REPUBLIC OF THE PHILIPPINES Sandiganbayan Quezon City Fifth Division REPUBLIC OF THE PHILIPPINES AND PHILIPPINE JOURNALIST, INC., REPRESENTED BY THE PRESIDENTIAL COMMISSION ON GOOD GOVERNMENT, Plaintiffs, ~ versus — CIVIL CASE NO. 0172 RAMON J. QUISUMBING, JOHNNY M. ARANETA, JAIME A. CURA, ANGEL C. SEPIDOZA and RENATO L. PARAS, Defendants. Present: LAGOS, J., Chairperson, MENDOZA-ARCEGA, and CORPUS-MANALAG, JJ. Promulgated: April 2 201% «ego penne X, DECISION LAGOS, J.: This is a Complaint for Reconveyance, Recovery of Possession, Accounting and Damages dated October 11, 1996, filed by the Republic of the Philippines and the Philippine Journalist, Inc. yfDecision Civil Case No. 0172 Republic vs. Quisumbing, et al. Page 2 of 49 (PJl), represented by the Presidential Commission on Good Government (PCGG), against defendants Ramon J. Quisumbing, Jaimie A. Cura, Johnny M. Araneta, Angel C. Sepidoza and Renato L. Paras. The antecedent facts and proceedings relating to the case are as follows: On April 22, 1986, by virtue of Executive Order No.1 and pursuant to a Writ of Sequestration issued by the PCGG, shares of certain individuals on the Philippines Journalist, Inc. (PJl) were sequestered on the grounds that these are the ill-gotten wealth of Benjamin Romualdez, Ferdinand E. Marcos, Imelda R. Marcos, and their alleged dummies and cohorts. Thereafter, on July 31, 1987, a complaint for the Reconveyance, Reversion, Accounting, Restitution, and Damages of various properties and assets was filed before the Sandiganbayan and docketed as Civil Case No. 0035, entitled Republic of the Philippines vs. Benjamin (Kokoy) Romualdez, Juliette Gomez Romualdez, Ferdinand E. Marcos, Imelda R. Marcos, et.al.. Among the properties subject of the complaint were properties of the PJl, including untitled parcels of land totaling around 7,087 square meters located in Bagalangit, Mabini, Batangas covered by Tax Declaration Nos. 0915, 0916, 0917 and 0918 (the “PJI Properties”). During the pendency of Civil Case No. 0035, herein defendants Jaime A. Cura, then President of the PJI, and Atty. Ramon J. Quisumbing, as trustee of Doy Realty Development Corporation (DRDC), executed a Contract of Sale dated June 5, 1991 and, subsequently, a Deed of Absolute Conveyance dated June 25, 1991, over the PJl Properties. The PJl Board of Directors, namely Jaime A. Cura, Johnny M. Araneta, Angel C. Sepidoza and Renato L. Paras, passed two Board Resolutions on July 1, 1991, approving and authorizing the sale of the aforementioned PJI Properties to defendant Atty. Ramon J. Quisumbing. Thereafter, an Urgent Motion to Enjoin PCGG-Appointed Board of Directors From Effecting Sale of PJ! Real Properties dated July 23,Decision Civil Case No. 0172 Republic vs. Quisumbing, et al Page 3 of 49 1991 was filed by PJI stockholder Rosario Olivares in Civil Case No. 0035. In a Resolution dated February 25, 1992, the Second Division of this Court nullified the sale of the PJl Properties, ruling as follows: WHEREFORE, premises duly considered, we rule and hold that the sale on June 25, 1991 of the beach property located at Barrio Bagalangit, Municipality of Mabini, Province of Batangas, previously covered by Tax Declaration Nos. 0915, 0916, 0917, and 0918 in the name of Philippine Journalist, Inc. to Doy Realty Development (represented by Atty. Ramon Quisumbing, trustee) is hereby declared null and void ab initio for clear lack of authority on the part of the transferor (Philippine Journalist Inc., represented by its President, Jaime A. Cura) to enter into, transact and execute such conveyance, there being no prior consent or approval by the Presidential Commission on Good Government and this court on such sale of a sequestered asset of Philippines Journalist, Inc. Accordingly, the Presidential Commission on Good Government and/or the Solicitor General's Office are hereby ordered to file the proper civil action for the recovery of the above-described property so as to re-include it among the assets of Philippine Journalists, Inc., pending final judicial determination as to whether it forms part of the ‘ill-gotten wealth” of any of the defendants herein. Jaime A. Cura, then President of PJl, assailed via certiorari the above ruling before the Honorable Supreme Court. In an en banc Resolution dated October 5, 1993, the Supreme Court, in Philippine Journalist, inc. and Jaime Cura vs. Sandiganbayan and Rosario M.B. Olivares’, sustained the pronouncement of the Sandiganbayan Second Division. The Supreme Court held that PJl is a sequestered corporation and all its properties and assets are considered in custodia legis. Hence, the PCGG cannot validly sell the property in question without prior authority from the Sandiganbayan. Thereupon, based on the pronouncement of the Supreme Court nullifying and voiding the sale of the PJ! Properties, as the same was executed by the PJI directors without the requisite authority, the instant Complaint dated October 11, 1996, for the Reconveyance, Recovery of Possession, Accounting and Damages of the PuJl "GR, No. 106208.Decision Civil Case No. 0172 Republic vs. Quisumbing, et al Page 4 of 49 Properties, was filed by the Republic of the Philippines and PuJl, represented by the PCGG, against herein defendants. Defendant Quisumbing filed a Motion to Dismiss? on the ground of lack of cause action on the part of the PCGG and the Republic. He contended that the PJI Properties were not sequestered and were not placed under custodia legis. He assailed the Sequestration Order dated April 22, 1986, and argued that this covered only the shares of Benjamin Romualdez and his agents, nominees, but not the properties and assets of PJI, as the latter is a corporation, therefore, having a separate personality from its stockholders. He further assailed the validity of the Sequestration Order considering that it was not signed by two commissioners — a violation of the PCGG rules. He also questioned the personality of the Republic to file such a case, contending that the Republic is not a real party in interest, as the PJI Properties were exclusive properties of PJI prior to the June 1991 sale. In its opposition, the Republic maintained that approval from the PCGG and the Sandiganbayan is required before the sale of the PJI Properties can be validly made. The said requirement is in accordance with the Resolution of the Supreme Court in G.R. No. 106209, Pul and Jaime Cura vs. Sandiganbayan, et al? finding that PJI is a sequestered corporation and its properties were brought under custodia legis. In a Resolution promulgated on November 13, 1998*, this Court denied Quisumbing's Motion to Dismiss for lack of merit. It held that the inconsistency in the reproduction of the Sequestration Orders affecting its authenticity, had already become immaterial when a Writ of Sequestration, dated February 19, 1987, bearing the signatures of two Commissioners superseded the former, and thus cured its defect. It was also ruled that the Republic is a real party in interest since the PJl is a corporation under sequestration by the PCGG, representing the Republic, for the recovery of ill-gotten wealth. Thus, the Republic stands to be benefited or injured in the outcome of the case. * Dated December 6, 1996. Records, Vol. 1, pp. 182-195, > Supra. “Records, Vol.t, pp. 364-375, ‘hDecision Civil Case No. 0172 Repubiic vs. Quisumbing, et al. Page 5 of 49 Quisumbing’s Motion for Reconsideration was denied by this Court in a Resolution promulgated on March 16, 1999.5 On May 14, 1999, Quisumbing filed a Petition for Certiorari® before the Honorable Supreme Court, questioning this Court's Resolution denying his Motion to Dismiss and finding the Republic to be a real party of interest. In a Supplement Petition dated October 22, 2002, Quisumbing alleged that the Supreme Court, inG.R. No. 108552, Asset Privatization Trust v. Sandiganbayan (Second Division) and Rosario Olivarez, had already overturned its ruling in G.R. 106209 that PJl is a sequestered corporation. He asserted that the Supreme Court ruling in said case validates his position that PJ! is not a sequestered corporation. Still in| another Manifestation dated January 13, 2005, Quisumbing invoked the ruling of the Supreme Court in GR. No. 138598, Asset Privatization Trust v. Sandiganbayan (5" Division) and Rosario Olivarez, directing the Asset Privatization Trust (APT) to turn-over the management and control of PJIl to its former stockholders upon payment of their outstanding obligations to PJI. Hence, Quisumbing averred that the Republic, through the APT, has lost all rights or interests it claims to have over the PJI. In a Decision promulgated on November 14, 2008, the Honorable Supreme Court, in G.R. No. 138437, Quisumbing vs. Sandiganbayan (Fifth Division), Republic of the Philippines and Philippine Journalist inc, represented by the Presidential Commission on Good Government, found the aforementioned Petition for Certiorari unmeritorious. It held that the Republic is a real party in interest, stating that: [...] the purpose of going after the assets and properties of the deposed President et al. is to protect the interest of the Filipino people and the Government, on the premise that those assets and properties were illegally acquired with the use of public funds or government resources or by taking advantage of their power. Hence, in filing the action for reconveyance, the Records, Vol. 2, pp. 41-44, $ Quisumbing vs. Sandiganboyan, Republic ofthe Phitippines and Philppine Journalist In, represented by the Presidential Commission on Good Government, G.R. NO. 138437.Decision Civil Case No. 0172 Republic vs, Quisumbing, et al. Page 6 of 49 Republic, through the PCGG, is protecting its interests in the Mabini lots owned by PJ! which, as earlier determined by this Court, is a sequestered corporation. (Italic supplied), In ruling on the other matters raised by Quisumbing in his petition, the Supreme Court further stated: Petitioner's reliance on the ruling in G. misplaced. Contrary to petitioner's assertion, overturn the ruling in G.R. 106209. What was involved in G.R. No, 108552 was, inter alia, the assignment of the shares of PJl’s former stockholders to the Development Bank of the Philippines (DBP) in settlement of a loan PJl contracted before its sequestration, hence, the pronouncement therein that only a minority of stockholders’ shares were sequestered. To recall, Civil Case No.0172subject of the present case is for reconveyance and recovery of possession only of the Mabini lots. Petitioner's reliance on the ruling in G.R. No. 138598 is likewise misplaced. That case involved the computation of the former Pul stockholders’ outstanding obligations to the APT to which DBP assigned the same. Petitioner's plea for the Court to take judicial notice of the news article on the supposed turn- over of PJ to its stockholders thus fails. Finally, petitioner's arguments that the Republic's failure to pray for the reconveyance to it of the Mabini lots reflects its not being a real party in interest, and that since PJl is already represented by the PCGG, it is superfluous for the Republic to be a co-plaintiff, fail. At most, like its misplaced reliance on rulings of this Court in G.R. Nos. 108652 and 138598, these are feeble attempts to invoke technicalities to further delay the proceedings in the case. (Emphasis and underscoring in the original) WHEREFORE, the petition is DISMISSED. On June 19, 2012, herein defendants Araneta and Paras filed a Motion to Dismiss’ the present complaint insofar as plaintiff Pul is concerned, for its failure to appear during the pre-trial conference pursuant to Sections 4 and 5, Rule 18 of the 1997 Rule of Civil Procedure. Among the arguments advanced by defendants is the seeming inconsistency in the position taken by the Republic and the Records, Vol. 6, pp. 129-134 “iDecision Civil Case No. 0172 Republic vs. Quisumbing, et al. Page 7 of 49 PCGG, on one hand, and that of the PJl, on the other. Thus, said defendants conclude that the PCGG should have a written authority from the PJi to represent it during the pre-trial conference unlike the Republic which, by law, is represented by the PCGG. Defendants also assailed the writs of sequestration issued by the PCGG, which they claim pertain only to specific shares belonging to certain stockholders of the PUl. Thereafter, Quisumbing filed a manifestation adopting the motion to dismiss filed by defendants Araneta and Paras. In its Comment dated July 18, 2012, plaintiff pointed out that all the issues raised by defendants are a mere rehash of the issues they raised in their motions for reconsideration which were already passed upon by this Court in its Resolution promulgated on June 8, 20119. Plaintiff further argued that the present action cannot be instituted by the PJl on its own. According to plaintiff, the prosecution of the present action should always be with the authority and imprimatur of the Republic considering that even if said properties reverted to the PJl's assets, the same will nonetheless be held in trust for the Republic until the final determination of whether said properties are ill-gotten wealth.