PCGG v. Silangan Investors (G.R. Nos. 167055-56; March 25, 2010)


FACTS: Silangan and Polygon owned 25,429 (39.999%) and 12,700 (19.977%) shares of stock, respectively, in Oceanic. The Presidential Commission on Good Government by authority of the President of the Philippines, ordered the sequestration of the shares which belong to or are owned or controlled by ROBERTO S. BENEDICTO, JOSE L. AFRICA, VICTOR A. AFRICA AND ALFREDO L. AFRRICA in the following business entities, including whatever emoluments or benefits may be due the said shares.PCGG filed before the Sandiganbayan a complaint for reconveyance, accounting and damages against Jose, Manuel H. Nieto, Jr. (Nieto, Jr.), Ferdinand E. Marcos, Imelda R. Marcos, Ferdinand R. Marcos, Jr., Benedicto, Juan Ponce Enrile, and Potenciano Ilusorio. The case was docketed as Civil Case No. 0009. By virtue of the writs of sequestration, PCGG sequestered majority of Oceanics shares of stock and took over its management. PCGG voted the shares of stock registered in the names of Silangan and Polygon, reorganized the board of directors, elected its own set of officers, and declared cash dividends.

Benedicto and PCGG entered into a compromise agreement. PCGG filed before the Sandiganbayan a complaint for injunction and damages against Victor, Jose, Nieto, Jr., and Juan De Ocampo. Jose, Nieto, Jr., Andres L. Africa, Aerocom, Polygon, Belgor Investment, Inc., and Silangan filed before the Sandiganbayan a petition for certiorari and prohibition under Rule 65 of the Rules of Court against PCGG.

In its 25 April 1994 Decision, the Sandiganbayan held that (1) the 15 June 1988 writs of sequestration were void because the PCGG failed to commence judicial action within the required six-month period; (2) the 11 April 1986 writ of sequestration was void because it was signed by only one commissioner; and (3) the acts of PCGG in managing Oceanic were void. PCGG filed a motion for reconsideration, which was denied by the Sandiganbayan in its 30 March 1995 Resolution.

In its 31 July 1998 Order, the Sandiganbayan placed the cash dividends declared by Oceanic in custodia legis. PCGG filed before the Court a petition for review on certiorari under Rule 45 of the Rules of Court, challenging the Sandiganbayans 25 April 1994 Decision. In Presidential Commission on Good Government v. Sandiganbayanthe Court affirmed the Sandiganbayans Decision.

In its 21 June 2004 Resolution, the Sandiganbayan granted Silangans 1 June 2004 motion and released the uncontested 49% of the cash dividends, with interest, declared by Oceanic. Upon denial of PCGGs motion for reconsideration, it filed the present.

ISSUE: Did the Sandiganbayan committ grave abuse of discretion when it ordered the release of the cash dividends, with interest, to Silangan and Polygon?

HELD: In petitions for certiorari under Rule 65 of the Rules of Court, petitioner must show that respondent tribunal acted with grave abuse of discretion.

Grave abuse of discretion is defined as such capricious or whimsical exercise of judgment equivalent to lack of jurisdiction. The abuse of discretion must be so patent and gross as to amount to an evasion of a positive duty or a virtual refusal to perform a duty enjoined by law, or to act at all in contemplation of law as where the power is exercised in an arbitrary and despotic manner by reason of passion or hostility.

PCGG failed to show that the Sandiganbayan acted with grave abuse of discretion. The Resolutions ordering the release to Silangan and Polygon of their Oceanic cash dividends, with interest, were grounded on sound legal and factual bases: (1) PCGG agreed to the release to Silangan of 49% of its cash dividends, with interest; (2) Benedicto ceded to the government his 51% equity in Silangan, not Oceanic; (3) Silangan, being a stockholder of Oceanic, was entitled to the cash dividends declared by the company; (4) Silangan engaged the services of M.M. Lazaro & Associates and agreed to pay 15% of the total amount it may recover as contingent fee; (5) in its 25 April 1994 Decision, the Sandiganbayan declared void PCGGs sequestration of the Oceanic shares of stock in the names of Polygon, Aerocom, Silangan, Belgor, Jose and Victor Silanan and Polygon were not sequestered; (6) In Presidential Commission, the Court affirmed the Sandiganbayans 25 April 1994 Decision; (7) Presidential Commission became final and executory and was entered in the Book of Entries of Judgments; (8) the Sandiganbayan issued a writ of execution, dated 30 September 2003, to implement the 25 April 1994 Decision; and (9) the 30 September 2003 writ of execution was implemented.

The actions contemplated by the Constitution should be those which include the corporation not as a mere annex to the complaint but as defendant. This is the minimum requirement of the due process guarantee.

Such is the fate of the subject writ of sequestration, unfortunately. Whether the 18-month period expired on July 26, 1988 (as claimed by Aerocom, in line with the computation of time under Article 13 of the Civil Code and the ruling in "National Marketing Corp. v. Tecson," 29 SCRA 70) or on August 2, 1988 (the PCGGs position), the fact remains that service of the writ on Aerocom on August 3, 1988 was made beyond these dates.

The PCGG cannot justify its failure, as found by the Sandiganbayan, to file the corresponding judicial action against Aerocom within the six (6)-month period as provided for under the same constitutional provision in focus (Section 26, Article XVIII, second paragraph) by the fact that Aerocom was mentioned in the complaint of the PCGG in Civil Case No. 0009 (the Nieto, Africa, et al. case) and in Annex "A" thereof notwithstanding that Aerocom was not impleaded as party-defendant, and on the argument that the filing of Civil Case No. 0009 against the "Nieto, Africa, et al. group" is enough compliance with the "judicial action" requirement.

There is no existing sequestration to talk about in this case, as the writ issued against Aerocom, to repeat, is invalid for reasons hereinbefore stated. Ergo, the suit in Civil Case No. 0009 against Mr. Nieto and Mr. Africa as shareholders in Aerocom is not and cannot ipso facto be a suit against the unimpleaded Aerocom itself without violating the fundamental principle that a corporation has a legal personality distinct and separate from its stockholders.

In cases where stocks of a corporation were allegedly the fruits of ill-gotten wealth, it should be remembered that in most of these cases the stocks involved constitute a substantial if not controlling interest in the corporations. The basic tenets of fair play demand that these corporations be impleaded as defendants since a judgment in favor of the government will undoubtedly substantially and decisively affect the corporations as distinct entities. The judgment could strip them of everything without being previously heard as they are not parties to the action in which judgment is rendered. DISMISSED.