Vous êtes sur la page 1sur 142

Republic of the Philippines SUPREME COURT Manila

EN BANC
G.R. No. L-23145 November 29, 1968
TESTATE ESTATE OF IDONAH SLADE PERKINS, deceased. RENATO D. TAYAG,
ancillary administrator-appellee, vs. BENGUET CONSOLIDATED, INC., oppositorappellant.
Cirilo F. Asperillo, Jr., for ancillary administrator-appellee. Ross, Salcedo, Del Rosario, Bito
and Misa for oppositor-appellant.
FERNANDO, J.:
Confronted by an obstinate and adamant refusal of the domiciliary administrator, the County
Trust Company of New York, United States of America, of the estate of the deceased Idonah
Slade Perkins, who died in New York City on March 27, 1960, to surrender to the ancillary
administrator in the Philippines the stock certificates owned by her in a Philippine
corporation, Benguet Consolidated, Inc., to satisfy the legitimate claims of local creditors,
the lower court, then presided by the Honorable Arsenio Santos, now retired, issued on May
18, 1964, an order of this tenor: "After considering the motion of the ancillary administrator,
dated February 11, 1964, as well as the opposition filed by the Benguet Consolidated, Inc.,
the Court hereby (1) considers as lost for all purposes in connection with the administration
and liquidation of the Philippine estate of Idonah Slade Perkins the stock certificates
covering the 33,002 shares of stock standing in her name in the books of the Benguet
Consolidated, Inc., (2) orders said certificates cancelled, and (3) directs said corporation to
issue new certificates in lieu thereof, the same to be delivered by said corporation to either
the incumbent ancillary administrator or to the Probate Division of this Court."1
From such an order, an appeal was taken to this Court not by the domiciliary administrator,
the County Trust Company of New York, but by the Philippine corporation, the Benguet
Consolidated, Inc. The appeal cannot possibly prosper. The challenged order represents a
response and expresses a policy, to paraphrase Frankfurter, arising out of a specific problem,
addressed to the attainment of specific ends by the use of specific remedies, with full and
ample support from legal doctrines of weight and significance.
The facts will explain why. As set forth in the brief of appellant Benguet Consolidated, Inc.,
Idonah Slade Perkins, who died on March 27, 1960 in New York City, left among others,
two stock certificates covering 33,002 shares of appellant, the certificates being in the
possession of the County Trust Company of New York, which as noted, is the domiciliary
administrator of the estate of the deceased.2 Then came this portion of the appellant's brief:

"On August 12, 1960, Prospero Sanidad instituted ancillary administration proceedings in
the Court of First Instance of Manila; Lazaro A. Marquez was appointed ancillary
administrator, and on January 22, 1963, he was substituted by the appellee Renato D. Tayag.
A dispute arose between the domiciary administrator in New York and the ancillary
administrator in the Philippines as to which of them was entitled to the possession of the
stock certificates in question. On January 27, 1964, the Court of First Instance of Manila
ordered the domiciliary administrator, County Trust Company, to "produce and deposit"
them with the ancillary administrator or with the Clerk of Court. The domiciliary
administrator did not comply with the order, and on February 11, 1964, the ancillary
administrator petitioned the court to "issue an order declaring the certificate or certificates of
stocks covering the 33,002 shares issued in the name of Idonah Slade Perkins by Benguet
Consolidated, Inc., be declared [or] considered as lost."3
It is to be noted further that appellant Benguet Consolidated, Inc. admits that "it is
immaterial" as far as it is concerned as to "who is entitled to the possession of the stock
certificates in question; appellant opposed the petition of the ancillary administrator because
the said stock certificates are in existence, they are today in the possession of the domiciliary
administrator, the County Trust Company, in New York, U.S.A...."4
It is its view, therefore, that under the circumstances, the stock certificates cannot be
declared or considered as lost. Moreover, it would allege that there was a failure to observe
certain requirements of its by-laws before new stock certificates could be issued. Hence, its
appeal.
As was made clear at the outset of this opinion, the appeal lacks merit. The challenged order
constitutes an emphatic affirmation of judicial authority sought to be emasculated by the
wilful conduct of the domiciliary administrator in refusing to accord obedience to a court
decree. How, then, can this order be stigmatized as illegal?
As is true of many problems confronting the judiciary, such a response was called for by the
realities of the situation. What cannot be ignored is that conduct bordering on wilful
defiance, if it had not actually reached it, cannot without undue loss of judicial prestige, be
condoned or tolerated. For the law is not so lacking in flexibility and resourcefulness as to
preclude such a solution, the more so as deeper reflection would make clear its being
buttressed by indisputable principles and supported by the strongest policy considerations.
It can truly be said then that the result arrived at upheld and vindicated the honor of the
judiciary no less than that of the country. Through this challenged order, there is thus
dispelled the atmosphere of contingent frustration brought about by the persistence of the
domiciliary administrator to hold on to the stock certificates after it had, as admitted,
voluntarily submitted itself to the jurisdiction of the lower court by entering its appearance
through counsel on June 27, 1963, and filing a petition for relief from a previous order of
March 15, 1963.

Thus did the lower court, in the order now on appeal, impart vitality and effectiveness to
what was decreed. For without it, what it had been decided would be set at naught and
nullified. Unless such a blatant disregard by the domiciliary administrator, with residence
abroad, of what was previously ordained by a court order could be thus remedied, it would
have entailed, insofar as this matter was concerned, not a partial but a well-nigh complete
paralysis of judicial authority.
1. Appellant Benguet Consolidated, Inc. did not dispute the power of the appellee
ancillary administrator to gain control and possession of all assets of the decedent
within the jurisdiction of the Philippines. Nor could it. Such a power is inherent in his
duty to settle her estate and satisfy the claims of local creditors.5 As Justice Tuason
speaking for this Court made clear, it is a "general rule universally recognized" that
administration, whether principal or ancillary, certainly "extends to the assets of a
decedent found within the state or country where it was granted," the corollary being
"that an administrator appointed in one state or country has no power over property in
another state or country."6
It is to be noted that the scope of the power of the ancillary administrator was, in an earlier
case, set forth by Justice Malcolm. Thus: "It is often necessary to have more than one
administration of an estate. When a person dies intestate owning property in the country of
his domicile as well as in a foreign country, administration is had in both countries. That
which is granted in the jurisdiction of decedent's last domicile is termed the principal
administration, while any other administration is termed the ancillary administration. The
reason for the latter is because a grant of administration does not ex proprio vigore have any
effect beyond the limits of the country in which it is granted. Hence, an administrator
appointed in a foreign state has no authority in the [Philippines]. The ancillary
administration is proper, whenever a person dies, leaving in a country other than that of his
last domicile, property to be administered in the nature of assets of the deceased liable for
his individual debts or to be distributed among his heirs."7
It would follow then that the authority of the probate court to require that ancillary
administrator's right to "the stock certificates covering the 33,002 shares ... standing in her
name in the books of [appellant] Benguet Consolidated, Inc...." be respected is equally
beyond question. For appellant is a Philippine corporation owing full allegiance and subject
to the unrestricted jurisdiction of local courts. Its shares of stock cannot therefore be
considered in any wise as immune from lawful court orders.
Our holding in Wells Fargo Bank and Union v. Collector of Internal Revenue8 finds
application. "In the instant case, the actual situs of the shares of stock is in the Philippines,
the corporation being domiciled [here]." To the force of the above undeniable proposition,
not even appellant is insensible. It does not dispute it. Nor could it successfully do so even if
it were so minded.

1. In the face of such incontrovertible doctrines that argue in a rather conclusive fashion
for the legality of the challenged order, how does appellant, Benguet Consolidated,
Inc. propose to carry the extremely heavy burden of persuasion of precisely
demonstrating the contrary? It would assign as the basic error allegedly committed by
the lower court its "considering as lost the stock certificates covering 33,002 shares of
Benguet belonging to the deceased Idonah Slade Perkins, ..."9 More specifically,
appellant would stress that the "lower court could not "consider as lost" the stock
certificates in question when, as a matter of fact, his Honor the trial Judge knew, and
does know, and it is admitted by the appellee, that the said stock certificates are in
existence and are today in the possession of the domiciliary administrator in New
York."10
There may be an element of fiction in the above view of the lower court. That certainly does
not suffice to call for the reversal of the appealed order. Since there is a refusal, persistently
adhered to by the domiciliary administrator in New York, to deliver the shares of stocks of
appellant corporation owned by the decedent to the ancillary administrator in the
Philippines, there was nothing unreasonable or arbitrary in considering them as lost and
requiring the appellant to issue new certificates in lieu thereof. Thereby, the task incumbent
under the law on the ancillary administrator could be discharged and his responsibility
fulfilled.
Any other view would result in the compliance to a valid judicial order being made to
depend on the uncontrolled discretion of the party or entity, in this case domiciled abroad,
which thus far has shown the utmost persistence in refusing to yield obedience. Certainly,
appellant would not be heard to contend in all seriousness that a judicial decree could be
treated as a mere scrap of paper, the court issuing it being powerless to remedy its flagrant
disregard.
It may be admitted of course that such alleged loss as found by the lower court did not
correspond exactly with the facts. To be more blunt, the quality of truth may be lacking in
such a conclusion arrived at. It is to be remembered however, again to borrow from
Frankfurter, "that fictions which the law may rely upon in the pursuit of legitimate ends have
played an important part in its development."11
Speaking of the common law in its earlier period, Cardozo could state fictions "were devices
to advance the ends of justice, [even if] clumsy and at times offensive."12 Some of them
have persisted even to the present, that eminent jurist, noting "the quasi contract, the adopted
child, the constructive trust, all of flourishing vitality, to attest the empire of "as if" today."13
He likewise noted "a class of fictions of another order, the fiction which is a working tool of
thought, but which at times hides itself from view till reflection and analysis have brought it
to the light."14
What cannot be disputed, therefore, is the at times indispensable role that fictions as such

played in the law. There should be then on the part of the appellant a further refinement in
the catholicity of its condemnation of such judicial technique. If ever an occasion did call for
the employment of a legal fiction to put an end to the anomalous situation of a valid judicial
order being disregarded with apparent impunity, this is it. What is thus most obvious is that
this particular alleged error does not carry persuasion.
1. Appellant Benguet Consolidated, Inc. would seek to bolster the above contention by
its invoking one of the provisions of its by-laws which would set forth the procedure
to be followed in case of a lost, stolen or destroyed stock certificate; it would stress
that in the event of a contest or the pendency of an action regarding ownership of such
certificate or certificates of stock allegedly lost, stolen or destroyed, the issuance of a
new certificate or certificates would await the "final decision by [a] court regarding
the ownership [thereof]."15
Such reliance is misplaced. In the first place, there is no such occasion to apply such by-law.
It is admitted that the foreign domiciliary administrator did not appeal from the order now in
question. Moreover, there is likewise the express admission of appellant that as far as it is
concerned, "it is immaterial ... who is entitled to the possession of the stock certificates ..."
Even if such were not the case, it would be a legal absurdity to impart to such a provision
conclusiveness and finality. Assuming that a contrariety exists between the above by-law
and the command of a court decree, the latter is to be followed.
It is understandable, as Cardozo pointed out, that the Constitution overrides a statute, to
which, however, the judiciary must yield deference, when appropriately invoked and
deemed applicable. It would be most highly unorthodox, however, if a corporate by-law
would be accorded such a high estate in the jural order that a court must not only take note
of it but yield to its alleged controlling force.
The fear of appellant of a contingent liability with which it could be saddled unless the
appealed order be set aside for its inconsistency with one of its by-laws does not impress us.
Its obedience to a lawful court order certainly constitutes a valid defense, assuming that such
apprehension of a possible court action against it could possibly materialize. Thus far,
nothing in the circumstances as they have developed gives substance to such a fear.
Gossamer possibilities of a future prejudice to appellant do not suffice to nullify the lawful
exercise of judicial authority.
1. What is more the view adopted by appellant Benguet Consolidated, Inc. is fraught
with implications at war with the basic postulates of corporate theory.
We start with the undeniable premise that, "a corporation is an artificial being created by
operation of law...."16 It owes its life to the state, its birth being purely dependent on its will.
As Berle so aptly stated: "Classically, a corporation was conceived as an artificial person,
owing its existence through creation by a sovereign power."17 As a matter of fact, the

statutory language employed owes much to Chief Justice Marshall, who in the Dartmouth
College decision defined a corporation precisely as "an artificial being, invisible, intangible,
and existing only in contemplation of law."18
The well-known authority Fletcher could summarize the matter thus: "A corporation is not
in fact and in reality a person, but the law treats it as though it were a person by process of
fiction, or by regarding it as an artificial person distinct and separate from its individual
stockholders.... It owes its existence to law. It is an artificial person created by law for
certain specific purposes, the extent of whose existence, powers and liberties is fixed by its
charter."19 Dean Pound's terse summary, a juristic person, resulting from an association of
human beings granted legal personality by the state, puts the matter neatly.20
There is thus a rejection of Gierke's genossenchaft theory, the basic theme of which to quote
from Friedmann, "is the reality of the group as a social and legal entity, independent of state
recognition and concession."21 A corporation as known to Philippine jurisprudence is a
creature without any existence until it has received the imprimatur of the state according to
law. It is logically inconceivable therefore that it will have rights and privileges of a higher
priority than that of its creator. More than that, it cannot legitimately refuse to yield
obedience to acts of its state organs, certainly not excluding the judiciary, whenever called
upon to do so.
As a matter of fact, a corporation once it comes into being, following American law still of
persuasive authority in our jurisdiction, comes more often within the ken of the judiciary
than the other two coordinate branches. It institutes the appropriate court action to enforce
its right. Correlatively, it is not immune from judicial control in those instances, where a
duty under the law as ascertained in an appropriate legal proceeding is cast upon it.
To assert that it can choose which court order to follow and which to disregard is to confer
upon it not autonomy which may be conceded but license which cannot be tolerated. It is to
argue that it may, when so minded, overrule the state, the source of its very existence; it is to
contend that what any of its governmental organs may lawfully require could be ignored at
will. So extravagant a claim cannot possibly merit approval.
1. One last point. In Viloria v. Administrator of Veterans Affairs,22 it was shown that in
a guardianship proceedings then pending in a lower court, the United States Veterans
Administration filed a motion for the refund of a certain sum of money paid to the
minor under guardianship, alleging that the lower court had previously granted its
petition to consider the deceased father as not entitled to guerilla benefits according to
a determination arrived at by its main office in the United States. The motion was
denied. In seeking a reconsideration of such order, the Administrator relied on an
American federal statute making his decisions "final and conclusive on all questions
of law or fact" precluding any other American official to examine the matter anew,
"except a judge or judges of the United States court."23 Reconsideration was denied,

and the Administrator appealed.


In an opinion by Justice J.B.L. Reyes, we sustained the lower court. Thus: "We are of the
opinion that the appeal should be rejected. The provisions of the U.S. Code, invoked by the
appellant, make the decisions of the U.S. Veterans' Administrator final and conclusive when
made on claims property submitted to him for resolution; but they are not applicable to the
present case, where the Administrator is not acting as a judge but as a litigant. There is a
great difference between actions against the Administrator (which must be filed strictly in
accordance with the conditions that are imposed by the Veterans' Act, including the
exclusive review by United States courts), and those actions where the Veterans'
Administrator seeks a remedy from our courts and submits to their jurisdiction by filing
actions therein. Our attention has not been called to any law or treaty that would make the
findings of the Veterans' Administrator, in actions where he is a party, conclusive on our
courts. That, in effect, would deprive our tribunals of judicial discretion and render them
mere subordinate instrumentalities of the Veterans' Administrator."
It is bad enough as the Viloria decision made patent for our judiciary to accept as final and
conclusive, determinations made by foreign governmental agencies. It is infinitely worse if
through the absence of any coercive power by our courts over juridical persons within our
jurisdiction, the force and effectivity of their orders could be made to depend on the whim or
caprice of alien entities. It is difficult to imagine of a situation more offensive to the dignity
of the bench or the honor of the country.
Yet that would be the effect, even if unintended, of the proposition to which appellant
Benguet Consolidated seems to be firmly committed as shown by its failure to accept the
validity of the order complained of; it seeks its reversal. Certainly we must at all pains see to
it that it does not succeed. The deplorable consequences attendant on appellant prevailing
attest to the necessity of negative response from us. That is what appellant will get.
That is all then that this case presents. It is obvious why the appeal cannot succeed. It is
always easy to conjure extreme and even oppressive possibilities. That is not decisive. It
does not settle the issue. What carries weight and conviction is the result arrived at, the just
solution obtained, grounded in the soundest of legal doctrines and distinguished by its
correspondence with what a sense of realism requires. For through the appealed order, the
imperative requirement of justice according to law is satisfied and national dignity and
honor maintained.
WHEREFORE, the appealed order of the Honorable Arsenio Santos, the Judge of the Court
of First Instance, dated May 18, 1964, is affirmed. With costs against oppositor-appelant
Benguet Consolidated, Inc.
Makalintal, Zaldivar and Capistrano, JJ., concur. Concepcion, C.J., Reyes, J.B.L., Dizon,
Sanchez and Castro, JJ., concur in the result.

