G.R. No.

58168 December 19, 1989

CONCEPCION MAGSAYSAY-LABRADOR, SOLEDAD MAGSAYSAY-CABRERA, LUISA MAGSAYSAY-CORPUZ,

assisted be her husband, Dr. Jose Corpuz, FELICIDAD P. MAGSAYSAY, and MERCEDES MAGSAYSAY-
DIAZ, petitioners,
vs.
THE COURT OF APPEALS and ADELAIDA RODRIGUEZ-MAGSAYSAY, Special Administratrix of the Estate of the late
Genaro F. Magsaysay respondents.

FERNAN, C.J.:

In this petition for review on certiorari, petitioners seek to reverse and set aside [1] the decision of the Court of Appeals dated July l3,
1981, 1 affirming that of the Court of First Instance of Zambales and Olongapo City which denied petitioners' motion to intervene in
an annulment suit filed by herein private respondent, and [2] its resolution dated September 7, 1981, denying their motion for
reconsideration.

Petitioners are raising a purely legal question; whether or not respondent Court of Appeals correctly denied their motion for
intervention.

The facts are not controverted.

On February 9, 1979, Adelaida Rodriguez-Magsaysay, widow and special administratix of the estate of the late Senator Genaro
Magsaysay, brought before the then Court of First Instance of Olongapo an action against Artemio Panganiban, Subic Land
Corporation (SUBIC), Filipinas Manufacturer's Bank (FILMANBANK) and the Register of Deeds of Zambales. In her complaint, she
alleged that in 1958, she and her husband acquired, thru conjugal funds, a parcel of land with improvements, known as "Pequena
Island", covered by TCT No. 3258; that after the death of her husband, she discovered [a] an annotation at the back of TCT No. 3258
that "the land was acquired by her husband from his separate capital;" [b] the registration of a Deed of Assignment dated June 25,
1976 purportedly executed by the late Senator in favor of SUBIC, as a result of which TCT No. 3258 was cancelled and TCT No.
22431 issued in the name of SUBIC; and [c] the registration of Deed of Mortgage dated April 28, 1977 in the amount of P
2,700,000.00 executed by SUBIC in favor of FILMANBANK; that the foregoing acts were void and done in an attempt to defraud the
conjugal partnership considering that the land is conjugal, her marital consent to the annotation on TCT No. 3258 was not obtained,
the change made by the Register of Deeds of the titleholders was effected without the approval of the Commissioner of Land
Registration and that the late Senator did not execute the purported Deed of Assignment or his consent thereto, if obtained, was
secured by mistake, violence and intimidation. She further alleged that the assignment in favor of SUBIC was without consideration
and consequently null and void. She prayed that the Deed of Assignment and the Deed of Mortgage be annulled and that the Register
of Deeds be ordered to cancel TCT No. 22431 and to issue a new title in her favor.

On March 7, 1979, herein petitioners, sisters of the late senator, filed a motion for intervention on the ground that on June 20, 1978,
their brother conveyed to them one-half (1/2 ) of his shareholdings in SUBIC or a total of 416,566.6 shares and as assignees of around
41 % of the total outstanding shares of such stocks of SUBIC, they have a substantial and legal interest in the subject matter of
litigation and that they have a legal interest in the success of the suit with respect to SUBIC.

On July 26, 1979, the court denied the motion for intervention, and ruled that petitioners have no legal interest whatsoever in the
matter in litigation and their being alleged assignees or transferees of certain shares in SUBIC cannot legally entitle them to intervene
because SUBIC has a personality separate and distinct from its stockholders.

On appeal, respondent Court of Appeals found no factual or legal justification to disturb the findings of the lower court. The appellate
court further stated that whatever claims the petitioners have against the late Senator or against SUBIC for that matter can be
ventilated in a separate proceeding, such that with the denial of the motion for intervention, they are not left without any remedy or
judicial relief under existing law.

Petitioners' motion for reconsideration was denied. Hence, the instant recourse.

Petitioners anchor their right to intervene on the purported assignment made by the late Senator of a certain portion of his
shareholdings to them as evidenced by a Deed of Sale dated June 20, 1978. 2 Such transfer, petitioners posit, clothes them with an
interest, protected by law, in the matter of litigation.
Invoking the principle enunciated in the case of PNB v. Phil. Veg. Oil Co., 49 Phil. 857,862 & 853 (1927), 3 petitioners strongly argue
that their ownership of 41.66% of the entire outstanding capital stock of SUBIC entitles them to a significant vote in the corporate
affairs; that they are affected by the action of the widow of their late brother for it concerns the only tangible asset of the corporation
and that it appears that they are more vitally interested in the outcome of the case than SUBIC.

Viewed in the light of Section 2, Rule 12 of the Revised Rules of Court, this Court affirms the respondent court's holding that
petitioners herein have no legal interest in the subject matter in litigation so as to entitle them to intervene in the proceedings below. In
the case of Batama Farmers' Cooperative Marketing Association, Inc. v. Rosal, 4 we held: "As clearly stated in Section 2 of Rule 12 of
the Rules of Court, to be permitted to intervene in a pending action, the party must have a legal interest in the matter in litigation, or in
the success of either of the parties or an interest against both, or he must be so situated as to be adversely affected by a distribution or
other disposition of the property in the custody of the court or an officer thereof ."

To allow intervention, [a] it must be shown that the movant has legal interest in the matter in litigation, or otherwise qualified; and [b]
consideration must be given as to whether the adjudication of the rights of the original parties may be delayed or prejudiced, or
whether the intervenor's rights may be protected in a separate proceeding or not. Both requirements must concur as the first is not
more important than the second. 5

The interest which entitles a person to intervene in a suit between other parties must be in the matter in litigation and of such direct
and immediate character that the intervenor will either gain or lose by the direct legal operation and effect of the judgment. Otherwise,
if persons not parties of the action could be allowed to intervene, proceedings will become unnecessarily complicated, expensive and
interminable. And this is not the policy of the law. 6

The words "an interest in the subject" mean a direct interest in the cause of action as pleaded, and which would put the intervenor in a
legal position to litigate a fact alleged in the complaint, without the establishment of which plaintiff could not recover. 7

Here, the interest, if it exists at all, of petitioners-movants is indirect, contingent, remote, conjectural, consequential and collateral. At
the very least, their interest is purely inchoate, or in sheer expectancy of a right in the management of the corporation and to share in
the profits thereof and in the properties and assets thereof on dissolution, after payment of the corporate debts and obligations.

While a share of stock represents a proportionate or aliquot interest in the property of the corporation, it does not vest the owner
thereof with any legal right or title to any of the property, his interest in the corporate property being equitable or beneficial in nature.
Shareholders are in no legal sense the owners of corporate property, which is owned by the corporation as a distinct legal person. 8

Petitioners further contend that the availability of other remedies, as declared by the Court of appeals, is totally immaterial to the
availability of the remedy of intervention.

We cannot give credit to such averment. As earlier stated, that the movant's interest may be protected in a separate proceeding is a
factor to be considered in allowing or disallowing a motion for intervention. It is significant to note at this juncture that as per records,
there are four pending cases involving the parties herein, enumerated as follows: [1] Special Proceedings No. 122122 before the CFI
of Manila, Branch XXII, entitled "Concepcion Magsaysay-Labrador, et al. v. Subic Land Corp., et al.", involving the validity of the
transfer by the late Genaro Magsaysay of one-half of his shareholdings in Subic Land Corporation; [2] Civil Case No. 2577-0 before
the CFI of Zambales, Branch III, "Adelaida Rodriguez-Magsaysay v. Panganiban, etc.; Concepcion Labrador, et al. Intervenors",
seeking to annul the purported Deed of Assignment in favor of SUBIC and its annotation at the back of TCT No. 3258 in the name of
respondent's deceased husband; [3] SEC Case No. 001770, filed by respondent praying, among other things that she be declared in her
capacity as the surviving spouse and administratrix of the estate of Genaro Magsaysay as the sole subscriber and stockholder of
SUBIC. There, petitioners, by motion, sought to intervene. Their motion to reconsider the denial of their motion to intervene was
granted; [4] SP No. Q-26739 before the CFI of Rizal, Branch IV, petitioners herein filing a contingent claim pursuant to Section 5,
Rule 86, Revised Rules of Court. 9 Petitioners' interests are no doubt amply protected in these cases.

Neither do we lend credence to petitioners' argument that they are more interested in the outcome of the case than the corporation-
assignee, owing to the fact that the latter is willing to compromise with widow-respondent and since a compromise involves the giving
of reciprocal concessions, the only conceivable concession the corporation may give is a total or partial relinquishment of the
corporate assets. 10

Such claim all the more bolsters the contingent nature of petitioners' interest in the subject of litigation.

The factual findings of the trial court are clear on this point. The petitioners cannot claim the right to intervene on the strength of the
transfer of shares allegedly executed by the late Senator. The corporation did not keep books and records. 11 Perforce, no transfer was
ever recorded, much less effected as to prejudice third parties. The transfer must be registered in the books of the corporation to affect
third persons. The law on corporations is explicit. Section 63 of the Corporation Code provides, thus: "No transfer, however, shall be
valid, except as between the parties, until the transfer is recorded in the books of the corporation showing the names of the parties to
the transaction, the date of the transfer, the number of the certificate or certificates and the number of shares transferred."

And even assuming arguendo that there was a valid transfer, petitioners are nonetheless barred from intervening inasmuch as their
rights can be ventilated and amply protected in another proceeding.

WHEREFORE, the instant petition is hereby DENIED. Costs against petitioners.

SO ORDERED.

Gutierrez, Jr., Bidin and Corte's, JJ., concur.

Feliciano, J., is on leave.

G.R. No. 171626 August 6, 2014

OLONGAPO CITY, Petitioner,

vs.
SUBIC WATER AND SEWERAGE CO., INC., Respondent.

DECISION

BRION, J.:

We resolve in this petition for certiorari1 under Rule 65 the challenge to the July 6, 2005 decision2 and the January 3, 2006
resolution3 (assailed CA rulings) of the Court of Appeals (CA) in CAG.R. SP No. 80947.

These assailed CA rulings annulled and set aside: a) the July 29, 2003 order 4 of the Regional Trial Court of Olongapo, Br. 75 (RTC
Olongapo ), which directed the issuance of a writ of execution in Civil Case No. 582-0-90, against respondent Subic Water and
Sewerage Co., Inc. (Subic Water); b) the July 31, 2003 writ of execution5subsequently issued by the same court; and c) the October 7,
2003 order6 of R TC Olongapo, denying Subic Water's special appearance with motion to reconsider order dated July 29, 2003 and to
quash writ of execution dated July 31, 2003. 7

Factual Antecedents

On May 25, 1973, Presidential Decree No. 198 8 (PD 198) took effect. This law authorized the creation of local water districts which
may acquire, install, maintain and operate water supply and distribution systems for domestic, industrial, municipal and agricultural
uses.9

Pursuant to PD 198, petitioner Olongapo City (petitioner) passed Resolution No. 161, which transferred all itsexisting water facilities
and assets under the Olongapo City Public Utilities Department Waterworks Division, to the jurisdiction and ownership of the
Olongapo City Water District (OCWD).10

PD 198, as amended,11 allows local water districts (LWDs)which have acquired an existing water system of a localgovernment unit
(LGU) to enter into a contract to pay the concerned LGU. In lieu of the LGU’s share in the acquired water utility plant, it shall be paid
by the LWD an amount not exceeding three percent (3%) of the LWD’s gross receipts from water sales in any year. 12

On October 24, 1990, petitioner filed a complaint for sum of money and damages against OCWD. Among others, petitioner alleged
that OCWD failed to pay its electricity bills to petitioner and remit its payment under the contract to pay, pursuant to OCWD’s
acquisition of petitioner’s water system. In its complaint, petitioner prayed for the following reliefs:

"WHEREOF, it is respectfully prayed of this Honorable Court that after due hearing and notice, judgment be rendered in favor of
plaintiff ordering the defendant to:

(a) pay the amount of P26,798,223.70 plus legal interests from the filing of the Complaint to actual full payment;

(b) pay the amount of its in lieu share representing three percent of the defendant’s gross receipts from water sales starting
1981 up to present;
 (c) pay the amount of P1,000,000 as moral damages; and

(d) pay the cost of suit and other litigation expenses." 13

In its answer,14 OCWD posed a counterclaim against petitioner for unpaid water bills amounting to P3,080,357.00.15

In the interim, OCWD entered into a Joint Venture Agreement16 (JVA) with Subic Bay Metropolitan Authority (SBMA), Biwater
International Limited (Biwater), and D.M. Consunji, Inc. (DMCI) on November 24, 1996. Pursuant to this agreement, Subic Water– a
new corporate entity – was incorporated, withthe following equity participation from its shareholders:

SBMA 19.99% or 20%

OCWD 9.99% or 10%

Biwater 29.99% or 30%

DMCI 39.99% or 40%17

On November 24, 1996, Subic Water was granted the franchise to operate and to carry on the businessof providing water and
sewerage services in the Subic BayFree Port Zone, as well as in Olongapo City.18 Hence, Subic Water took over OCWD’s water
operations in Olongapo City.19

To finally settle their money claims against each other, petitioner and OCWD entered into a compromise agreement 20 on June 4, 1997.
In this agreement, petitioner and OCWD offset their respective claims and counterclaims. OCWD also undertook to pay to petitioner
its net obligation amounting to P135,909,467.09, to be amortized for a period of not exceeding twenty-five (25) years at twenty-
fourpercent (24%) per annum. 21

The compromise agreement also contained a provision regarding the parties’ requestthat Subic Water, Philippines,which took over the
operations of the defendant Olongapo City Water District be made the co-makerfor OCWD’s obligations. Mr. Noli Aldip, then
chairman of Subic Water, acted as its representative and signed the agreement on behalf of Subic Water.

Subsequently, the parties submitted the compromise agreement to RTC Olongapo for approval. In its decision dated June 13,
1997,22 the trial court approved the compromiseagreement and adopted it as its judgment in Civil Case No. 580-0-90.

Pursuant to the compromise agreement and in payment of OCWD’s obligations to petitioner,petitioner and OCWD executed a Deed of
Assignment onNovember 24, 1997.23 OCWD assigned all of its rights in the JVA in favor of the petitioner, including but not limited
to the assignment of its shares, lease payments, regulatory assistance fees and other receivables arising out of or related to the Joint
Venture Agreement and the Lease Agreement.24 On December 15,1998, OCWD was judicially dissolved. 25

On May 7, 1999, to enforce the compromise agreement, the petitioner filed a motion for the issuance of a writ of execution 26 with the
trial court. In its July 23, 1999 order,27 the trial court granted the motion, but did not issue the corresponding writ of execution.

Almost four years later, on May 30, 2003, the petitioner, through its new counsel, filed a notice of appearance with urgent
motion/manifestation28 and prayed again for the issuance of a writ of execution against OCWD. A certain Atty. Segundo Mangohig,
claiming to be OCWD’s former counsel, filed a manifestation alleging that OCWD had already been dissolved and that Subic Water is
now the former OCWD.29

Because of this assertion, Subic Water also filed a manifestation informing the trial court that as borne out by the articles of
incorporation and general information sheet of Subic Water x x x defendant OCWD is not Subic Water. 30The manifestation also
indicated that OCWD was only a ten percent (10%) shareholder of Subic Water; and that its 10% share was already inthe process of
being transferred to petitioner pursuant to the Deed of Assignment dated November 24, 1997. 31

The trial court granted the motion for execution and directed its issuance against OCWD and/or Subic Water. Because of this
unfavorable order, Subic Water filed a special appearance with motion to: (1) reconsider order dated July29, 2003; and (2) quash writ
of execution dated July 31, 2003.32
The trial court denied Subic Water’s special appearance, motion for reconsideration, and its motion to quash. Subic Water then filed a
petition for certiorari33 with the CA, imputing grave abuse of discretion amounting to lack or excess of jurisdiction to RTC Olongapo
for issuing its July 29, 2003 and October 7, 2003 orders aswell as the writ of execution dated July 31, 2003. The CA’s Ruling

In its decision dated July 6, 2005,34 the CA granted Subic Water’s petition for certiorariand reversed the trial court’s rulings.

The CA found that the writ ofexecution dated July 31, 200335 did not comply with Section 6, Rule 39 of the Rules of Court, to wit:

Section 6. Execution by motion orby independent action. — A final and executory judgment or order may be executed on motion
within five (5) years from the date of its entry. After the lapse of such time, and before it is barred by the statute of limitations, a
judgment may be enforced by action. The revived judgment may also be enforced by motion within five (5) years from the date of its
entry and thereafter by action before it is barred by the statute of limitations. (6a)[emphasis ours]

A judgment on a compromiseagreement is immediately executory and is considered to have been entered on the date it was approved
by the trial court.36 Since the compromise agreement was approved and adoptedby the trial court on June 13, 1997, this should be the
reckoning date for the counting of the period for the filing of a valid motion for issuance of a writ of execution. Petitioner thus had
until June 13, 2002, to file its motion.

The CA further remarked that whileit was true that a motion for execution was filed by petitioner on May 7, 1999, and the same was
granted by the trial court in its July 23, 1999 order,37 no writ of execution was actually issued.

As the CA looked at the case, petitioner, instead of following up with the trial court the issuance ofthe writ of execution, did not do
anything to secure its prompt issuance. It waitedanother four years to file a second motion for execution on May 30, 2003. 38 By this
time, the allowed period for the filing of a motion for the issuance of the writ had already lapsed. Hence, the trial court’s July 29, 2003
order granting the issuance of the writ was null and void for having been issued by a court without jurisdiction.

The CA denied petitioner’s subsequentmotion for reconsideration. Petitioner is now before us on a petition for certiorari under Rule
65.

The Petition

The petitioner acknowledged the rule that the execution of a judgment could no longer be made by mere motion after the prescribed
five-year period had already lapsed. However, it argued that the delay for the issuance of the writ of execution was caused by OCWD
and Subic Water. The petitioner submitted that this Court had allowed execution by mere motion even after the lapse ofthe five-year
period, when the delay was caused or occasioned by the actions of the judgment debtor. 39

Also, the petitioner asserted that although Subic Water was not a party in the case, it could still be subjected to a writ of execution,
since it was identified as OCWD’s co-maker and successor-in-interest in the compromise agreement.40

Lastly, the petitioner contended that the compromise agreement was signed by Mr. Noli R. Aldip,then Subic Water’s chairman,
signifying Subic Water’s consent to the agreement.

The Court’s Ruling

We DISMISSthe petition for being the wrong remedy and, in any case, for lack of merit; what we have before us is a final judgment
that we can no longer touch unless there is grave abuse of discretion.

A. Procedural Law Aspect

Certiorari is not a substitute for a lost appeal.

At the outset, we emphasize thatthe present petition, brought under Rule 65, merits outright dismissal for having availed an improper
remedy.

The instant petition should havebeen brought under Rule 45 in a petition for review on certiorari. Section 1 of this Rule mandates:

Section 1. Filing of petition with Supreme Court. — A party desiring to appeal by certiorari from a judgment or final order or
resolution of the Court of Appeals, the Sandiganbayan, the Regional Trial Court or other courts whenever authorized by law, may file
with the Supreme Court a verified petition for review on certiorari. The petition shall raise only questions of law which must be
distinctly set forth. (1a, 2a) [emphasis supplied]

Supplementing Rule 45 are Sections 341 and 442 of Rule 56 which govern the applicable procedure in the Supreme Court.

Appeals from judgmentsor final orders or resolutions of the CA should be made through a verified petition for review on certiorari
under Rule 45.43 In this case, petitioner questioned the July 6, 2005 decision44 and the January 3, 2006 resolution45 of the CA which
declared as null and void the writ of execution issued by the trial court. Since the CA’s pronouncement completely disposed of the
case and the issues raised by the parties, it was the proper subject of a Rule 45 petition. It was already a final order that resolved the
subject matter in its entirety, leaving nothing else to be done.

A petition for certiorari under Rule 65 is appropriate only if there is no appeal, or any plain, speedy, and adequate remedy in the
ordinary course of law available tothe aggrieved party. As we have distinctly explained in the case of Pasiona v. Court of Appeals:46

The aggrieved party is proscribed from assailing a decision or final order of the CA viaRule 65 because such recourse is proper only if
the party has no plain,speedy and adequate remedy in the course of law. In this case, petitioner had an adequate remedy, namely, a
petition for review on certiorari under Rule 45 ofthe Rules of Court.A petition for review on certiorari, not a special civil action for
certiorari was, therefore, the correct remedy.

xxxx

Settled is the rule that where appeal is available to the aggrieved party, the special civil actionfor certiorari will not be entertained –
remedies of appealand certiorari are mutually exclusive, not alternative or successive. Hence, certiorari is not and cannot be a
substitute for a lost appeal,especially if one's own negligence or error in one's choice of remedy occasioned such loss or
lapse.47 [emphasis ours]

The petitioner received the CA’s assailed resolution denying its motion for reconsideration on January 9, 2006. Following Rule 45,
Section 2 of the Rules of Court,48 the petitioner had until January 24, 2006 to file its petition for review. It could have even filed a
motion for a 30-day extension of time, a motion that this Court grants for justifiable reasons. 49 But all of these, it failed to do. Thus,
the assailed CA rulings became final and executory and could no longer be the subject of an appeal.

Apparently, to revive its lost appeal, petitioner filed the present petition for certiorari that – under Rule 65 – may be filed within sixty
days from the promulgation of the assailed CA resolution (on January 3, 2006). A Rule 65 petition for certiorari, however, cannot be a
substitute for a lost appeal. With the lapse of the prescribed period for appeal without an action from the petitioner, the present petition
for certiorari– a mere replacement –must be dismissed.

But even without the procedural infirmity, the present recourse to us has no basis on the merits and must be denied.

Execution by motion is only available within the five-year period from entry of judgment.

Under Rule 39, Section 6,50 a judgment creditor has two modes in enforcing the court’s judgment. Execution may be either through
motion or an independent action.

These two modes of execution are available depending on the timing when the judgmentcreditor invoked its right to enforce the
court’s judgment. Execution by motion is only available if the enforcement of the judgment was sought within five (5) years from the
date of its entry. On the other hand, execution by independent action is mandatory if the five-year prescriptive period for execution by
motion had already elapsed.51 However, for execution by independent action to prosper – the Rules impose another limitation – the
action must be filed before it is barred by the statute of limitations which, under the Civil Code, is ten (10) years from the finality of
the judgment.52

On May 7, 1999, within the five-year period from the trial court’s judgment, petitioner filed its motion for the issuance of a writ of
execution. However, despite the grant of the motion, the court did not issue an actual writ. It was only onMay 30, 2003 that petitioner
filed a second motion to ask again for the writ’s issuance. By this time, the allowed five-year period for execution by motion had
already lapsed.

As will be discussed below, since the second motion was filed beyond the five-year prescriptive period set by the Rules, then the writ
of execution issued by the trial court on July 31, 2003 was null and void for having been issued by a court already ousted ofits
jurisdiction.
In Arambulo v. Court of First Instance of Laguna, 53 we explained the rule that the jurisdiction of a court to issue a writ of execution by
motion is only effective within the five-year period from the entry of judgment. Outside this five-year period, any writ of execution
issued pursuant to a motion filed by the judgment creditor, is null and void. If no writ of execution was issued by the court within the
five-year period, even a motion filed within such prescriptive period would not suffice. A writ issued by the court after the lapse of the
five-year period is already null and void.54 The judgment creditor’s only recourse then is to file an independent action, which must
also be within the prescriptive period set by law for the enforcement of judgments.

This Court subsequently reiterated its Arambuloruling in Ramos v. Garciano, 55 where we said:

There seems to be no serious dispute that the 4th alias writ of execution was issued eight (8) daysafter the lapse of the five (5) year
period from the dateof the entry of judgment in Civil Case No. 367. As a general rule, after the lapse of such period a judgment may
be enforced only by ordinary action, not by mere motion (Section 6, Rule 39, Rules of Court).

xxxx

The limitation that a judgment beenforced by execution within five years, otherwise itloses efficacy, goes tothe very jurisdiction of the
Court.A writ issued after such period is void, and the failure to object thereto does notvalidate it, for the reason that jurisdiction of
courts is solely conferred by law and not by express or implied will of the parties. 56[emphasis supplied]

To clearly restate these rulings, for execution by motion to be valid, the judgment creditor mustensure the accomplishment of two acts
within the five-year prescriptive period. These are:a) the filing of the motion for the issuance of the writ of execution; and b) the
court’s actual issuance of the writ.In the instanceswhen the Court allowed execution by motion even after the lapse of five years, we
only recognized one exception, i.e., when the delay is caused or occasioned by actions of the judgment debtor and/or is incurred for
his benefit or advantage.57However, petitioner failed toshow or cite circumstances showing how OCWD or Subic Water caused it to
belatedly file its second motion for execution.

Strictly speaking, the issuance of the writ should have been a ministerial duty on the partof the trial court after it gave its July 23, 1999
order, approving the first motion and directing the issuance of such writ. The petitioner could have easily compelled the court to
actually issue the writ by filing a manifestation onthe existence of the July 23, 1999 order. However, petitioner idly sat and waited for
the five-year period to lapse before it filed its second motion. Having slept on its rights, petitioner had no one to blame but itself.

A writ of execution cannot affect a non- party to a case.

Strangers to a case are not bound by the judgment rendered in it. Thus, a writ of execution can only beissued against a party and not
against one who did not have his day in court.58

Subic Water never participated in the proceedings in Civil Case No. 580-0-90, where OCWD and petitioner were the contending
parties. Subic Water only came into the picture when one Atty. Segundo Mangohig, claiming to beOCWD’s former counsel,
manifested before the trial court that OCWD had already been judicially dissolved and thatSubic Water assumed OCWD’s
personality.

In the present case, the compromise agreement, although signed by Mr. Noli Aldip, did not carry the express conformity of Subic
Water. Mr. Aldip was never given any authorization to conform to or bind Subic Water in the compromiseagreement. Also, the
agreement merely labeled Subic Water as a co-maker. It did not contain any provision where Subic Water acknowledged its solidary
liability with OCWD.

Lastly, Subic Water did not voluntarily submit tothe court’s jurisdiction. In fact, the motion it filed was only made as a special
appearance, precisely toavoid the court’s acquisition of jurisdiction over its person. Without any participation inthe proceedings
below, it cannot be made liable on the writ ofexecution issuedby the court a quo.

B. Substantive Law Aspect

Solidary liability mustbe expressly stated.

The petitioner also argued that Subic Water could be held solidarily liable under the writ of execution since it was identified as
OCWD’s co-maker in the compromise agreement.The petitioner’s basis for this is the following provision of the agreement:

4. Both parties also requestthat Subic Water,Philippines which took over the operations of the defendant Olongapo City Water District
be made as co-makerfor the obligation herein abovecited.59 [emphasis supplied]
As the rule stands, solidary liability is not presumed. This stems from Art. 1207 of the Civil Code, which provides:

Art. 1207. x x x There is a solidary liability only when the obligation expressly so states, or when the law orthe nature of the
obligation requiressolidarity. [emphasis supplied]

In Palmares v. Court of Appeals,60 the Court did not hesitate to rule that although a party to a promissory note was onlylabeled as a
comaker, his liability was that ofa surety, since the instrument expressly provided for his joint and several liabilitywith the principal.

In the present case, the joint and several liability of Subic Water and OCWD was nowhere clear in the agreement. The agreement
simply and plainly stated that petitioner and OCWD were only requestingSubic Water to be a co-maker, in view of its assumption of
OCWD’s water operations. No evidence was presented to show that such request was ever approved by Subic Water’s board of
directors.

Under these circumstances, petitioner cannot proceed after Subic Water for OCWD’s unpaid obligations. The law explicitly states that
solidary liability is not presumed and must be expressly provided for. Not being a surety, Subic Water is not an insurer of OCWD’s
obligations under the compromise agreement. At best, Subic Water was merely a guarantor against whom petitioner can claim,
provided it was first shown that: a) petitioner had already proceeded after the properties of OCWD, the principal debtor; b) and despite
this, the obligation under the compromise agreement, remains to be not fully satisfied. 61 But as will be discussed next, Subic Water
could not also be recognized as a guarantorof OCWD’s obligations.

An officer’s actions can only bind the corporation ifhe had been authorized to do so.

An examination of the compromise agreement reveals that it was not accompanied by any document showing a grant of authority to
Mr. Noli Aldip to sign on behalf of Subic Water.

Subic Water is a corporation. A corporation, as a juridical entity, primarily acts through its board ofdirectors, which exercises its
corporate powers. In this capacity, the general rule is that, in the absence of authority from the board ofdirectors, no person, not even
its officers, can validly bind a corporation.62 Section 23 of the Corporation Code provides:

Section 23. The board of directors or trustees.– Unless otherwise provided in this Code, the corporate powers of all corporations
formed under this Code shall be exercised, all business conducted and all property of such corporations controlled and held by the
board of directors or trusteesto be elected from among the holders of stocks, or where there is no stock, from among the members of
the corporation, who shall hold office for one (1) year until their successors are elected and qualified. (28a) [emphasis supplied]

In People’s Aircargo and Warehousing Co., Inc. v. Court of Appeals, 63 we held that under Section 23 of the Corporation Code, the
power and responsibility to decide whether a corporation can enter into a binding contract is lodged with the board of directors,
subject to the articles of incorporation, by-laws, or relevant provisions of law. As we have clearly explained in another case:

A corporate officer or agent may represent and bind the corporation in transactions with third persons to the extent that [the] authority
to do so has been conferred upon him, and this includes powers which have been intentionally conferred, and also such powers as, in
the usual courseof the particular business, are incidental to, or may be implied from, the powers intentionally conferred, powers added
bycustom and usage, as usually pertaining to the particular officer or agent,and such apparent powers as the corporation has caused
persons dealing with the officer oragent to believe that ithas conferred. 64 [emphasis ours]

Mr. Noli Aldip signedthe compromise agreement purely in his own capacity. Moreover, the compromise agreement did not expressly
provide that Subic Water consented to become OCWD’s co-maker. As worded, the compromise agreement merely provided that both
parties [also]requestSubic Water, Philippines, which took over the operations of Olongapo City Water District be made asco-maker
[for the obligations above-cited].This request was never forwarded to Subic Water’s board of directors. Even if due notification had
been made (which does not appearin the records), Subic Water’s board does not appear to have given any approval tosuch request.
Nodocument such as the minutes of Subic Water’s board of directors’ meeting or a secretary’s certificate, purporting to be an
authorization to Mr. Aldip to conform to the compromise agreement, was everpresented. In effect, Mr. Aldip’s act of signing the
compromise agreement was outside of his authority to undertake.

Since Mr. Aldip was never authorized and there was no showing that Subic Water’s articles of incorporation or by-laws granted him
such authority, then the compromise agreement he signed cannot bind Subic Water. Subic Water cannot likewise be made a surety or
even a guarantor for OCWD’s obligations. OCWD’s debts under the compromise agreement are its own corporate obligations to
petitioner.

OCWD and Subic Water are two separate and different entities.
Petitioner practically suggests that since Subic Water took over OCWD’s water operations in OlongapoCity, it also acquired OCWD’s
juridical personality, making the two entities one and the same.

This is an interpretation that we cannot make or adopt under the facts and the evidence of this case. Subic Water clearly demonstrated
that it was a separate corporate entity from OCWD. OCWD is just a ten percent (10%) shareholder of Subic Water. As a mere
shareholder, OCWD’s juridical personality cannot be equated nor confused with that ofSubic Water. It is basic in corporation law that
a corporation is a juridical entity vested with a legal personality separate and distinct from those acting for and in its behalf and, in
general, from the people comprising it.65 Under this corporate reality, Subic Water cannot be held liable for OCWD’s corporate
obligations in the same manner that OCWD cannot be held liable for the obligations incurred by Subic Water as a separate entity. The
corporate veilshould not and cannot be pierced unless it is clearly established that the separate and distinct personality of the
corporation was used to justify a wrong, protect fraud, or perpetrate a deception. 66

In Concept Builders, Inc. v. NLRC,67 the Court enumerated the possible probative factors of identity which could justify the
application of the doctrine of piercing the corporate veil. These are:

(1) Stock ownership by one or common ownership of both corporations;

(2) Identity of directors and officers;

(3) The manner of keeping corporate books and records; and

(4) Methods of conducting the business.68

The burden of proving the presence of any of these probative factors lies with the one alleging it. Unfortunately, petitioner simply
claimed that Subic Water took over OCWD's water operations in Olongapo City. Apart from this allegation, petitioner failed to
demonstrate any link to justify the construction that Subic Water and OCWD are one and the same.

