U.S. vs. Antonelli Fireworks Co., 53 F.
discarding of those distinctions in the 257, 267, the U.S. Supreme Court went a step the moving defendant. Henzel vs. United States, Supp. 870, Aff'd 155 F. 2d 631: Henzel vs. U.S.,
homeland of the common law. See further. Jones was a mere guest in the apartment 296 F. 2d at 682; Villano vs. United States, 310 F. supra; andSchwimmer vs. U.S., supra, pointed out
Occupiers' Liability Act, 1957, 5 and 6 unlawfully searched but the Court nonetheless 2d at 683. that
Eliz. 2, c. 31, carrying out Law Reform declared that the exclusionary rule protected In a case in which an attorney closed his law It is overwhelmingly established that
Committee, Third Report, Cmd. 9305. him as well. The concept of "person aggrieved by office, placed his files in storage and went to the searches here in question were
Distinctions such as those between an unlawful search and seizure" was enlarged to Puerto Rico, the Court of Appeals for the Eighth directed solely and exclusively against
"lessee", "licensee," "invitee," "guest," include "anyone legitimately on premise where Circuit recognized his standing to move to quash Birrell. The only person suggested in
often only of gossamer strength, ought the search occurs." as unreasonable search and seizure under the the papers as having violated the law
not be determinative in fashioning Shortly after the U.S. Supreme Fourth Amendment of the U.S. Constitution a was Birrell. The first search warrant
procedures ultimately referable to Court's Jones decision the U.S. Court of Appeals grand jury subpoena duces tecum directed to the described the records as having been
constitutional safeguards. See for the Fifth Circuit held that the defendant custodian of his files. The Government used "in committing a violation of Title
also Chapman vs. United States, 354 U.S. organizer, sole stockholder and president of a contended that the petitioner had no standing 18, United States Code, Section 1341,
610, 616-17 (1961). corporation had standing in a mail fraud because the books and papers were physically in by the use of the mails by one Lowell M.
It has never been held that a person with prosecution against him to demand the return the possession of the custodian, and because the Birrell, . . ." The second search warrant
requisite interest in the premises searched must and suppression of corporate property. Henzel subpoena was directed against the custodian. was captioned: "United States of
own the property seized in order to have vs. United States, 296 F 2d 650, 652 (5th Cir. The court rejected the contention, holding that America vs. Lowell M. Birrell. (p. 198)
standing in a motion to return and suppress. 1961), supra. The court conclude that the Schwimmer legally had such Possession (actual or constructive), no
In Alioto vs. United States, 216 F. Supp. 48 (1963), defendant had standing on two independent possession, control and unrelinquished less than ownership, gives standing to
a Bookkeeper for several corporations from grounds: First — he had a sufficient interest in personal rights in the books and papers move to suppress. Such was the rule
whose apartment the corporate records were the property seized, and second — he had an as not to enable the question of even before Jones. (p. 199)
seized successfully moved for their return. adequate interest in the premises searched (just unreasonable search and seizure to be If, as thus indicated Birrell had at least
In United States vs. Antonelli, Fireworks Co., 53 F. like in the case at bar). A postal inspector had escaped through the mere procedural constructive possession of the records
Supp. 870, 873 (W D. N. Y. 1943), the unlawfully searched the corporation' premises device of compelling a third-party stored with Dunn, it matters not
corporation's president successfully moved for and had seized most of the corporation's book naked possessor to produce and deliver whether he had any interest in the
the return and suppression is to him of both and records. Looking to Jones, the court them. Schwimmer vs. United States, 232 premises searched. See also Jeffers v.
personal and corporate documents seized from observed: F. 2d 855, 861 (8th Cir. 1956). United States, 88 U.S. Appl. D.C. 58, 187
his home during the course of an illegal search: Jones clearly tells us, therefore, what is Aggrieved person doctrine where the search F. 2d 498 (1950), affirmed 432 U.S. 48,
The lawful possession by Antonelli of not required qualify one as a "person warrant s primarily directed against said person 72 S. Ct. 93, 96 L. Ed. 459 (1951).
documents and property, "either his aggrieved by an unlawful search and gives "standing."
The ruling in the Birrell case was reaffirmed on corporate papers will have to be left to the lower
motion for reargument; the United States did not courts which issued the void search warrants in
appeal from this decision. The factual situation ultimately effecting the suppression and/or
in Birrell is strikingly similar to the case of the return of the said documents.
present petitioners; as in Birrell, many personal And as unequivocally indicated by the
and corporate papers were seized from premises authorities above cited, the petitioners likewise
not petitioners' family residences; as have clear legal standing to move for the
in Birrell,the searches were "PRIMARILY suppression of purely corporate papers as
DIRECTED SOLETY AND EXCLUSIVELY" against "President and/or General Manager" of the
the petitioners. Still both types of documents corporations involved as specifically mentioned
were suppressed in Birrell because of the illegal in the void search warrants.
search. In the case at bar, the petitioners Finally, I must articulate my persuasion that
connection with the premises raided is much although the cases cited in my disquisition were
closer than in Birrell. criminal prosecutions, the great clauses of the
Thus, the petitioners have full standing to move constitutional proscription on illegal searches
for the quashing of all the warrants regardless and seizures do not withhold the mantle of their
whether these were directed against residences protection from cases not criminal in origin or
in the narrow sense of the word, as long as the nature.
documents were personal papers of the
petitioners or (to the extent that they were
corporate papers) were held by them in a
personal capacity or under their personal
control.
Prescinding a from the foregoing, this Court, at
all events, should order the return to the
petitioners all personaland private papers and
effects seized, no matter where these were
seized, whether from their residences or
corporate offices or any other place or places.
The uncontradicted sworn statements of the
petitioners in their, various pleadings submitted
to this Court indisputably show that amongst the
things seized from the corporate offices and
other places were personal and private papers
and effects belonging to the petitioners.
If there should be any categorization of the
documents, papers and things which where the
objects of the unlawful searches and seizures, I
submit that the grouping should be:
(a) personal or private papers of the petitioners
were they were unlawfully seized, be it their
family residences offices, warehouses and/or
premises owned and/or possessed (actually or
constructively) by them as shown in all the
search and in the sworn applications filed in
securing the void search warrants and (b)
purely corporate papers belonging to
corporations. Under such categorization or
grouping, the determination of which unlawfully
seized papers, documents and things
are personal/private of the petitioners or purely
Republic of the Philippines was also dismissed on September 13, 1955. On but should have ordered only the striking out of Department of National Defense to pay
SUPREME COURT appeal, this Court reversed the order of the moot portion of appellants' first cause of to defendant Allied Technologists, Inc.
Manila dismissal, under the impression that the real action, citing Pacal v. Ramos, 81 Phil. 30, 33; 27 the amounts retained by the
EN BANC controversy was confined merely between C.J.S. 209-210; Bush v. Murray, 205 N.Y.S. 21, 26, Department of National Defense is
G.R. No. L-15526 December 28, 1963 defendant Panlilio and plaintiffs Ruiz and 209 App. Div. 563; Bearden v. Longino. 190 S.E. academic, groundless, unfounded and
ENRIQUE J. L. RUIZ and JOSE V. HERRERA, in Herrera over the 15% of the contract price, 12, 183 Ga. 819. Appellants further argue in their malicious"; that the said allegations of
their behalf and as minority stockholders of which was retained by the Department of brief that they base their cause of action on the separate answers of defendants
the Allied Technologists, Inc., plaintiffs- National Defense. The retention of the 15% of article 21, New Civil Code. Pablo Panlilio and Allied Technologists,
appellants, the contract price in the sum of P34,740.00 was The appeal has no merit. The order appealed Inc., are not and can not be denied by
vs. made to answer for any claim or lien that might from, states — plaintiffs, and that it is this Court's
THE SECRETARY OF NATIONAL DEFENSE, arise, in the course of the construction. The last Considering the manifestation of understanding that defendant has no
COL. NICOLAS JIMENEZ, Head of the Engineer case, however, was remanded to the court of counsel for plaintiffs that the latter objection to the dismissal of this case
Group, Office of the Secretary of National origin, for further proceedings. Panlilio and the would insist on the hearing of the — it is ordered that this case be, as it is
Defense, THE FINANCE OFFICER of the corporation filed their amended answers, stating above-entitled case for the purpose of hereby DISMISSED, with costs against
Department of National Defense, THE that the amount retained by the Department of establishing their right to be plaintiffs.
AUDITOR of the Dept. of National Defense, National Defense was already paid to defendant recognized as the architects of the A cursory reading of pars. 18 and 19 of the
PABLO D. PANLILIO and ALLIED corporation, as sought for by the plaintiffs in Veterans Hospital together with amended complaint with injunction and prayers
TECHNOLOGISTS, INC., defendants-appellees. their complaint. In view of this development, the defendant Pablo D. Panlilio, and it (1) and (2) thereof, reveals that appellants' first
Montenegro, Madayag, Viola and Hernandez for trial court invited the parties to a conference, in appearing that plaintiffs' Amended cause of action is composed of two parts, as
plaintiffs-appellants. which the plaintiffs indicated their conformity, to Complaint with Injunction prays, follows:
Office of the Solicitor General for defendant- the dismissal of the complaint with respect to the among others, "That this Honorable (a) A judicial declaration or recognition that
appellee Secretary of National Defense. retention of the 15% of the contract price; but Court order defendants Secretary of appellants Ruiz and Herrera, together with
Rosauro Alvarez for defendant-appellee Allied insisted upon the hearing of the second question, National Defense, Col. Nicolas Jimenez, appellee Panlilio, were the architects of the
Technologists, Inc. which sought the declaration and recognition of and the Finance Officer and Auditor of Veterans Hospital; and
L. D. Panlilio for defendant-appellee Pablo plaintiffs Ruiz and Herrera, as two of the three the Department of National Defense to (b) An injunction restraining the appellee
Panlilio. architects of the hospital. The trial court, pay the Allied Technologists, Inc., the government officials paying their co-appellee
PAREDES, J.: nevertheless, dismissed the complaint, for being balance unpaid by virtue of the contract Panlilio the sum retained by the former, as per
This is an appeal by plaintiffs Enrique J. L. Ruiz already academic and moot. Hence, this appeal executed on September 11, 1950 stipulation contained in the contract for the
and Jose V. Herrera from an Order of the Court of by plaintiffs-appellants, who alleged in their lone (Annex "C" hereof) for services construction of the hospital because "they will
First Instance of Manila, in Civil Case No. 26601, assignment of error that "the lower court rendered under Title I and to be not only be deprived of the monetary value of
dated February 25, 1959, dismissing plaintiffs' grievously erred in ordering the dismissal of the rendered under Title II of said contract; the services legally due them, but that their
complaint. case, with costs against the plaintiffs". that paragraph 4 of defendant Pablo professional prestige and standing will be
On September 11, 1950, a contract was executed Plaintiffs-appellants contend that the only Panlilio's Amended Answer to said seriously impaired".lawphil.net
between the defendant Allied Technologists, Inc. ground relied upon by the lower court to dismiss complaint alleges "That whatever As appellants admitted, they no longer consider
(corporation, for short), and the Republic of the the case without any trial is the allegation amounts were retained by the Dept. of the Secretary and other officials of the
Philippines, for the construction of the Veterans contained in pars. 4 and (e) of the answers of the National Defense on the contract price, Department of National Defense, as parties-
Memorial Hospital. Ruiz and Herrera were appellees Panlilio and Allied Technologists, Inc., which retention was authorized by the defendants in the case, said officials can no
stockholders and officers of the corporation. The respectively; that the amount retained by the contract, was paid by the Dept. of longer be compelled to recognize the appellants,
construction of the hospital was terminated in Department of National Defense had already National Defense to the Allied Ruiz and Herrera, as co-architects with appellee
1955. On August 20, 1954, and June 20, 1955, been paid; that except for this bare allegation of Technologists Inc. as sought by the Panlilio of the Veterans Hospital. And, as the
Civil Cases Nos. 23778 and 26601, respectively, the appellees, no evidence was adduced to prove plaintiffs; that paragraph (e) of the amount retained by the Department on the
were filed by same plaintiffs herein, making as the truth of the same; that even assuming, for the ANSWER TO THE AMENDED contract price, which retention was authorized
parties-defendants in both cases, the same sake of argument, that the same is true, COMPLAINT of defendant Allied by the contract, was, as sought by the appellants,
defendants herein, the Secretary of National nevertheless the first part of the first cause of Technologists, Inc., also alleges "That already paid to the Allied Technologists, Inc.,
Defense, Col. Nicolas Jimenez (Engineer), the action still remains, for which they had insisted whatever amounts were retained by there is nothing more for the trial court to
Finance Officer, and the Auditor of the Dept. of upon a hearing in order to establish their right to the Department of National Defense, decide, even without first ruling on the special
National Defense, Pablo D. Panlilio and Allied be recognized as two of the three architects of per the stipulations contained in the defenses of appellees Panlilio and the
Technologists, Inc. Civil Case No. 23778 was the hospital; that because the pleadings do not contract, have already been paid by the corporation.
dismissed by the CFI on October 12, 1954; and show any ground which might legally justify the Allied Technologists, Inc. and, Moreover, by discarding the Secretary and other
the dismissal was affirmed by this Court on July action taken by the lower court, the latter should therefore, the present action seeking to officials of the Department of National Defense,
7, 1955, in G.R. No. L-8638. Civil Case No. 26601 not have ordered the dismissal of the entire case compel the aforementioned as parties-defendants, appellants could not
expect the trial court to order them to recognize allegations regarding alleged threatened said violation. The pleadings do not show that
and declare appellants as co-architects in the payment of P34,740.00 to Panlilio alone, because damages were ever asked or alleged, in
construction of the hospital. And this must be so, "they will not only be deprived of the monetary connection with this case, predicated upon the
because the construction agreement expressly value of the services legally due them, but that article aforecited. And under the facts and
provides that the architect being contracted by their professional prestige and standing will be circumstances obtaining in this case, one cannot
the Government was appellee Pablo Panlilio. The seriously impaired". When the very defendant plausibly sustain the contention that the failure
said agreement states that the same was entered Allied Technologists, Inc. itself asserted in its or refusal to extend the recognition was an act
into by the government, party of the first part answer the amended complaint, that the amount contrary to morals, good customs or public
and "Allied Technologists, Inc. . . . and Mr. Pablo was paid to it, an assertion which was not at all policy.
D. Panlilio, architect, hereinafter called the party denied, plaintiffs-appellants' cause of action IN VIEW HEREOF, the order appealed from is
of the second part" and "The Allied under said par. 19 dissipated entirely. affirmed, with costs against plaintiffs-appellants.
Technologists, Inc. for rendering engineering There is a veiled insinuation that appellants, Bengzon, C.J., Padilla, Bautista Angelo, Labrador,
services and Mr. Pablo D. Panlilio, architect, for thesis would fall under the provisions of the Concepcion, Reyes, J.B.L., Barrera, Dizon, Regala
rendering architectural services". And the Rules on declaratory relief, because appellants and Makalintal, JJ., concur.
contract was signed for the Government by wanted merely a declaration of their rights in a
"Ramon Magsaysay, Secretary of National contract in which they were interested. The trial
Defense (party of the first part," and "Allied court, however, was correct in refusing to make
Technologists, Inc., by Enrique J. L. Ruiz, such declaration, because it was not necessary
President, Contractor, Pablo D. Panlilio, and proper under the circumstances (sec. 6, Rule
Architect". 66). Appellants were not parties to the
Appellants maintain that their claim for construction agreement. The sole object the
recognition is divisible and separable from their appeal is only to secure for them a recognition,
allegations regarding the non-payment by the that they were allegedly the co-architects of
government of a portion of the architectural fees; Panlilio, in the construction of the hospital, so as
thereby concluding that what the lower court to enhance their professional prestige and not to
should have done, should have been merely to impair their standing. If this is the goal of
order the striking out of the moot portion of appellants, a judicial declaration to the effect
appellants' cause of action, and should have would seem unnecessary. Let us ponder over the
proceeded with hearing their claim for thought that a brilliant professional enjoys the
recognition. But the allegations in pars. 18 and respect and esteem of his fellowmen, even
19 of the amended complaint, show otherwise. without any court declaration of such fact, and
There is an indivisible and single cause of action that an incompetent one may summon all the
which is primarily to prevent payment tribunals in the world, to proclaim his genius in
exclusively to defendant Panlilio of the amount vain.
of P34,740.00, which said appellants contend But appellants invoke Article 21 of the Civil Code,
should be paid to appellee Allied Technologists, which states —
Inc.; the matter recognizing them together with Any person who willfully causes loss or
Pablo Panlilio as architects of the hospital, being injury to another in a manner that is
merely incidental thereto. The case of Pacal v. contrary to morals, good customs or
Ramos, 81 Phil. 30, cited by appellants is not public policy shall compensate the
applicable. In this case, the grounds for quo latter for the damages.
warranto are separable from the grounds for contending that the word "injury" in the said
election irregularities which are distinct and article, refers not only to any indeterminate right
separate causes of action, entitling the petitioner or property, but also to honor or credit (I
to separate and unrelated reliefs. These two Tolentino Civil Code, p. 67). It may be added,
grounds were alleged under separate paragraphs however, that this article also envisions a
and they were two independent actions situation where a person has a legal right, and
improperly joined in one proceeding. In the case such right is violated by another in a manner
at bar, in one paragraph (par. 19 of the amended contrary to morals, good customs or public
complaint), as first cause of action, the claim for policy; it presupposes losses or injuries, material
recognition is inseparably linked with their or otherwise, which one may suffer as a result of
Republic of the Philippines 1. Bataan Shipyard and Engineering Co., Inc. 2.4. Minutes of the Regular and Special Meetings On July 15, 1986, the same Capt. Zabala issued a
SUPREME COURT (Engineering Island Shipyard and Mariveles of the Board of Directors from 1973 to 1986 Memorandum addressed to "Truck Owners and
Manila Shipyard) 2.5. Minutes of the Executive Committee Contractors," particularly a "Mr. Buddy Ondivilla
EN BANC 2. Baseco Quarry Meetings from 1973 to 1986 National Marine Corporation," advising of the
G.R. No. 75885 May 27, 1987 3. Philippine Jai-Alai Corporation 2.6. Existing contracts with amendment in part of their contracts with
BATAAN SHIPYARD & ENGINEERING CO., INC. 4. Fidelity Management Co., Inc. suppliers/contractors/others. BASECO in the sense that the stipulated charges
(BASECO), petitioner, 5. Romson Realty, Inc. 3. Yearly list of stockholders with their for use of the BASECO road network were made
vs. 6. Trident Management Co. corresponding share/stockholdings from 1973 payable "upon entry and not anymore subject to
PRESIDENTIAL COMMISSION ON GOOD 7. New Trident Management to 1986 duly certified by the Corporate monthly billing as was originally agreed upon." 4
GOVERNMENT, CHAIRMAN JOVITO SALONGA, 8. Bay Transport Secretary. d. Aborted Contract for
COMMISSIONER MARY CONCEPCION 9. And all affiliate companies of Alfredo "Bejo" 4. Audited Financial Statements such as Balance Improvement of Wharf at
BAUTISTA, COMMISSIONER RAMON DIAZ, Romualdez Sheet, Profit & Loss and others from 1973 to Engineer Island
COMMISSIONER RAUL R. DAZA, You are hereby ordered: December 31, 1985. On July 9, 1986, a PCGG fiscal agent, S.
COMMISSIONER QUINTIN S. DOROMAL, CAPT. 1. To implement this 5. Monthly Financial Statements for the current Berenguer, entered into a contract in behalf of
JORGE B. SIACUNCO, et al.,respondents. sequestration order with a year up to March 31, 1986. BASECO with Deltamarine Integrated Port
Apostol, Bernas, Gumaru, Ona and Associates for minimum disruption of these 6. Consolidated Cash Position Reports from Services, Inc., in virtue of which the latter
petitioner. companies' business January to April 15, 1986. undertook to introduce improvements costing
Vicente G. Sison for intervenor A.T. Abesamis. activities. 7. Inventory listings of assets up dated up to approximately P210,000.00 on the BASECO
2. To ensure the continuity of March 31, 1986. wharf at Engineer Island, allegedly then in poor
NARVASA, J.: these companies as going 8. Updated schedule of Accounts Receivable and condition, avowedly to "optimize its utilization
Challenged in this special civil action of certiorari concerns, the care and Accounts Payable. and in return maximize the revenue which
and prohibition by a private corporation known maintenance of these assets 9. Complete list of depository banks for all funds would flow into the government coffers," in
as the Bataan Shipyard and Engineering Co., Inc. until such time that the Office with the authorized signatories for withdrawals consideration of Deltamarine's being granted
are: (1) Executive Orders Numbered 1 and 2, of the President through the thereof. "priority in using the improved portion of the
promulgated by President Corazon C. Aquino on Commission on Good 10. Schedule of company investments and wharf ahead of anybody" and exemption "from
February 28, 1986 and March 12, 1986, Government should decide placements. 2 the payment of any charges for the use of wharf
respectively, and (2) the sequestration, takeover, otherwise. including the area where it may install its
and other orders issued, and acts done, in 3. To report to the The letter closed with the warning that if the bagging equipments" "until the improvement
accordance with said executive orders by the Commission on Good documents were not submitted within five days, remains in a condition suitable for port
Presidential Commission on Good Government Government periodically. the officers would be cited for "contempt in operations." 5It seems however that this contract
and/or its Commissioners and agents, affecting Further, you are authorized to pursuance with Presidential Executive Order was never consummated. Capt. Jorge B. Siacunco,
said corporation. request for Military/Security Nos. 1 and 2." "Head- (PCGG) BASECO Management Team,"
1. The Sequestration, Takeover, and Other Orders Support from the c. Orders Re Engineer Island advised Deltamarine by letter dated July 30,
Complained of Military/Police authorities, (1) Termin 1986 that "the new management is not in a
a. The Basic Sequestration and such other acts essential ation of position to honor the said contract" and thus
Order to the achievement of this Contract "whatever improvements * * (may be
The sequestration order which, in the view of the sequestration order. 1 for Security introduced) shall be deemed unauthorized * *
petitioner corporation, initiated all its misery b. Order for Production of Services and shall be at * * (Deltamarine's) own risk." 6
was issued on April 14, 1986 by Commissioner Documents A third order assailed by petitioner corporation, e. Order for Operation of
Mary Concepcion Bautista. It was addressed to On the strength of the above sequestration order, hereafter referred to simply as BASECO, is that Sesiman Rock Quarry,
three of the agents of the Commission, hereafter Mr. Jose M. Balde, acting for the PCGG, addressed issued on April 21, 1986 by a Capt. Flordelino B. Mariveles, Bataan
simply referred to as PCGG. It reads as follows: a letter dated April 18, 1986 to the President and Zabala, a member of the task force assigned to By Order dated June 20, 1986, Commissioner
RE: SEQUESTRATION ORDER other officers of petitioner firm, reiterating an carry out the basic sequestration order. He sent a Mary Bautista first directed a PCGG agent, Mayor
By virtue of the powers vested earlier request for the production of certain letter to BASECO's Vice-President for Melba O. Buenaventura, "to plan and implement
in the Presidential documents, to wit: Finance, 3 terminating the contract for security progress towards maximizing the continuous
Commission on Good 1. Stock Transfer Book services within the Engineer Island compound operation of the BASECO Sesiman Rock Quarry *
Government, by authority of 2. Legal documents, such as: between BASECO and "Anchor and FAIRWAYS" * by conventional methods;" but afterwards,
the President of the 2.1. Articles of Incorporation and "other civilian security agencies," CAPCOM Commissioner Bautista, in representation of the
Philippines, you are hereby 2.2. By-Laws military personnel having already been assigned PCGG, authorized another party, A.T. Abesamis,
directed to sequester the 2.3. Minutes of the Annual Stockholders Meeting to the area, to operate the quarry, located at Mariveles,
following companies. from 1973 to 1986 (2) Change of Mode of Payment of Entry Charges
Bataan, an agreement to this effect having been for; and disburses funds only Section I of the same, Article IV (Bill of Rights) of 3) authorizing PCGG Agent, Mayor Melba
executed by them on September 17, 1986. 7 as may be necessary; the 1973 Constitution was adopted providing, Buenaventura, to manage and operate its rock
f. Order to Dispose of Scrap, 5. Does actions including among others, that "No person shall be deprived quarry at Sesiman, Mariveles; 17
etc. among others, seeking of of life, liberty and property without due process 4) authorizing the same mayor to sell or dispose
By another Order of Commissioner Bautista, this military support as may be of law." (Const., Art. I V, Sec. 1)." 12 of its metal scrap, equipment, machinery and
time dated June 26, 1986, Mayor Buenaventura necessary, that will ensure It declares that its objection to the other materials; 18
was also "authorized to clean and beautify the compliance to this order; constitutionality of the Executive Orders "as well 5) authorizing the takeover of BASECO,
Company's compound," and in this connection, 6. Holds itself fully as the Sequestration Order * * and Takeover Philippine Dockyard Corporation, and all their
to dispose of or sell "metal scraps" and other accountable to the Order * * issued purportedly under the authority affiliated companies;
materials, equipment and machineries no longer Presidential Commission on of said Executive Orders, rests on four 6) terminating the services of BASECO
usable, subject to specified guidelines and Good Government on all fundamental considerations: First, no notice and executives: President Hilario M. Ruiz; EVP
safeguards including audit and verification. 8 aspects related to this take- hearing was accorded * * (it) before its Manuel S. Mendoza; GM Moises M. Valdez;
g. The TAKEOVER Order over order. properties and business were taken Finance Mgr. Gilberto Pasimanero; Legal Dept.
By letter dated July 14, 1986, Commissioner h. Terminat over; Second, the PCGG is not a court, but a Mgr. Benito R. Cuesta I; 19
Ramon A. Diaz decreed the provisional takeover ion of purely investigative agency and therefore not 7) planning to elect its own Board of Directors; 20
by the PCGG of BASECO, "the Philippine Services of competent to act as prosecutor and judge in the 8) allowing willingly or unwillingly its personnel
Dockyard Corporation and all their affiliated BASECO same cause; Third, there is nothing in the to take, steal, carry away from petitioner's
companies." 9 Diaz invoked the provisions of Officers issuances which envisions any proceeding, premises at Mariveles * * rolls of cable wires,
Section 3 (c) of Executive Order No. 1, Thereafter, Capt. Siacunco, sent letters to Hilario process or remedy by which petitioner may worth P600,000.00 on May 11, 1986; 21
empowering the Commission — M. Ruiz, Manuel S. Mendoza, Moises M. Valdez, expeditiously challenge the validity of the 9) allowing "indiscriminate diggings" at Engineer
* * To provisionally takeover Gilberto Pasimanero, and Benito R. Cuesta I, takeover after the same has been effected; Island to retrieve gold bars supposed to have
in the public interest or to advising of the termination of their services by and Fourthly, being directed against specified been buried therein. 22
prevent its disposal or the PCGG. 10 persons, and in disregard of the constitutional 3. Doubts, Misconceptions regarding
dissipation, business 2. Petitioner's Plea and presumption of innocence and general rules and Sequestration, Freeze and Takeover Orders
enterprises and properties Postulates procedures, they constitute a Bill of Many misconceptions and much doubt about the
taken over by the government It is the foregoing specific orders and acts of the Attainder." 13 matter of sequestration, takeover and freeze
of the Marcos Administration PCGG and its members and agents which, to b. Re Order to Produce orders have been engendered by
or by entities or persons close repeat, petitioner BASECO would have this Court Documents misapprehension, or incomplete comprehension
to former President Marcos, nullify. More particularly, BASECO prays that this It argues that the order to produce corporate if not indeed downright ignorance of the law
until the transactions leading Court- records from 1973 to 1986, which it has governing these remedies. It is needful that these
to such acquisition by the 1) declare unconstitutional and void Executive apparently already complied with, was issued misconceptions and doubts be dispelled so that
latter can be disposed of by Orders Numbered 1 and 2; without court authority and infringed its uninformed and useless debates about them may
the appropriate authorities. 2) annul the sequestration order dated April- 14, constitutional right against self-incrimination, be avoided, and arguments tainted b sophistry or
A management team was designated to 1986, and all other orders subsequently issued and unreasonable search and seizure. 14 intellectual dishonesty be quickly exposed and
implement the order, headed by Capt. Siacunco, and acts done on the basis thereof, inclusive of c. Re PCGG's Exercise of Right discarded. Towards this end, this opinion will
and was given the following powers: the takeover order of July 14, 1986 and the of Ownership and Management essay an exposition of the law on the matter. In
1. Conducts all aspects of termination of the services of the BASECO BASECO further contends that the PCGG had the process many of the objections raised by
operation of the subject executives. 11 unduly interfered with its right of dominion and BASECO will be dealt with.
companies; a. Re Executive Orders No. 1 management of its business affairs by — 4. The Governing Law
2. Installs key officers, hires and 2, and the Sequestration 1) terminating its contract for security services a. Proclamation No. 3
and terminates personnel as and Takeover Orders with Fairways & Anchor, without the consent The impugned executive orders are avowedly
necessary; While BASECO concedes that "sequestration and against the will of the contracting parties; meant to carry out the explicit command of the
3. Enters into contracts without resorting to judicial action, might be and amending the mode of payment of entry fees Provisional Constitution, ordained by
related to management and made within the context of Executive Orders Nos. stipulated in its Lease Contract with National Proclamation No. 3, 23 that the President-in the
operation of the companies; 1 and 2 before March 25, 1986 when the Freedom Stevedoring & Lighterage Corporation, these acts exercise of legislative power which she was
4. Ensures that the assets of Constitution was promulgated, under the being in violation of the non-impairment clause authorized to continue to wield "(until a
the companies are not principle that the law promulgated by the ruler of the constitution; 15 legislature is elected and convened under a new
dissipated and used under a revolutionary regime is the law of the 2) allowing PCGG Agent Silverio Berenguer to Constitution" — "shall give priority to measures
effectively and efficiently; land, it ceased to be acceptable when the same enter into an "anomalous contract" with to achieve the mandate of the people," among
revenues are duly accounted ruler opted to promulgate the Freedom Deltamarine Integrated Port Services, Inc., giving others to (r)ecover ill-gotten properties amassed
Constitution on March 25, 1986 wherein under the latter free use of BASECO premises; 16 by the leaders and supporters of the previous
regime and protect the interest of the people prevent the Commission from been or were acquired by and abroad, pending the
through orders of sequestration or freezing of accomplishing its task. them directly or indirectly, outcome of appropriate
assets or accounts." 24 2. To provisionally take over in through or as a result of the proceedings in the Philippines
b. Executive Order No. 1 the public interest or to improper or illegal use of to determine whether any
Executive Order No. 1 stresses the "urgent need prevent the disposal or funds or properties owned by such assets or properties
to recover all ill-gotten wealth," and postulates dissipation, business the government of the were acquired by them
that "vast resources of the government have enterprises and properties Philippines or any of its through or as a result of
been amassed by former President Ferdinand E. taken over by the government branches, instrumentalities, improper or illegal use of or
Marcos, his immediate family, relatives, and of the Marcos Administration enterprises, banks or financial the conversion of funds
close associates both here and abroad." 25 Upon or by entities or persons close institutions, or by taking belonging to the Government
these premises, the Presidential Commission on to former President Marcos, undue advantage of their of the Philippines or any of its
Good Government was created, 26 "charged with until the transactions leading office, authority, influence, branches, instrumentalities,
the task of assisting the President in regard to to such acquisition by the connections or relationship, enterprises, banks or financial
(certain specified) matters," among which was latter can be disposed of by resulting in their unjust institutions, or by taking
precisely- the appropriate authorities. enrichment and causing grave undue advantage of their
* * The recovery of all in- 3. To enjoin or restrain any damage and prejudice to the official position, authority,
gotten wealth accumulated by actual or threatened Filipino people and the relationship, connection or
former President Ferdinand E. commission of acts by any Republic of the Philippines:" influence to unjustly enrich
Marcos, his immediate family, person or entity that may and themselves at the expense and
relatives, subordinates and render moot and academic, or 2) * * said assets and to the grave damage and
close associates, whether frustrate or otherwise make properties are in the form of prejudice of the Filipino
located in the Philippines or ineffectual the efforts of the bank accounts, deposits, trust people and the Republic of the
abroad, including the takeover Commission to carry out its accounts, shares of stocks, Philippines;
or sequestration of all task under this order. 28 buildings, shopping centers, 3) prohibited "any person
business enterprises and So that it might ascertain the facts germane to its condominiums, mansions, from transferring, conveying,
entities owned or controlled objectives, it was granted power to conduct residences, estates, and other encumbering or otherwise
by them, during his investigations; require submission of evidence kinds of real and personal depleting or concealing such
administration, directly or by subpoenae ad testificandum and duces properties in the Philippines assets and properties or from
through nominees, by taking tecum; administer oaths; punish for and in various countries of the assisting or taking part in
undue advantage of their contempt. 29 It was given power also to world." 31 their transfer, encumbrance,
public office and/or using promulgate such rules and regulations as may be Upon these premises, the President- concealment or dissipation
their powers, authority, necessary to carry out the purposes of * * (its 1) froze "all assets and under pain of such penalties
influence, connections or creation). 30 properties in the Philippines as are prescribed by law;" and
relationship. 27 c. Executive in which former President 4) required "all persons in the
In relation to the takeover or sequestration that it Order No. 2 Marcos and/or his wife, Mrs. Philippines holding such
was authorized to undertake in the fulfillment of Executive Order No. 2 gives additional and more Imelda Romualdez Marcos, assets or properties, whether
its mission, the PCGG was granted "power and specific data and directions respecting "the their close relatives, located in the Philippines or
authority" to do the following particular acts, to recovery of ill-gotten properties amassed by the subordinates, business abroad, in their names as
wit: leaders and supporters of the previous regime." associates, dummies, agents, nominees, agents or trustees,
1. To sequester or place or It declares that: or nominees have any interest to make full disclosure of the
cause to be placed under its 1) * * the Government of the or participation; same to the Commission on
control or possession any Philippines is in possession of 2) prohibited former Good Government within
building or office wherein any evidence showing that there President Ferdinand Marcos thirty (30) days from
ill-gotten wealth or properties are assets and properties and/or his wife * *, their close publication of * (the)
may be found, and any purportedly pertaining to relatives, subordinates, Executive Order, * *. 32
records pertaining thereto, in former Ferdinand E. Marcos, business associates, duties, d. Executive
order to prevent their and/or his wife Mrs. Imelda agents, or nominees Order No.
destruction, concealment or Romualdez Marcos, their from transferring, conveying, 14
disappearance which would close relatives, subordinates, encumbering, concealing or A third executive order is relevant: Executive
frustrate or hamper the business associates, dummies, dissipating said assets or Order No. 14, 33 by which the PCGG is
investigation or otherwise agents or nominees which had properties in the Philippines empowered, "with the assistance of the Office of
the Solicitor General and other government President Ferdinand E. factual premises of the Executive Orders and progressive and happy
agencies, * * to file and prosecute all cases Marcos, and/or his wife Mrs. Proclamation No. 3 to be true, to be country. 42
investigated by it * * as may be warranted by its Imelda Romualdez Marcos, demonstrable by competent evidence, the a. Need of Evidentiary
findings." 34 All such cases, whether civil or their close relatives, recovery from Marcos, his family and his Substantiation in Proper Suit
criminal, are to be filed "with subordinates, business dominions of the assets and properties involved, Consequently, the factual premises of the
the Sandiganbayan which shall have exclusive associates, dummies, agents is not only a right but a duty on the part of Executive Orders cannot simply be assumed.
and original jurisdiction thereof." 35 Executive or nominees which had been Government. They will have to be duly established by
Order No. 14 also pertinently provides that civil or were acquired by them But however plain and valid that right and duty adequate proof in each case, in a proper judicial
suits for restitution, reparation of damages, or directly or indirectly, through may be, still a balance must be sought with the proceeding, so that the recovery of the ill-gotten
indemnification for consequential damages, or as a result of the improper equally compelling necessity that a proper wealth may be validly and properly adjudged
forfeiture proceedings provided for under or illegal use of funds or respect be accorded and adequate protection and consummated; although there are some who
Republic Act No. 1379, or any other civil actions properties owned by the assured, the fundamental rights of private maintain that the fact-that an immense fortune,
under the Civil Code or other existing laws, in Government of the property and free enterprise which are deemed and "vast resources of the government have
connection with * * (said Executive Orders Philippines or any of its pillars of a free society such as ours, and to been amassed by former President Ferdinand E.
Numbered 1 and 2) may be filed separately from branches, instrumentalities, which all members of that society may without Marcos, his immediate family, relatives, and
and proceed independently of any criminal enterprises, banks or financial exception lay claim. close associates both here and abroad," and they
proceedings and may be proved by a institutions, or by taking * * Democracy, as a way of life have resorted to all sorts of clever schemes and
preponderance of evidence;" and that, moreover, undue advantage of their enshrined in the Constitution, manipulations to disguise and hide their illicit
the "technical rules of procedure and evidence office, authority, influence, embraces as its necessary acquisitions-is within the realm of judicial notice,
shall not be strictly applied to* * (said)civil connections or relationship, components freedom of being of so extensive notoriety as to dispense
cases." 36 resulting in their unjust conscience, freedom of with proof thereof, Be this as it may, the
5. Contemplated Situations enrichment and causing grave expression, and freedom in requirement of evidentiary substantiation has
The situations envisaged and sought to be damage and prejudice to the the pursuit of been expressly acknowledged, and the
governed are self-evident, these being: Filipino people and the happiness. Along with these procedure to be followed explicitly laid down, in
1) that "(i)ll-gotten properties Republic of the freedoms are included Executive Order No. 14.