Footnotes
1 Statement of the Case and Issues Involved, Brief for the Oppositor-Appellant, p. 2.
2 Ibid, p. 3.
3 Ibid, pp. 3 to 4.
4 Ibid, p. 4.
5 Rule 84, Sec. 3, Rules of Court. Cf. Pavia v. De la Rosa, 8 Phil. 70 (1907); Suiliong and
Co. v. Chio Taysan, 12 Phil. 13 (1908); Malahacan v. Ignacio, 19 Phil. 434 (1911);
McMicking v. Sy Conbieng, 21 Phil. 211 (1912); In re Estate of De Dios, 24 Phil. 573
(1913); Santos v. Manarang, 27 Phil. 209 (1914); Jaucian v. Querol, 38 Phil. 707 (1918);
Buenaventura v. Ramos, 43 Phil. 704 (1922); Roxas v. Pecson, 82 Phil. 407 (1948); De
Borja v. De Boria, 83 Phil. 405 (1949); Barraca v. Zayco, 88 Phil. 774 (1951); Pabilonia v.
Santiago, 93 Phil. 516 (1953); Sison v. Teodoro, 98 Phil. 680 (1956); Ozaeta v. Palanca, 101
Phil. 976 (1957); Natividad Castelvi de Raquiza v. Castelvi, et al, L-17630, Oct. 31, 1963;
Habana v. Imbo, L-15598 & L-15726, March 31, 1964; Gliceria Liwanag v. Hon. Luis
Reyes, L-19159, Sept. 29, 1964; Ignacio v. Elchico, L-18937, May 16, 1967.
6 Leon and Ghezzi v. Manufacturers Life, Inc. Co., 990 Phil. 459 (1951).
7 Johannes v. Harvey, 43 Phil. 175, 177-178 (1922).
8 70 Phil. 325 (1940). Cf. Perkins v. Dizon, 69 Phil. 186 (1939).
9 Brief for Oppositor-Appellant, p. 5. The Assignment of Error reads: "The lower court
erred in entering its order of May 18, 1964, (1) considering as lost the stock certificates
covering 33,002 shares of Benguet belonging to the deceased Idonah Slade Perkins, (2)
ordering the said certificates cancelled, and (3) ordering appellant to issue new certificates in
lieu thereof and to deliver them to the ancillary administrator of the estate of the deceased
Idonah Slade Perkins or to the probate division of the lower court."
10 Ibid, pp. 5 to 6.
11 Nashville C. St. Louis Ry v. Browning, 310 US 362 (1940).
12 Cardozo, The Paradoxes of Legal Science, 34 (1928).
13 Ibid, p. 34.
14 Ibid, p. 34. The late Professor Gray in his The Nature and Sources of the Law,
distinguished, following Ihering, historic fictions from dogmatic fictions, the former being

devices to allow the addition of new law to old without changing the form of the old law and
the latter being intended to arrange recognized and established doctrines under the most
convenient forms. pp. 30, 36 (1909) Speaking of historic fictions, Gray added: "Such
fictions have had their field of operation largely in the domain of procedure, and have
consisted in pretending that a person or thing was other than which he or it was in truth (or
that an event had occurred which had not in fact occurred) for the purpose of thereby giving
an action at law to or against a person who did not really come within the class to or against
which the old section was confined." Ibid, pp. 30-31. See also Pound, The Philosophy of
Law, pp. 179, 180, 274 (1922).
15 This is what the particular by-law provides: Section 10. Lost, Stolen or Destroyed
Certificates. Any registered stockholder claiming a certificate or certificates of stock to
be lost, stolen or destroyed shall file an affidavit in triplicate with the Secretary of the
Company, or with one of its Transfer Agents, setting forth, if possible, the circumstances as
to how, when and where said certificate or certificates was or were lost, stolen or destroyed,
the number of shares represented by the certificate or by each of the certificates, the serial
number or numbers of the certificate or certificates, and the name of this Company. The
registered stockholder shall also submit such other information and evidence which he may
deem necessary.
xxx xxx xxx
If a contest is presented to the Company, or if an action is pending in court regarding the
ownership of said certificate or certificates of stock which have been claimed to have been
lost, stolen or destroyed, the issuance of the new certificate or certificates in lieu of that or
those claimed to have been lost, stolen or destroyed, shall be suspended until final decision
by the court regarding the ownership of said certificate or certificates. Brief for OppositorAppelant, pp. 8-10.
16 Sec. 2, Act No. 1459 (1906).
17 Berle, The Theory of Enterprise Entity, 47 Co. Law Rev. 343 (1907).
18 Dartmouth College v. Woodward, 4 Wheat, 518 (1819). Cook would trace such a concept
to Lord Coke. See 1 Cook on Corporations, p. 2 (1923).
19 Fletcher, Cyclopedia Corporations, pp. 19-20 (1931). Chancellor Kent and Chief Justice
Baldwin of Connecticut were likewise cited to the same effect. At pp. 12-13.
20 4 Pound on Jurisprudence, pp. 207-209 (1959).
21 Friedmann, Legal Theory, pp. 164-168 (1947). See also Holdsworth, English Corporation
Law, 31 Yale Law Journal, 382 (1922).

22 101 Phil. 762 (1957).


23 38 USCA, Sec. 808.
The Lawphil Project - Arellano Law Foundation

Republic of the Philippines SUPREME COURT Manila


EN BANC
G.R. No. L-17295 July 30, 1962
ANG PUE & COMPANY, ET AL., plaintiffs-appellants, vs. SECRETARY OF
COMMERCE AND INDUSTRY, defendant-appellee.
Felicisimo E. Escaran for plaintiffs-appellants. Office of the Solicitor General for defendantappellee.
DIZON, J.:
Action for declaratory relief filed in the Court of First Instance of Iloilo by Ang Pue &
Company, Ang Pue and Tan Siong against the Secretary of Commerce and Industry to
secure judgment "declaring that plaintiffs could extend for five years the term of the
partnership pursuant to the provisions of plaintiffs' Amendment to the Article of Copartnership."
The answer filed by the defendant alleged, in substance, that the extension for another five
years of the term of the plaintiffs' partnership would be in violation of the provisions of
Republic Act No. 1180.
It appears that on May 1, 1953, Ang Pue and Tan Siong, both Chinese citizens, organized the
partnership Ang Pue & Company for a term of five years from May 1, 1953, extendible by
their mutual consent. The purpose of the partnership was "to maintain the business of
general merchandising, buying and selling at wholesale and retail, particularly of lumber,
hardware and other construction materials for commerce, either native or foreign." The
corresponding articles of partnership (Exhibit B) were registered in the Office of the
Securities & Exchange Commission on June 16, 1953.
On June 19, 1954 Republic Act No. 1180 was enacted to regulate the retail business. It
provided, among other things, that, after its enactment, a partnership not wholly formed by
Filipinos could continue to engage in the retail business until the expiration of its term.

10

On April 15, 1958 prior to the expiration of the five-year term of the partnership Ang Pue
& Company, but after the enactment of the Republic Act 1180, the partners already
mentioned amended the original articles of part ownership (Exhibit B) so as to extend the
term of life of the partnership to another five years. When the amended articles were
presented for registration in the Office of the Securities & Exchange Commission on April
16, 1958, registration was refused upon the ground that the extension was in violation of the
aforesaid Act.
From the decision of the lower court dismissing the action, with costs, the plaintiffs
interposed this appeal.
The question before us is too clear to require an extended discussion. To organize a
corporation or a partnership that could claim a juridical personality of its own and transact
business as such, is not a matter of absolute right but a privilege which may be enjoyed only
under such terms as the State may deem necessary to impose. That the State, through
Congress, and in the manner provided by law, had the right to enact Republic Act No. 1180
and to provide therein that only Filipinos and concerns wholly owned by Filipinos may
engage in the retail business can not be seriously disputed. That this provision was clearly
intended to apply to partnership already existing at the time of the enactment of the law is
clearly showing by its provision giving them the right to continue engaging in their retail
business until the expiration of their term or life.
To argue that because the original articles of partnership provided that the partners could
extend the term of the partnership, the provisions of Republic Act 1180 cannot be adversely
affect appellants herein, is to erroneously assume that the aforesaid provision constitute a
property right of which the partners can not be deprived without due process or without their
consent. The agreement contain therein must be deemed subject to the law existing at the
time when the partners came to agree regarding the extension. In the present case, as already
stated, when the partners amended the articles of partnership, the provisions of Republic Act
1180 were already in force, and there can be not the slightest doubt that the right claimed by
appellants to extend the original term of their partnership to another five years would be in
violation of the clear intent and purpose of the law aforesaid.
WHEREFORE, the judgment appealed from is affirmed, with costs.
Bengzon, C.J., Padilla, Labrador, Concepcion, Barrera, Paredes, Regala and Makalintal, JJ.,
concur. Bautista Angelo and Reyes, J.B.L., JJ., took no part.

EN BANC
[G.R. Nos. 84132-33 : December 10, 1990.]

11

192 SCRA 257


NATIONAL DEVELOPMENT COMPANY AND NEW AGRIX, INC., Petitioners, vs.
PHILIPPINE VETERANS BANK, THE EX-OFFICIO SHERIFF and GODOFREDO
QUILING, in his capacity as Deputy Sheriff of Calamba, Laguna, Respondents.
DECISION
CRUZ, J.:
This case involves the constitutionality of a presidential decree which, like all other
issuances of President Marcos during his regime, was at that time regarded as sacrosanct. It
is only now, in a freer atmosphere, that his acts are being tested by the touchstone of the
fundamental law that even then was supposed to limit presidential action.: rd
The particular enactment in question is Pres. Decree No. 1717, which ordered the
rehabilitation of the Agrix Group of Companies to be administered mainly by the National
Development Company. The law outlined the procedure for filing claims against the Agrix
companies and created a Claims Committee to process these claims. Especially relevant to
this case, and noted at the outset, is Sec. 4(1) thereof providing that "all mortgages and other
liens presently attaching to any of the assets of the dissolved corporations are hereby
extinguished."
Earlier, the Agrix Marketing, Inc. (AGRIX) had executed in favor of private respondent
Philippine Veterans Bank a real estate mortgage dated July 7, 1978, over three (3) parcels of
land situated in Los Baos, Laguna. During the existence of the mortgage, AGRIX went
bankrupt. It was for the expressed purpose of salvaging this and the other Agrix companies
that the aforementioned decree was issued by President Marcos.
Pursuant thereto, the private respondent filed a claim with the AGRIX Claims Committee
for the payment of its loan credit. In the meantime, the New Agrix, Inc. and the National
Development Company, petitioners herein, invoking Sec. 4 (1) of the decree, filed a petition
with the Regional Trial Court of Calamba, Laguna, for the cancellation of the mortgage lien
in favor of the private respondent. For its part, the private respondent took steps to
extrajudicially foreclose the mortgage, prompting the petitioners to file a second case with
the same court to stop the foreclosure. The two cases were consolidated.
After the submission by the parties of their respective pleadings, the trial court rendered the
impugned decision. Judge Francisco Ma. Guerrero annulled not only the challenged
provision, viz., Sec. 4 (1), but the entire Pres. Decree No. 1717 on the grounds that: (1) the
presidential exercise of legislative power was a violation of the principle of separation of
powers; (2) the law impaired the obligation of contracts; and (3) the decree violated the
equal protection clause. The motion for reconsideration of this decision having been denied,

12

the present petition was filed.: rd


The petition was originally assigned to the Third Division of this Court but because of the
constitutional questions involved it was transferred to the Court en banc. On August 30,
1988, the Court granted the petitioner's prayer for a temporary restraining order and
instructed the respondents to cease and desist from conducting a public auction sale of the
lands in question. After the Solicitor General and the private respondent had filed their
comments and the petitioners their reply, the Court gave due course to the petition and
ordered the parties to file simultaneous memoranda. Upon compliance by the parties, the
case was deemed submitted.
The petitioners contend that the private respondent is now estopped from contesting the
validity of the decree. In support of this contention, it cites the recent case of Mendoza v.
Agrix Marketing, Inc., 1 where the constitutionality of Pres. Decree No. 1717 was also
raised but not resolved. The Court, after noting that the petitioners had already filed their
claims with the AGRIX Claims Committee created by the decree, had simply dismissed the
petition on the ground of estoppel.
The petitioners stress that in the case at bar the private respondent also invoked the
provisions of Pres. Decree No. 1717 by filing a claim with the AGRIX Claims Committee.
Failing to get results, it sought to foreclose the real estate mortgage executed by AGRIX in
its favor, which had been extinguished by the decree. It was only when the petitioners
challenged the foreclosure on the basis of Sec. 4 (1) of the decree, that the private
respondent attacked the validity of the provision. At that stage, however, consistent with
Mendoza, the private respondent was already estopped from questioning the
constitutionality of the decree.
The Court does not agree that the principle of estoppel is applicable.
It is not denied that the private respondent did file a claim with the AGRIX Claims
Committee pursuant to this decree. It must be noted, however, that this was done in 1980,
when President Marcos was the absolute ruler of this country and his decrees were the
absolute law. Any judicial challenge to them would have been futile, not to say foolhardy.
The private respondent, no less than the rest of the nation, was aware of that reality and
knew it had no choice under the circumstances but to conform.: nad
It is true that there were a few venturesome souls who dared to question the dictator's
decisions before the courts of justice then. The record will show, however, that not a single
act or issuance of President Marcos was ever declared unconstitutional, not even by the
highest court, as long as he was in power. To rule now that the private respondent is
estopped for having abided with the decree instead of boldly assailing it is to close our eyes
to a cynical fact of life during that repressive time.

13

This case must be distinguished from Mendoza, where the petitioners, after filing their
claims with the AGRIX Claims Committee, received in settlement thereof shares of stock
valued at P40,000.00 without protest or reservation. The herein private respondent has not
been paid a single centavo on its claim, which was kept pending for more than seven years
for alleged lack of supporting papers. Significantly, the validity of that claim was not
questioned by the petitioner when it sought to restrain the extrajudicial foreclosure of the
mortgage by the private respondent. The petitioner limited itself to the argument that the
private respondent was estopped from questioning the decree because of its earlier
compliance with its provisions.
Independently of these observations, there is the consideration that an affront to the
Constitution cannot be allowed to continue existing simply because of procedural inhibitions
that exalt form over substance.
The Court is especially disturbed by Section 4(1) of the decree, quoted above, extinguishing
all mortgages and other liens attaching to the assets of AGRIX. It also notes, with equal
concern, the restriction in Subsection (ii) thereof that all "unsecured obligations shall not
bear interest" and in Subsection (iii) that "all accrued interests, penalties or charges as of
date hereof pertaining to the obligations, whether secured or unsecured, shall not be
recognized."
These provisions must be read with the Bill of Rights, where it is clearly provided in Section
1 that "no person shall be deprived of life, liberty or property without due course of law nor
shall any person be denied the equal protection of the law" and in Section 10 that "no law
impairing the obligation of contracts shall be passed."
In defending the decree, the petitioners argue that property rights, like all rights, are subject
to regulation under the police power for the promotion of the common welfare. The
contention is that this inherent power of the state may be exercised at any time for this
purpose so long as the taking of the property right, even if based on contract, is done with
due process of law.
This argument is an over-simplification of the problem before us. The police power is not a
panacea for all constitutional maladies. Neither does its mere invocation conjure an instant
and automatic justification for every act of the government depriving a person of his life,
liberty or property.
A legislative act based on the police power requires the concurrence of a lawful subject and
a lawful method. In more familiar words, a) the interests of the public generally, as
distinguished from those of a particular class, should justify the interference of the state; and
b) the means employed are reasonably necessary for the accomplishment of the purpose and
not unduly oppressive upon individuals. 2

14

Applying these criteria to the case at bar, the Court finds first of all that the interests of the
public are not sufficiently involved to warrant the interference of the government with the
private contracts of AGRIX. The decree speaks vaguely of the "public, particularly the small
investors," who would be prejudiced if the corporation were not to be assisted. However, the
record does not state how many there are of such investors, and who they are, and why they
are being preferred to the private respondent and other creditors of AGRIX with vested
property rights.:-cralaw
The public interest supposedly involved is not identified or explained. It has not been shown
that by the creation of the New Agrix, Inc. and the extinction of the property rights of the
creditors of AGRIX, the interests of the public as a whole, as distinguished from those of a
particular class, would be promoted or protected. The indispensable link to the welfare of
the greater number has not been established. On the contrary, it would appear that the decree
was issued only to favor a special group of investors who, for reasons not given, have been
preferred to the legitimate creditors of AGRIX.
Assuming there is a valid public interest involved, the Court still finds that the means
employed to rehabilitate AGRIX fall far short of the requirement that they shall not be
unduly oppressive. The oppressiveness is patent on the face of the decree. The right to
property in all mortgages, liens, interests, penalties and charges owing to the creditors of
AGRIX is arbitrarily destroyed. No consideration is paid for the extinction of the mortgage
rights. The accrued interests and other charges are simply rejected by the decree. The right
to property is dissolved by legislative fiat without regard to the private interest violated and,
worse, in favor of another private interest.
A mortgage lien is a property right derived from contract and so comes under the protection
of the Bill of Rights. So do interests on loans, as well as penalties and charges, which are
also vested rights once they accrue. Private property cannot simply be taken by law from
one person and given to another without compensation and any known public purpose. This
is plain arbitrariness and is not permitted under the Constitution.
And not only is there arbitrary taking, there is discrimination as well. In extinguishing the
mortgage and other liens, the decree lumps the secured creditors with the unsecured
creditors and places them on the same level in the prosecution of their respective claims. In
this respect, all of them are considered unsecured creditors. The only concession given to the
secured creditors is that their loans are allowed to earn interest from the date of the decree,
but that still does not justify the cancellation of the interests earned before that date. Such
interests, whether due to the secured or the unsecured creditors, are all extinguished by the
decree. Even assuming such cancellation to be valid, we still cannot see why all kinds of
creditors, regardless of security, are treated alike.
Under the equal protection clause, all persons or things similarly situated must be treated
alike, both in the privileges conferred and the obligations imposed. Conversely, all persons

15

or things differently situated should be treated differently. In the case at bar, persons
differently situated are similarly treated, in disregard of the principle that there should be
equality only among equals.- nad
One may also well wonder why AGRIX was singled out for government help, among other
corporations where the stockholders or investors were also swindled. It is not clear why
other companies entitled to similar concern were not similarly treated. And surely, the
stockholders of the private respondent, whose mortgage lien had been cancelled and
legitimate claims to accrued interests rejected, were no less deserving of protection, which
they did not get. The decree operated, to use the words of a celebrated case, 3 "with an evil
eye and an uneven hand."
On top of all this, New Agrix, Inc. was created by special decree notwithstanding the
provision of Article XIV, Section 4 of the 1973 Constitution, then in force, that:
SEC. 4. The Batasang Pambansa shall not, except by general law, provide for the formation,
organization, or regulation of private corporations, unless such corporations are owned or
controlled by the Government or any subdivision or instrumentality thereof. 4
The new corporation is neither owned nor controlled by the government. The National
Development Corporation was merely required to extend a loan of not more than
P10,000,000.00 to New Agrix, Inc. Pending payment thereof, NDC would undertake the
management of the corporation, but with the obligation of making periodic reports to the
Agrix board of directors. After payment of the loan, the said board can then appoint its own
management. The stocks of the new corporation are to be issued to the old investors and
stockholders of AGRIX upon proof of their claims against the abolished corporation. They
shall then be the owners of the new corporation. New Agrix, Inc. is entirely private and so
should have been organized under the Corporation Law in accordance with the above-cited
constitutional provision.
The Court also feels that the decree impairs the obligation of the contract between AGRIX
and the private respondent without justification. While it is true that the police power is
superior to the impairment clause, the principle will apply only where the contract is so
related to the public welfare that it will be considered congenitally susceptible to change by
the legislature in the interest of the greater number. 5 Most present-day contracts are of that
nature. But as already observed, the contracts of loan and mortgage executed by AGRIX are
purely private transactions and have not been shown to be affected with public interest.
There was therefore no warrant to amend their provisions and deprive the private respondent
of its vested property rights.
It is worth noting that only recently in the case of the Development Bank of the Philippines
v. NLRC, 6 we sustained the preference in payment of a mortgage creditor as against the
argument that the claims of laborers should take precedence over all other claims, including

16

those of the government. In arriving at this ruling, the Court recognized the mortgage lien as
a property right protected by the due process and contract clauses notwithstanding the
argument that the amendment in Section 110 of the Labor Code was a proper exercise of the
police power.: nad
The Court reaffirms and applies that ruling in the case at bar.
Our finding, in sum, is that Pres. Decree No. 1717 is an invalid exercise of the police power,
not being in conformity with the traditional requirements of a lawful subject and a lawful
method. The extinction of the mortgage and other liens and of the interest and other charges
pertaining to the legitimate creditors of AGRIX constitutes taking without due process of
law, and this is compounded by the reduction of the secured creditors to the category of
unsecured creditors in violation of the equal protection clause. Moreover, the new
corporation, being neither owned nor controlled by the Government, should have been
created only by general and not special law. And insofar as the decree also interferes with
purely private agreements without any demonstrated connection with the public interest,
there is likewise an impairment of the obligation of the contract.
With the above pronouncements, we feel there is no more need to rule on the authority of
President Marcos to promulgate Pres. Decree No. 1717 under Amendment No. 6 of the 1973
Constitution. Even if he had such authority, the decree must fall just the same because of its
violation of the Bill of Rights.
WHEREFORE, the petition is DISMISSED. Pres. Decree No. 1717 is declared
UNCONSTITUTIONAL. The temporary restraining order dated August 30, 1988, is
LIFTED. Costs against the petitioners.- nad
SO ORDERED.
Fernan (C.J.), Narvasa, Gutierrez, Jr., Paras, Gancayco Padilla, Bidin, Sarmiento, GrioAquino, Medialdea and Regalado, JJ., concur.
Melencio-Herrera, J., In the result. In Dumlao v. COMELEC, 95 SCRA 392 (1980), a
portion of the second paragraph of section 4 of Batas Pambansa Blg. 52 was declared null
and void for being unconstitutional.