Under this evidentiary situation, our duty is to respect the separate and distinct personalities of these two juridical entities.1âwphi1

We thus deny the present petition. The writ of execution issued by RTC Olongapo, Br. 75, in favor of Olongapo City, is hereby
confirmed to be null and void. Accordingly, respondent Subic Water cannot be made liable under this writ.

WHEREFORE, premises considered, we hereby DISMISS the petition. The Court of Appeals' decision dated July 6, 2005 and
resolution dated January 3, 2006, annulling and setting aside the orders of the Regional Trial Court of Olongapo, Branch 75 dated July
29, 2003 and October 7, 2003, and the writ of execution dated July 31, 2003, are hereby AFFIRMED. Costs against the City of
Olongapo.

SO ORDERED.

ARTURO D. BRION
Associate Justice

G.R. No. 75885 May 27, 1987

BATAAN SHIPYARD & ENGINEERING CO., INC. (BASECO), petitioner,

vs.
PRESIDENTIAL COMMISSION ON GOOD GOVERNMENT, CHAIRMAN JOVITO SALONGA, COMMISSIONER
MARY CONCEPCION BAUTISTA, COMMISSIONER RAMON DIAZ, COMMISSIONER RAUL R. DAZA,
COMMISSIONER QUINTIN S. DOROMAL, CAPT. JORGE B. SIACUNCO, et al., respondents.

Apostol, Bernas, Gumaru, Ona and Associates for petitioner.

Vicente G. Sison for intervenor A.T. Abesamis.

NARVASA, J.:
Challenged in this special civil action of certiorari and prohibition by a private corporation known as the Bataan Shipyard and
Engineering Co., Inc. are: (1) Executive Orders Numbered 1 and 2, promulgated by President Corazon C. Aquino on February 28,
1986 and March 12, 1986, respectively, and (2) the sequestration, takeover, and other orders issued, and acts done, in accordance with
said executive orders by the Presidential Commission on Good Government and/or its Commissioners and agents, affecting said
corporation.

1. The Sequestration, Takeover, and Other Orders Complained of

a. The Basic Sequestration Order

The sequestration order which, in the view of the petitioner corporation, initiated all its misery was issued on April 14, 1986 by
Commissioner Mary Concepcion Bautista. It was addressed to three of the agents of the Commission, hereafter simply referred to as
PCGG. It reads as follows:

RE: SEQUESTRATION ORDER

By virtue of the powers vested in the Presidential Commission on Good Government, by authority of the President
of the Philippines, you are hereby directed to sequester the following companies.

1. Bataan Shipyard and Engineering Co., Inc. (Engineering Island Shipyard and Mariveles
Shipyard)

2. Baseco Quarry

3. Philippine Jai-Alai Corporation

4. Fidelity Management Co., Inc.

5. Romson Realty, Inc.

6. Trident Management Co.

7. New Trident Management

8. Bay Transport

9. And all affiliate companies of Alfredo "Bejo" Romualdez

You are hereby ordered:

1. To implement this sequestration order with a minimum disruption of these companies' business activities.

2. To ensure the continuity of these companies as going concerns, the care and maintenance of these assets until
such time that the Office of the President through the Commission on Good Government should decide otherwise.

3. To report to the Commission on Good Government periodically.

Further, you are authorized to request for Military/Security Support from the Military/Police authorities, and such
other acts essential to the achievement of this sequestration order. 1

b. Order for Production of Documents

On the strength of the above sequestration order, Mr. Jose M. Balde, acting for the PCGG, addressed a letter dated April 18, 1986 to
the President and other officers of petitioner firm, reiterating an earlier request for the production of certain documents, to wit:

1. Stock Transfer Book

 2. Legal documents, such as:

2.1. Articles of Incorporation

2.2. By-Laws

2.3. Minutes of the Annual Stockholders Meeting from 1973 to 1986

2.4. Minutes of the Regular and Special Meetings of the Board of Directors from 1973 to 1986

2.5. Minutes of the Executive Committee Meetings from 1973 to 1986

2.6. Existing contracts with suppliers/contractors/others.

3. Yearly list of stockholders with their corresponding share/stockholdings from 1973 to 1986 duly certified by the
Corporate Secretary.

4. Audited Financial Statements such as Balance Sheet, Profit & Loss and others from 1973 to December 31, 1985.

5. Monthly Financial Statements for the current year up to March 31, 1986.

6. Consolidated Cash Position Reports from January to April 15, 1986.

7. Inventory listings of assets up dated up to March 31, 1986.

8. Updated schedule of Accounts Receivable and Accounts Payable.

9. Complete list of depository banks for all funds with the authorized signatories for withdrawals thereof.

10. Schedule of company investments and placements. 2

The letter closed with the warning that if the documents were not submitted within five days, the officers would be cited for "contempt
in pursuance with Presidential Executive Order Nos. 1 and 2."

c. Orders Re Engineer Island

(1) Termination of Contract for Security Services

A third order assailed by petitioner corporation, hereafter referred to simply as BASECO, is that issued on April 21, 1986 by a Capt.
Flordelino B. Zabala, a member of the task force assigned to carry out the basic sequestration order. He sent a letter to BASECO's
Vice-President for Finance, 3 terminating the contract for security services within the Engineer Island compound between BASECO
and "Anchor and FAIRWAYS" and "other civilian security agencies," CAPCOM military personnel having already been assigned to
the area,

(2) Change of Mode of Payment of Entry Charges

On July 15, 1986, the same Capt. Zabala issued a Memorandum addressed to "Truck Owners and Contractors," particularly a "Mr.
Buddy Ondivilla National Marine Corporation," advising of the amendment in part of their contracts with BASECO in the sense that
the stipulated charges for use of the BASECO road network were made payable "upon entry and not anymore subject to monthly
billing as was originally agreed upon." 4

d. Aborted Contract for Improvement of Wharf at Engineer Island

On July 9, 1986, a PCGG fiscal agent, S. Berenguer, entered into a contract in behalf of BASECO with Deltamarine Integrated Port
Services, Inc., in virtue of which the latter undertook to introduce improvements costing approximately P210,000.00 on the BASECO
wharf at Engineer Island, allegedly then in poor condition, avowedly to "optimize its utilization and in return maximize the revenue
which would flow into the government coffers," in consideration of Deltamarine's being granted "priority in using the improved
portion of the wharf ahead of anybody" and exemption "from the payment of any charges for the use of wharf including the area
where it may install its bagging equipments" "until the improvement remains in a condition suitable for port operations." 5 It seems
however that this contract was never consummated. Capt. Jorge B. Siacunco, "Head- (PCGG) BASECO Management Team," advised
Deltamarine by letter dated July 30, 1986 that "the new management is not in a position to honor the said contract" and thus "whatever
improvements * * (may be introduced) shall be deemed unauthorized * * and shall be at * * (Deltamarine's) own risk." 6

e. Order for Operation of Sesiman Rock Quarry, Mariveles, Bataan

By Order dated June 20, 1986, Commissioner Mary Bautista first directed a PCGG agent, Mayor Melba O. Buenaventura, "to plan and
implement progress towards maximizing the continuous operation of the BASECO Sesiman Rock Quarry * * by conventional
methods;" but afterwards, Commissioner Bautista, in representation of the PCGG, authorized another party, A.T. Abesamis, to operate
the quarry, located at Mariveles, Bataan, an agreement to this effect having been executed by them on September 17, 1986. 7

f. Order to Dispose of Scrap, etc.

By another Order of Commissioner Bautista, this time dated June 26, 1986, Mayor Buenaventura was also "authorized to clean and
beautify the Company's compound," and in this connection, to dispose of or sell "metal scraps" and other materials, equipment and
machineries no longer usable, subject to specified guidelines and safeguards including audit and verification. 8

g. The TAKEOVER Order

By letter dated July 14, 1986, Commissioner Ramon A. Diaz decreed the provisional takeover by the PCGG of BASECO, "the
Philippine Dockyard Corporation and all their affiliated companies." 9 Diaz invoked the provisions of Section 3 (c) of Executive Order
No. 1, empowering the Commission —

* * To provisionally takeover 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.

A management team was designated to implement the order, headed by Capt. Siacunco, and was given the following powers:

1. Conducts all aspects of operation of the subject companies;

2. Installs key officers, hires and terminates personnel as necessary;

3. Enters into contracts related to management and operation of the companies;

4. Ensures that the assets of the companies are not dissipated and used effectively and efficiently; revenues are duly
accounted for; and disburses funds only as may be necessary;

5. Does actions including among others, seeking of military support as may be necessary, that will ensure
compliance to this order;

6. Holds itself fully accountable to the Presidential Commission on Good Government on all aspects related to this
take-over order.

h. Termination of Services of BASECO Officers

Thereafter, Capt. Siacunco, sent letters to Hilario M. Ruiz, Manuel S. Mendoza, Moises M. Valdez, Gilberto Pasimanero, and Benito
R. Cuesta I, advising of the termination of their services by the PCGG. 10

2. Petitioner's Plea and Postulates

It is the foregoing specific orders and acts of the PCGG and its members and agents which, to repeat, petitioner BASECO would have
this Court nullify. More particularly, BASECO prays that this Court-

1) declare unconstitutional and void Executive Orders Numbered 1 and 2;

2) annul the sequestration order dated April- 14, 1986, and all other orders subsequently issued and acts done on the basis thereof,
inclusive of the takeover order of July 14, 1986 and the termination of the services of the BASECO executives. 11

a. Re Executive Orders No. 1 and 2, and the Sequestration and Takeover Orders

While BASECO concedes that "sequestration without resorting to judicial action, might be made within the context of Executive
Orders Nos. 1 and 2 before March 25, 1986 when the Freedom Constitution was promulgated, under the principle that the law
promulgated by the ruler under a revolutionary regime is the law of the land, it ceased to be acceptable when the same ruler opted to
promulgate the Freedom Constitution on March 25, 1986 wherein under Section I of the same, Article IV (Bill of Rights) of the 1973
Constitution was adopted providing, among others, that "No person shall be deprived of life, liberty and property without due process
of law." (Const., Art. I V, Sec. 1)." 12

It declares that its objection to the constitutionality of the Executive Orders "as well as the Sequestration Order * * and Takeover
Order * * issued purportedly under the authority of said Executive Orders, rests on four fundamental considerations: First, no notice
and hearing was accorded * * (it) before its properties and business were taken over; Second, the PCGG is not a court, but a purely
investigative agency and therefore not competent to act as prosecutor and judge in the same cause; Third, there is nothing in the
issuances which envisions any proceeding, process or remedy by which petitioner may expeditiously challenge the validity of the
takeover after the same has been effected; and Fourthly, being directed against specified persons, and in disregard of the constitutional
presumption of innocence and general rules and procedures, they constitute a Bill of Attainder." 13

b. Re Order to Produce Documents

It argues that the order to produce corporate records from 1973 to 1986, which it has apparently already complied with, was issued
without court authority and infringed its constitutional right against self-incrimination, and unreasonable search and seizure. 14

c. Re PCGG's Exercise of Right of Ownership and Management

BASECO further contends that the PCGG had unduly interfered with its right of dominion and management of its business affairs by
—

1) terminating its contract for security services with Fairways & Anchor, without the consent and against the will of the contracting
parties; and amending the mode of payment of entry fees stipulated in its Lease Contract with National Stevedoring & Lighterage
Corporation, these acts being in violation of the non-impairment clause of the constitution; 15

2) allowing PCGG Agent Silverio Berenguer to enter into an "anomalous contract" with Deltamarine Integrated Port Services, Inc.,
giving the latter free use of BASECO premises; 16

3) authorizing PCGG Agent, Mayor Melba Buenaventura, to manage and operate its rock quarry at Sesiman, Mariveles; 17

4) authorizing the same mayor to sell or dispose of its metal scrap, equipment, machinery and other materials; 18

5) authorizing the takeover of BASECO, Philippine Dockyard Corporation, and all their affiliated companies;

6) terminating the services of BASECO executives: President Hilario M. Ruiz; EVP Manuel S. Mendoza; GM Moises M. Valdez;
Finance Mgr. Gilberto Pasimanero; Legal Dept. Mgr. Benito R. Cuesta I; 19

7) planning to elect its own Board of Directors; 20

8) allowing willingly or unwillingly its personnel to take, steal, carry away from petitioner's premises at Mariveles * * rolls of cable
wires, worth P600,000.00 on May 11, 1986; 21

22
9) allowing "indiscriminate diggings" at Engineer Island to retrieve gold bars supposed to have been buried therein.

3. Doubts, Misconceptions regarding Sequestration, Freeze and Takeover Orders

Many misconceptions and much doubt about the matter of sequestration, takeover and freeze orders have been engendered by
misapprehension, or incomplete comprehension if not indeed downright ignorance of the law governing these remedies. It is needful
that these misconceptions and doubts be dispelled so that uninformed and useless debates about them may be avoided, and arguments
tainted b sophistry or intellectual dishonesty be quickly exposed and discarded. Towards this end, this opinion will essay an exposition
of the law on the matter. In the process many of the objections raised by BASECO will be dealt with.

4. The Governing Law

a. Proclamation No. 3

The impugned executive orders are avowedly meant to carry out the explicit command of the Provisional Constitution, ordained by
Proclamation No. 3, 23 that the President-in the exercise of legislative power which she was authorized to continue to wield "(until a
legislature is elected and convened under a new Constitution" — "shall give priority to measures to achieve the mandate of the
people," among others to (r)ecover ill-gotten properties amassed by the leaders and supporters of the previous regime and protect the
interest of the people through orders of sequestration or freezing of assets or accounts." 24

b. Executive Order No. 1

Executive Order No. 1 stresses the "urgent need to recover all ill-gotten wealth," and postulates that "vast resources of the government
have been amassed by former President Ferdinand E. Marcos, his immediate family, relatives, and close associates both here and
abroad." 25 Upon these premises, the Presidential Commission on Good Government was created, 26 "charged with the task of assisting
the President in regard to (certain specified) matters," among which was precisely-

* * The recovery of all in-gotten wealth accumulated by former President Ferdinand E. Marcos, his immediate
family, relatives, subordinates and close associates, whether located in the Philippines or abroad, including
the takeover or sequestration of all business enterprises and entities owned or controlled by them, during his
administration, directly or through nominees, by taking undue advantage of their public office and/or using their
powers, authority, influence, connections or relationship. 27

In relation to the takeover or sequestration that it was authorized to undertake in the fulfillment of its mission, the PCGG was granted
"power and authority" to do the following particular acts, to wit:

1. 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.

2. To provisionally take over in the public interest or to prevent the 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.

3. To enjoin or restrain any actual or threatened commission of acts by any person or entity that may render moot
and academic, or frustrate or otherwise make ineffectual the efforts of the Commission to carry out its task under
this order. 28

So that it might ascertain the facts germane to its objectives, it was granted power to conduct investigations; require submission of
evidence by subpoenae ad testificandum and duces tecum; administer oaths; punish for contempt. 29It was given power also to
promulgate such rules and regulations as may be necessary to carry out the purposes of * * (its creation). 30

c. Executive Order No. 2

Executive Order No. 2 gives additional and more specific data and directions respecting "the recovery of ill-gotten properties amassed
by the leaders and supporters of the previous regime." It declares that:

1) * * the Government of the Philippines is in possession of evidence showing that there are assets and properties
purportedly pertaining to former Ferdinand E. Marcos, and/or his wife Mrs. Imelda Romualdez Marcos, their close
relatives, subordinates, business associates, dummies, agents or nominees which had been or were acquired by them
directly or indirectly, through or as a result of the improper or illegal use of funds or properties owned by the
government of the Philippines or any of its branches, instrumentalities, enterprises, banks or financial institutions, or
by taking undue advantage of their office, authority, influence, connections or relationship, resulting in their unjust
enrichment and causing grave damage and prejudice to the Filipino people and the Republic of the Philippines:" and
 2) * * said assets and properties are in the form of bank accounts, deposits, trust accounts, shares of stocks,
buildings, shopping centers, condominiums, mansions, residences, estates, and other kinds of real and personal
properties in the Philippines and in various countries of the world." 31

Upon these premises, the President-

1) froze "all assets and properties in the Philippines in which former President Marcos and/or his wife, Mrs. Imelda
Romualdez Marcos, their close relatives, subordinates, business associates, dummies, agents, or nominees have any
interest or participation;

2) prohibited former President Ferdinand Marcos and/or his wife * *, their close relatives, subordinates, business
associates, duties, agents, or nominees from transferring, conveying, encumbering, concealing or dissipating said
assets or properties in the Philippines and abroad, pending the outcome of appropriate proceedings in the Philippines
to determine whether any such assets or properties were acquired by them through or as a result of improper or
illegal use of or the conversion of funds belonging to the Government of the Philippines or any of its branches,
instrumentalities, enterprises, banks or financial institutions, or by taking undue advantage of their official position,
authority, relationship, connection or influence to unjustly enrich themselves at the expense and to the grave damage
and prejudice of the Filipino people and the Republic of the Philippines;

3) prohibited "any person from transferring, conveying, encumbering or otherwise depleting or concealing such
assets and properties or from assisting or taking part in their transfer, encumbrance, concealment or dissipation
under pain of such penalties as are prescribed by law;" and

4) required "all persons in the Philippines holding such assets or properties, whether located in the Philippines or
abroad, in their names as nominees, agents or trustees, to make full disclosure of the same to the Commission on
Good Government within thirty (30) days from publication of * (the) Executive Order, * *. 32

d. Executive Order No. 14

A third executive order is relevant: Executive Order No. 14, 33 by which the PCGG is empowered, "with the assistance of the Office of
the Solicitor General and other government agencies, * * to file and prosecute all cases investigated by it * * as may be warranted by
its findings." 34 All such cases, whether civil or criminal, are to be filed "with the Sandiganbayanwhich shall have exclusive and
original jurisdiction thereof." 35 Executive Order No. 14 also pertinently provides that civil suits for restitution, reparation of damages,
or indemnification for consequential damages, forfeiture proceedings provided for under Republic Act No. 1379, or any other civil
actions under the Civil Code or other existing laws, in connection with * * (said Executive Orders Numbered 1 and 2) may be filed
separately from and proceed independently of any criminal proceedings and may be proved by a preponderance of evidence;" and that,
moreover, the "technical rules of procedure and evidence shall not be strictly applied to* * (said)civil cases." 36

5. Contemplated Situations

The situations envisaged and sought to be governed are self-evident, these being:

1) that "(i)ll-gotten properties (were) amassed by the leaders and supporters of the previous regime"; 37

a) more particularly, that ill-gotten wealth (was) accumulated by former President Ferdinand E. Marcos, his
immediate family, relatives, subordinates and close associates, * * located in the Philippines or abroad, * * (and)
business enterprises and entities (came to be) owned or controlled by them, during * * (the Marcos) administration,
directly or through nominees, by taking undue advantage of their public office and/or using their powers, authority,
influence, Connections or relationship; 38

b) otherwise stated, that "there are assets and properties purportedly pertaining to former President Ferdinand E.
Marcos, and/or his wife Mrs. Imelda Romualdez Marcos, their close relatives, subordinates, business associates,
dummies, agents or nominees which had been or were acquired by them directly or indirectly, through or as a result
of the improper or illegal use of funds or properties owned by the Government of the Philippines or any of its
branches, instrumentalities, enterprises, banks or financial institutions, or by taking undue advantage of their office,
authority, influence, connections or relationship, resulting in their unjust enrichment and causing grave damage and
prejudice to the Filipino people and the Republic of the Philippines"; 39
 c) that "said assets and properties are in the form of bank accounts. deposits, trust. accounts, shares of stocks,
buildings, shopping centers, condominiums, mansions, residences, estates, and other kinds of real and personal
properties in the Philippines and in various countries of the world;" 40 and

2) that certain "business enterprises and properties (were) taken over by the government of the Marcos
Administration or by entities or persons close to former President Marcos. 41

6. Government's Right and Duty to Recover All Ill-gotten Wealth

There can be no debate about the validity and eminent propriety of the Government's plan "to recover all ill-gotten wealth."

Neither can there be any debate about the proposition that assuming the above described factual premises of the Executive Orders and
Proclamation No. 3 to be true, to be demonstrable by competent evidence, the recovery from Marcos, his family and his dominions of
the assets and properties involved, is not only a right but a duty on the part of Government.

But however plain and valid that right and duty may be, still a balance must be sought with the equally compelling necessity that a
proper respect be accorded and adequate protection assured, the fundamental rights of private property and free enterprise which are
deemed pillars of a free society such as ours, and to which all members of that society may without exception lay claim.

* * Democracy, as a way of life enshrined in the Constitution, embraces as its necessary components freedom of
conscience, freedom of expression, and freedom in the pursuit of happiness. Along with these freedoms are included
economic freedom and freedom of enterprise within reasonable bounds and under proper control. * * Evincing much
concern for the protection of property, the Constitution distinctly recognizes the preferred position which real estate
has occupied in law for ages. Property is bound up with every aspect of social life in a democracy as democracy is
conceived in the Constitution.The Constitution realizes the indispensable role which property, owned in reasonable
quantities and used legitimately, plays in the stimulation to economic effort and the formation and growth of a solid
social middle class that is said to be the bulwark of democracy and the backbone of every progressive and happy
country. 42

a. Need of Evidentiary Substantiation in Proper Suit

Consequently, the factual premises of the Executive Orders cannot simply be assumed. They will have to be duly established by
adequate proof in each case, in a proper judicial proceeding, so that the recovery of the ill-gotten wealth may be validly and properly
adjudged and consummated; although there are some who maintain that the fact-that an immense fortune, and "vast resources of the
government have been amassed by former President Ferdinand E. Marcos, his immediate family, relatives, and close associates both
here and abroad," and they have resorted to all sorts of clever schemes and manipulations to disguise and hide their illicit acquisitions-
is within the realm of judicial notice, being of so extensive notoriety as to dispense with proof thereof, Be this as it may, the
requirement of evidentiary substantiation has been expressly acknowledged, and the procedure to be followed explicitly laid down, in
Executive Order No. 14.

b. Need of Provisional Measures to Collect and Conserve Assets Pending Suits

Nor may it be gainsaid that pending the institution of the suits for the recovery of such "ill-gotten wealth" as the evidence at hand may
reveal, there is an obvious and imperative need for preliminary, provisional measures to prevent the concealment, disappearance,
destruction, dissipation, or loss of the assets and properties subject of the suits, or to restrain or foil acts that may render moot and
academic, or effectively hamper, delay, or negate efforts to recover the same.

7. Provisional Remedies Prescribed by Law

To answer this need, the law has prescribed three (3) provisional remedies. These are: (1) sequestration; (2) freeze orders; and (3)
provisional takeover.

Sequestration and freezing are remedies applicable generally to unearthed instances of "ill-gotten wealth." The remedy of "provisional
takeover" is peculiar to cases where "business enterprises and properties (were) taken over by the government of the Marcos
Administration or by entities or persons close to former President Marcos." 43

a. Sequestration
By the clear terms of the law, the power of the PCGG to sequester property claimed to be "ill-gotten" means to place or cause to be
placed under its possession or control said property, or any building or office wherein any such property and any records pertaining
thereto may be found, 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 will- gotten," i.e., acquired through or as a result of improper or illegal use of or the conversion of
funds belonging to the Government or any of its branches, instrumentalities, enterprises, banks or financial institutions, or by taking
undue advantage of official position, authority relationship, connection or influence, resulting in unjust enrichment of the ostensible
owner and grave damage and prejudice to the State. 44 And this, too, is the sense in which the term is commonly understood in other
jurisdictions. 45

b. "Freeze Order"

A "freeze order" prohibits the person having possession or control of property alleged to constitute "ill-gotten wealth" "from
transferring, conveying, encumbering or otherwise depleting or concealing such property, or from assisting or taking part in its
transfer, encumbrance, concealment, or dissipation." 46 In other words, it commands the possessor to hold the property and conserve it
subject to the orders and disposition of the authority decreeing such freezing. In this sense, it is akin to a garnishment by which the
possessor or ostensible owner of property is enjoined not to deliver, transfer, or otherwise dispose of any effects or credits in his
possession or control, and thus becomes in a sense an involuntary depositary thereof. 47

c. Provisional Takeover

In providing for the remedy of "provisional takeover," the law acknowledges the apparent distinction between "ill gotten" "business
enterprises and entities" (going concerns, businesses in actual operation), generally, as to which the remedy of sequestration applies, it
being necessarily inferred that the remedy entails no interference, or the least possible interference with the actual management and
operations thereof; and "business enterprises which were taken over by the government government of the Marcos Administration or
by entities or persons close to him," in particular, as to which a "provisional takeover" is authorized, "in the public interest or to
prevent disposal or dissipation of the enterprises." 48 Such a "provisional takeover" imports something more than sequestration or
freezing, more than the placing of the business under physical possession and control, albeit without or with the least possible
interference with the management and carrying on of the business itself. In a "provisional takeover," what is taken into custody is not
only the physical assets of the business enterprise or entity, but the business operation as well. It is in fine the assumption of control
not only over things, but over operations or on- going activities. But, to repeat, such a "provisional takeover" is allowed only as
regards "business enterprises * * taken over by the government of the Marcos Administration or by entities or persons close to former
President Marcos."

d. No Divestment of Title Over Property Seized

It may perhaps be well at this point to stress once again the provisional, contingent character of the remedies just described. Indeed the
law plainly qualifies the remedy of take-over by the adjective, "provisional." These remedies may be resorted to only for a particular
exigency: to prevent in the public interest the disappearance or dissipation of property or business, and conserve it pending
adjudgment in appropriate proceedings of the primary issue of whether or not the acquisition of title or other right thereto by the
apparent owner was attended by some vitiating anomaly. None of the remedies is meant to deprive the owner or possessor of his title
or any right to the property sequestered, frozen or taken over and vest it in the sequestering agency, the Government or other person.
This can be done only for the causes and by the processes laid down by law.

That this is the sense in which the power to sequester, freeze or provisionally take over is to be understood and exercised, the language
of the executive orders in question leaves no doubt. Executive Order No. 1 declares that the sequestration of property the acquisition
of which is suspect shall last "until the transactions leading to such acquisition * * can be disposed of by the appropriate
authorities." 49 Executive Order No. 2 declares that the assets or properties therein mentioned shall remain frozen "pending the
outcome of appropriate proceedings in the Philippines to determine whether any such assets or properties were acquired" by illegal
means. Executive Order No. 14 makes clear that judicial proceedings are essential for the resolution of the basic issue of whether or
not particular assets are "ill-gotten," and resultant recovery thereof by the Government is warranted.

e. State of Seizure Not To Be Indefinitely Maintained; The Constitutional Command

There is thus no cause for the apprehension voiced by BASECO 50 that sequestration, freezing or provisional takeover is designed to
be an end in itself, that it is the device through which persons may be deprived of their property branded as "ill-gotten," that it is
intended to bring about a permanent, rather than a passing, transitional state of affairs. That this is not so is quite explicitly declared by
the governing rules.
Be this as it may, the 1987 Constitution should allay any lingering fears about the duration of these provisional remedies. Section 26
of its Transitory Provisions, 51 lays down the relevant rule in plain terms, apart from extending ratification or confirmation (although
not really necessary) to the institution by presidential fiat of the remedy of sequestration and freeze orders:

SEC. 26. The authority to issue sequestration or freeze orders under Proclamation No. 3 dated March 25, 1986 in
relation to the recovery of ill-gotten wealth shag remain operative for not more than eighteen months after the
ratification of this Constitution. However, in the national interest, as certified by the President, the Congress may
extend said period.

A sequestration or freeze order shall be issued only upon showing of a prima facie case. The order and the list of the
sequestered or frozen properties shall forthwith be registered with the proper court. For orders issued before the
ratification of this Constitution, the corresponding judicial action or proceeding shall be filed within six months from
its ratification. For those issued after such ratification, the judicial action or proceeding shall be commenced
within six months from the issuance thereof.

The sequestration or freeze order is deemed automatically lifted if no judicial action or proceeding is commenced as
herein provided. 52

f. Kinship to Attachment Receivership

As thus described, sequestration, freezing and provisional takeover are akin to the provisional remedy of preliminary attachment, or
receivership. 53 By attachment, a sheriff seizes property of a defendant in a civil suit so that it may stand as security for the satisfaction
of any judgment that may be obtained, and not disposed of, or dissipated, or lost intentionally or otherwise, pending the action. 54 By
receivership, property, real or personal, which is subject of litigation, is placed in the possession and control of a receiver appointed by
the Court, who shall conserve it pending final determination of the title or right of possession over it. 55 All these remedies —
sequestration, freezing, provisional, takeover, attachment and receivership — are provisional, temporary, designed for-particular
exigencies, attended by no character of permanency or finality, and always subject to the control of the issuing court or agency.

g. Remedies, Non-Judicial

Parenthetically, that writs of sequestration or freeze or takeover orders are not issued by a court is of no moment. The Solicitor
General draws attention to the writ of distraint and levy which since 1936 the Commissioner of Internal Revenue has been by law
authorized to issue against property of a delinquent taxpayer. 56 BASECO itself declares that it has not manifested "a rigid insistence
on sequestration as a purely judicial remedy * * (as it feels) that the law should not be ossified to a point that makes it insensitive to
change." What it insists on, what it pronounces to be its "unyielding position, is that any change in procedure, or the institution of a
new one, should conform to due process and the other prescriptions of the Bill of Rights of the Constitution." 57 It is, to be sure, a
proposition on which there can be no disagreement.

h. Orders May Issue Ex Parte

Like the remedy of preliminary attachment and receivership, as well as delivery of personal property in replevin suits, sequestration
and provisional takeover writs may issue ex parte. 58 And as in preliminary attachment, receivership, and delivery of personality, no
objection of any significance may be raised to the ex parte issuance of an order of sequestration, freezing or takeover, given its
fundamental character of temporariness or conditionality; and taking account specially of the constitutionally expressed "mandate of
the people to recover ill-gotten properties amassed by the leaders and supporters of the previous regime and protect the interest of the
people;" 59 as well as the obvious need to avoid alerting suspected possessors of "ill-gotten wealth" and thereby cause that
disappearance or loss of property precisely sought to be prevented, and the fact, just as self-evident, that "any transfer, disposition,
concealment or disappearance of said assets and properties would frustrate, obstruct or hamper the efforts of the Government" at the
just recovery thereof. 60

8. Requisites for Validity

What is indispensable is that, again as in the case of attachment and receivership, there exist a prima facie factual foundation, at least,
for the sequestration, freeze or takeover order, and adequate and fair opportunity to contest it and endeavor to cause its negation or
nullification. 61

Both are assured under the executive orders in question and the rules and regulations promulgated by the PCGG.

a. Prima Facie Evidence as Basis for Orders

Executive Order No. 14 enjoins that there be "due regard to the requirements of fairness and due process." 62Executive Order No. 2
declares that with respect to claims on allegedly "ill-gotten" assets and properties, "it is the position of the new democratic government
that President Marcos * * (and other parties affected) be afforded fair opportunity to contest these claims before appropriate Philippine
authorities." 63 Section 7 of the Commission's Rules and Regulations provides that sequestration or freeze (and takeover) orders issue
upon the authority of at least two commissioners, based on the affirmation or complaint of an interested party, or motu proprio when
the Commission has reasonable grounds to believe that the issuance thereof is warranted. 64 A similar requirement is now found in
Section 26, Art. XVIII of the 1987 Constitution, which requires that a "sequestration or freeze order shall be issued only upon showing
of a prima facie case." 65

b. Opportunity to Contest

And Sections 5 and 6 of the same Rules and Regulations lay down the procedure by which a party may seek to set aside a writ of
sequestration or freeze order, viz:

SECTION 5. Who may contend.-The person against whom a writ of sequestration or freeze or hold order is directed
may request the lifting thereof in writing, either personally or through counsel within five (5) days from receipt of
the writ or order, or in the case of a hold order, from date of knowledge thereof.

