Corporation CASES Based on the Syllabus of Fr. Agustin EN BANC G.R. No. 149802 January 20, 2006 G.R.

No. 1,-20. January 20, 2006

Nazareno

ALFONSO T. YUCHENGCO AN Y REALTY COR!ORAT"ON, Petitioners, vs. THE HONORA#LE SAN "GAN#AYAN, FOURTH "$"S"ON, RE!U#L"C OF THE !H"L"!!"NES, !RES" ENT"AL CO%%"SS"ON ON GOO GO$ERN%ENT, ESTATE OF FER "NAN E. %ARCOS, "%EL A R. %ARCOS, !R"%E HOL "NGS, "NC., ESTATE OF RA%ON U. COJUANGCO, r&'r&(&n)&* +y "%EL A O. COJUANGCO, an* "%EL A O. COJUANGCO, espondents. ! """""""""""""""""""""""""""""""""""""""""! G.R. No. 1,0-20 January 20, 2006

ALFONSO T. YUCHENGCO AN Y REALTY COR!ORAT"ON, Petitioners, vs. RE!U#L"C OF THE !H"L"!!"NES, !RES" ENT"AL CO%%"SS"ON ON GOO GO$ERN%ENT, ESTATE OF FER "NAN E. %ARCOS, "%EL A R. %ARCOS, !R"%E HOL "NGS, "NC., ESTATE OF RA%ON U. COJUANGCO r&'r&(&n)&* +y "%EL A O COJUANGCO, an* "%EL A O. COJUANGCO, espondents. ! """""""""""""""""""""""""""""""""""""""""! G.R. No. 1,-4,9 January 20, 2006

ALFONSO T. YUCHENCGO AN Y REALTY COR!ORAT"ON, Petitioners, vs. THE HONORA#LE SAN "GAN#AYAN, FOURTH "$"S"ON, RE!U#L"C OF THE !H"L"!!"NES, !RES" ENT"AL CO%%"SS"ON ON GOO GO$ERN%ENT, ESTATE OF FER "NAN E. %ARCOS, "%EL A R. %ARCOS, !R"%E HOL "NGS, "NC., ESTATE OF RA%ON U. COJUANGCO r&'r&(&n)&* +y "%EL A O. COJUANGCO, an* "%EL A O. COJUANGCO, espondents. ! """""""""""""""""""""""""""""""""""""""""!

RE!U#L"C OF THE !H"L"!!"NES, r&'r&(&n)&* +y )3& !RES" ENT"AL CO%%"SS"ON ON GOO GO$ERN%ENT, Petitioner, vs. ESTATE OF FER "NAN E. %ARCOS, "%EL A R. %ARCOS, "%EL A /"%EE0 R. %ARCOS8%ANOTOC, TO%AS %ANOTOC, "RENE R. %ARCOS8ARANETA, GREGOR"O %A. ARANETA, """, FER "NAN R. %ARCOS, JR., "%EL A COJUANGCO, ESTATE OF RA%ON COJUANGCO /r&'r&(&n)&* +y )3& A*21n1()ra)r17, "%EL A COJUANGCO0, !R"%E HOL "NGS, "NC., ALFONSO T. YUCHENGCO, AN Y. REALTY COR!ORAT"ON, espondents. #EC$S$%N CAR!"O %ORALES, J.:

G.R. No. 1,0-6.

January 20, 2006

RE!U#L"C OF THE !H"L"!!"NES, Petitioner, vs. HON. SAN "GAN#AYAN /FOURTH "$"S"ON0, ESTATE OF FER "NAN E. %ARCOS /r&'r&(&n)&* +y 1)( A*21n1()ra)or, )3& #ur&au o4 "n)&rna5 R&6&nu&0, "%EL A R. %ARCOS, !R"%E HOL "NGS, "NC., ESTATE OF RA%ON U. COJUANGCO /r&'r&(&n)&* +y 1)( A*21n1()ra)r17, "%EL A O. COJUANGCO0, "%EL A O. COJUANGCO, ALFONSO T. YUCHENGCO, an* Y REALTY COR!ORAT"ON, espondents. ! """""""""""""""""""""""""""""""""""""""""!

&hese five 'onsolidated petitions pray for the nullifi'ation of 'ertain issuan'es of the Sandiganbayan in Civil Case No. (((), * epubli' of the Philippines v. Estate of Ferdinand E. +ar'os, et al.* &he 'o,plaint in Civil Case No. ((() -or the 'ase. /as filed before the Sandiganbayan on 0uly 11, 1234 by the epubli' of the Philippines -the epubli'. through the Presidential Co,,ission on 5ood 5overn,ent -PC55. against for,er President and +rs. +ar'os, their three 'hildren, and so,e other individuals. &he 'o,plaint /as later a,ended to i,plead additional defendants.

Corporation CASES Based on the Syllabus of Fr. Agustin &he 'ase is for the re'overy of alleged ill"gotten /ealth of the +ar'oses, a,ong /hi'h are shares of sto'6 in the Philippine &ele'o,,uni'ations $nvest,ent Corporation -P&$C.7 41,442 shares in the na,e of a,on 8. Co9uang'o, )1,:): shares in the na,e of $,elda %. Co9uang'o, and 111,;1: shares in the na,e of Pri,e <oldings $n'orporated -P<$.. P&$C is the biggest sto'6holder of P=#&, it o/ning so,e )3> of the outstanding shares in P=#& at the ti,e Civil Case No. ((() /as filed.1 $n the 'ourse of the pro'eedings in Civil Case No. (((), the first three petitions assailing interlo'utory orders of the Sandiganbayan /ere filed before this Court. &hus, the petitions in G.R. No(. 149802 an* 1,0-20 , filed by Alfonso ?u'heng'o and ? ealty Corporation, 'o,plainants"in" intervention in Civil Case No. (((), assail via petition for 'ertiorari orders and resolutions of the Sandiganbayan denying their ,otions to suspend trial pending dis'overy pro'eedings and to re"set trial dates -/ith alternative prayer for a 'hange in the order of trial., and de'laring the, as having /aived their right to present eviden'e. &he petition in G.R. No. 1,0-6., filed by the epubli', assails via petition for 'ertiorari the Sandiganbayan %rders denying its espe'tful +otion for Additional &i,e to Co,plete the Presentation of Eviden'e and dire'ting it to sub,it its offer of eviden'e /ithin @( days. #uring the penden'y of these first three petitions, the Sandiganbayan 'ontinued /ith the pro'eedings in Civil Case No. (((), no restraining order en9oining the sa,e having been issued by this Court. &he Sandiganbayan, still during the penden'y of the first three petitions, pro,ulgated in Civil Case No. ((() a Partial #e'ision on +ay 1, )(() the dispositive portion of /hi'h reads7 A<E EF% E, pre,ises 'onsidered, the 'o,plaint of plaintiff epubli' of the Philippines on the P=#& shares sub9e't of separate trial is hereby #$S+$SSE# for la'6 of ,erit. &he +otion for Su,,ary 0udg,ent Bfiled by $,elda Co9uang'o, et alC is hereby 5 AN&E#, and the Co,plaint"in"$ntervention Bfiled by the ?u'heng'osC #$S+$SSE#. S% % #E E#. -8nders'oring supplied.

Nazareno

&he last t/o of the five petitions at bar, both for revie/ on 'ertiorari, /ere thereupon filed. &he petition in G.R. No. 1,-20. filed by the 'o,plainants"in"intervention ?u'heng'os, and that in G.R. No. 1,-4,9 filed by the epubli',both 'hallenge the Partial #e'ision. &he in'idents that gave rise to the filing of the petitions are stated in the ,inorityDs dissenting opinion penned by 0usti'e Can'io 5ar'ia /hi'h i,,ediately follo/s this ,a9ority opinion. &he dissenting opinion substantially reiterates the draft that 0usti'e 5ar'ia prepared /hi'h /as used by this Court as a /or6ing basis for its deliberations. $n issue in these petitions are7 1. Ahether petitioners in G.R. No(. 149802, 1,0-20 and 1,0-6. /ere denied due pro'ess /hen the Sandiganbayan in effe't dire'ted the, to ter,inate the presentation of their respe'tive eviden'eE and ). Ahether the Partial #e'ision being assailed via petition for revie/ in G.R. No(. 1,-20. an* 1,-4,9 , 'onfor,s to the eviden'e presented, the la/ andFor settled 9urispruden'e. &here is no disagree,ent /ith respe't to the disposition"dis,issal by the ,inority of the first three petitions G the first having be'o,e ,oot, and the se'ond and third for la'6 of grave abuse of dis'retion on the part of the Sandiganbayan. ) &here is also no disagree,ent /ith respe't to the disposition"denial by the ,inority of the fourth petition -5. . No. 1:@)(4. in the absen'e of reversible error on the part of the Sandiganbayan. $t is /ith respe't to the disposition"denial by the ,inority of the fifth petition -5. . No. 1:@;:2. insofar as it denied the prayer of the epubli' for a 9udg,ent ordering the Estate of a,on 8. Co9uang'o -Co9uang'o., $,elda %. Co9uang'o, P<$, their assigns, no,inees and agents to re'onvey to the epubli' 111,;1: P&$C shares registered in the na,e of P<$ that the ,a9ority does not agree, in light of the i,,ediately follo/ing dis'ussions. &he Sandiganbayan having held in its 4@"page Partial #e'ision @ that the epubli' has failed to prove that the P=#& shares sought to be re'overed are ill"gotten, thus7

Corporation CASES Based on the Syllabus of Fr. Agustin . . . the epubli' has failed to provide su'h *proof of authenti'ity or reliability* of the do'u,ents offered by it in eviden'e. &hus al,ost all the do'u,ents offered by the epubli' are photo'opies, and no effort /as underta6en . . . to sub,it the originals of said do'u,ents, or to have the, properly identified, or to other/ise 9ustify the ad,ission of ,ere photo'opies. Not surprisingly, defendants . . . ob9e'ted to the ad,ission of the epubli'Ds do'u,entary e!hibits, 'iting violation of the Best Eviden'e ule -Se'tion @, ule 1@( of the evised ules of Civil Pro'edure B* ules*C, the ules of Presentation of #o'u,entary Eviden'e -Se'tion )(, ule 1@) of the ules.. &he <earsay Eviden'e ule, and the rule as to PurposeFs of #o'u,entary Eviden'e -Se'tion @;, ule 1@) of the ules..* ; -8nders'oring supplied., a dis'ussion of the eviden'e presented in the 'ase is in order. FACTUAL #AC9GROUN OF !H" AN "TS EAL"NGS :"TH !T"C

5eneral &elephone and Ele'troni's -5&E., an A,eri'an 'orporation, in favor of P&$C. %n #e'e,ber )(, 1244, the P&$C Board of #ire'tors resolved to sell su'h :;,@;2 shares to its sto'6holders in proportion to their holdings.4 No sto'6holder, apart fro, Co9uang'o, P&$C President and ,e,ber of its Board of #ire'tors, e!pressed interest in pur'hasing the shares.3 All the :;,@;2 shares /ere then transferred to his na,e. Co9uang'o and =uis &irso ivilla - ivilla., another sto'6holder of P&$C, together /ith P<$ President 5apud, forged an agree,ent dated 0anuary )4, 1243 referring to the *various dis'ussions during /hi'h BCo9uang'o and ivillaC offered to sell and BP<$C agreed to pur'hase partially paid subs'riptions and 'o,,on shares of BP&$CC.* 2 &he agree,ent /hi'h indi'ated the basi' ter,s and 'onditions of the transa'tion states that the nu,ber of P&$C shares /hi'h Co9uang'o and ivilla /ere prepared to sell to P<$ /as * 111,41, ;o22on (3ar&( representing46.12,0< of the subs'ribed and outstanding shares of P&$C.* %n April )(, 1243, the P&$C Board of #ire'tors granted Co9uang'o and ivilla authorization to transfer their P&$C shares to P<$.1( Co9uang'o thereafter 'eded to P<$ 44,412 P&$C shares registered in his na,e via t/o separate deeds of assign,ent both dated +ay ), 1243, one for ;;,()@ shares and the other for @@,121 shares. 11 ivilla li6e/ise 'onveyed P&$C @@,121 shares registered in his na,e to P<$ via a deed of assign,ent also dated +ay ), 1243. 1)&hus, a )o)a5 o4 111,41, !T"C (3ar&( /as )ran(4&rr&* )o !H" on %ay 2, 19.8. 5apud and 0ose #. Ca,pos, 0r. later assigned all their shares in P<$ -;(( shares ea'h. to Co9uang'o and P&$C #ire'tor %s'ar Afri'a -Afri'a., respe'tively, via t/o separate deeds of assign,ent dated February 13, 1231.1@ %n +ay 2, 1231, Co9uang'o and Afri'a /ere ele'ted dire'tors of P<$, repla'ing 5apud and 0ose #. Ca,pos, 0r., /hile the other dire'tors G =irio, Abalos, and 5aviola G re,ained as su'h. 1; %n even date, Co9uang'o and Afri'a /ere ele'ted by the P<$ Board of #ire'tors as President and Hi'e"President, respe'tively, /hile de 5uz,an and 5aviola re,ained as Se'retary and &reasurer, respe'tively.1:

Nazareno

P<$ /as registered on %'tober :, 1244 /ith the follo/ing five -:. in'orporators7 Jo(& . Ca2'o(, Jr. /(on o4 Jo(& Yao Ca2'o(0, Ro5an*o Ga'u* /Ga'u*0, R&na)o L1r1o /L1r1o0, Ern&()o A+a5o( /A+a5o(0, an* G&r6a;1o Ga61o5a /Ga61o5a0, /ith ;(( shares ea'h, /ith a par value of P1(( per share. &he total a,ount of 'apital sto'6 subs'ribed /as thus P)((,(((.((, P:(,(((.(( of /hi'h /as a'tually paid.: $ts pla'e of business /as at 11 8nited Street, +andaluyong, +etro +anila.1 &he five P<$ in'orporators, in their 'apa'ity as sto'6holders, ele'ted the,selves as dire'tors on %'tober 1(, 1244. %n even date, they ele'ted the follo/ing as offi'ers of the 'orporation7 olando C. 5apud " President 0ose #. Ca,pos, 0r. " Hi'e"President 5ervasio &. 5aviola " &reasurer Fran'is'o 5. #e 5uz,an " Se'retary odolfo . #i,aano " Assistant Se'retary

+ean/hile, :;,@;2 shares in another 'orporation, P&$C, /ere *'ontributed to andFor abandoned* by one of its sto'6holders,

Corporation CASES Based on the Syllabus of Fr. Agustin SubseIuently, by #eed of Assign,ent 11 dated 0une 123@ -the day is not indi'ated., Afri'a transferred all his ;(( P<$ shares J );( to Antonio Co9uang'o and 11( to &rinidad Co9uang'o ?ulo. %n even date, the re,aining in'orporators on the board of dire'tors G =irio, Abalos, and 5aviola G ea'h e!e'uted a deed of assign,ent transferring their P<$ shares to ,e,bers of the Co9uang'o fa,ily. &hus =irio transferred );( shares to Antonio Co9uang'o and 11( to &rinidad C. ?uloE14 Abalos transferred @)( shares to a,on %. Co9uang'o, 0r. and 3( to +iguel %. Co9uang'oE 13 and 5aviola transferred @)( shares to +a. Hi'toria %. Co9uang'o ?ulo and 3( also to Antonio Co9uang'o.12 #ENEF"C"AL O:NERSH"! OF !H" Signifi'antly, respondents in 5. . No. 1:@;:2, na,ely7 Estate of a,on Co9uang'o, $,elda %. Co9uang'o, P<$, and $,elda . +ar'os all agree /ith petitioner epubli' that P<$ has an undis'losed benefi'ial o/ner, their only disagree,ent being /ho this o/ner is. &he Co9uang'os and P<$ in their Co,,ent proffer that the benefi'ial o/ners are the Co9uang'os, arguing as follo/s7 ! ! ! &he unsupported allegation that President +ar'os o/ned the disputed shares in P=#&, P&$C and P<$ 2ayperhaps e!plain the 'ir'u,stan'es surrounding P<$Ds in'orporation, /hy P&$CDs sto'6holders /ere disinterested in pur'hasing P=#&Ds shares in 1244, /hy P&$CDs sto'6holders /aived their right of first refusal in 1243, /hy there are no proper entries in P<$Ds Sto'6 and &ransfer Boo6, or /hy the sub9e't shareholdings /ere not in'luded in a,on 8. Co9uang'oDs Estate inventory. <o/ever, the 'onverse syllogis, is not true G the details of P<$Ds in'orporation, or the fa't that P&$CDs sto'6holders /ere disinterested in pur'hasing P=#&Ds shares in 1244, or that P&$CDs sto'6holders /aived their right of first refusal in 1243, or that there are no proper entries in P<$Ds Sto'6 and &ransfer Boo6, or that ;(( P<$ shares /ere not in'luded in a,on 8. Co9uang'oDs Estate inventory do not ne'essarily establish that President +ar'os o/ned the sub9e't shares in P<$, P&$C and P=#&. T3&(& ;1r;u2()an;&( (3o= )3a) !H" 3a* an un*1(;5o(&* 'r1n;1'a5 an* +&n&41;1a5 o=n&r. Su+(&>u&n) &6&n)(, i.e. the assignment of shares in 1231 and 123@, reveal and ;on41r2 )3a) %r. Ra2on U. Co?uan@;o an* 31( 4a215y =&r& )3& 'r1n;1'a5 an* +&n&41;1a5 o=n&r( o4 !H" , and, 'orollarily, the SE!ARATE "SSENT"NG O!"N"ON sub9e't P<$, P&$C and P=#& shares, not +ar'os.)( -E,phasis, itali's and unders'oring supplied.

Nazareno

President

$,elda +ar'os, on the other hand, 'onsistent /ith the theory of petitioner

! """"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""" !

SAN O$AL8GUT"ERREA, J.B $ 9oin +r. 0usti'e Can'io C. 5ar'ia in his /ell"'rafted #issent in 5. . No. 1:@;:2 denying the epubli'Ds petition and affir,ing respondent SandiganbayanDs #e'ision. $n 'ivil suits for forfeiture before the Sandiganbayan, li6e the instant 'ase, the epubli' ,ust ,eet the burden of proof and establish =1)3 a 'r&'on*&ran;& o4 &61*&n;& that the property in Iuestion G *. . . are assets and properties purportedly pertaining to for,er President Ferdinand E. +ar'os andFor his /ife +rs. $,elda o,ualdez +ar'os, their 'lose relatives, subordinates, business asso'iates, du,,ies, agents or no,inees /hi'h had been or /ere a'Iuired by the, dire'tly or indire'tly, through or as a result of the i,proper or illegal use of funds or properties o/ned by the 5overn,ent of the Philippines or any of its bran'hes, instru,entalities, enterprises, ban6s or finan'ial institutions, or by ta6ing advantage of their offi'e, authority, influen'e, 'onne'tions or relationships, resulting in their un9ust enri'h,ent, and 'ausing da,age and pre9udi'e to the Filipino people and the epubli' of the Philippines.*1

Corporation CASES Based on the Syllabus of Fr. Agustin &he alleged ill"gotten assets in this 'ase are shares of sto'6 in Pri,e <oldings $n'. -P<$. /hi'h, in turn, holds shares in Philippine &ele'o,,uni'ations $nvest,ent Corporation -P&$C., a shareholder in the Philippine =ong #istan'e &elephone Co,pany -P=#&.. &he epubli'Ds 'ase is pre,ised on the theory that P<$ is a *du,,y 'orporation,* not o/ned by private respondent Co9uang'o fa,ily, but ,erely held in benefi'ial trust for for,er President Ferdinand E. +ar'os. $ have 'losely revie/ed the re'ords and revisited both fa'tual and legal bases of the Sandiganbayan #e'ision, and found that the epubli' failed to prove its 'ase by preponderan'e of eviden'e. &he epubli'Ds 'ase is an'hored al,ost entirely upon the testi,onies of +essrs. 0ose ?. Ca,pos, olando 5apud and Fran'is'o de 5uz,an. &hey atte,pted to prove that P<$ /as a 'orporate vehi'le *organized for* +ar'os. As *benefi'ial o/ner* of P<$, +ar'os used a,on 8. Co9uang'o as a *du,,y* 'ontrolling P<$ and its assets. &he sa,e /itnesses identified the modus operandi e,ployed by +ar'os to hide his ill"gotten /ealth. 8nfortunately, the eviden'e for the epubli' fails to sho/ that P<$ is +ar'osD *du,,y 'orporation.* Aitness Ca,pos, in des'ribing the modus operandi behind du,,y 'orporations *organized for* +ar'os, stated7 *$n the organization, ad,inistration and ,anage,ent of the above" na,ed 'orporations, as it /as ,y poli'y that /henever su'h a 'orporation is organized for and on behalf of the intended benefi'iaries, " &7&;u)& an* " r&>u1r& a55 2y (a1* a((o;1a)&( )o &7&;u)& a &&* o4 Tru() or &&* o4 A((1@n2&n) *u5y (1@n&* 1n 4a6or o4 an unna2&* +&n&41;1ary an* )o *&516&r )3& or1@1na5 ;o'y )3&r&o4 )o )3& 4or2&r !r&(1*&n). $t is in fa't ,y poli'y and pro'edure that /e dis'lai, 'o,pletely any interest in any su'h business and ,a6e it 'lear to the for,er President that /e hold su'h interests on his behalf.* $n his affidavit, Ca,pos na,ed P<$ as one of the 'o,panies he organized for President +ar'os. ?et, /hen as6ed if the modus operandi /as applied to P<$ as it /as /ith the other +ar'os du,,y 'orporations, he va'illated,) thus7

*@. $n your S/orn State,ent, page ), you stated that /ith respe't to the 'orporations you held in trust for President +ar'os, it /as your Kpoli'yD that /henever su'h a 'orporation /as organized, you e!e'uted, and you reIuired all your business asso'iates to e!e'ute, a #eed of &rust or #eed of Assign,ent in favor of an Kunna,ed benefi'iary,D and delivered the originals thereof to President +ar'os. !!! Aas this Kpoli'yD F%==%AE# $N &<E CASE %F BP<$CL !!! ANSAE 7 KAll the 'orporations $ organized G that /as the standard poli'y G that /e surrendered dire't to President +ar'os.D* Ca,pos also testified that he had n&6&r ;o22un1;a)&* 1n any 2ann&r =3a)(o&6&r =1)3 !r&(1*&n) %ar;o(, 31( a55&@&* 'r1n;1'a5, nor =1)3 Ra2on Co?uan@;o r&@ar*1n@ %ar;o(C +&n&41;1a5 o=n&r(31' o4 (3ar&( o4 ()o;D 1n !H" or !T"C or !r12& Ho5*1n@(, "n;., thus7 *4. #id you ever have any dis'ussions or 'orresponden'es /ith President +ar'os regarding his benefi'ial o/nership or the benefi'ial o/nership by any ,e,ber of his fa,ily, dire'tly or indire'tly, of shares of sto'6 in Philippine =ong #istan'e &elephone Co,pany -P=#&., Philippine &ele'o,,uni'ations $nvest,ent Corporation -P&$C. or Pri,e <oldings, $n'.L Ans/er7 No, %aCa2. !!! #id you ever have any dis'ussions or 'orresponden'es /ith a,on 8. Co9uang'o regarding the benefi'ial o/nership by President +ar'os or any ,e,ber of his fa,ily, dire'tly or indire'tly, of shares of sto'6 in P=#&, P&$C or Pri,e <oldings, $n'.L Ans/er7 No, %aCa2.* Considering the fa't that Ca,pos G by his o/n ad,ission G /as the organizer of du,,y 'orporations for +ar'os, it is 'ontrary to hu,an e!perien'e that he never had any dis'ussion /ith the for,er President about P<$, if indeed it /as su'h a du,,y 'orporation. %bviously, there /as nothing to dis'uss /ith President +ar'os about P<$ be'ause it /as not one of his du,,y 'orporations. $n fa't, the epubli'Ds other /itness, Atty. Fran'is'o de 5uz,an, ad,itted that

Nazareno

Corporation CASES Based on the Syllabus of Fr. Agustin P<$ did not ,eet the des'ription of a +ar'os du,,y 'orporation, thus, to Iuote the very sa,e passage 'ited in the #issent7 *M7 :a( 1) )3& ()an*ar* o'&ra)1n@ 'ro;&*ur& 1n Jo(& Yao Ca2'o( 3o5*1n@( ;o2'an1&( )3a) )3& ()o;D ;&r)141;a)&( o4 )3& ()o;D3o5*&r( =ou5* +& &n*or(&* 1n +5anDE A7 Y&(, (1r. M7 And /ho /ould hold 'ustody or possession of thoseF ban6 endorsed sto'6 'ertifi'atesL A7 $n the 'ase of ,any of the 'orporations $ thin6 in'luding Pri,e <oldings, $n'. these are not fully paid shares and therefore, $ 6ne/ that no sto'6 'ertifi'ates have been issued, sir. M7 So, ('&;141;a55y 1n )3& ;a(& o4 !r12& Ho5*1n@(, "n;. )3&r& =&r& no ()o;D ;&r)141;a)&( 1((u&* +&;au(& )3& (u+(;r1')1on( =&r& no) 4u55y 'a1*E A7 ?es, sir. M7 o you Dno= 14 )3& ()o;D3o5*&r( o4 !r12& Ho5*1n@(, "n;., )31( 1( 'r1or )o 1981, 3a* &7&;u)&* &&* o4 A((1@n2&n) 1n +5anD 4or )3&1r (u+(;r1')1on )o !H" (3ar&(E A7 Y&(, (1r, )3& ()an*ar* o'&ra)1n@ 'ro;&*ur& 1n )3& ;o2'an1&( o4 %r. Ca2'o( 1( )3a) a55 )3& (u+(;r1+&r( =ou5* 3a6& &1)3&r a &&* o4 A((1@n2&n) (1@n&* or a &&* o4 Tru(), (1r. M7 And you are referring to these holding 'o,panies that +r. Ca,pos, a nu,ber of holding 'o,panies that +r. Ca,pos have 'aused to be in'orporated, these are the 'o,paniesL A7 ?es, sir. M7 ?ou said #eed of &rust, /ould there be a designated trusteeL A7 No, sir. A7 ?es, sir.

M7 So, these are #eeds of Assign,ent or #eeds of &rust, the benefi'iary of /hi'h /ould be left blan6L A7 ?es, sir. M7 But the assignors or the trustees or grantors /ould all sign, /ould all e!e'ute these #eedsL

Nazareno

M7 Aho /ould have possession, you ,entioned standard operating pro'edure or S%P, under the S%P /ho /ould hold the blan6 deedsL A7 A 'opy of /hi'h usually t/o -). 'opies are ,ade, sir. M7 &/o -). originalsL A7 No. M7 Nero! 'opiesL A7 No. %ne original and one Nero! 'opy and the original /ill be in'luded in the re'ords, sir. M7 &he re'ords of that parti'ular 'o,panyL A7 ?es, sir, and the other one /e give it to the &reasurer. M7 %f that parti'ular 'o,panyL A7 No, to +r. 5aviola, sir. M7 +r. 5aviola /as the &reasurer of Pri,e <oldings, $n'. /asnDt heL A7 $ thin6 he is be'ause he is al/ays, /as the &reasurer of ,any of the 'o,panies of +r. Ca,pos, sir. M7 So, there is the S%P also, + . 5erva'io 5aviola is the &reasurer of Pri,e <oldings, $n'.L A7 ?es, sir.

Corporation CASES Based on the Syllabus of Fr. Agustin !!! !!! !!! M7 No/, /ho /ould hold the re'ords of these 'o,panies /hi'h /ould in'lude those blan6 #eeds of Assign,ent or #eeds of &rustL A7 :&55, )3& a;)ua5 ;u()o*1an o4 )3a) =155 +& )3& L&@a5 &'ar)2&n) =3o 3a( a55 )3& 5&@a5 415&(, (1r. M7 :a( 1) no) or =ou5* you ;on(1*&r 1) r1(Dy )3a) )3& +5anD &&*( o4 A((1@n2&n) or +5anD &&*( o4 Tru() o4 a55 )3& (3ar&( 1n )31( ;o2'an1&( 3& r1@3) )3&r& 1n )3& r&;or*(, +& a2on@ )3& ;or'ora)& r&;or*(, )3a) (o2&+o*y ;ou5* )aD& )3&2 an* 'u) )3&1r na2&(E A7 %ay+& )3&r& 1( (o2& r1(D )3&r& +u) you (&&, (1r, )3& '&o'5& 1n )3& L&@a5 &'ar)2&n) ar& =&55 )ru()&* +y a55 o4 u(. T3&y 3a6& +&&n =1)3 )3& ;o2'any 4or 2any y&ar( an* ;on(1*&r1n@ )3& ;o2'&)&n;& )3a) )3&y 3a6& &()a+51(3&* =1)3 u(, no+o*y =ou5* &6&n @&) )3o(& r&;or*( =1)3ou), 5&)C( (ay or*&r o4 %r. Ca2'o( or 2& or )3& Cor'ora)& S&;r&)ary, (1r. M7 And /ho /ere these trusted people of the =egal #epart,entL A7 &he la/yers, sir. M7 Could you give us the na,esL AE ?es, t/o of the, died and one of the, retired. +r. 8rbano Fran'is'o /as the only survivor, sir. M7 Can $ have the na,es of those /ho diedL A7 Ed <alagao, $ 'annot re,e,ber the other one, sir. M7 &hese are the trusted la/yers of the =egal #epart,ent of 8N$=ABL A7 ?es, sir. !!!

M7 o you Dno= =3a) 3a''&n&* )o )3o(& +5anD *&&*( o4 A((1@n2&n) o4 &&*( o4 Tru() o4 !r12& Ho5*1n@(, "n;. )3a) =&r& &n)ru()&* =1)3 )3& )ru()&* 5a=y&r( o4 UN"LA#E A7 :3&n !r12& Ho5*1n@(, "n;.C( r&;or*( =&r& *&516&r&*, a55 )3o(& r&;or*(, a55 )3o(& 'a'&r( ar& =1)3 )3& r&;or*(, (1r. M7 So, you are referring to the 123) delivery to the representative of +r. a,on 8. Co9uang'oL A7 Y&(, (1r, &7;&') )=o /20 &&*( o4 A((1@n2&n) =31;3 =&r& " )31nD 2a*& *1r&;)5y a4)&r=ar*( =3&n %r. Ga'u* an* %r. Jo(& Ca2'o(, Jr. 2a*& )3& *1r&;) a((1@n2&n)( )o '&r(on( a;)ua55y *&(1@na)&* 1n )3& &&*( o4 A((1@n2&n), (1r. M7 Aho /ere thoseL A7 &he shares of +r. 5apud /as -sic. given to +r. a,on 8. Co9uang'o, +r. Ca,pos, 0r. $ 'anDt re,e,ber to /ho, he ,ade the assign,ent, sir.* $f, a''ording to the epubli'Ds o/n /itness, the shares of a +ar'os du,,y 'orporation are 'overed by a #eed of Assign,ent endorsed to an unna,ed benefi'iary, then Atty. #e 5uz,anDs above ad,issions are fatal to the epubli'Ds 'ase. <is 'ategori'al de'laration is that the blan6 #eeds of Assign,ent and #eeds of &rust 'overing P<$ shares /ere not delivered to +ar'os, but to a,on 8. Co9uang'o. No/, delivery of the blan6 deeds of Assign,ent and #eeds of &rust /as a 'ru'ial ele,ent of the modus operandi. Considering that +ar'os /as not in possession of the #eeds over P<$ shares, he 'ould not have 'ontrolled or ,anaged P<$. &o be sure, there /as no point organizing P<$ as a du,,y 'orporation for +ar'os sin'e he 'ould not perfor, these fun'tions. Aitness 5apud testified that he assigned his P<$ shares to Co9uang'o G not +ar'os, thus7 a,on 8.

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*C%NS8= A58$=8C<%7 "( 1) r&a55y )ru& )3a) you a((1@n&* your 400 (3ar&( F1n !r12& Ho5*1n@(G )o Ra2on U. Co?uan@;oE + . 5AP8#7 Y&(.

Corporation CASES Based on the Syllabus of Fr. Agustin C%NS8= A58$=8C<%7 <o/ ,u'h did you re'eive as 'onsideration for assigning your shares to hi,L + . 5AP8#7 &he 'onsideration for this assign,ent /as that upon ,y assign,ent, first, ,y fidu'iary responsibilities as no,inee /ere e!tinguished, and se'ondly, $ had transferred and e!tinguished any and all liabilities under the subs'ription payable. C%NS8= A58$=8C<%7 o you Dno= 14 Ra2on Co?uan@;o r&;&16&* )3& (a1* (3ar&( 4or 312(&54 or 4or any+o*y &5(&E + . 5AP8#7 " *onC) Dno=.* $n fa't, /hile he 'ould have easily identified +ar'os as the benefi'ial o/ner of P<$, /itness 5apud G /ho su''eeded Ca,pos as President of P<$ G refused under oath to do so. $nstead7 *C%NS8= A58$=8C<%7 &he heirs of a,on 8. Co9uango, na,ely $,elda %. Co9uang'o and her 'hildrenO 'lai, that they o/n eighty -3(. per'ent of the outstanding 'apital sto'6 of Pri,e <olding, /hile the Estate of a,on 8. Co9uang'o allegedly o/ns the re,aining t/enty -)(. per'entL Muestion7 Based on your personal 6no/ledge, do you affir, or deny the said allegationL + . 5AP8#7 " *o no) Dno=. " ;an n&1)3&r a441r2 nor *&ny.* &he ,a9ority of ,y 'olleagues hold that *5apudDs state,ent relating to subseIuent e!e'ution of deeds of assign,ent to Co9uang'o and his 6in does not detra't fro, the prior delivery of blan6 deeds to the for,er President, espe'ially so in this 'ase /here, by 5apudDs o/n re'ounting, he and his 'o"in'orporators e!e'uted the 1231 and 123@ #eeds of Assign,ent /ith the 6no/ledge and authorization of the sa,e person to /ho, the earlier deeds /ere delivered G President +ar'os.* But the ponencia 'onveniently sidesteps the reality that there is no eviden'e of su'h prior delivery to +ar'os. Aitness de 5uz,an de'lared that the blan6 #eeds of Assign,ent over P<$ shares /ere pla'ed in the 'ustody of the =egal #epart,ent, and thereafter delivered to a,on Co9uang'o, together /ith all the re'ords of P<$. &he ,a9ority in'orporators, also hold that the alleged e!e'ution by the as *no,inees* of +ar'os, of the #eeds of

Assign,entF#eeds of &rust is 'onsistent /ith 5apudDs state,ent that he re'eived virtually nothing in return for P<$ shares. But to ,y ,ind, this is falla'ious G a 'on9e'ture ,ade to fit an insignifi'ant fa't. A straightfor/ard e!planation is si,ply that /hen the P<$ shares /ere assigned to a,on 8. Co9uang'o G the true benefi'ial o/ner "5apudDs role as a no,inee be'a,e untenable. %bviously, a no,ineeDs role ends /hen the prin'ipalDs e!er'ise of his right begins. Nor is it a''urate to say that there /as an absen'e of 'onsideration for the transfer of the P<$ shares. 5apud hi,self ad,itted that the 'onsideration for the assign,ent of his shares to Co9uang'o /as the ter,ination of his fidu'iary responsibilities as no,inee and the e!tinguish,ent of his liabilities under the subs'ription. &he ponencia does not e!plain /hy +ar'os allo/ed the e!e'ution of the #eeds of Assign,ent in favor of respondent Co9uang'os. $f P<$ /as indeed a du,,y 'orporation, then it /ould be 'ontrary to hu,an e!perien'e for President +ar'os to deprive hi,self of the legal ,e'hanis, to assert his alleged benefi'ial o/nership. $ndeed, if the transfer of P<$ shares to the Co9uang'o fa,ily /as /ith the *blessings* of President +ar'os, then it 'an only ,ean the he /as never interested in those shares G a fa't 'onsistent /ith Ca,posD state,ent that he *never dis'ussed* the P<$ shares /ith +ar'os. &herefore, the plausible reason for this is that +ar'os never o/ned the shares in the first pla'e. &he realisti' s'enario, therefore, is that these shares a'tually pertained to a,on 8. Co9uang'o fro, the beginning and the assign,ents to hi, and ,e,bers of his fa,ily ,erely 'onfir,ed /hat already e!isted in fa't. $n other /ords, Co9uang'o G not +ar'os G has been the benefi'ial o/ner of the shares from the start. &his e!plains /hy no blan6 #eeds of &rust or Assign,ent /ere e!e'uted and delivered by the sto'6holders of P<$, and the reason /hy they e!e'uted and delivered #eeds of Assign,ent spe'ifi'ally na,ing a,on 8. Co9uang'o and the ,e,bers of his fa,ily as the assignees of the P<$ shares. &his also e!plains /hy P<$Ds 'apitalization /as not in'reased despite its a'Iuisition of P&$C shares. An in'rease /as unne'essary be'ause a,on 8. Co9uang'o a'tually did not part /ith the o/nership of the P&$C shares transferred to P<$, sin'e after all, he, not +ar'os, o/ned the P<$. &hat he is the o/ner thereof is sho/n by the follo/ing 'ir'u,stan'es7

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Corporation CASES Based on the Syllabus of Fr. Agustin -a. respondent Co9uang'o too6 over as Chair,an and President of P<$ after the assign,entE and -b. the boo6s and re'ords of P<$ /ere turned over to hi,, as testified to by de 5uz,an, the epubli'Ds /itness. Certainly, these assign,ents are effe'tive7 *Ahen a for,al deed of assign,ent is e!e'uted by the transferor in favor of a transferee, for the purpose of assigning shares of sto'6, endorse,ent and delivery reIuire,ents stated in Se'tion 1@ of the Corporation Code are dee,ed substantially 'o,plied /ith. &his ,ode of transfer 'overs a situation /here no 'ertifi'ate of sto'6 has been issued or /here the sto'6 'ertifi'ate is not in the possession of the transferor"sto'6holder so that the shares of sto'6 ,ay be transferred by ,eans of a deed of assign,ent.*@ Additionally, the epubli' failed to prove that +ar'os had a subsisting interest in P<$. &here had been no intervention on his part in the affairs of P=#&, P&$C, or P<$. Nor did he issue instru'tions that *hugely and ine!pli'ably benefited* these 'o,panies indi'ating he had any a'tual interest therein. Another sour'e of debate in this 'ase has been the evidentiary standard appli'able to this and other ill"gotten /ealth 'ases, given the SandiganbayanDs relian'e on Baseco vs. PCGG; and related 9urispruden'e. &he ponenciastresses that this Court never intended to lay do/n evidentiary standards in Baseco and, therefore, the SandiganbayanDs referen'e to su'h standards is nothing ,ore than its *inferen'e fro, its reading of the #e'ision.* $ disagree. &o ,y ,ind, Baseco is appli'able. Baseco is a land,ar6 ruling that 'onfir,s the modus operandi des'ribed by the epubli'Ds /itnesses here. $n that 'ase, *street 'ertifi'ates* -i.e. sto'6 'ertifi'ates endorsed in blan6. and #eeds of Assign,ent to various 'orporations in'luding Baseco, also assigned in blan6, /ere a,ong the do'u,ents found to have been in +ar'osD possession in +ala'aPang. Ae /ere 'onvin'ed that based on su'h proof, +ar'os *a'tually o/ns /ell nigh one hundred per'ent of its outstanding sto'6.*: But unli6e Baseco, here there is no su'h do'u,entary eviden'e. Neither P<$ sto'6 'ertifi'ates nor P<$ #eeds of Assign,ent have turned up in +ar'osD hands. Aitness de 5uz,an testified that assign,ents of P<$ shares /ere delivered to Co9uang'o, not +ar'os.

#o'u,entary eviden'e -E!hibits *1* to *:*, for instan'e. 'learly identify a,on 8. Co9uang'o and the ,e,bers of his fa,ily as the assignees of P<$ shares G 'ertainly re,oving any idea that these /ere assigned in blan6 to an *unna,ed benefi'iary.* Be'ause this is a 'ivil forfeiture 'ase, then the epubli' ,ust establish, by a *preponderan'e of eviden'e,* that the P<$ shares /ere *ill"gotten /ealth.* $ts burden is e!plained by this Court, thus7 *EIuiponderan'e of eviden'e rule states7 Ahen the s'ales shall stand upon an eIuipoise and there is nothing in the eviden'e /hi'h shall in'line it to one side or the other, the 'ourt /ill find for the defendant. 8nder said prin'iple, the plaintiff ,ust rely on the strength of his eviden'e and not on the /ea6nesses of defendantDs 'lai,. Even if the eviden'e of the plaintiff ,ay be stronger than that of the defendant, )3&r& 1( no 'r&'on*&ran;& o4 &61*&n;& on 31( (1*& 14 (u;3 &61*&n;& 1( 1n(u441;1&n) 1n 1)(&54 )o &()a+51(3 31( ;au(& o4 a;)1on.*11awphil.net Si,ilarly7 *Ae are at a loss to deter,ine /hi'h position is 'orre't. 8nder the 'ir'u,stan'es, /e are 'onstrained to de'ide the issues under the rule of burden of proof. Ahere the eviden'e on an issue of fa't is in eIuipoise or there is any doubt on /hi'h the eviden'e preponderates the party having the burden of proof falls upon that issue, that is to say, if the eviden'e tou'hing on disputed fa'ts is eIually balan'ed, or if it does not produ'e a 9ust, rational belief of its e!isten'e, or it leaves the ,ind in a state of perple!ity the party holding the affir,ative as to su'h fa't ,ust fail. -)@ C.0. 11"1).*4 So ,ust it be in this 'ase. %n the assu,ption that the epubli' has presented a persuasive 'ase, it ,ay not be said that the defendants do not have in their favor an eIually persuasive one. Even /ere /e to find the balan'e of eviden'e to be 9ust about at eIuipoise, the epubli'Ds instant 'lai, G as a ,atter of la/ G ,ust fall.

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Corporation CASES Based on the Syllabus of Fr. Agustin So,e ,ight argue that the evidentiary reIuire,ent in 'ivil forfeiture 'ases has an even higher standard, that is, proof beyond reasonable doubt. $n Cabal vs. Kapunan,3 /e ruled that pro'eedings for forfeiture of property in favor of the State -under the Anti"5raft =a/. is 'ri,inal and penal in nature be'ause su'h a'tions are pri,arily to punish for violation of a duty or a publi' /rong and to deter others fro, offending in the li6e ,anner. Forfeiture of property is in substan'e a 'ri,inal pro'eeding, and su'h forfeiture has been held to parta6e of the nature of a penalty. :HEREFORE, $ vote to ENY the petition in 5. . No. 1:@;:2 and AFF"R% respondent SandiganbayanDs Partial #e'ision. ANGEL"NA Asso'iate Justi'e SAN O$AL8GUT"ERREA

Nazareno
&he =a/phil Pro9e't " Arellano =a/ Foundation

1(

CONCURR"NG O!"N"ON CALLEJO, SR., J.B $ 'on'ur /ith the ,a9ority opinion penned by +ada, 0usti'e Con'hita Carpio +orales and vote to grant the petition in 5. . No. 1:@;:2 to the e!tent that it prays for the re'onveyan'e to the epubli' of the Philippines of 111,;1: shares of sto'6 of the Philippine &ele'o,,uni'ation $nvest,ent Corp. -P&$C. registered in the na,e of Pri,e <oldings $n'. -P<$.. P&$C is the biggest sto'6holder of Philippine =ong #istan'e &elephone Co. -P=#&., o/ning )3> of its outstanding shares or totaling appro!i,ately 1): ,illion P=#& shares valued at appro!i,ately 1.1 billion pesos. &he shares of sto'6 of P&$C are registered in the follo/ing na,es7 111,;1: -;1> of total shares. are held by P<$E 41,442 /ere held by a,on Co9uang'o during his lifeti,eE and )1,:): are held by $,elda Co9uang'o -;;> of total shares.. $n its A,ended Co,plaint for e'onveyan'e, eversion, A''ounting, estitution and #a,ages, the epubli' of the Philippines, through the Presidential Co,,ission on 5ood 5overn,ent -PC55., alleges, inter alia! that these P&$C shares of sto'6 held by P<$ and the Co9uang'os belong in truth and in fa't to the +ar'oses. $n other /ords, P<$ and the Co9uang'os are ,ere du,,iesF'onduitsFno,inees of the +ar'oses /ho effe'tively o/ned P&$C and, ne'essarily, the disputed shares of sto'6 of P=#&. Pursuant to its ,andate, the PC55 filed the 'o,plaint for reversion of the +ar'osesD ill"gotten /ealth in'luding these P=#& shares of sto'6 to the epubli'.

Foo)no)&(
1

First Ahereas Clause, E!e'utive %rder No. ) -1231..

#eposition of 13 #e'e,ber 122:, &rans'ript, E!hibit QQQ to QQQ"1"N.

@

Id. at 3(4. No. ="4:33:, +ay )4, 1234, 1:( SC A 131. Ibid, at ))3.

Sapu an! et al. vs. C", 5. . No. 21312, %'tober 12, 122), )1; SC A 4(1, 4(:"4(1.
4

Pilar #evelopment Corp. vs. I"C, No. ="4))3@, #e'e,ber 1), 1231, 1;1 SC A )1:.
3

1 SC A 1(:2, 'iting Katigba$ vs. Solicitor General! et al., 5. . No. 12@)3, #e'e,ber )), 1232.

Corporation CASES Based on the Syllabus of Fr. Agustin $n their respe'tive Ans/ers, P<$ and the Co9uang'os vehe,ently deny that the +ar'os fa,ily o/ned the disputed shares of sto'6. P<$, in parti'ular, asserted that the ,e,bers of the fa,ily of the late a,on Co9uang'o o/n allthe outstanding shares in P<$. $,elda +ar'os, on the other hand, ad,itted in her Ans/er that they hold benefi'ial o/nership over these shares of sto'6. She ,aintained that their /ealth /as la/fully a'Iuired. Alfonso ?u'heng'o and ? Corp. filed a 'o,plaint in intervention see6ing to re'over fro, the Co9uang'os their shares of sto'6 and asserting o/nership thereof as against the epubli'. ?u'heng'o 'lai,s that the +ar'os regi,e 'o,pelled hi, into giving up 1> of P&$C shares for,erly o/ned by 5regorio o,ulo and =eonides Hirata and deprived hi, of e!er'ising his option to buy 5eneral &elephone and Ele'troni's, $n'.Ds -5&EDs. ):> eIuity in P&$C. &his ):> eIuity in P&$C /as subseIuently a'Iuired by P<$. After protra'ted hearings, the Sandiganbayan rendered the assailed Partial #e'ision dated +ay 1, )(() dis,issing the epubli'Ds 'o,plaint insofar as it see6s to re'over the P=#& shares. &he petition in 5. . No. 1:@;:2 is filed by the epubli' assailing the Partial #e'ision. ?u'heng'o and ? Corp. also assail the said Partial #e'ision in their petition in 5. . No. 1:@)(4. &he petition in 5. . No. 1:(@14 is filed by the epubli' assailing the SandiganbayanDs %rder denying its espe'tful +otion for Additional &i,e to Co,plete the Presentation of Eviden'e. &he petitions in 5. . Nos. 1;23() and 1:(@)( /ere filed by ?u'heng'o and ? Corp. assailing the %rders of the Sandiganbayan denying their ,otions to suspend trial pending dis'overy pro'eedings and 'an'ellation of hearings. &he Sandiganbayan de'lared the, to have /aived their right to present eviden'e. $n the Partial #e'ision, the Sandiganbayan ruled that the epubli' failed to prove that the P=#& shares are part of the ill"gotten /ealth of the +ar'oses. ConseIuently, it affir,ed the P<$Ds and the Co9uang'oDs o/nership over the disputed shares. &he Sandiganbayan held that *al,ost all the do'u,ents offered by the epubli' are photo'opiesE* thus, the latter failed to provide *su'h proof of authenti'ity or reliability7*

Ae are therefore 'onstrained to find that the epubli'Ds do'u,entary eviden'e, to the e!tent that they are ,ere photo'opies, or are other/ise unidentified, unauthenti'ated, and 'onstitutive of hearsay, ,ay not be 9ustifiably relied upon by this Court, nor ,ay their integrity be assu,ed, for their purpose of establishing the fa'ts, or for supporting the theory pursued by the epubli'. +ore parti'ularly, there is no 'o,petent eviden'e to sho/ that defendant Ferdinand +ar'os had any hand in P&$C, or in the a'Iuisition by the defendants Co9uang'o in their o/n na,es of any of their shares therein. &here is no 'o,petent eviden'e to establish or even infer, the e!isten'e of a relationship of trust bet/een the defendants Co9uang'o and defendant Ferdinand +ar'os /ith P&$C, or to establish that presidential 'on'essions, benefits, or other in'entives that 'ould have i,proved the finan'ial and operational situation of P&$C, P=#&, and P<$, /ere a''orded said 'o,panies by defendant Ferdinand +ar'os. A''ordingly, there is no 'o,petent eviden'e to prove the epubli'Ds allegation that the P=#& shares herein /ere ill"gotten. %n the other hand, there is eviden'e for the defense /hi'h establishes the fa't that all shares in P<$ /ere vested upon defendant a,on 8. Co9uang'o and his fa,ily. &hus do'u,ents /ere offered in eviden'e plainly na,ing and identifying a,on 8. Co9uang'o and ,e,bers of his fa,ily as assignees of P<$ shares, and in the absen'e of blan6 #eeds of Assign,ent andFor #eeds of trust e!e'uted by sto'6holders of P<$, said 'orporation ,ay not be said to have been organized for defendant +ar'osDs benefit. &o reiterate, it is the e!isten'e of su'h blan6 #eeds of Assign,ent andFor #eeds of &rust that distinguishes 'orporations asserted to be o/ned by defendant Ferdinand +ar'os fro, the others. +ore i,portantly, /ith the assign,ent of P<$ shares spe'ifi'ally to defendant a,on 8. Co9uang'o and ,e,bers of his fa,ily, defendant Ferdinand +ar'os lost the essential legal instru,entation or ,e'hanis, upon /hi'h he 'ould have 'lai,ed the shares in o/nership or 'o,pel the re'onveyan'e thereof to hi,. =i6e/ise, there is, by the eviden'e, suffi'ient basis to 'on'lude that the defendants Co9uang'o a'Iuired the shares in their na,es in P&$C as the a'tual and benefi'ial o/ners thereof. $n fa't, based on plaintiffDs o/n offered do'u,ent, it is 'lear and indubitable that defendants Co9uang'o /ere original sto'6holders of P&$C, hen'e held

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Corporation CASES Based on the Syllabus of Fr. Agustin so,e of their shares therein as early as 1214. &hese shares have been 'lai,ed by the, in a'tual and benefi'ial o/nership. Ahen defendant a,on 8. Co9uang'o died on +ay 1, 123;, the 41,442 P&$C shares registered in his na,e /ere de'lared as part of his estate.1 &he Sandiganbayan, in fine, ruled that the epubli' failed to prove by preponderant eviden'e that P&$C as /ell as the disputed shares in P=#& belonged to the +ar'oses. &he ,a9ority opinion further adds the follo/ing relevant fa'ts7 P<$ /as in'orporated in 1244 by 0ose #. Ca,pos -son of 0ose ?ao Ca,pos., 5apud, enato =irio, Ernesto Abalos and 5erva'io 5aviola, /ith ;(( shares ea'h in their na,es. &hese in'orporators /ere also the offi'ers of P<$. +ean/hile, in 1244, :;,@;2 shares of P&$C, originally o/ned by 5&E, a 8S 'orporation, /ere a'Iuired by a,on Co9uang'o, /ho /as then P&$C President and ,e,ber of its board of dire'tors. $n 1243, together /ith =uis evilla, another sto'6holder of P&$C, a,on Co9uang'o 'eded a total of 111,;1: P&$C shares to P<$ through several deeds of assign,ent. $n 1231, 5apud and 0ose #. Ca,pos later assigned all their shares in P<$ -;(( shares ea'h. to Co9uang'o and %s'ar Afri'a, respe'tively, through separate deeds of assign,ent. %n that sa,e year, Co9uang'o and Afri'a be'a,e dire'tors of P<$ and its President and Hi'e"President, respe'tively. $n 123@, Afri'a transferred his ;(( P<$ shares to Antonio Co9uang'o and &rinidad Co9uang'o ?ulo. Also, =irio, Abalos and 5aviola, re,aining in'orporators of P<$, transferred their 1,)(( shares in P<$ to ,e,bers of the Co9uang'o fa,ily through deeds of assign,ent. $n effe't, the Co9uang'os a'Iuired full 'ontrol of P<$. &'o(1)1on o4 Ca2'o( Ca,pos /as a +ar'os 'rony. <e 'ategori'ally stated that he organized 'orporations for and in behalf of Pres. +ar'os. <e gave a list of these 'orporations /hi'h in'luded P<$. $t /as his poli'y that

*/henever su'h 'orporation is organized for and on behalf of the intended benefi'iaries, $ e!e'ute and reIuire all ,y said business asso'iates to e!e'ute a #eed of &rust or #eed of Assign,ent duly signed in favor of unna,ed benefi'iary and to deliver the original 'opy thereof to the for,er President.* $n 1242, he suffered a severe heart atta'6E thus, he transferred to 5apud the ,anage,ent of these 'orporations. Ahen 'ategori'ally as6ed during his deposition /hether the poli'y of e!e'uting deeds of trust or assign,ent in favor of an *unna,ed benefi'iary* and delivering the, to then Pres. +ar'os /as follo/ed in the 'ase of P<$, Ca,pos replied that *all the 'orporations $ organized G that /as the standard poli'y G that /e surrendered dire't to President +ar'os.* &hese state,ents /ere 'orroborated by the testi,ony of de 5uz,an on 'ross"e!a,ination to the effe't that he re'eived instru'tions fro, Ca,pos to organize P<$ and thereafter, he -Ca,pos. told hi, that it /as 5apud /ho /ould be giving instru'tions regarding P<$. &he foregoing state,ents 'learly sho/ that P<$ /as one of the 'orporations organized by Ca,pos for and in behalf of Pres. +ar'os and that in all the 'orporations he organized, it /as the standard poli'y that they surrendered Ba deed of trust or assign,entC dire't to the latter. $n other /ords, P<$ /as benefi'ially o/ned by Pres. +ar'os. #eposition of Gapud 5apud /as one of the in'orporators of P<$ and a 'lose asso'iate of Ca,pos. Ahen as6ed /hether he 6ne/ the benefi'ial o/ners of P<$, 5apud ans/ered that /hat he 6ne/ /as that *the shares of sto'6 andFor assign,ents endorsed in blan6 /ere delivered to Pres. +ar'os by +r. Ca,pos.* Also, that the deed of assign,ent in blan6 'overing his -5apudDs. ;(( shares in P<$ /as delivered by Ca,pos to Pres. +ar'os. <o/ever, he affir,ed that he subseIuently transferred these shares to a,on Co9uang'o through a deed of assign,ent. 5apudDs testi,ony 'orroborates Ca,posD state,ent that P<$ /as organized for and in behalf of Pres. +ar'os. &here is no 'ontradi'tion bet/een 5apudDs 'lai,s that blan6 deed of assign,ent 'overing his shares in P<$ /as delivered to Pres. +ar'os and, later, he e!e'uted a

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Corporation CASES Based on the Syllabus of Fr. Agustin deed of assign,ent 'overing these sa,e shares in favor of Co9uang'o. $ agree /ith the disIuisitions of the ,a9ority that 5apudDs state,ent relating to the subseIuent e!e'ution of deeds of assign,ent to Co9uang'o and his 6in does not detra't fro, the prior delivery of blan6 deeds to the for,er President, espe'ially so in this 'ase /here, by 5apudDs o/n re'ounting, he and his 'o"in'orporators e!e'uted the 1231 and 123@ deeds of assign,ent /ith the 6no/ledge and authorization of the sa,e person to /ho, the earlier deeds /ere delivered G President +ar'os. $"CE CONSUL HERNAN EA So the aforesaid #eeds of Assign,ents obviously /ere /ith the 6no/ledge and upon authorization and order of for,er President Ferdinand E. +ar'os, is this 'orre'tL + . 5AP8#. Considering that Pri,e <oldings, $n'. /as in'orporated upon the instru'tions of for,er President +ar'os, obviously all the no,inees /ould a't only upon his authorization. &hatDs ,y ans/er. As gleaned fro, the deposition of 5apud, there is pra'ti'ally no 'onsideration for the transfer by 5apud of his shares to Co9uang'o7 C%NS8= A58$=8C<%. <o/ ,u'h did you re'eive as 'onsideration for assigning your shares to hi,L + 5AP8#. &he 'onsideration for the assign,ent /as that upon ,y assign,ent, first, ,y fidu'iary responsibilities as no,inee /ere e!tinguished, and se'ondly, $ had transferred and e!tinguished any and all liabilities under the subs'ription payable. &'o(1)1on o4 *& GuH2an #e 5uz,an /as the Corporate Se'retary of P<$. $n his testi,ony, de 5uz,an identified the original in'orporators of P<$, na,ely, 5apud, =irio, 5aviola and Abalos, as 'lose asso'iates of Ca,pos. &he other in'orporator, 0ose #. Ca,pos, 0r., /as the latterDs son. &he offi'e of P<$ /as /ithin the pre,ises of the 8nited =aboratories, another 'orporation 'ontrolled by Ca,pos.

Based on the foregoing, there is nary any eviden'e on Co9uang'oDs role in the organization of P<$ to substantiate the thesis that the sa,e /as benefi'ially o/ned by Co9uang'o. %n the other hand, the epubli'Ds thesis that President +ar'os is the benefi'ial o/ner of P<$ *is dedu'ed fro, established fa'ts /hi'h, /eighed by 'o,,on e!perien'e, engender the inferen'e as a very strong probability.* Preponderan'e of eviden'e lies /ith the epubli'. %n the basis of the eviden'e on re'ord, $ a, 'onvin'ed that that President +ar'os o/ned P<$ and all the in'orporators thereof a'ted under his dire'tion and that on'e this is a'6no/ledged, the follo/ing 'on'lusions inevitably follo/7 1. Co9uang'o /as ele'ted President and too6 over the ,anage,ent of P<$ on 1231 /ith the 'ooperation of the +ar'os no,inees /ho, it ,ust be e,phasized, still held the ,a9ority sto'6holding as of that dateE ). As the re,aining in'orporators on the Board divested their shares only in 123@, Co9uang'o ,anaged a +ar'os"'ontrolled 'orporation for at least t/o yearsE @. &he si,ultaneous divest,ent of shares by the three re,aining in'orporators on the Board to Co9uang'oDs 'lose relatives in 123@ /ere /ith the 6no/ledge and authorization of their Prin'ipal G President +ar'os. &he preponderan'e of eviden'e lies /ith the epubli' /ith respe't to the 111,;1: shares of P&$C registered in the na,e of P<$. Su'h eviden'e 'onsists of the state,ent of Ca,pos as 'orroborated by the state,ents of 5apud and #e 5uz,an. For 'larity, the o/nership of the outstanding P&$C shares are divided as follo/s7 I 111,;1: shares are held by the Pri,e <oldings $n'. -P<$.E I 41,442 /ere held by a,on Co9uang'o during his lifeti,e andE

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I )1,:): are held by $,elda Co9uang'o. &hus, ;1> of the total shares are held by P<$ /hile the other ;;> are held by the Co9uang'os. <o/ever, as sho/n earlier, the

Corporation CASES Based on the Syllabus of Fr. Agustin Co9uang'o fa,ily eventually a'Iuired 'ontrol of P<$ /hen, in 123@, its in'orporators transferred their shares to the for,er. Aith respe't to the in'orporation of P<$, the follo/ing allegations in the S/orn State,ent dated +ar'h )1, 1231 of Ca,pos are enlightening7 1. +y relationship /ith the then President Ferdinand E. +ar'os dates ba'6 to the ti,e /hen he /as first ele'ted as Congress,an of the then Philippine Congress. &he relationship 'ontinued /hen he /as then ele'ted President of the epubli' of the Philippines. T3&r&a4)&r " a((1()&* 1n )3& or@an1Ha)1on an* a;>u1(1)1on o4 (o2& +u(1n&(( 6&n)ur&( 4or )3& 4or2&r !r&(1*&n). Fo55o=1n@ 31( *1r&;)16& " 1n()ru;)&* 2y 5a=y&r( an* r&>u&()&* )3& a((1()an;& o4 2y o)3&r +u(1n&(( a((o;1a)&( an* o441;&r( o4 )3& ;o2'any )o or@an1H&, &()a+51(3 an* 2ana@& )3&(& +u(1n&(( 6&n)ur&( 4or an* on +&3a54 o4 )3& !r&(1*&n)I 2. T3& ;o2'an1&( )3a) =& 3a6& or@an1H&* 4or an* on +&3a54 o4 4or2&r !r&(1*&n) %ar;o( ar& 51()&* 1n Ann&7 JAJ a))a;3&* 3&r&=1)3I @. $n the organization, ad,inistration and ,anage,ent of the abovena,ed 'orporations, it /as ,y 'o51;ythat /henever su'h a 'orporation is organized for and on behalf of the intended benefi'iaries, $ e!e'ute and $ reIuire all ,y said business asso'iates to e!e'ute a &&* o4 Tru() or &&* o4 A((1@n2&n) duly signed in favour of an unna,ed benefi'iary and to deliver the original 'opy thereof to the for,er President. $t is in fa't ,y 'o51;y and pro'edure that /e dis'lai, 'o,pletely any interest in any of su'h businesses and ,a6e it 'lear to the for,er President that /e hold su'h interests on his behalfE ;. $n the latter part of 1242 suffered a severe heart atta'6 and /as 'onfined in the intensive 'are unit of the +a6ati +edi'al Center. ! ! ! :. %''asioned by the /ithdra/al of ,y a'tive parti'ipation in the ,anage,ent of the abovena,ed 'orporations, %r. Ro5an*o C. Ga'u* /ho /as ,y finan'ial 'onsultant too6

over the dire't responsibility of dire'ting, ,anaging and ad,inistering all the a'tivities of the said 'orporations. <o/ever, sin'e +r. 5apud did not have the ad,inistrative staff to effi'iently ,anage the businesses, he reIuested ,e that all the e,ployees and offi'ers involved in the organization should 'ontinue to re,ain in the 'o,panies even only in a no,inal 'apa'ity 'onsidering that they had previously dis'lai,ed any interest therein. $t is for this reason that olando C. 5apud and ,y business asso'iates, na,ely, +ariano R. &an, Jo(& . Ca2'o(, Jr., =u'iano E. Salazar, Fran;1(;o G. & GuH2an, 5uiller,o C. 5astro'6, Ern&()o S. A+a5o(, G&r6a(1o T. Ga61o5a, odolfo #i,aano, +anuel Eng/a, =ourdes F. Florentino, Florentin, #aniel M. &an and Elizabeth S. Ca,pos 'ontinued to be na,ed sto'6holders in these 'orporations although they did not have any finan'ial interest therein. -E,phasis and unders'oring supplied.. Anne! A referred to by Ca,pos in'luded P<$. $n his S/orn State,ent dated #e'e,ber 13, 122:, Ca,pos further averred7 @. $n your S/orn State,ent, page ), you stated that /ith respe't to the 'orporations you held in trust for President +ar'os, it /as your *poli'y* that /henever su'h a 'orporation /as organized, you e!e'uted, and you reIuired all your business asso'iates to e!e'ute, A #eed of &rust or #eed of Assign,ent in favor of an *unna,ed benefi'iary*, and delivered the originals thereof to President +ar'os. ! ! ! :a( )31( J'o51;yJ 4o55o=&* 1n )3& ;a(& o4 F!H"GE 7 7 7 ANS:ERB A55 )3& ;or'ora)1on( " or@an1H&* K )3a) =a( )3& ()an*ar* 'o51;y K )3a) =& (urr&n*&r&* *1r&;) )o !r&(1*&n) %ar;o(. @.1 Aas it also your poli'y to deliver to President +ar'os the sto'6 'ertifi'ates that you and your business asso'iates held in trust for hi,L ANSAE 7 ?es, +aD,. @.) $f sto'6 'ertifi'ates that you and your business asso'iates held in trust for President +ar'os /ere delivered to hi, /as it also your

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Corporation CASES Based on the Syllabus of Fr. Agustin poli'y to have the sto'6 'ertifi'ates indorsed in blan6L Aere the sto'6 'ertifi'ates in SP<$T indorsed in blan6L ANSAE 7 "4 there are 'ertifi'ates issued in Pri,e <oldings, it is the sa,e /ay it /as delivered to hi,. "4 there is su'h 'ertifi'ate issued, it is indorsed in blan6 and 4o55o= )3& (a2& 'a))&rn 4or a55 )3& ;or'ora)1on(. Ahatever /e have de'ided, /e deliver, sign in blan6 and deliver to hi,. @.@. #id you and your business asso'iates deliver to President +ar'os the sto'6 'ertifi'ates issued by BP<$CL $f not, /hat did you and your business asso'iates do /ith the sto'6 'ertifi'atesL ANSAE 7 "4 Pri,e <oldings 'ertifi'ates have been issued, as $ said +aD,, it is delivered to the President. ;. $n your S/orn State,ent, page ), you also stated that *it is in fa't ,y poli'y and pro'edure that /e dis'lai, 'o,pletely any interest* in the business organized for President +ar'os and *,a6e it 'lear to the for,er President that /e held su'h interests in his behalf* . . . . :a( )31( J'o51;y an* 'ro;&*ur&J 4o55o=&* 1n )3& ;a(& o4 F!H"GE 777 ANS:ERB T3& 'o51;y 1( 4o55o=&* +y &6&ry ;or'ora)1on )3a) =& or@an1H&* 4or )3& !r&(1*&n). ;.1 #id you and your business asso'iates also *dis'lai, 'o,pletely any interest* in ... -P&$C. and *,a6e it 'lear to the for,er President that /e hold su'h interests on his behalf*L ANSAE 7 +aD,, as $ said, $ donDt 6no/ that Pri,e <oldings has su'h holdings of the P&$C shares that you referred to. -KE,phasis and unders'oring supplied. T3& a*21((1on( o4 Ca2'o( ar& ?u*1;1a5I 3&n;&, ;on;5u(16& on 312 an* 31( (u;;&((or(81n81n)&r&(). T3& (a2& ;an +& ;on)ra*1;)&* on5y +y (3o=1n@ )3a) 1) =a( 2a*& )3rou@3 'a5'a+5& 21()aD& or )3a) no (u;3 a*21((1on =a( 2a*&. ) A55 'roo4( (u+21))&* +y 312 an* 31( (u;;&((or( ;on)rary )3&r&)o or 1n;on(1()&n) )3&r&=1)3 (3ou5* +& 1@nor&*, =3&)3&r o+?&;)1on 1( 1n)&r'o(&* +y 312 or no). @ T3& a*21((1on( o4 Ca2'o( ar& &6&n a*21((1on( a@a1n() 1n)&r&(), an*, 3&n;&, )ru()=or)3y. For )3&1r 'ar), )3& Co?uan@;o( 4a15&* )o a55&@&,

2u;3 5&(( (3o=, )3a) )3& a*21((1on( o4 Ca2'o( =&r& 2a*& )3rou@3 'a5'a+5& 21()aD& or )3a) no (u;3 a*21((1on =a( 2a*&. $t bears stressing that under E!e'utive %rder No. 1;, ; the Iuantu, of eviden'e reIuired in 'ases involving forfeiture pro'eedings is preponderan'e of eviden'e, i.e., *eviden'e /hi'h is of greater /eight, or ,ore 'onvin'ing than that /hi'h is offered in opposition to it. &he ter, Kpreponderan'e of eviden'eD ,eans the /eight, 'redit and value of the aggregate eviden'e on either side and is usually 'onsidered to be synony,ous /ith the ter,s Kgreater /eight of eviden'eD or Kgreater /eight of the 'redible eviden'e.D Preponderan'e of the eviden'e ,eans eviden'e /hi'h is offered in opposition thereto.*: &he testi,ony of Ca,pos, as 'orroborated by 5apud and de 5uz,an, that he organized P<$ for and in behalf of Pres. +ar'os should be a''orded great probative /eight. &he in'orporators of the said 'orporation /ere 'lose asso'iates of Ca,pos and, in fa't, 5apud ad,itted that he did not really o/n the shares registered in his na,e and that the deed of assign,ent 'overing these shares /as delivered by Ca,pos to Pres. +ar'os. elian'e by the dissenting opinion on the deeds of assign,ent purportedly e!e'uted by the P<$ in'orporators in favor of Co9uang'o fa,ily ,e,bers is ,ispla'ed. &he fa't that in these deeds of assign,ents the Co9uang'os /ere spe'ifi'ally na,ed, does not 'onstitute proof that the benefi'ial o/nership of P<$ belonged to the Co9uang'os although they -deeds of assign,ent /ith spe'ifi' na,es. deviated fro, the *standard pra'ti'e* ,entioned by Ca,pos of delivering invariably blan6 deeds of assign,ent to Pres. +ar'os. &o reiterate, there is no eviden'e at all that there /as a 'onsideration for the transfer by the in'orporators of their shares in favor of the Co9uang'os. As 5apud stated in his deposition7 C%NS8= A58$=8C<%7 <o/ ,u'h did you re'eive as 'onsideration for assigning your shares to hi, Breferring to a,on Co9uang'oCL + . 5AP8#7 &he 'onsideration for the assign,ent /as that upon ,y assign,ent, first, ,y fidu'iary responsibilities as no,inee /ere e!tinguished, and se'ondly, $ had transferred and e!tinguished any and all liabilities under the subs'ription payable.

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Corporation CASES Based on the Syllabus of Fr. Agustin &his la'6 of 'onsideration renders the a'Iuisition by the Co9uang'os of the said P<$ shares of no 9uridi'al effe't. $t also appears that the transfer by these in'orporators of their shares in favor of Co9uang'o /as ,ade /ith the 6no/ledge and 'onsent of then Pres. +ar'os. As 5apud further averred in his deposition7 H$CE C%NS8= <E NAN#EQ7 Can /e note your ob9e'tion and let +r. 5apud ans/er. So the aforesaid #eeds of Assign,ents obviously /ill be /ith the 6no/ledge and upon authorization and order of for,er Pres. Ferdinand E. +ar'os, is this 'orre'tL + . 5AP8#7 Considering that Pri,e <oldings, $n'. /as in'orporated upon the instru'tions of for,er President +ar'os, obviously all the no,inees /ould a't only upon his authorization. &hatDs ,y ans/er. H$CE C%NS8= <E NAN#EQ7 So the deposition ends. 5iven the la'6 of 'onsideration and the authority given by Pres. +ar'os therefor, it /ould thus appear that the deeds of assign,ent e!e'uted by the P<$ in'orporators in favor of a,on Co9uang'o and his fa,ily /ere forged for the purpose of 'onveying ,anage,ent and 'ontrol of P<$ to the latter /ho li6e/ise a'ted for and in behalf of Pres. +ar'os. $n fine, the preponderan'e of eviden'e lies /ith the epubli' insofar as the 111,;1: shares in P&$C held by P<$ are 'on'erned. Again, the eviden'e sho/s that P<$ /as organized for and in behalf of Pres. +ar'os. &hus, the 111,;1: shares in P&$C, and ne'essarily the 'orresponding shares in P=#&, held by P<$ ,ust be re'onveyed to the epubli' as part of the +ar'osesD ill"gotten /ealth. ACC% #$N5=?, $ vote to grant the petition in 5. . No. 1:@;:2 to the e!tent that it prays for the re'onveyan'e to the epubli' of 111,;1: shares of sto'6 of P&$C registered in the na,e of P<$. RO%EO Asso'iate 0usti'e J. CALLEJO, JR. Foo)no)&(
1

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Assailed Partial #e'ision, pp. @)"@@. ule 1)2, Se'tion ;, evised ules of Eviden'e.

Cunanan v. "mparo! 3( Phil. ))2.

E!e'utive %rder No. 1; provides that *'ivil suits for restitution, reparation of da,ages, forfeiture pro'eedings provided for under epubli' A't No. 1@42, or any other 'ivil a'tion under the Civil Code or other e!isting la/s, in 'onne'tion /ith -said E% Nos. 1 and ). ,ay be filed separately fro, and pro'eed independently of any 'ri,inal pro'eedings and ,ay be proved by preponderan'e of eviden'e.
:

%epublic v. Court "ppeals, )(; SC A 11(.

&he =a/phil Pro9e't " Arellano =a/ Foundation

"SSENT"NG O!"N"ON GARC"A, J.: Before the Court are these five -:. separate petitions to nullify and set aside 'ertain issuan'es of the Sandiganbayan, Fourth #ivision, in C1615 Ca(& No. 0002, a 'o,plaint for re'onveyan'e, reversion, a''ounting, restitution and da,ages thereat instituted by the R&'u+51; o4 )3& !3151''1n&( /R&'u+51;., through the!r&(1*&n)1a5 Co221((1on on Goo* Go6&rn2&n) /!CGG0.

Corporation CASES Based on the Syllabus of Fr. Agustin Per its en banc esolution of +ar'h ;, )((@,1 the Court ordered the 'onsolidation of these five -:. petitions, e,anating, as they all do, fro, the sa,e 'ase. ". THE UN ERLY"NG CASEB C"$"L CASE NO. 0002 C1615 Ca(& No. 0002, one of several suits involving ill"gotten or une!plained /ealth that the Republic, through thePCGG, initiated /ith the Sandiganbayan pursuant to E!e'utive %rder -E%. Nos. 1 and ) in relation to E% No. 1;, all series of 1231, ) see6s the re'overy of ill"gotten /ealth fro, for,er !r&(1*&n) F&r*1nan* E. %ar;o( -Pres. Marcos, hereafter., later substituted by his Estate, his /ife, their three -@. 'hildren -Marcos family, or Marcoses, 'olle'tively. and their alleged 'ronies. A,ong the properties identified as parta6ing the nature of * ill gotten wealth*, as the ter, is 'onte!tually understood, are shares of sto'6 in !3151''1n& T&5&;o22un1;a)1on( "n6&()2&n) Cor'ora)1on -PTIC! for short. /hi'h, in turn, 'overed over t/o -). ,illion shares in !3151''1n& Lon@ 1()an;& T&5&'3on& Co2'any, "n;. -PLDT.. &he Republic see6s to re'over the 'overed P=#& shares fro,"2&5*a O. Co?uan@;o, the E()a)& o4 Ra2on U. Co?uan@;o, represented by its ad,inistratri! $,elda %. Co9uang'o -'olle'tively, *Cojuangcos*., and !r12& Ho5*1n@(, "n;. -PHI., as part of the alleged *ill gotten wealth* of the +ar'os fa,ily. SubseIuently, petitioner A54on(o T. Yu;3&n@;o - uc!engco., 9oined later by his ally, Y R&a5)y Cor'ora)1on - Real"y., intervened, 'lai,ing they are the rightful o/ners of P<$Ds ;1> shareholding in P&$C. &hey /ould assert that their 'lai, for re'overy of the property allegedly un9ustly ta6en fro, the, is superior to the forfeiture 'lai, of the epubli'. A'ting on a February 1221 ,otion of the Cojuangcos, the Sandiganbayan /ould later resolve to sever the P=#&"share" o/nership issue fro, the other 'lai,s involved in Civil Case No. (((), and allo/ed a separate trial /ith respe't only to the issue related to the P=#& shares. $n the 'ourse of the separate trial, the Sandiganbayan -Fourth #ivision. issued 'ertain orders and resolutions, infra, that are no/ sub9e't to 'hallenge in either one of the herein five -:. 'onsolidated petitions.

&hree -@. of these petitions, i.e., G.R. No. 1,0-6., G.R. No. 149802 and G. R. No. 1,0-20, are for certiorariunder ule 1: of the ules of Court, the first filed by Republic and the re,aining t/o, by Yu;3&n@;oLY R&a5)y /'olle'tively, the uc!engcos.. &hese re'ourses si,ilarly assail as having been issued in grave abuse of dis'retion or in e!'ess or la'6 of 9urisdi'tion, ergo null and void, 'ertain resolutions and orders issued by the graft 'ourt in Civil Case (((). As ea'h petitioner in these three -@. petitions alleged, the resolutions and orders adverted to effe'tively deny the, due pro'ess of la/. A''ordingly, they pray that /rits of 'ertiorari issue /ith the end in vie/ of en9oining respondent Sandiganbayan to allo/ the, additional trial dates for purposes of presenting their respe'tive eviden'e in the separate trial belo/. %n the other hand, G.R. No. 1,-4,9 and G.R. No. 1,-20., filed by Republic and the uc!engcos! respe'tively, under ule ;: of the ules of Court, ea'h see6s a revie/ and the setting aside, allegedly for not being in a''ord /ith the eviden'e addu'ed belo/, and for being 'ontrary to la/ and settled 9urispruden'e, the SandiganbayanDs!ar)1a5 &;1(1on@ on the P=#& issue dated A'r15 2,, 2002, but pro,ulgated on %ay 6, 2002 -si,ply !ar)1a5 &;1(1on, hereafter.. &he Partial #e'ision, /hi'h /as rendered after the three -@. afore,entioned petitions forcertiorari had been filed, disposes, as follo/s7 A<E EF% E, pre,ises 'onsidered, the 'o,plaint of the plaintiff epubli' of the Philippines on the P=#& shares sub9e't of separate trial is hereby #$S+$SSE# for la'6 of ,erit. &he +otion for Su,,ary 0udg,ent is hereby 5 AN&E#, and the Co,plaint"in"$ntervention #$S+$SSE#. S% % #E E#. &he argu,ents and 'ounter"argu,ents of the herein four -;. ,ain sets of litigants -the Republic, the Marcoses,the Cojuangcos and the uc!engcos. on a ,enu of issues presently pressed in pleadings after pleadings are as nu,erous as they are e!tensive. Ahat is ,ore, the parties, along the /ay, sIueezed the rules of pro'edure to the hilt, thus adding in'idental ,atters to an already 'o,ple! pro'eedings. So as not to be sidetra'6ed, or, /orse still, /aylaid thereby and thus negle't, if not altogether ,iss, the proverbial tree for the forest, the Court shall li,it itself and shall a''ord parti'ular fo'us only to /hat it per'eives to be ,aterial

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Corporation CASES Based on the Syllabus of Fr. Agustin deter,inative fa'ts and ,atters /hi'h led to the filing of the instant petitions. &o/ards the sa,e end, the Court shall 'ondense the several issues raised into t/o -). 'ore Iuestions for resolution ! to /it& 1. /hether or not petitioners in G.R. No(. 149802, 1,0-20 and 1,0-6. /ere denied due pro'ess /hen the respondent 'ourt in effe't dire'ted the, to ter,inate the presentation of their respe'tive eviden'eE and ). /hether or not the 'hallenged Partial #e'ision, sub9e't of the petitions for revie/ in G.R. No(. 1,-4,9 an* 1,-20., 'onfor,s to the eviden'e presented, the la/ andFor settled 9urispruden'e. "". THE !ART"ES M THE"R !R"NC"!AL CLA"% 1n C"$"L CASE No. 0002 A. Pe"i"ioner Republic &he original 'o,plaint in Civil Case No. (((), filed on 0uly 11, 1234 by the Republic, thru the PCGG, na,ed, as defendants, Pres. +ar'os and $,elda . +ar'os - Mrs. Marcos, hereafter., their three -@. 'hildren, and seven -4. other individuals. As the 'ase progressed, the Republic su''essively a,ended its original 'o,plaint to in'lude other alleged illegally a'Iuired assets andFor i,plead other parties. A,ong the properties sought to be re'overed as part of the alleged ill"gotten /ealth of the +ar'os fa,ily are, as indi'ated earlier, shares of sto'6 in P&$C and P=#&. &he Republic#s &hird A,ended Co,plaint -*A,ended Co,plaint*., dated April )(, 122(,; i,pleaded, as additional party"defendants, the herein respondents Cojuangcos$PHI, and, as to the,, the A,ended Co,plaint pertinently avers7 1. &his is a 'ivil a'tion against #efendants Ferdinand E. +ar'os, $,elda . +ar'os, . . . $,elda Co9uang'o, the Estate of a,on Co9uang'o, and Pri,e <oldings, $n'. to re'over fro, the, ill"gotten /ealth 'onsisting of funds and other property /hi'h they . . . had a'Iuired and a''u,ulated in flagrant brea'h of trust and of their fidu'iary obligations as publi'

offi'ers, . . . thus resulting in their un9ust enri'h,ent during #efendant Ferdinand E. +ar'osD )( years of rule . . . . ). &he /rongs 'o,,itted by #efendants, a'ting singly or 'olle'tively and in unla/ful 'on'ert /ith one another. . . in'lude the ,isappropriation and theft of publi' funds, plunder of the nationDs /ealth, e!tortion, bla'6,ail, bribery, e,bezzle,ent and other a'ts of 'orruption, betrayal and publi' trust . . . . !!! !!! !!! 14. A,ong the assets a'Iuired by #efendants in the ,anner above"des'ribed . . . are funds and other property listed in Anne! *A* hereof and ,ade an integral part of this Co,plaint, Bin'luding, but not li,ited to the follo/ingC7 !!! !!! !!! '. Sto'6s Shares of sto'6s in nu,erous 'orporations . . ., in'luding about ).; ,illion shares of . . . BP=#&C valued, at 'urrent ,ar6et pri'es, appro!i,ately P1.1 Billion pesos and 'overed by shares of sto'6 in . . . -P&$C. registered in the na,es of Pri,e <oldings $n'. -P<$., a,on Co9uang'o and the latterDs asso'iates. #uring his lifeti,e, a,on 8. Co9uang'o held 41,442 shares of sto'6 in P&$C, /hile $,elda %. Co9uang'o held )1,:): shares of sto'6 in her o/n na,e, the benefi'ial and a'tual o/nership of /hi'h is that of defendants Ferdinand +ar'os and his fa,ily. #efendant Pri,e <oldings, $n'. -P<$. held 111,;1: shares /hi'h in truth and in fa't belong to defendants Ferdinand E. +ar'os and his fa,ily. &his sto'6holding of defendants +ar'os and his fa,ily in P&$C, through a,on 8. Co9uang'o and P<$, 'onstitutes the ,a9ority sto'6holding in P&$C. P&$C, in turn, is the biggest sto'6holder of P=#& shares. $n the ,anner above stated, defendants +ar'os and his fa,ily effe'tively 'ontrolled P=#&. -8nders'oring in the %riginalE Aords in bra'6et, added. As ,ay thus be gathered fro, the above aver,ents, petitioner Republic% as plaintiff a 'uo, see6s to re'over fro,

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Corporation CASES Based on the Syllabus of Fr. Agustin respondents Cojuangcos$PHI! the follo/ing P&$C shares of sto'6, vi(7 -1. the 111,;1: shares in P<$Ds na,eE -). the 41,442 and the )1,:): shares in the na,e of a,on 8. Co9uang'o and $,elda %. Co9uang'o, respe'tively.&he desired re'overy is predi'ated on the postulate that the three, as defendants a 'uo, are ,ere du,,iesFno,ineesF'onduits of the +ar'os fa,ily in the 'ontrol of P=#&. #. Respon&en"s Cojuangcos an& PHI $n its Ans/er dated 0une :, 122(,: to the epubli'Ds A,ended Co,plaint, PHI belied allegations that the +ar'os fa,ily is the benefi'ial o/ner of its 111,;1: P&$C shares, stating in this regards, as follo/s7 11. Ans/ering defendant P<$ spe'ifi'ally denies the allegations 'ontained in paragraphs )( -a. and )( -b. of plaintiffDs Co,plaint. $nsofar as the fa'ts alleged in paragraph )( -'. thereof, defendant P<$ respe'tfully alleges that7 -a. #efendant P<$ is the registered sto'6holder of 111,;1: shares in . . . -P&$C.E that *during his lifeti,e* a,on 8. Co9uang'o held 41,442 shares of sto'6 in P&$CE that $,elda %. Co9uang'o held )1,:): shares of sto'6 *in her na,e*, but ans/ering defendant spe'ifi'ally denies that these shares registered in said na,es are o/ned, a'tually andFor benefi'ially, by Ferdinand E. +ar'os and his fa,ily. !!! !!! !!! &he truth of the ,atter is that the ,e,bers of the fa,ily of the late a,on 8. Co9uang'o o/n all the outstanding shares in P<$ in full legal and benefi'ial o/nership . . . . espondent Cojuangcos) Ans/er dated 0une 2, 122(,1 to the sa,e A,ended Co,plaint 'ontains virtually the sa,e ,aterial aver,ents as those in P<$Ds ans/er. And li6e P<$, the Cojuangcos also pray for the dis,issal, as to the,, of the A,ended Co,plaint. C. Respon&en" Imel&a R. Marcos As its ,ost essential, %r(. %ar;o(C Ans/er /ith Counter'lai, dated Nove,ber )), 122@,4 'onfir,ed theRepublic#s allegation about the +ar'osesD o/nership over the P=#& shares in 'ontroversy, but /ith the Iualifi'ation that these shares /ere legiti,ate a'Iuisitions. Hery

,u'h later, ho/ever, +rs. +ar'os, by ,otion dated 0anuary )), 1222, sought leave to a,end ans/er for the purpose of pursuing a 'ross"'lai, against Co9uang'osFP<$. &he respondent 'ourt, ho/ever, denied her ,otion, holding that the proferred A,ended Ans/er /ith Cross"Clai, thus atta'hed to her ,otion varied her theory of defense, in that, /hile she asserted in her original ans/er that the late Pres. +ar'os had la/fully a'Iuired and thus o/ned the P=#& shares in Iuestion, she, in the intended a,ended ans/er /ith 'ross" 'lai,, traversed the allegations of the epubli'Ds A,ended Co,plaint by pleading la'6 of 6no/ledge of fa'ts suffi'ient to for, a belief as to the truth thereof. Nonetheless, the respondent 'ourt allo/ed +rs. +ar'os to file a pleading to 'ontain her 'ross"'lai, against Co9uang'osFP<$. A''ordingly, +rs. +ar'os filed a Cross"Clai, dated April )1, 12223 against Co9uang'osFP<$, alleging, inter alia, the follo/ing7 ). &he . . . -P=#&., . . . is one of the assets listed in Anne! *A* of the &hird A,ended Co,plaint Bof the epubli'C . . . . @. &he Philippine &ele'o,,uni'ations $nvest,ent Corp. -P&$C. /as organized . . . /ith the pri,ary purpose to * . . . other/ise deal in all se'urities, shares of sto'6s and bonds of the BP=#&C.* ! ! ! . P&$C is the single biggest 'orporate sto'6holder of P=#&. @.1. P&$CDs 'apital sto'6 /ere originally subs'ribed by . . ., a,ong others7 defendants a,on Co9uang'o and $,elda Co9uang'o both of /ho, held shares of sto'6 in their respe'tive na,es as trustees . . .for and in behalf of the late President Ferdinand E. +ar'os, . . . and fa,ily . . . . All shares of sto'6 in P&$C a'Iuired and registered in their respe'tive na,es subseIuent to the in'orporation /ere li6e/ise a'Iuired and held for and behalf of said prin'ipals. @.). %n 4 #e'e,ber 1214, defendant a,on Co9uang'o and +r. =uis &. ivilla,. . . e!e'uted an agree,ent /hereby . . . -14,@2). shares of P&$C, /hi'h /ere held in their na,es /ere transferred, . . . unto defendant $,elda . +ar'os in 'onsideration of the e!tinguish,ent of BtheirC loan of . . .-P@,;((,(((.((. . . . . !!! !!! !!! @.;. +rs. +ar'os subseIuently authorized +essrs. Co9uang'o and ivilla, their assigns, . . . to hold said 14,@2) P&$C shares for and in

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Corporation CASES Based on the Syllabus of Fr. Agustin her behalf on the understanding, agree,ent and re'ognition of her true, la/ful and benefi'ial o/nership thereof. ;. So,eti,e in 1244, defendants a,on Co9uang'o and $,elda Co9uang'o li6e/ise a'Iuired for and in behalf of +r. and +rs. +ar'os and their fa,ily appro!i,ately . . . -:;,@;2. fully paid shares of sto'6 in P&$C fro, 5eneral &elephone and Ele'troni's, $n'. -5&E., an A,eri'an 'o,pany. Again, this share a'Iuisition /as on the understanding, agree,ent and re'ognition that defendant Co9uang'os /ere ,ere trusteesFno,inees of +r. and +rs. +ar'os and their fa,ily. !!! !!! !!! :. All the shares of sto'6 of P&$C registered in the na,e of defendants a,on Co9uang'o, $,elda Co9uang'o, their assigns, no,inees and representatives, . . ., /ere never a'Iuired and held in their o/n right, . . . sin'e they have al/ays been held by the, as trusteesFno,inees for and in behalf of +r. and +rs. +ar'os and fa,ily G the true, la/ful and benefi'ial o/ners thereof. !!! !!! !!! 1. %n (: %'tober 1244, . . .. -P<$. /as organized . . . as an invest,ent and holding 'o,pany. P<$Ds prin'ipal asset at present is the . . . -111,;1:. P&$C shares of sto'6 registered and held in P&$C. 1.1 P<$ /as in'orporated to serve as the holding 'o,pany of all the P&$C shares o/ned by +r. and +rs. +ar'os and fa,ily, in addition to those being held by trusteesFno,inees . . . . For this purpose, P<$ /as organized /ith the follo/ing as in'orporators B0ose #. Ca,pos, olando C. 5apud, enato E. =irio, 5ervaso &. 5aviola and Ernesto S. Abalos, /ith ;(( shares ea'hC, all of /ho, are the trusteesFno,inees of the +ar'oses7 !!! !!! !!! 1.@ $n 1243, . . . -111,;1:. shares of sto'6 in P&$C /ere transferred and registered in the na,e of P<$. &hese P&$C shares 'a,e fro, various sour'es, in'luding fro, registered sto'6holders of P&$C. !!! !!! !!! -Aords in bra'6et added..

%n the basis of the foregoing aver,ents, +rs. +ar'os, for her o/n behalf and that of her fa,ily, prayed that 9udg,ent be rendered ordering the Co9uang'osFP<$, their assignees and agents, to transfer in her favor -i. the aforesaid shares of sto'6 in P&$C being held by the, as trusteesFno,inees of the +ar'os fa,ily, and -ii. all the t/o thousand -),(((. shares of sto'6 in P<$ being held by the, as su'h trusteesFno,inees, together /ith all the fruits a''ruing fro, the ti,e that they /ere 'onstituted or a'ted as su'h trusteesFno,inees. $n fine, +rs. +ar'os ,aintained that all P&$C shares registered in the na,es of Co9uang'osFP<$ as /ell as the P<$ shares /hi'h are registered in the na,e of its in'orporators have al/ays been held by the, as trustees andFor no,inees of the +ar'os spouses and their fa,ily /ho are the la/ful and benefi'ial o/ners thereof. She assu,ed the sa,e posture in her Pre"trial Brief dated April );, 12222 as /ell in her Ans/er to petitioner epubli'Ds eIuest for Ad,ission.1( *ia a esolution pro,ulgated on February )), )(((, 11 the respondent 'ourt dis,issed +rs. +ar'osD Cross"'lai, * for being barred and for failure to state a cause of action .* <er ,otion for re'onsideration /as denied in another esolution of +ay )@, )(((. 1) . !&)1)1on&r uc!engcos

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Petitioner uc!engco filed his Co,plaint"in"$ntervention and his A,ended Co,plaint"in"$ntervention in August 1233 and +ay 122@, respe'tively, both of /hi'h the Sandiganbayan -&hird #ivision. ad,itted. <e asserted o/nership over a 'ertain nu,ber of P&$C shares and ne'essarily a portion of the disputed P=#& shares. Real"ylater 9oined ?u'heng'o in his Se'ond A,ended Co,plaint"in" $ntervention and, to the e!tent of their 'o,bined 'lai, over the disputed P=#& shares, pitted the sa,e against that of either the Republic, the %ar;o( fa,ily, or the Cojuangcos$PHI. &he uc!engcos#s 9oint Se'ond A,ended Co,plaint"in"$ntervention dated Septe,ber )(, 122@1@ " ad,itted on 0une 11, 122: " 'ontained the ensuing ,aterial aver,ents7 F$ S& CA8SE %F AC&$%N

Corporation CASES Based on the Syllabus of Fr. Agustin 1. $n the early to ,id"121(Ds, the largest blo'6 of sto'6 of . . . BP=#&C /as held by 5eneral &elephone U Ele'troni's Corporation -*5&E*., /hi'h held )3> of its outstanding sto'6. $n 1214, 5&E de'ided to divest its shareholdings in P=#&. . . . 5&E agreed to sell its P=#& shares to the a,on 8. Co9uang'o group, /hi'h in'luded . . . Ferdinand E. +ar'os andFor . . . $,elda . +ar'os, Estate of a,on 8. Co9uang'o and $,elda %. Co9uang'o, and their no,inees. &he a,on 8. Co9uang'o group 'aused. . . -P&$C. to be for,ed for the purpose of pur'hasing 5&EDs )3> sto'6holdings in P=#&. !!!. 4. $n 1214, P&$C /as o/ned by the follo/ing7 5&E re'eived ):> of P&$C as part of the 'onsideration for selling its shareholding in P=#& to P&$C. Appro!i,ately :4> of the P&$C sto'6 /as divided a,ong the a,on 8. Co9uang'o group. 5regorio o,ulo and =eonides Hirata ea'h re'eived @> of P&$C for their servi'es rendered . . . . &he re,aining 1)> of P&$C /as divided a,ong various persons. Plaintiff"in"intervention ?u'heng'o " . . . /ho already 'ontrolled 1(> of P=#& G pur'hased 4.4:> of the sto'6 in P&$C -13,4)( shares. . . . . <e pla'ed the 4.4:> shares in the na,e of . . . ? ealty Corporation. 3. So,e ti,e after P&$CDs a'Iuisition of )3> of P=#&, 5regorio o,ulo and =eonides Hirata . . . approa'hed . . .?u'heng'o and offered to sell their respe'tive @> shareholdings in P&$C to hi, for P@((,(((.(( ea'h. Plaintiff"in"intervention ?u'heng'o agreed to buy. 2. But, the a,on 8. Co9uang'o group learned of the agreed sale and sent Atty. Alberto +eer to . . . ?u'heng'oto infor, hi, that . . . President +ar'os ob9e'ted to his a'Iuiring additional shares in P&$C. !!!! ?u'heng'o /as instru'ted to pay the pur'hase pri'e of P1((,(((.(( and to transfer the 1> sto'6holdings to the a,on 8. Co9uang'o group. %ther/ise, . . . ?u'heng'o /as told, his business interests /ould suffer. 5regorio o,ulo, upon finding out, also strenuously ob9e'ted to selling to the a,on 8. Co9uang'o group.

But, . . . ?u'heng'o and 5regorio o,ulo 'o,plied as they 'ould not do other/ise. !!! ?u'heng'o paid the P1((,(((.(( pri'e. &he 1> sto'6holdings of 5regorio o,ulo and =eonides Hirata /ere transferred to the a,on 8. Co9uang'o group and eventually to. . . BP<$C. 1(. !!! Yu;3&n@;o =a( )3& 61;)12 o4 155&@a5 ;o&r;1on an* *ur&(( o4 )3& %ar;o( r&@12&. <e /as ;o&r;&* 1n)o @161n@ u' 5regorio Ro2u5oC( an* =eonides $1ra)aC( 6< shareholdings in P&$C . . . . !!! ?u'heng'o /as prevented by the sa,e illegal 'oer'ion and duress and by for'e ma+eure -+artial =a/. fro, see6ing 9udi'ial relief until after the ouster of the for,er regi,e. 11. ConseIuently, . . . BP<$C holds the 1> sto'6holdings in P&$C, and all dividends and distributions attributable thereto, in 'onstru'tive trust for . . . !!! !!! !!! SEC%N# CA8SE %F AC&$%N !!! !!! !!! 1;. %n )) Nove,ber 1214 G at about the ti,e 5&E sold out its P=#& shares to P&$C and re'eived ):> of P&$C G 5&E through its . . ., 0ohn 0. #ouglas, entered into a *put and 'all* agree,ent /ith . . . ?u'heng'o for 5&EDs ):> sto'6holdings in P&$C. !!! 1:. But, as /ith the =eonides Hirata and 5regorio o,ulo shares, O ?u'heng'o /as prevented fro, a'Iuiring 5&EDs ):> shares in P&$C by e!er'ise of his *put and 'all* agree,ent /ith 5&E. 11. $n February 1241, GTE =a( ;o2'&55&* by the a,on 8. Co9uang'o group to /aive its ):> sto'6holdings in P&$C for free. At a ,eeting in &o6yo /ith &ed Brophy, . . . and a,on 8. Co9uang'o, Band @ othersC, Brophy /aived the ):> sto'6holdings, not/ithstanding plaintiffDs *put and 'all* agree,ent /ith 5&E. Said ):> sto'6holdings in P&$C /ere re"issued to the a,on 8. Co9uang'o group for a no,inal a,ount and eventually transferred to . . . BP<$C.

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Corporation CASES Based on the Syllabus of Fr. Agustin !!! !!! !!! 14. Again, . . . Yu;3&n@;o . . . =a( ;o&r;&* 1n)o no) &7&r;1(1n@ 31( J'u) an* ;a55J a@r&&2&n) =1)3 GTE for the latterDs ):> sto'6holdings in P&$C, /hen he /as other/ise ready, /illing and able to do so. !!!. Plaintiff"in"intervention ?u'heng'o =a( 'r&6&n)&* +y )3& (a2& 155&@a5 ;o&r;1on an* *ur&(( and by for'e,a9eure -+artial =a/. fro, see6ing 9udi'ial relief until after the ouster of the for,er regi,e. 13. ConseIuently, . . .BP<$C and the o/ners of . . . BP<$C G /hether they be -a. the Estate of a,on 8. Co9uang'o and $,elda %. Co9uang'o -b. plaintiff epubli' and the PC55, or -'. the Estate of Ferdinand E. +ar'os and $,elda . +ar'os G hold the ):> sto'6holdings in P&$C, and all dividends and distributions attributable thereto, in 'onstru'tive trust for plaintiff"in"intervention ?u'heng'o, and should be 'o,pelled to turn over the sa,e to hi,. A=&E NA&$HE &<$ # CA8SE %F AC&$%N !!! !!! !!! )(. $n the event the <onorable Court should ad9udge that . . . ?u'heng'o is not entitled to re'over, under the Se'ond Cause of A'tion, the ):> shareholdings in P&$C for,erly belonging to 5&E, then plaintiffs"in"interventionare at least entitled to re'over ;.1> of said ):> shareholdings, as de,onstrated belo/. )(.1. !!! ? ealty Corporation o/ns 4.4> of the sto'6 in P&$C, and . . . ?u'heng'o is entitled to re'over the 1> shareholdings for,erly belonging to 5regorio o,ulo and =eonides Hirata . . . G for a total of 1@.4:>. )(.). Ahen 5&E /as 'oer'ed by the a,on 8. Co9uang'o group to /aive its ):> sto'6holdings in P&$C in February 1241, the re,aining sto'6holders of P&$C /ere entitled to a pro rata distribution of said ):> sto'6holdings G /hi'h /ere instead /holly re"issued to the a,on 8. Co9uang'o group for a no,inal a,ount and eventually transferred to . . . BP<$C.

)(.@. &hus, plaintiffs"in"intervention, /ith 1@.4:> of the re,aining 4:> sto'6, /ere entitled to ;.1> of the ):> sto'6holdings for,erly belonging to 5&E.* B$t is thus prayedC G %n the first 'ause of a'tion, -a. !!! %rdering . . . BP<$C to turn over the 1> P&$C shareholdings in'luding sto'6, 'ash and other dividends and sto'6 splits thereon, to . . . ?u'heng'oE and -b. Ad9udging plaintiff"in"intervention ?u'heng'o to be the true o/ner of said 1> P&$C Bfor,erly HirataDs and o,uloDsC, shareholdingsE %n the se'ond 'ause of a'tion -a. %rdering . . . BP<$C to turn over the ):> P&$C shareholdings -for,erly of 5&E., in'luding all . . . dividends and sto'6 splits thereon, to . . . ?u'heng'o Bas true o/ner thereofCE and !!! %n the alternative third 'ause of a'tion, -a. %rdering defendant"in"intervention BP<$C to turn over ;.1> of its P&$C shareholdings -plaintiffs"in"interventionDspro rata share of 5&EDs for,er ):> shares., in'luding all sto'6, 'ash and other dividends and sto'6 splits thereon, to plaintiffs"in"interventionE and -b. Ad9udging plaintiffs"in"intervention to be the true o/ners of said ;.1> P&$C shareholdings.* -8nders'oring as found in the originalE E,phasis and /ords in bra'6et added.. $n their ans/er to the A,ended Co,plaint"in"$ntervention, /hi'h they later ,anifested as serving as their ans/er to the Se'ond A,ended Co,plaint"in"$ntervention, respondents Cojuangcos$PHI set up, inter alia! by /ay of affir,ative defense, the follo/ing grounds7 -1. la'6 of 'ause of a'tion, sin'e the P&$C and P<$ shares of sto'6 in the na,e of the late a,on 8. Co9uang'o and ,e,bers of his fa,ily /ere la/fully a'Iuired by the,E -). neither of the +ar'os spouses /as a ,e,ber of the a,on 8. Co9uang'o group, so that they -the +ar'os spouses. have no interest /hatsoever over any share in the said 'orporationsE

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Corporation CASES Based on the Syllabus of Fr. Agustin and -@. no 9urisdi'tion has been a'Iuired by the Sandiganbayan over the A,ended Co,plaint"in"$ntervention for non"pay,ent of the proper do'6et fees. """. THE !ET"T"ONS A. G.R. 'os. ()*+,- an& ()+.)/ 0Republic#s1 %n February 11, )((1, petitioner Republic se'ured a subpoena ad testificandum1; for ,rs. ,arcos to testify as its /itness respe'ting her 'lai, over the disputed P=#& shareholdings. +rs. +ar'os, ho/ever, /asted no ti,e in ,oving for the Iuashal of the subpoena, invo6ing in this regard her right against self"in'ri,ination. $n its opposition to ,otion, petitioner Republic argued that +rs. +ar'os has /aived su'h right /hen, in her Ans/er and subseIuent pleadings, she ,ade 9udi'ial ad,issions and de'laration of the benefi'ial o/nership of the +ar'oses over the disputed P=#& shares. &he respondent 'ourt, per its %rder of +ay ;, )((1, denied her ,otion to Iuash subpoena.1: Another resolution of 0uly 2, )((1 /ould eventually follo/ denying re'onsideration of the denial of her ,otion to Iuash subpoena, along the follo/ing tenor7 Be that as it ,ay, the prose'utionDs %pposition to +otion to Muash, dated @ April )((1, spe'ifi'ally ,entions only defendant $,elda +ar'osD ad,ission that Ferdinand +ar'os a'Iuired the properties ,entioned in paragraph 12 of the 'o,plaintE hen'e, other than this fa't, said prose'ution ,ay not propound any Iuestion that ,ay violate her right against self"in'ri,ination, upon proper and ti,ely ob9e'tion. !!! !!! !!! A<E EF% E, defendant $,elda +ar'osD +otion for e'onsideration dated 12 0une )((1, is hereby denied, and the subpoena earlier issued stand. <o/ever, in lieu of the testi,ony of said defendant in 'ourt, the plaintiff ,ay, instead, ,a6e use of the provisions in ule )1 of the evised ules on Civil Pro'edure. 11 $n the ,eanti,e, petitioner Republic 'ontinued presenting other /itnesses, relying " as it /ould later 'lai, G on the oral assuran'e given by the graft 'ourt during the hearing on %ar;3 26, 2001 that it /ould allo/ the epubli' to present +rs. +ar'os as its adverse or hostile /itness.

At the +ay )3, )((1 hearing, the respondent 'ourt dire'ted petitioner Republic to /rap up by +ay @(, )((1 the presentation of its eviden'e. &his pro,pted petitioner Republic to posthaste file its *%espectful ,otion -or "dditional .ime .o Complete Presentation /f 0vidence*14therein praying for t/o -). additional settings to 'o,plete the presentation of its eviden'e. But, in an open 'ourt Or*&r *a)&* %ay -0, 2001,13 the respondent 'ourt denied the said respe'tful ,otionE the desired re'onsideration /as also denied per a R&(o5u)1on *a)&* Au@u() 2., 2001.12 +ean/hile, in the Septe,ber :, )((1 hearing, PC55 Spe'ial Counsel &o,as Evangelista, apparently una/are of the 2ugus" 3-% 3**( 4r&er adverted to, reiterated the epubli'Ds intention to present +rs. +ar'os as its /itness, only to be apprised by the respondent 'ourt of its August )4, )((1 %rder, supra. $n the end, Atty. Evangelista reIuested that he be allo/ed thirty -@(. days /ithin /hi'h to file the Republic#s for,al offer of do'u,entary eviden'e, /hi'h respondent 'ourt in fa't dire'ted hi, to do via an Or*&r *a)&* S&')&2+&r ,, 2001)( . <en'e, petitioner Republic filed on %'tober 1, )((1 its *-ormal /ffer of 0vidence1 dated %'tober ;, )((1, follo/ed later by a *Supplemental /ffer of 0vidence* dated Nove,ber 1@, )((1)1 therein reserving the right to present the testi,ony of +rs. +ar'os, as a hostile /itness regarding her 'ross"'lai,, should this Court grant its petition for 'ertiorari that it -%epublic. intended to file. &he intended petition /as eventually filed and is presently do'6eted as G.R. No. 1,0-6.. *ia its petition in 5. . No. 1:(@14, petitioner Republic see6s to nullify the follo/ing issuan'es of the respondent 'ourt, as des'ribed hereunder for better perspe'tive7 1. Or*&r *a)&* %ay -0, 2001,)) denying the epubli'Ds respe'tful ,otion for additional ti,e to 'o,plete the presentation of eviden'e and R&(o5u)1on o4 Au@u() 2., 2001,)@ denying the ,otion to re'onsider the +ay @(, )((1 orderE and ). Or*&r *a)&* S&')&2+&r ,, 2001,); dire'ting the epubli' to sub,it its offer of eviden'e /ithin @( days fro, that date.