° The parties filed subsequent pleadings to support their respective positions. On September 3, 2012, defendant Araneta filed a Motion for Hearing on Motion to Dismiss. He claimed that there is a need to first determine, through hearing and presentation of evidence, whether the PJl is a sequestered corporation so that the PCGG can represent it without an authority from its Board of Directors. Plaintiff filed its comment on September 25, 2012, claiming that the setting of defendants’ motion to dismiss for presentation of evidence would only delay the proceedings because the issue of * Dated June 25, 2012. Records, Vol. Vi, pp. 141-143. * This Resolution denied defendants’ motion for reconsideration of this Court’s Resolution promulgated on October 8, 2009 (Records, Vol. 6, ap. 53-67). The latter Resolution denied defendant’ Quisumbing's ‘motion to dismiss (joined by defendants Araneta and Paras) on the ground of lack of jurisdiction aver the subject matter of this case (Records, Vol. 5, pp, 408-414). * Records, Vol. 6, pp. 158-165, “Decision Civil Case No. 0172 Republic vs. Quisumbing, et al. Page 8 of 49 whether the PJI is a sequestered corporation has long been resolved by the Supreme Court in its en banc Resolution dated October 5, 1993 in G.R. No.106209, PJi and Jaime Cura vs, Sandiganbayan, et al., and in its Decision dated November 14, 2008 in G.R. No. 138437, Quisumbing vs. Sandiganbayan, et. al, Plaintiff also pointed out that the same issue has been repeatedly raised by defendants and consistently rejected by this Court. In a Resolution dated January 31, 2013,"' the Sandiganbayan Fifth Division denied defendants Johnny Araneta and Renato Paras’ Motion to Dismiss dated June 18, 2012, and the Motion for Hearing on Motion to Dismiss dated August 20, 2012 (with defendant Quisumbing joining said motions), both for lack of merit. This Court made the following observation therein: Plainly, the issue of whether the PJI is a sequestered corpors was directly resolved by the Supreme Court in the above cited cases. Thus, the present motion to dismiss {and the motion to set the same for hearing for the purpose of presentation of evidence to determine whether PJI is a sequestered corporation) is actually a deplorable attempt to revive a long settled issue which simply cannot be done and countenanced. Defendant Sepidoza passed away on December 9, 1992 and was substituted by his heirs. His heirs were subsequently declared in default per the Court's Order dated June 3, 2014" for failure to file their answer to the complaint. Defendant Paras passed away on May 6, 2012 and was subsequently substituted by his heirs. In the Pre-Trial Order dated June 3, 201473, the following issues were posited by the parties: Records, Vol. ® Records, Vol. 7, * Records, Vol. 7, pp. 136-146, 4Decision Civil Case No. 0172 Republic vs. Quisumbing, et al. Page 9 of 49 Issues for the PLAINTIFF: 1) Whether or not defendants may be compelled to surrender Possession of the subject properties and execute a deed of Teconveyance transferring ownership to PJl; 2) Whether or not defendants may be compelled to render accounting as to the fruits and income of the subject properties; and 3) Whether defendants may be held liable for damages and ordered to Pay plaintiff the amount of One Million Pesos. Issues for Defendants ARANETA AND PARAS: 1) Whether or not this Honorable Court has jurisdiction over the subject matter of the instant case; 2) Whether or not PJI, an independent corporate entity, is indispensable party in this case 3) Whether or not what was sequestered by the PCGG are only the shares of Benjamin Kokoy Romualdez and not the entire corporate entity called PJI; 4) That assuming this Honorable Court has jurisdiction over the subject matter of this case, whether or not defendants Araneta and Paras can be held liable for the sale of the subject parcel of land to defendant Ramon Quisumbing; 5) _ Whether or not damage or injury was caused to plaintiff by reason of the alleged sale; and 6) Whether or not defendants Araneta and Paras are entitled to damages, attomey's fees and litigation expenses pleaded as counterclaims in their answer. Issues for Defendant CURA: 1) Whether or not the Board of Directors was legally authorized to sell the subject property to DRDC: and 2) Whether or not there was a valid sale of the subject property from PJI to DRDC. He also adopted the issues as proposed by defendants Araneta and Paras. Issues for Defendant QUISUMBING: He adopted the issues framed by defendants Araneta, Paras and Cura.Decision Civil Case No. 0172 Republic vs. Quisumbing, et al. Page 10 of 49 In addition: 1) Whether or not the Complaint states a cause of action against defendant Quisumbing; 2) Whether the Complaint states a cause of action by plaintiff, Republic of the Philippines, against any defendant; 3) Whether or not plaintiff Republic of the Philippines is a real party in interest; 4) Whether the subject real property is sequestered or the subject of Civil Case No. 0035; 5) Assuming that the subject property was sequestered, whether or not the writ of sequestration is valid and binding: 6) Assuming that the sale of the subject property was defective and voidable, whether plaintiff PJ! is barred from regaining possession of the subject property under Article 546 of the Civil Code, until it pays reimbursement of many millions of pesos of necessary and useful expenses invested in the property, prior to notice of the instant suit; and 7) Whether or not defendant Quisumbing is entitled to his counterclaims. EVIDENCE PRESENTED BY THE PARTIES During trial, the Republic presented as its witness Maria Lourdes O. Magno, PCGG Records Custodian. She executed a seven-page Judicial Affidavit and she affirmed the truthfulness and veracity of all the statements in said document. The witness brought the original copy of the Sequestration Order to court, and she confirmed that she was not the one who issued the certified true copy. She also confirmed that she has no basis that the document she has brought to court as the original is the original of the certified true copy. Counsel for defendant Quisumbing, Atty. Mia Carmela Imperial, requested a second subpoena asking the witness that she bring the Amended Complaint or other pleadings in Civil Case No. 0035 pending in the Fourth Division of the Sandiganbayan showing that PJI was impleaded as a defendant in said case. Magno explained that with regard to legal papers, pleadings and other documents in relation to cases filed in court, the Legal Department of the PCGG has custody. According to the witness, her role as Records Custodian does not include safekeeping of said documents. %Decision Civil Case No. 0172 Republic vs. Quisumbing, et al Page 11 of 49 Both parties agreed that they need to go over the records and verify from the complaint marked as Exhibit B whether PuJl is impleaded in Civil Case No. 0035. Magno also confirmed that based on her submitted Judicial Affidavit, she is in possession of the documents relevant to the instant case. The defense counsel then asked the witness if she examined the pleadings and determined the documents relevant to the case, to which she answered in the negative. She further explained that she was only requested by their lawyer to bring the specific documents deemed relevant to the case, and that she did not personally examine the said documents. The defense asked the witness if she can bring the other Writs of Sequestration relevant to the case. The counsel for the plaintiff averred that the witness already testified in her direct-examination that the documents relevant to the case, including the Sequestration Orders, are already attached in the complaint. The Republic also presented Eriberto C. Singson, PCGG Administrative Officer. He executed a nine-page Judicial Affidavit dated September 14, 2015 to prove the allegations in the Complaint, and he affirmed the truthfulness and veracity of all the statements in said document. The defense questioned Singson if he has personal knowledge of the documents in the possession and custody of the PCGG as its Legal Researcher, to which Singson answered in the affirmative. The defense asked the witness if he personally witnessed the alleged sale stated in Civil Case No. 0035, to which the latter answered in the negative. The defense then pointed out to the Court that the witness is only basing his answer to his personal knowledge of the document itself and not to the supposed transaction that transpired as indicated in said document. Counsel for the plaintiff emphasized that the document herein was already admitted by the defendants during the pre-trial, and that it was among the documents in the common exhibits of the parties. When asked if PJl is impleaded as a defendant in Civil Case No. 0035, Singson answered in the negative. The witness further clarified that as part of the Legal Department of the PCGG which is in possession of the documents involved in the cases filed with the Sandiganbayan, he is aware that PJl is not impleaded in any other case. In another cross-examination of Singson, the witness declared that by virtue of the power vested in the PCGG by authority of the President of the Philippines, the shares of Benjamin Romualdez as nominee are hereby sequestered, as stated in his Judicial Affidavit. He also confirmed that in the attached Writ of Sequestration in hisDecision Civil Case No. 0172 Republic vs. Quisumbing, et al. Page 12 of 49 Judicial Affidavit, there is nothing stated that PJI itself as a corporation was sequestered. The witness based his answer, that PJI is one of the corporations sequestered, on the Sequestration Order. Singson further clarified that in said Sequestration Order, what were sequestered were the shares of the individual stockholder, and not PJl as a corporation. The witness confirmed that the Pul officers who approved the sale were defendants Johnny M. Araneta, Jaime A. Cura, Angel Sepidoza and Renato L. Paras, but Singson stated that he is not part of the Board of Directors nor the Corporate Secretary of PJl. He was not present during the meeting. The witness confirmed that PJI is only being tried as one of the corporations where shares in the name of Benjamin Romualdez are supposed to be sequestered and not Pul itself is sequestered. Singson declared that his estimation of one million pesos in damages is based on documents but no document on which the estimation was based was attached. In his re-direct examination, Singson stated that there is no complaint filed by the PCGG against PJI, and that said corporation was only included in Annex A of the complaint Civil Case No. 0035. As verified by the witness, this is the only complaint/case that was filed by the PCGG against the defendants, and he confirmed that the Sequestration Order issued by the PCGG only sequestered the shares of stocks of the individual person and not the corporation itself. Singson averred that aside from the Sequestration Order asked by the defense counsel, the proof that PJI is a sequestered Corporation is based from a decision of the Supreme Court. The following documentary exhibits were offered by the Republic'* to substantiate its claim that the PJl Properties are proper subjects of reconveyance in its favor: EXHIBIT DESCRIPTION A - Sequestration Order dated April 22, 1986 A1 - Writ of Sequestration dated February 19, 1987 A2 - Writ of Sequestration dated April 28, 1987 A3 - Writ of Sequestration dated August 21, 1987 B - Complaint entitled, "Republic of the Philippines, Plaintiff, vs. Benjamin (Kokoy) Romualdez, et al., Respondents” docketed as Civil Case No. 0035 + Records, Vol. 7, pp. 371-375,Decision Civil Case No. 0172 Republic vs. Quisumbing, et al Page 13 of 49 i C —- Tax Declaration No. 0915 issued in the name of PJl €1toC3- Tax Declaration Nos. 0916, 0917 and 0918, all issued in the name of PJl D - Contract of Sale dated June 5, 1991 entered into by and between defendants Cura and Quisumbing involving the sale of two (2) parcels of land located in Mabini, Batangas E - Deed of Absolute Conveyance dated June 25, 1991 entered into by and between PJI and DRDC and signed by defendant Cura for PJI and defendant Quisumbing for DRDC. FtoF-1- Minutes to the Regular Meeting of the Board of Directors of PJl held on July 1, 1991 and PJ! Board Resolution No. 91-30 G = Resolution dated February 25, 1992 of the Sandiganbayan, Second Division, in Civil Case No. 0035 H —- Supreme Court En Banc Resolution dated October 5, 1993 in G.R No, 106209, entitled “Philippine Joumalists, Inc. and Jaime Cura vs. The Sandiganbayan and Rosario M.B Olivares” |= Decision dated November 14, 2008 of the Supreme Court Second Division in G.R. No. 138437, entitled “Ramon J. Quisumbing vs. Sandiganbayan (Fifth Division), et al.” After the presentation of the Republic's evidence, defendant Cura filed a demurrer to evidence,"® which the Court denied in a Resolution dated August 9, 2016.'