SECTION 6. Procedure for review of writ or order.-After due hearing or motu proprio for good cause shown, the
Commission may lift the writ or order unconditionally or subject to such conditions as it may deem necessary,
taking into consideration the evidence and the circumstance of the case. The resolution of the commission may be
appealed by the party concerned to the Office of the President of the Philippines within fifteen (15) days from
receipt thereof.

Parenthetically, even if the requirement for a prima facie showing of "ill- gotten wealth" were not expressly imposed by some rule or
regulation as a condition to warrant the sequestration or freezing of property contemplated in the executive orders in question, it would
nevertheless be exigible in this jurisdiction in which the Rule of Law prevails and official acts which are devoid of rational basis in
fact or law, or are whimsical and capricious, are condemned and struck down. 66

9. Constitutional Sanction of Remedies

If any doubt should still persist in the face of the foregoing considerations as to the validity and propriety of sequestration, freeze and
takeover orders, it should be dispelled by the fact that these particular remedies and the authority of the PCGG to issue them have
received constitutional approbation and sanction. As already mentioned, the Provisional or "Freedom" Constitution recognizes the
power and duty of the President to enact "measures to achieve the mandate of the people to * * * (recover ill- gotten properties
amassed by the leaders and supporters of the previous regime and protect the interest of the people through orders of sequestration or
freezing of assets or accounts." And as also already adverted to, Section 26, Article XVIII of the 1987 Constitution 67 treats of, and
ratifies the "authority to issue sequestration or freeze orders under Proclamation No. 3 dated March 25, 1986."

The institution of these provisional remedies is also premised upon the State's inherent police power, regarded, as t lie power of
promoting the public welfare by restraining and regulating the use of liberty and property," 68 and as "the most essential, insistent and
illimitable of powers * * in the promotion of general welfare and the public interest," 69 and said to be co-extensive with self-
protection and * * not inaptly termed (also) the'law of overruling necessity." " 70

10. PCGG not a "Judge"; General Functions

It should also by now be reasonably evident from what has thus far been said that the PCGG is not, and was never intended to act as, a
judge. Its general function is to conduct investigations in order to collect evidence establishing instances of "ill-gotten wealth;" issue
sequestration, and such orders as may be warranted by the evidence thus collected and as may be necessary to preserve and conserve
the assets of which it takes custody and control and prevent their disappearance, loss or dissipation; and eventually file and
prosecute in the proper court of competent jurisdiction all cases investigated by it as may be warranted by its findings. It does not try
and decide, or hear and determine, or adjudicate with any character of finality or compulsion, cases involving the essential issue of
whether or not property should be forfeited and transferred to the State because "ill-gotten" within the meaning of the Constitution and
the executive orders. This function is reserved to the designated court, in this case, the Sandiganbayan. 71 There can therefore be no
serious regard accorded to the accusation, leveled by BASECO, 72 that the PCGG plays the perfidious role of prosecutor and judge at
the same time.

11. Facts Preclude Grant of Relief to Petitioner

Upon these premises and reasoned conclusions, and upon the facts disclosed by the record, hereafter to be discussed, the petition
cannot succeed. The writs of certiorari and prohibition prayed for will not be issued.

The facts show that the corporation known as BASECO was owned or controlled by President Marcos "during his administration,
through nominees, by taking undue advantage of his public office and/or using his powers, authority, or influence, " and that it was by
and through the same means, that BASECO had taken over the business and/or assets of the National Shipyard and Engineering Co.,
Inc., and other government-owned or controlled entities.

12. Organization and Stock Distribution of BASECO

BASECO describes itself in its petition as "a shiprepair and shipbuilding company * * incorporated as a domestic private corporation
* * (on Aug. 30, 1972) by a consortium of Filipino shipowners and shipping executives. Its main office is at Engineer Island, Port
Area, Manila, where its Engineer Island Shipyard is housed, and its main shipyard is located at Mariveles Bataan." 73 Its Articles of
Incorporation disclose that its authorized capital stock is P60,000,000.00 divided into 60,000 shares, of which 12,000 shares with a
value of P12,000,000.00 have been subscribed, and on said subscription, the aggregate sum of P3,035,000.00 has been paid by the
incorporators. 74 The same articles Identify the incorporators, numbering fifteen (15), as follows: (1) Jose A. Rojas, (2) Anthony P.
Lee, (3) Eduardo T. Marcelo, (4) Jose P. Fernandez, (5) Generoso Tanseco, (6) Emilio T. Yap, (7) Antonio M. Ezpeleta, (8) Zacarias
Amante, (9) Severino de la Cruz, (10) Jose Francisco, (11) Dioscoro Papa, (12) Octavio Posadas, (13) Manuel S. Mendoza, (14)
Magiliw Torres, and (15) Rodolfo Torres.

By 1986, however, of these fifteen (15) incorporators, six (6) had ceased to be stockholders, namely: (1) Generoso Tanseco, (2)
Antonio Ezpeleta, (3) Zacarias Amante, (4) Octavio Posadas, (5) Magiliw Torres, and (6) Rodolfo Torres. As of this year, 1986, there
were twenty (20) stockholders listed in BASECO's Stock and Transfer Book. 75Their names and the number of shares respectively
held by them are as follows:

1. Jose A. 1,248
Rojas shares
2. Severino 1,248
G. de la Cruz shares

3. Emilio T. 2,508
Yap shares

4. Jose 1,248
Fernandez shares
5. Jose 128
Francisco shares

6. Manuel S. 96
Mendoza shares
7. Anthony 1,248
P. Lee shares
8. Hilario M. 32
Ruiz shares

9. Constante 8 shares
L. Fariñas
10. Fidelity 65,882
Management, shares
Inc.

11. Trident 7,412

Management shares
12. United 1,240
Phil. Lines shares
13. Renato 8 shares
M. Tanseco
 14. Fidel 8 shares
Ventura

15. Metro 136,370

Bay Drydock shares
16. Manuel 1 share
Jacela
17. Jonathan 1 share
G. Lu
18. Jose J. 1 share
Tanchanco

19. Dioscoro 128

Papa shares
20. Edward 4 shares
T. Marcelo
TOTAL 218,819
shares.

13 Acquisition of NASSCO by BASECO

Barely six months after its incorporation, BASECO acquired from National Shipyard & Steel Corporation, or NASSCO, a
government-owned or controlled corporation, the latter's shipyard at Mariveles, Bataan, known as the Bataan National Shipyard
(BNS), and — except for NASSCO's Engineer Island Shops and certain equipment of the BNS, consigned for future negotiation — all
its structures, buildings, shops, quarters, houses, plants, equipment and facilities, in stock or in transit. This it did in virtue of a
"Contract of Purchase and Sale with Chattel Mortgage" executed on February 13, 1973. The price was P52,000,000.00. As partial
payment thereof, BASECO delivered to NASSCO a cash bond of P11,400,000.00, convertible into cash within twenty-four (24) hours
from completion of the inventory undertaken pursuant to the contract. The balance of P41,600,000.00, with interest at seven percent
(7%) per annum, compounded semi-annually, was stipulated to be paid in equal semi-annual installments over a term of nine (9)
years, payment to commence after a grace period of two (2) years from date of turnover of the shipyard to BASECO. 76

14. Subsequent Reduction of Price; Intervention of Marcos

Unaccountably, the price of P52,000,000.00 was reduced by more than one-half, to P24,311,550.00, about eight (8) months later. A
document to this effect was executed on October 9, 1973, entitled "Memorandum Agreement," and was signed for NASSCO by
Arturo Pacificador, as Presiding Officer of the Board of Directors, and David R. Ines, as General Manager. 77 This agreement bore, at
the top right corner of the first page, the word "APPROVED" in the handwriting of President Marcos, followed by his usual full
signature. The document recited that a down payment of P5,862,310.00 had been made by BASECO, and the balance of
P19,449,240.00 was payable in equal semi-annual installments over nine (9) years after a grace period of two (2) years, with interest at
7% per annum.

15. Acquisition of 300 Hectares from Export Processing Zone Authority

On October 1, 1974, BASECO acquired three hundred (300) hectares of land in Mariveles from the Export Processing Zone Authority
for the price of P10,047,940.00 of which, as set out in the document of sale, P2,000.000.00 was paid upon its execution, and the
balance stipulated to be payable in installments. 78

16. Acquisition of Other Assets of NASSCO; Intervention of Marcos

Some nine months afterwards, or on July 15, 1975, to be precise, BASECO, again with the intervention of President Marcos, acquired
ownership of the rest of the assets of NASSCO which had not been included in the first two (2) purchase documents. This was
accomplished by a deed entitled "Contract of Purchase and Sale," 79 which, like the Memorandum of Agreement dated October 9,
1973 supra also bore at the upper right-hand corner of its first page, the handwritten notation of President Marcos reading,
"APPROVED, July 29, 1973," and underneath it, his usual full signature. Transferred to BASECO were NASSCO's "ownership and
all its titles, rights and interests over all equipment and facilities including structures, buildings, shops, quarters, houses, plants and
expendable or semi-expendable assets, located at the Engineer Island, known as the Engineer Island Shops, including all the
equipment of the Bataan National Shipyards (BNS) which were excluded from the sale of NBS to BASECO but retained by BASECO
and all other selected equipment and machineries of NASSCO at J. Panganiban Smelting Plant." In the same deed, NASSCO
committed itself to cooperate with BASECO for the acquisition from the National Government or other appropriate Government
entity of Engineer Island. Consideration for the sale was set at P5,000,000.00; a down payment of P1,000,000.00 appears to have been
made, and the balance was stipulated to be paid at 7% interest per annum in equal semi annual installments over a term of nine (9)
years, to commence after a grace period of two (2) years. Mr. Arturo Pacificador again signed for NASSCO, together with the general
manager, Mr. David R. Ines.

17. Loans Obtained

It further appears that on May 27, 1975 BASECO obtained a loan from the NDC, taken from "the last available Japanese war damage
fund of $19,000,000.00," to pay for "Japanese made heavy equipment (brand new)." 80 On September 3, 1975, it got another loan also
from the NDC in the amount of P30,000,000.00 (id.). And on January 28, 1976, it got still another loan, this time from the GSIS, in
the sum of P12,400,000.00. 81 The claim has been made that not a single centavo has been paid on these loans. 82

18. Reports to President Marcos

In September, 1977, two (2) reports were submitted to President Marcos regarding BASECO. The first was contained in a letter dated
September 5, 1977 of Hilario M. Ruiz, BASECO president. 83 The second was embodied in a confidential memorandum dated
September 16, 1977 of Capt. A.T. Romualdez. 84 They further disclose the fine hand of Marcos in the affairs of BASECO, and that of
a Romualdez, a relative by affinity.

a. BASECO President's Report

In his letter of September 5, 1977, BASECO President Ruiz reported to Marcos that there had been "no orders or demands for ship
construction" for some time and expressed the fear that if that state of affairs persisted, BASECO would not be able to pay its debts to
the Government, which at the time stood at the not inconsiderable amount of P165,854,000.00. 85 He suggested that, to "save the
situation," there be a "spin-off (of their) shipbuilding activities which shall be handled exclusively by an entirely new corporation to be
created;" and towards this end, he informed Marcos that BASECO was —

* * inviting NDC and LUSTEVECO to participate by converting the NDC shipbuilding loan to BASECO
amounting to P341.165M and assuming and converting a portion of BASECO's shipbuilding loans from REPACOM
amounting to P52.2M or a total of P83.365M as NDC's equity contribution in the new corporation. LUSTEVECO
will participate by absorbing and converting a portion of the REPACOM loan of Bay Shipyard and Drydock, Inc.,
amounting to P32.538M. 86

b. Romualdez' Report

Capt. A.T. Romualdez' report to the President was submitted eleven (11) days later. It opened with the following caption:

MEMORANDUM:

FOR : The President

SUBJECT: An Evaluation and Re-assessment of a Performance of a Mission

FROM: Capt. A.T. Romualdez.

Like Ruiz, Romualdez wrote that BASECO faced great difficulties in meeting its loan obligations due chiefly to the fact that "orders
to build ships as expected * * did not materialize."

He advised that five stockholders had "waived and/or assigned their holdings inblank," these being: (1) Jose A. Rojas, (2) Severino de
la Cruz, (3) Rodolfo Torres, (4) Magiliw Torres, and (5) Anthony P. Lee. Pointing out that "Mr. Magiliw Torres * * is already dead
and Mr. Jose A. Rojas had a major heart attack," he made the following quite revealing, and it may be added, quite cynical and
indurate recommendation, to wit:

* * (that) their replacements (be effected) so we can register their names in the stock book prior to the
implementation of your instructions to pass a board resolution to legalize the transfers under SEC regulations;
 2. By getting their replacements, the families cannot question us later on; and

3. We will owe no further favors from them. 87

He also transmitted to Marcos, together with the report, the following documents: 88

1. Stock certificates indorsed and assigned in blank with assignments and waivers; 89

2. The articles of incorporation, the amended articles, and the by-laws of BASECO;

3. Deed of Sales, wherein NASSCO sold to BASECO four (4) parcels of land in "Engineer Island", Port Area,
Manila;

4. Transfer Certificate of Title No. 124822 in the name of BASECO, covering "Engineer Island";

5. Contract dated October 9, 1973, between NASSCO and BASECO re-structure and equipment at Mariveles,
Bataan;

6. Contract dated July 16, 1975, between NASSCO and BASECO re-structure and equipment at Engineer Island,
Port Area Manila;

7. Contract dated October 1, 1974, between EPZA and BASECO re 300 hectares of land at Mariveles, Bataan;

8. List of BASECO's fixed assets;

9. Loan Agreement dated September 3, 1975, BASECO's loan from NDC of P30,000,000.00;

10. BASECO-REPACOM Agreement dated May 27, 1975;

11. GSIS loan to BASECO dated January 28, 1976 of P12,400,000.00 for the housing facilities for BASECO's rank-
and-file employees. 90

Capt. Romualdez also recommended that BASECO's loans be restructured "until such period when BASECO will have enough orders
for ships in order for the company to meet loan obligations," and that —

An LOI may be issued to government agencies using floating equipment, that a linkage scheme be applied to a
certain percent of BASECO's net profit as part of BASECO's amortization payments to make it justifiable for you,
Sir. 91

It is noteworthy that Capt. A.T. Romualdez does not appear to be a stockholder or officer of BASECO, yet he has presented a report
on BASECO to President Marcos, and his report demonstrates intimate familiarity with the firm's affairs and problems.

19. Marcos' Response to Reports

President Marcos lost no time in acting on his subordinates' recommendations, particularly as regards the "spin-off" and the "linkage
scheme" relative to "BASECO's amortization payments."

a. Instructions re "Spin-Off"

Under date of September 28, 1977, he addressed a Memorandum to Secretary Geronimo Velasco of the Philippine National Oil
Company and Chairman Constante Fariñas of the National Development Company, directing them "to participate in the formation of a
new corporation resulting from the spin-off of the shipbuilding component of BASECO along the following guidelines:

a. Equity participation of government shall be through LUSTEVECO and NDC in the amount of P115,903,000
consisting of the following obligations of BASECO which are hereby authorized to be converted to equity of the said
new corporation, to wit:
 1. NDC P83,865,000 (P31.165M loan & P52.2M Reparation)

2. LUSTEVECO P32,538,000 (Reparation)

b. Equity participation of government shall be in the form of non- voting shares.

For immediate compliance. 92

Mr. Marcos' guidelines were promptly complied with by his subordinates. Twenty-two (22) days after receiving their president's
memorandum, Messrs. Hilario M. Ruiz, Constante L. Fariñas and Geronimo Z. Velasco, in representation of their respective
corporations, executed a PRE-INCORPORATION AGREEMENT dated October 20, 1977. 93 In it, they undertook to form a
shipbuilding corporation to be known as "PHIL-ASIA SHIPBUILDING CORPORATION," to bring to realization their president's
instructions. It would seem that the new corporation ultimately formed was actually named "Philippine Dockyard Corporation
(PDC)." 94

b. Letter of Instructions No. 670

Mr. Marcos did not forget Capt. Romualdez' recommendation for a letter of instructions. On February 14, 1978, he issued Letter of
Instructions No. 670 addressed to the Reparations Commission REPACOM the Philippine National Oil Company (PNOC), the Luzon
Stevedoring Company (LUSTEVECO), and the National Development Company (NDC). What is commanded therein is summarized
by the Solicitor General, with pithy and not inaccurate observations as to the effects thereof (in italics), as follows:

* * 1) the shipbuilding equipment procured by BASECO through reparations be transferred to NDC subject to
reimbursement by NDC to BASECO (of) the amount of s allegedly representing the handling and incidental
expenses incurred by BASECO in the installation of said equipment (so instead of NDC getting paid on its loan to
BASECO, it was made to pay BASECO instead the amount of P18.285M); 2) the shipbuilding equipment procured
from reparations through EPZA, now in the possession of BASECO and BSDI (Bay Shipyard & Drydocking, Inc.)
be transferred to LUSTEVECO through PNOC; and 3) the shipbuilding equipment (thus) transferred be invested by
LUSTEVECO, acting through PNOC and NDC, as the government's equity participation in a shipbuilding
corporation to be established in partnership with the private sector.

xxx xxx xxx

And so, through a simple letter of instruction and memorandum, BASECO's loan obligation to NDC and
REPACOM * * in the total amount of P83.365M and BSD's REPACOM loan of P32.438M were wiped out and
converted into non-voting preferred shares. 95

20. Evidence of Marcos'

Ownership of BASECO

It cannot therefore be gainsaid that, in the context of the proceedings at bar, the actuality of the control by President Marcos of
BASECO has been sufficiently shown.

Other evidence submitted to the Court by the Solicitor General proves that President Marcos not only exercised control over
BASECO, but also that he actually owns well nigh one hundred percent of its outstanding stock.

It will be recalled that according to petitioner- itself, as of April 23, 1986, there were 218,819 shares of stock outstanding, ostensibly
owned by twenty (20) stockholders. 96 Four of these twenty are juridical persons: (1) Metro Bay Drydock, recorded as holding 136,370
shares; (2) Fidelity Management, Inc., 65,882 shares; (3) Trident Management, 7,412 shares; and (4) United Phil. Lines, 1,240 shares.
The first three corporations, among themselves, own an aggregate of 209,664 shares of BASECO stock, or 95.82% of the outstanding
stock.

Now, the Solicitor General has drawn the Court's attention to the intriguing circumstance that found in Malacanang shortly after the
sudden flight of President Marcos, were certificates corresponding to more than ninety-five percent (95%) of all the outstanding shares
of stock of BASECO, endorsed in blank, together with deeds of assignment of practically all the outstanding shares of stock of the
three (3) corporations above mentioned (which hold 95.82% of all BASECO stock), signed by the owners thereof although not
notarized. 97
More specifically, found in Malacanang (and now in the custody of the PCGG) were:

1) the deeds of assignment of all 600 outstanding shares of Fidelity Management Inc. — which supposedly owns as
aforesaid 65,882 shares of BASECO stock;

2) the deeds of assignment of 2,499,995 of the 2,500,000 outstanding shares of Metro Bay Drydock Corporation —
which allegedly owns 136,370 shares of BASECO stock;

3) the deeds of assignment of 800 outstanding shares of Trident Management Co., Inc. — which allegedly owns
7,412 shares of BASECO stock, assigned in blank; 98 and

4) stock certificates corresponding to 207,725 out of the 218,819 outstanding shares of BASECO stock; that is, all
but 5 % — all endorsed in blank. 99

While the petitioner's counsel was quick to dispute this asserted fact, assuring this Court that the BASECO stockholders were still in
possession of their respective stock certificates and had "never endorsed * * them in blank or to anyone else," 100 that denial is
exposed by his own prior and subsequent recorded statements as a mere gesture of defiance rather than a verifiable factual declaration.

By resolution dated September 25, 1986, this Court granted BASECO's counsel a period of 10 days "to SUBMIT, as undertaken by
him, * * the certificates of stock issued to the stockholders of * * BASECO as of April 23, 1986, as listed in Annex 'P' of the
petition.' 101 Counsel thereafter moved for extension; and in his motion dated October 2, 1986, he declared inter alia that "said
certificates of stock are in the possession of third parties, among whom being the respondents themselves * * and petitioner is still
endeavoring to secure copies thereof from them." 102 On the same day he filed another motion praying that he be allowed "to secure
copies of the Certificates of Stock in the name of Metro Bay Drydock, Inc., and of all other Certificates, of Stock of petitioner's
stockholders in possession of respondents." 103

In a Manifestation dated October 10, 1986,, 104 the Solicitor General not unreasonably argued that counsel's aforestated motion to
secure copies of the stock certificates "confirms the fact that stockholders of petitioner corporation are not in possession of * * (their)
certificates of stock," and the reason, according to him, was "that 95% of said shares * * have been endorsed in blank and found in
Malacañang after the former President and his family fled the country." To this manifestation BASECO's counsel replied on
November 5, 1986, as already mentioned, Stubbornly insisting that the firm's stockholders had not really assigned their stock. 105

In view of the parties' conflicting declarations, this Court resolved on November 27, 1986 among other things "to require * * the
petitioner * * to deposit upon proper receipt with Clerk of Court Juanito Ranjo the originals of the stock certificates alleged to be in its
possession or accessible to it, mentioned and described in Annex 'P' of its petition, (and other pleadings) * * within ten (10) days from
notice." 106 In a motion filed on December 5, 1986, 107 BASECO's counsel made the statement, quite surprising in the premises, that
"it will negotiate with the owners (of the BASECO stock in question) to allow petitioner to borrow from them, if available, the
certificates referred to" but that "it needs a more sufficient time therefor" (sic). BASECO's counsel however eventually had to confess
inability to produce the originals of the stock certificates, putting up the feeble excuse that while he had "requested the stockholders to
allow * * (him) to borrow said certificates, * * some of * * (them) claimed that they had delivered the certificates to third parties by
way of pledge and/or to secure performance of obligations, while others allegedly have entrusted them to third parties in view of last
national emergency." 108 He has conveniently omitted, nor has he offered to give the details of the transactions adverted to by him, or
to explain why he had not impressed on the supposed stockholders the primordial importance of convincing this Court of their present
custody of the originals of the stock, or if he had done so, why the stockholders are unwilling to agree to some sort of arrangement so
that the originals of their certificates might at the very least be exhibited to the Court. Under the circumstances, the Court can only
conclude that he could not get the originals from the stockholders for the simple reason that, as the Solicitor General maintains, said
stockholders in truth no longer have them in their possession, these having already been assigned in blank to then President Marcos.

21. Facts Justify Issuance of Sequestration and Takeover Orders

In the light of the affirmative showing by the Government that, prima facie at least, the stockholders and directors of BASECO as of
April, 1986 109 were mere "dummies," nominees or alter egos of President Marcos; at any rate, that they are no longer owners of any
shares of stock in the corporation, the conclusion cannot be avoided that said stockholders and directors have no basis and no standing
whatever to cause the filing and prosecution of the instant proceeding; and to grant relief to BASECO, as prayed for in the petition,
would in effect be to restore the assets, properties and business sequestered and taken over by the PCGG to persons who are
"dummies," nominees or alter egos of the former president.

From the standpoint of the PCGG, the facts herein stated at some length do indeed show that the private corporation known as
BASECO was "owned or controlled by former President Ferdinand E. Marcos * * during his administration, * * through nominees, by
taking advantage of * * (his) public office and/or using * * (his) powers, authority, influence * *," and that NASSCO and other
property of the government had been taken over by BASECO; and the situation justified the sequestration as well as the provisional
takeover of the corporation in the public interest, in accordance with the terms of Executive Orders No. 1 and 2, pending the filing of
the requisite actions with the Sandiganbayan to cause divestment of title thereto from Marcos, and its adjudication in favor of the
Republic pursuant to Executive Order No. 14.

As already earlier stated, this Court agrees that this assessment of the facts is correct; accordingly, it sustains the acts of sequestration
and takeover by the PCGG as being in accord with the law, and, in view of what has thus far been set out in this opinion, pronounces
to be without merit the theory that said acts, and the executive orders pursuant to which they were done, are fatally defective in not
according to the parties affected prior notice and hearing, or an adequate remedy to impugn, set aside or otherwise obtain relief
therefrom, or that the PCGG had acted as prosecutor and judge at the same time.

22. Executive Orders Not a Bill of Attainder

Neither will this Court sustain the theory that the executive orders in question are a bill of attainder. 110 "A bill of attainder is a
legislative act which inflicts punishment without judicial trial." 111 "Its essence is the substitution of a legislative for a judicial
determination of guilt." 112

In the first place, nothing in the executive orders can be reasonably construed as a determination or declaration of guilt. On the
contrary, the executive orders, inclusive of Executive Order No. 14, make it perfectly clear that any judgment of guilt in the amassing
or acquisition of "ill-gotten wealth" is to be handed down by a judicial tribunal, in this case, the Sandiganbayan, upon complaint filed
and prosecuted by the PCGG. In the second place, no punishment is inflicted by the executive orders, as the merest glance at their
provisions will immediately make apparent. In no sense, therefore, may the executive orders be regarded as a bill of attainder.

23. No Violation of Right against Self-Incrimination and Unreasonable Searches and Seizures

BASECO also contends that its right against self incrimination and unreasonable searches and seizures had been transgressed by the
Order of April 18, 1986 which required it "to produce corporate records from 1973 to 1986 under pain of contempt of the Commission
if it fails to do so." The order was issued upon the authority of Section 3 (e) of Executive Order No. 1, treating of the PCGG's power to
"issue subpoenas requiring * * the production of such books, papers, contracts, records, statements of accounts and other documents as
may be material to the investigation conducted by the Commission, " and paragraph (3), Executive Order No. 2 dealing with its power
to "require all persons in the Philippines holding * * (alleged "ill-gotten") assets or properties, whether located in the Philippines or
abroad, in their names as nominees, agents or trustees, to make full disclosure of the same * *." The contention lacks merit.

It is elementary that the right against self-incrimination has no application to juridical persons.

While an individual may lawfully refuse to answer incriminating questions unless protected by an immunity statute,
it does not follow that a corporation, vested with special privileges and franchises, may refuse to show its hand when
charged with an abuse ofsuchprivileges * * 113

Relevant jurisprudence is also cited by the Solicitor General. 114

* * corporations are not entitled to all of the constitutional protections which private individuals have. * * They are
not at all within the privilege against self-incrimination, although this court more than once has said that the
privilege runs very closely with the 4th Amendment's Search and Seizure provisions. It is also settled that an officer
of the company cannot refuse to produce its records in its possession upon the plea that they will either incriminate
him or may incriminate it." (Oklahoma Press Publishing Co. v. Walling, 327 U.S. 186; emphasis, the Solicitor
General's).

* * The corporation is a creature of the state. It is presumed to be incorporated for the benefit of the public. It
received certain special privileges and franchises, and holds them subject to the laws of the state and the limitations
of its charter. Its powers are limited by law. It can make no contract not authorized by its charter. Its rights to act as a
corporation are only preserved to it so long as it obeys the laws of its creation. There is a reserve right in the
legislature to investigate its contracts and find out whether it has exceeded its powers. It would be a strange anomaly
to hold that a state, having chartered a corporation to make use of certain franchises, could not, in the exercise of
sovereignty, inquire how these franchises had been employed, and whether they had been abused, and demand the
production of the corporate books and papers for that purpose. The defense amounts to this, that an officer of the
corporation which is charged with a criminal violation of the statute may plead the criminality of such corporation as
a refusal to produce its books. To state this proposition is to answer it. While an individual may lawfully refuse to
answer incriminating questions unless protected by an immunity statute, it does not follow that a corporation, vested
 with special privileges and franchises may refuse to show its hand when charged with an abuse of such
privileges. (Wilson v. United States, 55 Law Ed., 771, 780 [emphasis, the Solicitor General's])

At any rate, Executive Order No. 14-A, amending Section 4 of Executive Order No. 14 assures protection to individuals required to
produce evidence before the PCGG against any possible violation of his right against self-incrimination. It gives them immunity from
prosecution on the basis of testimony or information he is compelled to present. As amended, said Section 4 now provides that —

xxx xxx xxx

The witness may not refuse to comply with the order on the basis of his privilege against self-incrimination; but no
testimony or other information compelled under the order (or any information directly or indirectly derived from
such testimony, or other information) may be used against the witness in any criminal case, except a prosecution for
perjury, giving a false statement, or otherwise failing to comply with the order.

The constitutional safeguard against unreasonable searches and seizures finds no application to the case at bar either. There has been
no search undertaken by any agent or representative of the PCGG, and of course no seizure on the occasion thereof.

24. Scope and Extent of Powers of the PCGG

One other question remains to be disposed of, that respecting the scope and extent of the powers that may be wielded by the PCGG
with regard to the properties or businesses placed under sequestration or provisionally taken over. Obviously, it is not a question to
which an answer can be easily given, much less one which will suffice for every conceivable situation.

a. PCGG May Not Exercise Acts of Ownership

One thing is certain, and should be stated at the outset: the PCGG cannot exercise acts of dominion over property sequestered, frozen
or provisionally taken over. AS already earlier stressed with no little insistence, the act of sequestration; freezing or provisional
takeover of property does not import or bring about a divestment of title over said property; does not make the PCGG the owner
thereof. In relation to the property sequestered, frozen or provisionally taken over, the PCGG is a conservator, not an
owner. Therefore, it can not perform acts of strict ownership; and this is specially true in the situations contemplated by the
sequestration rules where, unlike cases of receivership, for example, no court exercises effective supervision or can upon due
application and hearing, grant authority for the performance of acts of dominion.

Equally evident is that the resort to the provisional remedies in question should entail the least possible interference with business
operations or activities so that, in the event that the accusation of the business enterprise being "ill gotten" be not proven, it may be
returned to its rightful owner as far as possible in the same condition as it was at the time of sequestration.

b. PCGG Has Only Powers of Administration

The PCGG may thus exercise only powers of administration over the property or business sequestered or provisionally taken over,
much like a court-appointed receiver, 115 such as to bring and defend actions in its own name; receive rents; collect debts due; pay
outstanding debts; and generally do such other acts and things as may be necessary to fulfill its mission as conservator and
administrator. In this context, it may in addition enjoin or restrain any actual or threatened commission of acts by any person or entity
that may render moot and academic, or frustrate or otherwise make ineffectual its efforts to carry out its task; punish for direct or
indirect contempt in accordance with the Rules of Court; and seek and secure the assistance of any office, agency or instrumentality of
the government. 116 In the case of sequestered businesses generally (i.e., going concerns, businesses in current operation), as in the
case of sequestered objects, its essential role, as already discussed, is that of conservator, caretaker, "watchdog" or overseer. It is not
that of manager, or innovator, much less an owner.

c. Powers over Business Enterprises Taken Over by Marcos or Entities or Persons Close to him; Limitations
Thereon

Now, in the special instance of a business enterprise shown by evidence to have been "taken over by the government of the Marcos
Administration or by entities or persons close to former President Marcos," 117 the PCGG is given power and authority, as already
adverted to, to "provisionally take (it) over in the public interest or to prevent * * (its) disposal or dissipation;" and since the term is
obviously employed in reference to going concerns, or business enterprises in operation, something more than mere physical custody
is connoted; the PCGG may in this case exercise some measure of control in the operation, running, or management of the business
itself. But even in this special situation, the intrusion into management should be restricted to the minimum degree necessary to
accomplish the legislative will, which is "to prevent the disposal or dissipation" of the business enterprise. There should be no hasty,
indiscriminate, unreasoned replacement or substitution of management officials or change of policies, particularly in respect of viable
establishments. In fact, such a replacement or substitution should be avoided if at all possible, and undertaken only when justified by
demonstrably tenable grounds and in line with the stated objectives of the PCGG. And it goes without saying that where replacement
of management officers may be called for, the greatest prudence, circumspection, care and attention - should accompany that
undertaking to the end that truly competent, experienced and honest managers may be recruited. There should be no role to be played
in this area by rank amateurs, no matter how wen meaning. The road to hell, it has been said, is paved with good intentions. The
business is not to be experimented or played around with, not run into the ground, not driven to bankruptcy, not fleeced, not ruined.
Sight should never be lost sight of the ultimate objective of the whole exercise, which is to turn over the business to the Republic, once
judicially established to be "ill-gotten." Reason dictates that it is only under these conditions and circumstances that the supervision,
administration and control of business enterprises provisionally taken over may legitimately be exercised.

d. Voting of Sequestered Stock; Conditions Therefor

So, too, it is within the parameters of these conditions and circumstances that the PCGG may properly exercise the prerogative to vote
sequestered stock of corporations, granted to it by the President of the Philippines through a Memorandum dated June 26, 1986. That
Memorandum authorizes the PCGG, "pending the outcome of proceedings to determine the ownership of * * (sequestered) shares of
stock," "to vote such shares of stock as it may have sequestered in corporations at all stockholders' meetings called for the election of
directors, declaration of dividends, amendment of the Articles of Incorporation, etc." The Memorandum should be construed in such a
manner as to be consistent with, and not contradictory of the Executive Orders earlier promulgated on the same matter. There should
be no exercise of the right to vote simply because the right exists, or because the stocks sequestered constitute the controlling or a
substantial part of the corporate voting power. The stock is not to be voted to replace directors, or revise the articles or by-laws, or
otherwise bring about substantial changes in policy, program or practice of the corporation except for demonstrably weighty and
defensible grounds, and always in the context of the stated purposes of sequestration or provisional takeover, i.e., to prevent the
dispersion or undue disposal of the corporate assets. Directors are not to be voted out simply because the power to do so exists.
Substitution of directors is not to be done without reason or rhyme, should indeed be shunned if at an possible, and undertaken only
when essential to prevent disappearance or wastage of corporate property, and always under such circumstances as assure that the
replacements are truly possessed of competence, experience and probity.