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Corporation CASES Based on the Syllabus of Fr. Agustin $t is the Republic#s sub,ission that the respondent 'ourt gravely abused its dis'retion /hen it issued the afore,entioned assailed orders and resolution 'onsidering that7 $. &<E ASSA$=E# % #E S . . . A+%8N& &% A #EP $HA&$%N %F &<E EP8B=$CDS S8BS&AN&$HE AN# C%NS&$&8&$%NA==? ENS< $NE# $5<& &% &<E F8== EC%HE ? %F &<E +A C%SESD $=="5%&&EN AEA=&<. $$. &<E ASSA$=E# % #E S B=A&AN&=? H$%=A&E# &<E EP8B=$CDS $5<& &% P %CE#8 A= #8E P %CESS %F =AA A<EN &<E ESP%N#EN& C%8 &, AF&E $SS8$N5 AN# S8S&A$N$N5 &<E HA=$#$&? %F &<E S8BP%ENA &% $+E=#A +A C%S, #EN$E# PE&$&$%NE DS P=EA &% P ESEN& <E AS A#HE SEF<%S&$=E A$&NESS AN# &% C%+P=E&E &<E P ESEN&A&$%N %F &<E EP8B=$CDS EH$#ENCE. A. B? $SS8$N5 &<E ASSA$=E# % #E S, &<E ESP%N#EN& C%8 & H$%=A&E# &<E EP8B=$CDS $5<& &% #8E P %CESS %F =AA $NAS+8C< AS $& BA E# &<E EP8B=$C F %+ P ESEN&$N5 $+E=#A +A C%S AS A#HE SEF<%S&$=E A$&NESS, N%&A$&<S&AN#$N5 &<A& &<E EP8B=$C C%NS$S&EN&=? AN# CA&E5% $CA==? ASSE &E# $&S $5<& &% P ESEN& <E AS S8C< A$&NESS. B. B? $SS8$N5 &<E ASSA$=E# % #E S, &<E ESP%N#EN& C%8 & EN#E E# N85A&% ? $&S %AN S8BP%ENA #$ EC&E# &% $+E=#A +A C%S, A<%SE HA=$#$&? &<E ESP%N#EN& C%8 & <A# A= EA#? S8S&A$NE# A$&< F$NA=$&?. C. B? $SS8$N5 &<E ASSA$=E# % #E S, &<E ESP%N#EN& C%8 & CAP $C$%8S=? S8B% #$NA&E# &<E P %CESS %F =AA &% ENPE#$ENC? AN# #$SPA&C<. #. B? $SS8$N5 &<E ASSA$=E# % #E S, &<E ESP%N#EN& C%8 & #EP $HE# &<E EP8B=$C %F #8E P %CESS %F =AA A<EN $& EFFEC&$HE=? BA E# &<E EP8B=$C F %+ P ESEN&$N5, A+%N5 %&<E EH$#ENCE, $+E=#A +A C%S, A H$&A= AN# +A&E $A= A$&NESS A<%SE &ES&$+%N? A$&< ESPEC& &% <E C %SS"C=A$+ A5A$NS& &<E ESP%N#EN&S C%08AN5C%S A$== B8&& ESS &<E EP8B=$CDS CA8SE %F

AC&$%N $N C$H$= CASE N%. ((() N%& %N=? A5A$NS& <E , B8& A=S% A5A$NS& &<E ESP%N#EN&S C%08AN5C%S. E. &<E ASSA$=E# % #E S BE& A? &<E ESP%N#EN& C%8 &DS 5=A $N5, A=="&%%"& ANSPA EN& &8 NAB%8& $NAS+8C< AS &<E? $ %N$CA==? S8PP ESSE# &<E ENF% CEAB$=$&? %F &<E ESP%N#EN& C%8 &DS %AN S8BP%ENA &% $+E=#A +A C%S, EHEN AS &<E ESP%N#EN& C%8 & <A# A= EA#? S8S&A$NE# &<E HA=$#$&? %F &<A& S8BP%ENA. %n the basis of the foregoing argu,ents, petitioner Republic prays, by /ay of relief, that this Court, upon the annul,ent of the assailed %rders and esolution sub9e't of its petition in G.R. No. 1,0-6., dire't the respondent 'ourt to allo/ the Republic to 'o,plete its presentation of eviden'e, and 'o,pel respondent +rs. +ar'os to ta6e the /itness stand. $n their 'o,,ent to the petition in 5. . No. 1:(@14, respondents Cojuangcos2PHI ,aintained the 'orre'tness of the assailed orders and resolution. Setting parti'ular fo'us on Republic#s 'lai, of having been denied its day in 'ourt, said respondents 'ontend that an agreed 'alendar of hearings /as in pla'e, but petitioner Republic ,oved to 'an'el a nu,ber of trial dates for la'6 of preparedness or for /ant of ready /itnesses, /hi'h thus i,pelled the respondent 'ourt to 'o,e out /ith the assailed issuan'es. $n the light of 'onfli'ting allegations thus ,ade, the Court dee,s it appropriate to re'ite additional deter,inative ante'edents as ,ay be gathered fro, the re'ords. &hus G $t /ould appear that at the preli,inary 'onferen'e held on Septe,ber )3, 1223, the parties agreed to 'ontinue the preli,inary 'onferen'e and the pre"trial on 0anuary 1;, 1222. Follo/ing a series of postpone,ents, the pre"trial for the epubli'Ds A,ended Co,plaint /as finally 'ondu'ted on +ay ):, )((( and ter,inated on the sa,e day. &he Pre"trial %rder issued on that date sets the trial of the 'ase, upon ,utual agree,ent, to 0uly 1(, 1;, @1, August 11 and 13, )((( at 37@( in the ,orning.

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Corporation CASES Based on the Syllabus of Fr. Agustin &hereafter, the respondent 'ourt issued a Supple,ental Pre"&rial %rder dated 0uly 1(, )(((,): therein defining the prin'ipal issue, as follo/s7 Ahether the properties, assets, and funds sought to be re'overed by the plaintiff are ill"gotten or la/fully a'IuiredE SubseIuent events sho/ that the s'heduled 0uly 1(, )((( hearing /as 'an'elled at the instan'e of petitioner epubli'Ds 'ounsel. &he 0uly 1;, )((( hearing /as also 'an'elled and reset to 0uly @1, )(((. &he 0uly @1, )((( hearing /as li6e/ise 'an'elled but the parties agreed, ho/ever, for the 'ontinuation of trial on August 11 and 13, )((( in the ,orning and on Septe,ber 1@, 13, )( and ):, )(((, ,orning and afternoon sessions. Presented in the August 11, )((( hearing as petitioner epubli'Ds /itness /as Atty. Fran'is'o 5. de 5uz,an. &he August 13, )((( hearing " /hen petitioner epubli' intended to present the PC55 re'ords 'ustodian, +a. =ourdes +agno " /as 'an'elled. %/ing to the volu,inous re'ords she had to identify and testify on, the respondent 'ourt ordered that +agnoDs testi,ony be ta6en before the E!e'utive Cler6 of Court on three trial dates to end on Septe,ber :, )(((. %n Septe,ber :, )(((, the respondent 'ourt s'heduled four -;. hearings for the re,aining days of the ,onth of Septe,ber )(((. <o/ever, the first three -@. settings, i.e.! Septe,ber 1@, 13 and )(, )(((, /ere, upon petitioner epubli'Ds /ritten ,otion dated Septe,ber 11, )(((, and for reasons ranging fro, its inability to lo'ate a ,ispla'ed deposition to affording the ne/ assigned Soli'itor ti,e to go over the 'ase re'ords, 'an'elled. #espite the develop,ents i,,ediately adverted to above, the parties and their 'ounsels nonetheless appeared for the Septe,ber 13, )((( hearing. &here, Atty. &aning'o of the PC55 ,anifested that the 5overn,ent panel is in the pro'ess of 'o,piling the re'ords to support the epubli'Ds ,otion for ad,ission, /hi'h, in turn, /ould serve as his basis for re'o,,ending the filing of a ,otion for su,,ary 9udg,ent. A''ordingly, the respondent 'ourt, in a bid to e!pedite an early 'ase disposition, then blo'6ed off the follo/ing dates for the presentation of eviden'e7 For petitioner Republic, #e'e,ber :, )(((, 0anuary )2, @( and @1, February 1 and ), )((1E

and for respondentsCojuangcos$PHI, +ar'h 1), 1@, 1;, 1:, )1, )4 and )3, )((1. Ahat transpired ne!t /ere the follo/ing events7 1. &he s'heduled hearing on #e'e,ber :, )((( /as 'an'elled be'ause the epubli'Ds /itness /as not available. ). Petitioner epubli' filed a ,otion to reset the 0anuary )2, @( and @1, )((1 hearings, its Spe'ial Counsel having 9ust re'eived his assign,ent order for Civil Case No. (((). @. %n 0anuary )2, )((1, petitioner epubli' ,anifested its intention to 'all +rs. +ar'os on the /itness stand, but reIuested for additional hearing dates, pleading that it /ill not be ready to present +rs. +ar'os /ithin its allotted ti,e. espondents Co9uang'osF P<$ offered to stipulate on the testi,ony of the epubli'Ds intended /itness, one Atty. +anuel 5. +onte'illo. ;. espondent 'ourt 'an'elled the 0anuary )2, )((1 hearing and reIuired the parties to ,a6e an appearan'e at the ne!t s'heduled hearing, 0anuary @(, )((1, as previously set. :. &he 0anuary @(, )((1 s'hedule /as 'an'elled, as reIuested by petitioner epubli', o/ing to la'6 of /itness. $n addition, the sa,e petitioner also as6ed for the 'an'ellation of the three -@. su''eeding s'heduled hearings, i.e., 0anuary @1, February 1 and ), )((1, and instead reIuested for a February 2, )((1 setting, underta6ing to present +rs. +ar'os on that date, then rest its 'ase, /ith or /ithout her testi,ony. 1. &he February 2, )((1 setting /as reset, o/ing to the unavailability on that day of the epubli'Ds intended /itness, +rs. +ar'os, /ho, Atty. Evangelista of PC55 e!plained, /as physi'ally indisposed. A'ting on the epubli'Ds reIuest for a ,onth to present +rs. +ar'os, the respondent 'ourt granted the desired resetting to +ar'h 1), 1@, 1; and 1:, )((1, on the 'ondition that the epubli' /ill have to rest its 'ase /ith or /ithout her testi,ony. 4. %n +ar'h 1), )((1, the epubli' reIuested to reset the s'heduled hearing. espondent 'ourt gave the epubli'

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Corporation CASES Based on the Syllabus of Fr. Agustin another opportunity to present its eviden'e and a''ordingly reset the hearings to +ar'h )1, )4, and )3, )((1, as previously s'heduled. 3. %n +ar'h )1, )((1, the epubli' presented =ourdes +agno, the PC55 re'ord 'ustodian. <er dire't, 'ross and redire't e!a,inations /ere done that day. +s. +agno /as follo/ed on +ar'h )4, )((1, by osalie Sarthou of the B$ . espondents Co9uang'osFP<$ ,anifested that the epubli' had until the ne!t trial date to finish its presentation of eviden'e. 2. After the parties, in the +ar'h )3, )((1 hearing, /ere through /ith +s. Sarthou, the epubli' reIuested and /as granted five additional trial dates, i.e.! +ay 4, 2, 11, )3, and @(, )((1, for the presentation of further eviden'e. 1(. &he hearing on +ay 4, )((1 /as 'an'elled and reset to +ay 2, )((1. %n +ay 2, )((1, epubli' presented +r. #anilo #aniel, a PC55 #ire'tor, after /hi'h the presentation of further eviden'e /as 'ontinued to +ay )3, and @(, )((1. $t is upon the foregoing fa'tual ba'6drop that the respondent 'ourt issued, in the +ay )3, )((1 hearing, its %rder of even date dire'ting petitioner epubli' to ter,inate the presentation of its eviden'e on the hearing of +ay @(, )((1. &he +ay )3, )((( %rder is, as earlier stated, /hat ,oved petitioner epubli' to file its *%espectful ,otion for "dditional .ime .o Complete Presentation /f 0vidence*.)1 $n the ,eanti,e, pending resolution of 5. . No. 1:(@14, the separate trial 'ontinued. After respondents Co9uang'osFP<$ have rested their 'ase, the respondent 'ourt rendered its !ar)1a5 &;1(1on, /hi'h, to reiterate, is the sub9e't of petitioner epubli'Ds petition for revie/, no/ do'6eted as G.R. No. 1,-4,9, on the follo/ing supporting grounds7 &<E SAN#$5ANBA?AN C%++$&&E# -S$C. 5 AHE=? E E# $N $&S PA &$A= #EC$S$%N #A&E# +A? 1, )(() A<EN $& #EC$#E# M8ES&$%NS %F S8BS&ANCE $N A AA? N%& $N ACC% # A$&< =AA % A$&< &<E APP=$CAB=E #EC$S$%NS %F &<E <%N% AB=E C%8 & AN#F% <AS #EPA &E# F %+ &<E ACCEP&E# AN# 8S8A= C%8 SE %F 08#$C$A= P %CEE#$N5S C%NS$#E $N5 &<A&7

$. &<E SAN#$5ANBA?AN PA &$A= #EC$S$%N #A&E# +A? 1, )(() #%ES N%& C%+P=? A$&< &<E BAS$C EM8$ E+EN& 8N#E SEC&$%N 1;, A &$C=E H$$$ %F &<E 1234 C%NS&$&$%N &<A& *N% #EC$S$%N S<A== BE EN#E E# B? AN? C%8 & A$&<%8& C=EA =? AN# #$S&$NC&=? ENP ESS$N5 &<E E$N &<E FAC&S AN# &<E =AA %N A<$C< $& $S BASE#,* <ENCE, PE&$&$%NE AAS #EP $HE# %F $&S $5<& &% #8E P %CESS %F =AA. $$. &<E SAN#$5ANBA?AN 8=E# $N $&S PA &$A= #EC$S$%N #A&E# +A? 1, )(() A5A$NS& &<E A#+$SS$B$=$&? %F &<E #%C8+EN&A ? EH$#ENCE AF&E A#+$&&$N5 &<E SA+E $N EH$#ENCE, &<E EB? #EP $H$N5 PE&$&$%NE %F $&S $5<& &% #8E P %CESS %F =AA. $$$. &<E PA &$A= #EC$S$%N #A&E# +A? 1, )(() $S FA&A==? F=AAE# AS $& FA$=E# % %+$&&E# &% +EN&$%N H$&A= FAC&S AN# EF8SE# &% C%NS$#E +A&E $A= EH$#ENCE P ESEN&E# B? PE&$&$%NE &% S8PP% & $&S C%+P=A$N& AN# EF8SE# &% C%NS$#E EH$#ENCE A<$C< &<E SAN#$5ANBA?AN $&SE=F <A# $N FAC& A= EA#? A#+$&&E#. $H. PE&$&$%NE AAS #EP $HE# %F &<E %PP% &8N$&? &% P ESEN& ESP%N#EN& $+E=#A . +A C%S AS $&S A#HE SEF<%S&$=E A$&NESS, A=S% $N A +ANNE H$%=A&$HE %F PE&$&$%NE DS F8N#A+EN&A= $5<& &% P %CE#8 A= AN# S8BS&AN&$HE #8E P %CESS %F =AA. H. &<E SAN#$5ANBA?AN #$S E5A #E# &<E #EC=A A&$%NS 8N#E %A&<F08#$C$A= A#+$SS$%NS %F ESP%N#EN& $+E=#A +A C%S P%S$&$HE=? $#EN&$F?$N5 AN# C=A$+$N5 %ANE S<$P %HE &<E S8B0EC& S<A ES $N P=#&, A<$C< #EC=A A&$%N =$REA$SE C%NC=8S$HE=? ES&AB=$S<ES AN# C%NF$ +S &<E AC&8A= AN# BENEF$C$A= %ANE S<$P B? ESP%N#EN&S +A C%S %F SA$# S<A ES % , &<E$ P $NC$PA="N%+$NEE E=A&$%NS<$P. H$. &<E SAN#$5ANBA?AN C%++$&&E# 8N#8E <AS&E $N #EC$#$N5 &<E CASE, $N 8&&E #$S E5A # %F $&S +AN#A&E# #8&? &% ASCE &A$N &<E & 8&< $N A== +A&&E S $N C%N& %HE S?.*

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Corporation CASES Based on the Syllabus of Fr. Agustin Petitioner Republic thus pray for a 9udg,ent7 -1. reversing and setting aside the Partial #e'ision dated April ):, )(()E and -). ordering respondents Co9uang'osFP<$, their assignees, no,inees, and agents to E&8 N and EC%NHE? to the epubli' 13a4 the 111!516 P.IC shares in the name of Prime 7oldings! Incorporated 3P7I4 ceded and conve8ed b8 %amon 9. Co+uangco and :uis .. %ivilla to P7I; 3b4 the <=!<<> P.IC shares in the name of %amon 9. Co+uangco; and 3c4 the ?1!6?6 P.IC shares in the name of Imelda /. Co+uangco! for being I:: G/..0@ A0":.7 of -erdinand 0. ,arcos and his famil81.)4 &his brings us to the Yu;3&n@;o(D petitions. B. G.R. 'os. (./5*3% ()*+3* an& ()+3*- F uc!engcos#G As already else/here herein ,entioned, petitioner Yu;3&n@;o( intervened in Civil Case No. ((() to re'over o/nership of a portion of the disputed P=#& shares the forfeiture of /hi'h petitioner epubli' itself is pursuing o/ing to their being * ill gotten wealth1. +r. ?u'heng'oDs original Co,plaint"in"$ntervention /as filed on August 11, 1233E the A,ended Co,plaint"in" $ntervention, on +ay @1 122@, and the Se'ond A,ended Co,plaint" in"$ntervention, on Septe,ber )), 122@, this ti,e 9oined by Y R&a5)y. $n a esolution dated %'tober 2, 1221, the respondent 'ourt dis,issed the A,ended Co,plaint"in"$ntervention for non"pay,ent of do'6et fees, a,ong other grounds, and denied the ?u'heng'osD +otion to Ad,it Se'ond A,ended Co,plaint, posthaste sending the ?u'heng'os to this Court on earlier separate petitions for revie/ on 'ertiorari. <o/ever, +r. ?u'heng'oDs intervention /as effe'tively reinstated and his and ? ealtyDs Se'ond A,ended Co,plaint"in"$ntervention ad,itted by the respondent 'ourt pursuant to the #e'ision rendered by this Court in 5. . No. 1@11)4, - Buchengco vs. %epublic! et al.4, on 0une 3, )(((,)3 in relation to a 'o,panion #e'ision dated +ar'h 1@, )((1,)2 in 5. . No. 1@1:@(, -B %ealt8 Corporation vs. 7on. Sandiganba8an4. $n its #e'ision in 5. . No. 1@11)4, this Court ordered petitioner ?u'heng'o 1to submit to public respondent Sandiganba8an the value of the properties he see$s to recover and to pa8 the proper doc$et

fees therefor within thirt8 3CD4 da8s upon determination thereof either b8 the Sandiganba8an or its cler$ of court! which in turn is directed to act with dispatch on the matter.1 Follo/ing another round of legal s6ir,ish on our 9udg,ents in 5. . No. 1@11)4 and 5. . No. 1@1:@(, the respondent 'ourt assessed the ?u'heng'os the do'6et fees due on the Se'ond A,ended Co,plaint" in"$ntervention in the a,ount of P3,4)2,13:.((, /hi'h the latter paid on April ;, )((1. Barely a ,onth after, the ?u'heng'os filed /ith the respondent 'ourt an *9rgent ,otion .o Suspend .rial Pending #iscover8 Proceedings * dated April @(, )((1,@( follo/ed by a *Supplement1 thereto dated +ay 4, )((1@1. &hereat, they prayed for the 'an'ellation of the separate trial settings already ,ade and agreed upon until they shall have fully underta6en pre"trial dis'overy pro'eedings under the provisions of ule )@ of the ules of Court, a right they allegedly are entitled to, but /ere unable to e!er'ise due to the erroneous dis,issal by the respondent 'ourt of their A,ended Co,plaint"in" $ntervention. &he ?u'heng'os 'o,,en'ed /ith the dis'overy pro'ess by filing and serving noti'es for the deposition"ta6ing of Atty. Fran'is'o #e 5uz,an, for,er P<$ Corporate Se'retary, and Atty. &eresa +er'ado" Ferrer, then Corporate Se'retary of P&$C on +ay 1:, )((1 and +ay 14, )((1, respe'tively, /ith a reIuest for the issuan'e of subpoenafor the,. %n +ay 1:, )((1, ho/ever, they filed a,ended noti'es re"s'heduling the deposition ta6ing of Attys. #e 5uz,an and +er'ado"Ferrer for +ay @1, )((1 and 0une 1, )((1, respe'tively. &he ?u'heng'os /ould later reIuest another res'heduling and issuan'e of the 'orresponding subpoenas for the 0une 11 and 1), )((1 deposition ta6ing of both individuals. &he deposition ta6ing of Atty. #e 5uz,an pro'eeded as s'heduled G and /as 'o,pleted " on 0une 1), )((1. &he s'heduled deposition ta6ing of Atty. +er'ado"Ferrer on 0une 11, )((1, ho/ever, /as deferred upon her reIuest for a )"/ee6 ti,e to prepare therefor. <er deposition /as finally ta6en on 0uly 1 and 'o,pleted on 0uly 1@, )((1. $n the ,eanti,e, the respondent 'ourt, via a R&(o5u)1on *a)&* %ay 24, 2001,@) as reiterated in an Or*&r given in open 'ourt on Ju5y 12, 2001, denied the ?u'heng'osD *9rgent ,otion .o Suspend .rial Pending #iscover8* and its *Supplement1, for the reason that7 -a. ule )@ of the ules of

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Corporation CASES Based on the Syllabus of Fr. Agustin Court does not authorize the suspension of trial o/ing alone to the fa't that a party /ishes, in the interi,, to avail itself of a ,ode of dis'overyE -b. petitioners /ere not being deprived of their right of dis'overy, as they have in fa't ta6en the deposition of +r. 5regorio o,ulo in 1234E and -'. the ground relied upon /as not a,ong the instan'es 'alling for the suspension of trial under Se'tion 3, ule @( of the ules of Court.@@ &he ?u'heng'os /ould re'eive a 'opy of the denying resolution on 0une 4, )((1. espondent 'ourt /ould, in a R&(o5u)1on of S&')&2+&r ,, 2001,@; deny the ?u'heng'osD ,otion for re'onsideration Bfiled on August 14C of the aforesaid +ay );, )((1 order. At the hearing of +ay @(, )((1 for the 'ontinuation of the re'eption of the epubli'Ds eviden'e, respondent 'ourt issued an order to refle't that the parties agreed on the follo/ing settings, vi(7 -1. 0uly 1), )((1 for the pre"trial 'onferen'e vis E vis the ?u'heng'osD 'o,plaint"in"intervention, and 0uly @( and August 4, )((1 for the re'eption of their eviden'eE and -). August )2 and Septe,ber 1), )((1, for the re'eption of the eviden'e for respondents Co9uang'os and P<$.@: $n the pre"trial 'onferen'e for the 'o,plaint"in"intervention 'ondu'ted on 0uly 1), )((1, the ?u'heng'os orally ,oved for the resetting of the s'heduled pre"trial as /ell as the trial dates previously agreed upon. &hey li6e/ise ,oved to 'hange the order of trial vis E vis respondents Co9uang'osFP<$, su'h that they -?u'heng'os. shall be presenting their eviden'e as plaintiffs"in" intervention only after Co9uang'osFP<$ shall have presented their defense eviden'e in relation to the epubli'Ds A,ended Co,plaint. Both ,otions /ere denied in open 'ourt. &he parties thereupon agreed on their trial dates. &he dispositive portion of the Ju5y 12, 2001 !r&8Tr1a5 Or*&r reads7 A<E EF% E, /ith this Pretrial %rder, the pretrial stage of this 'ase /ith respe't to plaintiff"in"intervention ? ealty Corporation is hereby ter,inated. As agreed upon by all the parties, let the trial on the ,erits be set on 0uly )1 and @(, )((1 for the re'eption of eviden'e for said plaintiff" intervenor, and on August 4, )2, )((1 and Septe,ber : and 1), )((1 for the turn of the defendants"intervenors to present their eviden'e. @1

At the initial s'heduled hearing on 0uly )1, )((1 for the presentation of their eviden'e as plaintiffs"in"intervention, the ?u'heng'os /ere unable to present any /itness to testify on their behalf. =i6e/ise, on 0uly @(, )((1, the ?u'heng'os ,anifested that the subpoenaed Atty. de 5uz,an and Atty. +er'ado"Ferrer /ere not in 'ourt. &his develop,ent pro,pted respondents Co9uang'osFP<$ to 'ounter" ,anifest that #e 5uz,anDs and +er'ado"FerrerDs testi,onies need not be ta6en any,ore, both having already been deposed and sub9e'ted to 'ross"e!a,ination, for /hi'h reason they -Co9uang'osF P<$. have /aived their right to 'ross"e!a,ine. At the ne!t hearing session G August 4, )((1 " the ?u'heng'os again ,oved for the 'an'ellation and resetting of the hearing on the ground that the /itness they intended to present on that day G one Nene &ra9ano " /as unavailable. &he respondent 'ourt denied the ,otion to 'an'el, and, in an open 'ourt order, dee,ed the ?u'heng'os as having /aived their right to present eviden'e, rationalizing as follo/s7 Ahen this 'ase /as 'alled for hearing today, Atty. =auren'e Arroyo appeared for the plaintiffs"in"intervention, . . ., and ,oved for the 'an'ellation of todayDs hearing as his . . . /itnesses are not present in Court. &he Court re,inded the plaintiffs"in"intervention that pre'isely the parties agreed on the trial dates for the, to present and ter,inate the presentation of their respe'tive eviden'e ! i.e.! the hearings for plaintiffs"in"intervention /ere set on 0uly )1, @(, and August 4, )((1 and for defendants"in"intervention on August )2, Septe,ber : and 1). $t appears that the plaintiffs"in"intervention failed to present their eviden'e on 0uly )1, @(, and in todayDs hearing. $n vie/ thereof, the plaintiffs"in"intervention are hereby dee,ed to have /aived their right to present further eviden'e and let the re'eption of eviden'e by the defendants"in"intervention be set on August )2, Septe,ber :, and 1), )((1 at 37@( in the ,orning, as previously s'heduled and agreed upon by the parties. @4 %n August 1:, )((1, the ?u'heng'os ,oved for a re'onsideration of the respondent 'ourtDs esolution of %ay 24, 2001, as reiterated in the open"'ourt %rder de'reed on 0uly 1), )((1. &he desired re'onsideration /as, ho/ever, denied per the respondent 'ourtDs R&(o5u)1on *a)&* S&')&2+&r ,, 2001.@3

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Corporation CASES Based on the Syllabus of Fr. Agustin &he ?u'heng'os re'eived a 'opy of the for,al %rder of August 4, )((1, on August 1:, )((1 and too6 due noti'e of the denying Septe,ber : esolution on Septe,ber 13, )((1. 8nable to a''ept these denials, the ?u'heng'os 'a,e to us via their present petition in G.R. No. 149802, on the singular ground that " ESP%N#EN& SAN#$5ANBA?AN C%++$&&E# 5 AHE AB8SE %F #$SC E&$%N, % AC&E# A$&<%8& % $N ENCESS %F $&S 08 $S#$C&$%N, $N $SS8$N5 &<E M8ES&$%NE# ES%=8&$%NS AN# % #E , A== %F A<$C< C%NS&$&8&E AN A B$& A ? #EN$A= %F PE&$&$%NE DS $5<& &% P E"& $A= #$SC%HE ?. $n the ,eanti,e, on August )1, )((1, the ?u'heng'os ,oved for a re'onsideration of the %rder of August 4, )((1, @2 but their ,otion for re'onsideration /as li6e/ise denied by the respondent 'ourt per its R&(o5u)1on *a)&* S&')&2+&r 28, 2001,;( saying7 !!! it appearing that the 'ourt, in various instan'es, had a''orded plaintiffs"in"intervention the opportunities to present their eviden'e but failed altogether to do so, thus effe'tively delaying the early disposition of the instant 'ase /hi'h has been pending for the last fourteen -1;. years. &he ?u'heng'os re'eived their 'opy of the )3, )((1 on %'tober 3, )((1. esolution of Septe,ber

$. !!! AE E #EP $HE# %F &<E$ $5<& &% P ESEN& EH$#ENCE AN# &<E$ #A? $N C%8 & $N H$%=A&$%N %F #8E P %CESS. $$. !!! S<%8=# N%& <AHE BEEN C%+P=E==E# &% P ESEN& EH$#ENCE A<EN ESP%N#EN&S EP8B=$CFPC55 <A# N%& ?E& F% +A==? %FFE E# &<E$ EH$#ENCE AN# ES&E# &<E$ CASE. $$$. !!! S<%8=# N%& <AHE BEEN C%+PE==E# &% P ESEN& EH$#ENCE BEF% E ESP%N#EN&S -#EFEN#AN&S. P<$FC%08AN5C%S. $H. !!! AE E 8N EAS%NAB=? B%8N# &% &<E SC<E#8=E %F & $A= $N &<E @( +A? )((1 % #E , C%NS$S&$N5 %F +E E=? @ & $A= #A&ES SPANN$N5 1@ #A?S. H. ESP%N#EN& SAN#$5ANBA?AN E %NE%8S=? F%8N# &<A& PE&$&$%NE S FA$=E# &% P ESEN& EH$#ENCE %N )1 AN# @( 08=? AN# 4 A858S& )((1. -Petition, 5. . No. 1:(@)(, p. )1. &o su,,arize, assailed and sought to be nullified by the ?u'heng'os in their 'ertiorari petitions in G.R. No. 149802 and G.R. No. 1,0-20, are the follo/ing related issuan'es of the respondent 'ourt7 -1. R&(o5u)1on *a)&* %ay 24, 2001, denying their *9rgent ,otion .o Suspend .rial Pending #iscover81and its Supple,entE -). Or*&r *a)&* Ju5y 12, 2001, denying their verbal ,otions for the re"setting of the agreed pre"trial and trial dates insofar as their 'o,plaint"in"intervention is 'on'erned or, in the alternative, for a 'hange in the order of trial so that Co9uang'osF P<$ be ,ade to present their eviden'e in relation to the 'o,plaint of petitioner epubli' ahead of the, -?u'heng'os., and the R&(o5u)1on *a)&* S&')&2+&r ,, 2001, denying re'onsideration of the R&(o5u)1on *a)&* %ay 24, 2001 and of the Or*&r o4 Ju5y 12, 2001E and -@. R&(o5u)1on *a)&* Au@u() ., 2001, de'laring the, as being dee,ed to have /aived their right to present eviden'e,

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%n %'tober 1), )((1, the respondent 'ourt re9e'ted the ?u'heng'osD further reIuests for the issuan'e of subpoenae to $,elda %. Co9uang'o, her son, Antonio, and three -@. other individuals. For, as e!plained by the respondent 'ourt, su'h reIuest is an atte,pt on the part of the ?u'heng'os to set to naught its earlier %rder 'onsidering the, as having /aived their right to present further eviden'e. <en'e, the ?u'heng'osD se'ond petition for certiorari, no/ do'6eted as G.R. No. 1,0-20, in /hi'h they as'ribe to the respondent 'ourt the 'o,,ission of grave abuse of dis'retion or of an a't in e!'ess of its 9urisdi'tion in issuing the %rder and esolution dated August 4, )((1 and Septe,ber )3, )((1, respe'tively. Pressing on, the ?u'heng'os argue that they "

Corporation CASES Based on the Syllabus of Fr. Agustin and the R&(o5u)1on *a)&* S&')&2+&r 28, 2001, denying re'onsideration of theR&(o5u)1on o4 Au@u() ., 2001. Apropos the ?u'heng'osD Se'ond A,ended Co,plaint"in" $ntervention, respondent Co9uang'osFP<$ filed on Septe,ber )(, )((1 a *,otion -or Summar8 Judgment1.;1 &hey 'ontended that the pleadings and affidavits on re'ord failed to tender any genuine issue on the alleged 'oer'ion and duress allegedly e!erted by the late Pres. +ar'os andFor the Co9uang'o group. A''ording to the,, the desired re'overy of P=#& shares sought under the Se'ond A,ended Co,plaint"in"$ntervention is an'hored on su'h 'oer'ion and duress e,ployed. &o this ,otion for su,,ary 9udg,ent, the ?u'heng'os interposed an opposition, follo/ed by a supple,ent to opposition. %n the basis of the foregoing ante'edents, and a'ting on the ,otion for su,,ary 9udg,ent, the respondent 'ourt rendered its assailed !ar)1a5 &;1(1on.;) Feeling aggrieved, 9ust li6e the epubli', over the dis,issal of their P=#& shares 'lai,s, the ?u'heng'os have 'hallenged in their petition in G.R. No. 1,-20. the aforesaid !ar)1a5 &;1(1on, raising the follo/ing issues for resolution7 $. &he Sandiganbayan gravely erred /hen it insisted on rendering the Iuestioned Partial #e'ision despite the penden'y of 5. . Nos. 1;23() and 1:(@)(. $$. &he Sandiganbayan gravely erred in 'onfining the presentation of petitionersD eviden'e to three -@. hearing dates spanning less than t/o -). /ee6s. $$$. &he Sandiganbayan gravely erred in granting respondents P<$FCo9uang'osD +otion for Su,,ary 0udg,ent. $H. &he Sandiganbayan gravely erred in finding that the sub9e't P&$C shares do not parta6e of the 'hara'ter of ill" gotten /ealth. -Petition, 5. . No. 1:@)(4, pp. @@"@;. "$. THE COURTCS RUL"NG As a ,atter of sound and long appellate pra'ti'e, the Court, before 'onsidering the ,erits of a petition before it, loo6s into the ,atter of

ti,eliness and a''ordingly /ould dis,iss or other/ise deny further due 'ourse to petitions for non"'o,plian'e /ith the 9urisdi'tional caveat on ti,eliness of filing. &he threshold Iuestion, therefore, is /hether or not all the five -:. petitions at bar /ere ti,ely filed. La"eness an& Moo"ness of the Petition in G.R. '4. (./5*3 A revie/ of the re'ords 'learly indi'ates that the ?u'heng'osD petition for 'ertiorari in G.R. No. 149802 /as filed out of ti,e. As it /ere, there 'an hardly be any Iuibbling that the esolution of +ay );, )((1 assailed thereby is interlo'utory in 'hara'ter. For, respondent 'ourtDs refusal to suspend trial until the ?u'heng'os shall have 'o,pleted their dis'overy did not ter,inate the 'ase. Further pro'eedings /ere still reIuired, su'h as the further re'eption of eviden'e for all parties, in'lusive of the ?u'heng'os . $n his ponencia in Investments! Inc. vs. Court of "ppeals,;@ then 0usti'e and later Chief 0usti'e Andres Narvasa e!plained the nature of an interlo'utory order and ho/ it differs /ith one that is final7 &he 'on'ept of 1final +udgment*, as distinguished fro, one /hi'h has *be'o,e final* -or *e!e'utory* as of right Bfinal and e!e'utoryC., is definite and settled. A *final* 9udg,ent or order is one that finally disposes of a 'ase, leaving nothing ,ore to be done by the Court in respe't thereto, e.g., an ad9udi'ation on the ,erits /hi'h, on the basis of the eviden'e presented at the trial, de'lares 'ategori'ally /hat the rights and obligations of the parties are and /hi'h party is in the rightE or a 9udg,ent or order that dis,isses an a'tion on the ground, for instan'e, ofres +udicata or pres'ription. %n'e rendered, the tas6 of the Court is ended, as far as de'iding the 'ontroversy or deter,ining the rights and liabilities of the litigants is 'on'erned. Nothing ,ore re,ains to be done by the Court e!'ept to a/ait the partiesD ne!t ,ove . . . and ulti,ately, of 'ourse, to 'ause the e!e'ution of the 9udg,ent on'e it be'o,es 1final* or, to use the established and ,ore distin'tive ter,, *final and eFecutor8*. !!! !!! !!! Conversely, an order that does not finally dispose of the 'ase, and does not end the CourtDs tas6 of ad9udi'ating the partiesD 'ontentions and deter,ining their rights and liabilities as regards ea'h other, but obviously indi'ates that other things re,ain to be done by the Court, is *interlo'utory*, e.g., an order denying a ,otion to dis,iss under ule 11 of the ules, . . . . 8nli6e a *final1 9udg,ent or order, /hi'h is

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Corporation CASES Based on the Syllabus of Fr. Agustin appealable, as above pointed out, an Kinterlo'utoryD order ,ay not be Iuestioned on appeal e!'ept only as part of an appeal that ,ay eventually be ta6en fro, the final 9udg,ent rendered in the 'ase. -at pp. @@2"@;(. Follo/ing Investments! Inc., the re,edy of an appeal fro, the interlo'utory +ay );, )((1 %rder /as unavailing to the ?u'heng'os, thus the propriety of their 'o,ing to this Court, /ith respe't to that order, in G.R. No. 149802 viaa spe'ial a'tion for 'ertiorari under ule 1: of the ules of the Court. $t ,ay be re'alled, ho/ever, that prior to the filing of their petition in 5. . No. 1;23(), the ?u'heng'os first urged the respondent 'ourt for a re'onsideration of its %ay 24, 2001 R&(o5u)1on, a 'opy of /hi'h they re'eived, by their o/n ad,ission, on 0une 4, )((1. &he 'orresponding ,otion filed on Au@u() 1,, 2001 also sought the re'onsideration of the open"'ourt Or*&r *a)&* Ju5y 12, 2001. 5iven these defining dates, there is a need to loo6 into the ti,eliness of the said ,otion as a preli,inary step to deter,ine the ti,eliness of the ?u'heng'osD petition in G.R. No. 149802 itself. &he rule on the filing of petitions for 'ertiorari is e,bodied in Se'tion ;, ule 1: of the ules of Court, partly reading " SEC. ;. Ahen and where petition filed. G &he petition ,ay be filed not later than si!ty -1(. days fro, noti'e of the 9udg,ent, order or resolution. $n 'ase a ,otion for re'onsideration or ne/ trial is ti,ely filed, /hether su'h ,otion is reIuired or not, the si!ty -1(. day period shall be 'ounted fro, noti'e of the denial of said ,otion. ;; As the rule no/ thus stands, the 1("day regle,entary period /ithin /hi'h to file a petition for 'ertiorari shall be re'6oned fro, noti'e of the resolution or order sought to be nullified, save /hen a ,otion for re'onsideration isti,ely filed in /hi'h 'ase the 1("day period shall start fro, re'eipt of the denial of su'h ,otion. A 'orollary rule, subsu,ed in the sa,e Se'tion ; of ule 1:, applies in the event it is deter,ined that a ,otion for re'onsideration is not ti,ely. $n su'h a situation, a party see6ing to avail hi,self of the re,edy of 'ertiorari under the sa,e ule 1:, does not have a ne/ 1("day period fro, re'eipt of the denial of the ,otion for re'onsideration, /ithin /hi'h to file the petition. As su'h, the ti,eliness of the petition ,ust be re'6oned fro, the date of noti'e

or re'eipt of the order or resolution assailed, as if no ,otion for re'onsideration /as filed. 5iven the follo/ing seIuen'e of events7 a 'opy of the +ay );, )((1 resolution /as re'eived on 0une 4E the ,otion for re'onsideration thereof /as filed on August 1:, /ith a 'opy of the resolving issuan'e dated Septe,ber : re'eived on Septe,ber 13, the Iuestion that no/ 'o,es to fore is7 *is a vis the +ay );, )((1 resolution, /as the ,otion for its re'onsideration filed on August 1:, )((1 ti,ely, so that the ?u'heng'os 'an validly re'6on, as they in fa't did, the 1(" day period fro, their re'eipt on Septe,ber 13, )((1 of the Septe,ber :, )((1 esolution denying re'onsideration of the esolution of +ay );, )((1 9ointly /ith the %rder of 0uly 1), )((1L &o ans/er the poser, a deter,ination ,ust first be ,ade as to /hen should a ,otion for re'onsideration of an interlo'utory order be filed. $n #enso 3Phils.4! Inc. vs. .he Intermediate "ppellate Court! et al.!;:this Court ruled that a ,otion for re'onsideration of an interlo'utory order is not sub9e't to the usual li,iting fifteen"day period of appeal pres'ribed for final 9udg,ents or orders. &he #enso ruling, ho/ever, stopped short of dire'tly addressing the issue of pre'isely /hen should a party file a ,otion for re'onsideration of an interlo'utory order. For, apart fro, saying that su'h ,otion is not sub9e't to the 1:"day"appeal"period rule, it ,erely held that ,oving for re'onsideration after the lapse of a @3"day period after re'eipt of the assailed order is not unreasonable. Ahile the ules of Court has no spe'ifi' provision dealing dire'tly /ith the Iuestion, Se'tion ; of ule 1: provides a logi'al ans/er. &a6en in its proper perspe'tive, the 'lause *not sub9e't to the li,iting 1:"day period for appeal pres'ribed for final 9udg,ents or orders* 'annot plausibly be stret'hed to ,ean that the period to as6 for re'onsideration of an interlo'utory order 'an e!'eed the 1("day threshold pres'ribed under the Se'tion ; of ule 1: for filing a petition for 'ertiorari. Else, a legal aberration /ould ensue /here a party /ho has ,erely 1( days fro, noti'e of an adverse interlo'utory order to interpose a spe'ial a'tion for 'ertiorari /ould be allo/ed a longer period to ,ove for re'onsideration of su'h order. Aithal, the filing of the ?u'heng'osD ,otion for re'onsideration of the esolution of +ay );, )((1 on August 1:, )((1, /hi'h is the 69)3 *ay fro, noti'e of the said esolution on 0une 4, )((1, is beyond the 1("day period pres'ribed under the present Se'tion ; of

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Corporation CASES Based on the Syllabus of Fr. Agustin ule 1:, and is, therefore, late. Perfor'e, and as dis'ussed earlier, their petition in G.R. No. 149802 itself /as belatedly filed. $n fine, for la'6 of a ti,ely ,otion for re'onsideration of the +ay );, )((1 esolution, the sa,e has, in a ,anner of spea6ing, thereby be'o,e final and e!e'utory. Certiorari, insofar as the said resolution is 'on'erned, is no longer available. Apropos the %rder of 0uly 1), )((1, this Court is of the vie/ that the sa,e petition in 5. . No. 1;23() has, /ith respe't to su'h order, be'o,e ,oot and a'ade,i'. As /e loo6 ba'6 at the in'idents sub9e't of the stated order, the ?u'heng'os had ,oved that the trial be suspended to a/ait the 'o,pletion of their dis'overy pro'edure or, in the alternative, for respondents Co9uang'osFP<$ to present their eviden'e, vis"V"vis the 'lai, of petitioner epubli', ahead of the, -?u'heng'os.. By this desired variation of the order of trial, the ?u'heng'os /ere, as /e see it, a'tually hoping to be given additional trial dates for presentation of eviden'e on top of those dates allotted the, but did not utilize. %/ing, ho/ever, to the pro,ulgation of the !ar)1a5 &;1(1on dated April ):, )((), /e 'an assu,e that during the penden'y of the petition in G.R. No. 149802, petitioner epubli' and respondent Co9uang'osFP<$ had, in the separate trial on the P=#& shares, already finished /ith the presentation of their eviden'e and have rested their 'ase, the latter in relation to both the epubli'Ds A,ended Co,plaint and the ?u'heng'osD Co,plaint"in" $ntervention. $n net effe't, the 'hange in the order of presentation of eviden'e veritably sought in G.R. No. 149802 'an no longer be granted, or, if granted, 'an no longer be i,ple,ented. $t is, therefore, futile to belabor, let alone rule, on the ,erits of this parti'ular petition insofar as it relates to the Or*&r o4 Ju5y 12, 2001. &i,e and again, /e have said that 'ourts e!ist to de'ide a'tual 'ontroversies, and do not render opinions on ,oot 'ases. .he Due Process Issue in G.R. '46. ()*+3* an& ()*+,&he Court shall first pass upon the issue of due pro'ess, or la'6 of it, to be pre'ise, unifor,ly invo6ed in G.R. No(. 1,0-20 and 1,0-6.. $f non"observan'e of the reIuire,ents of due pro'ess indeed tainted the separate trial belo/, then the resolution on the issue of the substantive 'orre'tness of the !ar)1a5 &;1(1on raised in petitions for revie/ in G.R. No. 1,-4,9 and G.R. No. 1,-20. should be 'lear, si,ple and unavoidable. For, a 9udg,ent arrived at after a trial

,arred by la'6 of due pro'ess deserves to be i,,ediately stru'6 do/n as a nullity. $t ,ay be /ell to revisit the various issuan'es sought to be annulled under ule 1: of the ules of Court on due pro'edural ground. Spe'ifi'ally, petitioner epubli' assails, in G.R. No.1,0-6., the respondent 'ourtDs Or*&r*a)&* %ay -0, 2001 denying its ,otion for additional ti,e to present its eviden'e, as /ell as the Or*&r *a)&*S&')&2+&r ,, 2001 reIuiring the sa,e petitioner to file and ter,inate its for,al offer of eviden'e /ithin @( days. %n the other hand, in G.R. No. 1,0-20, the ?u'heng'os urge the annul,ent of the Au@u() ., 2001 andS&')&2+&r 28, 2001 R&(o5u)1on( in /hi'h they /ere dee,ed by the respondent 'ourt to have /aived their right to present further eviden'e. At botto,, respondent 'ourt issued these assailed orders andFor resolutions o/ing to both petitionersD failure to 'o,plete the presentation of their respe'tive eviden'e /ithin the agreed trial dates, a failure /hi'h, if allo/ed to 'ontinue, /ould, in the eyes of that 'ourt, further derail the early disposition of Civil Case No. (((). $t 'ould have been that the respondent 'ourt /as, in the end, a'tuated by the desire to resolve a 'ase that has been pending for the last fourteen -1;. years. And this, in hindsight, is not an idle spe'ulation on our part as respondent 'ourt /ould later /rite in its !ar)1a5 &;1(1on, 'iting %epublic vs. Sandiganba8an!;1 the follo/ing7 Ae stress that the resolution of the 'o,plaint"in"intervention, along /ith the prin'ipal 'ase, is long overdue. Ahat the Supre,e Court has said in this regard four years ago has a'Iuired even greater urgen'y today G K!!! Eleven years have passed sin'e the govern,ent started its sear'h for and reversion of su'h alleged ill"gotten /ealth. &he definitive resolution of su'h 'ases on the ,erits is thus long overdue. $f there is adeIuate proof of illegal a'Iuisition, a''u,ulation, ,isappropriation, fraud or illi'it 'ondu't, let it be brought no/ . . .D $t 'annot be gainsaid that the respondent 'ourt ,erely e!er'ised its dis'retion to order G and to be guided by su'h order " the ter,ination of the respe'tive presentation of eviden'e by both petitioners ?u'heng'os and epubli' or to set a li,iting ti,etable for su'h presentation. Ae are loathe to disturb su'h e!er'ise of 9udi'ial dis'retion /hi'h has spa/ned the petitions for 'ertiorari in G.R. No. 1,0-20 and G.R. No. 1,0-6.. For, 9urispruden'e tea'hes that 'ertiorari lies only /hen the tribunal a'ts /ithout or oversteps its

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Corporation CASES Based on the Syllabus of Fr. Agustin 9urisdi'tion, or gravely abuses its dis'retion, ;4 as /hen the po/er is e!er'ised in an arbitrary or despoti' ,anner by reason of passion, pre9udi'e or personal hostility.;3 &he abuse ,ust, in fine, be of su'h degree as to a,ount to an evasion of positive duty, or a virtual refusal to perfor, a duty en9oined, or to a't at all, in 'onte,plation of la/, as to be eIuivalent to having a'ted /ithout 9urisdi'tion. ;2 Ahat /e said in :ee! et al. vs. People:(is also apropos, vi(.7 !!! Certiorari ,ay not be availed of /here it is not sho/n that the respondent 'ourt la'6ed or e!'eeded its 9urisdi'tion over the 'ase even if its findings are not 'orre't. $n other /ords, 'ertiorari /ill issue only to 'orre't errors or 9urisdi'tion and not to 'orre't errors of pro'edure or ,ista6es in the 'ourtDs findings and 'on'lusions. An interlo'utory order ,ay be assailed by 'ertiorari only /hen it is sho/n that the 'ourt a'ted /ithout or in e!'ess of 9urisdi'tion or /ith grave abuse of dis'retion. <o/ever, this Court generally fro/ns upon this re,edial ,easure as regards interlo'utory orders. &o tolerate the pra'ti'e of allo/ing interlo'utory orders to be the sub9e't of revie/ by 'ertiorari /ill not only delay the ad,inistration of 9usti'e but /ill also unduly burden the 'ourts. -At pp. ;()"(@. Co,ple,enting :ee is "mpelo'uio! Sr. vs. Court of "ppeals :1/here /e /rote7 !!! $f every error 'o,,itted by the trial 'ourt /ere to be a proper ob9e't of revie/ by 'ertiorari, the trial /ould never 'o,e to an end and the appellate 'ourtsD do'6ets /ould be 'logged ad infinitum /ith the aggrieved parties"litigants filing petitions against every interlo'utory order of the trial 'ourt. Su'h a situation 'ould only under,ine the proper 'ondu't of litigation before the 'ourts and ought not to be tolerated if /e are to enhan'e the pro,pt ad,inistration of 9usti'e at every level of the 9udi'ial hierar'hy. $n the light of the foregoing do'trinal holdings, /e 'an say /ithout fear of 'ontradi'tion that not every erroneous interlo'utory order, if that be the 'ase, is 'orre'tible by 'ertiorari. Ae grant 'ertiorari only upon 'lear sho/ing that the trial 'ourt issued its 'hallenged interlo'utory order /ithout or in e!'ess of 9urisdi'tion or in grave abuse of dis'retion a,ounting to la'6 of 9urisdi'tion. Conversely,

absent the vitiating ele,ent of /ant or e!'ess of 9urisdi'tion, 'ertiorari is unavailing as a re,edy. Ae thus sustain as defensible, nay 'orre't, under the obtaining fa'tual ,ilieu and 'ertainly /ithin the 9urisdi'tion of the respondent 'ourt, the issuan'e of the assailed orders and resolutions respe'ting the presentation of eviden'e. As it /ere, petitioners epubli'Ds and ?u'heng'osD respe'tive 'ertiorari petitions basi'ally rest on the postulate that the respondent 'ourt violated their right to due pro'ess of la/ /hen it refused to grant the, /hat basi'ally /ere reIuests for further postpone,ents to further re'eive their respe'tive eviden'e. =est it be overloo6ed, the ,atter of granting or denying a plea for 'ontinuan'e or postpone,ent is, as a rule, addressed to the sound dis'retion of the trial 'ourt. :) $n 1211, or so,e eighty nine -32. years ago, the land,ar6 'ase of :ino :una vs. "rcenas!:@e!pounded on the 9uridi'al 'on'ept of *discretion* in the follo/ing /ise7 $n its very nature, the dis'retionary 'ontrol 'onferred upon the trial 9udge over the pro'eedings had before hi, i,plies the absen'e of any hard"and"fast rule by /hi'h it is to be e!er'ised, and in a''ordan'e /ith /hi'h it ,ay be revie/ed. But the dis'retion 'onferred upon the 'ourts is not a /illful, arbitrary, 'apri'ious and un'ontrolled dis'retion. $t is a sound, 9udi'ial dis'retion /hi'h should al/ays be e!er'ised /ith due regard to the rights of the parties and the de,ands of eIuity and 9usti'e. As /as said in the 'ase of &he Styria vs. +organ -131 8.S., 1, 2.7 *&he establish,ent of a 'learly defined rule of a'tion /ould be the end of dis'retion, and yet dis'retion should not be a /ord for arbitrary /ill or in'onsiderate a'tion.* So in the 'ase of 5ood/in vs. Pri,e -2) +e., @::., it /as said that *dis'retion i,plies that in the absen'e of positive la/ or fi!ed rule the 9udge is to de'ide by his vie/ of e!pedien'y or by the de,ands of eIuity and 9usti'e.* &here being no *positive la/ or fi!ed rule* to guide the 9udge in the 'ourt belo/ in su'h 'ases, there is no *positive la/ or fi!ed rule* to guide a 'ourt of appeal in revie/ing his a'tion in the pre,ises, and su'h 'ourts /ill not therefore atte,pt to 'ontrol the e!er'ise of dis'retion by the 'ourt belo/ unless it plainly appears that there /as *in'onsiderate a'tion* or the e!er'ise of ,ere *arbitrary /ill,* or in other /ords that his a'tion in the pre,ises a,ounted to *an abuse of dis'retion.* But the right of an appellate 'ourt to revie/ 9udi'ial a'ts /hi'h lie in the dis'retion of inferior 'ourts ,ay properly be

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Corporation CASES Based on the Syllabus of Fr. Agustin invo6ed upon a sho/ing of a strong and 'lear 'ase of abuse of po/er to the pre9udi'e of the appellant, or that the ruling ob9e'ted to rested on an erroneous prin'iple of la/ not vested in dis'retion. &he do'trine, supported by nu,erous 'itations of authority, is thus stated in the En'y'lopedia of Pleading and Pra'ti'e -vol. ), pp. ;11, ;13.7 "buse of discretion. " A''ordingly, /here the po/er is so e!er'ised as to deprive a party of a legal right, or unduly benefit one party at the e!pense of the other, or /here, generally, the in9usti'e or ine!pedien'y of the a't is so 'lear as to sho/ beyond a reasonable doubt the violation of eIuitable 'onsiderations, the a't of de'ision is al/ays revie/able in so,e for, on appeal, as an abuse of po/er. KPresumption. " &he presu,ption on appeal that the e!er'ise of dis'retionary po/ers /as sound is very strong. &he appellant ,ust rebut it by sho/ing a strong and 'lear 'ase of abuse of po/er to his pre9udi'e, or that the de'ision belo/ rested on an erroneous prin'iple of la/ not vested in dis'retion. A ,ere ,ista6e of 9udg,ent, or a differen'e in opinion bet/een the appellate and the trial 'ourt, is not suffi'ient.D $t 'annot be stressed enough that postpone,ents have a /ay of 'ausing delays of the ve!atious 6ind. Aith this in ,ind and /ith respe't to the spe'ifi' issue before us, /e are no/ 'onfronted /ith the tas6 of har,onizing t/o -). basi', but not ne'essarily irre'on'ilable, rights et'hed no less in the Bill of ights. Ae refer to the right to due pro'ess, on one hand, and the right to speedy trial, on the other. &his underta6ing be'o,es all the ,ore ,ade diffi'ult by the star6 reality that these petitions involve * ill gotten wealth1 reputedly a,assed by the +ar'os fa,ily, their friends and for,er business asso'iates /here, as in several li6e 'ases, the Court itself di'tated a resolution in * utmost dispatch*, albeit a'6no/ledging in the sa,e breath that * over and above the eFigencies of recovering ill gotten wealth! we must carr8 out the more pressing constitutional tas$ of seeing to it that all parties are afforded due processes and substantial +ustice1! stressing that this burden e!tends 1G0Hven to those suspected . . . of having ac'uired and2or accumulated ill gotten wealthI1 :; $t is, therefore, /ell"nigh apropos to har6 on 9udi'ial pre'edents on the t/o 'onstitutional rights adverted to above.

$n the abstra't *due process* has been des'ribed as nothing ,ore and nothing less than *the embodiment of the sporting idea of fair pla8.*:: $ts irredu'ible ,ini,u, reIuire,ents are noti'e and hearing,:1 the right to be heard being its ,ost basi' tenet. :4 $n PCIB vs. Court of "ppeals!:3/e held that the essen'e of due pro'ess is that a party is afforded a reasonable opportunity to be heard in support of his 'aseE /hat the la/ abhors and prohibits is the absolute absen'e of the opportunity to be heard. <en'e, a party 'annot feign denial of due pro'ess /hen, having been afforded the opportunity to present his side, 'hooses, for /hatever reason, not to be heard.:2 %n the other hand, the right to speedy trial, as an ad9un't to the right of all persons to a speedy disposition of their 'ases before 9udi'ial, Iuasi"9udi'ial, or ad,inistrative bodies, reIuires that 'ourt pro'eedings should be 'ondu'ted a''ording to fi!ed rules and ,ust be free fro, ve!atious, 'apri'ious and oppressive delays. 1( $n the deter,ination of /hether or not the right to speedy trial has been violated, the fa'tors that ,ay be 'onsidered and balan'ed are length of delay, reason for the delay, assertion of the right or failure to assert it, and pre9udi'e to 'ounsel by the delay.11 5iven the foregoing perspe'tive, it /as in 6eeping /ith the i,peratives of speedy trial for the respondent 'ourt, in the e!er'ise of its dis'retion, to issue the ordersFresolutions assailed in G.R. No. 1,0-20 and G.R. No. 1,0-6. as a ne'essary 'onseIuen'e to its denial of petitionersD innu,erable ,otions for postpone,ent. An old but still good de'isional la/ holds that the postpone,ent of the hearing of a 'ase, /hi'h had been previously set /ith due noti'e to the parties and their attorneys, is not an absolute right of the litigants nor of their 'ounsel. 1) %/ing, ho/ever, to the pra'ti'e that persists to this day, /e a'6no/ledged the stubborn reality that 'ontinuan'es and postpone,ents for, part of the pro'edural syste, of dispensing 9usti'e.1@ But even so, the Court has already ta6en ,easures to 'leanse the syste, of this pra'ti'e /hi'h, /hen abused, as it has often been abused, leads to * the wheels of +ustice grinding to a halt1. %ne refor,ative step is the ,andatory 'ontinuous trial s'he,e pres'ribed under Supre,e Court -SC. Ad,inistrative %rder No.;, series of 1233, in relation to SC Cir'ular No. 1"32. 8nder this s'he,e, *trials are to be held on the scheduled dates without needless postponements! the factual issues for trial well defined at pre trial and the whole proceedings terminated and read8 for +udgment within ninet8 3>D4 da8s from the date of the initial hearing! unless! for meritorious reasons! an eFtension is permitted*. Follo/ing

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Corporation CASES Based on the Syllabus of Fr. Agustin a trial period involving the parti'ipation of designated pilot 'ourts, the Court issued Ad,inistrative Cir'ular -AC. No. @"2(, series of 122(, de'reeing the adoption of the ,andatory 'ontinuous trial syste, starting February 1:, 122(, in all trial 'ourts. Not to be overloo6ed as another ,easure to/ards a speedy disposition of 'ases is the issuan'e of SC Ad,inistrative Cir'ular No. @"22 pres'ribing guidelines on effe'tive ,anage,ent of 'ases to ensure their speedy disposition. So,e highlights7 B. .rial -:. &he 9udge shall 'ondu't trial /ith ut,ost dispat'h, /ith 9udi'ious e!er'ise of the 'ourtDs po/er to 'ontrol trial pro'eedings to avoid delay. !!! !!! !!! -4. &he trial shall be ter,inated /ithin ninety -2(. days fro, initial hearing. Appropriate dis'iplinary san'tions ,ay be i,posed on the 9udge and the la/yers for failure to 'o,ply /ith this reIuire,ent due to 'auses attributable to the,. -3. Ea'h party is bound to 'o,plete the presentation of his eviden'e /ithin the trial dates assigned to hi,. After the lapse of said dates, the party is dee,ed to have 'o,pleted the presentation of eviden'e. <o/ever, upon verified ,otion based on 'o,pelling reasons, the 9udge ,ay allo/ a party additional trial dates in the afternoonE provided that said e!tension /ill not go beyond the three",onth li,it 'o,puted fro, the first trial date e!'ept /hen authorized in /riting by the Court Ad,inistrator, Supre,e Court. $t is thus abundantly 'lear that the ,andatory 'ontinuous trial s'he,e, the guidelines on trial, and, to a signifi'ant level, the ideal arti'ulated in %epublic 3PCGG4 vs. Sandiganba8an1;to resolve *ill gotten wealth cases1 /ith ut,ost dispat'h, 'ir'u,s'ribed, in a /ay, the respondent 'ourtDs other/ise /ide latitude in the 'ondu't of its pro'eedings. At botto,, then, respondent 'ourt a'ted /ith so,e degree of 'ir'u,spe'tion and, doubtless, /ell /ithin its authority /hen, in its assailed issuan'es in G.R. No. 1,0-6., it refused to a''o,,odate petitioner epubli' /ith additional trial dates and ordered it to file its for,al offer of e!hibits and rest its 'ase. &he sa,e 'on'lusion applies to petitioner ?u'heng'os in G.R. No.

1,0-20. 5rave abuse of dis'retion 'annot be as'ribed on the respondent 'ourt in -i. pro'eeding to hear the eviden'e of the ?u'heng'os on the agreed trial dates of 0uly )1 and @( and August 4, )((1, -ii. refusing to reset the hearings to later dates, and -iii. de'laring the, to have effe'tively /aived their right to present further eviden'e /hen they /ere still /ithout eviden'e or /itness on the last trial date. &here is hardly any dispute that these /ere trial dates previously agreed upon and to /hi'h the ?u'heng'os 'o,,itted to abide. And under the 'ited 5uidelines on &rial, petitioner ?u'heng'os /ere bound to 'o,plete the presentation of their eviden'e /ithin the trial dates assigned to the,. =i6e/ise, at the end of the trial dates, they /ere dee,ed to have 'o,pleted /ith the presentation of their eviden'e. $t /ould be an aberration for the Court to fault and reverse the graft 'ourt for follo/ing /hat it has en9oined the latter to observe in the first pla'e. As to petitioner epubli', it /as given, per our o/n 'ount, no less than t/enty -)(. trial dates. &here /ere, in fa't, ,ore trial settings than those agreed upon and dire'ted in the pre"trial of +ay ):, )(((. &he a''o,,odating attitude of the graft 'ourt to/ards petitioner epubli' did not es'ape petitioner ?u'heng'osD noti'e. Ahile perhaps a bit e!aggerated, petitioner ?u'heng'os state,ent in page 33 of their *Consolidated +e,orandu,* that 1not once did Gthe Sandiganba8anH den8 their 3%epublic)s4 re'uests to cancel scheduled hearings* belies the epubli'Ds la,ent that the respondent 'ourt did not a''ord it * fair! ade'uate and reasonable opportunit8 to present all evidence the8 consider vital1. &he proble, lies not in the alleged unreasonable refusal of the respondent 'ourt to grant the epubli' ,ore trial dates, but, as the respondent 'ourt aptly suggested, in the epubli'Ds innu,erable reIuests for 'an'ellation and resetting of hearings, on one prete!t after another, /hi'h, at the end of the day, refle'ted on the unpreparedness of its set of 'ounsels and the see,ing unavailability of ad,issible ,aterial eviden'e. Aith the vie/ /e ta6e of the 'ase, petitioner epubli' sought, but in vain, to present respondent +rs. +ar'os, it being its posture that her testi,ony " after she had announ'ed to the four /inds that the +ar'os fa,ily o/ns the disputed P=#& shares in the na,e of respondent Co9uang'osFP<$ " /ould have been vital to its 'ase. $roni'al as it ,ay sound, petitioner epubli' see,s to i,ply by its 'onsu,ing bid to have +rs. +ar'os on the /itness stand that it 'annot adeIuately prove its 'ase /ithout her testi,ony. For, ho/ else e!plain the fa't that it footnoted its

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Corporation CASES Based on the Syllabus of Fr. Agustin For,al %ffer of Eviden'e /ith the reservation to have her testify, if so allo/ed by this CourtL &o be sure, /e have ta6en note of petitioner epubli'Ds assertion that respondent 'ourt gave its /ord during the +ar'h )1, )((1 hearing that it 'an present +rs. +ar'os after all of its intended /itnesses shall have testified. &his assuran'e, if indeed given, 'annot be ta6en to ,ean, ho/ever, that the 'ourt has to forever a/ait her testi,ony. &he refusal to grant petitioner epubli' additional trial dates 9ust to have the un/illing +rs. +ar'os testify is understandable, /hen ta6en in the perspe'tive of ve!atious delays 9u!taposed /ith the epubli'Ds 'ounselDs 'o,,it,ent given in one of the hearings to finish /ith the presentation of eviden'e /ith or /ithout her testi,ony. As /e refer to the re'ords, /e see that the first ti,e petitioner epubli' ,anifested its intention to present +rs. +ar'os as its hostile /itness /as during the hearing of 0anuary )2, )((1. But the su''eeding s'heduled hearing dates, i.e, 0anuary @( and @1, )((1, February 1, ), and 2, +ar'h 1), 1@, 1;, 1:, )1, )4, and )3, +ay 4, 2, 11 and )3, )((1 'a,e and /ent /ithout +rs. +ar'os testifying as a /itness of petitioner epubli'. $t is in fa't not a,iss to say that all these s'heduled hearings /ere, at the instan'e of petitioner epubli', 'an'elled or reset to other dates, either be'ause of the unavailability of the intended /itness or the govern,ent handling 'ounsel /as ill prepared for trial. &he ?u'heng'os /ere no better. &hey agreed to present their eviden'e on 'ertain trial dates, but /ere unable to do so in any of those trial dates, in'lusive of the last s'heduled hearing. $n any event, the depositions of Attys. de 5uz,an and +er'ado"Ferrer, together /ith that of 5regorio o,ulo, /ere re'eived in eviden'e for said petitioners over the ob9e'tions of the adverse parties. +oreover, petitioner ?u'heng'os /asted their trial dates by their unyielding insisten'e on presenting /itnesses /ho have already been deposed, and even after respondents Co9uang'osFP<$ anti'ipatorily ,anifested their intention to /aive their right to further 'ross"e!a,ine the deponents. Ahile perhaps a bit anti"'li,a'ti' to state at this 9un'ture, there /as no atte,pt to present petitioner ?u'heng'o hi,self, /hen it /ould see, that he /as in the best of position to testify on his andFor ? ealty CorporationDs 'lai, over the P&$C and P=#& shares or on the alleged duress e!erted on hi, by the +ar'oses or the Co9uang'o group. Neither do /e find persuasive 'ogen'y in the ?u'heng'osD posture that the separate trial should have been suspended to a/ait the

'o,pletion of their dis'overy efforts. For, su'h arrange,ent, if allo/ed and put in ,otion, /ould have veritably provided said petitioners /ith tools to 'ause the indefinite suspension of the separate trial by the 'onvenient plea of inadeIuate avail,ent of dis'overy. Besides, /e are at loss to understand the ?u'heng'osD 'ontention about their inability to underta6e dis'overy pro'edure until this Court reinstated their A,ended Co,plaint"in"$ntervention heretofore dis,issed by the respondent 'ourt. &here is no rule, and the ?u'heng'os have 'ited none G pre'luding the, fro, underta6ing su'h dis'overy pro'edure prior to the reinstate,ent a'tion of this Court. Neither is there any rule reIuiring the suspension of trial 9ust to allo/ a party"litigant to 'o,plete dis'overy pro'edure. And, /hen /e ta6e into sto'6 of respondent 'ourtDs 'onstant re,inders to the 'ontending parties to observe the trial s'hedule in vie/ of the length of ti,e that Civil Case No. ((() has been pending, petitioners epubli' and ?u'heng'os have, in the final re'6oning, only the,selves to point at for their present plight. &he re'orded fa'ts indi'ate that they /ere not denied the opportunity to be heard. Finally, /e 'annot /rite finis to the due pro'ess issue /ithout resolving the Iuestion of /hether the respondent 'ourt, through the use of its 'oer'ive po/ers, 'ould have had 'o,pelled +rs. +ar'os to be petitioner epubli'Ds hostile /itness and testify on the 'ir'u,stan'es surrounding their -the +ar'os fa,ily. 'lai,ed a'Iuisition and o/nership of the disputed P=#& and P&$C shares. &he Court only has to re'all that /hen +rs. +ar'os refused to ,a6e a 'ourt appearan'e for petitioner epubli', she invo6ed her right against self"in'ri,ination under Arti'le $$$, Se'tion 14 of the Constitution.1: She /as 'orre't. She 'annot be 'o,pelled to testify /ithout violating her 'onstitutional right against self"in'ri,ination. As she aptly observed, Civil Case No. (((), /hile basi'ally a 'ivil suit, is penal in nature, sin'e it is, for all intents and purposes, a forfeiture pro'eeding, ta6en under and pursuant to E% Nos. 1 and ), series of 1231.11 &hese t/in issuan'es indeed see6, as ulti,ate ob9e'tive, the *recover8 of all ill gotten wealth accumulated b8 former President -erdinand 0. ,arcos! his immediate famil8! relatives! subordinates and close associates1, and the properties being 'onte,plated to be re'overed being those *funds! mone8s! assets and properties illegall8 ac'uired or misappropriated * by said persons G thus, sta,ping upon the 'ivil suit the 'hara'teristi's of a forfeiture pro'eedings.

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Corporation CASES Based on the Syllabus of Fr. Agustin &he suggestion that the right against 'o,pulsory self"in'ri,ination ,ay be invo6ed only in 'ri,inal pro'eedings is valid to a 'ertain e!tent, but not enough 9ustifi'ation to 'o,pel +rs. +ar'os to testify against her volition, given the penal 'hara'teristi's of Civil Case No. (((). &his is be'ause ule 11:, Se'tion 1-e. of the ules of Court a''ords the a''used at a trial the right *to be eFempt from being compelled to be witness against himself *. &he 6ernel of this privilege is testi,onial 'o,pulsion, or si,ply a prohibition against legal pro'ess to e!tra't fro, a personDs o/n lips an ad,ission of guilt against his /ill.14 As this Court has further e!plained in People vs. "8son13 &he right of a defendant in a 'ri,inal 'ase -to be e!e,pt fro, being a /itness against hi,self. signifies that he 'annot be 'o,pelled to testify or produ'e eviden'e in the 'ri,inal 'ases in /hi'h he is the a''used, or one of the a''used. <e 'annot be 'o,pelled to do so even b8 subpoena or other pro'ess or order of the Court. <e 'annot be reIuired to be a /itness either for the prose'ution, or for a 'o"a''used, or even for hi,self. $n other /ords G unli6e an ordinary /itness -or a party in a 'ivil a'tion. /ho ,ay be 'o,pelled to testify by subpoena, having only the right to refuse to ans/er a parti'ular in'ri,inatory Iuestion at the ti,e it is put to hi, G the defendant in a criminal action can refuse to testif8 altogether. 7e can refuse to ta$e the witness stand! be sworn! answer an8 'uestion . And, as the la/ 'ategori'ally states, his negle't or refusal to be a /itness shall not in any ,anner pre9udi'e or be used against hi,. -E,phasis supplied. =est /e be ,isunderstood, this CourtDs 'on'urren'e /ith +rs. +ar'os is really nothing ,ore than being faithful /ith /hat /as taught in the oft"'ited 'ase of Cabal vs. Kapunan!12to /it7 $n a stri't signifi'ation, a forfeiture is a divestiture of property /ithout 'o,pensation, in 'onseIuen'e of a default or an offense, and the ter, is used in su'h a sense in this arti'le. A forfeiture, as thus defined, is i,posed by /ay ofpunishment not by the ,ere 'onvention of the parties, but by the la/,a6ing po/er, to insure a pres'ribed 'ourse of 'ondu't. $t is a ,ethod dee,ed ne'essary by the legislature to restrain the commission of an offense and to aid in the prevention of such an offense. &he effe't of su'h a forfeiture is to transfer the title to the spe'ifi' thing fro, the o/ner to the sovereign po/er. -)@ A,. 0ur. :22, itali's in the original.

$n Bla'6Ds =a/ #i'tionary a *forfeiture* is defined to be *the in'urring of a liability to pay a definite su, of ,oney as the 'onseIuen'e of violating the provisions of so,e statute or refusal to 'o,ply /ith so,e reIuire,ent of la/*. $t ,ay be said to be a penalt8 i,posed for ,is'ondu't or brea'h of duty. -Co,. vs. Fren'h, 11; S.A. )::. As a 'onseIuen'e, pro'eedings for forfeiture of property are dee,ed 'ri,inal or penal, and, hen'e, the e!e,ption of defendants in 'ri,inal 'ases fro, the obligation to be /itnesses against the,selves is appli'able thereto. !!! !!! !!! &he rule prote'ting a person fro, being 'o,pelled to furnish eviden'e /hi'h /ould in'ri,inate hi, e!ists not only/hen he is liable 'ri,inally to prose'ution and punish,ent, but also /hen his ans/er /ould tend to e!pose hi, to a !!! forfeiture !!!.* -A,. 0ur. Se'. ;@, p. ;3. -$tali's in the original. Assayed against the 'ited 9urispruden'e, respondent +rs. +ar'os 'an, as /as her bent, refuse to testify altogether, not/ithstanding the e!press allegations she ,ade in the pleadings adverted to by petitioner epubli'. .he Propriet8 of 67MM2R J7DGM8'T as

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"gainst the Buchengcos) Second "mended Complaint in Intervention 8nder Se'tion @, ule @:, of the 1224 ules of Civil Pro'edure, su,,ary 9udg,ent ,ay be allo/ed /here, save for the a,ount of da,ages, there is no genuine issue as to any ,aterial fa't and the ,oving party is entitled to a 9udg,ent as a ,atter of la/. Su,,ary or a''elerated 9udg,ent is a pro'edural te'hniIue ai,ed at /eeding out sha, 'lai,s or defenses at an early stage of the litigation, thereby avoiding the e!pense and loss of ti,e involved in a trial. Even if the pleadings appear, on their fa'e, to raise issues, su,,ary 9udg,ent ,ay still ensue as a ,atter of la/ if the affidavits, depositions and ad,issions sho/ that su'h issues are not genuine.4( &he presen'e or absen'e of a genuine issue as to any ,aterial fa't deter,ines, at botto,, the propriety of su,,ary 9udg,ent. A *genuine issue*, as differentiated fro, a fi'titious or 'ontrived one, is an issue of fa't that reIuires the presentation of eviden'e. &o the party /ho ,oves for su,,ary 9udg,ent rests the

Corporation CASES Based on the Syllabus of Fr. Agustin onus of de,onstrating 'learly the absen'e of any genuine issue of fa't, or that the issue posed in the 'o,plaint is patently unsubstantial so as not to 'onstitute a genuine issue for trial.41 5uided by the prin'iples above indi'ated, /e hold that, under the 'ir'u,stan'es obtaining, su,,ary 9udg,ent is proper and the respondent 'ourt did not 'o,,it a reversible error in granting the 'orresponding ,otion for su,,ary 9udg,ent filed by respondents Co9uang'osFP<$ on the Se'ond A,ended Co,plaint"in"$ntervention. As ,ay be observed, petitioner ?u'heng'o an'hored his 'lai, over the disputed P=#& shares on the proposition that the +ar'os regi,e 'oer'ed hi, into giving up 1> of P&$C shares for,erly o/ned by 5regorio o,ulo and =eonides Hirata /hi'h he paid for. Apart fro, this 1> P&$C"share transa'tion, he alleged having entered into a * put and call* agree,ent /ith 5&E for the pur'hase of the latterDs ):> eIuity in P&$C, but that he /as again 'oer'ed into not e!er'ising his option to pur'hase, only to be apprised later that P<$ a'Iuired the sa,e ):> sto'6holdings. $t 'annot be overe,phasized, vis E vis the ?u'heng'osD 'lai, that, /hen respondents Co9uang'osFP<$ ,oved for su,,ary 9udg,ent, the ?u'heng'os, 'onseIuent to their having been dee,ed to have /aived their right to present their eviden'e, /ere effe'tively pre'luded fro, pursuing dis'overy pro'edure. $n net effe't, the only fa'ts before the respondent 'ourt at the ti,e of the filing of the ,otion for su,,ary 9udg,ent /ere those to be gathered fro, the pleadings and the depositions of +r. o,ulo and Attys. de 5uz,an and +er'ado"Ferrer. No substantial proof of 'oer'ion or duress, ho/ever, appears fro, the depositions on file. %n the other hand, the only relevant fa'ts dedu'ible fro, the deposition of Atty. +er'ado"Ferrer on the * put and call1 option, are7 -1. the put option of petitioner Alfonso &. ?u'heng'o e!pired in 124)E and -). petitioner ? ealty Corporation e!e'uted a /aiver of its pre"e,ptive right on the transfer of the P&$C shares held by 5&E to +r. a,on 8. Co9uang'o in 1243. &hus, if, by its o/n ter,s, the *put and call1 option e!pired in 124), ?u'heng'oDs right had long lapsed /hen the assign,ent of the P&$C shares /ere ,ade in favor of the late a,on 8. Co9uang'o. +oreover, the /aiver ? ealty Corporation e!e'uted ,ay be seen to 'onfir, petitioner ?u'heng'oDs assent to the aforesaid assign,ent of P&$C shares in favor of a,on Co9uang'o. As to +r. 5regorio #. yields the follo/ing7 *A&&?. M8$S8+B$N57

o,ulo, his deposition ta6en on August @, 1234

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M7 And /ho /ere the ,a9or sto'6holders in that 'orporation i.e. BP&$CCL A7 &he sto'6holders involved is the 5entel /ho turned over their eIuity to P=#& into the 'orporation and it /as assu,ed that this 'o,pany for,ed in the Baha,as /ould be the body agent of P=#& /hi'h in turn /ould buy all those eIuip,ents fro, 5entel through the Baha,as 'orporation paying 5entel its share /ith a large 'o,,ission, $ do not 6no/. M7 Ahen you said 5entel, are you referring to 5eneral &elephone U Ele'troni's Corporation you have ,entionedL A7 ?es, sir. M7 And O /ho held the interest in P&$C eventuallyL A7 Ahat resulted, fro, ,y point of vie/, /as /hile in +anila, $ re'eived /ord that $ /as the o/ner of @> shares in P&$C, $ i,,ediately /ired ,y offi'e in Ne/ ?or6 and /anted to 6no/ if $ 'ould hold the shares in ,y na,e or if they /anted to transfer to the, but $ had the offer and $ /anted to 6no/ definitely /hat /as the position of the <eadIuarters /ith regards to this. M7 And /hat /as their positionL A7 %ur position /as the a'Iuired @> do not ,ean anything to us of a 'o,pany that is fro, P=#&, at least one regular share of the P=#& had no or rather $&U& had no interest in P=#& e!'ept to a'Iuire if it 'ould be a'Iuired and /e have Iuite to iron in the fire at that ti,e so $ donDt 6no/ no/. M7 Aho else held sto'6holding interestL A7 $ /as infor,ed that =eo Hirata had @>, &ony +eer had @>, %s'ar Afri'a had 1> or )> and the rest /ere distributed a,ong the relatives and in"la/s of Co9uang'o, oh yes, +r. Alfonso ?u'heng'o. $

Corporation CASES Based on the Syllabus of Fr. Agustin donDt 6no/ if a/arded or allo/ed to possess the 4> of the original shares. A&&?. F ANC$SC%7 $ /ould li6e to reIuest for the stri6ing of the testi,ony of the /itness fro, the re'ord, that is hearsay be'ause he 'lai,ed that he /as ,erely infor,ed of the other interests. A&&?. =EAN%7 $ adopt the ,anifestation of 'ounsel. !!! !!! !!! C%++$SS$%NE 7 A== ob9e'tions are re'orded. A&&?. M8$S8+B$N57 M7 #id you subseIuently ,a6e any 'onfir,ation of the infor,ation that you re'eivedL A7 ?es, but $ never sa/ a pie'e of paper, $ /as told by a,on Co9uang'o and Antonio +eer about this infor,ation after their return fro, their trip abroad and that /e su''essfully negotiated the pur'hase of P=#&. M7 And /hat /as the role of then President +ar'os in this a'IuisitionL A&&?. =EAN%7 No basis. A&&?. F ANC$SC%7 =eading. !!! !!! !!! C%++$SS$%NE 7

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But the /itness ,ay ans/er the Iuestion if he so desire. A7 $ believe that $ 'an ans/er the Iuestion by si,ply telling the Court ho/ /e /ere infor,ed that P=#& /as available apparently be'ause $ a, only told this. &he person that found that this P=#& /as going to be sold to Ninoy AIuino /as his 'ousin #anding Co9uang'o, his 'ousin told the President and the President as6ed A,bassador oberto S. Benedi'to to go to the offi'es of P=#& and stop all /ays then he signed for +on'hing Co9uang'o be'ause he felt that a transa'tion of this nature, of this large /as beyond the abilities of #anding . . . $ do not 6no/ but that /as then trans,itted to us by +on'hing Co9uang'o, $ do not 6no/ and $ 'annot testify to the vera'ity of this story but /hat /e /ere told that in order to ,eet us O A&&?. F ANC$SC%7 $ ,ove to stri6e out the ans/er of the /itness for being hearsay. A&&?. PA=+A7 Counsel for Pri,e <olding adopts the sa,e ob9e'tion. A&&?. =EAN%7 For +rs. Co9uang'o, the sa,e ob9e'tion for being hearsay. C%++$SS$%NE 7 All ob9e'tions re'orded. !!! !!! !!! A&&?. M8$S8+B$N57 M7 So 5eneral &elephone and Ele'troni's Corporation /as paid the ,onthly fee and /ho ,ade those pay,ent on the feesL A&&?. =EAN%7

Corporation CASES Based on the Syllabus of Fr. Agustin &he best eviden'e /ould be the pay,ent. A7 $ believe it /as already P=#& that is being privy to the finan'ial ,ethod, P=#& is not ans/ering definitely /ho 'a,e, /ho held but ,u'h later on, every interest then /as bought up by at that ti,e Chair,an of the Board of the #BP and that our friend Alfonso ?u'heng'o ,ay eventually had P&$C but sin'e /e /ere, at least /as 'o,pletely out of the pi'ture, $ did not 6no/ /hether it /as true or not but sin'e =eo Hirata /as still at that ti,e very ,u'h involved /ith P=#& be'ause of the guarantee issued by #BP during the ti,e of =i'aros, $ believe he has reason to at least suspe't that the 'o,pany of 5eneral &elephone had negotiated /ith +r. ?u'heng'o, $ do not 6no/ if this is true, $ have not spo6en to +r. ?u'heng'o about this ,atter, he has not as6ed ,e to spea6 about this. $ de'ided this be'ause naturally it is al/ays a ,atter of ,otive, ,y ,otive is that long before Senator Salonga ,ade seIuestration, $ /as seIuestered and so /ith =eo Hirata and $ felt ,y repose had been dead a long ti,e that /hoever en9oyed the benefits of that seIuestration should at least be ta6en to proper authorities or in turn ,a6e a,ends of the years that they have illegally en9oyed the re'ourse /hi'h is substantial and /hi'h at todayDs pri'es ,ust be /orth an a/ful of ,oney. M7 No/, you ,entioned =i'aros of the #BP O A&&?. =EAN%7 $ ob9e't, ,ay $ ,ove for the stri6ing out of the ans/er for being hearsay. A&&?. PA=+A7 Sa,e ob9e'tion for being hearsay. A&&?. F ANC$SC%7 $t is not responsive to the Iuestion. A&&?. =EAN%7 All his state,ents are hearsay, all his state,ents are ,ere e!pression of opinion and under the la/, the best eviden'e should be the do'u,ent. !!! !!! !!! C%++$SS$%NE 7 All ob9e'tions are re'orded. A&&?. M8$S8+B$N57

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M7 ?ou ,entioned the #BP and =i'aros, /ere they 'onne'ted then at that ti,e and ho/L A7 $n the pur'hase of eventually of P=#&, it reIuired the guaranty of the #BP that any future 'o,,it,ents ,ade by this group /ill be guaranteed by the Philippine govern,ent. M7 Ahat spe'ifi'ally /as guaranteed by the #BPL A7 %f ,y 6no/ledge, it /as reIuired that the agreed pur'hase pri'e be guaranteed by #BP to 5entel. M7 #o you re,e,ber the figureL And the guarantee of the #BP /as given in favor of /ho,L A7 $t /as released by order of +r. =i'aros in favor, $ believe of P&$C. M7 Ahi'h is the P&$C, /hat did you ,ean by P&$C, /hat fir,L A7 &hat P&$C is the Philippine &ele'o,,uni'ations $nvest,ent Co,pany. M7 So the #BP issued a guaranty, guaranteeing P&$C an obligation to /ho,L A7 &o 5entel. M7 Aas there an inter,ediary ban6 involved in the 8.S.L A7 $n the later operation, $ only re,e,ber the $rving &rust lending W1,illion to a,on Co9uang'o in order to pay the options of this group to pur'hase P=#& fro, 5entel.

Corporation CASES Based on the Syllabus of Fr. Agustin !!! !!! !!! M7 ?ou spo6e of this seIuestration or rather the seIuestration of yours and of =eo Hirata, /hat did you ,ean by that, /ill you give us spe'ifi'sL A7 $ /ill give you the spe'ifi's as $ 6no/ it happened to ,e personally. =eo Hirata and $ de'ided to bail out be'ause /e did not li6e /hat /as going on, /e offered our shares to Alfonso ?u'heng'o, he offered to pay the, but being honorable, /e have to tell a,on Co9uang'o and &ony +eer that in turn have a ,eeting in the ne/ P=#& building /here a'ross fro, the offi'e of &ony and a,on /as a lun'h and /e /ere told that our shares had to be given to Pasig, no/ /hat that ,ean, $ do not 6no/, there is appro!i,ately no /ay to verify that. &hose /ords /ere enough for a,on, to tell +on'hing, go ahead and ta6e these t/o and you /ill be ta6en 'ared of later on, he /as never paid, $ found out this. M7 Ahile you say you do not 6no/ e!a'tly /hat Pasig ,eans, /ho used the /ord PasigL A7 +on'hing, a,on Co9uang'o. <e never said that, ,ay /e 9ust ,a6e our ob9e'tion. M7 Ahat /ere for'ed to do that ,ade you angryL A&&?. =EAN%7 +ay $ ,a6e another ob9e'tion insofar as the estate is 'on'erned be'ause of the testi,ony of the /itness, /e /ould li6e to ,anifest our 'ontinuing ob9e'tion to any and all Iuestions and ,atters that /ould affe't the estate of a,on Co9uang'o, /e are ,a6ing this ob9e'tion in behalf of the /ido/ /ho, /e are representing in behalf of the estate. C%++$SS$%NE 7 &he ob9e'tion is re'orded. A7 No/, this is the /ay /e /ere told, and +r. Co9uang'o, there /as a pre"long negotiation in that lun'h bet/een +r. Hirata, ,yself and later, +r. ?u'heng'o. $ do not 6no/ ho/ the thing ter,inated be'ause $ /as as6ed by +r. Hirata to go ho,e be'ause $ get very violent, $ did not li6e being treated that /ay by anybody and that is

it, $ /ent ho,e and ,u'h later on be'ause $ refused to dis'uss this /ith anybody, $ found out that +r. ?u'heng'o /as never paid but that he paid ,e, $ 6no/ he did be'ause $ used in ,y na,e to pay a 'orporate obligation to the CBC ban6 /hi'h is $ believe /as his ban6. M7 No/, you said that you got violently angry, so /hat did you understand by the /ord PasigL A7 $ 'annot spe'ify be'ause in ,y ,ind, at that ti,e there /as a tur,oil, too ,u'h $ understand /e have been drin6ing sin'e lun'h ti,e and this /as about ;7(( in the afternoon, so /hat /as 'onveyed to ,e by the /ords Pasig, $ 'annot definitely say no/ but $ do 6no/ /hat it 'onveyed in those days the long regi,e of po/ers that /ere in 'ontrol at that ti,e. M7 ?ou said that you have never been treated that /ay before, you refer to your selling, to your offer to sell to ?u'heng'o but being for'ed to sell to anotherL A&&?. =EAN%7

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M7 Ahat do you understand of PasigL

A7 Ahat ,ade ,e angry /as, $ 6no/ that the 'o,pany had a tre,endous future, /hen +r. ?u'heng'o gave ,e a visit in the hospital seven years ago on ,y stro6e, not no/, he ,entioned the fa't that he had never been rei,bursed of the ,oney that he advan'ed to ,e and that $ thought that /as terrible. M7 No/ let us go ba'6 to your reasons as /ell as of the reasons =eo Hirata in getting rid of this @> share ea'h in P&$C, /hat /ere those reasons e!a'tly that ,ade you de'ide to sell outL A7 Nor,ally, inspe'tion of the 'orporation ,eans to loo6 to the 'orporation papers, $ never did, or they are signed by the in'orporators in ter,s of the original do'u,ents at the buyersD list, $ never sa/ the,, /e understood that P&$C /as in operation, pay regular dividends, $ never sa/ the,, so naturally $ as6ed the ,an /ho got ,e in to all this things in the first pla'e, /hat happened, he said, $ do not 6no/, $ have not re'eived anything either, so let us get

Corporation CASES Based on the Syllabus of Fr. Agustin rid of this and /e have thought ,ost li6ely the buyer is +r. Alfonso ?u'heng'o. M7 Ahat happened to your offer to ?u'heng'oL A7 <e a''epted it, $ and =eo Hirata arrived and /e de'ided to tell +on'hing and &ony that /e had sold our shares to +r. ?u'heng'o. Apparently =eo told a,on this only and by the ti,e /e arrived in the P=#& building, he had already apparently 'onsulted and /e /ere told that the Pasig did not li6e and said go ahead and you /ill be ta6en 'ared of /hi'h ,u'h later on told ,e never happened. #oon a6o nagalit, ,asiyado nanag pag"oonse. Aell, any/ay no/, there is nothing ,ore de,anding of persons at their state that being lo'6ed in a hospital roo, for years and in the usual reading, $ de'ided /hoever en9oyed those shares, better ,a6e good and sin'e $ have read in the ne/spapers about investigation of P&$C /hi'h see, to get out the 'loud, $ de'ided to do this, ,aybe to give so,e 'lue to the investigation of P&$C, $ donDt 6no/. M7 And /hat /as the figure agreed upon /ith +r. ?u'heng'oL A7 Apparently . . . A&&?. =EAN% $ 9ust /ant to ,a6e the sa,e ob9e'tion for being hearsay. A&&?. M8$S8+B$N57 &hese ob9e'tions are to be used during the presentation of eviden'e not at the ta6ing of the deposition. 0ust re,e,ber that. A&&?.=EAN%7 But /e /ant to ,a6e our ob9e'tion. !!! !!! !!! C%++$SS$%NE 7 All ob9e'tions are re'orded. A7 $ do not 6no/ any,ore that anybody else, after this ,aybe stray bit of infor,ation /ill be re,e,bered later on but none right no/ !!! !!! !!! M7 Aas &ony +eer present in that ,eetingL

and $ /as revie/ing over ,y ,ind ti,e and again, ,y parti'ipation in the /hole affair, $ /as eventually and $ /as used in that /ay as a ,eans to get $&U& into their negotiation and let 5entel to the bargaining if only to sho/ that they 'ould afford to buy 5entel, in effe't, they /ere 'losing the deal, leaving $&U& to for'e 5entel to sit do/n and negotiate /ith the,. &hat /as the idea be'ause unfortunately, $&U& did not /or6 for the, but for this group apparently that $ do not 6no/ any,ore. M7 +y last Iuestion only is, ho/ ,u'h is the figure for the sale of this @> A7 $ understand, /ell, $ used part of it to pay an obligation /orth P1@1,(((.((, it /as an obligation /ith the defun't &.0. Aolfe that /as bought by ,e /hi'h appears in its boo6 that a,ount or a little bit ,ore /ith CBC, no/ the balan'e ,aybe used by +r. Hirata for so,ething else, $ do not 6no/. ! ! ! C %SS ENA+$NA&$%N7 B? A&&?. =EAN%

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A7 <e /as al/ays in the ,eeting . . . . -&SN of the #eposition of 5regorio =. o,ulo, August @, 1234 pp. 1) G@4..4) As /e see it, +r. o,uloDs deposition is virtually a hearsay a''ount and should, therefore, be disregarded, being itself inad,issible in eviden'e. Supporting and opposing affidavits shall be based on personal 6no/ledge of the de'larant, shall set forth su'h fa'ts as /ould be ad,issible in eviden'e, and shall sho/ affir,atively that the affiant is 'o,petent to testify to the ,atters stated therein. &herefore, in deter,ining /hether su,,ary 9udg,ent is proper, state,ents 'ontained in affidavits, /hi'h /ould be inad,issible in eviden'e -su'h as state,ents of opinion, belief and hearsay. ,ust be disregarded. So it ,ust be /ith the o,ulo deposition. %ne ,inor point. Petitioner ?u'heng'os dre/ attention to the penden'y of their petitions in G.R. No(. 149802 and1,0-20 /hen the !ar)1a5 &;1(1on /as rendered, suggesting doubtless that it /as

Corporation CASES Based on the Syllabus of Fr. Agustin error on the part of the respondent 'ourt to pro'eed /ith the separate trial belo/ /ithout a/aiting the out'o,e of said petitions. Ae are not persuaded. &he penden'y of the petitions in 5. . Nos. 1;23() and 1:(@)( did not, /ithout ,ore, dilute the validity of the assailed !ar)1a5 &;1(1on or di,inish the authority of the respondent 'ourt to render the sa,e. Se'tion 4, ule 1: of the ules of Court says as ,u'h7 SEC. 4. 0Fpediting proceedings; in+unctive relief. " &he 'ourt in /hi'h the petition Bfor 'ertiorari, prohibition or ,anda,usC is filed ,ay issue orders e!pediting the pro'eedings, and it ,ay also grant a te,porary restraining order or a /rit of preli,inary in9un'tion for the preservation of the rights of the parties pending su'h pro'eedings. &he petition shall not interrupt the 'ourse of the prin'ipal 'ase unless a te,porary restraining order or a /rit of preli,inary in9un'tion has been issued against the publi' respondent fro, further pro'eedings in the 'ase. &he governing rule, in fine, is that to arrest the 'ourse of the prin'ipal a'tion during the penden'y of 'ertiorari pro'eedings, there ,ust be an interrupting restraining order or a /rit of preli,inary in9un'tion fro, the appellate 'ourt dire'ted to the lo/er 'ourt.4@ &here /as none in the instant 'ase. A''ordingly, it /as in order for the respondent 'ourt to pro'eed /ith the separate trial in Civil Case No. ((() and ne'essarily in rendering a 9udg,ent, in this instan'e, the !ar)1a5 &;1(1on, /hi'h, in its esti,ation, is 'alled for by the fa'ts and la/ of the 'ase. "S%"SSAL OF THE A%EN E AGA"NST COJUANGCOSL!H" Ae no/ 'o,e /hat, to us, is the 'enter of the 'ontroversy. Ae refer to the Iuestion of /hether or not the disputed P=#& shares, /hi'h are 'overed by the eIually disputed P&$C shares of respondents Co9uang'osFP<$, are indeed part of the *ill"gotten /ealth* of the +ar'os fa,ily " ergo to be forfeited in favor of the State " using the evidentiary standards and deter,inative indi'ia set out in Bataan Ship8ard J 0ngineering Co.! Inc. -Base'o. vs. PCGG,4; and applied analogously in subseIuent 'ases,4: /hen'e the 'on'lusion that the /ealth is *ill gotten* ,ay be reasonably dedu'ed. espondent 'ourt CO%!LA"NT

'ited the ben'h,ar6 outlined in Baseco in support of its !ar)1a5 &;1(1on,41 to /it7 %ne, eviden'e indi'ating ,anifest partiality and favorable treat,ent by the for,er President to/ards the alleged trustees, as de,onstrated by a'tive interplay bet/een hi, and su'h trustees andFor presidential interventions /hi'h have resulted in ine!pli'able benefits to the trustees or to the 'orporations held by hi, through su'h trusteesE and &/o, the e!isten'e of do'u,ents and re'ords in the possession of the for,er President /hi'h, through indorse,ents andFor assign,ent ,ade thereon in blan6 by his trustees, provide the legal instru,entation for hi, to assert, no/ or in the future, o/nership or 'ontrol over the properties held by his trustees andFor to re'over su'h properties fro, the,. -At p. )@. &he respondent 'ourt dis,issed the epubli'Ds A,ended Co,plaint as against the Co9uang'osF P<$ on the finding that the for,er has not adeIuately dis'harged its burden of proving, by the threshold preponderan'e of eviden'e reIuired in *ill"gotten /ealth* 'ases, that the sub9e't P=#& shares are ill"gotten. Arote the respondent 'ourt7 !!! the epubli' has failed to provide su'h *proof of authenti'ity or reliability* of the do'u,ents offered by it in eviden'e. &hus al,ost all the do'u,ents offered by the epubli' are photo'opies, and no effort /as underta6en . . . to sub,it the originals of said do'u,ents, or to have the, properly identified, or to other/ise 9ustify the ad,ission of ,ere photo'opies. Not surprisingly, defendants . . . ob9e'ted to the ad,ission of the epubli'Ds do'u,entary e!hibits, 'iting violation of the Best Eviden'e ule -Se'tion @, ule 1@( of the evised ules of Civil Pro'edure B* ules*C, the ules on Presentation of #o'u,entary Eviden'e -Se'tion )(, ule 1@) of the ules., the <earsay Eviden'e ule, and the rule as to PurposeFs of #o'u,entary Eviden'e -Se'tion @;, ule 1@) of the ules..* -at p. @1. E!'epting, petitioner epubli' tags the respondent 'ourtDs deter,inative finding as a *sweeping conclusion1 or *bare generali(ation*. Pressing the point, petitioner epubli' argues that the !ar)1a5 &;1(1on did not identify /ith parti'ular spe'ifi'ity /hi'h eviden'e failed to hurdle the bar of ad,issibility for being * mere photocopies1 or *are otherwise unidentified! unauthenticated! and constitutive of hearsa81.44

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Corporation CASES Based on the Syllabus of Fr. Agustin Petitioner epubli'Ds la,ent is, to a point, /ell ta6en. $ndeed, not all do'u,ents the epubli' offered in eviden'e in the separate trial on the P=#& shares suffer fro, the infir,ity i,puted on the, by the graft 'ourt. For, as argued /ith so,e ,easure of ,erit, ,ost of these do'u,entary eviden'e have been identified and authenti'ated during the deposition ta6ing of the deponents /hose depositions /ere entered into eviden'e after the usual pro'edure of 'o,paring the originals /ith the faithful reprodu'tions thereof /hi'h /ere those ,ar6ed in eviden'e. And 'ertainly not lost on this Court is the fa't that so,e do'u,ents are 'o,,on e!hibits, thus, there e!ists no tenable reason for any of the parties offering the, as 'o,,on e!hibits to ob9e't to their ad,issibility. Aere /ant of proof of authenti'ity and reliability of the offered do'u,entary eviden'e /as, /ith respe't to the epubli'Ds A,ended Co,plaint, the rationale behind the adverse !ar)1a5 &;1(1on, as it stri6es this Court to be, /e 'an only say that su'h disposition is not in a''ordan'e /ith Se'tion @ of E% No. 1; 43 /hi'h en9oins 'ourts, in resolving suits filed in the re'overy efforts, not to stri'tly apply te'hni'al rules of eviden'e. Be that as it ,ay, /e instead ta6e the 'ourse of delving into the substan'e of the eviden'e on re'ord /hi'h petitioner epubli' asserts to be *vital facts and material evidence*,42 and thereby deter,ine /hether or not the respondent 'ourt indeed 9ustifiably ignored the, in arriving at the disputed holding dis,issing the A,ended Co,plaint as against the Co9uang'osFP<$. &o/ards this end, the Court shall first as'ertain /hat 'ould be those asserted *vital facts and material evidence1 be by loo6ing at the allegations of the epubli' in its Petition. &hus, a''ording to the epubli'Ds petition in G.R. No. 1,-4,9, to 'ite pertinently7 1. P<$ /as registered by 0ose ?. Ca,pos on Nove,ber 3, 1244 /ith a paid"up 'apital of a ,easly Fifty &housand Pesos -P:(,(((.((. and utilizing as pla'e of business the address of 8N$=AB, a 'orporation o/ned and 'ontrolled by 0ose ?. Ca,pos, and /ith 8N$=ABDs offi'ers and dire'tors, na,ely olando 5apud, enato =irio, Bet'.C . . . and 5erva'io 5aviola ,anaging P<$ !!! albeit, said ,anaging offi'ers and dire'tors had no finan'ial interest /hatsoever in P<$. ). %n +ay ), 1243, a,on 8. Co9uang'o, 'eded and 'onveyed in favor of P<$ by /ay of #eed of Assign,ent dated +ay ), 1243, so,e ;;,()@ shares of sto'6 of P&$C . . . . %n that sa,e date, also by /ay of #eed of Assign,ent . . .

a,on 8. Co9uang'o 'eded and 'onveyed in favor of P<$ another @@,121 shares of sto'6 of P&$C . . . . Also on the sa,e date, =uis &irso ivilla 'eded and 'onveyed in favor of P<$ another @@,121 shares . . . . a,on 8. Co9uang'o and =uis &irso ivilla /ere 'o,pensated by P<$ for said P&$C shares of sto'6 /hi'h all in all su, up to 111,;1: shareholdings in the na,e of P<$. !!! @. Fro, the foregoing eviden'e, there is no doubt that respondent P<$ is a 'orporation /hi'h /as for,ed and organized and ,aintained by the for,er di'tator, President Ferdinand E. +ar'os through 'onfessed du,,ies, 0ose ?ao Ca,pos and olando C. 5apud, /ho, in 'onspira'y /ith a,on 8. Co9uang'o and =uis &irso ivilla, sought to a'Iuire for the +ar'oses the single biggest ,a9ority shareholdings in P=#&. ;. &he foregoing is 'onfir,ed by the de'larations of 'onfessed no,ineesF'ronies of for,er President Ferdinand E. +ar'os7 0ose ?. Ca,pos, oland C. 5apud and Atty. Fran'is'o de 5uz,an. !!! !!! !!! %n the basis of the foregoing eviden'e, respondents Co9uang'os 'annot la/fully a'Iuire o/nership of title over the P<$ shares of sto'6s, be'ause the sa,e 'onstitute the +ar'os ill"gotten /ealth, for,ed andFor a'Iuired in violation of the 124@ Constitution. !! -Petition, 5. . No. 1:@;:2, pp. 12"2(. $ndubitably, petitioner epubli' 'alls attention to the s/orn de'larations of +essrs. 0ose ?ao Ca,pos, oland C. 5apud and Atty. Fran'is'o de 5uz,an -Ca,pos, 5apud and de 5uz,an, respe'tively, hereafter. as alleged proof of its theory of the 'ase, i.e.! that the disputed P=#& shares are in fa't o/ned by the +ar'os fa,ily and that respondents Co9uang'osFP<$ are but du,,iesFno,ineesF'onduit for the +ar'os fa,ily to 'ontrol P=#&. $t is, hen'e, our tas6 to s'rutinize the s/orn de'larations of Ca,pos et al., to as'ertain if they indeed prove the fa'ts adverted to by petitioner epubli', failing /hi'h /ould naturally i,pel this Court to affir, the !ar)1a5 &;1(1oninsofar as it dis,issed the epubli'Ds A,ended Co,plaint against the respondents Co9uang'osFP<$.

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Corporation CASES Based on the Syllabus of Fr. Agustin Follo/ing are e!'erpts of the S/orn State,ent of +r. Ca,pos, dated +ar'h )1, 12313(7 *!!! a dis'ussion bet/een ,e and +r. Co,,ission BPC55T /ho inIuired properties that $ ,ight be holding benefi'iaries and /hi'h . . . are no/ Philippine 5overn,ent. a,on #iaz, a ,e,ber of the about 'ertain assets and in favour -si'. of 'ertain about to be 'lai,ed by the

and validity of various #eeds of &rust and #eeds of Assign,ent /hi'h $ and ,y business asso'iates signed and e!e'uted as afore,entioned 'overing properties, interest and shares of sto'6 of the 'orporations listed therein. :. %''asioned by the /ithdra/al of ,y a'tive parti'ipation in the ,anage,ent of the above na,ed 'orporations, +r. olando C. 5apud /ho /as ,y finan'ial 'onsultant too6 over the dire't responsibility of dire'ting, ,anaging and ad,inistering all the a'tivities of the said 'orporation. <o/ever, sin'e +r. 5apud did not have the ad,inistrative staff to effi'iently ,anage the businesses, he reIuested ,e that all the e,ployees and offi'ers involved in the organization should 'ontinue to re,ain in the 'o,panies even only in a no,inal 'apa'ity 'onsidering that they had previously dis'lai,ed any interest therein. $t is for this reason that oland C. 5apud and ,y business asso'iates, na,ely, . . . Fran'is'o 5. de 5uz,an, . . . Ernesto Abalos, 5ervasio &. 5aviola, . . ., enato E. =irio, afael de 5uz,an, Bet'.C . . . 'ontinued to be na,ed sto'6holders in these 'orporations although they did not have any finan'ial interest thereinE !!! !!! !!! A,ong the Philippine 'orporations listed in ite, X;.11 of Anne! *A* of +r. Ca,posD aforesaid S/orn State,ent and held in trust by hi, and his asso'iates /as *Prime 7oldings Corporation1. +oreover, on the o''asion of his deposition"ta6ing on #e'e,ber 13, 122: at the Philippine Consulate 5eneral, Han'ouver, British Colu,bia, Canada +r. Ca,pos, responding to /ritten interrogatories, ,ade the follo/ing de'larations in ans/er731 *).) &he re'ords sho/ that BP<$C o/ns appro!i,ately ;1> of the sto'6 of . . . -P&$C. /hi'h in turn o/ns appro!i,ately )3> of Philippine =ong #istan'e &elephone Co,pany -P=#&.. &he re'ords of this Civil Case No. ((() sho/ that PC55 has seIuestered 111,;1: shares of sto'6 in P&$C registered in the na,e of BP<$C. Aas anything /ith respe't to P&$C delivered to the PC55 by Atty. #e 5uz,an or anyone else in your behalfL Please des'ribe /ith spe'ifi'ity the things that /ere delivered.