° Defendant Cura filed a motion for reconsideration of the aforesaid resolution but the same was denied in a Resolution dated January 31, 2017."7 After the denial of his demurrer, defendant Cura presented himself as witness. He executed a Judicial Affidavit to which he authenticated the veracity and truthfulness of his statements in said document. He stated that he was invited by the then Chairperson of the PCGG, Mr. Mat Caparas, to join Pul. According to him, he was being nominated by the Development Bank of the Philippines (DBP) that had a 67% of the shares of stock of PJl. As such, Cura became a member of the Pul's Board of Directors as early as 1989 The witness also confirmed that he sold PJl’s assets during his term in said firm, and one of the assets sold by PJI during his term as * Dated February 26, 2016. ® Records, Vol. 8, pp. 220-231, * Records, Vol. 8, pp. 430-433,Decision Civil Case No. 0172 Republic vs. Quisumbing, et al. Page 14 of 49 company president is the subject property in the current case. Cura affirmed that there exists a PJ! board resolution authorizing him as company president to sell the subject property to defendant Ramon J. Quisumbing, but said resolution is not attached in the Judicial Affidavit of the witness. Cura explained that when he gave his answers to the questions in the Judicial Affidavit, he did not need to produce the legal documents. The witness stated that he did not inform the PCGG with regard to the sales transaction with defendant Quisumbing for the reason that in the course of their management of PJI, from 1989 to 1992, he does not recall of any time when they have to go to the PCGG for any permission regarding the decisions they were taking in running the company. In his Judicial Affidavit, the witness confirmed that a motion was filed by Olivares in Civil Case No. 0035 regarding the sale of the subject property to defendant Quisumbing, and the said motion was the urgent motion to enjoin the PCGG-appointed board of directors from effecting the sale of PJI real properties to defendant Quisumbing. Cura further narrated that after his stint as PJl President in 1992 and turning over his company responsibilities to the board, he did not make it part of his business to keep track of what was happening to the company thereafter. As he further stated, Cura was not aware that the Motion for Reconsideration filed by Olivares was already decided by the Court before his time as PJl President ended. He explained that he was not aware of the decisions taken on said case. Cura said that they were aware from the start of their stint that Olivares belongs to the minority stockholders, with her as the minority group's leader, and that there would be complaints regarding their every decision in the board. Based on his understanding, the witness stated that PJl could not have been a sequestered corporation. That was also the perception of his colleagues who were all voted into the PJ! board. According to Cura, this is the first time that he raised the issue of PJi being a non-sequestered corporation before any court, but the counsel for the plaintiff pointed out that the same argument was already raised by the witness in his petition for certiorari and prohibition before the Supreme Court. Cura clarified that he was totally unaware and uninvolved in the formulation of whatever course of action that was going to be taken on said issue by his counsel: he further stated that he was informed by his counsel that they were going to take action on the matter, and if the action they were taking was in defense of his interest, such action would be authorized.Decision Civil Case No. 0172 Republic vs. Quisumbing, et al Page 15 of 49 When the witness was asked if his counsel consulted with him about PJI being a non-sequestered corporation, he answered in the affirmative but he explained that he had minimal knowledge since the issue was totally in the hands of his counsel. He stated that he had no interest in knowing it, and he had no competence to appreciate such, and since he has already done his service to Pul, he left the issue to his counsel. Cura also confirmed that based in his Judicial Affidavit, he believed that the sequestration offered in evidence by the PCGG was falsified. When asked if this was the first time that the issue of authenticity of the Writ of Sequestration was brought before any court, Cura answered that he cannot think of any other time. But he confirmed that he heard about the denial of his Motion for Leave of Court to File Demurrer to Evidence arguing that the Writ of Sequestration issued by the PCGG was falsified. Cura also confirmed that he had to sell the subject property in order to improve the cash flow or position of the company. Furthermore, the witness explained that when they assumed responsibility in PJI, they took care of managing the company given that it was in a bad shape, both in its operations and finances. They started to cut down costs, dispose of idle assets and liquefy assets in order to improve the company’s cash flow. As per witness, positive outcome in PJl started to thrive in 1990, After the termination of his testimony, he rested his case and formally offered the following exhibits: EXHIBIT DESCRIPTION 2 = Supreme Court Decision in Asset Privatization Trust vs. Sandiganbayan, G.R No. 108552, October 2, 2000 4 a Tax Declaration No. 0915 in the name of PJl issued on April 6, 1988 - Contract of Sale dated June 5, 1991 - Deed of Absolute Conveyance dated June 25, 1991 Appraisal Report dated November 20, 1991 - Minutes of PJI's Board of Directors’ Meeting on July 1, 1991 Conan 7 Supreme Court Resolution in Asset Privatization Trust vs. Sandiganbayan, G.R No. 138598, December 14, 2004 11 - Tax Declaration No. 0624 in the name of Manuel Vasallo and wife for the year 1985, WeDecision Civil Case No. 0172 Republic vs. Quisumbing, et al Page 16 of 49 12 - — Sandiganbayan Resolution in Republic of the Philippines vs. Benjamin "Kokoy” Romualdez et al.,” Civil Case No. 0035, April 6, 2005, During defendant Quisumbing's turn to present evidence, he testified and also presented as witness Mr. Florencio Y. Rojas, the receiver of PJI who was appointed as such by Branch 46 of the Regional Trial Court of Manila in 2015. Quisumbing executed a Judicial Affidavit and a Supplemental Judicial Affidavit which he submitted to the Court. There was no objection to the Motion to Admit Supplemental Judicial Affidavit of the witness and the counsel of Quisumbing completed the presentation of the latter's Judicial Affidavit and Supplemental Judicial Affidavit to form part of his direct testimony. During the cross-examination of Quisumbing, he stated that he mentioned a contract of sale and a deed of absolute conveyance in his Judicial Affidavit. The said contract was executed on June 5, 1991 and the deed of absolute conveyance was dated 20 days later. The witness further declared that the board of directors of Pul held a meeting on July 1, 1991 to confirm the earlier resolution (May 22, 1991) where they approved in advance the sale of the subject property to the former. Quisumbing disclosed that he was never given a copy of the minutes of the May 22, 1991 PJ! Board meeting; he only has the minutes of the July 1, 1991 Board meeting with him. The witness affirmed that the subject contract of sale was executed between PUI and him as trustee of DRDC. Said corporation was still in the process of being incorporated by the witness himself and his family and siblings. As one of the principals of said corporation, the witness declared that he did not need authority to be appointed as one of its trustees. Quisumbing also stated that there were no claimants to the subject property when this was being sold by PJl The witness stated that he was not a party in Civil Case No. 0035, and that he had a chance to subsequently review the records after the current case was filed against him. He believes that there is no evidence presented when the Sandiganbayan, in its Resolution issued in February 1992, acted upon the motion filed by Olivares. He further averred that the supposed “evidence” may have been ‘submitted as annexes to the motion or annexes to the opposition, but there was no identification, no authentication, no witnesses and no trial. The witness also said that he was a “builder in good faith” in the subject property. He confirmed that he took possession of the tDecision Civil Case No. 0172 Republic vs. Quisumbing, et al Page 17 of 49 property immediately after its sale in 1991 and he received a copy of the summons relative to the current case in 1996. In his supplemental affidavit, Quisumbing attached several Photos to show improvements he made to the subject property. He claimed that these improvements were made before 1996, prior to him receiving the summons in the current case. He still continued with the business operations of the property after the receipt of said summons. The witness also explained that the 1993 Resolution of the Supreme Court in G.R. No. 106209 cannot be binding because, according to him, it is not res judicata, since he was never a party in said case. He is also stern in his belief that PJl was never a sequestered corporation based on all the evidence presented. As insisted by the witness, he does not recall that PJI was declared as sequestered by the Supreme Court. Quisumbing narrated that he is aware of the intra-corporate dispute between the members or stockholders of PJI. According to him, this dispute was discussed in a Supreme Court decision (G.R. No. 108552) wherein there was a bitter intra-corporate conflict between the Development Bank of the Philippines -— Asset Privatization Trust (DBP APT) and the private stockholders, with the former owning 67% of the PJI shares. Upon learning of the outcome of said decision, the witness stated that he did not aspire to have this annulled since he was not a party to that previous case and that he was just a buyer of the subject property from Pul The last witness for the defense, Rojas, executed a Judicial Affidavit that he submitted to the Court. In the cross-examination that ensued, he confessed that he knew of Civil Case No. 0172 filed by the PCGG in 1996 only when it was discussed to him by defendant Quisumbing. When asked if he knows why the PCGG filed a case against Quisumbing, the witness answered in the negative. The witness narrated that it was a certain Roland de Jesus who mentioned to him that PJl was a sequestered corporation. He likewise admitted that De Jesus is the administrator of PJl. When asked if he is aware that the Mabini property, the subject property in the current case, was among the sequestered PJI properties, Rojas answered in the negative. He also stated that he is not aware that the PCGG-appointed officers of PJI sold the subject property to defendant Quisumbing during the pendency of Civil Case No. 0035 Rojas then stressed that the subject Mabini property was not included in the inventory of Pul assets. He further confessed that he is not aware that the current case was filed because the Sandiganbayan “4Decision Civil Case No. 0172 Republic vs. Quisumbing, et al Page 18 of 49 specifically directed the PCGG to file a case to recover the subject property and to include this as one of the assets of PJ. He also stated that he was not able to exert effort to know about the cases filed against