(were) amassed by the Philippines"; 39 economic freedom and b. Need of Provisional
leaders and supporters of the c) that "said assets and freedom of enterprisewithin Measures to Collect and
previous regime";37 properties are in the form of reasonable bounds and under Conserve Assets Pending Suits
a) more particularly, that ill- bank accounts. deposits, trust. proper control. * * Evincing Nor may it be gainsaid that pending the
gotten wealth (was) accounts, shares of stocks, much concern for the institution of the suits for the recovery of such
accumulated by former buildings, shopping centers, protection of property, the "ill-gotten wealth" as the evidence at hand may
President Ferdinand E. condominiums, mansions, Constitution distinctly reveal, there is an obvious and imperative need
Marcos, his immediate family, residences, estates, and other recognizes the preferred for preliminary, provisional measures to prevent
relatives, subordinates and kinds of real and personal position which real estate has the concealment, disappearance, destruction,
close associates, * * located in properties in the Philippines occupied in law for dissipation, or loss of the assets and properties
the Philippines or abroad, * * and in various countries of the ages. Property is bound up subject of the suits, or to restrain or foil acts that
(and) business enterprises world;" 40and with every aspect of social life may render moot and academic, or effectively
and entities (came to be) 2) that certain "business in a democracy as democracy hamper, delay, or negate efforts to recover the
owned or controlled by them, enterprises and properties is conceived in the same.
during * * (the Marcos) (were) taken over by the Constitution. The Constitution 7. Provisional Remedies Prescribed by Law
administration, directly or government of the Marcos realizes the indispensable role To answer this need, the law has prescribed
through nominees, by taking Administration or by entities which property, owned in three (3) provisional remedies. These are: (1)
undue advantage of their or persons close to former reasonable quantities and sequestration; (2) freeze orders; and (3)
public office and/or using President Marcos. 41 used legitimately, plays in the provisional takeover.
their powers, authority, 6. Government's Right and Duty to Recover All stimulation to economic effort Sequestration and freezing are remedies
influence, Connections or Ill-gotten Wealth and the formation and growth applicable generally to unearthed instances of
relationship; 38 There can be no debate about the validity and of a solid social middle class "ill-gotten wealth." The remedy of "provisional
b) otherwise stated, that eminent propriety of the Government's plan "to that is said to be the bulwark takeover" is peculiar to cases where "business
"there are assets and recover all ill-gotten wealth." of democracy and the enterprises and properties (were) taken over by
properties purportedly Neither can there be any debate about the backbone of every the government of the Marcos Administration or
pertaining to former proposition that assuming the above described
by entities or persons close to former President being necessarily inferred that the remedy executive orders in question leaves no doubt. A sequestration or freeze
Marcos." 43 entails no interference, or the least possible Executive Order No. 1 declares that the order shall be issued only
a. Sequestration interference with the actual management and sequestration of property the acquisition of upon showing of a prima
By the clear terms of the law, the power of the operations thereof; and "business enterprises which is suspect shall last "until the transactions facie case. The order and the
PCGG to sequester property claimed to be "ill- which were taken over by the government leading to such acquisition * * can be disposed of list of the sequestered or
gotten" means to place or cause to be placed government of the Marcos Administration or by by the appropriate authorities." 49 Executive frozen properties shall
under its possession or control said property, or entities or persons close to him," in particular, as Order No. 2 declares that the assets or properties forthwith be registered with
any building or office wherein any such property to which a "provisional takeover" is authorized, therein mentioned shall remain frozen "pending the proper court. For orders
and any records pertaining thereto may be "in the public interest or to prevent disposal or the outcome of appropriate proceedings in the issued before the ratification
found, including "business enterprises and dissipation of the enterprises." 48 Such a Philippines to determine whether any such assets of this Constitution, the
entities,"-for the purpose of preventing the "provisional takeover" imports something more or properties were acquired" by illegal corresponding judicial action
destruction, concealment or dissipation of, and than sequestration or freezing, more than the means. Executive Order No. 14 makes clear that or proceeding shall be filed
otherwise conserving and preserving, the same- placing of the business under physical judicial proceedings are essential for the within six months from its
until it can be determined, through appropriate possession and control, albeit without or with resolution of the basic issue of whether or not ratification. For those issued
judicial proceedings, whether the property was the least possible interference with the particular assets are "ill-gotten," and resultant after such ratification, the
in truth will- gotten," i.e., acquired through or as management and carrying on of the business recovery thereof by the Government is judicial action or proceeding
a result of improper or illegal use of or the itself. In a "provisional takeover," what is taken warranted. shall be commenced within six
conversion of funds belonging to the into custody is not only the physical assets of the e. State of Seizure Not To Be months from the issuance
Government or any of its branches, business enterprise or entity, but the business Indefinitely Maintained; The thereof.
instrumentalities, enterprises, banks or financial operation as well. It is in fine the assumption of Constitutional Command The sequestration or freeze
institutions, or by taking undue advantage of control not only over things, but over operations There is thus no cause for the apprehension order is deemed automatically
official position, authority relationship, or on- going activities. But, to repeat, such a voiced by BASECO 50 that sequestration, freezing lifted if no judicial action or
connection or influence, resulting in unjust "provisional takeover" is allowed only as regards or provisional takeover is designed to be an end proceeding is commenced as
enrichment of the ostensible owner and grave "business enterprises * * taken over by the in itself, that it is the device through which herein provided. 52
damage and prejudice to the State. 44 And this, government of the Marcos Administration or by persons may be deprived of their property f. Kinship to Attachment
too, is the sense in which the term is commonly entities or persons close to former President branded as "ill-gotten," that it is intended to Receivership
understood in other jurisdictions. 45 Marcos." bring about a permanent, rather than a passing, As thus described, sequestration, freezing and
b. "Freeze Order" d. No Divestment of Title Over transitional state of affairs. That this is not so is provisional takeover are akin to the provisional
A "freeze order" prohibits the person having Property Seized quite explicitly declared by the governing rules. remedy of preliminary attachment, or
possession or control of property alleged to It may perhaps be well at this point to stress Be this as it may, the 1987 Constitution should receivership. 53 By attachment, a sheriff seizes
constitute "ill-gotten wealth" "from transferring, once again the provisional, contingent character allay any lingering fears about the duration of property of a defendant in a civil suit so that it
conveying, encumbering or otherwise depleting of the remedies just described. Indeed the law these provisional remedies. Section 26 of its may stand as security for the satisfaction of any
or concealing such property, or from assisting or plainly qualifies the remedy of take-over by the Transitory Provisions, 51 lays down the relevant judgment that may be obtained, and not
taking part in its transfer, encumbrance, adjective, "provisional." These remedies may be rule in plain terms, apart from extending disposed of, or dissipated, or lost intentionally or
concealment, or dissipation." 46 In other words, it resorted to only for a particular exigency: to ratification or confirmation (although not really otherwise, pending the action. 54 By receivership,
commands the possessor to hold the property prevent in the public interest the disappearance necessary) to the institution by presidential fiat property, real or personal, which is subject of
and conserve it subject to the orders and or dissipation of property or business, and of the remedy of sequestration and freeze litigation, is placed in the possession and control
disposition of the authority decreeing such conserve it pending adjudgment in appropriate orders: of a receiver appointed by the Court, who shall
freezing. In this sense, it is akin to a garnishment proceedings of the primary issue of whether or SEC. 26. The authority to issue conserve it pending final determination of the
by which the possessor or ostensible owner of not the acquisition of title or other right thereto sequestration or freeze orders title or right of possession over it. 55 All these
property is enjoined not to deliver, transfer, or by the apparent owner was attended by some under Proclamation No. 3 remedies — sequestration, freezing, provisional,
otherwise dispose of any effects or credits in his vitiating anomaly. None of the remedies is meant dated March 25, 1986 in takeover, attachment and receivership — are
possession or control, and thus becomes in a to deprive the owner or possessor of his title or relation to the recovery of ill- provisional, temporary, designed for-particular
sense an involuntary depositary thereof. 47 any right to the property sequestered, frozen or gotten wealth shag remain exigencies, attended by no character of
c. Provisional Takeover taken over and vest it in the sequestering agency, operative for not more permanency or finality, and always subject to the
In providing for the remedy of "provisional the Government or other person. This can be than eighteen months after the control of the issuing court or agency.
takeover," the law acknowledges the apparent done only for the causes and by the processes ratification of this g. Remedies, Non-Judicial
distinction between "ill gotten" "business laid down by law. Constitution. However, in the Parenthetically, that writs of sequestration or
enterprises and entities" (going concerns, That this is the sense in which the power to national interest, as certified freeze or takeover orders are not issued by a
businesses in actual operation), generally, as to sequester, freeze or provisionally take over is to by the President, the Congress court is of no moment. The Solicitor General
which the remedy of sequestration applies, it be understood and exercised, the language of the may extend said period. draws attention to the writ of distraint and levy
which since 1936 the Commissioner of Internal a. Prima Facie Evidence as circumstance of the case. The It should also by now be reasonably evident from
Revenue has been by law authorized to issue Basis for Orders resolution of the commission what has thus far been said that the PCGG is not,
against property of a delinquent Executive Order No. 14 enjoins that there be may be appealed by the party and was never intended to act as, a judge. Its
taxpayer. 56 BASECO itself declares that it has not "due regard to the requirements of fairness and concerned to the Office of the general function is to conduct investigations in
manifested "a rigid insistence on sequestration due process." 62Executive Order No. 2 declares President of the Philippines order to collect evidenceestablishing instances of
as a purely judicial remedy * * (as it feels) that that with respect to claims on allegedly "ill- within fifteen (15) days from "ill-gotten wealth;" issue sequestration, and such
the law should not be ossified to a point that gotten" assets and properties, "it is the position receipt thereof. orders as may be warranted by the evidence thus
makes it insensitive to change." What it insists of the new democratic government that Parenthetically, even if the requirement for collected and as may be necessary to preserve
on, what it pronounces to be its "unyielding President Marcos * * (and other parties affected) a prima facie showing of "ill- gotten wealth" were and conserve the assets of which it takes custody
position, is that any change in procedure, or the be afforded fair opportunity to contest these not expressly imposed by some rule or and control and prevent their disappearance,
institution of a new one, should conform to due claims before appropriate Philippine regulation as a condition to warrant the loss or dissipation; and eventually file and
process and the other prescriptions of the Bill of authorities." 63 Section 7 of the Commission's sequestration or freezing of property prosecute in the proper court of competent
Rights of the Constitution." 57 It is, to be sure, a Rules and Regulations provides that contemplated in the executive orders in jurisdiction all cases investigated by it as may be
proposition on which there can be no sequestration or freeze (and takeover) orders question, it would nevertheless be exigible in warranted by its findings. It does not try and
disagreement. issue upon the authority of at least two this jurisdiction in which the Rule of Law decide, or hear and determine, or adjudicate
h. Orders May Issue Ex Parte commissioners, based on the affirmation or prevails and official acts which are devoid of with any character of finality or compulsion,
Like the remedy of preliminary attachment and complaint of an interested party, or motu rational basis in fact or law, or are whimsical and cases involving the essential issue of whether or
receivership, as well as delivery of personal proprio when the Commission has reasonable capricious, are condemned and struck down. 66 not property should be forfeited and transferred
property in replevinsuits, sequestration and grounds to believe that the issuance thereof is 9. Constitutional Sanction of Remedies to the State because "ill-gotten" within the
provisional takeover writs may issue ex warranted. 64 A similar requirement is now If any doubt should still persist in the face of the meaning of the Constitution and the executive
parte. 58 And as in preliminary attachment, found in Section 26, Art. XVIII of the 1987 foregoing considerations as to the validity and orders. This function is reserved to the
receivership, and delivery of personality, no Constitution, which requires that a propriety of sequestration, freeze and takeover designated court, in this case, the
objection of any significance may be raised to "sequestration or freeze order shall be issued orders, it should be dispelled by the fact that Sandiganbayan. 71 There can therefore be no
the ex parte issuance of an order of only upon showing of a prima facie case." 65 these particular remedies and the authority of serious regard accorded to the accusation,
sequestration, freezing or takeover, given its b. Opportunity to Contest the PCGG to issue them have received leveled by BASECO, 72 that the PCGG plays the
fundamental character of temporariness or And Sections 5 and 6 of the same Rules and constitutional approbation and sanction. As perfidious role of prosecutor and judge at the
conditionality; and taking account specially of Regulations lay down the procedure by which a already mentioned, the Provisional or "Freedom" same time.
the constitutionally expressed "mandate of the party may seek to set aside a writ of Constitution recognizes the power and duty of 11. Facts Preclude Grant of Relief to Petitioner
people to recover ill-gotten properties amassed sequestration or freeze order, viz: the President to enact "measures to achieve the Upon these premises and reasoned conclusions,
by the leaders and supporters of the previous SECTION 5. Who may mandate of the people to * * * (recover ill- gotten and upon the facts disclosed by the record,
regime and protect the interest of the contend.-The person against properties amassed by the leaders and hereafter to be discussed, the petition cannot
people;" 59 as well as the obvious need to avoid whom a writ of sequestration supporters of the previous regime and protect succeed. The writs of certiorari and prohibition
alerting suspected possessors of "ill-gotten or freeze or hold order is the interest of the people through orders of prayed for will not be issued.
wealth" and thereby cause that disappearance or directed may request the sequestration or freezing of assets or The facts show that the corporation known as
loss of property precisely sought to be lifting thereof in writing, accounts." And as also already adverted to, BASECO was owned or controlled by President
prevented, and the fact, just as self-evident, that either personally or through Section 26, Article XVIII of the 1987 Marcos "during his administration, through
"any transfer, disposition, concealment or counsel within five (5) days Constitution 67 treats of, and ratifies the nominees, by taking undue advantage of his
disappearance of said assets and properties from receipt of the writ or "authority to issue sequestration or freeze public office and/or using his powers, authority,
would frustrate, obstruct or hamper the efforts order, or in the case of a hold orders under Proclamation No. 3 dated March or influence, " and that it was by and through the
of the Government" at the just recovery order, from date of knowledge 25, 1986." same means, that BASECO had taken over the
thereof. 60 thereof. The institution of these provisional remedies is business and/or assets of the National Shipyard
8. Requisites for Validity SECTION 6. Procedure for also premised upon the State's inherent police and Engineering Co., Inc., and other government-
What is indispensable is that, again as in the case review of writ or order.-After power, regarded, as t lie power of promoting the owned or controlled entities.
of attachment and receivership, there exist a due hearing or motu proprio public welfare by restraining and regulating the 12. Organization and Stock Distribution of
prima facie factual foundation, at least, for the for good cause shown, the use of liberty and property," 68 and as "the most BASECO
sequestration, freeze or takeover order, and Commission may lift the writ essential, insistent and illimitable of powers * * BASECO describes itself in its petition as "a
adequate and fair opportunity to contest it and or order unconditionally or in the promotion of general welfare and the shiprepair and shipbuilding company * *
endeavor to cause its negation or nullification. 61 subject to such conditions as public interest," 69 and said to be co-extensive incorporated as a domestic private corporation *
Both are assured under the executive orders in it may deem necessary, taking with self-protection and * * not inaptly termed * (on Aug. 30, 1972) by a consortium of Filipino
question and the rules and regulations into consideration the (also) the'law of overruling necessity." "70 shipowners and shipping executives. Its main
promulgated by the PCGG. evidence and the 10. PCGG not a "Judge"; General Functions office is at Engineer Island, Port Area, Manila,
where its Engineer Island Shipyard is housed, of two (2) years from date of turnover of the the Engineer Island Shops, including all the
11. Trident 7,412 shares
and its main shipyard is located at Mariveles shipyard to BASECO. 76 equipment of the Bataan National Shipyards
Management
Bataan." 73 Its Articles of Incorporation disclose 14. Subsequent Reduction of Price; Intervention of (BNS) which were excluded from the sale of NBS
that its authorized capital stock is Marcos to BASECO but retained by BASECO and all other
12. United Phil. Lines 1,240 shares
P60,000,000.00 divided into 60,000 shares, of Unaccountably, the price of P52,000,000.00 was selected equipment and machineries of NASSCO
which 12,000 shares with a value of reduced by more than one-half, to at J. Panganiban Smelting Plant." In the same
13. Renato M. 8 shares
P12,000,000.00 have been subscribed, and on P24,311,550.00, about eight (8) months later. A deed, NASSCO committed itself to cooperate with
Tanseco
said subscription, the aggregate sum of document to this effect was executed on October BASECO for the acquisition from the National
P3,035,000.00 has been paid by the 9, 1973, entitled "Memorandum Agreement," and Government or other appropriate Government
14. Fidel Ventura 8 shares
incorporators. 74 The same articles Identify the was signed for NASSCO by Arturo Pacificador, as entity of Engineer Island. Consideration for the
incorporators, numbering fifteen (15), as Presiding Officer of the Board of Directors, and sale was set at P5,000,000.00; a down payment
15. Metro Bay 136,370 shares
follows: (1) Jose A. Rojas, (2) Anthony P. Lee, (3) David R. Ines, as General Manager. 77 This of P1,000,000.00 appears to have been made,
Drydock
Eduardo T. Marcelo, (4) Jose P. Fernandez, (5) agreement bore, at the top right corner of the and the balance was stipulated to be paid at 7%
Generoso Tanseco, (6) Emilio T. Yap, (7) Antonio first page, the word "APPROVED" in the interest per annum in equal semi annual
16. Manuel Jacela 1 share
M. Ezpeleta, (8) Zacarias Amante, (9) Severino de handwriting of President Marcos, followed by his installments over a term of nine (9) years, to
la Cruz, (10) Jose Francisco, (11) Dioscoro Papa, usual full signature. The document recited that a commence after a grace period of two (2) years.
17. Jonathan G. Lu 1 share
(12) Octavio Posadas, (13) Manuel S. Mendoza, down payment of P5,862,310.00 had been made Mr. Arturo Pacificador again signed for NASSCO,
(14) Magiliw Torres, and (15) Rodolfo Torres. by BASECO, and the balance of P19,449,240.00 together with the general manager, Mr. David R.
18. Jose J. Tanchanco 1 share
By 1986, however, of these fifteen (15) was payable in equal semi-annual installments Ines.
incorporators, six (6) had ceased to be over nine (9) years after a grace period of two 17. Loans Obtained
19. Dioscoro Papa 128 shares
stockholders, namely: (1) Generoso Tanseco, (2) (2) years, with interest at 7% per annum. It further appears that on May 27, 1975 BASECO
Antonio Ezpeleta, (3) Zacarias Amante, (4) 15. Acquisition of 300 Hectares from Export obtained a loan from the NDC, taken from "the
20. Edward T. 4 shares
Octavio Posadas, (5) Magiliw Torres, and (6) Processing Zone Authority last available Japanese war damage fund of
Marcelo
Rodolfo Torres. As of this year, 1986, there were On October 1, 1974, BASECO acquired three $19,000,000.00," to pay for "Japanese made
twenty (20) stockholders listed in BASECO's hundred (300) hectares of land in Mariveles heavy equipment (brand new)." 80 On September
TOTAL 218,819
Stock and Transfer Book. 75 Their names and the from the Export Processing Zone Authority for 3, 1975, it got another loan also from the NDC in
shares.
number of shares respectively held by them are the price of P10,047,940.00 of which, as set out the amount of P30,000,000.00 (id.). And on
as follows: 13 Acquisition of NASSCO by BASECO in the document of sale, P2,000.000.00 was paid January 28, 1976, it got still another loan, this
Barely six months after its incorporation, upon its execution, and the balance stipulated to time from the GSIS, in the sum of
1. Jose A. Rojas 1,248 shares
BASECO acquired from National Shipyard & Steel be payable in installments. 78 P12,400,000.00. 81 The claim has been made that
Corporation, or NASSCO, a government-owned 16. Acquisition of Other Assets of NASSCO; not a single centavo has been paid on these
2. Severino G. de la 1,248 shares
or controlled corporation, the latter's shipyard at Intervention of Marcos loans. 82
Cruz
Mariveles, Bataan, known as the Bataan National Some nine months afterwards, or on July 15, 18. Reports to President Marcos
Shipyard (BNS), and — except for NASSCO's 1975, to be precise, BASECO, again with the In September, 1977, two (2) reports were
3. Emilio T. Yap 2,508 shares
Engineer Island Shops and certain equipment of intervention of President Marcos, acquired submitted to President Marcos regarding
the BNS, consigned for future negotiation — all ownership of the rest of the assets of NASSCO BASECO. The first was contained in a letter dated
4. Jose Fernandez 1,248 shares
its structures, buildings, shops, quarters, houses, which had not been included in the first two (2) September 5, 1977 of Hilario M. Ruiz, BASECO
plants, equipment and facilities, in stock or in purchase documents. This was accomplished by president. 83 The second was embodied in a
5. Jose Francisco 128 shares
transit. This it did in virtue of a "Contract of a deed entitled "Contract of Purchase and confidential memorandum dated September 16,
Purchase and Sale with Chattel Mortgage" Sale," 79which, like the Memorandum of 1977 of Capt. A.T. Romualdez. 84 They further
6. Manuel S. Mendoza 96 shares
executed on February 13, 1973. The price was Agreement dated October 9, 1973 supra also disclose the fine hand of Marcos in the affairs of
P52,000,000.00. As partial payment thereof, bore at the upper right-hand corner of its first BASECO, and that of a Romualdez, a relative by
7. Anthony P. Lee 1,248 shares
BASECO delivered to NASSCO a cash bond of page, the handwritten notation of President affinity.
P11,400,000.00, convertible into cash within Marcos reading, "APPROVED, July 29, 1973," and a. BASECO President's Report
8. Hilario M. Ruiz 32 shares
twenty-four (24) hours from completion of the underneath it, his usual full signature. In his letter of September 5, 1977, BASECO
inventory undertaken pursuant to the contract. Transferred to BASECO were NASSCO's President Ruiz reported to Marcos that there had
9. Constante L. 8 shares
The balance of P41,600,000.00, with interest at "ownership and all its titles, rights and interests been "no orders or demands for ship
Fariñas
seven percent (7%) per annum, compounded over all equipment and facilities including construction" for some time and expressed the
semi-annually, was stipulated to be paid in equal structures, buildings, shops, quarters, houses, fear that if that state of affairs persisted, BASECO
10. Fidelity 65,882 shares
semi-annual installments over a term of nine (9) plants and expendable or semi-expendable would not be able to pay its debts to the
Management, Inc.
years, payment to commence after a grace period assets, located at the Engineer Island, known as Government, which at the time stood at the not
inconsiderable amount of P165,854,000.00. 85 He implementation of your 10. BASECO-REPACOM BASECO which are hereby
suggested that, to "save the situation," there be instructions to pass a board Agreement dated May 27, authorized to be converted to
a "spin-off (of their) shipbuilding activities which resolution to legalize the 1975; equity of the said new
shall be handled exclusively by an entirely new transfers under SEC 11. GSIS loan to BASECO corporation, to wit:
corporation to be created;" and towards this end, regulations; dated January 28, 1976 of 1. NDC
he informed Marcos that BASECO was — 2. By getting their P12,400,000.00 for the P83,865,00
* * inviting replacements, the families housing facilities for 0
NDC and LUSTEVECO to cannot question us later BASECO's rank-and-file (P31.165M
participate by converting the on; and employees. 90 loan &
NDC shipbuilding loan to 3. We will owe no further Capt. Romualdez also recommended that P52.2M
BASECO amounting to favors from them. 87 BASECO's loans be restructured "until such Reparation
P341.165M and assuming and He also transmitted to Marcos, together with the period when BASECO will have enough orders )
converting a portion of report, the following documents: 88 for ships in order for the company to meet loan 2.
BASECO's shipbuilding loans 1. Stock certificates indorsed obligations," and that — LUSTEVEC
from REPACOM amounting to and assigned in blank with An LOI may be issued to O
P52.2M or a total of P83.365M assignments and waivers; 89 government agencies using P32,538,00
as NDC's equity contribution 2. The articles of floating equipment, that a 0
in the new corporation. incorporation, the amended linkage scheme be applied to (Reparatio
LUSTEVECO will participate articles, and the by-laws of a certain percent of BASECO's n)
by absorbing and converting a BASECO; net profit as part of BASECO's b. Equity participation of
portion of the REPACOM loan 3. Deed of Sales, wherein amortization payments government shall be in the
of Bay Shipyard and Drydock, NASSCO sold to BASECO four tomake it justifiable for you, form of non- voting shares.
Inc., amounting to (4) parcels of land in Sir. 91 For immediate compliance. 92
P32.538M.86 "Engineer Island", Port Area, It is noteworthy that Capt. A.T. Romualdez does Mr. Marcos' guidelines were promptly complied
b. Romualdez' Report Manila; not appear to be a stockholder or officer of with by his subordinates. Twenty-two (22) days
Capt. A.T. Romualdez' report to the President 4. Transfer Certificate of Title BASECO, yet he has presented a report on after receiving their president's memorandum,
was submitted eleven (11) days later. It opened No. 124822 in the name of BASECO to President Marcos, and his report Messrs. Hilario M. Ruiz, Constante L. Fariñas and
with the following caption: BASECO, covering "Engineer demonstrates intimate familiarity with the firm's Geronimo Z. Velasco, in representation of their
MEMORANDUM: Island"; affairs and problems. respective corporations, executed a PRE-
FOR : The President 5. Contract dated October 9, 19. Marcos' Response to INCORPORATION AGREEMENT dated October
SUBJECT: An Evaluation and 1973, between NASSCO and Reports 20, 1977. 93 In it, they undertook to form a
Re-assessment of a BASECO re-structure and President Marcos lost no time in acting on his shipbuilding corporation to be known as "PHIL-
Performance of a Mission equipment at Mariveles, subordinates' recommendations, particularly as ASIA SHIPBUILDING CORPORATION," to bring to
FROM: Capt. A.T. Romualdez. Bataan; regards the "spin-off" and the "linkage scheme" realization their president's instructions. It
Like Ruiz, Romualdez wrote that BASECO faced 6. Contract dated July 16, relative to "BASECO's amortization payments." would seem that the new corporation ultimately
great difficulties in meeting its loan obligations 1975, between NASSCO and a. Instructions re "Spin-Off" formed was actually named "Philippine
due chiefly to the fact that "orders to build ships BASECO re-structure and Under date of September 28, 1977, he addressed Dockyard Corporation (PDC)." 94
as expected * * did not materialize." equipment at Engineer Island, a Memorandum to Secretary Geronimo Velasco b. Letter of Instructions No.
He advised that five stockholders had "waived Port Area Manila; of the Philippine National Oil Company and 670
and/or assigned their holdings inblank," these 7. Contract dated October 1, Chairman Constante Fariñas of the National Mr. Marcos did not forget Capt. Romualdez'
being: (1) Jose A. Rojas, (2) Severino de la Cruz, 1974, between EPZA and Development Company, directing them "to recommendation for a letter of instructions. On
(3) Rodolfo Torres, (4) Magiliw Torres, and (5) BASECO re 300 hectares of participate in the formation of a new corporation February 14, 1978, he issued Letter of
Anthony P. Lee. Pointing out that "Mr. Magiliw land at Mariveles, Bataan; resulting from the spin-off of the shipbuilding Instructions No. 670 addressed to the
Torres * * is already dead and Mr. Jose A. Rojas 8. List of BASECO's fixed component of BASECO along the following Reparations Commission REPACOM the
had a major heart attack," he made the following assets; guidelines: Philippine National Oil Company (PNOC), the
quite revealing, and it may be added, quite 9. Loan Agreement dated a. Equity participation of Luzon Stevedoring Company (LUSTEVECO), and
cynical and indurate recommendation, to wit: September 3, 1975, BASECO's government shall be through the National Development Company (NDC).
* * (that) their replacements loan from NDC of LUSTEVECO and NDC in the What is commanded therein is summarized by
(be effected) so we can P30,000,000.00; amount of P115,903,000 the Solicitor General, with pithy and not
register their names in the consisting of the inaccurate observations as to the effects thereof
stock book prior to the following obligations of (in italics), as follows:
* * 1) the shipbuilding not only exercised control over BASECO, but also shares of BASECO stock; that accessible to it, mentioned and described in
equipment procured by that he actually owns well nigh one hundred is, all but 5 % — all endorsed Annex 'P' of its petition, (and other pleadings) * *
BASECO through reparations percent of its outstanding stock. in blank. 99 within ten (10) days from notice." 106 In a
be transferred to NDC subject It will be recalled that according to petitioner- While the petitioner's counsel was quick to motion filed on December 5, 1986, 107BASECO's
to reimbursement by NDC to itself, as of April 23, 1986, there were 218,819 dispute this asserted fact, assuring this Court counsel made the statement, quite surprising in
BASECO (of) the amount of s shares of stock outstanding, ostensibly owned by that the BASECO stockholders were still in the premises, that "it will negotiate with the
allegedly representing the twenty (20) stockholders. 96 Four of these possession of their respective stock certificates owners (of the BASECO stock in question) to
handling and incidental twenty are juridical persons: (1)Metro Bay and had "never endorsed * * them in blank or to allow petitioner to borrow from them, if
expenses incurred by BASECO Drydock, recorded as holding 136,370 shares; anyone else," 100 that denial is exposed by his available, the certificates referred to" but that "it
in the installation of said (2) Fidelity Management, Inc., 65,882 shares; own prior and subsequent recorded statements needs a more sufficient time therefor" (sic).
equipment (so instead of NDC (3)Trident Management, 7,412 shares; and (4) as a mere gesture of defiance rather than a BASECO's counsel however eventually had to
getting paid on its loan to United Phil. Lines, 1,240 shares. The first three verifiable factual declaration. confess inability to produce the originals of the
BASECO, it was made to pay corporations, among themselves, own an By resolution dated September 25, 1986, this stock certificates, putting up the feeble excuse
BASECO instead the amount of aggregate of 209,664 shares of BASECO stock, or Court granted BASECO's counsel a period of 10 that while he had "requested the stockholders to
P18.285M); 2) the 95.82% of the outstanding stock. days "to SUBMIT, as undertaken by him, * * the allow * * (him) to borrow said certificates, * *
shipbuilding equipment Now, the Solicitor General has drawn the Court's certificates of stock issued to the stockholders of some of * * (them) claimed that they had
procured from reparations attention to the intriguing circumstance that * * BASECO as of April 23, 1986, as listed in delivered the certificates to third parties by way
through EPZA, now in the found in Malacanang shortly after the sudden Annex 'P' of the petition.' 101 Counsel thereafter of pledge and/or to secure performance of
possession of BASECO and flight of President Marcos, were certificates moved for extension; and in his motion dated obligations, while others allegedly have
BSDI (Bay Shipyard & corresponding to more thanninety-five percent October 2, 1986, he declared inter alia that "said entrusted them to third parties in view of last
Drydocking, Inc.) be (95%) of all the outstanding shares of stock of certificates of stock are in the possession of third national emergency." 108 He has conveniently
transferred to LUSTEVECO BASECO, endorsed in blank, together with deeds parties, among whom being the respondents omitted, nor has he offered to give the details of
through PNOC; and 3) the of assignment of practically all the outstanding themselves * * andpetitioner is still endeavoring the transactions adverted to by him, or to explain
shipbuilding equipment shares of stock of the three (3) corporations to secure copies thereof from them." 102 On the why he had not impressed on the supposed
(thus) transferred be invested above mentioned (which hold 95.82% of all same day he filed another motion praying that he stockholders the primordial importance of
by LUSTEVECO, acting BASECO stock), signed by the owners thereof be allowed "to secure copies of the Certificates of convincing this Court of their present custody of
through PNOC and NDC, as although not notarized. 97 Stock in the name of Metro Bay Drydock, Inc., the originals of the stock, or if he had done so,
the government's equity More specifically, found in Malacanang (and now and of all other Certificates, of Stock of why the stockholders are unwilling to agree to
participation in a shipbuilding in the custody of the PCGG) were: petitioner's stockholders in possession of some sort of arrangement so that the originals of
corporation to be established 1) the deeds of assignment respondents." 103 their certificates might at the very least be
in partnership with the of all 600 outstanding shares In a Manifestation dated October 10, exhibited to the Court. Under the circumstances,
private sector. of Fidelity Management Inc. — 1986,, 104 the Solicitor General not the Court can only conclude that he could not get
xxx xxx xxx which supposedly owns as unreasonably argued that counsel's aforestated the originals from the stockholders for the
And so, through a simple aforesaid 65,882 shares of motion to secure copies of the stock certificates simple reason that, as the Solicitor General
letter of instruction and BASECO stock; "confirms the fact that stockholders of petitioner maintains, said stockholders in truth no longer
memorandum, BASECO's loan 2) the deeds of assignment corporation are not in possession of * * (their) have them in their possession, these having
obligation to NDC and of 2,499,995 of the 2,500,000 certificates of stock," and the reason, according already been assigned in blank to then President
REPACOM * * in the total outstanding shares of Metro to him, was "that 95% of said shares * * have Marcos.
amount of P83.365M and Bay Drydock Corporation — been endorsed in blank and found in Malacañang 21. Facts Justify Issuance of Sequestration and
BSD's REPACOM loan of which allegedly owns after the former President and his family fled the Takeover Orders
P32.438M were wiped out 136,370 shares of BASECO country." To this manifestation BASECO's In the light of the affirmative showing by the
and converted into non-voting stock; counsel replied on November 5, 1986, as already Government that, prima facie at least, the
preferred shares. 95 3) the deeds of assignment mentioned, Stubbornly insisting that the firm's stockholders and directors of BASECO as of April,
20. Evidence of Marcos' of 800 outstanding shares of stockholders had not really assigned their 1986 109 were mere "dummies," nominees
Ownership of BASECO Trident Management Co., stock. 105 or alter egos of President Marcos; at any rate,
It cannot therefore be gainsaid that, in the Inc. — which allegedly owns In view of the parties' conflicting declarations, that they are no longer owners of any shares of
context of the proceedings at bar, the actuality of 7,412 shares of BASECO stock, this Court resolved on November 27, 1986 stock in the corporation, the conclusion cannot
the control by President Marcos of BASECO has assigned in blank; 98 and among other things "to require * * the petitioner be avoided that said stockholders and directors
been sufficiently shown. 4) stock certificates * * to depositupon proper receipt with Clerk of have no basis and no standing whatever to cause
Other evidence submitted to the Court by the corresponding to 207,725 out Court Juanito Ranjo the originals of the stock the filing and prosecution of the instant
Solicitor General proves that President Marcos of the 218,819 outstanding certificates alleged to be in its possession or proceeding; and to grant relief to BASECO, as
prayed for in the petition, would in effect be to of guilt in the amassing or acquisition of "ill- * * corporations are not production of the corporate
restore the assets, properties and business gotten wealth" is to be handed down by a judicial entitled to all of the books and papers for that
sequestered and taken over by the PCGG to tribunal, in this case, the Sandiganbayan, upon constitutional protections purpose. The defense
persons who are "dummies," nominees or alter complaint filed and prosecuted by the PCGG. In which private individuals amounts to this, that an
egosof the former president. the second place, no punishment is inflicted by have. * * They are not at all officer of the corporation
From the standpoint of the PCGG, the facts the executive orders, as the merest glance at within the privilege against which is charged with a
herein stated at some length do indeed show that their provisions will immediately make self-incrimination, although criminal violation of the
the private corporation known as BASECO was apparent. In no sense, therefore, may the this court more than once has statute may plead the
"owned or controlled by former President executive orders be regarded as a bill of said that the privilege runs criminality of such
Ferdinand E. Marcos * * during his attainder. very closely with the 4th corporation as a refusal to
administration, * * through nominees, by taking 23. No Violation of Right against Self- Amendment's Search and produce its books. To state
advantage of * * (his) public office and/or using * Incrimination and Unreasonable Searches and Seizure provisions. It is also this proposition is to answer
* (his) powers, authority, influence * *," and that Seizures settled that an officer of the it. While an individual may
NASSCO and other property of the government BASECO also contends that its right against self company cannot refuse to lawfully refuse to answer
had been taken over by BASECO; and the incrimination and unreasonable searches and produce its records in its incriminating questions unless
situation justified the sequestration as well as seizures had been transgressed by the Order of possession upon the plea that protected by an immunity
the provisional takeover of the corporation in April 18, 1986 which required it "to produce they will either incriminate statute, it does not follow that
the public interest, in accordance with the terms corporate records from 1973 to 1986 under pain him or may incriminate a corporation, vested with
of Executive Orders No. 1 and 2, pending the of contempt of the Commission if it fails to do it." (Oklahoma Press special privileges and
filing of the requisite actions with the so." The order was issued upon the authority of Publishing Co. v. Walling, 327 franchises may refuse to show
Sandiganbayan to cause divestment of title Section 3 (e) of Executive Order No. 1, treating of U.S. 186; emphasis, the its hand when charged with an
thereto from Marcos, and its adjudication in the PCGG's power to "issue subpoenas requiring Solicitor General's). abuse of such
favor of the Republic pursuant to Executive * * the production of such books, papers, * * The corporation is a privileges. (Wilson v. United
Order No. 14. contracts, records, statements of accounts and creature of the state. It is States, 55 Law Ed., 771, 780
As already earlier stated, this Court agrees that other documents as may be material to the presumed to be incorporated [emphasis, the Solicitor
this assessment of the facts is correct; investigation conducted by the Commission, " for the benefit of the public. It General's])
accordingly, it sustains the acts of sequestration and paragraph (3), Executive Order No. 2 dealing received certain special At any rate, Executive Order No. 14-A, amending
and takeover by the PCGG as being in accord with its power to "require all persons in the privileges and franchises, and Section 4 of Executive Order No. 14 assures
with the law, and, in view of what has thus far Philippines holding * * (alleged "ill-gotten") holds them subject to the laws protection to individuals required to produce
been set out in this opinion, pronounces to be assets or properties, whether located in the of the state and the limitations evidence before the PCGG against any possible
without merit the theory that said acts, and the Philippines or abroad, in their names as of its charter. Its powers are violation of his right against self-incrimination. It
executive orders pursuant to which they were nominees, agents or trustees, to make full limited by law. It can make no gives them immunity from prosecution on the
done, are fatally defective in not according to the disclosure of the same * *." The contention lacks contract not authorized by its basis of testimony or information he is
parties affected prior notice and hearing, or an merit. charter. Its rights to act as a compelled to present. As amended, said Section 4
adequate remedy to impugn, set aside or It is elementary that the right against self- corporation are only now provides that —
otherwise obtain relief therefrom, or that the incrimination has no application to juridical preserved to it so long as it xxx xxx xxx
PCGG had acted as prosecutor and judge at the persons. obeys the laws of its creation. The witness may not refuse to
same time. While an individual may There is a reserve right in the comply with the order on the
22. Executive Orders Not a Bill of Attainder lawfully refuse to answer legislature to investigate its basis of his privilege against
Neither will this Court sustain the theory that the incriminating questions contracts and find out self-incrimination; but no
executive orders in question are a bill of unless protected by an whether it has exceeded its testimony or other
attainder. 110 "A bill of attainder is a legislative immunity statute, it does not powers. It would be a strange information compelled under
act which inflicts punishment without judicial follow that a corporation, anomaly to hold that a state, the order (or any information
trial." 111 "Its essence is the substitution of a vested with special privileges having chartered a directly or indirectly derived
legislative for a judicial determination of and franchises, may refuse to corporation to make use of from such testimony, or other
guilt." 112 show its hand when charged certain franchises, could not, information) may be used
In the first place, nothing in the executive orders with an abuse in the exercise of sovereignty, against the witness in any
can be reasonably construed as a determination ofsuchprivileges * * 113 inquire how these franchises criminal case, except a
or declaration of guilt. On the contrary, the Relevant jurisprudence is also cited by the had been employed, and prosecution for perjury,
executive orders, inclusive of Executive Order Solicitor General. 114 whether they had been giving a false statement, or
No. 14, make it perfectly clear that any judgment abused, and demand the
otherwise failing to comply like a court-appointed receiver, 115 such as to at all possible, and undertaken only when corporation except for demonstrably weighty
with the order. bring and defend actions in its own name; justified by demonstrably tenable grounds and in and defensible grounds, and always in the
The constitutional safeguard against receive rents; collect debts due; pay outstanding line with the stated objectives of the PCGG. And it context of the stated purposes of sequestration
unreasonable searches and seizures finds no debts; and generally do such other acts and goes without saying that where replacement of or provisional takeover, i.e., to prevent the
application to the case at bar either. There has things as may be necessary to fulfill its mission management officers may be called for, the dispersion or undue disposal of the corporate
been no search undertaken by any agent or as conservator and administrator. In this context, greatest prudence, circumspection, care and assets. Directors are not to be voted out simply
representative of the PCGG, and of course no it may in addition enjoin or restrain any actual or attention - should accompany that undertaking because the power to do so exists. Substitution of
seizure on the occasion thereof. threatened commission of acts by any person or to the end that truly competent, experienced and directors is not to be done without reason or
24. Scope and Extent of Powers of the PCGG entity that may render moot and academic, or honest managers may be recruited. There should rhyme, should indeed be shunned if at an
One other question remains to be disposed of, frustrate or otherwise make ineffectual its be no role to be played in this area by rank possible, and undertaken only when essential to
that respecting the scope and extent of the efforts to carry out its task; punish for direct or amateurs, no matter how wen meaning. The road prevent disappearance or wastage of corporate
powers that may be wielded by the PCGG with indirect contempt in accordance with the Rules to hell, it has been said, is paved with good property, and always under such circumstances
regard to the properties or businesses placed of Court; and seek and secure the assistance of intentions. The business is not to be as assure that the replacements are truly
under sequestration or provisionally taken over. any office, agency or instrumentality of the experimented or played around with, not run possessed of competence, experience and
Obviously, it is not a question to which an government. 116 In the case of sequestered into the ground, not driven to bankruptcy, not probity.
answer can be easily given, much less one which businesses generally (i.e., going concerns, fleeced, not ruined. Sight should never be lost In the case at bar, there was adequate
will suffice for every conceivable situation. businesses in current operation), as in the case sight of the ultimate objective of the whole justification to vote the incumbent directors out
a. PCGG May Not Exercise Acts of sequestered objects, its essential role, as exercise, which is to turn over the business to of office and elect others in their stead because
of Ownership already discussed, is that of conservator, the Republic, once judicially established to be the evidence showed prima facie that the former
One thing is certain, and should be stated at the caretaker, "watchdog" or overseer. It is not that "ill-gotten." Reason dictates that it is only under were just tools of President Marcos and were no
outset: the PCGG cannot exercise acts of of manager, or innovator, much less an owner. these conditions and circumstances that the longer owners of any stock in the firm, if they
dominion over property sequestered, frozen or c. Powers over Business supervision, administration and control of ever were at all. This is why, in its Resolution of
provisionally taken over. AS already earlier Enterprises Taken Over by business enterprises provisionally taken over October 28, 1986; 118 this Court declared that
stressed with no little insistence, the act of Marcos or Entities or Persons may legitimately be exercised. —
sequestration; freezing or provisional takeover Close to him; Limitations d. Voting of Sequestered Stock; Petitioner has failed to make
of property does not import or bring about a Thereon Conditions Therefor out a case of grave abuse or
divestment of title over said property; does not Now, in the special instance of a business So, too, it is within the parameters of these excess of jurisdiction in
make the PCGG the owner thereof. In relation to enterprise shown by evidence to have been conditions and circumstances that the PCGG may respondents' calling and
the property sequestered, frozen or "taken over by the government of the Marcos properly exercise the prerogative to vote holding of a stockholders'
provisionally taken over, the PCGG is a Administration or by entities or persons close to sequestered stock of corporations, granted to it meeting for the election of
conservator, not an owner. Therefore, it can not former President Marcos," 117 the PCGG is given by the President of the Philippines through a directors as authorized by the
perform acts of strict ownership; and this is power and authority, as already adverted to, to Memorandum dated June 26, 1986. That Memorandum of the
specially true in the situations contemplated by "provisionally take (it) over in the public interest Memorandum authorizes the PCGG, "pending the President * * (to the PCGG)
the sequestration rules where, unlike cases of or to prevent * * (its) disposal or dissipation;" outcome of proceedings to determine the dated June 26, 1986,
receivership, for example, no court exercises and since the term is obviously employed in ownership of * * (sequestered) shares of stock," particularly, where as in this
effective supervision or can upon due application reference to going concerns, or business "to vote such shares of stock as it may have case, the government can,
and hearing, grant authority for the performance enterprises in operation, something more than sequestered in corporations at all stockholders' through its designated
of acts of dominion. mere physical custody is connoted; the PCGG meetings called for the election of directors, directors, properly exercise
Equally evident is that the resort to the may in this case exercise some measure of declaration of dividends, amendment of the control and management over
provisional remedies in question should entail control in the operation, running, or Articles of Incorporation, etc." The Memorandum what appear to be properties
the least possible interference with business management of the business itself. But even in should be construed in such a manner as to be and assets owned and
operations or activities so that, in the event that this special situation, the intrusion into consistent with, and not contradictory of the belonging to the government
the accusation of the business enterprise being management should be restricted to the Executive Orders earlier promulgated on the itself and over which the
"ill gotten" be not proven, it may be returned to minimum degree necessary to accomplish the same matter. There should be no exercise of the persons who appear in this
its rightful owner as far as possible in the same legislative will, which is "to prevent the disposal right to vote simply because the right exists, or case on behalf of BASECO
condition as it was at the time of sequestration. or dissipation" of the business enterprise. There because the stocks sequestered constitute the have failed to show any right
b. PCGG Has Only Powers of should be no hasty, indiscriminate, unreasoned controlling or a substantial part of the corporate or even any shareholding in
Administration replacement or substitution of management voting power. The stock is not to be voted to said corporation.
