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G.R. No. 178158 December 4, 2009 STRATEGIC ALLIANCE DEVELOPMENT CORPORATION, Petitioner, vs.



Construction Development Corporation of the Philippines (CDCP) was incorporated in 1966. It was granted a franchise to construct, operate and maintain toll facilities in the North and South Luzon Tollways and Metro Manila Expressway. CDCP Mining Corporation (CDCP Mining), an affiliate of CDCP, obtained loans from Marubeni Corporation of Japan (Marubeni). A CDCP official issued letters of guarantee for the loans although there was no CDCP Board Resolution authorizing the issuance of such letters of guarantee. CDCP Mining secured the Marubeni loans when CDCP and CDCP Mining were still privately owned and managed. In 1983, CDCPs name was changed to Philippine National Construction Corporation (PNCC) in order to reflect that the Government already owned 90.3% of PNCC and only 9.70% is under private ownership. Meanwhile, the Marubeni loans to CDCP Mining remained unpaid. On 20 October 2000 and 22 November 2000, the PNCC Board of Directors (PNCC Board) passed Board Resolutions admitting PNCCs liability to Marubeni. Previously, for two decades the PNCC Board consistently refused to admit any liability for the Marubeni loans. In January 2001, Marubeni assigned its entire credit to Radstock Securities Limited (Radstock), a foreign corporation. Radstock immediately sent a notice and demand letter to PNCC. PNCC and Radstock entered into a Compromise Agreement. Under this agreement, PNCC shall payRadstock the reduced amount of P6,185,000,000.00 in full settlement of PNCCs guarantee of CDCP Minings debt allegedly totaling P17,040,843,968.00 (judgment debt asof 31 July 2006). To satisfy its reduced obligation, PNCC undertakes to (1) "assign to a third party assignee to be designated by Radstock all its rights and interests" to the listed real properties of PNCC; (2) issue to Radstock or its assignee common shares of the capital stock of PNCC issued at par value which shall comprise 20% of the outstanding capital stock of PNCC; and (3) assign to Radstock or its assignee 50% of PNCCs 6% share, for the next 27 years, in the gross toll revenues of the Manila North Tollways Corporation. Strategic Alliance Development Corporation (STRADEC) moved for reconsideration. STRADEC alleged that it has a claim against PNCC as a bidder of the National Governments shares, receivables, securities and interests in PNCC.

ISSUE: Whether or not the Compromise Agreement between PNCC and Radstock is valid in relation to the Constitution, existing laws, and public policy HELD: Radstock is a private corporation incorporated in the British Virgin Islands. Its office address is at Suite 14021Duddell Street, Central Hongkong. As a foreign corporation, with unknown owners whose nationalities are also unknown, Radstock is not qualified to own land in the Philippines pursuant to Section 7, in relation to Section3, Article XII of the Constitution. Consequently, Radstock is also disqualified to own the rights to ownership of lands in the Philippines. Contrary to the OGCCs claim, Radstock cannot own the rights to ownership of any land in the Philippines because Radstock cannot lawfully own the land itself. Otherwise, there will be a blatant circumvention of the Constitution, which prohibits a foreign private corporation from owning land in the Philippines. In addition, Radstock cannot transfer the rights to ownership of land in the Philippines if it cannot own the land itself. It is basic that an assignor or seller cannot assign or sell something he does not own at the time the ownership, or the rights to the ownership, are to be transferred to the assignee or buyer. The Corporation Code defines a sale or disposition of substantially all assets and property of a corporation as one by which the corporation "would be rendered incapable of continuing the business or accomplishing the purpose for which it was incorporated" - any sale or disposition short of this will not need stockholder ratification, and may be pursued by the majority vote of the Board of Directors.