EN
BANC
PRESIDENTIAL
COMMISSION
ON GOOD GOVERNMENT [PCGG]
AND
PCGG-NOMINEES/DESIGNEES:
EDUARDO M. VILLANUEVA,
ROMAN
MABANTA,
EDUARDO
DE LOS ANGELES, RAMON
DESUASIDO,
ALMARIO
VELASCO, RANULFO PAYOS,
Petitioners,
G.
R.
No. 82188
June
30,
1988
-versus-
SECURITIES
AND
EXCHANGE
COMMISSION, FELIPE S. TONGCO,
ANTONIO M.
ESTEVES,
NAPOLEON M. TUMAMAD, VICTOR AFRICA
AND RAFAEL
C. VALDEZ,
Respondents.
PRESIDENTIAL
COMMISSION
ON GOOD GOVERNMENT [PCGG],
Petitioner,
-versus-
THE
HONORABLE
SANDIGANBAYAN,
HON. CONRADO M. MOLINA,
HON.
LUCIANO JOSON,
HON. CIPRIANO A. DEL ROSARIO,
JOSE L.
AFRICA AND
MANUEL H. NIETO, JR.,
Respondents.
D
E C I S I
O N
FERNAN,
J :
Assailed in this consolidated
Petition for Certiorari, Mandamus and Prohibition with prayer for
Preliminary
Injunction and/or Temporary Restraining Order as having been issued
with
grave abuse of discretion and in excess of jurisdiction are two
restraining
orders issued by [1] the Securities and Exchange Commission Hearing
Panel
on March 3, 1988 in SEC Case No. 3297 entitled "Victor Africa and
Rafael
C. Valdez, Complainants, versus Eduardo M. Villanueva, et al.,
Respondents"
enjoining the respondents therein as members of the Board of Directors
of Eastern Telecommunications Philippines, Inc. [ETPI] from holding the
stockholders' meeting scheduled on March 4, 1988; and [2] the
Sandiganbayan
on March 4, 1988 in SB Civil Case No. 0009 entitled "Republic of the
Philippines, Plaintiff, versus Jose L. Africa, et al., Defendants",
"enjoining the PCGG, its Commissioners, nominated Directors and/or
Corporate
Officers, employees, nominees, agents and/or representatives from
calling
and/or holding stockholders meetings and voting [the] sequestered
shares
thereat for the purpose of amending the Articles or By-laws of ETPI, or
otherwise effecting substantial changes in policy, programs or
practices
of said corporation."[1]
The Temporary Restraining Order dated March 4, 1988 was subsequently
replaced
by a writ of preliminary injunction on March 25, 1988.[2]
The relevant background
facts of the case culled from Petitioners' Uurgent Consolidated
Petition
are as follows:
Until 1974, Eastern
Telecommunications of the Philippines [ETPI] was a wholly-owned
subsidiary
of Cable and Wireless, Ltd., operating under the name Eastern Extension
Australasia and China Telegraph Company Ltd. [EEATC] by virtue of a
royal
decree from Spain, renewed in 1952 by the Philippine Government. In the
late 1966, EEATC attempted to win a contract for the establishment of a
satellite earth station but the contract was awarded by then President
Ferdinand E. Marcos to a previously unknown corporation, the Philippine
Overseas Telecoms Corporation [POTC] controlled by Messrs. Ilusorio,
Poblador,
Nieto, Benedicto and Reyes. Thereafter, desiring to obtain the
franchise
for the establishment of a tropospheric scatter system communications
with
Taiwan, but aware that it could not possibly do so without a strong
Filipino
partner, EEATC entered into a business alliance with POTC enabling them
to obtain a franchise and the needed government approvals.
Despite this alliance,
Cable & Wireless was uneasy about its tenure in the Philippines, in
view of the then forthcoming expiration of the Laurel-Langley Act which
expiration would require American corporations to reorganize themselves
into 60/40 corporations with majority Filipino ownership.
In March 1974, EEATC
Philippine representative M.C. Bane was called to a conference at Camp
Crame with the then Secretary of National Defense. Present at the
meeting
were representatives of RCA and Globe Mackay who, together with M.C.
Bane,
were told that they had until July of 1974 within which to reorganize
their
respective corporations into a 60/40 corporation in favor of Filipino
ownership
and that failing to do so, the Philippine Government would take the
necessary
action.
With the deadline fast
approaching, EEATC re-opened negotiations with POTC, which at that time
had undergone rapid changes resulting in Nieto, Jr. becoming its
controlling
figure and Atty. Jose L. Africa as its negotiating representative.