The PCGG may thus exercise only powers of officials or change of policies, particularly in replace directors, or revise the articles or by- It must however be emphasized that the conduct
administration over the property or business respect of viable establishments. In fact, such a laws, or otherwise bring about substantial of the PCGG nominees in the BASECO Board in
sequestered or provisionally taken over, much replacement or substitution should be avoided if changes in policy, program or practice of the the management of the company's affairs should
henceforth be guided and governed by the norms nominees, by taking undue advantage of their any office, agency or instrumentality of the law, then Captain (later Commodore) Alfredo
herein laid down. They should never for a public office and/or using their powers, government. In the case of sequestered Romualdez, who although not on record as an
moment allow themselves to forget that they are authority, influence, connections or businesses generally (i.e. going concerns, officer or stockholder of BASECO reported
conservators, not owners of the business; they relationship." 1 business in current operation), as in the case of directly to the deposed President on its affairs
are fiduciaries, trustees, of whom the highest The Court is unanimous insofar as the judgment sequestered objects, its essential role, as already and made the recommendations, all approved by
degree of diligence and rectitude is, in the at bar upholds the imperative need of recovering discussed, is that of conservator, caretaker, the latter, for the gobbling up by BASECO of all
premises, required. the ill-gotten properties amassed by the previous 'watchdog' or overseer. It is not that of manager, the choice government assets and properties.
25. No Sufficient Showing of Other Irregularities regime, which "deserves the fullest support of or innovator, much less an owner." 5 All this evidence has been placed of record in the
As to the other irregularities complained of by the judiciary and all sectors of society." 2 To Now, the case at bar involves one where the case at bar. And petitioner has had all the time
BASECO, i.e., the cancellation or revision, and the quote the pungent language of Mr. Justice Cruz, third and most encompassing and rarely invoked and opportunity to refute it, submittals to the
execution of certain contracts, inclusive of the "(T)here is no question that all lawful efforts of provisional remedies, 6 the provisional contrary notwithstanding, but has dismally failed
termination of the employment of some of its should be taken to recover the tremendous takeover of the Baseco properties and business to do so. To cite one glaring instance: as stated in
executives, 119 this Court cannot, in the present wealth plundered from the people by the past operations has been availed of by the PCGG, the main opinion, the evidence submitted to this
state of the evidence on record, pass upon them. regime in the most execrable thievery simply because the evidence on hand, not Court by the Solicitor General "proves that
It is not necessary to do so. The issues arising perpetrated in all history. No right-thinking only prima facie but convincingly with President Marcos not only exercised control over
therefrom may and will be left for initial Filipino can quarrel with this necessary substantial and documentary evidence of record BASECO, but also that he actually owns well nigh
determination in the appropriate action. But the objective, and on this score I am happy to concur establishes that the corporation known as one hundred percent of its outstanding stock." It
Court will state that absent any showing of any with theponencia." 3 petitioner BASECO "was owned or controlled by cites the fact that three corporations, evidently
important cause therefor, it will not normally The Court is likewise unanimous in its judgment President Marcos 'during his administration, front or dummy corporations, among twenty
substitute its judgment for that of the PCGG in dismissing the petition to declare through nominees, by taking undue advantage of shareholders, in name, of BASECO, namely Metro
these individual transactions. It is clear however, unconstitutional and void Executive Orders Nos. his public office and/or using his powers, Bay Drydock, Fidelity Management, Inc. and
that as things now stand, the petitioner cannot 1 and 2 to annul the sequestration order of April authority, or influence;' and that it was by and Trident Management hold 209,664 shares or
be said to have established the correctness of its 14, 1986. For indeed, the 1987 Constitution through the same means, that BASECO had taken 95.82%, of BASECO's outstanding stock. Now,
submission that the acts of the PCGG in question overwhelmingly adopted by the people at the over the business and/or assets of the the Solicitor General points out further than
were done without or in excess of its powers, or February 2, 1987 plebiscite expressly recognized [government-owned] National Shipyard and BASECO certificates "corresponding to more
with grave abuse of discretion. in Article XVIII, section 26 thereof 4 the vital Engineering Co., Inc., and other government- than ninety-five percent (95%) of all the
WHEREFORE, the petition is dismissed. The functions of respondent PCGG to achieve the owned or controlled entities." The documentary outstanding shares of stock of BASECO, endorsed
temporary restraining order issued on October mandate of the people to recover such ill-gotten evidence shows that petitioner BASECO (read in blank, together with deeds of assignment of
14, 1986 is lifted. wealth and properties as ordained by Ferdinand E. Marcos) in successive transactions practically all the outstanding shares of stock of
Yap, Fernan, Paras, Gancayco and Sarmiento, JJ., Proclamation No. 3 promulgated on March 25, all directed and approved by the former the three (3) corporations above mentioned
concur. 1986. President-in an orgy of what according to the (which hold 95.82% of all BASECO stock), signed
The Court is likewise unanimous as to the PCGG's then chairman, Jovito Salonga, in his by the owners thereof although not
general rule set forth in the main opinion that statement before the 1986 Constitutional notarized" 7 were found in Malacañang shortly
Separate Opinions "the PCGG cannot exercise acts of dominion over Commission, "Mr. Ople once called 'organized after the deposed President's sudden flight from
property sequestered, frozen or provisionally pillage' "-gobbled up the government the country on the night of February 25, 1986.
TEEHANKEE, CJ., concurring: taken over" and "(T)he PCGG may thus exercise corporation National Shipyard & Steel Thus, the main opinion's unavoidable conclusion
I fully concur with the masterly opinion of Mr. only powers of administration over the property Corporation NASSCO its shipyard at Mariveles, that "(W)hile the petitioner's counsel was quick
Justice Narvasa. In the process of disposing of the or business sequestered or provisionally taken 300 hectares of land in Mariveles from the to dispute this asserted fact, assuring this Court
issues raised by petitioner BASECO in the case at over, much like a court-appointed receiver, such Export Processing Zone Authority, Engineer that the BASECO stockholders were still in
bar, it comprehensively discusses the laws and as to bring and defend actions in its own name; Island itself in Manila and its complex of possession of their respective stock certificates
principles governing the Presidential receive rents; collect debts due; pay outstanding equipment and facilities including structures, and had 'never endorsed * * * them in blank or to
Commission on Good Government (PCGG) and debts; and generally do such other acts and buildings, shops, quarters, houses, plants and anyone else,' that denial is exposed by his own
defines the scope and extent of its powers in the things as may be necessary to fulfill its mission expendable or semi-expendable assets and prior and subsequent recorded statements as a
discharge of its monumental task of recovering as conservator and administrator. In this context, obtained huge loans of $19,000,000.00 from the mere gesture of defiance rattler than a verifiable
the "ill-gotten wealth, accumulated by former it may in addition enjoin or restrain any actual or last available Japanese war damage fund, factual declaration . . . . Under the circumstances,
President Ferdinand E. Marcos, his immediate threatened commission of acts by any person or P30,000,000.00 from the NDC and the Court can only conclude that he could not get
family, relatives, subordinates and close entity that may render moot and academic, or P12,400,000.00 from the GSIS. The sordid details the originals from the stockholders for the
associates, whether located in the Philippines or frustrate or otherwise make ineffectual its are set forth in detail in Paragraphs 1 1 to 20 of simple reason that as the Solicitor General
abroad (and) business enterprises and entities efforts to carry out its task; punish for direct or the main opinion. They include confidential maintains, said stockholders in truth no longer
owned or controlled by them during I . . .(the indirect contempt in accordance with the Rules reports from then BASECO president Hilario M. have them in their possession, these having
Marcos) administration, directly or through of Court; and seek and secure the assistance of Ruiz and the deposed President's brother-in-
already been assigned in blank to President street certificates all found in Malacanang should are no longer owners of any shares of stock in taking over stolen properties of the government
Marcos."8 in reality read "Ferdinand E. Marcos" and/or his the corporation, the conclusion cannot be channeled to dummy or front companies is
With this strong unrebutted evidence of record brother-in-law. Such take-over can in no way be avoided that said stockholders and directors stating the obvious. The recovery of these ill-
in this Court, Justice Melencio-Herrera, joined by termed "lawless usurpation," for the government have no basis and no standing whatever to cause gotten assets and properties would greatly aid
Justice Feliciano, expressly concurs with the does not commit any act of usurpation in taking the filing and prosecution of the instant our financially crippled government and hasten
main opinion upholding the commission's take- over its own properties that have been channeled proceeding; and to grant relief to BASECO, as our national economic recovery, not to mention
over, stating that "(I) have no objection to to dummies, who are called upon to prove in the prayed for in the petition, would in effect be to the fact that they rightfully belong to the people.
according the right to vote sequestered stock in proper court action what they have failed to do restore the assets, properties and business While as a measure of self-protection, if, in the
case of a takeover of business actually belonging in this Court, that they have lawfully acquired sequestered and taken over by the PCGG to interest of general welfare, police power may be
to the government or whose capitalization comes ownership of said properties, contrary to the persons who are 'dummies' nominees or alter exercised to protect citizens and their businesses
from public funds but which, somehow, landed in documentary evidence of record, which they egos of the former President." 9 in financial and economic matters, it may
the hands of private persons, as in the case of must likewise explain away. This Court, in the And Justice Padilla in his separate concurrence similarly be exercised to protect the government
BASECO." They merely qualify their concurrence exercise of its jurisdiction on certiorari and as "called a spade a spade," citing the street itself against potential financial loss and the
with the injunction that such takeovers be the guardian of the Constitution and protector of certificates representing 95 % of BASECO's possible disruption of governmental
exercised with "caution and prudence" pending the people's basic constitutional rights, has outstanding stock found in Malacañang after Mr. functions. 17 Police power as the power of self-
the determination of "the true and real entertained many petitions on the part of parties Marcos' hasty flight in February, 1986 and the protection on the part of the community bears
ownership" of the sequestered shares. Suffice it claiming to be adversely affected by extent of the control he exercised over policy the same relation to the community that the
to say in this regard that each case has to be sequestration and other orders of the PCGG, This decisions affecting BASECO and concluding that principle of self-defense bears to the
judged from the pertinent facts and Court set the criterion that such orders should "Consequently, even ahead of judicial individual. 18 Truly, it may be said that even
circumstances and that the main opinion issue only upon showing of a prima facie case, proceedings, I am convinced that the Republic of more than self- defense, the recovery of ill-gotten
emphasizes sufficiently that it is only in the which criterion was adopted in the 1987 the Philippines, thru the PCGG, has the right and wealth and of the government's own properties
special instances specified in the governing laws Constitution. The Court's judgment cannot be even the duty to take over full control and involves the material and moral survival of the
grounded on the superior national interest and faulted if much more than a prima facie has been supervision of BASECO." nation, marked as the past regime was by the
welfare and the practical necessity of preserving shown in this case, which the faceless figures Indeed, the provisional remedies available to obliteration of any line between private funds
the property and preventing its loss or claiming to represent BASECO have failed to respondent commission are rooted in the police and the public treasury and abuse of unlimited
disposition that the provisional remedy of refute or disprove despite all the opportunity to power of the State, the most pervasive and the power and elimination of any accountability in
provisional take-over is exercised. do so. least limitable of the powers of Government public office, as the evidence of record amply
Here, according to the dissenting opinion, "the The record plainly shows that petitioner BASECO since it represents "the power of sovereignty, the shows.
PCGG concludes that sequestered property is ill- which is but a mere shell to mask its real owner power to govern men and things within the It should be mentioned that the tracking down of
gotten wealth and proceeds to exercise acts of did not and could not explain how and why they limits of its domain." 10 Police power has been the deposed President's actual ownership of the
ownership over said properties . . . . and adds received such favored and preferred treatment defined as the power inherent in the State "to BASECO shares was fortuitously facilitated by
that "the fact of ownership must be established with tailored Letters of Instruction and prescribe regulations to promote the health, the recovery of the street certificates in
in a proper suit before a court of justice"-which handwritten personal approval of the deposed morals, education, good order or safety, and Malacañang after his hasty flight from the
this Court has preempted with its finding that "in President that handed it on a silver platter the general welfare of the people." 11Police power country last year. This is not generally the case.
the context of the proceedings at bar, the whole complex and properties of NASSCO and rests upon public necessity and upon the right of For example, in the ongoing case filed by the
actuality of the control by President Marcos of Engineer Island and the Mariveles Shipyard. the State and of the public to self- government to recover from the Marcoses
BASECO has been sufficiently shown." It certainly would be the height of absurdity and protection. 12 "Salus populi suprema est lex" or valuable real estate holdings in New York and
But BASECO who has instituted this action to set helplessness if this government could not here "the welfare of the people is the Supreme the Lindenmere estate in Long Island, former
aside the sequestration and take-over orders of and now take over the possession and custody Law." 13 For this reason, it is co-extensive with PCGG chairman Jovito Salonga has revealed that
respondent commission has chosen to raise of its very own properties and assets that had the necessities of the case and the safeguards of their names "do not appear on any title to the
these very issues in this Court. We cannot been stolen from it and which it had pledged to public interest. 14Its scope expands and property. Every building in New York is titled in
ostrich-like hide our head in the sand and say recover for the benefit and in the greater interest contracts with changing needs. 15 "It may be the name of a Netherlands Antilles corporation,
that it has not yet been established in the proper of the Filipino people, whom the past regime had said in a general way that the police power which in turn is purportedly owned by three
court that what the PCGG has taken over here saddled with a huge $27-billion foreign debt that extends to all the great public needs. It may be Panamanian corporations, with bearer shares.
are government properties, as a matter of record has since ballooned to $28.5-billion. put forth in aid of what is sanctioned by usage, or This means that the shares of this corporation
and public notice and knowledge, like the Thus, the main opinion correctly concludes that held by the prevailing morality or strong and can change hands any time, since they can be
NASSCO, its Engineer Island and Mariveles "(I)n the light of the affirmative showing by the preponderant opinion to be greatly and transferred, under the law of Panama, without
Shipyard and entire complex, which have been Government that,prima facie at least, the immediately necessary to the public previous registration on the books of the
pillaged and placed in the name of the dummy or stockholders and directors of BASECO as of April, welfare." 16 That the public interest or the corporation. One of the first documents that we
front company named BASECO but from all the 1986 were mere 'dummies,' nominees or alter general welfare is subserved by sequestering the discovered shortly after the February revolution
documentary evidence of record shown by its egos of President Marcos; at any rate, that they purported ill-gotten assets and properties and was a declaration of trust handwritten by Mr.
Joseph Bernstein on April 4, 1982 on a Manila developments in Switzerland, appreciated, together with the assistance that encompass the first type of acts. They do not
Peninsula Hotel stationery stating that he would we may expect, according to foreign governments and lawyers have include the second type of acts which are
act as a trustee for the benefit of President our Swiss lawyers, the first spontaneously given the commission. reserved only to the rightful owner of the assets
Ferdinand Marcos and would act solely pursuant deliveries of the Swiss A word about the PCGG's firing of the BASECO or business sequestered or temporarily taken
to the instructions of Marcos with respect to the deposits in the foreseeable lawyers who filed the present petition over.
Crown Building in New York." 19 future, perhaps in less than a challenging its questioned orders, filing a motion The removal and election of members of the
This is just to stress the difficulties of the tasks year's time. In New York, to withdraw the petition, after it had put in eight board of directors of a corporate enterprise is, to
confronting respondent PCGG, which PCGG through its lawyers who of its representatives as directors of the BASECO me, a clear act of ownership on the part of the
nevertheless has so far commendably produced render their services free of board of directors. This was entirely proper and shareholders of the corporation. Under ordinary
unprecedented positive results. As stated by cost to the Philippine in accordance with the Court's Resolution of circumstances, I would deny the PCGG the
then chairman Salonga: government, succeeded in October 28, 1986, which denied BASECO's authority to change and elect the members of
PCGG has turned over to the getting injunctive relief motion for the issuance of a restraining order BASECO's Board of Directors. However, under
Office of the President around against Mr. and Mrs. Marcos against such take-over and declared that "the the facts as disclosed by the records, it appears
2 billion pesos in cash, free of and their nominees and government can, through its designated that the certificates of stock representing about
any lien. It has also delivered agents. There is now an offer directors, properly exercise control and ninety-five (95%) per cent of the total ownership
to the President-as a result of for settlement that is being management over what appear to be properties in BASECO's capital stock were found endorsed
a compromise settlement- studied and explored by our and assets owned and belonging to the in blank in Malacanang (presumably in the
around 200 land titles lawyers there. government itself and over which the persons who possession and control of Mr. Marcos) at the
involving vast tracks of land If we succeed in recovering appear in this case on behalf of BASECO have time he and his family fled in February 1986.
in Metro Manila, Rizal, not an (since this is failed to show any eight or even any shareholding This circumstance let alone the extent of the
Laguna, Cavite, and Bataan, impossible) but a substantial in said corporation." In other words, these control Mr. Marcos exercised, while in power,
worth several billion pesos. part of the ill-gotten wealth dummies or fronts cannot seek to question the over policy decisions affecting BASECO, entirely
These lands are now available here and in various countries government's right to recover the very satisfies my mind that BASECO was owned and
for low-cost housing projects of the world — something the properties and assets that have been stolen from controlled by Mr. Marcos. This is calling a spade
for the benefit of the poor and revolutionary governments of it by using the very same stolen properties and a spade. I am also entirely satisfied in my mind
the dispossessed amongst our China, Ethiopia, Iran and funds derived therefrom. If they wish to pursue that Mr. Marcos could not have acquired the
people. Nicaragua were not able to their own empty claim, they must do it on their ownership of BASECO out of his lawfully-gotten
In the legal custody of the accomplish at all with respect own, after first establishing that they indeed wealth.
Commission as a result of to properties outside their have a lawful right and/or shareholding in Consequently, even ahead of judicial
sequestration proceedings, territorial boundaries — the BASECO. proceedings, I am convinced that the Republic of
are expensive jewelry Presidential Commission on Under the 1987 Constitution, the PCGG is called the Philippines, through the PCGG, has the right
amounting to 310 million Good Government, which has upon to file the judicial proceedings for and even the duty to take-over full control and
pesos, 42 aircraft amounting undertaken the difficult and forfeiture and recovery of the sequestered or supervision of BASECO.
to 718 million pesos, vessels thankless task of trying to frozen properties covered by its orders issued MELENCIO-HERRERA, J., concurring:
amounting to 748 million undo what had been done so before the ratification of the Constitution on I would like to qualify my concurrence in so far
pesos, and shares of stock secretly and effectively in the February 2, 1987, within six months from such as the voting of sequestered stork is concerned.
amounting to around 215 last twenty years, shall have ratification, or by August 2, 1987. (For those The voting of sequestered stock is, to my mind,
million pesos. more than justified its orders issued after such ratification, the judicial an exercise of an attribute of ownership. It goes
But, as I said, the bulk of the existence. 20 action or proceeding must be commenced within beyond the purpose of a writ of sequestration,
ill-gotten wealth is located The misdeeds of some PCGG volunteers and six months from the issuance thereof.) The PCGG which is essentially to preserve the property in
abroad, not in the Philippines. personnel cited in the dissenting opinion do not has not really been given much time, considering litigation (Article 2005, Civil Code).
Through the efforts of the detract at an from the PCGG's accomplishments, the magnitude of its tasks. It is entitled to some Sequestration is in the nature of a judicial
PCGG, we have caused the just as no one would do away with newspapers forbearance, in availing of the maximum time deposit (ibid.).
freezing or sequestration of because of some undesirable elements. The point granted it for the filing of the corresponding I have no objection to according the right to vote
properties, deposits, and is that all such misdeeds have been subject to judicial action with the Sandiganbayan. sequestered stock in case of a take-over of
securities probably worth public exposure and as stated in the dissent PADILLA, J., concurring: business actually belonging to the government
many billions of pesos in New itself, the erring PCGG representatives have been The majority opinion penned by Mr. Justice or whose capitalization comes from public funds
York, New Jersey, Hawaii, forthwith dismissed and replaced. Narvasa maintains and upholds the valid but which, somehow, landed in the hands of
California, and more The magnitude of the tasks that confront distinction between acts of conservation and private persons, as in the case of BASECO. To my
importantly-in Switzerland. respondent PCGG with its limited resources and preservation of assets and acts of ownership. mind, however, caution and prudence should be
Due to favorable staff support and volunteers should be Sequestration, freeze and temporary take-over exercised in the case of sequestered shares of an
on-going private business enterprise, specially however, that a nation professing adherence to ownership must be established in a proper suit the ends, in running the BASECO, taking over the
the sensitive ones, since the true and real the rule of law and fealty to democratic before a court of justice. board of directors and management, getting rid
ownership of said shares is yet to be determined processes must adopt ways and means which are But what has the Court, in effect, ruled? of security guards, disposing of scrap, entering
and proven more conclusively by the Courts. always within the bounds of lawfully granted Pages 21 to 33 of the majority opinion are into new contracts and otherwise behaving as if
It would be more in keeping with legal norms if authority and which meet the tests of due dedicated to a statement of facts it were already the owner. At this late date and
forfeiture proceedings provided for under process and other Bill of Rights protections. which conclusively and indubitably shows that with all the evidence PCGG claims to have, no
Republic Act No. 1379 be filed in Court and the (2) Sequestration is intended to prevent the BASECO is owned by President Marcos-and that court case has been filed.
PCGG seek judicial appointment as a receiver or destruction, concealment, or dissipation of ill- it was acquired and vastly enlarged by the Among the interesting items elicited during the
administrator, in which case, it would be gotten wealth. The object is conservation and former President's taking undue advantage of his oral arguments or found in the records of this
empowered to vote sequestered shares under its preservation. Any exercise of power beyond public office and using his powers, authority, or petition are:
custody (Section 55, Corporation Code). Thereby, these objectives is lawless usurpation. influence. (1) Upon sequestering BASECO, some PCGG
the assets in litigation are brought within the (3) The PCGG exercises only such powers as are There has been no court hearing, no trial, and no personnel lost no time in digging up paved
Court's jurisdiction and the presence of an granted by law and not proscribed by the presentation of evidence. All that we have is premises with jack hammers in a frantic search
impartial Judge, as a requisite of due process, is Constitution. The remedies it enforces are what the PCGG has given us. The petitioner has for buried gold bars.
assured. For, even in its historical context, provisional and contingent. Whether or not not even been allowed to see the evidence, much (2) Two top PCGG volunteers charged each other
sequestration is a judicial matter that is best sequestered property is indeed ill-gotten must less refute it. with stealing properties under their custody. The
handled by the Courts. be-determined by a court of justice. The PCGG What the PCGG has gathered in the course of its PCGG had to step in, dismiss the erring
I consider it imperative that sequestration has absolutely no power to divest title over seizures and investigations may be gospel truth. representatives, and replace them with new
measures be buttressed by judicial proceedings sequestered property or to act as if its findings However, that truth must be properly ones.
the soonest possible in order to settle the matter are final. established in a trial court, not unilaterally (3) The petitioner claims that the lower bid of a
of ownership of sequestered shares and to (4) The PCGG does not own sequestered determined by the PCGG or declared by this rock quarry operator was accepted even as a
determine whether or not they are legally owned property. It cannot and must not exercise acts of Court in a special proceeding which only asks us higher and more favorable bid was offered.
by the stockholders of record or are "ill-gotten ownership. To quote the majority opinion, "one to set aside or enjoin an illegal exercise of power. When the questionable deal was brought to our
wealth" subject to forfeiture in favor of the State. thing is certain ..., the PCGG cannot exercise acts After this decision, there is nothing more for a attention, the awardee allegedly raised his bid to
Sequestration alone, being actually an ancillary of dominion." trial court to ascertain. Certainly, no lower court the level of the better offer. The successful
remedy to a principal action, should not be made (5) The provisional takeover in a sequestration would dare to arrive at findings contrary to this bidder later submitted a comment in
the basis for the exercise of acts of dominion for should not be indefinitely maintained. It is the Court's conclusions, no matter how insistent we intervention explaining his side. Whoever is
an indefinite period of time. duty of the PCGG to immediately file appropriate may be in labelling such conclusions as "prima telling the truth, the fact remains that multi-
Sequestration is an extraordinary, harsh, and criminal or civil cases once the evidence has facie." To me, this is the basic flaw in PCGG million peso contracts involving the operations
severe remedy. It should be confined to its lawful been gathered. procedures that the Court is, today, unwittingly of sequestered companies should be entered into
parameters and exercised, with due regard, in It is the difference between what the Court says legitimating. Even before the institution of a under the supervision of a court, not freely
the words of its enabling laws, to the and what the PCGG does which constrains me to court case, the PCGG concludes that sequestered executed by the PCGG even when the petitioner-
requirements of fairness, due process (Executive dissent. Even as the Court emphasizes principles property is ill-gotten wealth and proceeds to owners question the propriety and integrity of
Order No. 14, palay 7, 1986), and Justice of due process and fair play, it has unfortunately exercise acts of ownership over said properties. those transactions.
(Executive Order No. 2, March 12, 1986). validated ultra vires acts violative of those very It treats sequestered property as its own even (4) The PCGG replaced eight out of eleven
Feliciano, J., concur. same principles. While we stress the rules which before the oppositor-owners have been divested members of the BASECO board of directors with
must govern the PCGG in the exercise of its of their titles. its own men. Upon taking over full control of the
GUTIERREZ, JR., J., concurring and dissenting: powers, the Court has failed to stop or check acts The Court declares that a state of seizure is not corporation, the newly installed board reversed
I concur, in part, in the erudite opinion penned which go beyond the power of sequestration to be indefinitely maintained. This means that the efforts of the former owners to protect their
for the Court by my distinguished colleague Mr. given by law to the PCGG. court proceedings to either forfeit the interests. The new board fired the BASECO
Justice Andres R. Narvasa. I agree insofar as it We are all agreed in the Court that the PCGG is sequestered properties or clear the names and lawyers who instituted the instant petition. It
states the principles which must govern PCGG not a judge. It is an investigator and prosecutor. titles of the petitioners must be filed as soon as then filed a motion to withdraw this very same
sequestrations and emphasizes the limitations in Sequestration is only a preliminary or ancillary possible. petition we are now deciding. In other words, the
the exercise of its broad grant of powers. remedy. There must be a principal and This case is a good example of disregard or "new owners" did not want the Supreme Court
I concur in the general propositions embodied in independent suit filed in court to establish the avoidance of this requirement. With the kind of to continue poking into the legality of their acts.
or implied from the majority opinion, among true ownership of sequestered properties. The evidence which the PCGG professes to possess, They moved to abort the petition filed with us.
them: factual premise that a sequestered property was the forfeiture case could have been filed Any suspicion of impropriety would have been
(1) The efforts of Government to recover ill- ill-gotten by former President Marcos, his family, simultaneously with the issuance of avoided if the PCGG had filed the required court
gotten properties amassed by the previous relatives, subordinates, and close sequestration orders or shortly thereafter. proceedings and exercised its acts of
regime deserve the fullest support of the associates cannot be assumed. The fact of And yet, the records show that the PCGG appears management and control under court
judiciary and all sectors of society. I believe, to concentrate more on the means rather than
supervision. The requirements of due process and analytical mind and a masterly grasp of the issues raised by petitioner BASECO in the case at over, much like a court-appointed receiver, such
would have been met. serious problem we are asked to resolve. He bar, it comprehensively discusses the laws and as to bring and defend actions in its own name;
One other matter I wish to discuss in this deserves and I offer him my sincere admiration. principles governing the Presidential receive rents; collect debts due; pay outstanding
separate opinion is PCGG's selection of eight out There is no question that all lawful efforts should Commission on Good Government (PCGG) and debts; and generally do such other acts and
of the eleven members of the BASECO board of be taken to recover the tremendous wealth defines the scope and extent of its powers in the things as may be necessary to fulfill its mission
directors. plundered from the people by the past regime in discharge of its monumental task of recovering as conservator and administrator. In this context,
The election of the members of a board of the most execrable thievery perpetrated in all the "ill-gotten wealth, accumulated by former it may in addition enjoin or restrain any actual or
directors is distinctly and unqualifiedly an act of history. No right-thinking Filipino can quarrel President Ferdinand E. Marcos, his immediate threatened commission of acts by any person or
ownership. When stockholders of a corporation with this necessary objective, and on this score I family, relatives, subordinates and close entity that may render moot and academic, or
elect or remove members of a board of directors, am happy to concur with the ponencia. associates, whether located in the Philippines or frustrate or otherwise make ineffectual its
they exercise their right of ownership in the But for all my full agreement with the basic abroad (and) business enterprises and entities efforts to carry out its task; punish for direct or
company they own, By no stretch of the thesis of the majority, I regret I find myself owned or controlled by them during I . . .(the indirect contempt in accordance with the Rules
imagination can the revamp of a board of unable to support its conclusions in favor Of the Marcos) administration, directly or through of Court; and seek and secure the assistance of
directors be considered as a mere act of respondent PCGG. My view is that these nominees, by taking undue advantage of their any office, agency or instrumentality of the
conserving assets or preventing the dissipation conclusions clash with the implacable principles public office and/or using their powers, government. In the case of sequestered
of sequestered assets. The broad powers of a of the free society. foremost among which is due authority, influence, connections or businesses generally (i.e. going concerns,
sequestrator are more than enough to protect process. This demands our reverent regard. relationship." 1 business in current operation), as in the case of
sequestered assets. There is no need and no legal Due process protects the life, liberty and The Court is unanimous insofar as the judgment sequestered objects, its essential role, as already
basis to reach out further and exercise ultimate property of every person, whoever he may be. at bar upholds the imperative need of recovering discussed, is that of conservator, caretaker,
acts of ownership. Even the most despicable criminal is entitled to the ill-gotten properties amassed by the previous 'watchdog' or overseer. It is not that of manager,
Under the powers which PCGG has assumed and this protection. Granting this distinction to regime, which "deserves the fullest support of or innovator, much less an owner." 5
wields, it can amend the articles and by-laws of a Marcos, we are still not justified in depriving him the judiciary and all sectors of society." 2 To Now, the case at bar involves one where the
sequestered corporation, decrease the capital of this guaranty on the mere justification that he quote the pungent language of Mr. Justice Cruz, third and most encompassing and rarely invoked
stock, or sell substantially all corporate assets appears to own the BASECO shares. "(T)here is no question that all lawful efforts of provisional remedies, 6 the provisional
without any effective check from the owners not I am convinced and so submit that the PCGG should be taken to recover the tremendous takeover of the Baseco properties and business
yet divested of their titles or from a court of cannot at this time take over the BASECO wealth plundered from the people by the past operations has been availed of by the PCGG,
justice. The PCGG is tasked to preserve assets but without any court order and exercise thereover regime in the most execrable thievery simply because the evidence on hand, not
when it exercises the acts of an owner, it could acts of ownership without court supervision. perpetrated in all history. No right-thinking only prima facie but convincingly with
also very well destroy. I hope that the case of Voting the shares is an act of ownership. Filipino can quarrel with this necessary substantial and documentary evidence of record
the Philippine Daily Express, a major newspaper Reorganizing the board of directors is an act of objective, and on this score I am happy to concur establishes that the corporation known as
closed by the PCGG, is an isolated example. ownership. Such acts are clearly unauthorized. with the ponencia." 3 petitioner BASECO "was owned or controlled by
Otherwise, banks, merchandizing firms, As the majority opinion itself stresses, the PCGG The Court is likewise unanimous in its judgment President Marcos 'during his administration,
investment institutions, and other sensitive is merely an administrator whose authority is dismissing the petition to declare through nominees, by taking undue advantage of
businesses will find themselves in a similar limited to preventing the sequestered properties unconstitutional and void Executive Orders Nos. his public office and/or using his powers,
quandary. from being dissipated or clandestinely 1 and 2 to annul the sequestration order of April authority, or influence;' and that it was by and
I join the PCGG and all right thinking Filipinos in transferred. 14, 1986. For indeed, the 1987 Constitution through the same means, that BASECO had taken
condemning the totalitarian acts which made The court action prescribed in the Constitution is overwhelmingly adopted by the people at the over the business and/or assets of the
possible the accumulation of ill-gotten wealth. I, not inadequate and is available to the PCGG. The February 2, 1987 plebiscite expressly recognized [government-owned] National Shipyard and
however, dissent when authoritarian and ultra advantage of this remedy is that, unlike the ad in Article XVIII, section 26 thereof 4 the vital Engineering Co., Inc., and other government-
vires methods are used to recover that stolen libitum measures now being take it functions of respondent PCGG to achieve the owned or controlled entities." The documentary
wealth. One wrong cannot be corrected by the is authorized and at the same time alsolimited by mandate of the people to recover such ill-gotten evidence shows that petitioner BASECO (read
employment of another wrong. the fundamental law. I see no reason why it wealth and properties as ordained by Ferdinand E. Marcos) in successive transactions
I, therefore, vote to grant the petition. Pending should not now be employed by the PCGG, to Proclamation No. 3 promulgated on March 25, all directed and approved by the former
the filing of an appropriate case in court, the remove all doubts regarding the legality of its 1986. President-in an orgy of what according to the
PCGG must be enjoined from exercising any and acts and all suspicions concerning its motives. The Court is likewise unanimous as to the PCGG's then chairman, Jovito Salonga, in his
all acts of ownership over the sequestered firm. general rule set forth in the main opinion that statement before the 1986 Constitutional
Bidin and Cortes, JJ., concur and dissent. "the PCGG cannot exercise acts of dominion over Commission, "Mr. Ople once called 'organized
Separate Opinions property sequestered, frozen or provisionally pillage' "-gobbled up the government
CRUZ, J., dissenting: TEEHANKEE, CJ., concurring: taken over" and "(T)he PCGG may thus exercise corporation National Shipyard & Steel
My brother Narvasa has written a truly I fully concur with the masterly opinion of Mr. only powers of administration over the property Corporation NASSCO its shipyard at Mariveles,
outstanding decision that bespeaks a penetrating Justice Narvasa. In the process of disposing of the or business sequestered or provisionally taken 300 hectares of land in Mariveles from the
Export Processing Zone Authority, Engineer that the BASECO stockholders were still in respondent commission has chosen to raise of its very own properties and assets that had
Island itself in Manila and its complex of possession of their respective stock certificates these very issues in this Court. We cannot been stolen from it and which it had pledged to
equipment and facilities including structures, and had 'never endorsed * * * them in blank or to ostrich-like hide our head in the sand and say recover for the benefit and in the greater interest
buildings, shops, quarters, houses, plants and anyone else,' that denial is exposed by his own that it has not yet been established in the proper of the Filipino people, whom the past regime had
expendable or semi-expendable assets and prior and subsequent recorded statements as a court that what the PCGG has taken over here saddled with a huge $27-billion foreign debt that
obtained huge loans of $19,000,000.00 from the mere gesture of defiance rattler than a verifiable are government properties, as a matter of record has since ballooned to $28.5-billion.
last available Japanese war damage fund, factual declaration . . . . Under the circumstances, and public notice and knowledge, like the Thus, the main opinion correctly concludes that
P30,000,000.00 from the NDC and the Court can only conclude that he could not get NASSCO, its Engineer Island and Mariveles "(I)n the light of the affirmative showing by the
P12,400,000.00 from the GSIS. The sordid details the originals from the stockholders for the Shipyard and entire complex, which have been Government that,prima facie at least, the
are set forth in detail in Paragraphs 1 1 to 20 of simple reason that as the Solicitor General pillaged and placed in the name of the dummy or stockholders and directors of BASECO as of April,
the main opinion. They include confidential maintains, said stockholders in truth no longer front company named BASECO but from all the 1986 were mere 'dummies,' nominees or alter
reports from then BASECO president Hilario M. have them in their possession, these having documentary evidence of record shown by its egos of President Marcos; at any rate, that they
Ruiz and the deposed President's brother-in- already been assigned in blank to President street certificates all found in Malacanang should are no longer owners of any shares of stock in
law, then Captain (later Commodore) Alfredo Marcos."8 in reality read "Ferdinand E. Marcos" and/or his the corporation, the conclusion cannot be
Romualdez, who although not on record as an With this strong unrebutted evidence of record brother-in-law. Such take-over can in no way be avoided that said stockholders and directors
officer or stockholder of BASECO reported in this Court, Justice Melencio-Herrera, joined by termed "lawless usurpation," for the government have no basis and no standing whatever to cause
directly to the deposed President on its affairs Justice Feliciano, expressly concurs with the does not commit any act of usurpation in taking the filing and prosecution of the instant
and made the recommendations, all approved by main opinion upholding the commission's take- over its own properties that have been channeled proceeding; and to grant relief to BASECO, as
the latter, for the gobbling up by BASECO of all over, stating that "(I) have no objection to to dummies, who are called upon to prove in the prayed for in the petition, would in effect be to
the choice government assets and properties. according the right to vote sequestered stock in proper court action what they have failed to do restore the assets, properties and business
All this evidence has been placed of record in the case of a takeover of business actually belonging in this Court, that they have lawfully acquired sequestered and taken over by the PCGG to
case at bar. And petitioner has had all the time to the government or whose capitalization comes ownership of said properties, contrary to the persons who are 'dummies' nominees or alter
and opportunity to refute it, submittals to the from public funds but which, somehow, landed in documentary evidence of record, which they egos of the former President." 9
contrary notwithstanding, but has dismally failed the hands of private persons, as in the case of must likewise explain away. This Court, in the And Justice Padilla in his separate concurrence
to do so. To cite one glaring instance: as stated in BASECO." They merely qualify their concurrence exercise of its jurisdiction on certiorari and as "called a spade a spade," citing the street
the main opinion, the evidence submitted to this with the injunction that such takeovers be the guardian of the Constitution and protector of certificates representing 95 % of BASECO's
Court by the Solicitor General "proves that exercised with "caution and prudence" pending the people's basic constitutional rights, has outstanding stock found in Malacañang after Mr.