PJl, despite being the receiver of said corporation. When asked why PCGG appears to be a creditor of certain stockholders and not of PJI, Rojas explained that PCGG is not mentioned in the list of the company's creditors. He only assumed that certain stockholders are the creditors of PJl. According to the witness, in all the proceedings before the court, both the PCGG and the Office of the Solicitor General (OSG) were not notified of the proceedings. Furthermore, Rojas stated that he was not notified as receiver of PJl because the Court directed them to notify the creditors. It was only in 2015 when Rojas was appointed as Pul receiver that De Jesus informed him about PJI being a sequestered corporation. Moreover, the witness clarified that the PUI management has no representation from PCGG during this time, explaining his action of not informing the Court about the matter. He did not even bother to inform his lawyers of his duty and responsibility to inform the Court; he stated that he was not aware that he should inform them. Rojas also narrated that so far, he only sold certain Pul properties consisting of tables and chairs, but no real properties yet. As explained by the witness, the PCGG appointed operational people in PJl and after that, there was no PCGG participation to speak of. Thereafter, defendant Quisumbing rested his case and formally offered the following exhibits: EXHIBIT DESCRIPTION 2 7 ‘Supreme Court Decision dated October 2, 2000 in G.R. No. 108562, entitled "Asset Privatization Trust vs. Sandiganbayan (Second Division) and Olivares" 3 - Sequestration Order dated April 22, 1986 3A - Purported copy of the Sequestration Order dated April 22, 1986 4 1 Tax Declaration No. 0915 in the name of PJl issued on April 6, 1988 iz Contract of Sale dated June 5, 1991 rA - Defendant Quisumbing's signature B - Defendant Cura's signature is Deed of Absolute Conveyance dated June 25, 1991 -A - Defendant Quisumbing's signature “Decision Civil Case No. 0172 Republic vs. Quisumbing, et al. Page 19 of 49 a 6B - Defendant Cura's signature 7 - Appraisal Report dated November 1991 7-A - The first paragraph in page 4 of exhibit ~- which states "The total fair market value arrived at for the subject property appraised consisting of land only, for updating purposes, as of November 18, 1991, is PESOS TWO HUNDRED EIGHTY THOUSAND (P280,000.00) ONLY." 8 - Minutes of the Regular Meeting of the Board of Directors of PJl held on July 1, 1991, Monday, at the PJI Board Room, Journal Building, Railroad St., Port Area, Manila 9 - Supreme Court Resolution dated December 14, 2004 in G.R. No. 138598, entitled “Asset Privatization Trust vs. Sandiganbayan" 10 - Newspaper clipping dated December 22, 2004, entitled "Original owners regain Journal group" 11 - Deed of Absolute Conveyance dated December 20, 1989 11-A - The portion of Exhibit "11" containing the name "Ramon J. Quisumbing" and ending with the word "Transferee" 12 - Tax Declaration No, 0655 13° - Tax Declaration No. 1053 14 - Deed of Absolute Conveyance dated August 13, 1992 14-A - Defendant Quisumbing's signature 15 - Deed of Absolute Sale dated October 28, 1991 15-A - Defendant Quisumbing’s signature 16 - Undated Deed of Absolute Sale 16-A - The portion of Exhibit "16" beginning with "LA MESA DEVELOMENT CORPORATION" and ending with the word “Transferee" 17 - Tax Declaration No. 0645 18 - Contract to Sell dated August 2, 1991 18-A - Defendant Quisumbing's signature 19 - Receipt dated August 3, 1991 19-A - Receipt dated October 28, 1991 20. - Tax Declaration No. 0624 21 - Tax Declaration No. 9426Decision Civil Case No. 0172 Republic vs. Quisumbing, et al Page 20 of 49 21-A - Tax Declaration No. 6910 21-B - Tax Declaration No. 0272 22 = =- Tax Declaration No. 8292 23 - 1997-2000 BIR Zonal Valuations of land in Bagalangit, Mabini 24 - Supreme Court's Decision in Palm Avenue Holdings, Inc. vs. Sandiganbayan, 5" Division, G.R. Nos. 173082 & 195795, August 6, 2014 25 - Complaint dated July 30, 1987 in Civil Case No. 0035 26 - — Sandiganbayan Resolution dated April 6, 2005 in Civil Case No, 0035 27 ~~ Liquidation Order dated February 22, 2017 in Special Proceeding No. 14-132862, entitled "In the Matter of the Petition for Rehabilitation of Philippine Journalists, Inc. Almega Management and Investment Corporation, Petitioner” and pending in the Regional Trial Court of Manila, Branch 46 28 - Plan of Lot-7421, CAD 859-D as surveyed for PJ! 29to - Original print-outs of the PJI property 69 70 - Commencement Order dated March 20, 2015 71 = RTC Order dated November 18, 2016 in Special Proceeding No. 14-132862 72 - Submission (of the Final Report of the Receiver on the Rehabilitation Plan) dated November 4, 2016 730 - RTC "Liquidation Order" dated November 22, 2017 Defendant Araneta and the Heirs of the late defendant Paras filed two (2) manifestations formally adopting the respective testimonial and documentary evidence of defendants Cura and Quisumbing. RULING AND DISCUSSION In the respective memoranda of defendants Cura and Quisumbing and defendants Araneta and heirs of Renato L. Paras,Decision Civil Case No. 0172 Republic vs. Quisumbing, et al Page 21 of 49 they contend that PJl and the PJI Properties were never sequestered, thus the sale of the PJl Properties to Quisumbing did not require the prior approval of the Sandiganbayan; and that the writs of sequestration are defective and of no effect. It has to be emphasized that issues relating to the sequestration of the PJI shares, and of the PuJl itself; the validity of said sequestration; and of the PJI properties being under custodia legis, have already been long settled. These matters have been thoroughly discussed and passed upon in the Resolutions issued by the Court in this particular case, as well as in G.R. No.106209, Pul and Jaime Cura vs. Sandiganbayan, et al., and in G.R. No. 138437, Quisumbing vs. Sandiganbayan, et. al."®. The rulings of the Supreme Court in G.R. No.106209 and G.R. No. 138437 have long attained finality. The Resolution of this Court dated January 31, 2013" provides an apt summary: 1) In the Sandiganbayan (Second Division) Resolution promulgated on February 25, 1992 in Civil Case No. 0035, entitled “Republic of the Philippines vs. Benjamin (Kokoy) Romualdez, et. al.," the sale of the beach property located in Mabini, Batangas executed by the PJI in favor of defendant Quisumbing was declared null and void ab initio. The rationale for such declaration is that the properties are sequestered assets of the PJl; hence, the sale of the same properties needs prior approval of the PCGG and the Sandiganbayan. The dispositive portion of the aforementioned Resolution states: WHEREFORE, premises duly considered, We rule and hold that the sale on June 25, 1991 of the beach property located in Barrio Bagalangit, Municipality of Mabini, Province of Batangas, previously covered by Tax Declaration Nos. 0915, 0916, 0917 and 0918 in the name of the Philippine Journalists, Inc. to Doy Realty Development (represented by Ramon Quisumbing, Trustee) is hereby declared null and ‘void lio for clear lack of authority on the part of the Transferor pine Journalists, Inc., represented by its President, Jaime A. Cura) to enter into, transact and execute such * supra * Records, Vol. VI, pp. 324-338.Decision Civil Case No. 0172 Republic vs. Quisumbing, et al. Page 22 of 49 de conveyance, there being no prior consent or approval by the Presidential Commission on Good Government and this Court on such a sale of a sequestered asset of Philippine Journalists, Inc. Accordingly, the Presidential Commission on Good Government and/ or the Solicitor General's Office are hereby ordered to file the proper civil action for the recovery of the above-described property so as to re-include it among the assets of Philippine Journalists, Inc., pending final judicial determination as to whether it forms part of the "Il-gotten wealth" of any of the defendants herein. (Underscoring supplied). The aforesaid resolution was affirmed by the Supreme Court en banc in its Resolution dated October 5, 1993 in Philippine Journalists, Inc. and Jaime Cura vs. the Sandiganbayan and Rosario M.B. Olivares, which was docketed as G.R. No. 106209. According to the Supreme Court, the PJl was not only under sequestration, it was as well under provisional takeover, thus: We are unable to agree with the petitioners that the PJI is not a sequestered corporation since it had offered nothing to rebut the finding and conclusion of the Sandiganbayan that it is. Such finding, of course, is supported by the unrebutted evidence that sequestration orders were issued by the PCGG on 19 February 1987 and 28 April 1987 and that it is under management and control of the PCGG-appointed Board of Directors of which petitioner Cura is one of the members. It may thus be said that the PJI was not only under sequestration, it was, as well, under provisional takeover. In Bataan Shipyard and Engineering Co., Inc. (BASECO) v. Presidential Commission on Good Government, we defined sequestration as placing or causing to be placed under PCGG control properties, including business enterprises and entities - - for the purpose of preventing the destruction, concealment or dissipation of and otherwise conserving and preserving the same ~ until it can be determined, through appropriate judicial proceedings whether the property was in truth ill-gotten. We also stated therein that in provisional takeover, what is taken into custody is not only the physical assets of the business enterprise of the entity, but the business operation as well. XXXX ivDecision Civil Case No. 0172 Republic vs. Quisumbing, et al. Page 23 of 49 This being the case, the PCGG cannot, therefore validly sell the property in question belonging to the sequestered PJl. Since the PCGG-appointed Board of Directors of the PJ is a mere agent of the PCGG, the former cannot likewise dispose of the property for it cannot have greater power than its own principal. Considering, furthermore, that the sequestration orders in this case are presumed to have been registered with the proper court upon filing of the Civil Case No. Article XVII (Transitory Provision) of the 1987 Constitution, all properties of the PJI were thus brought under cusfodia fegis. Any disposition then of the said properties, including the beach resort in question, even if permissible, may only be valid done upon prior authority of the Sandiganbayan. That the vendee, Doy Realty Corporation, was not a party in the proceedings before the respondent Sandiganbayan does not affect the declaration of nullity of the sale. Said vendee does not have any juridical personality. It is a non-existing corporation because as explicitly stated in the 5 June 1991 Contract of Sale and the 25 June 1991 Deed of Absolute Conveyance, it is a corporation to be created under Philippine law. The party who acted as its trustee, Ramon J. Quisumbing, ought to know that the transaction was with a sequestered corporation involved in a case pending in the Sandiganbayan and therefore, the sale required prior authority from either the PCGG or the Sandiganbayan, if at all, the sale was voidable. 2) In its Resolutions dated November 13, 1998 and March 16, 1999, this Court denied defendant Quisumbing's motion to dismiss the complaint. Said motion to dismiss was anchored on the ground that the complaint states no cause of action allegedly because the properties subject of this case were never under sequestration or the subject of Civil Case No. 0035, and that the Sandiganbayan's Resolution promulgated on February 25, 1992 and the Supreme Court's en banc's Resolution dated October 5, 1993 did not bind him because he was not a party to the said case. The Supreme Court affirmed this Court's denial of defendant Quisumbing's motion to dismiss in G.R. No. 138437, Quisumbing vs. Sandiganbayan, et al. The Supreme Court held that it had earlier determined that the PJl is a sequestered corporation. In the same decision, and as cited previously, the Supreme Court categorically ruled that defendant Quisumbing's feliance on Asset Privatization Trust vs. Sandiganbayan 4Decision Civil Case No, 0172 Republic vs. Quisumbing, et al Page 24 of 49 (Second Division), G.R. No. 108552; and Rosario Olivarez, and Asset Privatization Trust vs. Sandiganbayan (Fifth Division) and Rosario Olivarez, G.R. No. 138598, is misplaced. 