During
the negotiations, Atty. Africa was quick to point out that EEATC was to
deal only with the BAN Group [Benedicto, Africa and Nieto] allegedly at
the express wish of then President Marcos.
The figure eventually
arrived at for EEATC's assets was P10M of which P6M was to be the input
of the BAN Group. However, upon Atty. Africa's information that the BAN
Group could put up only P1M, a compromise was suggested for the new
corporation
to raise a bank loan from which Cable and Wireless could be paid for
the
assets to be acquired. After a series of negotiations, it was agreed
that
a loan of P7M was to be arranged and BAN would contribute P3M while
Cable
and Wireless would contribute P2M, thus establishing a 60/40
relationship
in a new corporation. Despite this agreement, Africa again informed
Cable
and Wireless that the BAN Group could raise only P1M and asked whether
it would be possible for Cable and Wireless to lend the group P2M
repayable
over a period of three [3] years. Seeing no other alternative, Cable
and
Wireless agreed to this arrangement. The loan document was drawn up
while
Nieto, Jr. secured the signature of then President Marcos on
Presidential
Decree No. 489 transferring the franchise of EEATC to the new
corporation,
Eastern Telecommunications of the Philippines, Inc. [ETPI].
Under the Management
of Cable and Wireless ETPI grew and prospered. But when its dividends,
which were paid in dollars to the BAN Group, began to run into
millions,
said group also started to intervene in the corporation's operations
and
management. Requests for employment of family relatives and high
salaries
for them were made. The BAN Group likewise placed the majority of their
individual stockholdings in three [3] separate companies, namely:
Aerocom
Investors, Universal Molasses, and Polygon, so that in 1986, the
ownership
of the Class "A" stocks of the corporation was as follows:
Roberto S.
Benedicto
3.3 percent
Universal Molasses
Corp. 16.6 percent
Manuel Nieto, Jr.
2.2
percent
Nieto's relatives
3.3
percent
Aerocom Investors
and
Managers Inc. 17.5 percent
Jose Africa 2.2
percent
Africa's relatives
.3 percent
Polygon Investors
and
Managers Inc. 17.5 percent
By the end of 1987, the
initial capital of P1M of the BAN Group and its corporations and
relatives,
had grown to the astronomical sum of P784,185,198.00. Cash dividends
paid
to them as of 1986 had amounted to P225,845,000.00 even as another
P180,000,000.00
is due them for 1987, for a grand total of P405,845,000.00. In 1984,
cash
dividends to the BAN Group, et al. in the amount of $1M were remitted
to
the United States.
Under a consultancy
contract, Polygon Investors and Managers, with Jose L. Africa as
Chairman
and his son, Victor Africa as President, earned from ETPI as of 1987
more
than P57M. Likewise in 1987, ETPI paid to Jose L. Africa P1,200,000.00
as "professional fees" and Manuel H. Nieto, Jr., another P1,200,000.00
as "allowances."
On a prima facie
finding that the three owned corporations, Aerocom, Universal and
Polygon
are Marcos-owned firms, the PCGG, on March 14, 1986 sequestered the
company
ETPI and on July 22, 1987 PCGG filed with the Sandiganbayan Civil Case
No. 0009 for Reconveyance, Reversion, Accounting, Restitution of the
ill-gotten
ETPI shares and damages in connection therewith. The sequestration
order
was partially lifted with respect to the Class "B" shares which
belonged
to Cable and Wireless.
The root cause of the
present controversy is the PCGG Resolution dated January 28, 1988 which
ordered the reconvening and resumption of the annual stockholders
meeting
of the Eastern Telecommunications Philippines, Inc. on 29 January 1988
at 2:00 P.M. at the principal office of the corporation. The meeting
was
originally scheduled for 4 January 1988, but had to be and was duly
adjourned
the same day.
A copy of this
resolution,
contained in a letter addressed to the Chairman and Corporate Secretary
of ETPI was received by respondent Victor Africa as Corporation
Secretary
of ETPI at 11:11 A.M. of January 29, 1988. At 2:00 P.M. of the same
day,
the reconvened stockholders' meeting was held over the objection
interposed
by said respondent Victor Africa as corporate secretary and stockholder
of ETPI, on the manner the meeting was called. In said stockholders'
meeting
petitioners Eduardo M. Villanueva, as PCGG nominee, and Roman Mabanta
and
Eduardo de los Angeles as nominees of the foreign investors, Cable and
Wireless Ltd. and Jose L. Africa [who was absent] were elected members
of the Board of Directors. Immediately thereafter, the elected
directors
present held an organizational meeting, in turn, electing Eduardo
Villanueva
as President and General Manager, petitioners Ramon Desuasido, Almario
Velasco and Ranulfo Payos as Acting Corporate Secretary, Acting
Treasurer
and Acting Assistant Corporate Secretary, respectively. The Board of
Directors
further resolved to hold a Board meeting on February 8, 1988.