President Marcos not only exercised control over the determination of "the true and real entertained many petitions on the part of parties Marcos' hasty flight in February, 1986 and the
BASECO, but also that he actually owns well nigh ownership" of the sequestered shares. Suffice it claiming to be adversely affected by extent of the control he exercised over policy
one hundred percent of its outstanding stock." It to say in this regard that each case has to be sequestration and other orders of the PCGG, This decisions affecting BASECO and concluding that
cites the fact that three corporations, evidently judged from the pertinent facts and Court set the criterion that such orders should "Consequently, even ahead of judicial
front or dummy corporations, among twenty circumstances and that the main opinion issue only upon showing of a prima facie case, proceedings, I am convinced that the Republic of
shareholders, in name, of BASECO, namely Metro emphasizes sufficiently that it is only in the which criterion was adopted in the 1987 the Philippines, thru the PCGG, has the right and
Bay Drydock, Fidelity Management, Inc. and special instances specified in the governing laws Constitution. The Court's judgment cannot be even the duty to take over full control and
Trident Management hold 209,664 shares or grounded on the superior national interest and faulted if much more than a prima facie has been supervision of BASECO."
95.82%, of BASECO's outstanding stock. Now, welfare and the practical necessity of preserving shown in this case, which the faceless figures Indeed, the provisional remedies available to
the Solicitor General points out further than the property and preventing its loss or claiming to represent BASECO have failed to respondent commission are rooted in the police
BASECO certificates "corresponding to more disposition that the provisional remedy of refute or disprove despite all the opportunity to power of the State, the most pervasive and the
than ninety-five percent (95%) of all the provisional take-over is exercised. do so. least limitable of the powers of Government
outstanding shares of stock of BASECO, endorsed Here, according to the dissenting opinion, "the The record plainly shows that petitioner BASECO since it represents "the power of sovereignty, the
in blank, together with deeds of assignment of PCGG concludes that sequestered property is ill- which is but a mere shell to mask its real owner power to govern men and things within the
practically all the outstanding shares of stock of gotten wealth and proceeds to exercise acts of did not and could not explain how and why they limits of its domain." 10 Police power has been
the three (3) corporations above mentioned ownership over said properties . . . . and adds received such favored and preferred treatment defined as the power inherent in the State "to
(which hold 95.82% of all BASECO stock), signed that "the fact of ownership must be established with tailored Letters of Instruction and prescribe regulations to promote the health,
by the owners thereof although not in a proper suit before a court of justice"-which handwritten personal approval of the deposed morals, education, good order or safety, and
notarized" 7 were found in Malacañang shortly this Court has preempted with its finding that "in President that handed it on a silver platter the general welfare of the people." 11Police power
after the deposed President's sudden flight from the context of the proceedings at bar, the whole complex and properties of NASSCO and rests upon public necessity and upon the right of
the country on the night of February 25, 1986. actuality of the control by President Marcos of Engineer Island and the Mariveles Shipyard. the State and of the public to self-
Thus, the main opinion's unavoidable conclusion BASECO has been sufficiently shown." It certainly would be the height of absurdity and protection. 12 "Salus populi suprema est lex" or
that "(W)hile the petitioner's counsel was quick But BASECO who has instituted this action to set helplessness if this government could not here "the welfare of the people is the Supreme
to dispute this asserted fact, assuring this Court aside the sequestration and take-over orders of and now take over the possession and custody Law." 13 For this reason, it is co-extensive with
the necessities of the case and the safeguards of their names "do not appear on any title to the But, as I said, the bulk of the more than justified its
public interest. 14Its scope expands and property. Every building in New York is titled in ill-gotten wealth is located existence. 20
contracts with changing needs. 15 "It may be the name of a Netherlands Antilles corporation, abroad, not in the Philippines. The misdeeds of some PCGG volunteers and
said in a general way that the police power which in turn is purportedly owned by three Through the efforts of the personnel cited in the dissenting opinion do not
extends to all the great public needs. It may be Panamanian corporations, with bearer shares. PCGG, we have caused the detract at an from the PCGG's accomplishments,
put forth in aid of what is sanctioned by usage, or This means that the shares of this corporation freezing or sequestration of just as no one would do away with newspapers
held by the prevailing morality or strong and can change hands any time, since they can be properties, deposits, and because of some undesirable elements. The point
preponderant opinion to be greatly and transferred, under the law of Panama, without securities probably worth is that all such misdeeds have been subject to
immediately necessary to the public previous registration on the books of the many billions of pesos in New public exposure and as stated in the dissent
welfare." 16 That the public interest or the corporation. One of the first documents that we York, New Jersey, Hawaii, itself, the erring PCGG representatives have been
general welfare is subserved by sequestering the discovered shortly after the February revolution California, and more forthwith dismissed and replaced.
purported ill-gotten assets and properties and was a declaration of trust handwritten by Mr. importantly-in Switzerland. The magnitude of the tasks that confront
taking over stolen properties of the government Joseph Bernstein on April 4, 1982 on a Manila Due to favorable respondent PCGG with its limited resources and
channeled to dummy or front companies is Peninsula Hotel stationery stating that he would developments in Switzerland, staff support and volunteers should be
stating the obvious. The recovery of these ill- act as a trustee for the benefit of President we may expect, according to appreciated, together with the assistance that
gotten assets and properties would greatly aid Ferdinand Marcos and would act solely pursuant our Swiss lawyers, the first foreign governments and lawyers have
our financially crippled government and hasten to the instructions of Marcos with respect to the deliveries of the Swiss spontaneously given the commission.
our national economic recovery, not to mention Crown Building in New York." 19 deposits in the foreseeable A word about the PCGG's firing of the BASECO
the fact that they rightfully belong to the people. This is just to stress the difficulties of the tasks future, perhaps in less than a lawyers who filed the present petition
While as a measure of self-protection, if, in the confronting respondent PCGG, which year's time. In New York, challenging its questioned orders, filing a motion
interest of general welfare, police power may be nevertheless has so far commendably produced PCGG through its lawyers who to withdraw the petition, after it had put in eight
exercised to protect citizens and their businesses unprecedented positive results. As stated by render their services free of of its representatives as directors of the BASECO
in financial and economic matters, it may then chairman Salonga: cost to the Philippine board of directors. This was entirely proper and
similarly be exercised to protect the government PCGG has turned over to the government, succeeded in in accordance with the Court's Resolution of
itself against potential financial loss and the Office of the President around getting injunctive relief October 28, 1986, which denied BASECO's
possible disruption of governmental 2 billion pesos in cash, free of against Mr. and Mrs. Marcos motion for the issuance of a restraining order
functions. 17 Police power as the power of self- any lien. It has also delivered and their nominees and against such take-over and declared that "the
protection on the part of the community bears to the President-as a result of agents. There is now an offer government can, through its designated
the same relation to the community that the a compromise settlement- for settlement that is being directors, properly exercise control and
principle of self-defense bears to the around 200 land titles studied and explored by our management over what appear to be properties
individual. 18 Truly, it may be said that even involving vast tracks of land lawyers there. and assets owned and belonging to the
more than self- defense, the recovery of ill-gotten in Metro Manila, Rizal, If we succeed in recovering government itself and over which the persons who
wealth and of the government's own properties Laguna, Cavite, and Bataan, not an (since this is appear in this case on behalf of BASECO have
involves the material and moral survival of the worth several billion pesos. impossible) but a substantial failed to show any eight or even any shareholding
nation, marked as the past regime was by the These lands are now available part of the ill-gotten wealth in said corporation." In other words, these
obliteration of any line between private funds for low-cost housing projects here and in various countries dummies or fronts cannot seek to question the
and the public treasury and abuse of unlimited for the benefit of the poor and of the world-something the government's right to recover the very
power and elimination of any accountability in the dispossessed amongst our revolutionary governments of properties and assets that have been stolen from
public office, as the evidence of record amply people. China, Ethiopia, Iran and it by using the very same stolen properties and
shows. In the legal custody of the Nicaragua were not able to funds derived therefrom. If they wish to pursue
It should be mentioned that the tracking down of Commission as a result of accomplish at all with respect their own empty claim, they must do it on their
the deposed President's actual ownership of the sequestration proceedings, to properties outside their own, after first establishing that they indeed
BASECO shares was fortuitously facilitated by are expensive jewelry territorial boundaries-the have a lawful right and/or shareholding in
the recovery of the street certificates in amounting to 310 million Presidential Commission on BASECO.
Malacañang after his hasty flight from the pesos, 42 aircraft amounting Good Government, which has Under the 1987 Constitution, the PCGG is called
country last year. This is not generally the case. to 718 million pesos, vessels undertaken the difficult and upon to file the judicial proceedings for
For example, in the ongoing case filed by the amounting to 748 million thankless task of trying to forfeiture and recovery of the sequestered or
government to recover from the Marcoses pesos, and shares of stock undo what had been done so frozen properties covered by its orders issued
valuable real estate holdings in New York and amounting to around 215 secretly and effectively in the before the ratification of the Constitution on
the Lindenmere estate in Long Island, former million pesos. last twenty years, shall have February 2, 1987, within six months from such
PCGG chairman Jovito Salonga has revealed that ratification, or by August 2, 1987. (For those
orders issued after such ratification, the judicial The voting of sequestered stock is, to my mind, must govern the PCGG in the exercise of its
action or proceeding must be commenced within an exercise of an attribute of ownership. It goes GUTIERREZ, JR., J., concurring and dissenting: powers, the Court has failed to stop or check acts
six months from the issuance thereof.) The PCGG beyond the purpose of a writ of sequestration, I concur, in part, in the erudite opinion penned which go beyond the power of sequestration
has not really been given much time, considering which is essentially to preserve the property in for the Court by my distinguished colleague Mr. given by law to the PCGG.
the magnitude of its tasks. It is entitled to some litigation (Article 2005, Civil Code). Justice Andres R. Narvasa. I agree insofar as it We are all agreed in the Court that the PCGG is
forbearance, in availing of the maximum time Sequestration is in the nature of a judicial states the principles which must govern PCGG not a judge. It is an investigator and prosecutor.
granted it for the filing of the corresponding deposit (ibid.). sequestrations and emphasizes the limitations in Sequestration is only a preliminary or ancillary
judicial action with the Sandiganbayan. I have no objection to according the right to vote the exercise of its broad grant of powers. remedy. There must be a principal and
PADILLA, J., concurring: sequestered stock in case of a take-over of I concur in the general propositions embodied in independent suit filed in court to establish the
The majority opinion penned by Mr. Justice business actually belonging to the government or implied from the majority opinion, among true ownership of sequestered properties. The
Narvasa maintains and upholds the valid or whose capitalization comes from public funds them: factual premise that a sequestered property was
distinction between acts of conservation and but which, somehow, landed in the hands of (1) The efforts of Government to recover ill- ill-gotten by former President Marcos, his family,
preservation of assets and acts of ownership. private persons, as in the case of BASECO. To my gotten properties amassed by the previous relatives, subordinates, and close
Sequestration, freeze and temporary take-over mind, however, caution and prudence should be regime deserve the fullest support of the associates cannot be assumed. The fact of
encompass the first type of acts. They do not exercised in the case of sequestered shares of an judiciary and all sectors of society. I believe, ownership must be established in a proper suit
include the second type of acts which are on-going private business enterprise, specially however, that a nation professing adherence to before a court of justice.
reserved only to the rightful owner of the assets the sensitive ones, since the true and real the rule of law and fealty to democratic But what has the Court, in effect, ruled?
or business sequestered or temporarily taken ownership of said shares is yet to be determined processes must adopt ways and means which are Pages 21 to 33 of the majority opinion are
over. and proven more conclusively by the Courts. always within the bounds of lawfully granted dedicated to a statement of facts
The removal and election of members of the It would be more in keeping with legal norms if authority and which meet the tests of due which conclusively and indubitably shows that
board of directors of a corporate enterprise is, to forfeiture proceedings provided for under process and other Bill of Rights protections. BASECO is owned by President Marcos-and that
me, a clear act of ownership on the part of the Republic Act No. 1379 be filed in Court and the (2) Sequestration is intended to prevent the it was acquired and vastly enlarged by the
shareholders of the corporation. Under ordinary PCGG seek judicial appointment as a receiver or destruction, concealment, or dissipation of ill- former President's taking undue advantage of his
circumstances, I would deny the PCGG the administrator, in which case, it would be gotten wealth. The object is conservation and public office and using his powers, authority, or
authority to change and elect the members of empowered to vote sequestered shares under its preservation. Any exercise of power beyond influence.
BASECO's Board of Directors. However, under custody (Section 55, Corporation Code). Thereby, these objectives is lawless usurpation. There has been no court hearing, no trial, and no
the facts as disclosed by the records, it appears the assets in litigation are brought within the (3) The PCGG exercises only such powers as are presentation of evidence. All that we have is
that the certificates of stock representing about Court's jurisdiction and the presence of an granted by law and not proscribed by the what the PCGG has given us. The petitioner has
ninety-five (95%) per cent of the total ownership impartial Judge, as a requisite of due process, is Constitution. The remedies it enforces are not even been allowed to see the evidence, much
in BASECO's capital stock were found endorsed assured. For, even in its historical context, provisional and contingent. Whether or not less refute it.
in blank in Malacanang (presumably in the sequestration is a judicial matter that is best sequestered property is indeed ill-gotten must What the PCGG has gathered in the course of its
possession and control of Mr. Marcos) at the handled by the Courts. be-determined by a court of justice. The PCGG seizures and investigations may be gospel truth.
time he and his family fled in February 1986. I consider it imperative that sequestration has absolutely no power to divest title over However, that truth must be properly
This circumstance let alone the extent of the measures be buttressed by judicial proceedings sequestered property or to act as if its findings established in a trial court, not unilaterally
control Mr. Marcos exercised, while in power, the soonest possible in order to settle the matter are final. determined by the PCGG or declared by this
over policy decisions affecting BASECO, entirely of ownership of sequestered shares and to (4) The PCGG does not own sequestered Court in a special proceeding which only asks us
satisfies my mind that BASECO was owned and determine whether or not they are legally owned property. It cannot and must not exercise acts of to set aside or enjoin an illegal exercise of power.
controlled by Mr. Marcos. This is calling a spade by the stockholders of record or are "ill-gotten ownership. To quote the majority opinion, "one After this decision, there is nothing more for a
a spade. I am also entirely satisfied in my mind wealth" subject to forfeiture in favor of the State. thing is certain ..., the PCGG cannot exercise acts trial court to ascertain. Certainly, no lower court
that Mr. Marcos could not have acquired the Sequestration alone, being actually an ancillary of dominion." would dare to arrive at findings contrary to this
ownership of BASECO out of his lawfully-gotten remedy to a principal action, should not be made (5) The provisional takeover in a sequestration Court's conclusions, no matter how insistent we
wealth. the basis for the exercise of acts of dominion for should not be indefinitely maintained. It is the may be in labelling such conclusions as "prima
Consequently, even ahead of judicial an indefinite period of time. duty of the PCGG to immediately file appropriate facie." To me, this is the basic flaw in PCGG
proceedings, I am convinced that the Republic of Sequestration is an extraordinary, harsh, and criminal or civil cases once the evidence has procedures that the Court is, today, unwittingly
the Philippines, through the PCGG, has the right severe remedy. It should be confined to its lawful been gathered. legitimating. Even before the institution of a
and even the duty to take-over full control and parameters and exercised, with due regard, in It is the difference between what the Court says court case, the PCGG concludes that sequestered
supervision of BASECO. the words of its enabling laws, to the and what the PCGG does which constrains me to property is ill-gotten wealth and proceeds to
MELENCIO-HERRERA, J., concurring: requirements of fairness, due process (Executive dissent. Even as the Court emphasizes principles exercise acts of ownership over said properties.
I would like to qualify my concurrence in so far Order No. 14, palay 7, 1986), and Justice of due process and fair play, it has unfortunately It treats sequestered property as its own even
as the voting of sequestered stork is concerned. (Executive Order No. 2, March 12, 1986). validated ultra vires acts violative of those very before the oppositor-owners have been divested
Feliciano, J., concur. same principles. While we stress the rules which of their titles.
The Court declares that a state of seizure is not corporation, the newly installed board reversed however, dissent when authoritarian and ultra advantage of this remedy is that, unlike the ad
to be indefinitely maintained. This means that the efforts of the former owners to protect their vires methods are used to recover that stolen libitum measures now being take it
court proceedings to either forfeit the interests. The new board fired the BASECO wealth. One wrong cannot be corrected by the is authorized and at the same time alsolimited by
sequestered properties or clear the names and lawyers who instituted the instant petition. It employment of another wrong. the fundamental law. I see no reason why it
titles of the petitioners must be filed as soon as then filed a motion to withdraw this very same I, therefore, vote to grant the petition. Pending should not now be employed by the PCGG, to
possible. petition we are now deciding. In other words, the the filing of an appropriate case in court, the remove all doubts regarding the legality of its
This case is a good example of disregard or "new owners" did not want the Supreme Court PCGG must be enjoined from exercising any and acts and all suspicions concerning its motives.
avoidance of this requirement. With the kind of to continue poking into the legality of their acts. all acts of ownership over the sequestered firm.
evidence which the PCGG professes to possess, They moved to abort the petition filed with us. Bidin and Cortes, JJ., concur and dissent.
the forfeiture case could have been filed Any suspicion of impropriety would have been
simultaneously with the issuance of avoided if the PCGG had filed the required court CRUZ, J., dissenting:
sequestration orders or shortly thereafter. proceedings and exercised its acts of My brother Narvasa has written a truly
And yet, the records show that the PCGG appears management and control under court outstanding decision that bespeaks a penetrating
to concentrate more on the means rather than supervision. The requirements of due process and analytical mind and a masterly grasp of the
the ends, in running the BASECO, taking over the would have been met. serious problem we are asked to resolve. He
board of directors and management, getting rid One other matter I wish to discuss in this deserves and I offer him my sincere admiration.
of security guards, disposing of scrap, entering separate opinion is PCGG's selection of eight out There is no question that all lawful efforts should
into new contracts and otherwise behaving as if of the eleven members of the BASECO board of be taken to recover the tremendous wealth
it were already the owner. At this late date and directors. plundered from the people by the past regime in
with all the evidence PCGG claims to have, no The election of the members of a board of the most execrable thievery perpetrated in all
court case has been filed. directors is distinctly and unqualifiedly an act of history. No right-thinking Filipino can quarrel
Among the interesting items elicited during the ownership. When stockholders of a corporation with this necessary objective, and on this score I
oral arguments or found in the records of this elect or remove members of a board of directors, am happy to concur with the ponencia.
petition are: they exercise their right of ownership in the But for all my full agreement with the basic
(1) Upon sequestering BASECO, some PCGG company they own, By no stretch of the thesis of the majority, I regret I find myself
personnel lost no time in digging up paved imagination can the revamp of a board of unable to support its conclusions in favor Of the
premises with jack hammers in a frantic search directors be considered as a mere act of respondent PCGG. My view is that these
for buried gold bars. conserving assets or preventing the dissipation conclusions clash with the implacable principles
(2) Two top PCGG volunteers charged each other of sequestered assets. The broad powers of a of the free society. foremost among which is due
with stealing properties under their custody. The sequestrator are more than enough to protect process. This demands our reverent regard.
PCGG had to step in, dismiss the erring sequestered assets. There is no need and no legal Due process protects the life, liberty and
representatives, and replace them with new basis to reach out further and exercise ultimate property of every person, whoever he may be.
ones. acts of ownership. Even the most despicable criminal is entitled to
(3) The petitioner claims that the lower bid of a Under the powers which PCGG has assumed and this protection. Granting this distinction to
rock quarry operator was accepted even as a wields, it can amend the articles and by-laws of a Marcos, we are still not justified in depriving him
higher and more favorable bid was offered. sequestered corporation, decrease the capital of this guaranty on the mere justification that he
When the questionable deal was brought to our stock, or sell substantially all corporate assets appears to own the BASECO shares.
attention, the awardee allegedly raised his bid to without any effective check from the owners not I am convinced and so submit that the PCGG
the level of the better offer. The successful yet divested of their titles or from a court of cannot at this time take over the BASECO
bidder later submitted a comment in justice. The PCGG is tasked to preserve assets but without any court order and exercise thereover
intervention explaining his side. Whoever is when it exercises the acts of an owner, it could acts of ownership without court supervision.
telling the truth, the fact remains that multi- also very well destroy. I hope that the case of Voting the shares is an act of ownership.
million peso contracts involving the operations the Philippine Daily Express, a major newspaper Reorganizing the board of directors is an act of
of sequestered companies should be entered into closed by the PCGG, is an isolated example. ownership. Such acts are clearly unauthorized.
under the supervision of a court, not freely Otherwise, banks, merchandizing firms, As the majority opinion itself stresses, the PCGG
executed by the PCGG even when the petitioner- investment institutions, and other sensitive is merely an administrator whose authority is
owners question the propriety and integrity of businesses will find themselves in a similar limited to preventing the sequestered properties
those transactions. quandary. from being dissipated or clandestinely
(4) The PCGG replaced eight out of eleven I join the PCGG and all right thinking Filipinos in transferred.
members of the BASECO board of directors with condemning the totalitarian acts which made The court action prescribed in the Constitution is
its own men. Upon taking over full control of the possible the accumulation of ill-gotten wealth. I, not inadequate and is available to the PCGG. The
Republic of the Philippines prayed that the complaint be dismissed, with powers of a corporation "and such other powers judgment should be affirmed. If the evidence
SUPREME COURT costs against the plaintiff. as may be necessary to enable it to prosecute the shows that the land does not belong to the
Manila business of developing coal deposits in the plaintiff, then the judgment should be reversed,
Upon the issue thus presented, the case was Philippine Island and of mining, extracting, unless the plaintiff's rights fall under section 3 of
EN BANC brought on for trial. After a consideration of the transporting and selling the coal contained in said Act.
evidence adduced by both parties, the Honorable said deposits." (Sec. 2, Act No. 2705.) By the
Pedro Conception, judge, held that the words same law (Act No. 2705) the Government of the The only witness presented by the plaintiff upon
G.R. No. L-22619 December 2, 1924 Philippine Islands is made the majority
"lands owned by any person, etc.," in section 15 the question of the ownership of the land in
of Act No. 2719 should be understood to mean stockholder, evidently in order to insure proper question was Mr. Dalmacio Costas, who stated
NATIONAL COAL COMPANY, plaintiff-appellee, "lands held in lease or usufruct," in harmony with government supervision and control, and thus to that he was a member of the board of directors
vs. the other provision of said Act; that the coal place the Government in a position to render all of the plaintiff corporation; that the plaintiff
THE COLLECTOR OF INTERNAL lands possessed by the plaintiff, belonging to the possible encouragement, assistance and help in corporation took possession of the land in
REVENUE, defendant-appellant. Government, fell within the provisions of section the prosecution and furtherance of the question by virtue of the proclamation of the
15 of Act No. 2719; and that a tax of P0.04 per company's business. Governor-General, known as Proclamation No.
Attorney-General Villa-Real for appellant. ton of 1,016 kilos on each ton of coal extracted 39 of the year 1917; that no document had been
Perfecto J. Salas Rodriguez for appellee. therefrom, as provided in said section, was the On May 14, 1917, two months after the passage issued in favor of the plaintiff corporation; that
only tax which should be collected from the of Act No. 2705, creating the National Coal said corporation had received no permission
plaintiff; and sentenced the defendant to refund Company, the Philippine Legislature passed Act from the Secretary of Agriculture and Natural
JOHNSON, J.: to the plaintiff the sum of P11,081.11 which is No. 2719 "to provide for the leasing and Resources; that it took possession of said lands
the difference between the amount collected development of coal lands in the Philippine covering an area of about 400 hectares, from
under section 1496 of the Administrative Code Islands." On October 18, 1917, upon petition of which the coal in question was mined, solely, by
This action was brought in the Court of First and the amount which should have been the National Coal Company, the Governor- virtue of said proclamation (Exhibit B, No. 39).
Instance of the City of Manila on the 17th day of collected under the provisions of said section 15 General, by Proclamation No. 39, withdrew
July, 1923, for the purpose of recovering the sum of Act No. 2719. From that sentence the "from settlement, entry, sale or other disposition,
of P12,044.68, alleged to have been paid under Said proclamation (Exhibit B) was issued by
defendant appealed, and now makes the all coal-bearing public lands within the Province Francis Burton Harrison, then Governor-General,
protest by the plaintiff company to the following assignments of error: of Zamboanga, Department of Mindanao and
defendant, as specific tax on 24,089.3 tons of on the 18th day of October, 1917, and provided:
Sulu, and the Island of Polillo, Province of "Pursuant to the provision of section 71 of Act
coal. Said company is a corporation created by Tayabas." Almost immediately after the issuance
Act No. 2705 of the Philippine Legislature for the I. The court below erred in holding that section No. 926, I hereby withdraw from settlement,
15 of Act No. 2719 does not refer to coal lands of said proclamation the National Coal Company entry, sale, or other disposition, all coal-bearing
purpose of developing the coal industry in the took possession of the coal lands within the said
Philippine Islands and is actually engaged in coal owned by persons and corporations. public lands within the Province of Zamboanga,
reservation, with an area of about 400 hectares, Department of Mindanao and Sulu, and the
mining on reserved lands belonging to the without any further formality, contract or lease.
Government. It claimed exemption from taxes II. The court below erred in holding that the Island of Polillo, Province of Tayabas." It will be
Of the 30,000 shares of stock issued by the noted that said proclamation only provided that
under the provision of sections 14 and 15 of Act plaintiff was not subject to the tax prescribed in company, the Government of the Philippine
No. 2719, and prayed for a judgment ordering section 1496 of the Administrative Code. all coal-bearing public lands within said province
Islands is the owner of 29,809 shares, that is, of and island should be withdrawn from
the defendant to refund to the plaintiff said sum 99 1/3 per centum of the whole capital stock.
of P12,044.68, with legal interest from the date settlement, entry, sale, or other disposition.
The question confronting us in this appeal is There is nothing in said proclamation which
of the presentation of the complaint, and costs whether the plaintiff is subject to the taxes under
against the defendant. If we understand the theory of the plaintiff- authorizes the plaintiff or any other person to
section 15 of Act No. 2719, or to the specific appellee, it is, that it claims to be the owner of enter upon said reversations and to mine coal,
taxes under section 1496 of the Administrative the land from which it has mined the coal in and no provision of law has been called to our
The defendant answered denying generally and Code. question and is therefore subject to the attention, by virtue of which the plaintiff was
specifically all the material allegations of the provisions of section 15 of Act No. 2719 and not entitled to enter upon any of the lands so
complaint, except the legal existence and The plaintiff corporation was created on the 10th to the provisions of the section 1496 of the reserved by said proclamation without first
personality of the plaintiff. As a special defense, day of March, 1917, by Act No. 2705, for the Administrative Code. That contention of the obtaining permission therefor.
the defendant alleged (a) that the sum of purpose of developing the coal industry in the plaintiff leads us to an examination of the
P12,044.68 was paid by the plaintiff without Philippine Island, in harmony with the general evidence upon the question of the ownership of
protests, and (b) that said sum was due and The plaintiff is a private corporation. The mere
plan of the Government to encourage the the land from which the coal in question was fact that the Government happens to the
owing from the plaintiff to the Government of development of the natural resources of the mined. Was the plaintiff the owner of the land
the Philippine Islands under the provisions of majority stockholder does not make it a public
country, and to provided facilities therefor. By from which the coal in question was mined? If corporation. Act No. 2705, as amended by Act
section 1496 of the Administrative Code and said Act, the company was granted the general the evidence shows the affirmative, then the No. 2822, makes it subject to all of the provisions
of the Corporation Law, in so far as they are not 2705, and has no greater powers nor privileges An examination of said Act (No. 2719) discloses lessees of coal lands only, it is difficult to
inconsistent with said Act (No. 2705). No than the ordinary private corporation, except the following facts important for consideration understand why the internal revenue duty and
provisions of Act No. 2705 are found to be those mentioned, perhaps, in section 10 of Act here: tax in said section was made different from the
inconsistent with the provisions of the No. 2719, and they do not change the situation obligations mentioned in section 3 of said Act,
Corporation Law. As a private corporation, it has here. First. All "coal-bearing lands of the public imposed upon lessees or holders.
no greater rights, powers or privileges than any domain in the Philippine Islands shall not be
other corporation which might be organized for (2) It mined on public lands between the month disposed of in any manner except as provided in From all of the foregoing, it seems to be made
the same purpose under the Corporation Law, of July, 1920, and the months of March, 1922, this Act." Second. Provisions for leasing by the plain that the plaintiff is neither a lessee nor an
and certainly it was not the intention of the 24,089.3 tons of coal. Secretary of Agriculture and Natural Resources owner of coal-bearing lands, and is, therefore,
Legislature to give it a preference or right or of "unreserved, unappropriated coal-bearing not subject to any other provisions of Act No.
privilege over other legitimate private public lands," and the obligation to the 2719. But, is the plaintiff subject to the
corporations in the mining of coal. While it is (3) Upon demand of the Collector of Internal
Revenue it paid a tax of P0.50 a ton, as taxes Government which shall be imposed by said provisions of section 1496 of the Administrative
true that said proclamation No. 39 withdrew Secretary upon the lessee.lawphi1.net Code?
"from settlement, entry, sale, or other disposition under the provisions of article 1946 of the
of coal-bearing public lands within the Province Administrative Code on the 15th day of
of Zamboanga . . . and the Island of Polillo," it December, 1922. Third. The internal revenue duty and tax which Section 1496 of the Administrative Code
made no provision for the occupation and must be paid upon coal-bearing lands owned by provides that "on all coal and coke there shall be
operation by the plaintiff, to the exclusion of (4) It is admitted that it is neither the owner nor any person, firm, association or corporation. collected, per metric ton, fifty centavos." Said
other persons or corporations who might, under the lessee of the lands upon which said coal was section (1496) is a part of article, 6 which
proper permission, enter upon the operate coal mined. To repeat, it will be noted, first, that Act No. 2719 provides for specific taxes. Said article provides
mines. provides an internal revenue duty and tax upon for a specific internal revenue tax upon all things
unreserved, unappropriated coal-bearing public manufactured or produced in the Philippine
(5) The proclamation of Francis Burton Harrison, Islands for domestic sale or consumption, and
On the 14th day of May, 1917, and before the Governor-General, of the 18th day of October, lands which may be leased by the Secretary of
Agriculture and Natural Resources; and, second, upon things imported from the United States or
issuance of said proclamation, the Legislature of 1917, by authority of section 1 of Act No. 926, foreign countries. It having been demonstrated
the Philippine Island in "an Act for the leasing withdrawing from settlement, entry, sale, or that said Act (No. 2719) provides an internal
revenue duty and tax imposed upon any person, that the plaintiff has produced coal in the
and development of coal lands in the Philippine other dispositon all coal-bearing public lands Philippine Islands and is not a lessee or owner of
Islands" (Act No. 2719), made liberal provision. within the Province of Zamboanga and the Island firm, association or corporation, who may be the
owner of "coal-bearing lands." A reading of said the land from which the coal was produced, we
Section 1 of said Act provides: "Coal-bearing of Polillo, was not a reservation for the benefit of are clearly of the opinion, and so hold, that it is
lands of the public domain in the Philippine the National Coal Company, but for any person Act clearly shows that the tax imposed thereby is
imposed upon two classes of persons only — subject to pay the internal revenue tax under the
Island shall not be disposed of in any manner or corporation of the Philippine Islands or of the provisions of section 1496 of the Administrative
except as provided in this Act," thereby giving a United States. lessees and owners.
Code, and is not subject to the payment of the
clear indication that no "coal-bearing lands of the internal revenue tax under section 15 of Act No.
public domain" had been disposed of by virtue of (6) That the National Coal Company entered The lower court had some trouble in 2719, nor to any other provisions of said Act.
said proclamation. upon said land and mined said coal, so far as the determining what was the correct interpretation
record shows, without any lease or other of section 15 of said Act, by reason of what he
believed to be some difference in the Therefore, the judgment appealed from is hereby
Neither is there any provision in Act No. 2705 authority from either the Secretary of revoked, and the defendant is hereby relieved
creating the National Coal Company, nor in the Agriculture and Natural Resources or any person interpretation of the language used in Spanish
and English. While there is some ground for from all responsibility under the complaint. And,
amendments thereof found in Act No. 2822, having the power to grant a leave or authority. without any finding as to costs, it is so ordered.
which authorizes the National Coal Company to confusion in the use of the language in Spanish
enter upon any of the reserved coal lands and English, we are persuaded, considering all
From all of the foregoing facts we find that the the provisions of said Act, that said section 15 Street, Malcolm, Avanceña, Villamor, Ostrand and
without first having obtained permission from issue is well defined between the plaintiff and
the Secretary of Agriculture and Natural has reference only to persons, firms, associations Romualdez, JJ., concur.
the defendant. The plaintiff contends that it was or corporations which had already, prior to the
Resources.lawphi1.net liable only to pay the internal revenue and other existence of said Act, become the owners of coal
fees and taxes provided for under section 15 of lands. Section 15 cannot certainty refer to
The following propositions are fully sustained by Act No. 2719; while the defendant contends, "holders or lessees of coal lands' for the reason
the facts and the law: under the facts of record, the plaintiff is obliged that practically all of the other provisions of said
to pay the internal revenue duty provided for in Act has reference to lessees or holders. If section
(1) The National Coal Company is an ordinary section 1496 of the Administrative Code. That 15 means that the persons, firms, associations, or
private corporation organized under Act No. being the issue, an examination of the provisions corporation mentioned therein are holders or
of Act No. 2719 becomes necessary.