Republic of the Philippines SUPREME COURT Manila


EN BANC
G.R. No. L-19891 July 31, 1964

17

J.R.S. BUSINESS CORPORATION, J.R. DA SILVA and A.J. BELTRAN, petitioners, vs.
IMPERIAL INSURANCE, INC., MACARIO M. OFILADA, Sheriff of Manila and HON.
AGUSTIN MONTESA, Judge of the Court of First Instance of Manila, respondents.
Republic of the Philippines SUPREME COURT Manila
EN BANC
G.R. No. L-19891 July 31, 1964
J.R.S. BUSINESS CORPORATION, J.R. DA SILVA and A.J. BELTRAN, petitioners, vs.
IMPERIAL INSURANCE, INC., MACARIO M. OFILADA, Sheriff of Manila and HON.
AGUSTIN MONTESA, Judge of the Court of First Instance of Manila, respondents.
Felipe N. Aurea for petitioners. Taada, Teehankee and Carreon for respondent Imperial
Insurance, Inc.
PAREDES, J.:
Petitioner J. R. Da Silva, is the President of the J.R.S. Business Corporation, an
establishment duly franchised by the Congress of the Philippines, to conduct a messenger
and delivery express service. On July 12, 1961, the respondent Imperial Insurance, Inc.,
presented with the CFI of Manila a complaint (Civ. Case No. 47520), for sum of money
against the petitioner corporation. After the defendants therein have submitted their Answer,
the parties entered into a Compromise Agreement, assisted by their respective counsels, the
pertinent portions of which recite:
1) WHEREAS, the DEFENDANTS admit and confess their joint and solidary indebtedness
to the PLAINTIFF in the full sum of PESOS SIXTY ONE THOUSAND ONE HUNDRED
SEVENTY-TWO & 32/100 (P61,172.32), Philippine Currency, itemized as follows:
a) Principal P50,000.00 b) Interest at 12% per annum 5,706.14 c) Liquidated damages at 7%
per annum 3,330.58 d) Costs of suit 135.60 e) Attorney's fees 2,000.00 2) WHEREAS, the
DEFENDANTS bind themselves, jointly and severally, and hereby promise to pay their
aforementioned obligation to the PLAINTIFF at its business address at 301-305 Banquero
St., (Ground Floor), Regina Building, Escolta, Manila, within sixty (60) days from March
16, 1962 or on or before May 14, 1962;
3) WHEREAS, in the event the DEFENDANTS FAIL to pay in full the total amount of
PESOS SIXTY ONE THOUSAND ONE HUNDRED SEVENTY TWO & 32/100
(P61,172.32), Philippine Currency, for any reason whatsoever, on May 14, 1962, the
PLAINTIFF shall be entitled, as a matter of right, to move for the execution of the decision
to be rendered in the above-entitled case by this Honorable Court based on this
COMPROMISE AGREEMENT.

18

On March 17, 1962, the lower court rendered judgment embodying the contents of the said
compromise agreement, the dispositive portion of which reads
WHEREFORE, the Court hereby approves the above-quoted compromise agreement and
renders judgment in accordance therewith, enjoining the parties to comply faithfully and
strictly with the terms and conditions thereof, without special pronouncement as to costs.
Wherefore, the parties respectfully pray that the foregoing stipulation of facts be admitted
and approved by this Honorable Court, without prejudice to the parties adducing other
evidence to prove their case not covered by this stipulation of facts. 1wph1.t
On May 15, 1962, one day after the date fixed in the compromise agreement, within which
the judgment debt would be paid, but was not, respondent Imperial Insurance Inc., filed a
"Motion for the Insurance of a Writ of Execution". On May 23, 1962, a Writ of Execution
was issued by respondent Sheriff of Manila and on May 26, 1962, Notices of Sale were sent
out for the auction of the personal properties of the petitioner J.R.S. Business Corporation.
On June 2, 1962, a Notice of Sale of the "whole capital stocks of the defendants JRS
Business Corporation, the business name, right of operation, the whole assets, furnitures and
equipments, the total liabilities, and Net Worth, books of accounts, etc., etc." of the
petitioner corporation was, handed down. On June 9, the petitioner, thru counsel, presented
an "Urgent Petition for Postponement of Auction Sale and for Release of Levy on the
Business Name and Right to Operate of Defendant JRS Business Corporation", stating that
petitioners were busy negotiating for a loan with which to pay the judgment debt; that the
judgment was for money only and, therefore, plaintiff (respondent Insurance Company) was
not authorized to take over and appropriate for its own use, the business name of the
defendants; that the right to operate under the franchise, was not transferable and could not
be considered a personal or immovable, property, subject to levy and sale. On June 10, 1962,
a Supplemental Motion for Release of Execution, was filed by counsel of petitioner JRS
Business Corporation, claiming that the capital stocks thereof, could not be levied upon and
sold under execution. Under date of June 20, 1962, petitioner's counsel presented a pleading
captioned "Very Urgent Motion for Postponement of Public Auction Sale and for Ruling on
Motion for Release of Levy on the Business Name, Right to Operate and Capital Stocks of
JRS Business Corporation". The auction sale was set for June 21, 1962. In said motion,
petitioners alleged that the loan they had applied for, was to be secured within the next ten
(10) days, and they would be able to discharge the judgment debt. Respondents opposed the
said motion and on June 21, 1962, the lower court denied the motion for postponement of
the auction sale.
In the sale which was conducted in the premises of the JRS Business Corporation at 1341
Perez St., Paco, Manila, all the properties of said corporation contained in the Notices of
Sale dated May 26, 1962, and June 2, 1962 (the latter notice being for the whole capital
stocks of the defendant, JRS Business Corporation, the business name, right of operation,

19

the whole assets, furnitures and equipments, the total liabilities and Net Worth, books of
accounts, etc., etc.), were bought by respondent Imperial Insurance, Inc., for P10,000.00,
which was the highest bid offered. Immediately after the sale, respondent Insurance
Company took possession of the proper ties and started running the affairs and operating the
business of the JRS Business Corporation. Hence, the present appeal.
It would seem that the matters which need determination are (1) whether the respondent
Judge acted without or in excess of his jurisdiction or with grave abuse of discretion in
promulgating the Order of June 21, 1962, denying the motion for postponement of the
scheduled sale at public auction, of the properties of petitioner; and (2) whether the business
name or trade name, franchise (right to operate) and capital stocks of the petitioner are
properties or property rights which could be the subject of levy, execution and sale.
The respondent Court's act of postponing the scheduled sale was within the discretion of
respondent Judge, the exercise of which, one way or the other, did not constitute grave abuse
of discretion and/or excess of jurisdiction. There was a decision rendered and the
corresponding writ of execution was issued. Respondent Judge had jurisdiction over the
matter and erroneous conclusions of law or fact, if any, committed in the exercise of such
jurisdiction are merely errors of judgment, not correctible by certiorari (Villa Rey Transit v.
Bello, et al., L-18957, April 23, 1963, and cases cited therein.)
The corporation law, on forced sale of franchises, provides
Any franchise granted to a corporation to collect tolls or to occupy, enjoy, or use public
property or any portion of the public domain or any right of way over public property or the
public domain, and any rights and privileges acquired under such franchise may be levied
upon and sold under execution, together with the property necessary for the enjoyment, the
exercise of the powers, and the receipt of the proceeds of such franchise or right of way, in
the same manner and with like effect as any other property to satisfy any judgment against
the corporation: Provided, That the sale of the franchise or right of way and the property
necessary for the enjoyment, the exercise of the powers, and the receipt of the proceeds of
said franchise or right of way is especially decreed and ordered in the judgment: And
provided, further, That the sale shall not become effective until confirmed by the court after
due notice. (Sec. 56, Corporation Law.)
In the case of Gulf Refining Co. v. Cleveland Trust Co., 108 So., 158, it was held
The first question then for decision is the meaning of the word "franchise" in the statute.
"A franchise is a special privilege conferred by governmental authority, and which does not
belong to citizens of the country generally as a matter of common right. ... Its meaning
depends more or less upon the connection in which the word is employed and the property
and corporation to which it is applied. It may have different significations.

20

"For practical purposes, franchises, so far as relating to corporations, are divisible into (1)
corporate or general franchises; and (2) special or secondary franchises. The former is the
franchise to exist as a corporation, while the latter are certain rights and privileges conferred
upon existing corporations, such as the right to use the streets of a municipality to lay pipes
or tracks, erect poles or string wires." 2 Fletcher's Cyclopedia Corp. See. 1148; 14 C.J. p.
160; Adams v. Yazon & M. V. R. Co., 24 So. 200, 317, 28 So. 956, 77 Miss. 253, 60 L.R.A.
33 et seq.
The primary franchise of a corporation that is, the right to exist as such, is vested "in the
individuals who compose the corporation and not in the corporation itself" (14 C.J. pp. 160,
161; Adams v. Railroad, supra; 2 Fletcher's Cyclopedia Corp. Secs. 1153, 1158; 3 Thompson
on Corporations 2d Ed.] Secs. 2863, 2864), and cannot be conveyed in the absence of a
legislative authority so to do (14A CJ. 543, 577; 1 Fletcher's Cyc. Corp. Sec. 1224; Memphis
& L.R.R. Co. v. Berry 5 S. Ct. 299, 112 U.S. 609, 28 L.E.d. 837; Vicksburg Waterworks Co.
v. Vicksburg, 26 S. Ct. 660, 202 U.S. 453, 50 L.E.d. 1102, 6 Ann. Cas. 253; Arthur v.
Commercial & Railroad Bank, 9 Smedes & M. 394, 48 Am. Dec. 719), but the specify or
secondary franchises of a corporation are vested in the corporation and may ordinarily be
conveyed or mortgaged under a general power granted to a corporation to dispose of its
property (Adams v. Railroad, supra; 14A C.J. 542, 557; 3 Thompson on Corp. [2nd Ed.] Sec.
2909), except such special or secondary franchises as are charged with a public use (2
Fletcher's Cyc. Corp. see. 1225; 14A C.J. 544; 3 Thompson on Corp. [2d Ed.] sec. 2908;
Arthur v. Commercial & R.R. Bank, supra; McAllister v. Plant, 54 Miss. 106).
The right to operate a messenger and express delivery service, by virtue of a legislative
enactment, is admittedly a secondary franchise (R.A. No. 3260, entitled "An Act granting
the JRS Business Corporation a franchise to conduct a messenger and express service)" and,
as such, under our corporation law, is subject to levy and sale on execution together and
including all the property necessary for the enjoyment thereof. The law, however, indicates
the procedure under which the same (secondary franchise and the properties necessary for its
enjoyment) may be sold under execution. Said franchise can be sold under execution, when
such sale is especially decreed and ordered in the judgment and it becomes effective only
when the sale is confirmed by the Court after due notice (Sec. 56, Corp. Law). The
compromise agreement and the judgment based thereon, do not contain any special decree
or order making the franchise answerable for the judgment debt. The same thing may be
stated with respect to petitioner's trade name or business name and its capital stock.
Incidentally, the trade name or business name corresponds to the initials of the President of
the petitioner corporation and there can be no serious dispute regarding the fact that a trade
name or business name and capital stock are necessarily included in the enjoyment of the
franchise. Like that of a franchise, the law mandates, that property necessary for the
enjoyment of said franchise, can only be sold to satisfy a judgment debt if the decision
especially so provides. As We have stated heretofore, no such directive appears in the
decision. Moreover, a trade name or business name cannot be sold separately from the

21

franchise, and the capital stock of the petitioner corporation or any other corporation, for the
matter, represents the interest and is the property of stockholders in the corporation, who can
only be deprived thereof in the manner provided by law (Therbee v. Baker, 35 N.E. Eq. [8
Stew.] 501, 505; In re Wells' Estate, 144 N.W. 174, 177, Wis. 294, cited in 6 Words and
Phrases, 109).
It, therefore, results that the inclusion of the franchise, the trade name and/or business name
and the capital stock of the petitioner corporation, in the sale of the properties of the JRS
Business Corporation, has no justification. The sale of the properties of petitioner
corporation is set aside, in so far as it authorizes the levy and sale of its franchise, trade
name and capital stocks. Without pronouncement as to costs.
Bengzon, C.J., Padilla, Bautista Angelo, Concepcion, Reyes, J.B.L., Regala and Makalintal,
JJ., concur.

G.R. No. L-4935 May 28, 1954


J. M. TUASON & CO., INC., represented by it Managing PARTNER, GREGORIA
ARANETA, INC., plaintiff-appellee, vs. QUIRINO BOLAOS, defendant-appellant.
Republic of the Philippines SUPREME COURT Manila
EN BANC
G.R. No. L-4935 May 28, 1954
J. M. TUASON & CO., INC., represented by it Managing PARTNER, GREGORIA
ARANETA, INC., plaintiff-appellee, vs. QUIRINO BOLAOS, defendant-appellant.
Araneta and Araneta for appellee. Jose A. Buendia for appellant.
REYES, J.:
This is an action originally brought in the Court of First Instance of Rizal, Quezon City
Branch, to recover possesion of registered land situated in barrio Tatalon, Quezon City.
Plaintiff's complaint was amended three times with respect to the extent and description of
the land sought to be recovered. The original complaint described the land as a portion of a
lot registered in plaintiff's name under Transfer Certificate of Title No. 37686 of the land
record of Rizal Province and as containing an area of 13 hectares more or less. But the
complaint was amended by reducing the area of 6 hectares, more or less, after the defendant
had indicated the plaintiff's surveyors the portion of land claimed and occupied by him. The

22

second amendment became necessary and was allowed following the testimony of plaintiff's
surveyors that a portion of the area was embraced in another certificate of title, which was
plaintiff's Transfer Certificate of Title No. 37677. And still later, in the course of trial, after
defendant's surveyor and witness, Quirino Feria, had testified that the area occupied and
claimed by defendant was about 13 hectares, as shown in his Exhibit 1, plaintiff again, with
the leave of court, amended its complaint to make its allegations conform to the evidence.
Defendant, in his answer, sets up prescription and title in himself thru "open, continuous,
exclusive and public and notorious possession (of land in dispute) under claim of ownership,
adverse to the entire world by defendant and his predecessor in interest" from "time inmemorial". The answer further alleges that registration of the land in dispute was obtained
by plaintiff or its predecessors in interest thru "fraud or error and without knowledge (of) or
interest either personal or thru publication to defendant and/or predecessors in interest." The
answer therefore prays that the complaint be dismissed with costs and plaintiff required to
reconvey the land to defendant or pay its value.
After trial, the lower court rendered judgment for plaintiff, declaring defendant to be without
any right to the land in question and ordering him to restore possession thereof to plaintiff
and to pay the latter a monthly rent of P132.62 from January, 1940, until he vacates the land,
and also to pay the costs.
Appealing directly to this court because of the value of the property involved, defendant
makes the following assignment or errors:
I. The trial court erred in not dismissing the case on the ground that the case was not brought
by the real property in interest.
II. The trial court erred in admitting the third amended complaint.
III. The trial court erred in denying defendant's motion to strike.
IV. The trial court erred in including in its decision land not involved in the litigation.
V. The trial court erred in holding that the land in dispute is covered by transfer certificates
of Title Nos. 37686 and 37677.
Vl. The trial court erred in not finding that the defendant is the true and lawful owner of the
land.
VII. The trial court erred in finding that the defendant is liable to pay the plaintiff the
amount of P132.62 monthly from January, 1940, until he vacates the premises.
VIII. The trial court erred in not ordering the plaintiff to reconvey the land in litigation to the
defendant.