3) In its Resolution promulgated on November 29, 2000,2° this Court denied defendants Araneta and Paras’ motion to dismiss the present case on the ground of, among others, lack of jurisdiction over the subject matter of the case purportedly because what was sequestered by the PCGG is only the shares of Rosario Olivares who was impleaded as respondent in Civil Case No. 00035 or only 20% of the voting shares of the PJl, among others. In denying said motion to dismiss, this Court cited PJ! and Jaime Cura vs. Sandiganbayan, et al.?', where the Supreme Court held that the entire PJl is not only under sequestration but also under provisional takeover. Defendants Araneta and Paras filed a motion for reconsideration which was denied by this Court in its Resolution promulgated on May 21, 2001. 4) In its Resolution promulgated on October 8, 2009,” this Court likewise denied defendant Quisumbing's second motion to dismiss (joined by defendants Araneta and Paras). Said motion to dismiss was based on the alleged lack of jurisdiction over the subject matter of the present case because the subject properties and the PJl were never sequestered. In denying said motion to dismiss, this Court cited Quisumbing vs. Sandiganbayan, et. al.?? The motion for reconsideration filed by defendants was denied by the Court in its Resolution dated June 8, 2014.74 Given the foregoing, the remaining issues which need to be resolved in this case are the following: 1) Whether or not Plaintiffs are entitled to Recover the PJI Properties; * Records, Vol. Il, pp. 164-1 * supra, ® Records, Vol. V, pp. 408-414 * supra, * Records, Vol. VI, pp. 53-67. 8. fDecision Civil Case No, 0172 Republic vs. Quisumbing, et al. Page 25 of 49 2) Whether or Not Defendant Quisumbing can be Considered a Buyer in Good Faith and/or a Builder in Good Faith; 3) Whether or Not Defendant Quisumbing Should be Required to Render an Accounting of the Fruits/income of the Property; 4) Whether or Not Plaintiffs are Entitled to Recover Damages from the Defendants; and 5) Whether or Not Defendants Are Entitled to Recover Damages ‘on their Counterclaims from the Plaintiffs. Plaintiffs Have the Right to Recover the PJ! Properties. Under Executive Order No. 1 dated February 28, 1986 creating the PCGG, the latter was vested with the power and authority to “sequester or place or cause to be placed under its control or possession any building or office wherein any ill-gotten wealth or properties may be found, and any records pertaining thereto, in order to prevent their destruction, concealment or disappearance which would frustrate or hamper the investigation or otherwise prevent the Commission from accomplishing its task,” and to “provisionally take over in the public interest or to prevent its disposal or dissipation, business enterprises and properties taken over by the government of the Marcos Administration or by entities or persons close to former President Marcos, until the transactions leading to such acquisition by the latter can be disposed of by the appropriate authorities.” It has been held that the PCGG's role in sequestration cases is that of a mere conservator. Thus, in the case of Uy vs. Sandiganbayan,”> it was ruled: In the recent case of PCGG v. Sandiganbayan, we stated that there is a need to vigorously guard sequestered assets and preserve them pending resolution of the sequestration case before the Sandiganbayan, considering the paramount public policy for the recovery of ill-gotten wealth. We ruled that sequestered assets and corporations 2433 SCRA 424 (2004) ¢Decision Civil Case No. 0172 Republic vs. Quisumbing, et al. Page 26 of 49 are legally and technically in custodia Jegis, under the administration of the PCGG, Executive Order No. 2 ‘specifically prohibits the transfer, conveyance, encumbrance, ‘or otherwise depletion or concealment of such assets and properties, under pain of penalties prescribed by law. Thus, an action which can result in the deterioration and disappearance of the sequestered assets cannot be allowed, unless there is a final adjudication and disposition of the issue as to whether these assets are ill-gotten or not, since it may result in damage or prejudice to the Republic of the Philippines. The sale of the PJ! Properties to defendant Quisumbing, through the execution by defendant Cura of a Contract of Sale dated June 5, 1991 and a Deed of Absolute Conveyance dated June 25, 1991; and the approval of the sale transaction by defendants Cura, Sepidoza, Araneta and Paras, as PCGG-appointed members of the Board of Directors of PJl, is void. This was categorically declared by the Supreme Court in PJ/ and Jaime Cura vs. Sandiganbayan, et al. :26 This being the case, the PCGG cannot, therefore validly sell the property in question belonging to the sequestered PJI. Since the PCGG-appointed Board of Directors of the PJlis a mere agent of the PCGG, the former cannot likewise dispose of the property for it cannot have greater power than its own Principal. Considering, furthermore, that the sequestration orders in this case are presumed to have been registered with the proper court upon filing of the Civil Case No. Article XVII (Transitory Provision) of the 1987 Constitution, all properties of the PJl were thus brought under custodia legis. Any disposition then of the said properties, including the beach resort in question, even if permissible, may only be validly né__upon prior authority __of the _Sandiganbayan. (Underscoring supplied). Considering that the sale of the PJI Properties to defendant Quisumbing is deemed void, plaintiffs, as the legal owners, have the tight to recover possession of the PJI Properties. Such right proceeds from Article 428 and Article 1456 of the New Civil Code: Article 428. The owner has the right to enjoy and dispose of a thing, without other limitations than those established by law. The owner has also a right of action Supra,Decision Civil Case No, 0172 Republic vs. Quisumbing, et al. Page 27 of 49 against the holder and possessor of the thing in order to recover it. XXXX Article 1456. If the property is acquired through mistake or fraud, the person obtaining it is, by force of law, considered a trustee of an implied trust for the benefit of the person from whom the property comes. Plaintiffs’ rignt to reconveyance and recovery of possession, however, is subject to the determination of whether or not defendant Quisumbing is a buyer in good faith and/or a builder in good faith with respect to the PJl Properties. Defendant Quisumbing Cannot be Considered a Buyer in Good Faith. Defendant Quisumbing cannot be considered a buyer in good faith. \n the case of Cabacungan vs. Laigo, et al., it was held: Fundamental is the rule in land registration law that the issue of whether the buyer of realty is in good or bad faith is relevant only where the subject of the sale is registered land and the purchase was made from the registered owner whose title to the land is clean, in which case the purchaser who relies on the clean title of the registered owner is protected if e is a purchaser in good faith and for value. Since the erties in question are unregistered lands, re: Its purchased the same at their own peril. Their claim of having bought the properties in good faith, i.e., without notice that there is some other person with a right to or interest therein, would not protect them should it turn out, as it in fact did in this case, that their seller, Roberto, had no right to sell them.2” (Underscoring supplied). The PJI Properties are unregistered lands and, similar to the situation in Cabacungan, covered only by tax declarations. Defendant Quisumbing therefore purchased the subject properties at his own peril. His claim of having bought the PJl Properties in good faith would not protect him should it turn out, as it in fact did in this case, that the PJI had no right and authority to sell the same. ® Cabacungon vs. Laigo, et al., G.R. No. 175073, Aug. 15, 2011, citing Spouses Rayos v. Reyes, 446 Phil 32, 50 (2003); David v. Bandin, G.R. Nos, |-48322, 1.49712, L-49716 and 49687, April 8, 1987.Decision Civil Case No. 0172 Republic vs. Quisumbing, et al. Page 28 of 49 Can defendant Quisumbing however be considered a builder in good faith? A builder in good faith is "one who builds with the belief that the land he is building on is his, or that by some title one has the right to build thereon, and is ignorant of any defect or flaw in his title or mode of acquisition.”28 From his evidence, it appears that Quisumbing's family owned real property in Mabini, Batangas, which had his family’s rest house and a small scuba diving resort named Eagle Point Resort, which they owned since the mid-1980s. The PJ! Properties comprising 7,087 square meters, more less, were one of several properties adjacent to Eagle Point Resort which Quisumbing’s family purchased from 1989 to 1992 for the expansion of the resort. From inquiries, Quisumbing learned that the subject properties had already been transferred by the previous owner, Mr. Manuel Vasallo, to PJi through a dacion en pago in order to settle a commercial debt amounting to Php 700,000. He then went to the PJl office in the port area of Manila, where he met with defendant Cura, then PJI President, and Atty. Dela Vega. Defendant Quisumbing offered to purchase the PJI Properties, and after negotiations, the Parties agreed to the net price of Php.700,000.00. The sale of the PJl Properties was consummated through the Contract of Sale dated 5 June 1991 (Exhibit 5) and a Deed of Absolute Conveyance dated 25 June 1991 (Exhibit 6). Defendant Cura subsequently gave Quisumbing a copy of the Minutes of the Regular Meeting of the PJI Board of Directors held on July 1, 1991 (Exhibit 8), where the Board formally approved the sale of the PJI Properties to DRDC, a Quisumbing family corporation. Defendant Quisumbing and his family also purchased six (6) other properties adjacent to or nearby the PJI Properties at around the same time, in 1989-1992. They then developed and expanded their Eagle Point Resort for the period 1991-1996. ® Miraliosa vs. Carmel Development, inc., G.R. No. 194538, Nov, 27, 2013.Decision Civil Case No. 0172 Republic vs. Quisumbing, et al Page 29 of 49 Defendant Quisumbing testified that he only learned of the Republic's claim on the PJI Properties when he was served with summons and a copy of the Complaint in the instant Civil Case No. 0172 in November 1996. Records show that summons in this case was actually served upon, and duly received by Quisumbing on November 6, 1996”. The Court notes that it was sometime in July 1991 when PJl stockholder Olivares filed the Urgent Motion to Enjoin PCGG- Appointed Board of Directors From Effecting Sale of PJ! Real Properties in Civil Case No. 0035. The subject matter of this motion was the same PJl Properties covering 7,087 square meters acquired by__defendant__Quisumbing. As previously discussed, the Sandiganbayan Second Division, in a Resolution dated February 25, 1992, nullified the sale of the PJI Properties. This matter was elevated to the Supreme Court, which gave rise to the en banc Resolution dated October 5, 1993 in G.R. No. 106209, PJ and Jaime Cura vs. Sandiganbayan, et al. Did defendant Quisumbing have knowledge, or was he aware, of the aforementioned proceedings in Civil Case No. 0035 and in G.R. No. 106209 involving the PJ! Properties? Upon a careful examination of the pertinent records and the evidence presented, there is no showing that Quisumbing was aware, prior to service of summons upon him on November 6, 1996, of the defect or infirmity in his acquisition of the PJI Properties. On the other hand, Quisumbing testified that he exercised due diligence and good faith in the acquisition of the subject properties. He also averred that he was not aware of the proceedings in Civil Case No. 0035, nor was he aware of the en banc Resolution dated October 5, 1993 in G.R. No. 106209. It was only when he was served with summons on November 6, 1996 that he came to know of these matters. He also pointed out that in the Contract of Sale dated June 5, 1991 (Exhibit 5), it states that “TRANSFEROR shall transfer and convey complete, vested and good title to the Property .. to TRANSFEREE”, and that “TRANSFEROR hereby declares under oath ... that there are no claimants to the Property.” Similar contractual provisions appear in the Deed of Absolute Conveyance dated June 25, 1991 (Exhibit 6). ™ Sheriff's Return dated Nov. 6, 1996; Records, Vol. 1, pp. 150-151.Decision Civil Case No. 0172 Republic vs. Quisumbing, et al. Page 30 of 49 For the reasons stated above, the