Republic of the Philippines 2007 (1/2) of the fines imposed and collected through Be it enacted by the National
Supreme Court x------------------------------------- its efforts for violations of the laws related Assembly of the Philippines:
Manila ----------------------x thereto. As originally worded, Sections 4 and 5 of
DECISION Act No. 1285 provide: Section 1. Section four of Act
EN BANC Numbered Twelve hundred
AUSTRIA-MARTINEZ, J.: SEC. 4. The said and eighty-five as amended by
society is authorized to Act Numbered Thirty five
PHILIPPINE SOCIETY G.R. No. 169752 Before the Court is a special civil action appoint not to exceed five hundred and forty-eight, is
FOR for Certiorari and Prohibition under Rule 65 of agents in the City of Manila, hereby further amended so as
THE PREVENTION OF the Rules of Court, in relation to Section 2 of Rule and not to exceed two in each to read as follows:
CRUELTY TO ANIMALS, 64, filed by the petitioner assailing Office Order of the provinces of the
Petitioners, Members: No. 2005-021[1] dated September 14, 2005 Philippine Islands who shall Sec. 4. The
issued by the respondents which constituted the have all the power and said society
PUNO, C.J. audit team, as well as its September 23, 2005 authority of a police officer to is
QUISUMBING, Letter[2] informing the petitioner that make arrests for violation of authorized
YNARES- respondents audit team shall conduct an audit the laws enacted for the to appoint
SANTIAGO, survey on the petitioner for a detailed audit of its prevention of cruelty to not to
SANDOVAL- accounts, operations, and financial animals and the protection of exceed ten
GUTIERREZ, transactions. No temporary restraining order animals, and to serve any agents in
CARPIO, was issued. process in connection with the City of
AUSTRIA- the execution of such laws; Manila, and
MARTINEZ, The petitioner was incorporated as a juridical and in addition thereto, all the not to
CORONA, entity over one hundred years ago by virtue of police force of the Philippine exceed one
- versus - CARPIO- Act No. 1285, enacted on January 19, 1905, by Islands, wherever organized, in each
MORALES, the Philippine Commission. The petitioner, at the shall, as occasion requires, municipalit
AZCUNA, time it was created, was composed of animal assist said society, its y of the
TINGA, aficionados and animal propagandists. The members or agents, in the Philippines
CHICO-NAZARIO, objects of the petitioner, as stated in Section 2 of enforcement of all such laws. who shall
GARCIA, its charter, shall be to enforce laws relating to have the
VELASCO, JR., cruelty inflicted upon animals or the protection SEC. 5. One-half of all authority to
NACHURA, and of animals in the Philippine Islands, and the fines imposed and collected denounce
REYES, JJ. generally, to do and perform all things which through the efforts of said to regular
COMMISSION ON may tend in any way to alleviate the suffering of society, its members or its peace
AUDIT, animals and promote their welfare.[3] agents, for violations of the officers any
DIR. RODULFO J. laws enacted for the violation of
ARIESGA At the time of the enactment of Act No. 1285, the prevention of cruelty to the laws
(in his official capacity original Corporation Law, Act No. 1459, was not animals and for their enacted for
as Director yet in existence. Act No. 1285 antedated both the protection, shall belong to said the
of the Commission on Corporation Law and the constitution of the society and shall be used to prevention
Audit), MS. Securities and Exchange Commission. Important promote its objects. of cruelty
MERLE M. VALENTIN Promulgated: to note is that the nature of the petitioner as a to animals
and MS. corporate entity is distinguished from (emphasis supplied) and the
SUSAN GUARDIAN (in the sociedad anonimasunder the Spanish Code of protection
their official Commerce. Subsequently, however, the power to make of animals
capacities as Team arrests as well as the privilege to retain a portion and to
Leader and Team For the purpose of enhancing its powers in of the fines collected for violation of animal- cooperate
Member, respectively, promoting animal welfare and enforcing laws for related laws were recalled by virtue of with said
of the audit the protection of animals, the petitioner was Commonwealth Act (C.A.) No. 148,[4] which peace
Team of the initially imbued under its charter with the power reads, in its entirety, thus: officers in
Commission on Audit), to apprehend violators of animal welfare laws. In the
Respondents. September 25, addition, the petitioner was to share one-half prosecutio
n of Now, therefore, I, Manuel commissions and officers that petitioner of its power to make
transgress L. Quezon, President of the have been granted fiscal arrests, and that the petitioner lost
ors of such Philippines, pursuant to the autonomy under the its operational funding,
laws. authority conferred upon me Constitution; (b) autonomous underscore the fact that it
by the Constitution, hereby state colleges and exercises no governmental
Sec. 2. The full amount of the decree, order, and direct the universities; (c) other function. In fine, the government
fines collected for violation of Commissioner of Public government-owned or itself, by its overt acts, confirmed
the laws against cruelty to Safety, the Provost Marshal controlled corporations and petitioners status as a private
animals and for the protection General as head of the their subsidiaries; and (d) such juridical entity.
of animals, shall accrue to the Constabulary Division of the non-governmental entities
general fund of the Philippine Army, every Mayor receiving subsidy or equity, The COA General Counsel issued a
Municipality where the of a chartered city, and every directly or indirectly, from or Memorandum[6] dated May 6, 2004, asserting
offense was committed. municipal president to detail through the government, that the petitioner was subject to its audit
and organize special members which are required by law or authority. In a letter dated May 17,
Sec. 3. This Act shall take of the police force, local, the granting institution to 2004,[7]respondent COA informed the petitioner
effect upon its approval. national, and the Constabulary submit to such audit as a of the result of the evaluation, furnishing it with
to watch, capture, and condition of subsidy or a copy of said Memorandum dated May 6,
Approved, November 8, prosecute offenders against equity. However, where the 2004 of the General Counsel.
1936. (Emphasis supplied) the laws enacted to prevent internal control system of the
cruelty to animals. (Emphasis audited agencies is Petitioner thereafter filed with the respondent
supplied) inadequate, the Commission COA a Request for Re-evaluation datedMay 19,
Immediately thereafter, then President Manuel may adopt such measures, 2004,[8] insisting that it was a private domestic
L. Quezon issued Executive Order (E.O.) No. 63 On December 1, 2003, an audit team from including temporary or corporation.
dated November 12, 1936, portions of which respondent Commission on Audit (COA) visited special pre-audit, as are
provide: the office of the petitioner to conduct an audit necessary and appropriate to Acting on the said request, the General Counsel
survey pursuant to COA Office Order No. 2003- correct the deficiencies. It of respondent COA, in a Memorandum dated July
Whereas, during the first 051 dated November 18, 2003[5] addressed to shall keep the general 13, 2004,[9] affirmed her earlier opinion that the
regular session of the National the petitioner. The petitioner demurred on the accounts of the Government, petitioner was a government entity that was
Assembly, Commonwealth Act ground that it was a private entity not under the and for such period as may be subject to the audit jurisdiction of respondent
Numbered One Hundred jurisdiction of COA, citing Section 2(1) of Article provided by law, preserve the COA. In a letter datedSeptember 14, 2004, the
Forty Eight was enacted IX of the Constitution which specifies the general vouchers and other respondent COA informed the petitioner of the
depriving the agents of the jurisdiction of the COA, viz: supporting papers pertaining result of the re-evaluation, maintaining its
Society for the Prevention of thereto. (Emphasis supplied) position that the petitioner was subject to its
Cruelty to Animals of their Section 1. General audit jurisdiction, and requested an initial
power to arrest persons who Jurisdiction. The Commission Petitioner explained thus: conference with the respondents.
have violated the laws on Audit shall have the power,
prohibiting cruelty to authority, and duty to a. Although the petitioner was In a Memorandum dated September 16, 2004,
animals thereby correcting a examine, audit, and settle all created by special legislation, this Director Delfin Aguilar reported to COA Assistant
serious defect in one of the accounts pertaining to the necessarily came about because in Commissioner Juanito Espino, Corporate
laws existing in our statute revenue and receipts of, and January 1905 there was as yet Government Sector, that the audit survey was
books. expenditures or uses of funds neither a Corporation Law or any not conducted due to the refusal of the petitioner
and property, owned or held in other general law under which it because the latter maintained that it was a
xxxx trust by, or pertaining to the may be organized and private corporation.
Government, or any of its incorporated, nor a Securities and
Whereas, the cruel treatment subdivisions, agencies, or Exchange Commission which Petitioner received on September 27, 2005 the
of animals is an offense against instrumentalities, including would have passed upon its subject COA Office Order 2005-021
the State, penalized under our government-owned and organization and incorporation. datedSeptember 14, 2005 and the COA Letter
statutes, which the controlled corporations with dated September 23, 2005.
Government is duty bound to original charters, and on a b. That Executive Order No. 63,
enforce; post-audit basis: (a) issued during the Commonwealth
constitutional bodies, period, effectively deprived the Hence, herein Petition on the following grounds:
A. Insurance System, which should have been the or control over the petitioner; fourth, under the theeffectivity of the Corporation law, Act No.
case had the employees been considered same Code, the requirement under its special 1459; and the 1935 and 1987 Constitutions.
RESPONDENT COMMISSION government employees; fifth, the petitioner does charter for the petitioner to render a report to
ON AUDIT COMMITTED not receive any form of financial assistance from the Civil Governor, whose functions have been The OSG submits that Act No. 1285 and its
GRAVE ABUSE OF the government, since C.A. No. 148, amending inherited by the Office of the President, clearly amendatory laws did not give petitioner the
DISCRETION AMOUNTING TO Section 5 of Act No. 1285, states that the full reflects the nature of the petitioner as a authority to impose fines for violation of
LACK OR EXCESS OF amount of the fines, collected for violation of the government instrumentality; fifth, despite the laws[12] relating to the prevention of cruelty to
JURISDICTION WHEN IT laws against cruelty to animals and for the passage of the Corporation Code, the law animals and the protection of animals; that even
RULED THAT PETITIONER IS protection of animals, shall accrue to the general creating the petitioner had not been abolished, prior to the amendment of Act No. 1285,
SUBJECT TO ITS AUDIT fund of the Municipality where the offense was nor had it been re-incorporated under any petitioner was only entitled to share in the fines
AUTHORITY. committed; sixth, C.A. No. 148 effectively general corporation law; and finally,sixth, imposed; C.A. No. 148 abolished that privilege to
deprived the petitioner of its powers to make Republic Act No. 8485, otherwise known as the share in the fines collected; that petitioner is a
B. arrests and serve processes as these functions Animal Welfare Act of 1998, designates the public corporation and has continued to exist
were placed in the hands of the police petitioner as a member of its Committee on since Act No. 1285; petitioner was not repealed
PETITIONER IS ENTITLED TO force; seventh, no government appointee or Animal Welfare which is attached to the by the 1935 and 1987 Constitutions which
THE RELIEF SOUGHT, THERE representative sits on the board of trustees of Department of Agriculture. contain transitory provisions maintaining all
BEING NO APPEAL, NOR ANY the petitioner; eighth, a reading of the provisions laws issued not inconsistent therewith until
PLAIN, SPEEDY AND of its charter (Act No. 1285) fails to show that In view of the phrase One-half of all the fines amended, modified or repealed.
ADEQUATE REMEDY IN THE any act or decision of the petitioner is subject to imposed and collected through the efforts of said
ORDINARY COURSE OF LAW the approval of or control by any government society, the Court, in a Resolution dated January The petition is impressed with merit.
AVAILABLE TO IT.[10] agency, except to the extent that it is governed 30, 2007, required the Office of the Solicitor
The essential question before this Court is by the law on private corporations in general; General (OSG) and the parties to comment on: a) The arguments of the parties, interlaced as they
whether the petitioner qualifies as a government and finally, ninth, the Committee on Animal petitioner's authority to impose fines and the are, can be disposed of in five points.
agency that may be subject to audit by Welfare, under the Animal Welfare Act of 1998, validity of the provisions of Act No. 1285 and
respondent COA. includes members from both the private and the Commonwealth Act No. 148 considering that First, the Court agrees with the petitioner that
public sectors. there are no standard measures provided for in the charter test cannot be applied.
Petitioner argues: first, even though it was the aforecitedlaws as to the manner of
created by special legislation in 1905 as there The respondents contend that since the implementation, the specific violations of the Essentially, the charter test as it stands today
was no general law then existing under which it petitioner is a body politic created by virtue of a law, the person/s authorized to impose fine and provides:
may be organized or incorporated, it exercises special legislation and endowed with a in what amount; and, b) the effect of the 1935
no governmental functions because these have governmental purpose, then, indubitably, the and 1987 Constitutions on whether petitioner [T]he test to determine
been revoked by C.A. No. 148 and E.O. No. COA may audit the financial activities of the continues to exist or should organize as a private whether a corporation is
63; second, nowhere in its charter is it indicated latter. Respondents in effect divide their corporation under the Corporation government owned or
that it is a public corporation, unlike, for contentions into six strains: first, the test to Code, B.P. Blg. 68 as amended. controlled, or private in
instance, C.A. No. 111 which created the Boy determine whether an entity is a government nature is simple. Is it created
Scouts of the Philippines, defined its powers and corporation lies in the manner of its creation, Petitioner and the OSG filed their respective by its own charter for the
purposes, and specifically stated that it was An and, since the petitioner was created by virtue of Comments. Respondents filed a Manifestation exercise of a public function, or
Act to Create a Public Corporation in which, even a special charter, it is thus a government stating that since they were being represented by incorporation under the
as amended by Presidential Decree No. 460, the corporation subject to respondents auditing by the OSG which filed its Comment, they opted general corporation law?
law still adverted to the Boy Scouts of the power; second, the petitioner exercises sovereign to dispense with the filing of a separate one and Those with special charters are
Philippines as a public corporation, all of which powers, that is, it is tasked to enforce the laws adopt for the purpose that of the OSG. government corporations
are not obtaining in the charter of the for the protection and welfare of animals which subject to its provisions, and its
petitioner; third, if it were a government body, ultimately redound to the public good and The petitioner avers that it does not have the employees are under the
there would have been no need for the State to welfare, and, therefore, it is deemed to be a authority to impose fines for violation of animal jurisdiction of the Civil
grant it tax exemptions under Republic Act No. government instrumentality as defined under welfare laws; it only enjoyed the privilege of Service Commission, and are
1178, and the fact that it was so exempted the Administrative Code of 1987, the purpose of sharing in the fines imposed and collected from compulsory members of the
strengthens its position that it is a private which is connected with the administration of its efforts in the enforcement of animal welfare Government Service
institution; fourth, the employees of the government, as purportedly affirmed by laws; such privilege, however, was subsequently Insurance System.
petitioner are registered and covered by the American jurisprudence; third, by virtue of abolished by C.A. No. 148; that it continues to xxx (Emphasis supplied)[13]
Social Security System at the latters initiative Section 23,[11] Title II, Book III of the same Code, exist as a private corporation since it was
and not through the Government Service the Office of the President exercises supervision created by the Philippine Commission before
The petitioner is correct in stating that the organize under and by virtue Time and again the Court must caution even the
charter test is predicated, at best, on the legal And since the underpinnings of the charter test of the provisions of this Act, most brilliant scholars of the law and all
regime established by the 1935 Constitution, had been introduced by the 1935 Constitution transferring all corporate constitutional historians on the danger of
Section 7, Article XIII, which states: and not earlier, it follows that the test cannot interests to the new imposing legal concepts of a later date on facts of
apply to the petitioner, which was incorporated corporation which, if a stock an earlier date.[20]
Sec. 7. The National Assembly by virtue of Act No. 1285, enacted on January 19, corporation, is authorized to
shall not, except by general 1905. Settled is the rule that laws in general have issue its shares of stock at par The amendments introduced by C.A. No. 148
law, provide for the no retroactive effect, unless the contrary is to the stockholders or made it clear that the petitioner was a private
formation, organization, or provided.[16] All statutes are to be construed as members of the old corporation and not an agency of the
regulation of private having only a prospective operation, unless the corporation according to their government. This was evident in Executive Order
corporations, unless such purpose and intention of the legislature to give interests. (Emphasis No. 63, issued by then President of the
corporations are owned or them a retrospective effect is expressly declared supplied). Philippines Manuel L. Quezon, declaring that the
controlled by the Government or is necessarily implied from the language revocation of the powers of the petitioner to
or any subdivision or used. In case of doubt, the doubt must be As pointed out by the OSG, both the 1935 and appoint agents with powers of arrest corrected a
instrumentality thereof.[14] resolved against the retrospective effect.[17] 1987 Constitutions contain transitory provisions serious defect in one of the laws existing in the
maintaining all laws issued not inconsistent statute books.
The foregoing proscription has been carried over There are a few exceptions. Statutes can be given therewith until amended, modified or
to the 1973 and the 1987 Constitutions.Section retroactive effect in the following cases: (1) repealed.[19] As a curative statute, and based on the doctrines
16 of Article XII of the present Constitution when the law itself so expressly provides; (2) in In a legal regime where the charter test doctrine so far discussed, C.A. No. 148 has to be given
provides: case of remedial statutes; (3) in case of curative cannot be applied, the mere fact that a retroactive effect, thereby freeing all doubt as to
statutes; (4) in case of laws interpreting others; corporation has been created by virtue of a which class of corporations the petitioner
Sec. 16. The and (5) in case of laws creating new special law does not necessarily qualify it as a belongs, that is, it is a quasi-public corporation, a
Congress shall not, except by rights.[18] None of the exceptions is present in the public corporation. kind of private domestic corporation, which the
general law, provide for the instant case. Court will further elaborate on under
formation, organization, or What then is the nature of the petitioner as a the fourth point.
regulation of private The general principle of prospectivity of the law corporate entity? What legal regime governs its
corporations. Government- likewise applies to Act No. 1459, otherwise rights, powers, and duties? Second, a reading of petitioners charter shows
owned or controlled known as the Corporation Law, which had been that it is not subject to control or supervision by
corporations may be created enacted by virtue of the plenary powers of the As stated, at the time the petitioner was formed, any agency of the State, unlike government-
or established by special Philippine Commission on March 1, 1906, a little the applicable law was the Philippine Bill of owned and -controlled corporations. No
charters in the interest of the over a year afterJanuary 19, 1905, the time the 1902, and, emphatically, as also stated above, no government representative sits on the board of
common good and subject to petitioner emerged as a juridical entity. Even the proscription similar to the charter test can be trustees of the petitioner.Like all private
the test of economic viability. Corporation Law respects the rights and powers found therein. corporations, the successors of its members are
of juridical entities organized beforehand,viz: determined voluntarily and solely by the
Section 16 is essentially a re-enactment of The textual foundation of the charter test, which petitioner in accordance with its by-laws, and
Section 7 of Article XVI of the 1935 Constitution SEC. 75. Any corporation placed a limitation on the power of the may exercise those powers generally accorded to
and Section 4 of Article XIV of the 1973 or sociedad anonima formed, legislature, first appeared in the 1935 private corporations, such as the powers to hold
Constitution. organized, and existing under Constitution. However, the petitioner was property, to sue and be sued, to use a common
the incorporated in 1905 by virtue of Act No. 1258, a seal, and so forth. It may adopt by-laws for its
During the formulation of the 1935 Constitution, laws of the Philippine Islands law antedating the Corporation Law (Act No. internal operations: the petitioner shall be
the Committee on Franchises recommended the and lawfully transacting busin 1459) by a year, and the 1935 Constitution, by managed or operated by its officers in
foregoing proscription to prevent the pressure of ess in the Philippine Islands thirty years. There being neither a general law accordance with its by-laws in force. The
special interests upon the lawmaking body in the on the date of the passage of on the formation and organization of private pertinent provisions of the charter provide:
creation of corporations or in the regulation of this Act, shall be subject to the corporations nor a restriction on the legislature
the same. To permit the lawmaking body by provisions hereof so far as to create private corporations by direct Section 1. Anna
special law to provide for the organization, such legislation, the Philippine Commission at that L. Ide, Kate S. Wright, John L.
formation, or regulation of private corporations provisions may be applicable moment in history was well within its powers in Chamberlain, William F.
would be in effect to offer to it the temptation in and shall 1905 to constitute the petitioner as a private Tucker, Mary S.
many cases to favor certain groups, to the be entitled at its option either juridical entity. Fergusson, Amasa S. Crossfiel
prejudice of others or to the prejudice of the to continue business as such d, Spencer Cosby, Sealy
interests of the country.[15] corporation or to reform and B. Rossiter, Richard P. Strong,
Jose Robles Lahesa, Josefina R. of animals which, in turn, redounds to the public governmental functions, then that corporation is
de Luzuriaga, and such other xxxx good. considered public; otherwise, it is
persons as may be associated private. Applying the above test, provinces,
with them in conformity with Sec. 6. The principal This argument, is, at best, specious. The fact that chartered cities, and barangays can best
this act, and their successors, office of the society shall be a certain juridical entity is impressed with public exemplify public corporations. They are created
are hereby constituted and kept in the city of Manila, and interest does not, by that circumstance alone, by the State as its own device and agency for the
created a body politic and the society shall have full make the entity a public corporation, inasmuch accomplishment of parts of its own public
corporate at law, under the power to locate and establish as a corporation may be private although its works.[25]
name and style of The branch offices of the society charter contains provisions of a public character,
Philippines Society for the wherever it may deem incorporated solely for the public good. This
It is clear that the amendments introduced by
Prevention of Cruelty to advisable in the Philippine class of corporations may be considered quasi-
C.A. No. 148 revoked the powers of the petitioner
Animals. Islands, such branch offices to public corporations, which are private
to arrest offenders of animal welfare laws and
be under the supervision and corporations that render public service, supply
the power to serve processes in connection
As incorporated by control of the principal office. public wants,[21] or pursue other eleemosynary
therewith.
this Act, said society shall objectives. While purposely organized for the
have the power to add to its Third. The employees of the petitioner are gain or benefit of its members, they are required
Fifth. The respondents argue that since the
organization such and as registered and covered by the Social Security by law to discharge functions for the public
charter of the petitioner requires the latter to
many members as it desires, System at the latters initiative, and not through benefit. Examples of these corporations are
render periodic reports to the Civil Governor,
to provide for and choose the Government Service Insurance System, utility,[22] railroad, warehouse, telegraph,
whose functions have been inherited by the
such officers as it may deem which should be the case if the employees are telephone, water supply corporations and
President, the petitioner is, therefore, a
advisable, considered government employees. This is transportation companies.[23] It must be stressed
and in such manner as it may another indication of petitioners nature as a that a quasi-public corporation is a species of government instrumentality.
wish, and to remove members private entity. Section 1 of Republic Act No. private corporations, but the qualifying factor
This contention is inconclusive. By virtue of the
as it shall provide. 1161, as amended by Republic Act No. 8282, is the type of service the former renders to the
fiction that all corporations owe their very
otherwise known as the Social Security Act of public: if it performs a public service, then it
existence and powers to the State, the
It shall have the 1997, defines the employer: becomes a quasi-public corporation.[24]
reportorial requirement is applicable to all
right to sue and be sued, to
corporations of whatever nature, whether they
use a common seal, to Employer Any
Authorities are of the view that the purpose are public, quasi-public, or private
receive legacies anddonations, person, natural or juridical,
alone of the corporation cannot be taken as a corporationsas creatures of the State, there is a
to conduct social enterprises domestic or foreign, who
safe guide, for the fact is that almost all reserved right in the legislature to investigate
for the purpose of obtaining carries on in the Philippines
corporations are nowadays created to promote the activities of a corporation to determine
funds, to levy dues upon any trade, business, industry,
the interest, good, or convenience of the public. A whether it acted within its powers.In other
itsmembers and provide for undertaking or activity of any
bank, for example, is a private corporation; yet, it words, the reportorial requirement is the
their collection to hold real kind and uses the services of
is created for a public benefit. Private schools principal means by which the State may see to it
and personal estate such as another person who is under
may be necessary for the his orders as regards the and universities are likewise private that its creature acted according to the powers
corporations; and yet, they are rendering public and functions conferred upon it.These principles
accomplishment of the employment, except the
service. Private hospitals and wards are charged were extensively discussed in Bataan Shipyard &
purposes of the society, and to Government and any of its
with heavy social responsibilities. More so with Engineering Co., Inc. v. Presidential Commission
adopt such by-laws for its political subdivisions, branches
all common carriers. On the other hand, there on Good Government.[26] Here, the Court, in
government as may not be or instrumentalities, including
may exist a public corporation even if it is holding that the subject corporation could not
inconsistent with law or this corporations owned or
endowed with gifts or donations from private invoke the right against self-incrimination
charter. controlled by the Government:
individuals. whenever the State demanded the production of
Provided, That a self-
its corporate books and papers, extensively
xxxx employed person shall be
discussed the purpose of reportorial
both employee and employer
The true criterion, therefore, to determine requirements, viz:
Sec. 3. The said at the same time. (Emphasis
society shall be operated supplied) whether a corporation is public or private is
found in the totality of the relation of the x x x The corporation is a
under the direction of its
corporation to the State. If the corporation is creature of the state. It is
officers, in accordance with its Fourth. The respondents contend that the
by-laws in force, and this petitioner is a body politic because its primary created by the State as the latters own agency or presumed to be incorporated
instrumentality to help it in carrying out its for the benefit of the public. It
charter. purpose is to secure the protection and welfare
received certain special corporation subject to the jurisdiction of the
privileges and franchises, and Securities and Exchange Commission. The
holds them subject to the laws respondents are ENJOINED from investigating,
of the state and the limitations examining and auditing the petitioner's fiscal
of its charter. Its powers are and financial affairs.
limited by law. It can make no
contract not authorized by its SO ORDERED.
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[d] 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.)[27]

WHEREFORE, the petition is GRANTED.


Petitioner is DECLARED a private domestic
Republic of the Philippines throughout the country formed pursuant to the As an offshoot of the immediately cited ruling, xxx xxx xxx
SUPREME COURT provisions of Presidential Decree No. 198, as the CSC. issued Resolution No. 90-575, the
Manila amended by Presidential Decrees Nos. 768 and dispositive portion of which reads: NOW, THEREFORE, in view of all the
1479, otherwise known as the "Provincial Water foregoing, the Commission resolved to
EN BANC Utilities Act of 1973." NOW THEREFORE, in view of all the rule, as it hereby rules, that the
foregoing, the Commission resolved, as implementation of CSC. Resolution No.
G.R. No. 95237-38 September 13, 1991 Presidential Decree No. 198 was issued by the it hereby resolves to rule that Local 575 dated June 27, 1990 be deferred in
then President Ferdinand E. Marcos by virtue of Water Districts, being quasi-public the meantime pending clarification
his legislative power under Proclamation No. corporations created by law to perform from the Supreme Court are regards its
DAVAO CITY WATER DISTRICT, CAGAYAN DE 1081. It authorized the different local legislative public services and supply public conflicting decisions in the cases
ORO CITY WATER DISTRICT, METRO CEBU bodies to form and create their respective water wants, the matter of hiring and firing of of Tanjay Water District v.
WATER DISTRICT, ZAMBOANGA CITY WATER districts through a resolution they will pass its officers and employees should be Gabaton and Metro Iloilo Water District
DISTRICT, LEYTE METRO WATER DISTRICT, subject to the guidelines, rules and regulations governed by the Civil Service Law, rules v. National Labor Relations
BUTUAN CITY WATER DISTRICT, CAMARINES therein laid down. The decree further created and regulations. Henceforth, all Commission. (p. 26, Rollo)
NORTE WATER DISTRICT, LAGUNA WATER and formed the "Local Water Utilities appointments of personnel of the
DISTRICT, DUMAGUETE CITY WATER Administration" (LWUA), a national agency different local water districts in the
DISTRICT, LA UNION WATER DISTRICT, In the meanwhile, there exists a divergence of
attached to the National Economic and country shall be submitted to the opinions between COA on one hand, and the
BAYBAY WATER DISTRICT, METRO Development Authority (NEDA), and granted Commission for appropriate action.
LINGAYEN WATER DISTRICT, URDANETA (LWUA), on the other hand, with respect to the
with regulatory power necessary to optimize (Rollo. p. 22). authority of COA to audit the different water
WATER DISTRICT, COTABATO CITY WATER public service from water utilities operations.
DISTRICT, MARAWI WATER DISTRICT, districts.
TAGUM WATER DISTRICT, DIGOS WATER However, on May 16, 1990, in G.R. No. 85760,
DISTRICT, BISLIG WATER DISTRICT, and The respondents, on the other hand, are the Civil entitled "Metro Iloilo Water District v. National COA opined that the audit of the water districts
MECAUAYAN WATER DISTRICT, petitioners, Service Commission (CSC) and the Commission Labor Relations Commission, et al.," the Third is simply an act of discharging the visitorial
vs. on Audit (COA), both government agencies and Division of this Court ruled in a minute power vested in them by law (letter of COA to
CIVIL SERVICE COMMISSION, and represented in this case by the Solicitor General. resolution: LWUA dated August 13, 1985, pp. 29-30, Rollo).
COMMISSION ON AUDIT, respondents.
On April 17, 1989, this Court ruled in the case xxx xxx xxx On the other hand, LWUA maintained that only
Rodolfo S. De Jesus for petitioners. of Tanjay Water District v. Gabaton, et al. (G.R. those water districts with subsidies from the
Evalyn H. Itaas-Fetalino, Rogelio C. Limare and No. 63742, 172 SCRA 253): Considering that PD 198 is a general government fall within the COA's jurisdiction
Daisy B. Garcia-Tingzon for CSC. legislation empowering and/or and only to the extent of the amount of such
Significantly, Article IX (B), Section 2(1) authorizing government agencies and subsidies, pursuant to the provision of the
of the 1987 Constitution provides that entities to create water districts, said Government Auditing Code of the Phils.
the Civil Service embraces all branches, PD 198 cannot be considered as the
subdivisions, instrumentalities, and charter itself creating the Water It is to be observed that just like the question of
agencies of the government, including District. Public respondent NLRC did whether the employees of the water districts
MEDIALDEA, J.:p government-owned and controlled not commit any grave abuse of falls under the coverage of the Civil Service Law,
corporations with original charters. discretion in holding that the operative the conflict between the water districts and the
Whether or not the Local Water Districts formed Inasmuch as PD No. 198, as amended, is act, that created the Metro Iloilo Water COA is also dependent on the final determination
and created pursuant to the provisions of the original charter of the petitioner, District was the resolution of the of whether or not water districts are
Presidential Decree No. 198, as amended, are Tanjay Water District, and respondent Sangguniang Panglunsod of Iloilo City. government-owned or controlled corporations
government-owned or controlled corporations Tarlac Water District and all water Hence, the employees of Water with original charter. The reason behind this is
with original charter falling under the Civil districts in the country, they come Districts are not covered by Civil Sec. 2(1), Article IX-D of the 1987 constitution
Service Law and/or covered by the visitorial under the coverage of the Civil Service Service Laws as the latter do (sic) not which reads:
power of the Commission on Audit is the issue Law, rules and regulations. (Sec. 35, have original charters.
which the petitioners entreat this Court, en banc, Art. VIII and Sec. 37, Art. IX of PD No.
to shed light on. 807). Sec. 2(1) The Commission on Audit
In adherence to the just cited ruling, the CSC shall have the power, authority, and
suspended the implementation of Resolution No. duty to examine, audit, and settle all
Petitioners are among the more than five 90-575 by issuing Resolution No. 90-770 which accounts pertaining to the revenue and
hundred (500) water districts existing reads: receipts of, and expenditures or uses of
funds and property, owned or held in pronoucement in this case, as extensively quoted Section 26 of the same decree PD 198 is intended to meet a particular set of conditions
trust by, or pertaining to the in the Tanjay case, supra, partly reads: hereby amended to read as Section 25 and cirmcumstances. The fact that said decree
Government, or any of its subdivisions, as follows: generally applies to all water districts
agencies or instrumentalities, including "The only question here is whether or throughout the country does not change the fact
government-owned or controlled not local water districts are Section 25. Authorization. — The that PD 198 is a special law. Accordingly, this
corporations with original charters, and governmkent owned or controlled district may exercise all the powers Court's resolution in Metro Iloilo case declaring
on a post audit basis. (emphasis corporations whose employees are which are expressly granted by this PD 198 as a general legislation is hereby
supplied) subject to the provisions of the Civil Title or which are necessarily implied abandoned.
Service Law. The Labor Arbiter from or incidental to the powers and
Petitioners' main argument is that they are asserted jurisdiction over the alleged purposes herein stated. For the By "government-owned or controlled
private corporations without original charter, illegal dismissal of private respondent purpose of carrying out the objectives corporation with original charter," We mean
hence they are outside the jurisdiction of Villanueva by relying on Section 25 of of this Act, a district is hereby granted government owned or controlled corporation
respondents CSC and COA. Reliance is made on Presidential decree No. 198, known as the power of eminent domain, the created by a special law and not under the
the Metro Iloilo case which declared petitioners the Provincial Water Utilities Act of exercise thereof shall, however, be Corporation Code of the Philippines. Thus, in the
as quasi-public corporations created by virtue of 1973" which went onto effect in 25 May subject to review by the case ofLumanta v. NLRC (G.R. No. 82819,
PD 198, a general legislation which cannot be 1973, and which provides as follows: Administration. February 8, 1989, 170 SCRA 79, 82), We held:
considered as the charter itself creating the
water districts. Holding on to this ruling, Exemption from Civil Service. Thus, Section 25 of PD 198 exempting The Court, in National Service
petitioners contend that they are private — The district and its the employees of water districts from Corporation (NASECO) v. National Labor
corporations which are only regarded as quasi- employees, being engaged in a the application of the Civil Service Law Relations Commission, G.R. No 69870,
public or semi-public because they serve public proprietary function, are was removed from the statute books: promulgated on 29 November 1988,
interest and convenience and that since PD 198 hereby exempt from the quoting extensively from the
is a general legislation, the operative act which provisions of the Civil Service deliberations of 1986 Constitutional
created a water district is not the said decree but xxx xxx xxx
Law. Collective Bargaining Commission in respect of the intent and
the resolution of the sanggunian concerned. shall be available only to meaning of the new phrase "with
personnel below supervisory We grant the petition for the following original character," in effect held
After a fair consideration of the parties' levels: Provided, however, reasons: that government-owned and controlled
arguments coupled with a careful study of the That the total of all salaries, corporations with original charter refer
applicable laws as well as the constitutional wages emoluments, benefits 1. Section 25 of PD No. 198 was to corporations chartered by special law
provisions involved, We rule against the or other compensation paid to repealed by Section 3 of PD No. 1479; as distinguished from corporations
petitioners and reiterate Our ruling in Tanjay all employees in any month Section 26 of PD No. 198 was amended organized under our general
case declaring water districts government- shall not exceed fifty percent ro read as Sec. 25 by Sec. 4 of PD No. incorporation statute — the
owned or controlled corporations with original (50%) of average net monthy 1479. The amendatory decree took Corporations Code. In NASECO, the
charter. revenue. Said net revenue effect on June 11, 1978. company involved had been organized
representing income from under the general incorporation statute
As early as Baguio Water District v. Trajano, et water sales and sewerage xxx xxx xxx and was a sbusidiary of the National
al., (G.R. No. 65428, February 20, 1984, 127 service charges, less pro-rata Investment Development Corporation
SCRA 730), We already ruled that a water district share of debt service and (NIDC) which in turn was a subsidiary
expenses for fuel or energy 3. The BWD is a corporation created of the Philippine National Bank, a bank
is a corporation created pursuant to a special law pursuant to a special law — PD No.
— P.D. No. 198, as amended, and as such its for pumping during the chartered by a special statute. Thus,
preceding fiscal year. 198, as amended. As such its officers government-owned or controlled
officers and employees are covered by the Civil and employees are part of the Civil
Service Law. corporations like NASECO are
Service (Sec. 1, Art. XII-B, [1973] effectively, excluded from the scope of
The Labor Arbiter failed to take into Constitution; PD No. 868).
accout the provisions of Presidential the Civil Service. (emphasis supplied)
In another case (Hagonoy Water District v. NLRC,
G.R. No. 81490, August 31, 1988, 165 SCRA 272), Decree No. 1479, which went into effect
on 11 June 1978, P.D. No. 1479, wiped Ascertained from a consideration of the whole From the foregoing pronouncement, it is clear
We ruled once again that local water districts are statute, PD 198 is a special law applicable only to
quasi-public corporations whose employees away Section 25 of PD 198 quoted that what has been excluded from the coverage
above, and Section 26 of PD 198 was the different water districts created pursuant of the CSC are those corporations created
belong to the Civil Service. The Court's thereto. In all its essential terms, it is obvious
renumbered as Section 25 in the pursuant to the Corporation Code. Significantly,
following manner: that it pertains to a special purpose which is petitioners are not created under the said code,
but on the contrary, they were created pursuant Philippines who are of voting age and district on or before November 1 of the Administration; (as amended by PD
to a special law and are governed primarily by its residents within the district. One such year: This list of nominees shall be 768).
provision. member shall be a representative of transmitted by the Secretary of the
civic-oriented service clubs, one district to the office of the appointing the manner of filling up vacancies:
No consideration may thus be given to member of representative of authority on or before November 15 of
petitioners' contention that the operative act professional associations, one member such year and he shall make his
a representative of business, appointment from the list submitted on Sec. 12. Vacancies. — In the event of a
which created the water districts are the vacancy in the board of directors
resolutions of the respective local sanggunians commercial or financial organizations, or before December 15. In the event the
one member a representative of appointing authority fails to make his occurring more than six months before
and that consequently, PD 198, as amended, expiration of any director's term, the
cannot be considered as their charter. educational institutions and one appointments on or before December
member a representative of women's 15, selection shall be made from said remaining directors shall within 30
organization. No public official shall list of nominees by majority vote of the days, serve notice to or request the
It is to be noted that PD 198, as amended is the serve as director. Provided, however, seated directors of the district secretary of the district for
source of authorization and power to form and that if the district has availed of the constituting a quorum. Initial nominations and within 30 days,
maintain a district. Section 6 of said decree financial assistance of the nominations for all five seats of the thereafter a list of nominees shall be
provides: Administration, the Administration board shall be solicited by the submitted to the appointing authority
may appoint any of its personnel to sit legislative body or bodies at the time of for his appointment of a replacement
Sec. 6. Formation of District. — This Act in the board of directors with all the adoption of the resolution forming the director from the list of nominees. In
is the source of authorization and rights and privileges appertaining to a district. Thirty days thereafter, a list of the absence of such nominations, the
power to form and maintain a district. regular member for such period as the nominees shall be submitted to the appointing authority shall make such
Once formed, a district is subject to the indebtedness remains unpaid in which provincial governor in the event the appointment. If within 30 days after
provisions of this Act and not under the case the board shall be composed of six resolution forming the district is by a submission to him of a list of nominees
jurisdiction of any political subdivision, members; (as amended by PDs Nos. provincial board, or the mayor of the the appointing authority fails to make
.... 768 and 1479). city or municipality in the event the an appointment, the vacancy shall be
resolution forming the adoption of the filled from such list by a majority vote
district is by the city or municipal of the remaining members of the Board
Moreover, it must be observed that PD 198, the manner of their appointment and of Directors constituting a quorum.
contains all the essential terms necessary to nominations; board of councilors, who shall select
the initial directors therefrom within Vacancies occurring within the last six
constitute a charter creating a juridical person. months of an unexpired term shall also
For example, Section 6(a) provides for the name 15 days after receipt of such
Sec. 9. Appointment. — Board members nominations; be filled by the Board in the above
that will be used by a water district, thus: shall be appointed by the appointing manner. The director thus appointed
authority. Said appointments shall be shall serve the unexpired term only; (as
Sec. 6. . . . To form a district, the made from a list of nominees, if any, their terms of office: amended by PD 768).
legislative body of any city, submitted pursuant to Section 10. If no
municipality or province shall enact a nominations are submitted, the Sec. 11. Term of Office. — Of the five and the compensation and personal liability of
resolution containing the following: appointing authority shall appoint any initial directors of each newly formed the members of the Board of Directors:
qualified person of the category to the district, two shall be appointed for a
a) The name of the local water district, vacant position; maximum term of two years, two for a
maximum term of four years, and one Sec. 13. Compensation. — Each director
which shall include the name of the shall receive a per diem, to be
city, municipality, or province, or Sec.10. Nominations. — On or before for a maximum term of six years. Terms
of office of all directors in a given determined by the board, for each
region thereof, served by said system, October 1 of each even numbered year, meeting of the board actually attended
followed by the words "Water District." the secretary of the district shall district shall be such that the term of at
least one director, but not more then by him, but no director shag receive per
contact each known organization, diems in any given month in excess of
association, or institution being two, shall expire on December 31 of
It also prescribes for the numbers and each even-numbered year. Regular the equivalent of the total per diems of
qualifications of the members of the Board of represented by the director whose four meetings in any given month. No
term will expire on December 31 and terms of office after the initial terms
Directors: shall be for six years commencing on director shall receive other
solicit nominations from these compensation for services to the
organizations to fill the position for the January 1 of odd-numbered years.