23

As to the first assigned error, there is nothing to the contention that the present action is not
brought by the real party in interest, that is, by J. M. Tuason and Co., Inc. What the Rules of
Court require is that an action be brought in the name of, but not necessarily by, the real
party in interest. (Section 2, Rule 2.) In fact the practice is for an attorney-at-law to bring the
action, that is to file the complaint, in the name of the plaintiff. That practice appears to have
been followed in this case, since the complaint is signed by the law firm of Araneta and
Araneta, "counsel for plaintiff" and commences with the statement "comes now plaintiff,
through its undersigned counsel." It is true that the complaint also states that the plaintiff is
"represented herein by its Managing Partner Gregorio Araneta, Inc.", another corporation,
but there is nothing against one corporation being represented by another person, natural or
juridical, in a suit in court. The contention that Gregorio Araneta, Inc. can not act as
managing partner for plaintiff on the theory that it is illegal for two corporations to enter into
a partnership is without merit, for the true rule is that "though a corporation has no power to
enter into a partnership, it may nevertheless enter into a joint venture with another where the
nature of that venture is in line with the business authorized by its charter." (WyomingIndiana Oil Gas Co. vs. Weston, 80 A. L. R., 1043, citing 2 Fletcher Cyc. of Corp., 1082.)
There is nothing in the record to indicate that the venture in which plaintiff is represented by
Gregorio Araneta, Inc. as "its managing partner" is not in line with the corporate business of
either of them.
Errors II, III, and IV, referring to the admission of the third amended complaint, may be
answered by mere reference to section 4 of Rule 17, Rules of Court, which sanctions such
amendment. It reads:
Sec. 4. Amendment to conform to evidence. When issues not raised by the pleadings are
tried by express or implied consent of the parties, they shall be treated in all respects, as if
they had been raised in the pleadings. Such amendment of the pleadings as may be
necessary to cause them to conform to the evidence and to raise these issues may be made
upon motion of any party at my time, even of the trial of these issues. If evidence is objected
to at the trial on the ground that it is not within the issues made by the pleadings, the court
may allow the pleadings to be amended and shall be so freely when the presentation of the
merits of the action will be subserved thereby and the objecting party fails to satisfy the
court that the admission of such evidence would prejudice him in maintaining his action or
defense upon the merits. The court may grant a continuance to enable the objecting party to
meet such evidence.
Under this provision amendment is not even necessary for the purpose of rendering
judgment on issues proved though not alleged. Thus, commenting on the provision, Chief
Justice Moran says in this Rules of Court:
Under this section, American courts have, under the New Federal Rules of Civil Procedure,
ruled that where the facts shown entitled plaintiff to relief other than that asked for, no

24

amendment to the complaint is necessary, especially where defendant has himself raised the
point on which recovery is based, and that the appellate court treat the pleadings as amended
to conform to the evidence, although the pleadings were not actually amended. (I Moran,
Rules of Court, 1952 ed., 389-390.)
Our conclusion therefore is that specification of error II, III, and IV are without merit..
Let us now pass on the errors V and VI. Admitting, though his attorney, at the early stage of
the trial, that the land in dispute "is that described or represented in Exhibit A and in Exhibit
B enclosed in red pencil with the name Quirino Bolaos," defendant later changed his
lawyer and also his theory and tried to prove that the land in dispute was not covered by
plaintiff's certificate of title. The evidence, however, is against defendant, for it clearly
establishes that plaintiff is the registered owner of lot No. 4-B-3-C, situate in barrio Tatalon,
Quezon City, with an area of 5,297,429.3 square meters, more or less, covered by transfer
certificate of title No. 37686 of the land records of Rizal province, and of lot No. 4-B-4,
situated in the same barrio, having an area of 74,789 square meters, more or less, covered by
transfer certificate of title No. 37677 of the land records of the same province, both lots
having been originally registered on July 8, 1914 under original certificate of title No. 735.
The identity of the lots was established by the testimony of Antonio Manahan and Magno
Faustino, witnesses for plaintiff, and the identity of the portion thereof claimed by defendant
was established by the testimony of his own witness, Quirico Feria. The combined
testimony of these three witnesses clearly shows that the portion claimed by defendant is
made up of a part of lot 4-B-3-C and major on portion of lot 4-B-4, and is well within the
area covered by the two transfer certificates of title already mentioned. This fact also
appears admitted in defendant's answer to the third amended complaint.
As the land in dispute is covered by plaintiff's Torrens certificate of title and was registered
in 1914, the decree of registration can no longer be impugned on the ground of fraud, error
or lack of notice to defendant, as more than one year has already elapsed from the issuance
and entry of the decree. Neither court the decree be collaterally attacked by any person
claiming title to, or interest in, the land prior to the registration proceedings. (Sorogon vs.
Makalintal,1 45 Off. Gaz., 3819.) Nor could title to that land in derogation of that of
plaintiff, the registered owner, be acquired by prescription or adverse possession. (Section
46, Act No. 496.) Adverse, notorious and continuous possession under claim of ownership
for the period fixed by law is ineffective against a Torrens title. (Valiente vs. Judge of CFI of
Tarlac,2 etc., 45 Off. Gaz., Supp. 9, p. 43.) And it is likewise settled that the right to secure
possession under a decree of registration does not prescribed. (Francisco vs. Cruz, 43 Off.
Gaz., 5105, 5109-5110.) A recent decision of this Court on this point is that rendered in the
case of Jose Alcantara et al., vs. Mariano et al., 92 Phil., 796. This disposes of the alleged
errors V and VI.
As to error VII, it is claimed that `there was no evidence to sustain the finding that defendant

25

should be sentenced to pay plaintiff P132.62 monthly from January, 1940, until he vacates
the premises.' But it appears from the record that that reasonable compensation for the use
and occupation of the premises, as stipulated at the hearing was P10 a month for each
hectare and that the area occupied by defendant was 13.2619 hectares. The total rent to be
paid for the area occupied should therefore be P132.62 a month. It is appears from the
testimony of J. A. Araneta and witness Emigdio Tanjuatco that as early as 1939 an action of
ejectment had already been filed against defendant. And it cannot be supposed that
defendant has been paying rents, for he has been asserting all along that the premises in
question 'have always been since time immemorial in open, continuous, exclusive and public
and notorious possession and under claim of ownership adverse to the entire world by
defendant and his predecessors in interest.' This assignment of error is thus clearly without
merit.
Error No. VIII is but a consequence of the other errors alleged and needs for further
consideration.
During the pendency of this case in this Court appellant, thru other counsel, has filed a
motion to dismiss alleging that there is pending before the Court of First Instance of Rizal
another action between the same parties and for the same cause and seeking to sustain that
allegation with a copy of the complaint filed in said action. But an examination of that
complaint reveals that appellant's allegation is not correct, for the pretended identity of
parties and cause of action in the two suits does not appear. That other case is one for
recovery of ownership, while the present one is for recovery of possession. And while
appellant claims that he is also involved in that order action because it is a class suit, the
complaint does not show that such is really the case. On the contrary, it appears that the
action seeks relief for each individual plaintiff and not relief for and on behalf of others. The
motion for dismissal is clearly without merit.
Wherefore, the judgment appealed from is affirmed, with costs against the plaintiff.
Paras, C.J., Pablo, Bengzon, Montemayor, Jugo, Bautista Angelo, Labrador, and
Concepcion, JJ., concur.
Footnotes
180 Phil., 259.
2 80 Phil., 415.

G.R. No. 75875 December 15, 1989


WOLRGANG AURBACH, JOHN GRIFFIN, DAVID P. WHITTINGHAM and CHARLES

26

CHAMSAY, petitioners, vs. SANITARY WARES MANUFACTURING CORPORATOIN,


ERNESTO V. LAGDAMEO, ERNESTO R. LAGDAMEO, JR., ENRIQUE R.
LAGDAMEO, GEORGE F. LEE, RAUL A. BONCAN, BALDWIN YOUNG and
AVELINO V. CRUZ, respondents.
G.R. No. 75951 December 15, 1989
SANITARY WARES MANUFACTURING CORPORATION, ERNESTO R. LAGDAMEO,
ENRIQUE B. LAGDAMEO, GEORGE FL .EE RAUL A. BONCAN, BALDWIN YOUNG
and AVELINO V. CRUX, petitioners, vs. THE COURT OF APPEALS, WOLFGANG
AURBACH, JOHN GRIFFIN, DAVID P. WHITTINGHAM, CHARLES CHAMSAY and
LUCIANO SALAZAR, respondents.
G.R. Nos. 75975-76 December 15, 1989
LUCIANO E. SALAZAR, petitioner, vs. SANITARY WARES MANUFACTURING
CORPORATION, ERNESTO V. LAGDAMEO, ERNESTO R. LAGDAMEO, JR.,
ENRIQUE R. LAGDAMEO, GEORGE F. LEE, RAUL A. BONCAN, BALDWIN
YOUNG, AVELINO V. CRUZ and the COURT OF APPEALS, respondents.
GUTIERREZ, JR., J.:
These consolidated petitions seek the review of the amended decision of the Court of
Appeals in CA-G.R. SP Nos. 05604 and 05617 which set aside the earlier decision dated
June 5, 1986, of the then Intermediate Appellate Court and directed that in all subsequent
elections for directors of Sanitary Wares Manufacturing Corporation (Saniwares), American
Standard Inc. (ASI) cannot nominate more than three (3) directors; that the Filipino
stockholders shall not interfere in ASI's choice of its three (3) nominees; that, on the other
hand, the Filipino stockholders can nominate only six (6) candidates and in the event they
cannot agree on the six (6) nominees, they shall vote only among themselves to determine
who the six (6) nominees will be, with cumulative voting to be allowed but without
interference from ASI.
The antecedent facts can be summarized as follows:
In 1961, Saniwares, a domestic corporation was incorporated for the primary purpose of
manufacturing and marketing sanitary wares. One of the incorporators, Mr. Baldwin Young
went abroad to look for foreign partners, European or American who could help in its
expansion plans. On August 15, 1962, ASI, a foreign corporation domiciled in Delaware,
United States entered into an Agreement with Saniwares and some Filipino investors
whereby ASI and the Filipino investors agreed to participate in the ownership of an
enterprise which would engage primarily in the business of manufacturing in the Philippines
and selling here and abroad vitreous china and sanitary wares. The parties agreed that the

27

business operations in the Philippines shall be carried on by an incorporated enterprise and


that the name of the corporation shall initially be "Sanitary Wares Manufacturing
Corporation."
The Agreement has the following provisions relevant to the issues in these cases on the
nomination and election of the directors of the corporation:
1. Articles of Incorporation
(a) The Articles of Incorporation of the Corporation shall be substantially in the form
annexed hereto as Exhibit A and, insofar as permitted under Philippine law, shall specifically
provide for
(1) Cumulative voting for directors:
xxx xxx xxx
1. Management
(a) The management of the Corporation shall be vested in a Board of Directors, which shall
consist of nine individuals. As long as American-Standard shall own at least 30% of the
outstanding stock of the Corporation, three of the nine directors shall be designated by
American-Standard, and the other six shall be designated by the other stockholders of the
Corporation. (pp. 51 & 53, Rollo of 75875)
At the request of ASI, the agreement contained provisions designed to protect it as a
minority group, including the grant of veto powers over a number of corporate acts and the
right to designate certain officers, such as a member of the Executive Committee whose vote
was required for important corporate transactions.
Later, the 30% capital stock of ASI was increased to 40%. The corporation was also
registered with the Board of Investments for availment of incentives with the condition that
at least 60% of the capital stock of the corporation shall be owned by Philippine nationals.
The joint enterprise thus entered into by the Filipino investors and the American corporation
prospered. Unfortunately, with the business successes, there came a deterioration of the
initially harmonious relations between the two groups. According to the Filipino group, a
basic disagreement was due to their desire to expand the export operations of the company
to which ASI objected as it apparently had other subsidiaries of joint joint venture groups in
the countries where Philippine exports were contemplated. On March 8, 1983, the annual
stockholders' meeting was held. The meeting was presided by Baldwin Young. The minutes
were taken by the Secretary, Avelino Cruz. After disposing of the preliminary items in the
agenda, the stockholders then proceeded to the election of the members of the board of
directors. The ASI group nominated three persons namely; Wolfgang Aurbach, John Griffin

28

and David P. Whittingham. The Philippine investors nominated six, namely; Ernesto
Lagdameo, Sr., Raul A. Boncan, Ernesto R. Lagdameo, Jr., George F. Lee, and Baldwin
Young. Mr. Eduardo R, Ceniza then nominated Mr. Luciano E. Salazar, who in turn
nominated Mr. Charles Chamsay. The chairman, Baldwin Young ruled the last two
nominations out of order on the basis of section 5 (a) of the Agreement, the consistent
practice of the parties during the past annual stockholders' meetings to nominate only nine
persons as nominees for the nine-member board of directors, and the legal advice of
Saniwares' legal counsel. The following events then, transpired:
... There were protests against the action of the Chairman and heated arguments ensued. An
appeal was made by the ASI representative to the body of stockholders present that a vote be
taken on the ruling of the Chairman. The Chairman, Baldwin Young, declared the appeal out
of order and no vote on the ruling was taken. The Chairman then instructed the Corporate
Secretary to cast all the votes present and represented by proxy equally for the 6 nominees
of the Philippine Investors and the 3 nominees of ASI, thus effectively excluding the 2
additional persons nominated, namely, Luciano E. Salazar and Charles Chamsay. The ASI
representative, Mr. Jaqua protested the decision of the Chairman and announced that all
votes accruing to ASI shares, a total of 1,329,695 (p. 27, Rollo, AC-G.R. SP No. 05617)
were being cumulatively voted for the three ASI nominees and Charles Chamsay, and
instructed the Secretary to so vote. Luciano E. Salazar and other proxy holders announced
that all the votes owned by and or represented by them 467,197 shares (p. 27, Rollo, ACG.R. SP No. 05617) were being voted cumulatively in favor of Luciano E. Salazar. The
Chairman, Baldwin Young, nevertheless instructed the Secretary to cast all votes equally in
favor of the three ASI nominees, namely, Wolfgang Aurbach, John Griffin and David
Whittingham and the six originally nominated by Rogelio Vinluan, namely, Ernesto
Lagdameo, Sr., Raul Boncan, Ernesto Lagdameo, Jr., Enrique Lagdameo, George F. Lee, and
Baldwin Young. The Secretary then certified for the election of the following Wolfgang
Aurbach, John Griffin, David Whittingham Ernesto Lagdameo, Sr., Ernesto Lagdameo, Jr.,
Enrique Lagdameo, George F. Lee, Raul A. Boncan, Baldwin Young. The representative of
ASI then moved to recess the meeting which was duly seconded. There was also a motion to
adjourn (p. 28, Rollo, AC-G.R. SP No. 05617). This motion to adjourn was accepted by the
Chairman, Baldwin Young, who announced that the motion was carried and declared the
meeting adjourned. Protests against the adjournment were registered and having been
ignored, Mr. Jaqua the ASI representative, stated that the meeting was not adjourned but
only recessed and that the meeting would be reconvened in the next room. The Chairman
then threatened to have the stockholders who did not agree to the decision of the Chairman
on the casting of votes bodily thrown out. The ASI Group, Luciano E. Salazar and other
stockholders, allegedly representing 53 or 54% of the shares of Saniwares, decided to
continue the meeting at the elevator lobby of the American Standard Building. The
continued meeting was presided by Luciano E. Salazar, while Andres Gatmaitan acted as
Secretary. On the basis of the cumulative votes cast earlier in the meeting, the ASI Group
nominated its four nominees; Wolfgang Aurbach, John Griffin, David Whittingham and

29

Charles Chamsay. Luciano E. Salazar voted for himself, thus the said five directors were
certified as elected directors by the Acting Secretary, Andres Gatmaitan, with the
explanation that there was a tie among the other six (6) nominees for the four (4) remaining
positions of directors and that the body decided not to break the tie. (pp. 37-39, Rollo of
75975-76)
These incidents triggered off the filing of separate petitions by the parties with the Securities
and Exchange Commission (SEC). The first petition filed was for preliminary injunction by
Saniwares, Emesto V. Lagdameo, Baldwin Young, Raul A. Bonean Ernesto R. Lagdameo,
Jr., Enrique Lagdameo and George F. Lee against Luciano Salazar and Charles Chamsay.
The case was denominated as SEC Case No. 2417. The second petition was for quo
warranto and application for receivership by Wolfgang Aurbach, John Griffin, David
Whittingham, Luciano E. Salazar and Charles Chamsay against the group of Young and
Lagdameo (petitioners in SEC Case No. 2417) and Avelino F. Cruz. The case was docketed
as SEC Case No. 2718. Both sets of parties except for Avelino Cruz claimed to be the
legitimate directors of the corporation.
The two petitions were consolidated and tried jointly by a hearing officer who rendered a
decision upholding the election of the Lagdameo Group and dismissing the quo warranto
petition of Salazar and Chamsay. The ASI Group and Salazar appealed the decision to the
SEC en banc which affirmed the hearing officer's decision.
The SEC decision led to the filing of two separate appeals with the Intermediate Appellate
Court by Wolfgang Aurbach, John Griffin, David Whittingham and Charles Chamsay
(docketed as AC-G.R. SP No. 05604) and by Luciano E. Salazar (docketed as AC-G.R. SP
No. 05617). The petitions were consolidated and the appellate court in its decision ordered
the remand of the case to the Securities and Exchange Commission with the directive that a
new stockholders' meeting of Saniwares be ordered convoked as soon as possible, under the
supervision of the Commission.
Upon a motion for reconsideration filed by the appellees Lagdameo Group) the appellate
court (Court of Appeals) rendered the questioned amended decision. Petitioners Wolfgang
Aurbach, John Griffin, David P. Whittingham and Charles Chamsay in G.R. No. 75875
assign the following errors:
I. THE COURT OF APPEALS, IN EFFECT, UPHELD THE ALLEGED ELECTION OF
PRIVATE RESPONDENTS AS MEMBERS OF THE BOARD OF DIRECTORS OF
SANIWARES WHEN IN FACT THERE WAS NO ELECTION AT ALL.
II. THE COURT OF APPEALS PROHIBITS THE STOCKHOLDERS FROM
EXERCISING THEIR FULL VOTING RIGHTS REPRESENTED BY THE NUMBER OF
SHARES IN SANIWARES, THUS DEPRIVING PETITIONERS AND THE
CORPORATION THEY REPRESENT OF THEIR PROPERTY RIGHTS WITHOUT DUE

30

PROCESS OF LAW.
III. THE COURT OF APPEALS IMPOSES CONDITIONS AND READS PROVISIONS
INTO THE AGREEMENT OF THE PARTIES WHICH WERE NOT THERE, WHICH
ACTION IT CANNOT LEGALLY DO. (p. 17, Rollo-75875)
Petitioner Luciano E. Salazar in G.R. Nos. 75975-76 assails the amended decision on the
following grounds:
11.1. ThatAmendedDecisionwouldsanctiontheCA'sdisregard of binding contractual
agreements entered into by stockholders and the replacement of the conditions of such
agreements with terms never contemplated by the stockholders but merely dictated by the
CA .
11.2. The Amended decision would likewise sanction the deprivation of the property rights
of stockholders without due process of law in order that a favored group of stockholders
may be illegally benefitted and guaranteed a continuing monopoly of the control of a
corporation. (pp. 14-15, Rollo-75975-76)
On the other hand, the petitioners in G.R. No. 75951 contend that:
I
THE AMENDED DECISION OF THE RESPONDENT COURT, WHILE RECOGNIZING
THAT THE STOCKHOLDERS OF SANIWARES ARE DIVIDED INTO TWO BLOCKS,
FAILS TO FULLY ENFORCE THE BASIC INTENT OF THE AGREEMENT AND THE
LAW.
II
THE AMENDED DECISION DOES NOT CATEGORICALLY RULE THAT PRIVATE
PETITIONERS HEREIN WERE THE DULY ELECTED DIRECTORS DURING THE 8
MARCH 1983 ANNUAL STOCKHOLDERS MEETING OF SANTWARES. (P. 24, Rollo75951)
The issues raised in the petitions are interrelated, hence, they are discussed jointly.
The main issue hinges on who were the duly elected directors of Saniwares for the year
1983 during its annual stockholders' meeting held on March 8, 1983. To answer this
question the following factors should be determined: (1) the nature of the business
established by the parties whether it was a joint venture or a corporation and (2) whether or
not the ASI Group may vote their additional 10% equity during elections of Saniwares'
board of directors.