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1. +y relationship /ith the then President Ferdinand E. +ar'os dates ba'6 to the ti,e /hen he /as first ele'ted as Congress,an . . . BandC 'ontinued /hen he /as then ele'ted President . . . . &hereafter $ assisted in the organization and a'Iuisition of so,e business ventures for the for,er President. Follo/ing his dire'tive $ instru'ted ,y la/yers and reIuested the assistan'e of ,y other business asso'iates and offi'ers of the 'o,pany to organize, establish and ,anage these business ventures for and on behalf of the PresidentE ). &he 'o,panies that /e have organized for and on behalf of for,er President +ar'os are listed in Anne! *A* atta'hed here/ithE @. $n the organization, ad,inistration and ,anage,ent of the abovena,ed 'orporations, it /as ,y poli'y that /henever su'h a 'orporation is organized for and on behalf of the intended benefi'iaries, $ e!e'ute and $ reIuire all ,y said business asso'iates to e!e'ute a #eed of &rust or #eed of Assign,ent duly signed in favour -si'. of an unna,ed benefi'iary and to deliver the original 'opy thereof to the for,er President. $t is in fa't ,y poli'y and pro'edure that /e dis'lai, 'o,pletely any interest in any of su'h businesses and ,a6e it 'lear to the for,er President that /e hold su'h interests on his behalfE ;. $n the latter part of 1242 $ suffered a severe heart atta'6 . . . . Be'ause of this . . ., $ reIuested for,er President +ar'os to relieve ,e of ,y responsibilities regarding the businesses that have been entrusted to ,e and follo/ing su'h reIuest, $ signed and delivered to hi, a Certifi'ation dated 0anuary 123(, atta'hed here/ith as Anne! *B* to the effe't that ,y fa,ily in'luding ,y /ife and 'hildren e!pressly dis'lai,ed any interest in the businesses that $ have been holding in his behalf and they a'6no/ledged the truthfulness, authenti'ity

Corporation CASES Based on the Syllabus of Fr. Agustin ANSAE 7 As $ said, $ donDt 6no/ that Pri,e <oldings has any holdings of P&$C. @. $n your S/orn State,ent, page ), you stated that /ith respe't to the 'orporations you held in trust for President +ar'os, it /as your *poli'y* that /henever su'h a 'orporation /as organized, you e!e'uted, and you reIuired all your business asso'iates to e!e'ute, a #eed of &rust or #eed of Assign,ent in favor of an *unna,ed benefi'iary*, and delivered the originals thereof to President +ar'os. ! ! !. Aas this *poli'y* follo/ed in the 'ase of BP<$CL !!! ANSAE 7 All the 'orporations that $ organized G that /as the standard poli'y G that /e surrendered dire't to President +ar'os. @.1. Aas it also your poli'y to deliver to President +ar'os the sto'6 'ertifi'ates that you and your business asso'iates held in trust for hi,L ANSAE 7 ?es, +aD,. @.). $f sto'6 'ertifi'ates that you and your business asso'iates held in trust for President +ar'os /ere delivered to hi, /as it also your poli'y to have the sto'6 'ertifi'ates indorsed in blan6L Aere the sto'6 'ertifi'ates in BP<$C $n'. indorsed in blan6L ANSAE 7 $f there are 'ertifi'ates issued in Pri,e <oldings, it is the sa,e /ay it /as delivered to hi,. $f there is su'h 'ertifi'ate issued, it is indorsed in blan6 and follo/ the sa,e pattern for all the 'orporations. Ahatever /e have de'ided, /e deliver, sign in blan6 and deliver to hi,. @.@ #id you and your business asso'iates deliver to President +ar'os the sto'6 'ertifi'ates issued by BP<$CL $f not, /hat did you and your business asso'iates do /ith the sto'6 'ertifi'atesL ANSAE 7 $f Pri,e <oldings 'ertifi'ates have been issued, as $ said +aD,, it is delivered to the President. ;. $n your S/orn State,ent, page ), you also stated that *it is in fa't ,y poli'y and pro'edure that /e dis'lai, 'o,pletely any interest* in the businesses organized for President +ar'os and *,a6e it 'lear to the for,er President that /e held su'h interests in his behalf*. !!!. Aas this *poli'y and pro'edure* follo/ed in the 'ase of BP<$CL !!!

ANSAE 7 &he poli'y is follo/ed by every 'orporation that /e organized for the President. ;.1 #id you and your business asso'iates also *dis'lai, 'o,pletely any interest* in . . . -P&$C. and *,a6e it 'lear to the for,er President that /e hold su'h interests on his behalf*L ANSAE 7 +aD,, as $ said, $ donDt 6no/ that Pri,e <oldings has su'h holdings of the P&$C shares that you referred to. :. &he re'ords of . . . -P&$C. sho/ that =uis &. ivilla o/ned appro!i,ately P;,:1:,4:( /orth of shares of sto'6 in P&$C and that so,e ti,e in 1243"123(, he transferred appro!i,ately P),2(@,41) /orth of su'h shares to BP<$C. Aho /as the true or benefi'ial o/ner of the shares of sto'6 in P&$C transferred by =uis &. ivilla to BP<$C in 1243"123(L ANSAE 7 Any ,atters that pertain to P&$C, $ donDt have any 6no/ledge of, +aDa,. !!! ANSAE 7 Consul +orales, 9ust to ,a6e everything short, after ,y heart atta'6 in 1242, +r. 5apud too6 over the ,anage,ent of the 'orporations that belonged to the President . . . $ did not parti'ipate any,ore in anything of the PresidentDs 'orporations ,anaged by +r. 5apud after ,y heart atta'6 and after he too6 over the ,anage,ent of those 'orporations. $t is be'ause of health reasons that $ /as 'o,pelled not only to relinIuish that to the President, but also ,y o/n 'o,panies and O !!! !!! !!! 1(. #id you ever have any dis'ussions or 'orresponden'e /ith anyone other than President +ar'os, a,on 8. Co9uang'o or olando C. 5apud regarding the benefi'ial o/nership by President +ar'os or any ,e,ber of his fa,ily, dire'tly or indire'tly, of shares of sto'6 in P=#&, P&$C, or Pri,e <oldings, $n'.L ANSAE 7 No, +aDa,. !!! !!! !!!

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Corporation CASES Based on the Syllabus of Fr. Agustin 11. $n your S/orn State,ent, pages )"@, you stated that be'ause of a heart atta'6 in the latter part of 1242, you reIuested President +ar'os to relieve you or your responsibilities regarding the businesses entrusted to you, and that olando C. 5apud too6 over the dire't responsibility of dire'ting, ,anaging and ad,inistering all the a'tivities of the said 'orporations. !!! ANSAE 7 ?es, +aD,. 11.1 Please des'ribe in detail the 'ir'u,stan'es surrounding the transfer, if any, of the dire't responsibility of dire'ting, ,anaging and ad,inistering all the a'tivities of P<$C to +r. 5apudL ANSAE 7 As $ stated +aDa,, Pri,e <oldings has been a holding 'o,pany. &he only assets are the sto'6 'ertifi'ates and there is nothing. $ thin6 G at that ti,e $ transferred G there is nothing +r. 5apud has to ,anage to do be'ause itDs a shared 'orporation. -Aords in bra'6et added. Conte!tually, the only 'on'lusion the Court 'an plausibly atta'h to the above response of +r. Ca,pos is that he had no 6no/ledge about P<$Ds shareholdings in P&$C. <is ans/ers, su'h as * ,a)m! as I said I don)t $now that Prime 7oldings has such holdings of the P.IC shares that 8ou referred to1 , and *"n8 matters that pertain to P.IC I don)t have an8 $nowledge1 say as ,u'h. $t is also a fa't dedu'ible fro, +r. Ca,posD s/orn de'larations that he adhered to a set of pattern or pra'ti'e /hen he organized 'orporations for then Pres. +ar'os. &hus, he de'lared that he, his fa,ily and his asso'iates e!e'uted deeds of trust or assign,ent in favor of an unna,ed benefi'iary, and there dis'lai, any interest in the 'orporations that he -+r. Ca,pos. organized for Pres. +ar'os. %r, they indorsed the sto'6 'ertifi'ates in blan6. And, all of su'h deeds or 'ertifi'ates /ere delivered to the late President. ?et, +r. Ca,pos /as unable to de'lare /ith 'ertitude if these patterns and pra'ti'es /ere follo/ed vis"V"vis P<$. A''ordingly, the Iuestion begging an ans/er is /hether there truly e!ists, in respe't to P<$ shares, 'ertifi'ates indorsed in blan6 or deeds of trust or assign,ent in favor of an unna,ed benefi'iary delivered to the late President. $f there is one person /ho 'an provide a satisfa'tory ans/er to this Iuestion, it is +r. Ca,pos. But he is not saying anything. 8nder this s'enario, /e 'annot see our /ay 'lear on ho/ the s/orn de'larations of +r. Ca,pos 'ould have, as asserted by petitioner epubli', proved that respondent P<$ /as ,erely in'orporated to hold the P&$C shares, that in turn /ould have

proved that P<$ together /ith respondents Co9uang'os /ere ,ere du,,ies of the +ar'os fa,ily to hold the 'ontrolling share of P=#&. %n the other hand, +r. 5apudDs deposition " ta6en on %'tober 12, %'tober )( and #e'e,ber 11, 122: at the <ong Rong Philippine Consulate %ffi'e " ,aterially reads7 *C%NS8= A58$=8C<%7 %n paragraph ; of E!hibit *E*, +r. 5aviola stated7 K&hat $ have no personal 6no/ledge of the operation of Pri,e <oldings, $n'. as +r. olando C. 5apud handled all the dire'ting, ,anaging and ad,inistering of all the a'tivities of the said 'orporation.D Muestion7 Based on your personal 6no/ledge, do you affir, or deny the 'ontents of the said paragraph ; of E!hibit *E*L + . 5AP8#7 $ affir,. !!! +ada, Consul, $ /ould li6e to ,a6e a 'larifi'ation here. Be'ause +r. 5aviola says $ handled all the dire'ting and ,anaging and ad,inistering of all the a'tivities. Prior to the heart atta'6 of +r. Ca,pos $ re'all that he /as also involved in the ad,inistration of this 'o,pany. So, /ith that 'larifi'ation $ affir, paragraph ;. C%NS8= A58$=8C<%7 For ho/ long did you ,anage BP<$CL + . 5AP8#7 $ /ould esti,ate ,aybe t/o or three years after +r. Ca,posD heart atta'6. C%NS8= A58$=8C<%7 #o you 6no/ anything about the . . . -P&$C., ;1> of the 'apital sto'6 of /hi'h is o/ned by BP<$CL + . 5AP8#7 Aell, very little e!'ept for that /hi'h $ have read fro, the ne/spapers. C%NS8= A58$=8C<%7 #o you 6no/ the P&$C o/ns ):> of the 'o,,on voting sto'6 of the . . . P=#&L + . 5AP8#7 ?es.

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Corporation CASES Based on the Syllabus of Fr. Agustin C%NS8= A58$=8C<% 7 #o you 6no/ the benefi'ial o/ner or o/ners of BP<$CL + . 5AP8# 7 Ahat $ 6no/ . . . is the shares of sto'6 andFor the assign,ents endorsed in blan6 /ere delivered to President +ar'os by +r. Ca,pos. C%NS8= A58$=8C<%7 &he heirs of a,on 8. Co9uang'o, na,ely7 $,elda %. Co9uang'o and her 'hildren . . .'lai, that they o/n . . . -3(>. per'ent of the outstanding 'apital sto'6 of BP<$C, /hile the Estate of a,on 8. Co9uang'o allegedly o/ns the re,aining t/enty -)(>. per'ent. Muestion7 Based on your personal 6no/ledge, do you affir, or deny the said allegationL + . 5AP8#7 $ do not 6no/. $ 'an neither affir, or deny. C%NC8= A58$=8C<%7 &he said heirs also alleged that BP<$C /as in'orporated on : %'tober 1244 /ith the follo/ing sto'6holders, na,ely7 olando C. 5apud, enato E. =irio, 0ose #. Ca,pos, 0r., 5ervasio &. 5aviola and Ernesto S. Abalos, /ith ;(( shares ea'h, . . . . Muestion7 Based on your personal 6no/ledge, do you affir, or deny the said allegationL + . 5AP8#7 $ affir,. C%NC8= A58$=8C<%7 #id you really o/n the ;(( shares of the Pri,e <oldingsL + . 5AP8#7 No. C%NS8= A58$=8C<%7 For /ho, did you hold those ;(( sharesL + . 5AP8#7 Aell, as $ said earlier the shares andFor assign,ent indorsed in blan6 /ere delivered by +r. Ca,pos to President +ar'os. C%NS8= A58$=8C<%7 &he sa,e heirs li6e/ise alleged7

*$n separate #eeds of Assign,ent dated 13 February 1231, t/o -). of the in'orporators of Pri,e <oldings, na,ely7 olando C. 5apud and 0ose #. Ca,pos, 0r., assigned and 'onveyed to +essrs. a,on 8. Co9uang'o and %s'ar Afri'a, respe'tively, all their shareholdings in Pri,e, 'onsisting of four hundred -;((. shares of sto'6 ea'h, or t/enty -)(>. per'ent ea'h of the shares of sto'6 of Pri,e -Anne!es *C* and *"1*.. Muestion7 Based on your personal 6no/ledge, do you affir, or deny the said allegationL !!! + . 5AP8#7 +ada, Consul, $ thin6 $ 'an only affir, that /hi'h pertains to ,e, na,ely7 the #eed of Assign,ent that $ signed. $ /ill leave it to +r. Ca,pos to affir, his #eed of Assign,ent. A&&?. +ANA=A?SA?7 +ada, Consul 5eneral, in vie/ of the identifi'ation by the /itness of the #eed of Assign,ent, ,ay /e reIuest that the sa,e be ,ar6ed as our E!hibit *1* -Co9uang'o. !!! !!! !!! ASS&. S%=$C$&% your signatureL + . 5AP8#7 ?es. !!! !!! !!! C%NS8= A58$=8C<%7 +ay /e 'ontinueL Sho/ing you the said Anne! *C* no/ ,ar6ed as E!hibit *F* for purposes of this pro'eeding, do you affir, or deny the authenti'ity of this do'u,entL + . 5AP8#7 ?es, $ affir,. C%NS8= A58$=8C<%7 $s it really true that you assigned your ;(( shares to a,on 8. Co9uang'oL + . 5AP8#7 ?es. 5ENE A= #E= %SA $%7 #o you identify this as

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Corporation CASES Based on the Syllabus of Fr. Agustin C%NS8= A58$=8C<%7 <o/ ,u'h did you re'eive as 'onsideration for assigning your shares to hi,L + . 5AP8#7 &he 'onsideration for the assign,ent /as that upon ,y assign,ent, first, ,y fidu'iary responsibilities as no,inee /ere e!tinguished, and se'ondly, $ had transferred and e!tinguished any and all liabilities under the subs'ription payable. C%NS8= A58$=8C<%7 #o you 6no/ if a,on 8. Co9uang'o re'eived the said shares for hi,self or for anybody elseL + . 5AP8#7 $ donDt 6no/. !!! !!! !!!.
3)

#eed of Assign,ent dated 0uly 123@ signed by %SCA 'opy ,ar6ed EN<$B$& *F":*E

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&. AF $CA,

&he aforesaid #eeds of Assign,ents obviously /ill be /ith the 6no/ledge and upon authorization and order of for,er President Ferdinand E. +ar'os, is this 'orre'tL A&&?. +ANA=A?SA?7 ?our <onor, before the /itness ans/ers the Iuestion, /e /ould li6e to reiterate our ob9e'tion insofar as the Iuestion referring to +r. %s'ar &. Afri'a is 'on'erned. Ae are ob9e'ting to the Iuestion on the ground that +r. 5apud /ould be in'o,petent to testify /ith respe't to +r. Afri'a, 'onsidering that +r. Afri'a is not a,ong the sto'6holders"no,inees ,entioned by +r. Ca,pos or +r. 5apud as far as Pri,e <oldings is 'on'erned and +r. Afri'a is not a,ong the in'orporators of Pri,e <oldings, $n'. !!! !!! !!! H$CE C%NS8= <E NAN#EQ7 Can /e note your ob9e'tion and let +r. 5apud ans/erL So the aforesaid #eeds of Assign,ents obviously /ill be /ith the 6no/ledge and upon authorization and order of for,er President Ferdinand E. +ar'os, is this 'orre'tL + . 5AP8#7 Considering that BP<$C /as in'orporated upon the instru'tions of for,er President +ar'os, obviously all the no,inees /ould a't only upon his authorization. &hatDs ,y ans/er. 3@ =i6e +r. Ca,pos before hi,, +r. 5apud also see,s to be /ithout personal 6no/ledge of /hether or not P<$ o/ned shares in P&$C. <e ad,its that /hatever he 6no/s about P<$Ds holding in P&$C, if there be any, is based only on /hat he has read fro, the ne/spapers. &rue it is that he a'6no/ledged not a'tually o/ning the ;(( P<$shares in his na,e. But /hen as6ed for /ho, he held su'h shares, he hedged on his ans/er, saying7 *Aell! as I said earlier the shares and2or assignment indorsed in blan$ were delivered b8 ,r. Campos to President ,arcos1. +r. 5apud, ho/ever, /ould later 'ontradi't hi,self /ith respe't to the disposition of the said ;(( P<$ shares /ith his state,ent that he assigned /hat on paper /as his P<$ shares to the late a,on 8. Co9uang'o. Clearly, it /ould have been i,plausible for hi, to ,a6e the assign,ent to +r. Co9uang'o if the 'overing 'ertifi'ates had previously been delivered to Pres.

-8nders'oring added.

Continuing his deposition"ta6ing on #e'e,ber 11, 122:, +r. 5apud also said7 *H$CE C%NS8= <E NAN#EQ7 No. :, regarding BP<$C /hi'h /as one of the 'o,panies organized for for,er President Ferdinand E, +ar'os, as stated by deponent 0ose ?. Ca,pos in his S/orn State,ent -EN<$B$& *#*. and affir,ed by you also, and the various #eeds of Assign,ent of shares in Pri,e <oldings, $n'. by the listed Sto'6holders"No,inees in favor of the late a,on 8. Co9uang'o and his 'hildren, respe'tively, na,ely7 #eed of Assign,ent dated February 13, 1231 signed by you and ,ar6ed EN<$B$& *F*E #eed of Assign,ent dated February 13, 1231 signed by 0%SE #. CA+P%S, 0 ., 'opy ,ar6ed EN<$B$& *F"1*E #eed of Assign,ent dated 0une 123@ signed by 'opy ,ar6ed as EN<$B$& *F")*E ENA&% E. =$ $%,

#eed of Assign,ent dated 0une 123@ signed by 5E HAC$% &. 5AH$%=A, 'opy ,ar6ed as EN<$B$& *F"@*E #eed of Assign,ent dated 0une 123@ signed by E NES&% S. ABA=%S, 'opy ,ar6ed EN<$B$& *F";*E

Corporation CASES Based on the Syllabus of Fr. Agustin +ar'os. <e also affir,ed that his assign,ent of P<$ shares to +r. Co9uang'o /as for a 'onsideration, albeit this 'onsisted of being freed fro, his fidu'iary responsibilities as no,inee and of the e!tinguish,ent of his liabilities on his subs'ription. &a6en as a pa'6age, +r. 5apudDs s/orn state,ents do not suffi'iently prove petitioner epubli'Ds theory of the 'ase. &he s/orn state,ent of Atty. Fran'is'o de 5uz,an, for,er P<$ 'orporate se'retary, ta6en during his deposition on 0une 1), )((1, is hereunder pertinently reprodu'ed, vi(.7 A&&?. M8$S8+B$N57 But as of 1243 . . . Pri,e <oldings, $n'. BP<$C /as in'orporated on instru'tion of +r. 0ose ?ao Ca,pos in 1244, so as of 1243 BP<$C /as still a holding 'o,pany of +r. Ca,posL !!! !!! !!! Aitness7 Please repeat the Iuestion. Atty. Muisu,bing 7&he re'ords in the Se'urities and E!'hange Co,,ission indi'ate that BP<$C /as in'orporated in %'tober of 1244 and you already testified that BP<$C /as in'orporated on instru'tions of +r. Ca,posL Aitness7 ?es sir7 M7 And you also testified that Pri,e <oldings is a holding 'o,panyL A7 ?es, sir. M7 %f +r. Ca,posL A7 $ said holding 'o,pany, you as6ed ,e /hat is the nature of the 'o,pany and $ thin6 you 'larified the Iuestion, a holding 'o,pany is one that hold assets and $ said yes, sir, thatDs ho/ $ understand a holding 'o,pany. M7 And you testified that all of these five -:. original sto'6holders of BP<$C /or6ed for +r. Ca,posL A7 ?es, sir. A7 ?es, sir. !!! !!! !!!

M7 So, the follo/ing year of 1243 you /ere still Corporate Se'retary of BP<$CL A7 ?es, sir. M7 And /ere you still ta6ing instru'tions fro, +r. Ca,pos the follo/ing year 1243 /ith regard to BP<$CL A7 ?es, sir. M7 And ho/ long after that did you 'ontinue to ta6e instru'tions fro, +r. Ca,pos /ith regard to BP<$CL A7 !!! $D, not too sure about this, but he distan'ed hi,self in ,any operations even of 8nited =aboratories /hen he had a heart atta'6 in 1242, sir. M7 So you are saying that you too6 instru'tions fro, +r. Ca,pos /ith regard to BP<$C until 1242 /hen +r. Ca,pos had a heart atta'6L A7 ?es, that is the possibility of having instru'tions fro, hi, be'ause after that he really /as very ina'tive in all these 'orporations and it /as then that +r. 5apud /ho too6 over, sir. M7 $n 1242L A7 ?es, sir. M7 By the /ay, in 1242 after +r. Ca,pos suffered this heart atta'6 and $ believe that /as late 1242, did +r. Ca,pos also retire fro, a'tive involve,ent in 8N$=ABL

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M7 After 1242 /hen +r. 5apud too6 over, are you a/are if there are any transfers of shares of sto'6s in BP<$C to other peopleL A7 ?es, sir. M7 Aill you tell us about thatL

Corporation CASES Based on the Syllabus of Fr. Agustin A7 +y re'olle'tion is, +r. 5apud hi,self ,ade a #eed of Assign,ent but $ donDt re,e,ber to /ho, the #eed of Assign,ent, in /hose favor. M7 Ahat year /as thatL A7 $ 'annot re'all the year, sir. M7 But this /as in 1242L A7 $ suppose so, sir. M7 No/, did +r. 5apud assign his four hundred shares to +r. 8. Co9uang'oL a,on

A7 ?es, sir, in the standard operating pro'edure in the 'o,panies of +r. Ca,pos is that all the subs'ribers /ould have either a #eed of Assign,ent signed or a #eed of &rust, sir. M7 And you are referring to these holding 'o,panies that +r. Ca,pos, a nu,ber of holding 'o,panies that +r. Ca,pos have 'aused to be in'orporated, these are the 'o,paniesL A7 ?es, sir. M7 ?ou said #eed of &rust, /ould there be a designated trusteeL A7 No, sir. M7 So, these are #eeds of Assign,ent or #eeds of &rust, the benefi'iary of /hi'h /ould be left blan6L A7 ?es, sir. M7 But the assignors or the trustees or grantors /ould all sign, /ould all e!e'ute these #eedsL A7 ?es, sir. M7 Aho /ould have possession, you ,entioned standard operating pro'edure or S%P, under that S%P /ho /ould hold the blan6 deedsL A7 A 'opy of /hi'h usually t/o -). 'opies are ,ade, sir. M7 &/o -). originalsL

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A7 $ thin6 the do'u,ent /ill sho/ be'ause $ 'annot re'all as to the person /ho ,ade the assign,ent, sir, $D, sorry, $ donDt really have a single paper of the re'ords, sir. !!! !!! !!! M7 Aas it the standard operating pro'edure in 0ose ?ao Ca,pos holdings 'o,panies that the sto'6 'ertifi'ates of the sto'6holders /ould be endorsed in blan6L A7 ?es, sir. M7 And /ho /ould hold 'ustody or possession of those blan6 endorsed sto'6 'ertifi'atesL A7 $n the 'ase of ,any of the 'orporations $ thin6 in'luding BP<$C these are not fully paid shares and therefore, $ 6ne/ that no sto'6 'ertifi'ates have been issued, sir. M7 So, spe'ifi'ally in the 'ase of BP<$C there /ere no sto'6 'ertifi'ates issued be'ause the subs'riptions /ere not fully paidL A7 ?es, sir. M7 #o you 6no/ if the sto'6holders of BP<$C, this is prior to 1231, had e!e'uted #eed of Assign,ent in blan6 for their subs'riptions to P<$ sharesL

A7 No. M7 Nero! 'opiesL A7 No, one original and one !ero! 'opy and the original /ill be in'luded in the re'ords, sir. M7 &he re'ords of that parti'ular 'o,panyL A7 ?es, sir, and the other one /e give it to the &reasurer.

Corporation CASES Based on the Syllabus of Fr. Agustin M7 %f that parti'ular 'o,panyL A7 No, to +r. 5aviola, sir. M7 +r. 5aviola /as the &reasurer of BP<$C /asnDt heL M7 No/, this /as in the year 1231, do you re'all thatL A7 $ thin6 he is be'ause he is al/ays, /as the &reasurer of ,any of the 'o,panies of +r. Ca,pos, sir. M7 So, there is the S%P also, +r. 5erva'io 5aviola is the &reasurer of BP<$CL A7 ?es, sir. !!! !!! !!! M7 #o you 6no/, so /hat happened to those blan6 #eeds of Assign,ent and #eeds of &rust of BP<$C that /ere entrusted /ith the trusted la/yers of 8N$=ABL A7 Ahen BP<$DsC re'ords /ere delivered, all those re'ords, all those papers are /ith the re'ords, sir. M7 So, you are referring to the 123) delivery to the representative of +r. a,on 8. Co9uang'oL A7 ?es, sir, e!'ept t/o -). #eeds of Assign,ent /hi'h /ere $ thin6 ,ade dire'tly after/ard /hen +r. 5apud and +r. 0ose Ca,pos, 0r. ,ade the dire't assign,ents to persons a'tually designated in the #eeds of Assign,ent, sir. M7 Aho /ere thoseL A7 &he shares of +r. 5apud /as given to +r. a,on 8. Co9uang'o, +r. Ca,pos, 0r. $ 'anDt re,e,ber to /ho, he ,ade the assign,ent, sir. M7 #oes the na,e Atty. Afri'a ring a bellL A7 ?es, sir. A7 No, sir. M7 #o you re'all it ,ight be 123)L A7 $ have no idea as to the year /hen this /as ,ade, sir.

M7 Aould he be the person /ho /as the assignee of the shares of either +r. 5apud or +r. Ca,pos, 0r.L A7 Aell, $ thin6 so, sir.

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M7 But you testified that there /as a 'hange of o/nership of BP<$C that led to the 'hange of offi'ers in'luding yourself in 123)L A7 $ didnDt say o/nership, sir. $ said that /hen there /as a 'hange /hen +r. a,on Co9uang'o be'a,e the Chair,an, 9ust on ti,e /hen he said there /ill be a 'hange of offi'er that is /hy they got the re'ords fro, ,e. M7 So, are you saying that there /as no 'hange of o/nership in BP<$C in 1231, 123)L A7 E!'ept the assign,ents ,ade by the t/o -). persons, sir. &hat is /hat $ 6no/. !!! !!! !!! M7 ?ou indi'ated earlier that those 'hange of offi'ers of BP<$C in 123), /ho /ere the ne/ offi'ers that too6 overL A7 $ do not 6no/, sir. !!! !!! !!! M7 Aho do you 6no/ /as 'hanged a,ong the offi'ers of BP<$C <oldings, $n'. A7 +r. 5apud as the Chair,an and President, sir.

Corporation CASES Based on the Syllabus of Fr. Agustin M7 Aas repla'edL A7 Aas repla'ed by +r. Co9uang'o, sir. M7 By +r. A7 ?es, sir. M7 And this is about 123)L A7 Possibly $ 'annot re'all the e!a't date, sir. !!! !!! !!! Atty. Muisu,bing7 ?ou testified earlier that +r. Co9uang'o be'a,e the PresidentL Aitness7 ?es, sir. $ testified to that effe't be'ause that /as the instru'tion given to ,e that the su''eeding ,inutes of the annual ,eeting +r. 5apud told ,e that the ne/ Chair,an and President /ill be, /as +r. a,on Co9uang'o, sir. M7 And that /as the instru'tion of +r. 5apudL A7 ?es, sir. M7 <e /as the President and Chair,an before +r. Co9uang'oL A7 ?es, sir. M7 No/, did you have any involve,ent in BP<$C after 123) A7 None, sir. M7 And you testified that all the re'ords that you /ere holding of BP<$C /ere ta6en fro, you in 123) A7 ?es, sir. M7 By +r. 5apudL a,on Co9uang'oL A7 ?es, sir.

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M7 #o you 6no/ /ho if - sic. he retained those re'ords or if he turned it over to the ne/ Chair,an and PresidentL A7 Aell, he told ,e he /ill be turning it over to the Co9uang'os, sir. M7 And those in'lude the blan6 #eeds of Assign,ent and #eeds of &rustL A7 $ suppose so, sir.3; -8nders'oring and the /ord *P<$* in bra'6et in lieu of the /ords *Pri,e <oldings $n'.* added. $n esse, Atty. 5uz,an ,erely reiterated fa'ts dedu'ible fro, the s/orn de'larations of +r. Ca,pos and +r. 5apud, fore,ost of /hi'h is that P<$ /as a,ong the 'orporations organized upon +r. Ca,posD instru'tions and that for all the 'orporations of +r. Ca,pos, deeds of trust or assign,ent /ere e!e'uted. Atty. #e 5uz,anDs state,ents are also affir,atory of the fa't that +r. 5apud assigned P<$ shares in his na,e to +r. Co9uang'o. $nterestingly, ho/ever, Atty. #e 5uz,an dis'losed a detail about the for,ation and the running of P<$ not heretofore 6no/n, i.e., that there /ere t/o 'opies of the deeds of trust or assign,ent, one a ,a'hine 'opy, and the other, the original, that /as 6ept in the re'ords of the 'o,pany. But of parti'ular signifi'an'e fro, this dis'losure is the a'tuality that until the ti,e that +r. Co9uang'o assu,ed the 'hair,anship and presiden'y of P<$ and the re'ords /ere delivered to hi, -Co9uang'o., the deeds of trust or assign,ent /ere on file /ith the re'ords, * eFcept two 3?4 #eeds of "ssignment which were FFF made directl8 afterward when ,r. Gapud and ,r. Jose Campos! Jr. made the direct assignments to persons actuall8 designated in the #eeds of "ssignments1. 5iven the above, it /ould appear that the e!e'ution of the #eeds of Assign,ent to a,on Co9uang'o ,ar6edly departs fro, the set pattern usually follo/ed in the organization of 'orporations on behalf of the late President +ar'os, respondent P<$ in'luded. &he pattern, to repeat, 'onsisted of7 the e!e'ution of deeds of trust or assign,ent to an unna,ed benefi'iary, or to indorse in blan6 the sto'6 'ertifi'ates, and deliver the 'orresponding deeds to the late President. $n the 'ase of /hat for the non'e ,ay be referred to as the *Co+uangco assignment1, the benefi'iary portion of the deeds /as not in blan6. $nstead, the na,e of +r. a,on Co9uang'o spe'ifi'ally appeared therein. Possession of the deeds /ere /ith the

Corporation CASES Based on the Syllabus of Fr. Agustin respondents Co9uang'os, not the +ar'oses, ne'essarily i,plying that nothing /as delivered to the late President +ar'os in regards to the 'overed P<$ shares. And there 'an be no serious argu,ent that petitioner epubli' has not produ'ed any deed of assign,ent or trust e!e'uted to an unna,ed benefi'iary or 'ertifi'ates indorsed in blan6 /hi'h /ould have other/ise 'orresponded to the disputed shareholdings of the Co9uang'os in P=#& by virtue of the P<$ shares assigned to the,. 8pon the above observations and absent any positive testi,ony, even fro, persons already e!tended by the PC55 state i,,unity fro, 'ri,inal prose'ution and li6e privileges, notably +essrs. Ca,pos, 5apud and #e 5uz,an, provided they dis'lose, a,ong other things, relevant infor,ation respe'ting the alleged a''u,ulated *ill"gotten /ealth* of the +ar'oses, that respondents Co9uang'os held their assigned shares on behalf of the late Pres. +ar'os, /e also hold as untenable petitioner epubli'Ds unyielding posture that the afore,entioned deeds of assign,ent to respondents Co9uang'os are sha, and fi'titious. $n all, this Court is unable to a''ord 'on'urren'e to petitioner epubli'Ds theory that the disputed P=#& shares, 'overed by the ne'essary P&$C sto'6 'ertifi'ates in the na,e of respondents Co9uang'osFP<$, are part of the +ar'osesD * ill gotten wealth*, for la'6 of dire't and substantial proof thereof. Petitioner epubli'Ds re'overy efforts 'annot be predi'ated on spe'ulations, sur,ises or vague inferen'es, as here. $n this sense, the respondent 'ourt stood on solid legal ground /hen it held that * a claim or recover8 of properties alleged b8 the %epublic to have been ill gotten cannot proceed under the mere presumption that said properties are indeed ill gotten1. %n another point, petitioner epubli' has ,ade ,u'h of respondent 'ourtDs failure to appre'iate in its favor the allegations, parta6ing of 9udi'ial ad,issions, ,ade by respondent +rs. +ar'os in her Ans/er to its A,ended Co,plaint, Cross"'lai, and other pleadings, bearing on the +ar'osesD o/nership of the disputed P=#& shares. $n this regard, suffi'e it to state that these ad,issions are eviden'e against the party /ho ,ade the, or, in appropriate 'ase, their privies. 3: $n the 'on'rete, the ad,issions adverted to ,ade by +rs. +ar'os, even if they parta6e of 9udi'ial ad,issions, are binding and 'on'lusive only as to her. &hey 'annot bind or pre9udi'e respondents Co9uang'osFP<$ /ho have ta6en issue against +rs. +ar'os on her o/nership 'lai, over the P=#& shares in Iuestion.

&his brings us to /hat are 6no/n as the *5eneral &elephone U Ele'troni's B5&EC #o'u,ents*, /hi'h to petitioner epubli' are li6e/ise ,aterial evidentiary lin6 to prove that the disputed P=#& shares for, part of the +ar'osesD *ill gotten wealth1, but /hi'h ,erited s'ant 'onsideration fro,, if not altogether ignored by, the respondent 'ourt. &/o -). letters 'o,prise the 5&E #o'u,ents7 one, purportedly fro, =eslie <. Aar6er of 5&E to +r. a,on Co9uang'o 'onfir,ing an appoint,ent /ith the latterDs *principal*E and the other, fro, &heodore F. Brophy of 5&E to 8S Assistant Se'retary of State Eugene <. Brader,an na,ing then Pres. +ar'os as the *Prin'ipal*. Per petitioner epubli'Ds a''ount, photo"'opies of the 5&E #o'u,ents /ere a,ong the papers and ,aterials seized by the 8S Custo,s Servi'e fro, the +ar'os fa,ily in February )1, 1231 in <a/aii and subseIuently turned over to PC55. &he Aar6er letter under date of 0une 13, 1214 31 reads in full, as follo/s7 +r. a,on Co9uang'o

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+anila Philippine $slands #ear +r. Co9uang'o7 Ae have re'eived your 'able on 0uly 13, 1214 to +r. #ouglas in /hi'h you 'onfir,ed that an appoint,ent had been se'ured for +r. Brophy to ,eet /ith your prin'ipal during the /ee6 of August 1@, 1214, the date and hour to be finalized upon +r. BrophyDs arrival. Based on this assuran'e, the *Proposal /ith espe't to the Sale of 5eneral &elephone U Ele'troni's CorporationDs Sto'6holdings in BP=#&C to a Philippine 5roup* dated 0une 1, 1214 /ill re,ain open until ;7@( p.,. Ne/ ?or6 ti,e on August @1, 1214, and unless a''epted by that ti,e -or further e!tended. /ill e!pire. Arti'le H$$$. #. of the proposal shall be dee,ed to be ,odified in this respe't by this letter.

Corporation CASES Based on the Syllabus of Fr. Agustin $ assure you of +r. BrophyDs 'ooperation /ith you in pursuing the proposal and hope that during your ,eetings you /ill be able to rea'h a ,utually satisfa'tory solution to any Iuestions /hi'h ,ay arise. Sin'erely yours, -Sgd.. =ES=$E <. AA RE * &he Brophy letter to +r. Brader,an34 referred to above reads7 %'tober 2, 1214 #ear +r. Brader,an7 $n a''ordan'e /ith your reIuest to +r. Stratton Anderson of our Aashington %ffi'e, $ a, en'losing a 'opy of a *Proposal /ith espe't to the Sale of 5eneral &elephone U Ele'troni's CorporationDs Sto'6holdings in BP=#&C to a Philippine 5roup*, dated 0une 1, 1214, together /ith a letter of 0uly 13, 1214 a,ending the Proposal, and a 'opy of a press release issued by this Corporation upon the 'o,pletion of the step provided for in Arti'le H$$$ E.P. of the proposal. &he Kprin'ipalD referred to in the 0uly 13 letter is President +ar'os. Sin'e the transa'tion has not been 'o,pleted, and /e 'annot be sure at this ti,e that it /ill be 'o,pleted, /e /ould prefer not to sub,it a detailed ,e,orandu, 'on'erning the ba'6ground of the Proposal. $ /ould, ho/ever, be glad to dis'uss it /ith you on the telephone and ans/er any Iuestions you ,ay have. Sin'erely yours, -Sgd.. &heodore F. Brophy* Petitioner epubli' 'ontends that the said 5&E #o'u,ents are *authori(ed public records of a private document1 . As su'h, it argues, 'iting Se'tion )4 of ule 1@), 33 that there /ould be no need to present the original 'opies thereof, as they ,ay be proved by a ,ere 'opy thereof, provided su'h 'opy is attested by the legal 'ustodian of the re'ords, /ith an appropriate 'ertifi'ate that su'h offi'er has the 'ustody. A''ording to said petitioner, the attestation

of +s. =ourdes +agno, PC55 e'ord %ffi'er, /ith the 'ertifi'ation that she has su'h 'ustody /ould suffi'e for the purpose of authenti'ating and proving their genuineness so as to have the 5&E do'u,ents re'eived in eviden'e. Ae disagree. Not every single paper or do'u,ent in the 'ustody of PC55 in relation to its Iuest to re'over the *ill gotten wealth* of the +ar'os fa,ily has the 'hara'ter and probative value of an *authori(ed public record1. Even the offi'ial seal of the PC55 on the t/o -). 5&E #o'u,ents does not suffi'e to ,a6e the, * authori(ed public records* of a private do'u,ent and thus enhan'e their ad,issibility. &he 5&E #o'u,ents are still private /ritings. &he 5&E #o'u,ents turned over by the 8S 5overn,ent in the hands of the PC55 are not self"authenti'ating, for /hat is 'onte!tually 'onsidered a publi' do'u,ent is not the private /riting, but the publi' re'ord thereof.32 &heir authenti'ity and due e!e'ution, as 'ondition sine 'ua non for their re'eption in eviden'e, /ith the evidentiary /eight they ,ight other/ise be entitled to, ,ust first be proved under Se'tion )(, ule 1@) of the ules Court, /hi'h reads7 *SEC. )(. Proof of private do'u,ent. G Before any private do'u,ent offered as authenti' is re'eived in eviden'e, its due e!e'ution and authenti'ity ,ust be proved either7 -a. By anyone /ho sa/ the do'u,ent e!e'uted or /ritten, or -b. By eviden'e of the genuineness of the signature or hand/riting of the ,a6er. Any other private do'u,ent need only be identified as that /hi'h it is 'lai,ed to be.*lawphKl.net A 'ontrary ruling /ould other/ise put the re'overy suits beyond the pale of the la/ on ad,issibility of eviden'e. &his 'ould not have been the intention of then President Corazon C. AIuino /hen she issued E% No. 1;, series of 1231, supra, providing that *technical rules of procedure and evidence shall not be applied strictl8 to Gsaid ill gotten wealth casesH.1 $n %epublic vs. Sandiganba8an 3.hird #ivision4!2( the Court /rote7 !!! Eleven years have passed sin'e the govern,ent initiated its sear'h for and reversion of su'h ill"gotten /ealth. &he definitive

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Corporation CASES Based on the Syllabus of Fr. Agustin resolution of su'h 'ases on the ,erits is thus long overdue. $f there is proof of illegal a'Iuisition, a''u,ulation, ,isappropriation, fraud of illi'it 'ondu't, let it be brought out no/. =et the o/nership of these funds and other assets be finally deter,ined and resolved /ith dispat'h, free fro, all the delaying te'hni'alities and annoying pro'edural sidetra'6s. A little over si! years -1. later, in 0uly )((@, the Court, in %epublic vs. Sandiganba8an 21 repeated the sa,e ,essage i,parted in the earlier %epublic 'ase, although the 'lause *BACl,ost t/o de'ades have passed* /as used, and aptly so, in lieu of *BECleven years have passed*. Ahat /e said in both %epublic 'ases is as sound and 'o,pelling as it is today. $t should not, ho/ever, be given a slant to ,ean that the Court has laid do/n a poli'y that ea'h and every re'overy suit brought by the PC55 shall be governed by different nor,s of 9usti'e or fair play. Far fro, it. $f the reIuired Iuantu, of proof obtains to establish illegal a'Iuisition, a''u,ulation, ,isappropriation, fraud or illi'it 'ondu't, ours is the duty to affir, the re'overy efforts of the epubli'. %n the other hand, should su'h proof be /anting, /e have the eIually e!a'ting obligation to de'lare that it is so. Si,ple 9usti'e de,ands su'h attitude fro, this Court. So does the guarantee against deprivation of property /ithout due pro'ess, /hi'h, li6e other basi' 'onstitutional guarantees, applies to all individuals, in'luding tyrants, 'harlatans and s'oundrels of every stripe, to borro/ fro, 0usti'e $sagani A. Cruz in his dissent in ,arcos vs. ,anglapus.2) $t has been said that ea'h 'ase, and ea'h litigious situation, ,ust stand on its o/n pe'uliar set of fa'ts, 9ust as every 'ase disposition ,ust stand on the basis of su'h fa'ts established by relevant and 'o,petent eviden'e in the light of appli'able statutory and de'isional la/. %ther de'ided 'ases ,ay be appropriate as points of referen'e , but, in the ulti,ate analysis, oneDs 'ause of a'tion shall su''eed or fail on the basis of the superiority of his eviden'e, ta6ing into a''ount the burden of proof assigned on ea'h party and the 'uantum of eviden'e reIuired by the 'ir'u,stan'es. So it ,ust be /ith ill"gotten /ealth re'overy 'ases, $nsofar as the disputed P=#& shares in underlying C1615 Ca(& No. 0002 are 'on'erned, /e agree /ith the holding of the respondent 'ourt that there is no satisfa'tory proof that they are indeed part of the *ill gotten wealth1 being re'overed by the State. &he 'ase for

petitioner epubli' falls short to satisfy the standards set ,ainly inB"S0C/2@ to establish a finding of *ill"gotten /ealth*. Ae thus lend 'on'urren'e to respondent 'ourtDs 'on'lusion, that7 *<en'e, a 'lai, for re'overy of properties alleged by the epubli' to have been ill"gotten 'annot pro'eed under the ,ere presu,ption that said properties are indeed ill"gotten. Before that 'hara'terization 'an be appended to the properties sought to -be. re'overed, there ,ust be proof of su'h 'lai,. &he 'hara'terization 'annot arise on the basis of publi' notoriety. $n the 'ase at bar, the epubli' failed to present the proof reIuired to 'hara'terize the P=#& shares as ill"gotten. As a ne'essary 'onseIuen'e of this failure, its 'lai, for re'overy thereof 'annot su''eed.* -at p. ;1. $n a,plifi'ation of the foregoing, $ reiterate /hat $ /rote in ,y *C%++EN&* -Anne! *A* hereof. to the #$SSEN&$N5 -no/ ,a9ority. %P$N$%N of 0usti'e +orales and ,y * E0%$N#E * -Anne! *B* hereof. to her reply to ,y 'o,,ent. :HEREFORE, $ vote to ENY, for la'6 of ,erit, the instant petitions and to AFF"R% the assailed issuan'es of the Sandiganbayan -;th #ivision. in Civil Case No. (((). CANC"O Asso'iate 0usti'e C. GARC"A

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Corporation CASES Based on the Syllabus of Fr. Agustin

EN BANC G.R. No. 1.6,.9 Jun& 28, 2011

:"LSON !. GA%#OA, Petitioner, vs. F"NANCE SECRETARY %ARGAR"TO #. TE$ES, F"NANCE UN ERSECRETARY JOHN !. SE$"LLA, AN CO%%"SS"ONER R"CAR O A#CE E OF THE !RES" ENT"AL CO%%"SS"ON ON GOO GO$ERN%ENT /!CGG0 "N THE"R CA!AC"T"ES AS CHA"R AN %E%#ERS, RES!ECT"$ELY, OF THE !R"$AT"AAT"ON COUNC"L, CHA"R%AN ANTHON" SAL"% OF F"RST !AC"F"C CO., LT . "N H"S CA!AC"TY AS "RECTOR OF %ETRO !AC"F"C ASSET HOL "NGS "NC., CHA"R%AN %ANUEL $. !ANG"L"NAN OF !H"L"!!"NE LONG "STANCE TELE!HONE CO%!ANY /!L T0 "N H"S CA!AC"TY AS %ANAG"NG "RECTOR OF F"RST !AC"F"C CO., LT ., !RES" ENT NA!OLEON L. NAAARENO OF !H"L"!!"NE LONG "STANCE TELE!HONE CO%!ANY, CHA"R FE #AR"N OF THE SECUR"T"ES ENCHANGE CO%%"SS"ON, an* !RES" ENT FRANC"S L"% OF THE !H"L"!!"NE STOC9 ENCHANGE, espondents. !A#L"TO $. SAN" A an* ARNO $. SAN" A , Petitioners"in" $ntervention. #EC$S$%N CAR!"O, J.: &he Case &his is an original petition for prohibition, in9un'tion, de'laratory relief and de'laration of nullity of the sale of shares of sto'6 of Philippine &ele'o,,uni'ations $nvest,ent Corporation -P&$C. by the govern,ent of the epubli' of the Philippines to +etro Pa'ifi' Assets <oldings, $n'. -+PA<., an affiliate of First Pa'ifi' Co,pany =i,ited -First Pa'ifi'.. T3& An)&;&*&n)( &he fa'ts, a''ording to petitioner Ailson P. 5a,boa, a sto'6holder of Philippine =ong #istan'e &elephone Co,pany -P=#&., are as follo/s71

%n )3 Nove,ber 12)3, the Philippine =egislature ena'ted A't No. @;@1 /hi'h granted P=#& a fran'hise and the right to engage in tele'o,,uni'ations business. $n 1212, 5eneral &elephone and Ele'troni's Corporation -5&E., an A,eri'an 'o,pany and a ,a9or P=#& sto'6holder, sold )1 per'ent of the outstanding 'o,,on shares of P=#& to P&$C. $n 1244, Pri,e <oldings, $n'. -P<$. /as in'orporated by several persons, in'luding oland 5apud and 0ose Ca,pos, 0r. SubseIuently, P<$ be'a,e the o/ner of 111,;1: shares of sto'6 of P&$C by virtue of three #eeds of Assign,ent e!e'uted by P&$C sto'6holders a,on Co9uang'o and =uis &irso ivilla. $n 1231, the 111,;1: shares of sto'6 of P&$C held by P<$ /ere seIuestered by the Presidential Co,,ission on 5ood 5overn,ent -PC55.. &he 111,;1: P&$C shares, /hi'h represent about ;1.1): per'ent of the outstanding 'apital sto'6 of P&$C, /ere later de'lared by this Court to be o/ned by the epubli' of the Philippines. ) $n 1222, First Pa'ifi', a Ber,uda"registered, <ong Rong"based invest,ent fir,, a'Iuired the re,aining :; per'ent of the outstanding 'apital sto'6 of P&$C. %n )( Nove,ber )((1, the $nter" Agen'y Privatization Coun'il -$PC. of the Philippine 5overn,ent announ'ed that it /ould sell the 111,;1: P&$C shares, or ;1.1): per'ent of the outstanding 'apital sto'6 of P&$C, through a publi' bidding to be 'ondu'ted on ; #e'e,ber )((1. SubseIuently, the publi' bidding /as reset to 3 #e'e,ber )((1, and only t/o bidders, Paralla! Henture Fund NNH$$ -Paralla!. and Pan"Asia Presidio Capital, sub,itted their bids. Paralla! /on /ith a bid of P):.1 billion or 8SW:1( ,illion. &hereafter, First Pa'ifi' announ'ed that it /ould e!er'ise its right of first refusal as a P&$C sto'6holder and buy the 111,;1: P&$C shares by ,at'hing the bid pri'e of Paralla!. <o/ever, First Pa'ifi' failed to do so by the 1 February )((4 deadline set by $PC and instead, yielded its right to P&$C itself /hi'h /as then given by $PC until ) +ar'h )((4 to buy the P&$C shares. %n 1; February )((4, First Pa'ifi', through its subsidiary, +PA<, entered into a Conditional Sale and Pur'hase Agree,ent of the 111,;1: P&$C shares, or ;1.1): per'ent of the outstanding 'apital sto'6 of P&$C, /ith the Philippine 5overn,ent for the pri'e of P):,)14,::1,((( or 8SW:1(,:3(,132. &he sale /as 'o,pleted on )3 February )((4. Sin'e P&$C is a sto'6holder of P=#&, the sale by the Philippine 5overn,ent of ;1.1): per'ent of P&$C shares is a'tually an indire't sale of 1) ,illion shares or about 1.@ per'ent of the outstanding 'o,,on shares of P=#&.:1)3 )3& (a5&, F1r() !a;141;C( ;o22on

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Corporation CASES Based on the Syllabus of Fr. Agustin (3ar&3o5*1n@( 1n !L T 1n;r&a(&* 4ro2 -0.. '&r;&n) )o -. '&r;&n), )3&r&+y 1n;r&a(1n@ )3& ;o22on (3ar&3o5*1n@( o4 4or&1@n&r( 1n !L T )o a+ou) 81.4. '&r;&n). &his violates Se'tion 11, Arti'le N$$ of the 1234 Philippine Constitution /hi'h li,its foreign o/nership of the 'apital of a publi' utility to not ,ore than ;( per'ent.@ %n the other hand, publi' respondents Finan'e Se'retary +argarito B. &eves, 8nderse'retary 0ohn P. Sevilla, and PC55 Co,,issioner i'ardo Ab'ede allege the follo/ing relevant fa'ts7 %n 2 Nove,ber 1214, P&$C /as in'orporated and had sin'e engaged in the business of invest,ent holdings. P&$C held )1,(@;,)1@ P=#& 'o,,on shares, or 1@.3;4 per'ent of the total P=#& outstanding 'o,,on shares. P<$, on the other hand, /as in'orporated in 1244, and be'a,e the o/ner of 111,;1: P&$C shares or ;1.1): per'ent of the outstanding 'apital sto'6 of P&$C by virtue of three #eeds of Assign,ent e!e'uted by a,on Co9uang'o and =uis &irso ivilla. $n 1231, the 111,;1: P&$C shares held by P<$ /ere seIuestered by the PC55, and subseIuently de'lared by this Court as part of the ill" gotten /ealth of for,er President Ferdinand +ar'os. &he seIuestered P&$C shares /ere re'onveyed to the epubli' of the Philippines in a''ordan'e /ith this CourtDs de'ision ; /hi'h be'a,e final and e!e'utory on 3 August )((1. &he Philippine 5overn,ent de'ided to sell the 111,;1: P&$C shares, /hi'h represent 1.; per'ent of the outstanding 'o,,on shares of sto'6 of P=#&, and designated the $nter"Agen'y Privatization Coun'il -$PC., 'o,posed of the #epart,ent of Finan'e and the PC55, as the disposing entity. An invitation to bid /as published in seven different ne/spapers fro, 1@ to ); Nove,ber )((1. %n )( Nove,ber )((1, a pre"bid 'onferen'e /as held, and the original deadline for bidding s'heduled on ; #e'e,ber )((1 /as reset to 3 #e'e,ber )((1. &he e!tension /as published in nine different ne/spapers. #uring the 3 #e'e,ber )((1 bidding, Paralla! Capital +anage,ent =P e,erged as the highest bidder /ith a bid of P):,)14,::1,(((. &he govern,ent notified First Pa'ifi', the ,a9ority o/ner of P&$C shares, of the bidding results and gave First Pa'ifi' until 1 February )((4 to e!er'ise its right of first refusal in a''ordan'e /ith P&$CDs Arti'les of $n'orporation. First Pa'ifi' announ'ed its intention to ,at'h Paralla!Ds bid.

%n @1 0anuary )((4, the <ouse of epresentatives -< . Co,,ittee on 5ood 5overn,ent 'ondu'ted a publi' hearing on the parti'ulars of the then i,pending sale of the 111,;1: P&$C shares. espondents &eves and Sevilla /ere a,ong those /ho attended the publi' hearing. &he < Co,,ittee eport No. ))4( 'on'luded that7 -a. the au'tion of the govern,entDs 111,;1: P&$C shares bore due diligen'e, transparen'y and 'onfor,ity /ith e!isting legal pro'eduresE and -b. F1r() !a;141;C( 1n)&n*&* a;>u1(1)1on o4 )3& @o6&rn2&n)C( 111,41, !T"C (3ar&( r&(u5)1n@ 1n F1r() !a;141;C( 100< o=n&r(31' o4 !T"C =155 no) 61o5a)& )3& 40 '&r;&n) ;on()1)u)1ona5 5121) on 4or&1@n o=n&r(31' o4 a 'u+51; u)151)y (1n;& !T"C 3o5*( on5y 1-.84. '&r;&n) o4 )3& )o)a5 ou)()an*1n@ ;o22on (3ar&( o4 !L T. : %n )3 February )((4, First Pa'ifi' 'o,pleted the a'Iuisition of the 111,;1: shares of sto'6 of P&$C. espondent +anuel H. Pangilinan ad,its the follo/ing fa'ts7 -a. the $PC 'ondu'ted a publi' bidding for the sale of 111,;1: P&$C shares or ;1 per'ent of the outstanding 'apital sto'6 of P&$C -the re,aining :; per'ent of P&$C shares /as already o/ned by First Pa'ifi' and its affiliates.E -b. Paralla! offered the highest bid a,ounting toP):,)14,::1,(((E -'. pursuant to the right of first refusal in favor of P&$C and its shareholders granted in P&$CDs Arti'les of $n'orporation, +PA<, a First Pa'ifi' affiliate, e!er'ised its right of first refusal by ,at'hing the highest bid offered for P&$C shares on 1@ February )((4E and -d. on )3 February )((4, the sale /as 'onsu,,ated /hen +PA< paid $PC P):,)14,::1,((( and the govern,ent delivered the 'ertifi'ates for the 111,;1: P&$C shares. espondent Pangilinan denies the other allegations of fa'ts of petitioner. %n )3 February )((4, petitioner filed the instant petition for prohibition, in9un'tion, de'laratory relief, and de'laration of nullity of sale of the 111,;1: P&$C shares. Petitioner 'lai,s, a,ong others, that the sale of the 111,;1: P&$C shares /ould result in an in'rease in First Pa'ifi'Ds 'o,,on shareholdings in P=#& fro, @(.4 per'ent to @4 per'ent, and this, 'o,bined /ith 0apanese N&& #oCo+oDs 'o,,on shareholdings in P=#&, /ould result to a total foreign 'o,,on shareholdings in P=#& of :1.:1 per'ent /hi'h is over the ;( per'ent 'onstitutional li,it.1 Petitioner asserts7 $f and /hen the sale is 'o,pleted, First Pa'ifi'Ds eIuity in P=#& /ill go up fro, @(.4 per'ent to @4.( per'ent of its 'o,,on G or voting" sto'6holdings, ! ! !. <en'e, the 'onsu,,ation of the sale /ill put the t/o largest foreign investors in P=#& G First Pa'ifi' and 0apanDs

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Corporation CASES Based on the Syllabus of Fr. Agustin N&& #oCo+o, /hi'h is the /orldDs largest /ireless tele'o,,uni'ations fir,, o/ning :1.:1 per'ent of P=#& 'o,,on eIuity. ! ! ! Aith the 'o,pletion of the sale, data 'ulled fro, the offi'ial /ebsite of the Ne/ ?or6 Sto'6 E!'hange -///.nyse.'o,. sho/ed that those foreign entities, /hi'h o/n at least five per'ent of 'o,,on eIuity, /ill 'olle'tively o/n 31.;4 per'ent of P=#&Ds 'o,,on eIuity. ! ! ! ! ! ! as the annual dis'losure reports, also referred to as For, )("R reports ! ! ! /hi'h P=#& sub,itted to the Ne/ ?or6 Sto'6 E!'hange for the period )((@")((:, revealed that First Pa'ifi' and several other foreign entities brea'hed the 'onstitutional li,it of ;( per'ent o/nership as early as )((@. ! ! !*4 Petitioner raises the follo/ing issues7 -1. /hether the 'onsu,,ation of the then i,pending sale of 111,;1: P&$C shares to First Pa'ifi' violates the 'onstitutional li,it on foreign o/nership of a publi' utilityE -). /hether publi' respondents 'o,,itted grave abuse of dis'retion in allo/ing the sale of the 111,;1: P&$C shares to First Pa'ifi'E and -@. /hether the sale of 'o,,on shares to foreigners in e!'ess of ;( per'ent of the entire subs'ribed 'o,,on 'apital sto'6 violates the 'onstitutional li,it on foreign o/nership of a publi' utility.3 %n 1@ August )((4, Pablito H. Sanidad and Arno H. Sanidad filed a +otion for =eave to $ntervene and Ad,it Atta'hed Petition"in" $ntervention. $n the esolution of )3 August )((4, the Court granted the ,otion and noted the Petition"in"$ntervention. Petitioners"in"intervention *9oin petitioner Ailson 5a,boa ! ! ! in see6ing, a,ong others, to en9oin andFor nullify the sale by respondents of the 111,;1: P&$C shares to First Pa'ifi' or assignee.* Petitioners"in"intervention 'lai, that, as P=#& subs'ribers, they have a *sta6e in the out'o,e of the 'ontroversy ! ! ! /here the Philippine 5overn,ent is 'o,pleting the sale of govern,ent o/ned assets in BP=#&C, unIuestionably a publi' utility, in violation of the nationality restri'tions of the Philippine Constitution.* T3& "((u& &his Court is not a trier of fa'ts. Fa'tual Iuestions su'h as those raised by petitioner,2 /hi'h indisputably de,and a thorough e!a,ination of the eviden'e of the parties, are generally beyond this

CourtDs 9urisdi'tion. Adhering to this /ell"settled prin'iple, the Court shall 'onfine the resolution of the instant 'ontroversy solely on the )3r&(3o5* an* 'ur&5y 5&@a5 1((u& of /hether the ter, *'apital* in Se'tion 11, Arti'le N$$ of the Constitution refers to the total 'o,,on shares only or to the total outstanding 'apital sto'6 -'o,bined total of 'o,,on and non"voting preferred shares. of P=#&, a publi' utility. T3& Ru51n@ o4 )3& Cour) &he petition is partly ,eritorious. Pe"i"ion for man&amus &eclara"ory relief "rea"e& as pe"i"ion for

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At the outset, petitioner is fa'ed /ith a pro'edural barrier. A,ong the re,edies petitioner see6s, only the petition for prohibition is /ithin the original 9urisdi'tion of this 'ourt, /hi'h ho/ever is not e!'lusive but is 'on'urrent /ith the egional &rial Court and the Court of Appeals. &he a'tions for de'laratory relief, 1( in9un'tion, and annul,ent of sale are not e,bra'ed /ithin the original 9urisdi'tion of the Supre,e Court. %n this ground alone, the petition 'ould have been dis,issed outright. Ahile dire't resort to this Court ,ay be 9ustified in a petition for prohibition,11 the Court shall nevertheless refrain fro, dis'ussing the grounds in support of the petition for prohibition sin'e on )3 February )((4, the Iuestioned sale /as 'onsu,,ated /hen +PA< paid $PC P):,)14,::1,((( and the govern,ent delivered the 'ertifi'ates for the 111,;1: P&$C shares. <o/ever, sin'e the threshold and purely legal issue on the definition of the ter, *'apital* in Se'tion 11, Arti'le N$$ of the Constitution has far"rea'hing i,pli'ations to the national e'ono,y, the Court treats the petition for de'laratory relief as one for ,anda,us. 1) $n Salvacion v. Central Ban$ of the Philippines ,1@ the Court treated the petition for de'laratory relief as one for ,anda,us 'onsidering the grave in9usti'e that /ould result in the interpretation of a ban6ing la/. $n that 'ase, /hi'h involved the 'ri,e of rape 'o,,itted by a foreign tourist against a Filipino ,inor and the e!e'ution of the final 9udg,ent in the 'ivil 'ase for da,ages on the touristDs dollar deposit /ith a lo'al ban6, the Court de'lared Se'tion

Corporation CASES Based on the Syllabus of Fr. Agustin 11@ of Central Ban6 Cir'ular No. 21(, e!e,pting foreign 'urren'y deposits fro, atta'h,ent, garnish,ent or any other order or pro'ess of any 'ourt, inappli'able due to the pe'uliar 'ir'u,stan'es of the 'ase. &he Court held that *in9usti'e /ould result espe'ially to a 'itizen aggrieved by a foreign guest li6e a''used ! ! !* that /ould *negate Arti'le 1( of the Civil Code /hi'h provides that Kin 'ase of doubt in the interpretation or appli'ation of la/s, it is presu,ed that the la/,a6ing body intended right and 9usti'e to prevail.D* &he Court therefore reIuired respondents Central Ban6 of the Philippines, the lo'al ban6, and the a''used to 'o,ply /ith the /rit of e!e'ution issued in the 'ivil 'ase for da,ages and to release the dollar deposit of the a''used to satisfy the 9udg,ent. $n "lliance of Government Aor$ers v. ,inister of :abor ,1; the Court si,ilarly brushed aside the pro'edural infir,ity of the petition for de'laratory relief and treated the sa,e as one for ,anda,us. $n "lliance, the issue /as /hether the govern,ent unla/fully e!'luded petitioners, /ho /ere govern,ent e,ployees, fro, the en9oy,ent of rights to /hi'h they /ere entitled under the la/. Spe'ifi'ally, the Iuestion /as7 *Are the bran'hes, agen'ies, subdivisions, and instru,entalities of the 5overn,ent, in'luding govern,ent o/ned or 'ontrolled 'orporations in'luded a,ong the four Ke,ployersD under Presidential #e'ree No. 3:1 /hi'h are reIuired to pay their e,ployees ! ! ! a thirteenth -1@th. ,onth pay ! ! ! L* &he Constitutional prin'iple involved therein affe'ted all govern,ent e,ployees, 'learly 9ustifying a rela!ation of the te'hni'al rules of pro'edure, and 'ertainly reIuiring the interpretation of the assailed presidential de'ree. $n short, it is /ell"settled that this Court ,ay treat a petition for de'laratory relief as one for ,anda,us if the issue involved has far" rea'hing i,pli'ations. As this Court held in Salvacion& &he Court has no original and e!'lusive 9urisdi'tion over a petition for de'laratory relief. Ho=&6&r, &7;&')1on( )o )31( ru5& 3a6& +&&n r&;o@n1H&*. T3u(, =3&r& )3& '&)1)1on 3a( 4ar8r&a;31n@ 12'51;a)1on( an* ra1(&( >u&()1on( )3a) (3ou5* +& r&(o56&*, 1) 2ay +& )r&a)&* a( on& 4or 2an*a2u( .1: -E,phasis supplied. $n the present 'ase, petitioner see6s pri,arily the interpretation of the ter, *'apital* in Se'tion 11, Arti'le N$$ of the Constitution. <e prays that this Court de'lare that the ter, *'apital* refers to 'o,,on shares only, and that su'h shares 'onstitute *the sole basis in deter,ining foreign eIuity in a publi' utility.* Petitioner further

as6s this Court to de'lare any ruling in'onsistent /ith su'h interpretation un'onstitutional. &he interpretation of the ter, *'apital* in Se'tion 11, Arti'le N$$ of the Constitution has far"rea'hing i,pli'ations to the national e'ono,y. $n fa't, a resolution of this issue /ill deter,ine /hether Filipinos are ,asters, or se'ond 'lass 'itizens, in their o/n 'ountry. Ahat is at sta6e here is /hether Filipinos or foreigners /ill have effec"i9e con"rol of the national e'ono,y. $ndeed, if ever there is a legal issue that has far"rea'hing i,pli'ations to the entire nation, and to future generations of Filipinos, it is the threshhold legal issue presented in this 'ase. &he Court first en'ountered the issue on the definition of the ter, *'apital* in Se'tion 11, Arti'le N$$ of the Constitution in the 'ase of -ernande( v. Co+uangco! do'6eted as 5. . No. 1:4@1(.11 &hat 'ase involved the sa,e publi' utility -P=#&. and substantially the sa,e private respondents. #espite the i,portan'e and novelty of the 'onstitutional issue raised therein and despite the fa't that the petition involved a purely legal Iuestion, the Court de'lined to resolve the 'ase on the ,erits, and instead denied the sa,e for disregarding the hierar'hy of 'ourts.14 &here, petitioner Fernandez assailed on a pure Iuestion of la/ the egional &rial CourtDs #e'ision of )1 February )((@ via a petition for revie/ under ule ;:. &he CourtDs esolution, denying the petition, be'a,e final on )1 #e'e,ber )((;. &he instant petition therefore presents the Court /ith another opportunity to finally settle this 'ur&5y 5&@a5 1((u&/hi'h is of trans'endental i,portan'e to the national e'ono,y and a funda,ental reIuire,ent to a faithful adheren'e to our Constitution. &he Court ,ust forth/ith seize su'h opportunity, not only for the benefit of the litigants, but ,ore signifi'antly for the benefit of the entire Filipino people, to ensure, in the /ords of the Constitution, *a self"reliant and independent national e'ono,y &44&;)16&5y ;on)ro55&* by Filipinos.*13 Besides, in the light of vague and 'onfusing positions ta6en by govern,ent agen'ies on this purely legal issue, present and future foreign investors in this 'ountry deserve, as a ,atter of basi' fairness, a 'ategori'al ruling fro, this Court on the e!tent of their parti'ipation in the 'apital of publi' utilities and other nationalized businesses. #espite its far"rea'hing i,pli'ations to the national e'ono,y, this purely legal issue has re,ained unresolved for over 4: years sin'e

Nazareno

1(

Corporation CASES Based on the Syllabus of Fr. Agustin the 12@: Constitution. &here is no reason for this Court to evade this ever re'urring funda,ental issue and delay again defining the ter, *'apital,* /hi'h appears not only in Se'tion 11, Arti'le N$$ of the Constitution, but also in Se'tion ), Arti'le N$$ on 'o"produ'tion and 9oint venture agree,ents for the develop,ent of our natural resour'es,12 in Se'tion 4, Arti'le N$$ on o/nership of private lands,)( in Se'tion 1(, Arti'le N$$ on the reservation of 'ertain invest,ents to Filipino 'itizens,)1 in Se'tion ;-)., Arti'le N$H on the o/nership of edu'ational institutions, )) and in Se'tion 11-)., Arti'le NH$ on the o/nership of advertising 'o,panies. )@ Pe"i"ioner !as locus s"an&i &here is no dispute that petitioner is a sto'6holder of P=#&. As su'h, he has the right to Iuestion the sub9e't sale, /hi'h he 'lai,s to violate the nationality reIuire,ent pres'ribed in Se'tion 11, Arti'le N$$ of the Constitution. $f the sale indeed violates the Constitution, then there is a possibility that P=#&Ds fran'hise 'ould be revo6ed, a dire 'onseIuen'e dire'tly affe'ting petitionerDs interest as a sto'6holder. +ore i,portantly, there is no Iuestion that the instant petition raises ,atters of trans'endental i,portan'e to the publi'. &he funda,ental and threshold legal issue in this 'ase, involving the national e'ono,y and the e'ono,i' /elfare of the Filipino people, far out/eighs any per'eived i,pedi,ent in the legal personality of the petitioner to bring this a'tion. $n Chave( v. PCGG,); the Court upheld the right of a 'itizen to bring a suit on ,atters of trans'endental i,portan'e to the publi', thus7 $n .aLada v. .uvera, the Court asserted that =3&n )3& 1((u& ;on;&rn( a 'u+51; r1@3) an* )3& o+?&;) o4 2an*a2u( 1( )o o+)a1n )3& &n4or;&2&n) o4 a 'u+51; *u)y, )3& '&o'5& ar& r&@ar*&* a( )3& r&a5 'ar)1&( 1n 1n)&r&()I an* +&;au(& 1) 1( (u441;1&n) )3a) '&)1)1on&r 1( a ;1)1H&n an* a( (u;3 1( 1n)&r&()&* 1n )3& &7&;u)1on o4 )3& 5a=(, 3& n&&* no) (3o= )3a) 3& 3a( any 5&@a5 or ('&;1a5 1n)&r&() 1n )3& r&(u5) o4 )3& a;)1on . $n the aforesaid 'ase, the petitioners sought to enfor'e their right to be infor,ed on ,atters of publi' 'on'ern, a right then re'ognized in Se'tion 1, Arti'le $H of the 124@ Constitution, in 'onne'tion /ith the rule that la/s in order to be valid and enfor'eable ,ust be published in the %ffi'ial 5azette or other/ise effe'tively pro,ulgated. $n ruling for the petitionersD legal standing, the Court de'lared that the right

they sought to be enfor'ed Kis a publi' right re'ognized by no less than the funda,ental la/ of the land.D :egaspi v. Civil Service Commission , /hile reiterating &aPada, further de'lared that K=3&n a 2an*a2u( 'ro;&&*1n@ 1n6o56&( )3& a((&r)1on o4 a 'u+51; r1@3), )3& r&>u1r&2&n) o4 '&r(ona5 1n)&r&() 1( (a)1(41&* +y )3& 2&r& 4a;) )3a) '&)1)1on&r 1( a ;1)1H&n an*, )3&r&4or&, 'ar) o4 )3& @&n&ra5 O'u+51;C =31;3 'o((&((&( )3& r1@3).D Further, in "lbano v. %e8es, /e said that /hile e!penditure of publi' funds ,ay not have been involved under the Iuestioned 'ontra't for the develop,ent, ,anage,ent and operation of the +anila $nternational Container &er,inal, K'u+51; 1n)&r&() F=a(G *&41n1)&5y 1n6o56&* ;on(1*&r1n@ )3& 12'or)an) ro5& Fo4 )3& (u+?&;) ;on)ra;)G . . . 1n )3& &;ono21; *&6&5o'2&n) o4 )3& ;oun)ry an* )3& 2a@n1)u*& o4 )3& 41nan;1a5 ;on(1*&ra)1on 1n6o56&* .D Ae 'on'luded that, as a 'onseIuen'e, the dis'losure provision in the Constitution /ould 'onstitute suffi'ient authority for upholding the petitionerDs standing. -E,phasis supplied. Clearly, sin'e the instant petition, brought by a 'itizen, involves ,atters of trans'endental publi' i,portan'e, the petitioner has the reIuisite locus standi. Defini"ion of "!e Term :Capi"al: 6ec"ion ((% 2r"icle ;II of "!e (/5- Cons"i"u"ion in

Nazareno

11

Se'tion 11, Arti'le N$$ -National E'ono,y and Patri,ony. of the 1234 Constitution ,andates the Filipinization of publi' utilities, to /it7 Se'tion 11. No 4ran;31(&, ;&r)141;a)&, or any o)3&r 4or2 o4 au)3or1Ha)1on 4or )3& o'&ra)1on o4 a 'u+51; u)151)y (3a55 +& @ran)&* &7;&') )o ;1)1H&n( o4 )3& !3151''1n&( or )o ;or'ora)1on( or a((o;1a)1on( or@an1H&* un*&r )3& 5a=( o4 )3& !3151''1n&(, a) 5&a() (17)y '&r ;&n)u2 o4 =3o(& ;a'1)a5 1( o=n&* +y (u;3 ;1)1H&n(E nor shall su'h fran'hise, 'ertifi'ate, or authorization be e!'lusive in 'hara'ter or for a longer period than fifty years. Neither shall any su'h fran'hise or right be granted e!'ept under the 'ondition that it shall be sub9e't to a,end,ent, alteration, or repeal by the Congress /hen the 'o,,on good so reIuires. &he State shall en'ourage eIuity parti'ipation in publi' utilities by the general publi'. &he parti'ipation of foreign investors

Corporation CASES Based on the Syllabus of Fr. Agustin in the governing body of any publi' utility enterprise shall be li,ited to their proportionate share in its 'apital, and all the e!e'utive and ,anaging offi'ers of su'h 'orporation or asso'iation ,ust be 'itizens of the Philippines. -E,phasis supplied. &he above provision substantially reiterates Se'tion :, Arti'le N$H of the 124@ Constitution, thus7 S&;)1on ,. No 4ran;31(&, ;&r)141;a)&, or any o)3&r 4or2 o4 au)3or1Ha)1on 4or )3& o'&ra)1on o4 a 'u+51; u)151)y (3a55 +& @ran)&* &7;&') )o ;1)1H&n( o4 )3& !3151''1n&( or )o ;or'ora)1on( or a((o;1a)1on( or@an1H&* un*&r )3& 5a=( o4 )3& !3151''1n&( a) 5&a() (17)y '&r ;&n)u2 o4 )3& ;a'1)a5 o4 =31;3 1( o=n&* +y (u;3 ;1)1H&n(, nor shall su'h fran'hise, 'ertifi'ate, or authorization be e!'lusive in 'hara'ter or for a longer period than fifty years. Neither shall any su'h fran'hise or right be granted e!'ept under the 'ondition that it shall be sub9e't to a,end,ent, alteration, or repeal by the National Asse,bly /hen the publi' interest so reIuires. &he State shall en'ourage eIuity parti'ipation in publi' utilities by the general publi'. &he parti'ipation of foreign investors in the governing body of any publi' utility enterprise shall be li,ited to their proportionate share in the 'apital thereof. -E,phasis supplied. &he foregoing provision in the 124@ Constitution reprodu'ed Se'tion 3, Arti'le N$H of the 12@: Constitution, vi(7 S&;)1on 8. No 4ran;31(&, ;&r)141;a)&, or any o)3&r 4or2 o4 au)3or1Ha)1on 4or )3& o'&ra)1on o4 a 'u+51; u)151)y (3a55 +& @ran)&* &7;&') )o ;1)1H&n( o4 )3& !3151''1n&( or )o ;or'ora)1on( or o)3&r &n)1)1&( or@an1H&* un*&r )3& 5a=( o4 )3& !3151''1n&( (17)y '&r ;&n)u2 o4 )3& ;a'1)a5 o4 =31;3 1( o=n&* +y ;1)1H&n( o4 )3& !3151''1n&(, nor shall su'h fran'hise, 'ertifi'ate, or authorization be e!'lusive in 'hara'ter or for a longer period than fifty years. No fran'hise or right shall be granted to any individual, fir,, or 'orporation, e!'ept under the 'ondition that it shall be sub9e't to a,end,ent, alteration, or repeal by the Congress /hen the publi' interest so reIuires. -E,phasis supplied. Father 0oaIuin 5. Bernas, S.0., a leading ,e,ber of the 1231 Constitutional Co,,ission, re,inds us that the Filipinization provision in the 1234 Constitution is one of the produ'ts of the spirit of nationalis, /hi'h gripped the 12@: Constitutional Convention.): &he 1234 Constitution *provides for the Filipinization of

publi' utilities by reIuiring that any for, of authorization for the operation of publi' utilities should be granted only to K'itizens of the Philippines or to 'orporations or asso'iations organized under the la/s of the Philippines at least si!ty per 'entu, of /hose 'apital is o/ned by su'h 'itizens.D T3& 'ro61(1on 1( Fan &7'r&((G r&;o@n1)1on o4 )3& (&n(1)16& an* 61)a5 'o(1)1on o4 'u+51; u)151)1&( +o)3 1n )3& na)1ona5 &;ono2y an* 4or na)1ona5 (&;ur1)y.J)1 &he evident purpose of the 'itizenship reIuire,ent is to prevent aliens fro, assu,ing 'ontrol of publi' utilities, /hi'h ,ay be ini,i'al to the national interest.)4 &his spe'ifi' provision e!pli'itly reserves to Filipino 'itizens 'ontrol of publi' utilities, pursuant to an overriding e'ono,i' goal of the 1234 Constitution7 to *'onserve and develop our patri,ony*)3 and ensure *a self"reliant and independent national e'ono,y effec"i9ely con"rolle& by Filipinos.*)2 Any 'itizen or 9uridi'al entity desiring to operate a publi' utility ,ust therefore ,eet the ,ini,u, nationality reIuire,ent pres'ribed in Se'tion 11, Arti'le N$$ of the Constitution. <en'e, for a 'orporation to be granted authority to operate a publi' utility, at least 1( per'ent of its *'apital* ,ust be o/ned by Filipino 'itizens. &he 'ru! of the 'ontroversy is the definition of the ter, * ;a'1)a5.* #oes the ter, *'apital* in Se'tion 11, Arti'le N$$ of the Constitution refer to 'o,,on shares or to the total outstanding 'apital sto'6 -'o,bined total of 'o,,on and non"voting preferred shares.L Petitioner sub,its that the ;( per'ent foreign eIuity li,itation in do,esti' publi' utilities refers only to 'o,,on shares be'ause su'h shares are entitled to vote and it is through voting that 'ontrol over a 'orporation is e!er'ised. Petitioner posits that the ter, *'apital* in Se'tion 11, Arti'le N$$ of the Constitution refers to *the o/nership of 'o,,on 'apital sto'6 subs'ribed and outstanding, /hi'h 'lass of shares alone, under the 'orporate set"up of P=#&, 'an vote and ele't ,e,bers of the board of dire'tors.* $t is undisputed that P=#&Ds non" voting preferred shares are held ,ostly by Filipino 'itizens. @( &his arose fro, Presidential #e'ree No. )14,@1 issued on 11 0une 124@ by then President Ferdinand +ar'os, reIuiring every appli'ant of a P=#& telephone line to subs'ribe to non"voting preferred shares to pay for the invest,ent 'ost of installing the telephone line.@) Petitioners"in"intervention basi'ally reiterate petitionerDs argu,ents and adopt petitionerDs definition of the ter, *'apital.* @@ Petitioners" in"intervention allege that *the appro!i,ate foreign o/nership of 'o,,on 'apital sto'6 of P=#& ! ! ! already a,ounts to at least

Nazareno

1)

Corporation CASES Based on the Syllabus of Fr. Agustin 1@.:;> of the total outstanding 'o,,on sto'6,* /hi'h ,eans that foreigners e!er'ise signifi'ant 'ontrol over P=#&, patently violating the ;( per'ent foreign eIuity li,itation in publi' utilities pres'ribed by the Constitution. espondents, on the other hand, do not offer any definition of the ter, *'apital* in Se'tion 11, Arti'le N$$ of the Constitution. +ore i,portantly, private respondents Nazareno and Pangilinan of P=#& do not dispute that ,ore than ;( per'ent of the 'o,,on shares of P=#& are held by foreigners. $n parti'ular, respondent NazarenoDs +e,orandu,, 'onsisting of 4@ pages, harps ,ainly on the pro'edural infir,ities of the petition and the supposed violation of the due pro'ess rights of the *affe'ted foreign 'o,,on shareholders.* espondent Nazareno does not deny petitionerDs allegation of foreignersD do,inating the 'o,,on shareholdings of P=#&. Nazareno stressed ,ainly that the petition *(&&D( )o *16&() 4or&1@n ;o22on (3ar&3o5*&r( 'ur'or)&*5y &7;&&*1n@ 40< o4 )3& )o)a5 ;o22on (3ar&3o5*1n@( 1n !L T o4 )3&1r o=n&r(31' o6&r )3&1r (3ar&( .* &hus, *the foreign natural and 9uridi'al P=#& shareholders ,ust be i,pleaded in this suit so that they 'an be heard.*@; Essentially, Nazareno invo6es denial of due pro'ess on behalf of the foreign 'o,,on shareholders. Ahile Nazareno does not introdu'e any definition of the ter, *'apital,* he states that * a2on@ )3& 4a;)ua5 a((&r)1on( )3a) n&&* )o +& &()a+51(3&* )o ;oun)&r '&)1)1on&rC( a55&@a)1on( 1( )3& un14or2 1n)&r'r&)a)1on +y @o6&rn2&n) a@&n;1&( /(u;3 a( )3& SEC0, 1n()1)u)1on( an* ;or'ora)1on( /(u;3 a( )3& !3151''1n& Na)1ona5 O15 Co2'any8En&r@y &6&5o'2&n) Cor'ora)1on or !NOC8E C0 o4 1n;5u*1n@ +o)3 'r&4&rr&* (3ar&( an* ;o22on (3ar&( 1n J;on)ro551n@ 1n)&r&()J 1n 61&= o4 )&()1n@ ;o2'51an;& =1)3 )3& 40< ;on()1)u)1ona5 5121)a)1on on 4or&1@n o=n&r(31' 1n 'u+51; u)151)1&(.*@: Si,ilarly, respondent +anuel H. Pangilinan does not define the ter, *'apital* in Se'tion 11, Arti'le N$$ of the Constitution. Neither does he refute petitionerDs 'lai, of foreigners holding ,ore than ;( per'ent of P=#&Ds 'o,,on shares. $nstead, respondent Pangilinan fo'uses on the pro'edural fla/s of the petition and the alleged violation of the due pro'ess rights of foreigners. espondent Pangilinan e,phasizes in his +e,orandu, -1. the absen'e of this CourtDs 9urisdi'tion over the petitionE -). petitionerDs la'6 of standingE -@. ,ootness of the petitionE -;. non"availability of de'laratory reliefE and -:. the denial

of due pro'ess rights. +oreover, respondent Pangilinan alleges that the issue should be /hether *o/ners of shares in P=#& as /ell as o/ners of shares in 'o,panies holding shares in P=#& ,ay be reIuired to relinIuish their shares in P=#& and in those 'o,panies /ithout any la/ reIuiring the, to surrender their shares and also /ithout noti'e and trial.* espondent Pangilinan further asserts that * S&;)1on 11, FAr)1;5& N"" o4 )3& Con()1)u)1onG 12'o(&( no na)1ona51)y r&>u1r&2&n) on )3& (3ar&3o5*&r( o4 )3& u)151)y ;o2'any a( a ;on*1)1on 4or D&&'1n@ )3&1r (3ar&( 1n )3& u)151)y ;o2'any. * A''ording to hi,, *Se'tion 11 does not authorize ta6ing one personDs property -the shareholderDs sto'6 in the utility 'o,pany. on the basis of another partyDs alleged failure to satisfy a reIuire,ent that is a 'ondition only for that other partyDs retention of another pie'e of property -the utility 'o,pany being at least 1(> Filipino"o/ned to 6eep its fran'hise..*@1 &he %S5, representing publi' respondents Se'retary +argarito &eves, 8nderse'retary 0ohn P. Sevilla, Co,,issioner i'ardo Ab'ede, and Chair,an Fe Barin, is li6e/ise silent on the definition of the ter, *'apital.* $n its +e,orandu, @4 dated ); Septe,ber )((4, the %S5 also li,its its dis'ussion on the supposed pro'edural defe'ts of the petition, i.e. la'6 of standing, la'6 of 9urisdi'tion, non"in'lusion of interested parties, and la'6 of basis for in9un'tion. &he %S5 does not present any definition or interpretation of the ter, *'apital* in Se'tion 11, Arti'le N$$ of the Constitution. &he %S5 'ontends that *the petition a'tually parta6es of a 'ollateral atta'6 on P=#&Ds fran'hise as a publi' utility,* /hi'h in effe't reIuires a *full"blo/n trial /here all the parties in interest are given their day in 'ourt.* @3 espondent Fran'is'o Ed =i,, i,pleaded as President and Chief E!e'utive %ffi'er of the Philippine Sto'6 E!'hange -PSE., does not also define the ter, *'apital* and see6s the dis,issal of the petition on the follo/ing grounds7 -1. failure to state a 'ause of a'tion against =i,E -). the PSE allegedly i,ple,ented its rules and reIuired all listed 'o,panies, in'luding P=#&, to ,a6e proper and ti,ely dis'losuresE and -@. the reliefs prayed for in the petition /ould adversely i,pa't the sto'6 ,ar6et. $n the earlier 'ase of -ernande( v. Co+uangco, petitioner Fernandez /ho 'lai,ed to be a sto'6holder of re'ord of P=#&, 'ontended that the ter, *'apital* in the 1234 Constitution refers to shares entitled to vote or the 'o,,on shares. Fernandez e!plained thus7

Nazareno

1@

Corporation CASES Based on the Syllabus of Fr. Agustin &he forty per'ent -;(>. foreign eIuity li,itation in publi' utilities pres'ribed by the Constitution refers to o/nership of shares of sto'6 entitled to vote, i.e., 'o,,on shares, 'onsidering that it is through voting that 'ontrol is being e!er'ised. ! ! ! %bviously, the intent of the fra,ers of the Constitution in i,posing li,itations and restri'tions on fully nationalized and partially nationalized a'tivities is for Filipino nationals to be al/ays in 'ontrol of the 'orporation underta6ing said a'tivities. %ther/ise, if the &rial CourtDs ruling upholding respondentsD argu,ents /ere to be given 'reden'e, it /ould be possible for the o/nership stru'ture of a publi' utility 'orporation to be divided into one per'ent -1>. 'o,,on sto'6s and ninety"nine per'ent -22>. preferred sto'6s. Follo/ing the &rial CourtDs ruling adopting respondentsD argu,ents, the 'o,,on shares 'an be o/ned entirely by foreigners thus 'reating an absurd situation /herein foreigners, /ho are supposed to be ,inority shareholders, 'ontrol the publi' utility 'orporation. !!!! &hus, the ;(> foreign o/nership li,itation should be interpreted to apply to both the benefi'ial o/nership and the 'ontrolling interest. !!!! Clearly, therefore, the forty per'ent -;(>. foreign eIuity li,itation in publi' utilities pres'ribed by the Constitution refers to o/nership of shares of sto'6 entitled to vote, i.e., 'o,,on shares. Further,ore, o/nership of re'ord of shares /ill not suffi'e but it ,ust be sho/n that the legal and benefi'ial o/nership rests in the hands of Filipino 'itizens. ConseIuently, in the 'ase of petitioner P=#&, sin'e it is already ad,itted that the voting interests of foreigners /hi'h /ould gain entry to petitioner P=#& by the a'Iuisition of S+A & shares through the Muestioned &ransa'tions is eIuivalent to 3).22>, and the no,inee arrange,ents bet/een the foreign prin'ipals and the Filipino o/ners is li6e/ise ad,itted, there is, therefore, a violation of Se'tion 11, Arti'le N$$ of the Constitution. Parentheti'ally, the %pinions dated February 1:, 1233 and April 1;, 1234 'ited by the &rial Court to support the proposition that the ,eaning of the /ord *'apital* as used in Se'tion 11, Arti'le N$$ of the Constitution allegedly refers to the su, total of the shares subs'ribed and paid"in by the shareholder and it allegedly is

i,,aterial ho/ the sto'6 is 'lassified, /hether as 'o,,on or preferred, 'annot stand in the fa'e of a 'lear legislative poli'y as stated in the F$A /hi'h too6 effe't in 1221 or /ay after said opinions /ere rendered, and as 'larified by the above"Iuoted A,end,ents. $n this regard, suffi'e it to state that as bet/een the la/ and an opinion rendered by an ad,inistrative agen'y, the la/ indubitably prevails. +oreover, said %pinions are ,erely advisory and 'annot prevail over the 'lear intent of the fra,ers of the Constitution. $n the sa,e vein, the SECDs 'onstru'tion of Se'tion 11, Arti'le N$$ of the Constitution is at best ,erely advisory for it is the 'ourts that finally deter,ine /hat a la/ ,eans.@2 %n the other hand, respondents therein, Antonio %. Co9uang'o, +anuel H. Pangilinan, Carlos A. Arellano, <elen ?. #ee, +agdangal B. El,a, +ariles Ca'ho" o,ulo, Fr. Bienvenido F. Nebres, ay C. Espinosa, Napoleon =. Nazareno, Albert F. #el osario, and %rlando B. Hea, argued that the ter, *'apital* in Se'tion 11, Arti'le N$$ of the Constitution in'ludes preferred shares sin'e the Constitution does not distinguish a,ong 'lasses of sto'6, thus7 11. &he Constitution applies its foreign o/nership li,itation on the 'orporationDs *'apital,* /ithout distin'tion as to 'lasses of shares. ! ! ! $n this 'onne'tion, the Corporation Code G /hi'h /as already in for'e at the ti,e the present -1234. Constitution /as drafted G defined outstanding 'apital sto'6 as follo/s7 Se'tion 1@4. %utstanding 'apital sto'6 defined. G &he ter, *outstanding 'apital sto'6*, as used in this Code, ,eans the total shares of sto'6 issued under binding subs'ription agree,ents to subs'ribers or sto'6holders, /hether or not fully or partially paid, e!'ept treasury shares. Se'tion 1@4 of the Corporation Code also does not distinguish bet/een 'o,,on and preferred shares, nor e!'lude either 'lass of shares, in deter,ining the outstanding 'apital sto'6 -the *'apital*. of a 'orporation. ConseIuently, petitionerDs suggestion to re'6on P=#&Ds foreign eIuity only on the basis of P=#&Ds outstanding 'o,,on shares is /ithout legal basis. &he language of the Constitution should be understood in the sense it has in 'o,,on use.

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Corporation CASES Based on the Syllabus of Fr. Agustin !!!! 14. But even assu,ing that resort to the pro'eedings of the Constitutional Co,,ission is ne'essary, there is nothing in the e'ord of the Constitutional Co,,ission -Hol. $$$. G /hi'h petitioner ,isleadingly 'ited in the Petition ! ! ! G /hi'h supports petitionerDs vie/ that only 'o,,on shares should for, the basis for 'o,puting a publi' utilityDs foreign eIuity. !!!! 13. $n addition, the SEC G the govern,ent agen'y pri,arily responsible for i,ple,enting the Corporation Code, and /hi'h also has the responsibility of ensuring 'o,plian'e /ith the ConstitutionDs foreign eIuity restri'tions as regards nationalized a'tivities ! ! ! G has 'ategori'ally ruled that both 'o,,on and preferred shares are properly 'onsidered in deter,ining outstanding 'apital sto'6 and the nationality 'o,position thereof.;( Ae agree /ith petitioner and petitioners"in"intervention. &he ter, *'apital* in Se'tion 11, Arti'le N$$ of the Constitution refers only to shares of sto'6 entitled to vote in the ele'tion of dire'tors, and thus in the present 'ase only to 'o,,on shares, ;1 and not to the total outstanding 'apital sto'6 'o,prising both 'o,,on and non"voting preferred shares. &he Corporation Code of the Philippines ;) 'lassifies shares as 'o,,on or preferred, thus7 Se'. 1. Classification of shares. " &he shares of sto'6 of sto'6 'orporations ,ay be divided into 'lasses or series of shares, or both, any of /hi'h 'lasses or series of shares ,ay have su'h rights, privileges or restri'tions as ,ay be stated in the arti'les of in'orporation7 Provided, T3a) no (3ar& 2ay +& *&'r16&* o4 6o)1n@ r1@3)( &7;&') )3o(& ;5a((141&* an* 1((u&* a( J'r&4&rr&*J or Jr&*&&2a+5&J (3ar&(, un5&(( o)3&r=1(& 'ro61*&* 1n )31( Co*&7 Provided, further, &hat there shall al/ays be a 'lass or series of shares /hi'h have 'o,plete voting rights. Any or all of the shares or series of shares ,ay have a par value or have no par value as ,ay be provided for in the arti'les of in'orporation7 Provided, ho/ever, &hat ban6s, trust 'o,panies, insuran'e 'o,panies, publi' utilities, and building and loan asso'iations shall not be per,itted to issue no"par value shares of sto'6.

Preferred shares of sto'6 issued by any 'orporation ,ay be given preferen'e in the distribution of the assets of the 'orporation in 'ase of liIuidation and in the distribution of dividends, or su'h other preferen'es as ,ay be stated in the arti'les of in'orporation /hi'h are not violative of the provisions of this Code7 Provided, &hat preferred shares of sto'6 ,ay be issued only /ith a stated par value. &he Board of #ire'tors, /here authorized in the arti'les of in'orporation, ,ay fi! the ter,s and 'onditions of preferred shares of sto'6 or any series thereof7 Provided, &hat su'h ter,s and 'onditions shall be effe'tive upon the filing of a 'ertifi'ate thereof /ith the Se'urities and E!'hange Co,,ission. Shares of 'apital sto'6 issued /ithout par value shall be dee,ed fully paid and non"assessable and the holder of su'h shares shall not be liable to the 'orporation or to its 'reditors in respe't thereto7 ProvidedE &hat shares /ithout par value ,ay not be issued for a 'onsideration less than the value of five -P:.((. pesos per share7 Provided, further, &hat the entire 'onsideration re'eived by the 'orporation for its no"par value shares shall be treated as 'apital and shall not be available for distribution as dividends. A 'orporation ,ay, further,ore, 'lassify its shares for the purpose of insuring 'o,plian'e /ith 'onstitutional or legal reIuire,ents. E!'ept as other/ise provided in the arti'les of in'orporation and stated in the 'ertifi'ate of sto'6, ea'h share shall be eIual in all respe'ts to every other share. Ahere the arti'les of in'orporation provide for non"voting shares in the 'ases allo/ed by this Code, the holders of su'h shares shall nevertheless be entitled to vote on the follo/ing ,atters7 1. A,end,ent of the arti'les of in'orporationE ). Adoption and a,end,ent of by"la/sE @. Sale, lease, e!'hange, ,ortgage, pledge or other disposition of all or substantially all of the 'orporate propertyE ;. $n'urring, 'reating or in'reasing bonded indebtednessE :. $n'rease or de'rease of 'apital sto'6E

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Corporation CASES Based on the Syllabus of Fr. Agustin 1. +erger or 'onsolidation of the 'orporation /ith another 'orporation or other 'orporationsE 4. $nvest,ent of 'orporate funds in another 'orporation or business in a''ordan'e /ith this CodeE and 3. #issolution of the 'orporation. E!'ept as provided in the i,,ediately pre'eding paragraph, the vote ne'essary to approve a parti'ular 'orporate a't as provided in this Code shall be dee,ed to refer only to sto'6s /ith voting rights. $ndisputably, one of the rights of a sto'6holder is the right to parti'ipate in the 'ontrol or ,anage,ent of the 'orporation. ;@ &his is e!er'ised through his vote in the ele'tion of dire'tors be'ause it is the board of dire'tors that 'ontrols or ,anages the 'orporation. ;; $n the absen'e of provisions in the arti'les of in'orporation denying voting rights to preferred shares, preferred shares have the sa,e voting rights as 'o,,on shares. <o/ever, preferred shareholders are often e!'luded fro, any 'ontrol, that is, deprived of the right to vote in the ele'tion of dire'tors and on other ,atters, on the theory that the preferred shareholders are ,erely investors in the 'orporation for in'o,e in the sa,e ,anner as bondholders. ;: $n fa't, under the Corporation Code only preferred or redee,able shares 'an be deprived of the right to vote. ;1 Co,,on shares 'annot be deprived of the right to vote in any 'orporate ,eeting, and any provision in the arti'les of in'orporation restri'ting the right of 'o,,on shareholders to vote is invalid.;4 Considering that 'o,,on shares have voting rights /hi'h translate to 'ontrol, as opposed to preferred shares /hi'h usually have no voting rights, the ter, *'apital* in Se'tion 11, Arti'le N$$ of the Constitution refers only to 'o,,on shares. <o/ever, if the preferred shares also have the right to vote in the ele'tion of dire'tors, then the ter, *'apital* shall in'lude su'h preferred shares be'ause the right to parti'ipate in the 'ontrol or ,anage,ent of the 'orporation is e!er'ised through the right to vote in the ele'tion of dire'tors. "n (3or), )3& )&r2 J;a'1)a5J 1n S&;)1on 11, Ar)1;5& N"" o4 )3& Con()1)u)1on r&4&r( on5y )o (3ar&( o4 ()o;D )3a) ;an 6o)& 1n )3& &5&;)1on o4 *1r&;)or(. &his interpretation is 'onsistent /ith the intent of the fra,ers of the Constitution to pla'e in the hands of Filipino 'itizens the 'ontrol and

,anage,ent of publi' utilities. As revealed in the deliberations of the Constitutional Co,,ission, *'apital* refers to the voting sto'6 or ;on)ro551n@ 1n)&r&() of a 'orporation, to /it7 + . N%==E#%. $n Se'tions @, 2 and 1:, the Co,,ittee stated lo'al or Filipino eIuity and foreign eIuityE na,ely, 1(";( in Se'tion @, 1(";( in Se'tion 2 and )F@"1F@ in Se'tion 1:. + . H$==E5AS. &hat is right. + . N%==E#%. $n tea'hing la/, /e are al/ays fa'ed /ith this Iuestion7 *Ahere do /e base the eIuity reIuire,ent, is it on the authorized 'apital sto'6, on the subs'ribed 'apital sto'6, or on the paid"up 'apital sto'6 of a 'orporation*L Aill the Co,,ittee please enlighten ,e on thisL + . H$==E5AS. Ae have 9ust had a long dis'ussion /ith the ,e,bers of the tea, fro, the 8P =a/ Center /ho provided us a draft. T3& '3ra(& )3a) 1( ;on)a1n&* 3&r& =31;3 =& a*o')&* 4ro2 )3& U! *ra4) 1( J60 '&r;&n) o4 6o)1n@ ()o;D.J + . N%==E#%. &hat ,ust be based on the subs'ribed 'apital sto'6, be'ause unless de'lared delinIuent, unpaid 'apital sto'6 shall be entitled to vote. + . H$==E5AS. &hat is right. + . N%==E#%. &han6 you. Aith respe't to an invest,ent by one 'orporation in another 'orporation, say, a 'orporation /ith 1(";( per'ent eIuity invests in another 'orporation /hi'h is per,itted by the Corporation Code, does the Co,,ittee adopt the grandfather ruleL + . H$==E5AS. ?es, that is the understanding of the Co,,ittee. + . N%==E#%. &herefore, /e need additional Filipino 'apitalL + . H$==E5AS. ?es.;3 !!!!