At the February 8,
1988 meeting, the Board of Directors resolved, among others, to propose
amendments to ETPI's Articles of Incorporation to abrogate "the right
of
first refusal" clause embodied in Article 10 thereof and to call for a
special stockholders meeting in February 29, 1988 for the purpose of
ratifying
the proposed amendment.
On February 15, 1988,
respondents Victor Africa and Rafael C. Valdez, as alleged erstwhile
Corporate
Secretary and Director, respectively, of ETPI, filed before the
Securities
and Exchange Commission [SEC] a verified complaint with prayer for
preliminary
injunction, docketed therein as SEC Case No. 3297, assailing the
legality
of the Board of Directors' and Corporate Officers' elections at the
reconvened
stockholders meeting on January 29, 1988, the Board meetings of January
29 and February 8, 1988 as well as all the acts done by the Board
during
said meetings.
During the pendency
of the application for preliminary injunction, respondents Victor
Africa
and Rafael Valdez filed an urgent motion for a temporary restraining
order
to enjoin the Board of Directors from proceeding with the special
stockholders
meeting on February 29, 1988. This motion was opposed by therein
respondents
Mabanta and delos Angeles.
On February 26, 1988,
by way of special appearance, the office of the Solicitor General filed
an omnibus motion for the PCGG to intervene and for the dismissal of
the
case in so far as Villanueva, Velasco, Payos and Desuasido were
concerned,
claiming that they were PCGG nominees/designees, and, therefore, beyond
the jurisdiction of the SEC.
At the hearing on
February
29, 1988, therein respondent de los Angeles agreed to defer the
February
29 meeting but at the resumption of the hearing on March 1, 1988,
therein
petitioners reiterated their Urgent Motion for a Temporary Restraining
Order manifesting that the meeting of February 29, 1988 was merely
adjourned
to March 4, 1988.
On March 3, 1988, after
marathon hearings on the application for a temporary restraining order,
the hearing panel of the SEC issued the assailed Order effective for
twenty
[20] days, on the grounds that "the said stockholders meeting on March
4, 1988 is not really that urgent and to afford the Panel sufficient
time
to deliberate on the matter without rendering the act sought to be
enjoined
academic."[4]
Also on March 3, 1988,
respondents Jose Africa and Manuel H. Nieto, Jr. as stockholders of
ETPI
filed in Civil Case No. 0009 of the Sandiganbayan a Motion for
Injunction
with prayer for a Temporary Restraining Order to enjoin the PCGG, its
Commissioners,
nominated Directors and/or Corporate Officers, employees, nominees,
agents
and/or representatives from calling or holding meetings of the
stockholders
and the Board of Directors, managing the corporation, controlling its
policies,
running its day-to-day business, etc. The following day, March 4, 1988,
the Sandiganbayan issued the second assailed temporary restraining
order.
Hence, this petition, PCGG maintaining that both the SEC and
Sandiganbayan
acted with grave abuse of discretion and in excess of jurisdiction in
issuing
said temporary restraining orders, the SEC for having done so without
first
resolving its motion for intervention and for dismissal of the case;
and
the Sandiganbayan for taking cognizance of the motion, thereby
intervening
with the PCGG's executive and administrative jurisdiction.
Without giving due
course to the Petition, the Court set the case for hearing on March 17,
1988. At said hearing, We required the parties to file their memoranda
on the applicability of the case of Bataan Shipyard & Engineering,
Co., Inc. vs. Presidential Commission on Good Government [150 SCRA 181]
to the petition at bar. All parties complied with this Order.
We shall deal first
with the SEC case. By its own terms, the temporary restraining order
issued
in SEC Case No. 3297 was effective only for twenty [20] days. The same
has, therefore, already expired rendering the challenge against it moot
and academic. This, notwithstanding, the Court has decided to delve
deeper
into the SEC case to correct a blatant jurisdictional defect and thus,
save the parties unnecessary waste of time and effort as well as to
avoid
multiplicity of suits and promote the orderly administration of justice.
On the basis of the
allegations in the Complaint filed by respondent Victor Africa and
Rafael
Valdez in SEC Case No. 3297, it would appear that the Complaint being
lodged
before the SEC pertained primarily to an intra-corporate controversy.
The
respondents named therein are the individual members of the Board of
Directors
and the Corporate Officers of ETPI and the acts sought to be nullified
or enjoined were the supposedly illegal corporate acts of these
individuals.