31

The rule is that whether the parties to a particular contract have thereby established among
themselves a joint venture or some other relation depends upon their actual intention which
is determined in accordance with the rules governing the interpretation and construction of
contracts. (Terminal Shares, Inc. v. Chicago, B. and Q.R. Co. (DC MO) 65 F Supp 678;
Universal Sales Corp. v. California Press Mfg. Co. 20 Cal. 2nd 751, 128 P 2nd 668)
The ASI Group and petitioner Salazar (G.R. Nos. 75975-76) contend that the actual
intention of the parties should be viewed strictly on the "Agreement" dated August 15,1962
wherein it is clearly stated that the parties' intention was to form a corporation and not a
joint venture.
They specifically mention number 16 under Miscellaneous Provisions which states:
xxx xxx xxx
c) nothing herein contained shall be construed to constitute any of the parties hereto partners
or joint venturers in respect of any transaction hereunder. (At P. 66, Rollo-GR No. 75875)
They object to the admission of other evidence which tends to show that the parties'
agreement was to establish a joint venture presented by the Lagdameo and Young Group on
the ground that it contravenes the parol evidence rule under section 7, Rule 130 of the
Revised Rules of Court. According to them, the Lagdameo and Young Group never pleaded
in their pleading that the "Agreement" failed to express the true intent of the parties.
The parol evidence Rule under Rule 130 provides:
Evidence of written agreements-When the terms of an agreement have been reduced to
writing, it is to be considered as containing all such terms, and therefore, there can be,
between the parties and their successors in interest, no evidence of the terms of the
agreement other than the contents of the writing, except in the following cases:
(a) Where a mistake or imperfection of the writing, or its failure to express the true intent
and agreement of the parties or the validity of the agreement is put in issue by the pleadings.
(b) When there is an intrinsic ambiguity in the writing.
Contrary to ASI Group's stand, the Lagdameo and Young Group pleaded in their Reply and
Answer to Counterclaim in SEC Case No. 2417 that the Agreement failed to express the true
intent of the parties, to wit:
xxx xxx xxx
1. While certain provisions of the Agreement would make it appear that the parties
thereto disclaim being partners or joint venturers such disclaimer is directed at third

32

parties and is not inconsistent with, and does not preclude, the existence of two
distinct groups of stockholders in Saniwares one of which (the Philippine Investors)
shall constitute the majority, and the other ASI shall constitute the minority
stockholder. In any event, the evident intention of the Philippine Investors and ASI in
entering into the Agreement is to enter into ajoint venture enterprise, and if some
words in the Agreement appear to be contrary to the evident intention of the parties,
the latter shall prevail over the former (Art. 1370, New Civil Code). The various
stipulations of a contract shall be interpreted together attributing to the doubtful ones
that sense which may result from all of them taken jointly (Art. 1374, New Civil
Code). Moreover, in order to judge the intention of the contracting parties, their
contemporaneous and subsequent acts shall be principally considered. (Art. 1371,
New Civil Code). (Part I, Original Records, SEC Case No. 2417)
It has been ruled:
In an action at law, where there is evidence tending to prove that the parties joined their
efforts in furtherance of an enterprise for their joint profit, the question whether they
intended by their agreement to create a joint adventure, or to assume some other relation is a
question of fact for the jury. (Binder v. Kessler v 200 App. Div. 40,192 N Y S 653; Pyroa v.
Brownfield (Tex. Civ. A.) 238 SW 725; Hoge v. George, 27 Wyo, 423, 200 P 96 33 C.J. p.
871)
In the instant cases, our examination of important provisions of the Agreement as well as the
testimonial evidence presented by the Lagdameo and Young Group shows that the parties
agreed to establish a joint venture and not a corporation. The history of the organization of
Saniwares and the unusual arrangements which govern its policy making body are all
consistent with a joint venture and not with an ordinary corporation. As stated by the SEC:
According to the unrebutted testimony of Mr. Baldwin Young, he negotiated the Agreement
with ASI in behalf of the Philippine nationals. He testified that ASI agreed to accept the role
of minority vis-a-vis the Philippine National group of investors, on the condition that the
Agreement should contain provisions to protect ASI as the minority.
An examination of the Agreement shows that certain provisions were included to protect the
interests of ASI as the minority. For example, the vote of 7 out of 9 directors is required in
certain enumerated corporate acts [Sec. 3 (b) (ii) (a) of the Agreement]. ASI is contractually
entitled to designate a member of the Executive Committee and the vote of this member is
required for certain transactions [Sec. 3 (b) (i)].
The Agreement also requires a 75% super-majority vote for the amendment of the articles
and by-laws of Saniwares [Sec. 3 (a) (iv) and (b) (iii)]. ASI is also given the right to
designate the president and plant manager [Sec. 5 (6)]. The Agreement further provides that
the sales policy of Saniwares shall be that which is normally followed by ASI [Sec. 13 (a)]

33

and that Saniwares should not export "Standard" products otherwise than through ASI's
Export Marketing Services [Sec. 13 (6)]. Under the Agreement, ASI agreed to provide
technology and know-how to Saniwares and the latter paid royalties for the same. (At p. 2).
xxx xxx xxx
It is pertinent to note that the provisions of the Agreement requiring a 7 out of 9 votes of the
board of directors for certain actions, in effect gave ASI (which designates 3 directors under
the Agreement) an effective veto power. Furthermore, the grant to ASI of the right to
designate certain officers of the corporation; the super-majority voting requirements for
amendments of the articles and by-laws; and most significantly to the issues of tms case, the
provision that ASI shall designate 3 out of the 9 directors and the other stockholders shall
designate the other 6, clearly indicate that there are two distinct groups in Saniwares, namely
ASI, which owns 40% of the capital stock and the Philippine National stockholders who
own the balance of 60%, and that 2) ASI is given certain protections as the minority
stockholder.
Premises considered, we believe that under the Agreement there are two groups of
stockholders who established a corporation with provisions for a special contractual
relationship between the parties, i.e., ASI and the other stockholders. (pp. 4-5)
Section 5 (a) of the agreement uses the word "designated" and not "nominated" or "elected"
in the selection of the nine directors on a six to three ratio. Each group is assured of a fixed
number of directors in the board.
Moreover, ASI in its communications referred to the enterprise as joint venture. Baldwin
Young also testified that Section 16(c) of the Agreement that "Nothing herein contained
shall be construed to constitute any of the parties hereto partners or joint venturers in respect
of any transaction hereunder" was merely to obviate the possibility of the enterprise being
treated as partnership for tax purposes and liabilities to third parties.
Quite often, Filipino entrepreneurs in their desire to develop the industrial and
manufacturing capacities of a local firm are constrained to seek the technology and
marketing assistance of huge multinational corporations of the developed world.
Arrangements are formalized where a foreign group becomes a minority owner of a firm in
exchange for its manufacturing expertise, use of its brand names, and other such assistance.
However, there is always a danger from such arrangements. The foreign group may, from
the start, intend to establish its own sole or monopolistic operations and merely uses the
joint venture arrangement to gain a foothold or test the Philippine waters, so to speak. Or the
covetousness may come later. As the Philippine firm enlarges its operations and becomes
profitable, the foreign group undermines the local majority ownership and actively tries to
completely or predominantly take over the entire company. This undermining of joint
ventures is not consistent with fair dealing to say the least. To the extent that such subversive

34

actions can be lawfully prevented, the courts should extend protection especially in
industries where constitutional and legal requirements reserve controlling ownership to
Filipino citizens.
The Lagdameo Group stated in their appellees' brief in the Court of Appeal
In fact, the Philippine Corporation Code itself recognizes the right of stockholders to enter
into agreements regarding the exercise of their voting rights.
Sec. 100. Agreements by stockholders.xxx xxx xxx
1. An agreement between two or more stockholders, if in writing and signed by the
parties thereto, may provide that in exercising any voting rights, the shares held by
them shall be voted as therein provided, or as they may agree, or as determined in
accordance with a procedure agreed upon by them.
Appellants contend that the above provision is included in the Corporation Code's chapter
on close corporations and Saniwares cannot be a close corporation because it has 95
stockholders. Firstly, although Saniwares had 95 stockholders at the time of the disputed
stockholders meeting, these 95 stockholders are not separate from each other but are
divisible into groups representing a single Identifiable interest. For example, ASI, its
nominees and lawyers count for 13 of the 95 stockholders. The YoungYutivo family count
for another 13 stockholders, the Chamsay family for 8 stockholders, the Santos family for 9
stockholders, the Dy family for 7 stockholders, etc. If the members of one family and/or
business or interest group are considered as one (which, it is respectfully submitted, they
should be for purposes of determining how closely held Saniwares is there were as of 8
March 1983, practically only 17 stockholders of Saniwares. (Please refer to discussion in pp.
5 to 6 of appellees' Rejoinder Memorandum dated 11 December 1984 and Annex "A"
thereof).
Secondly, even assuming that Saniwares is technically not a close corporation because it has
more than 20 stockholders, the undeniable fact is that it is a close-held corporation. Surely,
appellants cannot honestly claim that Saniwares is a public issue or a widely held
corporation.
In the United States, many courts have taken a realistic approach to joint venture
corporations and have not rigidly applied principles of corporation law designed primarily
for public issue corporations. These courts have indicated that express arrangements
between corporate joint ventures should be construed with less emphasis on the ordinary
rules of law usually applied to corporate entities and with more consideration given to the
nature of the agreement between the joint venturers (Please see Wabash Ry v. American

35

Refrigerator Transit Co., 7 F 2d 335; Chicago, M & St. P. Ry v. Des Moines Union Ry; 254
Ass'n. 247 US. 490'; Seaboard Airline Ry v. Atlantic Coast Line Ry; 240 N.C. 495,.82 S.E.
2d 771; Deboy v. Harris, 207 Md., 212,113 A 2d 903; Hathway v. Porter Royalty Pool, Inc.,
296 Mich. 90, 90, 295 N.W. 571; Beardsley v. Beardsley, 138 U.S. 262; "The Legal Status of
Joint Venture Corporations", 11 Vand Law Rev. p. 680,1958). These American cases dealt
with legal questions as to the extent to which the requirements arising from the corporate
form of joint venture corporations should control, and the courts ruled that substantial justice
lay with those litigants who relied on the joint venture agreement rather than the litigants
who relied on the orthodox principles of corporation law.
As correctly held by the SEC Hearing Officer:
It is said that participants in a joint venture, in organizing the joint venture deviate from the
traditional pattern of corporation management. A noted authority has pointed out that just as
in close corporations, shareholders' agreements in joint venture corporations often contain
provisions which do one or more of the following: (1) require greater than majority vote for
shareholder and director action; (2) give certain shareholders or groups of shareholders
power to select a specified number of directors; (3) give to the shareholders control over the
selection and retention of employees; and (4) set up a procedure for the settlement of
disputes by arbitration (See I O' Neal, Close Corporations, 1971 ed., Section 1.06a, pp. 1516) (Decision of SEC Hearing Officer, P. 16)
Thirdly paragraph 2 of Sec. 100 of the Corporation Code does not necessarily imply that
agreements regarding the exercise of voting rights are allowed only in close corporations. As
Campos and Lopez-Campos explain:
Paragraph 2 refers to pooling and voting agreements in particular. Does this provision
necessarily imply that these agreements can be valid only in close corporations as defined by
the Code? Suppose that a corporation has twenty five stockholders, and therefore cannot
qualify as a close corporation under section 96, can some of them enter into an agreement to
vote as a unit in the election of directors? It is submitted that there is no reason for denying
stockholders of corporations other than close ones the right to enter into not voting or
pooling agreements to protect their interests, as long as they do not intend to commit any
wrong, or fraud on the other stockholders not parties to the agreement. Of course, voting or
pooling agreements are perhaps more useful and more often resorted to in close
corporations. But they may also be found necessary even in widely held corporations.
Moreover, since the Code limits the legal meaning of close corporations to those which
comply with the requisites laid down by section 96, it is entirely possible that a corporation
which is in fact a close corporation will not come within the definition. In such case, its
stockholders should not be precluded from entering into contracts like voting agreements if
these are otherwise valid. (Campos & Lopez-Campos, op cit, p. 405)
In short, even assuming that sec. 5(a) of the Agreement relating to the designation or

36

nomination of directors restricts the right of the Agreement's signatories to vote for
directors, such contractual provision, as correctly held by the SEC, is valid and binding upon
the signatories thereto, which include appellants. (Rollo No. 75951, pp. 90-94)
In regard to the question as to whether or not the ASI group may vote their additional equity
during elections of Saniwares' board of directors, the Court of Appeals correctly stated:
As in other joint venture companies, the extent of ASI's participation in the management of
the corporation is spelled out in the Agreement. Section 5(a) hereof says that three of the
nine directors shall be designated by ASI and the remaining six by the other stockholders,
i.e., the Filipino stockholders. This allocation of board seats is obviously in consonance with
the minority position of ASI.
Having entered into a well-defined contractual relationship, it is imperative that the parties
should honor and adhere to their respective rights and obligations thereunder. Appellants
seem to contend that any allocation of board seats, even in joint venture corporations, are
null and void to the extent that such may interfere with the stockholder's rights to cumulative
voting as provided in Section 24 of the Corporation Code. This Court should not be prepared
to hold that any agreement which curtails in any way cumulative voting should be struck
down, even if such agreement has been freely entered into by experienced businessmen and
do not prejudice those who are not parties thereto. It may well be that it would be more
cogent to hold, as the Securities and Exchange Commission has held in the decision
appealed from, that cumulative voting rights may be voluntarily waived by stockholders
who enter into special relationships with each other to pursue and implement specific
purposes, as in joint venture relationships between foreign and local stockholders, so long as
such agreements do not adversely affect third parties.
In any event, it is believed that we are not here called upon to make a general rule on this
question. Rather, all that needs to be done is to give life and effect to the particular
contractual rights and obligations which the parties have assumed for themselves.
On the one hand, the clearly established minority position of ASI and the contractual
allocation of board seats Cannot be disregarded. On the other hand, the rights of the
stockholders to cumulative voting should also be protected.
In our decision sought to be reconsidered, we opted to uphold the second over the first.
Upon further reflection, we feel that the proper and just solution to give due consideration to
both factors suggests itself quite clearly. This Court should recognize and uphold the
division of the stockholders into two groups, and at the same time uphold the right of the
stockholders within each group to cumulative voting in the process of determining who the
group's nominees would be. In practical terms, as suggested by appellant Luciano E. Salazar
himself, this means that if the Filipino stockholders cannot agree who their six nominees
will be, a vote would have to be taken among the Filipino stockholders only. During this

37

voting, each Filipino stockholder can cumulate his votes. ASI, however, should not be
allowed to interfere in the voting within the Filipino group. Otherwise, ASI would be able to
designate more than the three directors it is allowed to designate under the Agreement, and
may even be able to get a majority of the board seats, a result which is clearly contrary to the
contractual intent of the parties.
Such a ruling will give effect to both the allocation of the board seats and the stockholder's
right to cumulative voting. Moreover, this ruling will also give due consideration to the issue
raised by the appellees on possible violation or circumvention of the Anti-Dummy Law
(Com. Act No. 108, as amended) and the nationalization requirements of the Constitution
and the laws if ASI is allowed to nominate more than three directors. (Rollo-75875, pp. 3839)
The ASI Group and petitioner Salazar, now reiterate their theory that the ASI Group has the
right to vote their additional equity pursuant to Section 24 of the Corporation Code which
gives the stockholders of a corporation the right to cumulate their votes in electing directors.
Petitioner Salazar adds that this right if granted to the ASI Group would not necessarily
mean a violation of the Anti-Dummy Act (Commonwealth Act 108, as amended). He cites
section 2-a thereof which provides:
And provided finally that the election of aliens as members of the board of directors or
governing body of corporations or associations engaging in partially nationalized activities
shall be allowed in proportion to their allowable participation or share in the capital of such
entities. (amendments introduced by Presidential Decree 715, section 1, promulgated May
28, 1975)
The ASI Group's argument is correct within the context of Section 24 of the Corporation
Code. The point of query, however, is whether or not that provision is applicable to a joint
venture with clearly defined agreements:
The legal concept of ajoint venture is of common law origin. It has no precise legal
definition but it has been generally understood to mean an organization formed for some
temporary purpose. (Gates v. Megargel, 266 Fed. 811 [1920]) It is in fact hardly
distinguishable from the partnership, since their elements are similar community of interest
in the business, sharing of profits and losses, and a mutual right of control. Blackner v. Mc
Dermott, 176 F. 2d. 498, [1949]; Carboneau v. Peterson, 95 P. 2d., 1043 [1939]; Buckley v.
Chadwick, 45 Cal. 2d. 183, 288 P. 2d. 12 289 P. 2d. 242 [1955]). The main distinction cited
by most opinions in common law jurisdictions is that the partnership contemplates a general
business with some degree of continuity, while the joint venture is formed for the execution
of a single transaction, and is thus of a temporary nature. (Tufts v. Mann 116 Cal. App. 170,
2 P. 2d. 500 [1931]; Harmon v. Martin, 395 111. 595, 71 NE 2d. 74 [1947]; Gates v.
Megargel 266 Fed. 811 [1920]). This observation is not entirely accurate in this jurisdiction,
since under the Civil Code, a partnership may be particular or universal, and a particular