Sec. 8. Number and Qualification. — The Directors may be removed for cause district.
ensuing term. One nomination may be
Board of Directors of a district shall be submitted in writing by each such only, subject to review and approval of
composed of five citizens of the organization to the Secretary of the
Any per diem in excess of P50.00 shall otherwise, the appointing authority eligibilities. As these employees are equally concerned forming and maintaining a local water
be subject to approval of the shall be the governor of the province protected by the constitutional guarantee to district. Thus, Section 2 of P.D. 198, among
Administration (as amended by PD within which the district is security of tenure, We find it necessary to rule others, provides:
768). located: Provided, That if the existing for the protection of such right which cannot be
waterworks system in the city or impaired by a subsequent ruling of this Court. Sec. 2. Declaration of Policy — . . . To
Sec. 14. Personal Liability. — No municipality established as a water Thus, those employees who have already encourage the formulation of such local
director may be held to be personally district under this Decree is operated acquired their permanent employment status at water districts and the transfer thereto
liable for any action of the district. and managed by the province, initial the time of the promulgation of this decision of existing water supply and waste
appointment shall be extended by the cannot be removed by the mere reason that they water disposal facilities, this Decree
governor of the province. Subsequent lack the necessary civil service eligibilities. provides by general act the authority for
Noteworthy, the above quoted provisions of PD appointments shall be as specified
198, as amended, are similar to those which are the formation thereof, on a local option
herein. ACCORDINGLY, the petition is hereby basis. . . . (Emphasis supplied)
actually contained in other corporate charters.
The conclusion is inescapable that the said DISMISSED. Petitioners are declared
decree is in truth and in fact the charter of the If portions of more than one province "government-owned or controlled corporations Implementing the above policy, Title II of P.D.
different water districts for it clearly defines the are included within the boundary of the with original charter" which fall under the 198 provides:
latter's primary purpose and its basic district, and the appointing authority is jurisdiction of the public respondents CSC and
organizational set-up. In other words, PD 198, as to be the governors then the power to COA.
appoint shall rotate between the TITLE II. LOCAL WATER DISTRICT
amended, is the very law which gives a water LAW
district juridical personality. While it is true that governors involved with the initial SO ORDERED.
appointments made by the governor in CHAPTER I. — Title
a resolution of a local sanggunian is still
necessary for the final creation of a district, this whose province the greatest number of
service connections exists (as amended Fernan, C.J., Narvasa, Melencio-Herrera, Cruz, Sec. 4. Title. — The provisions
Court is of the opinion that said resolution Paras, Padilla, Griño-Aquino, Regalado and
cannot be considered as its charter, the same by PD 768). of this Title shall be known
Davide, Jr., JJ., concur. and referred to as the "Local
being intended only to implement the provisions Gutierrez, Jr., Feliciano and Sarmiento, JJ., are on
of said decree. In passing a resolution forming a The above-quoted section definitely sets to Water District Law."
leave.
water district, the local sanggunian is entrusted naught petitioners' contention that they are
with no authority or discretion to grant a charter private corporations. It is clear therefrom that CHAPTER II. Purpose and
for the creation of a private corporation. It is the power to appoint the members who will Separate Opinions Formation
merely given the authority for the formation of a comprise the Board of Directors belongs to the
water district, on a local option basis, to be local executives of the local subdivision units BIDIN, J., dissenting: Sec. 5. Purpose. — Local water
exercised under and in pursuance of PD 198. where such districts are located. In contrast, the districts may be formed
members of the Board of Directors or trustees of I regret I have to register my dissent in this case. pursuant to this Title for the
More than the aforequoted provisions, what is of a private corporation are elected from among the I agree with the main ponencia that P.D. 198, as purposes of (a) acquiring,
important interest in the case at bar is Section 3, members and stockholders thereof. It would not amended, authorizes the different local installing, improving,
par. (b) of the same decree which reads: be amiss to emphasize at this point that a private legislative bodies (Sanggunian) to form and maintaining and operating
corporation is created for the private purpose, create their respective water districts through a water supply and distribution
benefit, aim and end of its members or Resolution which they will pass subject to the systems for domestic,
Sec. 3(b). Appointing authority. — The stockholders. Necessarily, said members or
person empowered to appoint the guidelines, rules and regulations therein laid industrial, municipal and
stockholders should be given a free hand to down. The issue, therefore, to be resolved is agricultural uses for residents
members of the Board of Directors of a choose those who will compose the governing
local water district, depending upon the whether the local water districts so created are and lands within the
body of their corporation. But this is not the case government-owned or controlled corporations boundaries of such districts,
geographic coverage and population here and this clearly indicates that petitioners
make-up of the particular district. In with original charters embraced by the Civil (b) providing, maintaining
are definitely not private corporations. Service as contemplated by Art. IX-B, Sec. 2[1] of and operating wastewater
the event that more than seventy-five
percent of the total active water service the 1987 Constitution. collection, treatment and
connections of a local water districts The foregoing disquisition notwithstanding, We disposal facilities, and (c)
are within the boundary of any city or are, however, not unaware of the serious P.D. 198 is a general legislation which authorizes conducting such other
municipality, the appointing authority repercussion this may bring to the thousands of the formation of water districts. However, the functions and operations
shall be the mayor of that city or water districts' employees throughout the operative act which creates a water district is not incidental to water resource
municipality, as the case may be; country who stand to be affected because they said decree but the resolution of the Sanggunian development, utilization and
do not have the necessary civil service disposal within such districts,
as are necessary or incidental It is apparent that insofar as the control over the district (Sec. 7, PD water supply and waste water
to said purpose. formation of local water districts are 198). disposal facilities, this Decree
concerned, P.D. 198 is not an original provides by general act the
Sec. 6. Formation of District. charter but a general act authorizing In view of the foregoing, I vote to Grant authority for the formation
— This Act is the source of the formation of water districts on local the petition and to declare petitioners thereof, on a local option basis.
authorization and power to option basis (Sec. 2, P.D. 198) similar to as quasi-public corporations . . . (Emphasis supplied)
form and maintain a district. the Corporation Code. What is performing public service without
For purposes of this Act, a chartered, formed and created under original charters and therefore not Implementing the above policy, Title II
district shall be considered as P.D. 198 as a government corporation embraced by the Civil Service. of P.D. 198 provides:
a quasi-public is the "Local Water Utilities
corporation performing public Administration" attached to the Office
of the President as follows: TITLE II. LOCAL WATER
service and supplying public DISTRICT LAW
wants. As such, a district shall CHAPTER I. — Title
exercise the powers, rights and Sec. 49. Charter. — There is Separate Opinions
privileges given to private hereby chartered, created and
corporations under existing formed a government BIDIN, J., dissenting: Sec. 4. Title. — The
laws, in addition to the corporation to be known as provisions of this
powers granted in, and the "Local Water Utilities Title shall be known
I regret I have to register my dissent in and referred to as
subject to such restrictions Administration which is this case. I agree with the main
imposed, under this Act. hereby attached to the Office the "Local Water
ponencia that P.D. 198, as amended, District Law."
of the President. The authorizes the different local legislative
xxx xxx xxx provisions of this title shall be bodies (Sanggunian) to form and create
and constitute the charter of their respective water districts through CHAPTER II.
the Administration. a Resolution which they will pass Purpose and
Sec. 7. Filing of Resolution.— A Formation
certifted copy of the resolution subject to the guidelines, rules and
or resolutions forming a On the other hand, local water districts regulations therein laid down. The
district shall be forwarded to are formed by resolutions of the issue, therefore, to be resolved is Sec. 5. Purpose. —
the office of the Secretary of respective Provincial, City and whether the local water districts so Local water districts
the Administration. If found by Municipal councils (Sec. 7, P.D. 198) created are government-owned or may be formed
the Administration to filed with the Local Water Utilities controlled corporations with original pursuant to this
conform to the requirements Administration, a government charters embraced by the Civil Service Title for the
of Section 6 and the policy corporation chartered under Section as contemplated by Art. IX-B, Sec. 2[1] purposes of (a)
objectives in Section 2, the 49, P.D. 198 and attached to the Office of the 1987 Constitution. acquiring, installing,
resolution shall be duly of the President. Consequently, without improving,
filed. The district shall be the requisite resolution of the P.D. 198 is a general legislation which maintaining and
deemed duly formed and Sanggunian concerned forming the authorizes the formation of water operating water
existing upon the date of such water district having been filed with districts. However, the operative act supply and
filing. A certified copy of said the Local Water Utility Administration, which creates a water district is not distribution systems
resolution showing the filing no water district is formed. What gives said decree but the resolution of the for domestic,
stamp of the Administration the water districts juridical personality Sanggunian concerned forming and industrial, municipal
shall be maintained in the is the resolution of the respective maintaining a local water district. Thus, and agricultural uses
office of the district. Upon Sanggunian forming the district and Section 2 of P.D. 198, among others, for residents and
such filing, the local filed with the Local Water Utilities provides: lands within the
government or governments Administration. Once formed, a water boundaries of such
concerned shall lose district is subject to the provisions of districts, (b)
P.D. 198 and no longer under the Sec. 2. Declaration of Policy — providing,
ownership, supervision and . . . To encourage the
control or any right jurisdiction of any political maintaining and
administration which shall thereafter formulation of such local operating
whatsoever over the district water districts and the
except as provided herein. lose ownership, supervision and wastewater
transfer thereto of existing collection, treatment
(Emphasis supplied)
and disposal district shall be Administration" attached to jurisdiction of any political
facilities, and (c) forwarded to the the Office of the President as administration which shall
conducting such office of the follows: thereafter lose ownership,
other functions and Secretary of the supervision and control over
operations Administration. If Sec. 49. Charter. — the district (Sec. 7, PD 198).
incidental to water found by the There is hereby
resource Administration to chartered, created In view of the foregoing, I vote
development, conform to the and formed a to Grant the petition and to
utilization and requirements of government declare petitioners as quasi-
disposal within such Section 6 and the corporation to be public corporations
districts, as are policy objectives in known as the "Local performing public service
necessary or Section 2, the Water Utilities without original charters and
incidental to said resolution shall be Administration therefore not embraced by
purpose. duly filed. The which is hereby the Civil Service.
district shall be attached to the
Sec. 6. Formation of deemed duly formed Office of the
District. — This Act is and existing upon the President. The
the source of date of such filing. A provisions of this
authorization and certified copy of said title shall be and
power to form and resolution showing constitute the
maintain a district. the filing stamp of charter of the
For purposes of this the Administration Administration.
Act, a district shall be maintained
shall be considered in the office of the
district. Upon such On the other hand, local water
as a quasi-public districts are formed by
corporation perform filing, the local
government or resolutions of the respective
ing public service Provincial, City and Municipal
and supplying public governments
concerned shall lose councils (Sec. 7, P.D. 198) filed
wants. As such, a with the Local Water Utilities
district shall exercise ownership,
supervision and Administration, a government
the powers, rights corporation chartered under
and privileges given control or any right
whatsoever over the Section 49, P.D. 198 and
to private attached to the Office of the
corporations under district except as
provided herein. President. Consequently,
existing laws, in without the requisite
addition to the (Emphasis supplied)
resolution of the Sanggunian
powers granted in, concerned forming the water
and subject to such It is apparent that insofar as district having been filed with
restrictions the formation of local water the Local Water Utility
imposed, under this districts are concerned, P.D. Administration, no water
Act. 198 is not an original charter district is formed. What gives
but a general act authorizing the water districts juridical
xxx xxx x the formation of water personality is the resolution
xx districts on local option basis of the respective Sanggunian
(Sec. 2, P.D. 198) similar to forming the district and filed
the Corporation Code. What is with the Local Water Utilities
Sec. 7. Filing of chartered, formed and created
Resolution.— A Administration. Once formed,
under P.D. 198 as a a water district is subject to
certifted copy of the government corporation is
resolution or the provisions of P.D. 198 and
the "Local Water Utilities no longer under the
resolutions forming a
Republic of the Philippines It appearing from the record of the and (2) that the refusal of the Register of Deeds As to the complaint that the disqualification
SUPREME COURT Consulta that UNG SIU SI TEMPLE is a violates the freedom of religion clause of our under article XIII is violative of the freedom of
Manila religious organization whose Constitution [Art. III, Sec. 1(7)]. religion guaranteed by Article III of the
deaconess, founder, trustees and Constitution, we are by no means convinced (nor
EN BANC administrator are all Chinese citizens, We are of the opinion that the Court below has has it been shown) that land tenure is
this Court is of the opinion and so hold correctly held that in view of the absolute terms indispensable to the free exercise and enjoyment
that in view of the provisions of the of section 5, Title XIII, of the Constitution, the of religious profession or worship; or that one
G.R. No. L-6776 May 21, 1955 sections 1 and 5 of Article XIII of the may not worship the Deity according to the
provisions of Act No. 271 of the old Philippine
Constitution of the Philippines limiting Commission must be deemed repealed since the dictates of his own conscience unless upon land
THE REGISTER OF DEEDS OF the acquisition of land in the Constitution was enacted, in so far as held in fee simple.
RIZAL, petitioner-appellee, Philippines to its citizens, or to incompatible therewith. In providing that, —
vs. corporations or associations at least The resolution appealed from is affirmed, with
UNG SIU SI TEMPLE, respondent-appellant. sixty per centum of the capital stock of costs against appellant.
which is owned by such citizens Save in cases of hereditary succession,
adopted after the enactment of said Act no private agricultural land shall be
Alejo F. Candido for appellant. transferred or assigned except to Pablo, Acting C.J., Bengzon, Montemayor, Reyes, A.,
Office of the Solicitor General Querube C. No. 271, and the decision of the
Supreme Court in the case of Krivenko individuals, corporations or Bautista Angelo, Labrador, and Concepcion,
Makalintal and Solicitor Felix V. Makasiar for associations qualified to acquire or JJ., concur.
appellee. vs. the Register of Deeds of Manila, the
deed of donation in question should not hold lands of the public domain in the
be admitted for admitted for Philippines,
REYES, J.B.L., J.: registration. (Printed Rec. App. pp 17-
18). the Constitution makes no exception in favor of
The Register of Deeds for the province of Rizal religious associations. Neither is there any such
refused to accept for record a deed of donation Not satisfied with the ruling of the Court of First saving found in sections 1 and 2 of Article XIII,
executed in due form on January 22, 1953, by Instance, counsel for the donee Uy Siu Si Temple restricting the acquisition of public agricultural
Jesus Dy, a Filipino citizen, conveying a parcel of has appealed to this Court, claiming: (1) that the lands and other natural resources to
residential land, in Caloocan, Rizal, known as lot acquisition of the land in question, for religious "corporations or associations at least sixty per
No. 2, block 48-D, PSD-4212, G.L.R.O. Record No. purposes, is authorized and permitted by Act No. centum of the capital of which is owned by such
11267, in favor of the unregistered religious 271 of the old Philippine Commission, providing citizens" (of the Philippines).
organization "Ung Siu Si Temple", operating as follows:
through three trustees all of Chinese nationality. The fact that the appellant religious organization
The donation was duly accepted by Yu Juan, of has no capital stock does not suffice to escape
Chinese nationality, founder and deaconess of SECTION 1. It shall be lawful for all
religious associations, of whatever sort the Constitutional inhibition, since it is admitted
the Temple, acting in representation and in that its members are of foreign nationality. The
behalf of the latter and its trustees. or denomination, whether incorporated
in the Philippine Islands or in the name purpose of the sixty per centum requirement is
of other country, or not incorporated at obviously to ensure that corporations or
The refusal of the Registrar was elevated en all, to hold land in the Philippine associations allowed to acquire agricultural land
Consultato the IVth Branch of the Court of First Islands upon which to build churches, or to exploit natural resources shall be
Instance of Manila. On March 14, 1953, the Court parsonages, or educational or controlled by Filipinos; and the spirit of the
upheld the action of the Rizal Register of Deeds, charitable institutions. Constitution demands that in the absence of
saying: capital stock, the controlling membership should
be composed of Filipino citizens.
SEC. 2. Such religious institutions, if not
The question raised by the Register of incorporated, shall hold the land in the
Deeds in the above transcribed name of three Trustees for the use of To permit religious associations controlled by
consulta is whether a deed of donation such associations; . . .. (Printed Rec. non-Filipinos to acquire agricultural lands would
of a parcel of land executed in favor of a App. p. 5.) be to drive the opening wedge to revive alien
religious organization whose founder, religious land holdings in this country. We can
trustees and administrator are Chinese not ignore the historical fact that complaints
citizens should be registered or not. against land holdings of that kind were among
the factors that sparked the revolution of 1896.
Republic of the Philippines Found guilty after trial and sentenced to a term did not belong to him but to the Americans Defendant is accused under article 172
SUPREME COURT of imprisonment and a fine, the accused has subscribers to the corporate stock. In paragraph 1, in connection with article 171,
Manila appealed to this Court. explanation, the accused testified, without paragraph 4, of the Revised Penal Code, which
contradiction, that in the process of organization read:
EN BANC The essential facts are not in dispute. On Baylon was made a trustee for the American
November 4,1946, the Pacific Airways incorporators, and that the reason for making ART. 171. Falsification by public officer,
Corporation registered its articles of Baylon such trustee was as follows: employee, or notary or ecclesiastic
G.R. No. L-6055 June 12, 1953
incorporation with the Securities and Exchanged minister. — The penalty ofprision
Commission. The article were prepared and the Q. According to this article of mayor and a fine not to exceed 5,000
THE PEOPLE OF THE PHILIPPINES, plaintiff- registration was effected by the accused, who incorporation Arsenio Baylon pesos shall be imposed upon any public
appellee, was in fact the organizer of the corporation. The subscribed to 1,135 preferred shares officer, employee, or notary who, taking
vs. article stated that the primary purpose of the with a total value of P1,135. Do you advantage of his official position, shall
WILLIAM H. QUASHA, defendant-appellant. corporation was to carry on the business of a know how that came to be? falsify a document by committing any
common carrier by air, land or water; that its of the following acts:
Jose P. Laurel for appellant and William H. Quasha capital stock was P1,000,000, represented by A. Yes.
in his own behalf. 9,000 preferred and 100,000 common shares, xxx xxx xxx
Office of the Solicitor General Juan R. Liwag and each preferred share being of the par value of
Assistant Solicitor General Francisco Carreon for p100 and entitled to 1/3 vote and each common The people who were desirous of forming the
appellee. share, of the par value of P1 and entitled to one corporation, whose names are listed on page 7 of 4. Making untruthful statements in a
vote; that the amount capital stock actually this certified copy came to my house, Messrs. narration of facts.
subscribed was P200,000, and the names of the Shannahan, Onstott, O'Bannon, Caven, Perry and
REYES, J.: Anastasakas one evening. There was
subscribers were Arsenio Baylon, Eruin E. ART. 172. Falsification by private
Shannahan, Albert W. Onstott, James O'Bannon, considerable difficulty to get them all together at individuals and use of falsified
William H. Quasha, a member of the Philippine Denzel J. Cavin, and William H. Quasha, the first one time because they were pilots. They had documents. — The penalty of prision
bar, was charged in the Court of First Instance of being a Filipino and the other five all Americans; difficulty in deciding what their respective share correccional in its medium and
Manila with the crime of falsification of a public that Baylon's subscription was for 1,145 holdings would be. Onstott had invested a maximum period and a fine of not more
and commercial document in that, having been preferred shares, of the total value of P114,500, certain amount of money in airplane surplus than 5,000 pesos shall be imposed
entrusted with the preparation and registration and for 6,500 common shares, of the total par property and they had obtained a considerable upon:
of the article of incorporation of the Pacific value of P6,500, while the aggregate amount of money on those planes and as I recall
Airways Corporation, a domestic corporation subscriptions of the American subscribers were they were desirous of getting a corporation
organized for the purpose of engaging in formed right away. And they wanted to have xxx xxx xxx
for 200 preferred shares, of the total par value of
business as a common carrier, he caused it to P20,000, and 59,000 common shares, of the total their respective shares holdings resolved at a
appear in said article of incorporation that one par value of P59,000; and that Baylon and the latter date. They stated that they could get 1. Any private individual who shall
Arsenio Baylon, a Filipino citizen, had subscribed American subscribers had already paid 25 per together that they feel that they had no time to commit any of the falsifications
to and was the owner of 60.005 per cent of the cent of their respective subscriptions. Ostensibly settle their respective share holdings. We enumerated in the next preceding
subscribed capital stock of the corporation when the owner of, or subscriber to, 60.005 per cent of discussed the matter and finally it was decided article in any public or official
in reality, as the accused well knew, such was not the subscribed capital stock of the corporation, that the best way to handle the things was not to document or letter of exchange or any
the case, the truth being that the owner of the Baylon nevertheless did not have the controlling put the shares in the name of anyone of the other kind of commercial document.
portion of the capital stock subscribed to by vote because of the difference in voting power interested parties and to have someone act as
Baylon and the money paid thereon were between the preferred shares and the common trustee for their respective shares holdings. So Commenting on the above provision, Justice
American citizen whose name did not appear in shares. Still, with the capital structure as it was, we looked around for a trustee. And he said Albert, in his well-known work on the Revised
the article of incorporation, and that the purpose the article of incorporation were accepted for "There are a lot of people whom I trust." He said, Penal Code ( new edition, pp. 407-408),
for making this false statement was to registration and a certificate of incorporation "Is there someone around whom we could get observes, on the authority of U.S. vs. Reyes, (1
circumvent the constitutional mandate that no was issued by the Securities and Exchange right away?" I said, "There is Arsenio. He was my Phil., 341), that the perversion of truth in the
corporation shall be authorize to operate as a Commission. boy during the liberation and he cared for me narration of facts must be made with the
public utility in the Philippines unless 60 per when i was sick and i said i consider him my wrongful intent of injuring a third person; and
cent of its capital stock is owned by Filipinos. friend." I said. They all knew Arsenio. He is a very on the authority ofU.S. vs. Lopez (15 Phil., 515),
There is no question that Baylon actually kind man and that was what was done. That is
subscribed to 60.005 per cent of the subscribed the same author further maintains that even if
how it came about. such wrongful intent is proven, still the
capital stock of the corporation. But it is
admitted that the money paid on his subscription untruthful statement will not constitute the
crime of falsification if there is no legal public utility to a corporation already in corporation that intends to operate a public In view of the foregoing, the judgment appealed
obligation on the part of the narrator to disclose existence but without the requisite proportion of utility to have, at the time of its formation, 60 per from is reversed and the defendant William H.
the truth. Wrongful intent to injure a third Filipino capital. This is obvious from the context, cent of its capital owned by Filipinos alone? That Quasha acquitted, with costs de oficio.
person and obligation on the part of the narrator for the constitutional provision in question condition may anytime be attained thru the
to disclose the truth are thus essential to a qualifies the terms " franchise", "certificate", or necessary transfer of stocks. The moment for Paras, C.J., Pablo, Bengzon, Padilla, Tuason, Jugo,
conviction for a crime of falsification under the "any other form of authorization" with the determining whether a corporation is entitled to Bautista Angelo, and Labrador, JJ., concur.
above article of the Revised Penal Code. phrase "for the operation of a public utility," operate as a public utility is when it applies for a
thereby making it clear that the franchise meant franchise, certificate, or any other form of
Now, as we see it, the falsification imputed in the is not the "primary franchise" that invest a body authorization for that purpose. And that can be
accused in the present case consists in not of men with corporate existence but the done after the corporation has already come into
disclosing in the articles of incorporation that "secondary franchise" or the privilege to operate being and not while it is still being formed. And
Baylon was a mere trustee ( or dummy as the as a public utility after the corporation has at that moment, the corporation must show that
prosecution chooses to call him) of his American already come into being. it has complied not only with the requirement of
co-incorporators, thus giving the impression that the Constitution as to the nationality of its
Baylon was the owner of the shares subscribed If the Constitution does not prohibit the mere capital, but also with the requirements of the
to by him which, as above stated, amount to formation of a public utility corporation with the Civil Aviation Law if it is a common carrier by air,
60.005 per cent of the sub-scribed capital stock. alien capital, then how can the accused be the Revised Administrative Code if it is a
This, in the opinion of the trial court, is a charged with having wrongfully intended to common carrier by water, and the Public Service
malicious perversion of the truth made with the circumvent that fundamental law by not Law if it is a common carrier by land or other
wrongful intent circumventing section 8, Article revealing in the articles of incorporation that kind of public service.
XIV of the Constitution, which provides that " no Baylon was a mere trustee of his American co-
franchise, certificate, or any other form of incorporation and that for that reason the Equally untenable is the suggestion that
authorization for the operation of a public utility subscribed capital stock of the corporation was defendant should at least be held guilty of an
shall be granted except to citizens of the wholly American? For the mere formation of the "impossible crime" under article 59 of the
Philippines or to corporation or other entities corporation such revelation was not essential, Revised Penal Code. It not being possible to
organized under the law of the Philippines, and the Corporation Law does not require it. suppose that defendant had intended to commit
sixty per centum of the capital of which is owned Defendant was, therefore, under no obligation to a crime for the simple reason that the alleged
by citizens of the Philippines . . . ." Plausible make it. In the absence of such obligation and of constitutional prohibition which he is charged
though it may appear at first glance, this opinion the allege wrongful intent, defendant cannot be for having tried to circumvent does not exist,
loses validity once it is noted that it is predicated legally convicted of the crime with which he is conviction under that article is out of the
on the erroneous assumption that the charged. question.
constitutional provision just quoted was meant
to prohibit the mere formation of a public utility It is urged, however, that the formation of the The foregoing consideration can not but lead to
corporation without 60 per cent of its capital corporation with 60 per cent of its subscribed the conclusion that the defendant can not be held
being owned by the Filipinos, a mistaken belief capital stock appearing in the name of Baylon guilty of the crime charged. The majority of the
which has induced the lower court to that the was an indispensable preparatory step to the court, however, are also of the opinion that, even
accused was under obligation to disclose the subversion of the constitutional prohibition and supposing that the act imputed to the defendant
whole truth about the nationality of the the laws implementing the policy expressed constituted falsification at the time it was
subscribed capital stock of the corporation by therein. This view is not correct. For a perpetrated, still with the approval of the Party
revealing that Baylon was a mere trustee or corporation to be entitled to operate a public Amendment to the Constitution in March, 1947,
dummy of his American co-incorporators, and utility it is not necessary that it be organized which placed Americans on the same footing as
that in not making such disclosure defendant's with 60 per cent of its capital owned by Filipinos Filipino citizens with respect to the right to
intention was to circumvent the Constitution to from the start. A corporation formed with capital operate public utilities in the Philippines, thus
the detriment of the public interests. Contrary to that is entirely alien may subsequently change doing away with the prohibition in section 8,
the lower court's assumption, the Constitution the nationality of its capital through transfer of Article XIV of the Constitution in so far as
does not prohibit the mere formationof a public shares to Filipino citizens. conversely, a American citizens are concerned, the said act has
utility corporation without the required corporation originally formed with Filipino ceased to be an offense within the meaning of the
formation of Filipino capital. What it does capital may subsequently change the national law, so that defendant can no longer be held
prohibit is the granting of a franchise or other status of said capital through transfer of shares criminally liable therefor.
form of authorization for the operation of a to foreigners. What need is there then for a
Republic of the Philippines The present action was filed on August 6, 1946, Hague (Netherlands) in August. 1948 the The United States did not, in the
SUPREME COURT in the Court of First Instance of Manila for the following enlightening passages appear: amendments of the Trading with the
Manila purpose of recovering from the respondent the Enemy Act during the last war, include
sum of P92,650 above mentioned. The theory of Since World War I, the determination of as did other legislations the
EN BANC the petitioner is that the insured merchandise enemy nationality of corporations has applications of the control test and
were burned up after the policy issued in 1941 in been discussion in many countries, again, as in World War I, courts refused
favor of the respondent corporation has ceased belligerent and neutral. A corporation to apply this concept whereby the
G.R. No. L-2294 May 25, 1951 to be effective because of the outbreak of the war enemy character of an American or
was subject to enemy legislation when
between the United States and Germany on it was controlled by enemies, namely neutral-registered corporation is
FILIPINAS COMPAÑIA DE December 10, 1941, and that the payment made managed under the influence of determined by the enemy nationality of
SEGUROS, petitioner, by the petitioner to the respondent corporation individuals or corporations, themselves the controlling stockholders.
vs. during the Japanese military occupation was considered as enemies. It was the
CHRISTERN, HUENEFELD and CO., under pressure. After trial, the Court of First English courts which first Measures of blocking foreign funds, the
INC., respondent. Instance of Manila dismissed the action without the Daimler case applied this new so called freezing regulations, and
pronouncement as to costs. Upon appeal to the concept of "piercing the corporate veil," other administrative practice in the
Ramirez and Ortigas for petitioner. Court of Appeals, the judgment of the Court of which was adopted by the peace of treatment of foreign-owned property in
Ewald Huenefeld for respondent. First Instance of Manila was affirmed, with costs. Treaties of 1919 and the Mixed Arbitral the United States allowed to large
The case is now before us on appeal established after the First World War. degree the determination of enemy
by certiorari from the decision of the Court of interest in domestic corporations and
PARAS, C.J.: Appeals.
The United States of America did not thus the application of the control test.
adopt the control test during the First Court decisions sanctioned such
On October 1, 1941, the respondent corporation, The Court of Appeals overruled the contention of administrative practice enacted under
Christern Huenefeld, & Co., Inc., after payment of World War. Courts refused to
the petitioner that the respondent corporation recognized the concept whereby the First War Powers Act of 1941, and
corresponding premium, obtained from the became an enemy when the United States more recently, on December 8, 1947,
petitioner ,Filipinas Cia. de Seguros, fire policy American-registered corporations
declared war against Germany, relying on could be considered as enemies and the Supreme Court of the United States
No. 29333 in the sum of P1000,000, covering English and American cases which held that a definitely approved of the control
merchandise contained in a building located at thus subject to domestic legislation and
corporation is a citizen of the country or state by administrative measures regarding theory. In Clark vs. Uebersee Finanz
No. 711 Roman Street, Binondo Manila. On and under the laws of which it was created or Korporation, A. G., dealing with a Swiss
February 27, 1942, or during the Japanese enemy property.
organized. It rejected the theory that nationality corporation allegedly controlled by
military occupation, the building and insured of private corporation is determine by the German interest, the Court: "The
merchandise were burned. In due time the character or citizenship of its controlling World War II revived the problem property of all foreign interest was
respondent submitted to the petitioner its claim stockholders. again. It was known that German and placed within the reach of the vesting
under the policy. The salvage goods were sold at other enemy interests were cloaked by power (of the Alien Property
public auction and, after deducting their value, domestic corporation structure. It was Custodian) not to appropriate friendly
the total loss suffered by the respondent was There is no question that majority of the not only by legal ownership of shares
stockholders of the respondent corporation were or neutral assets but to reach enemy
fixed at P92,650. The petitioner refused to pay that a material influence could be interest which masqueraded under
the claim on the ground that the policy in favor German subjects. This being so, we have to rule exercised on the management of the
that said respondent became an enemy those innocent fronts. . . . The power of
of the respondent had ceased to be in force on corporation but also by long term loans seizure and vesting was extended to all
the date the United States declared war against corporation upon the outbreak of the war and other factual situations. For that
between the United States and Germany. The property of any foreign country or
Germany, the respondent Corporation (though reason, legislation on enemy property national so that no innocent appearing
organized under and by virtue of the laws of the English and American cases relied upon by the enacted in various countries during
Court of Appeals have lost their force in view of device could become a Trojan horse."
Philippines) being controlled by the German World War II adopted by statutory
subjects and the petitioner being a company the latest decision of the Supreme Court of the provisions to the control test and
under American jurisdiction when said policy United States in Clark vs.Uebersee Finanz determined, to various degrees, the It becomes unnecessary, therefore, to dwell at
was issued on October 1, 1941. The petitioner, Korporation, decided on December 8, 1947, 92 incidents of control. Court decisions length on the authorities cited in support of the
however, in pursuance of the order of the Law. Ed. Advance Opinions, No. 4, pp. 148-153, in were rendered on the basis of such appealed decision. However, we may add that,
Director of Bureau of Financing, Philippine which the controls test has been adopted. In newly enacted statutory provisions in in Haw Pia vs. China Banking Corporation,* 45 Off
Executive Commission, dated April 9, 1943, paid "Enemy Corporation" by Martin Domke, a paper determining enemy character of Gaz., (Supp. 9) 299, we already held that China
to the respondent the sum of P92,650 on April presented to the Second International domestic corporation. Banking Corporation came within the meaning of
19, 1943. Conference of the Legal Profession held at the the word "enemy" as used in the Trading with
the Enemy Acts of civilized countries not only
because it was incorporated under the laws of an enemies. (6 Couch, Cyc. of Ins. Law, pp. claim of the respondent, merely obeyed the
enemy country but because it was controlled by 5352-5353.) instruction of the Japanese Military
enemies. Administration, as may be seen from the
In the case of an ordinary fire policy, following: "In view of the findings and conclusion
The Philippine Insurance Law (Act No. 2427, as which grants insurance only from year, of this office contained in its decision on
amended,) in section 8, provides that "anyone or for some other specified term it is Administrative Case dated February 9, 1943
except a public enemy may be insured." It stands plain that when the parties become copy of which was sent to your office and the
to reason that an insurance policy ceases to be alien enemies, the contractual tie is concurrence therein of the Financial Department
allowable as soon as an insured becomes a public broken and the contractual rights of the of the Japanese Military Administration,
enemy. parties, so far as not vested. lost. (Vance, and following the instruction of said
the Law on Insurance, Sec. 44, p. 112.) authority, you are hereby ordered to pay the
claim of Messrs. Christern, Huenefeld & Co., Inc.
Effect of war, generally. — All The payment of said claim, however, should be
intercourse between citizens of The respondent having become an enemy made by means of crossed check." (Emphasis
belligerent powers which is corporation on December 10, 1941, the supplied.)
inconsistent with a state of war is insurance policy issued in its favor on October 1,
prohibited by the law of nations. Such 1941, by the petitioner (a Philippine
prohibition includes all negotiations, corporation) had ceased to be valid and It results that the petitioner is entitled to recover
commerce, or trading with the enemy; enforcible, and since the insured goods were what paid to the respondent under the
all acts which will increase, or tend to burned after December 10, 1941, and during the circumstances on this case. However, the
increase, its income or resources; all war, the respondent was not entitled to any petitioner will be entitled to recover only the
acts of voluntary submission to it; or indemnity under said policy from the petitioner. equivalent, in actual Philippines currency of
receiving its protection; also all acts However, elementary rules of justice (in the P92,650 paid on April 19, 1943, in accordance
concerning the transmission of money absence of specific provision in the Insurance with the rate fixed in the Ballantyne scale.
or goods; and all contracts relating Law) require that the premium paid by the
thereto are thereby nullified. It further respondent for the period covered by its policy Wherefore, the appealed decision is hereby
prohibits insurance upon trade with or from December 11, 1941, should be returned by reversed and the respondent corporation is
by the enemy, upon the life or lives of the petitioner. ordered to pay to the petitioner the sum of
aliens engaged in service with the P77,208.33, Philippine currency, less the amount
enemy; this for the reason that the The Court of Appeals, in deciding the case, stated of the premium, in Philippine currency, that
subjects of one country cannot be that the main issue hinges on the question of should be returned by the petitioner for the
permitted to lend their assistance to whether the policy in question became null and unexpired term of the policy in question,
protect by insurance the commerce or void upon the declaration of war between the beginning December 11, 1941. Without costs. So
property of belligerent, alien subjects, United States and Germany on December 10, ordered.
or to do anything detrimental too their 1941, and its judgment in favor of the
country's interest. The purpose of war respondent corporation was predicated on its Feria, Pablo, Bengzon, Tuason, Montemayor, Jugo
is to cripple the power and exhaust the conclusion that the policy did not cease to be in and Bautista Angelo, JJ., concur.
resources of the enemy, and it is force. The Court of Appeals necessarily assumed
inconsistent that one country should that, even if the payment by the petitioner to the
destroy its enemy's property and repay respondent was involuntary, its action is not
in insurance the value of what has been tenable in view of the ruling on the validity of the
so destroyed, or that it should in such policy. As a matter of fact, the Court of Appeals
manner increase the resources of the held that "any intimidation resorted to by the
enemy, or render it aid, and the appellee was not unjust but the exercise of its
commencement of war determines, for lawful right to claim for and received the
like reasons, all trading intercourse payment of the insurance policy," and that the
with the enemy, which prior thereto ruling of the Bureau of Financing to the effect
may have been lawful. All individuals that "the appellee was entitled to payment from
therefore, who compose the belligerent the appellant was, well founded." Factually, there
powers, exist, as to each other, in a can be no doubt that the Director of the Bureau
state of utter exclusion, and are public of Financing, in ordering the petitioner to pay the
Republic of the Philippines per cent of the members of their of its capital is owned by Filipino citizens — be EXISTING RIGHT, grant, lease, or concession AT
SUPREME COURT corporation were Filipino citizens present, and, therefore, ordered the Registered THE TIME OF THE INAUGURATION OF THE
Manila when they sought to register in favor of Deeds of Davao to deny registration of the deed GOVERNMENT ESTABLISHED UNDER
their congregation of deed of donation of sale in the absence of proof of compliance with CONSTITUTION. Natural resources, with the
EN BANC of a parcel of land— such condition. exception of public agricultural land, shall not be
alienated, and no license, concession, or leases
required said corporation sole to submit a After the motion to reconsider said resolution for the exploitation, development, or utilization
G.R. No. L-8451 December 20, 1957 of any of the natural resources shall be granted
similar affidavit declaring that 60 per cent of the was denied, an action for mandamus was
members thereof were Filipino citizens. instituted with this Court by said corporation for a period exceeding twenty-five years,
THE ROMAN CATHOLIC APOSTOLIC sole, alleging that under the Corporation Law as renewable for another twenty-five years, except
ADMINISTRATOR OF DAVAO, INC., petitioner, well as the settled jurisprudence on the matter, as to water rights for irrigation, water supply,
vs. The vendee in the letter dated June 28, 1954, fisheries, or industrial uses other than the
expressed willingness to submit an affidavit, the deed of sale executed by Mateo L. Rodis in
THE LAND REGISTRATION COMMISSION and favor of petitioner is actually a deed of sale in development of water power, in which cases
THE REGISTER OF DEEDS OF DAVAO both not in the same tenor as that made the other than the development and limit of the
Progress of the Carmelite Nuns because the two favor of the Catholic Church which is qualified to
CITY, respondents. acquire private agricultural lands for the grant.
cases were not similar, for whereas the
congregation of the Carmelite Nuns had five establishment and maintenance of places of
Teodoro Padilla, for petitioner. incorporators, the corporation sole has only one; worship, and prayed that judgment be rendered In virtue of the foregoing mandates of the
Office of the Solicitor General Ambrosio Padilla, that according to their articles of incorporation, reserving and setting aside the resolution of the Constitution, who are considered "qualified" to
Assistant Solicitor General Jose G. Bautista and the organization of the Carmelite Nuns became Land Registration Commissioner in question. In acquire and hold agricultural lands in the
Troadio T. Quianzon, Jr., for respondents. the owner of properties donated to it, whereas its resolution of November 15, 1954, this Court Philippines? What is the effect of these
the case at bar, the totality of the Catholic gave due course to this petition providing that constitutional prohibition of the right of a
population of Davao would become the owner of the procedure prescribed for appeals from the religious corporation recognized by our
FELIX, J.: the property bought to be registered. Public Service Commission of the Securities and Corporation Law and registered as a corporation
Exchange Commissions (Rule 43), be followed. sole, to possess, acquire and register real estates
in its name when the Head, Manager,
This is a petition for mandamus filed by the As the Register of Deeds entertained some Administrator or actual incumbent is an alien?