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Corporation CASES Based on the Syllabus of Fr. Agustin + . AQC8NA. +ay $ be 'larified as to that portion that /as a''epted by the Co,,ittee. + . H$==E5AS. &he portion a''epted by the Co,,ittee is the deletion of the phrase *voting sto'6 or 'ontrolling interest.* + . AQC8NA. <en'e, /ithout the #avide a,end,ent, the 'o,,ittee report /ould read7 *'orporations or asso'iations at least si!ty per'ent of /hose CAP$&A= is o/ned by su'h 'itizens.* + . H$==E5AS. ?es. + . AQC8NA. So if the #avide a,end,ent is lost, /e are stu'6 /ith 1( per'ent of the 'apital to be o/ned by 'itizens. + . H$==E5AS. &hat is right. %R. AACUNA. #u) )3& ;on)ro5 ;an +& =1)3 )3& 4or&1@n&r( &6&n 14 )3&y ar& )3& 21nor1)y. L&) u( (ay 40 '&r;&n) o4 )3& ;a'1)a5 1( o=n&* +y )3&2, +u) 1) 1( )3& 6o)1n@ ;a'1)a5, =3&r&a(, )3& F151'1no( o=n )3& non6o)1n@ (3ar&(. So =& ;an 3a6& a (1)ua)1on =3&r& )3& ;or'ora)1on 1( ;on)ro55&* +y 4or&1@n&r( *&('1)& +&1n@ )3& 21nor1)y +&;au(& )3&y 3a6& )3& 6o)1n@ ;a'1)a5. T3a) 1( )3& ano2a5y )3a) =ou5* r&(u5) 3&r&. %R. #ENGAON. No, )3& r&a(on =& &5121na)&* )3& =or* J()o;DJ a( ()a)&* 1n )3& 19.- an* 19-, Con()1)u)1on( 1( )3a) a;;or*1n@ )o Co221((1on&r Ro*r1@o, )3&r& ar& a((o;1a)1on( )3a) *o no) 3a6& ()o;D(. T3a) 1( =3y =& (ay JCA!"TAL.J %R. AACUNA. :& (3ou5* J;on)ro551n@ 1n)&r&().J no) &5121na)& )3& '3ra(& SEC. @. #efinitions. " As used in this A't7

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a. &he ter, *Philippine national1 shall ,ean a 'itizen of the PhilippinesE or a do,esti' partnership or asso'iation /holly o/ned by 'itizens of the PhilippinesE or a ;or'ora)1on or@an1H&* un*&r )3& 5a=( o4 )3& !3151''1n&( o4 =31;3 a) 5&a() (17)y '&r;&n) /60<0 o4 )3& ;a'1)a5 ()o;D ou)()an*1n@ an* &n)1)5&* )o 6o)& 1( o=n&* an* 3&5* +y ;1)1H&n( o4 )3& !3151''1n&( E or a 'orporation organized abroad and registered as doing business in the Philippines under the Corporation Code of /hi'h one hundred per'ent -1((>. of the 'apital sto'6 outstanding and entitled to vote is /holly o/ned by Filipinos or a trustee of funds for pension or other e,ployee retire,ent or separation benefits, /here the trustee is a Philippine national and at least si!ty per'ent -1(>. of the fund /ill a''rue to the benefit of Philippine nationals7 Provided, &hat /here a 'orporation and its non"Filipino sto'6holders o/n sto'6s in a Se'urities and E!'hange Co,,ission -SEC. registered enterprise, at least si!ty per'ent -1(>. of the 'apital sto'6 outstanding and entitled to vote of ea'h of both 'orporations ,ust be o/ned and held by 'itizens of the Philippines and at least si!ty per'ent -1(>. of the ,e,bers of the Board of #ire'tors of ea'h of both 'orporations ,ust be 'itizens of the Philippines, in order that the 'orporation, shall be 'onsidered a *Philippine national.* -E,phasis supplied. $n e!plaining the definition of a *Philippine national,* the $,ple,enting ules and egulations of the Foreign $nvest,ents A't of 1221 provide7 b. *Philippine national1 shall ,ean a 'itizen of the Philippines or a do,esti' partnership or asso'iation /holly o/ned by the 'itizens of the PhilippinesE or a ;or'ora)1on or@an1H&* un*&r )3& 5a=( o4 )3& !3151''1n&( o4 =31;3 a) 5&a() (17)y '&r;&n) F60<G o4 )3& ;a'1)a5 ()o;D ou)()an*1n@ an* &n)1)5&* )o 6o)& 1( o=n&* an* 3&5* +y ;1)1H&n( o4 )3& !3151''1n&(E or a trustee of funds for pension or other e,ployee retire,ent or separation benefits, /here the trustee is a Philippine national and at least si!ty per'ent B1(>C of the fund /ill a''rue to the benefit of the Philippine nationalsE Provided! that /here a 'orporation its non"Filipino sto'6holders o/n sto'6s in a Se'urities and E!'hange Co,,ission BSECC registered enterprise, at least si!ty per'ent B1(>C of the 'apital sto'6 outstanding and entitled to vote of both 'orporations ,ust be o/ned and held by 'itizens of the Philippines and at least si!ty per'ent B1(>C of the ,e,bers of the Board of #ire'tors of ea'h of both 'orporation ,ust be 'itizens of the Philippines, in order that

%R. #ENGAON. "n )3& ;a(& o4 ()o;D ;or'ora)1on(, 1) 1( a((u2&*.;2 -E,phasis supplied. &hus, 1( per'ent of the *'apital* assu,es, or should result in, *;on)ro551n@ 1n)&r&()* in the 'orporation. einfor'ing this interpretation of the ter, *'apital,* as referring to 'ontrolling interest or shares entitled to vote, is the definition of a *Philippine national* in the Foreign $nvest,ents A't of 1221,:( to /it7

Corporation CASES Based on the Syllabus of Fr. Agustin the 'orporation shall be 'onsidered a Philippine national. &he 'ontrol test shall be applied for this purpose. Co2'51an;& =1)3 )3& r&>u1r&* F151'1no o=n&r(31' o4 a ;or'ora)1on (3a55 +& *&)&r21n&* on )3& +a(1( o4 ou)()an*1n@ ;a'1)a5 ()o;D =3&)3&r 4u55y 'a1* or no), +u) on5y (u;3 ()o;D( =31;3 ar& @&n&ra55y &n)1)5&* )o 6o)& ar& ;on(1*&r&*. For ()o;D( )o +& *&&2&* o=n&* an* 3&5* +y !3151''1n& ;1)1H&n( or !3151''1n& na)1ona5(, 2&r& 5&@a5 )1)5& 1( no) &nou@3 )o 2&&) )3& r&>u1r&* F151'1no &>u1)y. Fu55 +&n&41;1a5 o=n&r(31' o4 )3& ()o;D(, ;ou'5&* =1)3 a''ro'r1a)& 6o)1n@ r1@3)( 1( &((&n)1a5. T3u(, ()o;D(, )3& 6o)1n@ r1@3)( o4 =31;3 3a6& +&&n a((1@n&* or )ran(4&rr&* )o a51&n( ;anno) +& ;on(1*&r&* 3&5* +y !3151''1n& ;1)1H&n( or !3151''1n& na)1ona5(. "n*161*ua5( or ?ur1*1;a5 &n)1)1&( no) 2&&)1n@ a4or&2&n)1on&* >ua5141;a)1on( ar& ;on(1*&r&* a( !3151''1n& na)1ona5(. -E,phasis supplied. )3& non8

Arti'le N$$ of the Constitution is also used 1n )3& (a2& ;on)&7) 1n nu2&rou( 5a=( reserving 'ertain areas of invest,ents to Filipino 'itizens. &o 'onstrue broadly the ter, *'apital* as the total outstanding 'apital sto'6, in'luding both 'o,,on and non voting preferred shares, grossly 'ontravenes the intent and letter of the Constitution that the *State shall develop a self"reliant and independent national e'ono,y effec"i9ely con"rolle& by Filipinos.* A broad definition un9ustifiably disregards /ho o/ns the all"i,portant voting sto'6, /hi'h ne'essarily eIuates to 'ontrol of the publi' utility. Ae shall illustrate the glaring ano,aly in giving a broad definition to the ter, *'apital.* =et us assu,e that a 'orporation has 1(( 'o,,on shares o/ned by foreigners and 1,(((,((( non"voting preferred shares o/ned by Filipinos, /ith both 'lasses of share having a par value of one peso -P1.((. per share. 8nder the broad definition of the ter, *'apital,* su'h 'orporation /ould be 'onsidered 'o,pliant /ith the ;( per'ent 'onstitutional li,it on foreign eIuity of publi' utilities sin'e the over/hel,ing ,a9ority, or ,ore than 22.222 per'ent, of the total outstanding 'apital sto'6 is Filipino o/ned. &his is obviously absurd. $n the e!a,ple given, only the foreigners holding the 'o,,on shares have voting rights in the ele'tion of dire'tors, even if they hold only 1(( shares. &he foreigners, /ith a ,inus'ule eIuity of less than (.((1 per'ent, e!er'ise 'ontrol over the publi' utility. %n the other hand, the Filipinos, holding ,ore than 22.222 per'ent of the eIuity, 'annot vote in the ele'tion of dire'tors and hen'e, have no 'ontrol over the publi' utility. &his star6ly 'ir'u,vents the intent of the fra,ers of the Constitution, as /ell as the 'lear language of the Constitution, to pla'e the 'ontrol of publi' utilities in the hands of Filipinos. $t also renders illusory the State poli'y of an independent national e'ono,y effec"i9ely con"rolle& by Filipinos. &he e!a,ple given is not theoreti'al but 'an be found in the real /orld, an& in fac" e<is"s in "!e presen" case. <olders of P=#& preferred shares are e!pli'itly denied of the right to vote in the ele'tion of dire'tors. P=#&Ds Arti'les of $n'orporation e!pressly state that *)3& 3o5*&r( o4 S&r1a5 !r&4&rr&* S)o;D (3a55 no) +& &n)1)5&* )o 6o)& a) any 2&&)1n@ o4 )3& ()o;D3o5*&r( 4or )3& &5&;)1on o4 *1r&;)or( or 4or any o)3&r 'ur'o(& or other/ise

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+ere legal title is insuffi'ient to ,eet the 1( per'ent Filipino"o/ned *'apital* reIuired in the Constitution. Full benefi'ial o/nership of 1( per'ent of the outstanding 'apital sto'6, 'oupled /ith 1( per'ent of the voting rights, is reIuired. &he legal and benefi'ial o/nership of 1( per'ent of the outstanding 'apital sto'6 ,ust rest in the hands of Filipino nationals in a''ordan'e /ith the 'onstitutional ,andate. %ther/ise, the 'orporation is *'onsidered as non"Philippine nationalBsC.* 8nder Se'tion 1(, Arti'le N$$ of the Constitution, Congress ,ay *reserve to 'itizens of the Philippines or to 'orporations or asso'iations at least si!ty per centum of /hose 'apital is o/ned by su'h 'itizens, or su'h higher per'entage as Congress ,ay pres'ribe, 'ertain areas of invest,ents.* &hus, in nu,erous la/s Congress has reserved 'ertain areas of invest,ents to Filipino 'itizens or to 'orporations at least si!ty per'ent of the *;a'1)a5* of /hi'h is o/ned by Filipino 'itizens. So,e of these la/s are7 -1. egulation of A/ard of 5overn,ent Contra'ts or .A. No. :13@E -). Philippine $nventors $n'entives A't or .A. No. @3:(E -@. +agna Carta for +i'ro, S,all and +ediu, Enterprises or .A. No. 1244E -;. Philippine %verseas Shipping #evelop,ent A't or .A. No. 4;41E -:. #o,esti' Shipping #evelop,ent A't of )((; or .A. No. 2)2:E -1. Philippine &e'hnology &ransfer A't of )((2 or .A. No. 1((::E and -4. Ship +ortgage #e'ree or P.#. No. 1:)1. <en'e, the ter, * ;a'1)a5* in Se'tion 11,

Corporation CASES Based on the Syllabus of Fr. Agustin parti'ipate in any a'tion ta6en by the 'orporation or its sto'6holders, or to re'eive noti'e of any ,eeting of sto'6holders.* :1 %n the other hand, holders of 'o,,on shares are granted the e!'lusive right to vote in the ele'tion of dire'tors. P=#&Ds Arti'les of $n'orporation:) state that *ea'h holder of Co,,on Capital Sto'6 shall have one vote in respe't of ea'h share of su'h sto'6 held by hi, on all ,atters voted upon by the sto'6holders, and )3& 3o5*&r( o4 Co22on Ca'1)a5 S)o;D (3a55 3a6& )3& &7;5u(16& r1@3) )o 6o)& 4or )3& &5&;)1on o4 *1r&;)or( an* 4or a55 o)3&r 'ur'o(&(.*:@ $n short, only holders of 'o,,on shares 'an vote in the ele'tion of dire'tors, ,eaning only 'o,,on shareholders e!er'ise 'ontrol over P=#&. Conversely, holders of preferred shares, /ho have no voting rights in the ele'tion of dire'tors, do not have any 'ontrol over P=#&. $n fa't, under P=#&Ds Arti'les of $n'orporation, holders of 'o,,on shares have voting rights for all purposes, /hile holders of preferred shares have no voting right for any purpose /hatsoever. $t ,ust be stressed, and r&('on*&n)( *o no) *1('u)&, that foreigners hold a ,a9ority of the 'o,,on shares of P=#&. $n fa't, based on P=#&Ds )(1( 5eneral $nfor,ation Sheet -5$S., :; /hi'h is a do'u,ent reIuired to be sub,itted annually to the Se'urities and E!'hange Co,,ission,:: foreigners hold 1)(,(;1,12( 'o,,on shares of P=#& /hereas Filipinos hold only 11,4:(,1)) 'o,,on shares.:1 $n other /ords, foreigners hold 1;.)4> of the total nu,ber of P=#&Ds 'o,,on shares, /hile Filipinos hold only @:.4@>. Sin'e holding a ,a9ority of the 'o,,on shares eIuates to 'ontrol, it is 'lear that foreigners e!er'ise 'ontrol over P=#&. Su'h a,ount of 'ontrol un,ista6ably e!'eeds the allo/able ;( per'ent li,it on foreign o/nership of publi' utilities e!pressly ,andated in Se'tion 11, Arti'le N$$ of the Constitution. +oreover, the #ividend #e'larations of P=#& for )((2,:4 as sub,itted to the SEC, sho/s that per share the S$P :3preferred shares earn a pittan'e in dividends 'o,pared to the 'o,,on shares. P=#& de'lared dividends for the 'o,,on shares at P4(.(( per share, /hile the de'lared dividends for the preferred shares a,ounted to a ,easlyP1.(( per share.:2 So the preferred shares not only 'annot vote in the ele'tion of dire'tors, they also have very little and obviously negligible dividend earning 'apa'ity 'o,pared to 'o,,on shares.

As sho/n in P=#&Ds )(1( 5$S,1( as sub,itted to the SEC, the par value of P=#& 'o,,on shares is P:.(( per share, /hereas the par value of preferred shares is P1(.(( per share. $n other /ords, preferred shares have t/i'e the par value of 'o,,on shares but 'annot ele't dire'tors and have only 1F4( of the dividends of 'o,,on shares. +oreover, 22.;;> of the preferred shares are o/ned by Filipinos /hile foreigners o/n only a ,inus'ule (.:1> of the preferred shares.11 Aorse, preferred shares 'onstitute 44.3:> of the authorized 'apital sto'6 of P=#& /hile 'o,,on shares 'onstitute only )).1:>.1) &his undeniably sho/s that benefi'ial interest in P=#& is not /ith the non"voting preferred shares but /ith the 'o,,on shares, blatantly violating the 'onstitutional reIuire,ent of 1( per'ent Filipino 'ontrol and Filipino benefi'ial o/nership in a publi' utility. &he legal and benefi'ial o/nership of 1( per'ent of the outstanding 'apital sto'6 ,ust rest in the hands of Filipinos in a''ordan'e /ith the 'onstitutional ,andate. Full benefi'ial o/nership of 1( per'ent of the outstanding 'apital sto'6, 'oupled /ith 1( per'ent of the voting rights, is 'onstitutionally reIuired for the StateDs grant of authority to operate a publi' utility. &he undisputed fa't that the P=#& preferred shares, 22.;;> o/ned by Filipinos, are non"voting and earn only 1F4( of the dividends that P=#& 'o,,on shares earn, grossly violates the 'onstitutional reIuire,ent of 1( per'ent Filipino 'ontrol and Filipino benefi'ial o/nership of a publi' utility. "n (3or), F151'1no( 3o5* 5&(( )3an 60 '&r;&n) o4 )3& 6o)1n@ ()o;D, an* &arn 5&(( )3an 60 '&r;&n) o4 )3& *161*&n*(, o4 !L T. &his dire'tly 'ontravenes the e!press 'o,,and in Se'tion 11, Arti'le N$$ of the Constitution that *BnCo fran'hise, 'ertifi'ate, or any other for, of authorization for the operation of a publi' utility shall be granted e!'ept to ! ! ! 'orporations ! ! ! organized under the la/s of the Philippines, a) 5&a() (17)y '&r ;&n)u2 o4 =3o(& ;a'1)a5 1( o=n&* +y (u;3 ;1)1H&n( 7 7 7.* &o repeat, -1. foreigners o/n 1;.)4> of the 'o,,on shares of P=#&, /hi'h 'lass of shares e!er'ises the (o5&right to vote in the ele'tion of dire'tors, and thus e!er'ise 'ontrol over P=#&E -). Filipinos o/n only @:.4@> of P=#&Ds 'o,,on shares, 'onstituting a ,inority of the voting sto'6, and thus do not e!er'ise 'ontrol over P=#&E -@. preferred shares, 22.;;> o/ned by Filipinos, have no voting rightsE -;. preferred shares earn only 1F4( of the dividends that 'o,,on shares earnE1@ -:. preferred shares have t/i'e the par value of 'o,,on sharesE and -1. preferred shares 'onstitute 44.3:> of the

Nazareno

12

Corporation CASES Based on the Syllabus of Fr. Agustin authorized 'apital sto'6 of P=#& and 'o,,on shares only )).1:>. &his 6ind of o/nership and 'ontrol of a publi' utility is a ,o'6ery of the Constitution. $n'identally, the fa't that P=#& 'o,,on shares /ith a par value of P:.(( have a 'urrent sto'6 ,ar6et value ofP),@)3.(( per share,1; /hile P=#& preferred shares /ith a par value of P1(.(( per share have a 'urrent sto'6 ,ar6et value ranging fro, only P1(.2) to P11.(1 per share,1: is a glaring 'onfir,ation by the ,ar6et that 'ontrol and benefi'ial o/nership of P=#& rest /ith the 'o,,on shares, not /ith the preferred shares. $ndisputably, 'onstruing the ter, *'apital* in Se'tion 11, Arti'le N$$ of the Constitution to in'lude both voting and non"voting shares /ill result in the ab9e't surrender of our tele'o,,uni'ations industry to foreigners, a,ounting to a 'lear abdi'ation of the StateDs 'onstitutional duty to li,it 'ontrol of publi' utilities to Filipino 'itizens. Su'h an interpretation 'ertainly runs 'ounter to the 'onstitutional provision reserving 'ertain areas of invest,ent to Filipino 'itizens, su'h as the e!ploitation of natural resour'es as /ell as the o/nership of land, edu'ational institutions and advertising businesses. &he Court should never open to foreign 'ontrol /hat the Constitution has e!pressly reserved to Filipinos for that /ould be a betrayal of the Constitution and of the national interest. &he Court ,ust perfor, its sole,n duty to defend and uphold the intent and letter of the Constitution to ensure, in the /ords of the Constitution, *a self"reliant and independent national e'ono,y effectivel8 controlled by Filipinos.* Se'tion 11, Arti'le N$$ of the Constitution, li6e other provisions of the Constitution e!pressly reserving to Filipinos specific areas of invest,ent, su'h as the develop,ent of natural resour'es and o/nership of land, edu'ational institutions and advertising business, is self=e<ecu"ing. &here is no need for legislation to i,ple,ent these self"e!e'uting provisions of the Constitution. &he rationale /hy these 'onstitutional provisions are self"e!e'uting /as e!plained in ,anila Prince 7otel v. GSIS,11 thus7 ! ! ! <en'e, unless it is e!pressly provided that a legislative a't is ne'essary to enfor'e a 'onstitutional ,andate, the presu,ption no/ is that all provisions of the 'onstitution are self"e!e'uting. $f the 'onstitutional provisions are treated as reIuiring legislation instead of self"e!e'uting, the legislature /ould have the po/er to ignore and pra'ti'ally nullify the ,andate of the funda,ental la/. &his 'an be

'ata'lys,i'. &hat is /hy the prevailing vie/ is, as it has al/ays been, that J . . . in 'ase of doubt, the Constitution should be 'onsidered self" e!e'uting rather than non"self"e!e'uting. . . . Un5&(( )3& ;on)rary 1( ;5&ar5y 1n)&n*&*, )3& 'ro61(1on( o4 )3& Con()1)u)1on (3ou5* +& ;on(1*&r&* (&548&7&;u)1n@, a( a ;on)rary ru5& =ou5* @16& )3& 5&@1(5a)ur& *1(;r&)1on )o *&)&r21n& =3&n, or =3&)3&r, )3&y (3a55 +& &44&;)16&. &hese provisions /ould be subordinated to the /ill of the la/,a6ing body, /hi'h 'ould ,a6e the, entirely ,eaningless by si,ply refusing to pass the needed i,ple,enting statute. -E,phasis supplied. $n ,anila Prince 7otel, even the #issenting %pinion of then Asso'iate 0usti'e eynato S. Puno, later Chief 0usti'e, agreed that 'onstitutional provisions are presu,ed to be self"e!e'uting. 0usti'e Puno stated7 Courts as a rule 'onsider the provisions of the Constitution as self" e!e'uting, rather than as reIuiring future legislation for their enfor'e,ent. &he reason is not diffi'ult to dis'ern. For 14 )3&y ar& no) )r&a)&* a( (&548&7&;u)1n@, )3& 2an*a)& o4 )3& 4un*a2&n)a5 5a= ra)141&* +y )3& (o6&r&1@n '&o'5& ;an +& &a(15y 1@nor&* an* nu55141&* +y Con@r&((. Su44u(&* =1)3 =1(*o2 o4 )3& a@&( 1( )3& uny1&5*1n@ ru5& )3a) 5&@1(5a)16& a;)1on( 2ay @16& +r&a)3 )o ;on()1)u)1ona5 r1@3)( +u) ;on@r&((1ona5 1na;)1on (3ou5* no) (u44o;a)& )3&2. &hus, /e have treated as self"e!e'uting the provisions in the Bill of ights on arrests, sear'hes and seizures, the rights of a person under 'ustodial investigation, the rights of an a''used, and the privilege against self"in'ri,ination. $t is re'ognized that legislation is unne'essary to enable 'ourts to effe'tuate 'onstitutional provisions guaranteeing the funda,ental rights of life, liberty and the prote'tion of property. &he sa,e treat,ent is a''orded to 'onstitutional provisions forbidding the ta6ing or da,aging of property for publi' use /ithout 9ust 'o,pensation. -E,phasis supplied. &hus, in nu,erous 'ases,14 this Court, even in the absen'e of i,ple,enting legislation, applied dire'tly the provisions of the 12@:, 124@ and 1234 Constitutions li,iting land o/nership to Filipinos. $n Soriano v. /ng 7oo,13this Court ruled7

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4(

Corporation CASES Based on the Syllabus of Fr. Agustin ! ! ! As the Constitution is silent as to the effe'ts or 'onseIuen'es of a sale by a 'itizen of his land to an alien, and as both the 'itizen and the alien have violated the la/, none of the, should have a re'ourse against the other, and it should only be the State that should be allo/ed to intervene and deter,ine /hat is to be done /ith the property sub9e't of the violation. Ae have said that /hat the State should do or 'ould do in su'h ,atters is a ,atter of publi' poli'y, entirely beyond the s'ope of 9udi'ial authority. -#inglasan, et al. vs. =ee Bun &ing, et al., 1 5. . No. =":221, 0une )4, 12:1.. :315& )3& 5&@1(5a)ur& 3a( no) *&41n1)&5y *&;1*&* =3a) 'o51;y (3ou5* +& 4o55o=&* 1n ;a(&( o4 61o5a)1on( a@a1n() )3& ;on()1)u)1ona5 'ro31+1)1on, ;our)( o4 ?u()1;& ;anno) @o +&yon* +y *&;5ar1n@ )3& *1('o(1)1on )o +& nu55 an* 6o1* a( 61o5a)16& o4 )3& Con()1)u)1on. ! ! ! -E,phasis supplied. &o treat Se'tion 11, Arti'le N$$ of the Constitution as not self" e!e'uting /ould ,ean that sin'e the 12@: Constitution, or over the last 4: years, not one of the 'onstitutional provisions e!pressly reserving spe'ifi' areas of invest,ents to 'orporations, at least 1( per'ent of the *'apital* of /hi'h is o/ned by Filipinos, /as enfor'eable. $n short, the fra,ers of the 12@:, 124@ and 1234 Constitutions ,iserably failed to effe'tively reserve to Filipinos spe'ifi' areas of invest,ent, li6e the operation by 'orporations of publi' utilities, the e!ploitation by 'orporations of ,ineral resour'es, the o/nership by 'orporations of real estate, and the o/nership of edu'ational institutions. All the legislatures that 'onvened sin'e 12@: also ,iserably failed to ena't legislations to i,ple,ent these vital 'onstitutional provisions that deter,ine /ho /ill effe'tively 'ontrol the national e'ono,y, Filipinos or foreigners. &his Court 'annot allo/ su'h an absurd interpretation of the Constitution. &his Court has held that the SEC *has both regulatory and ad9udi'ative fun'tions.*12 8nder its regulatory fun'tions, the SEC 'an be 'o,pelled by ,anda,us to perfor, its statutory duty /hen it unla/fully negle'ts to perfor, the sa,e. 8nder its ad9udi'ative or Iuasi"9udi'ial fun'tions, the SEC 'an be also be 'o,pelled by ,anda,us to hear and de'ide a possible violation of any la/ it ad,inisters or enfor'es /hen it is ,andated by la/ to investigate su'h violation.1awphi1 8nder Se'tion 14-;.4( of the Corporation Code, the SEC has the regulatory fun'tion to re9e't or disapprove the Arti'les of $n'orporation of any 'orporation /here J)3& r&>u1r&* '&r;&n)a@& o4 o=n&r(31' o4 )3& ;a'1)a5 ()o;D )o +& o=n&* +y ;1)1H&n( o4

)3& !3151''1n&( 3a( no) +&&n ;o2'51&* =1)3 a( r&>u1r&* +y &71()1n@ 5a=( or )3& Con()1)u)1on.J &hus, the SEC is the govern,ent agen'y tas6ed /ith the statutory duty to enfor'e the nationality reIuire,ent pres'ribed in Se'tion 11, Arti'le N$$ of the Constitution on the o/nership of publi' utilities. &his Court, in a petition for de'laratory relief that is treated as a petition for ,anda,us as in the present 'ase, 'an dire't the SEC to perfor, its statutory duty under the la/, a duty that the SEC has apparently unla/fully negle'ted to do based on the )(1( 5$S that respondent P=#& sub,itted to the SEC. 8nder Se'tion :-,. of the Se'urities egulation Code, 41 the SEC is vested /ith the *po/er and fun'tion* to * (u('&n* or r&6oD&, a4)&r 'ro'&r no)1;& an* 3&ar1n@, )3& 4ran;31(& or ;&r)141;a)& o4 r&@1()ra)1on o4 ;or'ora)1on(, 'ar)n&r(31'( or a((o;1a)1on(, u'on any o4 )3& @roun*( 'ro61*&* +y 5a=. * &he SEC is ,andated under Se'tion :-d. of the sa,e Code /ith the *po/er and fun'tion* to *1n6&()1@a)& 7 7 7 )3& a;)161)1&( o4 '&r(on( )o &n(ur& ;o2'51an;&* /ith the la/s and regulations that SEC ad,inisters or enfor'es. &he 5$S that all 'orporations are reIuired to sub,it to SEC annually should put the SEC on guard against violations of the nationality reIuire,ent pres'ribed in the Constitution and e!isting la/s. &his Court 'an 'o,pel the SEC, in a petition for de'laratory relief that is treated as a petition for ,anda,us as in the present 'ase, to hear and de'ide a possible violation of Se'tion 11, Arti'le N$$ of the Constitution in vie/ of the o/nership stru'ture of P=#&Ds voting shares, as ad,itted by respondents and as stated in P=#&Ds )(1( 5$S that P=#& sub,itted to SEC. :HEREFORE, /e !ARTLY GRANT the petition and rule that the ter, *'apital* in Se'tion 11, Arti'le N$$ of the 1234 Constitution refers only to shares of sto'6 entitled to vote in the ele'tion of dire'tors, and thus in the present 'ase only to 'o,,on shares, and not to the total outstanding 'apital sto'6 -'o,,on and non"voting preferred shares.. espondent Chairperson of the Se'urities and E!'hange Co,,ission is "RECTE to apply this definition of the ter, *'apital* in deter,ining the e!tent of allo/able foreign o/nership in respondent Philippine =ong #istan'e &elephone Co,pany, and if there is a violation of Se'tion 11, Arti'le N$$ of the Constitution, to i,pose the appropriate san'tions under the la/. SO OR ERE .

Nazareno

41

Corporation CASES Based on the Syllabus of Fr. Agustin

EN BANC G.R. No. 1.6,.9 O;)o+&r 9, 2012

reiterated its position 'onsistent /ith the CourtYs )3 0une )(11 #e'ision. Ae deny the ,otions for re'onsideration. I. >ar=reac!ing implica"ions of "!e legal issue jus"ify "rea"men" of pe"i"ion for &eclara"ory relief as one for man&amus. As /e e,phati'ally stated in the )3 0une )(11 #e'ision, the interpretation of the ter, *'apital* in Se'tion 11, Arti'le N$$ of the Constitution has far"rea'hing i,pli'ations to the national e'ono,y. $n fa't, a resolution of this issue /ill deter,ine /hether Filipinos are ,asters, or se'ond"'lass 'itizens, in their o/n 'ountry. Ahat is at sta6e here is /hether Filipinos or foreigners /ill have effec"i9e con"rol of the Philippine national e'ono,y. $ndeed, if ever there is a legal issue that has far"rea'hing i,pli'ations to the entire nation, and to future generations of Filipinos, it is the threshold legal issue presented in this 'ase. Contrary to PangilinanDs narro/ vie/, the serious e'ono,i' 'onseIuen'es resulting in the interpretation of the ter, *'apital* in Se'tion 11, Arti'le N$$ of the Constitution undoubtedly de,and an i,,ediate ad9udi'ation of this issue. S12'5y 'u), )3& 4ar8r&a;31n@ 12'51;a)1on( o4 )31( 1((u& ?u()14y )3& )r&a)2&n) o4 )3& '&)1)1on a( on& 4or 2an*a2u(.4 $n :u(on Stevedoring Corp. v. "nti #umm8 Board ,3 the Court dee,ed it /ise and e!pedient to resolve the 'ase although the petition for de'laratory relief 'ould be outrightly dis,issed for being pro'edurally defe'tive. &here, appellant ad,ittedly had already 'o,,itted a brea'h of the Publi' Servi'e A't in relation to the Anti" #u,,y =a/ sin'e it had been e,ploying non" A,eri'an aliens long before the de'ision in a prior si,ilar 'ase. <o/ever, the ,ain issue in :u(on Stevedoring /as of trans'endental i,portan'e, involving the e!er'ise or en9oy,ent of rights, fran'hises, privileges, properties and businesses /hi'h only Filipinos and Iualified 'orporations 'ould e!er'ise or en9oy under the Constitution and the statutes. +oreover, the sa,e issue 'ould be raised by appellant in an appropriate a'tion. &hus, in :u(on Stevedoring the Court dee,ed it ne'essary to finally dispose of the 'ase for the guidan'e of all 'on'erned, despite the apparent pro'edural fla/ in the petition.

Nazareno

4)

HE"RS OF :"LSON !. GA%#OA,P Petitioners, vs. F"NANCE SECRETARY%ARGAR"TO #. TE$ES, F"NANCE UN ERSECRETARYJOHN !. SE$"LLA, AN CO%%"SS"ONER R"CAR O A#CE E OF THE !RES" ENT"AL CO%%"SS"ON ON GOO GO$ERN%ENT/!CGG0 "N THE"R CA!AC"T"ES AS CHA"R AN %E%#ERS, RES!ECT"$ELY, OF THE !R"$AT"AAT"ON COUNC"L, CHA"R%AN ANTHON" SAL"% OF F"RST !AC"F"C CO., LT . "N H"S CA!AC"TY AS "RECTOR OF %ETRO !AC"F"C ASSET HOL "NGS "NC., CHA"R%AN %ANUEL $. !ANG"L"NAN OF !H"L"!!"NE LONG "STANCE TELE!HONE CO%!ANY /!L T0 "N H"S CA!AC"TY AS %ANAG"NG "RECTOR OF F"RST !AC"F"C CO., LT ., !RES" ENT NA!OLEON L. NAAARENO OF !H"L"!!"NE LONG "STANCE TELE!HONE CO%!ANY, CHA"R FE #AR"N OF THE SECUR"T"ES AN ENCHANGE CO%%"SS"ON, an* !RES" ENT FRANC"S L"% OF THE !H"L"!!"NE STOC9 ENCHANGE, espondents. !A#L"TO $. SAN" A $ntervention. ES%=8&$%N CAR!"O, J.: &his resolves the ,otions for re'onsideration of the )3 0une )(11 #e'ision filed by -1. the Philippine Sto'6 E!'hangeYs -PSE. President, 1 -). +anuel H. Pangilinan -Pangilinan., ) -@. Napoleon =. Nazareno -Nazareno .,@and - ;. the Se'urities and E!'hange Co,,ission -SEC.; -'olle'tively, ,ovants .. &he %ffi'e of the Soli'itor 5eneral -%S5. initially filed a ,otion for re'onsideration on behalfofthe SEC,: assailing the )3 0une )(11 #e'ision. <o/ever, it subseIuently filed a Consolidated Co,,ent on behalf of the State,1de'laring e!pressly that it agrees /ith the CourtYs definition of the ter, *'apital* in Se'tion 11, Arti'le N$$ of the Constitution. #uring the %ral Argu,ents on )1 0une )(1), the %S5 an* ARNO $. SAN" A , Petitioner"in"

Corporation CASES Based on the Syllabus of Fr. Agustin &he 'ir'u,stan'es surrounding the present 'ase, su'h as the supposed pro'edural defe't of the petition and the pivotal legal issue involved, rese,ble those in :u(on Stevedoring. ConseIuently, in the interest of substantial 9usti'e and faithful adheren'e to the Constitution, /e opted to resolve this 'ase for the guidan'e of the publi' and all 'on'erned parties. II. 'o c!ange of any long=s"an&ing "!us% no re&efini"ion of "!e "erm :capi"al.:

have 'onsistently and unifor,ly adopted a definition of the ter, *'apital* 'ontrary to the definition that this Court adopted in its )3 0une )(11 #e'ision. $n #%0 %pinion No. 1@(, s. 123:,1( dated 4 %'tober 123:, the s'ope of the ter, *'apital* in Se'tion 2, Arti'le N$H of the 124@ Constitution /as raised, that is, /hether the ter, *'apital* in'ludes *both preferred and 'o,,on sto'6s.* &he issue /as raised in relation to a sto'6"s/ap transa'tion bet/een a Filipino and a 0apanese 'orporation, both sto'6holders of a do,esti' 'orporation that o/ned lands in the Philippines. &hen +inister of 0usti'e Estelito P. +endoza ruled that the resulting o/nership stru'ture of the 'orporation /ould beun;on()1)u)1ona5 be'ause 1(> of the voting sto'6 /ould be o/ned by 0apanese /hile Filipinos /ould o/n only ;(> of the voting sto'6, although /hen the non"voting sto'6 is added, Filipinos /ould o/n 1(> of the 'o,bined voting and non"voting sto'6. T31( o=n&r(31' ()ru;)ur& 1( r&2arDa+5y (1215ar )o )3& ;urr&n) o=n&r(31' ()ru;)ur& o4 !L T. +inister +endoza ruled7 !!!! &hus, the Filipino group still o/ns si!ty -1(>. of the entire subs'ribed 'apital sto'6 -'o,,on and preferred. /hile the 0apanese investors 'ontrol si!ty per'ent -1(>. of the 'o,,on -voting. shares. ") 1( your 'o(1)1on )3a) 7 7 7 (1n;& S&;)1on 9, Ar)1;5& N"$ o4 )3& Con()1)u)1on u(&( )3& =or* J;a'1)a5,J =31;3 1( ;on()ru&* J)o 1n;5u*& +o)3 'r&4&rr&* an* ;o22on (3ar&(J an* J)3a) =3&r& )3& 5a= *o&( no) *1()1n@u1(3, )3& ;our)( (3a55 no) *1()1n@u1(3.J !!!! $n light of the foregoing 9urispruden'e, 1) 1( 2y o'1n1on )3a) )3& ()o;D8(=a' )ran(a;)1on 1n >u&()1on 2ay no) +& ;on()1)u)1ona55y u'3&5*. Ahile it ,ay be ordinary 'orporate pra'ti'e to 'lassify 'orporate shares into 'o,,on voting shares and preferred non"voting shares, any arrange,ent /hi'h atte,pts to defeat the 'onstitutional purpose should be es'he/ed. T3u(, )3& r&(u5)an) &>u1)y arran@&2&n) =31;3 =ou5* '5a;& o=n&r(31' o4 60<11 o4 )3& ;o22on /6o)1n@0 (3ar&( 1n )3& Ja'an&(& @rou', =315& r&)a1n1n@ 60< o4 )3& )o)a5 '&r;&n)a@& o4 ;o22on an* 'r&4&rr&* (3ar&( 1n F151'1no 3an*( =ou5*

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rule?

+ovants 'ontend that the ter, *'apital* in Se'tion 11, Arti'le N$$ of the Constitution has long been settled and defined to refer to the total outstanding shares of sto'6, /hether voting or non"voting. $n fa't, ,ovants 'lai, that the SEC, /hi'h is the ad,inistrative agen'y tas6ed to enfor'e the 1(";( o/nership reIuire,ent in favor of Filipino 'itizens in the Constitution and various statutes, has 'onsistently adopted this parti'ular definition in its nu,erous opinions. +ovants point out that /ith the )3 0une )(11 #e'ision, the Court in effe't introdu'ed a *ne/* definition or *,idstrea, redefinition*2 of the ter, *'apital* in Se'tion 11, Arti'le N$$ of the Constitution. &his is egregious error. For ,ore than 4: years sin'e the 12@: Constitution, the Court has no" interpreted or defined the ter, *'apital* found in various e'ono,i' provisions of the 12@:, 124@ and 1234 Constitutions. &here has never been a 9udi'ial pre'edent interpreting the ter, *'apital* in the 12@:, 124@ and 1234 Constitutions, until no/. <en'e, it is patently /rong and utterly baseless to 'lai, that the Court in defining the ter, *'apital* in its )3 0une )(11 #e'ision ,odified, reversed, or set aside the purported long"standing definition of the ter, *'apital,* /hi'h supposedly refers to the total outstanding shares of sto'6, /hether voting or non"voting. &o repeat, until the present 'ase there has never been a Court ruling 'ategori'ally defining the ter, *'apital* found in the various e'ono,i' provisions of the 12@:, 124@ and 1234 Philippine Constitutions. &he opinions of the SEC, as /ell as of the #epart,ent of 0usti'e -#%0., on the definition of the ter, *'apital* as referring to both voting and non"voting shares -'o,bined total of 'o,,on and preferred shares. are, in the first pla'e, 'onfli'ting and in'onsistent. &here is no basis /hatsoever to the 'lai, that the SEC and the #%0

Corporation CASES Based on the Syllabus of Fr. Agustin a2oun) )o ;1r;u26&n)1on o4 )3& 'r1n;1'5& o4 ;on)ro5 +y !3151''1n& ()o;D3o5*&r( )3a) 1( 12'51;1) 1n )3& 60< !3151''1n& na)1ona51)y r&>u1r&2&n) 1n )3& Con()1)u)1on. -E,phasis supplied. $n short, +inister +endoza ;a)&@or1;a55y r&?&;)&* the theory that the ter, *'apital* in Se'tion 2, Arti'le N$H of the 124@ Constitution in'ludes *both preferred and 'o,,on sto'6s* treated as the sa,e 'lass of shares regardless of differen'es in voting rights and privileges. +inister +endoza stressed that the 1(";( o/nership reIuire,ent in favor of Filipino 'itizens in the Constitution is not 'o,plied /ith unless the 'orporation * (a)1(41&( )3& ;r1)&r1on o4 +&n&41;1a5 o=n&r(31'* and that in applying the sa,e * )3& 'r12or*1a5 ;on(1*&ra)1on 1( (1)u( o4 ;on)ro5 .* %n the other hand, in %pinion No. )@"1( dated 13 August )(1(, addressed to Castillo =a,an &an Pantaleon U San 0ose, then SEC 5eneral Counsel Hernette 5. 8,ali"Pa'o applied the $o)1n@ Con)ro5 T&(), that is, using only the voting sto'6 to deter,ine /hether a 'orporation is a Philippine national. &he %pinion states7 Applying the foregoing, 'ar)1;u5ar5y )3& Con)ro5 T&(), += C is dee,ed as a Philippine national be'ause7 -1. si!ty per'ent -1(>. of its ou)()an*1n@ ;a'1)a5 ()o;D en"i"le& "o 9o"e is o/ned by a Philippine national, the &rusteeE and -). at least si!ty per'ent -1(>. of the E F /ill a''rue to the benefit of Philippine nationals. S)155 'ur(uan) )o )3& Con)ro5 T&(), %LRCC( 1n6&()2&n) 1n 60< o4 #F CC( ou)()an*1n@ ;a'1)a5 ()o;D en"i"le& "o 9o"e (3a55 +& *&&2&* a( o4 !3151''1n& na)1ona51)y, )3&r&+y >ua514y1n@ #F C )o o=n 'r16a)& 5an*. Further, under, and for purposes of, the F$A, += C and BF#C are both Philippine nationals, 'onsidering that7 -1. si!ty per'ent -1(>. of their respe'tive ou)()an*1n@ ;a'1)a5 ()o;D en"i"le& "o 9o"e is o/ned by a Philippine national -i.e., by the &rustee, in the 'ase of += CE and by += C, in the 'ase of BF#C.E and -). at least 1(> of their respe'tive board of dire'tors are Filipino 'itizens. -Boldfa'ing and itali'ization supplied. Clearly, these #%0 and SEC opinions are 'o,patible /ith the CourtDs interpretation of the 1(";( o/nership reIuire,ent in favor of Filipino 'itizens ,andated by the Constitution for 'ertain e'ono,i' a'tivities. At the sa,e ti,e, these opinions highlight the 'onfli'ting, 'ontradi'tory, and in'onsistent positions ta6en by the #%0 and the

SEC on the definition of the ter, *'apital* found in the e'ono,i' provisions of the Constitution. &he opinions issued by SEC legal offi'ers do not have the for'e and effe't of SEC rules and regulations be'ause only the SEC en banc 'an adopt rules and regulations. As e!pressly provided in Se'tion ;.1 of the Se'urities egulation Code, 1) the SEC 'annot delegate to any of its individual Co,,issioner or staff the po/er to adopt any rule or regulation. Further, un*&r S&;)1on ,.1 o4 )3& (a2& Co*&, 1) 1( "!e 68C as a collegial bo&y , an* no) any o4 1)( 5&@a5 o441;&r(, )3a) 1( &2'o=&r&* )o 1((u& opinions an* a''ro6& ru5&( an* r&@u5a)1on(. &hus7 ;.1. &he Co,,ission ,ay, for purposes of effi'ien'y, delegate any of its fun'tions to any depart,ent or offi'e of the Co,,ission, an individual Co,,issioner or staff ,e,ber of the Co,,ission &7;&')its revie/ or appellate authority and 1)( 'o=&r )o a*o'), a5)&r an* (u''5&2&n) any ru5& or r&@u5a)1on. &he Co,,ission ,ay revie/ upon its o/n initiative or upon the petition of any interested party any a'tion of any depart,ent or offi'e, individual Co,,issioner, or staff ,e,ber of the Co,,ission. SEC. :. Powers and -unctions of the Commission. :.1. &he Co,,ission shall a't /ith transparen'y and shall have the po/ers and fun'tions provided by this Code, Presidential #e'ree No. 2()"A, the Corporation Code, the $nvest,ent <ouses =a/, the Finan'ing Co,pany A't and other e!isting la/s. Pursuant thereto the Co,,ission shall have, a,ong others, the follo/ing po/ers and fun'tions7 !!!! /@0 !r&'ar&, a''ro6&, a2&n* or r&'&a5 ru5&(, r&@u5a)1on( an* or*&r(, an* 1((u& opinionsan* 'ro61*& @u1*an;& on an* (u'&r61(& ;o2'51an;& =1)3 (u;3 ru5&(, r&@u5a)1on( an* or*&r(I ! ! ! ! -E,phasis supplied. &hus, the a't of the individual Co,,issioners or legal offi'ers of the SEC in issuing opinions that have the effe't of SEC rules or regulations is ultra vires. 8nder Se'tions ;.1 and :.1-g. of the Code,

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4;

Corporation CASES Based on the Syllabus of Fr. Agustin only the SEC en banc 'an *issue opinions* that have the for'e and effe't of rules or regulations. Se'tion ;.1 of the Code bars the SEC en banc fro, delegating to any individual Co,,issioner or staff the po/er to adopt rules or regulations. "n (3or), any o'1n1on o4 1n*161*ua5 Co221((1on&r( or SEC 5&@a5 o441;&r( *o&( no) ;on()1)u)& a ru5& or r&@u5a)1on o4 )3& SEC. &he SEC ad,its during the %ral Argu,ents that only the SEC en banc, and not any of its individual 'o,,issioners or legal staff, is e,po/ered to issue opinions /hi'h have the sa,e binding effe't as SEC rules and regulations, thus7 08S&$CE CA P$%7 So, under the la/, it is the Co,,ission En Ban' that 'an issue an SEC %pinion, 'orre'tL C%++$SS$%NE 5A$&E71@ 08S&$CE CA P$%7

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Ahat 'annot be delegated, a,ong others, is the po/er to adopt or a,end rules and regulations, 'orre'tL C%++$SS$%NE 5A$&E7

&hatDs 'orre't, ?our <onor. JUST"CE CAR!"OB So, you ;o2+1n& )3& )=o /20, )3& SEC o441;&r, 14 *&5&@a)&* )3a) 'o=&r, ;an 1((u& an o'1n1on +u) )3a) o'1n1on *o&( no) ;on()1)u)& a ru5& or r&@u5a)1on, ;orr&;)E CO%%"SS"ONER GA"TEB Corr&;), Your Honor. JUST"CE CAR!"OB So, a55 o4 )3&(& o'1n1on( )3a) you 2&n)1on&* )3&y ar& no) ru5&( an* r&@u5a)1on(, ;orr&;)E CO%%"SS"ONER GA"TEB T3&y ar& no) ru5&( an* r&@u5a)1on(. 08S&$CE CA P$%7 $f they are not rules and regulations, they apply only to that parti'ular situation and /ill not 'onstitute a pre'edent, 'orre'tL C%++$SS$%NE 5A$&E7

&hatDs 'orre't, ?our <onor. 08S&$CE CA P$%7 Can the Co,,ission En Ban' delegate this fun'tion to an SEC offi'erL C%++$SS$%NE 5A$&E7

?es, ?our <onor, /e have delegated it to the 5eneral Counsel. 08S&$CE CA P$%7 $t 'an be delegated. Ahat 'annot be delegated by the Co,,ission En Ban' to a 'o,,issioner or an individual e,ployee of the Co,,issionL C%++$SS$%NE 5A$&E7

?es, ?our <onor.1; -E,phasis supplied. Signifi'antly, the SEC en banc, /hi'h is the 'ollegial body statutorily e,po/ered to issue rules and opinions on behalf of the SEC, has

Novel opinions that BhaveC to be de'ided by the En Ban'...

Corporation CASES Based on the Syllabus of Fr. Agustin adopted even the 5randfather ule in deter,ining 'o,plian'e /ith the 1(";( o/nership reIuire,ent in favor of Filipino 'itizens ,andated by the Constitution for 'ertain e'ono,i' a'tivities. &his prevailing SEC ruling, /hi'h the SEC 'orre'tly adopted to th/art any 'ir'u,vention of the reIuired Filipino * o=n&r(31' an* ;on)ro5,* is laid do/n in the ): +ar'h )(1( SEC en banc ruling in %edmont Consolidated ,ines! Corp. v. ,c"rthur ,ining! Inc.! et al. ,1: to /it7 &he avo/ed purpose of the Constitution is to pla'e in the hands of Filipinos the e!ploitation of our natural resour'es. N&;&((ar15y, )3&r&4or&, )3& Ru5& 1n)&r'r&)1n@ )3& ;on()1)u)1ona5 'ro61(1on (3ou5* no) *121n1(3 )3a) r1@3) )3rou@3 )3& 5&@a5 41;)1on o4 ;or'ora)& o=n&r(31' an* ;on)ro5. But the 'onstitutional provision, as interpreted and pra'ti'ed via the 1214 SEC ules, has favored foreigners 'ontrary to the 'o,,and of the Constitution. Hence% "!e Gran&fa"!er Rule mus" be applie& "o accura"ely &e"ermine "!e ac"ual par"icipa"ion% bo"! &irec" an& in&irec"% of foreigners in a corpora"ion engage& in a na"ionali@e& ac"i9i"y or business. Co,plian'e /ith the 'onstitutional li,itation-s. on engaging in nationalized a'tivities ,ust be deter,ined by as'ertaining if 1(> of the investing 'orporationDs outstanding 'apital sto'6 is o/ned by *Filipino 'itizens*, or as interpreted, by natural or individual Filipino 'itizens. $f su'h investing 'orporation is in turn o/ned to so,e e!tent by another investing 'orporation, the sa,e pro'ess ,ust be observed. %ne ,ust not stop until the 'itizenships of the individual or natural sto'6holders of layer after layer of investing 'orporations have been established, the very essen'e of the 5randfather ule. La()5y, 1) =a( )3& 1n)&n) o4 )3& 4ra2&r( o4 )3& 198. Con()1)u)1on )o a*o') )3& Gran*4a)3&r Ru5&. $n one of the dis'ussions on /hat is no/ Arti'le N$$ of the present Constitution, the fra,ers ,ade the follo/ing e!'hange7 + . N%==E#%. $n Se'tions @, 2 and 1:, the Co,,ittee stated lo'al or Filipino eIuity and foreign eIuityE na,ely, 1(";( in Se'tion @, 1(";( in Se'tion 2, and )F@"1F@ in Se'tion 1:. + . H$==E5AS. &hat is right. + . N%==E#%. $n tea'hing la/, /e are al/ays fa'ed /ith the Iuestion7 KAhere do /e base the eIuity reIuire,ent, is it on the

authorized 'apital sto'6, on the subs'ribed 'apital sto'6, or on the paid"up 'apital sto'6 of a 'orporationDL Aill the Co,,ittee please enlighten ,e on thisL + . H$==E5AS. Ae have 9ust had a long dis'ussion /ith the ,e,bers of the tea, fro, the 8P =a/ Center /ho provided us a draft. &he phrase that is 'ontained here /hi'h /e adopted fro, the 8P draft is K1( per'ent of voting sto'6.D + . N%==E#%. &hat ,ust be based on the subs'ribed 'apital sto'6, be'ause unless de'lared delinIuent, unpaid 'apital sto'6 shall be entitled to vote. + . H$==E5AS. &hat is right. + . N%==E#%. &han6 you. Aith respe't to an invest,ent by one 'orporation in another 'orporation, say, a 'orporation /ith 1(";( per'ent eIuity invests in another 'orporation /hi'h is per,itted by the Corporation Code, does the Co,,ittee adopt the grandfather ruleL + . H$==E5AS. ?es, that is the understanding of the Co,,ittee. + . N%==E#%. &herefore, /e need additional Filipino 'apitalL + . H$==E5AS. ?es. -Boldfa'ing itali'ization in the original. and unders'oring suppliedE

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&his SEC en banc ruling 'onfor,s to our )3 0une )(11 #e'ision that the 1(";( o/nership reIuire,ent in favor of Filipino 'itizens in the Constitution to engage in 'ertain e'ono,i' a'tivities applies not only to voting 'ontrol of the 'orporation, but a5(o )o )3& +&n&41;1a5 o=n&r(31' o4 )3& ;or'ora)1on. &hus, in our )3 0une )(11 #e'ision /e stated7 +ere legal title is insuffi'ient to ,eet the 1( per'ent Filipinoo/ned *'apital* reIuired in the Constitution. Fu55 +&n&41;1a5 o=n&r(31' o4 60 '&r;&n) o4 )3& ou)()an*1n@ ;a'1)a5 ()o;D, ;ou'5&* =1)3 60 '&r;&n) o4 )3& 6o)1n@ r1@3)(, 1( r&>u1r&* . &he legal and benefi'ial o/nership of 1( per'ent of the outstanding 'apital sto'6 ,ust rest in the hands of Filipino nationals in a''ordan'e /ith the 'onstitutional ,andate. %ther/ise, the 'orporation is *'onsidered as non"Philippine nationalBsC.* -E,phasis supplied.

Corporation CASES Based on the Syllabus of Fr. Agustin Both the Hoting Control &est and the Benefi'ial %/nership &est ,ust be applied to deter,ine /hether a 'orporation is a *Philippine national.* &he interpretation by legal offi'ers of the SEC of the ter, *'apital,* e,bodied in various opinions /hi'h respondents relied upon, is ,erely preli,inary and an opinion only of su'h offi'ers. &o repeat, any su'h opinion does not 'onstitute an SEC rule or regulation. $n fa't, ,any of these opinions 'ontain a dis'lai,er /hi'h e!pressly states7 *! ! ! )3& 4or&@o1n@ o'1n1on is based solely on fa'ts dis'losed in your Iuery and relevant only to the parti'ular issue raised therein and (3a55 no) +& u(&* 1n )3& na)ur& o4 a ()an*1n@ ru5& +1n*1n@ u'on )3& Co221((1on 1n o)3&r ;a(&( =3&)3&r o4 (1215ar or *1((1215ar ;1r;u2()an;&( .*11 &hus, the opinions 'learly ,a6e a caveat that they do not 'onstitute binding pre'edents on any one, not even on the SEC itself. =i6e/ise, the opinions of the SEC en banc, as /ell as of the #%0, interpreting the la/ are neither 'on'lusive nor 'ontrolling and thus, do not bind the Court. $t is hornboo6 do'trine that any interpretation of the la/ that ad,inistrative or Iuasi"9udi'ial agen'ies ,a6e is only preli,inary, never 'on'lusive on the Court. &he po/er to ,a6e a final interpretation of the la/, in this 'ase the ter, *'apital* in Se'tion 11, Arti'le N$$ of the 1234 Constitution, lies /ith this Court, not /ith any other govern,ent entity. $n his ,otion for re'onsideration, the PSE President 'ites the 'ases of @ational .elecommunications Commission v. Court of "ppeals14 and Philippine :ong #istance .elephone Compan8 v. @ational .elecommunications Commission13 in arguing that the Court has already defined the ter, *'apital* in Se'tion 11, Arti'le N$$ of the 1234 Constitution.12 &he PSE President is grossly ,ista6en. $n both 'ases of @ational .elecommunications v. Court of "ppeals )( andPhilippine :ong #istance .elephone Compan8 v. @ational .elecommunications Commission!)1 the Court did not define the ter, *'apital* as found in Se'tion 11, Arti'le N$$ of the 1234 Constitution. "n 4a;), )3&(& )=o ;a(&( n&6&r 2&n)1on&*, *1(;u((&* or ;1)&* S&;)1on 11, Ar)1;5& N"" o4 )3& Con()1)u)1on or any o4 1)( &;ono21; 'ro61(1on( , an* )3u( ;anno) (&r6& a( 'r&;&*&n) 1n )3& 1n)&r'r&)a)1on o4 S&;)1on 11, Ar)1;5& N"" o4 )3& Con()1)u)1on . &hese t/o 'ases dealt solely /ith the deter,ination of the 'orre't regulatory fees under Se'tion ;(-e. and -f. of the Publi' Servi'e A't, to /it7

-e. For annual rei,burse,ent of the e!penses in'urred by the Co,,ission in the supervision of other publi' servi'es andFor in the regulation or fi!ing of their rates, t/enty 'entavos for ea'h one hundred pesos or fra'tion thereof, of the ;a'1)a5 ()o;D (u+(;r1+&* or 'a1*, or if no shares have been issued, of the 'apital invested, or of the property and eIuip,ent /hi'hever is higher. -f. For the issue or in'rease of ;a'1)a5 ()o;D, t/enty 'entavos for ea'h one hundred pesos or fra'tion thereof, of the in'reased 'apital. -E,phasis supplied. &he CourtDs interpretation in these t/o 'ases of the ter,s *'apital sto'6 subs'ribed or paid,* *'apital sto'6* and *'apital* does not pertain to, and 'annot 'ontrol, the definition of the ter, *'apital* as used in Se'tion 11, Arti'le N$$ of the Constitution, or any of the e'ono,i' provisions of the Constitution /here the ter, *'apital* is found. &he definition of the ter, *'apital* found in the Constitution ,ust not be ta6en out of 'onte!t. A 'areful reading of these t/o 'ases reveals that the ter,s *'apital sto'6 subs'ribed or paid,* *'apital sto'6* and *'apital* /ere defined solely to deter,ine the basis for 'o,puting the supervision and regulation fees under Se'tion ;(-e. and -f. of the Publi' Servi'e A't. III. >ilipini@a"ion of Public 7"ili"ies &he Prea,ble of the 1234 Constitution, as the prologue of the supre,e la/ of the land, e,bodies the ideals that the Constitution intends to a'hieve.)) &he Prea,ble reads7 Ae, the sovereign Filipino people, i,ploring the aid of Al,ighty 5od, in order to build a 9ust and hu,ane so'iety, and establish a 5overn,ent that shall e,body our ideals and aspirations, pro,ote the 'o,,on good, ;on(&r6& an* *&6&5o' our 'a)r12ony, and se'ure to ourselves and our posterity, the blessings of independen'e and de,o'ra'y under the rule of la/ and a regi,e of truth, 9usti'e, freedo,, love, eIuality, and pea'e, do ordain and pro,ulgate this Constitution. -E,phasis supplied. Consistent /ith these ideals, Se'tion 12, Arti'le $$ of the 1234 Constitution de'lares as State poli'y the develop,ent of a national e'ono,y *effec"i9ely con"rolle&* by Filipinos7

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Corporation CASES Based on the Syllabus of Fr. Agustin Se'tion 12. &he State shall develop a self"reliant and independent national e'ono,y effec"i9ely con"rolle& by >ilipinos. Fortifying the State poli'y of a Filipino"'ontrolled e'ono,y, the Constitution de'rees7 Se'tion 1(. &he Congress shall, upon re'o,,endation of the e'ono,i' and planning agen'y, /hen the national interest di'tates, reserve to 'itizens of the Philippines or to 'orporations or asso'iations at least si!ty per centum of /hose 'apital is o/ned by su'h 'itizens, or su'h higher per'entage as Congress ,ay pres'ribe, 'ertain areas of invest,ents. &he Congress shall ena't ,easures that /ill en'ourage the for,ation and operation of enterprises /hose 'apital is /holly o/ned by Filipinos. $n the grant of rights, privileges, and 'on'essions 'overing the national e'ono,y and patri,ony, the State shall give preferen'e to Iualified Filipinos. &he State shall regulate and e!er'ise authority over foreign invest,ents /ithin its national 9urisdi'tion and in a''ordan'e /ith its national goals and priorities.)@ 8nder Se'tion 1(, Arti'le N$$ of the 1234 Constitution, Congress ,ay *reserve to 'itizens of the Philippines or to 'orporations or asso'iations at least si!ty per centum of /hose 'apital is o/ned by su'h 'itizens, or su'h higher per'entage as Congress ,ay pres'ribe, 'ertain areas of invest,ents.* &hus, in nu,erous la/s Congress has reserved 'ertain areas of invest,ents to Filipino 'itizens or to 'orporations at least si!ty per'ent of the *;a'1)a5* of /hi'h is o/ned by Filipino 'itizens. So,e of these la/s are7 -1. egulation of A/ard of 5overn,ent Contra'ts or .A. No. :13@E -). Philippine $nventors $n'entives A't or .A. No. @3:(E -@. +agna Carta for +i'ro, S,all and +ediu, Enterprises or .A. No. 1244E -;. Philippine %verseas Shipping #evelop,ent A't or .A. No. 4;41E -:. #o,esti' Shipping #evelop,ent A't of )((; or .A. No. 2)2:E -1. Philippine &e'hnology &ransfer A't of )((2 or .A. No. 1((::E and -4. Ship +ortgage #e'ree or P.#. No. 1:)1. Aith respe't to publi' utilities, the 1234 Constitution spe'ifi'ally ordains7

Se'tion 11. No 4ran;31(&, ;&r)141;a)&, or any o)3&r 4or2 o4 au)3or1Ha)1on 4or )3& o'&ra)1on o4 a 'u+51; u)151)y (3a55 +& @ran)&* &7;&') )o ;1)1H&n( o4 )3& !3151''1n&( or )o ;or'ora)1on( or a((o;1a)1on( or@an1H&* un*&r )3& 5a=( o4 )3& !3151''1n&(, a) 5&a() (17)y per cen"um o4 =3o(& ;a'1)a5 1( o=n&* +y (u;3 ;1)1H&n(I nor shall su'h fran'hise, 'ertifi'ate, or authorization be e!'lusive in 'hara'ter or for a longer period than fifty years. Neither shall any su'h fran'hise or right be granted e!'ept under the 'ondition that it shall be sub9e't to a,end,ent, alteration, or repeal by the Congress /hen the 'o,,on good so reIuires. &he State shall en'ourage eIuity parti'ipation in publi' utilities by the general publi'. &he parti'ipation of foreign investors in the governing body of any publi' utility enterprise shall be li,ited to their proportionate share in its 'apital, and all the e!e'utive and ,anaging offi'ers of su'h 'orporation or asso'iation ,ust be 'itizens of the Philippines. -E,phasis supplied. &his provision, /hi'h ,andates the Filipinization of publi' utilities, reIuires that any for, of authorization for the operation of publi' utilities shall be granted only to *'itizens of the Philippines or to 'orporations or asso'iations organized under the la/s of the Philippines at least si!ty per 'entu, of /hose 'apital is o/ned by su'h 'itizens.* *T3& 'ro61(1on 1( Fan &7'r&((G r&;o@n1)1on o4 )3& (&n(1)16& an* 61)a5 'o(1)1on o4 'u+51; u)151)1&( +o)3 1n )3& na)1ona5 &;ono2y an* 4or na)1ona5 (&;ur1)y.J); &he 1234 Constitution reserves the o/nership and operation of publi' utilities e!'lusively to -1. Filipino 'itizens, or -). 'orporations or asso'iations at least 1( per'ent of /hose *'apital* is o/ned by Filipino 'itizens. <en'e, in the 'ase of individuals, only Filipino 'itizens 'an validly o/n and operate a publi' utility. $n the 'ase of 'orporations or asso'iations, at least 1( per'ent of their *'apital* ,ust be o/ned by Filipino 'itizens. "n o)3&r =or*(, un*&r S&;)1on 11, Ar)1;5& N"" o4 )3& 198. Con()1)u)1on, )o o=n an* o'&ra)& a 'u+51; u)151)y a ;or'ora)1onC( ;a'1)a5 2u() a) 5&a() +& 60 '&r;&n) o=n&* +y P!ilippine na"ionals. IA. Defini"ion of :P!ilippine 'a"ional: Pursuant to the e!press ,andate of Se'tion 11, Arti'le N$$ of the 1234 Constitution, Congress ena'ted epubli' A't No. 4(;) or the -oreign Investments "ct of 1>>1 -F$A., as a,ended, /hi'h defined a *!3151''1n& na)1ona5* as follo/s7

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Corporation CASES Based on the Syllabus of Fr. Agustin SEC. @. #efinitions. " As used in this A't7 a. &he ter, *Philippine national1 shall ,ean a 'itizen of the PhilippinesE or a do,esti' partnership or asso'iation /holly o/ned by 'itizens of the PhilippinesE or a ;or'ora)1on or@an1H&* un*&r )3& 5a=( o4 )3& !3151''1n&( o4 =31;3 a) 5&a() (17)y '&r;&n) /60<0 o4 )3& ;a'1)a5 ()o;D ou)()an*1n@ an& en"i"le& "o 9o"e 1( o=n&* an* 3&5* +y ;1)1H&n( o4 )3& !3151''1n&( E or a 'orporation organized abroad and registered as doing business in the Philippines under the Corporation Code of /hi'h one hundred per'ent -1((>. of the 'apital sto'6 outstanding and entitled to vote is /holly o/ned by Filipinos or a trustee of funds for pension or other e,ployee retire,ent or separation benefits, /here the trustee is a Philippine national and at least si!ty per'ent -1(>. of the fund /ill a''rue to the benefit of Philippine nationals7 Provided, &hat /here a 'orporation and its non"Filipino sto'6holders o/n sto'6s in a Se'urities and E!'hange Co,,ission -SEC. registered enterprise, at least si!ty per'ent -1(>. of the 'apital sto'6 outstanding and entitled to vote of ea'h of both 'orporations ,ust be o/ned and held by 'itizens of the Philippines and at least si!ty per'ent -1(>. of the ,e,bers of the Board of #ire'tors of ea'h of both 'orporations ,ust be 'itizens of the Philippines, in order that the 'orporation, shall be 'onsidered a *Philippine national.* -Boldfa'ing, itali'ization and unders'oring supplied. &hus, the F$A 'learly and uneIuivo'ally defines a * !3151''1n& na)1ona5* as a Philippine 'itizen, or a do,esti' 'orporation at least *60< o4 )3& ;a'1)a5 ()o;D ou)()an*1n@ an* en"i"le& "o 9o"e* is o/ned by Philippine 'itizens. &he definition of a *Philippine national* in the F$A reiterated the ,eaning of su'h ter, as provided in its prede'essor statute, E!e'utive %rder No. ))1 or the /mnibus Investments Code of 1>M<,): /hi'h /as issued by then President Corazon C. AIuino. Arti'le 1: of this Code states7 Arti'le 1:. *Philippine national* shall ,ean a 'itizen of the Philippines or a diplo,ati' partnership or asso'iation /holly"o/ned by 'itizens of the PhilippinesE or a ;or'ora)1on or@an1H&* un*&r )3& 5a=( o4 )3& !3151''1n&( o4 =31;3 a) 5&a() (17)y '&r ;&n) /60<0 o4 )3& ;a'1)a5 ()o;D ou)()an*1n@an& en"i"le& "o 9o"e 1( o=n&* an* 3&5* +y ;1)1H&n( o4 )3& !3151''1n&(E or a trustee of funds for pension or other e,ployee retire,ent or separation benefits, /here the trustee is a Philippine national and at least si!ty per 'ent -1(>.

of the fund /ill a''rue to the benefit of Philippine nationals7 Provided, &hat /here a 'orporation and its non"Filipino sto'6holders o/n sto'6 in a registered enterprise, at least si!ty per 'ent -1(>. of the 'apital sto'6 outstanding and entitled to vote of both 'orporations ,ust be o/ned and held by the 'itizens of the Philippines and at least si!ty per 'ent -1(>. of the ,e,bers of the Board of #ire'tors of both 'orporations ,ust be 'itizens of the Philippines in order that the 'orporation shall be 'onsidered a Philippine national. -Boldfa'ing, itali'ization and unders'oring supplied. 8nder Arti'le ;3-@.)1 of the %,nibus $nvest,ents Code of 1234, *no 'orporation ! ! ! /hi'h is not a KPhilippine nationalD ! ! ! shall do business ! ! ! in the Philippines ! ! ! /ithout first se'uring fro, the Board of $nvest,ents a /ritten 'ertifi'ate to the effe't that su'h business or e'ono,i' a'tivity ! ! ! /ould no) 'onfli't /ith the Constitution or la/s of the Philippines.*)4&hus, a *non"Philippine national* 'annot o/n and operate a reserved e'ono,i' a'tivity li6e a publi' utility. &his ,eans, of 'ourse, that only a *Philippine national* 'an o/n and operate a publi' utility. $n turn, the definition of a *Philippine national* under Arti'le 1: of the %,nibus $nvest,ents Code of 1234 /as a reiteration of the ,eaning of su'h ter, as provided in Arti'le 1; of the /mnibus Investments Code of 1>M1,)3 to /it7 Arti'le 1;. *Philippine national* shall ,ean a 'itizen of the PhilippinesE or a do,esti' partnership or asso'iation /holly o/ned by 'itizens of the PhilippinesE or a ;or'ora)1on or@an1H&* un*&r )3& 5a=( o4 )3& !3151''1n&( o4 =31;3 a) 5&a() (17)y '&r ;&n) /60<0 o4 )3& ;a'1)a5 ()o;D ou)()an*1n@ an& en"i"le& "o 9o"e 1( o=n&* an* 3&5* +y ;1)1H&n( o4 )3& !3151''1n&(I or a trustee of funds for pension or other e,ployee retire,ent or separation benefits, /here the trustee is a Philippine national and at least si!ty per 'ent -1(>. of the fund /ill a''rue to the benefit of Philippine nationals7 Provided, &hat /here a 'orporation and its non"Filipino sto'6holders o/n sto'6 in a registered enterprise, at least si!ty per 'ent -1(>. of the 'apital sto'6 outstanding and entitled to vote of both 'orporations ,ust be o/ned and held by the 'itizens of the Philippines and at least si!ty per 'ent -1(>. of the ,e,bers of the Board of #ire'tors of both 'orporations ,ust be 'itizens of the Philippines in order that the 'orporation shall be 'onsidered a

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Corporation CASES Based on the Syllabus of Fr. Agustin Philippine supplied. national. -Boldfa'ing, itali'ization and unders'oring

8nder Arti'le 12-@. of the %,nibus $nvest,ents Code of 1231, *no 'orporation ! ! ! /hi'h is not a KPhilippine nationalD ! ! ! shall do business ! ! ! in the Philippines ! ! ! /ithout first se'uring a /ritten 'ertifi'ate fro, the Board of $nvest,ents to the effe't that su'h business or e'ono,i' a'tivity ! ! ! /ould no) 'onfli't /ith the Constitution or la/s of the Philippines.* )2 &hus, a *non"Philippine national* 'annot o/n and operate a reserved e'ono,i' a'tivity li6e a publi' utility. Again, this ,eans that only a *Philippine national* 'an o/n and operate a publi' utility. Prior to the %,nibus $nvest,ents Code of 1231, epubli' A't No. :131@( or the Investment Incentives "ct! /hi'h too6 effe't on 11 Septe,ber 1214, 'ontained a si,ilar definition of a *Philippine national,* to /it7 -f. *Philippine National* shall ,ean a 'itizen of the PhilippinesE or a partnership or asso'iation /holly o/ned by 'itizens of the PhilippinesE or a ;or'ora)1on or@an1H&* un*&r )3& 5a=( o4 )3& !3151''1n&( o4 =31;3 a) 5&a() (17)y '&r ;&n) o4 )3& ;a'1)a5 ()o;D ou)()an*1n@ an& en"i"le& "o 9o"e 1( o=n&* an* 3&5* +y ;1)1H&n( o4 )3& !3151''1n&(E or a trustee of funds for pension or other e,ployee retire,ent or separation benefits, /here the trustee is a Philippine National and at least si!ty per 'ent of the fund /ill a''rue to the benefit of Philippine Nationals7 Provided, &hat /here a 'orporation and its non"Filipino sto'6holders o/n sto'6 in a registered enterprise, at least si!ty per 'ent of the 'apital sto'6 outstanding and entitled to vote of both 'orporations ,ust be o/ned and held by the 'itizens of the Philippines and at least si!ty per 'ent of the ,e,bers of the Board of #ire'tors of both 'orporations ,ust be 'itizens of the Philippines in order that the 'orporation shall be 'onsidered a Philippine National. -Boldfa'ing, itali'ization and unders'oring supplied. 8nder Se'tion @ of epubli' A't No. :;:: or the -oreign Business %egulations "ct, /hi'h too6 effe't on @( Septe,ber 1213, if the invest,ent in a do,esti' enterprise by non"Philippine nationals e!'eeds @(> of its outstanding 'apital sto'6, su'h enterprise ,ust obtain prior approval fro, the Board of $nvest,ents before a''epting su'h invest,ent. Su'h approval shall no) be granted if the invest,ent */ould 'onfli't /ith e!isting 'onstitutional provisions and la/s regulating the degree of reIuired o/nership by Philippine

nationals in the enterprise.*@1 A *non"Philippine national* 'annot o/n and operate a reserved e'ono,i' a'tivity li6e a publi' utility. Again, this ,eans that only a *Philippine national* 'an o/n and operate a publi' utility. &he F$A, liBe all i"s pre&ecessor s"a"u"es, 'learly defines a *!3151''1n& na)1ona5* as a Filipino 'itizen, or a*o2&()1; ;or'ora)1on Ja) 5&a() (17)y '&r;&n) /60<0 o4 )3& ;a'1)a5 ()o;D ou)()an*1n@ an& en"i"le& "o 9o"eJis o/ned by Filipino 'itizens. A do,esti' 'orporation is a *Philippine national* only if at least 1(> of its 9o"ing s"ocB is o/ned by Filipino 'itizens. &his definition of a *Philippine national* is 'ru'ial in the present 'ase be'ause the F$A reiterates and 'larifies Se'tion 11, Arti'le N$$ of the 1234 Constitution, /hi'h li,its the o/nership and operation of publi' utilities to Filipino 'itizens or to 'orporations or asso'iations at least 1(> Filipino"o/ned. &he F$A is the basi' la/ governing foreign invest,ents in the Philippines, irrespe'tive of the nature of business and area of invest,ent. &he F$A spells out the pro'edures by /hi'h non" Philippine nationals 'an invest in the Philippines. A,ong the 6ey features of this la/ is the 'on'ept of a negative list or the Foreign $nvest,ents Negative =ist.@) Se'tion 3 of the la/ states7 SEC. 3. Lis" of In9es"men" 2reas Reser9e& "o P!ilippine 'a"ionals G-oreign Investment @egative :istH. " &he Foreign $nvest,ent Negative =ist shall have t/o ) 'o,ponent lists7 " and B7 a. Lis" 2 (3a55 &nu2&ra)& )3& areas of ac"i9i"ies reser9e& "o P!ilippine na"ionals by man&a"e of "!e Cons"i"u"ion an* ('&;141; 5a=(. b. :ist B shall 'ontain the areas of a'tivities and enterprises regulated pursuant to la/7 1. /hi'h are defense"related a'tivities, reIuiring prior 'learan'e and authorization fro, the #epart,ent of National #efense B#N#C to engage in su'h a'tivity, su'h as the ,anufa'ture, repair, storage andFor distribution of firear,s, a,,unition, lethal /eapons, ,ilitary ordinan'e, e!plosives, pyrote'hni's and si,ilar ,aterialsE unless su'h ,anufa'turing or repair a'tivity is spe'ifi'ally authorized, /ith a substantial e!port 'o,ponent, to a non"Philippine national by the Se'retary of National #efenseE or

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Corporation CASES Based on the Syllabus of Fr. Agustin ). /hi'h have i,pli'ations on publi' health and ,orals, su'h as the ,anufa'ture and distribution of dangerous drugsE all for,s of ga,blingE night'lubs, bars, beer houses, dan'e halls, sauna and stea, bathhouses and ,assage 'lini's. -Boldfa'ing, unders'oring and itali'ization supplied. Se'tion 3 of the F$A enu,erates the invest,ent areas *reserved to Philippine nationals.* For&1@n "n6&()2&n) N&@a)16& L1() A ;on(1()( o4 Jareas of ac"i9i"ies reser9e& "o P!ilippine na"ionals by man&a"e of "!e Cons"i"u"ion an& specific laCs ,J =3&r& 4or&1@n &>u1)y 'ar)1;1'a)1on 1n any &n)&r'r1(& (3a55 +& 5121)&* )o )3& 2a712u2 '&r;&n)a@& &7'r&((5y 'r&(;r1+&* +y )3& Con()1)u)1on an* o)3&r ('&;141; 5a=(. "n (3or), )o o=n an* o'&ra)& a 'u+51; u)151)y 1n )3& !3151''1n&( on& 2u() +& a J!3151''1n& na)1ona5J a( *&41n&* 1n )3& F"A. T3& F"A 1( a+un*an) no)1;& )o 4or&1@n 1n6&()or( )o =3a) &7)&n) )3&y ;an 1n6&() 1n 'u+51; u)151)1&( 1n )3& !3151''1n&(. &o repeat, a,ong the areas of invest,ent 'overed by the Foreign $nvest,ent Negative =ist A is the o/nership and operation of publi' utilities, /hi'h the Constitution e!pressly reserves to Filipino 'itizens and to 'orporations at least 1(> o/ned by Filipino 'itizens. "n o)3&r =or*(, N&@a)16& L1() A o4 )3& F"A r&(&r6&( )3& o=n&r(31' an* o'&ra)1on o4 'u+51; u)151)1&( on5y )o J!3151''1n& na)1ona5(,J *&41n&* 1n S&;)1on -/a0 o4 )3& F"A a( *-1. a 'itizen of the PhilippinesE ! ! ! or -@. a ;or'ora)1on or@an1H&* un*&r )3& 5a=( o4 )3& !3151''1n&( o4 =31;3 a) 5&a() (17)y '&r;&n) /60<0 o4 )3& ;a'1)a5 ()o;D ou)()an*1n@ an& en"i"le& "o 9o"e 1( o=n&* an* 3&5* +y ;1)1H&n( o4 )3& !3151''1n&( E or -;. a 'orporation organized abroad and registered as doing business in the Philippines under the Corporation Code of /hi'h one hundred per'ent -1((>. of the 'apital sto'6 outstanding and entitled to vote is /holly o/ned by Filipinos or a trustee of funds for pension or other e,ployee retire,ent or separation benefits, /here the trustee is a Philippine national and at least si!ty per'ent -1(>. of the fund /ill a''rue to the benefit of Philippine nationals.* Clearly, fro, the effe'tivity of the $nvest,ent $n'entives A't of 1214 to the adoption of the %,nibus $nvest,ents Code of 1231, to the ena't,ent of the %,nibus $nvest,ents Code of 1234, and to the passage of the present Foreign $nvest,ents A't of 1221, or 4or 2or& )3an 4our *&;a*&(, )3& ()a)u)ory *&41n1)1on o4 )3& )&r2 J!3151''1n& na)1ona5J 3a( +&&n un14or2 an* ;on(1()&n)B 1) 2&an( a F151'1no ;1)1H&n, or a *o2&()1; ;or'ora)1on a) 5&a()

60< o4 )3& 9o"ing s"ocB 1( o=n&* +y F151'1no(. L1D&=1(&, )3&(& (a2& ()a)u)&( 3a6& un14or25y an* ;on(1()&n)5y r&>u1r&* )3a) on5y J!3151''1n& na)1ona5(J ;ou5* o=n an* o'&ra)& 'u+51; u)151)1&( 1n )3& !3151''1n&(. &he follo/ing e!'hange during the %ral Argu,ents is revealing7 08S&$CE CA P$%7 Counsel, $ have so,e Iuestions. ?ou are a/are of the Foreign $nvest,ents A't of 1221, ! ! !L And the F$A of 1221 too6 effe't in 1221, 'orre'tL &hatDs over t/enty -)(. years ago, 'orre'tL C%++$SS$%NE 5A$&E7

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Corre't, ?our <onor. 08S&$CE CA P$%7 And Se'tion 3 of the Foreign $nvest,ents A't of 1221 states that BConly Philippine nationals 'an o/n and operate publi' utilitiesBC, 'orre'tL C%++$SS$%NE 5A$&E7

?es, ?our <onor. 08S&$CE CA P$%7 And the sa,e Foreign $nvest,ents A't of 1221 defines a *Philippine national* either as a 'itizen of the Philippines, or if it is a 'orporation at least si!ty per'ent -1(>. of the voting sto'6 is o/ned by 'itizens of the Philippines, 'orre'tL C%++$SS$%NE 5A$&E7

Corre't, ?our <onor. 08S&$CE CA P$%7 And, you are also a/are that under the prede'essor la/ of the Foreign $nvest,ents A't of 1221, the %,nibus

Corporation CASES Based on the Syllabus of Fr. Agustin $nvest,ents A't of 1234, the sa,e provisions apply7 ! ! ! only Philippine nationals 'an o/n and operate a publi' utility and the Philippine national, if it is a 'orporation, ! ! ! si!ty per'ent -1(>. of the 'apital sto'6 of that 'orporation ,ust be o/ned by 'itizens of the Philippines, 'orre'tL C%++$SS$%NE 5A$&E7 CO%%"SS"ONER GA"TEB

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Corr&;), Your Honor.@@ -E,phasis supplied. 5overn,ent agen'ies li6e the SEC 'annot si,ply ignore Se'tions @-a. and 3 of the F$A /hi'h 'ategori'ally pres'ribe that 'ertain e'ono,i' a'tivities, li6e the o/nership and operation of publi' utilities, are reserved to 'orporations *at least si!ty per'ent -1(>. of the 'apital sto'6 outstanding an& en"i"le& "o 9o"e is o/ned and held by 'itizens of the Philippines.* Foreign $nvest,ent Negative =ist A refers to *a'tivities reserved to Philippine nationals by ,andate of the Constitution and spe'ifi' la/s.* T3& F"A 1( )3& +a(1; ()a)u)& r&@u5a)1n@ 4or&1@n 1n6&()2&n)( 1n )3& !3151''1n&(. 5overn,ent agen'ies tas6ed /ith regulating or ,onitoring foreign invest,ents, as /ell as 'ounsels of foreign investors, should start /ith the F$A in deter,ining to /hat e!tent a parti'ular foreign invest,ent is allo/ed in the Philippines. Foreign investors and their 'ounsels /ho ignore the F$A do so at their o/n peril. Foreign investors and their 'ounsels /ho rely on opinions of SEC legal offi'ers that obviously 'ontradi't the F$A do so also at their o/n peril. %''asional opinions of SEC legal offi'ers that obviously 'ontradi't the F$A should i,,ediately raise a red flag. &here are already nu,erous opinions of SEC legal offi'ers that 'ite the definition of a *Philippine national* in Se'tion @-a. of the F$A in deter,ining /hether a parti'ular 'orporation is Iualified to o/n and operate a nationalized or partially nationalized business in the Philippines. &his sho/s that SEC legal offi'ers are not only a/are of, but also rely on and invo6e, the provisions of the F$A in as'ertaining the eligibility of a 'orporation to engage in partially nationalized industries. &he follo/ing are so,e of su'h opinions7 1. %pinion of )@ +ar'h 122@, addressed to +r. Fran'is F. <o/E ). %pinion of 1; April 122@, addressed to #ire'tor Angeles &. Aong of the Philippine %verseas E,ploy,ent Ad,inistrationE @. %pinion of )@ Nove,ber 122@, addressed to +essrs. #o,inador Al,eda and enato S. Cal,aE ;. %pinion of 4 #e'e,ber 122@, addressed to Rapunan +igallos U 0ardelezaE o'o Bunag

Corre't, ?our <onor. 08S&$CE CA P$%7 And even prior to the %,nibus $nvest,ents A't of 1234, under the %,nibus $nvest,ents A't of 1231, the sa,e rules apply7 ! ! ! only a Philippine national 'an o/n and operate a publi' utility and a Philippine national, if it is a 'orporation, si!ty per'ent -1(>. of its ! ! ! voting sto'6, ,ust be o/ned by 'itizens of the Philippines, 'orre'tL C%++$SS$%NE 5A$&E7

Corre't, ?our <onor. 08S&$CE CA P$%7 And even prior to that, under BtheC1214 $nvest,ents $n'entives A't and the Foreign Co,pany A't of 1213, the sa,e rules applied, 'orre'tL C%++$SS$%NE 5A$&E7

Corre't, ?our <onor. JUST"CE CAR!"OB So, 4or )3& 5a() 4our /40 *&;a*&(, 7 7 7, )3& 5a= 3a( +&&n 6&ry ;on(1()&n) K on5y a !3151''1n& na)1ona5 ;an o=n an* o'&ra)& a 'u+51; u)151)y, an* a !3151''1n& na)1ona5, 14 1) 1( a ;or'ora)1on, 7 7 7 a) 5&a() (17)y '&r;&n) /60<0 o4 )3& 6o)1n@ ()o;D 2u() +& o=n&* +y ;1)1H&n( o4 )3& !3151''1n&(, ;orr&;)E

Corporation CASES Based on the Syllabus of Fr. Agustin :. SEC %pinion No. ;2"(;, addressed to Buenaventura Sayo' U #e =os AngelesE o,ulo +abanta

1. SEC"%5C %pinion No. 14"(4, addressed to +r. #avidE and 4. SEC"%5C %pinion No. (@"(3, addressed to Attys. 0. ?usi and udyard S. Arbolado.

eynaldo 5.

1) 4ro2 S&;)1on 11, Ar)1;5& N"" o4 )3& Con()1)u)1on r&@u5a)1n@ 4or&1@n 1n6&()2&n)( 1n 'u+51; u)151)1&( . $n fa't, the Board of $nvest,entsD !r12&r on "n6&()2&n) !o51;1&( 1n )3& !3151''1n&(,@; /hi'h is given out to foreign investors, provides7 !ART """. FORE"GN "N$EST%ENTS :"THOUT "NCENT"$ES

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uby

ose $nvestors /ho do not see6 in'entives andFor /hose 'hosen a'tivities do not Iualify for in'entives, -i.e., the a'tivity is not listed in the $PP, and they are not e!porting at least 4(> of their produ'tion. ,ay go ahead and ,a6e the invest,ents /ithout see6ing in'entives. T3&y on5y 3a6& )o +& @u1*&* +y )3& For&1@n "n6&()2&n)( N&@a)16& L1() /F"NL0. &he F$N= 'learly defines invest,ent areas reIuiring at least 1(> Filipino o/nership. All other areas outside of this list are fully open to foreign investors. -E,phasis supplied. A. Rig!" "o elec" &irec"ors% couple& Ci"! beneficial oCners!ip% "ransla"es "o effec"i9e con"rol. &he )3 0une )(11 #e'ision de'lares that the 1( per'ent Filipino o/nership reIuired by the Constitution to engage in 'ertain e'ono,i' a'tivities applies not only to voting 'ontrol of the 'orporation, but a5(o )o )3& +&n&41;1a5 o=n&r(31' o4 )3& ;or'ora)1on. &o repeat, /e held7 +ere legal title is insuffi'ient to ,eet the 1( per'ent Filipino"o/ned *'apital* reIuired in the Constitution. Fu55 +&n&41;1a5 o=n&r(31' o4 60 '&r;&n) o4 )3& ou)()an*1n@ ;a'1)a5 ()o;D, ;ou'5&* =1)3 60 '&r;&n) o4 )3& 6o)1n@ r1@3)(, 1( r&>u1r&* . &he legal and benefi'ial o/nership of 1( per'ent of the outstanding 'apital sto'6 ,ust rest in the hands of Filipino nationals in a''ordan'e /ith the 'onstitutional ,andate. %ther/ise, the 'orporation is *'onsidered as non"Philippine nationalBsC.* -E,phasis supplied. &his is 'onsistent /ith Se'tion @ of the F$A /hi'h provides that /here 1((> of the 'apital sto'6 is held by *a trustee of funds for pension or other e,ployee retire,ent or separation benefits,* the trustee is a Philippine national if *at least si!ty per'ent -1(>. of the fund /ill a''rue to the benefit of Philippine nationals.* =i6e/ise, Se'tion 1-b. of the $,ple,enting ules of the F$A provides that *for sto'6s to be

&he SEC legal offi'ersD o''asional but blatant disregard of the definition of the ter, *Philippine national* in the F$A signifies their la'6 of integrity and 'o,peten'e in resolving issues on the 1(";( o/nership reIuire,ent in favor of Filipino 'itizens in Se'tion 11, Arti'le N$$ of the Constitution. &he PSE President argues that the ter, *Philippine national* defined in the F$A should be li,ited and interpreted to refer to 'orporations see6ing to avail of ta! and fis'al in'entives under invest,ent in'entives la/s and 'annot be eIuated /ith the ter, *'apital* in Se'tion 11, Arti'le N$$ of the 1234 Constitution. Pangilinan si,ilarly 'ontends that the F$A and its prede'essor statutes do not apply to *'o,panies /hi'h have not registered and obtained spe'ial in'entives under the s'he,es established by those la/s.* Both are desperately grasping at stra/s. &he F$A does not grant ta! or fis'al in'entives to any enterprise. &a! and fis'al in'entives to invest,ents are granted separately under the %,nibus $nvest,ents Code of 1234, not under the F$A. $n fa't, the F$A e!pressly repealed Arti'les ;; to :1 of Boo6 $$ of the %,nibus $nvest,ents Code of 1234, /hi'h arti'les previously regulated foreign invest,ents in nationalized or partially nationalized industries. &he F$A is the appli'able la/ regulating foreign invest,ents in nationalized or partially nationalized industries. &here is nothing in the F$A, or even in the %,nibus $nvest,ents Code of 1234 or its prede'essor statutes, that states, e!pressly or i,pliedly, that the F$A or its prede'essor statutes do not apply to enterprises not availing of ta! and fis'al in'entives under the Code. &he F$A and its prede'essor statutes apply to invest,ents in all do,esti' enterprises, /hether or not su'h enterprises en9oy ta! and fis'al in'entives under the %,nibus $nvest,ents Code of 1234 or its prede'essor statutes. T3& r&a(on 1( >u1)& o+61ou( K 2&r& non8a6a152&n) o4 )a7 an* 41(;a5 1n;&n)16&( +y a non8!3151''1n& na)1ona5 ;anno) &7&2')

Corporation CASES Based on the Syllabus of Fr. Agustin dee,ed o/ned and held by Philippine 'itizens or Philippine nationals, ,ere legal title is not enough to ,eet the reIuired Filipino eIuity. Fu55 +&n&41;1a5 o=n&r(31' o4 )3& ()o;D(, ;ou'5&* =1)3 a''ro'r1a)& 6o)1n@ r1@3)(, 1( &((&n)1a5.J Sin'e the 'onstitutional reIuire,ent of at least 1( per'ent Filipino o/nership applies not only to voting 'ontrol of the 'orporation but also to the benefi'ial o/nership of the 'orporation, it is therefore i,perative that su'h reIuire,ent apply unifor,ly and a'ross the board to all 'lasses of shares, regardless of no,en'lature and 'ategory, 'o,prising the 'apital of a 'orporation. 8nder the Corporation Code, 'apital sto'6 @: 'onsists of all 'lasses of shares issued to sto'6holders, that is, 'o,,on shares as /ell as preferred shares, /hi'h ,ay have different rights, privileges or restri'tions as stated in the arti'les of in'orporation.@1 &he Corporation Code allo/s denial of the right to vote to preferred and redee,able shares, but disallo/s denial of the right to vote in spe'ifi' 'orporate ,atters. &hus, 'o,,on shares have the right to vote in the ele'tion of dire'tors, /hile preferred shares ,ay be denied su'h right. Nonetheless, preferred shares, even if denied the right to vote in the ele'tion of dire'tors, are entitled to vote on the follo/ing 'orporate ,atters7 -1. a,end,ent of arti'les of in'orporationE -). in'rease and de'rease of 'apital sto'6E -@. in'urring, 'reating or in'reasing bonded indebtednessE -;. sale, lease, ,ortgage or other disposition of substantially all 'orporate assetsE -:. invest,ent of funds in another business or 'orporation or for a purpose other than the pri,ary purpose for /hi'h the 'orporation /as organizedE -1. adoption, a,end,ent and repeal of by"la/sE -4. ,erger and 'onsolidationE and -3. dissolution of 'orporation.@4 Sin'e a spe'ifi' 'lass of shares ,ay have rights and privileges or restri'tions different fro, the rest of the shares in a 'orporation, the 1(";( o/nership reIuire,ent in favor of Filipino 'itizens in Se'tion 11, Arti'le N$$ of the Constitution ,ust apply not only to shares /ith voting rights but also to shares /ithout voting rights. Preferred shares, denied the right to vote in the ele'tion of dire'tors, are any/ay still entitled to vote on the eight spe'ifi' 'orporate ,atters ,entioned above. T3u(, 14 a ;or'ora)1on, &n@a@&* 1n a 'ar)1a55y na)1ona51H&* 1n*u()ry, 1((u&( a 217)ur& o4 ;o22on an* 'r&4&rr&* non86o)1n@ (3ar&(, a) 5&a() 60 '&r;&n) o4 )3& ;o22on (3ar&( an* a) 5&a() 60 '&r;&n) o4 )3& 'r&4&rr&* non8 6o)1n@ (3ar&( 2u() +& o=n&* +y F151'1no(. %f 'ourse, if a

'orporation issues only a single 'lass of shares, at least 1( per'ent of su'h shares ,ust ne'essarily be o/ned by Filipinos. "n (3or), )3& 60840 o=n&r(31' r&>u1r&2&n) 1n 4a6or o4 F151'1no ;1)1H&n( 2u() a''5y (&'ara)&5y )o &a;3 ;5a(( o4 (3ar&(, =3&)3&r ;o22on, 'r&4&rr&* non86o)1n@, 'r&4&rr&* 6o)1n@ or any o)3&r ;5a(( o4 (3ar&(. &his unifor, appli'ation of the 1(";( o/nership reIuire,ent in favor of Filipino 'itizens 'learly breathes life to the 'onstitutional 'o,,and that the o/nership and operation of publi' utilities shall be reserved e!'lusively to 'orporations at least 1( per'ent of /hose 'apital is Filipino"o/ned. Applying unifor,ly the 1(";( o/nership reIuire,ent in favor of Filipino 'itizens to ea'h 'lass of shares, regardless of differen'es in voting rights, privileges and restri'tions, guarantees effe'tive Filipino 'ontrol of publi' utilities, as ,andated by the Constitution. +oreover, su'h unifor, appli'ation to ea'h 'lass of shares insures that the *'ontrolling interest* in publi' utilities al/ays lies in the hands of Filipino 'itizens. &his addresses and e!tinguishes PangilinanDs /orry that foreigners, o/ning ,ost of the non"voting shares, /ill e!er'ise greater 'ontrol over funda,ental 'orporate ,atters reIuiring t/o"thirds or ,a9ority vote of all shareholders. AI. In"en" of "!e framers of "!e Cons"i"u"ion Ahile 0usti'e Helas'o Iuoted in his #issenting %pinion @3 a portion of the deliberations of the Constitutional Co,,ission to support his 'lai, that the ter, *'apital* refers to the total outstanding shares of sto'6, /hether voting or non"voting, the follo/ing e!'erpts of the deliberations reveal other/ise. $t is 'lear fro, the follo/ing e!'hange that the ter, *'apital* refers to ;on)ro551n@ 1n)&r&() of a 'orporation, thus7 + . N%==E#%. $n Se'tions @, 2 and 1:, the Co,,ittee stated lo'al or Filipino eIuity and foreign eIuityE na,ely, 1(";( in Se'tion @, 1(";( in Se'tion 2 and )F@"1F@ in Se'tion 1:. + . H$==E5AS. &hat is right. + . N%==E#%. $n tea'hing la/, /e are al/ays fa'ed /ith this Iuestion7 *Ahere do /e base the eIuity reIuire,ent, is it on the authorized 'apital sto'6, on the subs'ribed 'apital sto'6, or on the

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Corporation CASES Based on the Syllabus of Fr. Agustin paid"up 'apital sto'6 of a 'orporation*L Aill the Co,,ittee please enlighten ,e on thisL + . H$==E5AS. Ae have 9ust had a long dis'ussion /ith the ,e,bers of the tea, fro, the 8P =a/ Center /ho provided us a draft. T3& '3ra(& )3a) 1( ;on)a1n&* 3&r& =31;3 =& a*o')&* 4ro2 )3& U! *ra4) 1( J60 '&r;&n) o4 6o)1n@ ()o;D.J + . N%==E#%. &hat ,ust be based on the subs'ribed 'apital sto'6, be'ause unless de'lared delinIuent, unpaid 'apital sto'6 shall be entitled to vote. + . H$==E5AS. &hat is right. + . N%==E#%. &han6 you. Aith respe't to an invest,ent by one 'orporation in another 'orporation, say, a 'orporation /ith 1(";( per'ent eIuity invests in another 'orporation /hi'h is per,itted by the Corporation Code, does the Co,,ittee adopt the grandfather ruleL + . H$==E5AS. ?es, that is the understanding of the Co,,ittee. + . N%==E#%. &herefore, /e need additional Filipino 'apitalL + . H$==E5AS. ?es. !!!! + . AQC8NA. +ay $ be 'larified as to that portion that /as a''epted by the Co,,ittee. + . H$==E5AS. &he portion a''epted by the Co,,ittee is the deletion of the phrase *voting sto'6 or 'ontrolling interest.* + . AQC8NA. <en'e, /ithout the #avide a,end,ent, the 'o,,ittee report /ould read7 *'orporations or asso'iations at least si!ty per'ent of /hose CAP$&A= is o/ned by su'h 'itizens.* + . H$==E5AS. ?es.
@2

+ . AQC8NA. So if the #avide a,end,ent is lost, /e are stu'6 /ith 1( per'ent of the 'apital to be o/ned by 'itizens. + . H$==E5AS. &hat is right. %R. AACUNA. #u) )3& ;on)ro5 ;an +& =1)3 )3& 4or&1@n&r( &6&n 14 )3&y ar& )3& 21nor1)y. L&) u( (ay 40 '&r;&n) o4 )3& ;a'1)a5 1( o=n&* +y )3&2, +u) 1) 1( )3& 6o)1n@ ;a'1)a5, =3&r&a(, )3& F151'1no( o=n )3& non6o)1n@ (3ar&(. So =& ;an 3a6& a (1)ua)1on =3&r& )3& ;or'ora)1on 1( ;on)ro55&* +y 4or&1@n&r( *&('1)& +&1n@ )3& 21nor1)y +&;au(& )3&y 3a6& )3& 6o)1n@ ;a'1)a5. T3a) 1( )3& ano2a5y )3a) =ou5* r&(u5) 3&r&. %R. #ENGAON. No, )3& r&a(on =& &5121na)&* )3& =or* J()o;DJ a( ()a)&* 1n )3& 19.- an* 19-, Con()1)u)1on( 1( )3a) a;;or*1n@ )o Co221((1on&r Ro*r1@o, )3&r& ar& a((o;1a)1on( )3a) *o no) 3a6& ()o;D(. T3a) 1( =3y =& (ay JCA!"TAL.J %R. AACUNA. :& (3ou5* J;on)ro551n@ 1n)&r&().J no) &5121na)& )3& '3ra(&

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%R. #ENGAON. "n )3& ;a(& o4 ()o;D ;or'ora)1on(, 1) 1( a((u2&*.;( -Boldfa'ing and unders'oring supplied. &hus, 1( per'ent of the *'apital* a((u2&(, or should result in, a *;on)ro551n@ 1n)&r&()* in the 'orporation. &he use of the ter, *'apital* /as intended to repla'e the /ord *sto'6* be'ause asso'iations /ithout sto'6s 'an operate publi' utilities as long as they ,eet the 1(";( o/nership reIuire,ent in favor of Filipino 'itizens pres'ribed in Se'tion 11, Arti'le N$$ of the Constitution. <o/ever, this did not 'hange the intent of the fra,ers of the Constitution to reserve e!'lusively to Philippine nationals the *;on)ro551n@ 1n)&r&()* in publi' utilities. #uring the drafting of the 12@: Constitution, e'ono,i' prote'tionis, /as *the battle"'ry of the nationalists in the Convention.*;1 &he sa,e battle"'ry resulted in the nationalization of the publi' utilities. ;) &his is also the sa,e intent of the fra,ers of the 1234 Constitution /ho adopted the e!a't for,ulation e,bodied in the 12@: and 124@ Constitutions on foreign eIuity li,itations in partially nationalized industries.

Corporation CASES Based on the Syllabus of Fr. Agustin &he %S5, in its o/n behalf and as 'ounsel for the State,;@ agrees fully /ith the CourtDs interpretation of the ter, *'apital.* $n its Consolidated Co,,ent, the %S5 e!plains that the deletion of the phrase *'ontrolling interest* and repla'e,ent of the /ord *sto'6* /ith the ter, *'apital* /ere intended spe'ifi'ally to e!tend the s'ope of the entities Iualified to operate publi' utilities to in'lude asso'iations /ithout sto'6s. &he fra,ersD o,ission of the phrase *'ontrolling interest* did not ,ean the in'lusion of all shares of sto'6, /hether voting or non"voting. &he %S5 reiterated essentially the CourtDs de'laration that the Constitution reserved e!'lusively to Philippine nationals the o/nership and operation of publi' utilities 'onsistent /ith the StateDs poli'y to *develop a self"reliant and independent national e'ono,y effec"i9ely con"rolle& by >ilipinos.* As /e held in our )3 0une )(11 #e'ision, to 'onstrue broadly the ter, *'apital* as the total outstanding 'apital sto'6, treated as a single 'lass regardless of the a'tual 'lassifi'ation of shares, grossly 'ontravenes the intent and letter of the Constitution that the *State shall develop a self"reliant and independent national e'ono,yeffec"i9ely con"rolle& by Filipinos.* Ae illustrated the glaring ano,aly /hi'h /ould result in defining the ter, *'apital* as the total outstanding 'apital sto'6 of a 'orporation, treated as a single 'lass of shares regardless of the a'tual 'lassifi'ation of shares, to /it7 =et us assu,e that a 'orporation has 1(( 'o,,on shares o/ned by foreigners and 1,(((,((( non"voting preferred shares o/ned by Filipinos, /ith both 'lasses of share having a par value of one peso -P 1.((. per share. 8nder the broad definition of the ter, *'apital,* su'h 'orporation /ould be 'onsidered 'o,pliant /ith the ;( per'ent 'onstitutional li,it on foreign eIuity of publi' utilities sin'e the over/hel,ing ,a9ority, or ,ore than 22.222 per'ent, of the total outstanding 'apital sto'6 is Filipino o/ned. &his is obviously absurd. $n the e!a,ple given, only the foreigners holding the 'o,,on shares have voting rights in the ele'tion of dire'tors, even if they hold only 1(( shares. &he foreigners, /ith a ,inus'ule eIuity of less than (.((1 per'ent, e!er'ise 'ontrol over the publi' utility. %n the other hand, the Filipinos, holding ,ore than 22.222 per'ent of the eIuity, 'annot vote in the ele'tion of dire'tors and hen'e, have no 'ontrol over the publi' utility. &his star6ly 'ir'u,vents the intent of the fra,ers of the Constitution, as /ell as the 'lear language of the

Constitution, to pla'e the 'ontrol of publi' utilities in the hands of Filipinos. ! ! ! Further, even if foreigners /ho o/n ,ore than forty per'ent of the voting shares ele't an all"Filipino board of dire'tors, this situation does not guarantee Filipino 'ontrol and does not in any /ay 'ure the violation of the Constitution. &he independen'e of the Filipino board ,e,bers so ele'ted by su'h foreign shareholders is highly doubtful. As the %S5 pointed out, Iuoting 0usti'e 5eorge SutherlandDs /ords in 7umphre8)s 0Fecutor v. 9S!;; *! ! ! it is Iuite evident that one /ho holds his offi'e only during the pleasure of another 'annot be depended upon to ,aintain an attitude of independen'e against the latterDs /ill.* Allo/ing foreign shareholders to ele't a 'ontrolling ,a9ority of the board, even if all the dire'tors are Filipinos, grossly 'ir'u,vents the letter and intent of the Constitution and defeats the very purpose of our nationalization la/s. AII. Las" sen"ence of 6ec"ion ((% 2r"icle ;II of "!e Cons"i"u"ion &he last senten'e of Se'tion 11, Arti'le N$$ of the 1234 Constitution reads7 &he parti'ipation of foreign investors in the governing body of any publi' utility enterprise shall be li,ited to their proportionate share in its 'apital, and all the e!e'utive and ,anaging offi'ers of su'h 'orporation or asso'iation ,ust be 'itizens of the Philippines. #uring the %ral Argu,ents, the %S5 e,phasized that there /as never a Iuestion on the intent of the fra,ers of the Constitution to li,it foreign o/nership, and assure ,a9ority Filipino o/nership and 'ontrol of publi' utilities. &he %S5 argued, */hile the delegates disagreed as to the per'entage threshold to adopt, ! ! ! the re'ords sho/ they 'learly understood that Filipino 'ontrol of the publi' utility 'orporation 'an only be and is obtained only through the ele'tion of a ,a9ority of the ,e,bers of the board.* $ndeed, the only point of 'ontention during the deliberations of the Constitutional Co,,ission on )@ August 1231 /as the e!tent of ,a9ority Filipino 'ontrol of publi' utilities. &his is evident fro, the follo/ing e!'hange7 &<E P ES$#EN&. Co,,issioner 0a,ir is re'ognized.

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Corporation CASES Based on the Syllabus of Fr. Agustin + . 0A+$ . +ada, President, ,y proposed a,end,ent on lines )( and )1 is to delete the phrase *t/o thirds of /hose voting sto'6 or 'ontrolling interest,* and instead substitute the /ords *S$N&? PE CEN& %F A<%SE CAP$&A=* so that the senten'e /ill read7 *No fran'hise, 'ertifi'ate, or any other for, of authorization for the operation of a publi' utility shall be granted e!'ept to 'itizens of the Philippines or to 'orporations or asso'iations organized under the la/s of the Philippines at least S$N&? PE CEN& %F A<%SE CAP$&A= is o/ned by su'h 'itizens.* !!!! &<E P ES$#EN&7 Aill Co,,issioner 0a,ir first e!plainL + . 0A+$ . ?es, in this Arti'le on National E'ono,y and Patri,ony, there /ere t/o previous se'tions in /hi'h /e fi!ed the Filipino eIuity to 1( per'ent as against ;( per'ent for foreigners. $t is only in this Se'tion 1: /ith respe't to publi' utilities that the 'o,,ittee proposal /as in'reased to t/o"thirds. $ thin6 it /ould be better to har,onize this provision by providing that even in the 'ase of publi' utilities, the ,ini,u, eIuity for Filipino 'itizens should be 1( per'ent. + . %+8=%. +ada, President. o,ulo is re'ognized. &<E P ES$#EN&. Co,,issioner osario Braid is re'ognized.

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+S. %SA $% B A$#. ?es, in the interest of eIual ti,e, ,ay $ also read fro, a ,e,orandu, by the spo6es,an of the Philippine Cha,ber of Co,,uni'ations on /hy they /ould li6e to ,aintain the present eIuity, $ a, referring to the 11 )F@. &hey /ould prefer to have a 4:"): ratio but /ould settle for 11 )F@. ! ! ! !!!! &<E P ES$#EN&. 0ust to 'larify, /ould Co,,issioner osario Braid support the proposal of t/o"thirds rather than the 1( per'entL +S. %SA $% B A$#. $ have added a 'lause ,anage,ent in the hands of Filipino 'itizens. ! ! ! !;1 Ahile they had differing vie/s on the per'entage of Filipino o/nership of 'apital, it is 'lear that the fra,ers of the Constitution intended publi' utilities to be majori"y Filipino"o/ned and 'ontrolled. &o ensure that Filipinos 'ontrol publi' utilities, the fra,ers of the Constitution approved, as additional safeguard, the in'lusion of the last senten'e of Se'tion 11, Arti'le N$$ of the Constitution 'o,,anding that *BtChe parti'ipation of foreign investors in the governing body of any publi' utility enterprise shall be li,ited to their proportionate share in its 'apital, and all the e!e'utive and ,anaging offi'ers of su'h 'orporation or asso'iation ,ust be 'itizens of the Philippines.* $n other /ords, the last senten'e of Se'tion 11, Arti'le N$$ of the Constitution ,andates that -1. the parti'ipation of foreign investors in the governing body of the 'orporation or asso'iation shall be li,ited to their proportionate share in the 'apital of su'h entityE and -). all offi'ers of the 'orporation or asso'iation ,ust be Filipino 'itizens. Co,,issioner osario Braid proposed the in'lusion of the phrase reIuiring the ,anaging offi'ers of the 'orporation or asso'iation to be Filipino 'itizens spe'ifi'ally to prevent ,anage,ent 'ontra'ts, /hi'h /ere designed pri,arily to 'ir'u,vent the Filipinization of publi' utilities, and to assure Filipino 'ontrol of publi' utilities, thus7 +S. %SA $% B A$#. ! ! ! &hey also li6e to suggest that /e a,end this provision by adding a phrase /hi'h states7 *&<E +ANA5E+EN& that /ill put

&<E P ES$#EN&. Co,,issioner

+ . %+8=%. +y reason for supporting the a,end,ent is based on the dis'ussions $ have had /ith representatives of the Filipino ,a9ority o/ners of the international re'ord 'arriers, and the subseIuent ,e,oranda they sub,itted to ,e. ! ! ! &heir se'ond point is that under the Corporation Code, the ,anage,ent and 'ontrol of a 'orporation is vested in the board of dire'tors, not in the offi'ers but in the board of dire'tors. &he offi'ers are only agents of the board. And they believe that /ith 1( per'ent of the eIuity, the Filipino ,a9ority sto'6holders undeniably 'ontrol the board. %nly on i,portant 'orporate a'ts 'an the ;("per'ent foreign eIuity e!er'ise a veto, ! ! !. ! ! ! !;: +S. %SA $% B A$#. +ada, President.

Corporation CASES Based on the Syllabus of Fr. Agustin B%#? %F EHE ? C% P% A&$%N % ASS%C$A&$%N S<A== $N A== CASES BE C%N& %==E# B? C$&$QENS %F &<E P<$=$PP$NES.* $ have /ith ,e their position paper. &<E P ES$#EN&. &he Co,,issioner ,ay pro'eed. +S. %SA $% B A$#. &he three ,a9or international re'ord 'arriers in the Philippines, /hi'h Co,,issioner o,ulo ,entioned G Philippine 5lobal Co,,uni'ations, Eastern &ele'o,,uni'ations, 5lobe +a'6ay Cable G are ;("per'ent o/ned by foreign ,ultinational 'o,panies and 1("per'ent o/ned by their respe'tive Filipino partners. All three, ho/ever, also have ,anage,ent 'ontra'ts /ith these foreign 'o,panies G Phil'o, /ith CA, E&P$ /ith Cable and Aireless P=C, and 5+C /ith $&&. 8p to the present ti,e, the general ,anagers of these 'arriers are foreigners. Ahile the foreigners in these 'o,,on 'arriers are only ,inority o/ners, the foreign ,ultinationals are the ones ,anaging and 'ontrolling their operations by virtue of their ,anage,ent 'ontra'ts and by virtue of their strength in the governing bodies of these 'arriers.;4 !!!! + . %P=E. $ thin6 a nu,ber of us have agreed to as6 Co,,issioner osario Braid to propose an a,end,ent /ith respe't to the operating ,anage,ent of publi' utilities, and in this a,end,ent, /e are asso'iated /ith Fr. Bernas, Co,,issioners Nieva and odrigo. Co,,issioner osario Braid /ill state this a,end,ent no/. &han6 you. +S. %SA $% B A$#. +ada, President.