38

partnership may have for its object a specific undertaking. (Art. 1783, Civil Code). It would
seem therefore that under Philippine law, a joint venture is a form of partnership and should
thus be governed by the law of partnerships. The Supreme Court has however recognized a
distinction between these two business forms, and has held that although a corporation
cannot enter into a partnership contract, it may however engage in a joint venture with
others. (At p. 12, Tuazon v. Bolanos, 95 Phil. 906 [1954]) (Campos and Lopez-Campos
Comments, Notes and Selected Cases, Corporation Code 1981)
Moreover, the usual rules as regards the construction and operations of contracts generally
apply to a contract of joint venture. (O' Hara v. Harman 14 App. Dev. (167) 43 NYS 556).
Bearing these principles in mind, the correct view would be that the resolution of the
question of whether or not the ASI Group may vote their additional equity lies in the
agreement of the parties.
Necessarily, the appellate court was correct in upholding the agreement of the parties as
regards the allocation of director seats under Section 5 (a) of the "Agreement," and the right
of each group of stockholders to cumulative voting in the process of determining who the
group's nominees would be under Section 3 (a) (1) of the "Agreement." As pointed out by
SEC, Section 5 (a) of the Agreement relates to the manner of nominating the members of the
board of directors while Section 3 (a) (1) relates to the manner of voting for these nominees.
This is the proper interpretation of the Agreement of the parties as regards the election of
members of the board of directors.
To allow the ASI Group to vote their additional equity to help elect even a Filipino director
who would be beholden to them would obliterate their minority status as agreed upon by the
parties. As aptly stated by the appellate court:
... ASI, however, should not be allowed to interfere in the voting within the Filipino group.
Otherwise, ASI would be able to designate more than the three directors it is allowed to
designate under the Agreement, and may even be able to get a majority of the board seats, a
result which is clearly contrary to the contractual intent of the parties.
Such a ruling will give effect to both the allocation of the board seats and the stockholder's
right to cumulative voting. Moreover, this ruling will also give due consideration to the issue
raised by the appellees on possible violation or circumvention of the Anti-Dummy Law
(Com. Act No. 108, as amended) and the nationalization requirements of the Constitution
and the laws if ASI is allowed to nominate more than three directors. (At p. 39, Rollo,
75875)
Equally important as the consideration of the contractual intent of the parties is the
consideration as regards the possible domination by the foreign investors of the enterprise in

39

violation of the nationalization requirements enshrined in the Constitution and


circumvention of the Anti-Dummy Act. In this regard, petitioner Salazar's position is that
the Anti-Dummy Act allows the ASI group to elect board directors in proportion to their
share in the capital of the entity. It is to be noted, however, that the same law also limits the
election of aliens as members of the board of directors in proportion to their allowance
participation of said entity. In the instant case, the foreign Group ASI was limited to
designate three directors. This is the allowable participation of the ASI Group. Hence, in
future dealings, this limitation of six to three board seats should always be maintained as
long as the joint venture agreement exists considering that in limiting 3 board seats in the 9man board of directors there are provisions already agreed upon and embodied in the parties'
Agreement to protect the interests arising from the minority status of the foreign investors.
With these findings, we the decisions of the SEC Hearing Officer and SEC which were
impliedly affirmed by the appellate court declaring Messrs. Wolfgang Aurbach, John
Griffin, David P Whittingham, Emesto V. Lagdameo, Baldwin young, Raul A. Boncan,
Emesto V. Lagdameo, Jr., Enrique Lagdameo, and George F. Lee as the duly elected
directors of Saniwares at the March 8,1983 annual stockholders' meeting.
On the other hand, the Lagdameo and Young Group (petitioners in G.R. No. 75951) object
to a cumulative voting during the election of the board of directors of the enterprise as ruled
by the appellate court and submits that the six (6) directors allotted the Filipino stockholders
should be selected by consensus pursuant to section 5 (a) of the Agreement which uses the
word "designate" meaning "nominate, delegate or appoint."
They also stress the possibility that the ASI Group might take control of the enterprise if the
Filipino stockholders are allowed to select their nominees separately and not as a common
slot determined by the majority of their group.
Section 5 (a) of the Agreement which uses the word designates in the allocation of board
directors should not be interpreted in isolation. This should be construed in relation to
section 3 (a) (1) of the Agreement. As we stated earlier, section 3(a) (1) relates to the
manner of voting for these nominees which is cumulative voting while section 5(a) relates to
the manner of nominating the members of the board of directors. The petitioners in G.R. No.
75951 agreed to this procedure, hence, they cannot now impugn its legality.
The insinuation that the ASI Group may be able to control the enterprise under the
cumulative voting procedure cannot, however, be ignored. The validity of the cumulative
voting procedure is dependent on the directors thus elected being genuine members of the
Filipino group, not voters whose interest is to increase the ASI share in the management of
Saniwares. The joint venture character of the enterprise must always be taken into account,
so long as the company exists under its original agreement. Cumulative voting may not be
used as a device to enable ASI to achieve stealthily or indirectly what they cannot
accomplish openly. There are substantial safeguards in the Agreement which are intended to

40

preserve the majority status of the Filipino investors as well as to maintain the minority
status of the foreign investors group as earlier discussed. They should be maintained.
WHEREFORE, the petitions in G.R. Nos. 75975-76 and G.R. No. 75875 are DISMISSED
and the petition in G.R. No. 75951 is partly GRANTED. The amended decision of the Court
of Appeals is MODIFIED in that Messrs. Wolfgang Aurbach John Griffin, David
Whittingham Emesto V. Lagdameo, Baldwin Young, Raul A. Boncan, Ernesto R.
Lagdameo, Jr., Enrique Lagdameo, and George F. Lee are declared as the duly elected
directors of Saniwares at the March 8,1983 annual stockholders' meeting. In all other
respects, the questioned decision is AFFIRMED. Costs against the petitioners in G.R. Nos.
75975-76 and G.R. No. 75875.
SO ORDERED.
Fernan, C.J., (Chairman), Bidin and Cortes, JJ., concur.
Feliciano, J., took no part.

G.R. No. 15574 September 17, 1919


SMITH, BELL & COMPANY (LTD.), petitioner, vs. JOAQUIN NATIVIDAD, Collector of
Customs of the port of Cebu, respondent.
Republic of the Philippines SUPREME COURT Manila
EN BANC
G.R. No. 15574 September 17, 1919
SMITH, BELL & COMPANY (LTD.), petitioner, vs. JOAQUIN NATIVIDAD, Collector of
Customs of the port of Cebu, respondent.
Ross and Lawrence for petitioner. Attorney-General Paredes for respondent.
MALCOLM, J.:
A writ of mandamus is prayed for by Smith, Bell & Co. (Ltd.), against Joaquin Natividad,
Collector of Customs of the port of Cebu, Philippine Islands, to compel him to issue a
certificate of Philippine registry to the petitioner for its motor vessel Bato. The AttorneyGeneral, acting as counsel for respondent, demurs to the petition on the general ground that
it does not state facts sufficient to constitute a cause of action. While the facts are thus
admitted, and while, moreover, the pertinent provisions of law are clear and understandable,

41

and interpretative American jurisprudence is found in abundance, yet the issue submitted is
not lightly to be resolved. The question, flatly presented, is, whether Act. No. 2761 of the
Philippine Legislature is valid or, more directly stated, whether the Government of the
Philippine Islands, through its Legislature, can deny the registry of vessels in its coastwise
trade to corporations having alien stockholders.
FACTS.
Smith, Bell & Co., (Ltd.), is a corporation organized and existing under the laws of the
Philippine Islands. A majority of its stockholders are British subjects. It is the owner of a
motor vessel known as the Bato built for it in the Philippine Islands in 1916, of more than
fifteen tons gross The Bato was brought to Cebu in the present year for the purpose of
transporting plaintiff's merchandise between ports in the Islands. Application was made at
Cebu, the home port of the vessel, to the Collector of Customs for a certificate of Philippine
registry. The Collector refused to issue the certificate, giving as his reason that all the
stockholders of Smith, Bell & Co., Ltd., were not citizens either of the United States or of
the Philippine Islands. The instant action is the result.
LAW.
The Act of Congress of April 29, 1908, repealing the Shipping Act of April 30, 1906 but
reenacting a portion of section 3 of this Law, and still in force, provides in its section 1:
That until Congress shall have authorized the registry as vessels of the United States of
vessels owned in the Philippine Islands, the Government of the Philippine Islands is hereby
authorized to adopt, from time to time, and enforce regulations governing the transportation
of merchandise and passengers between ports or places in the Philippine Archipelago. (35
Stat. at L., 70; Section 3912, U. S. Comp Stat. [1916]; 7 Pub. Laws, 364.)
The Act of Congress of August 29, 1916, commonly known as the Jones Law, still in force,
provides in section 3, (first paragraph, first sentence), 6, 7, 8, 10, and 31, as follows.
SEC. 3. That no law shall be enacted in said Islands which shall deprive any person of life,
liberty, or property without due process of law, or deny to any person therein the equal
protection of the laws. . . .
SEC. 6. That the laws now in force in the Philippines shall continue in force and effect,
except as altered, amended, or modified herein, until altered, amended, or repealed by the
legislative authority herein provided or by Act of Congress of the United States.
SEC. 7. That the legislative authority herein provided shall have power, when not
inconsistent with this Act, by due enactment to amend, alter modify, or repeal any law, civil
or criminal, continued in force by this Act as it may from time to time see fit

42

This power shall specifically extend with the limitation herein provided as to the tariff to all
laws relating to revenue provided as to the tariff to all laws relating to revenue and taxation
in effect in the Philippines.
SEC. 8. That general legislative power, except as otherwise herein provided, is hereby
granted to the Philippine Legislature, authorized by this Act.
SEC. 10. That while this Act provides that the Philippine government shall have the
authority to enact a tariff law the trade relations between the islands and the United States
shall continue to be governed exclusively by laws of the Congress of the United States:
Provided, That tariff acts or acts amendatory to the tariff of the Philippine Islands shall not
become law until they shall receive the approval of the President of the United States, nor
shall any act of the Philippine Legislature affecting immigration or the currency or coinage
laws of the Philippines become a law until it has been approved by the President of the
United States: Provided further, That the President shall approve or disapprove any act
mentioned in the foregoing proviso within six months from and after its enactment and
submission for his approval, and if not disapproved within such time it shall become a law
the same as if it had been specifically approved.
SEC. 31. That all laws or parts of laws applicable to the Philippines not in conflict with any
of the provisions of this Act are hereby continued in force and effect." (39 Stat at L., 546.)
On February 23, 1918, the Philippine Legislature enacted Act No. 2761. The first section of
this law amended section 1172 of the Administrative Code to read as follows:
SEC. 1172. Certificate of Philippine register. Upon registration of a vessel of domestic
ownership, and of more than fifteen tons gross, a certificate of Philippine register shall be
issued for it. If the vessel is of domestic ownership and of fifteen tons gross or less, the
taking of the certificate of Philippine register shall be optional with the owner.
"Domestic ownership," as used in this section, means ownership vested in some one or more
of the following classes of persons: (a) Citizens or native inhabitants of the Philippine
Islands; (b) citizens of the United States residing in the Philippine Islands; (c) any
corporation or company composed wholly of citizens of the Philippine Islands or of the
United States or of both, created under the laws of the United States, or of any State thereof,
or of thereof, or the managing agent or master of the vessel resides in the Philippine Islands
Any vessel of more than fifteen gross tons which on February eighth, nineteen hundred and
eighteen, had a certificate of Philippine register under existing law, shall likewise be deemed
a vessel of domestic ownership so long as there shall not be any change in the ownership
thereof nor any transfer of stock of the companies or corporations owning such vessel to
person not included under the last preceding paragraph.

43

Sections 2 and 3 of Act No. 2761 amended sections 1176 and 1202 of the Administrative
Code to read as follows:
SEC. 1176. Investigation into character of vessel. No application for a certificate of
Philippine register shall be approved until the collector of customs is satisfied from an
inspection of the vessel that it is engaged or destined to be engaged in legitimate trade and
that it is of domestic ownership as such ownership is defined in section eleven hundred and
seventy-two of this Code.
The collector of customs may at any time inspect a vessel or examine its owner, master,
crew, or passengers in order to ascertain whether the vessel is engaged in legitimate trade
and is entitled to have or retain the certificate of Philippine register.
SEC. 1202. Limiting number of foreign officers and engineers on board vessels. No
Philippine vessel operating in the coastwise trade or on the high seas shall be permitted to
have on board more than one master or one mate and one engineer who are not citizens of
the United States or of the Philippine Islands, even if they hold licenses under section one
thousand one hundred and ninety-nine hereof. No other person who is not a citizen of the
United States or of the Philippine Islands shall be an officer or a member of the crew of such
vessel. Any such vessel which fails to comply with the terms of this section shall be required
to pay an additional tonnage tax of fifty centavos per net ton per month during the
continuance of said failure.
ISSUES.
Predicated on these facts and provisions of law, the issues as above stated recur, namely,
whether Act No 2761 of the Philippine Legislature is valid in whole or in part whether
the Government of the Philippine Islands, through its Legislature, can deny the registry of
vessel in its coastwise trade to corporations having alien stockholders .
OPINION.
1. Considered from a positive standpoint, there can exist no measure of doubt as to the
power of the Philippine Legislature to enact Act No. 2761. The Act of Congress of
April 29, 1908, with its specific delegation of authority to the Government of the
Philippine Islands to regulate the transportation of merchandise and passengers
between ports or places therein, the liberal construction given to the provisions of the
Philippine Bill, the Act of Congress of July 1, 1902, by the courts, and the grant by
the Act of Congress of August 29, 1916, of general legislative power to the Philippine
Legislature, are certainly superabundant authority for such a law. While the Act of the
local legislature may in a way be inconsistent with the Act of Congress regulating the
coasting trade of the Continental United States, yet the general rule that only such
laws of the United States have force in the Philippines as are expressly extended

44

thereto, and the abnegation of power by Congress in favor of the Philippine Islands
would leave no starting point for convincing argument. As a matter of fact, counsel
for petitioner does not assail legislative action from this direction (See U. S. vs. Bull
[1910], 15 Phil., 7; Sinnot vs. Davenport [1859] 22 How., 227.)
2. It is from the negative, prohibitory standpoint that counsel argues against the
constitutionality of Act No. 2761. The first paragraph of the Philippine Bill of Rights
of the Philippine Bill, repeated again in the first paragraph of the Philippine Bill of
Rights as set forth in the Jones Law, provides "That no law shall be enacted in said
Islands which shall deprive any person of life, liberty, or property without due process
of law, or deny to any person therein the equal protection of the laws." Counsel says
that Act No. 2761 denies to Smith, Bell & Co., Ltd., the equal protection of the laws
because it, in effect, prohibits the corporation from owning vessels, and because
classification of corporations based on the citizenship of one or more of their
stockholders is capricious, and that Act No. 2761 deprives the corporation of its
properly without due process of law because by the passage of the law company was
automatically deprived of every beneficial attribute of ownership in the Bato and left
with the naked title to a boat it could not use .
The guaranties extended by the Congress of the United States to the Philippine Islands have
been used in the same sense as like provisions found in the United States Constitution.
While the "due process of law and equal protection of the laws" clause of the Philippine Bill
of Rights is couched in slightly different words than the corresponding clause of the
Fourteenth Amendment to the United States Constitution, the first should be interpreted and
given the same force and effect as the latter. (Kepner vs. U.S. [1904], 195 U. S., 100; Sierra
vs. Mortiga [1907], 204 U. S.,.470; U. S. vs. Bull [1910], 15 Phil., 7.) The meaning of the
Fourteenth Amendment has been announced in classic decisions of the United States
Supreme Court. Even at the expense of restating what is so well known, these basic
principles must again be set down in order to serve as the basis of this decision.
The guaranties of the Fourteenth Amendment and so of the first paragraph of the Philippine
Bill of Rights, are universal in their application to all person within the territorial
jurisdiction, without regard to any differences of race, color, or nationality. The word
"person" includes aliens. (Yick Wo vs. Hopkins [1886], 118 U. S., 356; Truax vs. Raich
[1915], 239 U. S., 33.) Private corporations, likewise, are "persons" within the scope of the
guaranties in so far as their property is concerned. (Santa Clara County vs. Southern Pac. R.
R. Co. [1886], 118.U. S., 394; Pembina Mining Co. vs. Pennsylvania [1888],.125 U. S., 181
Covington & L. Turnpike Road Co. vs. Sandford [1896], 164 U. S., 578.) Classification with
the end in view of providing diversity of treatment may be made among corporations, but
must be based upon some reasonable ground and not be a mere arbitrary selection (Gulf,
Colorado & Santa Fe Railway Co. vs. Ellis [1897],.165 U. S., 150.) Examples of laws held
unconstitutional because of unlawful discrimination against aliens could be cited. Generally,

45

these decisions relate to statutes which had attempted arbitrarily to forbid aliens to engage in
ordinary kinds of business to earn their living. (State vs. Montgomery [1900], 94 Maine,
192, peddling but see. Commonwealth vs. Hana [1907], 195 Mass., 262; Templar vs.
Board of Examiners of Barbers [1902], 131 Mich., 254, barbers; Yick Wo vs. Hopkins
[1886], 118 U. S.,.356, discrimination against Chinese; Truax vs. Raich [1915], 239 U. S.,
33; In re Parrott [1880], 1 Fed , 481; Fraser vs. McConway & Torley Co. [1897], 82 Fed ,
257; Juniata Limestone Co. vs. Fagley [1898], 187 Penn., 193, all relating to the
employment of aliens by private corporations.)
A literal application of general principles to the facts before us would, of course, cause the
inevitable deduction that Act No. 2761 is unconstitutional by reason of its denial to a
corporation, some of whole members are foreigners, of the equal protection of the laws. Like
all beneficient propositions, deeper research discloses provisos. Examples of a denial of
rights to aliens notwithstanding the provisions of the Fourteenth Amendment could be cited.
(Tragesser vs. Gray [1890], 73 Md., 250, licenses to sell spirituous liquors denied to persons
not citizens of the United States; Commonwealth vs. Hana [1907], 195 Mass , 262,
excluding aliens from the right to peddle; Patsone vs. Commonwealth of Pennsylvania
[1914], 232 U. S. , 138, prohibiting the killing of any wild bird or animal by any
unnaturalized foreign-born resident; Ex parte Gilleti [1915], 70 Fla., 442, discriminating in
favor of citizens with reference to the taking for private use of the common property in fish
and oysters found in the public waters of the State; Heim vs. McCall [1915], 239 U. S.,.175,
and Crane vs. New York [1915], 239 U. S., 195, limiting employment on public works by, or
for, the State or a municipality to citizens of the United States.)
One of the exceptions to the general rule, most persistent and far reaching in influence is,
that neither the Fourteenth Amendment to the United States Constitution, broad and
comprehensive as it is, nor any other amendment, "was designed to interfere with the power
of the State, sometimes termed its `police power,' to prescribe regulations to promote the
health, peace, morals, education, and good order of the people, and legislate so as to increase
the industries of the State, develop its resources and add to its wealth and prosperity. From
the very necessities of society, legislation of a special character, having these objects in
view, must often be had in certain districts." (Barbier vs. Connolly [1884], 113 U.S., 27;
New Orleans Gas Co. vs. Lousiana Light Co. [1885], 115 U.S., 650.) This is the same police
power which the United States Supreme Court say "extends to so dealing with the conditions
which exist in the state as to bring out of them the greatest welfare in of its people." (Bacon
vs. Walker [1907], 204 U.S., 311.) For quite similar reasons, none of the provision of the
Philippine Organic Law could could have had the effect of denying to the Government of
the Philippine Islands, acting through its Legislature, the right to exercise that most
essential, insistent, and illimitable of powers, the sovereign police power, in the promotion
of the general welfare and the public interest. (U. S. vs. Toribio [1910], 15 Phil., 85;
Churchill and Tait vs. Rafferty [1915], 32 Phil., 580; Rubi vs. Provincial Board of Mindoro
[1919], 39 Phil., 660.) Another notable exception permits of the regulation or distribution of