Conveniently omitted are the information that certain stocks of the
corporation
are under sequestration by the PCGG and that some individually named
respondents
are PCGG nominees or designees. The lone reference to PCGG is found in
paragraph 5 of the complaint alleging the receipt by Victor Africa of a
letter from PCGG Chairman Ramon A. Diaz ordering a stockholders'
meeting
on the 29th of January, 1988 at 2:00 P.M. at the principal office of
the
Corporation and the allegation that this notice was in violation of the
provision in the corporation's By-laws regarding notice of meetings. By
this clever presentation of the antecedent facts, the SEC was misled
into
taking cognizance of the complaint, and in view of the forthcoming
special
stockholders meeting being sought to be enjoined, the Hearing Panel was
constrained to issue the assailed temporary restraining order if only
to
maintain the status quo and thus, prevent the case from
becoming
moot and academic.
Under these
circumstances,
the issuance of the temporary restraining order would have been legal
and
proper. What, to Our mind, taints the same with grave abuse of
discretion
was the fact that at the time of the issuance of the assailed temporary
restraining order, there were certain information already within the
knowledge
of the Hearing Panel. For it must be remembered that as early as
February
26, 1988, the Office of the Solicitor General had filed a motion for
intervention
and for dismissal of the case for lack of jurisdiction. If on the basis
of the complaint filed by respondents Victor Africa and Rafael Valdez,
it was not readily discernible that it was the legality of the PCGG's
resolution
of January 29, 1988 that has to be determined as the order which gave
rise
to the chain of events sought to be nullified or enjoined, the
disclosure
in the motion to intervene that some of the individual respondents in
SEC
Case No. 3297 are PCGG nominees or designees should have made it clear
to the Hearing Panel that the PCGG was the real party in interest. The
Hearing Panel should have then realized that there exists an element in
the case which effectively removes it from the jurisdiction of the
Commission,
i.e., the presence of the PCGG, which as another quasi-judicial body is
a co-equal entity over which actions the SEC has no power of control.
In one of the
valedictory
Decisions of Mr. Chief Justice Claudio Teehankee, this Court finally
laid
to rest the question of the proper forum before which actions to
challenge
the PCGG's acts or orders in sequestration cases may be instituted.
Thus:
"Executive Order No.
14 specifically provides in Section 2 that 'The Presidential Commission
on Good Government shall file such cases whether civil or criminal,
with
the Sandiganbayan which shall have exclusive and original jurisdiction
thereof.' Necessarily, those who wish to question or challenge the
Commission's
acts or orders in such case must seek recourse in the same court, the
Sandiganbayan,
which is vested exclusive and original jurisdiction. The
Sandiganbayan's
decisions and final orders are in turn subject to review on certiorari
exclusively by this Court."[5]
The root cause of the SEC
controversy being undeniably the PCGG's resolution calling for a
stockholders
meeting of the partially sequestered ETPI, the challenge thereto is
properly
cognizable by the Sandiganbayan. The other respondents in this
petition,
Messrs. Jose Africa and Manuel H. Nieto, Jr., were, in a sense, more
perceptive
in filing a Motion for Injunction in Civil Case No. 0009 pending before
the Sandiganbayan.
In the face of this
glaring lack of jurisdiction, it follows that had the temporary
restraining
order issued in SEC Case No. 3297 not lost its effectivity functus
officio,
the same would have been set aside. But, as earlier intimated, the case
does not end here. SEC Case No. 3297 should further be ordered
dismissed
for lack of jurisdiction.
We come now to the
second assailed temporary restraining order dated March 4, 1988 issued
by the Sandiganbayan in Civil Case No. 0009, which was replaced on
March
29, 1988 with a writ of preliminary injunction, and which injunction
was
reiterated on May 2, 1988.[6]
The main objection interposed by the PCGG to the issuance of these
orders
is that they were. in effect, an intervention by the Sandiganbayan with
the PCGG's discretionary executive and administrative jurisdiction.
Verily, the PCGG is
vested with executive and administrative jurisdiction over sequestered
corporations, business enterprises and properties. The powers granted
to
the PCGG, no matter how broad they appear, however, must be exercised
pursuant
to its pronounced objective of "provisionally taking 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 entities or persons close to the former President Marcos."[7]
It is with this objective in mind that in the leading case of BASECO
vs.
PCGG, supra, this Court laid down certain guidelines on what
acts
may or may not be done by the PCGG with regard to said sequestered
properties
or businesses. We tried to cover as wide a range of activities in said
case as possible but We realize that We cannot even attempt to
encompass
all situations. Each case must be decided on the basis of its factual
antecedents
and merits, but always with reference to the objectives for which the
PCGG
was created. In like manner should the PCGG's acts and orders be
measured.