ASS%C$A&$%N S<A== $N A== CASES BE C%N& %==E# B? C$&$QENS %F &<E P<$=$PP$NES.* T31( =155 'r&6&n) 2ana@&2&n) ;on)ra;)( an* a((ur& ;on)ro5 +y F151'1no ;1)1H&n(. Aill the 'o,,ittee assure us that this a,end,ent /ill insure that past a'tivities su'h as ,anage,ent 'ontra'ts /ill no longer be possible under this a,end,entL !!!! F . BE NAS. +ada, President. &<E P ES$#EN&. Co,,issioner Bernas is re'ognized. F . BE NAS. Aill the 'o,,ittee a''ept a refor,ulation of the first partL + . BEN5Q%N. =et us hear it. F . BE NAS. &he refor,ulation /ill be essentially the for,ula of the 124@ Constitution /hi'h reads7 *&<E PA &$C$PA&$%N %F F% E$5N $NHES&% S $N &<E 5%HE N$N5 B%#? %F AN? P8B=$C 8&$=$&? EN&E P $SE S<A== BE =$+$&E# &% &<E$ P %P% &$%NA&E S<A E $N &<E CAP$&A= &<E E%F AN#...* + . H$==E5AS. *A== &<E ENEC8&$HE AN# +ANA5$N5 %FF$CE S %F S8C< C% P% A&$%NS AN# ASS%C$A&$%NS +8S& BE C$&$QENS %F &<E P<$=$PP$NES.* + . BEN5Q%N. Aill Co,,issioner Bernas read the /hole thing againL F . BE NAS. *&<E PA &$C$PA&$%N %F F% E$5N $NHES&% S $N &<E 5%HE N$N5 B%#? %F AN? P8B=$C 8&$=$&? EN&E P $SE S<A== BE =$+$&E# &% &<E$ P %P% &$%NA&E S<A E $N &<E CAP$&A= &<E E%F...* $ do not have the rest of the 'opy. + . BEN5Q%N. *AN# A== &<E ENEC8&$HE AN# +ANA5$N5 %FF$CE S %F S8C< C% P% A&$%NS % ASS%C$A&$%NS +8S& BE C$&$QENS %F &<E P<$=$PP$NES.* $s that 'orre'tL + . H$==E5AS. ?es.

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&<E P ES$#EN&. &his is still on Se'tion 1:. +S. %SA $% B A$#. ?es.

+ . H$==E5AS. ?es, +ada, President. !!!! +S. %SA $% B A$#. +ada, President, $ propose a ne/ se'tion to read7 K&<E +ANA5E+EN& B%#? %F EHE ? C% P% A&$%N %

Corporation CASES Based on the Syllabus of Fr. Agustin + . BEN5Q%N. +ada, President, $ thin6 that /as said in a ,ore elegant language. Ae a''ept the a,end,ent. $s that all right /ith Co,,issioner osario BraidL +S. %SA $% B A$#. ?es.

o/ned by su'h 'itizens.* +ay $ reIuest Co,,issioner Bengzon to please 'ontinue reading. + . BEN5Q%N. *&<E PA &$C$PA&$%N %F F% E$5N $NHES&% S $N &<E 5%HE N$N5 B%#? %F AN? P8B=$C 8&$=$&? EN&E P $SE S<A== BE =$+$&E# &% &<E$ P %P% &$%NA&E S<A E $N &<E CAP$&A= &<E E%F AN# A== &<E ENEC8&$HE AN# +ANA5$N5 %FF$CE S %F S8C< C% P% A&$%NS % ASS%C$A&$%NS +8S& BE C$&$QENS %F &<E P<$=$PP$NES.* + . H$==E5AS. *N% S<A== S8C< F ANC<$SE, CE &$F$CA&E % A8&<% $QA&$%N BE ENC=8S$HE $N C<A AC&E % F% A PE $%# =%N5E &<AN &AEN&?"F$HE ?EA S ENEAAB=E F% N%& +% E &<AN &AEN&?"F$HE ?EA S. Neither shall any su'h fran'hise or right be granted e!'ept under the 'ondition that it shall be sub9e't to a,end,ent, alteration, or repeal by Congress /hen the 'o,,on good so reIuires. &he State shall en'ourage eIuity parti'ipation in publi' utilities by the general publi'.* H%&$N5 !!!! &he results sho/ )2 votes in favor and ; againstE Se'tion 1:, as a,ended, is approved.;3 -E,phasis supplied. &he last senten'e of Se'tion 11, Arti'le N$$ of the 1234 Constitution, parti'ularly the provision on the li,ited parti'ipation of foreign investors in the governing body of publi' utilities, is a reiteration of the last senten'e of Se'tion :, Arti'le N$H of the 124@ Constitution,;2 signifying its i,portan'e in reserving o/nership and 'ontrol of publi' utilities to Filipino 'itizens. AIII. T!e un&ispu"e& fac"s &here is no dispute, and respondents do not 'lai, the 'ontrary, that -1. foreigners o/n 1;.)4> of the 'o,,on shares of P=#&, /hi'h 'lass of shares e!er'ises the (o5& right to vote in the ele'tion of dire'tors, and thus foreigners 'ontrol P=#&E -). Filipinos o/n only @:.4@> of P=#&Ds 'o,,on shares, 'onstituting a ,inority of the voting sto'6, and thus Filipinos do not 'ontrol P=#&E -@. preferred shares, 22.;;> o/ned by Filipinos, have no voting rightsE -;.

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!!!! + . #E =%S E?ES. &he governing body refers to the board of dire'tors and trustees. + . H$==E5AS. &hat is right. + . BEN5Q%N. ?es, the governing body refers to the board of dire'tors. + . + . E5A=A#%. $t is a''epted. A+A. &he body is no/ ready to vote, +ada, President.

H%&$N5 !!!! &he results sho/ )2 votes in favor and none againstE so the proposed a,end,ent is approved. !!!! &<E P ES$#EN&. All right. Can /e pro'eed no/ to vote on Se'tion 1:L + . A+A. ?es, +ada, President.

&<E P ES$#EN&. Aill the 'hair,an of the 'o,,ittee please read Se'tion 1:L + . H$==E5AS. &he entire Se'tion 1:, as a,ended, reads7 *No fran'hise, 'ertifi'ate, or any other for, of authorization for the operation of a publi' utility shall be granted e!'ept to 'itizens of the Philippines or to 'orporations or asso'iations organized under the la/s of the Philippines at least 1( PE CEN& %F A<%SE CAP$&A= is

Corporation CASES Based on the Syllabus of Fr. Agustin preferred shares earn only 1F4( of the dividends that 'o,,on shares earnE:( -:. preferred shares have t/i'e the par value of 'o,,on sharesE and -1. preferred shares 'onstitute 44.3:> of the authorized 'apital sto'6 of P=#& and 'o,,on shares only )).1:>. #espite the foregoing fa'ts, the Court did not de'ide, and in fa't refrained fro, ruling on the Iuestion of /hether P=#& violated the 1(";( o/nership reIuire,ent in favor of Filipino 'itizens in Se'tion 11, Arti'le N$$ of the 1234 Constitution. Su'h Iuestion indisputably 'alls for a presentation and deter,ination of eviden'e through a hearing, /hi'h is generally outside the provin'e of the CourtDs 9urisdi'tion, but /ell /ithin the SECDs statutory po/ers. &hus, for obvious reasons, the Court li,ited its de'ision on the purely legal and threshold issue on the definition of the ter, *'apital* in Se'tion 11, Arti'le N$$ of the Constitution and dire'ted the SEC to apply su'h definition in deter,ining the e!a't per'entage of foreign o/nership in P=#&. I;. PLDT is no" an 68C is implea&e& in "!is case.

%ther relief-s. 9ust and eIuitable are li6e/ise prayed for. -E,phasis supplied. As 'an be gleaned fro, his prayer, 5a,boa 'learly as6s this Court to 'o,pel the SEC to perfor, its statutory duty to investigate /hether *the reIuired per'entage of o/nership of the 'apital sto'6 to be o/ned by 'itizens of the Philippines has been 'o,plied /ith Bby P=#&C as reIuired by ! ! ! the Constitution.* :1 Su'h plea 'learly negates SECDs argu,ent that it /as not i,pleaded. 5ranting that only the SEC Chair,an /as i,pleaded in this 'ase, the Court has a,ple po/ers to order the SECDs 'o,plian'e /ith its dire'tive 'ontained in the )3 0une )(11 #e'ision in vie/ of the far" rea'hing i,pli'ations of this 'ase. $n #omingo v. Scheer,:) the Court dispensed /ith the a,end,ent of the pleadings to i,plead the Bureau of Custo,s 'onsidering -1. the uniIue ba'6drop of the 'aseE -). the ut,ost need to avoid further delaysE and -@. the issue of publi' interest involved. &he Court held7 &he Court ,ay be 'uring the defe't in this 'ase by adding the B%C as party"petitioner. &he petition should not be dis,issed be'ause the se'ond a'tion /ould only be a repetition of the first. $n Salvador! et al.! v. Court of "ppeals! et al. , /e held that this Court has full po/ers, apart fro, that po/er and authority /hi'h is inherent, to a,end the pro'esses, pleadings, pro'eedings and de'isions by substituting as party"plaintiff the real party"in"interest. T3& Cour) 3a( )3& 'o=&r )o a6o1* *&5ay 1n )3& *1('o(1)1on o4 )31( ;a(&, )o or*&r 1)( a2&n*2&n) a( )o 12'5&a* )3& #OC a( 'ar)y8r&('on*&n). "n*&&*, 1) 2ay no 5on@&r +& n&;&((ary )o *o (o )aD1n@ 1n)o a;;oun) )3& un1>u& +a;D*ro' 1n )31( ;a(&, 1n6o561n@ a( 1) *o&( an 1((u& o4 'u+51; 1n)&r&(). After all, the %ffi'e of the Soli'itor 5eneral has represented the petitioner in the instant pro'eedings, as /ell as in the appellate 'ourt, and ,aintained the validity of the deportation order and of the B%CDs %,nibus esolution. $t 'annot, thus, be 'lai,ed by the State that the B%C /as not afforded its day in 'ourt, si,ply be'ause only the petitioner, the Chairperson of the B%C, /as the respondent in the CA, and the petitioner in the instant re'ourse. $n "lonso v. *illamor! /e had the o''asion to state7 T3&r& 1( no)31n@ (a;r&* a+ou) 'ro;&((&( or '5&a*1n@(, )3&1r 4or2( or ;on)&n)(. T3&1r (o5& 'ur'o(& 1( )o 4a;151)a)& )3& a''51;a)1on o4 ?u()1;& )o )3& r16a5 ;5a12( o4 ;on)&n*1n@ 'ar)1&(. &hey /ere 'reated, not to hinder and delay, but to fa'ilitate

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in&ispensable

par"y?

$n his petition, 5a,boa prays, a,ong others7 !!!! :. For the <onorable Court to issue a de'laratory relief that o/nership of 'o,,on or voting shares is the sole basis in deter,ining foreign eIuity in a publi' utility and that any other govern,ent rulings, opinions, and regulations in'onsistent /ith this de'laratory relief be de'lared un'onstitutional and a violation of the intent and spirit of the 1234 ConstitutionE 1. For the <onorable Court to de'lare null and void all sales of 'o,,on sto'6s to foreigners in e!'ess of ;( per'ent of the total subs'ribed 'o,,on shareholdingsE and 4. For the <onorable Court )o *1r&;) )3& S&;ur1)1&( an* E7;3an@& Co221((1on and Philippine Sto'6 E!'hange )o r&>u1r& !L T )o 2aD& a 'u+51; *1(;5o(ur& o4 a55 o4 1)( 4or&1@n (3ar&3o5*1n@( an* )3&1r a;)ua5 an* r&a5 +&n&41;1a5 o=n&r(.

Corporation CASES Based on the Syllabus of Fr. Agustin and pro,ote, the ad,inistration of 9usti'e. &hey do not 'onstitute the thing itself, /hi'h 'ourts are al/ays striving to se'ure to litigants. &hey are designed as the ,eans best adapted to obtain that thing. $n other /ords, they are a ,eans to an end. Ahen they lose the 'hara'ter of the one and be'o,e the other, the ad,inistration of 9usti'e is at fault and 'ourts are 'orrespondingly re,iss in the perfor,an'e of their obvious duty. :@ -E,phasis supplied. "n any &6&n), )3& SEC 3a( &7'r&((5y 2an14&()&* :; )3a) 1) =155 a+1*& +y )3& Cour)C( *&;1(1on an* *&4&r )o )3& Cour)C( *&41n1)1on o4 )3& )&r2 J;a'1)a5J 1n S&;)1on 11, Ar)1;5& N"" o4 )3& Con()1)u)1on. Fur)3&r, )3& SEC &n)&r&* 1)( ('&;1a5 a''&aran;& 1n )31( ;a(& an* ar@u&* *ur1n@ )3& Ora5 Ar@u2&n)(, 1n*1;a)1n@ 1)( (u+21((1on )o )3& Cour)C( ?ur1(*1;)1on. ") 1( ;5&ar, )3&r&4or&, )3a) )3&r& &71()( no 5&@a5 12'&*12&n) a@a1n() )3& 'ro'&r an* 122&*1a)& 12'5&2&n)a)1on o4 )3& Cour)C( *1r&;)16& )o )3& SEC . P=#& is an indispensable party only insofar as the other issues, parti'ularly the fa'tual Iuestions, are 'on'erned. $n other /ords, P=#& ,ust be i,pleaded in order to fully resolve the issues on -1. /hether the sale of 111,;1: P&$C shares to First Pa'ifi' violates the 'onstitutional li,it on foreign o/nership of P=#&E -). /hether the sale of 'o,,on shares to foreigners e!'eeded the ;( per'ent li,it on foreign eIuity in P=#&E and -@. /hether the total per'entage of the P=#& 'o,,on shares /ith voting rights 'o,plies /ith the 1(";( o/nership reIuire,ent in favor of Filipino 'itizens under the Constitution for the o/nership and operation of P=#&. &hese issues indisputably 'all for an e!a,ination of the partiesD respe'tive eviden'e, and thus are 'learly /ithin the 9urisdi'tion of the SEC. $n short, P=#& ,ust be i,pleaded, and ,ust ne'essarily be heard, in the pro'eedings before the SEC /here the fa'tual issues /ill be thoroughly threshed out and resolved. No)a+5y, )3& 4or&@o1n@ 1((u&( =&r& 5&4) un)ou;3&* +y )3& Cour). &he Court did not rule on the fa'tual issues raised by 5a,boa, e!'ept the single and purely legal issue on the definition of the ter, *'apital* in Se'tion 11, Arti'le N$$ of the Constitution. &he Court 'onfined the resolution of the instant 'ase to this threshold legal issue in deferen'e to the fa't"finding po/er of the SEC. Needless to state, the Court 'an validly, properly, and fully dispose of the funda,ental legal issue in this 'ase even /ithout the

parti'ipation of P=#& sin'e defining the ter, *'apital* in Se'tion 11, Arti'le N$$ of the Constitution does not, in any /ay, depend on /hether P=#& /as i,pleaded. Si,ply put, P=#& is not indispensable for a 'o,plete resolution of the purely legal Iuestion in this 'ase.:: $n fa't, the Court, by treating the petition as one for ,anda,us,:1 ,erely dire'ted the SEC to apply the CourtDs definition of the ter, *'apital* in Se'tion 11, Arti'le N$$ of the Constitution in deter,ining /hether P=#& 'o,,itted any violation of the said 'onstitutional provision. T3& *1('o(1)16& 'or)1on o4 )3& Cour)C( ru51n@ 1( a**r&((&* no) )o !L T +u) (o5&5y )o )3& SEC, =31;3 1( )3& a*21n1()ra)16& a@&n;y )a(D&* )o &n4or;& )3& 60840 o=n&r(31' r&>u1r&2&n) 1n 4a6or o4 F151'1no ;1)1H&n( 1n S&;)1on 11, Ar)1;5& N"" o4 )3& Con()1)u)1on. Sin'e the Court li,ited its resolution on the purely legal issue on the definition of the ter, *'apital* in Se'tion 11, Arti'le N$$ of the 1234 Constitution, and dire'ted the SEC to investigate any violation by P=#& of the 1(";( o/nership reIuire,ent in favor of Filipino 'itizens under the Constitution, :4 there is no deprivation of P=#&Ds property or denial of P=#&Ds right to due pro'ess, 'ontrary to Pangilinan and NazarenoDs ,isi,pression. #ue pro'ess /ill be afforded to P=#& /hen it presents proof to the SEC that it 'o,plies, as it 'lai,s here, /ith Se'tion 11, Arti'le N$$ of the Constitution. ;. >oreign In9es"men"s in "!e P!ilippines +ovants fear that the )3 0une )(11 #e'ision /ould spell disaster to our e'ono,y, as it ,ay result in a sudden flight of e!isting foreign investors to *friendlier* 'ountries and si,ultaneously deterring ne/ foreign investors to our 'ountry. $n parti'ular, the PSE 'lai,s that the )3 0une )(11 #e'ision ,ay result in the follo/ing7 -1. loss of ,ore than P 1@( billion in foreign invest,ents in PSE"listed sharesE -). ,assive de'rease in foreign trading transa'tionsE -@. lo/er PSE Co,posite $nde!E and -;. lo'al investors not investing in PSE"listed shares.:3 #r. Bernardo +. Hillegas, one of the amici curiae in the %ral Argu,ents, shared ,ovantsD apprehension. Aithout providing spe'ifi' details, he pointed out the depressing state of the Philippine e'ono,y 'o,pared to our neighboring 'ountries /hi'h boast of gro/ing e'ono,ies. Further, #r. Hillegas e!plained that the solution to our e'ono,i' /oes is for the govern,ent to *ta6e"over* strategi' industries, su'h as the publi' utilities se'tor, thus7

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Corporation CASES Based on the Syllabus of Fr. Agustin 08S&$CE CA P$%7 $ /ould li6e also to get fro, you #r. Hillegas if you have additional infor,ation on /hether this high F#$ :2 'ountries in East Asia have allo/ed foreigners ! ! ! 'ontrol BofC their publi' utilities, so that /e 'an 'o,pare apples /ith apples. # . H$==E5AS7 Corre't, but let ,e 9ust ,a6e a 'o,,ent. Ahen these neighbors of ours find an industry strategi', their solution is not to *Filipinize* or *Hietna,ize* or *Singaporize.* T3&1r (o5u)1on 1( )o 2aD& (ur& )3a) )3o(& 1n*u()r1&( ar& 1n )3& 3an*( o4 ()a)& &n)&r'r1(&(. So, 1n )3&(& ;oun)r1&(, na)1ona51Ha)1on 2&an( )3& @o6&rn2&n) )aD&( o6&r. An* +&;au(& )3&1r @o6&rn2&n)( ar& ;o2'&)&n) an* 3on&() &nou@3 )o )3& 'u+51;, )3a) 1( )3& (o5u)1on. ! ! ! 1( -E,phasis supplied. $f govern,ent o/nership of publi' utilities is the solution, then foreign invest,ents in our publi' utilities serve no purpose. %bviously, there 'an never be foreign invest,ents in publi' utilities if, as #r. Hillegas 'lai,s, the *solution is to ,a6e sure that those industries are in the hands of state enterprises.* #r. HillegasDs argu,ent that foreign invest,ents in tele'o,,uni'ation 'o,panies li6e P=#& are badly needed to save our ailing e'ono,y 'ontradi'ts his o/n theory that the solution is for govern,ent to ta6e over these 'o,panies. #r. Hillegas is bar6ing up the /rong tree sin'e State o/nership of publi' utilities and foreign invest,ents in su'h industries are dia,etri'ally opposed 'on'epts, /hi'h 'annot possibly be re'on'iled. $n any event, the e!perien'e of our neighboring 'ountries 'annot be used as argu,ent to de'ide the present 'ase differently for t/o reasons. First, the govern,ents of our neighboring 'ountries have, as 'lai,ed by #r. Hillegas, ta6en over o/nership and 'ontrol of their strategi' publi' utilities li6e the tele'o,,uni'ations industry. Se'ond, our Constitution has spe'ifi' provisions li,iting foreign o/nership in publi' utilities /hi'h the Court is s/orn to uphold regardless of the e!perien'e of our neighboring 'ountries. $n our 9urisdi'tion, the Constitution e!pressly reserves the o/nership and operation of publi' utilities to Filipino 'itizens, or 'orporations or asso'iations at least 1( per'ent of /hose 'apital belongs to Filipinos.

Follo/ing #r. HillegasDs 'lai,, the Philippines appears to be ,ore liberal in allo/ing foreign investors to o/n ;( per'ent of publi' utilities, unli6e in other Asian 'ountries /hose govern,ents o/n and operate su'h industries. ;I. Prospec"i9e 2pplica"ion of 6anc"ions $n its +otion for Partial e'onsideration, the SEC sought to 'larify the re'6oning period of the appli'ation and i,position of appropriate san'tions against P=#& if found violating Se'tion 11, Arti'le N$$ of the Constitution.1avvphi1 As dis'ussed, the Court has dire'ted the SEC to investigate and deter,ine /hether P=#& violated Se'tion 11, Arti'le N$$ of the Constitution. &hus, there is no dispute that it is only after the SEC has deter,ined P=#&Ds violation, if any e!ists at the ti,e of the 'o,,en'e,ent of the ad,inistrative 'ase or investigation, that the SEC ,ay i,pose the statutory san'tions against P=#&. $n other /ords, on'e the )3 0une )(11 #e'ision be'o,es final, the SEC shall i,pose the appropriate san'tions only if it finds after due hearing that, at the start of the ad,inistrative 'ase or investigation, there is an e!isting violation of Se'tion 11, Arti'le N$$ of the Constitution. 8nder prevailing 9urispruden'e, publi' utilities that fail to 'o,ply /ith the nationality reIuire,ent under Se'tion 11, Arti'le N$$ and the F$A 'an 'ure their defi'ien'ies prior to the start of the ad,inistrative 'ase or investigation.11 ;II. >inal Dor& &he Constitution e!pressly de'lares as State poli'y the develop,ent of an e'ono,y *effec"i9ely con"rolle&* by Filipinos. Consistent /ith su'h State poli'y, the Constitution e!pli'itly reserves the o/nership and operation of publi' utilities to Philippine nationals, /ho are defined in the Foreign $nvest,ents A't of 1221 as Filipino 'itizens, or 'orporations or asso'iations at least 1( per'ent of /hose 'apital Ci"! 9o"ing rig!"s belongs to Filipinos. &he F$ADs i,ple,enting rules e!plain that *BfCor sto'6s to be dee,ed o/ned and held by Philippine 'itizens or Philippine nationals, ,ere legal title is not enough to ,eet the reIuired Filipino eIuity. Fu55 +&n&41;1a5 o=n&r(31' o4 )3& ()o;D(, ;ou'5&* =1)3 a''ro'r1a)& 6o)1n@ r1@3)( 1( &((&n)1a5.* $n effe't, the F$A 'larifies, reiterates and 'onfir,s the interpretation that the ter, *'apital* in Se'tion 11,

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Corporation CASES Based on the Syllabus of Fr. Agustin Arti'le N$$ of the 1234 Constitution refers to s!ares Ci"! 9o"ing rig!"s% as Cell as Ci"! full beneficial oCners!ip . &his is pre'isely be'ause the right to vote in the ele'tion of dire'tors, 'oupled /ith full benefi'ial o/nership of sto'6s, translates to effe'tive 'ontrol of a 'orporation. Any other 'onstru'tion of the ter, *'apital* in Se'tion 11, Arti'le N$$ of the Constitution 'ontravenes the letter and intent of the Constitution. Any other ,eaning of the ter, *'apital* openly invites alien do,ination of e'ono,i' a'tivities reserved e!'lusively to Philippine nationals. &herefore, respondentsD interpretation /ill ulti,ately result in handing over effe'tive 'ontrol of our national e'ono,y to foreigners in patent violation of the Constitution, ,a6ing Filipinos se'ond"'lass 'itizens in their o/n 'ountry. Filipinos have only to re,ind the,selves of ho/ this 'ountry /as e!ploited under the Parity A,end,ent, /hi'h gave A,eri'ans the sa,e rights as Filipinos in the e!ploitation of natural resour'es, and in the o/nership and 'ontrol of publi' utilities, in the Philippines. &o do this the 12@: Constitution, /hi'h 'ontained the sa,e 1( per'ent Filipino o/nership and 'ontrol reIuire,ent as the present 1234 Constitution, had to be a,ended to give A,eri'ans parity rights /ith Filipinos. &here /as bitter opposition to the Parity A,end,ent 1) and ,any Filipinos eagerly a/aited its e!piration. $n late 1213, P=#& /as one of the A,eri'an"'ontrolled publi' utilities that be'a,e Filipino" 'ontrolled /hen the 'ontrolling A,eri'an sto'6holders divested in anti'ipation of the e!piration of the Parity A,end,ent on @ 0uly 124;.1@ No e'ono,i' sui'ide happened /hen 'ontrol of publi' utilities and ,ining 'orporations passed to FilipinosD hands upon e!piration of the Parity A,end,ent. +ovantsD interpretation of the ter, *'apital* /ould bring us ba'6 to the sa,e evils spa/ned by the Parity A,end,ent, effec"i9ely gi9ing foreigners pari"y rig!"s Ci"! >ilipinos% bu" "!is "ime e9en Ci"!ou" any amen&men" "o "!e presen" Cons"i"u"ion . Aorse, ,ovantsD interpretation opens up our national e'ono,y toeffec"i9e con"rol not only by A,eri'ans but also by a55 4or&1@n&r(, +& )3&y "n*on&(1an(, %a5ay(1an( or C31n&(&, &6&n 1n )3& a+(&n;& o4 r&;1'ro;a5 )r&a)y arran@&2&n)( . At least the Parity A,end,ent, as i,ple,ented by the =aurel"=angley Agree,ent, gave the 'apital"starved Filipinos theoreti'al parity G the sa,e rights as A,eri'ans to e!ploit natural resour'es, and to o/n and 'ontrol publi' utilities, in the 9nited States of "merica. <ere, ,ovantsD interpretation /ould effe'tively ,ean

a unila"eral opening up of our national e'ono,y to all foreigners, Ci"!ou" any reciprocal arrangemen"s. &hat /ould ,ean that $ndonesians, +alaysians and Chinese nationals 'ould effe'tively 'ontrol our ,ining 'o,panies and publi' utilities /hile Filipinos, even if they have the 'apital, 'ould not 'ontrol si,ilar 'orporations in these 'ountries. &he 12@:, 124@ and 1234 Constitutions have the sa,e 1( per'ent Filipino o/nership and 'ontrol reIuire,ent for publi' utilities li6e P=%&. Any deviation fro, this reIuire,ent ne'essitates an a,end,ent to the Constitution as e!e,plified by the Parity A,end,ent. &his Court has no po/er to a,end the Constitution for its po/er and duty is only to faithfully apply and interpret the Constitution. :HEREFORE, =& ENY the ,otions for re'onsideration :"TH F"NAL"TY. No further pleadings shall be entertained. S% % #E E#. ANTON"O Asso'iate 0usti'e AE C%NC8 7 %AR"A Chief 0usti'e LOUR ES !.A. SERENO T. CAR!"O

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!RES#"TERO J. $ELASCO, JR. Asso'iate 0usti'e ARTURO . Asso'iate 0usti'e #R"ON

TERES"TA J. LEONAR O8 E CASTRO Asso'iate 0usti'e "OS A O %. Asso'iate 0usti'e %AR"ANO C. CAST"LLO Asso'iate 0usti'e !ERALTA

LUCAS !. #ERSA%"N Asso'iate 0usti'e

EL

Corporation CASES Based on the Syllabus of Fr. Agustin

RO#ERTO A. Asso'iate 0usti'e JOSE !ORTUGAL Asso'iate 0usti'e

A#A

%ART"N S. $"LLARA%A, JR. Asso'iate 0usti'e JOSE C. %EN OAA Asso'iate 0usti'e ESTELA %. #ERNA#E Asso'iate 0usti'e !ERLAS8

+anifestation and %,nibus +otion dated )2 0uly )( $$, the SEC ,anifested that the position of the %S5 on the ,eaning of the ter, *'apital* does not refle't the vie/ of the SEC. &he SEC sought a partial re[onsideration praying that the state,ent on SECYs unla/ful negle't of its statutory duty be e!punged and for 'larifi'ation on the re'6oning period of the i,position of any san'tions against P=%&.
:

Nazareno

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!EREA

#"EN$EN" O L. Asso'iate 0usti'e

REYES

CE

&$F$CA&$%N

$d. at 111;"11)4. #ated 1@ 0uly )(11. %n behalfofthe SEC, by spe'ial appearan'e. &he %S5 prayed that the CourtYs de'ision *be 'ured of its pro'edural defe't /hi'h ho/ever should not prevail over the substantive aspe't of the #e'ision.*
1

Pursuant to Se'tion 1@, Arti'le H$$$ of the Constitution, $ 'ertify that the 'on'lusions in the above esolution had been rea'hed in 'onsultation before the 'ase /as assigned to the /riter of the opinion of the Court. %AR"A Chief 0usti'e LOUR ES !.A. SERENO

$ d. at )1()")1);. Filed on 1: #e'e,ber )( $$.

Salvacion v. Central Ban$ of the Philippines! @;@ Phil. :@2 -1224..

3

1:("B Phil. @3( -124).. %ollo -Hol. $$$., p. 1:3@. 5ov. =ilia Bautista of the Board of

1(

Addressed to $nvest,ents. Foo)no)&(

Z 11

&he <eirs of Ailson P. 5a,boa substituted petitioner Ailson P. 5a,boa per esolution dated 14 April )(1) /hi'h noted the +anifestation of =auro 5a,boa dated 1) April )(1).
1

A typographi'al error in #%0 %pinion No. 1@( /here it states 3(>.

1)

epubli' A't No. 3422.

1@

olFo-Hol.lll.,pp.l;@1"1;:1. #ated $$ 0uly)(11. $d. at 1:1@"111@. #ated 1; 0uly )(11. $d. at 1;:;"1:@4. #ated 1: 0uly )(11.

5eneral Counsel and Co,,issioner +anuel <uberto B. 5aite of the Se'urities and E!'hange Co,,ission.
1;

&SN -%ral Argu,ents., )1 0une )(1), pp. 31"3@. E,phasis supplied.

1:

$d. at 1112"113(. &hrough its %ffi'e of the 5eneral Counsel and Co,,issioner +anuel llubeiio B. 5aite. $n its

SEC En Ban' Case No. (2"(2"144, ): +ar'h )(1(.

Corporation CASES Based on the Syllabus of Fr. Agustin

11

SEC %pinion No. ;2"(;, e7 Corporations 'onsidered as Philippine Nationals, dated )) #e'e,ber )((;, addressed to o,ulo +abanta Buenaventura Sayo' U #e =os Angeles and signed by 5eneral Counsel Hernette 5. 8,ali"Pa'oE SEC"%5C %pinion No. (@"(3, dated 1: 0anuary )((3, addressed to Attys. uby ose 0. ?usi and udyard S. Arbolado and signed by 5eneral Counsel Hernette 5. 8,ali"Pa'oE SEC"%5C %pinion No. (2"(2, dated )3 April )((2, addressed to Hillaraza Cruz +ar'elo Angang'o and signed by 5eneral Counsel Hernette 5. 8,ali"Pa'oE SEC%5C %pinion No. (3"1(, dated 3 February )(1(, addressed to +r. &eodoro B. Mui9ano and signed by 5eneral Counsel Hernette 5. 8,ali"Pa'oE SEC"%5C %pinion No. )@"1(, dated 13 August )(1(, addressed to Castillo =a,an &an Pantaleon and San 0ose and signed by 5eneral Counsel Hernette 5. 8,ali"Pa'oE SEC"%5C %pinion No. 13"(4, dated )3 Nove,ber )((4, addressed to +r. afael C. Bueno, 0r. and signed by 5eneral Counsel Hernette 5. 8,ali"Pa'o. $n SEC %pinion No. @)"(@, dated ) 0une )((@, addressed to National &ele'o,,uni'ations Co,,issioner Ar,i 0ane . Bor9e, SEC 5eneral Counsel Hernette 5. 8,ali"Pa'o stated7 $n this light, it is i,perative that /e reiterate the poli'y of this Co,,ission -SEC. in refraining fro, rendering opinions that ,ight pre9udi'e or affe't the out'o,e of a 'ase, /hi'h is sub9e't to present litigation before the 'ourts, or any other foru, for that ,atter. &he opinion, /hi'h ,ay be rendered thereon, /ould not be binding upon any party /ho /ould in all probability, if the opinion happens to be adverse to his or its interest, ta6e issue there/ith and 'ontest it before the proper venue. &he Co,,ission, therefore, has to refrain fro, giving 'ategori'al ans/ers to your Iuery.
14

)1

Supra.

Nazareno
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2:

))

#e =eon, <e'tor S., &EN&B%%R %N C%NS&$&8&$%N, )((: Edition, pp. @), @@.
)@

P<$=$PP$NE

Se'tion 1(, Arti'le N$$ of the 1234 Constitution.

);

Bernas, 0oaIuin 5., S.0., &<E 1234 C%NS&$&8&$%N %F &<E EP8B=$C %F &<E P<$=$PP$NES7 A C%++EN&A ?, 1221 Edition, p. 1(;;, 'iting Smith! Bell and Co. v. @atividad , ;( Phil. 1@1, 1;3 -1212.E:u(on Stevedoring Corporation v. "nti #umm8 Board, 1:("B Phil. @3(, ;(@";(; -124)..
):

$ssued on 14 0uly 1234.

)1

Arti'les ;; to :1 of the %,nibus $nvest,ents Code of 1234 /ere later repealed by the Foreign $nvest,ents A't of 1221. See infra, p. )1.
)4

Arti'le ;3. "uthorit8 to #o Business. No alien, and no fir, asso'iation, partnership, 'orporation or any other for, of business organization for,ed, organized, 'hartered or e!isting under any la/s other than those of the Philippines, or /hi'h is not a Philippine national, or ,ore than forty per'ent -;(>. of the outstanding 'apital of /hi'h is o/ned or 'ontrolled by aliens shall do business or engage in any e'ono,i' a'tivity in the Philippines or be registered, li'ensed, or per,itted by the Se'urities and E!'hange Co,,ission or by any other bureau, offi'e, agen'y, politi'al subdivision or instru,entality of the govern,ent, to do business, or engage in any e'ono,i' a'tivity in the Philippines /ithout first se'uring a /ritten 'ertifi'ate fro, the Board of $nvest,ents to the effe't7 !!!!

@4( Phil. :@3 -1222.. 5. . No. 1:)13:, ; #e'e,ber )((4, :@2 SC A @1:. %ollo -Hol. $$$., pp. 1@2)"1@2@. Supra.
)3

13

-@. &hat su'h business or e'ono,i' a'tivity by the appli'ant /ould not 'onfli't /ith the Constitution or la/s of the PhilippinesE !!!! Presidential #e'ree No. 1432.

12

)(

Corporation CASES Based on the Syllabus of Fr. Agustin

)2

Arti'le 12. "uthorit8 to #o Business. No alien, and no fir,, asso'iation, partnership, 'orporation or any other for, of business organization for,ed, organized, 'hartered or e!isting under any la/s other than those of the Philippines, or /hi'h is not a Philippine national, or ,ore than thirty -@(>. per 'ent of the outstanding 'apital of /hi'h is o/ned or 'ontrolled by aliens shall do business or engage in any e'ono,i' a'tivity in the Philippines, or be registered, li'ensed, or per,itted by the Se'urities and E!'hange Co,,ission or by any other bureau, offi'e, agen'y, politi'al subdivision or instru,entality of the govern,ent, to do business, or engage in any e'ono,i' a'tivity in the Philippines, /ithout first se'uring a /ritten 'ertifi'ate fro, the Board of $nvest,ents to the effe't7 !!!! -@. &hat su'h business or e'ono,i' a'tivity by the appli'ant /ould not 'onfli't /ith the Constitution or la/s of the PhilippinesE !!!!
@(

-b. Aould pose a 'lear and present danger of pro,oting ,onopolies or 'o,binations in restraint of tradeE or -'. Aould be ,ade in an enterprise engaged in an area adeIuately being e!ploited by Philippine nationalsE or -d. Aould 'onfli't or be in'onsistent /ith the $nvest,ents Priorities Plan in for'e at the ti,e the invest,ent is sought to be ,adeE or -e. Aould not 'ontribute to the sound and balan'ed develop,ent of the national e'ono,y on a self" sustaining basis. !!!!
@)

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E!e'utive %rder No. 3:3, Pro,ulgating the Eighth egular Foreign $nvest,ent Negative =ist, signed on : February )(1(, http7FF///.boi.gov.phFpdfFla/sFeoFE%>)(3:3.pdf -a''essed 14 August )(11..
@@

An A't Pres'ribing $n'entives And 5uarantees &o $nvest,ents $n &he Philippines, Creating A Board %f $nvest,ents, Appropriating &he Ne'essary Funds &herefor And For %ther Purposes.
@1

&SN -%ral Argu,ents., )1 0une )(1), pp. 41"4;.

@;

Se'tion @ of

A No. :;:: states7

Published by the Board of $nvest,ents. For on"line 'opy, see http7FF///.fdi.netFdo'u,entsFAorldBan6FdatabasesFphilippin esFpri,er.ht, -a''essed @ Septe,ber )(1).
@:

Se'tion @. Permissible Investments. $f an invest,ent by a non"Philippine national in an enterprise not registered under the $nvest,ent $n'entives A't is su'h that the total parti'ipation by non"Philippine nationals in the outstanding 'apital thereof shall e!'eed thirty per 'ent, the enterprise ,ust obtain prior authority fro, the Board of $nvest,ents, /hi'h authority shall be granted unless the proposed invest,ent -a. Aould 'onfli't /ith e!isting 'onstitutional provisions and la/s regulating the degree of reIuired o/nership by Philippine nationals in the enterpriseE or

$n his boo6, Flet'her e!plains7 &he ter, *sto'6* has been used in the sa,e sense as *'apital sto'6* or *'apital,* and it has been said that *tis pri,ary ,eaning is 'apital, in /hatever for, it ,ay be invested. +ore 'o,,only, it is no/ being used to designate shares of the sto'6 in the hands of the individual shareholders, or the 'ertifi'ates issued by the 'orporation to the,. -Flet'her Cy'lopedia of the =a/ of Private Corporations, 122: evised Holu,e, Hol. 11, \ :(42, p. 1@E 'itations o,itted..

Corporation CASES Based on the Syllabus of Fr. Agustin

@1

SEC&$%N 1@4. %utstanding 'apital sto'6 defined. " &he ter, *outstanding 'apital sto'6* as used in this Code, ,eans the total shares of sto'6 issued to subs'ribers or sto'6holders, /hether or not fully or partially paid, e!'ept treasury shares. SEC. 1. Classification of shares. " &he shares of sto'6 of sto'6 'orporations ,ay be divided into 'lasses or series of shares, or both, any of /hi'h 'lasses or series of shares ,ay have su'h rights, privileges or restri'tions as ,ay be stated in the arti'les of in'orporation7 Provided, &hat no share ,ay be deprived of voting rights e!'ept those 'lassified and issued as *preferred* or *redee,able* shares, unless other/ise provided in this Code7 Provided, further, &hat there shall al/ays be a 'lass or series of shares /hi'h have 'o,plete voting rights. Any or all of the shares or series of shares ,ay have a par value or have no par value as ,ay be provided for in the arti'les of in'orporation7 Provided, ho/ever, &hat ban6s, trust 'o,panies, insuran'e 'o,panies, publi' utilities, and building and loan asso'iations shall not be per,itted to issue no"par value shares of sto'6. Preferred shares of sto'6 issued by any 'orporation ,ay be given preferen'e in the distribution of the assets of the 'orporation in 'ase of liIuidation and in the distribution of dividends, or su'h other preferen'es as ,ay be stated in the arti'les of in'orporation /hi'h are not violative of the provisions of this Code7 Provided, &hat preferred shares of sto'6 ,ay be issued only /ith a stated par value. &he board of dire'tors, /here authorized in the arti'les of in'orporation, ,ay fi! the ter,s and 'onditions of preferred shares of sto'6 or any series thereof7 Provided, &hat su'h ter,s and 'onditions shall be effe'tive upon the filing of a 'ertifi'ate thereof /ith the Se'urities and E!'hange Co,,ission. Shares of 'apital sto'6 issued /ithout par value shall be dee,ed fully paid and non"assessable and the holder of su'h shares shall not be liable to the 'orporation or to its 'reditors in respe't thereto7 ProvidedE &hat shares /ithout par value ,ay not be issued for a 'onsideration less than the value of five

-P :.((. pesos per share7 Provided, further, &hat the entire 'onsideration re'eived by the 'orporation for its no"par value shares shall be treated as 'apital and shall not be available for distribution as dividends. A 'orporation ,ay, further,ore, 'lassify its shares for the purpose of insuring 'o,plian'e /ith 'onstitutional or legal reIuire,ents. E!'ept as other/ise provided in the arti'les of in'orporation and stated in the 'ertifi'ate of sto'6, ea'h share shall be eIual in all respe'ts to every other share. !!!!
@4

Nazareno

24

8nder Se'tion 1 of the Corporation Code. #issenting %pinion to the )3 0une )(11 #e'ision.

@3

@2

e'ord of the Constitutional Co,,ission, Hol. $$$, pp. )::" ):1.

;(

$d. at @1(. %F &<E P<$=$PP$NE

;1

Aruego, 0ose +., &<E F A+$N5 C%NS&$&8&$%N, Hol. $$, 12@1, p. 1:3.
;)

$d.

;@

&he %S5 stated, *$t ,ust be stressed that /hen the %S5 stated its 'on'urren'e /ith the <onorable CourtDs ruling on the proper definition of 'apital, it did so, not on behalf of the SEC, its individual 'lient in this 'ase. ather, the %S5 did so in the e!er'ise of its dis'retion not only in its 'apa'ity as statutory 'ounsel of the SEC but as 'ounsel for no less than the State itself.*
;;

)2: 8.S. 1(), :: S.Ct. 312, 8.S. 12@: -)4 +ay 12@:..

;:

e'ord of the Constitutional Co,,ission, Hol. @, pp. 1:(" 1:1 -)@ August 1231..

Corporation CASES Based on the Syllabus of Fr. Agustin

;1

e'ord of the Constitutional Co,,ission, Hol. @, pp. 1:)" 1:@ -)@ August 1231..
;4

!!!!

Nazareno

23

e'ord of the Constitutional Co,,ission, Hol. @, p. 1:) -)@ August 1231..

;3

e'ord of the Constitutional Co,,ission, Hol. @, pp. 11:" 114 -)@ August 1231..
;2

-;. T3a) )3& '&r;&n)a@& o4 o=n&r(31' o4 )3& ;a'1)a5 ()o;D )o +& o=n&* +y ;1)1H&n( o4 )3& !3151''1n&( 3a( no) +&&n ;o2'51&* =1)3 a( r&>u1r&* +y &71()1n@ 5a=( or )3& Con()1)u)1on . -E,phasis supplied. Se'tion : of .A. No. 3422 provides7

Se'tion :, Arti'le N$H of the 124@ Constitution provides7 Se'tion :. No fran'hise, 'ertifi'ate, or any other for, of authorization for the operation of a publi' utility shall be granted e!'ept to 'itizens of the Philippines or to 'orporations or asso'iations organized under the la/s of the Philippines at least si!ty per 'entu, of the 'apital of /hi'h is o/ned by su'h 'itizens, nor shall su'h fran'hise, 'ertifi'ate, or authorization be e!'lusive in 'hara'ter or for a longer period than fifty years. Neither shall any su'h fran'hise or right be granted e!'ept under the 'ondition that it shall be sub9e't to a,end,ent, alteration, or repeal by the National Asse,bly /hen the publi' interest so reIuires. &he State shall en'ourage eIuity parti'ipation in publi' utilities by the general publi'. T3& 'ar)1;1'a)1on o4 4or&1@n 1n6&()or( 1n )3& @o6&rn1n@ +o*y o4 any 'u+51; u)151)y &n)&r'r1(& (3a55 +& 5121)&* )o )3&1r 'ro'or)1ona)& (3ar& 1n )3& ;a'1)a5 )3&r&o4.-E,phasis supplied. Se'tion :. Powers and -unctions of the Commission .G :.1. &he Co,,ission shall a't /ith transparen'y and shall have the po/ers and fun'tions provided by this Code, Presidential #e'ree No. 2()"A, the Corporation Code, the $nvest,ent <ouses =a/, the Finan'ing Co,pany A't and other e!isting la/s. Pursuant thereto the Co,,ission shall have, a,ong others, the follo/ing po/ers and fun'tions7 -a. <ave 9urisdi'tion and supervision over all 'orporations, partnerships or asso'iations /ho are the grantees of pri,ary fran'hises andFor a li'ense or a per,it issued by the 5overn,entE !!!! -'. Approve, re9e't, suspend, revo6e or reIuire a,end,ents to registration state,ents, and registration and li'ensing appli'ationsE !!!! -f. $,pose san'tions for the violation of la/s and the rules, regulations and orders, issued pursuant theretoE !!!! -i. $ssue 'ease and desist orders to prevent fraud or in9ury to the investing publi'E !!!!

:(

For the year )((2.

:1

SEC. 14. Grounds when articles of incorporation or amendment ma8 be re+ected or disapproved . G &he Se'urities and E!'hange Co,,ission ,ay re9e't the arti'les of in'orporation or disapprove any a,end,ent thereto if the sa,e is not in 'o,plian'e /ith the reIuire,ents of this Code7 Provided, T3a) )3& Co221((1on (3a55 @16& )3& 1n;or'ora)or( a r&a(ona+5& )12& =1)31n =31;3 )o ;orr&;) or 2o*14y )3& o+?&;)1ona+5& 'or)1on( o4 )3& ar)1;5&( or a2&n*2&n). &he follo/ing are grounds for su'h re9e'tion or disapproval7

Corporation CASES Based on the Syllabus of Fr. Agustin -,. Suspend, or revo6e, after proper noti'e and hearing the fran'hise or 'ertifi'ate of registration of 'orporations, partnership or asso'iations, upon any of the grounds provided by la/E and -n. E!er'ise su'h other po/ers as ,ay be provided by la/ as /ell as those /hi'h ,ay be i,plied fro,, or /hi'h are ne'essary or in'idental to the 'arrying out of, the e!press po/ers granted the Co,,ission to a'hieve the ob9e'tives and purposes of these la/s.
:)

su'h other is entitled, and there is no other plain, speedy and adeIuate re,edy in the ordinary 'ourse of la/, the person aggrieved thereby ,ay file a verified petition in the proper 'ourt, alleging the fa'ts /ith 'ertainty and praying that 9udg,ent be rendered 'o,,anding the respondent, i,,ediately or at so,e other ti,e to be spe'ified by the 'ourt, to do the a't reIuired to be done to prote't the rights of the petitioner and to pay the da,ages sustained by the petitioner by reason of the /rongful a'ts of the respondent. !!!!
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Nazareno

22

;11 Phil. )@: -)((;.. $d. at )11")14.

:@

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$n its +anifestation and %,nibus +otion dated )2 0uly )(11, the SEC stated7 *&he Co,,ission respe'tfully ,anifests that the position of the %ffi'e of the Soli'itor 5eneral -K%S5D. on the ,eaning of the ter, *'apital* does not refle't the vie/ of the Co,,ission. &he Co,,issionDs position has been laid do/n in 'ountless opinions that needs no reiteration. T3& Co221((1on, 3o=&6&r, =ou5* (u+21) )o =3a)&6&r =ou5* +& )3& 41na5 *&;1(1on o4 )31( Honora+5& Cour) on )3& 2&an1n@ o4 )3& )&r2 J;a'1)a5.J-E,phasis suppliedE 'itations o,itted. $n its +e,orandu,, the SEC stated7 *$n the event that this <onorable Court rules /ith finality on the ,eaning of *'apital*, the SEC /ill yield to the Court and follo/ its interpretation.*
::

See :ucman v. ,alawi, supra, /here the Court referred to the #epart,ent of $nterior and =o'al 5overn,ent -though not i,pleaded. for investigation and appropriate a'tion the ,atter regarding the /ithdra/als of deposits representing the 'on'erned barangaysD $nternal evenue Allot,ents.
:3

%ollo -Hol. $$$., pp. 1;;;"1;;:. Foreign #ire't $nvest,ents. &SN -%ral Argu,ents., )1 0une )(1), p. 114.

:2

1(

11

See 7alili v. Court of "ppeals , @:( Phil. 2(1 -1223.E 9nited Church Board for Aorld ,inistries v. Sebastian , );) Phil. 3;3 -1233..
1)

$n :ucman v. ,alawi, :;( Phil. )32 -)((1., the Court defined indispensable parties as parties ininterest /ithout /ho, there 'an be no final deter,ination of an a'tion.
:1

8rbano A. Qafra, .he :aurel :angle8 "greement and the Philippine 0conom8, p. ;@ -124@.. See also,abanag v. :ope( *ito, 43 Phil. 1 -12;4..
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Se'tion @,

ule 1: of the

ules of Court states7

See <adi Salehi Esfahani, .he Political 0conom8 of the Philippines) .elecommunications Sector, Aorld Ban6 Poli'y esear'h #epart,ent -122;..

SEC. @. Petition for mandamus. G Ahen any tribunal, 'orporation, board, offi'er or person unla/fully negle'ts the perfor,an'e of an a't /hi'h the la/ spe'ifi'ally en9oins as a duty resulting fro, an offi'e, trust, or station, or unla/fully e!'ludes another fro, the use and en9oy,ent of a right or offi'e to /hi'h

&he =a/phil Pro9e't " Arellano =a/ Foundation

1( Nazareno ( After 'onsidering the partiesD positions as arti'ulated during the oral
Corporation CASES Based on the Syllabus of Fr. Agustin "SSENT"NG O!"N"ON $ELASCO, JR., J.: Before 8s are separate ,otions for re'on[ideration of the CourtYs 0une )3, )(11 #e'ision, 1 /hi'h partially granted the petition for prohibition, in9un'tion and de'laratory relief interposed by Ailson P. 5a,boa -petitioner or 5a,boa.. Hery si,ply, the Court held that the ter, *'apital* appearing in Se'tion 11, Arti'le N$$ of the 1234 Constitution refers only to 'o,,on shares or shares of sto'6 entitled to vote in the ele'tion of the ,e,bers of the board of dire'tors of a publi' utility, and not to the total outstanding 'apital sto'6. espondents +anuel H. Pangilinan -Pangilinan. and Napoleon =.Nazare no -Nazareno. separately ,oved for re'onsideration on pro'edural and substantive grounds, but reserved their ,ain argu,ents against the ,a9orityYs holding on the ,eaning of *'apital.* &he %ffi'e of the Soli'itor 5eneral -%S5., /hi'h initially represent=7d the Se'urities and E!'hange Co,,ission -SEC., also reIuested re'on[it6ratiun even as it ,anifested agree,ent /ith the ,a9orityYs 'onstrual 'tY the ]Hord *'apital.* 8nable to 9oin the %S5Ys stand on the deter,inative issue of 'apital, the SEC sought leave to 9oin the fray on its ,vn. fn its Jtdotion to "dmit "1anifestation and /mnibus ,otion, the SEC stated that the %S5Ds position on said issue does not refle't its o/n and in fa't diverges fro, /hat the Co,,ission has 'onsistently adopted prior to this 'ase . And be'ause the de'ision in Iuestion has a penalty 'o,ponent /hi'h it is tas6ed to i,pose, SEC reIuested 'larifi'ation as to =3&n )3& r&;Don1n@ '&r1o* o4 a''51;a)1on o4 )3& a''ro'r1a)& (an;)1on( 2ay +& 12'o(&* on !3151''1n& Lon@ 1()an;& T&5&'3on& Co2'any /!L T0 1n ;a(& )3& SEC *&)&r21n&( )3a) 1) 3a( 61o5a)&* S&;. 11, Ar). N"" o4 )3& Con()1)u)1on. &o the foregoing ,otions, the ,ain petitioner, no/ de'eased, filed his Comment and2or /pposition to ,otions for %econsideration. A'ting on the various ,otions and 'o,,ent, the Court 'ondu'ted and heard the parties in oral argu,ents on April 14 and 0une )1, )(1). argu,ents and in their pleadings and respe'tive ,e,oranda, $ vote to grant re'onsideration. &his disposition is 'onsistent /ith ,y dissent, on pro'edural and substantive grounds, to the 0une )3, )(11 ,a9ority #e'ision. Con('&;)u( &he 'ore issue is the ,eaning of the /ord *'apital* in the opening senten'e of Se'. 11, Art. N$$ of the 1234 Constitution /hi'h reads7 S&;)1on 11. No 4ran;31(&, ;&r)141;a)&, or any o)3&r 4or2 o4 au)3or1Ha)1on 4or )3& o'&ra)1on o4 a 'u+51; u)151)y (3a55 +& @ran)&* &7;&') )o ;1)1H&n( o4 )3& !3151''1n&( or )o ;or'ora)1on( or a((o;1a)1on( or@an1H&* un*&r )3& 5a=( o4 )3& !3151''1n&(, a) 5&a() (17)y '&r ;&n)u2 o4 =3o(& ;a'1)a5 1( o=n&* +y (u;3 ;1)1H&n(I nor shall su'h fran'hise, 'ertifi'ate, or authorization be e!'lusive in 'hara'ter or for a longer period than fifty years. Neither shall any su'h fran'hise or right be granted e!'ept under the 'ondition that it shall be sub9e't to a,end,ent, alteration, or repeal by the Congress /hen the 'o,,on good so reIuires. &he State shall en'ourage eIuity parti'ipation in publi' utilities by the general publi'. T3& 'ar)1;1'a)1on o4 4or&1@n 1n6&()or( 1n )3& @o6&rn1n@ +o*y o4 any 'u+51; u)151)y &n)&r'r1(& (3a55 +& 5121)&* )o )3&1r 'ro'or)1ona)& (3ar& 1n 1)( ;a'1)a5, an* a55 )3& &7&;u)16& an* 2ana@1n@ o441;&r( o4 (u;3 ;or'ora)1on or a((o;1a)1on 2u() +& ;1)1H&n( o4 )3& !3151''1n&(. -E,phasis supplied.. For an easier 'o,prehension of the t/o 'ontrasting positions on the 'ontentious ,eaning of the /ord *'apital,* as found in the first senten'e of the aforeIuoted provision, allo/ ,e to present a brief 'o,parative analysis sho/ing the dissi,ilarities. &he ,a9ority, in the 0une )3, )(11 #e'ision, as reiterated in the draft resolution, is of the vie/ that the /ord *'apital* in the first senten'e of Se'. 11, Art. N$$ refers to 'o,,on shares or voting shares on5yE thus li,iting foreign o/nership of su'h shares to ;(>. &he rationale, as stated in the basi' ponencia, is that this interpretation ensures that 'ontrol of the Board of #ire'tors stays in the hands of Filipinos, sin'e foreigners 'an only o/n a ,a!i,u, of ;(> of said shares and, a''ordingly, 'an only ele't the eIuivalent per'entage of dire'tors. As a ne'essary 'orollary, Filipino sto'6holders 'an al/ays ele't 1(> of

Corporation CASES Based on the Syllabus of Fr. Agustin the Board of #ire'tors /hi'h, to the ,a9ority, translates to 'ontrol over the 'orporation. &he opposite vie/ is that the /ord *'apital* in the first senten'e refers to the entire 'apital sto'6 of the 'orporation or both voting and non"voting shares and N%& solely to 'o,,on shares. Fro, this standpoint, 1(> 'ontrol over the 'apital sto'6 or the sto'6holders o/ning both voting and non"voting shares is assured to Filipinos and, as a 'onseIuen'e, over 'orporate ,atters voted upon and de'isions rea'hed during sto'6holdersD ,eetings. %n the other hand, the last senten'e of Se'. 11, Art. N$$, /ith the /ord *'apital* e,bedded in it, is the provision that ensures Filipino 'ontrol over the Board of #ire'tors and its de'isions. &o resolve the 'onfli'ting interpretations of the /ord *'apital,* the first senten'e of Se'. 11, Art. N$$ ,ust be read and 'onsidered in 'on9un'tion /ith the last senten'e of said Se'. 11 /hi'h pres'ribes that *the parti'ipation of foreign investors in the governing body of any publi' utility enterprise shall be li,ited to their proportionate share in its 'apital.* After all, it is an established prin'iple in 'onstitutional 'onstru'tion that provisions in the Constitution ,ust be har,onized. $t has been ,ade very 'lear during the oral argu,ents and even by the partiesD /ritten sub,issions that 'ontrol by Filipinos over the publi' utility enterprise e!ists on three -@. levels, na,ely7 1. Si!ty per'ent -1(>. 'ontrol of Filipinos over the 'apital sto'6 /hi'h 'overs both voting and non"voting shares and inevitably over the sto'6holders. &his level of 'ontrol is e,bodied in the first senten'e of Se'. 11, Art. N$$ /hi'h reads7 S&;)1on 11. No 4ran;31(&, ;&r)141;a)&, or any o)3&r 4or2 o4 au)3or1Ha)1on 4or )3& o'&ra)1on o4 a 'u+51; u)151)y (3a55 +& @ran)&* &7;&') )o ;1)1H&n( o4 )3& !3151''1n&( or )o ;or'ora)1on( or a((o;1a)1on( or@an1H&* un*&r )3& 5a=( o4 )3& !3151''1n&(, a) 5&a() (17)y '&r ;&n)u2 o4 =3o(& ;a'1)a5 1( o=n&* +y (u;3 ;1)1H&n( 7 7 7. &he /ord *'apital* in the above provision refers to 'apital sto'6 or both voting and non"voting shares. Si!ty per'ent -1(>. 'ontrol over the 'apital sto'6 translates to 'ontrol by Filipinos over al,ost all de'isions by the sto'6holders during sto'6holdersD ,eetings

in'luding ratifi'ation of the de'isions and #ire'tors. #uring said ,eetings, voting and even non"voting shares are entitled to vote. &he e!er'ise by non"voting shares of voting rights over ,a9or 'orporate de'isions is e!pressly provided in Se'. 1 of the Corporation Code /hi'h reads7 Se'. 1. ! ! ! ! Ahere the arti'les of in'orporation provide for non"voting shares in the 'ases allo/ed by this Code, the holders of su'h shares shall nevertheless be entitled to vote on the follo/ing ,atters7 1. A,end,ent of the arti'les of in'orporationE ). Adoption and a,end,ent of by"la/sE @. Sale, lease, e!'hange, ,ortgage, pledge or other disposition of all or substantially all of the 'orporate propertyE ;. $n'urring, 'reating or in'reasing bonded indebtednessE :. $n'rease or de'rease of 'apital sto'6E 1. +erger or 'onsolidation of the 'orporation /ith another 'orporation or other 'orporationsE 4. $nvest,ent of 'orporate funds in another 'orporation or business in a''ordan'e /ith this CodeE and 3. #issolution of the 'orporation. Construing the /ord *'apital* in the first senten'e of Se'. 11, Art. N$$ of the Constitution as 'apital sto'6 /ould ensure Filipino 'ontrol over the publi' utility /ith respe't to ,a9or 'orporate de'isions. $f /e adopt the vie/ espoused by 0usti'e Carpio that the /ord *'apital* ,eans only 'o,,on shares or voting shares, then foreigners 'an o/n even up to 1((> of the non"voting shares. $n su'h a situation, foreigners ,ay very /ell e!er'ise 'ontrol over all ,a9or 'orporate de'isions as their o/nership of the nonvoting shares re,ains unfettered by the ;(> 'ap laid do/n in the first senten'e of Se'. 11, Art. N$$. &his /ill spa/n an even greater ano,aly be'ause it /ould give the foreigners the opportunity to a'Iuire o/nership of the net

1( Nazareno 1 a'ts of the Board of

assets of the 'orporation upon its dissolution to in'lude /hat the Constitution en9oinsGGland o/nership possibly through du,,y 'orporations. Aith the vie/ of 0usti'e Carpio, Filipinos /ill definitely lose 'ontrol over ,a9or 'orporate de'isions /hi'h are de'ided by sto'6holders o/ning the ,a9ority of the non"voting shares. ). Si!ty per'ent -1(>. 'ontrol by Filipinos over the 'o,,on shares or voting shares and ne'essarily over the Board of #ire'tors of the publi' utility. Control on this level is guaranteed by the last senten'e of Se'. 11, Art. N$$ /hi'h reads7 T3& 'ar)1;1'a)1on o4 4or&1@n 1n6&()or( 1n )3& @o6&rn1n@ +o*y o4 any 'u+51; u)151)y &n)&r'r1(& (3a55 +& 5121)&* )o )3&1r 'ro'or)1ona)& (3ar& 1n 1)( J;a'1)a5J ! ! !. $n its ordinary signifi'ation, *parti'ipation* 'onnotes *the a'tion or state of ta6ing part /ith others in an a'tivity.*)&his parti'ipation in its de'ision",a6ing fun'tion 'an only be the right to ele't board dire'tors. <en'e, )3& 5a() (&n)&n;& o4 S&;. 11, Ar). N"" o4 )3& Con()1)u)1on &44&;)16&5y r&()r1;)( )3& r1@3) o4 4or&1@n&r( )o &5&;) *1r&;)or( )o )3& +oar* 1n 'ro'or)1on )o )3& 5121) on )3&1r )o)a5 (3ar&3o5*1n@(. Sin'e the first part of Se'. 11, Art. N$$ of the Constitution spe'ifies a ;(> li,it of foreign o/nership in the total 'apital of the publi' utility 'orporation, then the rights of foreigners to be ele'ted to the board of dire'tors, is li6e/ise li,ited to ;( percent. $f the foreign o/nership of 'o,,on shares is lo/er than ;(>, the parti'ipation of foreigners is li,ited to their proportionate share in the 'apital sto'6. $n the highly hypotheti'al publi' utility 'orporation /ith 1(( 'o,,on shares and 1,(((,((( preferred non"voting shares, or a total of 1,(((,1(( shares 'ited in the 0une )3, )(11 #e'ision, foreigners 'an thus only o/n up to ;((,(;( shares of the 'orporation, 'onsisting of the 2a712u2 ;( -out of the 1((. voting shares and ;((,((( non" voting shares. And, assu,ing a 1(" ,e,ber board, the foreigners 'an ele't only ; ,e,bers of the boardu(1n@ )3& 40 6o)1n@ (3ar&( )3&y ar& a55o=&* )o o=n. Fo55o=1n@, 1n 41n&, )3& *1;)a)&( o4 S&;. 11, Ar). N"", a( ;ou;3&*, )3& 4or&1@n (3ar&3o5*&r(C r1@3) )o &5&;) 2&2+&r( o4 )3& @o6&rn1n@ +oar* o4 a @16&n 'u+51; u)151)y ;or'ora)1on 1( 'ro'or)1ona5 on5y )o )3&1r r1@3) )o 3o5* a 'ar) o4 )3& )o)a5 (3ar&3o5*1n@( o4 )3a) &n)1)y. Sin'e foreigners 'an only o/n, in the ,a!i,u,, up to ;(> of the total shareholdings of the 'o,pany,

1( Nazareno ) then )3&1r 6o)1n@ &n)1)5&2&n) a( )o )3& nu2&r1;a5 ;o2'o(1)1on

Corporation CASES Based on the Syllabus of Fr. Agustin o4 )3& +oar* =ou5* *&'&n* on )3& 5&6&5 o4 )3&1r (3ar&3o5*1n@ 1n r&5a)1on )o )3& ;a'1)a5 ()o;D, +u) 1n no ;a(& (3a55 1) &7;&&* )3& 40< )3r&(3o5*. Contrary to the vie/ of 0usti'e Carpio that the ob9e'tive behind the first senten'e of Se'. 11, Art. N$$ is to ensure 'ontrol of Filipinos over the Board of #ire'tors by li,iting foreign o/nership of the 'o,,on shares or voting shares up to ;(>, 1) 1( a;)ua55y )3& 41r() 'ar) o4 )3& a4or&>uo)&* 5a() (&n)&n;& o4 S&;. 11, Ar). N"" )3a) 5121)( )3& r1@3)( o4 4or&1@n&r( )o &5&;) no) 2or& )3an 40< o4 )3& +oar* (&a)( thus ensuring a 'lear ,a9ority in the Board of #ire'tors to Filipinos. $f /e follo/ the line of reasoning of 0usti'e Carpio on the ,eaning of the /ord *'apital* in the first senten'e, then there is no need for the fra,ers of the Constitution to in'orporate the last senten'e in Se'. 11, Art. N$$ on the ;(> ,a!i,u, parti'ipation of the foreigners in the Board of #ire'tors. &he last senten'e /ould be a useless redundan'y, a situation doubtless unintended by the fra,ers of the Constitution. A 'onstru'tion that renders a part of the la/ or Constitution being 'onstrued superfluous is an aberration, @ for it is at all ti,es presu,ed that ea'h /ord used in the la/ is intentional and has a parti'ular and spe'ial role in the appro!i,ation of the poli'y sought to be attained, ut magis valeat 'uam pereat. @. &he third level of 'ontrol pro'eeds fro, the reIuire,ent tu'6ed in the se'ond part of the ulti,ate senten'e that * a55 )3& &7&;u)16& an* 2ana@1n@ o441;&r( o4 )3& ;or'ora)1on 2u() +& ;1)1H&n( o4 )3& !3151''1n&(.* &his assures full Filipino 'ontrol, at all ti,es, over the ,anage,ent of the publi' utility. &o su,,arize, the Constitution, as ena'ted, establishes not 9ust one but a three"tiered 'ontrol"enhan'ing"and"lo'6ing ,e'hanis, in Se'. 11, Arti'le N$$ to ensure that Filipinos /ill al/ays have full benefi'ial o/nership and 'ontrol of publi' utility 'orporations7 1. ;(> 'eiling on foreign o/nership in the 'apital sto'6 that ensures si!ty per'ent -1(>. Filipino 'ontrol over the 'apital sto'6 /hi'h 'overs both voting and non"voting shares. As a 'onseIuen'e, Filipino 'ontrol over the sto'6holders is assured. -First senten'e of Se'. 11, Art. N$$.. &hus, foreigners 'an o/n only up to ;(> of the 'apital sto'6.

Corporation CASES Based on the Syllabus of Fr. Agustin ). ;(> 'eiling on the right of foreigners to ele't board dire'tors that guarantees si!ty per'ent -1(>. Filipino 'ontrol over the Board of #ire'tors. -First part of last senten'e of Se'. 11, Art. N$$.. @. eservation to Filipino 'itizens of the e!e'utive and ,anaging offi'ers, regardless of the level of alien eIuity o/nership to se'ure total Filipino 'ontrol over the ,anage,ent of the publi' utility enterprise -Se'ond part of last senten'e of Se'. 11, Art. N$$.. &hus, all e!e'utive and ,anaging offi'ers ,ust be Filipinos. 1(;u((1on 8ndoubtedly there is a 'lash of 'onfli'ting opinions as to /hat *'apital* in the first senten'e of Se'. 11, Art. N$$ ,eans. &he ,a9ority says it refers only to 'o,,on or voting shares. &he ,inority says it in'ludes both voting and non"voting shares. A resort to 'onstitutional 'onstru'tion is unavoidable. $t is settled though that the *pri,ary sour'e fro, /hi'h to as'ertain 'onstitutional intent or purpose is the language of the 'onstitution itself.*; &o this end, )3& =or*( u(&* +y )3& Con()1)u)1on (3ou5* a( 2u;3 a( 'o((1+5& +& un*&r()oo* 1n )3&1r or*1nary 2&an1n@ as the Constitution is not a la/yerDs do'u,ent. : &his approa'h, other/ise 6no/n as )3& 9erba legis ru5&, (3ou5* +& a''51&* (a6& =3&r& )&;3n1;a5 )&r2( ar& &2'5oy&*.1 T3& '5a1n 2&an1n@ o4 J;a'1)a5J 1n (&n)&n;& o4 S&;. 11, Ar). N"" o4 )3& 1n;5u*&( +o)3 6o)1n@ an* non86o)1n@ (3ar&( )3& 41r() Con()1)u)1on

that it should ever be present in the 5an@ua@& a( 2u;3 a( 'o((1+5& (3ou5* +& un*&r()oo* 1n )3& (&n(& )3&y 3a6& 1n ;o22on u(&. Ahat it says a''ording to the te!t of the provision to be 'onstrued 'o,pels a''eptan'e and negates the po/er of the 'ourts to alter it, based on the postulate that the fra,ers and the people ,ean /hat they say. &hus, there are 'ases /here the need for 'onstru'tion is redu'ed to a ,ini,u,.4 -E,phasis supplied..

1( Nazareno @ peopleYs 'ons'iousness, 1)(

&he pri,ary reason for the verba legis approa'h, as pointed out by Fr. 0oaIuin Bernas during the 0une )1, )(1) argu,ents, is that the people /ho ratified the Constitution voted on their understanding of the /ord 'apital in its everyday ,eaning. Fr. Bernas elu'idated thus7 ! ! ! %ver the years, fro, the 12@: to the 124@ and finally even under the 1234 Constitution, the prevailing pra'ti'e has been to base the 1(";( proportion on total outstanding 'apital sto'6, that is, the 'o,bined total of 'o,,on and non"voting preferred shares. &his is /hat o''asioned the 'ase under 'onsideration. Ahat is the 'onstitutional relevan'e of this 'ontinuing pra'ti'eL $ suggest that it is relevant for deter,ining /hat the people in the street voted for /hen they ratified the Constitution. :3&n )3& *ra4) o4 a Con()1)u)1on 1( 'r&(&n)&* )o )3& '&o'5& 4or ra)141;a)1on, =3a) )3& '&o'5& 6o)& on 1( no) )3& *&+a)&( 1n )3& ;on()1)u&n) +o*y +u) )3& )&7) o4 )3& *ra4). Con;r&)&5y, =3a) )3& &5&;)ora)& 6o)&* on =a( )3&1r un*&r()an*1n@ o4 )3& =or* ;a'1)a5 1n 1)( &6&ry*ay 2&an1n@ )3&y &n;oun)&r 1n *a15y 514&. Ae 'annot attribute to the voters a 9uristDs sophisti'ated ,eaning of 'apital and its brea6do/n into 'o,,on and preferred. Ahat they vote on is /hat they see. Nor do they vote on /hat the drafters sa/ as assu,ed ,eaning, to use BengzonDs e!planation. $n the language of the sophisti'ates, /hat 6o)&r( 1n a '5&+1(;1)& 6o)& on 1( 9erba legis an* no) anima legis a+ou) =31;3 )ra1n&* ?ur1()( *&+a)&. Ahat then does it ,a6e of the 'onte,porary understanding by SEC et'. $s the 'onte,porary understanding un'onstitutional or 'onstitutionalL $ hesitate to 'hara'terize it as 'onstitutional or un'onstitutional. $ /ould ,erely 'hara'terize it as popular. Ahat $ ,ean is it refle'ts the 'o,,on understanding of the ordinary populi, 'o,,on but in'o,plete.3 -E,phasis supplied..

J.,. .uason J Co.! Inc. v. :and .enure "dministration illustrates the verba legis rule. &here, the Court 'autions against departing fro, the 'o,,only understood ,eaning of ordinary /ords used in the Constitution, vi(.7 Ae loo6 to the language of the do'u,ent itself in our sear'h for its ,eaning. Ae do not of 'ourse stop there, but that is /here /e begin. $t is to be assu,ed that the =or*( 1n =31;3 ;on()1)u)1ona5 'ro61(1on( ar& ;ou;3&* &7'r&(( )3& o+?&;)16& (ou@3) )o +& a))a1n&*. &hey are to be given their ordinary ,eaning e!'ept /here te'hni'al ter,s are e,ployed in /hi'h 'ase the signifi'an'e thus atta'hed to the, prevails. As the Constitution is not pri,arily a la/yerYs do'u,ent, it being essential for the rule of la/ to obtain

Corporation CASES Based on the Syllabus of Fr. Agustin *Capital* in the first senten'e of Se'. 11, Art. N$$ ,ust then be a''orded a ,eaning a''epted, understood, and used by an ordinary person not versed in the te'hni'alities of la/. As defined in a non" legal di'tionary, 'apital sto'6 or 'apital is ordinarily ta6en to ,ean *the ou)()an*1n@ (3ar&( of a 9oint sto'6 'o,pany 'onsidered as an aggregate*2 or *the o=n&r(31' &5&2&n) of a 'orporation divided into shares and represented by 'ertifi'ates.*1( &he ter, *'apital* in'ludes all the outstanding shares of a 'o,pany that represent *the proprietary 'lai, in a business.* 11 ") *o&( no) *1()1n@u1(3 +a(&* on )3& 6o)1n@ 4&a)ur& o4 )3& ()o;D( +u) r&4&r( )o a55 (3ar&(, +& )3&y 6o)1n@ or non86o)1n@ . Neither is the ter, li,ited to the ,anage,ent aspe't of the 'orporation but 'learly refers to the separate aspe't of o=n&r(31' of the 'orporate shares thereby en'o,passing all shares representing the eIuity of the 'orporation. &his plain ,eaning, as understood, a''epted, and used in ordinary parlan'e, he/s /ith the definition given by Bla'6 /ho eIuates 'apital to 'apital sto'61) and defines it as *the total nu,ber of shares of sto'6 that a 'orporation ,ay issue under its 'harter or arti'les of in'orporation, 1n;5u*1n@ +o)3 ;o22on ()o;D an* 'r&4&rr&* ()o;D.*1@ &his ,eaning is also refle'ted in legal 'o,,entaries on the Corporation Code. &he respe'ted 'o,,entator uben E. Agpalo defines *'apital* as the *,oney, property or ,eans 'ontributed by sto'6holders for the business or enterprise for /hi'h the 'orporation /as for,ed and generally i,plies that su'h ,oney or property or ,eans have been 'ontributed in pay,ent for sto'6 issued to the 'ontributors.*1; +ean/hile, *'apital sto'6* is *)3& a@@r&@a)& o4 )3& (3ar&( a;)ua55y (u+(;r1+&* BorC the a,ount subs'ribed and paid" in and upon /hi'h the 'orporation is to 'ondu't its operations, or the a,ount paid"in by its sto'6holders in ,oney, property or servi'es /ith /hi'h it is to 'ondu't its business.* 1: &his definition has been e'hoed by nu,erous other e!perts in the field of 'orporation la/. #ean Hillanueva /rote, thus7 $n defining the relationship bet/een the 'orporation and its sto'6holders, the 'apital sto'6 represents the proportional standing of the sto'6holders /ith respe't to the 'orporation and 'orporate ,atters, su'h as their rights to vote and to re'eive dividends. $n finan'ial ter,s, )3& ;a'1)a5 ()o;D o4 )3& ;or'ora)1on a( r&45&;)&* 1n )3& 41nan;1a5 ()a)&2&n) o4 )3& ;or'ora)1on

r&'r&(&n)( )3& 41nan;1a5 or ()o;D3o5*&r( )o )3& n&) a((&)( o4 )3& ;or'ora)1on u'on *1((o5u)1on. $n addition, the 'apital sto'6 represents the totality of the portion of the 'orporationDs assets and re'eivables /hi'h are 'overed by the trust fund do'trine and provide for the a,ount of assets and re'eivables of the 'orporation /hi'h are dee,ed prote'ted for the benefit of the 'orporate 'reditors and fro, /hi'h the 'orporation 'annot de'lare any dividends. 11 -E,phasis supplied.. Si,ilarly, reno/ned author <e'tor S. de =eon defines *'apital* and *'apital sto'6* in the follo/ing ,anner7 Capital is used broadly to indi'ate the entire property or assets of the 'orporation. $t in'ludes the a,ount invested by the sto'6holders plus the undistributed earnings less losses and e!penses. $n the stri't sense, the ter, refers to that portion of the net assets paid by the sto'6holders as 'onsideration for the shares issued to the,, /hi'h is utilized for the prose'ution of the business of the 'orporation. $t in'ludes all balan'es or instal,ents due the 'orporation for shares of sto'6 sold by it and all unpaid subs'ription for shares. !!!! &he ter, is also used synony,ously /ith the /ords *'apital sto'6,* as ,eaning the a,ount subs'ribed and paid"in and upon /hi'h the 'orporation is to 'ondu't its operation -11 Flet'her Cy'. Corp., p. 1: B1231 ed.C. and 1) 1( 122a)&r1a5 3o= )3& ()o;D 1( ;5a((141&*, =3&)3&r a( ;o22on or 'r&4&rr&*.14 -E,phasis and unders'oring supplied.. <en'e, follo/ing the verba legis approa'h, $ see no reason to stray a/ay fro, /hat appears to be a 'o,,on and settled a''eptation of the /ord *'apital,* given that, as used in the 'onstitutional provision in Iuestion, 1) ()an*( un>ua5141&* by any restri'tive or e!pansive /ord as to reasonably 9ustify a distin'tion or a deli,itation of the ,eaning of the /ord. 9bi leF non distinguit nos distinguere debemus, /hen the la/ does not distinguish, /e ,ust not distinguish.13 8sing this plain ,eaning of *'apital* /ithin the 'onte!t of Se'. 11, Art. N$$, foreigners are entitled to o/n no) 2or& )3an 40< o4 )3& ou)()an*1n@ ;a'1)a5 ()o;D, /hi'h /ould in'lude both voting and non"voting shares.

1( Nazareno ; 'ro'r1&)ary ;5a12( o4 )3&

E7)ran&ou( a1*( )o 4&rr&) ou) ;on()1)u)1ona5 1n)&n) Ahen the see,ing a,biguity on the ,eaning of *'apital* 'annot be threshed out by loo6ing at the language of the Constitution, then resort to e!traneous aids has be'o,e i,perative. &he Court 'an utilize the follo/ing e!traneous aids, to /it7 -1. pro'eedings of the 'onventionE -). 'hanges in phraseologyE -@. history or realities e!isting at the ti,e of the adoption of the ConstitutionE -;. prior la/s and 9udi'ial de'isionsE -:. 'onte,poraneous 'onstru'tionE and -1. 'onseIuen'es of alternative interpretations. 12 $ sub,it that all these aids of 'onstitutional 'onstru'tion affir, that the only a''eptable 'onstru'tion of *'apital* in the first senten'e of Se'. 11, Art. N$$ of the 1234 Constitution is that it refers to a55 shares of a 'orporation, both voting and non"voting. &51+&ra)1on( o4 )3& Con()1)u)1ona5 Co221((1on o4 1986 *&2on()ra)& )3a) ;a'1)a5 2&an( +o)3 6o)1n@ an* non86o)1n@ (3ar&( /1() &7)r1n(1; a1*0 &he pro'eedings of the 1231 Constitutional Co,,ission that drafted the 1234 Constitution /ere a''urately re'orded in the e'ords of the Constitutional Co,,ission. &o bring to light the true ,eaning of the /ord *'apital* in the first line of Se'. 11, Art. N$$, one ,ust peruse, disse't and analyze the entire deliberations of the Constitutional Co,,ission pertinent to the arti'le on national e'ono,y and patri,ony, as Iuoted belo/7 August 1@, 1231, Aednesday P %P%SE# ES%=8&$%N N%. ;21

1( Nazareno : SEC&$%N 1. &he State shall develop a self"reliant and independent

Corporation CASES Based on the Syllabus of Fr. Agustin national e'ono,y. ! ! ! !!!! SEC. @. ! ! ! &he e!ploration, develop,ent, and utilization of natural resour'es shall be under the full 'ontrol and supervision of the State. Su'h a'tivities ,ay be dire'tly underta6en by the State, or it ,ay enter into 'o"produ'tion, 9oint venture, produ'tion"sharing agree,ents /ith Filipino 'itizens or;or'ora)1on( or a((o;1a)1on( a) 5&a() (17)y '&r;&n) o4 =3o(& 6o)1n@ ()o;D or ;on)ro551n@ 1n)&r&() 1( o=n&* +y (u;3 ;1)1H&n(. ! ! ! !!!! SEC. 2. &he Congress shall reserve to 'itizens of the Philippines or to 'orporations or asso'iations a) 5&a() (17)y '&r ;&n) o4 =3o(& 6o)1n@ ()o;D or ;on)ro551n@ 1n)&r&() is o/ned by su'h 'itizens or su'h higher per'entage as Congress ,ay pres'ribe, 'ertain areas of invest,ents /hen the national interest so di'tates. !!!! SEC. 1:. No fran'hise, 'ertifi'ate, or any other for, of authorization for the operation of a publi' utility shall be granted e!'ept to 'itizens of the Philippines or to 'orporations or asso'iations organized under the la/s of the Philippines a) 5&a() )=o8)31r*( o4 =3o(& 6o)1n@ ()o;D or ;on)ro551n@ 1n)&r&() 1( o=n&* +y (u;3 ;1)1H&n(. Neither shall any su'h fran'hise or right be granted e!'ept under the 'ondition that it shall be sub9e't to a,end,ent, alteration, or repeal by Congress /hen the 'o,,on good so reIuires. &he State shall en'ourage eIuity parti'ipation in publi' utilities by the general publi'. -%rigin of Se'. 11, Arti'le N$$. !!!!

ES%=8&$%N &% $NC% P% A&E $N &<E NEA C%NS&$&8&$%N AN A &$C=E %N NA&$%NA= EC%N%+? AN# PA& $+%N? Be it resolved as it is hereb8 resolved b8 the Constitutional Commission in session assembled! &o in'orporate the National E'ono,y and Patri,ony of the ne/ Constitution, the follo/ing provisions7 A &$C=E^^^^ NA&$%NA= EC%N%+? AN# PA& $+%N?

+ . N%==E#%. $n Se'tions @, 2 and 1:, the Co,,ittee stated lo'al or Filipino eIuity and foreign eIuityE na,ely, 1(";( in Se'tion @, 1(";( in Se'tion 2, and )F@"1F@ in Se'tion 1:. + . H$==E5AS. &hat is right.

Corporation CASES Based on the Syllabus of Fr. Agustin + . N%==E#%. $n tea'hing la/, /e are al/ays fa'ed /ith this Iuestion7 *Ahere do /e base the eIuity reIuire,ent, is it on the authorized 'apital sto'6, on the subs'ribed 'apital sto'6, or on the paid"up 'apital sto'6 of a 'orporationL* Aill the Co,,ittee please enlighten ,e on thisL + . H$==E5AS. Ae have 9ust had a long dis'ussion /ith the ,e,bers of the tea, fro, the 8P =a/ Center /ho provided us a draft. &he phrase that is 'ontained here /hi'h /e adopted fro, the 8P draft is *1( per'ent of voting sto'6.* + . N%==E#%. &hat ,ust be based on the subs'ribed 'apital sto'6, be'ause unless de'lared delinIuent, unpaid 'apital sto'6 shall be entitled to vote. + . H$==E5AS. &hat is right. + . N%==E#%. &han6 you. Aith respe't to an invest,ent by one 'orporation in another 'orporation, say, a 'orporation /ith 1(";( per'ent eIuity invests in another 'orporation /hi'h is per,itted by the Corporation Code, does the Co,,ittee adopt the grandfather ruleL + . H$==E5AS. ?es, that is the understanding of the Co,,ittee. + . N%==E#%. &herefore, /e need additional Filipino 'apitalL + . H$==E5AS. ?es.)( August 1;, 1231, &hursday + . F%Q. +r. Hi'e"President, in Se'tions @ and 2, the provision on eIuity is both 1( per'ent, but $ noti'e that this is no/ different fro, the provision in the 124@ Constitution in that the basis for the eIuity provision is voting sto'6 or 'ontrolling interest instead of the usual 'apital per'entage as provided for in the 124@ Constitution. Ae /ould li6e to 6no/ /hat the differen'e /ould be bet/een the previous and the proposed provisions regarding eIuity interest. + . H$==E5AS. Co,,issioner Suarez /ill ans/er that. + . S8A EQ. &han6 you.

Nazareno

1( 1

As a ,atter of fa't, this parti'ular portion is still being revie/ed by this Co,,ittee. $n Se'tion 1, Arti'le N$$$ of the 12@: Constitution, the /ording is that the per'entage should be based on the 'apital /hi'h is o/ned by su'h 'itizens. $n the proposed draft, this phrase /as proposed7 *voting sto'6 or 'ontrolling interest.* &his /as a plan sub,itted by the 8P =a/ Center. &hree days ago, /e had an early ,orning brea6fast 'onferen'e /ith the ,e,bers of the 8P =a/ Center and pre'isely, /e /ere see6ing 'larifi'ation regarding the differen'e. Ae /ould have three 'riteria to go by7 %ne /ould be based on 'apital, /hi'h is 'apital sto'6 of the 'orporation, authorized, subs'ribed or paid up, as e,ployed under the 12@: and the 124@ Constitution. &he idea behind the introdu'tion of the phrase *voting sto'6 or 'ontrolling interest* /as pre'isely to avoid the perpetration of du,,ies, Filipino du,,ies of ,ultinationals. $t is theoreti'ally possible that a situation ,ay develop /here these ,ultinational interests /ould not really be only ;( per'ent but /ill e!tend beyond that in the ,atter of voting be'ause they 'ould enter into /hat is 6no/n as a voting trust or voting agree,ent /ith the rest of the sto'6holders and, therefore, not/ithstanding the fa't that on re'ord their 'apital e!tent is only up to ;("per'ent interest in the 'orporation, a'tually, they /ould be ,anaging and 'ontrolling the entire 'o,pany. &hat is /hy the 8P =a/ Center ,e,bers suggested that /e utilize the /ords *voting interest* /hi'h /ould pre'lude ,ultinational 'ontrol in the ,atter of voting, independent of the 'apital stru'ture of the 'orporation. And then they also added the phrase *'ontrolling interest* /hi'h up to no/ they have not been able to su''essfully define the e!a't ,eaning of. But they ,entioned the situation /here theoreti'ally the board /ould be 'ontrolled by these ,ultinationals, su'h that instead of, say, three Filipino dire'tors out of five, there /ould be three foreign dire'tors and, therefore, they /ould be 'ontrolling the ,anage,ent of the 'o,pany /ith foreign interest. &hat is /hy they volunteered to flesh out this parti'ular portion /hi'h /as sub,itted by the,, but up to no/, they have not 'o,e up /ith a 'onstru'tive rephrasing of this portion. And as far as $ a, 'on'erned, $ a, not spea6ing in behalf of the Co,,ittee, " =ou5* 4&&5 2or& ;o24or)a+5& 14 =& @o +a;D )o )3& =or*1n@ o4 )3& 19-, an* )3& 19.- Con()1)u)1on, )3a) 1( )o (ay, )3& 60840 '&r;&n)a@& ;ou5* +& +a(&* on )3& ;a'1)a5 ()o;D o4 )3& ;or'ora)1on.

+ . F%Q. $ understand that that /as the sa,e vie/ of #ean Carale /ho does not agree /ith the others on this panel at the 8P =a/ Center regarding the per'entage of the ratio. + . S8A EQ. &hat is right. #ean Carale shares ,y senti,ent about this ,atter. + . BEN5Q%N. $ also share the senti,ent of Co,,issioner Suarez in that respe't. So there are already t/o in the Co,,ittee /ho /ant to go ba'6 to the /ording of the 12@: and the 124@ Constitution. )1 August 1:, 1231, Friday + . +AA+B%N5. $ as6 that Co,,issioner &rePas be re'ognized for an a,end,ent on line 1;. &<E P ES$#EN&. Co,,issioner &rePas is re'ognized. + . & E_AS. +ada, President, ,ay $ propose an a,end,ent on line 1; of Se'tion @ by deleting therefro, */hose voting sto'6 and 'ontrolling interest.* An* 1n 51&u )3&r&o4, 1n(&r) )3& CA!"TAL (o )3& 51n& (3ou5* r&a*B Ja((o;1a)1on( a) 5&a() (17)y '&r;&n) o4 )3& CA!"TAL 1( o=n&* +y (u;3 ;1)1H&n(. %R. $"LLEGAS. :& a;;&') )3& a2&n*2&n). %R. TREQAS. T3anD you. THE !RES" ENT. T3& a2&n*2&n) o4 Co221((1on&r Tr&Ra( on 51n& 14 3a( +&&n a;;&')&* +y )3& Co221))&&. "( )3&r& any o+?&;)1onE /6ilence0 T3& C3a1r 3&ar( non&I )3& a2&n*2&n) 1( a''ro6&*. !!!! &<E P ES$#EN&. Co,,issioner Suarez is re'ognized. + . S8A EQ. &han6 you, +ada, President. &/o points a'tually are being raised by Co,,issioner #avideDs proposed a,end,ent. %ne has referen'e to the per'entage of

1( Nazareno 4 holdings and the other one is the basis for that per'entage. Aould
Corporation CASES Based on the Syllabus of Fr. Agustin the body have any ob9e'tion if /e split it into t/o portions be'ause there ,ay be several Co,,issioners /ho /ould be /illing to a''ept the Co,,issionerDs proposal on 'apital sto'6 in 'ontradistin'tion to a voting sto'6 for 'ontrolling interestL + . H$==E5AS. &he proposal has been a''epted already. + . #AH$#E. ?es, but it /as 1( per'ent. + . H$==E5AS. &hat is right. + . S8A EQ. So, it is no/ 1( per'ent as against /holly o/nedL + . #AH$#E. ?es. + . S8A EQ. $s the Co,,issioner not insisting on the voting 'apital sto'6 be'ause that /as already a''epted by the Co,,itteeL + . #AH$#E. Aould it ,ean that it /ould be 1(("per'ent voting 'apital sto'6L + . S8A EQ. No, under the Co,,issionerDs proposal it is 9ust *CAP$&A=* not *sto'6.* %R. A$" E. No, " =an) 1) )o +& 6&ry ;5&ar. :3a) 1( )3& a5)&rna)16& 'ro'o(a5 o4 )3& Co221))&&E Ho= (3a55 1) r&a*E %R. SUAREA. ") =155 on5y r&a* (o2&)31n@ 51D&B J)3& CA!"TAL OF :H"CH "S FULLY o=n&*.J %R. $"LLEGAS. L&) 2& r&a* 51n&( 12 )o 14 =31;3 ()a)&B S &n)&r 1n)o ;o8'ro*u;)1on, ?o1n) 6&n)ur&, 'ro*u;)1on (3ar1n@ a@r&&2&n)( =1)3 F151'1no ;1)1H&n( or ;or'ora)1on( or a((o;1a)1on( a) 5&a() 60 '&r;&n) o4 =3o(& CA!"TAL 1( o=n&* +y (u;3 ;1)1H&n(. :& ar& @o1n@ +a;D )o )3& 19-, an* 19.- 4or2u5a)1on(. %R. A$" E. " ;anno) a;;&') )3& 'ro'o(a5 +&;au(& )3& =or* CA!"TAL (3ou5* no) r&a55y +& )3& @u1*1n@ 'r1n;1'5&. ") 1( )3&

o=n&r(31' o4 )3& ;or'ora)1on. ") 2ay +& 6o)1n@ or no) 6o)1n@, +u) )3a) 1( no) )3& @u1*1n@ 'r1n;1'5&. %R. SUAREA. So, )3& Co221((1on&r 1( 1n(1()1n@ on )3& u(& o4 )3& )&r2 JCA!"TAL STOC9JE %R. A$" E. Y&(, )o +& 4o55o=&* +y )3& '3ra(& J:HOLLY o=n&*.J %R. SUAREA. Y&(, +u) =& ar& on5y ;on;&n)ra)1n@ on )3& 41r() 'o1n) K JCA!"TAL STOC9J or 2&r&5y JCA!"TAL.J %R. A$" E. CA!"TAL STOC9E

+ other Co,,issioner to ,a6e any re'o,,endations on other per'entagesL + . H$==E5AS. $ /ould suggest that /e vote on *si!ty,* /hi'h is indi'ated in the 'o,,ittee report. + . 5ASC%N. $t is the a,end,ent of Co,,issioner #avide that /e should vote on, not the 'o,,ittee report. + . H$==E5AS. ?es, it is all right. + . AQC8NA. +ada, President. THE !RES" ENT. Co221((1on&r AH;una 1( r&;o@n1H&*. %R. AACUNA. %ay " +& ;5ar141&* a( )o )3a) 'or)1on )3a) =a( a;;&')&* +y )3& Co221))&&E %R. $"LLEGAS. T3& 'or)1on a;;&')&* +y )3& Co221))&& 1( )3& *&5&)1on o4 )3& '3ra(& J6o)1n@ ()o;D or ;on)ro551n@ 1n)&r&().J %R. AACUNA. H&n;&, =1)3ou) )3& a61*& a2&n*2&n), )3& ;o221))&& r&'or) =ou5* r&a*B J;or'ora)1on( or a((o;1a)1on( a) 5&a() (17)y '&r;&n) o4 =3o(& CA!"TAL 1( o=n&* +y (u;3 ;1)1H&n(.J %R. $"LLEGAS. Y&(. %R. AACUNA. So 14 )3& a61*& a2&n*2&n) 1( 5o(), =& ar& ()u;D =1)3 60 '&r;&n) o4 )3& ;a'1)a5 )o +& o=n&* +y ;1)1H&n(E %R. $"LLEGAS. T3a) 1( r1@3). + . AQC8NA. But the 'ontrol 'an be /ith the foreigners even if they are the ,inority. =et us say ;( per'ent of the 'apital is o/ned by the,, but it is the voting 'apital, /hereas, the Filipinos o/n the nonvoting shares. So /e 'an have a situation /here the 'orporation is 'ontrolled by foreigners despite being the ,inority be'ause they have the voting 'apital. &hat is the ano,aly that /ould result there.

1( Nazareno 3 . 5ASC%N. Assu,ing that it is lost, that does not pre9udi'e any
Corporation CASES Based on the Syllabus of Fr. Agustin

%R. SUAREA. Y&(, 1) 1( JCA!"TAL STOC9.* S8SPENS$%N %F SESS$%N "t 5&5? p.m.! the session was resumed. THE !RES" ENT. T3& (&((1on 1( r&(u2&*. Co221((1on&r a61*& 1( )o ;5ar14y 31( 'o1n).

%R. $"LLEGAS. Y&(, Co221((1on&r a61*& 3a( a;;&')&* )3& =or* JCA!"TALJ 1n '5a;& o4 J6o)1n@ ()o;D or ;on)ro551n@ 1n)&r&().J T31( 1( an a2&n*2&n) a5r&a*y a;;&')&* +y )3& Co221))&&. Ae /ould li6e to 'all for a vote on 1(("per'ent Filipino versus 1(" per'ent Filipino. + . A=%N&%. $s it 1( per'entL + . H$==E5AS. Si!ty per'ent, yes. + . 5ASC%N. +ada, President, shall /e vote on the proposed a,end,ent of Co,,issioner #avide of *%NE <8N# E# PE CEN&L* + . H$==E5AS. ?es.

Corporation CASES Based on the Syllabus of Fr. Agustin + . BEN5Q%N. No, the reason /e eli,inated the /ord *sto'6* as stated in the 124@ and 12@: Constitutions is that a''ording to Co,,issioner odrigo, there are asso'iations that do not have sto'6s. &hat is /hy /e say *CAP$&A=.* + . AQC8NA. Ae should not eli,inate the phrase *'ontrolling interest.* + . BEN5Q%N. $n the 'ase of sto'6 'orporations, it is assu,ed. + . AQC8NA. ?es, but /hat $ ,ean is that the 'ontrol should be /ith the Filipinos. + . BEN5Q%N. ?es, that is understood. + . AQC8NA. ?es, be'ause if /e 9ust say *si!ty per'ent of /hose 'apital is o/ned by the Filipinos,* the 'apital ,ay be voting or nonvoting. + . BEN5Q%N. &hat is 'orre't. + . AQC8NA. +y 'on'ern is the situation /here there is a voting sto'6. $t is a sto'6 'orporation. Ahat the Co,,ittee reIuires is that 1( per'ent of the 'apital should be o/ned by Filipinos. But that /ould not assure 'ontrol be'ause that 1( per'ent ,ay be non" voting. +S. AM8$N%. +ada, President. + . %+8=%. +ay /e vote on the per'entage firstL + . AQC8NA. &he phrase *'ontrolling 'onsideration.

1( Nazareno 2 interest* is an i,portant

&<E P ES$#EN&. =et us pro'eed to vote then. %R. !A "LLA. %a*a2 !r&(1*&n). THE !RES" ENT. T3& $1;&8!r&(1*&n), Co221((1on&r !a*155a, 1( r&;o@n1H&*. %R. !A "LLA. T3& Tr&Ra( a2&n*2&n) 3a( a5r&a*y +&&n a''ro6&*. T3& on5y on& 5&4) 1( )3& a61*& a2&n*2&n) =31;3 1( (u+()1)u)1n@ )3& J(17)y '&r;&n)J )o J:HOLLY o=n&* +y F151'1no(.* -&he &rePas a,end,ent deleted the phrase */hose voting sto'6s and 'ontrolling interest* and inserted the /ord *'apital.* $t approved the phrase *asso'iations at least si!ty per'ent of the CAP$&A= is o/ned by su'h 'itizens..-see page 11. +ada, President, $ a, against the proposed a,end,ent of Co,,issioner #avide be'ause that is an ideal situation /here do,esti' 'apital is available for the e!ploration, develop,ent and utilization of these natural resour'es, espe'ially ,inerals, petroleu, and other ,ineral oils. &hese are not only ris6y business but they also involve substantial 'apital. %bviously, it is an ideal situation but it is not pra'ti'al. And if /e adopt the 1(("per'ent 'apital of Filipino 'itizens, $ a, afraid that these natural resour'es, parti'ularly these ,inerals and oil, et 'etera, ,ay re,ain hidden in our lands, or in other offshore pla'es /ithout anyone being able to e!plore, develop or utilize the,. $f it /ere possible to have a 1(("per'ent Filipino 'apital, $ /ould prefer that rather than the 1( per'ent, but if /e adopt the 1(( per'ent, ,y fear is that /e /ill never be able to e!plore, develop and utilize our natural resour'es be'ause /e do not have the do,esti' resour'es for that. + . #AH$#E. +ada, President, ,ay $ be allo/ed to rea'tL &<E P ES$#EN&. Co,,issioner #avide is re'ognized. + . #AH$#E. $ a, very glad that Co,,issioner Padilla e,phasized ,inerals, petroleu, and ,ineral oils. &he Co,,ission has 9ust approved the possible foreign entry into the develop,ent, e!ploration and utilization of these ,inerals, petroleu, and other ,ineral oils by virtue of the 0a,ir a,end,ent. $ voted in favour of

&<E P ES$#EN&. Before /e vote on this, /e /ant to be 'larified first. +S. AM8$N%. +ada, President. &<E P ES$#EN&. Co,,issioner AIuino is re'ognized. +S. AM8$N%. $ /ould suggest that /e vote on the #avide a,end,ent /hi'h is 1(("per'ent 'apital, and if it is voted do/n, then /e refer to the original draft /hi'h is *'apital sto'6* not 9ust *'apital.*

the 0a,ir a,end,ent be'ause it /ill eventually give /ay to vesting in e!'lusively Filipino 'itizens and 'orporations /holly o/ned by Filipino 'itizens the right to utilize the other natural resour'es. &his ,eans that as a ,atter of poli'y, natural resour'es should be utilized and e!ploited only by Filipino 'itizens or 'orporations /holly o/ned by su'h 'itizens. But by virtue of the 0a,ir a,end,ent, sin'e /e feel that Filipino 'apital ,ay not be enough for the develop,ent and utilization of ,inerals, petroleu, and other ,ineral oils, the President 'an enter into servi'e 'ontra'ts /ith foreign 'orporations pre'isely for the develop,ent and utilization of su'h resour'es. And so, there is nothing to fear that /e /ill stagnate in the develop,ent of ,inerals, petroleu,, and ,ineral oils be'ause /e no/ allo/ servi'e 'ontra'ts. $t is, therefore, /ith ,ore reason that at this ti,e /e ,ust provide for a 1(("per'ent Filipinization generally to all natural resour'es. + . H$==E5AS. $ thin6 /e are ready to vote, +ada, President. &<E P ES$#EN&. &he A'ting Floor =eader is re'ognized. + . +AA+B%N5. +ada, President, /e as6 that the ,atter be put to a vote. &<E P ES$#EN&. Aill Co,,issioner #avide please read lines 1; and 1: /ith his a,end,ent. + . #AH$#E. =ines 1; and 1:, Se'tion @, as a,ended, /ill read7 *asso'iations /hose CAP$&A= sto'6 is A<%==? o/ned by su'h 'itizens.* H%&$N5

+ be re'ognized on'e ,ore for further a,end,ents.

11 Nazareno ( . +AA+B%N5. +ada, President, $ as6 that Co,,issioner #avide

Corporation CASES Based on the Syllabus of Fr. Agustin

&<E P ES$#EN&. Co,,issioner #avide is re'ognized. + . #AH$#E. &han6 you, +ada, President. &his is 9ust an insertion of a ne/ paragraph bet/een lines ); and ): of Se'tion @ of the sa,e page. $t /ill read as follo/s7 &<E 5%HE N$N5 AN# +ANA5$N5 B%A #S %F S8C< C% P% A&$%NS S<A== BE HES&E# ENC=8S$HE=? $N C$&$QENS %F &<E P<$=$PP$NES. + . H$==E5AS. Ahi'h 'orporations is the Co,,issioner referring toL + . #AH$#E. &his refers to 'orporations 1( per'ent of /hose 'apital is o/ned by su'h 'itizens. + . H$==E5AS. Again the a,end,ent /ill readO + . #AH$#E. *&<E 5%HE N$N5 AN# +ANA5$N5 B%#$ES %F S8C< C% P% A&$%NS S<A== BE HES&E# ENC=8S$HE=? $N C$&$QENS %F &<E P<$=$PP$NES.* EH. $5%S. +ada, President. igos is re'ognized.

&<E P ES$#EN&. Co,,issioner

EH. $5%S. $ /onder if Co,,issioner #avide /ould agree to put that senten'e i,,ediately after *'itizens* on line 1:. + . %+8=%. +ay $ as6 a Iuestion. Presu,ably, it is 1(";(L

&<E P ES$#EN&. As ,any as are in favour of this proposed a,end,ent of Co,,issioner #avide on lines 1; and 1: of Se'tion @, please raise their hand. --ew ,embers raised their hand.. As ,any as are against the a,end,ent, please raise their hand. -Several ,embers raised their hand.. &he results sho/ 11 votes in favour and )) againstE the a,end,ent is lost.

+ . #AH$#E. ?es. + . %+8=%. Ahat about the ;( per'entL Aould they not be entitled to a proportionate seat in the boardL + . #AH$#E. 8nder ,y proposal, they should not be allo/ed to sit in the board. + . %+8=%. &hen the Co,,issioner is really proposing 1(( per'ent /hi'h is the opposite /ayL

+ . #AH$#E. Not ne'essarily, be'ause if ;( per'ent of the 'apital sto'6 /ill be o/ned by aliens /ho ,ay sit in the board, they 'an still e!er'ise their right as ordinary sto'6holders and 'an sub,it the ne'essary proposal for, say, a poli'y to be underta6en by the board. + . %+8=%. But that is part of the sto'6holderDs right G to sit in the board of dire'tors. + . #AH$#E. &hat ,ay be allo/ed but this is a very unusual and abnor,al situation so the Constitution itself 'an prohibit the, to sit in the board. + . %+8=%. But it /ould be pointless to allo/ the, ;( per'ent /hen they 'annot sit in the board nor have a say in the ,anage,ent of the 'o,pany. =i6e/ise, that /ould be e!traordinary be'ause both the 12@: and the 124@ Constitutions allo/ed not only the ;( per'ent but 'o,,ensurately they /ere represented in the board and ,anage,ent only to the e!tent of their eIuity interest, /hi'h is ;( per'ent. &he ,anage,ent of a 'o,pany is lodged in the boardE so if the 1( per'ent, /hi'h is 'o,posed of Filipinos, 'ontrols the board, then the Filipino part has 'ontrol of the 'o,pany. $ thin6 it is rather unfair to say7 *?ou ,ay have ;( per'ent of the 'o,pany, but that is all. ?ou 'annot ,anage, you 'annot sit in the board.* &hat /ould dis'ourage invest,ents. &hen it is li6e having a one hundredper'ent o/nershipE $ ,ean, either /e allo/ a 1(";( /ith full rights to the ;( per'ent, li,ited as it is as to a ,inority, or /e do not allo/ the, at all. &his ,eans if it is allo/edE /e 'annot have it both /ays. + . #AH$#E. &he aliens 'annot also have everything. Ahile they ,ay be given entry into subs'riptions of the 'apital sto'6 of the 'orporation, it does not ne'essarily follo/ that they 'annot be deprived of the right of ,e,bership in the ,anaging or in the governing board of a parti'ular 'orporation. But it /ill not totally deprive the, of a say be'ause they 'an still e!er'ise the ordinary rights of sto'6holders. &hey 'an sub,it their proposal and they 'an be heard. + . %+8=%. ?es, but they have no vote. &hat is li6e being represented in the Congress but not being allo/ed to vote li6e our old resident Co,,issioners in the 8nited States. &hey 'an be heardE they 'an be seen but they 'annot vote.

+ do it no/ in respe't to our natural resour'esL &his is a very 'riti'al and deli'ate issue.