Roman Catholic Apostolic Administrator of doubts as to the registerability if the document, Section 5 of Article XIII of the Philippine
Davao seeking the reversal of a resolution by the the matter was referred to the Land Registration Constitution reads as follows:
Land Registration Commissioner in L.R.C. Commissioner en consulta for resolution in Petitioner consistently maintained that a
Consulta No. 14. The facts of the case are as accordance with section 4 of Republic Act No. SEC. 5. Save in cases of hereditary corporation sole, irrespective of the citizenship
follows: 1151. Proper hearing on the matter was succession, no private agricultural of its incumbent, is not prohibited or disqualified
conducted by the Commissioner and after the land shall be transferred or assigned to acquire and hold real properties. The
petitioner corporation had filed its except to individuals, corporations, or Corporation Law and the Canon Law are explicit
On October 4, 1954, Mateo L. Rodis, a Filipino in their provisions that a corporation sole or
citizen and resident of the City of Davao, memorandum, a resolution was rendered on associations qualified to acquire or hold
September 21, 1954, holding that in view of the lands of the public domain in the "ordinary" is not the owner of the of the
executed a deed of sale of a parcel of land located properties that he may acquire but merely the
in the same city covered by Transfer Certificate provisions of Section 1 and 5 of Article XIII of the Philippines.
Philippine Constitution, the vendee was not administrator thereof. The Canon Law also
No. 2263, in favor of the Roman Catholic specified that church temporalities are owned by
Apostolic Administrator of Davao Inc., s qualified to acquire private lands in the Section 1 of the same Article also provides the
Philippines in the absence of proof that at least the Catholic Church as a "moral person" or by the
corporation sole organized and existing in following: diocess as minor "moral persons" with the
accordance with Philippine Laws, with Msgr. 60 per centum of the capital, property, or assets
of the Roman Catholic Apostolic Administrator of ordinary or bishop as administrator.
Clovis Thibault, a Canadian citizen, as actual SECTION 1. All agricultural, timber, and mineral
incumbent. When the deed of sale was presented Davao, Inc., was actually owned or controlled by
Filipino citizens, there being no question that the lands of the public domain, water, minerals, coal, And elaborating on the composition of the
to Register of Deeds of Davao for registration, petroleum, and other mineral oils, all forces of
the latter. present incumbent of the corporation sole was a Catholic Church in the Philippines, petitioner
Canadian citizen. It was also the opinion of the potential energy, and other natural resources of explained that as a religious society or
Land Registration Commissioner that section the Philippines belong to the State, and their organization, it is made up of 2 elements or
having in mind a previous resolution of 159 of the corporation Law relied upon by the disposition, exploitation, development, or divisions — the clergy or religious members and
the Fourth Branch of the Court of First vendee was rendered operative by the utilization shall be limited to cititzens of the the faithful or lay members. The 1948 figures of
Instance of Manila wherein the aforementioned provisions of the Constitution Philippines, or to corporations or associations at the Bureau of Census showed that there were
Carmelite Nuns of Davao were made to with respect to real estate, unless the precise least sixty per centum of the capital of which is 277,551 Catholics in Davao and aliens residing
prepare an affidavit to the effect that 60 condition set therein — that at least 60 per cent owned by such citizens, SUBJECT TO ANY therein numbered 3,465. Ever granting that all
these foreigners are Catholics, petitioner Respondents likewise advanced the opinion that See also the pertinent provisions of the religious denomination, society, or
contends that Filipino citizens form more than in construing the constitutional provision calling succeeding sections of the same Corporation Law church, including hospitals, schools,
80 per cent of the entire Catholics population of for 60 per cent of Filipino citizenship, the copied hereunder: colleges, orphan, asylums, parsonages,
that area. As to its clergy and religious criterion of the properties or assets thereof. and cemeteries thereof. For the filing of
composition, counsel for petitioner presented SEC. 155. In order to become a such articles of incorporation, the
the Catholic Directory of the Philippines for 1954 In solving the problem thus submitted to our corporation sole the bishop, chief Securities and Exchange Commissioner
(Annex A) which revealed that as of that year, consideration, We can say the following: A priest, or presiding elder of any shall collect twenty-five pesos. (As
Filipino clergy and women novices comprise corporation sole is a special form of corporation religious denomination, society or amended by Commonwealth Act. No.
already 60.5 per cent of the group. It was, usually associated with the clergy. Conceived and church must file with the Securities and 287); and.
therefore, allowed that the constitutional introduced into the common law by sheer Exchange Commissioner articles of
requirement was fully met and satisfied. necessity, this legal creation which was referred incorporation setting forth the SEC. 163. The right to administer all
to as "that unhappy freak of English law" was following facts: temporalities and all property held or
Respondents, on the other hand, averred that designed to facilitate the exercise of the owned by a religious order or society,
although it might be true that petitioner is not functions of ownership carried on by the clerics xxx xxx xxx. or by the diocese, synod, or district
the owner of the land purchased, yet he has for and on behalf of the church which was organization of any religious
control over the same, with full power to regarded as the property owner (See I Couvier's denomination or church shall, on its
administer, take possession of, alienate, transfer, Law Dictionary, p. 682-683). (3) That as such bishop, chief priest, or incorporation, pass to the corporation
encumber, sell or dispose of any or all lands and presiding elder he is charged with the and shall be held in trust for the use,
their improvements registered in the name of administration of the temporalities and purpose behalf, and benefit of the
A corporation sole consists of one person only, the management of the estates and
the corporation sole and can collect, receive, and his successors (who will always be one at a religious society, or order so
demand or sue for all money or values of any properties of his religious incorporated or of the church of which
time), in some particular station, who are denomination, society, or church within
kind that may be kind that may become due or incorporated by law in order to give them some the diocese, or district organization is
owing to said corporation, and vested with its territorial jurisdiction, describing it; an organized and constituent part.
legal capacities and advantages, particularly that
authority to enter into agreements with any of perpetuity, which in their natural persons they
persons, concerns or entities in connection with could not have had. In this sense, the king is a xxx xxx xxx. The Cannon Law contains similar provisions
said real properties, or in other words, actually sole corporation; so is a bishop, or dens, distinct regarding the duties of the corporation sole or
exercising all rights of ownership over the from their several chapters (Reid vs. Barry, 93 (As amended by Commonwealth Act ordinary as administrator of the church
properties. It was their stand that the theory that Fla. 849, 112 So. 846). No. 287). properties, as follows:
properties registered in the name of the
corporation sole are held in true for the benefit
of the Catholic population of a place, as of Davao The provisions of our Corporation law on SEC. 157. From and after the filing with Al Ordinario local pertenence vigilar
in the case at bar should be sustained because a religious corporations are illuminating and the Securities and Exchange diligentemente sobre
conglomeration of persons cannot just be sustain the stand of petitioner. Section 154 Commissioner of the said articles of la administracion de todos los bienes
pointed out as the cestui que trust or recipient of thereof provides: incorporation, which verified by eclesiasticos que se hallan en su
the benefits from the property allegedly affidavit or affirmation as aforesaid and territorio y no estuvieren sustraidos de
administered in their behalf. Neither can it be SEC. 154. — For the administration of accompanied by the copy of the su jurisdiccion, salvs las prescriciones
said that the mass of people referred to as such the temporalities of any religious commission, certificate of election, or legitimas que le concedan mas
beneficiary exercise ant right of ownership over denomination, society or church and letters of appointment of the bishop, aamplios derechos.
the same. This set-up, respondents argued, falls the management of the estates and the chief priest, or presiding elder, duly
short of a trust. The respondents instead tried to properties thereof, it shall be lawful for certified as prescribed in the section Teniendo en cuenta los derechos y las
prove that in reality, the beneficiary of the bishop, chief priest, or presiding immediately preceding such the bishop, legitimas costumbres y circunstancias,
ecclesiastical properties are not members or either of any such religious chief priest, or presiding elder, as the procuraran los Ordinarios regular todo
faithful of the church but someone else, by denomination, society or church to case may be, shall become a lo concerniente a la administracion de
quoting a portion a portion of the ought of become a corporation sole, unless corporation sole and all temporalities, los bienes eclesciasticos, dando las
fidelity subscribed by a bishop upon his inconsistent wit the rules, regulations estates, and properties the religious oportunas instucciones particularles
elevation to the episcopacy wherein he promises or discipline of his religious denomination, society, or church dentro del narco del derecho comun.
to render to the Pontificial Father or his denomination, society or church or therefore administered or managed by (Title XXVIII, Codigo de Derecho
successors an account of his pastoral office and forbidden by competent authority him as such bishop, chief priest, or Canonico, Lib. III, Canon 1519).1
of all things appertaining to the state of this thereof. presiding elder, shall be held in trust by
church. him as a corporation sole, for the use,
purpose, behalf, and sole benefit of his
That leaves no room for doubt that the bishops The second question to be decided is in the word "Roman" clearly expresses its unity branches. Citizenship is a political right which
or archbishops, as the case may be, as whom the ownership of the properties with and recognizes the authority of the Pope in cannot be acquired by a sort of "radiation". We
corporation's sole are merely administrators of constituting the endowment of the Rome. However, lest We become hasty in have to realize that although there is a fraternity
the church properties that come to their ecclesiastical or collative chaplaincies is drawing conclusions, We have to analyze and among all the catholic countries and the dioceses
possession, in which they hold in trust for the vested. take note of the nature of the government therein all over the globe, the universality that
church. It can also be said that while it is true established in the Vatican City, of which it was the word "catholic" implies, merely characterize
that church properties could be administered by Canonists entertain different opinions said: their faith, a uniformity in the practice and the
a natural persons, problems regarding as to the persons in whom the interpretation of their dogma and in the exercise
succession to said properties can not be avoided ownership of the ecclesiastical GOVERNMENT. In the Roman Catholic of their belief, but certainly they are separate
to rise upon his death. Through this legal fiction, properties is vested, with respect to Church supreme authority and and independent from one another in
however, church properties acquired by the which we shall, for our purpose, jurisdiction over clergy and laity alike jurisdiction, governed by different laws under
incumbent of a corporation sole pass, by confine ourselves to stating with as held by the pope who (since the which they are incorporated, and entirely
operation of law, upon his death not his personal Donoso that, while many doctors cited Middle Ages) is elected by the cardinals independent on the others in the management
heirs but to his successor in office. It could be by Fagnano believe that it resides in the assembled in conclave, and holds office and ownership of their temporalities. To allow
seen, therefore, that a corporation sole is created Roman Pontiff as Head of the Universal until his death or legitimate abdication. theory that the Roman Catholic Churches all over
not only to administer the temporalities of the Church, it is more probable that . . While the pope is obviously the world follow the citizenship of their Supreme
church or religious society where he belongs but ownership, strictly speaking, does not independent of the laws made, and the Head, the Pontifical Father, would lead to the
also to hold and transmit the same to his reside in the latter, and, consequently, officials appointed, by himself or his absurdity of finding the citizens of a country who
successor in said office. If the ownership or title ecclesiastical properties are owned by predecessors, he usually exercises his embrace the Catholic faith and become members
to the properties do not pass to the the churches, institutions and administrative authority according to of that religious society, likewise citizens of the
administrators, who are the owners of church canonically established private the code of canon law and through the Vatican or of Italy. And this is more so if We
properties?. corporations to which said properties congregations, tribunals and offices of consider that the Pope himself may be an Italian
have been donated. the Curia Romana. In their respective or national of any other country of the world.
Bouscaren and Elis, S.J., authorities on cannon territories (called generally dioceses) The same thing be said with regard to the
law, on their treatise comment: and over their respective subjects, the nationality or citizenship of the corporation sole
Considering that nowhere can We find any created under the laws of the Philippines, which
provision conferring ownership of church patriarchs, metropolitans or
archbishops and bishops exercise a is not altered by the change of citizenship of the
In matters regarding property properties on the Pope although he appears to incumbent bishops or head of said corporation
belonging to the Universal Church and be the supreme administrator or guardian of his jurisdiction which is called ordinary (as
attached by law to an office given to a sole.
to the Apostolic See, the Supreme flock, nor on the corporation sole or heads of
Pontiff exercises his office of supreme dioceses as they are admittedly person. . . (Collier's Encyclopedia, Vol.
administrator through the Roman mere administrators of said properties, 17, p. 93). We must therefore, declare that although a
Curia; in matters regarding other ownership of these temporalities logically fall branch of the Universal Roman Catholic
church property, through the and develop upon the church, diocese or While it is true and We have to concede that in Apostolic Church, every Roman Catholic Church
administrators of the individual moral congregation acquiring the same. Although this the profession of their faith, the Roman Pontiff is in different countries, if it exercises its mission
persons in the Church according to that question of ownership of ecclesiastical the supreme head; that in the religious matters, and is lawfully incorporated in accordance with
norms, laid down in the Code of Cannon properties has off and on been mentioned in in the exercise of their belief, the Catholic the laws of the country where it is located, is
Law. This does not mean, however, that several decisions of the Court yet in no instance congregation of the faithful throughout the considered an entity or person with all the rights
the Roman Pontiff is the owner of all the was the subject of citizenship of this religious world seeks the guidance and direction of their and privileges granted to such artificial being
church property; but merely that he is society been passed upon. Spiritual Father in the Vatican, yet it cannot be under the laws of that country, separate and
the supreme guardian (Bouscaren and said that there is a merger of personalities distinct from the personality of the Roman
Ellis, Cannon Law, A Text and resultant therein. Neither can it be said that the Pontiff or the Holy See, without prejudice to its
We are not unaware of the opinion expressed by religious relations with the latter which are
Commentary, p. 764). the late Justice Perfecto in his dissent in the case political and civil rights of the faithful, inherent
or acquired under the laws of their country, are governed by the Canon Law or their rules and
of Agustines vs. Court of First Instance of regulations.
and this Court, citing Campes y Pulido, Bulacan, 80 Phil. 565, to the effect that "the affected by that relationship with the Pope. The
Legislacion y Jurisprudencia Canonica, ruled in Roman Catholic Archbishop of Manila is only a fact that the Roman Catholic Church in almost
the case of Trinidad vs. Roman Catholic branch of a universal church by the Pope, with every country springs from that society that saw We certainly are conscious of the fact that
Archbishop of Manila, 63 Phil. 881, that: permanent residence in Rome, Italy". There is no its beginning in Europe and the fact that the whatever conclusion We may draw on this
question that the Roman Catholic Church clergy of this faith derive their authorities and matter will have a far reaching influence, nor can
existing in the Philippines is a tributary and part receive orders from the Holy See do not give or We overlook the pages of history that arouse
of the international religious organization, for bestow the citizenship of the Pope upon these indignation and criticisms against church
landholdings. This nurtured feeling that however, new dioceses were formed and new before making the order proof must be expressly authorized by law to acquire in
snowbailed into a strong nationalistic sentiment corporations sole were created to correspond made to the satisfaction of the Court connection with the propagation of the Roman
manifested itself when the provisions on natural with the territorial jurisdiction of the new that notice of the application for leave Catholic Apostolic faith or in furtherance of their
to be embodied in the Philippine Constitution dioceses, one of them being petitioner herein, the to mortgage or sell has been given by freedom of religion they could not register said
were framed, but all that has been said on this Roman Catholic Apostolic Administrator of publication or otherwise in such properties in their name. As professor Javier J.
regard referred more particularly to Davao, Inc., which was registered with the manner and for such time as said Court Nepomuceno very well says "Man in his search
landholdings of religious corporations known as Securities and Exchange Commission on or the Judge thereof may have directed, for the immortal and imponderable, has, even
"Friar Estates" which have already bee acquired September 12, 1950, and succeeded in the and that it is to the interest of the before the dawn of recorded history, erected
by our government, and not to properties held administrative for all the "temporalities" of the corporation that leave to mortgage or temples to the Unknown God, and there is no
by corporations sole which, We repeat, are Roman Catholic Church existing in Davao. sell must be made by petition, duly doubt that he will continue to do so for all time
properties held in trust for the benefit of the verified by the bishop, chief priest, or to come, as long as he continues 'imploring the
faithful residing within its territorial jurisdiction. According to our Corporation Law, Public Act No. presiding elder acting as corporation aid of Divine Providence'" (Nepomuceno's
Though that same feeling probably precipitated 1549, approved April 1, 1906, a corporation sole. sole, and may be opposed by any Corporation Sole, VI Ateneo Law Journal, No. 1, p.
and influenced to a large extent the doctrine laid member of the religious denomination, 41, September, 1956). Under the circumstances
down in the celebrated Krivenco decision, We society or church represented by the of this case, We might safely state that even
have to take this matter in the light of legal is organized and composed of a single corporation sole: Provided, however, before the establishment of the Philippine
provisions and jurisprudence actually obtaining, individual, the head of any religious That in cases where the rules, Commonwealth and of the Republic of the
irrespective of sentiments. society or church, for the regulations, and discipline of the Philippines every corporation sole then
ADMINISTRATION of the temporalities religious denomination, society or organized and registered had by express
of such society or church. By church concerned represented by such provision of law the necessary power and
The question now left for our determination is "temporalities" is meant estate and
whether the Universal Roman Catholic Apostolic corporation sole regulate the methods qualification to purchase in its name private
properties not used exclusively for of acquiring, holding, selling and lands located in the territory in which it
Church in the Philippines, or better still, the religious worship. The successor in
corporation sole named the Roman Catholic mortgaging real estate and personal exercised its functions or ministry and for which
office of such religious head or chief property, such rules, regulations, and it was created, independently of the nationality
Apostolic Administrator of Davao, Inc., is priest incorporated as a corporation
qualified to acquire private agricultural lands in discipline shall control and the of its incumbent unique and single member and
sole shall become the corporation sole intervention of the Courts shall not be head, the bishop of the dioceses. It can be also
the Philippines pursuant to the provisions of on ascension to office, and shall be
Article XIII of the Constitution. necessary. maintained without fear of being gainsaid that
permitted to transact business as such the Roman Catholic Apostolic Church in the
on filing with the Securities and Philippines has no nationality and that the
We see from sections 1 and 5 of said Article Exchange Commission a copy of his It can, therefore, be noticed that the power of a
corporation sole to purchase real property, like framers of the Constitution, as will be hereunder
quoted before, that only persons or corporations commission, certificate of election or explained, did not have in mind the religious
qualified to acquire hold lands of the public letter of appointment duly certified by the power exercised in the case at bar, it is not
restricted although the power to sell or corporations sole when they provided that 60
domain in the Philippines may acquire or be any notary public or clerk of court of per centum of the capital thereof be owned by
assigned and hold private agricultural lands. record (Guevara's The Philippine mortgage sometimes is, depending upon the
rules, regulations, and discipline of the church Filipino citizens.
Consequently, the decisive factor in the present Corporation Law, p. 223).
controversy hinges on the proposition or concerned represented by said corporation sole.
whether or not the petitioner in this case can If corporations sole can purchase and sell real There could be no controversy as to the fact that
The Corporation Law also contains the following estate for its church, charitable, benevolent, or a duly registered corporation sole is an artificial
acquire agricultural lands of the public domain. provisions: educational purposes, can they register said real being having the right of succession and the
properties? As provided by law, lands held in power, attributes, and properties expressly
From the data secured from the Securities and SECTION 159. Any corporation sole trust for specific purposes me be subject of authorized by law or incident to its existence
Exchange Commission, We find that the Roman may purchase and hold real estate and registration (section 69, Act 496), and the (section 1, Corporation Law). In outlining the
Catholic Bishop of Zamboanga was incorporated personal; property for its church, capacity of a corporation sole, like petitioner general powers of a corporation. Public Act. No.
(as a corporation sole) in September, 1912, charitable, benevolent, or educational herein, to register lands belonging to it is 1459 provides among others:
principally to administer its temporalities and purposes, and may receive bequests or acknowledged, and title thereto may be issued in
manage its properties. Probably due to the gifts of such purposes. Such its name (Bishop of Nueva Segovia vs. Insular
ravages of the last war, its articles of SEC. 13. Every corporation has the
corporation may mortgage or sell real Government, 26 Phil. 300-1913). Indeed it is power:
incorporation were reconstructed in the property held by it upon obtaining an absurd that while the corporations sole that
Securities and Exchange Commission on April 8, order for that purpose from the Court might be in need of acquiring lands for the
1948. At first, this corporation sole administered of First Instance of the province in erection of temples where the faithful can pray, (5) To purchase, hold, convey, sell,
all the temporalities of the church existing or which the property is situated; but or schools and cemeteries which they are lease, lot, mortgage, encumber, and
located in the island of Mindanao. Later on, otherwise deal with such real and
personal property as the purpose for to be rather shy. Filipinos hesitated s a against or the liability of the Roman Catholic inauguration of the Government
which the corporation was formed may general rule to invest a considerable Church in the Philippines to acquire and hold established under this Constitution'.
permit, and the transaction of the sum of their capital for the agricultural lands. Although there were some This recognition is not mere
lawful business of the corporation may development, exploitation and discussions on landholdings, they were mostly graciousness but springs form the just
reasonably and necessarily require, utilization of the natural resources of confined in the inclusion of the provision character of the government
unless otherwise prescribed in this Act: the country. They had not as yet been allowing the Government to break big landed established. The framers of the
... so used to corporate as the peoples of estates to put an end to absentee landlordism. Constitution were not obscured by the
the west. This general apathy, the rhetoric of democracy or swayed to
In implementation of the same and specially delegates knew, would mean the But let us suppose, for the sake of argument, that hostility by an intense spirit of
made applicable to a form of corporation retardation of the development of the the above referred to inhibitory clause of Section nationalism. They well knew that
recognized by the same law, Section 159 natural resources, unless foreign 1 of Article XIII of the constitution does have conservation of our natural resources
aforequoted expressly allowed the corporation capital would be encouraged to come bearing on the petitioner's case; even so the did not mean destruction or
sole to purchase and hold real as well as and help in that development. They clause requiring that at least 60 per centum of annihilation of acquired property
personal properties necessary for the promotion knew that the naturalization of the the capital of the corporation be owned by rights. Withal, they erected a
of the objects for which said corporation sole is natural resources would certainly not Filipinos is subordinated to the petitioner's government neither episodic nor
created. Respondent Land Registration encourage theINVESTMENT OF aforesaid right already existing at the time of the stationary but well-nigh conservative
Commissioner, however, maintained that since FOREIGN CAPITAL into them. But there inauguration of the Commonwealth and the in the protection of property rights.
the Philippine Constitution is a later enactment was a general feeling in the Convention Republic of the Philippines. In the language of This notwithstanding nationalistic and
than public Act No. 1459, the provisions of that it was better to have such a Mr. Justice Jose P. Laurel (a delegate to the socialistic traits discoverable upon
Section 159 in amplification of Section 13 development retarded or even Constitutional Convention), in his concurring even a sudden dip into a variety of the
thereof, as regard real properties, should be postpone together until such time opinion of the case of Gold Creek mining provisions embodied in the instrument.
considered repealed by the former. when the Filipinos would be ready and Corporation, petitioner vs. Eulogio Rodriguez,
willing to undertake it rather than Secretary of Agriculture and Commerce, and The writer of this decision wishes to state at this
permit the natural resources to be Quirico Abadilla, Director of the Bureau of Mines, juncture that during the deliberation of this case
There is a reason to believe that when the placed under the ownership or control
specific provision of the Constitution invoked by respondent, 66 Phil. 259: he submitted to the consideration of the Court
of foreigners in order that they might the question that may be termed the "vested
respondent Commissioner was under be immediately be developed, with the
consideration, the framers of the same did not The saving clause in the section right saving clause" contained in Section 1,
Filipinos of the future serving not as Article XII of the Constitution, but some of the
have in mind or overlooked this particular form owners but utmost as tenants or involved of the Constitution was
of corporation. It is undeniable that the originally embodied in the report members of this Court either did not agree with
workers under foreign masters. By all the theory of the writer, or were not ready to
naturalization and conservation of our national means, the delegates believed, the submitted by the Committee on
resources was one of the dominating objectives Naturalization and Preservation of take a definite stand on the particular point I am
natural resources should be conserved now to discuss deferring our ruling on such
of the Convention and in drafting the present for Filipino posterity. Land and Other Natural Resources to
Article XII of the Constitution, the delegates were the Constitutional Convention on debatable question for a better occasion,
goaded by the desire (1) to insure their September 17, 1954. It was later inasmuch as the determination thereof is not
conservation for Filipino posterity; (2) to serve It could be distilled from the foregoing that the inserted in the first draft of the absolutely necessary for the solution of the
as an instrument of national defense, helping farmers of the Constitution intended said Constitution as section 13 of Article XIII problem involved in this case. In his desire to
prevent the extension into the country of foreign provisions as barrier for foreigners or thereof, and finally incorporated as we face the issues squarely, the writer will
control through peaceful economic penetration; corporations financed by such foreigners to find it now. Slight have been the endeavor, at least as a disgression, to explain and
and (3) to prevent making the Philippines a acquire, exploit and develop our natural changes undergone by the proviso from develop his theory, not as a lucubration of the
source of international conflicts with the resources, saving these undeveloped wealth for the time when it comes out of the Court, but of his own, for he deems it better and
consequent danger to its internal security and our people to clear and enrich when they are committee until it was finally adopted. convenient to go over the cycle of reasons that
independence (See The Framing of the already prepared and capable of doing so. But When first submitted and as inserted to are linked to one another and that step by step
Philippine Constitution by Professor Jose M. that is not the case of corporations sole in the the first draft of the Constitution it lead Us to conclude as We do in the dispositive
Aruego, a Delegate to the Constitutional Philippines, for, We repeat, they are mere reads: 'subject to any right, grant, lease, part of this decision.
Convention, Vol. II. P. 592-604). In the same book administrators of the "temporalities" or or concession existing in respect
Delegate Aruego, explaining the reason behind properties titled in their name and for the thereto on the date of the adoption of It will be noticed that Section 1 of Article XIII of
the first consideration, wrote: benefit of the members of their respective the Constitution'. As finally adopted, the Constitution provides, among other things,
religion composed of an overwhelming majority the proviso reads: 'subject to any that "all agricultural lands of the public domain
of Filipinos. No mention nor allusion whatsoever existing right, grant, lease, or and their disposition shall be limited to citizens
At the time of the framing of Philippine is made in the Constitution as to the prohibition
Constitution, Filipino capital had been concession at the time of the of the Philippines or tocorporations at least 60
per centum of the capital of which is owned by incumbent Ordinary has nothing to do with the corporation sole? The writer leaves the answer record to inquire into the composing
such citizens, SUBJECT TO ANY EXISTING RIGHT operation, management or administration of the to whoever may read and consider this portion membership to determine whether the
AT THE TIME OF THE INAUGURATION OF THE corporation sole, nor effects the citizenship of of the decision. citizenship requirement is satisfied or not, we
GOVERNMENT ESTABLISHED UNDER THIS the faithful connected with their respective would find undeniable proof that the members of
CONSTITUTION." dioceses or corporation sole. Anyway, as stated before, this question is not a the Roman Catholic Apostolic faith within the
decisive factor in disposing the case, for even if territory of Davao are predominantly Filipino
As recounted by Mr. Justice Laurel in the In view of these peculiarities of the corporation We were to disregard such saving clause of the citizens. As indicated before, petitioner has
aforementioned case of Gold Creek Mining sole, it would seem obvious that when the Constitution, which reads: subject to any existing presented evidence to establish that the clergy
Corporation vs. Rodriguez et al., 66 Phil. 259, specific provision of the Constitution invoked by right, grant, etc., at the same time of the and lay members of this religion fully covers the
"this recognition (in the clause already quoted), respondent Commissioner (section 1, Art. XIII), inauguration of the Government established under percentage of Filipino citizens required by the
is not mere graciousness but springs from the just was under consideration, the framers of the this Constitution, yet We would have, under the Constitution. These facts are not controverted by
character of the government established. The same did not have in mind or overlooked this evidence on record, sufficient grounds to uphold respondents and our conclusion in this point is
farmers of the Constitution were not obscured by particular form of corporation. If this were so, as petitioner's contention on this matter. sensibly obvious.
the rhetoric of democracy or swayed to hostility by the facts and circumstances already indicated
an intense spirit of nationalism. They well knew tend to prove it to be so, then the inescapable In this case of the Register of Deeds of Rizal vs. Dissenting Opinion—Discussed. — After having
that conservation of our natural resources did not conclusion would be that this requirement of at Ung Sui Si Temple, 2 G.R. No. L-6776, developed our theory in the case and arrived at
mean destruction or annihilation of ACQUIRED least 60 per cent of Filipino capital was never promulgated May 21, 1955, wherein this the findings and conclusions already expressed
PROPERTY RIGHTS". intended to apply to corporations sole, and the question was considered from a different angle, in this decision. We now deem it proper to
existence or not a vested right becomes this Court through Mr. Justice J.B.L. Reyes, said: analyze and delve into the basic foundation on
But respondents' counsel may argue that the unquestionably immaterial. which the dissenting opinion stands up. Being
preexisting right of acquisition of public or aware of the transcendental and far-reaching
The fact that the appellant religious effects that Our ruling on the matter might have,
private lands by a corporation which does not But let us assumed that the questioned proviso is organization has no capital stock does
fulfill this 60 per cent requisite, refers to material. yet We might say that a reading of said this case was thoroughly considered from all
not suffice to escape the Constitutional points of view, the Court sparing no effort to
purchases of the Constitution and not to later Section 1 will show that it does not refer to any inhibition, since it is admitted that its
transactions. This argument would imply that actual acquisition of land up to the right, solve the delicate problems involved herein.
members are of foreign nationality. The
even assuming that petitioner had at the time of qualification or power to acquireand hold private purpose of the sixty per centum
the enactment of the Constitution the right to real property. The population of the Philippines, requirement is obviously to ensure that At the deliberations had to attain this end, two
purchase real property or right could not be Catholic to a high percentage, is ever increasing. corporation or associations allowed to ways were open to a prompt dispatch of the
exercised after the effectivity of our Constitution, In the practice of religion of their faithful the acquire agricultural land or to exploit case: (1) the reversal of the doctrine We laid
because said power or right of corporations sole, corporation sole may be in need of more temples natural resources shall be controlled by down in the celebrated Krivenko case by
like the herein petitioner, conferred in virtue of where to pray, more schools where the children Filipinos; and the spirit of the excluding urban lots and properties from the
the aforequoted provisions of the Corporation of the congregation could be taught in the Constitution demands that in the group of the term "private agricultural lands" use
Law, could no longer be exercised in view of the principles of their religion, more hospitals where absence of capital stock, the controlling in this section 5, Article XIII of the Constitution;
requisite therein prescribed that at least 60 per their sick could be treated, more hallow or membership should be composed of and (2) by driving Our reasons to a point that
centum of the capital of the corporation had to consecrated grounds or cemeteries where Filipino citizens. might indirectly cause the appointment of
be Filipino. It has been shown before that: (1) Catholics could be buried, many more than those Filipino bishops or Ordinary to head the
the corporation sole, unlike the ordinary actually existing at the time of the enactment of corporations sole created to administer the
corporations which are formed by no less than 5 our Constitution. This being the case, could it be In that case respondent-appellant Ung Siu Si temporalities of the Roman Catholic Church in
incorporators, is composed of only one persons, logically maintained that because the Temple was not a corporation sole but a the Philippines. With regard to the first way, a
usually the head or bishop of the diocese, a unit corporation sole which, by express provision of corporation aggregate, i.e., an unregistered great majority of the members of this Court were
which is not subject to expansion for the purpose law, has the power to hold and acquire real organization operating through 3 trustees, all of not yet prepared nor agreeable to follow that
of determining any percentage whatsoever; (2) estate and personal property of its churches, Chinese nationality, and that is why this Court course, for reasons that are obvious. As to the
the corporation sole is only charitable benevolent, or educational purposes laid down the doctrine just quoted. With regard second way, it seems to be misleading because
the administrator and not the owner of the (section 159, Corporation Law) it has to stop its to petitioner, which likewise is a non-stock the nationality of the head of a diocese
temporalities located in the territory comprised growth and restrain its necessities just because corporation, the case is different, because it is a constituted as a corporation sole has no material
by said corporation sole; (3) such temporalities the corporation sole is a non-stock corporation registered corporation sole, evidently of no bearing on the functions of the latter, which are
are administered for and on behalf of the faithful composed of only one person who in his unity nationality and registered mainly to administer limited to the administration of the temporalities
residing in the diocese or territory of the does not admit of any percentage, especially the temporalities and manage the properties of the Roman Catholic Apostolic Church in the
corporation sole; and (4) the latter, as such, has when that person is not the owner but merely an belonging to the faithful of said church residing Philippines.
no nationality and the citizenship of the administrator of the temporalities of the in Davao. But even if we were to go over the
Upon going over the grounds on which the these provisions in conjunction with Section 159 full knowledge of the prior legislation 4. That under the law the nationality of
dissenting opinion is based, it may be noticed of the same law which provides that a on the subject and its construction by said Ordinary or of any administrator
that its author lingered on the outskirts of the corporation sole may only "purchase and hold the courts. (Johns vs. Town of Sheridan, has absolutely no bearing on the
issues, thus throwing the main points in real estate and personal properties for its 89 N. E. 899, 44 Ind. App. 620.). nationality of the person desiring to
controversy out of focus. Of course We fully church, charitable, benevolent or educational acquire real property in the Philippines
agree, as stated by Professor Aruego, that the purposes", the above mentioned fear of The Legislature is presumed to have by purchase or other lawful means
framers of our Constitution had at heart to revitalization of religious landholdings in the been familiar with the subject with other than by hereditary succession,
insure the conservation of the natural resources Philippines is absolutely dispelled. The fact that which it was dealing . . . . (Landers vs. who according to the Constitution must
of Our motherland of Filipino posterity; to serve the law thus expressly authorizes the Commonwealth, 101 S. E. 778, 781.). be a Filipino (sections 1 and 5, Article
them as an instrument of national defense, corporations sole to receive bequests or gifts of XIII).
helping prevent the extension into the country real properties (which were the main source that
of foreign control through peaceful economic the friars had to acquire their big haciendas The Legislature is presumed to know
principles of statutory construction. 5. That section 159 of the Corporation
penetration; and to prevent making the during the Spanish regime), is a clear indication Law expressly authorized the
Philippines a source of international conflicts that the requisite that bequests or gifts of real (People vs. Lowell, 230 N. W. 202, 250
Mich. 349, followed in P. vs. corporation sole to purchase and
with the consequent danger to its internal estate be for charitable, benevolent, or holdreal estate for its church,
security and independence. But all these educational purposes, was, in the opinion of the Woodworth, 230 N.W. 211, 250 Mich.