46

the public domain or the common property or resources of the people of the State, so that
use may be limited to its citizens. (Ex parte Gilleti [1915], 70 Fla., 442; McCready vs.
Virginia [1876], 94 U. S., 391; Patsone vs. Commonwealth of Pennsylvania [1914], 232U.
S., 138.) Still another exception permits of the limitation of employment in the construction
of public works by, or for, the State or a municipality to citizens of the United States or of
the State. (Atkin vs. Kansas [1903],191 U. S., 207; Heim vs. McCall [1915], 239 U.S., 175;
Crane vs. New York [1915], 239 U. S., 195.) Even as to classification, it is admitted that a
State may classify with reference to the evil to be prevented; the question is a practical one,
dependent upon experience. (Patsone vs. Commonwealth of Pennsylvania [1914], 232 U. S.,
138.)
To justify that portion of Act no. 2761 which permits corporations or companies to obtain a
certificate of Philippine registry only on condition that they be composed wholly of citizens
of the Philippine Islands or of the United States or both, as not infringing Philippine Organic
Law, it must be done under some one of the exceptions here mentioned This must be done,
moreover, having particularly in mind what is so often of controlling effect in this
jurisdiction our local experience and our peculiar local conditions.
To recall a few facts in geography, within the confines of Philippine jurisdictional limits are
found more than three thousand islands. Literally, and absolutely, steamship lines are, for an
Insular territory thus situated, the arteries of commerce. If one be severed, the life-blood of
the nation is lost. If on the other hand these arteries are protected, then the security of the
country and the promotion of the general welfare is sustained. Time and again, with such
conditions confronting it, has the executive branch of the Government of the Philippine
Islands, always later with the sanction of the judicial branch, taken a firm stand with
reference to the presence of undesirable foreigners. The Government has thus assumed to act
for the all-sufficient and primitive reason of the benefit and protection of its own citizens
and of the self-preservation and integrity of its dominion. (In re Patterson [1902], 1 Phil., 93;
Forbes vs. Chuoco, Tiaco and Crossfield [1910], 16 Phil., 534;.228 U.S., 549; In re
McCulloch Dick [1918], 38 Phil., 41.) Boats owned by foreigners, particularly by such solid
and reputable firms as the instant claimant, might indeed traverse the waters of the
Philippines for ages without doing any particular harm. Again, some evilminded foreigner
might very easily take advantage of such lavish hospitality to chart Philippine waters, to
obtain valuable information for unfriendly foreign powers, to stir up insurrection, or to
prejudice Filipino or American commerce. Moreover, under the Spanish portion of
Philippine law, the waters within the domestic jurisdiction are deemed part of the national
domain, open to public use. (Book II, Tit. IV, Ch. I, Civil Code; Spanish Law of Waters of
August 3, 1866, arts 1, 2, 3.) Common carriers which in the Philippines as in the United
States and other countries are, as Lord Hale said, "affected with a public interest," can only
be permitted to use these public waters as a privilege and under such conditions as to the
representatives of the people may seem wise. (See De Villata vs. Stanley [1915], 32 Phil.,
541.)

47

In Patsone vs. Commonwealth of Pennsylvania ([1913], 232 U.S., 138), a case herein before
mentioned, Justice Holmes delivering the opinion of the United States Supreme Court said:
This statute makes it unlawful for any unnaturalized foreign-born resident to kill any wild
bird or animal except in defense of person or property, and `to that end' makes it unlawful
for such foreign-born person to own or be possessed of a shotgun or rifle; with a penalty of
$25 and a forfeiture of the gun or guns. The plaintiff in error was found guilty and was
sentenced to pay the abovementioned fine. The judgment was affirmed on successive
appeals. (231 Pa., 46; 79 Atl., 928.) He brings the case to this court on the ground that the
statute is contrary to the 14th Amendment and also is in contravention of the treaty between
the United States and Italy, to which latter country the plaintiff in error belongs .
Under the 14th Amendment the objection is twofold; unjustifiably depriving the alien of
property, and discrimination against such aliens as a class. But the former really depends
upon the latter, since it hardly can be disputed that if the lawful object, the protection of wild
life (Geer vs. Connecticut, 161 U.S., 519; 40 L. ed., 793; 16 Sup. Ct. Rep., 600), warrants
the discrimination, the, means adopted for making it effective also might be adopted. . . .
The discrimination undoubtedly presents a more difficult question. But we start with
reference to the evil to be prevented, and that if the class discriminated against is or
reasonably might be considered to define those from whom the evil mainly is to be feared, it
properly may be picked out. A lack of abstract symmetry does not matter. The question is a
practical one, dependent upon experience. . . .
The question therefore narrows itself to whether this court can say that the legislature of
Pennsylvania was not warranted in assuming as its premise for the law that resident
unnaturalized aliens were the peculiar source of the evil that it desired to prevent. (Barrett
vs. Indiana,. 229 U.S., 26, 29; 57 L. ed., 1050, 1052; 33 Sup. Ct. Rep., 692.)
Obviously the question, so stated, is one of local experience, on which this court ought to be
very slow to declare that the state legislature was wrong in its facts (Adams vs. Milwaukee,
228 U.S., 572, 583; 57 L. ed., 971,.977; 33 Sup. Ct. Rep., 610.) If we might trust popular
speech in some states it was right; but it is enough that this court has no such knowledge of
local conditions as to be able to say that it was manifestly wrong. . . .
Judgment affirmed.
We are inclined to the view that while Smith, Bell & Co. Ltd., a corporation having alien
stockholders, is entitled to the protection afforded by the due-process of law and equal
protection of the laws clause of the Philippine Bill of Rights, nevertheless, Act No. 2761 of
the Philippine Legislature, in denying to corporations such as Smith, Bell &. Co. Ltd., the
right to register vessels in the Philippines coastwise trade, does not belong to that vicious
species of class legislation which must always be condemned, but does fall within

48

authorized exceptions, notably, within the purview of the police power, and so does not
offend against the constitutional provision.
This opinion might well be brought to a close at this point. It occurs to us, however, that the
legislative history of the United States and the Philippine Islands, and, probably, the
legislative history of other countries, if we were to take the time to search it out, might
disclose similar attempts at restriction on the right to enter the coastwise trade, and might
thus furnish valuable aid by which to ascertain and, if possible, effectuate legislative
intention.
1. The power to regulate commerce, expressly delegated to the Congress by the
Constitution, includes the power to nationalize ships built and owned in the United
States by registries and enrollments, and the recording of the muniments of title of
American vessels. The Congress "may encourage or it may entirely prohibit such
commerce, and it may regulate in any way it may see fit between these two extremes."
(U.S. vs. Craig [1886], 28 Fed., 795; Gibbons vs. Ogden [1824], 9 Wheat., 1; The
Passenger Cases [1849], 7 How., 283.)
Acting within the purview of such power, the first Congress of the United States had not
been long convened before it enacted on September 1, 1789, "An Act for Registering and
Clearing Vessels, Regulating the Coasting Trade, and for other purposes." Section 1 of this
law provided that for any ship or vessel to obtain the benefits of American registry, it must
belong wholly to a citizen or citizens of the United States "and no other." (1 Stat. at L., 55.)
That Act was shortly after repealed, but the same idea was carried into the Acts of Congress
of December 31, 1792 and February 18, 1793. (1 Stat. at L., 287, 305.).Section 4 of the Act
of 1792 provided that in order to obtain the registry of any vessel, an oath shall be taken and
subscribed by the owner, or by one of the owners thereof, before the officer authorized to
make such registry, declaring, "that there is no subject or citizen of any foreign prince or
state, directly or indirectly, by way of trust, confidence, or otherwise, interested in such
vessel, or in the profits or issues thereof." Section 32 of the Act of 1793 even went so far as
to say "that if any licensed ship or vessel shall be transferred to any person who is not at the
time of such transfer a citizen of and resident within the United States, ... every such vessel
with her tackle, apparel, and furniture, and the cargo found on board her, shall be forefeited."
In case of alienation to a foreigner, Chief Justice Marshall said that all the privileges of an
American bottom were ipso facto forfeited. (U.S. vs. Willings and Francis [1807], 4 Cranch,
48.) Even as late as 1873, the Attorney-General of the United States was of the opinion that
under the provisions of the Act of December 31, 1792, no vessel in which a foreigner is
directly or indirectly interested can lawfully be registered as a vessel of the United. States.
(14 Op. Atty.-Gen. [U.S.], 340.)
These laws continued in force without contest, although possibly the Act of March 3, 1825,
may have affected them, until amended by the Act of May 28, 1896 (29 Stat. at L., 188)

49

which extended the privileges of registry from vessels wholly owned by a citizen or citizens
of the United States to corporations created under the laws of any of the states thereof. The
law, as amended, made possible the deduction that a vessel belonging to a domestic
corporation was entitled to registry or enrollment even though some stock of the company
be owned by aliens. The right of ownership of stock in a corporation was thereafter distinct
from the right to hold the property by the corporation (Humphreys vs. McKissock [1890],
140 U.S., 304; Queen vs. Arnaud [1846], 9 Q. B., 806; 29 Op. Atty.-Gen. [U.S.],188.)
On American occupation of the Philippines, the new government found a substantive law in
operation in the Islands with a civil law history which it wisely continued in force Article
fifteen of the Spanish Code of Commerce permitted any foreigner to engage in Philippine
trade if he had legal capacity to do so under the laws of his nation. When the Philippine
Commission came to enact the Customs Administrative Act (No. 355) in 1902, it returned to
the old American policy of limiting the protection and flag of the United States to vessels
owned by citizens of the United States or by native inhabitants of the Philippine Islands
(Sec. 117.) Two years later, the same body reverted to the existing Congressional law by
permitting certification to be issued to a citizen of the United States or to a corporation or
company created under the laws of the United States or of any state thereof or of the
Philippine Islands (Act No. 1235, sec. 3.) The two administration codes repeated the same
provisions with the necessary amplification of inclusion of citizens or native inhabitants of
the Philippine Islands (Adm. Code of 1916, sec. 1345; Adm. Code of 1917, sec. 1172). And
now Act No. 2761 has returned to the restrictive idea of the original Customs Administrative
Act which in turn was merely a reflection of the statutory language of the first American
Congress.
Provisions such as those in Act No. 2761, which deny to foreigners the right to a certificate
of Philippine registry, are thus found not to be as radical as a first reading would make them
appear.
Without any subterfuge, the apparent purpose of the Philippine Legislature is seen to be to
enact an anti-alien shipping act. The ultimate purpose of the Legislature is to encourage
Philippine ship-building. This, without doubt, has, likewise, been the intention of the United
States Congress in passing navigation or tariff laws on different occasions. The object of
such a law, the United States Supreme Court once said, was to encourage American trade,
navigation, and ship-building by giving American ship-owners exclusive privileges. (Old
Dominion Steamship Co. vs. Virginia [1905], 198 U.S., 299; Kent's Commentaries, Vol. 3,
p. 139.)
In the concurring opinion of Justice Johnson in Gibbons vs. Ogden ([1824], 9 Wheat., 1) is
found the following:
Licensing acts, in fact, in legislation, are universally restraining acts; as, for example, acts
licensing gaming houses, retailers of spirituous liquors, etc. The act, in this instance, is

50

distinctly of that character, and forms part of an extensive system, the object of which is to
encourage American shipping, and place them on an equal footing with the shipping of other
nations. Almost every commercial nation reserves to its own subjects a monopoly of its
coasting trade; and a countervailing privilege in favor of American shipping is
contemplated, in the whole legislation of the United States on this subject. It is not to give
the vessel an American character, that the license is granted; that effect has been correctly
attributed to the act of her enrollment. But it is to confer on her American privileges, as
contradistinguished from foreign; and to preserve the. Government from fraud by foreigners,
in surreptitiously intruding themselves into the American commercial marine, as well as
frauds upon the revenue in the trade coastwise, that this whole system is projected.
The United States Congress in assuming its grave responsibility of legislating wisely for a
new country did so imbued with a spirit of Americanism. Domestic navigation and trade, it
decreed, could only be carried on by citizens of the United States. If the representatives of
the American people acted in this patriotic manner to advance the national policy, and if
their action was accepted without protest in the courts, who can say that they did not enact
such beneficial laws under the all-pervading police power, with the prime motive of
safeguarding the country and of promoting its prosperity? Quite similarly, the Philippine
Legislature made up entirely of Filipinos, representing the mandate of the Filipino people
and the guardian of their rights, acting under practically autonomous powers, and imbued
with a strong sense of Philippinism, has desired for these Islands safety from foreign
interlopers, the use of the common property exclusively by its citizens and the citizens of the
United States, and protection for the common good of the people. Who can say, therefore,
especially can a court, that with all the facts and circumstances affecting the Filipino people
before it, the Philippine Legislature has erred in the enactment of Act No. 2761?
Surely, the members of the judiciary are not expected to live apart from active life, in
monastic seclusion amidst dusty tomes and ancient records, but, as keen spectators of
passing events and alive to the dictates of the general the national welfare, can incline
the scales of their decisions in favor of that solution which will most effectively promote the
public policy. All the presumption is in favor of the constitutionally of the law and without
good and strong reasons, courts should not attempt to nullify the action of the Legislature.
"In construing a statute enacted by the Philippine Commission (Legislature), we deem it our
duty not to give it a construction which would be repugnant to an Act of Congress, if the
language of the statute is fairly susceptible of another construction not in conflict with the
higher law." (In re Guaria [1913], 24. Phil., 36; U.S. vs. Ten Yu [1912], 24 Phil., 1.) That is
the true construction which will best carry legislative intention into effect.
With full consciousness of the importance of the question, we nevertheless are clearly of the
opinion that the limitation of domestic ownership for purposes of obtaining a certificate of
Philippine registry in the coastwise trade to citizens of the Philippine Islands, and to citizens
of the United States, does not violate the provisions of paragraph 1 of section 3 of the Act of

51

Congress of August 29, 1916 No treaty right relied upon Act No. 2761 of the Philippine
Legislature is held valid and constitutional .
The petition for a writ of mandamus is denied, with costs against the petitioner. So ordered.
Arellano, C.J., Torres, Johnson, Araullo, Street, Avancea and Moir, JJ., concur.

G.R. No. L-19550 June 19, 1967


HARRY S. STONEHILL, ROBERT P. BROOKS, JOHN J. BROOKS and KARL BECK,
petitioners, vs. HON. JOSE W. DIOKNO, in his capacity as SECRETARY OF JUSTICE;
JOSE LUKBAN, in his capacity as Acting Director, National Bureau of Investigation;
SPECIAL PROSECUTORS PEDRO D. CENZON, EFREN I. PLANA and MANUEL
VILLAREAL, JR. and ASST. FISCAL MANASES G. REYES; JUDGE AMADO ROAN,
Municipal Court of Manila; JUDGE ROMAN CANSINO, Municipal Court of Manila;
JUDGE HERMOGENES CALUAG, Court of First Instance of Rizal-Quezon City Branch,
and JUDGE DAMIAN JIMENEZ, Municipal Court of Quezon City, respondents.
CONCEPCION, C.J.:
Upon application of the officers of the government named on the margin1 hereinafter
referred to as Respondents-Prosecutors several judges2 hereinafter referred to as
Respondents-Judges issued, on different dates,3 a total of 42 search warrants against
petitioners herein4 and/or the corporations of which they were officers,5 directed to the any
peace officer, to search the persons above-named and/or the premises of their offices,
warehouses and/or residences, and to seize and take possession of the following personal
property to wit:
Books of accounts, financial records, vouchers, correspondence, receipts, ledgers, journals,
portfolios, credit journals, typewriters, and other documents and/or papers showing all
business transactions including disbursements receipts, balance sheets and profit and loss
statements and Bobbins (cigarette wrappers).
as "the subject of the offense; stolen or embezzled and proceeds or fruits of the offense," or
"used or intended to be used as the means of committing the offense," which is described in
the applications adverted to above as "violation of Central Bank Laws, Tariff and Customs
Laws, Internal Revenue (Code) and the Revised Penal Code."
Alleging that the aforementioned search warrants are null and void, as contravening the
Constitution and the Rules of Court because, inter alia: (1) they do not describe with
particularity the documents, books and things to be seized; (2) cash money, not mentioned in
the warrants, were actually seized; (3) the warrants were issued to fish evidence against the