11 Nazareno 1 . #AH$#E. $f that /as allo/ed under that situation, /hy 'an /e not
Corporation CASES Based on the Syllabus of Fr. Agustin

+ . %+8=%. Pre'isely, /e used to 'o,plain ho/ unfair that /as. %ne 'an be seen and heard but he 'annot vote. + . #AH$#E. Ae 6no/ that under the 'orporation la/, /e have the rights of the ,inority sto'6holders. &hey 'an be heard. As a ,atter of fa't, they 'an probably allo/ a pro!y to vote for the, and, therefore, they still retain that spe'ifi' prerogative to parti'ipate 9ust li6e /hat /e did in the Arti'le on So'ial 0usti'e. + . %+8=%. &hat /ould en'ourage du,,ies if /e give the, pro!ies. + . #AH$#E. As a ,atter of fa't, /hen it 'o,es to en'ouraging du,,ies, by allo/ing ;("per'ent o/nership to 'o,e in /e /ill e!pe't the proliferation of 'orporations a'tually o/ned by aliens using du,,ies. + . %+8=%. No, be'ause ;( per'ent is a substantial and fair share and, therefore, the bona fide foreign investor is satisfied /ith that proportion. <e does not have to loo6 for du,,ies. $n fa't, that is /hat assures a genuine invest,ent if /e give a foreign investor the ;( per'ent and all the rights that go /ith it. %ther/ise, /e are either dis'ouraging the invest,ent altogether or /e are en'ouraging 'ir'u,vention. =et us be fair. $f it is 1(";(, then /e give hi, the right, li,ited as to his ,inority position. + . +AA+B%N5. +ada, President, the body /ould li6e to 6no/ the position of the Co,,ittee so that /e 'an put the ,atter to a vote. + . H$==E5AS. &he Co,,ittee does not a''ept the a,end,ent. &<E P ES$#EN&. &he Co,,ittee does not a''ept. Aill Co,,issioner #avide insist on his a,end,entL + . #AH$#E. Ae reIuest a vote.

&<E P ES$#EN&. Aill Co,,issioner #avide state his proposed a,end,ent againL + . #AH$#E. &he proposed a,end,ent /ould be the insertion of a ne/ paragraph to Se'tion @, bet/een lines ); and ):, page ), /hi'h reads7 *&<E 5%HE N$N5 AN# +ANA5$N5 B%#$ES %F S8C< C% P% A&$%NS S<A== BE HES&E# ENC=8S$HE=? $N C$&$QENS %F &<E P<$=$PP$NES.* + . PA#$==A. +ada, President. &<E P ES$#EN&. Co,,issioner Padilla is re'ognized. + . PA#$==A. +ada, President, ,ay $ 9ust say that this Se'tion @ spea6s of *'o"produ'tion, 9oint venture, produ'tion sharing agree,ents /ith Filipino 'itizens.* $f the foreign share of, say, ;( per'ent /ill not be represented in the board or in ,anage,ent, $ /onder if there /ould be any foreign investor /ho /ill a''ept putting 'apital but /ithout any voi'e in ,anage,ent. $ thin6 that ,ight ,a6e the provision on *'oprodu'tion, 9oint venture and produ'tion sharing* illusory. H%&$N5 &<E P ES$#EN&. $f the Chair is not ,ista6en, that /as the sa,e point e!pressed by Co,,issioner o,ulo, a ,e,ber of the Co,,ittee. As ,any as are in favour of the #avide a,end,ent, please raise their hand. --ew ,embers raised their hand.. As ,any as are against, please raise their hand. -Several ,embers raised their hand.. As ,any as are abstaining, please raise their hand. -/ne ,ember raised his hand.. !!!! &<E P ES$#EN&. Co,,issioner 5ar'ia is re'ognized.

11 Nazareno ) %R. GARC"A. %y a2&n*2&n) 1( on S&;)1on -, )3& (a2& 1)&2

Corporation CASES Based on the Syllabus of Fr. Agustin =31;3 Co221((1on&r a61*& )r1&* )o a2&n*. ") 1( +a(1;a55y on )3& (3ar& o4 60 '&r;&n). " =ou5* 51D& )o 'ro'o(& )3a) =& ra1(& )3& 60 '&r;&n) )o SE$ENTY8F"$E !ERCENT (o )3& 51n& =ou5* r&a*B JSE$ENTY8F"$E !ERCENT o4 =3o(& CA!"TAL 1( o=n&* +y (u;3 ;1)1H&n(.* &<E P ES$#EN&. Ahat does the Co,,ittee sayL S8SPENS$%N %F SESS$%N + . H$==E5AS. &he Co,,ittee insists on staying /ith the 1( per'ent G 1(";(. +ada, President, ,ay /e as6 for a suspension of the session. &<E P ES$#EN&. &he session is suspended. It was 6&D< p.m. ES8+P&$%N %F SESS$%N "t 6&C1 p.m.! the session was resumed. &<E P ES$#EN&. &he session is resu,ed. + . SA +$EN&%. +ada, President. &<E P ES$#EN&. &he A'ting Floor =eader, Co,,issioner Sar,iento, is re'ognized. + . SA +$EN&%7 Co,,issioner 5ar'ia still has the floor. +ay $ as6 that he be re'ognized. &<E P ES$#EN&. Co,,issioner 5ar'ia is re'ognized. %R. GARC"A. T3anD you 6&ry 2u;3, %a*a2 !r&(1*&n). " =ou5* 51D& )o 'ro'o(& )3& 4o55o=1n@ a2&n*2&n) on S&;)1on -, 51n& 14 on 'a@& 2. " 'ro'o(& )o ;3an@& )3& =or* J(17)yJ )o SE$ENTY8F"$E. So, )31( =155 r&a*B Jor 1) 2ay &n)&r 1n)o ;o8 'ro*u;)1on, ?o1n) 6&n)ur&, 'ro*u;)1on (3ar1n@ a@r&&2&n)(

Corporation CASES Based on the Syllabus of Fr. Agustin =1)3 F151'1no ;1)1H&n( or ;or'ora)1on( or a((o;1a)1on( a) 5&a() SE$ENTY8F"$E '&r;&n) o4 =3o(& CA!"TAL ()o;D or ;on)ro551n@ 1n)&r&() 1( o=n&* +y (u;3 ;1)1H&n(.J %R. $"LLEGAS. T31( 1( ?u() a ;orr&;)1on. " )31nD Co221((1on&r AH;una 1( no) 1n(1()1n@ on )3& r&)&n)1on o4 )3& '3ra(& J;on)ro551n@ 1n)&r&(),J (o =& =155 r&)a1n JCA!"TALJ )o @o +a;D r&a55y )o )3& 19-, an* 19.- 4or2u5a)1on(. + . BENNA5EN. +ay $ suggest that /e retain the phrase *'ontrolling interest*L + . H$==E5AS. ?es, /e /ill retain it. -&he state,ent of Co,,issioner Hillegas is possibly erroneous 'onsidering his 'onsistent state,ent, espe'ially during the oral argu,ents, that the Constitutional Co,,ission re9e'ted the 8P Proposal to use the phrase *'ontrolling interest.*. &<E P ES$#EN&. Are /e no/ ready to voteL + . SA +$EN&%. ?es, +ada, President. H%&$N5 &<E P ES$#EN&. As ,any as are in favour of the proposed a,end,ent of Co,,issioner 5ar'ia for *SEHEN&?"F$HE* per'ent, please raise their hand. --ew ,embers raised their hand.. As ,any as are against the a,end,ent, please raise their hand. -Several ,embers raised their hand.. As ,any as are abstaining, please raise their hand. -/ne ,ember raised his hand.. T3& r&(u5)( (3o= 16 6o)&( 1n 4a6our, 18 a@a1n() an* 1 a+()&n)1onI )3& Gar;1a a2&n*2&n) 1( 5o(). + . SA +$EN&%. +ada, President, ,ay $ as6 that Co,,issioner Foz be re'ognized. &<E P ES$#EN&. Co,,issioner Foz is re'ognized.

+ . F%Q. After losing by only t/o votes, proposal /ill finally get the vote of the ,a9ority. &he a,end,ent is to provide for at least &A%"&<$ #S. + . S8A EQ. $t is eIuivalent to 11 )F@. &<E P ES$#EN&. Aill the Co,,issioner repeatL %R. FOA. " 'ro'o(& JT:O8TH"R S o4 =3o(& CA!"TAL 1( o=n&* +y (u;3 ;1)1H&n(.J %a*a2 !r&(1*&n), =& ar& r&4&rr1n@ )o )3& (a2& 'ro61(1on )o =31;3 )3& 'r&61ou( a2&n*2&n)( 3a6& +&&n (u@@&()&*. F1r(), =& ;a55&* 4or a 1008'&r;&n) o=n&r(31'I an* )3&n, (&;on*, =& ;a55&* 4or a .,8'&r;&n) o=n&r(31' +y F151'1no ;1)1H&n(. So ,y proposal is to provide for at least &A%"&<$ #S of the 'apital to be o/ned by Filipino 'itizens. $ /ould li6e to 'all the attention of the body that the sa,e ratio or eIuity reIuire,ent is provided in the 'ase of publi' utilities. And if /e are /illing to provide su'h eIuity reIuire,ents in the 'ase of publi' utilities, /e should at least li6e/ise provide the sa,e eIuity ratio in the 'ase of natural resour'es. + . H$==E5AS. Co,,issioner o,ulo /ill respond.

11 Nazareno @ $ suppose that this ne!t

+ . %+8=%. $ 9ust /ant to point out that there is an a,end,ent here filed to also redu'e the ratio in Se'tion 1: to 1(";(. + . PA#$==A. +ada, President. &<E P ES$#EN&. Co,,issioner Padilla is re'ognized. + . PA#$==A. &he 1( per'ent /hi'h appears in the 'o,,ittee report has been repeatedly upheld in various votings. %ne proposal /as /hole G 1(( per'entE another one /as 4: per'ent and no/ it is 11 )F@ per'ent. $s not the de'ision of this Co,,ission in voting to uphold the per'entage in the 'o,,ittee report already a de'ision on this issueL + . F%Q. %ur a,end,ent has been previously brought to the attention of the body.

Corporation CASES Based on the Syllabus of Fr. Agustin + . H$==E5AS. &he Co,,ittee does not a''ept the Co,,issionerDs a,end,ent. &his has been dis'ussed fully and, /ith only one"third of the vote, it is li6e having nothing at all in de'ision",a6ing. $t 'an be 'o,pletely vetoed. + . %# $5%. +ada, President. odrigo is re'ognized. &<E P ES$#EN&. Co,,issioner Nolledo is re'ognized. %R. NOLLE O. T3anD you, %a*a2 !r&(1*&n).

Nazareno

11 ;

&<E P ES$#EN&. Co,,issioner

+ . %# $5%. &his is an e!traordinary suggestion. But 'onsidering the 'ir'u,stan'es that the proposals fro, the 1(( per'ent to 4: per'ent lost, and no/ it /ent do/n to 11 )F@ per'ent, /e ,ight go do/n to 1: per'ent ne!t ti,e. So $ suggest that /e vote bet/een 11 )F@ and 1( per'ent. Ahi'h does the body /antL &hen that should be the end of itE other/ise, this is ridi'ulous. After this, if the 11 )F@ per'ent /ill lose, then so,ebody 'an say7 *Aell, ho/ about 1: per'entL* &<E P ES$#EN&. &he Chair /as ,ade to understand that Co,,issioner FozD proposal is the last proposal on this parti'ular line. Aill Co,,issioner Foz restate his proposalL + . F%Q. +y proposal is *&A%"&<$ #S of /hose CAP$&A= or 'ontrolling interest is o/ned by su'h 'itizens.* H%&$N5 THE !RES" ENT. :& no= 'u) Co221((1on&r FoHC a2&n*2&n) )o a 6o)&. As ,any as are in favour of the a,end,ent of Co,,issioner Foz, please raise their hand. --ew ,embers raised their hand.. As ,any as are against, please raise their hand. -Several ,embers raised their hand.. T3& r&(u5)( (3o= 1. 6o)&( 1n 4a6our, 20 a@a1n(), an* no) a+()&n)1onI )3& a2&n*2&n) 1( 5o().)) !!!! August )), 1231, Friday

" =ou5* 51D& )o 'ro'oun* (o2& >u&()1on( )o )3& ;3a1r2an an* 2&2+&r( o4 )3& ;o221))&&. " 3a6& 3&r& a ;o'y o4 )3& a''ro6&* 'ro61(1on( on Ar)1;5& on )3& Na)1ona5 E;ono2y an* !a)r12ony. On 'a@& 2, )3& 41r() )=o 51n&( ar& =1)3 r&('&;) )o )3& F151'1no an* 4or&1@n &>u1)y an* " (a1*B JA) 5&a() (17)y '&r;&n) o4 =3o(& ;a'1)a5 or ;on)ro551n@ 1n)&r&() 1( o=n&* +y (u;3 ;1)1H&n(.J " no)1;& )3a) )31( 'ro61(1on =a( a2&n*&* +y Co221((1on&r a61*& +y ;3an@1n@ J6o)1n@ ()o;D(J )o JCA!"TAL,J +u) " ()155 no)1;& )3a) )3&r& a''&ar( )3& )&r2 J;on)ro551n@ 1n)&r&()J =31;3 (&&2( )o r&4&r )o a((o;a1)1on( o)3&r )3an ;or'ora)1on( an* 1) 1( 2&r&5y ,0 '&r;&n) '5u( on& '&r;&n) =31;3 1( 5&(( )3an 60 '&r;&n). #&(1*&(, )3& =or*1n@( 2ay 1n*1;a)& )3a) )3& 60 '&r;&n) 2ay +& +a(&* no) on5y on ;a'1)a5 +u) a5(o on ;on)ro551n@ 1n)&r&()I 1) ;ou5* 2&an 60 '&r;&n) or ,1 '&r;&n). #&4or& " 'ro'oun* )3& 41na5 >u&()1on, " =ou5* 51D& )o 2aD& a ;o22&n) 1n r&5a)1on )o S&;)1on 1, (1n;& )3&y ar& r&5a)&* )o &a;3 o)3&r. " no)1;& )3a) 1n S&;)1on 1,, )3&r& ()155 a''&ar( )3& '3ra(& J6o)1n@ ()o;D or ;on)ro551n@ 1n)&r&().J T3& )&r2 J6o)1n@ ()o;D(J a( )3& +a(1( o4 )3& F151'1no &>u1)y 2&an( )3a) 14 60 '&r;&n) o4 )3& 6o)1n@ ()o;D( +&5on@ )o F151'1no(, 4or&1@n&r( 2ay no= o=n 2or& )3an 40 '&r;&n) o4 )3& ;a'1)a5 a( 5on@ a( )3& 40 '&r;&n) or )3& &7;&(( )3&r&o4 =155 ;o6&r non6o)1n@ ()o;D. T31( 1( a(1*& 4ro2 )3& 4a;) )3a) un*&r )3& Cor'ora)1on Co*&, &6&n non6o)1n@ (3ar&( ;an 6o)& on ;&r)a1n 1n()an;&(. Con)ro5 o6&r 1n6&()2&n)( 2ay ;o6&r a('&;)( o4 2ana@&2&n) an* 'ar)1;1'a)1on 1n )3& 4ru1)( o4 'ro*u;)1on or &7'5o1)a)1on. So, " 3o'& )3& ;o221))&& =155 ;on(1*&r 4a6ora+5y 2y r&;o22&n*a)1on )3a) 1n()&a* o4 u(1n@ J;on)ro551n@ 1n)&r&()(,J =& ?u() u(& JCA!"TALJ un14or25y 1n ;a(&( =3&r& 4or&1@n &>u1)y 1( '&r21))&* +y 5a=, +&;au(& )3& 'ur'o(& 1( r&a55y )o 3&5' )3& F151'1no( 1n )3& &7'5o1)a)1on o4 na)ura5 r&(our;&( an* 1n )3& o'&ra)1on o4 'u+51; u)151)1&(. " Dno= )3& ;o221))&&, a) 1)( o=n 1n()an;&, ;an 2aD& )3& a2&n*2&n).

Corporation CASES Based on the Syllabus of Fr. Agustin :3a) *o&( )3& ;o221))&& (ayE %R. $"LLEGAS. :& ;o2'5&)&5y a@r&& =1)3 )3& Co221((1on&rC( 61&=(. A;)ua55y, 1) =a( r&a55y an o6&r(1@3). :& *1* *&;1*& on )3& =or* JCA!"TAL.J " )31nD 1) =a( )3& o'1n1on o4 )3& 2a?or1)y )3a) )3& '3ra(& J;on)ro551n@ 1n)&r&()J 1( a2+1@uou(. So, =& *o a;;&') )3& Co221((1on&rC( 'ro'o(a5 )o &5121na)& )3& '3ra(& Jor ;on)ro551n@ 1n)&r&()J 1n a55 )3& 'ro61(1on( )3a) )a5D a+ou) 4or&1@n 'ar)1;1'a)1on. %R. NOLLE O. No) on5y 1n S&;)1on -, +u) a5(o =1)3 r&('&;) )o S&;)1on 1,. &han6 you very ,u'h. + . +AA+B%N5. +ada, President. &<E P ES$#EN&. Co,,issioner +aa,bong is re'ognized. + . +AA+B%N5. $n vie/ of the ,anifestation of the 'o,,ittee, $ /ould li6e to be 'larified on the use of the /ord *CAP$&A=.* + . H$==E5AS. ?es, that /as the /ord used in the 124@ and 12@: Constitutions. %R. %AA%#ONG. L&) u( *&5121) our(&56&( )o )3a) =or* JCA!"TALJ. "n )3& Cor'ora)1on La=, 14 " r&2&2+&r ;orr&;)5y, =& 3a6& )3r&& )y'&( o4 ;a'1)a5B )3& au)3or1H&* ;a'1)a5 ()o;D, )3& (u+(;r1+&* ;a'1)a5 ()o;D an* )3& 'a1*8u' ;a'1)a5 ()o;D. T3& au)3or1H&* ;a'1)a5 ()o;D ;ou5* +& 1n)&r'r&)&* a( )3& ;a'1)a5 o4 )3& ;or'ora)1on 1)(&54 +&;au(& )3a) 1( )3& )o)a51)y o4 )3& 1n6&()2&n) o4 )3& ;or'ora)1on a( ()a)&* 1n )3& ar)1;5&( o4 1n;or'ora)1on. :3&n =& r&4&r )o 60 '&r;&n), ar& =& r&4&rr1n@ )o )3& au)3or1H&* ;a'1)a5 ()o;D or )3& 'a1*8u' ;a'1)a5 ()o;D (1n;& )3& *&)&r21nan) a( )o =3o o=n( )3& ;or'ora)1on, a( 4ar a( &>u1)y 1( ;on;&rn&*, 1( )3& (u+(;r1')1on o4 )3& '&r(onE " )31nD =& (3ou5* *&5121) our(&56&( a5(o )o =3a) =& 2&an +y 60 '&r;&n). Ar& =& r&4&rr1n@ )o )3& au)3or1H&* ;a'1)a5 ()o;D or )o )3& (u+(;r1+&* ;a'1)a5 ()o;D, +&;au(& )3&

*&)&r21na)1on, a( " (a1*, on )3& ;or'ora)1on 1( +a(&* on )3& (u+(;r1+&* ;a'1)a5 ()o;DE " =ou5* 51D& a r&'5y on )3a). + . H$==E5AS. Co,,issioner Suarez, a ,e,ber of the 'o,,ittee, /ould li6e to ans/er that. &<E P ES$#EN&. Co,,issioner Suarez is re'ognized. + . S8A EQ. &han6 you, +ada, President. Ae stated this be'ause there ,ight be a ,isunderstanding regarding the interpretation of the ter, *CAP$&A=* as no/ used as the basis for the per'entage of foreign invest,ents in appropriate instan'es and the interpretation attributed to the /ord is that it should be based on the paidup 'apital. Ae eli,inated the use the phrase *voting sto'6 or 'ontrolling interest* be'ause that is only used in 'onne'tion /ith the ,atter of voting. As a ,atter of fa't, in the de'laration of dividends for private 'orporations, it is usually based on the paid"up 'apitalization. So, /hat is really the do,inant fa'tor to be 'onsidered in ,atters of deter,ining the 1(";( per'entage should really be the paid"up 'apital of the 'orporation. + . +AA+B%N5. $ /ould li6e to get 'larifi'ation on this. $f $ re,e,ber ,y 'orporation la/ 'orre'tly, /e usually use a deter,inant in order to find out /hat the ratio of o/nership is, not really on the paid"up 'apital sto'6 but on the subs'ribed 'apital sto'6. For e!a,ple, if the /hole authorized 'apital sto'6 of the 'orporation is P 1 ,illion, if the subs'ription is 1( per'ent of P 1 ,illion /hi'h is P 1((,(((, then that is supposed to be the deter,inant /hether there is a sharing of 1( per'ent of Filipinos or not. $t is not really on the paid"up 'apital be'ause on'e a person subs'ribes to a 'apital sto'6 then /hether that 'apital sto'6 is paid up or not, does not really ,atter, as far as the boo6s of the 'orporation are 'on'erned. &he subs'ribed 'apital sto'6 is supposed to be o/ned by the person /ho ,a6es the subs'ription. &here are so ,any la/s on ho/ to 'olle't the delinIuen'y and so on.

11 Nazareno : ;on)ro551n@ 1n)&r&() o4 a

$ vie/ of the Co,,issionerDs ans/er, $ /ould li6e to 6no/ /hether he is deter,ined to put on the re'ord that in order to deter,ine the 1(";( per'ent sharing, /e have to deter,ine /hether /e /ill use a deter,inant /hi'h is the subs'ribed 'apital sto'6 or the paid"up 'apital sto'6. + S8A EQ. Ae are prin'ipally 'on'erned about the interpretation /hi'h /ould be atta'hed to itE that is, it should be li,ited to authorized 'apital sto'6, not to subs'ribed 'apital sto'6. $ /ill give the Co,,issioner an illustration of /hat he is e!plaining to the Co,,ission. + . +AA+B%N5. ?es, than6 you. + . S8A EQ. =et us say the authorized 'apital sto'6 is P 1 ,illion. 8nder the present rules in the Se'urities and E!'hange Co,,ission, at least ): per'ent of that a,ount ,ust be subs'ribed and at least ): per'ent of this subs'ribed 'apital ,ust be paid up. No/, let us dis'uss the basis of 1(";(. &o illustrate the ,atter further, let us say that 1( per'ent of the subs'riptions /ould be allo'ated to Filipinos and ;( per'ent of the subs'ribed 'apital /ould be held by foreigners. &hen /e 'o,e to the paid"up 'apitalization. 8nder the present rules in the Se'urities and E!'hange Co,,ission, a foreign 'orporation is supposed to subs'ribe to a ;("per'ent share /hi'h ,ust be fully paid up. %n the other hand, the 1( per'ent allo'ated to Filipinos need not be paid up. <o/ever, at least ): per'ent of the subs'ription ,ust be paid up for purposes of 'o,plying /ith the Corporation =a/. Ae 'an illustrate the ,atter further by saying that the 'o,plian'e of ): per'ent paid"up of the subs'ribed 'apital /ould be fulfilled by the full pay,ent of the ;( per'ent by the foreigners. So, /e have a situation /here the Filipino per'entage of 1( ,ay not even 'o,ply /ith the ):"per'ent reIuire,ent be'ause of the totality due to the fully pay,ent of the ;("per'ent of the foreign investors, the pay,ent of ): per'ent paid"up on the subs'ription /ould have been 'onsidered fulfilled. &hat is e!a'tly /hat /e are trying to avoid. + . +AA+B%N5 $ appre'iate very ,u'h the e!planation but $ /onder if the 'o,,ittee /ould subs'ribe to that vie/ be'ause $ /ill

11 Nazareno 1 sti'6 to ,y thin6ing that in the 'o,putation of the 1(";( ratio, the
Corporation CASES Based on the Syllabus of Fr. Agustin basis should be on the subs'ription. $f the subs'ription is being done by 1( per'ent Filipinos, /hether it is paid"up or not and the subs'ription is a''epted by the 'orporation, $ thin6 that is the proper deter,inant. $f /e base the 1(";( on the paid"up 'apital sto'6, /e have a proble, here /here the ;( per'ent is fully paid up and the 1( per'ent is not fully paid up G this ,ay be 'ontrary to the provisions of the Constitution. So $ /ould li6e to as6 for the proper advise,ent fro, the Co,,ittee as to /hat should be the proper interpretation be'ause this /ill 'ause havo' on the interpretation of our Corporation =a/. + . %+8=%. +ada, President. o,ulo is re'ognized.

&<E P ES$#EN&. Co,,issioner

+ . %+8=%. Ae go by the established rule /hi'h $ believe is unifor,ly held. $t is based on the subs'ribed 'apital. $ 6no/ only of one possible e!'eption and that is /here the byla/s prohibit the subs'riber fro, voting. But that is a very rare provision in byla/s. %ther/ise, ,y infor,ation and belief is that it is based on the subs'ribed 'apital. + . +AA+B%N5. $t is, therefore, the understanding of this +e,ber that the Co,,issioner is so,e/hat revising the ans/er of Co,,issioner Suarez to that e!tentL + . %+8=%. No, $ do not thin6 /e 'ontradi't ea'h other. <e is tal6ing really of the instan'e /here the subs'riber is a non"resident and, therefore, ,ust fully pay. &hat is ho/ $ understand his position. + . +AA+B%N5. +y understanding is that in the 'o,putation of the 1(";( sharing under the present for,ulation, the deter,inant is the paid"up 'apital sto'6 to /hi'h $ disagree. %R. RO%ULO. A) 5&a(), 4ro2 2y 'o1n) o4 61&=, 1) 1( )3& (u+(;r1+&* ;a'1)a5 ()o;D. %R. %AA%#ONG. T3&n )3a) 1( ;5ar141&*.)@ !!!! August )@, 1231, Saturday

Corporation CASES Based on the Syllabus of Fr. Agustin +S. %SA $% B A$#. +ada, President, $ propose a ne/ se'tion to read7 *&<E +ANA5E+EN& B%#? %F EHE ? C% P% A&$%N % ASS%C$A&$%N S<A== $N A== CASES BE C%N& %==E# B? C$&$QENS %F &<E P<$=$PP$NES.* &his /ill prevent ,anage,ent 'ontra'ts and assure 'ontrol by Filipino 'itizens. Aill the 'o,,ittee assure us that this a,end,ent /ill insure that past a'tivities su'h as ,anage,ent 'ontra'ts /ill no longer be possible under this a,end,entL + . %+8=%. +ada, President, if $ ,ay reply. o,ulo is re'ognized.

+ . BEN5Q%N. &he 'o,,ittee sitting out a,end,ent of Co,,issioner de los eyes /hi'h subsu,es the a,end,ent of Co,,issioner osario Braid. &<E P ES$#EN&. So this /ill be a 9oint a,end,ent no/ of Co,,issioners osario Braid, de los eyes and others. + . E5A=A#%. +ada, President, $ 9oin in that a,end,ent /ith the reIuest that it /ill be the last senten'e of Se'tion 1: be'ause /e intend to put an anterior a,end,ent. <o/ever, that parti'ular senten'e /hi'h subsu,es also the proposal of Co,,issioner osario Braid 'an 9ust be pla'ed as the last senten'e of the arti'le. &<E P ES$#EN&. $s that a''eptable to the 'o,,itteeL + . H$==E5AS. ?es, +ada, President. +S. + . %SA $% B A$#. &han6 you. A+A, &he body is no/ ready to vote on the a,end,ent.

11 Nazareno 4 here a''epts the

&<E P ES$#EN&. Co,,issioner

+ . %+8=%. +ay $ as6 the proponent to read the a,end,ent again. +S. %SA $% B A$#. &he a,end,ent reads7 *&<E +ANA5E+EN& B%#? %F EHE ? C% P% A&$%N % ASS%C$A&$%N S<A== $N A== CASES BE C%N& %==E# B? C$&$QENS %F &<E P<$=$PP$NES.* + . #E =%S E?ES. +ada, President, /ill Co,,issioner osario Braid agree to a refor,ulation of her a,end,ent for it to be ,ore 'o,prehensive and all"e,bra'ingL &<E P ES$#EN&. Co,,issioner de los eyes is re'ognized.

F . BE NAS. +ada, President. &<E P ES$#EN&. Co,,issioner Bernas is re'ognized. F . BE NAS. Aill the 'o,,ittee a''ept a refor,ulation of the first partL + . BEN5Q%N. =et us hear it. FR. #ERNAS. T3& r&4or2u5a)1on =155 +& &((&n)1a55y )3& 4or2u5a o4 )3& 19.- Con()1)u)1on =31;3 r&a*(B JTHE !ART"C"!AT"ON OF FORE"GN "N$ESTORS "N THE GO$ERN"NG #O Y OF ANY !U#L"C UT"L"TY ENTER!R"SE SHALL #E L"%"TE TO THE"R !RO!ORT"ONATE SHARE "N THE CA!"TAL THEREOF AN SJ %R. $"LLEGAS. JALL THE ENECUT"$E AN %ANAG"NG OFF"CERS OF SUCH COR!ORAT"ONS AN ASSOC"AT"ONS %UST #E C"T"AENS OF THE !H"L"!!"NES.J

+ . #E =%S E?ES. &his is an a,end,ent $ sub,itted to the 'o,,ittee /hi'h reads7 *+A0% $&? %F &<E #$ EC&% S % & 8S&EES AN# A== &<E ENEC8&$HE AN# +ANA5$N5 %FF$CE S %F S8C< C% P% A&$%N % ASS%C$A&$%N +8S& BE C$&$QENS %F &<E P<$=$PP$NES.* &his a,end,ent is ,ore dire't be'ause it refers to parti'ular offi'ers to be all"Filipino 'itizens. + . BEN5Q%N. +ada, President. &<E P ES$#EN&. Co,,issioner Bengzon is re'ognized.

%R. #ENGAON. :155 Co221((1on&r #&rna( r&a* )3& =3o5& )31n@ a@a1nE FR. #ERNAS. JTHE !ART"C"!AT"ON OF FORE"GN "N$ESTORS "N THE GO$ERN"NG #O Y OF ANY !U#L"C UT"L"TY ENTER!R"SE SHALL #E L"%"TE TO THE"R !RO!ORT"ONATE SHARE "N THE CA!"TAL THEREOFSJ " *o no) 3a6& )3& r&() o4 )3& ;o'y. %R. #ENGAON. JAN ALL THE ENECUT"$E AN %ANAG"NG OFF"CERS OF SUCH COR!ORAT"ONS OR ASSOC"AT"ONS %UST #E C"T"AENS OF THE !H"L"!!"NES.J "( )3a) ;orr&;)E %R. $"LLEGAS. Y&(. %R. #ENGAON. %a*a2 !r&(1*&n), " )31nD )3a) =a( (a1* 1n a 2or& &5&@an) 5an@ua@&. :& a;;&') )3& a2&n*2&n). "( )3a) a55 r1@3) =1)3 Co221((1on&r Ro(ar1o #ra1*E %S. ROSAR"O #RA" . Y&(. THE !RES" ENT. T3& or1@1na5 au)3or( o4 )31( a2&n*2&n) ar& Co221((1on&r( Ro(ar1o #ra1*, *& 5o( R&y&(, R&@a5a*o, Na)161*a*, Gu1n@ona an* Fr. #&rna(. %R. E LOS REYES. T3& @o6&rn1n@ +o*y r&4&r( )o )3& +oar* o4 *1r&;)or( an* )ru()&&(. %R. $"LLEGAS. T3a) 1( r1@3). %R. #ENGAON. Y&(, )3& @o6&rn1n@ +o*y r&4&r( )o )3& +oar* o4 *1r&;)or(. %R. REGALA O. ") 1( a;;&')&*. %R. RA%A. T3& +o*y 1( no= r&a*y )o 6o)&, %a*a2 !r&(1*&n). H%&$N5 &<E P ES$#EN&. As ,any as are in favour of this proposed a,end,ent /hi'h should be the last senten'e of Se'tion 1: and has been a''epted by the 'o,,ittee, pleas raise their hand. - "ll ,embers raised their hand..

11 Nazareno 3 As ,any as are against, please raise their hand. - @o ,ember raised
Corporation CASES Based on the Syllabus of Fr. Agustin his hand.. T3& r&(u5)( (3o= 29 6o)&( 1n 4a6our an* non& a@a1n()I (o )3& 'ro'o(&* a2&n*2&n) 1( a''ro6&*.); $t 'an be 'on'luded that the vie/ advan'ed by 0usti'e Carpio is in'orre't as the deliberations easily reveal that )3& 1n)&n) o4 )3& 4ra2&r( =a( no) )o 5121) )3& *&41n1)1on o4 )3& =or* J;a'1)a5J a( 2&an1n@ 6o)1n@ (3ar&(L()o;D(. &he ,a9ority in the original de'ision reprodu'ed the C%NC%+ deliberations held on August 1@ and August 1:, 1231, but negle'ted to Iuote the other pertinent portions of the deliberations that /ould have shed light on the true intent of the fra,ers of the Constitution. $t is 'on'eded that Proposed esolution No. ;21 on the language of /hat /ould be Art. N$$ of the Constitution 'ontained the phrase *voting sto'6 or 'ontrolling interest,* viz7 P %P%SE# ES%=8&$%N N%. ;21

ES%=8&$%N &% $NC% P% A&E $N &<E NEA C%NS&$&8&$%N AN A &$C=E %N NA&$%NA= EC%N%+? AN# PA& $+%N? Be it resolved as it is hereb8 resolved b8 the Constitutional Commission in session assembled! &o in'orporate the National E'ono,y and Patri,ony of the ne/ Constitution, the follo/ing provisions7 A &$C=E^^^^ NA&$%NA= EC%N%+? AN# PA& $+%N? !!!! SEC. 1:. No fran'hise, 'ertifi'ate, or any other for, of authorization for the operation of a publi' utility shall be granted e!'ept to 'itizens of the Philippines or to 'orporations or asso'iations organized under the la/s of the Philippines a) 5&a() )=o8)31r*( o4 =3o(& 6o)1n@ ()o;D or ;on)ro551n@ 1n)&r&() 1( o=n&* +y (u;3 ;1)1H&n(. Neither shall any su'h fran'hise or right be granted e!'ept under the 'ondition that it shall be sub9e't to a,end,ent, alteration, or repeal by Congress /hen the 'o,,on good so reIuires. &he State

Corporation CASES Based on the Syllabus of Fr. Agustin shall en'ourage eIuity parti'ipation in publi' utilities by the general publi'.): -&his be'a,e Se'. 11, Art. N$$.-E,phasis supplied.. &he aforeIuoted deliberations dis'lose that )3& Co221((1on &6&n)ua55y an* un&>u16o;a55y *&;1*&* )o u(& J;a'1)a5,J =31;3 r&4&r( )o )3& ;a'1)a5 ()o;D o4 )3& ;or'ora)1on, Ja( =a( &2'5oy&* 1n )3& 19-, an* 19.- Con()1)u)1on,J 1n()&a* o4 )3& 'ro'o(&* J6o)1n@ ()o;D or ;on)ro551n@ 1n)&r&()J a( )3& +a(1( 4or )3& '&r;&n)a@& o4 o=n&r(31' a55o=&* )o 4or&1@n&r( . &he follo/ing e!'hanges a,ong Co,,issioners Foz, Suarez and Bengzon refle't this de'ision, but the ,a9ority opinion in the 0une )3, )(11 #e'ision left their state,ents out7 + . F%Q. +r. Hi'e"President, in Se'tions @ and 2, )1 )3& 'ro61(1on on &>u1)y 1( +o)3 60 '&r;&n), +u) $ noti'e that )31( 1( no= *144&r&n) 4ro2 the provision in )3& 19.- Con()1)u)1on 1n )3a) )3& +a(1( 4or )3& &>u1)y 'ro61(1on 1( 6o)1n@ ()o;D or ;on)ro551n@ 1n)&r&() 1n()&a* o4 )3& u(ua5 ;a'1)a5 per'entage as provided for in the 124@ Constitution. :& =ou5* 51D& )o Dno= =3a) )3& *144&r&n;& =ou5* +& +&)=&&n )3& 'r&61ou( an* )3& 'ro'o(&* 'ro61(1on( r&@ar*1n@ &>u1)y 1n)&r&(). !!!! + . S8A EQ. ! ! ! As a ,atter of fa't, this parti'ular portion is still being revie/ed ! ! !. $n Se'tion 1, Arti'le N$$$ of the 19-, Con()1)u)1on, the /ording is that )3& '&r;&n)a@& (3ou5* +& +a(&* on )3& ;a'1)a5 =31;3 1( o=n&* +y (u;3 ;1)1H&n(. "n )3& 'ro'o(&* *ra4), )31( '3ra(& =a( 'ro'o(&*B J6o)1n@ ()o;D or ;on)ro551n@ 1n)&r&().J &his /as a plan (u+21))&* +y )3& U! La= C&n)&r. ! ! ! Ae /ould 3a6& )3r&& ;r1)&r1a to go by7 On& =ou5* +& +a(&* on ;a'1)a5, =31;3 1( ;a'1)a5 ()o;D o4 )3& ;or'ora)1on, au)3or1H&*, (u+(;r1+&* or 'a1* u', a( &2'5oy&* un*&r )3& 19-, an* )3& 19.- Con()1)u)1on. &he idea behind the introdu'tion of the phrase *voting sto'6 or 'ontrolling interest* /as pre'isely to avoid the perpetration of du,,ies, Filipino du,,ies of ,ultinationals. $t is theoreti'ally possible that a situation ,ay develop /here these ,ultinational interests /ould not really be only ;( per'ent but /ill e!tend beyond that in the ,atter of voting be'ause they 'ould enter into /hat is 6no/n as a voting trust or voting agree,ent /ith the rest of the sto'6holders and, therefore, not/ithstanding the fa't that on re'ord their 'apital e!tent is only up

to ;(" per'ent interest in the 'orporation, ,anaging and 'ontrolling the entire 'o,pany. &hat is /hy the 8P =a/ Center ,e,bers suggested that /e utilize the /ords *voting interest* /hi'h /ould pre'lude ,ultinational 'ontrol in the ,atter of voting, independent of the 'apital stru'ture of the 'orporation. And then )3&y a5(o a**&* )3& '3ra(& J;on)ro551n@ 1n)&r&()* /hi'h up to no/ they have not been able to su''essfully define the e!a't ,eaning of. ! ! ! And as far as $ a, 'on'erned, $ a, not spea6ing in behalf of the Co,,ittee, $ /ould feel ,ore ;o24or)a+5& 14 =& @o +a;D )o the /ording of )3& 19-, an* )3& 19.- Con()1)u)1on, )3a) 1( )o (ay, )3& 60840 '&r;&n)a@& ;ou5* +& +a(&* on )3& ;a'1)a5 ()o;D o4 )3& ;or'ora)1on. !!!! + . BEN5Q%N. $ also share the senti,ent of Co,,issioner Suarez in that respe't. So there are already t/o in the Co,,ittee /ho /ant to go ba'6 to the /ording of the 12@: and the 124@ Constitution. )4 $n fa't, in another portion of the C%NC%+ deliberations 'onveniently glossed over by the 0une )3, )(11 #e'ision, then Co,,issioner #avide strongly resisted the retention of the ter, *'apital* as used in the 12@: and 124@ Constitution on the ground that the ter, refers to both voting and nonvoting. Eventually, ho/ever, he 'a,e around to a''ept the use of *CAP$&A=* along /ith the ,a9ority of the ,e,bers of the Co,,ittee on Natural E'ono,y and Patri,ony in the afternoon session held on August 1:, 12317 %R. TREQAS. ! ! ! 2ay " 'ro'o(& an a2&n*2&n) on line 1; of Se'tion @ +y *&5&)1n@ )3&r&4ro2 J=3o(& 6o)1n@ ()o;D an* ;on)ro551n@ 1n)&r&().J And 1n 51&u )3&r&o4, 1n(&r) )3& CA!"TAL (o )3& 51n& (3ou5* r&a*B Ja((o;1a)1on( a) 5&a() (17)y '&r;&n) o4 )3& CA!"TAL 1( o=n&* +y (u;3 ;1)1H&n(. %R. $"LLEGAS. :& a;;&') )3& a2&n*2&n). %R. TREQAS. T3anD you. THE !RES" ENT. T3& a2&n*2&n) o4 Co221((1on&r Tr&Ra( on 51n& 14 3a( +&&n a;;&')&* +y )3& Co221))&&. "( )3&r& any o+?&;)1onE /6ilence0 T3& C3a1r 3&ar( non&I )3& a2&n*2&n) 1( a''ro6&*.)3

11 Nazareno 2 a'tually, they /ould be

Corporation CASES Based on the Syllabus of Fr. Agustin !!!! + . S8A EQ. ! ! ! &/o points are being raised by Co,,issioner #avideDs proposed a,end,ent. %ne has referen'e to the per'entage of holdings and the other one is the basis for the per'entage ! ! ! ! "( )3& Co221((1on&r no) 1n(1()1n@ on )3& 6o)1n@ ;a'1)a5 ()o;D +&;au(& )3a) =a( a5r&a*y a;;&')&* +y )3& Co221))&&E + . #AH$#E. Aould it ,ean that it /ould be 1(("per'ent voting 'apital sto'6L + . S8A EQ. No, under the Co,,issionerDs proposal it is 9ust *CAP$&A=* not *sto'6.* + . #AH$#E. No, $ /ant it to be very 'lear. Ahat is the alternative proposal of the Co,,itteeL <o/ shall it readL + . S8A EQ. $t /ill only read so,ething li6e7 *the CAP$&A= %F A<$C< $S F8==? o/ned.* + . H$==E5AS. =et ,e read lines 1) to 1; /hi'h state7 O enter into 'o"produ'tion, 9oint venture, produ'tion sharing agree,ents /ith Filipino 'itizens or 'orporations or asso'iations at least 1( per'ent of /hose CAP$&A= is o/ned by su'h 'itizens. Ae are going ba'6 to the 12@: and 124@ for,ulations. %R. A$" E. " ;anno) a;;&') )3& 'ro'o(a5 +&;au(& )3& =or* CA!"TAL (3ou5* no) r&a55y +& )3& @u1*1n@ 'r1n;1'5&. ") 1( )3& o=n&r(31' o4 )3& ;or'ora)1on. ") 2ay +& 6o)1n@ or no) 6o)1n@, +u) )3a) 1( no) )3& @u1*1n@ 'r1n;1'5&. !!!! &<E P ES$#EN&O. Co,,issioner #avide is to 'larify his point. %R. $"LLEGAS. Y&(, Co221((1on&r a61*& 3a( a;;&')&* )3& =or* JCA!"TALJ 1n '5a;& o4 J6o)1n@ ()o;D or ;on)ro551n@ 1n)&r&().J T31( 1( an a2&n*2&n) a5r&a*y a;;&')&* +y )3& Co221))&&.)2

&he above e!'hange pre'edes the Co,,issioner Az'una, /hi'h /ere 'ited in the 0une )3, )(11 #e'ision. +oreover, the state,ents ,ade subseIuent to the portion Iuoted in the 0une )3, )(11 #e'ision e,phasize the C%NC%+Ds a/areness of the plain ,eaning of the ter, *'apital* /ithout the Iualifi'ation espoused in the ,a9orityDs de'ision7 + . AQC8NA. +ay $ be 'larified as to B/hatC /as a''epted ! ! !. + . H$==E5AS. &he portion a''epted by the Co,,ittee is the *&5&)1on o4 )3& '3ra(& J6o)1n@ ()o;D or ;on)ro551n@ 1n)&r&().* + . AQC8NA. <en'e, /ithout the #avide a,end,ent, the 'o,,ittee report /ould read7 *'orporations or asso'iations at least si!ty per'ent of /hose CAP$&A= is o/ned by su'h 'itizens.* + . H$==E5AS. ?es. + . AQC8NA. So 14 )3& a61*& a2&n*2&n) 1( 5o(), =& ar& ()u;D =1)3 60 '&r;&n) o4 )3& ;a'1)a5 )o +& o=n&* +y ;1)1H&n(E + . H$==E5AS. &hat is right. + . AQC8NA. But the 'ontrol 'an be /ith the foreigners even if they are the ,inority. =et us say ;( per'ent of the 'apital is o/ned by the,, but it is the voting 'apital, /hereas, the Filipinos o/n the nonvoting shares. So /e 'an have a situation /here the 'orporation is 'ontrolled by foreigners despite being the ,inority be'ause they have the voting 'apital. &hat is the ano,aly that /ould result here. + . BEN5Q%N. No, the reason /e eli,inated the /ord *sto'6* as stated in the 124@ and 12@: Constitutions is that !!! there are asso'iations that do not have sto'6s. &hat is /hy /e say *CAP$&A=.* + . AQC8NA. Ae should not eli,inate the phrase *'ontrolling interest.* + . BEN5Q%N. $n the 'ase of sto'6 'orporation, it is assu,ed. + . AQC8NA. ?es, but /hat $ ,ean is that the 'ontrol should be /ith the Filipinos.

1) Nazareno ( 'larifi'ations ,ade by then

+ . BEN5Q%N. ?es, that is understood. %R. AACUNA. Y&(, +&;au(& 14 =& ?u() (ay J(17)y '&r;&n) o4 =3o(& ;a'1)a5 1( o=n&* +y )3& F151'1no(,J )3& ;a'1)a5 2ay +& 6o)1n@ or non86o)1n@. %R. #ENGAON. T3a) 1( ;orr&;).@( +ore i,portantly, on the very sa,e August 1:, 1231 session, Co,,issioner Az'una no longer insisted on retaining the deli,iting phrase *'ontrolling interest*7 + . 5A C$A. &han6 you very ,u'h, +ada, President. $ /ould li6e to propose the follo/ing a,end,ent on Se'tion @, line 1; on page ). $ propose to 'hange the /ord *si!ty* to SEHEN&?"F$HE. So, this /ill read7 *or it ,ay enter into 'o"produ'tion, 9oint venture, produ'tion sharing agree,ents /ith Filipino 'itizens or 'orporations or asso'iations at least SEHEN&?"F$HE per'ent of /hose CAP$&A= sto'6 or 'ontrolling interest is o/ned by su'h 'itizens.* + . H$==E5AS. &his is 9ust a 'orre'tion . " )31nD Co221((1on&r AH;una 1( no) 1n(1()1n@ on )3& r&)&n)1on o4 )3& '3ra(& J;on)ro551n@ 1n)&r&(),J (o =& =155 r&)a1n JCA!"TALJ )o @o +a;D r&a55y )o )3& 19-, an* 19.- 4or2u5a)1on( .@1 -E,phasis supplied.. &he later deliberations held on August )), 1231 further unders'ore the fra,ersD true intent to in'lude both voting and non"voting shares as 'o,ing /ithin the pale of the /ord *'apital.* &he 8P =a/ Center atte,pted to li,it the s'ope of the /ord along the line then and no/ adopted by the ,a9ority, but, as 'an be gleaned fro, the follo/ing dis'ussion, )3& 4ra2&r( o')&* no) )o a*o') )3& 'ro'o(a5 o4 )3& U! La= C&n)&r )o a** )3& 2or& 'ro)&;)1on1() '3ra(& J6o)1n@ ()o;D or ;on)ro551n@ 1n)&r&()J7 + . N%==E#%. ! ! ! $ /ould li6e to propound so,e Iuestions !!!. $ have here a 'opy of the approved provisions on Arti'le on the National E'ono,y and Patri,ony. ! ! ! $ noti'e that this provision /as a,ended by Co,,issioner #avide by 'hanging *voting sto'6s* to *CAP$&A=,* but $ still noti'e that there appears the ter, *'ontrolling interest* ! ! !. Besides, the /ordings

1) Nazareno 1 ,ay indi'ate that the 1( per'ent ,ay be based not only on 'apital
Corporation CASES Based on the Syllabus of Fr. Agustin but also on 'ontrolling interestE it 'ould ,ean 1( per'ent or :1 per'ent. Before $ propound the final Iuestion, $ /ould li6e to ,a6e a 'o,,ent in relation to Se'tion 1: sin'e they are related to ea'h other. $ noti'e that in Se'tion 1:, there still appears the phrase *voting sto'6 or 'ontrolling interest.* &he ter, *voting sto'6s* as the basis of the Filipino eIuity ,eans that if 1( per'ent of the voting sto'6s belong to Filipinos, foreigners ,ay no/ o/n ,ore than ;( per'ent of the 'apital as long as the ;( per'ent or the e!'ess thereof /ill 'over nonvoting sto'6. &his is aside fro, the fa't that under the Corporation Code, even nonvoting shares 'an vote on 'ertain instan'es.Con)ro5 o6&r 1n6&()2&n)( 2ay ;o6&r a('&;)( o4 2ana@&2&n) an* 'ar)1;1'a)1on 1n )3& 4ru1)( o4 'ro*u;)1on or &7'5o1)a)1on. So, " 3o'& )3& ;o221))&& =155 ;on(1*&r 4a6ora+5y 2y r&;o22&n*a)1on )3a) 1n()&a* o4 u(1n@ J;on)ro551n@ 1n)&r&()(,J =& ?u() u(& JCA!"TALJ un14or25y 1n ;a(&( =3&r& 4or&1@n &>u1)y 1( '&r21))&* +y 5a=, +&;au(& )3& 'ur'o(& 1( r&a55y )o 3&5' )3& F151'1no( 1n )3& &7'5o1)a)1on o4 na)ura5 r&(our;&( an* 1n )3& o'&ra)1on o4 'u+51; u)151)1&( . ! ! ! Ahat does the 'o,,ittee sayL %R. $"LLEGAS. :& ;o2'5&)&5y a@r&& /ith the Co,,issionerDs vie/s. A'tually, it /as really an oversight . :& *1* *&;1*& on )3& =or* JCA!"TAL.J " )31nD 1) =a( )3& o'1n1on o4 )3& 2a?or1)y )3a) )3& '3ra(& J;on)ro551n@ 1n)&r&()J 1( a2+1@uou(. So, =& *o a;;&') )3& Co221((1on&rC( 'ro'o(a5 )o &5121na)& )3& '3ra(& Jor ;on)ro551n@ 1n)&r&()J 1n a55 )3& 'ro61(1on( )3a) )a5D a+ou) 4or&1@n 'ar)1;1'a)1on. + . N%==E#%. Not only in Se'tion @, but also /ith respe't to Se'tion 1:.@) -E,phasis supplied.. $n fa't, on the very sa,e day of deliberations, the Co,,issioners 'larified that the proper and ,ore spe'ifi' *interpretation* that should be atta'hed to the /ord *'apital* is that it refers to the *subs'ribed 'apital,* a 'orporate 'on'ept defined as *that portion of the authorized 'apital sto'6 that is 'overed by subs'ription

agree,ents /hether fully paid or not* @@ and refers to both voting and non"voting shares7 %R. %AA%#ONG. ! ! ! " =ou5* 51D& )o +& ;5ar141&* on )3& u(& o4 )3& =or* JCA!"TAL.J %R. $"LLEGAS. Y&(, )3a) =a( )3& =or* u(&* 1n )3& 19.- an* )3& 19-, Con()1)u)1on(. + . +AA+B%N5. =et us deli,it ourselves to that /ord *CAP$&A=.* $n the Corporation =a/, if $ re,e,ber 'orre'tly, /e have three types of 'apital7 the authorized 'apital sto'6, the subs'ribed 'apital sto'6 and the paid"up 'apital sto'6. !!!! $ /ould li6e to get 'larifi'ation on this. "4 " r&2&2+&r 2y ;or'ora)1on 5a= ;orr&;)5y, =& u(ua55y u(& a *&)&r21nan) 1n or*&r )o 41n* ou) =3a) )3& ra)1o o4 o=n&r(31' 1(, no) r&a55y on )3& 'a1*8u' ;a'1)a5 ()o;D +u) on )3& (u+(;r1+& ;a'1)a5 ()o;D. !!!! ! ! ! $ /ould li6e to 6no/ /hether -Co,,issioner Suarez. is deter,ined to put on the re'ord that in order to deter,ine the 1(";( per'ent sharing, /e have to deter,ine /hether /e /ill use a deter,inant /hi'h is the subs'ribed 'apital sto'6 or the paid"up 'apital sto'6. %R. SUAREA. :& ar& 'r1n;1'a55y ;on;&rn&* a+ou) )3& 1n)&r'r&)a)1on =31;3 =ou5* +& a))a;3&* )o 1), )3a) 1(, 1) (3ou5* +& 5121)&* )o au)3or1H&* ;a'1)a5 ()o;D, no) )o (u+(;r1+&* ;a'1)a5 ()o;D. $ /ill give the Co,,issioner an illustration of /hat he is e!plaining to the Co,,ission. !!!! =et us say authorized 'apital sto'6 is P 1 ,illion. 8nder the present rules in the BSECC, at least ): per'ent of that a,ount ,ust be

1) Nazareno ) subs'ribed and at least ): per'ent of this subs'ribed 'apital ,ust be

Corporation CASES Based on the Syllabus of Fr. Agustin paid up. No/, let us dis'uss the basis of 1(";(. &o illustrate the ,atter further, let us say that 1( per'ent of the subs'riptions /ould be allo'ated to Filipinos and ;( per'ent of the subs'ribed 'apital sto'6 /ould be held by foreigners. &hen /e 'o,e to the paid"up 'apitalization. 8nder the present rules in the BSECC, a foreign 'orporation is supposed to subs'ribe to ;("per'ent share /hi'h ,ust be fully paid up. %n the other hand, the 1( per'ent allo'ated to Filipinos need not be paid up. <o/ever, at least ): per'ent of the subs'ription ,ust be paid up for purposes of 'o,plying /ith the Corporation =a/. Ae 'an illustrate the ,atter further by saying that the 'o,plian'e of ): per'ent paid"up of the subs'ribed 'apital /ould be fulfilled by the full pay,ent of the ;( per'ent by the foreigners. So, /e have a situation /here the Filipino per'entage of 1( ,ay not even 'o,ply /ith the ):"per'ent reIuire,ent be'ause of the totality due to the full pay,ent of the ;("per'ent of the foreign investors, the pay,ent of ): per'ent paid"up on the subs'ription /ould have been 'onsidered fulfilled. &hat is e!a'tly /hat /e are trying to avoid. + . +AA+B%N5. $ appre'iate very ,u'h the e!planation but $ /onder if the 'o,,ittee /ould subs'ribe to that vie/ be'ause $ /ill sti'6 to ,y thin6ing that in the 'o,putation of the 1(";( ratio, the basis should be on the subs'ription. ! ! ! !!!! + . %+8=%. :& @o +y )3& &()a+51(3&* ru5& =31;3 " +&51&6& 1( un14or25y 3&5*. ") 1( +a(&* on )3& (u+(;r1+&* ;a'1)a5. ! ! ! !!!! $ do not thin6 that /e 'ontradi't ea'h other. -Co,,isioner Suarez. is tal6ing really of the instan'e /here the subs'riber is a non"resident and, therefore, ,ust fully pay. &hat is ho/ $ understand his position. + . +AA+B%N5. +y understanding is that in the 'o,putation of the 1(";( sharing under the present for,ulation, the deter,inant is the paid"up 'apital sto'6 to /hi'h $ disagree.

Corporation CASES Based on the Syllabus of Fr. Agustin + . %+8=%. At least, fro, ,y point of vie/, 1) 1( )3& (u+(;r1+&* ;a'1)a5 ()o;D.*@; Clearly, /hile the 'on'ept of voting 'apital as the nor, to deter,ine the 1(";( Filipino"alien ratio /as initially debated upon as a result of the 'ro'o(a5 to use *at least two thirds of whose voting stoc$ or controlling interest is owned b8 such citi(ens! *@: in /hat /ould eventually be Se'. 11, Art. N$$ of the Constitution, that proposal /as eventually *1(;ar*&*. And no/here in the re'ords of the C%NC%+ 'an it be dedu'ed that the idea of full o/nership of voting sto'6s presently parlayed by the ,a9ority /as earnestly, if at all, 'onsidered. $n fa't, the fra,ers de'ided that the ter, *'apital,* as used in the 12@: and 124@ Constitutions, should be properly interpreted as the *subs'ribed 'apital,* /hi'h, again, does not distinguish sto'6s based on their board",e,bership voting features. $ndeed, the phrase *voting stoc$ or controlling interest* /as suggested for and in fa't deliberated, but /as si,ilarly dropped in the approved draft provisions on National E'ono,y and Patri,ony, parti'ularly in /hat /ould be'o,e Se'tions ) @1 and 1(,@4 Arti'le N$$ of the 1234 Constitution. <o/ever, the fra,ers e!pressed preferen'e to the for,ulation of the provision in Iuestion in the 12@: and 124@ Constitutions, both of /hi'h e,ployed the /ord *'apital* alone. &his /as very apparent in the afore,entioned deliberations and affir,ed by amicus curiae #r. Bernardo Hillegas, Chair of the Co,,ittee on the National E'ono,y and Patri,ony in 'harge of drafting Se'tion 11 and the rest of Arti'le N$$ of the Constitution. #uring the 0une )1, )(1) oral argu,ents, #r. Hillegas ,anifested that7 ! ! ! 0usti'e Abad /as right. B$f iCt /as not in the ,inds of the Co,,issioners to define 'apital broadly, these additional provisions /ould be ,eaningless. And it /ould have been really ,ore or less e!pressing so,e 6ind of a 'ontradi'tion in ter,s. So, that is /hy $ /as pleasantly surprised that one of the ,ost pro"Filipino ,e,bers of the Co,,ission, Atty. 0ose Suarez, /ho a'tually voted *N%* to the entire Constitution has only said, /as one of the first to insist, during one of the plenary sessions that /e should re9e't the 8P =a/ Center re'o,,endation. "n 31( =or*(, " >uo)& J" =ou5* 4&&5 2or& ;o24or)a+5& 14 =& @o +a;D )o )3& =or*1n@ o4 )3& 19-, an* 19.0 Con()1)u)1on( )3a) 1( )o (ay )3& 60840 '&r;&n)a@& ;ou5* +& +a(&* on )3& ;a'1)a5 ()o;D o4 )3& ;or'ora)1on.J &he final ,otion /as ,ade by Co,,issioner Efren &rePas, in the sa,e plenary session /hen he ,oved, *+ada, President, ,ay $ propose an a,end,ent on line 1; of Se'tion @ by deleting therefro, K/hose

voting sto'6 and 'ontrolling interestD and in 'apital, so the line should read7 *asso'iations of at least si!ty per'ent -1(>. of the 'apital is o/ned by su'h 'itizens.* A4)&r " a;;&')&* )3& a2&n*2&n) (1n;& " =a( )3& ;3a1r2an o4 )3& Na)1ona5 E;ono2y Co221))&&, 1n )3& na2& o4 )3& Co221))&&, )3& !r&(1*&n) o4 )3& Co221((1on a(D&* 4or any o+?&;)1on. :3&n no on& o+?&;)&*, )3& !r&(1*&n) (o5&2n5y announ;&* )3a) )3& a2&n*2&n) 3a* +&&n a''ro6&* +y )3& !5&nary. ") 1( ;5&ar, )3&r&4or&, )3a) 1n )3& 21n*( o4 )3& Co221((1on&r( )3& =or* J;a'1)a5J 1n S&;)1on 11 o4 Ar)1;5& N"" r&4&r(, no) )o 6o)1n@ ()o;D, +u) )o )o)a5 (u+(;r1+&* ;a'1)a5, +o)3 ;o22on an* 'r&4&rr&*.@3 -E,phasis supplied.. T3&r& =a( no ;3an@& 1n '3ra(&o5o@y 4ro2 )3& 19-, an* 19.- Con()1)u)1on(, or a )ran(1)ory 'ro61(1on )3a) (1@na5( (u;3 ;3an@&, =1)3 r&('&;) )o 4or&1@n o=n&r(31' 1n 'u+51; u)151)y ;or'ora)1on( /2n* &7)r1n(1; a1*0 $f the fra,ers /anted the /ord *'apital* to ,ean voting 'apital sto'6, their ter,inology /ould have 'ertainly been un,ista6ably li,iting as to leave no doubt about their intention. But )3& 4ra2&r( ;on(;1ou(5y an* 'ur'o(&5y &7;5u*&* r&()r1;)16& '3ra(&( , su'h as *voting sto'6s* or *'ontrolling interest,* in the approved final draft, the proposal of the 8P =a/ Center, Co,,issioner #avide and Co,,issioner Az'una not/ithstanding. $nstead, they retained *'apital* as *used in the 12@: and 124@ Constitutions.* @2 &here /as, therefore, a 'ons'ious design to avoid stringent /ords that /ould li,it the ,eaning of *'apital* in a sense insisted upon by the ,a9ority. Cassus omissus pro omisso habendus est GGa person, ob9e't, or thing o,itted ,ust have been o,itted intentionally. +ore i,portantly, by using the /ord *'apital,* the intent of the fra,ers of the Constitution /as to in'lude a55 types of shares, /hether voting or nonvoting, /ithin the a,bit of the /ord. H1()ory or r&a51)1&( or ;1r;u2()an;&( 'r&6a151n@ *ur1n@ )3& *ra4)1n@ o4 )3& Con()1)u)1on 6a51*a)& )3& a*o')1on o4 )3& '5a1n 2&an1n@ o4 JCa'1)a5J /-r* &7)r1n(1; a1*0 &his plain, non"e!'lusive interpretation of *'apital* also 'o,es to light 'onsidering the e'ono,i' ba'6drop of the 1231 C%NC%+ /hen the 'ountry /as still starting to rebuild the finan'ial ,ar6ets and regain the foreign investorsD 'onfiden'e follo/ing the 'hanges 'aused by the toppling of the +artial =a/ regi,e. As previously pointed out, the Court, in 'onstruing the Constitution, ,ust ta6e into

1) Nazareno @ lieu thereof, insert

Corporation CASES Based on the Syllabus of Fr. Agustin 'onsideration the ai,s of its fra,ers and the evils they /ished to avoid and address. $n Ci9il Liber"ies 7nion 9. 8<ecu"i9e 6ecre"ary,;( Ae held7 A foolproof yardsti'6 in 'onstitutional 'onstru'tion is the intention underlying the provision under 'onsideration. &hus, it has been held that )3& Cour) 1n ;on()ru1n@ a Con()1)u)1on (3ou5* +&ar 1n 21n* )3& o+?&;) (ou@3) )o +& a;;o2'51(3&* +y 1)( a*o')1on, an* )3& &615(, 14 any, (ou@3) )o +& 'r&6&n)&* or r&2&*1&* . A doubtful provision /ill be e!a,ined in the light of the history of the ti,es, and the 'ondition and 'ir'u,stan'es under /hi'h the Constitution /as fra,ed. T3& o+?&;) 1( )o a(;&r)a1n )3& r&a(on =31;3 1n*u;&* )3& 4ra2&r( o4 )3& Con()1)u)1on )o &na;) )3& 'ar)1;u5ar 'ro61(1on an* )3& 'ur'o(& (ou@3) )o +& a;;o2'51(3&* )3&r&+y, 1n or*&r )o ;on()ru& )3& =3o5& a( )o 2aD& )3& =or*( ;on(onan) )o )3a) r&a(on an* ;a5;u5a)&* )o &44&;) )3a) 'ur'o(&. -E,phasis supplied.. $t is, thus, proper to revisit the 'ir'u,stan'es prevailing during the drafting period. $n an astute observation of the e'ono,i' realities in 1231, Iuoted by respondent Pangilinan, 8niversity of the Philippines S'hool of E'ono,i's Professor #r. E,,anuel S. de #ios e!a,ined the nationDs dire need for foreign invest,ents and foreign e!'hange during the ti,e /hen the fra,ers deliberated on /hat /ould eventually be the National E'ono,y and Patri,ony provisions of the Constitution7 T3& '&r1o* 122&*1a)&5y a4)&r )3& 1986 E SA R&6o5u)1on 1( =&55 Dno=n )o 3a6& =1)n&((&* )3& ;oun)ryC( *&&'&() &;ono21; ;r1(1( (1n;& )3& S&;on* :or5* :ar. %ffi'ial data readily sho/ this period /as 'hara'terised by the highest une,ploy,ent, highest interest rates, and largest 'ontra'tions in output the Philippine e'ono,y e!perien'ed in the post/ar period. At the start of the AIuino ad,inistration in 1231, total output had already 'ontra'ted by ,ore than seven per'ent annually for t/o 'onse'utive years -123; and 123:., inflation /as running at an average of @: per'ent, une,ploy,ent ,ore than 11 per'ent, and the 'urren'y devalued by @: per'ent. T3& 'ro712a)& r&a(on 4or )31( =a( )3& 2ora)or1u2 on 4or&1@n*&+) 'ay2&n)( )3& ;oun)ry 3a* ;a55&* 1n 5a)& 198-, &44&;)16&5y ;u))1n@ o44 )3& ;oun)ryC( a;;&(( )o 1n)&rna)1ona5 ;r&*1) 2arD&)( -for a deeper 'onte,porary analysis of /hat led to the debt 'risis, see de #ios 123;.. T3& ;oun)ry )3&r&4or& 3a* )o

(u+(1() on5y on 1)( ;urr&n) &arn1n@( 4ro2 &7'or)(, 2&an) )3&r& =a( a ;r1)1;a5 (3or)a@& o4 4or&1@n &7;3an@&. "2'or)( &('&;1a55y o4 ;a'1)a5 @oo*( an* 1n)&r2&*1a)& @oo*( )3&r&4or& 3a* )o +& *ra()1;a55y ;ur)a15&* ! ! !. For the sa,e reasons, obviously, ne/ foreign invest,ents /ere unli6ely to be forth'o,ing. &his is re'orded by Bautista )((@71:3, /ho /rites7 =ong"ter, 'apital inflo/s have been rising at double"digit rates sin'e 123(, &7;&') *ur1n@ 198681990, a )12& o4 @r&a) 'o51)1;a5 an* &;ono21; un;&r)a1n)y 4o55o=1n@ )3& '&r1o* o4 2ar)1a5 5a= un*&r !r&(1*&n) %ar;o(. &he foreign"e!'hange 'ontrols then effe'tively in pla'e /ill have ,ade i,porting inputs diffi'ult for ne/ enterprises, parti'ularly foreign investors -espe'ially 0apanese. interested in relo'ating so,e of theire!port"oriented but i,port"dependent operations to the Philippines. ! ! ! &he sa,e foreign"e!'hange restri'tions /ould have ,ade the freedo, to re,it profits a di'ey affairs. Finally, ho/ever, the period /as also 'hara'terised by e!tre,e politi'al un'ertainty, /hi'h did not 'ease even after the +ar'os regi,e /as toppled. ;1 ! ! ! Surely, it /as far fro, the ,inds of the fra,ers to alienate and disenfran'hise foreign investors by i,posing an indire't restri'tion that only e!a'erbates the di'hoto,y bet/een ,anage,ent and o/nership /ithout the a'tual guarantee of giving 'ontrol and prote'tion to the Filipino investors. $nstead, it 'an be fairly assu,ed that the fra,ers intended to avoid further e'ono,i' ,eltdo/n and so 'hose to attra't foreign investors by allo/ing the, to ;(> eIuity o/nership of the entirety of the 'orporate shareholdings but, /isely, i,posing li,its on their parti'ipation in the governing body to ensure that the effe'tive 'ontrol and ulti,ate e'ono,i' benefits still re,ained /ith the Filipino shareholders. Ju*1;1a5 *&;1(1on( an* 'r1or 5a=( u(& J;a'1)a5J a( J;a'1)a5 ()o;DJ /4)3 &7)r1n(1; a1*0 an*Lor )r&a)

Nazareno

1) ; =31;3

&hat the ter, *'apital* in Se'. 11, Art. N$$ is eIuivalent to *'apital sto'6,* /hi'h en'o,passes all 'lasses of shares regardless of their no,en'lature or voting 'apa'ity, is easily deter,ined by a revie/ of various la/s passed prior to the ratifi'ation of the 1234 Constitution.

Corporation CASES Based on the Syllabus of Fr. Agustin $n 12@1, for instan'e, the Publi' Servi'e A't ;) established the nationality reIuire,ent for 'orporations that ,ay be granted the authority to operate a *publi' servi'e,* ;@ /hi'h in'lude ,ost of the present"day publi' utilities, by referring to the paid"up *'apital sto'6* of a 'orporation, viz7 Se'. 11. Pro'eedings of the Co,,ission, upon noti'e and hearing. G &he Co,,ission shall have po/er, upon proper noti'e and hearing in a''ordan'e /ith the rules and provisions of this A't, sub9e't to the li,itations and e!'eptions ,entioned and saving provisions to the 'ontrary7 -a. &o issue 'ertifi'ates /hi'h shall be 6no/n as 'ertifi'ates of publi' 'onvenien'e, authorizing the operation of publi' servi'e /ithin the Philippines /henever the Co,,ission finds that the operation of the publi' servi'e proposed and the authorization to do business /ill pro,ote the publi' interest in a proper and suitable ,anner. Provided, &hat thereafter, ;&r)141;a)&( o4 'u+51; ;on6&n1&n;& an* ;&r)141;a)&( o4 'u+51; ;on6&n1&n;& an* n&;&((1)y =155 +& @ran)&* on5y )o 'itizens of the Philippines or of the 8nited States or to ;or'ora)1on(, ;o8'ar)n&r(31'(, a((o;1a)1on( or ?o1n)8()o;D ;o2'an1&( ;on()1)u)&* an* or@an1H&* un*&r )3& 5a=( o4 )3& !3151''1n&(I !ro61*&*, T3a) (17)y '&r ;&n)u2 o4 )3& ()o;D or 'a1*8u' ;a'1)a5 o4 any (u;3 ;or'ora)1on(, ;o8'ar)n&r(31', a((o;1a)1on or ?o1n)8()o;D ;o2'any 2u() +&5on@ &n)1r&5y )o ;1)1H&n( o4 )3& !3151''1n&( or of the 8nited States7 Provided, further, &hat no su'h 'ertifi'ates shall be issued for a period of ,ore than fifty years. -E,phasis supplied.. &he heading of Se'. ) of Co,,on/ealth A't No. -CA. 1(3, or the Anti"#u,,y =a/, /hi'h /as approved on %'tober @(, 12@1, si,ilarly 'onveys the idea that the ter, *'apital* is eIuivalent to *'apital sto'6*;;7 Se'tion ). 6imula"ion of minimum capi"al s"ocB J "n a55 ;a(&( 1n =31;3 a ;on()1)u)1ona5 or 5&@a5 'ro61(1on r&>u1r&( )3a), 1n or*&r )3a) a ;or'ora)1on or a((o;1a)1on 2ay &7&r;1(& or &n?oy a r1@3), 4ran;31(& or 'r1615&@&, no) 5&(( )3an a ;&r)a1n '&r ;&n)u2 o4 1)( ;a'1)a5 2u() +& o=n&* +y ;1)1H&n( o4 )3& !3151''1n&( or of any other spe'ifi' 'ountry, it shall be unla/ful to falsely si,ulate the e!isten'e of su'h 21n12u2 ()o;D or ;a'1)a5 as o/ned by su'h 'itizens, for the purpose of evading said

provision. &he president or ,anagers and 'orporations or asso'iations 'onvi'ted of a violation of this se'tion shall be punished by i,prison,ent of not less than five nor ,ore than fifteen years, and by a fine not less than the value of the right, fran'hise or privilege, en9oyed or a'Iuired in violation of the provisions hereof but in no 'ase less than five thousand pesos.;: -E,phasis and unders'oring supplied.. Pursuant to these legislative a'ts and under the aegis of the Constitutional nationality reIuire,ent of publi' utilities then in for'e, Congress granted various fran'hises upon the understanding that the *'apital sto'6* of the grantee is at least 1(> Filipino. $n 121;, Congress, via epubli' A't No. - A. ;1;4, ;1 granted Filipinas %rient Air/ay, $n'. a legislative fran'hise to operate an air 'arrier upon the understanding that its *'apital sto'6* /as 1(> per'ent Filipino" o/ned. Se'tion 1; of A ;1;4, provided7 Se'. 1;. &his fran'hise is granted /ith the understanding that )3& @ran)&& 1( a ;or'ora)1on (17)y '&r ;&n) o4 )3& ;a'1)a5 ()o;D o4 =31;3 1( )3& +ona 41*& 'ro'&r)y o4 ;1)1H&n( o4 )3& !3151''1n&(and that the interest of su'h 'itizens in its 'apital sto'6 or in the 'apital of the Co,pany /ith /hi'h it ,ay ,erge shall at no ti,e be allo/ed to fall belo/ su'h per'entage, under the penalty of the 'an'ellation of this fran'hise. -E,phasis and unders'oring supplied.. &he grant of a publi' utility fran'hise to Air +anila. $n'. to establish and ,aintain air transport in the 'ountry a year later pursuant to A ;:(1;4 'ontained e!a'tly the sa,e Filipino 'apitalization reIuire,ent i,posed in A ;1;47 Se'. 1;. &his fran'hise is granted /ith the understanding that the grantee is a 'orporation, (17)y '&r ;&n) o4 )3& ;a'1)a5 ()o;D o4 =31;3 1( o=n&* or )3& +ona 41*& 'ro'&r)y o4 ;1)1H&n( o4 )3& !3151''1n&( and that the interest of su'h 'itizens in its 'apital sto'6 or in the 'apital of the 'o,pany /ith /hi'h it ,ay ,erge shall at no ti,e be allo/ed to fall belo/ su'h per'entage, under the penalty of the 'an'ellation of this fran'hise. -E,phasis and unders'oring supplied.. $n li6e ,anner, A ::1;,;3 /hi'h granted a fran'hise to the Philippine Co,,uni'ations Satellite Corporation in 1212, reIuired of the grantee to e!e'ute ,anage,ent 'ontra'ts only /ith

1) Nazareno : dire'tors or trustees of

Corporation CASES Based on the Syllabus of Fr. Agustin 'orporations /hose *'apital or 'apital sto'6* are at least 1(> Filipino7 Se'. 2. &he grantee shall not lease, transfer, grant the usufru't of, sell or assign this fran'hise to any person or entity, e!'ept any bran'h or instru,entality of the 5overn,ent, /ithout the previous approval of the Congress of the Philippines7 Provided, &hat the grantee ,ay enter into ,anage,ent 'ontra't /ith any person or entity, /ith the approval of the President of the Philippines7 Provided, further, &hat su'h person or entity /ith /ho, the grantee ,ay enter into ,anage,ent 'ontra't shall be a 'itizen of the Philippines and in 'ase of an entity or a ;or'ora)1on, a) 5&a() (17)y '&r ;&n)u2 o4 )3& ;a'1)a5 or ;a'1)a5 ()o;D o4 =31;3 1( o=n&* +y ;1)1H&n( o4 )3& !3151''1n&(. -E,phasis supplied.. $n 1213, A :)(4,;2 other/ise 6no/n as the *Ato,i' Energy egulatory A't of 1213,* 'onsidered a 'orporation si!ty per'ent of /hose 'apital sto'6 as do,esti'7 Se'. 2. C1)1H&n(31' R&>u1r&2&n). No li'ense to a'Iuire, o/n, or operate any ato,i' energy fa'ility shall be issued to an alien, or any 'orporation or other entity /hi'h is o/ned or 'ontrolled by an alien, a foreign 'orporation, or a foreign govern,ent. For purposes of this A't, a 'orporation or entity is no) o=n&* or ;on)ro55&* +y an a51&n, a foreign 'orporation of a foreign govern,ent 14 a) 5&a() (17)y '&r;&n) /60<0 o4 1)( ;a'1)a5 ()o;D 1( o=n&* +y F151'1no ;1)1H&n(. -E,phasis supplied.. Anent pertinent 9udi'ial de'isions, this Court has used the very sa,e definition of 'apital as eIuivalent to the entire 'apital sto'6holdings in a 'orporation in resolving various other issues. $n 'a"ional Telecommunica"ions Commission 9. Cour" of 2ppeals ,:( this Court, thus, held7 T3& )&r2 J;a'1)a5J an* o)3&r )&r2( u(&* )o *&(;r1+& )3& ;a'1)a5 ()ru;)ur& o4 a ;or'ora)1on ar& o4 un16&r(a5 a;;&')an;&, an* )3&1r u(a@&( 3a6& 5on@ +&&n &()a+51(3&* 1n ?ur1('ru*&n;&. Briefly, ;a'1)a5 r&4&r( )o )3& 6a5u& o4 )3& 'ro'&r)y or a((&)( o4 a ;or'ora)1on. T3& ;a'1)a5 (u+(;r1+&* 1( )3& )o)a5 a2oun) o4 )3& ;a'1)a5 )3a) '&r(on( /(u+(;r1+&r( or (3ar&3o5*&r(0 3a6& a@r&&* )o )aD& an* 'ay 4or, =31;3 n&&* no) n&;&((ar15y +&, an* ;an +& 2or& )3an, )3& 'ar 6a5u& o4

)3& (3ar&(. "n 41n&, 1) 1( )3& a2oun) r&;&16&(, 1n;5u(16& o4 )3& 'r&21u2( 14 any, 1n ;on(1*&ra)1on o4 )3& or1@1na5 1((uan;& o4 )3& (3ar&(. $n the 'ase of sto'6 dividends, it is the a,ount that the 'orporation transfers fro, its surplus profit a''ount to its 'apital a''ount. $t is the sa,e a,ount that 'an loosely be ter,ed as the *trust fund* of the 'orporation. &he *&rust Fund* do'trine 'onsiders this subs'ribed 'apital as a trust fund for the pay,ent of the debts of the 'orporation, to /hi'h the 'reditors ,ay loo6 for satisfa'tion. 8ntil the liIuidation of the 'orporation, no part of the subs'ribed 'apital ,ay be returned or released to the sto'6holder -e!'ept in the rede,ption of redee,able shares. /ithout violating this prin'iple. &hus, dividends ,ust never i,pair the subs'ribed 'apitalE subs'ription 'o,,it,ents 'annot be 'ondoned or re,ittedE nor 'an the 'orporation buy its o/n shares using the subs'ribed 'apital as the 'onsideration therefor.:1 &his is si,ilar to the holding in Eanco >ilipino 9. Mone"ary Eoar&:) /here the Court treated the ter, *'apital* as in'luding both 'o,,on and preferred sto'6, /hi'h are usually deprived of voting rights7 $t is 'lear fro, the la/ that a solvent ban6 is one in /hi'h its assets e!'eed its liabilities. $t is a basi' a''ounting prin'iple that assets are 'o,posed of liabilities and 'apital. &he ter, *assets* in'ludes 'apital and surplus* -E!ley v. <arris, )14 p. 24(, 24@, 1)1 Ran., @().. %n the other hand, )3& )&r2 J;a'1)a5J 1n;5u*&( ;o22on an* 'r&4&rr&* ()o;D, (ur'5u( r&(&r6&(, (ur'5u( an* un*161*&* 'ro41)( . -+anual of E!a,ination Pro'edures, eport of E!a,ination on #epart,ent of Co,,er'ial and Savings Ban6s, p. @"C.. $f valuation reserves /ould be dedu'ted fro, these ite,s, the result /ould ,erely be the net/orth or the uni,paired 'apital and surplus of the ban6 applying Se'. : of A @@4 but not the total finan'ial 'ondition of the ban6. $n Commissioner of In"ernal Re9enue 9. Cour" of 2ppeals ,:@ the Court alluded to the do'trine of eIuality of shares in resolving the issue therein and held that all shares 'o,prise the 'apital sto'6 of a 'orporation7 A 'o,,on sto'6 represents the residual o/nership interest in the 'orporation. $t is a basi' 'lass of sto'6 ordinarily and usually issued /ithout e!traordinary rights or privileges and entitles the shareholder to a pro rata division of profits. Preferred sto'6s are those /hi'h entitle the shareholder to so,e priority on dividends

1) Nazareno 1 )3a) )3& ;or'ora)1on

and asset distribution. #o)3 (3ar&( ar& 'ar) o4 )3& ;or'ora)1onC( ;a'1)a5 ()o;D. #o)3 ()o;D3o5*&r( ar& no *144&r&n) 4ro2 or*1nary 1n6&()or( =3o )aD& on )3& (a2& 1n6&()2&n) r1(D(. !r&4&rr&* an* ;o22on (3ar&3o5*&r( 'ar)1;1'a)& 1n )3& (a2& 6&n)ur&, =1551n@ )o (3ar& 1n )3& 'ro41) an* 5o((&( o4 )3& &n)&r'r1(&. %or&o6&r, un*&r )3& *o;)r1n& o4 &>ua51)y o4 (3ar&( 888 a55 ()o;D( 1((u&* +y )3& ;or'ora)1on ar& 'r&(u2&* &>ua5 =1)3 )3& (a2& 'r1615&@&( an* 51a+151)1&( , provided that the Arti'les of $n'orporation is silent on su'h differen'es. :; -E,phasis supplied.. T3& SEC 3a( r&45&;)&* )3& 'o'u5ar ;on)&2'oran&ou( ;on()ru;)1on o4 ;a'1)a5 1n ;o2'u)1n@ )3& na)1ona51)y r&>u1r&2&n) +a(&* on )3& )o)a5 ;a'1)a5 ()o;D, no) on5y )3& 6o)1n@ ()o;D, o4 a ;or'ora)1on /,)3 &7)r1n(1; a1*0 &he SEC has 'onfir,ed that, as an institution, it has al/ays interpreted and applied the ;(> ,a!i,u, foreigno=n&r(31' li,it for publi' utilities to the total 'apital sto'6, and not 9ust its total voting sto'6. $n its 0uly )2, )(11 +anifestation and %,nibus +otion, the SEC reaffir,ed its longstanding pra'ti'e and history of enfor'e,ent of the ;(> ,a!i,u, foreign o/nership li,it for publi' utilities, viz7 :. &he Co,,ission respe'tfully sub,its that it has al/ays perfor,ed its duty under Se'tion 14-;. of the Corporation Code to enfor'e the foreign eIuity restri'tions under Se'tion 11, Arti'le N$$ of the Constitution on the o/nership of publi' utilities. !!!! 3. &hus, in *&)&r21n1n@ ;o2'51an;& =1)3 )3& Con()1)u)1ona5 r&()r1;)1on( on 4or&1@n &>u1)y, )3& Co221((1on ;on(1()&n)5y ;on()ru&* an* a''51&* )3& )&r2 J;a'1)a5J 1n 1)( ;o22on5y a;;&')&* u(a@&, )3a) 1( K )3& (u2 )o)a5 o4 )3& (3ar&( (u+(;r1+&* 1rr&('&;)16& o4 )3&1r no2&n;5a)ur& an* =3&)3&r or no) )3&y ar& 6o)1n@ or non86o)1n@ -E,phasis supplied.. 2. &his 'o,,only a''epted usage of the ter, K'apitalD is based on persuasive authorities su'h as the /idely estee,ed -letcher C8clopedia of the :aw of Private Corporations , and do'trines fro, A,eri'an 0urispruden'e. &o illustrate, in its /pinion dated February

1) Nazareno 4 1:, 1233 addresses to 5ozon, Fernandez, #efensor and Asso'iates,

Corporation CASES Based on the Syllabus of Fr. Agustin the Co,,ission dis'ussed ho/ the ter, K'apitalD is 'o,,only used7 *Anent thereto, please be infor,ed that the ter, K'apitalD as applied to 'orporations, refers to the ,oney, property or ,eans 'ontributed by sto'6holders as the for, or basis for the business or enterprise for /hi'h the 'orporation /as for,ed and generally i,plies that su'h ,oney or property or ,eans have been 'ontributed in pay,ent for sto'6 issued to the 'ontributors. -8nited 5ro'ers, =td. v. 8nited States F. Supp. 3@;, 'ited in 11 Flet'her, Cy'. Corp., 1231, rev. vol., se'. :(3( at 13.. As further ruled by the 'ourt, K'apital of a 'orporation is )3& 4un* or o)3&r 'ro'&r)y, a;)ua55y or 'o)&n)1a55y 1n 1)( 'o((&((1on, *&r16&* or )o +& *&r16&* 4ro2 )3& (a5& +y 1) o4 (3ar&( o4 1)( ()o;D or 31( &7;3an@& +y 1) 4or 'ro'&r)y o)3&r )3an 2on&y. &his fund in'ludes not only ,oney or other property re'eived by the 'orporation for shares of sto'6 but all balan'es of pur'hase ,oney, or instal,ents, due the 'orporation for shares of sto'6 sold by it, and all unpaid subs'riptions for shares.D* -Aillia,s v. Bro/nstein, 1F. )d ;4(, 'ited in 11 Flet'her, Cy'. Corp., 1(:3 rev. vol., se'. :(3(, p. )1.. &he ter, K'apitalD is also used synony,ously /ith the /ords K'apital sto'6D, as ,eaning the a,ount subs'ribed and paidin and upon /hi'h the 'orporation is to 'ondu't its operation. -11 Flet'her, Cy'. Corp. 1231, rev. vol., se'. :(3( at 1:.. And, as held by the 'ourt in <aggard v. =e!ington 8tilities Co., -)1( Ry ):1, 3; SA )d 3;, 'ited in 11 Flet'her, Cy'. Corp., 12:3 rev. vol., se'. :(42 at 14., K&he 'apital sto'6 of a 'orporation is the a,ount paidin by its sto'6holders in ,oney, property or servi'es /ith /hi'h it is to 'ondu't its business, and i" is imma"erial !oC "!e s"ocB is classifie&% C!e"!er as common or preferre&.) &he Co,,ission, in a previous opinion, ruled that the ter, K'apitalD denotes the su, total of the shares subs'ribed and paid by the shareholders or served to be paid, irrespe'tive of their no,en'lature. -=etter to Supre,e &e'hnotroni's Corporation, dated April 1;, 1234..* -E,phasis ours. 1(. Further, in adopting this 'o,,on usage of the ter, K'apital,D the Co,,ission believed in good faith and /ith sound reasons that it /as 'onsistent /ith the intent and purpose of the Constitution. $n an /pinion dated )4 #e'e,ber 122: addressed to 0oaIuin Cunanan U Co. the Co,,ission observed that7

*&o 'onstrue the 1(";(> eIuity reIuire,ent as ,erely based on the voting shares, disregarding the preferred non"voting share, not on the total outstanding subs'ribed 'apital sto'6, /ould give rise to a situation /here the a'tual foreign interest /ould not really be only ;(> but ,ay e!tend beyond that be'ause they 'ould also o/n even the entire preferred non"voting shares. $n this situation, Filipinos ,ay have the 'ontrol in the operation of the 'orporation by /ay of voting rights, but have no effe'tive o/nership of the 'orporate assets /hi'h in'ludes lands, be'ause the a'tual Filipino eIuity 'onstitutes only a ,inority of the entire outstanding 'apital sto'6. T3&r&4or&, 1n &((&n;&, )3& ;o2'any, a5)3ou@3 ;on)ro55&* +y F151'1no(, 1( +&n&41;1a55y o=n&* +y 4or&1@n&r( (1n;& )3& a;)ua5 o=n&r(31' o4 a) 5&a() 60< o4 )3& &n)1r& ou)()an*1n@ ;a'1)a5 ()o;D( =ou5* +& 1n )3& 3an*( o4 4or&1@n&r(. A55o=1n@ )31( (1)ua)1on =ou5* o'&n )3& 45oo*@a)&( )o ;1r;u26&n)1on o4 )3& 1n)&n) o4 )3& 5a= )o 2aD& )3& F151'1no( )3& 'r1n;1'a5 +&n&41;1ar1&( 1n )3& o=n&r(31' o4 a51&na+5& 5an*(.J -E,phasis ours. 11. &he foregoing settled prin'iples and estee,ed authorities relied upon by the Co,,ission sho/ that its interpretation of the ter, K'apitalD is reasonable. 1). And, it is /ell settled that 'ourts ,ust give due deferen'e to an ad,inistrative agen'yDs reasonable interpretation of the statute it enfor'es.:: $t should be borne in ,ind that the SEC is the govern,ent agen'y invested /ith the 9urisdi'tion to deter,ine at the first instan'e the observan'e by a publi' utility of the 'onstitutional nationality reIuire,ent pres'ribed vis"V"vis the o/nership of publi' utilities:1 and to interpret legislative a'ts, li6e the F$A. &he rationale behind the do'trine of pri,ary 9urisdi'tion lies on the postulate that su'h ad,inistrative agen'y has the *spe'ial 6no/ledge, e!perien'e and tools to deter,ine te'hni'al and intri'ate ,atters of fa'tO*:4 &hus, the deter,ination of the SEC is afforded great respe't by other e!e'utive agen'ies, li6e the #epart,ent of 0usti'e -#%0.,:3 and by the 'ourts. Herily, /hen as6ed as early as 1233G *Aould it be legal for foreigners to o/n in a publi' utility entity ,ore than ;(> of the 'o,,on shares but not ,ore than ;(> of the total outstanding 'apital sto'6 /hi'h /ould in'lude both 'o,,on and non"voting preferred sharesL* Gthe SEC, 'iting Flet'her, invariably ans/ered in the affir,ative, /hether the poser /as ,ade in light of the present or previous Constitutions7

1) Nazareno 3 &he pertinent provision of the Philippine Constitution under Arti'le

Corporation CASES Based on the Syllabus of Fr. Agustin N$$, Se'tion 4, reads in part thus7 *No fran'hise, 'ertifi'ate, or any for, of authorization for the operation of a publi' utility shall be granted e!'ept to 'itizens of the Philippines, or to 'orporations or asso'iations organized under the la/s of the Philippines at least si!ty per 'entu, of /hose 'apital is o/ned by su'h 'itizens. . .* ! ! ! T3& 1((u& ra1(&* on your 5&))&r H&ro&( 1n on )3& 2&an1n@ o4 )3& =or* J;a'1)a5J a( u(&* 1n )3& a+o6& ;on()1)u)1ona5 'ro61(1on. Anent thereto, please be infor,ed that the ter, *'apital* as applied to 'orporations, refers to the ,oney, property or ,eans 'ontributed by sto'6holders as the for, or basis for the business or enterprise for /hi'h the 'orporation /as for,ed and generally i,plies that su'h ,oney or property or ,eans have been 'ontributed in pay,ent for sto'6 issued to the 'ontributors. -8nited 5ro'ers, =td. v. 8nited States F. Supp. 3@;, 'ited in 11 Flet'her, Cy'. Corp., 1231, rev. vol., se'. :(3( at 13.. As further ruled by the 'ourt, *'apital of a 'orporation is the fund or other property, a'tually or potentially in its possession, derived or to be derived fro, the sale by it of shares of its sto'6 or his e!'hange by it for property other than ,oney. &his fund in'ludes not only ,oney or other property re'eived by the 'orporation for shares of sto'6 but all balan'es of pur'hase ,oney, or install,ents, due the 'orporation for shares of sto'6 sold by it, and all unpaid subs'riptions for shares.* -Aillia,s v. Bro/nstein, 1F. )d ;4(, 'ited in 11 Flet'her, Cy'. Corp., 1(:3 rev. vol., se'. :(3(, p. )1.. &he ter, *'apital* is also used synony,ously /ith the /ords *'apital sto'6*, as ,eaning the a,ount subs'ribed and paid"in and upon /hi'h the 'orporation is to 'ondu't its operation. -11 Flet'her, Cy'. Corp. 1231, rev. vol., se'. :(3( at 1:.. And, as held by the 'ourt in <aggard v. =e!ington 8tilities Co., -)1( Ry ):1, 3; SA )d 3;, 'ited in 11 Flet'her, Cy'. Corp., 12:3 rev. vol., se'. :(42 at 14., JT3& ;a'1)a5 ()o;D o4 a ;or'ora)1on 1( )3& a2oun) 'a1*81n +y 1)( ()o;D3o5*&r( 1n 2on&y, 'ro'&r)y or (&r61;&( =1)3 =31;3 1) 1( )o ;on*u;) 1)( +u(1n&((, an* 1) 1( 122a)&r1a5 3o= )3& ()o;D 1( ;5a((141&*, =3&)3&r a( ;o22on or 'r&4&rr&*.J T3& Co221((1on, 1n a 'r&61ou( o'1n1on, ru5&* )3a) )3& )&r2 O;a'1)a5C *&no)&( )3& (u2 )o)a5 o4 )3& (3ar&( (u+(;r1+&* an* 'a1* +y )3& (3ar&3o5*&r( or (&r6&* )o +& 'a1*, 1rr&('&;)16& o4 )3&1r no2&n;5a)ur&. -=etter to Supre,e &e'hnotroni's

Corporation, dated April 1;, 1234.. <en'e, your Iuery is ans/ered in the affir,ative.:2 -E,phasis supplied.. As it /ere, the SEC has held on the sa,e positive response long before the 1234 Constitution 'a,e into effe't, a ,atter of fa't /hi'h has re'eived due a'6no/ledg,ent fro, this Court. $n People 9. Fuas!a,1( a 'ase de'ided under the 12@: Constitution, this Court narrated that in 12;1 the SEC approved the in'orporation of a 'o,,on 'arrier, a publi' utility, /here Filipinos, /hile not holding the 'ontrolling vote, o/ned the ,a9ority of the 'apital, viz7 &he essential fa'ts are not in dispute. %n Nove,ber ;, 12;1, the Pa'ifi' Air/ays Corporation registered its arti'les of in'orporation /ith the BSECC. &he arti'les /ere prepared and the registration /as effe'ted by the a''used, /ho /as in fa't the organizer of the 'orporation. &he arti'les stated that the pri,ary purpose of the 'orporation /as to 'arry on the business of a 'o,,on 'arrier by air, land, or /ater, that its ;a'1)a5 ()o;D =a( ! 1,000,000, r&'r&(&n)&* +y 9,000 'r&4&rr&* an* 100,000 ;o22on (3ar&(, &a;3 'r&4&rr&* (3ar& +&1n@ o4 )3& 'ar 6a5u& o4 ! 100 an* &n)1)5&* )o 1L- 6o)& an* &a;3 ;o22on (3ar&, o4 )3& 'ar 6a5u& o4 ! 1 an* &n)1)5&* )o on& 6o)& E that the a,ount of 'apital sto'6 a'tually subs'ribed /as P )((,(((, and the na,es of the subs'riber /ere Arsenio Baylon, Eruin E. Shannahan, Albert A. %nstott, 0a,es %Dbannon, #enzel 0. Cavin, and Aillia, <. Muasha, )3& 41r() +&1n@ a F151'1no an* )3& o)3&r 416& a55 A2&r1;an(I that BaylonDs subs'ription /as for 1,1;: preferred shares, of the total value of P 11;,:(( and 1,:(( 'o,,on shares, of the total par value of P 1,:((, /hile the aggregate subs'riptions of the A,eri'an subs'ribers /ere for )(( preferred shares, of the total par value of P )(,((( and :2,((( 'o,,on shares, of the total par value of P :2,(((E and that Baylon and the A,eri'an subs'ribers had already paid ): per'ent of their respe'tive subs'riptions. O()&n(1+5y )3& o=n&r o4, or (u+(;r1+&r )o, 60.00, '&r ;&n) o4 )3& (u+(;r1+&* ;a'1)a5 ()o;D o4 )3& ;or'ora)1on, #ay5on, *1* no) 3a6& )3& ;on)ro551n@ 6o)& +&;au(& o4 )3& *144&r&n;& 1n 6o)1n@ 'o=&r +&)=&&n )3& 'r&4&rr&* (3ar&( an* )3& ;o22on (3ar&(. S)155, =1)3 )3& ;a'1)a5 ()ru;)ur& a( 1) =a(, )3& ar)1;5&( o4 1n;or'ora)1on =&r& a;;&')&* 4or r&@1()ra)1on an* a ;&r)141;a)& o4 1n;or'ora)1on =a( 1((u&* +y )3& FSECG. -E,phasis supplied.. &he SEC has, through the years, stood by this interpretation. $n an %pinion dated Nove,ber )1, 1232, the SEC held that the basis of the

1) Nazareno 2 'o,putation for the nationality reIuire,ent is the total outstanding

Corporation CASES Based on the Syllabus of Fr. Agustin 'apital sto'6, to /it7 As to the basis of 'o,putation of the 1(";( per'entage nationality reIuire,ent under e!isting la/s -/hether it should be based on the nu,ber of shares or the aggregate a,ount in pesos of the par value of the shares., the follo/ing definitions of 'orporate ter,s are /orth ,entioning. *&he ter, 'apital sto'6 signifies the aggregate of the shares a'tually subs'ribed*. -11 Flet'her, Cy'. Corps. -1241 ev. Hol.. se'. :(3), 'iting 5oodno/ v. A,eri'an Ariting Paper Co., 4@ N0 EI. 12), 12 A 1(1; affYg 4) N0 EI. 1;:, 11 A, 1(4.. *Capital sto'6 ,eans the 'apital subs'ribed -the share 'apital.*. -$bid., e,phasis supplied.. *$n its pri,ary sense a share of sto'6 is si,ply one of the proportionate integers or units, the su, of /hi'h 'onstitutes the 'apital sto'6 of 'orporation. -Flet'her, se'. :(3@.. &he eIuitable interest of the shareholder in the property of the 'orporation is represented by the ter, sto'6, and the e!tent of his interest is des'ribed by the ter, shares. &he e!pression shares of sto'6 /hen Iualified by /ords indi'ating nu,ber and o/nership e!presses the e!tent of the o/nerYs interest in the 'orporate property -$bid, Se'. :(3@, e,phasis supplied.. =i6e/ise, in all provisions of the Corporation Code the sto'6holdersD right to vote and re'eive dividends is al/ays deter,ined and based on the *outstanding 'apital sto'6*, defined as follo/s7 *SEC&$%N 1@4. %utstanding 'apital sto'6 defined. J &he ter, *outstanding 'apital sto'6* as used in this Code, ,eans the total shares of sto'6 issued to subs'ribers or sto'6holders, /hether or not fully or partially paid -as long as there is a binding subs'ription agree,ent, e!'ept treasury shares.* &he 'o,putation, therefore, should be based on the total outstanding 'apital sto'6, irrespe'tive of the a,ount of the par value of the shares. &hen 'a,e SEC"%5C %pinion No. (3"1; dated 0une (), )((37

Corporation CASES Based on the Syllabus of Fr. Agustin &he instant Iuery no/ 'enters on /hether both voting and nonvoting shares are in'luded in the 'o,putation of the reIuired per'entage of Filipino eIuity, As a rule, the 1234 Constitution does not distinguish bet/een voting and non"voting shares /ith regard to the 'o,putation of the per'entage interest by Filipinos and non"Filipinos in a 'o,pany. "n o)3&r =or*(, non86o)1n@ (3ar&( (3ou5* +& 1n;5u*&* 1n )3& ;o2'u)a)1on o4 )3& 4or&1@n o=n&r(31' 5121) 4or *o2&()1; ;or'ora)1on.&his /as the rule applied Bin SEC %pinion No. (;"@( ! ! ! $t /as opined therein that the o/nership of the shares of sto'6 of a 'orporation is based on the total outstanding or subs'ribedFissued 'apital sto'6 regardless of /hether they are 'lassified as 'o,,on voting shares or preferred shares /ithout voting rights. &his is in line /ith the poli'y of the State to develop an independent national e'ono,y effe'tively 'ontrolled by Filipinos. ! ! ! -E,phasis added.. &he SEC again e'hoed the sa,e interpretation in an %pinion issued last April 12, )(11 /herein it stated, thus7 &his is, thus, the general rule, su'h that /hen the provision ,erely uses the ter, *'apital* /ithout Iualifi'ation -as in Se'tion 11, Arti'le N$$ of the 1234 Constitution, /hi'h deals /ith eIuity stru'ture in a publi' utility 'o,pany., the sa,e should be interpreted to refer to the su, total of the outstanding 'apital sto'6, irrespe'tive of the no,en'lature or 'lassifi'ation as 'o,,on, preferred, voting or non" voting.11 &he above 'onstrual is in har,ony /ith the letter and spirit of Se'. 11, Art. N$$ of the Constitution and its 'ounterpart provisions in the 12@: and 124@ Constitution and, thus, is entitled to respe'tful 'onsideration. As the Court de'lared in P!ilippine Global Communica"ions% Inc. 9. Relo9a71) ! ! ! As far ba'6 as $n re Allen, -) Phil. 1@(. a 12(@ de'ision, 0usti'e +'#onough, as ponente, 'ited this e!'erpt fro, the leading A,eri'an 'ase of Pennoyer v. +'Connaughy, de'ided in 13217 * T3& 'r1n;1'5& )3a) )3& ;on)&2'oran&ou( ;on()ru;)1on o4 a ()a)u)& +y )3& &7&;u)16& o441;&r( o4 )3& @o6&rn2&n), =3o(& *u)y 1) 1( )o &7&;u)& 1), 1( &n)1)5&* )o @r&a) r&('&;), an* (3ou5* or*1nar15y ;on)ro5 )3& ;on()ru;)1on o4 )3& ()a)u)& +y )3& ;our)(, is so fir,ly e,bedded in our 9urispruden'e that no authorities need be 'ited to support it.D ! ! ! &here /as a paraphrase by 0usti'e +al'ol, of su'h a pronoun'e,ent in +olina v. afferty, -@4 Phil. :;:. a 1213 de'ision7* Courts /ill and should respe't the

'onte,poraneous 'onstru'tion pla'ed upon a statute e!e'utive offi'ers /hose duty it is to enfor'e it, and unless su'h interpretation is 'learly erroneous /ill ordinarily be 'ontrolled thereby. -$bid, :::. Sin'e then, su'h a do'trine has been reiterated in nu,erous de'isions.1@ -E,phasis supplied.. La<amana 9. Eal"a@ar1; restates this long"standing di'tu,7 *B/Chere a statute has re'eived a 'onte,poraneous and pra'ti'al interpretation and the statute as interpreted is re"ena'ted, the pra'ti'al interpretation is a''orded greater /eight than it ordinarily re'eives, and is regarded as presu,ptively the 'orre't interpretation of the la/. &he rule here is based upon the theory that the legislature is a'Iuainted /ith the 'onte,poraneous interpretation of a statute, espe'ially /hen ,ade by an ad,inistrative body or e!e'utive offi'ers 'harged /ith the duty of ad,inistering or enfor'ing the la/, and therefore i,pliedly adopts the interpretation upon re"ena't,ent.*1: <en'e, it 'an be safely assu,ed that the fra,ers, in the 'ourse of deliberating the 1234 Constitution, 6ne/ of the adverted SEC interpretation. Parentheti'ally, it is i,,aterial /hether the SEC opinion /as rendered by the banc or by the SEC"%ffi'e of the 5eneral Counsel -%5C. 'onsidering that the latter has been given the authority to issue opinions on the la/s that the SEC i,ple,ents under SEC"ENS. es. No. 1(1, Series of )((). 11 &he 'onfer,ent does not violate Se'. ;.114of the Se'urities and egulation Code -S C. that pros'ribes the non"delegation of the legislative rule ,a6ing po/er of the SEC, /hi'h is in the nature of subordinate legislation. As ,ay be noted, the sa,e Se'. ;.1 does not ,ention the SECDs po/er to issue interpretative *opinions and provide guidan'e on and supervise 'o,plian'e /ith su'h rules,*13 /hi'h is in'idental to the SECDs enfor'e,ent fun'tions. A legislative rule and an interpretative rule are t/o different 'on'epts and the distin'tion bet/een the t/o is established in ad,inistrative la/.12 <en'e, the various opinions issued by the SEC"%5C deserve as ,u'h respe't as the opinions issued by the SEC en banc. Nonetheless, the estee,ed ponente posits that the SEC, 'ontrary to its 'lai,, has been less than 'onsistent in its 'onstrual of *'apital.* #uring the oral argu,ents, he dre/ attention to various SEC %pinions, nine -2. to be pre'ise, that purportedly 'onsider *'apital* as referring only to voting sto'6s.

Nazareno

1@ ( by the

efuting this position, the SEC in its +e,orandu, dated 0uly ):, )(1) e!plained in so,e detail that )3& Co221((1on 3a( +&&n ;on(1()&n) 1n a''5y1n@ )3& )&r2 J;a'1)a5J )o )3& )o)a5 ou)()an*1n@ ;a'1)a5 ()o;D, =3&)3&r 6o)1n@ or non86o)1n@ . &he SEC %pinions referred to by 0usti'e Carpio, /hi'h 'ited the provisions of the F$A, is not, ho/ever, pertinent or de'isive of the issue on the ,eaning of *'apital.* &he said SEC +e,orandu, states7 #uring the oral argu,ents held on )1 0une )(1), the SEC /as dire'ted to e!plain nine -2. of its %pinions in relation to the definition of *'apital* as used in Se'tion 11, Arti'le N$$ of the Constitution, na,ely7 -1. %pinion dated @ +ar'h 122@ for +r. Fran'is F. <o/E -). %pinion dated 1; April 122@ for #ire'tor Angeles &. AongE -@. %pinion dated )@ Nove,ber 122@ for +ssrs. #o,inador Al,eda and enato S. Cal,aE -;. %pinion dated 4 #e'e,ber 122@ for o'o BuPag Rapunan +igallos U 0ardeleza =a/ %ffi'esE -:. %pinion dated )) #e'e,ber )((; for o,ulo +abanta Buenaventura Sayo' U #e =os AngelesE -1. %pinion dated )4 Septe,ber )((4 for eynaldo 5. #avidE -4. %pinion dated )3 Nove,ber )((4 for Santiago U Santiago la/ %ffi'esE -3. %pinion dated 1: 0anuary )((3 for Attys. uby ose 0. ?usi and udyard S. ArboladoE and -2. %pinion dated 13 August )(1( for Castillo =a,an &an Pantaleon U San 0ose. !!!! :1)3 *u& r&('&;), )3& 1((u& o4 =3&)3&r J;a'1)a5J r&4&r( )o ou)()an*1n@ ;a'1)a5 ()o;D or on5y 6o)1n@ ()o;D( =a( n&6&r ra1(&* 1n )3& r&>u&()( 4or )3&(& o'1n1on( . $n fa't, the definition of *'apital* 'ould not have been a relevant andFor a ,aterial issue in so,e of these opinions be'ause the 'o,,on and preferred shares involved have the sa,e voting rights. Also, so,e %pinions ,entioned the F$A to e,phasize that the said la/ ,andates the appli'ation of the Control &est. +oreover, these %pinions state they are based solely on the fa'ts dis'losed and relevant only to the issues raised therein. For one, the %pinion dated @ +ar'h 122@ for +r. Fran'is F. <o/ *o&( no) *1(;u(( =3&)3&r J;a'1)a5J r&4&r( )o )o)a5 ou)()an*1n@ ;a'1)a5 ()o;D or on5y 6o)1n@ ()o;D( . $nstead, it tal6s about the appli'ation of the Control test in a ,ining 'orporation by loo6ing into the nationality of its investors. T3& F"A 1( no) 2&n)1on&* )o 'ro61*& a *&41n1)1on o4 J;a'1)a5,J +u) )o &7'5a1n )3& na)1ona51)y r&>u1r&2&n) '&r)1n&n) )o 1n6&()or( o4 a 21n1n@ ;or'ora)1on.