436.). charitable, benevolent or educational
precautions adopted by the Delegates to Our legislators, considered sufficient and adequate purposes, and to receive bequests or
Constitutional Assembly could have not been protection against the revitalization of religious giftsfor such purposes;
intended for or directed against cases like the landholdings. It is not to be presumed that a
one at bar. The emphasis and wonderings on the provision was inserted in a constitution
statement that once the capacity of a corporation or statute without reason, or that a 6. That in approving our Magna Carta
Finally, and as previously stated, We have reason the Delegates to the Constitutional
sole to acquire private agricultural lands is to believe that when the Delegates to the result was intended inconsistent with
admitted there will be no limit to the areas that it the judgment of men of common sense Convention, almost all of whom were
Constitutional Convention drafted and approved Roman Catholics, could not have
may hold and that this will pave the way for the Article XIII of the Constitution they do not have guided by reason" (Mitchell vs. Lawden,
"revival or revitalization of religious 123 N.E. 566, 288 Ill. 326.) See City of intended to curtail the propagation of
in mind the corporation sole. We come to this the Roman Catholic faith or the
landholdings that proved so troublesome in our finding because the Constitutional Assembly, Decatur vs. German, 142 N. E. 252, 310
past", cannot even furnish the "penumbra" of a Ill. 591, and may other authorities that expansion of the activities of their
composed as it was by a great number of church, knowing pretty well that with
threat to the future of the Filipino people. In the eminent lawyers and jurists, was like any other can be cited in support hereof.
first place, the right of Filipino citizens, including the growth of our population more
legislative body empowered to enact either the places of worship, more schools where
those of foreign extraction, and Philippine Constitution of the country or any public statute, Consequently, the Constitutional Assembly must
corporations, to acquire private lands is not our youth could be taught and trained;
presumed to know the conditions existing as to have known: more hallow grounds where to bury
subject to any restriction or limit as to quantity particular subject matter when it enacted a
or area, and We certainly do not see any wrong our dead would be needed in the
statute (Board of Commerce of Orange Country 1. That a corporation sole is organized course of time.
in that. The right of Filipino citizens and vs. Bain, 92 S.E. 176; N. C. 377).
corporations to acquire public agricultural lands by and composed of a single individual,
is already limited by law. In the second place, the head of any religious society or Long before the enactment of our Constitution
corporations sole cannot be considered as aliens Immemorial customs are presumed to church operating within the zone, area the law authorized the corporations sole even to
because they have no nationality at all. have been always in the mind of the or jurisdiction covered by said receive bequests or gifts of real estates and this
Corporations sole are, under the law, mere Legislature in enacting legislation. (In corporation sole (Article 155, Public Court could not, without any clear and specific
administrators of the temporalities of the Roman re Kruger's Estate, 121 A. 109; 277 P. Act No. 1459); provision of the Constitution, declare that any
Catholic Church in the Philippines. In the third 326). real property donated, let as say this year, could
place, every corporation, be it aggregate or sole, 2. That a corporation sole is a non-stock no longer be registered in the name of the
is only entitled to purchase, convey, sell, lease, The Legislative is presumed to have a corporation; corporation sole to which it was conveyed. That
let, mortgage, encumber and otherwise deal with knowledge of the state of the law on the would be an absurdity that should not receive
real properties when it is pursuant to or in subjects upon which it legislates. 3. That the Ordinary ( the corporation our sanction on the pretext that corporations
consonance with the purposes for which the (Clover Valley Land and Stock Co. vs. sole proper) does not own the sole which have no nationality and are non-stock
corporation was formed, and when the Lamb et al., 187, p. 723,726.) temporalities which he merely corporations composed of only one person in the
transactions of the lawful business of the administers; capacity of administrator, have to establish first
corporation reasonably and necessarily require The Court in construing a statute, will that at least sixty per centum of their capital
such dealing — section 13-(5) of the Corporation assume that the legislature acted with belong to Filipino citizens. The new Civil Code
Law, Public Act No. 1459 — and considering even provides:
ART. 10. — In case of doubt in It is true that under section 159 of the The courts of the State have no general adequate interpretation of sections 1 and 5 of
the interpretation or application of laws, Corporation Law, the intervention of the courts jurisdiction and control over the Article XIII of the Constitution. Let Us then be
it is presumed that the lawmaking body is not necessary, tomortgage or sell real property officers of such corporations in respect guided by the principles of statutory
intended right and justice to prevail. held by the corporation sole where the rules, to the performance of their official construction laid down by the authorities on the
regulations and discipline of the religious duties; but as in respect to the property matter:
Moreover, under the laws of the Philippines, the denomination, society or church concerned which they hold for the corporation, they
administrator of the properties of a Filipino can presented by such corporation sole regulates the stand in position of TRUSTEES and the The most important single factor in
acquire, in the name of the latter, private lands methods of acquiring, holding, selling and courts may exercise the same determining the intention of the people
without any limitation whatsoever, and that is so mortgaging real estate, and that the Roman supervision as in other cases of from whom the constitution emanated
because the properties thus acquired are not for Catholic faithful residing in the jurisdiction of the trust (Ramsey vs. Hicks, 174 Ind. 428, is the language in which it is expressed.
and would not belong to the administrator but to corporation sole has no say either in the manner 91 N.E. 344, 92 N.E. 164, 30 L.R.A. — The words employed are to be taken in
the Filipino whom he represents. But the of acquiring or of selling real property. It may be n.s. — 665; Hendryx vs. Peoples United their natural sense, except that legal or
dissenting Justice inquires: If the Ordinary is also admitted that the faithful of the diocese Church, supra.). technical terms are to be given their
only the administrator, for whom does he cannot govern or overrule the acts of the technical meaning. The imperfections
administer? And who can alter or overrule his Ordinary, but all this does not mean that the Courts of the state do not interfere with of language as a vehicle for conveying
acts? We will forthwith proceed to answer these latter can administer the temporalities of the the administration of church rules or meanings result in ambiguities that
questions. The corporations sole by reason of corporation sole without check or restraint. We discipline unless civil rights become must be resolved by result to
their peculiar constitution and form of operation must not forget that when a corporation sole is involved and which must be protected extraneous aids for discovering the
have no designed owner of its temporalities, incorporated under Philippine laws, the head (Morris St., Baptist Church vs. Dart, 67 intent of the framers. Among the more
although by the terms of the law it can be safely and only member thereof subjects himself to the S.C. 338, 45 S.E. 753, and others). (All important of these are a consideration
implied that the Ordinary holds them in trust for jurisdiction of the Philippine courts of justice and cited in Vol. II, Cooley's Constitutional of the history of the times when the
the benefit of the Roman Catholic faithful to their these tribunals can thus entertain grievances Limitations, p. 960-964.). provision was adopted and of the
respective locality or diocese. Borrowing the arising out of or with respect to the temporalities purposes aimed at in its adoption. The
very words of the law, We may say that the of the church which came into the possession of debates of constitutional convention,
the corporation sole as administrator. It may be If the Constitutional Assembly was aware of all
temporalities of every corporation sole are the facts above enumerated and of the provisions contemporaneous construction, and
held in trust for the use, purpose, behalf and alleged that the courts cannot intervene as to the practical construction by the legislative
matters of doctrine or teachings of the Roman of law relative to existing conditions as to
benefit of the religious society, or order so management and operation of corporations sole and executive departments, especially
incorporated or of the church to which the Catholic Church. That is correct, but the courts if long continued, may be resorted to
may step in, at the instance of the faithful for in the Philippines, and if, on the other hand,
diocese, synod, or district organization is an almost all of the Delegates thereto embraced the resolve, but not to create, ambiguities. .
organized and constituent part (section 163 of whom the temporalities are being held in trust, . . Consideration of the consequences
to check undue exercise by the corporation sole Roman Catholic faith, can it be imagined even for
the Corporation Law). an instant that when Article XIII of the flowing from alternative constructions
of its power as administrator to insure that they of doubtful provisions constitutes an
are used for the purpose or purposes for which Constitution was approved the framers thereof
In connection with the powers of the Ordinary intended to prevent or curtail from then on the important interpretative device. . . . The
the corporation sole was created. purposes of many of the broadly phrased
over the temporalities of the corporation sole, let acquisition sole, either by purchase or donation,
us see now what is the meaning and scope of the of real properties that they might need for the constitutional limitations were the
word "control". According to the Merriam- American authorities have these to say: propagation of the faith and for there religious promotion of policies that do not lend
Webster's New International Dictionary, 2nd ed., and Christian activities such as the moral themselves to definite and specific
p. 580, on of the acceptations of the word It has been held that the courts have education of the youth, the care, attention and formulation. The courts have had to
"control" is: jurisdiction over an action brought by treatment of the sick and the burial of the dead define those policies and have often
persons claiming to be members of a of the Roman Catholic faithful residing in the drawn on natural law and natural
church, who allege a wrongful and jurisdiction of the respective corporations sole? rights theories in doing so. The
4. To exercise restraining or directing interpretation of constitutions tends to
influence over; to dominate; regulate; fraudulent diversion of the church The mere indulgence in said thought would
property to uses foreign to the purposes impress upon Us a feeling of apprehension and respond to changing conceptions of
hence, to hold from action; to curb; political and social values. The extent to
subject; also, Obs. — to overpower. of the church, since no ecclesiastical absurdity. And that is precisely the leit motiv
question is involved and equity will that permeates the whole fabric of the dissenting which these extraneous aids affect the
protect from wrongful diversion of the opinion. judicial construction of constitutions
SYN: restrain, rule, govern, guide, property (Hendryx vs. Peoples United cannot be formulated in precise rules,
direct; check, subdue. Church, 42 Wash. 336, 4 L.R.A. — n.s. — but their influence cannot be ignored in
It seems from the foregoing that the main describing the essentials of the process
1154). problem We are confronted with in this appeal,
hinges around the necessity of a proper and
(Rottschaeffer on Constitutional Law, (State ex rel. Randolph Country vs. protects from impairment. For a property right executed by Mateo L. Rodis in favor of the Roman
1939 ed., p. 18-19). Walden, 206 S.W. 2d 979). to be vested (or acquired) there must be a Catholic Apostolic Administrator of Davao, Inc.,
transition from the potential or contingent to which is the subject of the present litigation. No
There are times that when even the It is quite generally held that in arriving the actual, and the proprietary interest must pronouncement is made as to costs. It is so
literal expression of legislation may be at the intent and purpose the have attached to a thing; it must have become ordered.
inconsistent with the general objectives construction should be broad or liberal 'fixed and established'" (Balboa vs. Farrales, 51
of policy behind it, and on the basis of or equitable, as the better method of Phil. 498). But the case at bar has to be Bautista Angelo and Endencia, JJ., concur.
equity or spirit of the statute the courts ascertaining that intent, rather than considered as an exception to the rule because
rationalize a restricted meaning of the technical (Great Southern Life Ins. Co. among the rights granted by section 159 of the
Corporation Law was the right to receive Paras, C.J., and Bengzon, J., concur in the result.
latter. A restricted interpretation is vs. City of Austin, 243 S.W. 778).
usually applied where the effect of bequests or gifts of real properties for charitable,
literal interpretation will make for benevolent and educational purposes. And this LABRADOR, J., concurring:
All these authorities uphold our conviction that right to receive such bequests or gifts (which
injustice and absurdity or, in the words the framers of the Constitution had not in mind
of one court, the language must be so implies donations in futuro), is not a mere The case at bar squarely present this important
the corporations sole, nor intended to apply potentiality that could be impaired without any
unreasonable 'as to shock general them the provisions of section 1 and 5 of said legal question: Has the bishop or ordinary of the
common sense'. (Vol. 3, Sutherland on specific provision in the Constitution to that Roman Catholic Church who is not a Filipino
Article XIII when they passed and approved the effect, especially when the impairment would
Statutory Construction, 3rd ed., 150.). same. And if it were so as We think it is, herein citizen, as corporation sole, the right to register
disturbingly affect the propagation of the land, belonging to the Church over which he
petitioner, the Roman Catholic Apostolic religious faith of the immense majority of the
A constitution is not intended to be a Administrator of Davao, Inc., could not be presides, in view of the Krivenko decision? Mr.
Filipino people and the curtailment of the Justice Felix sustains the affirmative view while
limitation on the development of a deprived of the right to acquire by purchase or activities of their Church. That is why the writer
country nor an obstruction to its donation real properties for charitable, Mr. Justice J. B. L. Reyes, the negative. As the
gave us a basis of his contention what Professor undersigned understands it, the reason given for
progress and foreign relations benevolent and educational purposes, nor of the Aruego said in his book "The Framing of the
(Moscow Fire Ins. Co. of Moscow, right to register the same in its name with the this last view is that the constitutional provision
Philippine Constitution" and the enlightening prohibiting land ownership by foreigners also
Russia vs. Bank of New York and Trust Register of Deeds of Davao, an indispensable opinion of Mr. Justice Jose P. Laurel, another
Co., 294 N. Y. S.648; 56 N.E. 2d. 745, requisite prescribed by the Land Registration Act extends to control because this lies within the
Delegate to the Constitutional Convention, in his scope and purpose of the prohibition.
293 N.Y. 749). for lands covered by the Torrens system. concurring opinion in the case of Goldcreek
Mining Co. vs. Eulogio Rodriguez et al., 66 Phil.
Although the meaning or principles of a We leave as the last theme for discussion the 259. Anyway the majority of the Court did not To our way of thinking, the question at issue
constitution remain fixed and much debated question above referred to as "the deem necessary to pass upon said "vested right depends for its resolution upon another, namely,
unchanged from the time of its vested right saving clause" contained in section saving clause" for the final determination of this who is the owner of the land or property of the
adoption, a constitution must be 1, Article XIII of the Constitution. The dissenting case. Church sought to be registered? Under the Canon
construed as if intended to stand for a Justice hurls upon the personal opinion Law the parish and the diocese have the right to
great length of time, and it is expressed on the matter by the writer of the acquire and own property.
JUDGMENT
progressive and not static. Accordingly, decision the most pointed darts of his severe
it should not receive too narrow or criticism. We think, however, that this strong SEC. 1. La Iglesia catolica y la Sede
literal an interpretation but rather the dissent should have been spared, because as Wherefore, the resolution of the respondent Apostolica, libre e independientemente
meaning given it should be applied in clearly indicated before, some members of this Land Registration Commission of September 21, de la potestad civil, tiene derecho
such manner as to meet new or Court either did not agree with the theory of the 1954, holding that in view of the provisions of innato de adquirir, retener y
changed conditions as they arise (U.S. writer or were not ready to take a definite stand sections 1 and 5 of Article XIII of the Philippine administrar bienes temporales para el
vs. Lassic, 313 U.S. 299, 85 L. Ed., 1368). on that particular point, so that there being no Constitution the vendee (petitioner) is not logro de sus propios fines.
majority opinion thereon there was no need of qualified to acquire lands in the Philippines in
any dissension therefrom. But as the criticism the absence of proof that at least 60 per centum
Effect should be given to the purpose of the capital, properties or assets of the Roman SEC. 2. Tambien las iglesias particulares
indicated by a fair interpretation of the has been made the writer deems it necessary to y demas personas morales erigidas por
say a few words of explanation. Catholic Apostolic Administrator of Davao, Inc. is
language used and that construction actually owned or controlled by Filipino citizens, la autoridad eclesiastica en persona
which effectuates, rather than that and denying the registration of the deed of sale juridica, tienen derecho, a tenor de los
which destroys a plain intent or The writer fully agrees with the dissenting in the absence of proof of compliance with such sagrados canones, de adquirir, retener
purpose of a constitutional provision, is Justice that ordinarily "a capacity to acquire requisite, is hereby reversed. Consequently, the y administrar bienes temporales.
not only favored but will be adopted (property) in futuro, is not in itself a vested or respondent Register of Deeds of the City of (Canon 1495) (Codigo de Derecho
existing property right that the Constitution Davao is ordered to register the deed of sale
Canonico por Miguelez-Alonzo- properties resides in the Roman Catholic Pontiff and authorizes it to purchase and hold real The mere fact that the Corporation Law
Cabreros, 4a ed., p. 562.). as Head of the Universal Church, but the better estate for the Church. authorizes the corporation sole to acquire and
opinion seems to be that they do belong to the hold real estate or other property does not make
The Canon Law further states that Church parishes and diocese as above indicated. SEC. 159. Any corporation sole may the latter the real owner thereof, as his tenure of
property belongs to the non-collegiate moral purchase and hold real estate and Church property is merely for the purposes of
person called the parish, or to the diocese. Canonists entertain different opinions personal property for its church, administration. As stated above, the bishop is
as to the person in whom the charitable, benevolent, or educational only the legal (technical) owner or trustee, the
ownership of the ecclesiastical purposes, and may receive bequests or parish or diocese being the beneficial owner, or
In canon law the ownership of cestui que trust.
ecclesiastical goods belongs to each properties is vested, with respect to gifts for such purposes. Such
separate juridical person in the Church which we shall, for our purpose, corporation may mortgage or sell real
(C. 1499). The property of St. John's confine ourselves to stating with property held by it upon obtaining an Having arrived at the conclusion that the
Church does not belong to the Pope, the Donoso that, while many doctors cited order for that purpose from the Court property in question belongs actually either to
bishop, the pastor, or even to the by Fagnano believe that it resides in the of First Instance of the province in the parish or to the dioceses of Davao, the next
people of the parish. It belongs to the Roman Pontiff as Head of the Universal which the property is situated; but question that possess for solution is, In case of
non-collegiate moral person called the Church, it is more probable that before making the order proof must be said property, whose nationality must be
parish, which has been lawfully ownership, strictly speaking, does not made to the satisfaction of the court considered for the purpose of determining the
erected. It is not like a stock company. reside in the latter and, consequently, that notice of the application for leave applicability of the constitutional provision
The civil law does not recognize this ecclesiastical properties are owned by to mortgage or sell has been given by limiting ownership of land to Filipinos, that of
canonical principle; it insists on an act the churches, institutions and publication or otherwise in such the bishop or chief priest who registers as
of civil incorporation or some other canonically established private manner and for such time as said court corporation sole, or that of the constituents of
legal device. (Ready Answers in Canon corporations to which said properties or the judge thereof may have directed, the parish or diocese who are the beneficial
Law by Rev. P.J. Lydon, DD., 3rd ed., have been donated. (3 Campos y Pulido, and that it is to the interest of the owners of the land? We believe that of a latter
1948, p. 576.). Legislacion y Jurisprudencia Canonica, corporation that leave to mortgage or must be considered, and not that of the priest
P. 420, cited in Trinidad vs. Roman sell should be granted. The application clothed with the corporate fiction and
Catholic Archbishop of Manila, 63 Phil., for leave to mortgage or sell must be denominated as the corporation sole. The
Parish. 3. A portion or subdivision of a 881, 888-889.). made by petition, duly verified by the corporation sole is a mere contrivance to enable
diocese committed to the spiritual bishop, chief priest, or presiding elder, a church to acquire, own and manage properties
jurisdiction or care of a priest or acting as corporation sole, and may be belonging to the church. It is only a means to an
minister, called rector or pastor. In the The property in question, therefore, appears to
belong to the parish or the diocese of Davao. But opposed by any member of the end. The constitutional provision could not have
Protestant Episcopal Church, it is a religious denomination, society, or been meant to apply to the means through which
territorial division usually following the Roman Catholics of Davao are not organized
as a juridical person, either under the Canon law church represented by the corporation and by which property may be owned or
civil bounds, as those of a town. In the sole: Provided, however, That in cases acquired, but to the ultimate owner of the
Roman Catholic Church, it is usually or under the Civil Law. Neither is there any
provision in either for their organization as a when the rules, regulations and property. Hence, the citizenship of the priest
territorial, but whenever, as in some discipline of the religious forming the corporation sole should be no
parts of the United States there are juridical person. Registration of the property in
the name of the Roman Catholics of Davao is, denomination, society or church impediment if the parish or diocese which owns
different rites and languages, the concerned represented by such the property is qualified to own and possess the
boundaries and jurisdiction are therefore, impossible.
corporation sole regulate the methods property.
determined by right or language; as, a of acquiring, holding, selling, and
Ruthenian or Polish parish. "5. The As under the Civil Law, however, the mortgaging real estate and personal
inhabitants or members of a parish, organization of parishes and dioceses as juridical We can take judicial notice of the fact that a great
property, such rules, regulations, and majority of the constituents of the parish or
collectively. persons is not expressly provided for, the discipline shall control and the
corporation law has set up the fiction known as diocese of Davao are Roman Catholics. The
intervention of the courts shall not be affidavit demanded is therefore, a mere
Diocese. 3. Eccl. The circuit or extent of the "corporation sole." necessary. (The Corporation Law.) formality.
a bishop's jurisdiction; the district in
which a bishop has authority. It tolerates the corporation sole And in accordance with the above section,
(Webster's New International wherever and as long as the state law The dissenting opinion sustains the proposition
temporalities of the Church or of parish or a that control, not actual ownership, is the factor
Dictionary). does not permit the legal incorporation diocese are allowed to be registered in the name
of the parish or diocese. The bishop that determines whether the constitutional
of the corporation sole for purposes of prohibition against alien ownership of lands
We are aware of the fact that some writers officially is the legal owner. (Ready administration and in trust for the real owners.
Answers in Canon Law, supra, p. 577.) . should or should not apply. We may assume the
believe that ownership of ecclesiastical correctness of the proposition that the Holy See
exercises control cannot be real and actual but citizens, subject to any existing right, economic penetration; and (3) to of control in the corporation sole known as "The
merely theoretical. In any case, the constitutional grant, lease, or concession at the time prevent making the Philippines a Roman Catholic Apostolic Administrator of
prohibition is limited by its terms to ownership of the inauguration of the Government source of international conflicts with Davao, Inc."?.
and ownership alone. And should the established under this Constitution. the consequent danger to its internal
corporation sole abuse its powers and authority Natural resources, with the exception security and independence. . . . Under section 155 of the Corporation Law, the
in relation to the administration or disposal of of public agricultural land, shall not be bishop, or other religious head, as corporation
the property contrary to the wishes of the alienated, and no license, concession, or The convention permitted aliens to sole, is "charged with the administration of the
constituents of the parish or the diocese, the act lease for the exploitation, development, acquire an interest in the natural temporalities of his church." It becomes then
may always be questioned as ultra vires. or utilization of any of the natural resources of the country and in private pertinent to inquire: if he is only an
resources shall be granted for a period agricultural lands as component administrator, for whom does he administer?
We agree, therefore, with the reversal of the exceeding twenty-five years, renewable elements of corporations or And who can alter or overrule his acts?
order. for another twenty-five years, except as associations. The maximum limit of
to water rights for irrigation, water interest that they could hold in a
supply fisheries, or industrial uses If his acts as administrator can not be
Montemayor and Reyes, A., JJ., concur. corporation or association would be overridden, or altered, except by himself, then
other than the development of water only forty per centum of the capital.
power, in which cases beneficial use obviously the control of the corporation and its
Accordingly the control of the temporalities is in the bishop himself, and he
REYES, J.B.L., dissenting: may be the measure and the limit of the corporation or association would
grant. (Article XII, Constitution of the must be a Filipino citizen. If, on the other hand,
remain in Filipino hands. the final say as to management, exploitation,
I regret not being able to assent to the opinion of Phil.).
encumbrance or disposition of the temporalities
Mr. Justice Felix. The decision of the Supreme In its report the committee on resides in another individual or body of
Court in this case will be of far reaching results, SEC. 5. Save in cases of hereditary nationalization and preservation of individuals, then the control resides there. To
for once the capacity of corporations sole to succession, no private agricultural land lands and other natural resources possess constitutional capacity to acquire
acquire public and private agricultural lands is shall be transferred or assigned except recommended that the maximum limit agricultural land or other natural resources, that
admitted, there will be no limit to the areas they to individuals, corporations, or of interest that aliens could hold in a body making the final decision for the
may hold until the Legislature implements associations qualified to acquire or corporation or association should be corporation must have at least 60 per cent
section 3 of Article XIII of the Constitution, hold lands of the public domain in the only twenty-five per centum of the Filipino membership.
empowering it to set a limit to the size of private Philippines. (Art. XII, Constitution of capital. The purpose of the committee
agricultural land that may be held; and even then the Phil.). was to enable Filipino-controlled
it can only be done without prejudice to rights By this test, the body of members professing the
corporations or associations, if Catholic faith in the diocese of Davao does not
acquired prior to the enactment of such law. In In requiring corporations or associations to have necessary, to interest aliens to join
other words, even if a limitative law is adopted, it constitute the controlling membership. For
sixty per cent (60%) of their capital owned by their technical or managerial staff by under the rules of the Roman Catholic Church
will not affect the landholdings acquired before Filipino citizens, the constitution manifestly giving them a part interest in the same.
the law become effective, no matter how vast the the faithful can not control the acts of the
disregarded the corporate fiction, i.e., the The sub-committee of seven embodied Ordinary; they cannot override his decision, just
estate should be. juridical personality of such corporations or this recommendation in the first draft as they do not elect or remove him. Only his
associations. It went behind the corporate entity of the Constitution; but in the revised hierarchical superiors can do that; the control is
The Constitutional restrictions to the acquisition and looked at the natural persons that composed article on General Provisions, it raised from above, not from below. Hence, the fact that
of agricultural land are well known: it, and demanded that a clear majority in interest the amount to forty per centum. 90 per cent (or even 100 per cent) of the faithful
(60%) should be Filipino. To me this was done to (emphasis supplied.) in the diocese should be composed of Filipino
SECTION 1. All agricultural, timber, and ensure that the control of its properties (not citizens is totally devoid of significance from the
mineral lands of the public domain, merely the beneficial ownership thereof) It was in recognition of this basic rule that we standpoint of the constitutional restrictions in
waters, minerals, coal, petroleum, and remained in Filipino hands. (Aruego, Framing of held in Register of Deeds vs. Ung Siu Si Temple, question (see Codex, Canons 1518 and 1530,
other mineral oils, all forces of the Constitution, Vol. 2. pp. 604, 606.) . 51 Off. Gaz. p. 2866, that if the association had no paragraph 1, No. 3).
potential energy, and other natural capital, its controlling membership must be
resources of the Philippines belong to The nationalization of the natural composed of Filipinos. Becauseownership Moreover, I do not think that the body of Catholic
the State, and their disposition, resources of the country was intended divorced from control is not true ownership. faithful in the Davao diocese can be taken, for the
exploitation, development, or (1) to insure their conservation for purpose here under consideration, as the Church
utilization shall be limited to citizens of Filipino posterity; (2) to serve as an From these premises it can be deduced that the represented by the Ordinary of Davao. That body
the Philippines, or to corporations or instrument of national defense, helping preliminary question to be decide by the court is does not constitute an entity or unit separate and
associations at least sixty per centum of prevent the extension into the country the following: what and who exercises the power apart from the rest of the faithful throughout the
the capital of which is owned by such of foreign control through peaceful
world that compose the Roman Catholic Church Filipino control that would satisfy the purposes That the law should have expressly conferred (3) That in the absence of evidence on these
that has always claimed ecumenical (universal) of the constitution, for the reason that under capacity to acquire land upon corporations sole points, the order appealed from, denying
character. There is nom Catholic Church of section 159 (last proviso) of the Corporation law, was not due any special predilection for them; it registration of the conveyance, should be
Davao district and independent of the Catholic the court intervention is dispensed with where was exclusively due to the principle that affirmed.
Church of Manila, Lipa or Rome. All those the rules and discipline of the church already corporation, as artificial entities, have no
professing Catholic faith are members of only regulate the acquisition and disposition of real inherent rights, but only those granted by the Concepcion, J., concur.
one single church or religious group. Thus the estate and personal property. sovereign. Unless conferred, the corporate right
Iglesia Filipina Independiente is not part of the would not exist.
Catholic Church, precisely because of its Provided however, that in cases where
independence. the rules, regulations and discipline of Furthermore, a capacity to acquire in futuro, is
the religious denomination, society, or not in itself a vested existing property right that
If, the, the Catholic Church of Davao is part and church concerned represented by such the Constitution protects from impairment. For a
parcel of the universal Catholic Church, it can not corporation sole regulate the methods property right to be vested (or acquired) there
be considered separate and apart from it in this of acquiring, holding, selling, and must be a transition from thepotential, or
case. And if considered with it, obviously the mortgaging real estate and personal contingent, to the actual, and the proprietary
condition of 60 per cent Filipino membership is property, such rules, regulations, and interest must have attached to a thing, it must
not satisfied when all the Catholic faithful in the discipline shall control and the have become "fixed or established "(Balboa vs.
world are taken into account. intervention of the courts shall not be Farrales, 51 Phil. 498). If mere potentialities
necessary. (emphasis supplied.) cannot be impaired, then the law would become
The unity and singleness of the various diocese unchangeable, for every variation in it will
of the church appears expressly recognized in It is argued that a distinction must be drawn reduce some one's legal ability to do or not to do.
section 163 of the Corporation Law, which between the lands to be devoted to purely Already in Benguet Consolidated vs. Pineda, 3 52
provides that the corporation (sole) shall hold religious purposes and the lands held in ordinary Off. Gaz. 1961, we have ruled that no one has a
the temporalities, not for the diocese; but for the ownership. But where in the Constitution is such vested right in statutory privileges or
benefit "of the church of which the diocese — is a distinction drawn? Under it, capacity to acquire exemptions. And in the concurring opinion in
an organized or constituent part." agricultural land for the erection of a church is Gold Creek Mining Corp. vs. Rodriguez, 66 Phil.
capacity to acquire agricultural lands for any 259 (cited by Justice Felix), Mr. Justice Laurel
lawful purpose, whether it be for convents or squarely declared that "contingency or
SEC. 163. The right to administer all expectation is neither property right." (cas. cit.,
temporalities and all property held or schools or seminaries or haciendas for their
support or land to be held solely for enjoyment p. 269.) Finally, the point is also made that the
owned by a religious order or society, Ordinary, as religious corporation sole, has no
or by the diocese synod, or district of the revenue. Once the capacity to acquire is
granted, the way is paved for the revitalization of citizenship, and is not an alien. The answer is
organization of any religious that under the Constitution of the Republic, it is
denomination or church shall, on its religious landholdings that proved so
troublesome in our past. I cannot conceive that not enough that the acquirer of agricultural land
incorporation, pass to the corporation be not an alien; he must be a Filipino or
and shall be held in trust for the use the Constitution intended to revive them.
controlled by Filipinos.
purpose, behalf, and benefit of the
religious society or order so It is also argued that, before the Constitution was
incorporated or of the church of which adopted, the corporations sole had, by express Wherefore, I am constrained to conclude:
the diocese, synod, or district statute, the right to acquire agricultural land; and
organization is an organized and that the Constitution was not intended to destroy (1) That the capacity of religious corporations
constituent part. such "acquired property rights." If followed, the sole to acquire agricultural land depends upon
argument destroys the constitutional 60 per cent Filipino membership of the group or
So that, even from the standpoint of beneficial restrictions. All aliens had a capacity to acquire body exercising control of the
ownership, the dioceses of Davao can not be agricultural land before the Constitution came corporation;lawphi1.net
viewed as a group legally isolated from the into effect, because no prohibition existed
Catholic Church as a whole. previously. Must their right to acquire and hold (2) That if control of any such corporation
agricultural land be conceded in spite of the should be vested in a single person, then such
Constitution?. person must be a Filipino citizen;1awphi1.net
Nor does court control over the acts of the
corporation sole constitute a guarantee of
Republic of the Philippines Bulacan an application for the registration of the be entitled to a certificate of private land in the Susi case was a parcel of land
SUPREME COURT two lots. It alleged that it and its predecessors- title under the provisions of possessed by a Filipino citizen since time
Manila in-interest had possessed the land for more than this chapter." (As amended by immemorial, as in Cariño vs. Insular
thirty years. It invoked section 48(b) of the Republic Act No. 1942, Government, 212 U.S. 449, 53 L. ed. 594, 41 Phil.
EN BANC Public Land Law, which provides: approved on June 22, 1957.) 935 and 7 Phil. 132. The lots sought to be
registered in this case do not fall within that
Chapter VIII.—Judicial The Republic of the Philippines, through the category. They are still public lands. A land
G.R. No. L-55289 June 29, 1982 registration proceeding under section 48(b)
confirmation of imperfect or Direct/r of Lands, opposed the application on the
incomplete titles. grounds that applicant, as a private corporation, "presupposes that the land is public" (Mindanao
REPUBLIC OF THE PHILIPPINES, represented is disqualified to hold alienable lands of the vs. Director of Lands, L-19535, July 10, 1967, 20
by the Director of Lands, petitioner-appellant, public domain, that the land applied for is public SCRA 641, 644).
vs. xxx xxx xxx
land not susceptible of private appropriation and
JUDGE CANDIDO P. VILLANUEVA, of the Court that the applicant and its predecessors-in- As held in Oh Cho vs. Director of Lands, 75 Phil.
of First Instance of Bulacan, Malolos Branch SEC. 48. The following- interest have not been in the open, continuous, 890, "all lands that were not acquired from the
VII, and IGLESIA NI CRISTO, as a corporation described citizens of the exclusive and notorious possession of the land Government, either by purchase or by grant,
sole, represented by ERAÑO G. MANALO, as Philippines, occupying lands of since June 12, 1945. belong to the public domain. An exception to the
Executive Minister,respondents-appellees. the public domain or claiming rule would be any land that should have been in
to own any such lands or an the possession of an occupant and of his
interest therein, but whose After hearing, the trial court ordered the
AQUINO, J.: registration of the two lots, as described in Plan predecessors-in-interest since time immemorial,
titles have not been perfected for such possession would justify the
or completed, may apply to Ap-04-001344 (Exh. E), in the name of the Iglesia
Like L-49623, Manila Electric Company vs. Judge Ni Cristo, a corporation sole, represented by presumption that the land had never been part
the Court of First Instance of of the public domain or that it had been a private
Castro-Bartolome, this case involves the the province where the land is Executive Minister Eraño G. Manalo, with office
prohibition in section 11, Article XIV of the at the corner of Central and Don Mariano Marcos property even before the Spanish conquest. "
located for confirmation of
Constitution that "no private corporation or their claims and the issuance Avenues, Quezon City, From that decision, the
association may hold alienable lands of the of a certificate of title Republic of the Philippines appealed to this In Uy Un vs. Perez, 71 Phil. 508, it was noted that
public domain except by lease not to exceed one therefore, under the Land Court under Republic Act No. 5440. The appeal the right of an occupant of public agricultural
thousand hectares in area". Register Act, to wit: should be sustained. land to obtain a confirmation of his title under
section 48(b) of the Public Land Law is a
Lots Nos. 568 and 569, located at Barrio Dampol, As correctly contended by the Solicitor General, "derecho dominical incoativo"and that before the
xxx xxx xxx issuance of the certificate of title the occupant is
Plaridel, Bulacan, with an area of 313 square the Iglesia Ni Cristo, as a corporation sole or a
meters and an assessed value of P1,350 were juridical person, is disqualified to acquire or hold not in the juridical sense the true owner of the
acquired by the Iglesia Ni Cristo on January 9, (b) Those who by themselves alienable lands of the public domain, like the two land since it still pertains to the State.
1953 from Andres Perez in exchange for a lot or through their lots in question, because of the constitutional
with an area of 247 square meters owned by the predecessors-in-interest have prohibition already mentioned and because the The lower court's judgment is reversed and set
said church (Exh. D). been in open, continuous, said church is not entitled to avail itself of the aside. The application for registration of the
exclusive, and notorious benefits of section 48(b) which applies only to Iglesia Ni Cristo is dismissed with costs against
possession and occupation of Filipino citizens or natural persons. A said applicant.
The said lots were already possessed by Perez in agricultural lands of the
1933. They are not included in any military corporation sole (an "unhappy freak of English
public domain, under a bona law") has no nationality (Roman Catholic
reservation. They are inside an area which was fide claim of acquisition of SO ORDERED.
certified as alienable or disposable by the Bureau Apostolic Adm. of Davao, Inc. vs. Land
ownership, for at least thirty Registration Commission, 102 Phil. 596. See
of Forestry in 1927. The lots are planted to years immediately preceding Barredo, Makasiar, Guerrero, Melencio-Herrera,
santol and mango trees and banana plants. A Register of Deeds vs. Ung Siu Si Temple, 97 Phil.
the filing of the application for 58 and sec. 49 of the Public Land Law). Escolin, Vasquez, Relova and Gutierrez, Jr., JJ.,
chapel exists on the said land. The land had been confirmation of title except concur.
declared for realty tax purposes. Realty taxes had when prevented by war or
been paid therefor (Exh. N). force majeure. These shall be The contention in the comments of the Iglesia Ni
Cristo (its lawyer did not file any brief) that the Concepcion, Jr., J., is on leave.
conclusively presumed to
On September 13, 1977, the Iglesia Ni Cristo, a have performed all the two lots are private lands, following the rule laid
corporation sole, duly existing under Philippine conditions essential to a down in Susi vs. Razon and Director of Lands, 48 Plana, J., took no part.
laws, filed with the Court of First Instance of Government grant and shall Phil. 424, is not correct. What was considered
Separate Opinions in undoubtedly public land. The possessor of a lands of the public domain, except by lease, not before us be viewed solely from the standpoint
piece of public land would have the option to to exceed 1,000 hectares in area. 4 Hence, even if of respondent appellee Iglesia ni Cristo being a
ABAD SANTOS, J., concurring: acquire title thereto through judicial the land involved in the present case is corporation sole, then I would have no hesitancy
confirmation or administrative legalization. The considered private land, the cited section in sustaining the conclusion that if the land be
difference is that in the latter case, the area prohibits its acquisition by the Meralco or Iglesia considered public, its registration would have to
In the result for the same reasons I have already disposable to a citizen-applicant by the Director which admittedly are "corporations or be denied. For me, that is not the decisive
given in Manila Electric Co. vs. Judge Floreliana of Lands is limited to 24 hectares. There is no association" within the meaning of the aforecited consideration. It is my view that the Bill of Rights
Castro-Bartolome, G.R. No. L-49623. limit to the area subject to judicial confirmation provision of the New Constitution. This provision on religious freedom which bans the
of incomplete or imperfect title, except possibly observation should end all arguments on the enactment of any law prohibiting its free
DE CASTRO, J., dissenting: the limit fixed for a State grant under old Spanish issue of whether the land in question is public or exercise, the "enjoyment of religious profession
laws and decrees, which certainly is much larger private land. Although it may further be and worship, without discrimination or
Justice Teehankee cites in his dissenting opinion than that set for free patents. observed that supposing a corporation has been preference, [being] forever ... allowed." 3 This is
the case of Herico vs. Dar, 1 the decision in which in possession of a piece of public land from the not the first time the Court has occasion to
I am theponente, as reiterating a supposedly It is because of the divestiture of authority of the very beginning, may it apply for judicial recognize the high estate that freedom of religion
well-established doctrine that lands of the public Director of Lands to dispose of the land subject confirmation of the land in question to acquire occupies in our hierarchy of values. Even as
domain which, by reason of possession and to judicial confirmation of incomplete and title to it as owner after possessing the land for against the fundamental objectives,
cultivation for such a length of time, a grant by imperfect title that some statements are found in the requisite length of time? The answer is constitutionally enshrined, of social justice and
the State to the occupant is presumed, and the many cases, such as those cited by Justice believed obvious-it may not. If its possession is protection to labor, the claim of such free
land thereby ceases to form part of the public Teehankee, to the effect that such land has not from the beginning but has commenced only exercise and enjoyment was recognized in the
domain, but is segregated therefrom as to be no ceased to be public land. What these statements, upon the transfer to it by the prior possessor, leading case of Victoriano v. Elizalde Rope
longer subject to the authority of the Director of however, really mean is that the land referred to may the corporation apply? The answer is just as Workers' Union. 4 Here the Iglesia ni Cristo, as a
Lands to dispose under the public land laws or no longer forms part of the mass of public obvious with more reason, it may not. corporation sole, seeks the registration. The area
statutes. He would thus consider said land as no domain still disposable by the Director of Lands, involved in the two parcels of land in question is
longer public land but "private" lands and under the authority granted him by the public This separate opinion should have had no need 313 square meters. As admitted in the opinion of
therefore, not within the prohibition of the New land statutes. It, however, would not follow that to be written because the majority opinion the Court, a chapel is therein located. It is that
Constitution against corporations from acquiring the land covered by Section 48 of the Public Land written by Justice Aquino is already well- basic consideration that leads me to conclude
public lands which provides that "no private Act has itself become private land. The fact that reasoned out and supported by applicable that the balancing process, which finds
corporation or association may hold alienable its disposition is provided for in the aforecited authorities. I •as impelled to write it only application in constitutional law adjudication,
lands of the public domain except by lease not to Act which deals with "public land" gives rise to because in the dissenting opinion of Justice equally requires that when two provisions in the
exceed one thousand hectares." 2 the very strong implication, if not a positive Teehankee, the case of Herico vs. Dar (supra) Constitution may be relevant to a certain factual
conclusion