Court finds that for the period June 5, 1991 to November 6, 1996, defendant Quisumbing was ignorant of any defect or flaw in his acquisition of the PJI Properties. In this sense he was a builder in good faith with respect to any structure, building or improvement he may have built or introduced on the Pul Properties during that period. Moreover, under Article 527 of the New Civil Code, good faith is always presumed, and upon him who alleges bad faith on the part of the possessor rests the burden of proof. Plaintiff failed to prove otherwise. Defendant Quisumbing testified that he and his family greatly developed and expanded their Eagle Point Resort for the period 1991-1996. The PJI Properties are part of, and sit in the middle of Eagle Point Resort. He claims to be a builder in good faith with respect to the structures and improvements on the PJI Properties consisting of part of the main core building, the spa building, the bayview building, 2 cottages, 1 staff house, generator house, 1 water tank, 1 pier, and the sturdy concrete wall protecting the 50-meter waterfront of the PJl Properties. He testified that these were all made and constructed after the property's sale to him in 1991, but before he received notice and learned of plaintiff's claim for reconveyance of the PJl Property ~ which was on November 6, 1996. As a builder in good faith, he should be reimbursed for the total cost of the improvements amounting to P40,000,000.00. His testimony on the matter is detailed below: “33. Q: In 1991 when you bought the PJ! Property from Pll, what were the structures existing in your family’s original property, in the PJ! Property, and in the 6 properties adjacent to or near the PJ! Property that you mentioned earlier? A: _ In 1991, our original properly contained our family resthouse and two guest houses, as well as our Eagle Point Resort during its first years of operation and before its expansion. Our resort consisted of around 8 wood and nipa cottages without air-conditioners. The Pu Property only had the dilapidated ruins of Manuel Vasallo's wood/bamboo/nipa resthouse. It had no occupants or even a caretaker. As of 1991, there had never been any beach resort on the PJI Property.Decision Civil Case No, 0172 Republic vs. Quisumbing, et al. Page 31 of 49 34, 35, 36. The 6 properties adjacent to or near the PJI Property had no ‘occupants or buildings as of 1991. There were mostly covered by “gubat” or trees and scrub. The local owners of these 6 properties had stopped planting on them because of the steep slope and lack of water. Q: _ In 1991, did your original property, the Pl Property, and the 6 properties adjacent to or near the PJ! Property, have any road access? A: No, In 1991, none of these properties had any road access, and they were cliff properties with steep slopes. The nearest paved road was in Anilao town about 8 kilometers away. The nearest dirt road was about 2 kilometers away, above the cliff. The only feasible way to access these properties was by “banca” or outrigger boat from Anilao town, about a 45-minute ride. Traveling by banca is often unsafe during the “habagat” or Monsoon season (July to December), because the sea is often rough and the waves can be huge in our area due to the deep water. Landing on the rocky shores of these properties with big waves crashing can be scary and dangerous. The entire coastline of this area is rocky with no sand beaches, and the water is deep. This lack of road access was one reason why the 6 adjacent and nearby properties had no occupants and why we were able to buy them at low prices. Q__Did your original property, the Pdi Property, and the 6 adjacent or nearby properties subsequently have any road access? A: Yes. In 1992-1994, we solved the lack of road access when we built our own 2-kilometer concrete road from the dirt municipal road to the top of the cliff, and a 1-kilometer, concrete zig-zag road going down the cliff to Eagle Point Resort. Or cliff road was a feat of engineering, complete with massive riprap concrete retaining walls below and above the road. These 2 roads took us almost 2 years to build and cost us more that PHP 20,000,000. The cliff road crisscrosses the PJI Property 3 or 4 times Q In 1991, did your original property, the PJ Property, and the 6 adjacent or nearby properties have any electric connections? A: Only our original resthouse property had electric connections to BATELEC (Batangas Electric Cooperative).Decision Civil Case No. 0172 Republic vs. Quisumbing, et al, Page 32 of 49 But there were always regular brownouts, so we had to have a generator as backup. 37. Q > How about water connections as of 1991? A: Only our resthouse had water connections — our own 1- inch pipeline to a “bukal’ or natural spring in the mountain about a kilometer away. But the water supply was intermittent or dried up, because some landowners tapped into our pipeline and got our water supply before it could get to us. Drilling deep wells in our area was not feasible. The water shortage in Barangay Bagalangit has been a big problem for many years We did not solve our problem until 1996-1997 when we installed our own 8-kilometer, 2-inch pipeline to a mountain spring on the other side of Mabini. This cost about PHP 5,000,000. The PuJl Property did not have any water source or connection in 1991. Neither did any of the 6 adjacent or nearby properties, which is another reason why they had no occupants and why we were able to buy them at low prices.” Defendant Quisumbing quantified the overall improvements he and his family introduced on their original property, the PJI Property, and the 6 adjacent or nearby properties: 65. Q: What happened after the sale of the PJI Property was consummated in 1991? AL Xxx As planned, we greatly developed and expanded our Eagle Point Resort in 1991-1996 on our original property, the PJI Property, and the 6 adjacent or nearby properties. As | testified earlier, we constructed the access and cliff roads that took 2 years and cost about PHP 20 Million. We built our main core building (with the biggest restaurant in Mabini, reception, front office and gift shop) at a cost of about PHP 25,000.000. We built 2 freshwater swimming pools and pool decks, saltwater swimming pool, dive shop, 40-room hotel and 20 cottages, spa building, bayview building, staff houses, concrete seawalls and piers, water pipeline and water tanks, generator house, electrical and plumbing works, landscaping, etc, - costing excess of PHP 80,000.000. ® Judicial Affidavit of Raman J. Quisumbing, pp. 10-12; Records, Vol. 10, pp. 236-238. 7Decision Civil Case No. 0172 Republic vs. Quisumbing, et al. Page 33 of 49 Part of the main core building the spa building, the bayview building, 2 cottages, 1 staff house, generator house, 1 water tank and 1 pier, among other improvements, were constructed in the PJI property. The entire 50-meter waterfront of the PJ! Property is protected from big habagat waves by a sturdy, concrete seawall. We estimate the cost of all the improvements on the PJl Property to total PHP 20 million or more. But | consider that PJI's payment of necessary and useful expenses under Article 448 of the Civil Code should also include the costs of the improvements on the adjoining and nearby properties, which would be rendered useless or non-viable if the Pul Property and its improvements are lost.”' (Citations omitted). As further evidence on the improvements made on the PJl Properties, defendant Quisumbing presented color print-outs of photographs showing the structures and improvements on the PJl Properties and of Eagle Point Resort, described below: Exhibit “29” - taken from a boat and shows the entire coastline of Eagle Point Resort. It also shows the PJi Property in relation to the entirety of Eagle Point Resort. Exhibit "30" - a closer photo of the approximate boundaries of the PJI Property. It shows that a portion of the main cure building (with the biggest restaurant in Mabini, reception desk, front office and gift shop) sits on the PJl Property. It also shows that the PJl Property contains most of the Spa Building, duplex Cottages #1 and #2, the Bayview building and the staff dining and quarters building. Exhibit "31" - shows how steep the PJI Property is, such that the slope above the shoreline is very difficult to build on and to access, as it would require hundreds or staircase steps. Only the portion or about 1,000 square meters by the shore is usable. This greatly reduces the fair market value or the PJl Property. Exhibit “32” - shows most of the front of the PJl Property, which has been built up with thick seawalls to protect the property from the big habagat waves. There are also a wide concrete deck, 2 concrete piers, and a concrete boat-ramp. * Judicial affidavit of Ramon J. Quisumbing, pp. 20-21; Ibid.Decision Civil Case No. 0172 Republic vs. Quisumbing, et al Page 34 of 49 Exhibit “33” - shows the concrete deck, 2 piers and boat- ramp. Exhibit 34” - shows duplex Cottages #1 and #2, and the concrete deck and seawall Exhibit “35” - shows duplex Cottages #1 and #2 made of concrete. These are rented to resort guests. Exhibit “36” - shows the roof and right side of duplex Cottages #1 and #2 Exhibit “37” - shows the front balcony of duplex Cottages #1. Exhibits “38” “39" “40” and “41” - show the interior of duplex Cottages #1 and #2 Exhibit “42” - shows the 2-storey Bayview Building made of concrete. It contains a lounge/bar/conference room, nurse's office, and storage room. Exhibit “43” - shows the left side of the 2-storey Bayview Building. Exhibit “44” - shows the rear of the Bayview Building and the sidewalk behind it. Exhibit “45” - shows the interior of the lounge/bar/conference room on the 2° floor of the Bayview Building Exhibit “46” - shows the front of the 4-storey Spa Building made of concrete, which contains 2 bedrooms in the 1* floor, the spa facility in the 2° floor, 3 bedrooms in the 3" floor, and a luxury 3-bedroom suite in the 3° and 4!” floors. This photo also shows the concrete deck in front. Exhibit "47" - shows the left side, 1* and 2" floors of the 4- storey Spa Building. Exhibit "48" - shows the left side, 3% and 4"" floors of the Spa Building. Exhibit shows the back of the Spa Building. Exhibits "50", "51", "52", "53", "54", "55", "56", "57", and "58" - show the interior of the luxury 3-bedroom suite in the 3rd and 4th floors of the Spa Building. aDecision Civil Case No, 0172 Republic vs. Quisumbing, et al Page 35 of 49, Exhibits "59" and " show the front of the staff building containing the staff dining room/kitchen and some staff quarters. Exhibit 1" - shows the right side of the staff building Exhibits “62” and “63” - show the interior of the portion of the main core building that sits on the PJ! Property. Exhibit “64” - shows the concrete power building that contains the throw switch boxes, etc. Exhibit “65” - shows the three (3) large concrete water-tanks. Exhibit “66” - shows the two (2) large, concrete generator houses. Exhibits “67”, “68”, and “69” - show the private concrete road that goes up the cliff. Due to the steep slope, the road is supported by a high, concrete riprap wall below and a low, concrete riprap wall above.°2 Defendant Quisumbing further testified: Q@ Why are you familiar with these print-outs? A: | caused the taking of these photos, | caused the printing of Exhibits “29” to "69". These are color print- outs of the digital photos of the PJl Property and the improvements | had built thereon. | have personally seen the images depicted in these print-outs. | attest that these are accurate depictions of the PJI Property and the improvements built thereon. XXXXX Q: Can you please summarize your claim in respect of these improvements on the PJl Property depicted in these photos? A: Yes. Considering that we developed and built very substantial improvements on the PJl Property costing more than Forty Million Pesos (P40,000,000.00), before we were notified of plaintiffs’ claim for reconveyance of the Property, we were a “builder in good faith" on the PJI Property. Therefore, even assuming that plaintiffs obtain a final judgment for reconveyance of the PJl Property, they cannot take possession of the PJl Property until ® Supplemental Judicial Affidavit of Ramon J. Quisumbing: Records, Vol. 11, pp. 13-63, oDecision Civil Case No. 0172 Republic vs. Quisumbing, et al. Page 36 of 49 they have reimbursed me for all these improvements amounting to more than Forty Million Pesos (P40,000,000.00), under Articles 448 and 546 of the Civil Code.