1@ Nazareno 1 &he %pinion dated 1; April 122@ for #ir. Angeles &. Aong also *o&(
Corporation CASES Based on the Syllabus of Fr. Agustin no) *&41n& J;a'1)a5J a( r&4&rr1n@ )o )o)a5 ou)()an*1n@ ;a'1)a5 or on5y )o 6o)1n@ (3ar&(, +u) )a5D( a+ou) )3& a''51;a)1on o4 )3& Con)ro5 T&() ! ! !. &he F$A is again ,entioned only to e!plain the nationality reIuired of investors of a 'orporation engaged in overseas re'ruit,ent. &he %pinion dated )@ Nove,ber 122@ for +ssrs. #o,inador Al,eda and enato S. Cal,a*1()1n@u1(3&( +&)=&&n )3& na)1ona51)y o4 a ;or'ora)1on a( an 1n6&()1n@ &n)1)y an* )3& na)1ona51)y o4 a ;or'ora)1on a( an 1n6&()&& ;or'ora)1on. T3& F"A 1( 2&n)1on&* on5y 1n )3& *1(;u((1on o4 )3& na)1ona51)y o4 )3& 1n6&()or( o4 a ;or'ora)1on o=n1n@ 5an* 1n )3& !3151''1n&( , 'o,posed of a trustee for pension or other e,ployee retire,ent or separation benefits, /here the trustee is a Philippine national and at least si!ty per'ent -1(>. of the fund /ill a''rue to the benefit of Philippine nationals, and another do,esti' 'orporation /hi'h is 1((> foreign o/ned. 8nli6e the #ecision rendered by this <onorable Court on )3 0une )(11, the %pinion dated (4 #e'e,ber 122@ for o'o BuPag Rapunan +igallos U 0ardeleza *o&( no) 'ar5&y on )3& 1((u& o4 )3& 'ro'&r 1n)&r'r&)a)1on o4 J;a'1)a5J +&;au(& 1) 1( no) a r&5&6an) an*Lor a 2a)&r1a5 1((u& 1n )31( o'1n1on !!!. T3& F"A 1( 2&n)1on&* on5y )o &7'5a1n )3& a''51;a)1on o4 )3& ;on)ro5 )&(). Note, ho/ever, that ,anufa'turing fertilizer is neither a nationalized or partly nationalized a'tivity, /hi'h is another reason /hy this %pinion has no relevan'e in this 'ase. &he %pinion dated )) #e'e,ber )((; for o,ulo +abanta Buenaventura Sayo' U #e =os Angeles fo'uses on the nationality of the investors of a 'orporation that /ill a'Iuire land /herein one of the investors is a foundation. ") ;on41r2( )3& 61&= )3a) )3& )&() 4or ;o2'51an;& =1)3 )3& na)1ona51)y r&>u1r&2&n) 1( +a(&* on )3& )o)a5 ou)()an*1n@ ;a'1)a5 ()o;D 1rr&('&;)16& o4 )3& a2oun) o4 )3& 'ar 6a5u& o4 (3ar&(. &he F$A is used ,erely to 9ustify the appli'ation of the Control &est as adopted in the #epart,ent of 0usti'e %pinion, No. 13, Series of 1232, dated 12 0anuary 1232, vi( N !!!! &he %pinion dated )4 Septe,ber )((4 for +r. eynaldo 5. #avid, li6e/ise, *o&( no) *1(;u(( =3&)3&r J;a'1)a5J r&4&r( )o )o)a5

Corporation CASES Based on the Syllabus of Fr. Agustin ou)()an*1n@ ;a'1)a5 ()o;D or on5y )o 6o)1n@ ()o;D(, +u) ra)3&r =3&)3&r )3& Con)ro5 T&() 1( a''51;a+5& 1n *&)&r21n1n@ )3& na)1ona51)y o4 )3& 'ro'o(&* ;or'ora)& +1**&r or +uy&r o4 !NOC8E C (3ar&(. ! ! ! &he F$A /as 'ited only to e,phasize that the said la/ ,andates the appli'ation of the Control &est. &he %pinion dated )3 Nove,ber )((4 for Santiago U Santiago =a/ %ffi'es 2a1n)a1n( an* (u''or)( )3& 'o(1)1on o4 )3& Co221((1on )3a) S&;)1on 11, Ar)1;5& N"" o4 )3& Con()1)u)1on 2aD&( no *1()1n;)1on +&)=&&n ;o22on an* 'r&4&rr&* (3ar&(, )3u(, +o)3 (3ar&( (3ou5* +& 1n;5u*&* 1n )3& ;o2'u)a)1on o4 )3& 4or&1@n &>u1)y ;a' 4or *o2&()1; ;or'ora)1on( . Si,ply put, the total outstanding 'apital sto'6, /ithout regard to ho/ the shares are 'lassified, should be used as the basis in deter,ining the 'o,plian'e by publi' utilities /ith the nationality reIuire,ent as provided for in Se'tion 11, Arti'le N$$ of the Constitution. Notably, all shares of the sub9e't 'orporation, Pilipinas First, have voting rights, /hether 'o,,on or preferred. <en'e, the issue on /hether *'apital* refers to total outstanding 'apital sto'6 or only to voting sto'6s has no relevan'e in this %pinion. $n the sa,e /ay, the %pinion dated 1: 0anuary )((3 for Attys. uby ose 0. ?usi and udyard S. Arbolada n&6&r *1(;u((&* =3&)3&r J;a'1)a5J r&4&r( )o ou)()an*1n@ ;a'1)a5 ()o;D or on5y )o 6o)1n@ ()o;D(, +u) ra)3&r =3&)3&r )3& Con)ro5 T&() 1( a''51;a+5& or no). &he F$A /as used ,erely to 9ustify the appli'ation of the Control &est. +ore i,portantly, the ter, *'apital* 'ould not have been relevant andFor ,aterial issue in this %pinion be'ause the 'o,,on and preferred shares involved have the sa,e voting rights. &he %pinion dated 13 August )(1( for Castillo =a,an &an Pantaleon U San 0ose r&1)&ra)&( )3a) )3& )&() 4or ;o2'51an;& =1)3 )3& na)1ona51)y r&>u1r&2&n) 1( +a(&* on )3& )o)a5 ou)()an*1n@ ;a'1)a5 ()o;D, 1rr&('&;)16& o4 )3& a2oun) o4 )3& 'ar 6a5u& o4 )3& (3ar&(. T3& F"A 1( 2&n)1on&* on5y )o &7'5a1n )3& a''51;a)1on o4 )3& Con)ro5 T&() an* )3& Gran*4a)3&r Ru5& in a 'orporation o/ning land in the Philippines by loo6ing into the nationality of its investors. -E,phasis supplied.. 4( $n vie/ of the foregoing, it is sub,itted that the long"established interpretation and ,ode of 'o,puting by the SEC of the total 'apital sto'6 strongly re'ognize the intent of the fra,ers of the Constitution to allo/ a''ess to ,u'h"needed foreign invest,ents 'onfined to ;(> of the 'apital sto'6 of publi' utilities.

Con(&>u&n;&( o4 a5)&rna)16& &44&;)( o4 )3& ;on()ru;)1on 'ro'o(&* 1n )3& '&)1)1on an* (u()a1n&* 1n )3& Jun& 28, 2011 &;1(1on. /6)3 &7)r1n(1; a1*0 -ilipino shareholders will control the fundamental matters nor own the economic benefits of the utilit8 corporation. not corporate ma+orit8 public

1@ Nazareno ) 1n)&r'r&)a)1onB 21(;31&6ou(

$ndeed, if the Court persists in adhering to the rationale underlying the ,a9orityDs original interpretation of *'apital* found in the first senten'e of Se'tion 11, Arti'le N$$, Ae ,ay perhaps be allo/ing Filipinos to dire't and 'ontrol the daily business of our publi' utilities, but /ould 1rr&6o;a+5y an* 1n?u*1;1ou(5y *&'r16& )3&2 o4 &44&;)16& J;on)ro5J o6&r )3& 2a?or an* &>ua55y 12'or)an) ;or'ora)& *&;1(1on( an* )3& &6&n)ua5 +&n&41;1a5 o=n&r(31' o4 )3& ;or'ora)& a((&)( )3a) ;ou5* 1n;5u*&, a2on@ o)3&r(, ;5a12 o6&r our (o15KKour 5an*. &his under,ines the 'lear te!tual 'o,,it,ent under the Constitution that reserves o/nership of disposable lands to Filipino 'itizens. &he interplay of the ensuing provisions of Arti'le N$$ is un,ista6able7 SEC&$%N ). All lands of the publi' do,ain ! ! ! forests or ti,ber, /ildlife, flora and fauna, and other natural resour'es are o/ned by the State. Aith the e!'eption of agri'ultural lands, all other natural resour'es shall not be alienated. T3& &7'5ora)1on, *&6&5o'2&n), an* u)151Ha)1on o4 na)ura5 r&(our;&( (3a55 +& un*&r )3& 4u55 ;on)ro5 an* (u'&r61(1on o4 )3& S)a)&. ! ! ! !!!! SEC&$%N @. =ands of the publi' do,ain are 'lassified into agri'ultural, forest or ti,ber, ,ineral lands, and national par6s. Agri'ultural lands of the publi' do,ain ,ay be further 'lassified by la/ a''ording to the uses /hi'h they ,ay be devoted. Alienable lands of the publi' do,ain shall be li,ited to agri'ultural lands. Private 'orporations or asso'iations ,ay not hold su'h alienable lands e!'ept by lease, for a period not e!'eeding t/enty"five years, rene/able for not ,ore than t/enty"five years, and not to e!'eed one thousand he'tares in area. Citizens of the Philippines ,ay lease not ,ore than five hundred he'tares, or a'Iuire not ,ore than t/elve he'tares thereof by pur'hase, ho,estead or grant.

!!!! SEC&$%N 4. Save in 'ases of hereditary su''ession, no 'r16a)& 5an*( (3a55 +& )ran(4&rr&* or ;on6&y&* &7;&') )o 1n*161*ua5(, ;or'ora)1on( or a((o;1a)1on( >ua5141&* )o a;>u1r& or 3o5* 5an*( o4 )3& 'u+51; *o2a1n. -E,phasis supplied.. Consider the hypotheti'al 'ase presented in the original ponencia7 =et us assu,e that a 'orporation has 1(( 'o,,on shares o/ned by foreigners and 1,(((,((( non"voting preferred shares o/ned by Filipinos, /ith both 'lasses of share having a par value of one peso -P 1.((. per share. 8nder the broad definition of the ter, *'apital,* su'h 'orporation /ould be 'onsidered 'o,pliant /ith the ;( per'ent 'onstitutional li,it on foreign eIuity of publi' utilities sin'e the over/hel,ing ,a9ority, or ,ore than 22.222 per'ent, of the total outstanding 'apital sto'6 is Filipino o/ned. &his is obviously absurd. Albeit trying not to appear to, the ,a9ority a'tually finds fault in the /isdo, of, or ,otive behind, the provision in Iuestion through *highly unli6ely s'enarios of 'lini'al e!tre,es,* to borro/ fro, *eterans -ederation Part8 v. C/,0:0C. 41 $t is sub,itted that the flip side of the ponenciaDs hypotheti'al illustration, /hi'h /ill be e!haustively elu'idated in this opinion, is ,ore ano,alous and pre9udi'ial to Filipino interests. For instan'e, let us suppose that the authorized 'apital sto'6 of a publi' utility 'orporation is divided into 1(( 'o,,on shares and 1,(((,((( non"voting preferred shares. Sin'e, a''ording to the CourtDs 0une )3, )(11 #e'ision, the /ord *'apital* in Se'. 11, Art. N$$ refers only to the voting shares, then the ;(> 'ap on foreign o/nership applies only to the 1(( 'o,,on shares. Foreigners 'an, therefore, o/n 1((> of the 1,(((,((( nonvoting preferred shares. But then again, the ponencia 'ontinues, at least, the *'ontrol* rests /ith the Filipinos be'ause the 1(> Filipino"o/ned 'o,,on shares /ill ne'essarily ordain the ,a9ority in the governing body of the publi' utility 'orporation, the board of dire'torsFtrustees. <en'e, Filipinos are assured of 'ontrol over the day"to"day a'tivities of the publi' utility 'orporation. =et us, ho/ever, ta6e this 'orporate s'enario a little bit farther and 'onsider the irresistible i,pli'ations of 'hanges and 'ir'u,stan'es that are inevitable and 'o,,on in the business /orld. Consider the

1@ Nazareno @ si,ple ,atter of a possible invest,ent of 'orporate funds in another

Corporation CASES Based on the Syllabus of Fr. Agustin 'orporation or business, or a ,erger of the publi' utility 'orporation, or a possible dissolution of the publi' utility 'orporation. :3o 3a( )3& J;on)ro5J o6&r )3&(& 61)a5 an* 12'or)an) ;or'ora)& 2a))&r(E &he last paragraph of Se'. 1 of the Corporation Code provides7 Ahere the arti'les of in'orporation provide for non"voting shares in the 'ases allo/ed by this Code,)3& 3o5*&r( o4 (u;3 /non86o)1n@0 (3ar&( (3a55 n&6&r)3&5&(( +& &n)1)5&* )o 6o)& on )3& 4o55o=1n@ 2a))&r(7 1. A,end,ent of the arti'les of in'orporationE ). Adoption and a,end,ent of by"la/sE @. Sale, lease, e!'hange, ,ortgage, pledge or other disposition of all or substantially all of the 'orporate propertyE ;. $n'urring, 'reating or in'reasing bonded indebtednessE :. $n'rease or de'rease of 'apital sto'6E 1. +erger or 'onsolidation of 'orporation or other 'orporationsE the 'orporation /ith another

4. $nvest,ent of 'orporate funds in another 'orporation or business in a''ordan'e /ith this CodeE and 3. #issolution of the 'orporation.*-E,phasis and unders'oring supplied.. $n our hypotheti'al 'ase, all 1,(((,1(( -voting and non"voting. shares are entitled to vote in 'ases involving funda,ental and ,a9or 'hanges in the 'orporate stru'ture, su'h as those listed in Se'. 1 of the Corporation Code. <en'e, /ith only 1( out of the 1,(((,1(( shares in the hands of the Filipino shareholders, 'ontrol is definitely in the hands of the foreigners. &he foreigners 'an opt to invest in other businesses and 'orporations, in'rease its bonded indebtedness, and even dissolve the publi' utility 'orporation against the interest of the Filipino holders of the ,a9ority voting shares. &his 'annot plausibly be the 'onstitutional intent.

Corporation CASES Based on the Syllabus of Fr. Agustin Consider further a situation /here the ,a9ority holders of the total outstanding 'apital sto'6, both voting and non"voting, de'ide to dissolve our hypotheti'al publi' utility 'orporation. :3o =155 &6&n)ua55y a;>u1r& )3& +&n&41;1a5 o=n&r(31' o4 )3& ;or'ora)& a((&)( u'on *1((o5u)1on an* 51>u1*a)1onE Note that Se'. 1)) of the Corporation Code states7 Se'tion 1)). Corporate liIuidation.GEvery 'orporation /hose 'harter e!pires by its o/n li,itation or is annulled by forfeiture or other/ise, or /hose 'orporate e!isten'e for other purposes is ter,inated in any other ,anner, shall nevertheless be 'ontinued as a body 'orporate for three -@. yearsO )o *1('o(& o4 an* ;on6&y 1)( 'ro'&r)y an* )o *1()r1+u)& 1)( a((&)(, but not for the purpose of 'ontinuing the business for /hi'h it /as established. At any ti,e during said three -@. years, the 'orporation is authorized and e,po/ered to 'onvey all of its property to trustees 4or )3& +&n&41) o4 ()o;D3o5*&r(, 2&2+&r(, 'reditors, and other persons in interest. Fro, and after any su'h 'onveyan'e by the 'orporation of its property in trust for the benefit of its sto'6holders, ,e,bers, 'reditors and others in interest, a55 1n)&r&() =31;3 )3& ;or'ora)1on 3a* 1n )3& 'ro'&r)y )&r21na)&(, the legal interest vests in the trustees, and )3& +&n&41;1a5 1n)&r&() 1n )3& ()o;D3o5*&r(, 2&2+&r( , ;r&*1)or( or o)3&r '&r(on( 1n 1n)&r&(). -E,phasis and unders'oring supplied.. Clearly then, the bul6 of the assets of our i,aginary publi' utility 'orporation, /hi'h ,ay in'lude private lands, /ill go to the benefi'ial o/nership of the foreigners /ho 'an hold up to ;( out of the 1(( 'o,,on shares and the entire 1,(((,((( preferred non"voting shares of the 'orporation. &hese foreign shareholders /ill en9oy the bul6 of the pro'eeds of the sale of the 'orporate lands, or /orse, e!er'ise 'ontrol over these lands behind the fa`ade of 'orporations no,inally o/ned by Filipino shareholders. Bluntly, /hile the Constitution e!pressly prohibits the transfer of land to aliens, foreign sto'6holders ,ay resort to s'he,es or arrange,ents /here su'h land /ill be 'onveyed to their du,,ies or no,inees. $s this not 'ir'u,vention, if not an outright violation, of the funda,ental Constitutional tenet that only Filipinos 'an o/n Philippine landL A 'onstru'tion of *'apital* as referring to the total shareholdings of the 'o,pany is an a'6no/ledg,ent of the e!isten'e of nu,erous 'orporate 'ontrol"enhan'ing ,e'hanis,s, besides o/nership of voting rights, that li,its the proportion bet/een the separate and

distin't 'on'epts of &;ono21; r1@3) to the 'ash flo/ 'orporation an*the right to 'orporate ;on)ro5 -hen'e, they are also referred to as proportionality"li,iting ,easures.. &his 'orporate reality is refle'ted in S C ule @-E. of the A,ended $,ple,enting ules and egulations -$ . of the S C and Se'. @-g. of &he eal Estate $nvest,ent &rust A't - E$&. of )((2, 4) /hi'h both provide that 'ontrol 'an e!ist r&@ar*5&(( o4 o=n&r(31' o4 6o)1n@ (3ar&( . &he S C$ states7 Con)ro5 1( )3& 'o=&r )o @o6&rn the 41nan;1a5 and o'&ra)1n@ 'o51;1&( of an enterprise so as to obtain benefits fro, its a'tivities. Control is presu,ed to e!ist /hen the parent o/ns, dire'tly or indire'tly through subsidiaries, ,ore than one half of the voting po/er of an enterprise unless, in e!'eptional 'ir'u,stan'es, it 'an be 'learly de,onstrated that su'h o/nership does not 'onstitute 'ontrol. Con)ro5 a5(o &71()( &6&n =3&n )3& 'ar&n) o=n( on& 3a54 or 5&(( o4 )3& 6o)1n@ 'o=&r o4 an &n)&r'r1(& =3&n )3&r& 1(7 i. !o=&r o6&r 2or& )3an on& 3a54 o4 )3& 6o)1n@ r1@3)( by virtue of an a@r&&2&n) /ith other investorsE ii. !o=&r )o @o6&rn )3& 41nan;1a5 an* o'&ra)1n@ 'o51;1&( of the enterprise under a statute or an a@r&&2&ntE iii. !o=&r )o a''o1n) or r&2o6& )3& 2a?or1)y o4 )3& 2&2+&r( o4 )3& +oar* of dire'tors or eIuivalent governing bodyE iv. !o=&r )o ;a() )3& 2a?or1)y o4 6o)&( at ,eetings of the board of dire'tors or eIuivalent governing body. -E,phasis and unders'oring supplied.. As sho/n above, o=n&r(31' o4 6o)1n@ (3ar&( or 'o=&r a5on& =1)3ou) &;ono21; ;on)ro5 o4 )3& ;o2'any *o&( no) n&;&((ar15y &>ua)& )o ;or'ora)& ;on)ro5 . A shareholder)s agreement 'an effe'tively 'lip the voting po/er of a shareholder holding voting shares. $n the sa,e /ay, a voting right ceiling, /hi'h is *a restri'tion prohibiting shareholders to vote above a 'ertain threshold irrespe'tive of the nu,ber of voting shares they hold,*4@ 'an li,it the 'ontrol that ,ay be e!erted by a person /ho o/ns voting sto'6s but /ho does not have a substantial e'ono,i' interest over the 'o,pany. So also does the use of financial

Nazareno

1@ ; of the

Corporation CASES Based on the Syllabus of Fr. Agustin derivatives /ith atta'hed 'onditions to ensure the a'Iuisition of 'orporate 'ontrol separately fro, the o/nership of voting shares, or the use of superma+orit8 provisions in the byla/s and arti'les of in'orporation or asso'iation. $ndeed, there are innu,erable /ays and ,eans, both e!pli'it and i,pli'it, by /hi'h the control of a corporation can be attained and retained even with ver8 limited voting shares, i.e.., there are a nu,ber of /ays by /hi'h 'ontrol 'an be disproportionately in'reased 'o,pared to o/nership4; so long as e'ono,i' rights over the ,a9ority of the assets and eIuity of the 'orporation are ,aintained. <en'e, if Ae follo/ the 'onstru'tion of *'apital* in Se'. 11, Art. N$$ stated in the ponencia of 0une )3, )(11 and turn a blind eye to these realities of the business /orld, )31( Cour) 2ay 3a6& 6&r1)a+5y 'u) a 5121) on )3& 4or&1@n o=n&r(31' o4 ;o22on (3ar&( +u) 3a6& 1n*1r&;)5y a55o=&* 4or&1@n&r( )o a;>u1r& @r&a)&r &;ono21; r1@3) )o )3& ;a(3 45o= o4 'u+51; u)151)y ;or'ora)1on( , /hi'h is a leverage to bargain for far greater 'ontrol through the various enhan'ing ,e'hanis,s or proportionality"li,iting ,easures available in the business /orld. $n our e!tre,ely hypotheti'al publi' utility 'orporation /ith the eIuity stru'ture as thus des'ribed, sin'e the ,a9ority re'ognized only the 1(( 'o,,on shares as the *'apital* referred to in the Constitution, the entire e'ono,i' right to the 'ash flo/ arising fro, the 1,(((,((( non"voting preferred shares 'an be a'Iuired by foreigners. Aith this e'ono,i' po/er, the foreign holders of the ,inority 'o,,on shares /ill, as they easily 'an, bargain /ith the holders of the ,a9ority 'o,,on shares for ,ore 'orporate 'ontrol in order to prote't their e'ono,i' interest and redu'e their e'ono,i' ris6 in the publi' utility 'orporation. For instan'e, they 'an easily de,and the right to 'ast the ,a9ority of votes during the ,eeting of the board of dire'tors. After all, ,oney 'o,,ands 'ontrol. &he 'ourt 'annot, and ought not, a''ept as 'orre't a holding that routinely disregards legal and pra'ti'al 'onsiderations as signifi'ant as above indi'ated. Co,,itting an error is bad enough, persisting in it is /orse. -oreigners can nationali(ed industries be owners of full8

the ,eaning assigned to it /ithin the provision li,iting foreign o/nership in 'orporations 'an affe't 'orporations /hose o/nership is reserved to Filipinos, or /hose foreign eIuity is li,ited by la/ pursuant to Se'. 1(, Art. N$$ of the Constitution /hi'h states7 SEC&$%N 1(. &he Congress shall, upon re'o,,endation of the e'ono,i' and planning agen'y, /hen the national interest di'tates, r&(&r6& )o ;1)1H&n( o4 )3& !3151''1n&( or )o ;or'ora)1on( or a((o;1a)1on( a) 5&a() (17)y '&r ;&n)u2 o4 =3o(& ;a'1)a5 1( o=n&* +y (u;3 ;1)1H&n(, or (u;3 31@3&r '&r;&n)a@& a( Con@r&(( 2ay 'r&(;r1+&, ;&r)a1n ar&a( o4 1n6&()2&n)(. T3& Con@r&(( (3a55 &na;) 2&a(ur&( )3a) =155 &n;oura@& )3& 4or2a)1on an* o'&ra)1on o4 &n)&r'r1(&( =3o(& ;a'1)a5 1( =3o55y o=n&* +y F151'1no(. -E,phasis supplied.. For instan'e, epubli' A't No. 4(;), also 6no/n as the -oreign Investments "ct of 1>>14: -F$A., provides for the for,ation of a egular Foreign $nvest,ent Negative =ist - F$N=. 'overing invest,ent areasFa'tivities that are partially or entirely reserved to Filipinos. &he 3th F$N=41 provides that *No Foreign EIuity* is allo/ed in the follo/ing areas of invest,entsFa'tivities7 1. +ass +edia e!'ept re'ording -Arti'le NH$, Se'tion 1 of the Constitution and Presidential +e,orandu, dated +ay ;, 122;.E ). Pra'ti'e of all professions -Arti'le N$$, Se'tion 1; of the Constitution and Se'tion 1, A :131.E44 @. etail trade enterprises /ith paid"up 'apital of less than W),:((,((( -Se'tion :, A 341).E ;. Cooperatives -Chapter $$$, Arti'le )1, :. Private Se'urity Agen'ies -Se'tion ;, 1. S,all"s'ale +ining -Se'tion @, A 12@3.E A :;34.E

1@ Nazareno : 'onte!t of a 'onstitutional

A 4(41.

=est it be overloo6ed, *'apital* is an oft"used ter, in the Constitution and various legislative a'ts that regulate 'orporate entities. <en'e,

4. 8tilization of +arine esour'es in ar'hipelagi' /aters, territorial sea, and e!'lusive e'ono,i' zone as /ell as s,all s'ale utilization of natural resour'es in rivers, la6es, bays, and lagoons -Arti'le N$$, Se'tion ) of the Constitution.E

Corporation CASES Based on the Syllabus of Fr. Agustin 3. %/nership, operation and ,anage,ent of 'o'6pits -Se'tion :, P# ;;2.E 2. +anufa'ture, repair, sto'6piling andFor distribution of nu'lear /eapons -Arti'le $$, Se'tion 3 of the Constitution.E 1(. +anufa'ture, repair, sto'6piling andFor distribution of biologi'al, 'he,i'al and radiologi'al /eapons and anti"personnel ,ines -Harious treaties to /hi'h the Philippines is a signatory and 'onventions supported by the Philippines.E 11. +anufa'ture of fire 'ra'6ers and other pyrote'hni' devi'es -Se'tion :, A 413@.. $f the 'onstru'tion of *'apital,* as espoused by the 0une )3, )(11 #e'ision, /ere to be sustained, the reservation of the full o/nership of 'orporations in the foregoing industries to Filipinos 'ould easily be negated by the si,ple e!pedien'e of issuing and ,a6ing available non"voting shares to foreigners. After all, these non"voting shares do not, follo/ing the 0une )3, )(11 #e'ision, for, part of the *'apital* of these supposedly fully nationalized industries. ConseIuently, /hile Filipinos 'an o''upy all of the seats in the board of dire'tors of 'orporations in fully nationalized industries, it is possible for foreigners to o/n the ,a9ority of the eIuity of the 'orporations through *non"voting* shares, /hi'h are nonetheless allo/ed to deter,ine funda,ental 'orporate ,atters re'ognized in Se'. 1 of the Corporation Code. Filipinos ,ay therefore be un/ittingly deprived of the *effe'tive* o/nership of 'orporations supposedly reserved to the, by the Constitution and various la/s. T3& For&1@n "n6&()2&n)( A;) o4 no) >ua514y or r&()r1;) )3& 2&an1n@ 1n S&;. 11, Ar). N"" o4 )3& Con()1)u)1on. 1991 *o&( o4 J;a'1)a5J

$ 'annot share this posture. T3& a2&n*&* )3rou@3 )3& 'ro;&*ur& ou)51n&* 1n )3& +a(1; *o;u2&n) 1)(&54.31 An a2&n*2&n) ;anno), )3&r&4or&, +& 2a*& )3rou@3 )3& &7'&*1&n;& o4 a 5&@1(5a)16& a;)1on )3a) *1a@ona55y o''o(&( )3& ;5&ar 'ro61(1on( o4 )3& Con()1)u)1on.

1@ Nazareno 1 Con()1)u)1on 2ay on5y +&

$ndeed, the ;on()1)u)1ona5 1n)&n) on the eIuity pres'ribed by Se'. 11, Art. N$$ ;anno) '5au(1+5y +& 45&(3&* ou) +y a 5ooD )3rou@3 )3& 'r1(2 o4 &;ono21; ()a)u)&( 'a((&* a4)&r )3& a*o')1on o4 )3& Con()1)u)1on, su'h as the 'ited F$A, the ,agna Carta for +i'ro, S,all and +ediu, $ndustries - epubli' A't No. 1244. and other 6indred la/s envisaged to Filipinize 'ertain areas of invest,ent. $t should be the other /ay around. Surely, the definition of a *Philippine National* in the F$A, or for that ,atter, the 1234 %$C3) 'ould not have influen'ed the ,inds of the 1231 C%NC%+ or the people /hen they ratified the Constitution. As heretofore dis'ussed, the pri,ary sour'e /hen'e to as'ertain 'onstitutional intent or purpose is the 'onstitutional te!t, or, to be ,ore pre'ise, the language of the provision itself, 3@ as inIuiry on any 'ontroversy arising out of a 'onstitutional provision ought to start and end as ,u'h as possible /ith the provision itself. 3; L&@1(5a)16& &na;)2&n)( on ;o22&r;&, )ra*& an* na)1ona5 &;ono2y 2u() +& (o ;on()ru&*, =3&n a''ro'r1a)&, )o *&)&r21n& =3&)3&r )3& 'ur'o(& un*&r5y1n@ )3&2 1( 1n a;;or* =1)3 )3& 'o51;1&( an* o+?&;)16&( 5a1* ou) 1n )3& Con()1)u)1on. Sur&5y, a 5a= ;anno) 6a51*5y +roa*&n or r&()r1;) )3& )3ru() o4 a ;on()1)u)1ona5 'ro61(1on un5&(( &7'r&((5y (an;)1on&* +y )3& Con()1)u)1on 1)(&54. And the Court ,ay not read into the Constitution an intent or purpose that is not there. Any atte,pt to enlarge the breadth of 'onstitutional li,itations beyond /hat its provision di'tates should be stri'6en do/n. $n fa't, it is obvious fro, the F$A itself that its fra,ers dee,ed it ne'essary to Iualify the ter, *'apital* /ith the phrase *sto'6 outstanding and entitled to vote* in defining a *Philippine National* in Se'. @-a.. &his only supports the 'onstrual that the ter, *'apital,* standing alone as in Se'. 11, Art. N$$ of the Constitution, applies to all shares, /hether 'lassified as voting or non"voting, and )31( 1( )3& 1n)&r'r&)a)1on 1n 3ar2ony =1)3 )3& Con()1)u)1on. $n passing the F$A, the legislature 'ould not have plausibly intended to restri't the ;(> foreign o/nership li,it i,posed by the Constitution on all 'apital sto'6 to only voting sto'6. Pre'isely, Congress ena'ted the F$A to liberalize the la/s on foreign

Nonetheless, 0usti'e Carpio parlays the thesis that the F$A, and its prede'essors, the $nvest,ents $n'entives A't of 1214 -*1214 $$A*.,43 %,nibus $nvest,ents Code of 1231 -*1231 %$C*., 42 and the %,nibus $n'entives Code of 1234 -*1234 %$C*., 3( -'olle'tively, *$nvest,ent $n'entives =a/s*. ,ore parti'ularly their definition of the ter, *Philippine National,* 'onstitutes a good guide for as'ertaining the intent behind the use of the ter, *'apital* in Se'. 11, Art. N$$Jthat it refers only to voting shares of publi' utility 'orporations.

Corporation CASES Based on the Syllabus of Fr. Agustin invest,ents. Su'h intent is at on'e apparent in the very title of the statute, i.e., *An A't to Pro,ote Foreign $nvest,ents,* and the poli'y7 *attra't, pro,ote and /el'o,e produ'tive invest,ents fro, foreign individuals, partnerships, 'orporations, and govern,ent,*3: e!presses the sa,e. &he Senate, through then Senator Hi'ente Paterno, 'ategori'ally stated that the F$A is ai,ed at *liberalizing foreign invest,ents*31 be'ause *Filipino invest,ent is not going to be enough BandC /e need the support and the assistan'e of foreign investors ! ! !.*34 &he senator ,ade 'lear that *the ter, KPhilippine nationalD* ,eans either Filipino 'itizens or enterprises of /hi'h the *total Filipino o=n&r(31'* is 1( percent or greater, thus7 S&na)or !a)&rno. +ay $ first say that )3& )&r2 J!3151''1n& na)1ona5J 2&an( &1)3&r F151'1no ;1)1H&n( or &n)&r'r1(&( o4 =31;3 )3& )o)a5 F151'1no o=n&r(31' 1( 60 '&r;&n) or @r&a)&r. $n other /ords, /e are not e!'luding foreign parti'ipation in do,esti' ,ar6et enterprises /ith total assets of less than P ): ,illion. Ae are ,erely li,iting foreign parti'ipation to not ,ore than ;( per'ent in this definition.33 Even granting, arguendo! that the definition of a *Philippine National* in the F$A /as lifted fro, the $nvest,ent $n'entives =a/s issued in 1214, 1231, and 1234 that defined *Philippine National* as a 'orporation 1(> of /hose voting sto'6s is o/ned by Filipino 'itizens, su'h definition does not li,it or Iualify the nationality reIuire,ent pres'ribed for publi' utility 'orporations by Se'. 11, Art. N$$ of the 1234 Constitution. &he latter does not refer to the definition of a *Philippine National.* $nstead, Se'. 11, Art. N$$ reiterates the use of the un>ua5141&* )&r2 J;a'1)a5J in the 12@: and 124@ Constitutions. $n fa't, neither the 124@ Constitutional Convention nor the 1231 C%NC%+ alluded to the $nvest,ent $n'entives =a/s in their deliberations on the nationality reIuire,ent of publi' utility 'orporations. Aith the uneIuivo'al re9e'tion of the 8P =a/ Center proposal to use the Iualifying *voting sto'6 or 'ontrolling interest,* the non"'onsideration of the $nvest,ent $n'entives =a/s ,eans that these la/s are not pertinent to the issue of the Filipino"foreign 'apital ratio in publi' utility 'orporations. Besides, none of the $nvest,ent $n'entives =a/s defining a *Philippine National* has sought to e!pand or ,odify the definition of *'apital,* as used in the Constitutions then e!isting. &he definition of a *Philippine National* in these la/s /as, to stress, only intended to

identify the 'orporations Iualified for registration to avail in'entives pres'ribed therein. &he definition /as not ,eant to find 'onte!t outside the s'ope of the various $nvest,ent $n'entives =a/s, ,u'h less to ,odify a nationality reIuire,ent set by the then e!isting Constitution. &his ,u'h is obvious in the very heading of the first of these $nvest,ent $n'entives =a/s, 1214 $$A 7 SECT"ON -. !!!! -f. *Philippine National* shall ,ean a 'itizen of the PhilippinesE or a partnership or asso'iation /holly o/ned by 'itizens of the PhilippinesE or a 'orporation organized and e!isting under the la/s of the Philippines of /hi'h at least si!ty per 'ent of the 'apital sto'6 outstanding and entitled to vote is o/ned and held by 'itizens of the Philippines !!!! -E,phasis and unders'oring supplied.. $ndeed, the definition of a *Philippine National* in the F$A 'annot apply to the o/nership stru'ture of enterprises applying for, and those granted, a fran'hise to operate as a publi' utility under Se'. 11, Art. N$$ of the Constitution. As aptly observed by the SEC, the definition of a *Philippine National* provided in the F$A refers only to a 'orporation that is per,itted to invest in an enterprise as a Philippine 'itizen -investorcorporation.. T3& F"A *o&( no) 'r&(;r1+& )3& &>u1)y o=n&r(31' ()ru;)ur& o4 )3& &n)&r'r1(& @ran)&* )3& 4ran;31(& or )3& 'o=&r )o o'&ra)& 1n a 4u55y or 'ar)1a55y na)1ona51H&* 1n*u()ry -investee corporation.. &his is apparent fro, the F$A itself, /hi'h also defines the a't of an *invest,ent* and *foreign invest,ent*7 Se'tion @. #efinitions. G As used in this A't7 a. &he ter, *Philippine national* shall ,ean a 'itizen of the Philippines, or a do,esti' partnership or asso'iation /holly o/ned by 'itizens of the PhilippinesE or a 'orporation organized under the la/s of the Philippines of /hi'h at least si!ty per'ent B1(>C of the 'apital sto'6 outstanding and entitled to vote is o/ned and held by 'itizens of the Philippines ! ! ! b. &he ter, *1n6&()2&n)* shall ,ean &>u1)y 'ar)1;1'a)1on in any enterprise organized or e!isting the la/s of the PhilippinesE &41n1)1on o4 T&r2(. 8 For 'ur'o(&( o4 )31( A;) 7

Nazareno

1@ 4 of the

'. &he ter, J4or&1@n 1n6&()2&n)J shall ,ean as &>u1)y 1n6&()2&n) ,ade by a non"Philippine national in the for, of foreign e!'hange andFor other assets a'tually transferred to the Philippines and duly registered /ith the Central Ban6 /hi'h shall assess and appraise the value of su'h assets other than foreign e!'hange. $n fa't, Se'. 4 of the F$A, as a,ended, allo/s aliens or non"Philippine nationals to o=n an enterprise up to the e!tent provided by the Constitution, e!isting la/s or the F$N=7 Se'. 4. Foreign invest,ents in do,esti' ,ar6et enterprises. G Non" Philippine nationals ,ay o=n up to one hundred per'ent B1((>C of do,esti' ,ar6et enterprises unless foreign o/nership therein is prohibited or li,ited by the Constitution and e!isting la/s or the Foreign $nvest,ent Negative =ist under Se'tion 3 hereof. -E,phasis supplied.. <en'e, pursuant to the Eight egular F$N=, =ist A, the foreign *eGui"y* is up to ;(> in enterprises engaged in the operation and ,anage,ent of publi' utilities /hile the re,aining 1(> of the *eGui"y* is reserved to Filipino 'itizens and *Philippine Nationals* as defined in Se'. @-a. of the F$A. Notably, the ter, *eIuity* refers to the *o=n&r(31'interest inO a business*32 or a *share in a publi'ly traded 'o,pany,*2( and not to the *'ontrolling* or *,anage,ent* interest in a 'o,pany. $t ne'essarily in'ludes all and every share in a 'orporation, /hether voting or non"voting. Again, Ae ,ust re'ognize the distin'tion of the separate 'on'epts of *o/nership* and *'ontrol* in ,odern 'orporate governan'e in order to realize the intent of the fra,ers of our Constitution to reserve for Filipinos the ulti,ate and all"en'o,passing 'ontrol of publi' utility entities fro, their daily ad,inistration to the a'ts of o/nership enu,erated in Se'. 1 of the Corporation Code. 21 As elu'idated, by eIuating the /ord *'apital* in Se'. 11, Art. N$$ to the li,ited aspe't of the right to 'ontrol the 'o,position of the board of dire'tors, the Court 'ould very /ell be depriving Filipinos of the ,a9ority e'ono,i' interest in the publi' utility 'orporation and, thus, the effe'tive 'ontrol and o/nership of su'h 'orporation. T3& Cour) 3a( no ?ur1(*1;)1on o6&r !L T an* 4or&1@n ()o;D3o5*&r( =3o ar& 1n*1('&n(a+5& 'ar)1&( 1n 1n)&r&()

1@ Nazareno 3 +ore i,portantly, this Court 'annot apply a ne/ do'trine adopted in
Corporation CASES Based on the Syllabus of Fr. Agustin a pre'edent"setting de'ision to parties that have never been given the 'han'e to present their o/n vie/s on the substantive and fa'tual issues involved in the pre'edent"setting 'ase. &o re'all, the instant 'ontroversy arose out of an original petition filed in February )((4 for, a,ong others, *&;5ara)ory r&51&4 on Se'. 11, Art. N$$ of the 1234 Constitution *to 'larify the intent of the Constitutional Co,,ission that 'rafted the 1234 Constitution to deter,ine the very nature of su'h li,itation on foreign o/nership.* 2) &he petition i,pleaded the follo/ing personalities as the respondents7 -1. +argarito B. &eves, then Se'retary of Finan'e and Chair of the Privatization Coun'ilE -). 0ohn P. Sevilla, then underse'retary for privatization of the #epart,ent of Finan'eE -@. i'ardo Ab'ede, 'o,,issioner of the Presidential Co,,ission on 5ood 5overn,entE -;. Anthoni Sali,, 'hair of First Pa'ifi' Co. =td. and dire'tor of +etro Pa'ifi' Asset <oldings, $n'. -+PA<.E -:. +anuel H. Pangilinan, 'hair,an of the board of P=#&E -1. Napoleon =. Nazareno, the president of P=#&E -4. Fe Barin -Barin., then 'hair of the SECE and -3. Fran'is =i, -=i,., then president of the PSE. Notably, neither P=#& itself nor any of its sto'6holders /ere na,ed as respondents in the petition, albeit it sought fro, the Court the follo/ing ,ain reliefs7 :. ! ! ! to issue a de'laratory relief that o/nership of 'o,,on or voting shares is the sole basis in deter,ining foreign eIuity in a publi' utility and that any other govern,ent rulings, opinions, and regulations in'onsistent /ith this de'laratory relief be de'lared as un'onstitutional and a violation of the intent and spirit of the 1234 ConstitutionE 1. ! ! ! to de'lare null and void all sales of 'o,,on sto'6s to foreigners in e!'ess of ;( per'ent of the total subs'ribed 'o,,on shareholdingsE and 4. ! ! ! to dire't the BSECC and BPSEC to reIuire P=#& to ,a6e a publi' dis'losure of all of its foreign shareholdings and their a'tual and real benefi'ial o/ners.* Clearly, the petition see6s a 9udg,ent that 'an adversely affe't P=#& and its foreign shareholders. $f this Court /ere to a''o,,odate the

petitionDs prayer, as the ,a9ority did in the 0une )3, )(11 #e'ision and proposes to do presently, P=#& stands to lose its fran'hise, /hile the foreign sto'6holders /ill be 'o,pelled to divest their voting shares in e!'ess of ;(> of P=#&Ds voting sto'6, if any, even at a loss. $t 'annot, therefore, be gainsaid that P=#& and its foreign shareholders are indispensable parties to the instant 'ase under the ter,s of Se's. ) and 4, ule @ of the ules of Civil Pro'edure, /hi'h read7 Se'tion ). Parties in interest.GEvery a'tion ,ust be prose'uted and defended in the na,e of the real party in interest. All persons having an interest in the sub9e't of the a'tion and in obtaining the relief de,anded shall be 9oined as plaintiffs. All persons /ho 'lai, an interest in the 'ontroversy or the sub9e't thereof adverse to the plaintiff, or /ho are ne'essary to a 'o,plete deter,ination or settle,ent of the Iuestions involved therein, shall be 9oined as defendants. !!!! Se'tion 4. Co,pulsory 9oinder of indispensable parties.G Parties in interest /ithout /ho, no final deter,ination 'an be had of an a'tion shall be 9oined either as plaintiffs or defendants. ?et, again, P=#& and its foreign shareholders have not been given noti'e of this petition to appear before, ,u'h less heard by, this Court. Nonetheless, the ,a9ority has allo/ed su'h irregularity in 'ontravention of the settled 9urispruden'e that an a'tion 'annot pro'eed unless indispensable parties are 9oined 2@ sin'e the non" 9oinder of these indispensable parties deprives the 'ourt the 9urisdi'tion to issue a de'ision binding on the indispensable parties that have not been 9oined or i,pleaded. $n other /ords, if an indispensable party is not i,pleaded, any personal 9udg,ent /ould have no effe'tiveness2; as to the, for the tribunalDs /ant of 9urisdi'tion. $n 2rcelona 9. Cour" of 2ppeals,2: Ae e!plained that the basi' notions of due pro'ess reIuire the observan'e of this rule that refuses the effe'tivity of a de'ision that /as rendered despite the non"9oinder of indispensable parties7 Basi' 'onsiderations of due pro'ess, ho/ever, i,pel a si,ilar holding in 'ases involving 9urisdi'tion over the persons of indispensable

1@ Nazareno 2 parties /hi'h a 'ourt ,ust a'Iuire before it 'an validly pronoun'e
Corporation CASES Based on the Syllabus of Fr. Agustin 9udg,ents personal to said defendants. Courts a'Iuire 9urisdi'tion over a party plaintiff upon the filing of the 'o,plaint. %n the other hand, 9urisdi'tion over the person of a party defendant is assured upon the servi'e of su,,ons in the ,anner reIuired by la/ or other/ise by his voluntary appearan'e. As a rule, if a defendant has not been su,,oned, the 'ourt a'Iuires no 9urisdi'tion over his person, and a personal 9udg,ent rendered against su'h defendant is null and void. A *&;1(1on )3a) 1( nu55 an* 6o1* 4or =an) o4 ?ur1(*1;)1on on )3& 'ar) o4 )3& )r1a5 ;our) 1( no) a *&;1(1on 1n )3& ;on)&2'5a)1on o4 5a= an*, 3&n;&, 1) ;an n&6&r +&;o2& 41na5 an* &7&;u)ory. ule @, Se'tion 4 of the ules of Court, defines indispensable parties as parties"in"interest /ithout /ho, there 'an be no final deter,ination of an a'tion. As su'h, they ,ust be 9oined either as plaintiffs or as defendants. T3& @&n&ra5 ru5& =1)3 r&4&r&n;& )o )3& 2aD1n@ o4 'ar)1&( 1n a ;1615 a;)1on r&>u1r&(, o4 ;our(&, )3& ?o1n*&r o4 a55 n&;&((ary 'ar)1&( =3&r& 'o((1+5&, an* )3& ?o1n*&r o4 a55 1n*1('&n(a+5& 'ar)1&( un*&r any an* a55 ;on*1)1on(, )3&1r 'r&(&n;& +&1n@ a (1n& >ua non 4or )3& &7&r;1(& o4 ?u*1;1a5 'o=&r. ") 1( 'r&;1(&5y J=3&n an 1n*1('&n(a+5& 'ar)y 1( no) +&4or& )3& ;our) /)3a)0 )3& a;)1on (3ou5* +& *1(21((&*.J T3& a+(&n;& o4 an 1n*1('&n(a+5& 'ar)y r&n*&r( a55 (u+(&>u&n) a;)1on( o4 )3& ;our) nu55 an* 6o1* 4or =an) o4 au)3or1)y )o a;), no) on5y a( )o )3& a+(&n) 'ar)1&( +u) &6&n a( )o )3o(& 'r&(&n).21 <en'e, the 0une )3, )(11 #e'ision having been rendered in a 'ase /here the indispensable parties have not been i,pleaded, ,u'h less su,,oned or heard, 'annot be given any effe't and is, thus, null and void. 0rgo, the assailed 0une )3, )(11 #e'ision is virtually a useless 9udg,ent, at least insofar as it tends to penalize P=#& and its foreign sto'6holders. $t 'annot bind and affe't P=#& and the foreign sto'6holders or be enfor'ed and e!e'uted against the,. $t is settled that ;our)( o4 5a= J(3ou5* no) r&n*&r ?u*@2&n)( =31;3 ;anno) +& &n4or;&* +y any 'ro;&(( Dno=n )o )3& 5a=,J 24 hen'e, this Court should have refused to give 'ognizan'e to the petition. &he ineffe'tivity 'aused by the non"9oinder of the indispensable parties, the deprivation of their day in 'ourt, and the denial of their right to due pro'ess, 'annot be 'ured by the sophisti' e!pedien'e of na,ing P=#& in the fallo of the de'ision as a respondent. &he dispositive portion of the 0une )3, )(11 #e'ision all the ,ore only

Corporation CASES Based on the Syllabus of Fr. Agustin highlights the unenfor'eability of the ,a9orityDs disposition and serves as an i,plied ad,ission of this CourtDs la'6 of 9urisdi'tion over the persons of P=#& and its foreign sto'6holders /hen it did not dire'tly order the latter to dispose the 'o,,on shares in e!'ess of the ;(> li,it. $nstead, it too6 the 'ir'uitous route of ordering the SEC, in the fallo of the assailed de'ision, *to apply this definition of the ter, K'apitalD in deter,ining the e!tent of allo/able o/nership in respondent P=#& and, if there is a violation of Se'. 11, Art. N$$ of the Constitution, to i,pose the appropriate san'tions under the la/.*23 C5&ar5y, (1n;& !L T an* )3& 4or&1@n ()o;D3o5*&r( =&r& no) 12'5&a*&* a( 1n*1('&n(a+5& 'ar)1&( )o )3& ;a(&, )3& 2a?or1)y =ou5* =an) )o 1n*1r&;)5y &7&;u)& 1)( *&;1(1on =31;3 1) ;ou5* no) &7&;u)& *1r&;)5y. T3& Cour) 2ay +& ;r1)1;1H&* 4or 61o5a)1n@ )3& 6&ry ru5&( 1) 'ro2u5@a)&* an* 4or )r&n;31n@ )3& 'ro61(1on( o4 S&;. ,, Ar). $""" o4 )3& Con()1)u)1on, =31;3 *&41n&( )3& 'o=&r( an* ?ur1(*1;)1on o4 )31( Cour). $t is apropos to stress, as a re,inder, that the ules of Court is not a ,ere body of te'hni'al rules that 'an be disregarded at /ill /henever 'onvenient. $t for,s an integral part of the basi' notion of fair play as e!pressed in this Constitutional 'aveat7 *No person shall be deprived of life, liberty or property /ithout due pro'ess of la/,*22and obliges this Court, as /ell as other 'ourts and tribunals, to hear a person first before rendering a 9udg,ent for or against hi,. As #aniel Aebster e!plained, *due pro'ess of la/ is ,ore 'learly intended the general la/, a la/ /hi'h hears before it 'onde,nsE /hi'h pro'eeds upon enIuiry, and renders 9udg,ent only after trial.*1(( &he prin'iple of due pro'ess of la/ *'onte,plates noti'e and opportunity to be heard before 9udg,ent is rendered, affe'ting oneDs person or property.*1(1 &hus, this Court has stressed the stri't observan'e of the follo/ing reIuisites of pro'edural due pro'ess in 9udi'ial pro'eedings in order to 'o,ply /ith this honored prin'iple7 -1. &here ,ust be a 'ourt or tribunal 'lothed /ith 9udi'ial po/er to hear and deter,ine the ,atter before itE -). 0urisdi'tion ,ust be la/fully a'Iuired over the person of the defendant or over the property /hi'h is the sub9e't of the pro'eedingsE -@. &he defendant ,ust be given an opportunity to be heardE and -;. 0udg,ent ,ust be rendered upon la/ful hearing. 1()

Nazareno

1; (

Apparently, not one of these reIuisites has been 'o,plied /ith before the 0une )3, )(11 #e'ision /as rendered. $nstead, P=#& and its foreign sto'6holders /ere not given their day in 'ourt, even /hen they stand to lose their properties, their shares, and even the fran'hise to operate as a publi' utility. &his stands 'ounter to our dis'ussion in 2gabon 9. 'LRC,1(@ /here Ae e,phasized that the prin'iple of due pro'ess 'o,ports /ith the si,plest notions of /hat is fair and 9ust7 &o be sure, the #ue Pro'ess Clause in Arti'le $$$, Se'tion 1 of the Constitution e,bodies a syste, of rights based on ,oral prin'iples so deeply i,bedded in the traditions and feelings of our people as to be dee,ed funda,ental to a 'ivilized so'iety as 'on'eived by our entire history. u& 'ro;&(( 1( )3a) =31;3 ;o2'or)( =1)3 )3& *&&'&() no)1on( o4 =3a) 1( 4a1r an* r1@3) an* ?u() . ") 1( a ;on()1)u)1ona5 r&()ra1n) on )3& legislative as /ell as on the e!e'utive and ?u*1;1a5 'o=&r( o4 )3& @o6&rn2&n) 'ro61*&* +y )3& #155 o4 R1@3)(.1(; Parentheti'ally, the present petition parta6es of a 'ollateral atta'6 on P=#&Ds fran'hise as a publi' utility. 5iving due 'ourse to the re'ourse is 'ontrary to the CourtDs ruling in PLDT 9. 'a"ional Telecommunica"ions Commission,1(: /here Ae de'lared a fran'hise to be a property right that 'an only be Iuestioned in a dire't pro'eeding.1(1 Aorse, the 0une )3, )(11 #e'ision 4a;151)a)&( an* @uaran)&&( )3& (u;;&(( o4 )3a) un5a=4u5 a))a;D by allo/ing it to be underta6en in the absen'e of P=#&. T3& !3151''1n& Go6&rn2&n) 1( +arr&* +y &()o''&5 4ro2 or*&r1n@ 4or&1@n 1n6&()or( )o *16&() 6o)1n@ (3ar&( 1n 'u+51; u)151)1&( 1n &7;&(( o4 )3& 40 '&r;&n) ;a' &he Philippine govern,entDs a't of pushing for and approving the sale of the P&$C shares, /hi'h is eIuivalent to 1) ,illion P=#& 'o,,on shares, to foreign investors pre'ludes it fro, asserting that the pur'hase violates the Constitutional li,it on foreign o/nership of publi' utilities so that the foreign investors ,ust no/ divest the 'o,,on P=#& shares bought. &he ele,entary prin'iple that a person is prevented fro, going ba'6 on his o/n a't or representation to the pre9udi'e of another /ho relied thereon1(4 finds appli'ation in the present 'ase.

Art. 1;@1 of the Civil Code provides that an *ad,ission or representation is rendered 'on'lusive upon the person ,a6ing it, and 'annot be denied or disproved as against a person relying thereon.* &his rule is supported by Se'tion )-a. of ule 1@1 of the ules of Court on the burden of proof and presu,ptions, /hi'h states7 Se'tion ). Con'lusive presu,ptions. G &he follo/ing are instan'es of 'on'lusive presu,ptions7 -a. Ahenever a party has, by his o/n de'laration, a't, or o,ission, intentionally and deliberately led another to believe a parti'ular thing true, and to a't upon su'h belief, he 'annot, in any litigation arising out of su'h de'laration, a't or o,ission, be per,itted to falsify it. &he govern,ent 'annot plausibly hide behind the ,antle of its general i,,unity to resist the appli'ation of this eIuitable prin'iple for *the rule on non"estoppel of the govern,ent is not designed to perpetrate an in9usti'e.*1(3<en'e, this Court has allo/ed several e!'eptions to the rule on the govern,entDs non"estoppel. As su''in'tly e!plained in Republic of "!e P!ilippines 9. Cour" of 2ppeals71(2 &he general rule is that the State 'annot be put in estoppel by the ,ista6es or errors of its offi'ials or agents. <o/ever, li6e all general rules, this is also sub9e't to e!'eptions, viz.7 *Estoppel against the publi' are little favored. &hey should not be invo6ed e!'ept in rare and unusual 'ir'u,stan'es and ,ay not be invo6ed /here they /ould operate to defeat the effe'tive operation of a poli'y adopted to prote't the publi'. &hey ,ust be applied /ith 'ir'u,spe'tion and should be applied only in those spe'ial 'ases /here the interests of 9usti'e 'learly reIuire it. Nevertheless, )3& @o6&rn2&n) 2u() no) +& a55o=&* )o *&a5 *1(3onora+5y or ;a'r1;1ou(5y =1)3 1)( ;1)1H&n(, an* 2u() no) '5ay an 1@no+5& 'ar) or *o a (3a++y )31n@I an* (u+?&;) )o 5121)a)1on( . . ., )3& *o;)r1n& o4 &>u1)a+5& &()o''&5 2ay +& 1n6oD&* a@a1n() 'u+51; au)3or1)1&( as /ell as against private individuals.* $n %epublic v. Sandiganba8an, the govern,ent, in its effort to re'over ill"gotten /ealth, tried to s6irt the appli'ation of estoppel

1; Nazareno 1 against it by invo6ing a spe'ifi' 'onstitutional provision. &he Court

Corporation CASES Based on the Syllabus of Fr. Agustin 'ountered7 *Ae agree /ith the state,ent that the State is i,,une fro, estoppel, but this 'on'ept is understood to refer to a'ts and ,ista6es of its offi'ials espe'ially those /hi'h are irregular -Sharp $nternational +ar6eting vs. Court of Appeals, )(1 SC A )22E @(1 1221E epubli' v. AIuino, 1)( SC A 131 123@., /hi'h pe'uliar 'ir'u,stan'es are absent in the 'ase at bar. Although the StateYs right of a'tion to re'over ill"gotten /ealth is not vulnerable to estoppelBEC it is non seIuitur to suggest that a ;on)ra;), 4r&&5y an* 1n @oo* 4a1)3 &7&;u)&* +&)=&&n )3& 'ar)1&( )3&r&)o 1( (u(;&')1+5& )o *1()ur+an;& a* 1n41n1)u2. A *144&r&n) 1n)&r'r&)a)1on =155 5&a* )o )3& a+(ur* (;&nar1o o4 '&r21))1n@ a 'ar)y )o un15a)&ra55y ?&))1(on a ;o2'ro21(& a@r&&2&n) =31;3 1( (u''o(&* )o 3a6& )3& au)3or1)y o4 r&( ?u*1;a)a /Ar)1;5& 20-., N&= C1615 Co*&0, an* 51D& any o)3&r ;on)ra;), 3a( )3& 4or;& o4 5a= +&)=&&n 'ar)1&( )3&r&)o -Arti'le 11:2, Ne/ Civil CodeE <ernaez vs. Rao, 14 SC A )21 1211E 1 Padilla, Civil Code Annotated, 4th ed., 1234, p. 411E @ AIuino, Civil Code, 122( ed., p. ;1@. . . .* &he Court further de'lared that *-t.he real offi'e of the eIuitable nor, of estoppel is li,ited to supplyBingC defi'ien'y in the la/, but it should not supplant positive la/.*11( -E,phasis supplied.. Si,ilarly, in Ramos 9. Cen"ral EanB of "!e P!ilippines ,111 this Court berated the govern,ent for reneging on its representations and urged it to 6eep its /ord, viz7 Even in the absen'e of 'ontra't, the re'ord plainly sho/s that the CB BCentral Ban6C ,ade e!press representations to petitioners herein that it /ould support the %B+ B%verseas Ban6 of +anilaC, and avoid its liIuidation if the petitioners /ould e!e'ute -a. the Hoting &rust Agree,ent turning over the ,anage,ent of %B+ to the CB or its no,inees, and -b. ,ortgage or assign their properties to the Central Ban6 to 'over the overdraft balan'e of %B+. &he petitioners having 'o,plied /ith these 'onditions and parted /ith value to the profit of the CB -/hi'h thus a'Iuired additional se'urity for its o/n advan'es., the CB ,ay not no/ renege on its representations and liIuidate the %B+, to the detri,ent of its sto'6holders, depositors and other 'reditors, under the rule of pro,issory estoppel -12 A,. 0ur., pages 1:4"1:3E )3 A,. 0ur. )d, 1:1"1:4E Ed. Note, 11: A= , 1:4..

Corporation CASES Based on the Syllabus of Fr. Agustin *&he broad general rule to the effe't that a pro,ise to do or not to do so,ething in the future does not /or6 an estoppel ,ust be Iualified, sin'e there are nu,erous 'ases in /hi'h an estoppel has been predi'ated on pro,ises or assuran'es as to future 'ondu't. &he do'trine of Kpro,issory estoppelD is by no ,eans ne/, although the na,e has been adopted only in 'o,paratively re'ent years. A''ording to that do'trine, an estoppel ,ay arise fro, the ,a6ing of a pro,ise even though /ithout 'onsideration, if it /as intended that the pro,ise should be relied upon and in fa't it /as relied upon, and if a refusal to enfor'e it /ould be virtually to san'tion the perpetration of fraud or /ould result in other in9usti'e. $n this respe't, the relian'e by the pro,ises is generally eviden'ed by a'tion or forbearan'e on his part, and the idea has been e!pressed that su'h a'tion or forbearan'e /ould reasonably have been e!pe'ted by the pro,isor. +ere o,ission by the pro,isee to do /hatever the pro,isor pro,ised to do has been held insuffi'ient Kforbearan'eD to give rise to a pro,issory estoppel.* -12 A,. 0ur., lo'. 'it.. &he e!'eption established in the foregoing 'ases is parti'ularly appropriate presently sin'e the *indire't* sale of P=#& 'o,,on shares to foreign investors partoo6 of a propriety business transa'tion of the govern,ent /hi'h /as not underta6en as an in'ident to any of its govern,ental fun'tions. A''ordingly, the govern,ent, by 'on'luding the sale, has des'ended to the level of an ordinary 'itizen and stripped itself of the vestiges of i,,unity that is available in the perfor,an'e of govern,ental a'ts.11) Ergo, the govern,ent is vulnerable to, and 'annot hold off, the appli'ation of the prin'iple of estoppel that the foreign investors 'an very /ell invo6e in 'ase they are 'o,pelled to divest the voting shares they have previously a'Iuired through the indu'e,ent of no less the govern,ent. $n other /ords, the govern,ent is pre'luded fro, penalizing these alien investors for an a't perfor,ed upon its guarantee, through its fa'ilities, and /ith its i,pri,atur. Un*&r )3& J4a1r an* &>u1)a+5& )r&a)2&n)J ;5au(& o4 our +15a)&ra5 1n6&()2&n) )r&a)1&( an* 4a1r )ra*& a@r&&2&n)(, 4or&1@n 1n6&()or( 3a6& )3& r1@3) )o r&5y on )3& (a2& 5&@a5 4ra2&=orD &71()1n@ a) )3& )12& )3&y 2a*& )3&1r 1n6&()2&n)(

Not only is the govern,ent put in representations during the sale of the P&$C shares to +PA<, it is li6e/ise bound by its guarantees in the Bilateral $nvest,ent &reaties -B$&s. and Free &rade Agree,ents -F&As. /ith other 'ountries. &o date, the Philippines has 'on'luded nu,erous B$&s and F&As to en'ourage and fa'ilitate foreign dire't invest,ents in the 'ountry. &hese B$&s and F&As invariably 'ontain guarantees 'al'ulated to ensure the safety and stability of these foreign invest,ents. Fore,ost of these is the 'o,,it,ent to give fair and eIuitable treat,ent -FE&. to the foreign investors and invest,ents in the 'ountry. &a6e for instan'e the B$& 'on'luded bet/een the Philippines and China,11@ Arti'le @-1. thereof provides that *invest,ents and a'tivities asso'iated /ith su'h invest,ents of investors of either Contra'ting Party (3a55 +& a;;or*&* &>u1)a+5& )r&a)2&n) an* (3a55 &n?oy 'ro)&;)1on in the territory of the other Contra'ting Party.*11;&he sa,e assuran'e is in the Agree,ent on $nvest,ent of the Fra,e/or6 Agree,ent on Co,prehensive E'ono,i' Cooperation Bet/een the Asso'iation of Southeast Asian Nations and the PeopleDs epubli' of China -ASEAN"China $nvest,ent Agree,ent. 11: /here the Philippines assured Chinese investors that the 'ountry *shall a''ord to Bthe,C 4a1r an* &>u1)a+5& )r&a)2&n) and full prote'tion and se'urity.*111 $n the sa,e ,anner, the Philippines agreed to *a''ord invest,ents B,ade by 0apanese investorsC treat,ent in a''ordan'e /ith international la/, in'luding 4a1r an* &>u1)a+5& )r&a)2&n) and full prote'tion and se'urity*114 in the Agree,ent bet/een the epubli' of the Philippines and 0apan for E'ono,i' Partnership -0PEPA..113 Si,ilar provisions are found in the ASEAN Co,prehensive $nvest,ent Agree,ent -AC$A.112 and the B$&s 'on'luded by the Philippines /ith, a,ong others, the Argentine epubli',1)( Australia,1)1 Austria,1))Bangladesh,1)@ Belgiu,,1); Ca,bod ia,1): Canada,1)1 Chile,1)4 the Cze'h epubli',1)3 #en,ar6,1)2Finland,1@( Fran'e,1@1 5er,any,1@) $ndia,1@@ $nd onesia,1@; $ran,1@: $taly,1@1 +ongolia,1@4 +yan,ar,1@3Netherlands,1@2 Pa6 istan,1;( Portuguese epubli',1;1 o,ania,1;) ussia,1;@ Saudi 1;; 1;: 1;1 Arabia, Spain, S/eden, S/itzerland,1;4 &hailand,1;3 &ur6ey,1;2 8 nited Ringdo,,1:( and Hietna,.1:1 E!plaining the FE& as a standard 'on'ordant /ith the rule of la/, Professor Handevelde /rote that it reIuires the host 'ounty to treat

1; Nazareno ) estoppel by its a'ts and

foreign invest,ents /ith 'onsisten'y, se'urity, non"dis'ri,ination and reasonableness7 &he thesis is that the a/ards issued to date i,pli'itly have interpreted the fair and eIuitable treat,ent standard as reIuiring treat,ent in a''ordan'e /ith the 'on'ept of the rule of la/. &hat is, )3& ;on;&') o4 5&@a51)y 1( )3& un14y1n@ )3&ory +&31n* )3& 4a1r an* &>u1)a+5& )r&a)2&n) ()an*ar*. !!!! &hus, international arbitral a/ards interpreting the fair and eIuitable treat,ent standard have in'orporated the substantive and pro'edural prin'iples of the rule of la/ into that standard. T3& 4a1r an* &>u1)a+5& )r&a)2&n) ()an*ar* 1n #"T( 3a( +&&n 1n)&r'r&)&* a( r&>u1r1n@ )3a) ;o6&r&* 1n6&()2&n) or 1n6&()or( r&;&16& )r&a)2&n) )3a) 1( r&a(ona+5&, ;on(1()&n), non8*1(;r121na)ory, )ran('ar&n), an* 1n a;;or*an;& =1)3 *u& 'ro;&((. As /ill be seen, these prin'iples e!plain virtually all of the a/ards applying the fair and eIuitable treat,ent standard. No a/ard is in'onsistent /ith this theory of the standard. 8nderstanding fair and eIuitable treat,ent as legality is 'onsistent /ith the purposes of the B$&s. B$&s essentially are instru,ents that i,pose legal restraints on the treat,ent of 'overed invest,ents and investors by host states. &he very essen'e of a B$& is a partial subordination of the sovereignYs po/er to the legal 'onstraints of the treaty. Further, individual B$& provisions are the,selves a refle'tion of the prin'iples of the rule of la/. -E,phasis and unders'oring supplied..1:) %n the reIuire,ent of 'onsisten'y, the $nternational Centre for the Settle,ent of $nvest,ent #isputes -$CS$#. e!plained in Tecnicas Me&ioambien"ales Tecme& 6.2. 9. T!e uni"e& Me<ican 6"a"es1:@ that the host 'ountry ,ust ,aintain a ()a+5& and 'r&*1;)a+5& 5&@a5 an* +u(1n&(( &n61ron2&n) to a''ord a fair and eIuitable treat,ent to foreign investors. 1:@. &he Arbitral &ribunal finds that t3& ;o221)2&n) o4 4a1r an* &>u1)a+5& )r&a)2&n) in'luded in Arti'le ;-1. of the Agree,ent 1( an &7'r&((1on an* 'ar) o4 )3& bona fi&e 'r1n;1'5& r&;o@n1H&* 1n 1n)&rna)1ona5 5a=, although bad faith fro, the State is not reIuired for its violation7

1; Nazareno @ &o the ,odern eye, /hat is unfair or ineIuitable need not eIuate
Corporation CASES Based on the Syllabus of Fr. Agustin /ith the outrageous or the egregious. $n parti'ular, a State ,ay treat foreign invest,ent unfairly and ineIuitably /ithout ne'essarily a'ting in bad faith. 1:;. &he Arbitral &ribunal 'onsiders that )31( 'ro61(1on of the Agree,ent, in light of the good faith prin'iple established by international la/, r&>u1r&( )3& Con)ra;)1n@ !ar)1&( )o 'ro61*& )o 1n)&rna)1ona5 1n6&()2&n)( )r&a)2&n) )3a) *o&( no) a44&;) )3& +a(1; &7'&;)a)1on( )3a) =&r& )aD&n 1n)o a;;oun) +y )3& 4or&1@n 1n6&()or )o 2aD& )3& 1n6&()2&n). T3& 4or&1@n 1n6&()or &7'&;)( )3& 3o() S)a)& )o a;) 1n a ;on(1()&n) 2ann&r, 4r&& 4ro2 a2+1@u1)y an* )o)a55y )ran('ar&n)5y 1n 1)( r&5a)1on( =1)3 )3& 4or&1@n 1n6&()or, (o )3a) 1) 2ay Dno= +&4or&3an* any an* a55 ru5&( an* r&@u5a)1on( )3a) =155 @o6&rn 1)( 1n6&()2&n)(, a( =&55 a( )3& @oa5( o4 )3& r&5&6an) 'o51;1&( an* a*21n1()ra)16& 'ra;)1;&( or *1r&;)16&(, )o +& a+5& )o '5an 1)( 1n6&()2&n) an* ;o2'5y =1)3 (u;3 r&@u5a)1on(. Any and all State a'tions 'onfor,ing to su'h 'riteria should relate not only to the guidelines, dire'tives or reIuire,ents issued, or the resolutions approved thereunder, but also to the goals underlying su'h regulations. T3& 4or&1@n 1n6&()or a5(o &7'&;)( )3& 3o() S)a)& )o a;) ;on(1()&n)5y, 1.&. =1)3ou) ar+1)rar15y r&6oD1n@ any 'r&&71()1n@ *&;1(1on( or '&r21)( 1((u&* +y )3& S)a)& )3a) =&r& r&51&* u'on +y )3& 1n6&()or )o a((u2& 1)( ;o221)2&n)( a( =&55 a( )o '5an an* 5aun;3 1)( ;o22&r;1a5 an* +u(1n&(( a;)161)1&(. T3& 1n6&()or a5(o &7'&;)( )3& S)a)& )o u(& )3& 5&@a5 1n()ru2&n)( )3a) @o6&rn )3& a;)1on( o4 )3& 1n6&()or or )3& 1n6&()2&n) 1n ;on4or21)y =1)3 )3& 4un;)1on u(ua55y a((1@n&* )o (u;31n()ru2&n)(, an* no) )o *&'r16& )3& 1n6&()or o4 1)( 1n6&()2&n) =1)3ou) )3& r&>u1r&* ;o2'&n(a)1on. $n fa't, failure by the host State to 'o,ply /ith su'h pattern of 'ondu't /ith respe't to the foreign investor or its invest,ents affe'ts the investorDs ability to ,easure the treat,ent and prote'tion a/arded by the host State and to deter,ine /hether the a'tions of the host State 'onfor, to the fair and eIuitable treat,ent prin'iple. &herefore, ;o2'51an;& +y )3& 3o() S)a)& =1)3 (u;3 'a))&rn o4 ;on*u;) 1( ;5o(&5y r&5a)&* )o )3& a+o6&82&n)1on&* 'r1n;1'5&, )o )3& a;)ua5 ;3an;&( o4 &n4or;1n@ (u;3 'r1n;1'5&, an* )o &7;5u*1n@ )3& 'o((1+151)y )3a) ()a)& a;)1on +& ;3ara;)&r1H&* a( ar+1)raryE i.e. as presenting insuffi'ien'ies that /ould be re'ognized *Oby any reasonable and i,partial ,an,* or, although not in violation of spe'ifi' regulations, as being 'ontrary to the la/ be'ause7

Corporation CASES Based on the Syllabus of Fr. Agustin ...-it. sho'6s, or at least surprises, a sense of 9uridi'al propriety. -E,phasis and unders'oring supplied added.. T3& !3151''1n&(, )3&r&4or&, ;anno), =1)3ou) (o 2u;3 a( a no)1;& o4 'o51;y (314), a5)&r an* ;3an@& )3& 5&@a5 an* +u(1n&(( &n61ron2&n) 1n =31;3 )3& 4or&1@n 1n6&()2&n)( 1n )3& ;oun)ry =&r& 2a*& 1n )3& 41r() '5a;&. &hese investors obviously ,ade the de'ision to 'o,e in after studying the 'ountryDs legal fra,e/or6"its restri'tions and in'entivesGGand so, as a ,atter of fairness, they ,ust be a''orded the right to e!pe't that the sa,e legal 'li,ate and the sa,e substantive set of rules /ill re,ain during the period of their invest,ents. &he representation that foreigners 'an invest up to ;(> of the entirety of the total sto'6holdings, and not 9ust the voting shares, of a publi' utility 'orporation is an i,plied 'ovenant that the Philippines 'annot renege /ithout violating the FE& guarantee. Espe'ially in this 'ase /here the Philippines ,ade spe'ifi' 'o,,it,ents to 'ountries li6e 0apan and China that their investing nationals 'an o/n up to ;(> of the &>u1)y of a publi' utility li6e a tele'o,,uni'ations 'orporation. $n the table 'ontained in S'hedule 1-B., Anne! 1 of the 0PEPA, the Philippines 'ategori'ally represented that 0apanese investorsD entry into the Philippine tele'o,,uni'ations industry, spe'ifi'ally 'orporations offering *voi'e telephone servi'es,* is sub9e't to only the follo/ing reIuire,ents and 'onditions7 A. Fran'hise fro, Congress of the Philippines B. Certifi'ate of Publi' Convenien'e and Ne'essity -CPCN. fro, the National &ele'o,,uni'ations Co,,ission C. For&1@n &>u1)y 1( '&r21))&* u' )o 40 '&r;&n). #. ! ! !1:; -E,phasis supplied.. &he sa,e representation is ,ade in the PhilippinesD S'hedule of Spe'ifi' Co,,it,ents appended to the ASEAN"China Agree,ent on &rade in Servi'es.1:: Further, as previously pointed out, it /as the Philippine govern,ent that pushed for and approved the sale of the 111,;1: P&$C shares to +PA<, thereby indire'tly transferring the o/nership of 1.@ percent of the outstanding 'o,,on shares of P=#&, to a foreign fir, and so

in'reasing the foreign voting shareholding presen'e of good faith ,ay not be 'onvin'ingly argued in favour of the Philippine govern,ent in a suit for violation of its FE& guarantee.

1; Nazareno ; in P=#&. <en'e, the

$n fa't, it has been held that a bona fide 'hange in poli'y by a bran'h of govern,ent does not e!'use 'o,plian'e /ith the FE& obligations. $n 4cci&en"al 8<plora"ion an& Pro&uc"ion Company 048PC1 9. "!e Republic of 8cua&or,1:1 the 8nited Nations Co,,ission on $nternational &rade =a/ -8NC$& A=. ruled that E'uador violated the 8SFE'uador B$& by denying %EPC fair and eIuitable treat,ent /hen it failed to provide a predi'table fra,e/or6 for its invest,ent planning. uling thus, the tribunal 'ited E'uadorDs 'hange in ta! la/ and its ta! authorityDs unsatisfa'tory and vague response to %EPCDs consulta, viz7 13@. ! ! ! &he stability of the legal and business fra,e/or6 is thus an essential ele,ent of fair and eIuitable treat,ent. 13;. &he tribunal ,ust note 1n )31( ;on)&7) )3a) )3& 4ra2&=orD un*&r =31;3 )3& 1n6&()2&n) =a( 2a*& an* o'&ra)&( 3a( +&&n ;3an@&* 1n an 12'or)an) 2ann&r +y a;)1on( a*o')&* +y F)3& E;ua*or1an )a7 au)3or1)yG. O &he 'larifi'ations that %EPC sought on the appli'ability of HA& by ,eans of *'onsulta* ,ade to Bthe E'uadorian ta! authorityC re'eived a /holly unsatisfa'tory and thoroughly vague ans/er. T3& )a7 5a= =a( ;3an@&* =1)3ou) 'ro61*1n@ any ;5ar1)y a+u) 1)( 2&an1n@ an* &7)&n* an* )3& 'ra;)1;& an* r&@u5a)1on( =&r& a5(o 1n;on(1()&n) =1)3 (u;3 ;3an@&(. 13:. Harious arbitral tribunals have re'ently insisted on the need for this stability. &he tribunal in,etalcad held that the espondent *failed to ensure a transparent and predi'table fra,e/or6 for +etal'adDs business planning and invest,ent. &he totality of these 'ir'u,stan'es de,onstrate a la'6 of orderly pro'ess and ti,ely disposition in relation to an investor of a Party a'ting in the e!pe'tation that it /ould be treated fairly and 9ustlyO* ! ! ! 131. $t is Iuite 'lear fro, the re'ord of this 'ase and fro, the events dis'ussed in this Final A/ard that su'h reIuire,ents /ere not ,et by E'uador. +oreover, )31( 1( an o+?&;)16& r&>u1r&2&n) )3a) *o&( no) *&'&n* on =3&)3&r )3& R&('on*&n) 3a( 'ro;&&*&* 1n @oo* 4a1)3 or no).

134. &he &ribunal a''ordingly holds that the espondent has brea'hed its obligations to a''ord fair and eIuitable treat,ent under Arti'le $$ -@. -a. of the &reaty. ! ! ! !!!! 121. &he relevant Iuestion for international la/ in this dis'ussion is not /hether there is an obligation to refund HA&, /hi'h is the point on /hi'h the parties have argued ,ost intensely, but rather =3&)3&r )3& 5&@a5 an* +u(1n&(( 4ra2&=orD 2&&)( )3& r&>u1r&2&n)( o4 ()a+151)y an* 'r&*1;)a+151)y un*&r 1n)&rna)1ona5 5a=. $t /as earlier 'on'luded that there is not a HA& refund obligation under international la/, e!'ept in the spe'ifi' 'ase of the Andean Co,,unity =a/, /hi'h provides for the option of either 'o,pensation or refund, but )3&r& 1( ;&r)a1n5y an o+51@a)1on no) )o a5)&r )3& 5&@a5 an* +u(1n&(( &n61ron2&n) 1n =31;3 )3& 1n6&()2&n) 3a( +&&n 2a*&. "n )31( ;a(& 1) 1( )3& 5a))&r >u&()1on )3a) )r1@@&r( a )r&a)2&n) )3a) 1( no) 4a1r an* &>u1)a+5&. -E,phasis supplied.. &o ,aintain the FE& guarantee 'ontained in the various B$&s and F&As 'on'luded by the 'ountry and avert a deluge of investor suits before the $CS$#, the 8NC$& A= or other fora, any *&;1(1on o4 )31( ;our) )3a) )&n*( )o *ra()1;a55y a5)&r )3& 4or&1@n 1n6&()or(C +a(1; &7'&;)a)1on( =3&n )3&y 2a*& )3&1r 1n6&()2&n)( , ta6ing into a''ount the 'onsistent SEC %pinions and the e!e'utive and legislative bran'hesD Spe'ifi' Co,,it,ents, 2u() +& a''51&* 'ro('&;)16&5y. &his Court 'annot turn oblivious to the fa't that if Ae diverge fro, the prospe'tivity rule and i,ple,ent the resolution on the present issue i,,ediately and, /ithout giving due deferen'e to the foreign investorsD rights to due pro'ess and the eIual prote'tion of the la/s, 'o,pel the foreign sto'6holders to divest their voting shares against their /ishes at pri'es lo/er than the a'Iuisition 'osts, these foreign investors ,ay very /ell shy a/ay fro, Philippine sto'6s and avoid investing in the Philippines. Not to ,ention, the validity of the fran'hise granted to P=#& and si,ilarly situated publi' utilities /ill be put under a 'loud of doubt. Su'h un'ertainty and the unfair treat,ent of foreign investors /ho ,erely relied in good faith on the poli'ies, rules and regulations of the PSE and the SEC /ill li6ely upset the volatile 'apital ,ar6et as it /ould have a negative i,pa't on the

1; Nazareno : value of these 'o,panies that /ill dis'ourage investors, both lo'al
Corporation CASES Based on the Syllabus of Fr. Agustin and foreign, fro, pur'hasing their shares. $n /hi'h 'ase, foreign dire't invest,ents -F#$s. in the 'ountry -/hi'h already lags behind our Asian neighbors. /ill ta6e a nosedive. $ndeed, it 'annot be gainsaid that a sudden and une!pe'ted deviation fro, the a''epted and 'onsistent 'onstru'tion of the ter, *'apital* /ill 'reate a do,ino effe't that ,ay 'ripple our 'apital ,ar6ets. &herefore, in applying the ne/ 'o,prehensive interpretation of Se'. 11, Art. N$$ of the Constitution, the 'urrent voting shares of the foreign investors in publi' utilities in e!'ess of the ;(> 'apital shall be ,aintained and honored. %ther/ise the due pro'ess guarantee under the Constitution and the long established pre'epts of 9usti'e, eIuity and fair play /ould be i,paired. !ro('&;)16& a''51;a)1on 1n)&r'r&)a)1on o4 n&= 5a=( or ;3an@&( 1n

&he 0une )3, )(11 #e'ision 'onstrued *'apital* in the first senten'e of Se'tion 11, Arti'le N$$ of the Constitution as *full benefi'ial o/nership of 1( per'ent of the outstanding 'apital sto'6s 'oupled /ith 1( per'ent of the voting rights.* $n the esolution denying the ,otions for re'onsideration, it further a,plified the s'ope of the /ord *'apital* by 'larifying that *the 1(" ;( o/nership reIuire,ent in favor of Filipino 'itizens ,ust apply separately to ea'h 'lass of shares /hether 'o,,on, preferred, preferred voting or any other 'lass of shares.* &his is a radi'al departure fro, the 'lear intent of the fra,ers of the 1234 Constitution and the long established interpretation as'ribed to said /ord by the Se'urities and E!'hange Co,,issionJthat *'apital* in the first senten'e of Se'. 11, Art. N$$ ,eans 'apital sto'6 or B%&< voting and non"voting shares. &he re'ent interpretation enun'iated in the 0une )3, )(11 and in the esolution at hand 'an only be applied P %SPEC&$HE=?. $t 'annot be applied retroa'tively to 'orporations su'h as P=#& and its investors su'h as its shareholders /ho have all along relied on the 'onsistent reading of *'apital* by SEC and the Philippine govern,ent to apply it to a publi' utilityDs total 'apital sto'6. :eF prospicit! non respicit G *la/s have no retroa'tive effe't unless the 'ontrary is provided.* 1:4 As a ne'essary 'orollary, 9udi'ial rulings should not be a''orded retroa'tive effe't sin'e *9udi'ial de'isions applying or interpreting the la/s or the Constitution shall for, part of the legal syste, of the Philippines.* 1:3 $t has been the 'onstant holding of the Court that a 9udi'ial de'ision setting a ne/ do'trine or

Corporation CASES Based on the Syllabus of Fr. Agustin prin'iple -*pre'edent"setting de'ision*. shall not retroa'tively apply to parties /ho relied in good faith on the prin'iples and do'trines standing prior to the pro,ulgation thereof -*old prin'iplesFdo'trines*., espe'ially /hen a retroa'tive appli'ation of the pre'edent"setting de'ision /ould i,pair the rights and obligations of the parties. So it is that as early as 12;(, the Court has refused to apply the ne/ do'trine of +us sanguinis to persons /ho relied in good faith on the prin'iple of +us soli adopted inRoa 9. Collec"or of Cus"oms.1:2 Si,ilarly, in Co 9. Cour" of 11( 2ppeals, the Court sustained petitioner CoDs bona fide relian'e on the +inister of 0usti'eDs %pinion dated #e'e,ber 1:, 1231 that the delivery of a *rubber* 'he'6 as guarantee for an obligation is not a punishable offense despite the CourtDs pronoun'e,ent on Septe,ber )1, 1234 in Fue 9. People that Batas Pambansa Blg. -BP. )) nonetheless 'overs a 'he'6 issued to guarantee the pay,ent of an obligation. $n so ruling, the Court Iuoted various de'isions applying pre'edent"setting de'isions prospe'tively. Ae held7 Ju*1;1a5 *&;1(1on( a''5y1n@ or 1n)&r'r&)1n@ )3& 5a=( or )3& Con()1)u)1on (3a55 4or2 a 'ar) o4 )3& 5&@a5 (y()&2 o4 )3& !3151''1n&(,J a;;or*1n@ )o Ar)1;5& 8 o4 )3& C1615 Co*&. JLa=( (3a55 3a6& no r&)roa;)16& &44&;), un5&(( )3& ;on)rary 1( 'ro61*&*,J *&;5ar&( Ar)1;5& 4 o4 )3& (a2& Co*& , a de'laration that is e'hoed by Arti'le )) of the evised Penal Code7 *Penal la/s shall have a retroa'tive effe't insofar as they favor the person guilty of a felony, /ho is not a habitual 'ri,inal . . .* !!!! T3& 'r1n;1'5& o4 'ro('&;)161)y 3a( a5(o +&&n a''51&* )o ?u*1;1a5 *&;1(1on( =31;3, Ja5)3ou@3 1n )3&2(&56&( no) 5a=(, ar& n&6&r)3&5&(( &61*&n;& o4 =3a) )3& 5a=( 2&an, . . . /)31( +&1n@0 )3& r&a(on =3y un*&r Ar)1;5& 8 o4 )3& N&= C1615 Co*&, TJu*1;1a5 *&;1(1on( a''5y1n@ or 1n)&r'r&)1n@ )3& 5a=( or )3& Con()1)u)1on (3a55 4or2 a 'ar) o4 )3& 5&@a5 (y()&2 . . .T * So did this Court hold, for e!a,ple, in Peo. v. Jabinal, :: SC A 1(4, 1117 !!!!

So, too, did the Court rule in Spouses Ben(onan v. Court of "ppeals! et al.-5. . No. 2424@. and #evelopment Ban$ of the Philippines v. Court of "ppeals! et al. -5. . No 24223., 0an. )4, 122), )(: SC A :1:, :)4":)37 !!!! A 'o,pelling rationalization of the prospe'tivity prin'iple of 9udi'ial de'isions is /ell set forth in the oft"'ited 'ase of Chicot Count8 #rainage #ist. v. BaFter States Ban$, @(3 8S @41, @4; 12;(. &he Chi'ot do'trine advo'ates )3& 12'&ra)16& n&;&((1)y )o )aD& a;;oun) o4 )3& a;)ua5 &71()&n;& o4 a ()a)u)& 'r1or )o 1)( nu55141;a)1on, a( an o'&ra)16& 4a;) n&@a)1n@ a;;&')an;& o4 Ja 'r1n;1'5& o4 a+(o5u)& r&)roa;)16& 1n6a51*1)y. * !!!! +u'h earlier, in #e "gba8ani v. P@B, @3 SC A ;)2 !!! the Court ,ade substantially the sa,e observationsO !!!! Again, treating of the effe't that should be given to its de'ision in /laguer v. ,ilitar8 Commission @o C5! J de'laring invalid 'ri,inal pro'eedings 'ondu'ted during the ,artial la/ regi,e against 'ivilians, /hi'h had resulted in the 'onvi'tion and in'ar'eration of nu,erous persons J this Court, in .an vs. Barrios, 12( SC A 131, at p. 4((, ruled as follo/s7 *"n )3& 1n)&r&() o4 ?u()1;& an* ;on(1()&n;y, =& 3o5* )3a) O5a@u&r (3ou5*, 1n 'r1n;1'5&, +& a''51&* 'ro('&;)16&5y on5y )o 4u)ur& ;a(&( an* ;a(&( ()155 on@o1n@ or no) y&) 41na5 =3&n )3a) *&;1(1on =a( 'ro2u5@a)&*. ! ! !* $t /ould see,, then, that the /eight of authority is de'idedly in favor of the proposition )3a) )3& Cour)C( *&;1(1on o4 S&')&2+&r 21, 198. in Oue v. People, 1:; SC A 11( -1234. J i.e., that a 'he'6 issued ,erely to guarantee the perfor,an'e of an obligation is nevertheless 'overed by B.P. Blg. )) J (3ou5* no) +& @16&n r&)ro('&;)16& &44&;) )o )3& 'r&?u*1;& o4 )3& '&)1)1on&r an* o)3&r '&r(on( (1215ar5y (1)ua)&*, =3o r&51&* on )3& o441;1a5 o'1n1on o4 )3& %1n1()&r o4 Ju()1;& that su'h a 'he'6 did not fall /ithin the s'ope of B.P. Blg. )). -E,phasis supplied..

1; Nazareno 1 Gauvain and Bernardita

$ndeed, pursuant to the do'trine of prospe'tivity, ne/ do'trines and prin'iples ,ust be applied only to a'ts and events transpiring a4)&r the pre'edent"setting 9udi'ial de'ision, and not to those that o''urred and /ere 'aused by persons /ho relied on the *old* do'trine and a'ted on the faith thereof. Not 'ontent /ith 'hanging the rule in the ,iddle of the ga,e, the ,a9ority, in the 0une )3, )(11 #e'ision, /ent a little further by ordering respondent SEC Chairperson *to apply this definition of the ter, K'apitalD in deter,ining the e!tent of allo/able foreign o/nership in respondent Philippine =ong #istan'e &elephone Co,pany, and if there is a violation of Se'tion 11, Arti'le N$$ of the Constitution, to i,pose the appropriate san'tions under the la/.* &his ,ay be vie/ed as unreasonable and arbitrary. &he Court in the 'hallenged 0une )3, )(11 #e'ision already ,ade a finding that foreigners hold 1;.)4> of the total nu,ber of P=#& 'o,,on shares /hile Filipinos hold only @:.4@>. 111 $n this fa'tual setting, P=#& /ill, as 'lear as day, fa'e san'tions sin'e its present 'apital stru'ture is presently in brea'h of the rule on the ;(> 'ap on foreign o/nership of voting shares even /ithout need of a SEC investigation. $n ans/ering the SECDs Iuery regarding the proper period of appli'ation and i,position of appropriate san'tions against P=#&, 0usti'e Carpio tersely stated that *on'e the )3 0une )(11 #e'ision be'o,es final, the SEC shall i,pose the appropriate san'tions only if it finds after due hearing that, at the start of the ad,inistrative 'ases or investigation, there is an e!isting violation of Se'. 11, Art. N$$ of the Constitution.* 11) As basis therefor, 0usti'e Carpio 'ited 7alili v. Court of "ppeals11@ and 9nited Church Board for Aorld ,inistries 39CBA,4 v. Sebastian.11; <o/ever, these 'ases do not provide a 9urisprudential foundation to this ,andate that ,ay very /ell deprive P=#& foreign shareholders of their voting shares. $n fa't, 9CBA, v. Sebastian respe'ted the voluntary transfer in a /ill by an A,eri'an of his shares of sto'6s in a land"holding 'orporation. $n the sa,e ,anner, 7alili v. Court of "ppeals sustained as valid the /aiver by an alien of her right of inheritan'e over a pie'e of land in favour of her son. No/here in these 'ases did this Court order the involuntary dispossession of 'orporate sto'6s by alien sto'6holders. At ,ost, these t/o 'ases only re'ognized the prin'iple validating the transfer of land to an alien /ho, after the transfer, subseIuently be'o,es a Philippine 'itizen or transfers the land to a Filipino 'itizen. &hey do not en'o,pass the situation that /ill eventually ensue after the investigation 'ondu'ted by the SEC in a''ordan'e /ith the 0une )3, )(11 and the present resolution. &hey do not 9ustify the

1; Nazareno 4 'o,pulsory deprivation of voting shares in publi' utility 'orporations

Corporation CASES Based on the Syllabus of Fr. Agustin fro, foreign sto'6holders /ho had legally a'Iuired these sto'6s in the first instan'e. &he abrupt appli'ation of the 'onstru'tion of Se'. 11, Art. N$$ of the Constitution to foreigners 'urrently holding voting shares in a publi' utility 'orporation is not only 'onstitutionally proble,ati'E it is li6e/ise replete /ith prag,ati' diffi'ulties that 'ould hinder the real" /orld translation of this CourtDs esolution. Although apparently benevolent, the ,a9orityDs 'on'ession to allo/ *publi' utilities that fail to 'o,ply /ith the nationality reIuire,ent under Se'tion 11, Arti'le N$$ and the F$A BtoC ;ur& )3&1r *&41;1&n;1&( 'r1or )o )3& ()ar) o4 )3& a*21n1()ra)16& ;a(& or 1n6&()1@a)1on *11: 'ould indire'tly o''asion a 'o,pulsory deprivation of the publi' utilitiesD foreign sto'6holders of their voting shares. Certainly, these publi' utilities ,ust i,,ediately pare do/n their foreign"o/ned voting shares to avoid the i,posable san'tions. &his holds true espe'ially for P=#& /hose 1;.)4> of its 'o,,on voting shares are foreign" subs'ribed and held. P=#& is, therefore, for'ed to i,,ediately deprive, or at the very least, dilute the property rights of their foreign sto'6holders before the 'o,,en'e,ent of the ad,inistrative pro'eedings, /hi'h /ould be a ,ere far'e 'onsidering the transparen'y of the publi' utility fro, the onset. Even /ith the 'han'e granted to the publi' utilities to re,edy their supposed defi'ien'y, the nebulous ti,e"fra,e given by the ,a9ority, i.e., *prior to the start of the ad,inistrative 'ase or investigation,*111 ,ay very /ell prove too short for these publi' utilities to raise the ne'essary a,ount of ,oney to in'rease the nu,ber of their authorized 'apital sto'6 in order to dilute the property rights of their foreign sto'6holders holding voting shares.114 Si,ilarly, if they indu'e their foreign sto'6holders to transfer the e!'ess voting shares to Iualified Philippine nationals, this period before the filing of the ad,inistrative ,ay not be suffi'ient for these sto'6holders to find Philippine nationals /illing to pur'hase these voting shares at the ,ar6et pri'e. &his Court 'annot ignore the fa't that the voting shares of Philippine publi' utilities li6e P=#& are listed and sold at large in foreign 'apital ,ar6ets. <en'e, foreigners /ho have previously pur'hased their voting shares in these ,ar6ets /ill not have a ready Philippine ,ar6et to i,,ediately transfer their shares. +ore than li6ely, these foreign sto'6holders /ill be for'ed to sell their voting shares at a loss to the fe/ Philippine nationals /ith ,oney to spare, or the publi' utility

Corporation CASES Based on the Syllabus of Fr. Agustin itself /ill be 'onstrained to a'Iuire these voting shares to the pre9udi'e of its retained earnings.113 Ahatever ,eans the publi' utilities 'hoose to e,ploy in order to 'ut do/n the foreign sto'6holdings of voting shares, it is ne'essary to deter,ine /ho a,ong the foreign sto'6holders of these publi' utilities ,ust bear the burden of unloading the voting shares or the dilution of their property rights. $n a situation li6e this, there is at present no settled rule on /ho should be deprived of their property rights. Aill it be the foreign sto'6holders /ho bought the latest issuan'esL %r the first foreign sto'6holders of the publi' utility 'orporationsL &his issue 'annot be realisti'ally settled /ithin the ti,e"fra,e given by the ,a9ority /ithout raising ,ore disputes. Aith these loose ends, the ,a9ority 'annot penalize the publi' utilities if they should fail to 'o,ply /ith the dire'tive of 'o,plying /ith the *nationality reIuire,ent under Se'tion 11, Arti'le N$$ and the F$A* /ithin the unreasonably nebulous and li,ited period *prior to the start of the ad,inistrative 'ase or investigation.*112 $n the light of the ne/ pronoun'e,ent of the Court that publi' utilities that fail to 'o,ply /ith the nationality reIuire,ent under Se'tion 11, Arti'le N$$ of the Constitution CAN C8 E &<E$ #EF$C$ENC$ES prior to the start of the ad,inistrative 'ase or investigation, $ sub,it that affe'ted 'o,panies li6e P=#& should be given reasonable ti,e to underta6e the ne'essary ,easures to ,a6e their respe'tive 'apital stru'ture 'o,pliant, and the SEC, as the regulatory authority, should 'o,e up /ith the appropriate guidelines on the pro'ess and supervise the sa,e. SEC should li6e/ise adopt the ne'essary rules and regulations to i,ple,ent the prospe'tive 'o,plian'e by all affe'ted 'o,panies /ith the ne/ ruling regarding the interpretation of the provision in Iuestion. Su'h rules and regulations ,ust respe't the due pro'ess rights of all affe'ted 'orporations and define a reasonable period for the, to 'o,ply /ith the 0une )3, )(11 #e'ision. A final note. ?ear in and year out, the govern,entDs trade ,anagers attend e'ono,i' su,,its 'ourting business,en to invest in the 'ountry, doubtless pro,ising the, a playing field /here the rules are friendly as they are predi'table. So it /ould appear odd if a bran'h of govern,ent /ould ,a6e business life 'o,pli'ated for investors /ho are already here. $ndeed, stability and predi'tability are the 6ey pillars on /hi'h our legal syste, ,ust be founded and run to

guarantee a business environ,ent sustainable e'ono,i' gro/th. <en'e, it behoves this Court to respe't the basi' e!pe'tations ta6en into a''ount by the investors at the ti,e they ,ade the invest,ents. $n other /ords, it is the duty of this Court to stand guard against any unto/ard 'hange of the rules in the ,iddle of the ga,e. $, therefore, vote to GRANT the ,otions for re'onsideration and a''ordingly RE$ERSE and SET AS" E the 0une )3, )(11 #e'ision. &he Court should de'lare that the /ord *'apital* in the first senten'e of Se'tion 11, Arti'le Nll of the 1234 Constitution ,eans the entire 'apital sto'6 or both voting and non"voting shares. Sin'e the 0une )3, )(11 #e'ision /as ho/ever sustained, $ sub,it that said de'ision should ta6e effe't only on the date of its finality and should be applied 'ro('&;)16&5y. P=#& should be given ti,e to u,6rta6e the ne'[ssary ,east1res to ,a6e its 'apital stru'ture 'o,pliant, and th[ Se'urities and E!'hange Co,,ission should for,ulal' appropriate guidelines and supervise the pro'ess. Said Co,,ission should also adopt ru6s and regulations to i,ple,ent the prospe'tive 'o,plian'e by all affe'ted 'o,panies /ith the ne/ ruling on the interpretation of Se'. 11, Art. N$$ of the Constitution. Su'h rules and regulations ,ust respe't the due pro'ess rights of all affe'ted 'orporations and provide a reasonable period for the, to 'o, pi y /ith the 0une )3, )(11 #e'ision. &he rights of foreigners over the voting shares they presently o/n in e!'ess of ;(> of said shares should, in the ,eanti,e, be respe'ted. !RES#"TERO Asso'iate 0usti'e J. $ELASCO, JR.

1; Nazareno 3 'ondu'ive to the 'ountryDs

Corporation CASES Based on the Syllabus of Fr. Agustin

F$ S& #$H$S$%N G.R. NOS. 1.44,.8,9 EN!RESS "N$EST%ENTS """ !R"$ATE LT . AN EN!ORT E$ELO!%ENT CANA A, Petitioner, vs. AYAN TELECO%%UN"CAT"ONS, "NC., THE #AN9 OF NE: YOR9 /AS TRUSTEE FOR THE HOL ERS OF THE USU200,000,000 1-.,< SEN"OR NOTES OF AYAN TELECO%%UN"CAT"ONS, "NC.0 AN ATTY. RE%"G"O A. NO$AL /AS THE COURT8A!!O"NTE REHA#"L"TAT"ON RECE"$ER OF #AYANTEL0, espondents. !"""""""""""""""! G.R. No(. 1.,418820

"NTERNAT"ONAL, LT ., A$ENUE AS"A FUN "", L.!., A$ENUE AS"A CA!"TAL !ARTNERS, L.!. AN A$ENUE AS"A S!EC"AL S"TUAT"ONS FUN """, L.!., Petitioner, vs. AYAN TELECO%%UN"CAT"ONS, "NC., espondents. !"""""""""""""""! G.R. No. 1..2.0 &;&2+&r ,, 2012

1; Nazareno 2 S!EC"AL S"TUAT"ONS

THE #AN9 OF NE: YOR9 AS TRUSTEE FOR THE HOL ERS OF THE USU200,000,000 1-.,< SEN"OR NOTES OF #AY AN TELECO%%UN"CAT"ONS, "NC., Petitioner, vs. #AY AN TELECO%%UN"CAT"ONS, "NC., espondents. #EC$S$%N $"LLARA%A, JR., J.:

"N THE %ATTER OFB THE COR!ORATE REHA#"L"TAT"ON OF AYAN TELECO%%UN"CAT"ONS, "NC. !URSUANT TO THE "NTER"% RULES OF !ROCE URE ON COR!ORATE REHA#"L"TAT"ON /A.%. NO. 00888108SC0 THE #AN9 OF NE: YOR9 AS TRUSTEE FOR THE HOL ERS OF THE USU200,000,000 1-.,< SEN"OR NOTES OF AYAN TELECO%%UN"CAT"ONS, "NC. UE 2006 ACT"NG ON THE "NSTRUCT"ONS OF THE "NFOR%AL STEER"NG CO%%"TTEEB A$ENUE AS"A "N$EST%ENTS, L.!., A$ENUE AS"A "NTERNAT"ONAL, LT ., A$ENUE AS"A S!EC"AL S"TUAT"ONS FUN "", L.!. AN A$ENUE AS"A CA!"TAL !ARTNERS, L.!., Petitioner, vs. AYAN TELECO%%UN"CAT"ONS, "NC., espondents. !"""""""""""""""! "N THE %ATTER OFB THE COR!ORATE REHA#"L"TAT"ON OF #AY AN TELECO%%UN"CAT"ONS, "NC. !URSUANT TO THE "NTER"% RULES OF !ROCE URE ON COR!ORATE REHA#"L"TAT"ON /A.%. NO. 00888108SC0 A$ENUE AS"A "N$EST%ENTS, L.!., A$ENUE AS"A

Before us are seven 'onsolidated petitions for revie/ on 'ertiorari filed , 'onne'tion /ith the 'orporate rehabilitation of Bayan &ele'o,,uni'ations, $n'. -Bayantel.. &he Petition for Partial evie/ on Certiorari 1 in 5. . Nos. 14;;:4":2 /as filed by E!press $nvest,ents $$$ Private =td. and E!port #evelop,ent Canada to assail the August 13, )((1 #e'ision ) of the Court of Appeals in CA"5. . SP No. 34)(@. %n the other hand, the Petition for evie/ on Certiorari @ in 5. . Nos. 14:;13")( /as filed by &he Ban6 of Ne/ ?or6E Avenue Asia $nvest,ents, =.P.E Avenue Asia $nternational, =td.E Avenue Asia Spe'ial Situations Fund $$, =.P.E Avenue Asia Capital Partners, =.P. and Avenue Asia Spe'ial Situations Fund $$$, =.P. Said petition Iuestions as /ell the said August 13, )((1 Court of Appeals #e'ision, and also the Nove,ber 3, )((1 esolution ; of the Court of Appeals in CA"5. . SP Nos. 341(( and 34111 affir,ing the 0une )3, )((; #e'ision : of the egional &rial Court - &C. of Pasig City, Bran'h 1:3, in SEC Case No. (@"):. +ean/hile, the Petition for evie/ on Certiorari 1 in 5. . No. 144)4( /as filed by &he Ban6 of Ne/ ?or6, in its 'apa'ity as trustee for the holders of the 8SW)(( ,illion 1@.:> Senior Notes of Bayantel and

Corporation CASES Based on the Syllabus of Fr. Agustin upon the instru'tions of the $nfor,al Steering Co,,ittee, to 'ontest the #e'ision4 and esolution3 of the Court of Appeals in CA"5. . SP No. 3232; /hi'h nullified the Nove,ber 2, )((; and +ar'h 1:, )((: %rders of the Pasig &C, Bran'h 1:3, in SEC Case No. (@"): insofar as it defined the po/ers and fun'tions of the +onitoring Co,,ittee. &he fa'ts, as 'ulled fro, the re'ords of these 'ases, follo/7 espondent Bayantel is a duly organized do,esti' 'orporation engaged in the business of providing tele'o,,uni'ation servi'es. $t is 23.1> o/ned by Bayan &ele'o,,uni'ations <oldings Corporation -B&<C., /hi'h in turn is 3:.;> o/ned by the =opez 5roup of Co,panies and Benpres <oldings Corporation. %n various dates bet/een the years 122: and )((1, Bayantel entered into several 'redit agree,ents /ith E!press $nvest,ents $$$ Private =td. And E!port #evelop,ent Canada -petitioners in 5. . Nos. 14;;:4":2., Asian Finan'e and $nvest,ent Corporation, Bayeris'he =andesban6 -Singapore Bran'h. and Clear/ater Capital Partners Singapore Pte =td., as agent for Credit $ndustriel et Co,,er'ial -Singapore., #euts'he Ban6 A5, EIuitable PC$ Ban6, 0P +organ Chase Ban6, +etropolitan Ban6 and &rust Co., P.&. Ban6 Negara $ndonesia -Persero., &BR, <ong Rong Bran'h, izal Co,,er'ial Ban6ing Corporation and Standard Chartered Ban6. &o se'ure said loans, Bayantel e!e'uted an %,nibus Agree,ent dated Septe,ber 12, 122: and an EH&E=C% +ortgage &rust $ndenture2 dated #e'e,ber 1), 1224.1( Pursuant to the %,nibus Agree,ent, Bayantel e!e'uted an Assign,ent Agree,ent in favor of the lenders under the %,nibus Agree,ent -hereinafter, %,nibus Creditors, Ban6 Creditors, or se'ured 'reditors.. $n the Assign,ent Agree,ent, Bayantel bound itself to assign, 'onvey and transfer to the Collateral Agent, the follo/ing properties as 'ollateral se'urity for the pro,pt and 'o,plete pay,ent of its obligations to the %,nibus Creditors7 -i. all ,onies payable to Bayantel under the Pro9e't #o'u,ents -as the ter, is defined by the %,nibus Agree,ent.E -ii. all Pro9e't #o'u,ents and all Contra't thereunderE ights arising -iii. all re'eivablesE -iv. all general intangiblesE

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-v. ea'h of the A''ounts -as the ter, is defined by the %,nibus Agree,ent.E -vi. all a,ounts ,aintained in the A''ounts and all ,onies, se'urities and instru,ents deposited or reIuired to be deposited in the A''ountsE -vii. all other 'hattel paper and do'u,entsE -viii. all other property, assets and revenues of Bayantel, /hether tangible or intangibleE and -i!. all pro'eeds and produ'ts of any and all of the foregoing.11 $n 0uly 1222, Bayantel issued 8SW)(( ,illion /orth of 1@.:> Senior Notes pursuant to an $ndenture1) dated 0uly )), 1222 that it entered into /ith &he Ban6 of Ne/ ?or6 -petitioner in 5. . Nos. 14:;13")(. as trustee for the holders of said notes. Pursuant to the said $ndenture, the notes are due in )((1 and Bayantel shall pay interest on the, se,i"annually. Bayantel ,anaged to ,a6e t/o interest pay,ents, on 0anuary 1:, )((( and 0uly 1:, )(((, before it defaulted on its obligation. Foreseeing the i,possibility of further ,eeting its obligations, Bayantel sent, in %'tober )((1, a proposal for the restru'turing of its debts to the Ban6 Creditors and the <olders of Notes. &o fa'ilitate the negotiations bet/een Bayantel and its 'reditors, an $nfor,al Steering Co,,ittee /as for,ed 'o,posed of Avenue Asia $nvest,ents, =.P., Avenue Asia $nternational, =td., Avenue Asia Spe'ial Situations Fund $$, =.P., Avenue Asia Capital Partners, =.P. -petitioners in 5. . Nos. 14:;13")(. and Han E'6 5lobal %pportunity +asterfund, =td. &he ,e,bers of the $nfor,al Steering Co,,ittee are the assignees of the unse'ured 'redits e!tended to Bayantel by 0.P. +organ Europe, =td., Bayeris'he =andesban6 Singapore Bran'h and #euts'he Ban6 A5, =ondon in the total prin'ipal a,ount of 8SW1@,1@4,;3:.)(. &hey are holders, as /ell, of the Notes issued by Bayantel pursuant to the $ndenture dated 0uly )), 1222.