In the case at bar, there was adequate justification to vote the incumbent directors out of office and elect others in their stead because
the evidence showed prima facie that the former were just tools of President Marcos and were no longer owners of any stock in the
firm, if they ever were at all. This is why, in its Resolution of October 28, 1986; 118 this Court declared that —

Petitioner has failed to make out a case of grave abuse or excess of jurisdiction in respondents' calling and holding
of a stockholders' meeting for the election of directors as authorized by the Memorandum of the President * * (to the
PCGG) dated June 26, 1986, particularly, where as in this case, the government can, through its designated directors,
properly exercise control and management over what appear to be properties and assets owned and belonging to the
government itself and over which the persons who appear in this case on behalf of BASECO have failed to show
any right or even any shareholding in said corporation.

It must however be emphasized that the conduct of the PCGG nominees in the BASECO Board in the management of the company's
affairs should henceforth be guided and governed by the norms herein laid down. They should never for a moment allow themselves
to forget that they are conservators, not owners of the business; they are fiduciaries, trustees, of whom the highest degree of diligence
and rectitude is, in the premises, required.

25. No Sufficient Showing of Other Irregularities

As to the other irregularities complained of by BASECO, i.e., the cancellation or revision, and the execution of certain contracts,
inclusive of the termination of the employment of some of its executives, 119 this Court cannot, in the present state of the evidence on
record, pass upon them. It is not necessary to do so. The issues arising therefrom may and will be left for initial determination in the
appropriate action. But the Court will state that absent any showing of any important cause therefor, it will not normally substitute its
judgment for that of the PCGG in these individual transactions. It is clear however, that as things now stand, the petitioner cannot be
said to have established the correctness of its submission that the acts of the PCGG in question were done without or in excess of its
powers, or with grave abuse of discretion.

WHEREFORE, the petition is dismissed. The temporary restraining order issued on October 14, 1986 is lifted.

Yap, Fernan, Paras, Gancayco and Sarmiento, JJ., concur.

Separate Opinions

TEEHANKEE, CJ., concurring:

I fully concur with the masterly opinion of Mr. Justice Narvasa. In the process of disposing of the issues raised by petitioner BASECO
in the case at bar, it comprehensively discusses the laws and principles governing the Presidential Commission on Good Government
(PCGG) and defines the scope and extent of its powers in the discharge of its monumental task of recovering the "ill-gotten wealth,
accumulated by former President Ferdinand E. Marcos, his immediate family, relatives, subordinates and close associates, whether
located in the Philippines or abroad (and) business enterprises and entities owned or controlled by them during I . . .(the Marcos)
administration, directly or through nominees, by taking undue advantage of their public office and/or using their powers, authority,
influence, connections or relationship." 1

The Court is unanimous insofar as the judgment at bar upholds the imperative need of recovering the ill-gotten properties amassed by
the previous regime, which "deserves the fullest support of the judiciary and all sectors of society." 2 To quote the pungent language of
Mr. Justice Cruz, "(T)here is no question that all lawful efforts should be taken to recover the tremendous wealth plundered from the
people by the past regime in the most execrable thievery perpetrated in all history. No right-thinking Filipino can quarrel with this
necessary objective, and on this score I am happy to concur with the ponencia." 3

The Court is likewise unanimous in its judgment dismissing the petition to declare unconstitutional and void Executive Orders Nos. 1
and 2 to annul the sequestration order of April 14, 1986. For indeed, the 1987 Constitution overwhelmingly adopted by the people at
the February 2, 1987 plebiscite expressly recognized in Article XVIII, section 26 thereof 4 the vital functions of respondent PCGG to
achieve the mandate of the people to recover such ill-gotten wealth and properties as ordained by Proclamation No. 3 promulgated on
March 25, 1986.

The Court is likewise unanimous as to the general rule set forth in the main opinion that "the PCGG cannot exercise acts of dominion
over property sequestered, frozen or provisionally taken over" and "(T)he PCGG may thus exercise only powers of administration
over the property or business sequestered or provisionally taken over, much like a court-appointed receiver, such as to bring and
defend actions in its own name; receive rents; collect debts due; pay outstanding debts; and generally do such other acts and things as
may be necessary to fulfill its mission as conservator and administrator. In this context, it may in addition enjoin or restrain any actual
or threatened commission of acts by any person or entity that may render moot and academic, or frustrate or otherwise make
ineffectual its efforts to carry out its task; punish for direct or indirect contempt in accordance with the Rules of Court; and seek and
secure the assistance of any office, agency or instrumentality of the government. In the case of sequestered businesses generally (i.e.
going concerns, business in current operation), as in the case of sequestered objects, its essential role, as already discussed, is that of
conservator, caretaker, 'watchdog' or overseer. It is not that of manager, or innovator, much less an owner." 5

Now, the case at bar involves one where the third and most encompassing and rarely invoked of provisional remedies, 6 the
provisional takeover of the Baseco properties and business operations has been availed of by the PCGG, simply because the evidence
on hand, not only prima facie but convincingly with substantial and documentary evidence of record establishes that the corporation
known as petitioner BASECO "was owned or controlled by President Marcos 'during his administration, through nominees, by taking
undue advantage of his public office and/or using his powers, authority, or influence;' and that it was by and through the same means,
that BASECO had taken over the business and/or assets of the [government-owned] National Shipyard and Engineering Co., Inc., and
other government-owned or controlled entities." The documentary evidence shows that petitioner BASECO (read Ferdinand E.
Marcos) in successive transactions all directed and approved by the former President-in an orgy of what according to the PCGG's then
chairman, Jovito Salonga, in his statement before the 1986 Constitutional Commission, "Mr. Ople once called 'organized pillage' "-
gobbled up the government corporation National Shipyard & Steel Corporation NASSCO its shipyard at Mariveles, 300 hectares of
land in Mariveles from the Export Processing Zone Authority, Engineer Island itself in Manila and its complex of equipment and
facilities including structures, buildings, shops, quarters, houses, plants and expendable or semi-expendable assets and obtained huge
loans of $19,000,000.00 from the last available Japanese war damage fund, P30,000,000.00 from the NDC and P12,400,000.00 from
the GSIS. The sordid details are set forth in detail in Paragraphs 1 1 to 20 of the main opinion. They include confidential reports from
then BASECO president Hilario M. Ruiz and the deposed President's brother-in- law, then Captain (later Commodore) Alfredo
Romualdez, who although not on record as an officer or stockholder of BASECO reported directly to the deposed President on its
affairs and made the recommendations, all approved by the latter, for the gobbling up by BASECO of all the choice government assets
and properties.

All this evidence has been placed of record in the case at bar. And petitioner has had all the time and opportunity to refute it,
submittals to the contrary notwithstanding, but has dismally failed to do so. To cite one glaring instance: as stated in the main opinion,
the evidence submitted to this Court by the Solicitor General "proves that President Marcos not only exercised control over BASECO,
but also that he actually owns well nigh one hundred percent of its outstanding stock." It cites the fact that three corporations,
evidently front or dummy corporations, among twenty shareholders, in name, of BASECO, namely Metro Bay Drydock, Fidelity
Management, Inc. and Trident Management hold 209,664 shares or 95.82%, of BASECO's outstanding stock. Now, the Solicitor
General points out further than BASECO certificates "corresponding to more than ninety-five percent (95%) of all the outstanding
shares of stock of BASECO, endorsed in blank, together with deeds of assignment of practically all the outstanding shares of stock of
the three (3) corporations above mentioned (which hold 95.82% of all BASECO stock), signed by the owners thereof although not
notarized" 7 were found in Malacañang shortly after the deposed President's sudden flight from the country on the night of February
25, 1986. Thus, the main opinion's unavoidable conclusion that "(W)hile the petitioner's counsel was quick to dispute this asserted
fact, assuring this Court that the BASECO stockholders were still in possession of their respective stock certificates and had 'never
endorsed * * * them in blank or to anyone else,' that denial is exposed by his own prior and subsequent recorded statements as a mere
gesture of defiance rattler than a verifiable factual declaration . . . . Under the circumstances, the Court can only conclude that he could
not get the originals from the stockholders for the simple reason that as the Solicitor General maintains, said stockholders in truth no
longer have them in their possession, these having already been assigned in blank to President Marcos." 8

With this strong unrebutted evidence of record in this Court, Justice Melencio-Herrera, joined by Justice Feliciano, expressly concurs
with the main opinion upholding the commission's take-over, stating that "(I) have no objection to according the right to vote
sequestered stock in case of a takeover of business actually belonging to the government or whose capitalization comes from public
funds but which, somehow, landed in the hands of private persons, as in the case of BASECO." They merely qualify their concurrence
with the injunction that such takeovers be exercised with "caution and prudence" pending the determination of "the true and real
ownership" of the sequestered shares. Suffice it to say in this regard that each case has to be judged from the pertinent facts and
circumstances and that the main opinion emphasizes sufficiently that it is only in the special instances specified in the governing laws
grounded on the superior national interest and welfare and the practical necessity of preserving the property and preventing its loss or
disposition that the provisional remedy of provisional take-over is exercised.

Here, according to the dissenting opinion, "the PCGG concludes that sequestered property is ill-gotten wealth and proceeds to exercise
acts of ownership over said properties . . . . and adds that "the fact of ownership must be established in a proper suit before a court of
justice"-which this Court has preempted with its finding that "in the context of the proceedings at bar, the actuality of the control by
President Marcos of BASECO has been sufficiently shown."

But BASECO who has instituted this action to set aside the sequestration and take-over orders of respondent commission has chosen
to raise these very issues in this Court. We cannot ostrich-like hide our head in the sand and say that it has not yet been established in
the proper court that what the PCGG has taken over here are government properties, as a matter of record and public notice and
knowledge, like the NASSCO, its Engineer Island and Mariveles Shipyard and entire complex, which have been pillaged and placed
in the name of the dummy or front company named BASECO but from all the documentary evidence of record shown by its street
certificates all found in Malacanang should in reality read "Ferdinand E. Marcos" and/or his brother-in-law. Such take-over can in no
way be termed "lawless usurpation," for the government does not commit any act of usurpation in taking over its own properties that
have been channeled to dummies, who are called upon to prove in the proper court action what they have failed to do in this Court,
that they have lawfully acquired ownership of said properties, contrary to the documentary evidence of record, which they must
likewise explain away. This Court, in the exercise of its jurisdiction on certiorari and as the guardian of the Constitution and protector
of the people's basic constitutional rights, has entertained many petitions on the part of parties claiming to be adversely affected by
sequestration and other orders of the PCGG, This Court set the criterion that such orders should issue only upon showing of a prima
facie case, which criterion was adopted in the 1987 Constitution. The Court's judgment cannot be faulted if much more than a prima
facie has been shown in this case, which the faceless figures claiming to represent BASECO have failed to refute or disprove despite
all the opportunity to do so.

The record plainly shows that petitioner BASECO which is but a mere shell to mask its real owner did not and could not explain how
and why they received such favored and preferred treatment with tailored Letters of Instruction and handwritten personal approval of
the deposed President that handed it on a silver platter the whole complex and properties of NASSCO and Engineer Island and the
Mariveles Shipyard.

It certainly would be the height of absurdity and helplessness if this government could not here and now take over the possession and
custody of its very own properties and assets that had been stolen from it and which it had pledged to recover for the benefit and in the
greater interest of the Filipino people, whom the past regime had saddled with a huge $27-billion foreign debt that has since ballooned
to $28.5-billion.

Thus, the main opinion correctly concludes that "(I)n the light of the affirmative showing by the Government that, prima facie at least,
the stockholders and directors of BASECO as of April, 1986 were mere 'dummies,' nominees or alter egos of President Marcos; at any
rate, that they are no longer owners of any shares of stock in the corporation, the conclusion cannot be avoided that said stockholders
and directors have no basis and no standing whatever to cause the filing and prosecution of the instant proceeding; and to grant relief
to BASECO, as prayed for in the petition, would in effect be to restore the assets, properties and business sequestered and taken over
by the PCGG to persons who are 'dummies' nominees or alter egos of the former President." 9

And Justice Padilla in his separate concurrence "called a spade a spade," citing the street certificates representing 95 % of BASECO's
outstanding stock found in Malacañang after Mr. Marcos' hasty flight in February, 1986 and the extent of the control he exercised over
policy decisions affecting BASECO and concluding that "Consequently, even ahead of judicial proceedings, I am convinced that the
Republic of the Philippines, thru the PCGG, has the right and even the duty to take over full control and supervision of BASECO."

Indeed, the provisional remedies available to respondent commission are rooted in the police power of the State, the most pervasive
and the least limitable of the powers of Government since it represents "the power of sovereignty, the power to govern men and things
within the limits of its domain." 10 Police power has been defined as the power inherent in the State "to prescribe regulations to
promote the health, morals, education, good order or safety, and general welfare of the people." 11 Police power rests upon public
necessity and upon the right of the State and of the public to self-protection. 12 "Salus populi suprema est lex" or "the welfare of the
people is the Supreme Law." 13 For this reason, it is co-extensive with the necessities of the case and the safeguards of public
interest. 14 Its scope expands and contracts with changing needs. 15 "It may be said in a general way that the police power extends to
all the great public needs. It may be put forth in aid of what is sanctioned by usage, or held by the prevailing morality or strong and
preponderant opinion to be greatly and immediately necessary to the public welfare." 16 That the public interest or the general welfare
is subserved by sequestering the purported ill-gotten assets and properties and taking over stolen properties of the government
channeled to dummy or front companies is stating the obvious. The recovery of these ill-gotten assets and properties would greatly aid
our financially crippled government and hasten our national economic recovery, not to mention the fact that they rightfully belong to
the people. While as a measure of self-protection, if, in the interest of general welfare, police power may be exercised to protect
citizens and their businesses in financial and economic matters, it may similarly be exercised to protect the government itself against
potential financial loss and the possible disruption of governmental functions. 17 Police power as the power of self-protection on the
part of the community bears the same relation to the community that the principle of self-defense bears to the individual. 18 Truly, it
may be said that even more than self- defense, the recovery of ill-gotten wealth and of the government's own properties involves the
material and moral survival of the nation, marked as the past regime was by the obliteration of any line between private funds and the
public treasury and abuse of unlimited power and elimination of any accountability in public office, as the evidence of record amply
shows.

It should be mentioned that the tracking down of the deposed President's actual ownership of the BASECO shares was fortuitously
facilitated by the recovery of the street certificates in Malacañang after his hasty flight from the country last year. This is not generally
the case.

For example, in the ongoing case filed by the government to recover from the Marcoses valuable real estate holdings in New York and
the Lindenmere estate in Long Island, former PCGG chairman Jovito Salonga has revealed that their names "do not appear on any title
to the property. Every building in New York is titled in the name of a Netherlands Antilles corporation, which in turn is purportedly
owned by three Panamanian corporations, with bearer shares. This means that the shares of this corporation can change hands any
time, since they can be transferred, under the law of Panama, without previous registration on the books of the corporation. One of the
first documents that we discovered shortly after the February revolution was a declaration of trust handwritten by Mr. Joseph
Bernstein on April 4, 1982 on a Manila Peninsula Hotel stationery stating that he would act as a trustee for the benefit of President
Ferdinand Marcos and would act solely pursuant to the instructions of Marcos with respect to the Crown Building in New York." 19

This is just to stress the difficulties of the tasks confronting respondent PCGG, which nevertheless has so far commendably produced
unprecedented positive results. As stated by then chairman Salonga:

PCGG has turned over to the Office of the President around 2 billion pesos in cash, free of any lien. It has also
delivered to the President-as a result of a compromise settlement-around 200 land titles involving vast tracks of land
in Metro Manila, Rizal, Laguna, Cavite, and Bataan, worth several billion pesos. These lands are now available for
low-cost housing projects for the benefit of the poor and the dispossessed amongst our people.

In the legal custody of the Commission as a result of sequestration proceedings, are expensive jewelry amounting to
310 million pesos, 42 aircraft amounting to 718 million pesos, vessels amounting to 748 million pesos, and shares of
stock amounting to around 215 million pesos.

But, as I said, the bulk of the ill-gotten wealth is located abroad, not in the Philippines. Through the efforts of the
PCGG, we have caused the freezing or sequestration of properties, deposits, and securities probably worth many
billions of pesos in New York, New Jersey, Hawaii, California, and more importantly-in Switzerland. Due to
favorable developments in Switzerland, we may expect, according to our Swiss lawyers, the first deliveries of the
Swiss deposits in the foreseeable future, perhaps in less than a year's time. In New York, PCGG through its lawyers
who render their services free of cost to the Philippine government, succeeded in getting injunctive relief against Mr.
 and Mrs. Marcos and their nominees and agents. There is now an offer for settlement that is being studied and
explored by our lawyers there.

If we succeed in recovering not an (since this is impossible) but a substantial part of the ill-gotten wealth here and in
various countries of the world — something the revolutionary governments of China, Ethiopia, Iran and Nicaragua
were not able to accomplish at all with respect to properties outside their territorial boundaries — the Presidential
Commission on Good Government, which has undertaken the difficult and thankless task of trying to undo what had
been done so secretly and effectively in the last twenty years, shall have more than justified its existence. 20

The misdeeds of some PCGG volunteers and personnel cited in the dissenting opinion do not detract at an from the PCGG's
accomplishments, just as no one would do away with newspapers because of some undesirable elements. The point is that all such
misdeeds have been subject to public exposure and as stated in the dissent itself, the erring PCGG representatives have been forthwith
dismissed and replaced.

The magnitude of the tasks that confront respondent PCGG with its limited resources and staff support and volunteers should be
appreciated, together with the assistance that foreign governments and lawyers have spontaneously given the commission.

A word about the PCGG's firing of the BASECO lawyers who filed the present petition challenging its questioned orders, filing a
motion to withdraw the petition, after it had put in eight of its representatives as directors of the BASECO board of directors. This was
entirely proper and in accordance with the Court's Resolution of October 28, 1986, which denied BASECO's motion for the issuance
of a restraining order against such take-over and declared that "the government can, through its designated directors, properly exercise
control and management over what appear to be properties and assets owned and belonging to the government itself and over which
the persons who appear in this case on behalf of BASECO have failed to show any eight or even any shareholding in said
corporation." In other words, these dummies or fronts cannot seek to question the government's right to recover the very properties
and assets that have been stolen from it by using the very same stolen properties and funds derived therefrom. If they wish to pursue
their own empty claim, they must do it on their own, after first establishing that they indeed have a lawful right and/or shareholding in
BASECO.

Under the 1987 Constitution, the PCGG is called upon to file the judicial proceedings for forfeiture and recovery of the sequestered or
frozen properties covered by its orders issued before the ratification of the Constitution on February 2, 1987, within six months from
such ratification, or by August 2, 1987. (For those orders issued after such ratification, the judicial action or proceeding must be
commenced within six months from the issuance thereof.) The PCGG has not really been given much time, considering the magnitude
of its tasks. It is entitled to some forbearance, in availing of the maximum time granted it for the filing of the corresponding judicial
action with the Sandiganbayan.

PADILLA, J., concurring:

The majority opinion penned by Mr. Justice Narvasa maintains and upholds the valid distinction between acts of conservation and
preservation of assets and acts of ownership. Sequestration, freeze and temporary take-over encompass the first type of acts. They do
not include the second type of acts which are reserved only to the rightful owner of the assets or business sequestered or temporarily
taken over.

The removal and election of members of the board of directors of a corporate enterprise is, to me, a clear act of ownership on the part
of the shareholders of the corporation. Under ordinary circumstances, I would deny the PCGG the authority to change and elect the
members of BASECO's Board of Directors. However, under the facts as disclosed by the records, it appears that the certificates of
stock representing about ninety-five (95%) per cent of the total ownership in BASECO's capital stock were found endorsed in blank in
Malacanang (presumably in the possession and control of Mr. Marcos) at the time he and his family fled in February 1986. This
circumstance let alone the extent of the control Mr. Marcos exercised, while in power, over policy decisions affecting BASECO,
entirely satisfies my mind that BASECO was owned and controlled by Mr. Marcos. This is calling a spade a spade. I am also entirely
satisfied in my mind that Mr. Marcos could not have acquired the ownership of BASECO out of his lawfully-gotten wealth.

Consequently, even ahead of judicial proceedings, I am convinced that the Republic of the Philippines, through the PCGG, has the
right and even the duty to take-over full control and supervision of BASECO.

MELENCIO-HERRERA, J., concurring:

I would like to qualify my concurrence in so far as the voting of sequestered stork is concerned.
The voting of sequestered stock is, to my mind, an exercise of an attribute of ownership. It goes beyond the purpose of a writ of
sequestration, which is essentially to preserve the property in litigation (Article 2005, Civil Code). Sequestration is in the nature of a
judicial deposit (ibid.).

I have no objection to according the right to vote sequestered stock in case of a take-over of business actually belonging to the
government or whose capitalization comes from public funds but which, somehow, landed in the hands of private persons, as in the
case of BASECO. To my mind, however, caution and prudence should be exercised in the case of sequestered shares of an on-going
private business enterprise, specially the sensitive ones, since the true and real ownership of said shares is yet to be determined and
proven more conclusively by the Courts.

It would be more in keeping with legal norms if forfeiture proceedings provided for under Republic Act No. 1379 be filed in Court
and the PCGG seek judicial appointment as a receiver or administrator, in which case, it would be empowered to vote sequestered
shares under its custody (Section 55, Corporation Code). Thereby, the assets in litigation are brought within the Court's jurisdiction
and the presence of an impartial Judge, as a requisite of due process, is assured. For, even in its historical context, sequestration is a
judicial matter that is best handled by the Courts.

I consider it imperative that sequestration measures be buttressed by judicial proceedings the soonest possible in order to settle the
matter of ownership of sequestered shares and to determine whether or not they are legally owned by the stockholders of record or are
"ill-gotten wealth" subject to forfeiture in favor of the State. Sequestration alone, being actually an ancillary remedy to a principal
action, should not be made the basis for the exercise of acts of dominion for an indefinite period of time.

Sequestration is an extraordinary, harsh, and severe remedy. It should be confined to its lawful parameters and exercised, with due
regard, in the words of its enabling laws, to the requirements of fairness, due process (Executive Order No. 14, palay 7, 1986), and
Justice (Executive Order No. 2, March 12, 1986).

Feliciano, J., concur.

GUTIERREZ, JR., J., concurring and dissenting:

I concur, in part, in the erudite opinion penned for the Court by my distinguished colleague Mr. Justice Andres R. Narvasa. I agree
insofar as it states the principles which must govern PCGG sequestrations and emphasizes the limitations in the exercise of its broad
grant of powers.

I concur in the general propositions embodied in or implied from the majority opinion, among them:

(1) The efforts of Government to recover ill-gotten properties amassed by the previous regime deserve the fullest support of the
judiciary and all sectors of society. I believe, however, that a nation professing adherence to the rule of law and fealty to democratic
processes must adopt ways and means which are always within the bounds of lawfully granted authority and which meet the tests of
due process and other Bill of Rights protections.

(2) Sequestration is intended to prevent the destruction, concealment, or dissipation of ill-gotten wealth. The object is conservation
and preservation. Any exercise of power beyond these objectives is lawless usurpation.

(3) The PCGG exercises only such powers as are granted by law and not proscribed by the Constitution. The remedies it enforces are
provisional and contingent. Whether or not sequestered property is indeed ill-gotten must be-determined by a court of justice. The
PCGG has absolutely no power to divest title over sequestered property or to act as if its findings are final.

(4) The PCGG does not own sequestered property. It cannot and must not exercise acts of ownership. To quote the majority opinion,
"one thing is certain ..., the PCGG cannot exercise acts of dominion."

(5) The provisional takeover in a sequestration should not be indefinitely maintained. It is the duty of the PCGG to immediately file
appropriate criminal or civil cases once the evidence has been gathered.

It is the difference between what the Court says and what the PCGG does which constrains me to dissent. Even as the Court
emphasizes principles of due process and fair play, it has unfortunately validated ultra vires acts violative of those very same
principles. While we stress the rules which must govern the PCGG in the exercise of its powers, the Court has failed to stop or check
acts which go beyond the power of sequestration given by law to the PCGG.
We are all agreed in the Court that the PCGG is not a judge. It is an investigator and prosecutor. Sequestration is only a preliminary or
ancillary remedy. There must be a principal and independent suit filed in court to establish the true ownership of sequestered
properties. The factual premise that a sequestered property was ill-gotten by former President Marcos, his family, relatives,
subordinates, and close associates cannot be assumed. The fact of ownership must be established in a proper suit before a court of
justice.

But what has the Court, in effect, ruled?

Pages 21 to 33 of the majority opinion are dedicated to a statement of facts which conclusively and indubitably shows that BASECO is
owned by President Marcos-and that it was acquired and vastly enlarged by the former President's taking undue advantage of his
public office and using his powers, authority, or influence.

There has been no court hearing, no trial, and no presentation of evidence. All that we have is what the PCGG has given us. The
petitioner has not even been allowed to see the evidence, much less refute it.

What the PCGG has gathered in the course of its seizures and investigations may be gospel truth. However, that truth must be properly
established in a trial court, not unilaterally determined by the PCGG or declared by this Court in a special proceeding which only asks
us to set aside or enjoin an illegal exercise of power. After this decision, there is nothing more for a trial court to ascertain. Certainly,
no lower court would dare to arrive at findings contrary to this Court's conclusions, no matter how insistent we may be in labelling
such conclusions as "prima facie." To me, this is the basic flaw in PCGG procedures that the Court is, today, unwittingly legitimating.
Even before the institution of a court case, the PCGG concludes that sequestered property is ill-gotten wealth and proceeds to exercise
acts of ownership over said properties. It treats sequestered property as its own even before the oppositor-owners have been divested
of their titles.

The Court declares that a state of seizure is not to be indefinitely maintained. This means that court proceedings to either forfeit the
sequestered properties or clear the names and titles of the petitioners must be filed as soon as possible.

This case is a good example of disregard or avoidance of this requirement. With the kind of evidence which the PCGG professes to
possess, the forfeiture case could have been filed simultaneously with the issuance of sequestration orders or shortly thereafter.

And yet, the records show that the PCGG appears to concentrate more on the means rather than the ends, in running the BASECO,
taking over the board of directors and management, getting rid of security guards, disposing of scrap, entering into new contracts and
otherwise behaving as if it were already the owner. At this late date and with all the evidence PCGG claims to have, no court case has
been filed.

Among the interesting items elicited during the oral arguments or found in the records of this petition are:

(1) Upon sequestering BASECO, some PCGG personnel lost no time in digging up paved premises with jack hammers in a frantic
search for buried gold bars.

(2) Two top PCGG volunteers charged each other with stealing properties under their custody. The PCGG had to step in, dismiss the
erring representatives, and replace them with new ones.

(3) The petitioner claims that the lower bid of a rock quarry operator was accepted even as a higher and more favorable bid was
offered. When the questionable deal was brought to our attention, the awardee allegedly raised his bid to the level of the better offer.
The successful bidder later submitted a comment in intervention explaining his side. Whoever is telling the truth, the fact remains that
multi-million peso contracts involving the operations of sequestered companies should be entered into under the supervision of a
court, not freely executed by the PCGG even when the petitioner-owners question the propriety and integrity of those transactions.

(4) The PCGG replaced eight out of eleven members of the BASECO board of directors with its own men. Upon taking over full
control of the corporation, the newly installed board reversed the efforts of the former owners to protect their interests. The new board
fired the BASECO lawyers who instituted the instant petition. It then filed a motion to withdraw this very same petition we are now
deciding. In other words, the "new owners" did not want the Supreme Court to continue poking into the legality of their acts. They
moved to abort the petition filed with us.

Any suspicion of impropriety would have been avoided if the PCGG had filed the required court proceedings and exercised its acts of
management and control under court supervision. The requirements of due process would have been met.
One other matter I wish to discuss in this separate opinion is PCGG's selection of eight out of the eleven members of the BASECO
board of directors.

The election of the members of a board of directors is distinctly and unqualifiedly an act of ownership. When stockholders of a
corporation elect or remove members of a board of directors, they exercise their right of ownership in the company they own, By no
stretch of the imagination can the revamp of a board of directors be considered as a mere act of conserving assets or preventing the
dissipation of sequestered assets. The broad powers of a sequestrator are more than enough to protect sequestered assets. There is no
need and no legal basis to reach out further and exercise ultimate acts of ownership.

Under the powers which PCGG has assumed and wields, it can amend the articles and by-laws of a sequestered corporation, decrease
the capital stock, or sell substantially all corporate assets without any effective check from the owners not yet divested of their titles or
from a court of justice. The PCGG is tasked to preserve assets but when it exercises the acts of an owner, it could also very well
destroy. I hope that the case of the Philippine Daily Express, a major newspaper closed by the PCGG, is an isolated example.
Otherwise, banks, merchandizing firms, investment institutions, and other sensitive businesses will find themselves in a similar
quandary.

I join the PCGG and all right thinking Filipinos in condemning the totalitarian acts which made possible the accumulation of ill-gotten
wealth. I, however, dissent when authoritarian and ultra vires methods are used to recover that stolen wealth. One wrong cannot be
corrected by the employment of another wrong.

I, therefore, vote to grant the petition. Pending the filing of an appropriate case in court, the PCGG must be enjoined from exercising
any and all acts of ownership over the sequestered firm.

Bidin and Cortes, JJ., concur and dissent.

CRUZ, J., dissenting:

My brother Narvasa has written a truly outstanding decision that bespeaks a penetrating and analytical mind and a masterly grasp of
the serious problem we are asked to resolve. He deserves and I offer him my sincere admiration.

There is no question that all lawful efforts should be taken to recover the tremendous wealth plundered from the people by the past
regime in the most execrable thievery perpetrated in all history. No right-thinking Filipino can quarrel with this necessary objective,
and on this score I am happy to concur with the ponencia.

But for all my full agreement with the basic thesis of the majority, I regret I find myself unable to support its conclusions in favor Of
the respondent PCGG. My view is that these conclusions clash with the implacable principles of the free society. foremost among
which is due process. This demands our reverent regard.