Acts or orders transgressing this parameter are certainly tainted with
abuse of discretion which the Sandiganbayan, the Court vested with
exclusive
and original jurisdiction over case involving the PCGG, may correct.
Otherwise,
PCGG would be above the law.
In the case at bar,
the stockholders meeting enjoined by the SEC and the Sandiganbayan was
called specifically for the purpose of ratifying the proposed amendment
to delete from ETPI's Articles of Incorporation and By-Laws the "right
of first refusal" clause. The question that must now be resolved
is
whether the PCGG may be permitted to vote the sequestered shares to
effect
this change.
The "right of first
refusal" is primarily an attribute of ownership. Conversely, a
waiver
thereof is an act of ownership. To allow the PCGG to vote the
sequestered
shares for this purpose would be sanctioning its exercise of an act of
strict ownership. To Our mind, though, it is not so much the nature of
the act proposed to be done by the PCGG that is essential, but rather,
the purpose for doing so. The prime consideration should be: Is the act
proposed to be done by the PCGG merely an act of administration or an
act
of strict ownership essential to the pursuit of its objectives? For, it
cannot be totally discounted that situations may arise wherein only
through
an act of strict ownership can the PCGG be able to prevent the
dissipation
of the assets of the sequestered corporation or business. Fortunately,
this is not one of them. For while We commend the purported objective
of
the PCGG for trying to amend the "right of first refusal"
clause
to enable it to sell the sequestered shares to the public. We cannot
see
our way clear as to how this move could help prevent the dissipation of
the corporation's assets, particularly when it has its own
representatives
in the Board of Directors, who can effectively provide such measures
and
safeguards to prevent such dissipation. Moreover, to sell the
sequestered
shares at this time when the issue of ownership is still pending before
the Sandiganbayan and the exact equity proportion thereof is still
uncertain,
would not only be premature, but would also expose the would-be buyers
to great risks.
But while We find the
Sandiganbayan to have acted properly in enjoining the PCGG from holding
the stockholders meeting for the specified purpose of amending the
"right
of first refusal" clause in ETPI's Articles of Incorporation and
By-Laws,
We find the general injunction imposed by it on the PCGG to desist and
refrain from calling a stockholders meeting for the purpose of electing
a new Board of Directors of effecting substantial changes in the
policy, program or practice of the corporation to be too broad as to
taint
said order with grave abuse of discretion. Said order completely ties
the
hands of the PCGG, rendering it virtually helpless in the exercise of
its
power of conserving and preserving the assets of the corporation.
Indeed,
of what use is the PCGG if it cannot even do this? The injunction
issued
by the Sandiganbayan must be lifted with qualifications as it was
lifted
in our resolution dated May 24, 1988.
As to the charge of
forum-shopping imputed to private respondents, We give the latter the
benefit
of the doubt considering that there are two separate sets of
petitioners
in the SEC and Sandiganbayan cases and the lack of a definite ruling,
at
the time of the filing of the petitions in SEC and Sandiganbayan, as to
which is the proper forum in cases of this nature.
WHEREFORE,
the
Temporary
Restraining Order issued in SEC Case No. 3297 is hereby declared a
nullity
and SEC Case No. 3297 is ordered dismissed for lack of jurisdiction.
The
writs of preliminary injunction dated March 25 and May 2, 1988 issued
by
the Sandiganbayan in Civil Case No. 0009 are lifted except in so far as
they enjoin petitioners from holding a stockholders meeting for the
purpose
of deleting from ETPI's Articles of Incorporation and By-Laws the "right
of first refusal" clause. No pronouncement as to costs.
SO ORDERED.
Yap, C.J .,
Narvasa, Melencio-Herrera, Cruz, Paras, Feliciano, Gancayco, Padilla,
Bidin,
Sarmiento, Cortes, Griño-Aquino and Medialdea, JJ.,
concur.
Gutierrez, Jr., J.,
is on leave.
________________________
Endnotes:
[1]
Annex "U", Petition, p. 192, Rollo.
[2]
Annex "B", Petitioners Urgent Manifestation and Motion dated March 29,
1988.
[3]
Footnote reference and text are not cited in the original copy.
[4]
p. 190, Rollo.
[5]
Presidential Commission on Good Government v. Hon. Emmanuel
Peña,
etc., et al., G.R. No. 77663, April 12, 1988.
[6]
Annex A, Third Urgent Motion to Resolve Urgent Consolidated Petition.
[7]
Sec. 3[b], Executive Order No. 1. |