$n its initial proposal 'alled the *First &er, Sheet,* Bayantel suggested a ):> /rite"off of the prin'ipal o/ing to the <olders of Notes. &he $nfor,al Steering Co,,ittee re9e'ted the idea, but a''epted BayantelDs proposal to pay the restru'tured debt, pari passu,1@ out of its 'ash flo/. &his pari passu or eIual treat,ent of debts, ho/ever, /as opposed by the Ban6 Creditors /ho invo6ed their se'urity interest under the Assign,ent Agree,ent. Bayantel 'ontinued to pay redu'ed interest on its debt to the Ban6 Creditors but stopped paying the <olders of Notes starting 0uly 14, )(((. By +ay @1, )((@, BayantelDs total indebtedness had rea'hed 8SW14; ,illion or P@:.2)3 billion in unpaid prin'ipal and interest, based on the prevailing 'onversion rate of 8SW1 a P:@.)3). %ut of its total liabilities, Bayantel allegedly o/es ;@.)> or 8SW)21 ,illion -P1:.:@2 billion. to the <olders of the Notes. %n 0uly ):, )((@, &he Ban6 of Ne/ ?or6, as trustee for the <olders of the Notes, /rote Bayantel an A''eleration =etter de'laring i,,ediately due and payable the prin'ipal, pre,iu, interest, and other ,onetary obligations on all outstanding Notes. &hen, on 0uly @(, )((@, &he Ban6 of Ne/ ?or6 filed a petition 1; for the 'orporate rehabilitation of Bayantel upon the instru'tions of the $nfor,al Steering Co,,ittee. %n August 3, )((@, the Pasig &C, Bran'h 1:3, issued a Stay %rder1: /hi'h dire'ted, a,ong others, the suspension of all 'lai,s against Bayantel and reIuired the latterDs 'reditors and other interested parties to file a 'o,,ent or opposition to the petition. &he 'ourt appointed #r. Con'hita =. +anabat to a't as rehabilitation re'eiver but the latter de'lined. 11 $n her stead, the 'ourt appointed Atty. e,igio A. Noval -Atty. Noval. /ho too6 his oath and posted a bond on Septe,ber )1, )((@.14 %n Nove,ber )3, )((@, the ehabilitation Court gave due 'ourse to the petition and dire'ted the ehabilitation e'eiver to sub,it his re'o,,endations to the 'ourt /ithin 1)( days fro, the initial hearing.13 After several e!tensions, Atty. Noval filed on +ar'h )), )((; a Co,plian'e and Sub,ission of the eport as Co,pelling Eviden'e that Bayantel ,ay be Su''essfully ehabilitated. 12 $n his report, Atty. Noval 'lassified BayantelDs debts into three7 -1. those o/ed to se'ured Ban6 Creditors pursuant to the %,nibus Agree,ents -%,nibus Creditors. in the total a,ount of 8SW@@; ,illion or P14.431 billionE -). those o/ed to <olders of the Senior

1: Nazareno 1 Notes and Ban6 Creditors 'o,bined -Chattel Creditors., 'o,prising

Corporation CASES Based on the Syllabus of Fr. Agustin 8SW1): ,illion, of /hi'h 8SW;4@ ,illion -P):.)1; billion. is prin'ipal and 8SW1:) ,illion -P3.1(1 billion. is a''rued unpaid interestE and -@. those that Bayantel o/ed to persons other than Finan'ial CreditorsFunse'ured 'reditors in the a,ount of 8SW;2 ,illion or P).1(3 billion. A''ording to &he Ban6 of Ne/ ?or6, out of the 8SW14; ,illion that respondent o/es its 'reditors under groups ) and @ above, the a,ount outstanding under the Senior Notes represent ;@.)> of its liabilities as of +ay @1, )((@. SubseIuently, negotiations for the restru'turing of BayantelDs debt rea'hed an i,passe /hen the $nfor,al Steering Co,,ittee insisted on a pari passu treat,ent of the 'lai,s of both se'ured and unse'ured 'reditors. +ean/hile, on 0anuary )(, )((;, Bayantel filed a *+otion to $n'lude adio Co,,uni'ations Philippines, $n'. B CP$C and Naga &elephone Co,pany BNagatelC as #ebtor"Corporations for ehabilitation ! ! !.*)( &he ehabilitation Court denied said ,otion in an %rder )1 dated April 12, )((;. &he fallo of said order reads7 A<E EF% E, the Court resolves the pending in'idents as follo/s7 1. &he 8rgent +otion to esolve of petitioner is hereby granted. &he 'reditors of Bayantel, /hether se'ured or unse'ured, should be treated eIually and on the sa,e footing or pari passu until the rehabilitation pro'eedings is ter,inated in a''ordan'e /ith the $nteri, ulesE ). &he +otion of Bayantel to $n'lude CP$ and Nagatel in the present rehabilitation pro'eedings as debtor"'orporations is deniedE @. &he +otion of Bayantel to E!e,pt fro, the Stay %rder the pay,ent of the 'o,pensation pa'6age of its for,er e,ployees per Anne! *A* atta'hed to said ,otion is granted, sub9e't to the verifi'ation and 'onfir,ation of the ite,s therein by the ehabilitation e'eiverE ;. &he +otion of Petitioner to Stri6e %ut the proposed rehabilitation plan of Bayantel is denied.

Corporation CASES Based on the Syllabus of Fr. Agustin S% % #E E#.)) %n 0une )3, )((;, the Pasig &C, Bran'h 1:3, a'ting as a ehabilitation Court, approved the eport and e'o,,endations)@ atta'hed by the e'eiver to his *Sub,ission /ith Prayer for Further 5uidan'e fro, the <onorable Court,*); sub9e't to the follo/ing 'larifi'ations andFor a,end,ents7 1. &he ruling on the pari passu treat,ent of all 'reditors /hose 'lai,s are sub9e't to restru'turing shall be ,aintained and shall e!tend to all pay,ent ter,s and treat,ent of past due interest. ). #ue regard shall be given to the rights of the se'ured 'reditors and no 'hanges in the se'urity positions of the 'reditors shall be granted as a result of the rehabilitation plan as a,ended and approved herein. @. &he level of sustainable debt of the rehabilitation plan, as a,ended, shall be redu'ed to the a,ount of B8SC W@):,(((,((( for a period of 12 years. ;. 8nsustainable debt shall be 'onverted into an appropriate instru,ent that shall not be a finan'ial burden for Bayantel. :. All provisions relating to eIuity in the rehabilitation plan, as approved and a,ended, ,ust stri'tly 'onfor, to the reIuire,ents of the Constitution li,iting foreign o/nership to ;(>. 1. A +onitoring Co,,ittee shall be for,ed 'o,posed of representatives fro, all 'lasses of the restru'tured debt. &he ehabilitation e'eiverDs role shall be li,ited to the po/ers of ,onitoring and oversight as provided in the $nteri, ules. All po/ers provided for in the eport and e'o,,endations, /hi'h e!'eed the ,onitoring and oversight fun'tions ,andated by the $nteri, ules shall be a,ended a''ordingly. S% % #E E#.): #issatisfied, &he Ban6 of Ne/ ?or6 filed a Noti'e of Appeal )1 on August 1, )((;. So did Avenue Asia $nvest,ents, =.P., Avenue Asia

$nternational, =td., Avenue Asia Spe'ial Situations Fund Avenue Asia Capital Partners, =.P., and Avenue Asia Spe'ial Situations Fund $$$, =.P. /hi'h filed a 0oint e'ord on Appeal )4 on August 2, )((;. %n Septe,ber )3, )((;, Bayantel sub,itted an $,ple,enting &er, Sheet to the ehabilitation Court and the e'eiver. Clai,ing that said &er, Sheet /as inadeIuate to prote't the interest of the 'reditors, &he Ban6 of Ne/ ?or6 -petitioner in 5. . No. 144)4(. filed a +anifestation)3 dated %'tober 1:, )((; praying for the 'onstitution of a +onitoring Co,,ittee and the 'reation of a 'onvertible debt instru,ent to 'over the unsustainable portion of the restru'tured debt. %n Nove,ber 2, )((;, the ehabilitation Court issued an %rder)2 dire'ting the 'reation of a +onitoring Co,,ittee to be 'o,posed of one ,e,ber ea'h fro, the group of %,nibus Creditors and unse'ured 'reditors, and a third ,e,ber to be 'hosen by the unani,ous vote of the first t/o ,e,bers. $n the sa,e %rder, the 'ourt defined the s'ope of the +onitoring Co,,itteeDs authority, as follo/s7 ! ! ! &he +onitoring Co,,ittee shall parti'ipate /ith the e'eiver in ,onitoring and overseeing the a'tions of the Board of #ire'tors of Bayantel and ,ay, by ,a9ority vote, adopt, ,odify, revise or substitute, any of the follo/ing ite,s7 -1. any proposed Annual %PEN BudgetsE -). any proposed Annual CAPEN BudgetsE -@. any proposed es'heduleE e'eiver on a pay,ent

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-;. any proposed a'tions by the defaultE -:. ter,s of +anage,ent +anage,ent &argetsE

$n'entivisation

S'he,e

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-1. the EB$&#AF evenue ratios set by the Bayantel Board of #ire'torsE and

Corporation CASES Based on the Syllabus of Fr. Agustin -4. any other proposed a'tions by the Bayantel Board of #ire'tors in'luding, /ithout li,itation, issuan'e of ne/ shares, sale of 'ore and non'ore assets, 'hange of business, et'. that /ill ,aterially affe't the ter,s and 'onditions of the rehabilitation plan and its i,ple,entation. $n 'ase of disagree,ent bet/een the +onitoring Co,,ittee and the Board of #ire'tors of Bayantel on any of the foregoing ,atters, the sa,e shall be sub,itted to the Court for resolution. @( %n Nove,ber 11, )((;, &he Ban6 of Ne/ ?or6 filed a Petition for evie/@1 before the Court of Appeals. &he petition /as do'6eted as CA5. . SP No. 341(( in the Fifteenth #ivision of the Court of Appeals. %n even date, Avenue Asia $nvest,ents, =.P., Avenue Asia $nternational, =td., Avenue Asia Spe'ial Situations Fund $$, =.P., Avenue Asia Capital Partners, =.P., and Avenue Asia Spe'ial Situations Fund $$$, =.P -Avenue Asia Capital 5roup. filed a si,ilar petition@) /hi'h /as do'6eted as CA"5. . SP No. 34111 in the Se'ond #ivision of the Court of Appeals. Both petitions 'ontest the ehabilitation CourtDs 0une )3, )((; #e'ision for, a,ong others, fi!ing the level of BayantelDs sustainable debt at 8SW@): ,illion to be paid in 12 years. &hereafter, on Nove,ber @(, )((;, petitioners E!press $nvest,ents $$$ Private =td. and E!port #evelop,ent Canada along /ith Bayeris'he =andesban6 -Singapore Bran'h., Credit $ndustriel et Co,,er'ial, #euts'he Ban6 A5, P.&. Ban6 Negara $ndonesia -Persero., &BR, <ong Rong Bran'h and izal Co,,er'ial Ban6ing Corporation filed a Petition for evie/ @@ /hi'h /as do'6eted as CA" 5. . No. 34)(@ in the &enth #ivision of the Court of Appeals. &he se'ured 'reditors li6e/ise assailed the ehabilitation CourtDs 0une )3, )((; #e'ision insofar as it ordered the pari passu treat,ent of all 'lai,s against Bayantel. Said petitioners invo6e a lien over the 'ash flo/ and re'eivables of Bayantel by virtue of the Assign,ent Agree,ent. %n #e'e,ber )@, )((;, Bayantel filed an %,nibus +otion @; for the 'onsolidation of CA"5. . SP Nos. 34111 and CA"5. . SP No. 34)(@ /ith CA"5. . SP No. 341((, the lo/est"nu,bered 'ase. $n a esolution dated 0anuary )(, )((:, the Court of Appeals, Fifteenth #ivision, ordered the 'onsolidation of CA"5. . SP No. 34)(@ /ith CA"5. . SP No. 341((. &his /as a''epted by the Court of Appeals, Seventh #ivision, in a esolution @: dated +ar'h )2, )((:.

&hen, in the esolution@1 First #ivision, ordered the 'onsolidation of CA"5. . SP No. 34111 /ith 341(( and the trans,ittal of the re'ords of the three 'ases to the Seventh #ivision.

1: Nazareno @ dated 0une 1(, )((:, the Court of Appeals,

+ean/hile, on 0anuary 1(, )((:, Atty. Noval sub,itted to the ehabilitation Court an $,ple,enting &er, Sheet @4to serve as a guide for BayantelDs ehabilitation. &he sa,e /as approved in an %rder@3 dated +ar'h 1:, )((:. $n the sa,e %rder, the ehabilitation Court appointed Avenue Asia $nvest,ents =.P. and E!port #evelop,ent Canada to represent the unse'ured and se'ured 'reditors, respe'tively, in the +onitoring Co,,ittee. %n +ay )1, )((:, Bayantel filed a petition for 'ertiorari and Prohibition@2 do'6eted as CA"5. . SP No. 3232; in the Court of Appeals. Said petition assailed the ehabilitation CourtDs %rders dated Nove,ber 2, )((; and +ar'h 1:, )((:, for purportedly 'onferring upon the +onitoring Co,,ittee, po/ers of ,anage,ent and 'ontrol over its operations. T!e Cour" of 2ppeals Decision in C2=G.R. 'os. 5-(**% 5-((( an& 5-3*+ $n the assailed August 13, )((1 #e'ision, the Court of Appeals dis,issed the petitions in CA"5. . SP Nos. 341((, 34111 and 34)(@ for la'6 of ,erit. &he appellate 'ourt upheld the ehabilitation CourtDs deter,ination of BayantelDs sustainable debt at 8SW@): ,illion payable in 12 years. $t re9e'ted the e'eiverDs proposal to set the sustainable debt at 8SW@4( ,illion payable in 1: years, and the proposal of the Avenue Asia Capital 5roup to set it at 8SW;41 ,illion payable in 1) years. &he Court of Appeals agreed /ith the ehabilitation Court that it is reasonable to adopt a level of sustainable debt that appro!i,ates respondent BayantelDs proposal be'ause the latter is in the best position to deter,ine the level of sustainable debt that it 'an ,anage. $t found BayantelDs proposal ,ore 'redible 'onsidering that it /as prepared using *updated finan'ial infor,ation /ith realisti' 'ash flo/ figures.*B40C &he appellate 'ourt noted that BayantelDs proposal /as drafted /ithout regard for its status as a *ni'he player* in the tele'o,,uni'ations ,ar6et and after fa'toring the 'ost of reorganization. $n 'ontrast, it e!pressed 'on'ern that the proposals sub,itted by Avenue Asia Capital 5roup and the e'eiver ,ight

Corporation CASES Based on the Syllabus of Fr. Agustin eventually leave Bayantel /ith an un/or6able finan'ial debt"to" revenue ratio. &he Court of Appeals also 'onfir,ed the ehabilitation CourtDs authority to approve, re9e't, substitute, or even 'hange the rehabilitation plans sub,itted by the e'eiver and the parties. $t upheld the trial 'ourt in adopting the e'eiverDs re'o,,endation to li,it the eIuity 'onversion of BayantelDs unsustainable debt to ;(> of its paid"up 'apital. &his per'entage, the appellate 'ourt e!plains, is 'onsistent /ith the 'onstitutional li,itation on the allo/able foreign eIuity in Filipino 'orporations. $t also ,aintained the /rite"off of penalties and default interest and re'o,putation of BayantelDs past due interest, as a valid e!er'ise of dis'retion by the ehabilitation Court under the $nteri, ules of Pro'edure on Corporate ehabilitation -$nteri, ules.. &he appellate 'ourt negated any violation of the pari passu prin'iple /ith the use of these ,easures sin'e they shall apply to all 'lasses of 'reditors. As to the 'lai, of the se'ured 'reditors in CA"5. . SP No. 34)(@, the Court of Appeals ruled that /hile rehabilitation is ongoing, the sole 'ontrol over the se'urity on the re'eivables and 'ash flo/ of Bayantel is vested in the ehabilitation Court. &o allo/ other/ise /ould not only violate the Stay %rder but interfere as /ell /ith the duty of the e'eiver to *ta6e possession, 'ontrol and 'ustody of the debtorDs assets.* ;1 8lti,ately, the Court of Appeals ruled that preferen'e in pay,ent 'annot be a''orded the se'ured 'reditors sin'e preferen'e applies only in liIuidation pro'eedings. #is'ontented, &he Ban6 of Ne/ ?or6 and the Avenue Asia Capital 5roup -petitioners in CA"5. . SP Nos. 341(( and 34111. filed a +otion for Partial e'onsideration. ;) Said ,otion /as, ho/ever, denied in the esolution dated Nove,ber 3, )((1. $n the ,eanti,e, E!press $nvest,ents $$$ Private =td. and E!port #evelop,ent Canada had filed before this Court a Petition for Partial evie/ on Certiorari of the Court of Appeals #e'ision do'6eted as 5. . Nos. 14;;:4":2. A''ording to petitioners, the other se'ured 'reditors /ho /ere also petitioners in CA"5. . SP No. 34)(@ had not re,ained in 'onta't /ith the, and had not authorized the, to file further petitions on their behalf. %n #e'e,ber )3, )((1, &he Ban6 of Ne/ ?or6 and the Avenue Asia Capital 5roup also filed their o/n Petition for evie/ on Certiorari /hi'h /as do'6eted as 5. . Nos. 14:;13")(. T!e Cour" of 2ppeals Decision in C2=G.R. 6P 'o. 5/5/.

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1: ;

$n CA"5. . SP No. 3232;, the Court of Appeals rendered the assailed #e'ision dated %'tober )4, )((1 de'laring null and void the Nove,ber 2, )((; and +ar'h 1:, )((: %rders of the ehabilitation Court insofar as they defined the po/ers and fun'tions of the +onitoring Co,,ittee. &he appellate 'ourt found grave abuse of dis'retion on the part of the ehabilitation Court for 'onferring upon the +onitoring Co,,ittee the po/er to ,odify, reverse or overrule the proposals of BayantelDs Board of #ire'tors relative to operations. $t stressed that the Co,,itteeDs fun'tions are 'onfined to ,onitoring and overseeing the operations of Bayantel to ensure its 'o,plian'e /ith the ter,s and 'onditions of the ehabilitation Plan. &o 'onfor, there/ith, the appellate 'ourt restated the Co,,itteeDs po/ers as follo/s7 &he +onitoring Co,,ittee shall parti'ipate /ith the e'eiver in ,onitoring and overseeing the operations of Bayantel to ensure 'o,plian'e by Bayantel /ith the ter,s and 'onditions of the ehabilitation Plan. $n the event Bayantel fails to ,eet any of the ,ilestones under the ehabilitation Plan or fails to 'o,ply /ith any ,aterial provision thereunder, the +onitoring Co,,ittee ,ay, by ,a9ority vote, r&;o22&n* ,odifi'ations, revisions and substitutions of the follo/ing ite,s7 ! ! ! !;@ -E,phasis supplied. &he Court of Appeals li6e/ise approved of the $,ple,enting &er, Sheet, 'larifying that the sa,e is not intended to address every 'ontingen'y that ,ay arise in the i,ple,entation of the Plan. $t assured that any doubt in the interpretation of the &er, Sheet shall be resolved by the ehabilitation Court. =astly, the appellate 'ourt affir,ed the 'reation of a 'onvertible debt instru,ent to 'over the unsustainable portion of respondentDs debt. $t per'eives su'h instru,ent as a tool to generate surplus 'ash to satisfy BayantelDs debt under &ran'he B. As /ell, it serves as a buy" ba'6 s'he,e for the assign,ent and transfer of 'redits by the Finan'ial Creditors in a ,anner that /ill not unduly burden Bayantel. Issues

Corporation CASES Based on the Syllabus of Fr. Agustin %n %'tober 12, )((1, E!press $nvest,ents $$$ Private =td. and E!port #evelop,ent Canada ;; filed a Petition for Partial evie/ on Certiorari /hi'h /as do'6eted as 5. . Nos. 14;;:4":2. Said petition, /hi'h see6s the reversal of the August 13, )((1 #e'ision of the Court of Appeals insofar as it dis,issed the petition of the se'ured 'reditors in CA"5. . SP No. 34)(@, essentially proffers the follo/ing issues for resolution7 -1. /hether the 'lai,s of se'ured and unse'ured 'reditors should be treated pari passu during rehabilitationE -). /hether the pari passutreat,ent of 'reditors during rehabilitation i,pairs the Assign,ent Agree,ent bet/een respondent and petitionersE -@. /hether an i,pair,ent in the se'urity position of petitioners 'an be 9ustified as a valid e!er'ise of poli'e po/er. %n the other hand, &he Ban6 of Ne/ ?or6 and the Avenue Asia Capital 5roup filed a Petition for evie/ on Certiorari do'6eted as 5. . Nos. 14:;13")(, to Iuestion the appellate 'ourtDs August 13, )((1 #e'ision as /ell as its Nove,ber 3, )((1 esolution in CA"5. . SP Nos. 341(( and 34111. &his se'ond 'onsolidated petition raises the follo/ing issues7 -1. /hether the Court of Appeals erred in setting BayantelDs sustainable debt at 8SW@): ,illion, payable in 12 yearsE -). /hether a debtor ,ay sub,it a rehabilitation plan in a 'reditor"initiated rehabilitationE -@. /hether the 'onversion of debt to eIuity in e!'ess of ;(> of the outstanding 'apital sto'6 in favor of petitioners violates the 'onstitutional li,it on foreign o/nership of a publi' utilityE -;. /hether the /rite"off of respondentDs penalties and default interest and re'o,putation of its past due interest violate the pari passuprin'ipleE and -:. /hether petitioners are entitled to 'osts. %n February )), )((4, respondent Bayantel ,oved for the 'onsolidation of 5. . Nos. 14;;:4":2 /ith 5. . Nos. 14:;13")(. $n a esolution;: dated April )@, )((4, /e dire'ted the #ivision Cler6 of Court to study the feasibility of 'onsolidating said 'ases. $n a +e,orandu, eport;1 dated +ay 14, )((4, the First #ivision Cler6 of Court re'o,,ended the 'onsolidation of 5. . Nos. 14;;:4":2 /ith 5. . Nos. 14:;13")(. %n +ay )1, )((4, &he Ban6 of Ne/ ?or6, as trustee for the <olders of the Senior Notes, filed a Petition for evie/ on Certiorari, do'6eted as 5. . No. 144)4(, to assail the %'tober )4, )((1 #e'ision and +ar'h )@, )((4 esolution of the Court of Appeals in CA"5. . SP No. 3232;. A,plified, the petition presents the lone issue of /hether the +onitoring Co,,ittee in this 'ontrol over BayantelDs operations.

1: Nazareno : 'ase ,ay e!er'ise

$n a esolution;4 dated 0une 1, )((4, /e dire'ted the #ivision Cler6 of Court to study the feasibility of 'onsolidating 5. . No. 144)4( /ith 5. . Nos. 14;;:4":2 and 5. . Nos. 14:;13")(. &o avoid 'onfli'ting de'isions on related 'ases, the Assistant Cler6 of Court re'o,,ended the 'onsolidation of the three 'ases. By esolution;3dated 0uly 11, )((4, the Court ordered the 'onsolidation of 5. . No. 144)4( /ith 5. . Nos. 14;;:4" :2 and 5. . Nos. 14:;13" )(. T!e Par"ies# 2rgumen"s In G.R. 'os. (-..)-=)/ &he petitionersFse'ured 'reditors argue pri,arily that the pari passu treat,ent of 'reditors during rehabilitation has no basis in la/. A''ording to petitioners, all that Presidential #e'ree No. 2()" A;2 -P# 2()"A. provides is the suspension of all 'lai,s against the debtor 'orporation during rehabilitation so that the e'eiver 'an e!er'ise his po/ers free fro, 9udi'ial or e!tra9udi'ial interferen'e. $f the eIuity poli'y is to be 'onsidered at all, they believe that the eIuity poli'y should be 'onstrued to a''ord 'reditors /ith si,ilar rights or unifor, treat,ent. $n line /ith this, petitioners assert priority under the Assign,ent Agree,ent to re'eive fro, BayantelDs surplus 'ash flo/ and to be paid in full, ahead of all other 'reditors. &he petitionersFse'ured 'reditors 'ontend that the pari passu treat,ent of 'lai,s i,pairs the %,nibus Agree,ent and the Assign,ent Agree,ent. Su'h i,pair,ent, they posit, 'annot be 9ustified as a proper e!er'ise of poli'e po/er for three reasons7 first, there is no la/ /hi'h authorizes the eIual treat,ent of 'lai,sE second, there is no enabling la/E and third, it is not reasonably ne'essary for the su''ess of the rehabilitation. Petitioners point out that the $nteri, ules ,andates instead that the rehabilitation plan shall give due regard to the interest of the se'ured 'reditors. For petitioners, the preservation of BayantelDs 'hattels alone is inadeIuate to ,eet said reIuire,ent sin'e the value thereof depre'iates over ti,e. &hey go on to invo6e international pra'ti'es on ban6rupt'y and rehabilitation /hi'h purportedly re'ognize the distin'tion bet/een the rights of se'ured

and unse'ured 'reditors. Petitioners /arn of dire 'onseIuen'es to the international 'redit standing of the Philippines, the finan'ial ,ar6et, and the influ! of foreign invest,ents if the pari passu prin'iple /ould be upheld. Finally, petitioners ,aintain that a *&rigger Event*:( had o''urred /hi'h rendered respondentDs obligations due and de,andable. &hus, despite their failure to notify respondent of the alleged Events of #efault, petitioners believe that they 'an rightfully pro'eed against the se'urities. For its part, respondent Bayantel reasons that enfor'ing preferen'e in pay,ent at this stage of the rehabilitation /ould only disrupt the progress it has ,ade so far. $t assures petitioners that their se'urity rights are adeIuately prote'ted in 'ase the 'ollateral assets are disposed. espondent adds that no single pay,ent s'he,e is appli'able in all rehabilitation pro'eedings and the pe'uliar 'ir'u,stan'es of its 'ase /arrant the pari passutreat,ent of its 'reditors. In G.R. 'os. (-).(5=3* +ainly, petitioners Ban6 of Ne/ ?or6 and Avenue Asia Capital 5roup i,pute error on the Court of Appeals for affir,ing the ehabilitation CourtDs de'ision /hi'h adopted the sustainable debt level Bayantel proposed. &he 'ourt a 'uo fi!ed respondentDs sustainable debt at 8SW@): ,illion payable /ithin 12 years against the e'eiverDs proposal of 8SW@4( ,illion payable in 1: years. Petitioners dispute BayantelDs finan'ial pro9e'tions as unreliable and 'ontrived, designed to bear out a redu'ed level of sustainable debt and 9ustify a substantial /rite"off of its debts. $n order to arrive at a reasonable level of sustainable debt, they believe that the prospe'tive 'ash flo/ of Bayantel ,ust be re'6oned against industry standards. Petitioners point out that the $nteri, ules only allo/s the debtor, in a 'reditor" initiated petition for 'orporate rehabilitation, to file a 'o,,ent or opposition but not to sub,it its o/n rehabilitation plan. &hey /arn that if the fulfill,ent of the obligation /ould be ,ade to depend on the sole /ill of Bayantel, the entire obligation /ould be void. Petitioners fault the trial 'ourt for basing the sustainable debt on the state of the tele'o,,uni'ations industry in the 'ountry rather than 'onsulting the finan'ial pro9e'tions and business ,odels sub,itted by petitioners and the e'eiver. &hey stress that the state of the tele'o,,uni'ations industry is not a,ong those /hi'h the 'ourt ,ay ta6e 9udi'ial noti'e of by dis'retion.

1: Nazareno 1 Petitioners ,aintain that 'onverting the unsustainable debt to 44.4>

Corporation CASES Based on the Syllabus of Fr. Agustin eIuity in Bayantel /ill not violate the nationality reIuire,ent of the 1234 Constitution. &hey aver that the debts to do,esti' ban6 'reditors:1 a''ount is 8SW;4@ ,illion or 4(.13> of BayantelDs total liabilities. Considering the substantial /rite"off of penalties and default interest in the a,ount of 8SW@;,(;;,::@.(( and past due interest of 8SW):,);@,@31.(4, petitioners believe that it is only fair to a''ord the Finan'ial Creditors greater eIuity in Bayantel to 'o,pensate for said losses. +oreover, it is the petitionersD vie/ that the /rite"off 'ontravenes the pari passu prin'iple be'ause they /ould suffer greater losses than the %,nibus Creditors. A''ording to petitioners, appro!i,ately 3)> of the penalties and interests shall be borne by the unse'ured 'reditors and the <olders of Notes. $n the sa,e vein, petitioners protest the re'o,putation of past due interest in a''ordan'e /ith the rate proposed by the e'eiver. &hey 'lai, that re'o,putation /ould result in the 'ondonation of 32> of the a''rued interest o/ing the,. &he e'eiverDs report sho/s that as of the filing of the present petition, the total a''rued interest a,ounts to 8SW1(1,(:;,124.11, of /hi'h, 8SW21,1((,((( are due the <olders of Notes. Finally, petitioners reiterate their 'lai, for 'osts. $n its %rder dated +ar'h 1:, )((:, the ehabilitation Court a/arded 'osts of suit to petitioner Ban6 of Ne/ ?or6. $n parti'ular, it granted the latterDs prayer for the pay,ent of filing fees, 'osts of publi'ation and professional fees. Even then, petitioner ban6 'lai,s that a huge a,ount of its e!penses for the professional fees of 'ounsels and advisers re,ain unpaid. +ore i,portantly, it asserts pre'eden'e in pay,ent over the preferred 'reditors. $n the alternative, the Ban6 of Ne/ ?or6 prays that the 'osts of suit be in'orporated in the a/ard to the nonfinan'ial or trade 'reditors. Si,ilarly, the Avenue Asia Capital 5roup see6s rei,burse,ent for the do'6et fees, publi'ation e!penses and the professional fees it has paid its 'ounsels and finan'ial adviser. $t invo6es Arti'le ))(3 of the Civil Code and the provisions of the $ndenture as legal bases therefor. +ean/hile, the se'ured 'reditors in 5. . Nos. 14;;:4":2 filed a +e,orandu,:) dated April @(, )((2 /ith a prayer for the dis,issal of the bondholdersD petition in 5. . Nos. 14:;13")(. For the se'ured 'reditors, the sustainable debt set by the Courts of Appeals is a ,ore ,anageable and realisti' underta6ing 'o,pared to herein petitionersD proposal. &hey add that the fa't that BayantelDs a'tual revenues are lo/er than its 'ash flo/ pro9e'tions belies any s'he,e

to avoid paying its debts in full. &he se'ured 'reditors agree /ith the appellate 'ourt in li,iting the 'onversion of the unsustainable debt to a ,a!i,u, of ;(> shares in Bayantel as ,ore in 6eeping /ith the Constitution. Further, the se'ured 'reditors point out that there is nothing in the $nteri, ules /hi'h prohibits a debtor 'o,pany fro, sub,itting an alternative rehabilitation plan in 'reditor"initiated pro'eedings. $n support of this, they 'ite Se'tion )),:@ ule ; of said rules /hi'h per,its the debtor to ,odify its proposed plan or sub,it a revised or substitute plan. A''ording to the,, BayantelDs suggestion as to the ter,s of pay,ent does not 'onstitute a potestative 'ondition that /ould render the obligation void. &he se'ured 'reditors, ho/ever, 9oin petitioners in protesting the 'ondonation of penalties and default interest. ather than observing absolute eIuality, they insist that the pari passu prin'iple should be applied su'h that 'reditors /ithin the sa,e 'lass are treated ali6e. $n response, respondent Bayantel sub,itted on +ay )1, )((2, a Consolidated +e,orandu,:; in 5. . Nos. 14:;13")( and 5. . No. 144)4(. $t pra'ti'ally e'hoed the ratio decidendi of the Court of Appeals in dis,issing both petitions. $n 5. . Nos. 14:;13")(, Bayantel defends the ehabilitation Court for adopting the sustainable debt level it proposed. Su'h approval by the 'ourt alone, Bayantel reasons, did not ,a6e the pay,ent of its debt a 'ondition /hose fulfill,ent rests on its sole /ill, as to render the obligation void under Arti'le 113) :: of the Civil Code. espondent ,aintains that a,ong the sta6eholders, it is in the best position to deter,ine the level of debt that it 'an pay. +oreover, it believes that a ,a9ority of the se'ured 'reditors are 'o,fortable /ith the approved sustainable debt sin'e only t/o of the, appealed. espondent insists that altering the sustainable debt at this point /ould be 'ounterprodu'tive. espondent eIually opposes the BondholdersD proposal to redu'e the 'o,panyDs 'apital e!penditures to bet/een 2> and 11> to ,a6e ,ore funds available for debt servi'ing. &his approa'h, a''ording to Bayantel, ignores its need to ,a6e signifi'ant invest,ents in ne/ infrastru'ture in order to 'ope /ith 'o,petitors. espondent disputes the value of petitionersD pro9e'tions /hi'h /ere derived by ben'h,ar6ing BayantelDs in'o,e, as a 'o,pany under rehabilitation, against those of the ,a9or players, P=#& and #igitel.

1: Nazareno 4 Further,ore, respondent ,aintains that its rehabilitation plan /as

Corporation CASES Based on the Syllabus of Fr. Agustin based on a''urate finan'ial data and operation reports. $t insists that the $nteri, ules allo/s a debtor, in 'reditor"initiated rehabilitation pro'eedings, to sub,it an alternative plan. $t agrees /ith the ehabilitation CourtDs de'ision to restri't 'onversion of the unsustainable debt to ;(> of fully paid"up 'apital in Bayantel. espondent believes that the /aiver of penalties and default interest and the re'o,putation of past due interest /ill not violate the pari passu prin'iple be'ause said ,easures shall apply eIually to all 'reditors. =astly, respondent ad,its li,ited liability for 'osts pursuant to the Assign,ent Agree,ent but not for those in'urred by petitioners under *non"'onsensual s'enarios.* In G.R. 'o. (--3-* $n this petition for revie/, the Ban6 of Ne/ ?or6, as trustee for the holders of the 1@.:> Senior Notes of respondent Bayantel, 'hallenges the Court of Appeals de'ision nullifying the +onitoring Co,,itteeDs po/er to ,odify, reverse or overrule the de'ision of BayantelDs Board of #ire'tors on 'ertain ,atters. $t invo6es Se'tion )@,:1 ule ; of the $nteri, ules as legal basis to 9ustify the ehabilitation CourtDs grant of e!tensive po/ers to the +onitoring Co,,ittee. &he pertinent portion of said ule states7 $n approving the rehabilitation plan, the 'ourt shall issue the ne'essary orders or pro'esses for its i,,ediate and su''essful i,ple,entation. $t ,ay i,pose su'h ter,s, 'onditions, or restri'tions as the effe'tive i,ple,entation and ,onitoring thereof ,ay reasonably reIuire, or for the prote'tion and preservation of the interests of the 'reditors should the plan fail. Petitioner 'ontends that the ,agnitude and 'o,ple!ity of respondentDs business ne'essitate 'lose ,onitoring of its operations to ensure su''essful rehabilitation. Spe'ifi'ally, the Ban6 of Ne/ ?or6 e!presses 'on'ern over BayantelDs ta'iturn disposition as regards its budget and e!pansion 'osts. Petitioner believes that su'h la'6 of transparen'y 'an be addressed by e,po/ering the +onitoring Co,,ittee to approve ,easures that /ill ulti,ately affe't respondentDs ability to settle its debts. +oreover, petitioner assures that the $,ple,enting &er, Sheet provides safeguards against the i,provident disapproval by the +onitoring Co,,ittee of proposed ,easures. Petitioner is of the vie/ that the fun'tions of the +onitoring Co,,ittee /ould be

Corporation CASES Based on the Syllabus of Fr. Agustin rendered illusory if all disagree,ents on 6ey areas /ould have to be heard by the ehabilitation Court. Petitioner e!plains that the +onitoring Co,,itteeDs po/ers do not in any /ay supplant those of the Board of #ire'tors. &he Ban6 of Ne/ ?or6 'lai,s that it is 'usto,ary to allo/ 'reditors to ,onitor and supervise the debtorDs operations as de,onstrated by the restru'turing e!perien'es of 'ertain Asian 'ountries. Petitioner sub,its that the ehabilitation Court did not intend to give the +onitoring Co,,ittee po/ers that are 'on'urrent /ith those of the e'eiver on a''ount of the differing interests that they represent in rehabilitation. $t argues that if at all, the 'ourt a 'uo 'o,,itted a ,ere error of 9udg,ent not 'orre'tible by 'ertiorari. Petitioner adds that even if a petition for 'ertiorari /as proper, the 1("day regle,entary period provided by the ules of Court had already lapsed /hen Bayantel filed its petition on +ay )4, )((:. $t 'ontends that BayantelDs +anifestation and +otion for Clarifi'ation dated #e'e,ber 1:, )((; /as in truth a ,otion for re'onsideration /hi'h is a prohibited pleading under Se'tion 1, :4 ule @ of the $nteri, ules. Petitioner 'on'ludes that su'h pleadings did not toll the period for filing a petition and, therefore, the ehabilitation CourtDs de'ision had be'o,e final. $n its Consolidated +e,orandu, dated +ay )1, )((2, Bayantel 'ounters that Se'tion )@, ule ; of the $nteri, ules should be understood as delineating the purpose of the 'ourtDs orders and pro'esses to ,ere i,ple,entation and ,onitoring of the plan. espondent opposes any interpretation of said provision /hi'h authorizes the Co,,ittee to substitute its 9udg,ent for those of the Board or vest it /ith po/ers greater than those of the e'eiver. $t argues that vesting the Co,,ittee /ith veto po/er over 'ertain de'isions of the Board /ould effe'tively give it 'ontrol and ,anage,ent over BayantelDs operations. &he ne'essary effe't, a''ording to Bayantel, is that every disagree,ent bet/een the Co,,ittee and the Board /ould have to be settled in 'ourt. espondent points out that petitioner failed to 'ite proof of its 'lai, that it is 'usto,ary a,ong Asian 'ountries to allo/ the +onitoring Co,,ittee a'tive parti'ipation during rehabilitation. Bayantel per'eive the instant petition as an underhanded atte,pt by petitioner to 'reate a +anage,ent Co,,ittee /ithout satisfying the reIuisites therefor. $t reiterates that the fun'tions of the +onitoring Co,,ittee are 'onfined to ensuring that Bayantel ,eets the debt redu'tion ,ilestones under the plan. espondent avers that even

/ithout a +onitoring Co,,ittee, it is obliged under the 'o,ply /ith 'ertain infor,ation 'ovenants and reportorial reIuire,ents. $t adds that the Plan provides a ,e'hanis, for dispute resolution through /hi'h 'reditors 'an enfor'e 'o,plian'e.

Nazareno

1: 3 Plan to

Penulti,ately, respondent assails the validity of the %rder dated Nove,ber 2, )((; for la'6 of noti'e. Allegedly, Bayantel learned of said %rder only after petitioner furnished it a 'opy of its Co,plian'e to /hi'h the sa,e /as ,ade an atta'h,ent. &hus, respondent insists that the regle,entary period to file an appeal or a petition for 'ertiorari did not run against it. T!e Cour"#s Ruling In G.R. 'os. (-..)-=)/ ehabilitation is an atte,pt to 'onserve and ad,inister the assets of an insolvent 'orporation in the hope of its eventual return fro, finan'ial stress to solven'y.:3 $t 'onte,plates the 'ontinuan'e of 'orporate life and a'tivities in an effort to restore and reinstate the 'orporation to its for,er position of su''essful operation and liIuidity. &he purpose of rehabilitation pro'eedings is pre'isely to enable the 'o,pany to gain a ne/ lease on life and thereby allo/ 'reditors to be paid their 'lai,s fro, its earnings. :2 ehabilitation shall be underta6en /hen it is sho/n that the 'ontinued operation of the 'orporation is e'ono,i'ally feasible and its 'reditors 'an re'over, by /ay of the present value of pay,ents pro9e'ted in the plan, ,ore, if the 'orporation 'ontinues as a going 'on'ern than if it is i,,ediately liIuidated. 1( &he la/ governing rehabilitation and suspension of a'tions for 'lai,s against 'orporations is P# 2()"A, as a,ended. %n #e'e,ber 1:, )(((, the Court pro,ulgated A.+. No. (("3"1("SC or the $nteri, ules of Pro'edure on Corporate ehabilitation, /hi'h applies to petitions for rehabilitation filed by 'orporations, partnerships and asso'iations pursuant to P# 2()"A. $n 0anuary )((;, epubli' A't No. 3422 - A 3422., other/ise 6no/n as the Se'urities egulation Code, a,ended Se'tion : of P# 2()"A, and transferred to the egional &rial Courts the 9urisdi'tion of the Se'urities and E!'hange Co,,ission -SEC. over petitions of 'orporations, partnerships or asso'iations to be de'lared in the state

Corporation CASES Based on the Syllabus of Fr. Agustin of suspension of pay,ents in 'ases /here the 'orporation, partnership or asso'iation possesses property to 'over all its debts but foresees the i,possibility of ,eeting the, /hen they respe'tively fall due or in 'ases /here the 'orporation, partnership or asso'iation has no suffi'ient assets to 'over its liabilities, but is under the ,anage,ent of a rehabilitation re'eiver or a ,anage,ent 'o,,ittee. $n order to effe'tively e!er'ise su'h 9urisdi'tion, Se'tion 1-'., P# 2()"A e,po/ers the egional &rial Court to appoint one or ,ore re'eivers of the property, real and personal, /hi'h is the sub9e't of the pending a'tion before the Co,,ission /henever ne'essary in order to preserve the rights of the parties"litigants andFor prote't the interest of the investing publi' and 'reditors. 8nder Se'tion 1, ule ; of the $nteri, ules, if the 'ourt finds the petition to be suffi'ient in for, and substan'e, it shall issue, not later than five -:. days fro, the filing of the petition, an %rder /ith the follo/ing pertinent effe'ts7 -a. appointing a ehabilitation e'eiver and fi!ing his bondE

su''essfully be rehabilitated. $n no instan'e, period for approving or disapproving a rehabilitation plan e!'eed 13 ,onths fro, the date of filing of the petition.1) %n the other hand, Se'tion )4, ule ; of the $nteri, ules provides /hen the rehabilitation pro'eedings is dee,ed ter,inated7

1: Nazareno 2 ho/ever, shall the

SEC. )4. Termina"ion of Procee&ings. G $n 'ase of the failure of the debtor to sub,it the rehabilitation plan, or the disapproval thereof by the 'ourt, or the failure of the rehabilitation of the debtor be'ause of failure to a'hieve the desired targets or goals as set forth therein, or the failure of the said debtor to perfor, its obligations under the said plan, or a deter,ination that the rehabilitation plan ,ay no longer be i,ple,ented in a''ordan'e /ith its ter,s, 'onditions, restri'tions, or assu,ptions, the 'ourt shall upon ,otion, motu proprio, or upon the re'o,,endation of the ehabilitation e'eiver, ter,inate the pro'eedings. T3& 'ro;&&*1n@( (3a55 a5(o )&r21na)& u'on )3& (u;;&((4u5 12'5&2&n)a)1on o4 )3& r&3a+151)a)1on '5an. -E,phasis supplied. <en'e, unless the petition is dis,issed for any reason, the stay order shall be effe'tive until the rehabilitation plan has been su''essfully i,ple,ented. $n the ,eanti,e, the debtor is prohibited fro, paying any of its outstanding liabilities as of the date of the filing of the petition e!'ept those authorized in the plan under Se'tion );-'., ule ; of the $nteri, ules. $n this 'ase, in an %rder dated April 12, )((;, the ehabilitation Court held that *BtChe 'reditors of Bayantel, /hether se'ured or unse'ured, should be treated eIually and on the sa,e footing or pari passu until the rehabilitation pro'eedings is ter,inated in a''ordan'e /ith the $nteri, ules.*1@ &he 'ourt reiterated this pronoun'e,ent in its #e'ision dated 0une )3, )((;. Before us, petitioners 'ontend that su'h pari passu treat,ent of 'lai,s violates not only the *due regard* provision in the $nteri, ules but also the Contra't Clause in the 1234 Constitution. Petitioners assert pre'eden'e in the pay,ent of 'lai,s during rehabilitation by virtue of the Assign,ent Agree,ent dated Septe,ber 12, 122:. 8nder said Agree,ent, Bayantel assigned, 'harged, 'onveyed and transferred to a Collateral Agent, the follo/ing properties as 'ollateral for the pro,pt and 'o,plete pay,ent of its obligations to se'ured 'reditors7

/+0 ()ay1n@ &n4or;&2&n) o4 a55 ;5a12(, =3&)3&r 4or 2on&y or o)3&r=1(& an* =3&)3&r (u;3 &n4or;&2&n) 1( +y ;our) a;)1on or o)3&r=1(&, a@a1n() )3& *&+)or, 1)( @uaran)or( an* (ur&)1&( no) (o51*ar15y 51a+5& =1)3 )3& *&+)orI -'. prohibiting the debtor fro, selling, en'u,bering, transferring, or disposing in any ,anner any of its properties e!'ept in the ordinary 'ourse of businessE -d. prohibiting the debtor fro, ,a6ing any pay,ent of its liabilities outstanding as at the date of filing of the petitionE ! ! ! -E,phasis supplied. &he stay order shall be effe'tive fro, the date of its issuan'e until the dis,issal of the petition or the ter,ination of the rehabilitation pro'eedings.11 8nder the $nteri, ules, the petition shall be dis,issed if no rehabilitation plan is approved by the 'ourt upon the lapse of 13( days fro, the date of the initial hearing. &he 'ourt ,ay grant an e!tension beyond this period only if it appears by 'onvin'ing and 'o,pelling eviden'e that the debtor ,ay

-i. All land, buildings, ,a'hinery and eIuip,ent 'urrently o/ned, and to be a'Iuired in the future by BayantelE -ii. All ,onies payable to Bayantel under the Pro9e't #o'u,ents -as the ter, is defined by the %,nibus Agree,ent.E -iii. All Pro9e't #o'u,ents and all Contra't thereunderE -iv. All re'eivablesE -v. Ea'h of the A''ounts -as the ter, is defined by the %,nibus Agree,ent.E -vi. All a,ounts ,aintained in the A''ounts and all ,onies, se'urities and instru,ents deposited or reIuired to be deposited in the A''ountsE -vii. All other Chattel Paper and #o'u,entsE -viii. All other property, assets and revenues of Bayantel, /hether tangible or intangibleE -i!. All 5eneral $ntangiblesE and -!. All pro'eeds and produ'ts of any and all of the foregoing. 1; $n parti'ular, petitioners refer to Se'tion ;.() of the Assign,ent Agree,ent as basis for de,anding full pay,ent, ahead of other 'reditors, out of respondentDs revenue fro, operations during rehabilitation. &he relevant provision reads7 Se'tion ;.(). Pay,ents 8nder Contra'ts and e'eivables. ights arising

11 Nazareno ( pay,ents to the Collateral Agent in the sa,e for, as so re'eived

Corporation CASES Based on the Syllabus of Fr. Agustin -/ith any ne'essary endorse,ent. along /ith a des'ription of the sour'es of su'h pay,ents. All a,ounts re'eived by the Collateral Agent pursuant to this Se'tion ;.() shall be applied as set forth in Part = and in the B$nter"'reditorC Agree,ent. 1:-8nders'oring in the originalE e,phasis supplied. &he resolution of the issue at hand rests on a deter,ination of /hether se'ured 'reditors ,ay enfor'e preferen'e in pay,ent during rehabilitation by virtue of a 'ontra'tual agree,ent. Se'tion 1-'., P# 2()"A provides that upon the appoint,ent of a ,anage,ent 'o,,ittee, rehabilitation re'eiver, board or body, all a'tions for 'lai,s against 'orporations, partnerships or asso'iations under ,anage,ent or re'eivership pending before any 'ourt, tribunal, board or body shall be suspended a''ordingly. 11 &he suspension of a'tion for 'lai,s against the 'orporation under a rehabilitation re'eiver or ,anage,ent 'o,,ittee e,bra'es all phases of the suit, be it before the trial 'ourt or any tribunal or before this Court.14 &he 9ustifi'ation for suspension of a'tions for 'lai,s is to enable the ,anage,ent 'o,,ittee or rehabilitation re'eiver to effe'tively e!er'ise itsFhis po/ers free fro, any 9udi'ial or e!tra9udi'ial interferen'e that ,ight unduly hinder or prevent the *res'ue* of the debtor 'o,pany. 13 $t is intended to give enough breathing spa'e for the ,anage,ent 'o,,ittee or rehabilitation re'eiver to ,a6e the business viable again /ithout having to divert attention and resour'es to litigation in various fora.12 $n the 122( 'ase of "lemar)s Sibal J Sons! Inc. v. Judge 0lbinias!4( the Court first enun'iated the prevailing prin'iple /hi'h governs the relationship a,ong 'reditors during rehabilitation. $n said 'ase, 5.A. ?upang'o sought the issuan'e of a /rit of e!e'ution to i,ple,ent a final and e!e'utory default 9udg,ent in its favor and after Ale,arDs Sibal U Sons, $n'. /as pla'ed under rehabilitation. $n ordering the stay of e!e'ution, the Court held7 ur1n@ r&3a+151)a)1on r&;&16&r(31', )3& a((&)( ar& 3&5* 1n )ru() 4or )3& &>ua5 +&n&41) o4 a55 ;r&*1)or( )o 'r&;5u*& on& 4ro2 o+)a1n1n@ an a*6an)a@& or 'r&4&r&n;& o6&r ano)3&r +y )3& &7'&*1&n;y o4 an a))a;32&n), &7&;u)1on or o)3&r=1(& . For /hat /ould prevent an alert 'reditor, upon learning of the re'eivership, fro, rushing posthaste to the 'ourts to se'ure

$f during the 'ontinuan'e of a &rigger Event the Co,pany shall re'eive dire'tly fro, any party to any Assigned Agree,ent or fro, any a''ount debtor or other obligor under any e'eivable, any pay,ents under su'h agree,ents or the e'eivables, )3& Co2'any (3a55 r&;&16& (u;3 'ay2&n)( 1n a ;on()ru;)16& )ru() 4or )3& +&n&41) o4 )3& S&;ur&* !ar)1&(, shall segregate su'h pay,ents fro, its other funds, and shall forth/ith trans,it and deliver su'h

Corporation CASES Based on the Syllabus of Fr. Agustin 9udg,ents for the satisfa'tion of its 'lai,s to the pre9udi'e of the less alert 'reditors. A( +&)=&&n )3& ;r&*1)or(, )3& D&y '3ra(& 1( J&>ua51)y 1( &>u1)y.J :3&n a ;or'ora)1on )3r&a)&n&* +y +anDru');y 1( )aD&n o6&r +y a r&;&16&r, a55 )3& ;r&*1)or( (3ou5* ()an* on &>ua5 4oo)1n@. No) anyon& o4 )3&2 (3ou5* +& @16&n any 'r&4&r&n;& +y 'ay1n@ on& or (o2& o4 )3&2 a3&a* o4 )3& o)3&r(. &his is pre'isely the reason for the suspension of all pending 'lai,s against the 'orporation under re'eivership. $nstead of 'reditors ve!ing the 'ourts /ith suits against the distressed fir,, they are dire'ted to file their 'lai,s /ith the re'eiver /ho is a duly appointed offi'er of the SEC.41 -E,phasis supplied. Sin'e then, the prin'iple of eIuality in eIuity has been 'ited as the basis for pla'ing se'ured and unse'ured 'reditors in eIual footing or in pari passu /ith ea'h other during rehabilitation. $n legal parlan'e, pari passu is used espe'ially of 'reditors /ho, in ,arshaling assets, are entitled to re'eive out of the sa,e fund /ithout any pre'eden'e over ea'h other.4) $n %i(al Commercial Ban$ing Corporation v. Intermediate "ppellate Court, 4@ the Court disallo/ed the fore'losure of the debtor 'o,panyDs property after the latter had filed a Petition for ehabilitation and #e'laration of Suspension of Pay,ents /ith the SEC. Ae ruled that /henever a distressed 'orporation as6s the SEC for rehabilitation and suspension of pay,ents, preferred 'reditors ,ay no longer assert preferen'e but shall stand on eIual footing /ith other 'reditors. Fore'losure shall be disallo/ed so as not to pre9udi'e other 'reditors, or 'ause dis'ri,ination a,ong the,. $n 1222, the Court Iualified this ruling by stating that preferred 'reditors of distressed 'orporations shall stand on eIual footing /ith all other 'reditors only after a rehabilitation re'eiver or ,anage,ent 'o,,ittee has been appointed. 4; +ore i,portantly, the Court laid the guidelines for the treat,ent of 'lai,s against 'orporations undergoing rehabilitation7 1. All 'lai,s against 'orporations, partnerships, or asso'iations that are pending before any 'ourt, tribunal, or board, /ithout distin'tion as to /hether or not a 'reditor is se'ured or unse'ured, shall be suspended effe'tive upon the appoint,ent of a ,anage,ent 'o,,ittee, rehabilitation re'eiver, board, or body in a''ordan'e /ith the provisions of Presidential #e'ree No. 2()"A.

). S&;ur&* ;r&*1)or( r&)a1n )3&1r un(&;ur&* ;r&*1)or(, +u) &n4or;&2&n) o4 (u;3 'r&4&r&n;& 1( &>ua55y (u('&n*&* u'on )3& a''o1n)2&n) o4 a 2ana@&2&n) ;o221))&&, r&3a+151)a)1on r&;&16&r, +oar*, or +o*y. $n the event that the assets of the 'orporation, partnership, or asso'iation are finally liIuidated, ho/ever, se'ured and preferred 'redits under the appli'able provisions of the Civil Code /ill definitely have preferen'e over unse'ured ones.4: -E,phasis supplied. Basi'ally, on'e a ,anage,ent 'o,,ittee or rehabilitation re'eiver has been appointed in a''ordan'e /ith P# 2()"A, no a'tion for 'lai,s ,ay be initiated against a distressed 'orporation and those already pending in 'ourt shall be suspended in /hatever stage they ,ay be. Not/ithstanding, se'ured 'reditors shall 'ontinue to have preferred status but the enfor'e,ent thereof is li6e/ise held in abeyan'e. <o/ever, if the 'ourt later deter,ines that the rehabilitation of the distressed 'orporation is no longer feasible and its assets are liIuidated, se'ured 'lai,s shall en9oy priority in pay,ent. Ae per'eive no good reason to depart fro, established 9urispruden'e. Ahile Se'tion );-d., ule ; of the $nteri, ules states that 'ontra'ts and other arrange,ents bet/een the debtor and its 'reditors shall be interpreted as 'ontinuing to apply, this holds true only to the e!tent that they do not 'onfli't /ith the provisions of the plan. <ere, the stipulation in the Assign,ent Agree,ent to the effe't that respondent Bayantel shall pay petitioners in full and ahead of other 'reditors out of its 'ash flo/ during rehabilitation dire'tly i,pinges on the provision of the approved ehabilitation Plan that *BtChe 'reditors of Bayantel, /hether se'ured or unse'ured, should be treated eIually and on the sa,e footing or pari passu until the rehabilitation pro'eedings is ter,inated in a''ordan'e /ith the $nteri, ules.* #uring rehabilitation, the only pay,ents san'tioned by the $nteri, ules are those ,ade to 'reditors in a''ordan'e /ith the provisions of the plan. Pertinent to this is Se'tion :-b., ule ; of the $nteri, ules /hi'h states that the ter,s and 'onditions of the rehabilitation plan shall in'lude the ,anner of its i,ple,entation, giving due regard to the interests of secured 'reditors. &his very phrase is /hat

11 Nazareno 1 'r&4&r&n;& o6&r

petitioners invo6e as basis for de,anding priority in pay,ent out of respondentDs 'ash flo/. But petitionersD relian'e thereon is ,ispla'ed. By definition, due regard ,eans 'onsideration in a degree appropriate to the de,ands of a parti'ular 'ase.41 %n the other hand, se'urity interest is a for, of interest in property /hi'h provides that the property ,ay be sold on default in order to satisfy the obligation for /hi'h the se'urity interest is given. %ften, the ter, *lien* is used as a synony,, although lien ,ost 'o,,only refers only to interests providing se'urity that are 'reated by operation of la/, not through agree,ent of the debtor and 'reditor. $n 'ontrast, the ter, *se'urity interest* ,eans any interest in property a'Iuired by 'ontra't for the purpose of se'uring pay,ent or perfor,an'e of an obligation or inde,nifying against loss or liability.44 8nder the $nteri, ules, the only pertinent referen'e to 'reditor se'urity is found in Se'tion 1), ule ; on relief fro,, ,odifi'ation or ter,ination of stay order. Said provision states that the 'reditor is regarded as la'6ing adeIuate prote'tion if it 'an be sho/n that7 -a. the debtor fails or refuses to honor a pre"e!isting agree,ent /ith the 'reditor to 6eep the property insuredE -b. the debtor fails or refuses to ta6e 'o,,er'ially reasonable steps to ,aintain the propertyE or -'. the property has depre'iated to an e!tent that the 'reditor is underse'ured. 8pon a sho/ing that the 'reditor is la'6ing in prote'tion, the 'ourt shall order the rehabilitation re'eiver to ta6e steps to ensure that the property is insured or ,aintained or to ,a6e pay,ent or provide repla'e,ent se'urity su'h that the obligation is fully se'ured. $f su'h arrange,ents are not feasible, the 'ourt ,ay allo/ the se'ured 'reditor to enfor'e its 'lai, against the debtor. Nonetheless, the 'ourt ,ay deny the 'reditor the foregoing re,edies if allo/ing so /ould prevent the 'ontinuation of the debtor as a going 'on'ern or other/ise prevent the approval and i,ple,entation of a rehabilitation plan.43 $n the 'onte!t of the foregoing provisions, *giving due regard to the interests of se'ured 'reditors* pri,arily entails ensuring that the property 'o,prising the 'ollateral is insured, ,aintained or repla'e,ent se'urity is provided su'h that the obligation is fully se'ured. &he reason for this rule is si,ple, in the event that the 'ourt ter,inates the pro'eedings for reasons other than the su''essful

11 Nazareno ) i,ple,entation of the plan, the se'ured 'reditors ,ay fore'lose the
Corporation CASES Based on the Syllabus of Fr. Agustin se'urities and the pro'eeds thereof applied to the satisfa'tion of their preferred 'lai,s. Ahen the ules of Pro'edure on Corporate ehabilitation too6 effe't on 0anuary 11, )((2, the *due regard* provision /as a,ended to read7 SEC. 13. %ehabilitation Plan. G &he rehabilitation plan shall in'lude -a. the desired business targets or goals and the duration and 'overage of the rehabilitationE -b. the ter,s and 'onditions of su'h rehabilitation /hi'h shall in'lude the ,anner of its i,ple,entation, giving due regard to the interests of se'ured 'reditors su'h as, +u) no) 5121)&*, )o )3& non812'a1r2&n) o4 )3&1r (&;ur1)y 51&n( or 1n)&r&()(E ! ! !. -E,phasis supplied. #espite the additional phrase, ho/ever, it is our vie/ that the a,end,ent si,ply a,plifies the ,eaning of the *due regard provision* in the $nteri, ules. First, the a,end,ent e!e,plifies /hat giving *due regard to the interests of se'ured 'reditors* 'onte,plates, ,ainly, the noni,pair,ent of se'urities. At the sa,e ti,e, the spe'ifi' referen'e to *se'urity liens* and *interests,* separated by the dis9un'tive *or,* des'ribes /hat *the interests of se'ured 'reditors* 'onsist of. Again, lien pertains only to interests providing se'urity that are 'reated by operation of la/ /hile se'urity interests in'lude those a'Iuired by 'ontra't for the purpose of se'uring pay,ent or perfor,an'e of an obligation or inde,nifying against loss or liability. =astly, the addition of the phrase *but not li,ited* in the a,end,ent shuns a rigid appli'ation of the provision by re'ognizing that *giving due regard to the interest of se'ured 'reditors* ,ay be rendered in other /ays than ta6ing 'are that the se'urity liens and interests of se'ured 'reditors are adeIuately prote'ted. $n this 'ase, petitioners E!press $nvest,ents $$$ Private =td. And E!port #evelop,ent Canada are 'on'erned, not so ,u'h /ith the adeIua'y of the se'urities offered by respondent, but /ith the devaluation of su'h se'urities over ti,e. Petitioners fear that the pro'eeds of respondentDs 'ollateral /ould be insuffi'ient to 'over their 'lai,s in the event of liIuidation. %n this point, suffi'e it to state that petitioners are not /ithout any re,edy to address a defi'ien'y in se'urities, if and /hen it 'o,es about. 8nder Se'tion 1), ule ; of the $nteri, ules, a se'ured

Corporation CASES Based on the Syllabus of Fr. Agustin 'reditor ,ay file a ,otion /ith the ehabilitation Court for the ,odifi'ation or ter,ination of the stay order. $f petitioners 'an sho/ that arrange,ents to insure or ,aintain the property or to ,a6e pay,ent or provide additional se'urity therefor is not feasible, the 'ourt shall ,odify the stay order to allo/ petitioners to enfor'e their 'lai, b that is, to fore'lose the ,ortgage and apply the pro'eeds thereof to their 'lai,s. Be that as it ,ay, the 'ourt ,ay deny the 'reditor this re,edy if allo/ing so /ould prevent the 'ontinuation of the debtor as a going 'on'ern or other/ise prevent the approval and i,ple,entation of a rehabilitation plan. $ndeed, neither the *due regard provision* nor 'ontra'tual arrange,ents 'an sha'6le the ehabilitation Court in deter,ining the best ,eans of rehabilitating a distressed 'orporation. &ruth be told, the ehabilitation Court ,ay approve a rehabilitation plan even over the opposition of 'reditors holding a ,a9ority of the total liabilities of the debtor if, in its 9udg,ent, the rehabilitation of the debtor is feasible and the opposition of the 'reditors is ,anifestly unreasonable. $n deter,ining /hether or not the opposition of the 'reditors is ,anifestly unreasonable, the 'ourt shall 'onsider the follo/ing7 -a. &hat the plan /ould li6ely provide the ob9e'ting 'lass of 'reditors /ith 'o,pensation greater than that /hi'h they /ould have re'eived if the assets of the debtor /ere sold by a liIuidator /ithin a three",onth periodE -b. &hat the shareholders or o/ners of the debtor lose at least their 'ontrolling interest as a result of the planE and -'. &he ehabilitation e'eiver has re'o,,ended approval of the plan.42 A''ording to the =iIuidation Analysis3( prepared by RP+5 at the reIuest of the e'eiver, the Fair +ar6et Halue of respondentDs fi!ed assets is P13.4 billion /hile its For'ed =iIuidation Halue is P2.@ billion. &ogether /ith 'ash and re'eivables in the a,ount of P211 ,illion, respondentDs total liIuidation assets are valued at P1(.) billion. Fro, this a,ount, the esti,ated liIuidation return to the %,nibus Creditors is P1,1(),1:(,((( or appro!i,ately :).2> of their 'lai,s in the a,ount of P11,:@2,441,(((. +ean/hile, Chattel Creditors 'an re'oup 11> of its 'lai,s. As regards the 8nse'ured Creditors, they /ill share in the pool of assets that respondents have a'Iuired sin'e 1223, /hi'h /ere not spe'ifi'ally registered under the %,nibus Agree,ent +ortgage Supple,ents. Said assets are esti,ated to have a value of P@.: Billion. &his a''ounts for 1(.4> of the 8nse'ured CreditorsD 'lai,s.

e'6oned fro, these figures, the e'eiver shareholders shall re'eive nothing on respondentDs liIuidation /hile the latterDs 'reditors 'an e!pe't signifi'antly less than full repay,ent. +oreover, regardless of /hether the shareholders /ill lose at least their 'ontrolling interest as a result of the plan, petitioners, in their +e,orandu, dated April @(, )((2, have signified their 'onfor,ity /ith the Court of Appeals de'ision to li,it the 'onversion of the unsustainable debt to a ,a!i,u, of ;(> of the fully"paid up 'apital of respondent 'orporation. =astly, the e'eiver not only re'o,,ended the approval of the Plan by the ehabilitation Court, he, hi,self, prepared it. &he 'on'urren'e of these 'onditions renders the opposition of petitioners ,anifestly unreasonable. As regards the se'ond issue, petitioners sub,it that the pari passu treat,ent of 'lai,s offends the Contra't Clause under the 1234 Constitution. Arti'le $$$, Se'tion 1( of the Constitution ,andates that no la/ i,pairing the obligation of 'ontra'ts shall be passed. Any la/ /hi'h enlarges, abridges, or in any ,anner 'hanges the intention of the parties, ne'essarily i,pairs the 'ontra't itself. And even /hen the 'hange in the 'ontra't is done by indire'tion, there is i,pair,ent nonetheless.31 At this point, it bears stressing that the non"i,pair,ent 'lause is a li,itation on the e!er'ise of legislative po/er and not of 9udi'ial or Iuasi9udi'ial po/er. $n :im! Sr. v. Secretar8 of "griculture J @atural %esources! et al.,3) /e held7 ! ! !. For it is /ell"settled that a la/ /ithin the ,eaning of this 'onstitutional provision has referen'e pri,arily to statutes and ordinan'es of ,uni'ipal 'orporations. E!e'utive orders issued by the President /hether derived fro, his 'onstitutional po/ers or valid statutes ,ay li6e/ise be 'onsidered as su'h. $t does not 'over, therefore, the e!er'ise of the Iuasi"9udi'ial po/er of a depart,ent head even if affir,ed by the President. &he ad,inistrative pro'ess in su'h a 'ase parta6es ,ore of an ad9udi'atory 'hara'ter. $t is bereft of any legislative signifi'an'e. $t falls outside the s'ope of the non" i,pair,ent 'lause. ! ! !.3@ &he prohibition e,bra'es ena't,ents of a govern,ental la/",a6ing body pertaining to its legislative fun'tions. Stri'tly spea6ing, it does not 'over the e!er'ise by su'h la/",a6ing body of Iuasi"9udi'ial po/er.

11 Nazareno @ 'on'luded that the

Corporation CASES Based on the Syllabus of Fr. Agustin Herily, the #e'ision dated 0une )3, )((; of the ehabilitation Court is not a proper sub9e't of the Non"i,pair,ent Clause. $n vie/ of the foregoing, /e find no need to dis'uss the third issue posed in this petition In G.R. 'os. (-).(5=3* Prefatorily, /e restate the ti,e honored prin'iple that in a petition for revie/ on certiorari under ule ;: of the ules of Court, only Iuestions of la/ ,ay be raised. &hus, in a petition for revie/ on 'ertiorari, the s'ope of the Supre,e CourtYs 9udi'ial revie/ is li,ited to revie/ing only errors of la/, not of fa't. 3; $t is not our fun'tion to /eigh all over again eviden'e already 'onsidered in the pro'eedings belo/, our 9urisdi'tion is li,ited to revie/ing only errors of la/ that ,ay have been 'o,,itted by the lo/er 'ourt. 3: Before us, petitioners Ban6 of Ne/ ?or6 and Avenue Asia Capital 5roup raise a Iuestion of fa't /hi'h is not proper in a petition for revie/ on certiorari. A Iuestion of la/ arises /hen there is doubt as to /hat the la/ is on a 'ertain state of fa'ts, /hile there is a Iuestion of fa't /hen the doubt arises as to the truth or falsity of the alleged fa'ts. For a Iuestion to be one of la/, the sa,e ,ust not involve an e!a,ination of the probative value of the eviden'e presented by the litigants or any of the,. &he resolution of the issue ,ust rest solely on /hat the la/ provides on the given set of 'ir'u,stan'es. %n'e it is 'lear that the issue invites a revie/ of the eviden'e presented, the Iuestion posed is one of fa't.31 Ahether the Court of Appeals erred in affir,ing the sustainable debt fi!ed by the ehabilitation Court is a Iuestion of fa't that 'alls for a re'alibration of the eviden'e presented by the parties before the trial 'ourt. $n order to resolve said issue, petitioners /ould have this Court reassess the state of respondent BayantelDs finan'es at the onset of rehabilitation and gauge the pra'ti'al value of the plans sub,itted by the parties vis"V"vis the finan'ial ,odels prepared by the e!perts engaged by the,. &hese tas6s are 'ertainly not for this Court to a''o,plish. &he resolution of fa'tual issues is the fun'tion of lo/er 'ourts, /hose findings on these ,atters are re'eived /ith respe't.34 &his is espe'ially true in rehabilitation pro'eedings /here 'ertain 'ourts are designated to hear the 'ase on a''ount of their e!pertise and spe'ialized 6no/ledge on the sub9e't ,atter. &hough this do'trine ad,its of several e!'eptions, 33 none is appli'able in the 'ase at bar

Notably, the $nteri, ules is silent on the sustainable debt of the debtor shall be deter,ined. ?et, Se'tion ) of the $nteri, ules pres'ribe that the ules shall be liberally 'onstrued to 'arry out the ob9e'tives of Se'tions :-d., 32 1-'.2( and 1-d.21 of P# 2()"A. Se'tion :-d., P# 2()"A vested 9urisdi'tion upon the SEC over petitions for rehabilitation. =ater, A 3422 or the Se'urities egulation Code, a,ended Se'tion :-d. of P# 2()"A by transferring SECDs 9urisdi'tion over said petitions to the &C. +ean/hile, Se'tion 1-'. of P# 2()"A provides for the appoint,ent of a re'eiver of the sub9e't property /henever ne'essary in order to preserve the rights of the parties and to prote't the interest of the investing publi' and the 'reditors. 8pon the appoint,ent of su'h re'eiver, all a'tions for 'lai,s against the 'orporation pending before any 'ourt, tribunal, board or body shall be suspended a''ordingly. %n the other hand, Se'tion :-d., P# 2()"A e!pands the po/er of the Co,,ission to allo/ the 'reation and appoint,ent of a ,anage,ent 'o,,ittee to underta6e the ,anage,ent of the 'orporation /hen there is i,,inent danger of dissipation, loss, /astage or destru'tion of assets or other properties or paralyzation of the business of the 'orporation /hi'h ,ay be pre9udi'ial to the interest of ,inority sto'6holders, parties"litigants or the general publi'. &he underlying ob9e'tive behind these provisions is to foster the rehabilitation of the debtor by insulating it against 'lai,s, preserving its assets and ta6ing steps to ensure that the rights of all parties 'on'erned are adeIuately prote'ted. &his Court is 'onvin'ed that the Court of Appeals ruled in a''ord /ith this poli'y /hen it upheld the ehabilitation CourtDs deter,ination of respondentDs sustainable debt. Ae find the sustainable debt of 8SW@): ,illion, spread over 12 years, to be a ,ore realisti'ally a'hievable a,ount 'onsidering respondentDs ,odest revenue pro9e'tions. Bayantel pro9e'ted a 'onstant rise in its revenues at the range of 1.11>";.21> /ith periodi' reverses every t/o years. 2) %n the other hand, petitionerDs proposal of a sustainable debt of 8SW;41 ,illion to be paid in 1) years and the e'eiverDs proposal of 8SW@4( ,illion to be paid in 1: years betray an over opti,is, that 'ould leave Bayantel /ith nothing to spend for its operations. Ne!t, petitioners 'ontest the ad,ission of respondentDs rehabilitation plan for being filed in violation of the $nteri, ules. $t is petitionerDs vie/ that in a 'reditor"initiated petition for rehabilitation, the debtor

11 Nazareno ; ,anner by /hi'h the

,ay only sub,it either a 'o,,ent or opposition but not its o/n rehabilitation plan. Ae 'annot agree. ule ; of the $nteri, ules treats of rehabilitation in general, /ithout distin'tion as to /ho bet/een the debtor and the 'reditor initiated the petition. No/here in said ule is there any provision that prohibits the debtor in a 'reditor"initiated petition to file its o/n rehabilitation plan for 'onsideration by the 'ourt. Muite the reverse, one of the fun'tions and po/ers of the rehabilitation re'eiver under Se'tion 1;-,. of said ule is to study the rehabilitation plan proposed b8 the debtor or any rehabilitation plan sub,itted during the pro'eedings, together /ith any 'o,,ents ,ade thereon. &his provision ,a6es parti'ular referen'e to a debtor"initiated pro'eeding in /hi'h the debtor prin'ipally files a rehabilitation plan. $n su'h 'ase, the re'eiver is tas6ed, a,ong other things, to study the rehabilitation plan presented by the debtor along /ith any rehabilitation plan sub,itted during the pro'eedings. &his i,plies that the 'reditors of the distressed 'orporation, and even the re'eiver, ,ay file their respe'tive rehabilitation plans. Ae per'eive no good reason /hy the sa,e option should not be available, by analogy, to a debtor in 'reditor"initiated pro'eedings, /hi'h is also found in ule ; of the $nteri, ules. &hird, petitioners fault the Court of Appeals for ruling that the debt" toeIuity 'onversion rate of 44.4>, as proposed by &he Ban6 of Ne/ ?or6, violates the Filipinization provision of the Constitution. Petitioners e!plain that the a'Iuisition of shares by foreign %,nibus and Finan'ial Creditors shall be done, both dire'tly and indire'tly in order to ,eet the 'ontrol test prin'iple under A 4(;) 2@ or the Foreign $nvest,ents A't of 1221. 8nder the proposed stru'ture, said 'reditors shall o/n ;(> of the outstanding 'apital sto'6 of the tele'o,,uni'ations 'o,pany on a dire't basis, /hile the re,aining ;(> of shares shall be registered to a holding 'o,pany that shall retain, on a dire't basis, the other 1(> eIuity reserved for Filipino 'itizens. +oreover, petitioners ,aintain that it is only fair to i,pose upon the %,nibus and Finan'ial Creditors a bigger eIuity 'onversion in Bayantel 'onsidering that petitioners /ill bear the bul6 of the a''rued interests and penalties to be /ritten off. $nitially, the ehabilitation Court approved the e'eiverDs re'o,,endation to /rite"off interests and penalties in the a,ount of 8SW@;,(;;,::@.((.

&he due interest in a''ordan'e /ith the rate proposed by the e'eiver. Follo/ing this, petitioners esti,ate the total unpaid a''rued interest of Bayantel as of 0uly @(, )((@ to be at 8SW1;(,(23,4:(.11 /hile the ehabilitation Court arrived at the total a,ount of past due interest and penalties of 8SW11;,3::,@12.:2 upon re'o,putation. &his ,a6es for a differen'e of 8SW):,);@,@31.(4 /hi'h, petitioners 'lai,, represents an additional /rite"off to be borne by the, for a total /rite"off of 8SW:2,)34,2@;.(4. &he provision adverted to is Arti'le N$$, Se'tion 11 of the 1234 Constitution /hi'h states7 SEC. 11. No fran'hise, 'ertifi'ate, or any other for, of authorization for the operation of a publi' utility shall be granted e!'ept to 'itizens of the Philippines or to 'orporations or asso'iations organized under the la/s of the Philippines at least si!ty per centum of /hose 'apital is o/ned by su'h 'itizens, nor shall su'h fran'hise, 'ertifi'ate or authorization be e!'lusive in 'hara'ter or for a longer period than fifty years. Neither shall any su'h fran'hise or right be granted e!'ept under the 'ondition that it shall be sub9e't to a,end,ent, alteration, or repeal by the Congress /hen the 'o,,on good so reIuires. &he State shall en'ourage eIuity parti'ipation in publi' utilities by the general publi'. &he parti'ipation of foreign investors in the governing body of any publi' utility enterprise shall be li,ited to their proportionate share in its 'apital, and all the e!e'utive and ,anaging offi'ers of su'h 'orporation or asso'iation ,ust be 'itizens of the Philippines. &his provision e!pli'itly reserves to Filipino 'itizens 'ontrol over publi' utilities, pursuant to an overriding e'ono,i' goal of the 1234 Constitution7 to *'onserve and develop our patri,ony* and ensure *a selfreliant and independent national e'ono,y effec"i9ely con"rolle& by Filipinos.*2; $n the re'ent 'ase of Gamboa v. .eves!2: the Court settled on'e and for all the ,eaning of *'apital* in the above"Iuoted Constitutional provision li,iting foreign o/nership in publi' utilities. $n said 'ase, /e held that 'onsidering that 'o,,on shares have voting rights /hi'h translate to 'ontrol as opposed to preferred shares /hi'h usually have no voting rights, the ter, *'apital* in Se'tion 11, Arti'le N$$ of the Constitution refers only to 'o,,on shares. <o/ever, if the preferred shares also have the right to vote in the ele'tion of dire'tors, then the ter, *'apital* shall in'lude su'h preferred shares

11 Nazareno : ehabilitation Court li6e/ise ordered a re"'o,putation of past

Corporation CASES Based on the Syllabus of Fr. Agustin

be'ause the right to parti'ipate in the 'ontrol or ,anage,ent of the 'orporation is e!er'ised through the right to vote in the ele'tion of dire'tors. $n short, the ter, *'apital* in Se'tion 11, Arti'le N$$ of the Constitution refers only to shares of sto'6 that 'an vote in the ele'tion of dire'tors. Applying this, t/o steps ,ust be follo/ed in order to deter,ine /hether the 'onversion of debt to eIuity in e!'ess of ;(> of the outstanding 'apital sto'6 violates the 'onstitutional li,it on foreign o/nership of a publi' utility7 -irst!identify into /hi'h 'lass of shares the debt shall be 'onverted, /hether 'o,,on shares, preferred shares that have the right to vote in the ele'tion of dire'tors or non" voting preferred sharesE Second! deter,ine the nu,ber of shares /ith voting right held by foreign entities prior to 'onversion. $f upon 'onversion, the total nu,ber of shares held by foreign entities e!'eeds ;(> of the 'apital sto'6 /ith voting rights, the 'onstitutional li,it on foreign o/nership is violated. %ther/ise, the 'onversion shall be respe'ted. $n its ehabilitation Plan,21 a,ong the ,aterial finan'ial 'o,,it,ents ,ade by respondent Bayantel is that its shareholders shall *relinIuish the agreed"upon a,ount of 'o,,on sto'6BsC as pay,ent to 8nse'ured Creditors as per the &er, Sheet.* 24 Evidently, the parties intend to 'onvert the unsustainable portion of respondentYs debt into 'o,,on sto'6s, /hi'h have voting rights. $f /e indulge petitioners on their proposal, the %,nibus Creditors /hi'h are foreign 'orporations, shall have 'ontrol over 44.4> of Bayantel, a publi' utility 'o,pany. &his is pre'isely the s'enario pros'ribed by the Filipinization provision of the Constitution. &herefore, the Court of Appeals a'ted 'orre'tly in sustaining the ;(> debt"to"eIuity 'eiling on 'onversion. As to the fourth issue, petitioners insist that the /rite"off of the default interest and penalties along /ith the re"'o,putation of past due interest violate the pari passu treat,ent of 'reditors. PetitionerDs argu,ent la'6s ,erit. Se'tion :-d., ule ; of the $nteri, ules provides that the rehabilitation plan shall in'lude the ,eans for the e!e'ution of the rehabilitation plan, /hi'h ,ay in'lude 'onversion of the debts or any portion thereof to eIuity, restru'turing of the debts, dacion en pago, or sale of assets or of the 'ontrolling interest.

11 Nazareno 1 #ebt restru'turing ,ay involve 'onversion of the debt or any portion
Corporation CASES Based on the Syllabus of Fr. Agustin thereof to eIuity, sale of the assets of the distressed 'o,pany and appli'ation of the pro'eeds to the obligation, dacion en pago, debt relief or redu'tion, ,odifi'ation of the ter,s of the loan or a 'o,bination of these s'he,es. $n this 'ase, the approved ehabilitation Plan provided for a longer period of pay,ent, the 'onversion of debt to ;(> eIuity in respondent 'o,pany, ,odifi'ation of interest rates on the restru'tured debt and a''rued interest and a /rite"off or relief fro, penalties and default interest. &hese re'o,,endations by the e'eiver are perfe'tly /ithin the po/ers of the ehabilitation Court to adopt and approve, as it did adopt and approve. $n so doing, no reversible error 'an be attributed to the ehabilitation Court. &he pertinent portion of the fallo of said 'ourtDs #e'ision dated 0une )3, )((; states7 1. &he ruling on )3& 'ar1 'a((u )r&a)2&n) o4 a55 ;r&*1)or( /hose 'lai,s are sub9e't to restru'turing shall be ,aintained and (3a55 &7)&n* )o a55 'ay2&n) )&r2( an* )r&a)2&n) o4 'a() *u& 1n)&r&().F23 -E,phasis supplied. &hus, the 'ourt a 'uo provided for a unifor, appli'ation of the pari passu prin'iple a,ong 'reditor 'lai,s and the ter,s by /hi'h they shall be paid, in'luding past due interest. &his is 'onsistent /ith the interpretation a''orded by 9urispruden'e to the pari passu prin'iple that during rehabilitation, the assets of the distressed 'orporation are held in trust for the eIual benefit of all 'reditors to pre'lude one fro, obtaining an advantage or preferen'e over another. All 'reditors should stand on eIual footing. Not any one of the, should be given preferen'e by paying one or so,e of the, ahead of the others.22 As applied to this 'ase, the pari passu treat,ent of 'lai,s during rehabilitation entitles all 'reditors, /hether se'ured or unse'ured, to re'eive pay,ent out of BayantelDs 'ash flo/. #espite their preferred position, therefore, the se'ured 'reditors shall not be paid ahead of the unse'ured 'reditors but shall re'eive pay,ent only in the proportion o/ing to the,. $n any event, the debt restru'turing s'he,es 'o,plained of shall be i,ple,ented a,ong all 'reditors regardless of 'lass. Both se'ured

and unse'ured 'reditors shall suffer a /rite"off of penalties and default interest and the es'alating interest rates shall be eIually i,posed on the,. Ae repeat, the 'o,,it,ent e,bodied in the pari passu prin'iple only goes so far as to ensure that the assets of the distressed 'orporation are held in trust for the eIual benefit of all 'reditors. $t does not espouse absolute eIuality in all aspe'ts of debt restru'turing. As regards petitionersD 'lai,s for 'osts, petitioner Ban6 of Ne/ ?or6 filed before the ehabilitation Court a Noti'e of Clai,1(( dated February 12, )((; for the pay,ent of 8SW1,)::,3:1.@(, representing filing fee, deposit for e!penses and the professional fees of its 'ounsels and finan'ial advisers. Earlier, said ban6 had filed a 'lai, for the pay,ent of 8SW31@,3)2.23 for professional fees of its 'ounsels and professional advisers and P),3:(,@(:.(( for do'6et fees and publi'ation e!penses. %n its end, the Avenue Asia Capital 5roup 'lai,s a total of 8SW:@:,(4:.1; to defray the professional fees of its finan'ial adviser, Pri'e Aaterhouse U Cooper and the Bondholder Co,,uni'ations 5roup. $n an %rder1(1 dated +ar'h 1:, )((:, the ehabilitation Court approved the 'lai,s for 'osts of petitioner Ban6 of Ne/ ?or6 as follo/s7 i. filing fees of P),4(1,4:(.(( as eviden'ed by %. . Nos. 13;1@223, 13;11)31 and (;3();1 all dated August 1@, )((@ of the egional &rial Court -of Pasig City.E ii. 'osts of publi'ation of the Stay %rder in the a,ount of P;4,::(.(( as eviden'ed by %. . No. 31@3; dated August 1@, )((@ of the Peoples $ndependent +edia, $n'., the sa,e being 9udi'ial 'osts authorized under Se'. 1, ule 1;) of the ules of CourtE iii. pay,ents of professional fees to its Philippine Counsel, Belo 5ozon El,a Parel Asun'ion U =u'ila, in the total a,ount of 8SW1:),43;.@) as eviden'ed by the Affidavit of Atty. oberto afael H. =u'ila and the State,ents of A''ount atta'hed theretoE /hi'h the Court 'onsiders to be reasonable and finds authorized under Se'. 1.11 and 1.1) of the $ndenture atta'hed as Anne! *E* to the PetitionE

&he of the a''ounts /ithin a period of si!teen -11. ,onths fro, re'eipt of this %rder.1() &he trial 'ourt ,ade no pronoun'e,ent on the 'lai,s for 'ost of petitioner Avenue Asia Capital 5roup, either in the sa,e %rder or in a subseIuent order. Before us, petitioners reiterate their 'lai,s for 'osts based on Se'tions 1.111(@ and 1.1)1(; of the $ndenture1(:dated 0uly )), 1222, /hi'h /as e!e'uted by respondent in their favor. $t bears stressing at this point that the sub9e't of petitionersD appeal before the Court of Appeals /as the ehabilitation CourtDs #e'ision dated 0une )3, )((;. Said #e'ision, ho/ever, bore no dis'ussion on either petitionersD 'lai, for 'osts fro, /hi'h they ,ay appeal. Notably, the assailed %rder of the ehabilitation Court /as pro,ulgated on +ar'h 1:, )((: or four -;. ,onths after petitioners had appealed the #e'ision dated 0une )3, )((; to the Court of Appeals on Nove,ber 11, )((;. Evidently, the appellate 'ourt 'ould not have a'Iuired 9urisdi'tion to revie/ said %rder. Nonetheless, /e doubt the propriety of the ehabilitation CourtDs a/ard for 'osts. A perusal of the %rder dated +ar'h 1:, )((: reveals that the a/ard to petitioner Ban6 of Ne/ ?or6 /as ,ade pursuant to Se'tion 1, ule 1;) of the ules of Court, /hi'h states7 SEC&$%N 1. Costs ordinaril8 follow results of suit ." 8nless other/ise provided in these ules, ;o()( (3a55 +& a55o=&* )o )3& 'r&6a151n@ 'ar)y as a ,atter of 'ourse, but the 'ourt shall have po/er, for spe'ial reasons, to ad9udge that either party shall pay the 'osts of an a'tion, or that the sa,e be divided, as ,ay be eIuitable. No 'osts shall be allo/ed against the epubli' of the Philippines unless other/ise provided by la/. -E,phasis supplied. <o/ever, there is no prevailing party in rehabilitation pro'eedings /hi'h is non"adversarial in nature. 1(1 8nli6e in adversarial pro'eedings, the 'ourt in rehabilitation pro'eedings appoints a re'eiver to study the best ,eans to revive the debtor and to ensure that the value of the debtorDs property is reasonably ,aintained pending the deter,ination of /hether or not the debtor should be rehabilitated, as /ell as i,ple,ent the rehabilitation plan after its approval.1(4 &he ,ain thrust of rehabilitation is not to ad9udi'ate

11 Nazareno 4 e'eiver is hereby dire'ted to 'ause the settle,ent of pay,ent

Corporation CASES Based on the Syllabus of Fr. Agustin

opposing 'lai,s but to restore the debtor to a position of su''essful operation and solven'y. 8nder the $nteri, ules, reasonable fees and e!penses are allo/ed the e'eiver and the persons hired by hi,,1(3 for those e!penses in'urred in the ordinary 'ourse of business of the debtor after the issuan'e of the stay order but e!'luding interest to 'reditors.1(2 +oreover, /hile it is true that the $ndenture bet/een petitioners and respondent 'orporation authorizes the &rustee to file proofs of 'lai, for the pay,ent of reasonable e!penses and disburse,ents of the &rustee, its agents and 'ounsel, a''ountants and e!perts, su'h re,edy is available only in 'ases /here the &rustee files a 'olle'tion suit against respondent 'o,pany. $ndubitably, the rehabilitation pro'eedings in the 'ase at bar is not a 'olle'tion suit, /hi'h is adversarial in nature. In G.R. 'o. (--3-* At issue in this petition for revie/ on 'ertiorari is the e!tent of po/er that the +onitoring Co,,ittee 'an e!er'ise. &he pertinent portion of the fallo of the #e'ision dated 0une )3, )((; provides7 1. A +onitoring Co,,ittee shall be for,ed 'o,posed of representatives fro, all 'lasses of the restru'tured debt. &he ehabilitation e'eiverDs role shall be li,ited to the po/ers of ,onitoring and oversight as provided in the $nteri, ules. All po/ers provided for in the eport and e'o,,endations, /hi'h e!'eed the ,onitoring and oversight fun'tions ,andated by the $nteri, ules shall be a,ended a''ordingly.11( %n %'tober 1:, )((;, petitioner Ban6 of Ne/ ?or6 filed a +anifestation /ith the ehabilitation Court for the 'reation of a ,onitoring 'o,,ittee in a''ordan'e /ith the aforeIuoted pronoun'e,ent. Petitioner espouses the vie/ that it is essential to *provide for a strong and effe'tive +onitoring Co,,ittee ! ! ! /hi'h gives the Finan'ial Creditors ,eaningful and substantial parti'ipation in Bayantel.*111 $t /ent on to propose the po/ers that the +onitoring Co,,ittee should possess, spe'ifi'ally7 &he role of the +onitoring Co,,ittee shall be to /or6 /ith the e'eiver -on pre'ise ter,s to be agreed as dis'ussed belo/. to

11 Nazareno 3 %versee the a'tions of the B&$ Ne/ Board of #ire'tors, ,a6ing 6ey
Corporation CASES Based on the Syllabus of Fr. Agustin #e'isions anda''ro61n@, a,ongst other things, -i. Any proposed Events of es'hedulingE

-ii. Any other proposed a'tions by the re'eiver on a pay,ent defaultE -iii. %perating E!penses BudgetsE -iv. Capital E!penditure BudgetsE -v. Asset Sales Progra,sE and -vi. &er,s of $n'entive S'he,e for Ne/ +anage,ent and +anage,ent &argets.11) SubseIuently, in an %rder11@ dated Nove,ber 2, )((;, the ehabilitation Court adopted petitionerDs proposal by 'onstituting a +onitoring Co,,ittee that shall parti'ipate /ith the e'eiver in ,onitoring and overseeing the a'tions of the Board of #ire'tors of Bayantel and ,ay, by ,a9ority vote, a*o'), 2o*14y, r&61(& or (u+()1)u)& any of the follo/ing ite,s7 -1. any proposed Annual %PEN BudgetsE -). any proposed Annual CAPEN BudgetsE -@. any proposed es'heduleE e'eiver on a pay,ent

-;. any proposed a'tions by the defaultE -:. ter,s of +anage,ent +anage,ent &argetsE

$n'entivisation

S'he,e

and

/60 )3& E#"T ALR&6&nu& ra)1o( (&) +y )3& #ayan)&5 #oar* o4 1r&;)or(I an*,

/.0 any o)3&r 'ro'o(&* a;)1on( +y )3& #ayan)&5 #oar* o4 1r&;)or( 1n;5u*1n@, =1)3ou) 5121)a)1on, 1((uan;& o4 n&= (3ar&(, (a5& o4 ;or& an* non8;or& a((&)(, ;3an@& o4 +u(1n&((, &);. )3a) =155 2a)&r1a55y a44&;) )3& )&r2( an* ;on*1)1on( o4 )3& r&3a+151)a)1on '5an an* 1)( 12'5&2&n)a)1on.11;-E,phasis supplied. Fro, said %rder, respondent Bayantel filed a +anifestation and +otion for Clarifi'ation /hile the se'ured 'reditors ,oved for an in'rease in the ,e,bership of the ,onitoring 'o,,ittee fro, three to five ,e,bers. For his part, the e'eiver sub,itted a Co,plian'e and +anifestation dated 0anuary 1(, )((:. $n an %rder11: dated +ar'h 1:, )((:, the ehabilitation Court affir,ed the 'reation of a ,onitoring 'o,,ittee but denied the ,otion for the appoint,ent of additional ,e,bers therein. $t also ,ade the follo/ing dispositions relative to the fun'tions of the +onitoring Co,,ittee7 -d. to approve the $,ple,enting &er, Sheet sub,itted by the e'eiver sub9e't to the follo/ing 'onditions7 !!!! ii. )3& R&;&16&r (3a55 *&(1@n an* 4or2u5a)& =1)3 )3& 'ar)1;1'a)1on o4 )3& %on1)or1n@ Co221))&& an* #ayan)&5 )3& ;on6&r)1+5& *&+) 1n()ru2&n), as dire'ted of hi, in the earlier %rder of Nove,ber 2, )((;, for the unsustainable portion of the restru'tured debt of Bayantel and sub,it the sa,e to the Court /ithin thirty -@(. days fro, re'eipt of this %rder. Costs, e!penses and ta!es that ,ay be due on the e!e'ution of the 'onvertible debt instru,ent shall be 'harged to Bayantel as 'osts of the rehabilitation pro'eedingsE !!!! iv. the e'eiver shall devise a ,ode or pro'edure /hereby )3& %on1)or1n@ Co221))&& ;an 3a6& 122&*1a)& an* *1r&;) a;;&(( )o any 1n4or2a)1on that the e'eiver has obtained or re'eived fro, Bayantel or the +onitoring A''ountant 1n r&@ar* )o )3& 2ana@&2&n) an* +u(1n&(( o'&ra)1on( o4 #ayan)&5 E

11 Nazareno 2 v. the trading of debt ,entioned in the $,ple,enting &er, Sheet

Corporation CASES Based on the Syllabus of Fr. Agustin shall be governed by the pre"petition do'u,ents /hi'h do not 'onfli't /ith the #e'ision of this Court and provided that no transfer shall be ,ade to the Bayantel 5roup Co,panies, or any 'ontrolling shareholders thereof in'luding Bayan &ele'o,,uni'ations <oldings Corporation -*B&<C*.E ho/ever, any *buy ba'6* s'he,e a( 2ay +& a''ro6&* +y )3& %on1)or1n@ Co221))&& and Bayantel shall be open to all 'reditors /hether se'ured or unse'uredE 111 -E,phasis supplied. %n appeal, the Court of Appeals nullified the %rders dated Nove,ber 2, )((; and +ar'h 1:, )((: insofar as they defined the po/ers and fun'tions of the +onitoring Co,,ittee. &he appellate 'ourt ruled that the ehabilitation Court 'o,,itted grave abuse of dis'retion in vesting the +onitoring Co,,ittee /ith po/ers beyond ,onitoring and overseeing BayantelDs operations. Before us, petitioner 'ontends that the ehabilitation Court intended for the +onitoring Co,,ittee to e!er'ise po/ers greater than those of the e'eiver. Ae find no ,erit in petitionerDs argu,ent. $n the #e'ision dated 0une )3, )((;, the ehabilitation Court dis'ussed the 'ir'u,stan'es surrounding the 'reation of the ,onitoring 'o,,ittee, thus7 Both Bayantel and the %pposing Creditors 'ontend that the ehabilitation e'eiver, under his eport and e'o,,endations, appear to be vested /ith too ,u'h dis'retion in the i,ple,entation of his proposed rehabilitation plan. Bayantel and the %pposing Creditors for one, argue against the po/er of the ehabilitation e'eiver to be able to further restru'ture estru'tured #ebt as /ell as the ehabilitation e'eiverYs po/er relating to ,atters of BayantelDs budget. &he B'Court /ishes to stress that the $nteri, ules prohibit the ehabilitation e'eiver fro, ta6ing over the ,anage,ent and 'ontrol of the 'o,pany under rehabilitation, and li,it his role to ,erely overseeing and ,onitoring the operations of the 'o,pany -Se'tion 1;, ule ;, $nteri, ules.. <o/ever, the B'Court also appre'iates that the ehabilitation e'eiver ,ust oversee the i,ple,entation of the rehabilitation plan as approved by the B'Court.

Corporation CASES Based on the Syllabus of Fr. Agustin $n line /ith petitionerDs proposal, )3& ;r&a)1on o4 a %on1)or1n@ Co221))&& ;o2'o(&* o4 r&'r&(&n)a)16&( 4ro2 a55 ;5a((&( o4 )3& r&()ru;)ur&* *&+) a**r&((&( )3& ;on;&rn( ra1(&* +y )3& ;r&*1)or(.114 -E,phasis supplied. $t 'an be gleaned fro, the foregoing that the ehabilitation CourtDs de'ision to for, a ,onitoring 'o,,ittee /as borne out of 'reditorsD 'on'erns over the possession of vast po/ers by the e'eiver. Ahile the ehabilitation Court /as Iui'6 to delineate the e'eiverDs authority, it nevertheless, unders'ored the value of his role in overseeing the i,ple,entation of the Plan. $t /as on this pre,ise that the ehabilitation Court appointed the +onitoring Co,,ittee " to *BaddressC the 'on'erns raised by the 'reditors.* ?et, in its %rders dated Nove,ber 2, )((; and +ar'h 1:, )((:, the ehabilitation Court eIuipped the +onitoring Co,,ittee /ith po/ers /ell beyond those of the e'eiverDs. Apart fro, 'ontrol over respondentDs budget, the +onitoring Co,,ittee ,ay also adopt, ,odify, revise or even substitute any other proposed a'tions by respondentDs Board of #ire'tors, in'luding, /ithout li,itation issuan'e of ne/ shares, sale of 'ore and non"'ore assets, 'hange of business and others that /ill ,aterially affe't the ter,s and 'onditions of the rehabilitation plan and its i,ple,entation. $roni'ally, the 'ourt a 'uo diluted the see,ing 'on'entration of po/er in the hands of the e'eiver but appointed a Co,,ittee possessed of even /ider dis'retion over respondentDs operations. Fro, all indi'ations, ho/ever, the tenor of the ehabilitation CourtDs #e'ision dated 0une )3, )((; does not 'onte,plate the 'reation of a +onitoring Co,,ittee /ith broader po/ers than the e'eiver. As the na,e of the +onitoring Co,,ittee itself suggests, its 9ob is *to /at'h, observe or 'he'6 espe'ially for a spe'ial purpose.* 113 $n the 'onte!t of the #e'ision dated 0une )3, )((;, the funda,ental tas6 of the +onitoring Co,,ittee herein is to oversee the i,ple,entation of the rehabilitation plan as approved by the 'ourt. &his should not be 'onfused /ith the fun'tions of the e'eiver under the $nteri, ules or a ,anage,ent 'o,,ittee under P# 2()"A. 8nder Se'tion 1;, ule ; of the $nteri, ules, the e'eiver shall not ta6e over the ,anage,ent and 'ontrol of the debtor but shall 'losely oversee and ,onitor its operations during the penden'y of the rehabilitation pro'eeding. &he ehabilitation e'eiver shall be 'onsidered an offi'er of the 'ourt and his 'ore duty is to assess ho/ best to rehabilitate the debtor and to preserve its assets pending the deter,ination of /hether or not it should be rehabilitated i,ple,ent the approved plan.

Nazareno

14 ( and to

$t is a basi' pre'ept in Corporation =a/ that the 'orporate po/ers of all 'orporations for,ed under Batas Pambansa Blg. 13 or the Corporation Code shall be e!er'ised, all business 'ondu'ted and all property of su'h 'orporations 'ontrolled and held by the board of dire'tors or trustees. Nonetheless, P# 2()"A presents an e!'eption to this rule. Se'tion 1-d.112 of P# 2()"A e,po/ers the ehabilitation Court to 'reate and appoint a ,anage,ent 'o,,ittee to underta6e the ,anage,ent of 'orporations /hen there is i,,inent danger of dissipation, loss, /astage or destru'tion of assets or other properties or paralyzation of business operations of su'h 'orporations /hi'h ,ay be pre9udi'ial to the interest of ,inority sto'6holders, parties" litigants or the general publi'. $n the 'ase of 'orporations supervised or regulated by govern,ent agen'ies, su'h as ban6s and insuran'e 'o,panies, the appoint,ent shall be ,ade upon the reIuest of the govern,ent agen'y 'on'erned. %ther/ise, the ehabilitation Court ,ay, upon petition or motu proprio, appoint su'h ,anage,ent 'o,,ittee. &he ,anage,ent 'o,,ittee or rehabilitation re'eiver, board or body shall have the follo/ing po/ers7 -1. to ta6e 'ustody of, and 'ontrol over, all the e!isting assets and property of the distressed 'orporationE -). to evaluate the e!isting assets and liabilities, earnings and operations of the 'orporationE -@. to deter,ine the best /ay to salvage and prote't the interest of the investors and 'reditorsE -;. to study, revie/ and evaluate the feasibility of 'ontinuing operations and restru'ture and rehabilitate su'h entities if deter,ined to be feasible by the ehabilitation CourtE and -:. it ,ay overrule or revo6e the a'tions of the previous ,anage,ent and board of dire'tors of the entity or entities under ,anage,ent not/ithstanding any provision of la/, arti'les of in'orporation or by" la/s to the 'ontrary.1Pwphi1 $n this 'ase, petitioner neither filed a petition for the appoint,ent of a ,anage,ent 'o,,ittee nor presented eviden'e to sho/ that there is i,,inent danger of dissipation, loss, /astage or destru'tion of assets or other properties or paralyzation of business operations of respondent 'orporation /hi'h ,ay be pre9udi'ial to the interest of the ,inority sto'6holders, the 'reditors or the publi'. 8nless petitioner satisfies these reIuisites, /e 'annot san'tion the e!er'ise

by the +onitoring Co,,ittee of po/ers that /ill a,ount to ,anage,ent of respondentDs operations. :HEREFORE, the Court hereby RESOL$ES to dispose of these 'onsolidated petitions, as follo/s7 -1. &he petition for revie/ on 'ertiorari in 5. . Nos. 14;;:4" :2 is EN"E . &he #e'ision dated August 13, )((1 of the Court of Appeals in CA"5. . SP No. 34)(@ is AFF"R%E I -). &he petition for revie/ on 'ertiorari in 5. . Nos. 14:;13" )( is EN"E . &he #e'ision dated August 13, )((1 and esolution dated Nove,ber 3, )((1 of the Court of Appeals in CA"5. . SP Nos. 341(( and 34111 are AFF"R%E I and -@. &he petition for revie/ on 'ertiorari in 5. . No. 144)4( is EN"E . &he #e'ision dated %'tober )4, )((1 and esolution dated +ar'h )@, )((4 of the Court of Appeals in CA"5. . SP No. 3232; areAFF"R%E . No pronoun'e,ent as to 'osts. S% % #E E#. %ART"N Asso'iate 0usti'e AE C%NC8 7 TERES"TA Asso'iate A'ting Chairperson LUCAS !. Asso'iate 0usti'e #"EN$EN" O Asso'iate 0usti'e A&&ES&A&$%N J. LEONAR O8 E CASTRO 0usti'e S. $"LLARA%A, JR.

14 Nazareno 1 $ attest that the 'on'lusions in the above #e'ision had been rea'hed
Corporation CASES Based on the Syllabus of Fr. Agustin in 'onsultation before the 'ase /as assigned to the /riter of the opinion of the CourtYs #ivision. TERES"TA J. LEONAR O8 E Asso'iate "cting Chairperson! -irst #ivision CE &$F$CA&$%N CASTRO 0usti'e

Pursuant to Se'tion 1@, Arti'le H$$$ of the 1234 Constitution and the #ivision A'ting ChairpersonYs Attestation, $ 'ertify that the 'on'lusions in the above #e'ision had been rea'hed in 'onsultation before the 'ase /as assigned to the /riter of the opinion of the CourtYs #ivision. ANTON"O A'ting Chief 0usti'e T. CAR!"O

#ERSA%"N JOSE !ORTUGAL Asso'iate 0usti'e L.

!EREAZ

REYES