Due process protects the life, liberty and property of every person, whoever he may be. Even the most despicable criminal is entitled
to this protection. Granting this distinction to Marcos, we are still not justified in depriving him of this guaranty on the mere
justification that he appears to own the BASECO shares.

I am convinced and so submit that the PCGG cannot at this time take over the BASECO without any court order and exercise
thereover acts of ownership without court supervision. Voting the shares is an act of ownership. Reorganizing the board of directors is
an act of ownership. Such acts are clearly unauthorized. As the majority opinion itself stresses, the PCGG is merely an administrator
whose authority is limited to preventing the sequestered properties from being dissipated or clandestinely transferred.

The court action prescribed in the Constitution is not inadequate and is available to the PCGG. The advantage of this remedy is that,
unlike the ad libitum measures now being take it is authorized and at the same time also limited by the fundamental law. I see no
reason why it should not now be employed by the PCGG, to remove all doubts regarding the legality of its acts and all suspicions
concerning its motives

G.R. No. 161759 July 2, 2014

COMMISSIONER OF CUSTOMS, Petitioner,

vs.
OILINK INTERNATIONAL CORPORATION, Respondent.
 DECISION

BERSAMIN, J.:

This appeal is brought by the Commissioner of Customs to seek the review and reversal of the decision promulgated on September 29,
2003,1 whereby the Court of Appeals (CA) affirmed the adverse ruling of the Court of Tax Appeals (CTA) declaring the assessment
for deficiency taxes and duties against Oilink International Corporation (Oilink) null and void.

Antecedents

The antecedents are summarized in the assailed decision.2

On September 15, 1966, Union Refinery Corporation (URC) was established under the Corporation Code of the Philippines. In the
course of its business undertakings, particularly in the period from 1991 to 1994, URC imported oil products into the country.

On January 11, 1996, Oilink was incorporated for the primary purpose of manufacturing, importing, exporting, buying, selling or
dealing in oil and gas, and their refinements and by-products at wholesale and retail of petroleum. URC and Oilink had interlocking
directors when Oilink started its business.

In applying for and in expediting the transfer of the operator’s name for the Customs Bonded Warehouse thenoperated by URC,
Esther Magleo, the Vice-President and General Manager of URC, sent a letter dated January 15, 1996 to manifest that URC and Oilink
had the same Board of Directors and that Oilink was 100% owned by URC.

On March 4, 1998, Oscar Brillo, the District Collector of the Port of Manila, formally demanded that URC pay the taxes and duties on
its oil imports that had arrived between January 6, 1991 and November 7, 1995 at the Port of Lucanin in Mariveles, Bataan.

On April 16, 1998, Brillo made another demand letter to URC for the payment of the reduced sum of P289,287,486.60 for the Value-
Added Taxes (VAT), special duties and excisetaxes for the years 1991-1995.

On April 23, 1998, URC, through its counsel, responded to the demands by seeking the landed computations of the assessments, and
challenged the inconsistencies of the demands.

On November 25, 1998, then Customs Commissioner Pedro C. Mendoza formally directed that URC pay the amount
of P119,223,541.71 representing URC’s special duties, VAT,and Excise Taxes that it had failed to pay at the time of the release of its
17 oil shipments that had arrived in the Sub-port of Mariveles from January 1, 1991 to September 7, 1995.

On December 21, 1998, Commissioner Mendoza wrote again to require URC to pay deficiency taxes but in the reduced sum
of P99,216,580.10.

On December 23, 1998, upon his assumption of office, Customs Commissioner Nelson Tan transmitted another demand letter to URC
affirming the assessment of P99,216,580.10 by Commissioner Mendoza.

On January 18, 1999, Magleo, in behalf of URC, replied by letter to Commissioner Tan’s affirmance by denying liability, insisting
instead that only P28,933,079.20 should be paid by way of compromise.

On March 26, 1999, Commissioner Tan responded by rejecting Magleo’s proposal, and directed URC to pay P99,216,580.10.

On May 24, 1999, Manuel Co, URC’s President, conveyed to Commissioner Tan URC’s willingness to pay only P94,216,580.10, of
which the initial amount of P28,264,974.00 would be taken from the collectibles of Oilink from the National Power Corporation, and
the balance to be paid in monthly installments over a period ofthree years to be secured with corresponding post-dated checks and its
future available tax credits.

On July 2, 1999, Commissioner Tan made a final demand for the total liability of P138,060,200.49 upon URC and Oilink.

On July 8, 1999, Co requested from Commissioner Tan a complete finding of the facts and law in support ofthe assessment made in
the latter’s July 2, 1999 final demand.
Also on July 8, 1999, Oilink formally protested the assessment on the ground that it was not the party liable for the assessed
deficiency taxes.

On July 12, 1999, after receiving the July 8, 1999 letter from Co, Commissioner Tan communicated in writing the detailed
computation of the tax liability, stressing that the Bureau of Customs (BoC) would not issue any clearance to Oilink unless the amount
of P138,060,200.49 demanded as Oilink’s tax liability befirst paid, and a performance bond be posted by URC/Oilink to secure the
payment of any adjustments that would result from the BIR’s review of the liabilities for VAT, excise tax, special duties, penalties,
etc.

Thus, on July 30, 1999, Oilink appealed to the CTA, seeking the nullification of the assessment for having been issued without
authority and with grave abuse of discretion tantamount to lack of jurisdiction because the Government was thereby shifting the
imposition from URC to Oilink.

Decision of the CTA

On July 9, 2001, the CTA rendered its decision declaring as null and void the assessment of the Commissioner of Customs, to wit:

IN THE LIGHT OF ALL THE FOREGOING, the petition is hereby GRANTED. The assailed assessment issued by Respondent
against herein Petitioner OILINK INTERNATIONAL CORPORATION is hereby declared NULL and VOID.

SO ORDERED.3

The Commissioner of Customs seasonably filed a motion for reconsideration, 4 but the CTA denied the motion for lack of merit.5

Judgment of the CA

Aggrieved, the Commissioner of Customs brought a petition for review in the CA upon the following issues, namely: (a) the CTA
gravely erred in holding that it had jurisdiction over the subject matter; (b) the CTA gravely erred in holding that Oilink had a cause of
action; and (c) the CTA gravely erred in holding that the Commissioner of Customs could not pierce the veil of corporate fiction.

On the issue of the jurisdiction of the CTA, the CA held:

x x x the case at bar is very much within the purview of the jurisdiction of the Court ofTax Appeals since it is undisputed that what is
involved herein is the respondent’s liability for payment of money to the Government as evidenced by the demand letters sent by the
petitioner. Hence, the Court of Tax Appeals did noterr in taking cognizance of the petition for review filed by the respondent.

xxxx

We find the petitioner’s submission untenable. The principle of non-exhaustion of administrative remedy is not an iron-clad rule for
there are instances that immediate resort to judicial action may be proper. Verily, a cursory examination of the factual milieu of the
instant case indeed reveals that exhaustion ofadministrative remedy would be unavailing because it was the Commissioner of Customs
himself who was demanding from the respondent payment of tax liability. In addition, it may be recalled that a crucial issue inthe
petition for review filed by the respondent before the CTA is whether or not the doctrine of piercing the veil of corporate fiction
validly applies. Indubitably, this is purely a question of law where judicial recourse may certainly be resorted to.6

As to whether or not the Commissioner of Customs could lawfully pierce the veil of corporate fiction in order to treat Oilink as the
mere alter ego of URC, the CA concurred with the CTA, quoting the latter’s following findings:

In the case at bar, the said wrongdoing was not clearly and convincingly established by Respondent. He did not submit any evidence
to support his allegations but merely submitted the case for decision based on the pleadings and evidence presented by petitioner.
Stated otherwise, should the Respondent sufficiently provethat OILINK was merely set up in order to avoid the payment of taxes or
for some other purpose which will defeat public convenience, justify wrong, protect fraud or defend crime, this Court will not hesitate
to pierce the veil of corporate fiction by URC and OILINK. 7

Issues

Hence, this appeal, whereby the Commissioner of Customs reiterates the issues raised in the CA.
Ruling of the Court

We affirm the judgment of the CA.

1.

The CTA had jurisdiction over the controversy

There is no question that the CTA had the jurisdiction over the case. Republic Act No. 1125, the law creating the CTA, defined the
appellate jurisdiction of the CTA as follows:

Section 7. Jurisdiction. - The Court of Tax Appeals shall exercise exclusive appellate jurisdiction to review by appeal, as herein
provided:

xxxx

2. Decisions of the Commissioner ofCustoms in cases involving liability for Customs duties, fees or other money charges; seizure,
detention or release of property affected; fines, forfeitures or other penalties imposed in relation thereto;or other matters arising under
the Customs Law or other law or part of law administered by the Bureau of Customs;

xxxx

Nonetheless, the Commissioner of Customs contends that the CTA should not take cognizance of the casebecause of the lapse of the
30-day period within which to appeal, arguing that on November 25, 1998 URC had already received the BoC’s final assessment
demanding payment of the amount due within 10 days, but filed the petition only on July 30, 1999. 8

We rule against the Commissioner of Customs. The CTA correctly ruled that the reckoning date for Oilink’s appeal was July 12, 1999,
not July 2, 1999, because it was on the former date that the Commissioner of Customs denied the protest of Oilink.Clearly, the filing
of the petition on July 30, 1999 by Oilink was well within its reglementary period to appeal. The insistence by the Commissioner of
Customs on reckoning the reglementary period to appeal from November 25, 1998, the date when URC received the final demand
letter, is unwarranted. We note that the November 25, 1998 final demand letter of the BoC was addressed to URC, not to Oilink. As
such, the final demand sentto URC did not bind Oilink unless the separate identities of the corporations were disregarded in order to
consider them as one.

2.

Oilink had a valid cause of action

The Commissioner of Customs positsthat the final demand letter dated July 2, 1999 from which Oilink appealed was not the final
"action" or "ruling" from which an appeal could be taken as contemplated by Section 2402 of the Tariff and Customs Code; that what
Section 7 of RA No. 1125 referred to as a decision that was appealable to the CTA was a judgment or order of the Commissioner of
Customs that was final in nature, not merely an interlocutory one; that Oilink did notexhaust its administrative remedies under Section
2308 of the Tariff and Customs Code by paying the assessment under protest; that only when the ensuing decision of the Collector and
then the adverse decision of the Commissioner of Customs would it be proper for Oilink to seek judicial relief from the CTA; and that,
accordingly, the CTA should have dismissed the petition for lack of cause of action.

The position of the Commissioner of Customs lacks merit.

The CA correctly held that the principle of non-exhaustion of administrative remedies was not an iron-clad rule because there were
instances in which the immediate resort to judicial action was proper. This was one such exceptional instance when the principle did
not apply. As the records indicate, the Commissioner of Customs already decided to deny the protest by Oilink on July 12, 1999, and
stressed then that the demand to pay was final. In that instance, the exhaustion of administrative remedies would have been an exercise
in futility because it was already the Commissioner of Customs demanding the payment of the deficiency taxes and duties.

3.

There was no ground to pierce

the veil of corporate existence

A corporation, upon coming into existence, is invested by law with a personality separate and distinct from those of the persons
composing it as well as from any other legal entity to which it may be related. For this reason, a stockholder is generally not made to
answer for the acts or liabilities of the corporation, and viceversa. The separate and distinct personality of the corporation is, however,
a mere fiction established by law for convenience and to promote the ends of justice. It may not be used or invoked for ends that
subvert the policy and purpose behind its establishment, or intended by law to which the corporation owes its being. This is true
particularly when the fiction is used to defeat public convenience, to justify wrong, to protectfraud, to defend crime, to confuse
legitimate legal or judicial issues, to perpetrate deception or otherwise to circumvent the law. This is likewise true where the corporate
entity is being used as an alter ego, adjunct, or business conduit for the sole benefit of the stockholders or of another corporate entity.
In such instances, the veil of corporate entity will be pierced or disregarded with reference to the particular transaction involved.9

In Philippine National Bank v. Ritratto Group, Inc., 10 the Court has outlined the following circumstances thatare useful in the
determination of whether a subsidiary is a mere instrumentality of the parent-corporation, viz:

1. Control, not mere majority or complete control, but complete domination, not only of finances butof policy and business practice in
respect to the transaction attacked so that the corporate entity as to this transaction had at the time no separatemind, will or existence
of its own;

2. Such control must have been used by the defendant to commit fraud or wrong, to perpetrate the violation of a statutory or other
positive legal duty, or dishonest and, unjust act incontravention of plaintiff's legal rights; and

3. The aforesaid control and breach of duty must proximately cause the injury or unjust loss complained of.

In applying the "instrumentality" or"alter ego" doctrine, the courts are concerned with reality, not form, and with how the corporation
operated and the individual defendant's relationship to the operation. 11 Consequently, the absence of any one of the foregoing elements
disauthorizes the piercing of the corporate veil.

Indeed, the doctrine of piercing the corporate veil has no application here because the Commissioner of Customs did not establish that
Oilink had been set up to avoid the payment of taxes or duties, or for purposes that would defeat public convenience, justify wrong,
protect fraud, defend crime, confuse legitimate legal or judicial issues, perpetrate deception or otherwise circumvent the law. It is also
noteworthy that from the outset the Commissioner of Customs sought to collect the deficiency taxes and duties from URC, and that it
was only on July 2, 1999 when the Commissioner of Customs sent the demand letter to both URC and Oilink. That was revealing,
because the failure of the Commissioner of Customs to pursue the remedies against Oilink from the outset manifested that its belated
pursuit of Oilink was only an afterthought. WHEREFORE, the Court AFFIRMS the decision promulgated by the Court of Appeals on
September 29, 2003.

No pronouncement on costs of suit.

SO ORDERED.

LUCAS P. BERSMAIN
Associate Justice

SECOND DIVISION

G.R. No. 174938, October 01, 2014

GERARDO LANUZA, JR. AND ANTONIO O. OLBES, Petitioners, v. BF CORPORATION, SHANGRI-LA PROPERTIES,
INC., ALFREDO C. RAMOS, RUFO B. COLAYCO, MAXIMO G. LICAUCO III, AND BENJAMIN C.
RAMOS, Respondents.

DECISION

LEONEN, J.:

Corporate representatives may be compelled to submit to arbitration proceedings pursuant to a contract entered into by the corporation
they represent if there are allegations of bad faith or malice in their acts representing the corporation.
This is a Rule 45 petition, assailing the Court of Appeals' May 11, 2006 decision and October 5, 2006 resolution. The Court of
Appeals affirmed the trial court's decision holding that petitioners, as directors, should submit themselves as parties to the arbitration
proceedings between BF Corporation and Shangri-La Properties, Inc. (Shangri-La).

In 1993, BF Corporation filed a collection complaint with the Regional Trial Court against Shangri-La and the members of its board of
directors: Alfredo C. Ramos, Rufo B. Colayco, Antonio O. Olbes, Gerardo Lanuza, Jr., Maximo G. Licauco III, and Benjamin C.
Ramos.1cralawred

BF Corporation alleged in its complaint that on December 11, 1989 and May 30, 1991, it entered into agreements with Shangri-La
wherein it undertook to construct for Shangri-La a mall and a multilevel parking structure along EDSA. 2cralawred

Shangri-La had been consistent in paying BF Corporation in accordance with its progress billing statements. 3 However, by October
1991, Shangri-La started defaulting in payment.4cralawred

BF Corporation alleged that Shangri-La induced BF Corporation to continue with the construction of the buildings using its own funds
and credit despite Shangri-La's default.5 According to BF Corporation, Shangri-La misrepresented that it had funds to pay for its
obligations with BF Corporation, and the delay in payment was simply a matter of delayed processing of BF Corporation's progress
billing statements.6cralawred

BF Corporation eventually completed the construction of the buildings. 7 Shangri-La allegedly took possession of the buildings while
still owing BF Corporation an outstanding balance.8cralawred

BF Corporation alleged that despite repeated demands, Shangri-La refused to pay the balance owed to it.9 It also alleged that the
Shangri-La's directors were in bad faith in directing Shangri-La's affairs. Therefore, they should be held jointly and severally liable
with Shangri-La for its obligations as well as for the damages that BF Corporation incurred as a result of Shangri-La's
default.10cralawred

On August 3, 1993, Shangri-La, Alfredo C. Ramos, Rufo B. Colayco, Maximo G. Licauco III, and Benjamin C. Ramos filed a motion
to suspend the proceedings in view of BF Corporation's failure to submit its dispute to arbitration, in accordance with the arbitration
clause provided in its contract, quoted in the motion as follows:11cralawred

35. Arbitration

(1) Provided always that in case any dispute or difference shall arise between the Owner or the Project Manager on his behalf and the
Contractor, either during the progress or after the completion or abandonment of the Works as to the construction of this Contract or
as to any matter or thing of whatsoever nature arising thereunder or in connection therewith(including any matter or thing left by this
Contract to the discretion of the Project Manager or the withholding by the Project Manager of any certificate to which the Contractor
may claim to be entitled or the measurement and valuation mentioned in clause 30(5)(a) of these Conditions or the rights and
liabilities of the parties under clauses 25, 26, 32 or 33 of these Conditions), the owner and the Contractor hereby agree to exert all
efforts to settle their differences or dispute amicably. Failing these efforts then such dispute or difference shall be referred to
arbitration in accordance with the rules and procedures of the Philippine Arbitration Law.

xxx xxx xxx

(6) The award of such Arbitrators shall be final and binding on the parties. The decision of the Arbitrators shall be a condition
precedent to any right of legal action that either party may have against the other. . . .12 (Underscoring in the original)

On August 19, 1993, BF Corporation opposed the motion to suspend proceedings. 13cralawred

In the November 18, 1993 order, the Regional Trial Court denied the motion to suspend proceedings.14cralawred

On December 8, 1993, petitioners filed an answer to BF Corporation's complaint, with compulsory counterclaim against BF
Corporation and cross-claim against Shangri-La.15 They alleged that they had resigned as members of Shangri-La's board of directors
as of July 15, 1991.16cralawred

After the Regional Trial Court denied on February 11, 1994 the motion for reconsideration of its November 18, 1993 order, Shangri-
La, Alfredo C. Ramos, Rufo B. Colayco, Maximo G. Licauco III, and Benjamin Ramos filed a petition for certiorari with the Court of
Appeals.17cralawred

On April 28, 1995, the Court of Appeals granted the petition for certiorari and ordered the submission of the dispute to
arbitration.18cralawred
Aggrieved by the Court of Appeals' decision, BF Corporation filed a petition for review on certiorari with this court. 19 On March 27,
1998, this court affirmed the Court of Appeals' decision, directing that the dispute be submitted for arbitration. 20cralawred

Another issue arose after BF Corporation had initiated arbitration proceedings. BF Corporation and Shangri-La failed to agree as to
the law that should govern the arbitration proceedings. 21 On October 27, 1998, the trial court issued the order directing the parties to
conduct the proceedings in accordance with Republic Act No. 876. 22cralawred

Shangri-La filed an omnibus motion and BF Corporation an urgent motion for clarification, both seeking to clarify the term, "parties,"
and whether Shangri-La's directors should be included in the arbitration proceedings and served with separate demands for
arbitration.23cralawred

Petitioners filed their comment on Shangri-La's and BF Corporation's motions, praying that they be excluded from the arbitration
proceedings for being non-parties to Shangri-La's and BF Corporation's agreement.24cralawred

On July 28, 2003, the trial court issued the order directing service of demands for arbitration upon all defendants in BF Corporation's
complaint.25 According to the trial court, Shangri-La's directors were interested parties who "must also be served with a demand for
arbitration to give them the opportunity to ventilate their side of the controversy, safeguard their interest and fend off their respective
positions."26 Petitioners' motion for reconsideration of this order was denied by the trial court on January 19, 2005. 27cralawred

Petitioners filed a petition for certiorari with the Court of Appeals, alleging grave abuse of discretion in the issuance of orders
compelling them to submit to arbitration proceedings despite being third parties to the contract between Shangri-La and BF
Corporation.28cralawred

In its May 11, 2006 decision,29 the Court of Appeals dismissed petitioners' petition for certiorari. The Court of Appeals ruled that
Shangri-La's directors were necessary parties in the arbitration proceedings. 30 According to the Court of
Appeals:chanRoblesvirtualLawlibrary

[They were] deemed not third-parties to the contract as they [were] sued for their acts in representation of the party to the contract
pursuant to Art. 31 of the Corporation Code, and that as directors of the defendant corporation, [they], in accordance with Art. 1217 of
the Civil Code, stand to be benefited or injured by the result of the arbitration proceedings, hence, being necessary parties, they must
be joined in order to have complete adjudication of the controversy. Consequently, if [they were] excluded as parties in the arbitration
proceedings and an arbitral award is rendered, holding [Shangri-La] and its board of directors jointly and solidarity liable to private
respondent BF Corporation, a problem will arise, i.e., whether petitioners will be bound by such arbitral award, and this will prevent
complete determination of the issues and resolution of the controversy.31

The Court of Appeals further ruled that "excluding petitioners in the arbitration proceedings . . . would be contrary to the policy
against multiplicity of suits."32cralawred

The dispositive portion of the Court of Appeals' decision reads:chanRoblesvirtualLawlibrary

WHEREFORE, the petition is DISMISSED. The assailed orders dated July 28, 2003 and January 19, 2005 of public respondent
RTC, Branch 157, Pasig City, in Civil Case No. 63400, are AFFIRMED.33

The Court of Appeals denied petitioners' motion for reconsideration in the October 5, 2006 resolution. 34cralawred

On November 24, 2006, petitioners filed a petition for review of the May 11, 2006 Court of Appeals decision and the October 5, 2006
Court of Appeals resolution.35cralawred

The issue in this case is whether petitioners should be made parties to the arbitration proceedings, pursuant to the arbitration clause
provided in the contract between BF Corporation and Shangri-La.

Petitioners argue that they cannot be held personally liable for corporate acts or obligations.36 The corporation is a separate being, and
nothing justifies BF Corporation's allegation that they are solidarity liable with Shangri-La.37 Neither did they bind themselves
personally nor did they undertake to shoulder Shangri-La's obligations should it fail in its obligations.38 BF Corporation also failed to
establish fraud or bad faith on their part.39cralawred

Petitioners also argue that they are third parties to the contract between BF Corporation and Shangri-La.40 Provisions including
arbitration stipulations should bind only the parties.41 Based on our arbitration laws, parties who are strangers to an agreement cannot
be compelled to arbitrate.42cralawred

Petitioners point out that our arbitration laws were enacted to promote the autonomy of parties in resolving their
disputes.43 Compelling them to submit to arbitration is against this purpose and may be tantamount to stipulating for the
parties.44cralawred

Separate comments on the petition were filed by BF Corporation, and Maximo G. Licauco III, Alfredo C. Ramos and Benjamin C.
Ramos.45cralawred

Maximo G. Licauco III Alfredo C. Ramos, and Benjamin C. Ramos agreed with petitioners that Shangri-La's directors, being non-
parties to the contract, should not be made personally liable for Shangri-La's acts.46 Since the contract was executed only by BF
Corporation and Shangri-La, only they should be affected by the contract's stipulation. 47 BF Corporation also failed to specifically
allege the unlawful acts of the directors that should make them solidarity liable with Shangri-La for its obligations.48cralawred

Meanwhile, in its comment, BF Corporation argued that the courts' ruling that the parties should undergo arbitration "clearly
contemplated the inclusion of the directors of the corporation[.]"49cralawred

BF Corporation also argued that while petitioners were not parties to the agreement, they were still impleaded under Section 31 of the
Corporation Code.50 Section 31 makes directors solidarity liable for fraud, gross negligence, and bad faith.51 Petitioners are not really
third parties to the agreement because they are being sued as Shangri-La's representatives, under Section 31 of the Corporation
Code.52cralawred

BF Corporation further argued that because petitioners were impleaded for their solidary liability, they are necessary parties to the
arbitration proceedings.53 The full resolution of all disputes in the arbitration proceedings should also be done in the interest of
justice.54cralawred

In the manifestation dated September 6, 2007, petitioners informed the court that the Arbitral Tribunal had already promulgated its
decision on July 31, 2007.55 The Arbitral Tribunal denied BF Corporation's claims against them. 56 Petitioners stated that "[they] were
included by the Arbitral Tribunal in the proceedings conducted . . . notwithstanding [their] continuing objection thereto. . . ." 57 They
also stated that "[their] unwilling participation in the arbitration case was done ex abundante ad cautela, as manifested therein on
several occasions."58 Petitioners informed the court that they already manifested with the trial court that "any action taken on [the
Arbitral Tribunal's decision] should be without prejudice to the resolution of [this] case." 59cralawred

Upon the court's order, petitioners and Shangri-La filed their respective memoranda. Petitioners and Maximo G. Licauco III, Alfredo
C. Ramos, and Benjamin C. Ramos reiterated their arguments that they should not be held liable for Shangri-La's default and made
parties to the arbitration proceedings because only BF Corporation and Shangri-La were parties to the contract.

In its memorandum, Shangri-La argued that petitioners were impleaded for their solidary liability under Section 31 of the Corporation
Code. Shangri-La added that their exclusion from the arbitration proceedings will result in multiplicity of suits, which "is not favored
in this jurisdiction."60 It pointed out that the case had already been mooted by the termination of the arbitration proceedings, which
petitioners actively participated in.61 Moreover, BF Corporation assailed only the correctness of the Arbitral Tribunal's award and not
the part absolving Shangri-La's directors from liability.62cralawred

BF Corporation filed a counter-manifestation with motion to dismiss63 in lieu of the required memorandum.

In its counter-manifestation, BF Corporation pointed out that since "petitioners' counterclaims were already dismissed with finality,
and the claims against them were likewise dismissed with finality, they no longer have any interest or personality in the arbitration
case. Thus, there is no longer any need to resolve the present Petition, which mainly questions the inclusion of petitioners in the
arbitration proceedings."64 The court's decision in this case will no longer have any effect on the issue of petitioners' inclusion in the
arbitration proceedings.65cralawred

The petition must fail.

The Arbitral Tribunal's decision, absolving petitioners from liability, and its binding effect on BF Corporation, have rendered this case
moot and academic.

The mootness of the case, however, had not precluded us from resolving issues so that principles may be established for the guidance
of the bench, bar, and the public. In De la Camara v. Hon. Enage,66 this court disregarded the fact that petitioner in that case already
escaped from prison and ruled on the issue of excessive bails:chanRoblesvirtualLawlibrary

While under the circumstances a ruling on the merits of the petition for certiorari is not warranted, still, as set forth at the opening of
this opinion, the fact that this case is moot and academic should not preclude this Tribunal from setting forth in language clear and
unmistakable, the obligation of fidelity on the part of lower court judges to the unequivocal command of the Constitution that
excessive bail shall not be required.67

This principle was repeated in subsequent cases when this court deemed it proper to clarify important matters for guidance. 68cralawred
Thus, we rule that petitioners may be compelled to submit to the arbitration proceedings in accordance with Shangri-La and BF
Corporation's agreement, in order to determine if the distinction between Shangri-La's personality and their personalities should be
disregarded.

This jurisdiction adopts a policy in favor of arbitration. Arbitration allows the parties to avoid litigation and settle disputes amicably
and more expeditiously by themselves and through their choice of arbitrators.

The policy in favor of arbitration has been affirmed in our Civil Code,69 which was approved as early as 1949. It was later
institutionalized by the approval of Republic Act No. 876, 70 which expressly authorized, made valid, enforceable, and irrevocable
parties' decision to submit their controversies, including incidental issues, to arbitration. This court recognized this policy
in Eastboard Navigation, Ltd. v. Ysmael and Company, Inc.:71cralawred

As a corollary to the question regarding the existence of an arbitration agreement, defendant raises the issue that, even if it be granted
that it agreed to submit its dispute with plaintiff to arbitration, said agreement is void and without effect for it amounts to removing
said dispute from the jurisdiction of the courts in which the parties are domiciled or where the dispute occurred. It is true that there are
authorities which hold that "a clause in a contract providing that all matters in dispute between the parties shall be referred to
arbitrators and to them alone, is contrary to public policy and cannot oust the courts of jurisdiction" (Manila Electric Co. vs. Pasay
Transportation Co., 57 Phil., 600, 603), however, there are authorities which favor "the more intelligent view that arbitration, as
an inexpensive, speedy and amicable method of settling disputes, and as a means of avoiding litigation, should receive every
encouragement from the courts which may be extended without contravening sound public policy or settled law" (3 Am. Jur.,
p. 835). Congress has officially adopted the modern view when it reproduced in the new Civil Code the provisions of the old
Code on Arbitration. And only recently it approved Republic Act No. 876 expressly authorizing arbitration of future
disputes.72 (Emphasis supplied)

In view of our policy to adopt arbitration as a manner of settling disputes, arbitration clauses are liberally construed to favor
arbitration. Thus, in LM Power Engineering Corporation v. Capitol Industrial Construction Groups, Inc.,73 this court
said:chanRoblesvirtualLawlibrary

Being an inexpensive, speedy and amicable method of settling disputes, arbitration — along with mediation, conciliation and
negotiation — is encouraged by the Supreme Court. Aside from unclogging judicial dockets, arbitration also hastens the resolution of
disputes, especially of the commercial kind. It is thus regarded as the "wave of the future" in international civil and commercial
disputes. Brushing aside a contractual agreement calling for arbitration between the parties would be a step backward.

Consistent with the above-mentioned policy of encouraging alternative dispute resolution methods, courts should liberally
construe arbitration clauses. Provided such clause is susceptible of an interpretation that covers the asserted dispute, an order
to arbitrate should be granted. Any doubt should be resolved in favor of arbitration.74 (Emphasis supplied)

A more clear-cut statement of the state policy to encourage arbitration and to favor interpretations that would render effective an
arbitration clause was later expressed in Republic Act No. 9285:75cralawred

SEC. 2. Declaration of Policy. - It is hereby declared the policy of the State to actively promote party autonomy in the resolution of
disputes, or the freedom of the party to make their own arrangements to resolve their disputes. Towards this end, the State shall
encourage and actively promote the use of Alternative Dispute Resolution (ADR) as an important means to achieve speedy and
impartial justice and declog court dockets. As such, the State shall provide means for the use of ADR as an efficient tool and an
alternative procedure for the resolution of appropriate cases. Likewise, the State shall enlist active private sector participation in the
settlement of disputes through ADR. This Act shall be without prejudice to the adoption by the Supreme Court of any ADR system,
such as mediation, conciliation, arbitration, or any combination thereof as a means of achieving speedy and efficient means of
resolving cases pending before all courts in the Philippines which shall be governed by such rules as the Supreme Court may approve
from time to time.

....

SEC. 25. Interpretation of the Act. - In interpreting the Act, the court shall have due regard to the policy of the law in favor of
arbitration. Where action is commenced by or against multiple parties, one or more of whom are parties who are bound by the
arbitration agreement although the civil action may continue as to those who are not bound by such arbitration agreement. (Emphasis
supplied)

Thus, if there is an interpretation that would render effective an arbitration clause for purposes of avoiding litigation and expediting
resolution of the dispute, that interpretation shall be adopted.

Petitioners' main argument arises from the separate personality given to juridical persons vis-a-vis their directors, officers,
stockholders, and agents. Since they did not sign the arbitration agreement in any capacity, they cannot be forced to submit to the
jurisdiction of the Arbitration Tribunal in accordance with the arbitration agreement. Moreover, they had already resigned as directors
of Shangri-La at the time of the alleged default.

Indeed, as petitioners point out, their personalities as directors of Shangri-La are separate and distinct from Shangri-La.

A corporation is an artificial entity created by fiction of law.76 This means that while it is not a person, naturally, the law gives it a
distinct personality and treats it as such. A corporation, in the legal sense, is an individual with a personality that is distinct and
separate from other persons including its stockholders, officers, directors, representatives, 77 and other juridical entities.