* Defendant Quisumbing was cross-examined regarding the improvements he introduced on the property: ATTY. NOLASCO-JIMENEZ: Q: Soin your supplemental affidavit, you also attached more or less 41 photos to show improvements introduced to the subject properly? WITNESS: A Yes. ATTY. NOLASCO-JIMENEZ: Q: So these were the restaurant, the reception ‘desk, gift shop, spa building, duplex cottages, Bayview building, Staff building, piers and boat ramps, water tanks and generation houses, among others these improvements introduced to the subject property before 1996? WITNESS: A: Before | was notified of any claim by Republic or the PCGG or PJl. ATTY. NOLASCO-JIMENEZ: Q: So after October 1996, you never introduced additional improvements on the subject property? WITNESS: A: After? | don't recall. Sorry. ATTY. NOLASCO-JIMENEZ: Q: You don't recall. So the properties, as they stood before 1996 are the very same structures that are now existent? ® Judicial Affidavit of Ramon J. Quisumbing,p. 5; Supra:Decision Civil Case No. 0172 Republic vs. Quisumbing, et al. Page 37 of 49 WITNESS: A: Oh yeah, The same structure. ATTY. NOLASCO-JIMENEZ: Q: No absolute change or anything? WITNESS: A: Well, if we repainted them after | don’t know. I'm sure we repainted them after, done repairs after (unfinished) ATTY. NOLASCO-JIMENEZ: Q: Have you not visited the property? In the recent years? WITNESS: A: But of course | visited, but I'm saying that, after 1996 between 1996 and today, 2018, of course we've repainted the same buildings and maintained them and repaired, | can't testify to any particular incident we've done there but I'm sure we maintained the buildings we'd had to. You know, we are operating a quality resort. Aside from the cross-examination on defendant Quisumbing, plaintiff did not present countervailing or rebuttal evidence to prove that the improvements made on the PJI Properties were not constructed during the period June 5, 1991 to November 6, 1996, when defendant Quisumbing is considered a builder in good faith. Neither did plaintiff present countervailing or rebuttal evidence to disprove the claim of defendant on the valuation of the improvements on the PJl Properties amounting to P40 million. Basic is the rule in civil cases that the party having the burden of proof must establish his case by a preponderance of evidence.*5. By “preponderance of evidence” is meant simply evidence which is of greater weight, or more convincing than that which is offered in opposition to it. After a careful examination of the evidence presented, the Court finds that there is preponderance of evidence that M Pages 20-22 of TSN dated March 20, 2048 on cross-examination of Ramon J. Quisumbing. 2 Section 1, Rule 133, Rule of Court * Rivera vs. Court of Appeals, G.R. No. 115625, Jan. 23, 1988,Decision Civil Case No. 0172 Republic vs, Quisumbing, et al. Page 38 of 49 improvements were indeed made by defendant Quisumbing on the PJI Properties for the period June 5, 1991 to November 6, 1996. These improvements consist of part of the main core building, the spa building, the bayview building, 2 cottages, 1 staff house, generator house, 1 water tank, 1 pier, and the sturdy concrete wall protecting the 50-meter waterfront of the Pu! Properties. There is also a 2- kilometer concrete road from the dirt municipal road to the top of the cliff, and a 1-kilometer, concrete zig-zag road going down the cliff to Eagle Point Resort. The cliff road, complete with massive riprap concrete retaining walls below and above the road, crisscrosses the PJI Properties 3 or 4 times. The color photographs marked as Exhibits 29 to 69, inclusive, show that the improvements on the Pul Properties are substantial. Defendant Quisumbing's valuation of P40 million as the cost of all the improvements on the PJI Properties - made during the period June 5, 1991 to November 6, 1996 - is supported by evidence, and therefore justified. The rights of a landowner vis-a-vis a builder in good faith are presented and explained in Article 448 of the New Civil Code: Article 448. The owner of the land on which anything has been built, sown or planted in good faith, shall have the right to appropriate as his own the works, sowing or planting, after payment of the indemnity provided for in articles 546 and 548, or to oblige the one who built or planted to pay the price of the land, and the one who sowed, the proper rent, However, the builder or planter cannot be obliged to buy the land if its value is considerably more than that of the building or trees. In such case, he shall pay reasonable rent, if the owner of the land does not choose to appropriate the building or trees after proper indemnity. The parties shall agree upon the terms of the lease and in case of disagreement; the court shall fix the terms thereof. Articles 546, 547 and 548 of the New Civil Code further provide: Article 546. Necessary expenses shall be refunded to every possessor; but only the possessor in good faith may retain the thing until he has been reimbursed therefor. Useful expenses shall be refunded only to the Possessor in good faith with the same right of retention, the Person who has defeated him in the possession having theDecision Civil Case No. 0172 Republic vs. Quisumbing, et al Page 39 of 49 option of refunding the amount of the expenses or of paying the increase in value which the thing may have acquired by reason thereof. Article 547. If the useful improvements can be removed without damage to the principal thing, the possessor in good faith may remove them, unless the person who recovers the Possession exercises the option under paragraph 2 of the preceding article. Article 548. Expenses for pure luxury or mere pleasure shall not be refunded to the possessor in good faith; but he may remove the ornaments with which he has embellished the principal thing if it suffers no injury thereby, and if his successor in the possession does not prefer to refund the amount expended Under Article 448, the landowner is given the option, either to: (1) appropriate the improvement as his own upon payment of the Proper amount of indemnity; or (2) to sell the land to the possessor in good faith. Relatedly, Article 546 provides that a builder in good faith is entitled to full reimbursement for all the necessary and useful expenses incurred; it also gives him the right of retention ‘until full reimbursement is made. Thus, until plaintiff appropriately indemnifies defendant Quisumbing for the improvements constructed by the latter, Quisumbing may retain possession of the PJ Properties. Under the second option, plaintiff may choose not to appropriate the building and, instead, oblige defendant Quisumbing to pay the present or current fair value of the land. If the present or current value of the PJl Properties turns out to be considerably more than that of the improvements built thereon, defendant Quisumbing cannot be obliged to pay for the subject property, but he must pay plaintiff reasonable rent for the same. Both plaintiff and defendant Quisumbing must agree on the terms of the lease; otherwise, the Court will fix the terms. On the other hand, defendant Quisumbing’s rights as a builder in good faith under Article 448 are limited to the following: (a) under the first option, a right to retain the improvements and the PJl Properties until plaintiff pays proper indemnity; and (b) under the /Decision Civil Case No. 0172 Republic vs. Quisumbing, et al. Page 40 of 49 second option, a right not to be obliged to pay for the price of the subject property, if it is considerably higher than the value of the improvements, in which case, he can only be obliged to pay reasonable rent for the same. In Pecson v. Court of Appeals*” the Supreme Court pronounced that the amount to be refunded to the builder under Article 546 of the Civil Code should be the current market value of the improvements, which, as determined by this Court in the instant case, amounts to P40 million. The rule that the choice under Article 448 of the Civil Code belongs to the owner of the land is in accord with the principle of accession, i.e., that the accessory follows the principal and not the other way around. Even as the option lies with the landowner, the grant to him, nevertheless, is preclusive.** The landowner cannot refuse to exercise either option and compel instead the owner of the building to remove it from the land.2° The raison d'etre for this provision has been enunciated thus: Where the builder, planter or sower has acted in good faith, a conflict of rights arises between the owners, and it becomes necessary to protect the owner of the improvements without causing injustice to the owner of the land. In view of the impracticability of creating a state of forced co-ownership, the law has provided a just solution by giving the owner of the land the option to acquire the improvements after payment of the proper indemnity, or to oblige the builder or planter to pay for the land and the sower the proper rent. He cannot refuse to exercise either option. It is the owner of the land who is authorized to exercise the option, because his right is older, and because, by the principle of accession, he is entitled to the ownership of the accessory thing.“? The directives given by the Supreme Court in Depra vs. Dumlao,*' Briones vs. Macabagdal? and Rosales vs. Castelltort? © 314 Phil, 313 (1995) PNB vs. De Jesus, 458 Phil. 454, 459 (2003). ® Technogas Philippines Manufacturing Corporation vs. Court of Appeals, 335 Phil. 471, 482 (1997). Tuatis vs, Spouses Escol, G.R. No. 175239, October 27, 2009. GR, No. L-$7348, May 16, 1985, *°G,R, No. 150666, August 3, 2010, flDecision Civil Case No. 0172 Repubiic vs. Quisumbing, et al. Page 41 of 49 may be used as guidelines in the additional proceedings for the final settlement of the rights of the parties under Article 448 of the Civil Code. No Legal and Factual Basis for Accounting. From the evidence, it appears that prior to Quisumbing's acquisition of the PJl Properties in 1991, the subject property had been vacant and unused for many years. It was categorized as a “cliff property” with steep slopes and having no road access. The only feasible way to access the property was by “banca” or outrigger boat from Anilao town, which is about a 45-minute ride. Neither was there any water or electricity connection. While the PJI Properties had a supposedly low fair market value, PJI recorded the property with a book value of Php 700,000.00. This was the amount of the unpaid commercial debts of the former owner, Manuel Vasallo, for which the property was transferred to PJI by way of dacion en pago sometime in 1988. At the time of the acquisition by Quisumbing of the Pul Properties, the land was not productive nor was it being used for any business activity. There is also no indication that PJI had plans to develop or make use of the property. The subsequent development of the property, and any fruits or income derived from it, were solely through the efforts of defendant Quisumbing and his family. There is therefore no legal and factual basis to require defendant Quisumbing to render-an accounting of the fruits and/orfincome of the PJl Properties. Moreover, since defendant Quisumbing is a builder in good faith, the provisions of Article 448 of the New Civil Code will apply. Under the said article, an accounting of the fruits and/or income of the subject land is not one of the remedies granted to the owner of the land. * @R.No. 157084, October 5, 2005,Decision Cwvil Case No. 0172 Republic vs. Quisumbing, et al. Page 42 of 49 Plaintiff is Not Entitled to Damages from Defendant Quisumbing. Defendant Quisumbing purchased the PJi Properties in 1991 as part of the plan to expand and develop his family’s Eagle Point Resort in Mabini Batangas. It would appear that aside from the PJI Properties, which were adjacent to Eagle Point Resort, Quisumbing’s family also acquired six (6) other properties which were adjacent or nearby Eagle Point Resort. Defendant Quisumbing initially offered to purchase the PJl Properties for Php 300,000.00. After negotiations with PJl President Cura, the purchase price was pegged at Php 700,000, net to Pui. Thus, among the adjacent and nearby properties acquired by Quisumbing and his family, the PJI Properties had the highest per ‘square meter value, pegged at Php 104.00 per square meter“. At the time, Quisumbing was not aware that PJI was allegedly owned by Benjamin “Kokoy” Romualdez, or that PJI was sequestered or involved in a PCGG suit filed in the Sandiganbayan. The foregoing facts and circumstances indicate the absence of bad faith on the part of defendant Quisumbing in the purchase of the PJI Properties. In addition, there is no evidence of his connivance with the other defendants or with PJI officers involved in the sale transaction. The purchase of the PJl Properties was in line with his family's plan to expand and develop Eagle Point Resort. Moreover, it is both regular and understandable for a buyer to try to negotiate for the best possible terms for a real property acquisition. Given the foregoing, and considering that defendant Quisumbing is a builder in good faith, plaintiff is not entitled to damages from defendant. Recompense to plaintiff for whatever damages it may have suffered by reason of defendant's occupation of the PJI Properties is already covered by Article 448 of the New Civil Code. * At a total purchase price of Php 735,000, inclusive of capital gains tax of Php 35,000 assumed by the = 4 7Decision Civil Case No. 0172 Republic vs. Quisumbing, et al. Page 43 of 49 Plaintiff is Entitled to Damages from Defendants Cura, Araneta, Sepidoza and Paras. As a defense to plaintiff's claim for damages, defendants argued that when they approved the sale of the PJI Properties to defendant Quisumbing, they were not aware of the requirement that they had to get prior approval of both the PCGG and the Sandiganbayan. They were also relying on the recommendation of the PJl management, which had favorably endorsed the sale. Citing the business judgment rule, defendants maintained that they acted in good faith on what they believed was for the best interest of PUI in approving the sale transaction. Section 31 of the Corporation Code provides: Section 31. Liability of directors, trustees or officers. - Directors or trustees who willfully and knowingly vote for or assent to patently unlawful acts of the corporation or who are guilty of gross negligence or bad faith in directing the affairs of the corporation or acquire any personal or pecuniary interest in conflict with their duty as such directors or trustees shall be liable jointly and severally for all! damages resulting therefrom ‘suffered by the corporation, its stockholders or members and other persons. x x x Under Section 31, there are there instances when a director, trustee or officer may be held personally liable for damages resulting therefrom suffered by the corporation, when he: 1) Willfully and knowingly votes for or assents to patently unlawful acts of the corporation; 2) Is guilty of gross negligence or bad faith in directing the affairs of the corporation; or 3) Acquires any personal or pecuniary interest in conflict with his duty as such director, trustee or officer. Bad faith is defined in jurisprudence as a state of mind affirmatively operating with furtive design or with some motive of self- interest or ill-will or for ulterior purpose.*> Bad faith implies breach of v ( © Retuya vs. Sabay, G.R. No. 154720, Sept. 4, 2009,Decision Civil Case No. 0172 Republic vs. Quisumbing, et al. Page 44 of 49 faith and willful failure to respond to plain and well understood obligation. It does not simply connote bad judgment or negligence; it imports a dishonest purpose or some moral obliquity and conscious doing of wrong; it means breach of a known duty through some motive or interest or ill will. It partakes of the nature of fraud.** Gross negligence, on the other hand, is the want of even slight care, acting or omitting to act in a situation where there is duty to act, not inadvertently but willfully and intentionally, with a conscious indifference to consequences insofar as other persons may be affected. It evinces a thoughtless disregard of consequences without exerting any effort to avoid them; the want or absence of or failure to exercise slight care or diligence, or the entire absence of care.*” From the evidence, it does not appear that defendants, as PCGG-nominated directors of PJI, were informed or actually aware of the requirement that prior approval of both the PCGG and the Sandiganbayan was required for the sale of the PJ! Properties to defendant Quisumbing, or for the sale of any PJI asset for that matter. This negates bad faith on their part; they cannot also be said to have willfully and knowingly voted for a patently unlawful act of the corporation. Defendants Cura, Araneta, Sepidoza and Paras, however, can be held liable for gross negligence in directing the affairs of the corporation. This finding of gross negligence is based on the clear, categorical findings of the Supreme Court in its en banc Resolution dated October 5, 1993 in G.R. No. 106209, PJ/ and Jaime Cura vs. the Sandiganbayan, et al., which is again quoted: We are unable to agree with the petitioners that the Pul is not a sequestered corporation since it had offered nothing to rebut the finding and conclusion of the Sandiganbayan that it is, Such finding, of course, is supported by the unrebutted evidence that sequestration orders were issued by the PCGG on 19 February 1987 and 28 April 1987 and that it is under management and control of the PCGG-appointed Board of Directors of which petitioner Cura is one of the members. Sanchez vs. Republic, G.R, No, 172885, October 9, 2009. idDecision Civil Case No. 0172 Republic vs. Quisumbing, et al Page 45 of 49 It may thus be said that the PJI was not only under sequestration, it was, as well, under provisional takeover. In Bataan Shipyard and Engineering Co., Inc. (BASECO) v. Presidential Commission on Good Government, we defined ‘sequestration as placing or causing to be placed under PCGG control properties, including business enterprises and entities - - for the purpose of preventing the destruction, concealment or dissipation of and otherwise conserving and preserving the ‘same — until it can be determined, through appropriate judicial Proceedings whether the property was in truth ill-gotten. We also stated therein that in provisional takeover, what is taken into custody is not only the physical assets of the business enterprise of the entity, but the business operation as well.” XXKX This being the case, the PCGG cannot, therefore validly sell the property in question belonging to the sequestered PJI. Since the PCGG-appointed Board of Directors of the PJl is a mere agent of the PCGG, the former cannot likewise dispose of the property for it cannot have greater power than its own principal. Considering, furthermore, that the sequestration orders in this case are presumed to have been registered with the proper court upon filing of the Civil Case No. Article XVII (Transitory Provision) of the 1987 Constitution, all properties of the PJI were thus brought under custodia legis. Any disposition then of the said properties, including the beach resort in question, even if permissible, may only be valid done upon prior authority of the Sandiganbayan. (Underscoring supplied). From the afore-quoted Supreme Court Resolution, the following factual findings are established: 1) _ Sequestration Orders were validly issued by the PCGG on February 19, 1987 and April 28, 1987 covering the entire PJI corporation, including its assets and properties as well as business operations; : 2) By virtue of the sequestration orders, PJI was not only under sequestration, but also under provisional takeover; 3) The PCGG-appointed Board of Directors of the PJl is a mere agent of the PCGG; 4) The PCGG-appointed Board of Directors cannot dispose of PUI property without prior authority from the PCGG and the Sandiganbayan. "fyDecision Civil Case No. 0172 Republic vs. Quisumbing, et a Page 46 of 49 Being PCGG-appointed Directors to the PJl, defendants Cura, Araneta, Sepidoza and Paras had the obligation to know that Sequestration Orders were issued way back in February 19, 1987 and April 28, 1987; that the PJl, including its assets and properties as. well as business operations, was under provisional takeover, and that the PJI Board cannot dispose of any PJI property unless with prior authority from the PCGG and the Sandiganbayan. This is part of their fiduciary duty of diligence to PJl. Directors and officers are required to exercise due care in the performance of their functions and duties, and gross negligence removes an act or omission from the operation of the business judgment rule. If true, defendants’ claim that they were not aware of any such requirement or limitation on their authority as PJI directors, makes them liable for gross negligence in directing the affairs of the corporation. Such gross negligence by defendants is further shown by their seeming lack of awareness of the ruling in the cited case of BASECO vs. PCGG, Gr. No. 75885 - rendered on May 27, 1987 — where the definition, purpose and effects of a sequestration were discussed. Plaintiff's witness Eriberto C. Singson testified as regards the damages incurred by plaintiff, to wit: 32. What sort of damages has PCGG or the Republic, for that matter, incurred, if any, from the void contract of sale between defendants Jaime Cura and Ramon Quisumbing? A Because of the illegal transaction entered into by defendants, plaintiff suffered damages in an amount equivalent to the pecuniary loss sustained when Pul was deprived of the lawful use of the subject parcels of land, as well as the income therefrom, including the appreciated value of the said parcels of land, in addition to the expenses incurred for the filing of the instant case to recover and Teconvey the subject parcels of land. In my estimate, defendants should be held liable for damages of not less than One Million Pesos (P1,000,000.00).Decision Civil Case No. 0172 Republic vs. Quisumbing, et al. Page 47 of 49 It is noted however that plaintiff did not present any document on which the estimate of One Million Pesos is based.“® With the finding of gross negligence on the part of defendants Cura, Araneta, Sepidoza and Paras, and taking into consideration the facts and circumstances of this case, the Court finds plaintiff to be entitled, and the aforementioned defendants liable, jointly and severally, for actual and compensatory damages amounting to Five Hundred Thousand Pesos (Php 500,000). Considering that plaintiffs were able to prove its main causes of action against the defendants, the latter's respective counterclaims against the plaintiffs are hereby dismissed for lack of merit. WHEREFORE, judgment is hereby rendered in this case as follows: 1) Adjudging plaintiffs Republic of the Philippines and the Philippine Journalist, Inc, as the legal owners of the PJI Properties located in Bagalangit, Mabini, Batangas, then covered by Tax Declaration Nos. 0915, 0916, 0917 and 0918, 2) Declaring defendant Ramon J. Quisumbing a builder in good faith with respect to the improvements, valued at Forty Million Pesos (Php 40,000,000) he introduced on the PJI Properties, and is entitled to the rights granted him under Articles 448, 546, 547 and 548 of the New Civil Code; 3) Plaintiffs Republic of the Philippines and the Philippine Journalist, Inc. are given the right to avail of the alternative rights and remedies provided under Article 448 of the New Civil Code and established jurisprudence as against defendant Ramon J. Quisumbing, who is considered a builder in good faith; 4) Ordering defendants Jaime A. Cura, Johnny M. Araneta, and the respective estates of the late Angel C. Sepidoza and Renato L. Paras, to jointly and severally pay plaintiff Philippine Journalist, Inc. “ Page 39 of TSN dated Oct, 14, 2015 on cross-examination of Eriberto C. Singson. M 7Decision Civil Case No. 0172 Republic vs. Quisumbing, et al Page 48 of 49 the amount of Five Hundred Thousand Pesos (Php 500,000) in actual and compensatory damages; and 5) Dismissing all of the defendants’ counterclaims against the plaintiffs for lack of merit. SO ORDERED. FAEL R. LAGOS. Chairperson Associate Justice WE CONCUR: MARYANN E. CORPYS-MANALAC Assdciate Justice ATTESTATION | attest that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division FAEL R. LAGOS Chairperson, Fifth Division fDecision Civil Case No. 0172 Republic vs. Quisumbing, et al Page 49 of 49 CERTIFICATION Pursuant to Article VIII, Section 13 of the Constitution, and the Division Chairperson’s Attestation, it is certified that the conclusions in the above decision were reached in consultation before the case was assigned to the writer of the opinion of the Court's Division. PARO M. Presi iY