33. Strategic Alliance Dev Corp v.

Radstock AUTHOR: Valera

[607 SCRA 413, 2009] NOTE: * SENATE prohibited PNCC to extended its
Nationalty of Corporations corporate life.
CARPIO
FACTS:
 The Philippines National Construction Corporation (PNCC)was previously known as the Construction Development
Corporation of the Philippines (CDCP)
 PD 1113 granted CDCP a franchise to construct operate and maintain toll facilities in the north and south Luzon toll
ways
 PD 1894 amended PD1113 to include the Metro manila Expressway in CDCP’s franchise
 Sometime between 1978 and 198, BASAY Mining who was an affiliate of CDCP obtained loans from Marubeni Corp
amounting to 5,460,000,000 Yen and 5mil $.
 CDCP guaranteed the said loan for the full amount of 5,460,000,00 yen and 20milPhp for the US$ loan.
 There was no CDCP board Resolution to authorize the said act of guarantee
 BASANG mining then changed its name to CDCP MINING, CDCP secured the said loans while both corporations
were still privately owned and managed.
 In 1983 CDCP changed its name to PNCP to reflect the extent of the governments equity investment in the company
which arose when government financial institutions converted their loans to PNCC into equity following PNCC’s
failure to pay their loans
 Government equity in PNCC held 77.48% of PNCC’s voting equity and PCGG owns 13.82% of the said voting
shares, thus the GOVT owns 90.3 % of PNCC’s shares. While 9.7% of the voting shares are left to private ownership.
 During the ESTRADA administration the PNCC board passed a Board resolution admitting the UNPAID
MARUBENI Loan for the amount of P10,743,103,388.
 Within 3 months after such board resolution MARUBENI assigned its entire credit to RADSTOCK for 2mil$ which
is less than 10% of the admitted unpaid loan.
 In Jan 2001, RADSTOCK filed an action for collection and damages against PNCC in the RTC
 PNCC filed a motion for injunction and an MtD which was both denied by the RTC
 PNCC appealed the MtD in the CA which was also denied.
 PNCC then filed a petition for review with the SC
 The Trial court ruled in favor of RADSTOCK
 PNCC appealed the RTC decision to the CA
 SC issued a TRO enjoining all proceedings in the RTC and CA
 On August 2006, PNCC and RADSTOCK entered into a COMPROMISE AGREEMENT
The Compromise agreement contains the following provisions:
- The compromise amount of 6,196,000,000.00 pesos is to be paid in the following order:
 PNCC shall transfer all its rights and interests to the ff real properties
 Pasay property (129,548 sq. m.)
 Paranaque property (5,123 sq. m.)
 Paranaque property (107 sq.m and 54 sq. .)
 Paranaque property ( 27, 762 sq. m)
 Tagaytay properties ( 149,107 sq.m) (149,100 sq, m)
 Antipolo properties ( 10,000 sq. m.) (840 sq. m.) (850 sq. m) (958 sq. m) (741 sq. m.) (680 Sq.
m.) (701 sq. m.)
 Bulacan Properties ( 4,945 sq. m.) (678 sq. m) (2,841 sq. m) (733 sq. m.) (1,141, sq.m.)
(20,000 sq. m.)
 Issue to RADSTOCK or its assignee common shares of the capital stock of PNCC at par par value
which shall compromise 20% of the outstanding capital stock of PNCC
 Assign to RADSTOCK or its assignee 50% of PNCC 6% share for the next 27 yers (2008-2035) in the
gross toll revenue of Manle north tollways corporation.
 The COMPROMISE AGREEMENT reduces PNCC’s liability to RADSTOCK from 17 billion to 6 billion
 The COMPROMISE AGREEMENT was submitted to the SC which referred it to the COA, the COA recommended
the approval of the COMPROMISE AGREEMENT, the SC then transmted it to the CA which then approved the
AGREEMENT.
 Various paries seek to intervene with the Case in the SC namely; STRADEC(who has supposed claims to PNCC)
Cuenca(Stockholder and former PNCC president and board chairman); Sison(another stockholder and former
presdent) Asiavest(as a judgement creditor)
 The SC issued an order directing all parties to maintain the status quo

ISSUE(S):
 WON the COMPROMISE AGREEMENT IS VOID FOR BEING ILLEGAL for multiple reasons;
1. The PNCC board has no power to compromise
2. PNCC’s toll fees are public funds
3. RADSTOCK is not qualified to own land in the Philippines (ONLY ISSUE REG TOPIC) (ONLY
ONE IM DISCUSSING)
4. Public bidding is required for disposal of govt properties.
5. PNCC must follow rules on preference of credit.

HELD:
YES- SC ruled the Board Resolution admitting the MARUBENI loan and the compromise agreement to be null and void
ab initio.

RATIO:
 RADSTOCK is a private corporation incorporated in the British Virgin Islands, its office is at suite 14021 Duddell
St. Central Hong Kong. As a foreign corporation with owners whose nationalities are also unknown RADSTOCK
is not qualified to own land in the PH pursuant to sec 7. In relation to sec 3. Art XII of the Constitution.

 OGCC admits that RADSTOCK cannot own lands in the PH however the OGCC claims that RADSTOCK can own
the rights of ownership of the lands.
 There is no dispute that RADSTOCK is disqualifies to own lands in the Ph. Consequently, RADSTOCK
is also disqualified to own the rights to ownership of any land in the PH contrary to the OGCC’s claim ,
RADSTOCK cannot own the rights to ownership of any land in the PH because RADSTOCK cannot
lawfully own the land itself. Otherwise, there will be a blatant circumvention of the Constitution, which
prohibits a foreign private corporation owning land in the PH. In addition RADSTOCK cannot transfer
the rights to ownership of land in the PH if it cannot own the land. It is basicc that an assignor or seller
cannot assign or sell something he does not own.
 The 3rd party assignee under the COMPROMISE AGREEMENT who will be designated by RADSTOCK
can only acquire rights duplicating those which RADSTOCK is entitled by law to exercise. Thus, the
assignee can acquire ownership of the land only f RADSTOCK owns the land. Clearly the assignment by
PNCC of the real property to a nominee of RADSTOCK is a circumvention of the constitutional
prohibition against a private foreign Corporation owning lands n the PH. SUCH CIRCUMVENTION
RENDERS THE COMPROMISE AGREEMENT VOID.
CASE LAW/ DOCTRINE:
DISSENTING/CONCURRING OPINION(S):