The law vests in corporations rights, powers, and attributes as if they were natural persons with physical existence and capabilities to
act on their own.78 For instance, they have the power to sue and enter into transactions or contracts. Section 36 of the Corporation
Code enumerates some of a corporation's powers, thus:chanRoblesvirtualLawlibrary

Section 36. Corporate powers and capacity. - Every corporation incorporated under this Code has the power and
capacity:chanroblesvirtuallawlibrary

1. To sue and be sued in its corporate name;

2. Of succession by its corporate name for the period of time stated in the articles of incorporation and the certificate of incorporation;

3. To adopt and use a corporate seal;

4. To amend its articles of incorporation in accordance with the provisions of this Code;

5. To adopt by-laws, not contrary to law, morals, or public policy, and to amend or repeal the same in accordance with this Code;

6. In case of stock corporations, to issue or sell stocks to subscribers and to sell treasury stocks in accordance with the provisions of
this Code; and to admit members to the corporation if it be a non-stock corporation;

7. To purchase, receive, take or grant, hold, convey, sell, lease, pledge, mortgage and otherwise deal with such real and personal
property, including securities and bonds of other corporations, as the transaction of the lawful business of the corporation may
reasonably and necessarily require, subject to the limitations prescribed by law and the Constitution;

8. To enter into merger or consolidation with other corporations as provided in this Code;

9. To make reasonable donations, including those for the public welfare or for hospital, charitable, cultural, scientific, civic, or similar
purposes: Provided, That no corporation, domestic or foreign, shall give donations in aid of any political party or candidate or for
purposes of partisan political activity;

10. To establish pension, retirement, and other plans for the benefit of its directors, trustees, officers and employees; and

11. To exercise such other powers as may be essential or necessary to carry out its purpose or purposes as stated in its articles of
incorporation. (13a)

Because a corporation's existence is only by fiction of law, it can only exercise its rights and powers through its directors, officers, or
agents, who are all natural persons. A corporation cannot sue or enter into contracts without them.

A consequence of a corporation's separate personality is that consent by a corporation through its representatives is not consent of the
representative, personally. Its obligations, incurred through official acts of its representatives, are its own. A stockholder, director, or
representative does not become a party to a contract just because a corporation executed a )C contract through that stockholder,
director or representative.

Hence, a corporation's representatives are generally not bound by the terms of the contract executed by the corporation. They are not
personally liable for obligations and liabilities incurred on or in behalf of the corporation.

Petitioners are also correct that arbitration promotes the parties' autonomy in resolving their disputes. This court recognized in Heirs
of Augusto Salas, Jr. v. Laperal Realty Corporation 79 that an arbitration clause shall not apply to persons who were neither parties to
the contract nor assignees of previous parties, thus:chanRoblesvirtualLawlibrary

A submission to arbitration is a contract. As such, the Agreement, containing the stipulation on arbitration, binds the parties thereto, as
well as their assigns and heirs. But only they.80 (Citations omitted)
Similarly, in Del Monte Corporation-USA v. Court of Appeals,81 this court ruled:chanRoblesvirtualLawlibrary

The provision to submit to arbitration any dispute arising therefrom and the relationship of the parties is part of that contract and is
itself a contract. As a rule, contracts are respected as the law between the contracting parties and produce effect as between them, their
assigns and heirs. Clearly, only parties to the Agreement . . . are bound by the Agreement and its arbitration clause as they are the only
signatories thereto.82 (Citation omitted)

This court incorporated these rulings in Agan, Jr. v. Philippine International Air Terminals Co., Inc.83 and Stanfilco Employees v.
DOLE Philippines, Inc., et al.84cralawred

As a general rule, therefore, a corporation's representative who did not personally bind himself or herself to an arbitration agreement
cannot be forced to participate in arbitration proceedings made pursuant to an agreement entered into by the corporation. He or she is
generally not considered a party to that agreement.

However, there are instances when the distinction between personalities of directors, officers, and representatives, and of the
corporation, are disregarded. We call this piercing the veil of corporate fiction.

Piercing the corporate veil is warranted when "[the separate personality of a corporation] is used as a means to perpetrate fraud or an
illegal act, or as a vehicle for the evasion of an existing obligation, the circumvention of statutes, or to confuse legitimate issues."85 It
is also warranted in alter ego cases "where a corporation is merely a farce since it is a mere alter ego or business conduit of a person,
or where the corporation is so organized and controlled and its affairs are so conducted as to make it merely an instrumentality,
agency, conduit or adjunct of another corporation." 86cralawred

When corporate veil is pierced, the corporation and persons who are normally treated as distinct from the corporation are treated as
one person, such that when the corporation is adjudged liable, these persons, too, become liable as if they were the corporation.

Among the persons who may be treated as the corporation itself under certain circumstances are its directors and officers. Section 31
of the Corporation Code provides the instances when directors, trustees, or officers may become liable for corporate
acts:chanRoblesvirtualLawlibrary

Sec. 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.

When a director, trustee or officer attempts to acquire or acquires, in violation of his duty, any interest adverse to the corporation in
respect of any matter which has been reposed in him in confidence, as to which equity imposes a disability upon him to deal in his
own behalf, he shall be liable as a trustee for the corporation and must account for the profits which otherwise would have accrued to
the corporation, (n)

Based on the above provision, a director, trustee, or officer of a corporation may be made solidarily liable with it for all damages
suffered by the corporation, its stockholders or members, and other persons in any of the following cases:chanroblesvirtuallawlibrary

a) The director or trustee willfully and knowingly voted for or assented to a patently unlawful corporate act;
b) The director or trustee was guilty of gross negligence or bad faith in directing corporate affairs; and
c) The director or trustee acquired personal or pecuniary interest in conflict with his or her duties as director or trustee.

Solidary liability with the corporation will also attach in the following instances:chanroblesvirtuallawlibrary

a) "When a director or officer has consented to the issuance of watered stocks or who, having knowledge thereof, did not
forthwith file with the corporate secretary his written objection thereto"; 87
b) "When a director, trustee or officer has contractually agreed or stipulated to hold himself personally and solidarity liable
with the corporation";88 and
c) "When a director, trustee or officer is made, by specific provision of law, personally liable for his corporate action." 89

When there are allegations of bad faith or malice against corporate directors or representatives, it becomes the duty of courts or
tribunals to determine if these persons and the corporation should be treated as one. Without a trial, courts and tribunals have no basis
for determining whether the veil of corporate fiction should be pierced. Courts or tribunals do not have such prior knowledge. Thus,
the courts or tribunals must first determine whether circumstances exist to warrant the courts or tribunals to disregard the distinction
between the corporation and the persons representing it. The determination of these circumstances must be made by one tribunal or
court in a proceeding participated in by all parties involved, including current representatives of the corporation, and those persons
whose personalities are impliedly the same as the corporation. This is because when the court or tribunal finds that circumstances exist
warranting the piercing of the corporate veil, the corporate representatives are treated as the corporation itself and should be held
liable for corporate acts. The corporation's distinct personality is disregarded, and the corporation is seen as a mere aggregation of
persons undertaking a business under the collective name of the corporation.

Hence, when the directors, as in this case, are impleaded in a case against a corporation, alleging malice or bad faith on their part in
directing the affairs of the corporation, complainants are effectively alleging that the directors and the corporation are not acting as
separate entities. They are alleging that the acts or omissions by the corporation that violated their rights are also the directors' acts or
omissions.90 They are alleging that contracts executed by the corporation are contracts executed by the directors. Complainants
effectively pray that the corporate veil be pierced because the cause of action between the corporation and the directors is the same.

In that case, complainants have no choice but to institute only one proceeding against the parties. Under the Rules of Court, filing of
multiple suits for a single cause of action is prohibited. Institution of more than one suit for the same cause of action constitutes
splitting the cause of action, which is a ground for the dismissal of the others. Thus, in Rule 2:chanRoblesvirtualLawlibrary

Section 3. One suit for a single cause of action. — A party may not institute more than one suit for a single cause of action. (3a)

Section 4. Splitting a single cause of action; effect of. — If two or more suits are instituted on the basis of the same cause of action,
the filing of one or a judgment upon the merits in any one is available as a ground for the dismissal of the others. (4a)

It is because the personalities of petitioners and the corporation may later be found to be indistinct that we rule that petitioners may be
compelled to submit to arbitration.

However, in ruling that petitioners may be compelled to submit to the arbitration proceedings, we are not overturning Heirs of Angus
to Salas wherein this court affirmed the basic arbitration principle that only parties to an arbitration agreement may be compelled to
submit to arbitration.

In that case, this court recognized that persons other than the main party may be compelled to submit to arbitration, e.g., assignees and
heirs. Assignees and heirs may be considered parties to an arbitration agreement entered into by their assignor because the assignor's
rights and obligations are transferred to them upon assignment. In other words, the assignor's rights and obligations become their own
rights and obligations. In the same way, the corporation's obligations are treated as the representative's obligations when the corporate
veil is pierced.

Moreover, in Heirs of Angus to Salas, this court affirmed its policy against multiplicity of suits and unnecessary delay. This court said
that "to split the proceeding into arbitration for some parties and trial for other parties would "result in multiplicity of suits, duplicitous
procedure and unnecessary delay."91This court also intimated that the interest of justice would be best observed if it adjudicated rights
in a single proceeding.92 While the facts of that case prompted this court to direct the trial court to proceed to determine the issues of
that case, it did not prohibit' courts from allowing the case to proceed to arbitration, when circumstances warrant.

Hence, the issue of whether the corporation's acts in violation of complainant's rights, and the incidental issue of whether piercing of
the corporate veil is warranted, should be determined in a single proceeding. Such finding would determine if the corporation is
merely an aggregation of persons whose liabilities must be treated as one with the corporation.

However, when the courts disregard the corporation's distinct and separate personality from its directors or officers, the courts do not
say that the corporation, in all instances and for all purposes, is the same as its directors, stockholders, officers, and agents. It does not
result in an absolute confusion of personalities of the corporation and the persons composing or representing it. Courts merely
discount the distinction and treat them as one, in relation to a specific act, in order to extend the terms of the contract and the liabilities
for all damages to erring corporate officials who participated in the corporation's illegal acts. This is done so that the legal fiction
cannot be used to perpetrate illegalities and injustices.

Thus, in cases alleging solidary liability with the corporation or praying for the piercing of the corporate veil, parties who are normally
treated as distinct individuals should be made to participate in the arbitration proceedings in order to determine if such distinction
should indeed be disregarded and, if so, to determine the extent of their liabilities.

In this case, the Arbitral Tribunal rendered a decision, finding that BF Corporation failed to prove the existence of circumstances that
render petitioners and the other directors solidarity liable. It ruled that petitioners and Shangri-La's other directors were not liable for
the contractual obligations of Shangri-La to BF Corporation. The Arbitral Tribunal's decision was made with the participation of
petitioners, albeit with their continuing objection. In view of our discussion above, we rule that petitioners are bound by such
decision.
WHEREFORE, the petition is DENIED. The Court of Appeals' decision of May 11, 2006 and resolution of October 5, 2006
are AFFIRMED.

SO ORDERED.cralawlawlibrary

Velasco, Jr.,* Brion, Chairperson, Peralta,** and Mendoza, JJ., concur.

WILLIAM C. YAO, SR., LUISA C. G.R. No. 168306
YAO, RICHARD C. YAO, WILLIAM C.
YAO JR., and ROGER C. YAO,
Petitioners, Present:

YNARES-SANTIAGO,
-versus Chairperson,
AUSTRIA-MARTINEZ,
CHICO-NAZARIO, and
THE PEOPLE OF THE PHILIPPINES, NACHURA, JJ.
PETRON CORPORATION and
PILIPINAS SHELL PETROLEUM
CORP., and its Principal, SHELL INTL
PETROLEUM CO. LTD.,
Respondents.
Promulgated:

June 19, 2007

x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

DECISION

CHICO-NAZARIO, J.:

In this Petition for Review on Certiorari[1] under Rule 45 of the Rules of Court, petitioners William C. Yao, Sr., Luisa C. Yao,
Richard C. Yao, William C. Yao, Jr., and Roger C. Yao pray for the reversal of the Decision dated 30 September 2004,[2] and
Resolution dated 1 June 2005, of the Court of Appeals in CA G.R. SP No. 79256, [3] affirming the two Orders, both dated 5 June 2003,
of the Regional Trial Court (RTC), Branch 17, Cavite City, relative to Search Warrants No. 2-2003 and No. 3-2003.[4] In the said
Orders, the RTC denied the petitioners Motion to Quash Search Warrant[5] and Motion for the Return of the Motor Compressor
and Liquified Petroleum Gas (LPG) Refilling Machine.[6]

The following are the facts:

Petitioners are incorporators and officers of MASAGANA GAS CORPORATION (MASAGANA), an entity engaged in the
refilling, sale and distribution of LPG products. Private respondents Petron Corporation (Petron) and Pilipinas Shell Petroleum
Corporation (PilipinasShell) are two of the largest bulk suppliers and producers of LPG in the Philippines. Their LPG products are
sold under the marks GASUL and SHELLANE, respectively. Petron is the registered owner in the Philippines of the trademarks
GASUL and GASUL cylinders used for its LPG products. It is the sole entity in the Philippines authorized to allow refillers and
distributors to refill, use, sell, and distribute GASUL LPG containers, products and its trademarks. Pilipinas Shell, on the other hand,
is the authorized user in the Philippines of the tradename, trademarks, symbols, or designs of its principal, Shell International
Petroleum Company Limited (Shell International), including the marks SHELLANE and SHELL device in connection with the
production, sale and distribution of SHELLANE LPGs. It is the only corporation in the Philippines authorized to allow refillers and
distributors to refill, use, sell and distribute SHELLANE LPG containers and products. [7]

On 3 April 2003, National Bureau of Investigation (NBI) agent Ritche N. Oblanca (Oblanca) filed two applications for search
warrant with the RTC, Branch 17, Cavite City, against petitioners and other occupants of the MASAGANA compound located at
Governors Drive, Barangay Lapidario, Trece Martires, Cavite City, for alleged violation of Section 155, in relation to Section 170 of
Republic Act No. 8293, otherwise known as The Intellectual Property Code of the Philippines.[8] The two applications for search
warrant uniformly alleged that per information, belief, and personal verification of Oblanca, the petitioners are actually producing,
selling, offering for sale and/or distributing LPG products using steel cylinders owned by, and bearing the tradenames, trademarks,
and devices of Petron and Pilipinas Shell, without authority and in violation of the rights of the said entities.

In his two separate affidavits[9] attached to the two applications for search warrant, Oblanca alleged:
1. [That] on 11 February 2003, the National Bureau of Investigation (NBI) received a letter-
complaint from Atty. Bienvenido I. SomeraJr. of Villaraza and Angangco, on behalf of among others,
[Petron Corporation (PETRON)] and Pilipinas Shell Petroleum Corporation (PSPC), the authorized representative of
Shell International Petroleum Company Limited (Shell International), requesting assistance in the investigation and,
if warranted, apprehension and prosecution of certain persons and/or establishments suspected of violating the
intellectual property rights [of PETRON] and of PSPC and Shell International.

2. [That] on the basis of the letter-complaint, I, together with Agent Angelo Zarzoso, was
assigned as the NBI agent on the case.

3. [That] prior to conducting the investigation on the reported illegal activities, he reviewed
the certificates of trademark registrations issued in favor of [PETRON], PSPC and Shell International as well as
other documents and other evidence obtained by the investigative agency authorized by [PETRON], PSPC and
Shell International to investigate and cause the investigation of persons and establishments violating the rights of
[PETRON], PSPC and Shell International, represented by Mr. Bernabe C. Alajar. Certified copies of the
foregoing trademark registrations are attached hereto as Annexes A to :E.

4. [That] among the establishments alleged to be unlawfully refilling and unlawfully selling
and distributing [Gasul LPG and] Shellaneproducts is Masagana Gas Corporation (MASAGANA). Based on
Securities and Exchange Commission Records, MASAGANA has its principal office address
at 9775 Kamagong Street, San Antonio Village, Makati, Metro Manila. The incorporators and directors of
MASAGANA are William C. Yao, Sr., Luisa C. Yao, Richard C. Yao, William C. Yao, Jr., and Roger
C. Yao. x x x.

5. I confirmed that MASAGANA is not authorized to use [PETRON and] Shellane LPG
cylinders and its trademarks and tradenamesor to be refillers or distributors of [PETRON and] Shellane LPGs.

6. I went to MASAGANAs refilling station located at Governors

Drive, Barangay Lapidario, Trece Martires City (sic), Cavite to investigate its activities. I confirmed that
MASAGANA is indeed engaged in the unauthorized refilling, sale and/or distribution of
[Gasul and] Shellane LPG cylinders. I found out that MASAGANA delivery trucks with Plate Nos. UMN-971,
PEZ-612, WTE-527, XAM-970 and WFC-603 coming in and out of the refilling plant located at the
aforementioned address contained multi-brand LPG cylinders including [Gasul and] Shellane.x x x.

7. [That] on 13 February 2003, I conducted a test-buy accompanied by

Mr. Bernabe C. Alajar. After asking the purpose of our visit, MASAGANAs guard allowed us to enter the
MASAGANA refilling plant to purchase GASUL and SHELLANE LPGs. x x x. We were issued an order slip
which we presented to the cashiers office located near the refilling station. After paying the amount x x x covering
the cost of the cylinders and their contents, they were issued Cash Invoice No. 56210 dated February 13,
2003. We were, thereafter, assisted by the plant attendant in choosing empty GASUL and SHELLANE 11
kg. cylinders, x x x were brought to the refilling station [and filled in their presence.] I noticed that no valve seals
were placed on the cylinders.

[That] while inside the refilling plant doing the test-buy, I noticed that stockpiles of multi-branded cylinders
including GASUL and SHELLANE cylinders were stored near the refilling station. I also noticed that the total
land area of the refilling plant is about 7,000 to 10,000 square meters. At the corner right side of the compound
immediately upon entering the gate is a covered area where the maintenance of the cylinders is taking
place.Located at the back right corner of the compound are two storage tanks while at the left side also at the
corner portion is another storage tank.Several meters and fronting the said storage tank is where the refilling
station and the office are located. It is also in this storage tank where the elevated blue water tank depicting
MASAGANA CORP. is located. About eleven (11) refilling pumps and stock piles of multi-branded cylinders
including Shellane and GASUL are stored in the refilling station. At the left side of the entrance gate is the guard
house with small door for the pedestrians and at the right is a blue steel gate used for incoming and outgoing
vehicles.
 8. [That] on 27 February 2003, I conducted another test-buy accompanied by
Mr. Bernabe C. Alajar. x x x After choosing the cylinders, we were issued an order slip which we presented to the
cashier. Upon payment, Cash Invoice No. 56398 was issued covering the cost of both GASUL and SHELLANE
LPG cylinders and their contents. x x x Both cylinders were refilled in our presence and no valve seals were
placed on the cylinders.

Copies of the photographs of the delivery trucks, LPG cylinders and registration papers were also attached to the
aforementioned affidavits.[10]

Bernabe C. Alajar (Alajar), owner of Able Research and Consulting Services Inc., was hired by Petron and Pilipinas Shell to
assist them in carrying out their Brand Protection Program. Alajar accompanied Oblanca during the surveillance of and test-buys at
the refilling plant of MASAGANA. He also executed two separate affidavits corroborating the statements of Oblanca. These were
annexed to the two applications for search warrant.[11]

After conducting the preliminary examination on Oblanca and Alajar, and upon reviewing their sworn affidavits and other
attached documents, Judge Melchor Q.C. Sadang (Judge Sadang), Presiding Judge of the RTC, Branch 17, Cavite City, found
probable cause and correspondingly issued Search Warrants No. 2-2003 and No. 3-2003.[12] The search warrants commanded any
peace officer to make an immediate search of the MASAGANA compound and to seize the following items:
Under Search Warrant No. 2-2003:

a. Empty/filled LPG cylinder tanks/containers, bearing the tradename SHELLANE, SHELL (Device)
of Pilipinas Shell Petroleum Corporation and the trademarks and other devices owned by Shell
International Petroleum Company, Ltd.;

b. Machinery and/or equipment being used or intended to be used for the purpose of illegally refilling
LPG cylinders belonging to PilipinasShell Petroleum Corporation bearing the latters tradename as well as
the marks belonging to Shell International Petroleum Company, Ltd., enumerated hereunder:

1. Bulk/Bullet LPG storage tanks;

2. Compressor/s (for pneumatic refilling system);
3. LPG hydraulic pump/s;
4. LPG refilling heads/hoses and appurtenances or LPG filling assembly;
5. LPG pipeline gate valve or ball valve and handles and levers;
6. LPG weighing scales; and
7. Seals simulating the shell trademark.
c. Sales invoices, ledgers, journals, official receipts, purchase orders, and all other books of accounts,
inventories and documents pertaining to the production, sale and/or distribution of the aforesaid
goods/products.

d. Delivery truck bearing Plate Nos. WTE-527, XAM-970 and WFC-603, hauling trucks, and/or other
delivery trucks or vehicles or conveyances being used or intended to be used for the purpose of selling
and/or distributing the above-mentioned counterfeit products.

Under Search Warrant No. 3-2003:

a. Empty/filled LPG cylinder tanks/containers, bearing Petron Corporations (Petron) tradename and
its tradename GASUL and other devices owned and/or used exclusively by Petron;

b. Machinery and/or equipment being used or intended to be used for the purpose of illegally refilling
LPG cylinders belonging to Petronenumerated hereunder;

1. Bulk/Bullet LPG storage tanks;

2. Compressor/s (for pneumatic filling system);
3. LPG hydraulic pump/s;
4. LPG filling heads/hoses and appurtenances or LPG filling assembly;
5. LPG pipeline gate valve or ball valve and handles levers;
6. LPG weighing scales; and
7. Seals bearing the Petron mark;
 c. Sales invoices, ledgers, journals, official receipts, purchase orders, and all other books of accounts,
inventories and documents pertaining to the production, sale and/or distribution of the aforesaid
goods/products; and

d. Delivery trucks bearing Plate Nos. UMN-971, PEZ-612 and WFC-603, hauling trucks, and/or other
delivery trucks or vehicles or conveyances being used for the purpose of selling and/or distributing the
above-mentioned counterfeit products.

Upon the issuance of the said search warrants, Oblanca and several NBI operatives immediately proceeded to the
MASAGANA compound and served the search warrants on petitioners. [13] After searching the premises of MASAGANA, the
following articles described in Search Warrant No. 2-2003 were seized:

a. Thirty-eight (38) filled 11 kg. LPG cylinders, bearing the tradename of Pilipinas Shell Petroleum
Corporation and the trademarks and other devices owned by Shell International Petroleum Company, Ltd.;

b. Thirty-nine (39) empty 11 kg. LPG cylinders, bearing the tradename of Pilipinas Shell Petroleum
Corporation and the trademarks and other devices owned by Shell International Petroleum Company, Ltd.;

c. Eight (8) filled 50 kg. LPG cylinders, bearing the tradename of Pilipinas Shell Petroleum Corporation
and the trademarks and other devices owned by Shell International Petroleum Company, Ltd.;

d. Three (3) empty 50 kg. LPG cylinders, bearing the tradename of Pilipinas Shell Petroleum Corporation
and the trademarks and other devices owned by Shell International Petroleum Company, Ltd.;

e. One (1) set of motor compressor for filling system.

Pursuant to Search Warrant No. 3-2003, the following articles were also seized:

a. Six (6) filled 11 kg. LPG cylinders without seal, bearing Petrons tradename and its trademark GASUL
and other devices owned and/or used exclusively by Petron;

b. Sixty-three (63) empty 11 kg. LPG cylinders, bearing Petrons tradename and its trademark GASUL and
other devices owned and/or used exclusively by Petron;

c. Seven (7) tampered 11 kg. LPG cylinders, bearing Petrons tradename and its trademark GASUL and
other devices owned and/or used exclusively by Petron;

d. Five (5) tampered 50 kg. LPG cylinders, bearing Petrons tradename and its trademark GASUL and
other devices owned and/or used exclusively by Petron with tampered GASUL logo;

e. One (1) set of motor compressor for filling system; and

f. One (1) set of LPG refilling machine.

On 22 April 2003, petitioners filed with the RTC a Motion to Quash Search Warrants No. 2-2003 and No. 3-2003[14] on the
following grounds:

1. There is no probable cause for the issuance of the search warrant and the conditions for the
issuance of a search warrant were not complied with;

2. Applicant NBI Agent Ritchie N. Oblanca and his witness Bernabe C. Alajar do not have
any authority to apply for a search warrant. Furthermore, they committed perjury when they
alleged in their sworn statements that they conducted a test-buy on two occasions;

3. The place to be searched was not specified in the Search Warrant as the place has an area of
10,000 square meters (one hectare) more or less, for which reason the place to be searched must
be indicated with particularity;
 4. The search warrant is characterized as a general warrant as the items to be seized as
mentioned in the search warrant are being used in the conduct of the lawful business of
respondents and the same are not being used in refilling Shellane and Gasul LPGs.

On 30 April 2003, MASAGANA, as third party claimant, filed with the RTC a Motion for the Return of Motor
Compressor and LPG Refilling Machine.[15] It claimed that it is the owner of the said motor compressor and LPG refilling machine;
that these items were used in the operation of its legitimate business; and that their seizure will jeopardize its business interests.

On 5 June 2003, the RTC issued two Orders, one of which denied the petitioners Motion to Quash Search Warrants No. 2-
2003 and No. 3-2003, and the other one also denied the Motion for the Return of Motor Compressor and LPG Refilling Machine of
MASAGANA, for lack of merit.[16]

With respect to the Order denying the petitioners motion to quash Search Warrants No. 2-2003 and No. 3-2003, the RTC
held that based on the testimonies of Oblanca and Alajar, as well as the documentary evidence consisting of receipts, photographs,
intellectual property and corporate registration papers, there is probable cause to believe that petitioners are engaged in the business
of refilling or using cylinders which bear the trademarks or devices of Petron and Pilipinas Shell in the place sought to be
searched and that such activity is probably in violation of Section 155 in relation to Section 170 of Republic Act No. 8293.

It also ruled that Oblanca and Alajar had personal knowledge of the acts complained of since they were the ones who
monitored the activities of and conducted test-buys on MASAGANA; that the search warrants in question are not general warrants
because the compound searched are solely used and occupied by MASAGANA, and as such, there was no need to particularize the
areas within the compound that would be searched; and that the items to be seized in the subject search warrants were sufficiently
described with particularity as the same was limited to cylinder tanks bearing the trademarks GASUL and SHELLANE.

As regards the Order denying the motion of MASAGANA for the return of its motor compressor and LPG refilling
machine, the RTC resolved that MASAGANA cannot be considered a third party claimant whose rights were violated as a result of
the seizure since the evidence disclosed that petitioners are stockholders of MASAGANA and that they conduct their business
through the same juridical entity. It maintained that to rule otherwise would result in the misapplication and debasement of the veil
of corporate fiction. It also stated that the veil of corporate fiction cannot be used as a refuge from liability.

Further, the RTC ratiocinated that ownership by another person or entity of the seized items is not a ground to order its
return; that in seizures pursuant to a search warrant, what is important is that the seized items were used or intended to be used as
means of committing the offense complained of; that by its very nature, the properties sought to be returned in the instant case
appear to be related to and intended for the illegal activity for which the search warrants were applied for; and that the items seized
are instruments of an offense.

Petitioners filed Motions for Reconsideration of the assailed Orders,[17] but these were denied by the RTC in its Order
dated 21 July 2003 for lack of compelling reasons.[18]

Subsequently, petitioners appealed the two Orders of the RTC to the Court of Appeals via a special civil action
for certiorari under Rule 65 of the Rules of Court.[19] On 30 September 2004, the Court of Appeals promulgated its Decision
affirming the Orders of the RTC.[20] It adopted in essence the bases and reasons of the RTC in its two Orders. The decretal portion
thereof reads:

Based on the foregoing, this Court finds no reason to disturb the assailed Orders of the respondent judge.
Grave abuse of discretion has not been proven to exist in this case.

WHEREFORE, the petition is hereby DISMISSED for lack of merit. The assailed orders both dated June 5,
2003 are hereby AFFIRMED.
 Petitioners filed a Motion for Reconsideration[21] of the Decision of the Court of Appeals, but this was denied in its
Resolution dated 1 June 2005 for lack of merit.[22]

Petitioners filed the instant petition on the following grounds:

I.

THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT THE PRESIDING JUDGE
OF RTC CAVITE CITY HAD SUFFICIENT BASIS IN DECLARING THE EXISTENCE OF PROBABLE
CAUSE;

II.

THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT NBI AGENT (RITCHIE OBLANCA)
CAN APPLY FOR THE SEARCH WARRANTS NOTHWITHSTANDING HIS LACK OF AUTHORITY;

III.

THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT THE REQUIREMENT OF GIVING A
PARTICULAR DESCRIPTION OF THE PLACE TO BE SEARCHED WAS COMPLIED WITH;

IV.

THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT THE APPLICATIONS AND THE
SEARCH WARRANTS THEMSELVES SHOW NO AMBIGUITY OF THE ITEMS TO BE SEIZED;

V.

THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT THE COMPLAINT IS DIRECTED
AGAINST MASAGANA GAS CORPORATION, ACTING THROUGH ITS OFFICERS AND DIRECTORS,
HENCE MASAGANA GAS CORPORATION MAY NOT BE CONSIDERED AS THIRD PARTY CLAIMANT
WHOSE RIGHTS WERE VIOLATED AS A RESULT OF THE SEIZURE.[23]

Apropos the first issue, petitioners allege that Oblanca and Alajar had no personal knowledge of the matters on which they
testified; that Oblanca and Alajar lied to Judge Sadang when they stated under oath that they were the ones who conducted the test-
buys on two different occasions; that the truth of the matter is that Oblanca and Alajar never made the purchases personally; that the
transactions were undertaken by other persons namely, Nikko Javier and G. Villanueva as shown in the Entry/Exit Slips of
MASAGANA; and that even if it were true that Oblanca and Alajar asked Nikko Javier and G. Villanueva to conduct the test-buys,
the information relayed by the latter two to the former was mere hearsay. [24]

Petitioners also contend that if Oblanca and Alajar had indeed used different names in purchasing the LPG cylinders, they
should have mentioned it in their applications for search warrants and in their testimonies during the preliminary examination; that it
was only after the petitioners had submitted to the RTC the entry/exit slips showing different personalities who made the purchases
that Oblanca and Alajarexplained that they had to use different names in order to avoid detection; that Alajar is not connected with
either of the private respondents; that Alajar was not in a position to inform the RTC as to the distinguishing trademarks of
SHELLANE and GASUL; that Oblanca was not also competent to testify on the marks allegedly infringed by petitioners; that
Judge Sadang failed to ask probing questions on the distinguishing marks of SHELLANE and GASUL; that the findings of the Brand
Protection Committee of Pilipinas Shell were not submitted nor presented to the RTC; that although
Judge Sadang examined Oblanca and Alajar, the former did not ask exhaustive questions; and that the questions Judge Sadang asked
were merely rehash of the contents of the affidavits of Oblanca and Alajar.[25]

These contentions are devoid of merit.

 Article III, Section 2, of the present Constitution states the requirements before a search warrant may be validly issued, to
wit:

Section 2. The right of the people to be secure in their persons, houses, papers, and effects against
unreasonable searches and seizures of whatever nature and for any purpose shall be inviolable, and no
search warrant or warrant of arrest shall issue except upon probable cause to be determined personally by the
judge after examination under oath or affirmation of the complainant and the witnesses he may produce, and
particularly describing the place to be searched and the persons or things to be seized. (emphasis supplied).

Section 4 of Rule 126 of the Revised Rules on Criminal Procedure, provides with more particularity the requisites in issuing
a search warrant, viz:

SEC. 4. Requisites for issuing search warrant. A search warrant shall not issue except upon probable cause
in connection with one specific offense to be determined personally by the judge after examination under oath or
affirmation of the complainant and the witnesses he may produce, and particularly describing the place to be
searched and the things to be seized which may be anywhere in the Philippines.

According to the foregoing provisions, a search warrant can be issued only upon a finding of probable cause. Probable cause
for search warrant means such facts and circumstances which would lead a reasonably discreet and prudent man to believe that an
offense has been committed and that the objects sought in connection with the offense are in the place to be searched. [26]

The facts and circumstances being referred thereto pertain to facts, data or information personally known to the applicant and
the witnesses he may present.[27] The applicant or his witnesses must have personal knowledge of the circumstances surrounding the
commission of the offense being complained of. Reliable information is insufficient. Mere affidavits are not enough, and the judge
must depose in writing the complainant and his witnesses.[28]

Section 155 of Republic Act No. 8293 identifies the acts constituting trademark infringement, thus:

SEC. 155. Remedies; Infringement. Any person who shall, without the consent of the owner of the
registered mark:

155.1. Use in commerce any reproduction, counterfeit, copy, or colorable imitation of a registered mark or
the same container or a dominant feature thereof in connection with the sale, offering for sale, distribution,
advertising of any goods or services including other preparatory steps necessary to carry out the sale of any goods or
services on or in connection with which such use is likely to cause confusion, or to cause mistake, or to deceive; or

155.2. Reproduce, counterfeit, copy or colorably imitate a registered mark or a dominant feature thereof
and apply such reproduction, counterfeit, copy or colorable imitation to labels, signs, prints, packages, wrappers,
receptacles or advertisements intended to be used in commerce upon or in connection with the sale, offering for sale,
distribution, or advertising of goods or services on or in connection with which such use is likely to cause confusion,
or to cause mistake, or to deceive, shall be liable in a civil action for infringement by the registrant for the remedies
hereinafter set forth: Provided, That the infringement takes place at the moment any of the acts stated in Subsection
155.1 or this subsection are committed regardless of whether there is actual sale of goods or services using the
infringing material.

As can be gleaned in Section 155.1, mere unauthorized use of a container bearing a registered trademark in connection with
the sale, distribution or advertising of goods or services which is likely to cause confusion, mistake or deception among the
buyers/consumers can be considered as trademark infringement.

In his sworn affidavits,[29] Oblanca stated that before conducting an investigation on the alleged illegal activities of
MASAGANA, he reviewed the certificates of trademark registrations issued by the Philippine Intellectual Property Office in favor
of Petron and Pilipinas Shell; that he confirmed from Petron and Pilipinas Shell that MASAGANA is not authorized to sell, use, refill
or distribute GASUL and SHELLANE LPG cylinder containers; that he and Alajar monitored the activities of MASAGANA in its
refilling plant station located within its compound at Governors Drive, Barangay Lapidario, Trece Martires, Cavite City; that, using
different names, they conducted two test-buys therein where they purchased LPG cylinders bearing the trademarks GASUL and
SHELLANE; that the said GASUL and SHELLANE LPG cylinders were refilled in their presence by the MASAGANA employees;
that while they were inside the MASAGANA compound, he noticed stock piles of multi-branded cylinders including GASUL and
SHELLANE LPG cylinders; and that they observed delivery trucks loaded with GASUL and SHELLANE LPG cylinders coming in
and out of the MASAGANA compound and making deliveries to various retail outlets. These allegations were corroborated
by Alajar in his separate affidavits.

In support of the foregoing statements, Oblanca also submitted the following documentary and object evidence:

1. Certified true copy of the Certificate of Registration No. 44046 for SHELL (DEVICE) in the name of
Shell International;

2. Certified true copy of the Certificate of Registration No. 41789 for SHELL (DEVICE) in the name of
Shell International;

3. Certified true copy of the Certificate of Registration No. 37525 for SHELL (DEVICE) in the name of
Shell International;

4. Certified true copy of the Certificate of Registration No. R-2813 for SHELL in the name of Shell
International;

5. Certified true copy of the Certificate of Registration No. 31443 for SHELLANE in the name of Shell
International;

6. Certified true copy of the Certificate of Registration No. 57945 for the mark GASUL in the name
of Petron;

7. Certified true copy of the Certificate of Registration No. C-147 for GASUL CYLINDER
CONTAINING LIQUEFIED PETROLEUM GAS in the name of Petron;

8. Certified true copy of the Certificate of Registration No. 61920 for the mark GASUL AND DEVICE in
the name of Petron;

9. Certified true copy of the Articles of Incorporation of Masagana;

10. Certified true copy of the By-laws of Masagana;

11. Certified true copy of the latest General Information Sheet of Masagana on file with the Securities and
Exchange Commission;

12. Pictures of delivery trucks coming in and out of Masagana while it delivered Gasul and Shellane LPG;

13. Cash Invoice No. 56210 dated 13 February 2003 issued by Masagana for the Gasul and Shellane LPG
purchased by Agent Oblanca and witness Alajar;

14. Pictures of the Shellane and Gasul LPGs covered by Cash Invoice No. 56210 purchased
from Masagana by Agent Oblanca and witness Alajar;

15. Cash Invoice No. 56398 dated 27 February 2003 issued by Masagana for the Gasul and Shellane LPG
purchased by Agent Oblanca and witness Alajar; and

16. Pictures of the Shellane and Gasul LPGs covered by Cash Invoice No. 56398 purchased
from Masagana by Agent Oblanca and witness Alajar.[30]

Extant from the foregoing testimonial, documentary and object evidence is that Oblanca and Alajar have personal knowledge
of the fact that petitioners, through MASAGANA, have been using the LPG cylinders bearing the marks GASUL and SHELLANE
without permission from Petron and Pilipinas Shell, a probable cause for trademark infringement. Both Oblanca and Alajar were clear
and insistent that they were the very same persons who monitored the activities of MASAGANA; that they conducted test-buys
thereon; and that in order to avoid suspicion, they used different names during the test-buys. They also personally witnessed the
refilling of LPG cylinders bearing the marks GASUL and SHELLANE inside the MASAGANA refilling plant station and the
deliveries of these refilled containers to some outlets using mini-trucks.

Indeed, the aforesaid facts and circumstances are sufficient to establish probable cause. It should be borne in mind that the
determination of probable cause does not call for the application of the rules and standards of proof that a judgment of conviction
requires after trial on the merits. As the term implies, probable cause is concerned with probability, not absolute or even moral
certainty. The standards of judgment are those of a reasonably prudent man, not the exacting calibrations of a judge after a full blown
trial.[31]

The fact that Oblanca and Alajar used different names in the purchase receipts do not negate personal knowledge on their
part. It is a common practice of the law enforcers such as NBI agents during covert investigations to use different names in order to
conceal their true identities. This is reasonable and understandable so as not to endanger the life of the undercover agents and to
facilitate the lawful arrest or apprehension of suspected violators of the law.

Petitioners contention that Oblanca and Alajar should have mentioned the fact that they used different names in their
respective affidavits and during the preliminary examination is puerile. The argument is too vacuous to merit serious consideration.
There is nothing in the provisions of law concerning the issuance of a search warrant which directly or indirectly mandates that the
applicant of the search warrant or his witnesses should state in their affidavits the fact that they used different names while conducting
undercover investigations, or to divulge such fact during the preliminary examination. In the light of other more material facts which
needed to be established for a finding of probable cause, it is not difficult to believe that Oblanca and Alajar failed to mention that
they used aliases in entering the MASAGANA compound due to mere oversight.

It cannot be gainfully said that Oblanca and Alajar are not competent to testify on the trademarks infringed by the petitioners.
As earlier discussed, Oblanca declared under oath that before conducting an investigation on the alleged illegal activities of
MASAGANA, he reviewed the certificates of trademark registrations issued by the Philippine Intellectual Property Office in favor
of Petron and Pilipinas Shell.These certifications of trademark registrations were attached by Oblanca in his applications for the search
warrants. Alajar, on the other hand, works as a private investigator and, in fact, owns a private investigation and research/consultation
firm. His firm was hired and authorized, pursuant to the Brand Protection Program of Petron and Pilipinas Shell, to verify reports that
MASAGANA is involved in the illegal sale and refill of GASUL and SHELLANE LPG cylinders. [32] As part of the job, he studied
and familiarized himself with the registered trademarks of GASUL and SHELLANE, and the distinct features of the LPG cylinders
bearing the same trademarks before conducting surveillance and test-buys on MASAGANA.[33] He also submitted to Oblanca several
copies of the same registered trademark registrations and accompanied Oblanca during the surveillance and test-buys.

As to whether the form and manner of questioning made by Judge Sadang complies with the requirements of law, Section 5
of Rule 126 of the Revised Rules on Criminal Procedure, prescribes the rules in the examination of the complainant and his witnesses
when applying for search warrant, to wit:

SEC. 5. Examination of complainant; record.- The judge must, before issuing the warrant, personally
examine in the form of searching questions and answers, in writing under oath, the complainant and the witnesses he
may produce on facts personally known to them and attach to the record their sworn statements, together with the
affidavits submitted.

The searching questions propounded to the applicant and the witnesses depend largely on the discretion of the judge.
Although there is no hard-andfast rule governing how a judge should conduct his investigation, it is axiomatic that the examination
must be probing and exhaustive, not merely routinary, general, peripheral, perfunctory or pro forma. The judge must not simply
rehash the contents of the affidavit but must make his own inquiry on the intent and justification of the application. [34]
 After perusing the Transcript of Stenographic Notes of the preliminary examination, we found the questions of
Judge Sadang to be sufficiently probing, not at all superficial and perfunctory. [35] The testimonies of Oblanca and Alajar were
consistent with each other and their narration of facts was credible. As correctly found by the Court of Appeals:

This Court is likewise not convinced that respondent Judge failed to ask probing questions in his
determination of the existence of probable cause. This Court has thoroughly examined the Transcript of
Stenographic Notes taken during the investigation conducted by the respondent Judge and found that respondent
Judge lengthily inquired into the circumstances of the case. For instance, he required the NBI agent to confirm the
contents of his affidavit, inquired as to where the test-buys were conducted and by whom, verified whether PSPC
and PETRON have registered trademarks or tradenames, required the NBI witness to explain how the test-buys were
conducted and to describe the LPG cylinders purchased from Masagana Gas Corporation, inquired why the
applications for Search Warrant were filed in Cavite City considering that Masagana Gas Corporation was located
in Trece Martires, Cavite, inquired whether the NBI Agent has a sketch of the place and if there was any
distinguishing sign to identify the place to be searched, and inquired about their alleged tailing and monitoring of the
delivery trucks. x x x.[36]

Since probable cause is dependent largely on the opinion and findings of the judge who conducted the examination and who
had the opportunity to question the applicant and his witnesses, the findings of the judge deserves great weight. The reviewing court
can overturn such findings only upon proof that the judge disregarded the facts before him or ignored the clear dictates of
reason.[37] We find no compelling reason to disturb Judge Sadangs findings herein.

Anent the second issue, petitioners argue that Judge Sadang failed to require Oblanca to show his authority to apply for
search warrants; that Oblanca is a member of the Anti-Organized Crime and not that of the Intellectual Property Division of the NBI;
that all complaints for infringement should be investigated by the Intellectual Property Division of the NBI; that it is highly irregular
that an agent not assigned to the Intellectual Property Division would apply for a search warrant and without authority from the NBI
Director; that the alleged letter-complaint of Atty. Bienvenido Somera, Jr. of Villaraza and Angangco Law Office was not produced in
court; that Judge Sadangdid not require Oblanca to produce the alleged letter-complaint which is material and relevant to the
determination of the existence of probable cause; and that Petron and Pilipinas Shell, being two different corporations, should have
issued a board resolution authorizing the Villaraza and Angangco Law Office to apply for search warrant in their behalf.[38]

We reject these protestations.

The authority of Oblanca to apply for the search warrants in question is clearly discussed and explained in his affidavit, viz:

[That] on 11 February 2003, the National Bureau of Investigation (NBI) received a letter-complaint from
Atty. Bienvenido I. Somera, Jr. of Villarazaand Angangco, on behalf of among others, Petron Corporation
(PETRON) [and Pilipinas Shell Petroleum Corporation (PSPC), the authorized representative of Shell International
Petroleum Company Limited (SHELL INTERNATIONAL)] requesting assistance in the investigation and, if
warranted, apprehension and prosecution of certain persons and/or establishments suspected of violating the
intellectual property rights of PETRON [and of PSPC and Shell International.]

11. [That] on the basis of the letter-complaint, I, together with Agent Angelo Zarzoso, was assigned as the NBI
agent on the case.[39]

The fact that Oblanca is a member of the Anti-Organized Crime Division and not that of the Intellectual Property Division
does not abrogate his authority to apply for search warrant. As aptly stated by the RTC and the Court of Appeals, there is nothing in
the provisions on search warrant under Rule 126 of the Revised Rules on Criminal Procedure, which specifically commands that the
applicant law enforcer must be a member of a division that is assigned or related to the subject crime or offense before the application
for search warrant may be acted upon. The petitioners did not also cite any law, rule or regulation mandating such requirement. At
most, petitioners may only be referring to the administrative organization and/or internal rule or practice of the NBI. However, not
only did petitioners failed to establish the existence thereof, but they also did not prove that such administrative organization and/or
internal rule or practice are inviolable.
 Neither is the presentation of the letter-complaint of Atty. Somera and board resolutions from Petron and Pilipinas Shell
required or necessary in determining probable cause. As heretofore discussed, the affidavits of Oblanca and Alajar, coupled with the
object and documentary evidence they presented, are sufficient to establish probable cause. It can also be presumed that Oblanca, as
an NBI agent, is a public officer who had regularly performed his official duty.[40] He would not have initiated an investigation on
MASAGANA without a proper complaint. Furthermore, Atty. Somera did not step up to deny his letter-complaint.

Regarding the third issue, petitioners posit that the applications for search warrants of Oblanca did not specify the particular
area to be searched, hence, giving the raiding team wide latitude in determining what areas they can search. They aver that the search
warrants were general warrants, and are therefore violative of the Constitution. Petitioners also assert that since the MASAGANA
compound is about 10,000.00 square meters with several structures erected on the lot, the search warrants should have defined the
areas to be searched.

The long standing rule is that a description of the place to be searched is sufficient if the officer with the warrant can, with
reasonable effort, ascertain and identify the place intended and distinguish it from other places in the community. Any designation or
description known to the locality that points out the place to the exclusion of all others, and on inquiry leads the officers unerringly
to it, satisfies the constitutional requirement.[41]

Moreover, in the determination of whether a search warrant describes the premises to be searched with sufficient
particularity, it has been held that the executing officers prior knowledge as to the place intended in the warrant is relevant. This would
seem to be especially true where the executing officer is the affiant on whose affidavit the warrant had been issued, and when he
knows that the judge who issued the warrant intended the compound described in the affidavit. [42]

The search warrants in question commanded any peace officer to make an immediate search on MASAGANA compound
located at Governors Drive, Barangay Lapidario, Trece Martires, Cavite City. It appears that the raiding team had ascertained and
reached MASAGANA compound without difficulty since MASAGANA does not have any other offices/plants
in Trece Martires, Cavite City. Moreover, Oblanca, who was with the raiding team, was already familiar with the MASAGANA
compound as he and Alajar had monitored and conducted test-buys thereat.

Even if there are several structures inside the MASAGANA compound, there was no need to particularize the areas to be
searched because, as correctly stated by Petron and Pilipinas Shell, these structures constitute the essential and necessary components
of the petitioners business and cannot be treated separately as they form part of one entire compound. The compound is owned and
used solely by MASAGANA. What the case law merely requires is that, the place to be searched can be distinguished in relation to
the other places in the community. Indubitably, this requisite was complied with in the instant case.

As to the fourth issue, petitioners asseverate that the search warrants did not indicate with particularity the items to be seized
since the search warrants merely described the items to be seized as LPG cylinders bearing the trademarks GASUL and SHELLANE
without specifying their sizes.

A search warrant may be said to particularly describe the things to be seized when the description therein is as specific as the
circumstances will ordinarily allow; or when the description expresses a conclusion of fact not of law by which the warrant officer
may be guided in making the search and seizure; or when the things described are limited to those which bear direct relation to the
offense for which the warrant is being issued.[43]

While it is true that the property to be seized under a warrant must be particularly described therein and no other property can
be taken thereunder, yet the description is required to be specific only in so far as the circumstances will ordinarily allow. The law
does not require that the things to be seized must be described in precise and minute details as to leave no room for doubt on the part
of the searching authorities; otherwise it would be virtually impossible for the applicants to obtain a search warrant as they would not
know exactly what kind of things they are looking for. Once described, however, the articles subject of the search and seizure need not
be so invariant as to require absolute concordance, in our view, between those seized and those described in the warrant. Substantial
similarity of those articles described as a class or specie would suffice. [44]

Measured against this standard, we find that the items to be seized under the search warrants in question were sufficiently
described with particularity. The articles to be confiscated were restricted to the following: (1) LPG cylinders bearing the trademarks
GASUL and SHELLANE; (2) Machines and equipments used or intended to be used in the illegal refilling of GASUL and
SHELLANE cylinders. These machines were also specifically enumerated and listed in the search warrants; (3) Documents which
pertain only to the production, sale and distribution of the GASUL and SHELLANE LPG cylinders; and (4) Delivery trucks bearing
Plate Nos. WTE-527, XAM-970 and WFC-603, hauling trucks, and/or other delivery trucks or vehicles or conveyances being used or
intended to be used for the purpose of selling and/or distributing GASUL and SHELLANE LPG cylinders. [45]

Additionally, since the described items are clearly limited only to those which bear direct relation to the offense, i.e.,
violation of section 155 of Republic Act No. 8293, for which the warrant was issued, the requirement of particularity of description is
satisfied.

Given the foregoing, the indication of the accurate sizes of the GASUL and SHELLANE LPG cylinders or tanks would be
unnecessary.

Finally, petitioners claim that MASAGANA has the right to intervene and to move for the return of the seized items; that the
items seized by the raiding team were being used in the legitimate business of MASAGANA; that the raiding team had no right to
seize them under the guise that the same were being used in refilling GASUL and SHELLANE LPG cylinders; and that there being no
action for infringement filed against them and/or MASAGANA from the seizure of the items up to the present, it is only fair that the
seized articles be returned to the lawful owner in accordance with Section 20 of A.M. No. 02-1-06-SC.

It is an elementary and fundamental principle of corporation law that a corporation is an entity separate and distinct from its
stockholders, directors or officers. However, when the notion of legal entity is used to defeat public convenience, justify wrong,
protect fraud, or defend crime, the law will regard the corporation as an association of persons, or in the case of two corporations
merge them into one.[46]In other words, the law will not recognize the separate corporate existence if the corporation is being used
pursuant to the foregoing unlawful objectives. This non-recognition is sometimes referred to as the doctrine of piercing the veil of
corporate entity or disregarding the fiction of corporate entity. Where the separate corporate entity is disregarded, the corporation will
be treated merely as an association of persons and the stockholders or members will be considered as the corporation, that is, liability
will attach personally or directly to the officers and stockholders. [47]

As we now find, the petitioners, as directors/officers of MASAGANA, are utilizing the latter in violating the intellectual
property rights of Petron and Pilipinas Shell. Thus, petitioners collectively and MASAGANA should be considered as one and the
same person for liability purposes. Consequently, MASAGANAs third party claim serves no refuge for petitioners.

Even if we were to sustain the separate personality of MASAGANA from that of the petitioners, the effect will be the same.
The law does not require that the property to be seized should be owned by the person against whom the search warrants is directed.
Ownership, therefore, is of no consequence, and it is sufficient that the person against whom the warrant is directed has control or
possession of the property sought to be seized. [48] Hence, even if, as petitioners claimed, the properties seized belong to MASAGANA
as a separate entity,their seizure pursuant to the search warrants is still valid.

Further, it is apparent that the motor compressor, LPG refilling machine and the GASUL and SHELL LPG cylinders seized
were the corpus delicti, the body or substance of the crime, or the evidence of the commission of trademark infringement. These were
the very instruments used or intended to be used by the petitioners in trademark infringement. It is possible that, if returned to
MASAGANA, these items will be used again in violating the intellectual property rights of Petron and Pilipinas Shell.[49] Thus, the
RTC was justified in denying the petitioners motion for their return so as to prevent the petitioners and/or MASAGANA from using
them again in trademark infringement.
 Petitioners reliance on Section 20 of A.M. No. 02-1-06-SC,[50] is not tenable. As correctly observed by the Solicitor General,
A.M. 02-1-06-SC is not applicable in the present case because it governs only searches and seizures in civil actions for infringement
of intellectual property rights.[51] The offense complained of herein is for criminal violation of Section 155 in relation to Section
170[52] of Republic Act No. 8293.

WHEREFORE, the petition is DENIED. The Decision and Resolution of the Court of Appeals in CA-G.R. SP No. 79256,
dated 30 September 2004 and 1 June 2005, respectively, are hereby AFFIRMED. Costs against petitioners.

SO ORDERED.
PRISMA CONSTRUCTION & G.R. No. 160545
DEVELOPMENT CORPORATION
and ROGELIO S. PANTALEON,
Petitioners, Present:


NACHURA, J.,
BRION, Acting Chairperson,
- versus - DEL CASTILLO,
ABAD, and
PEREZ, JJ.

ARTHUR F. MENCHAVEZ ,
Respondent. Promulgated:

March 9, 2010

x------------------------------------------------------------------------------------------x
DECISION

BRION, J.:

We resolve in this Decision the petition for review on certiorari[1] filed by petitioners Prisma
Construction & Development Corporation (PRISMA) and Rogelio S. Pantaleon (Pantaleon)
(collectively, petitioners) who seek to reverse and set aside the Decision[2] dated May 5, 2003
and the Resolution[3] dated October 22, 2003 of the Former Ninth Division of the Court of
Appeals (CA) in CA-G.R. CV No. 69627. The assailed CA Decision affirmed the Decision of the
Regional Trial Court (RTC), Branch 73, Antipolo City in Civil Case No. 97-4552 that held the
petitioners liable for payment of P3,526,117.00 to respondent Arthur F. Menchavez
(respondent), but modified the interest rate from 4% per month to 12% per annum, computed
from the filing of the complaint to full payment. The assailed CA Resolution denied the
petitioners Motion for Reconsideration.

FACTUAL BACKGROUND

The facts of the case, gathered from the records, are briefly summarized below.

On December 8, 1993, Pantaleon, the President and Chairman of the Board of PRISMA,
obtained a P1,000,000.00[4] loan from the respondent, with a monthly interest of P40,000.00
payable for six months, or a total obligation of P1,240,000.00 to be paid within six (6)
months,[5] under the following schedule of payments:

January 8, 1994 . P40,000.00

February 8, 1994 ... P40,000.00

March 8, 1994 ... P40,000.00

April 8, 1994 . P40,000.00

May 8, 1994 .. P40,000.00

June 8, 1994 P1,040,000.00[6]

Total P1,240,000.00
To secure the payment of the loan, Pantaleon issued a promissory note[7] that states:

I, Rogelio S. Pantaleon, hereby acknowledge the receipt of ONE MILLION TWO HUNDRED FORTY

THOUSAND PESOS (P1,240,000), Philippine Currency, from Mr. Arthur F. Menchavez, representing a six-

month loan payable according to the following schedule:

January 8, 1994 . P40,000.00

February 8, 1994 ... P40,000.00

March 8, 1994 ... P40,000.00

April 8, 1994 . P40,000.00

May 8, 1994 .. P40,000.00

 June 8, 1994 P1,040,000.00

The checks corresponding to the above amounts are hereby acknowledged.[8]

and six (6) postdated checks corresponding to the schedule of payments. Pantaleon signed the
promissory note in his personal capacity,[9]and as duly authorized by the Board of Directors of
PRISMA.[10] The petitioners failed to completely pay the loan within the stipulated six (6)-
month period.

From September 8, 1994 to January 4, 1997, the petitioners paid the following amounts
to the respondent:

September 8, 1994 P320,000.00

October 8, 1995.P600,000.00

November 8, 1995.....P158,772.00

January 4, 1997 P30,000.00[11]

As of January 4, 1997, the petitioners had already paid a total of P1,108,772.00. However, the
respondent found that the petitioners still had an outstanding balance of P1,364,151.00 as of
January 4, 1997, to which it applied a 4% monthly interest.[12] Thus, on August 28, 1997, the
respondent filed a complaint for sum of money with the RTC to enforce the unpaid
balance, plus 4% monthly interest, P30,000.00 in attorneys fees, P1,000.00 per court
appearance and costs of suit.[13]

In their Answer dated October 6, 1998, the petitioners admitted the loan of P1,240,000.00, but
denied the stipulation on the 4% monthly interest, arguing that the interest was not provided
in the promissory note. Pantaleon also denied that he made himself personally liable and that
he made representations that the loan would be repaid within six (6) months.[14]

THE RTC RULING

The RTC rendered a Decision on October 27, 2000 finding that the respondent issued a check
for P1,000,000.00 in favor of the petitioners for a loan that would earn an interest of 4%
or P40,000.00 per month, or a total of P240,000.00 for a 6-month period. It noted that the
petitioners made several payments amounting to P1,228,772.00, but they were still indebted
to the respondent for P3,526,117.00 as of February 11,[15]1999 after considering the 4%
monthly interest. The RTC observed that PRISMA was a one-man corporation of Pantaleon and
used this circumstance to justify the piercing of the veil of corporate fiction. Thus, the RTC
ordered the petitioners to jointly and severally pay the respondent the amount
of P3,526,117.00 plus 4% per month interest from February 11, 1999 until fully paid.[16]

The petitioners elevated the case to the CA via an ordinary appeal under Rule 41 of the Rules
of Court, insisting that there was no express stipulation on the 4% monthly interest.

THE CA RULING

The CA decided the appeal on May 5, 2003. The CA found that the parties agreed to a 4%
monthly interest principally based on the board resolution that authorized Pantaleon to
transact a loan with an approved interest of not more than 4% per month. The appellate court,
however, noted that the interest of 4% per month, or 48% per annum, was unreasonable and
should be reduced to 12% per annum. The CA affirmed the RTCs finding that PRISMA was a
mere instrumentality of Pantaleon that justified the piercing of the veil of corporate fiction.
Thus, the CA modified the RTC Decision by imposing a 12% per annum interest, computed
from the filing of the complaint until finality of judgment, and thereafter, 12% from finality
until fully paid.[17]

After the CA's denial[18] of their motion for reconsideration,[19] the petitioners filed the present
petition for review on certiorari under Rule 45 of the Rules of Court.

THE PETITION

The petitioners submit that the CA mistakenly relied on their board resolution to conclude that
the parties agreed to a 4% monthly interest because the board resolution was not an evidence
of a loan or forbearance of money, but merely an authorization for Pantaleon to perform
certain acts, including the power to enter into a contract of loan. The expressed mandate of
Article 1956 of the Civil Code is that interest due should be stipulated in writing, and no such
stipulation exists. Even assuming that the loan is subject to 4% monthly interest, the interest
covers the six (6)-month period only and cannot be interpreted to apply beyond it. The
petitioners also point out the glaring inconsistency in the CA Decision, which reduced the
interest from 4% per month or 48% per annum to 12% per annum, but failed to consider that
the amount of P3,526,117.00 that the RTC ordered them to pay includes the compounded 4%
monthly interest.

THE CASE FOR THE RESPONDENT

The respondent counters that the CA correctly ruled that the loan is subject to a 4% monthly
interest because the board resolution is attached to, and an integral part of, the promissory
note based on which the petitioners obtained the loan. The respondent further contends that
the petitioners are estopped from assailing the 4% monthly interest, since they agreed to pay
the 4% monthly interest on the principal amount under the promissory note and the board
resolution.

THE ISSUE

The core issue boils down to whether the parties agreed to the 4% monthly interest on the
loan. If so, does the rate of interest apply to the 6-month payment period only or until full
payment of the loan?

OUR RULING

We find the petition meritorious.

Interest due should be stipulated in writing;

otherwise, 12% per annum

Obligations arising from contracts have the force of law between the contracting parties and
should be complied with in good faith.[20] When the terms of a contract are clear and leave no
doubt as to the intention of the contracting parties, the literal meaning of its stipulations
governs.[21] In such cases, courts have no authority to alter the contract by construction or to
make a new contract for the parties; a court's duty is confined to the interpretation of the
contract the parties made for themselves without regard to its wisdom or folly, as the court
cannot supply material stipulations or read into the contract words the contract does not
contain.[22] It is only when the contract is vague and ambiguous that courts are permitted to
resort to the interpretation of its terms to determine the parties intent.

In the present case, the respondent issued a check for P1,000,000.00.[23] In turn, Pantaleon, in
his personal capacity and as authorized by the Board, executed the promissory note quoted
above. Thus, the P1,000,000.00 loan shall be payable within six (6) months, or from January 8,
1994 up to June 8, 1994. During this period, the loan shall earn an interest of P40,000.00 per
month, for a total obligation of P1,240,000.00 for the six-month period. We note that this
agreed sum can be computed at 4% interest per month, but no such rate of interest was
stipulated in the promissory note; rather a fixed sum equivalent to this rate was agreed
upon.
Article 1956 of the Civil Code specifically mandates that no interest shall be due unless it has
been expressly stipulated in writing. Under this provision, the payment of interest in loans or
forbearance of money is allowed only if: (1) there was an express stipulation for the payment
of interest; and (2) the agreement for the payment of interest was reduced in writing. The
concurrence of the two conditions is required for the payment of interest at a stipulated rate.
Thus, we held in Tan v. Valdehueza[24] and Ching v. Nicdao[25] that collection of interest without
any stipulation in writing is prohibited by law.

Applying this provision, we find that the interest of P40,000.00 per month corresponds only to
the six (6)-month period of the loan, or from January 8, 1994 to June 8, 1994, as agreed upon
by the parties in the promissory note. Thereafter, the interest on the loan should be at the
legal interest rate of 12% per annum, consistent with our ruling in Eastern Shipping Lines, Inc.
v. Court of Appeals:[26]

When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or

forbearance of money, the interest due should be that which may have been stipulated in writing.

Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded. In

the absence of stipulation, the rate of interest shall be 12% per annum to be computed from default,

i.e., from judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the Civil

Code. (Emphasis supplied)

We reiterated this ruling in Security Bank and Trust Co. v. RTC-Makati, Br. 61,[27] Sulit v. Court
of Appeals,[28] Crismina Garments, Inc. v. Court of Appeals,[29] Eastern Assurance and Surety
Corporation v. Court of Appeals,[30] Sps. Catungal v. Hao,[31] Yong v. Tiu,[32] and Sps. Barrera v.
Sps. Lorenzo.[33] Thus, the RTC and the CA misappreciated the facts of the case; they erred in
finding that the parties agreed to a 4% interest, compounded by the application of this interest
beyond the promissory notes six (6)-month period. The facts show that the parties agreed to
the payment of a specific sum of money of P40,000.00 per month for six months, not to a 4%
rate of interest payable within a six (6)-month period.

Medel v. Court of Appeals not applicable

The CA misapplied Medel v. Court of Appeals[34] in finding that a 4% interest per month
was unconscionable.

In Medel, the debtors in a P500,000.00 loan were required to pay an interest of 5.5% per
month, a service charge of 2% per annum, and a penalty charge of 1% per month, plus
attorneys fee equivalent to 25% of the amount due, until the loan is fully paid. Taken in
conjunction with the stipulated service charge and penalty, we found the interest rate of 5.5%
to be excessive, iniquitous, unconscionable, exorbitant and hence, contrary to morals, thereby
rendering the stipulation null and void.

Applying Medel, we invalidated and reduced the stipulated interest in Spouses Solangon
v. Salazar[35] of 6% per month or 72% per annum interest on a P60,000.00 loan; in Ruiz v. Court
of Appeals,[36] of 3% per month or 36% per annum interest on a P3,000,000.00 loan; in Imperial
v. Jaucian,[37] of 16% per month or 192% per annum interest on a P320,000.00 loan; in Arrofo
v. Quio,[38] of 7% interest per month or 84% per annum interest on a P15,000.00 loan; in Bulos,
Jr. v. Yasuma,[39] of 4% per month or 48% per annum interest on aP2,500,000.00 loan; and
in Chua v. Timan,[40] of 7% and 5% per month for loans totalling P964,000.00. We note that in
all these cases, the terms of the loans were open-ended; the stipulated interest rates were
applied for an indefinite period.

Medel finds no application in the present case where no other stipulation exists for the
payment of any extra amount except a specific sum of P40,000.00 per month on the principal
of a loan payable within six months. Additionally, no issue on the excessiveness of the
stipulated amount of P40,000.00 per month was ever put in issue by the petitioners;[41] they
only assailed the application of a 4% interest rate, since it was not agreed upon.

It is a familiar doctrine in obligations and contracts that the parties are bound by the
stipulations, clauses, terms and conditions they have agreed to, which is the law between
them, the only limitation being that these stipulations, clauses, terms and conditions are not
contrary to law, morals, public order or public policy.[42] The payment of the specific sum of
money of P40,000.00 per month was voluntarily agreed upon by the petitioners and the
respondent. There is nothing from the records and, in fact, there is no allegation showing that
petitioners were victims of fraud when they entered into the agreement with the respondent.
Therefore, as agreed by the parties, the loan of P1,000,000.00 shall earn P40,000.00 per
month for a period of six (6) months, or from December 8, 1993 to June 8, 1994, for a total
principal and interest amount of P1,240,000.00. Thereafter, interest at the rate of 12% per
annum shall apply. The amounts already paid by the petitioners during the pendency of the
suit, amounting to P1,228,772.00 as of February 12, 1999,[43] should be deducted from the
total amount due, computed as indicated above. We remand the case to the trial court for the
actual computation of the total amount due.

Doctrine of Estoppel not applicable

The respondent submits that the petitioners are estopped from disputing the 4% monthly
interest beyond the six-month stipulated period, since they agreed to pay this interest on the
principal amount under the promissory note and the board resolution.
We disagree with the respondents contention.

We cannot apply the doctrine of estoppel in the present case since the facts and
circumstances, as established by the record, negate its application. Under the promissory
note,[44] what the petitioners agreed to was the payment of a specific sum of P40,000.00 per
month for six months not a 4% rate of interest per month for six (6) months on a loan whose
principal is P1,000,000.00, for the total amount of P1,240,000.00. Thus, no reason exists to
place the petitioners in estoppel, barring them from raising their present defenses against a
4% per month interest after the six-month period of the agreement. The board
resolution,[45] on the other hand, simply authorizes Pantaleon to contract for a loan with a
monthly interest of not more than 4%. This resolution merely embodies the extent of
Pantaleons authority to contract and does not create any right or obligation except as between
Pantaleon and the board. Again, no cause exists to place the petitioners in estoppel.

Piercing the corporate veil unfounded

We find it unfounded and unwarranted for the lower courts to pierce the corporate veil of
PRISMA.

The doctrine of piercing the corporate veil applies only in three (3) basic instances, namely: a)
when the separate and distinct corporate personality defeats public convenience, as when the
corporate fiction is used as a vehicle for the evasion of an existing obligation; b) in fraud cases,
or when the corporate entity is used to justify a wrong, protect a fraud, or defend a crime; or
c) is used in alter ego cases, i.e., where a corporation is essentially a farce, since it is a mere
alter ego or business conduit of a person, or where the corporation is so organized and
controlled and its affairs so conducted as to make it merely an instrumentality, agency, conduit
or adjunct of another corporation.[46] In the absence of malice, bad faith, or a specific provision
of law making a corporate officer liable, such corporate officer cannot be made personally
liable for corporate liabilities.[47]

In the present case, we see no competent and convincing evidence of any wrongful, fraudulent
or unlawful act on the part of PRISMA to justify piercing its corporate veil. While Pantaleon
denied personal liability in his Answer, he made himself accountable in the promissory note in
his personal capacity and as authorized by the Board Resolution of PRISMA.[48] With this
statement of personal liability and in the absence of any representation on the part of PRISMA
that the obligation is all its own because of its separate corporate identity, we see no occasion
to consider piercing the corporate veil as material to the case.
WHEREFORE, in light of all the foregoing, we hereby REVERSE and SET ASIDE the Decision
dated May 5, 2003 of the Court of Appeals in CA-G.R. CV No. 69627. The petitioners loan
of P1,000,000.00 shall bear interest of P40,000.00 per month for six (6) months from
December 8, 1993 as indicated in the promissory note. Any portion of this loan, unpaid as of
the end of the six-month payment period, shall thereafter bear interest at 12% per
annum. The total amount due and unpaid, including accrued interests, shall bear interest at
12% per annum from the finality of this Decision. Let this case be REMANDED to the Regional
Trial Court, Branch 73, Antipolo City for the proper computation of the amount due as herein
directed, with due regard to the payments the petitioners have already remitted. Costs against
the respondent.
SO ORDERED.
G.R. No. 170479 February 18, 2008

ANDRE T. ALMOCERA, petitioner,

vs.
JOHNNY ONG, respondent.

DECISION

CHICO-NAZARIO, J.:

Before Us is a Petition for Review on Certiorari under Rule 45 of the 1997 Rules of Civil Procedure which seeks to set aside the Decision1 of the
Court of Appeals dated 18 July 2005 in CA-G.R. CV No. 75610 affirming in toto the Decision2 of Branch 11 of the Regional Trial Court (RTC) of
Cebu City in Civil Case No. CEB-23687 and its Resolution3 dated 16 November 2005 denying petitioner’s motion for reconsideration. The RTC
decision found petitioner Andre T. Almocera, Chairman and Chief Executive Officer of First Builder Multi-Purpose Cooperative (FBMC),
solidarily liable with FMBC for damages.

Stripped of non-essentials, the respective versions of the parties have been summarized by the Court of Appeals as follows:

Plaintiff Johnny Ong tried to acquire from the defendants a "townhome" described as Unit No. 4 of Atrium Townhomes in Cebu City.
As reflected in a Contract to Sell, the selling price of the unit was P3,400,000.00 pesos, for a lot area of eighty-eight (88) square
meters with a three-storey building. Out of the purchase price, plaintiff was able to pay the amount of P1,060,000.00. Prior to the full
payment of this amount, plaintiff claims that defendants Andre Almocera and First Builders fraudulently concealed the fact that before
and at the time of the perfection of the aforesaid contract to sell, the property was already mortgaged to and encumbered with the
Land Bank of the Philippines (LBP). In addition, the construction of the house has long been delayed and remains unfinished. On
March 13, 1999, Lot 4-a covered by TCT No. 148818, covering the unit was advertised in a local tabloid for public auction for
foreclosure of mortgage. It is the assertion of the plaintiff that had it not for the fraudulent concealment of the mortgage and
encumbrance by defendants, he would have not entered into the contract to sell.

On the other hand, defendants assert that on March 20, 1995, First Builders Multi-purpose Coop. Inc., borrowed money in the amount
of P500,000.00 from Tommy Ong, plaintiff’s brother. This amount was used to finance the documentation requirements of the LBP for
the funding of the Atrium Town Homes. This loan will be applied in payment of one (1) town house unit which Tommy Ong may
eventually purchase from the project. When the project was under way, Tommy Ong wanted to buy another townhouse for his brother,
Johnny Ong, plaintiff herein, which then, the amount of P150,000.00 was given as additional partial payment. However, the particular
unit was not yet identified. It was only on January 10, 1997 that Tommy Ong identified Unit No. 4 plaintiff’s chosen unit and again
tendered P350,000.00 as his third partial payment. When the contract to sell for Unit 4 was being drafted, Tommy Ong requested that
another contract to sell covering Unit 5 be made so as to give Johnny Ong another option to choose whichever unit he might decide to
have. When the construction was already in full blast, defendants were informed by Tommy Ong that their final choice was Unit 5. It
was only upon knowing that the defendants will be selling Unit 4 to some other persons for P4million that plaintiff changed his choice
from Unit 5 to Unit 4.4

In trying to recover the amount he paid as down payment for the townhouse unit, respondent Johnny Ong filed a complaint for Damages before
the RTC of Cebu City, docketed as Civil Case No. CEB-23687, against defendants Andre T. Almocera and FBMC alleging that defendants
were guilty of fraudulent concealment and breach of contract when they sold to him a townhouse unit without divulging that the same, at the
time of the perfection of their contract, was already mortgaged with the Land Bank of the Philippines (LBP), with the latter causing the
foreclosure of the mortgage and the eventual sale of the townhouse unit to a third person.

In their Answer, defendants denied liability claiming that the foreclosure of the mortgage on the townhouse unit was caused by the failure of
complainant Johnny Ong to pay the balance of the price of said townhouse unit.
After the pre-trial conference was terminated, trial on the merits ensued. Respondent and his brother, Thomas Y. Ong, took the witness stand.
For defendants, petitioner testified.

In a Decision dated 20 May 2002, the RTC disposed of the case in this manner:

WHEREFORE, in view of all the foregoing premises, judgment is hereby rendered in this case in favor of the plaintiff and against the
defendants:

(a) Ordering the defendants to solidarily pay to the plaintiff the sum of P1,060,000.00, together with a legal interest thereon at 6% per
annum from April 21, 1999 until its full payment before finality of the judgment. Thereafter, if the amount adjudged remains unpaid, the
interest rate shall be 12% per annum computed from the time when the judgment becomes final and executory until fully satisfied;

(b) Ordering the defendants to solidarily pay to the plaintiff the sum of P100,000.00 as moral damages, the sum of P50,000.00 as
attorney’s fee and the sum of P15,619.80 as expenses of litigation; and

(c) Ordering the defendants to pay the cost of this suit.5

The trial court ruled against defendants for not acting in good faith and for not complying with their obligations under their contract with
respondent. In the Contract to Sell6 involving Unit 4 of the Atrium Townhomes, defendants agreed to sell said townhouse to respondent
for P3,400,000.00. The down payment was P1,000,000.00, while the balance of P2,400,000.00 was to be paid in full upon completion, delivery
and acceptance of the townhouse. Under the contract which was signed on 10 January 1997, defendants agreed to complete and convey to
respondent the unit within six months from the signing thereof.

The trial court found that respondent was able to make a down payment or partial payment of P1,060,000.00 and that the defendants failed to
complete the construction of, as well as deliver to respondent, the townhouse within six months from the signing of the contract. Moreover,
respondent was not informed by the defendants at the time of the perfection of their contract that the subject townhouse was already
mortgaged to LBP. The mortgage was foreclosed by the LBP and the townhouse was eventually sold at public auction. It said that defendants
were guilty of fraud in their dealing with respondent because the mortgage was not disclosed to respondent when the contract was perfected.
There was also non-compliance with their obligations under the contract when they failed to complete and deliver the townhouse unit at the
agreed time. On the part of respondent, the trial court declared he was justified in suspending further payments to the defendants and was
entitled to the return of the down payment.

Aggrieved, defendants appealed the decision to the Court of Appeals assigning the following as errors:

1. THE LOWER COURT ERRED IN HOLDING THAT PLAINTIFF HAS A VALID CAUSE OF ACTION FOR DAMAGES AGAINST
DEFENDANT(S).

2. THE LOWER COURT ERRED IN HOLDING THAT DEFENDANT ANDRE T. ALMOCERA IS SOLIDARILY LIABLE WITH THE
COOPERATIVE FOR THE DAMAGES TO THE PLAINTIFF.7

The Court of Appeals ruled that the defendants incurred delay when they failed to deliver the townhouse unit to the respondent within six
months from the signing of the contract to sell. It agreed with the finding of the trial court that the nonpayment of the balance of P2.4M by
respondent to defendants was proper in light of such delay and the fact that the property subject of the case was foreclosed and auctioned. It
added that the trial court did not err in giving credence to respondent’s assertion that had he known beforehand that the unit was used as
collateral with the LBP, he would not have proceeded in buying the townhouse. Like the trial court, the Court of Appeals gave no weight to
defendants’ argument that had respondent paid the balance of the purchase price of the townhouse, the mortgage could have been released. It
explained:

We cannot find fault with the choice of plaintiff not to further dole out money for a property that in all events, would never be his.
Moreover, defendants could, if they were really desirous of satisfying their obligation, demanded that plaintiff pay the outstanding
balance based on their contract. This they had not done. We can fairly surmise that defendants could not comply with their obligation
themselves, because as testified to by Mr. Almocera, they already signified to LBP that they cannot pay their outstanding loan
obligations resulting to the foreclosure of the townhouse. 8

Moreover, as to the issue of petitioner’s solidary liability, it said that this issue was belatedly raised and cannot be treated for the first time on
appeal.

On 18 July 2005, the Court of Appeals denied the appeal and affirmed in toto the decision of the trial court. The dispositive portion of the
decision reads:

IN LIGHT OF ALL THE FOREGOING, this appeal is DENIED. The assailed decision of the Regional Trial Court, Branch 11, Cebu
City in Civil Case No. CEB-23687 is AFFIRMED in toto.9

In a Resolution dated 16 November 2005, the Court of Appeals denied defendants’ motion for reconsideration.
Petitioner is now before us pleading his case via a Petition for Review on Certiorari under Rule 45 of the 1997 Rules of Civil Procedure. The
petition raises the following issues:

I. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT DEFENDANT HAS INCURRED DELAY.

II. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN SUSTAINING RESPONDENT’S REFUSAL TO PAY THE
BALANCE OF THE PURCHASE PRICE.

III. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT DEFENDANT ANDRE T. ALMOCERA IS
SOLIDARILY LIABLE WITH THE DEFENDANT COOPERATIVE FOR DAMAGES TO PLAINTIFF.10

It cannot be disputed that the contract entered into by the parties was a contract to sell. The contract was denominated as such and it contained
the provision that the unit shall be conveyed by way of an Absolute Deed of Sale, together with the attendant documents of Ownership – the
Transfer Certificate of Title and Certificate of Occupancy – and that the balance of the contract price shall be paid upon the completion and
delivery of the unit, as well as the acceptance thereof by respondent. All these clearly indicate that ownership of the townhouse has not passed
to respondent.

In Serrano v. Caguiat, 11 we explained:

A contract to sell is akin to a conditional sale where the efficacy or obligatory force of the vendor’s obligation to transfer title is
subordinated to the happening of a future and uncertain event, so that if the suspensive condition does not take place, the parties
would stand as if the conditional obligation had never existed. The suspensive condition is commonly full payment of the purchase
price.

The differences between a contract to sell and a contract of sale are well-settled in jurisprudence. As early as 1951, in Sing Yee v.
Santos [47 O.G. 6372 (1951)], we held that:

"x x x [a] distinction must be made between a contract of sale in which title passes to the buyer upon delivery of the thing
sold and a contract to sell x x x where by agreement the ownership is reserved in the seller and is not to pass until the full
payment of the purchase price is made. In the first case, non-payment of the price is a negative resolutory condition; in the
second case, full payment is a positive suspensive condition. Being contraries, their effect in law cannot be identical. In the
first case, the vendor has lost and cannot recover the ownership of the land sold until and unless the contract of sale is itself
resolved and set aside. In the second case, however, the title remains in the vendor if the vendee does not comply with the
condition precedent of making payment at the time specified in the contract."

In other words, in a contract to sell, ownership is retained by the seller and is not to pass to the buyer until full payment of
the price.

The Contract to Sell entered into by the parties contains the following pertinent provisions:

4. TERMS OF PAYMENT:

4a. ONE MILLION PESOS (P1,000,000.00) is hereby acknowledged as Downpayment for the above-mentioned Contract Price.

4b. The Balance, in the amount of TWO MILLION FOUR HUNDRED PESOS (P2,400,000.00) shall be paid thru financing Institution
facilitated by the SELLER, preferably Landbank of the Philippines (LBP).

Upon completion, delivery and acceptance of the BUYER of the Townhouse Unit, the BUYER shall have paid the Contract Price in full
to the SELLER.

xxxx

6. COMPLETION DATES OF THE TOWNHOUSE UNIT:

The unit shall be completed and conveyed by way of an Absolute Deed of Sale together with the attendant documents of Ownership
in the name of the BUYER – the Transfer Certificate of Title and Certificate of Occupancy within a period of six (6) months from the
signing of Contract to Sell.12

From the foregoing provisions, it is clear that petitioner and FBMC had the obligation to complete the townhouse unit within six months from the
signing of the contract. Upon compliance therewith, the obligation of respondent to pay the balance of P2,400,000.00 arises. Upon payment
thereof, the townhouse shall be delivered and conveyed to respondent upon the execution of the Absolute Deed of Sale and other relevant
documents.

The evidence adduced shows that petitioner and FBMC failed to fulfill their obligation -- to complete and deliver the townhouse within the six-
month period. With petitioner and FBMC’s non-fulfillment of their obligation, respondent refused to pay the balance of the contract price.
Respondent does not ask that ownership of the townhouse be transferred to him, but merely asks that the amount or down payment he had
made be returned to him.

Article 1169 of the Civil Code reads:

Art. 1169. Those obliged to deliver or to do something incur in delay from the time the obligee judicially or extrajudicially demands
from them the fulfillment of their obligation.

However, the demand by the creditor shall not be necessary in order that delay may exist:

(1) When the obligation or the law expressly so declares; or

(2) When from the nature and the circumstances of the obligation it appears that the designation of the time when the thing is to be
delivered or the service is to be rendered was a controlling motive for the establishment of the contract; or

(3) When demand would be useless, as when the obligor has rendered it beyond his power to perform.

In reciprocal obligations, neither party incurs in delay if the other does not comply or is not ready to comply in a proper manner with
what is incumbent upon him. From the moment one of the parties fulfills his obligation, delay by the other begins.

The contract subject of this case contains reciprocal obligations which were to be fulfilled by the parties, i.e., to complete and deliver the
townhouse within six months from the execution of the contract to sell on the part of petitioner and FBMC, and to pay the balance of the
contract price upon completion and delivery of the townhouse on the part of the respondent.

In the case at bar, the obligation of petitioner and FBMC which is to complete and deliver the townhouse unit within the prescribed period, is
determinative of the respondent’s obligation to pay the balance of the contract price. With their failure to fulfill their obligation as stipulated in the
contract, they incurred delay and are liable for damages. 13They cannot insist that respondent comply with his obligation. Where one of the
parties to a contract did not perform the undertaking to which he was bound by the terms of the agreement to perform, he is not entitled to insist
upon the performance of the other party.14

On the first assigned error, petitioner insists there was no delay when the townhouse unit was not completed within six months from the signing
of the contract inasmuch as the mere lapse of the stipulated six (6) month period is not by itself enough to constitute delay on his part and that
of FBMC, since the law requires that there must either be judicial or extrajudicial demand to fulfill an obligation so that the obligor may be
declared in default. He argues there was no evidence introduced showing that a prior demand was made by respondent before the original
action was instituted in the trial court.

We do not agree.

Demand is not necessary in the instant case. Demand by the respondent would be useless because the impossibility of complying with their
(petitioner and FBMC) obligation was due to their fault. If only they paid their loans with the LBP, the mortgage on the subject townhouse would
not have been foreclosed and thereafter sold to a third person.

Anent the second assigned error, petitioner argues that if there was any delay, the same was incurred by respondent because he refused to
pay the balance of the contract price.

We find his argument specious.

As above-discussed, the obligation of respondent to pay the balance of the contract price was conditioned on petitioner and FBMC’s
performance of their obligation. Considering that the latter did not comply with their obligation to complete and deliver the townhouse unit within
the period agreed upon, respondent could not have incurred delay. For failure of one party to assume and perform the obligation imposed on
him, the other party does not incur delay.15

Under the circumstances obtaining in this case, we find that respondent is justified in refusing to pay the balance of the contract price. He was
never in possession of the townhouse unit and he can no longer be its owner since ownership thereof has been transferred to a third person
who was not a party to the proceedings below. It would simply be the height of inequity if we are to require respondent to pay the balance of the
contract price. To allow this would result in the unjust enrichment of petitioner and FBMC. The fundamental doctrine of unjust enrichment is the
transfer of value without just cause or consideration. The elements of this doctrine which are present in this case are: enrichment on the part of
the defendant; impoverishment on the part of the plaintiff; and lack of cause. The main objective is to prevent one to enrich himself at the
expense of another. It is commonly accepted that this doctrine simply means a person shall not be allowed to profit or enrich himself inequitably
at another's expense.16Hence, to allow petitioner and FBMC keep the down payment made by respondent amounting to P1,060,000.00 would
result in their unjust enrichment at the expense of the respondent. Thus, said amount should be returned.

What is worse is the fact that petitioner and FBMC intentionally failed to inform respondent that the subject townhouse which he was going to
purchase was already mortgaged to LBP at the time of the perfection of their contract. This deliberate withholding by petitioner and FBMC of
the mortgage constitutes fraud and bad faith. The trial court had this say:
 In the light of the foregoing environmental circumstances and milieu, therefore, it appears that the defendants are guilty of fraud in
dealing with the plaintiff. They performed voluntary and willful acts which prevent the normal realization of the prestation, knowing the
effects which naturally and necessarily arise from such acts. Their acts import a dishonest purpose or some moral obliquity and
conscious doing of a wrong. The said acts certainly gtive rise to liability for damages (8 Manresa 72; Borrell-Macia 26-27; 3 Camus
34; O’Leary v. Macondray & Company, 454 Phil. 812; Heredia v. Salinas, 10 Phil. 157). Article 1170 of the New Civil Code of the
Philippines provides expressly that "those who in the performance of their obligations are guilty of fraud and those who in any manner
contravene the tenor thereof are liable for damages.17

On the last assigned error, petitioner contends that he should not be held solidarily liable with defendant FBMC, because the latter is a separate
and distinct entity which is the seller of the subject townhouse. He claims that he, as Chairman and Chief Executive Officer of FBMC, cannot be
held liable because his representing FBMC in its dealings is a corporate act for which only FBMC should be held liable.

This issue of piercing the veil of corporate fiction was never raised before the trial court. The same was raised for the first time before the Court
of Appeals which ruled that it was too late in the day to raise the same. The Court of Appeals declared:

In the case below, the pleadings and the evidence of the defendants are one and the same and never had it made to appear that
Almocera is a person distinct and separate from the other defendant. In fine, we cannot treat this error for the first time on appeal. We
cannot in good conscience, let the defendant Almocera raise the issue of piercing the veil of corporate fiction just because of the
adverse decision against him. x x x.18

To allow petitioner to pursue such a defense would undermine basic considerations of due process. Points of law, theories, issues and
arguments not brought to the attention of the trial court will not be and ought not to be considered by a reviewing court, as these cannot be
raised for the first time on appeal. It would be unfair to the adverse party who would have no opportunity to present further evidence material to
the new theory not ventilated before the trial court. 19

As to the award of damages granted by the trial court, and affirmed by the Court of Appeals, we find the same to be proper and reasonable
under the circumstances.

WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals dated 18 July 2005 in CA-G.R. CV No. 75610
is AFFIRMED. Costs against the petitioner.

SO ORDERED

G.R. No. 150416 July 21, 2006

SEVENTH DAY ADVENTIST CONFERENCE CHURCH OF SOUTHERN PHILIPPINES, INC., and/or represented by MANASSEH C.
ARRANGUEZ, BRIGIDO P. GULAY, FRANCISCO M. LUCENARA, DIONICES O. TIPGOS, LORESTO C. MURILLON, ISRAEL C. NINAL,
GEORGE G. SOMOSOT, JESSIE T. ORBISO, LORETO PAEL and JOEL BACUBAS, petitioners,
vs.
NORTHEASTERN MINDANAO MISSION OF SEVENTH DAY ADVENTIST, INC., and/or represented by JOSUE A. LAYON, WENDELL M.
SERRANO, FLORANTE P. TY and JETHRO CALAHAT and/or SEVENTH DAY ADVENTIST CHURCH [OF] NORTHEASTERN MINDANAO
MISSION,* Respondents.

DECISION

CORONA, J.:

This petition for review on certiorari assails the Court of Appeals (CA) decision 1 and resolution2 in CA-G.R. CV No. 41966 affirming, with
modification, the decision of the Regional Trial Court (RTC) of Bayugan, Agusan del Sur, Branch 7 in Civil Case No. 63.

This case involves a 1,069 sq. m. lot covered by Transfer Certificate of Title (TCT) No. 4468 in Bayugan, Agusan del Sur originally owned by
Felix Cosio and his wife, Felisa Cuysona.

On April 21, 1959, the spouses Cosio donated the land to the South Philippine Union Mission of Seventh Day Adventist Church of Bayugan
Esperanza, Agusan (SPUM-SDA Bayugan).3 Part of the deed of donation read:

KNOW ALL MEN BY THESE PRESENTS:

That we Felix Cosio[,] 49 years of age[,] and Felisa Cuysona[,] 40 years of age, [h]usband and wife, both are citizen[s] of the Philippines, and
resident[s] with post office address in the Barrio of Bayugan, Municipality of Esperanza, Province of Agusan, Philippines, do hereby grant,
convey and forever quit claim by way of Donation or gift unto the South Philippine [Union] Mission of Seventh Day Adventist Church of
Bayugan, Esperanza, Agusan, all the rights, title, interest, claim and demand both at law and as well in possession as in expectancy of in and
to all the place of land and portion situated in the Barrio of Bayugan, Municipality of Esperanza, Province of Agusan, Philippines, more
particularly and bounded as follows, to wit:

1. a parcel of land for Church Site purposes only.

2. situated [in Barrio Bayugan, Esperanza].

3. Area: 30 meters wide and 30 meters length or 900 square meters.

4. Lot No. 822-Pls-225. Homestead Application No. V-36704, Title No. P-285.

5. Bounded Areas

North by National High Way; East by Bricio Gerona; South by Serapio Abijaron and West by Feliz Cosio xxx. 4

The donation was allegedly accepted by one Liberato Rayos, an elder of the Seventh Day Adventist Church, on behalf of the donee.

Twenty-one years later, however, on February 28, 1980, the same parcel of land was sold by the spouses Cosio to the Seventh Day Adventist
Church of Northeastern Mindanao Mission (SDA-NEMM).5 TCT No. 4468 was thereafter issued in the name of SDA-NEMM.6

Claiming to be the alleged donee’s successors-in-interest, petitioners asserted ownership over the property. This was opposed by respondents
who argued that at the time of the donation, SPUM-SDA Bayugan could not legally be a donee

because, not having been incorporated yet, it had no juridical personality. Neither were petitioners members of the local church then, hence, the
donation could not have been made particularly to them.

On September 28, 1987, petitioners filed a case, docketed as Civil Case No. 63 (a suit for cancellation of title, quieting of ownership and
possession, declaratory relief and reconveyance with prayer for preliminary injunction and damages), in the RTC of Bayugan, Agusan del Sur.
After trial, the trial court rendered a decision7 on November 20, 1992 upholding the sale in favor of respondents.

On appeal, the CA affirmed the RTC decision but deleted the award of moral damages and attorney’s fees. 8Petitioners’ motion for
reconsideration was likewise denied. Thus, this petition.

The issue in this petition is simple: should SDA-NEMM’s ownership of the lot covered by TCT No. 4468 be upheld? 9We answer in the
affirmative.

The controversy between petitioners and respondents involves two supposed transfers of the lot previously owned by the spouses Cosio: (1) a
donation to petitioners’ alleged predecessors-in-interest in 1959 and (2) a sale to respondents in 1980.

Donation is undeniably one of the modes of acquiring ownership of real property. Likewise, ownership of a property may be transferred by
tradition as a consequence of a sale.

Petitioners contend that the appellate court should not have ruled on the validity of the donation since it was not among the issues raised on
appeal. This is not correct because an appeal generally opens the entire case for review.

We agree with the appellate court that the alleged donation to petitioners was void.

Donation is an act of liberality whereby a person disposes gratuitously of a thing or right in favor of another personwho accepts it. The donation
could not have been made in favor of an entity yet inexistent at the time it was made. Nor could it have been accepted as there was yet no one
to accept it.

The deed of donation was not in favor of any informal group of SDA members but a supposed SPUM-SDA Bayugan (the local church) which, at
the time, had neither juridical personality nor capacity to accept such gift.

Declaring themselves a de facto corporation, petitioners allege that they should benefit from the donation.

But there are stringent requirements before one can qualify as a de facto corporation:

(a) the existence of a valid law under which it may be incorporated;

(b) an attempt in good faith to incorporate; and

(c) assumption of corporate powers.10

While there existed the old Corporation Law (Act 1459), 11 a law under which SPUM-SDA Bayugan could have been organized, there is no proof
that there was an attempt to incorporate at that time.
The filing of articles of incorporation and the issuance of the certificate of incorporation are essential for the existence of a de
facto corporation.12 We have held that an organization not registered with the Securities and Exchange Commission (SEC) cannot be
considered a corporation in any concept, not even as a corporation de facto.13 Petitioners themselves admitted that at the time of the donation,
they were not registered with the SEC, nor did they even attempt to organize 14 to comply with legal requirements.

Corporate existence begins only from the moment a certificate of incorporation is issued. No such certificate was ever issued to petitioners or
their supposed predecessor-in-interest at the time of the donation. Petitioners obviously could not have claimed succession to an entity that
never came to exist. Neither could the principle of separate juridical personality apply since there was never any corporation15 to speak of. And,
as already stated, some of the representatives of petitioner Seventh Day Adventist Conference Church of Southern Philippines, Inc. were not
even members of the local church then, thus, they could not even claim that the donation was particularly for them. 16

"The de facto doctrine thus effects a compromise between two conflicting public interest[s]—the one opposed to an unauthorized assumption of
corporate privileges; the other in favor of doing justice to the parties and of establishing a general assurance of security in business dealing with
corporations."17

Generally, the doctrine exists to protect the public dealing with supposed corporate entities, not to favor the defective or non-existent
corporation.18

In view of the foregoing, petitioners’ arguments anchored on their supposed de facto status hold no water. We are convinced that there was no
donation to petitioners or their supposed predecessor-in-interest.

On the other hand, there is sufficient basis to affirm the title of SDA-NEMM. The factual findings of the trial court in this regard were not
convincingly disputed. This Court is not a trier of facts. Only questions of law are the proper subject of a petition for review on certiorari. 19

Sustaining the validity of respondents’ title as well as their right of ownership over the property, the trial court stated:

[W]hen Felix Cosio was shown the Absolute Deed of Sale during the hearing xxx he acknowledged that the same was his xxx but that it was
not his intention to sell the controverted property because he had previously donated the same lot to the South Philippine Union Mission of SDA
Church of Bayugan-Esperanza. Cosio avouched that had it been his intendment to sell, he would not have disposed of it for a mere P2,000.00
in two installments but for P50,000.00 or P60,000.00. According to him, the P2,000.00 was not a consideration of the sale but only a form of
help extended.

A thorough analysis and perusal, nonetheless, of the Deed of Absolute Sale disclosed that it has the essential requisites of contracts
pursuant to xxx Article 1318 of the Civil Code, except that the consideration of P2,000.00 is somewhat insufficient for a [1,069-square meter]
land. Would then this inadequacy of the consideration render the contract invalid?

Article 1355 of the Civil Code provides:

Except in cases specified by law, lesion or inadequacy of cause shall not invalidate a contract, unless there has been fraud, mistake or undue
influence.

No evidence [of fraud, mistake or undue influence] was adduced by [petitioners].

xxx

Well-entrenched is the rule that a Certificate of Title is generally a conclusive evidence of [ownership] of the land. There is that strong
and solid presumption that titles were legally issued and that they are valid. It is irrevocable and indefeasible and the duty of the Court is to see
to it that the title is maintained and respected unless challenged in a direct proceeding. xxx The title shall be received as evidence in all the
Courts and shall be conclusive as to all matters contained therein.

[This action was instituted almost seven years after the certificate of title in respondents’ name was issued in 1980.] 20

According to Art. 1477 of the Civil Code, the ownership of the thing sold shall be transferred to the vendee upon the actual or constructive
delivery thereof. On this, the noted author Arturo Tolentino had this to say:

The execution of [a] public instrument xxx transfers the ownership from the vendor to the vendee who may thereafter exercise the rights of an
owner over the same21

Here, transfer of ownership from the spouses Cosio to SDA-NEMM was made upon constructive delivery of the property on February 28, 1980
when the sale was made through a public instrument. 22 TCT No. 4468 was thereafter issued and it remains in the name of SDA-NEMM.

WHEREFORE, the petition is hereby DENIED.

Costs against petitioners.

SO ORDERED.