52

aforementioned petitioners in deportation cases filed against them; (4) the searches and
seizures were made in an illegal manner; and (5) the documents, papers and cash money
seized were not delivered to the courts that issued the warrants, to be disposed of in
accordance with law on March 20, 1962, said petitioners filed with the Supreme Court
this original action for certiorari, prohibition, mandamus and injunction, and prayed that,
pending final disposition of the present case, a writ of preliminary injunction be issued
restraining Respondents-Prosecutors, their agents and /or representatives from using the
effects seized as aforementioned or any copies thereof, in the deportation cases already
adverted to, and that, in due course, thereafter, decision be rendered quashing the contested
search warrants and declaring the same null and void, and commanding the respondents,
their agents or representatives to return to petitioners herein, in accordance with Section 3,
Rule 67, of the Rules of Court, the documents, papers, things and cash moneys seized or
confiscated under the search warrants in question.
In their answer, respondents-prosecutors alleged, 6 (1) that the contested search warrants are
valid and have been issued in accordance with law; (2) that the defects of said warrants, if
any, were cured by petitioners' consent; and (3) that, in any event, the effects seized are
admissible in evidence against herein petitioners, regardless of the alleged illegality of the
aforementioned searches and seizures.
On March 22, 1962, this Court issued the writ of preliminary injunction prayed for in the
petition. However, by resolution dated June 29, 1962, the writ was partially lifted or
dissolved, insofar as the papers, documents and things seized from the offices of the
corporations above mentioned are concerned; but, the injunction was maintained as regards
the papers, documents and things found and seized in the residences of petitioners herein.7
Thus, the documents, papers, and things seized under the alleged authority of the warrants in
question may be split into two (2) major groups, namely: (a) those found and seized in the
offices of the aforementioned corporations, and (b) those found and seized in the residences
of petitioners herein.
As regards the first group, we hold that petitioners herein have no cause of action to assail
the legality of the contested warrants and of the seizures made in pursuance thereof, for the
simple reason that said corporations have their respective personalities, separate and distinct
from the personality of herein petitioners, regardless of the amount of shares of stock or of
the interest of each of them in said corporations, and whatever the offices they hold therein
may be.8 Indeed, it is well settled that the legality of a seizure can be contested only by the
party whose rights have been impaired thereby,9 and that the objection to an unlawful search
and seizure is purely personal and cannot be availed of by third parties. 10 Consequently,
petitioners herein may not validly object to the use in evidence against them of the
documents, papers and things seized from the offices and premises of the corporations
adverted to above, since the right to object to the admission of said papers in evidence

53

belongs exclusively to the corporations, to whom the seized effects belong, and may not be
invoked by the corporate officers in proceedings against them in their individual capacity. 11
Indeed, it has been held:
. . . that the Government's action in gaining possession of papers belonging to the
corporation did not relate to nor did it affect the personal defendants. If these papers were
unlawfully seized and thereby the constitutional rights of or any one were invaded, they
were the rights of the corporation and not the rights of the other defendants. Next, it is clear
that a question of the lawfulness of a seizure can be raised only by one whose rights have
been invaded. Certainly, such a seizure, if unlawful, could not affect the constitutional rights
of defendants whose property had not been seized or the privacy of whose homes had not
been disturbed; nor could they claim for themselves the benefits of the Fourth Amendment,
when its violation, if any, was with reference to the rights of another. Remus vs. United
States (C.C.A.)291 F. 501, 511. It follows, therefore, that the question of the admissibility of
the evidence based on an alleged unlawful search and seizure does not extend to the personal
defendants but embraces only the corporation whose property was taken. . . . (A
Guckenheimer & Bros. Co. vs. United States, [1925] 3 F. 2d. 786, 789, Emphasis supplied.)
With respect to the documents, papers and things seized in the residences of petitioners
herein, the aforementioned resolution of June 29, 1962, lifted the writ of preliminary
injunction previously issued by this Court, 12 thereby, in effect, restraining herein
Respondents-Prosecutors from using them in evidence against petitioners herein.
In connection with said documents, papers and things, two (2) important questions need be
settled, namely: (1) whether the search warrants in question, and the searches and seizures
made under the authority thereof, are valid or not, and (2) if the answer to the preceding
question is in the negative, whether said documents, papers and things may be used in
evidence against petitioners herein.1wph1.t
Petitioners maintain that the aforementioned search warrants are in the nature of general
warrants and that accordingly, the seizures effected upon the authority there of are null and
void. In this connection, the Constitution 13 provides:
The right of the people to be secure in their persons, houses, papers, and effects against
unreasonable searches and seizures shall not be violated, and no warrants shall issue but
upon probable cause, to be determined 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.
Two points must be stressed in connection with this constitutional mandate, namely: (1) that
no warrant shall issue but upon probable cause, to be determined by the judge in the manner
set forth in said provision; and (2) that the warrant shall particularly describe the things to be
seized.

54

None of these requirements has been complied with in the contested warrants. Indeed, the
same were issued upon applications stating that the natural and juridical person therein
named had committed a "violation of Central Ban Laws, Tariff and Customs Laws, Internal
Revenue (Code) and Revised Penal Code." In other words, no specific offense had been
alleged in said applications. The averments thereof with respect to the offense committed
were abstract. As a consequence, it was impossible for the judges who issued the warrants to
have found the existence of probable cause, for the same presupposes the introduction of
competent proof that the party against whom it is sought has performed particular acts, or
committed specific omissions, violating a given provision of our criminal laws. As a matter
of fact, the applications involved in this case do not allege any specific acts performed by
herein petitioners. It would be the legal heresy, of the highest order, to convict anybody of a
"violation of Central Bank Laws, Tariff and Customs Laws, Internal Revenue (Code) and
Revised Penal Code," as alleged in the aforementioned applications without reference
to any determinate provision of said laws or
To uphold the validity of the warrants in question would be to wipe out completely one of
the most fundamental rights guaranteed in our Constitution, for it would place the sanctity of
the domicile and the privacy of communication and correspondence at the mercy of the
whims caprice or passion of peace officers. This is precisely the evil sought to be remedied
by the constitutional provision above quoted to outlaw the so-called general warrants. It
is not difficult to imagine what would happen, in times of keen political strife, when the
party in power feels that the minority is likely to wrest it, even though by legal means.
Such is the seriousness of the irregularities committed in connection with the disputed
search warrants, that this Court deemed it fit to amend Section 3 of Rule 122 of the former
Rules of Court 14 by providing in its counterpart, under the Revised Rules of Court 15 that
"a search warrant shall not issue but upon probable cause in connection with one specific
offense." Not satisfied with this qualification, the Court added thereto a paragraph, directing
that "no search warrant shall issue for more than one specific offense."
The grave violation of the Constitution made in the application for the contested search
warrants was compounded by the description therein made of the effects to be searched for
and seized, to wit:
Books of accounts, financial records, vouchers, journals, correspondence, receipts, ledgers,
portfolios, credit journals, typewriters, and other documents and/or papers showing all
business transactions including disbursement receipts, balance sheets and related profit and
loss statements.
Thus, the warrants authorized the search for and seizure of records pertaining to all business
transactions of petitioners herein, regardless of whether the transactions were legal or illegal.
The warrants sanctioned the seizure of all records of the petitioners and the aforementioned
corporations, whatever their nature, thus openly contravening the explicit command of our

55

Bill of Rights that the things to be seized be particularly described as well as tending
to defeat its major objective: the elimination of general warrants.
Relying upon Moncado vs. People's Court (80 Phil. 1), Respondents-Prosecutors maintain
that, even if the searches and seizures under consideration were unconstitutional, the
documents, papers and things thus seized are admissible in evidence against petitioners
herein. Upon mature deliberation, however, we are unanimously of the opinion that the
position taken in the Moncado case must be abandoned. Said position was in line with the
American common law rule, that the criminal should not be allowed to go free merely
"because the constable has blundered," 16 upon the theory that the constitutional prohibition
against unreasonable searches and seizures is protected by means other than the exclusion of
evidence unlawfully obtained, 17 such as the common-law action for damages against the
searching officer, against the party who procured the issuance of the search warrant and
against those assisting in the execution of an illegal search, their criminal punishment,
resistance, without liability to an unlawful seizure, and such other legal remedies as may be
provided by other laws.
However, most common law jurisdictions have already given up this approach and
eventually adopted the exclusionary rule, realizing that this is the only practical means of
enforcing the constitutional injunction against unreasonable searches and seizures. In the
language of Judge Learned Hand:
As we understand it, the reason for the exclusion of evidence competent as such, which has
been unlawfully acquired, is that exclusion is the only practical way of enforcing the
constitutional privilege. In earlier times the action of trespass against the offending official
may have been protection enough; but that is true no longer. Only in case the prosecution
which itself controls the seizing officials, knows that it cannot profit by their wrong will that
wrong be repressed.18
In fact, over thirty (30) years before, the Federal Supreme Court had already declared:
If letters and private documents can thus be seized and held and used in evidence against a
citizen accused of an offense, the protection of the 4th Amendment, declaring his rights to
be secure against such searches and seizures, is of no value, and, so far as those thus placed
are concerned, might as well be stricken from the Constitution. The efforts of the courts and
their officials to bring the guilty to punishment, praiseworthy as they are, are not to be aided
by the sacrifice of those great principles established by years of endeavor and suffering
which have resulted in their embodiment in the fundamental law of the land.19
This view was, not only reiterated, but, also, broadened in subsequent decisions on the same
Federal Court. 20 After reviewing previous decisions thereon, said Court held, in Mapp vs.
Ohio (supra.):

56

. . . Today we once again examine the Wolf's constitutional documentation of the right of
privacy free from unreasonable state intrusion, and after its dozen years on our books, are
led by it to close the only courtroom door remaining open to evidence secured by official
lawlessness in flagrant abuse of that basic right, reserved to all persons as a specific
guarantee against that very same unlawful conduct. We hold that all evidence obtained by
searches and seizures in violation of the Constitution is, by that same authority, inadmissible
in a State.
Since the Fourth Amendment's right of privacy has been declared enforceable against the
States through the Due Process Clause of the Fourteenth, it is enforceable against them by
the same sanction of exclusion as it used against the Federal Government. Were it otherwise,
then just as without the Weeks rule the assurance against unreasonable federal searches and
seizures would be "a form of words," valueless and underserving of mention in a perpetual
charter of inestimable human liberties, so too, without that rule the freedom from state
invasions of privacy would be so ephemeral and so neatly severed from its conceptual nexus
with the freedom from all brutish means of coercing evidence as not to permit this Court's
high regard as a freedom "implicit in the concept of ordered liberty." At the time that the
Court held in Wolf that the amendment was applicable to the States through the Due Process
Clause, the cases of this Court as we have seen, had steadfastly held that as to federal
officers the Fourth Amendment included the exclusion of the evidence seized in violation of
its provisions. Even Wolf "stoutly adhered" to that proposition. The right to when conceded
operatively enforceable against the States, was not susceptible of destruction by avulsion of
the sanction upon which its protection and enjoyment had always been deemed dependent
under the Boyd, Weeks and Silverthorne Cases. Therefore, in extending the substantive
protections of due process to all constitutionally unreasonable searches state or federal
it was logically and constitutionally necessarily that the exclusion doctrine an essential
part of the right to privacy be also insisted upon as an essential ingredient of the right
newly recognized by the Wolf Case. In short, the admission of the new constitutional Right
by Wolf could not tolerate denial of its most important constitutional privilege, namely, the
exclusion of the evidence which an accused had been forced to give by reason of the
unlawful seizure. To hold otherwise is to grant the right but in reality to withhold its
privilege and enjoyment. Only last year the Court itself recognized that the purpose of the
exclusionary rule to "is to deter to compel respect for the constitutional guaranty in the
only effectively available way by removing the incentive to disregard it" . . . .
The ignoble shortcut to conviction left open to the State tends to destroy the entire system of
constitutional restraints on which the liberties of the people rest. Having once recognized
that the right to privacy embodied in the Fourth Amendment is enforceable against the
States, and that the right to be secure against rude invasions of privacy by state officers is,
therefore constitutional in origin, we can no longer permit that right to remain an empty
promise. Because it is enforceable in the same manner and to like effect as other basic rights
secured by its Due Process Clause, we can no longer permit it to be revocable at the whim of

57

any police officer who, in the name of law enforcement itself, chooses to suspend its
enjoyment. Our decision, founded on reason and truth, gives to the individual no more than
that which the Constitution guarantees him to the police officer no less than that to which
honest law enforcement is entitled, and, to the courts, that judicial integrity so necessary in
the true administration of justice. (emphasis ours.)
Indeed, the non-exclusionary rule is contrary, not only to the letter, but also, to the spirit of
the constitutional injunction against unreasonable searches and seizures. To be sure, if the
applicant for a search warrant has competent evidence to establish probable cause of the
commission of a given crime by the party against whom the warrant is intended, then there
is no reason why the applicant should not comply with the requirements of the fundamental
law. Upon the other hand, if he has no such competent evidence, then it is not possible for
the Judge to find that there is probable cause, and, hence, no justification for the issuance of
the warrant. The only possible explanation (not justification) for its issuance is the necessity
of fishing evidence of the commission of a crime. But, then, this fishing expedition is
indicative of the absence of evidence to establish a probable cause.
Moreover, the theory that the criminal prosecution of those who secure an illegal search
warrant and/or make unreasonable searches or seizures would suffice to protect the
constitutional guarantee under consideration, overlooks the fact that violations thereof are, in
general, committed By agents of the party in power, for, certainly, those belonging to the
minority could not possibly abuse a power they do not have. Regardless of the handicap
under which the minority usually but, understandably finds itself in prosecuting agents
of the majority, one must not lose sight of the fact that the psychological and moral effect of
the possibility 21 of securing their conviction, is watered down by the pardoning power of
the party for whose benefit the illegality had been committed.
In their Motion for Reconsideration and Amendment of the Resolution of this Court dated
June 29, 1962, petitioners allege that Rooms Nos. 81 and 91 of Carmen Apartments, House
No. 2008, Dewey Boulevard, House No. 1436, Colorado Street, and Room No. 304 of the
Army-Navy Club, should be included among the premises considered in said Resolution as
residences of herein petitioners, Harry S. Stonehill, Robert P. Brook, John J. Brooks and
Karl Beck, respectively, and that, furthermore, the records, papers and other effects seized in
the offices of the corporations above referred to include personal belongings of said
petitioners and other effects under their exclusive possession and control, for the exclusion
of which they have a standing under the latest rulings of the federal courts of federal courts
of the United States. 22
We note, however, that petitioners' theory, regarding their alleged possession of and control
over the aforementioned records, papers and effects, and the alleged "personal" nature
thereof, has Been Advanced, not in their petition or amended petition herein, but in the
Motion for Reconsideration and Amendment of the Resolution of June 29, 1962. In other

58

words, said theory would appear to be readjustment of that followed in said petitions, to suit
the approach intimated in the Resolution sought to be reconsidered and amended. Then, too,
some of the affidavits or copies of alleged affidavits attached to said motion for
reconsideration, or submitted in support thereof, contain either inconsistent allegations, or
allegations inconsistent with the theory now advanced by petitioners herein.
Upon the other hand, we are not satisfied that the allegations of said petitions said motion
for reconsideration, and the contents of the aforementioned affidavits and other papers
submitted in support of said motion, have sufficiently established the facts or conditions
contemplated in the cases relied upon by the petitioners; to warrant application of the views
therein expressed, should we agree thereto. At any rate, we do not deem it necessary to
express our opinion thereon, it being best to leave the matter open for determination in
appropriate cases in the future.
We hold, therefore, that the doctrine adopted in the Moncado case must be, as it is hereby,
abandoned; that the warrants for the search of three (3) residences of herein petitioners, as
specified in the Resolution of June 29, 1962, are null and void; that the searches and seizures
therein made are illegal; that the writ of preliminary injunction heretofore issued, in
connection with the documents, papers and other effects thus seized in said residences of
herein petitioners is hereby made permanent; that the writs prayed for are granted, insofar as
the documents, papers and other effects so seized in the aforementioned residences are
concerned; that the aforementioned motion for Reconsideration and Amendment should be,
as it is hereby, denied; and that the petition herein is dismissed and the writs prayed for
denied, as regards the documents, papers and other effects seized in the twenty-nine (29)
places, offices and other premises enumerated in the same Resolution, without special
pronouncement as to costs.
It is so ordered.
Reyes, J.B.L., Dizon, Makalintal, Bengzon, J.P., Zaldivar and Sanchez, JJ., concur.
CASTRO, J., concurring and dissenting:
From my analysis of the opinion written by Chief Justice Roberto Concepcion and from the
import of the deliberations of the Court on this case, I gather the following distinct
conclusions:
1. All the search warrants served by the National Bureau of Investigation in this case are
general warrants and are therefore proscribed by, and in violation of, paragraph 3 of
section 1 of Article III (Bill of Rights) of the Constitution;
2. All the searches and seizures conducted under the authority of the said search warrants
were consequently illegal;

59

3. The non-exclusionary rule enunciated in Moncado vs. People, 80 Phil. 1, should be,
and is declared, abandoned;
4. The search warrants served at the three residences of the petitioners are expressly
declared null and void the searches and seizures therein made are expressly declared
illegal; and the writ of preliminary injunction heretofore issued against the use of the
documents, papers and effect seized in the said residences is made permanent; and
5. Reasoning that the petitioners have not in their pleadings satisfactorily demonstrated
that they have legal standing to move for the suppression of the documents, papers
and effects seized in the places other than the three residences adverted to above, the
opinion written by the Chief Justice refrains from expressly declaring as null and void
the such warrants served at such other places and as illegal the searches and seizures
made therein, and leaves "the matter open for determination in appropriate cases in the
future."
It is precisely the position taken by the Chief Justice summarized in the immediately
preceding paragraph (numbered 5) with which I am not in accord.
I do not share his reluctance or unwillingness to expressly declare, at this time, the nullity of
the search warrants served at places other than the three residences, and the illegibility of the
searches and seizures conducted under the authority thereof. In my view even the
exacerbating passions and prejudices inordinately generated by the environmental political
and moral developments of this case should not deter this Court from forthrightly laying
down the law not only for this case but as well for future cases and future generations. All
the search warrants, without exception, in this case are admittedly general, blanket and
roving warrants and are therefore admittedly and indisputably outlawed by the Constitution;
and the searches and seizures made were therefore unlawful. That the petitioners, let us
assume in gratia argumente, have no legal standing to ask for the suppression of the papers,
things and effects seized from places other than their residences, to my mind, cannot in any
manner affect, alter or otherwise modify the intrinsic nullity of the search warrants and the
intrinsic illegality of the searches and seizures made thereunder. Whether or not the
petitioners possess legal standing the said warrants are void and remain void, and the
searches and seizures were illegal and remain illegal. No inference can be drawn from the
words of the Constitution that "legal standing" or the lack of it is a determinant of the nullity
or validity of a search warrant or of the lawfulness or illegality of a search or seizure.
On the question of legal standing, I am of the conviction that, upon the pleadings submitted
to this Court the petitioners have the requisite legal standing to move for the suppression and
return of the documents, papers and effects that were seized from places other than their
family residences.
Our constitutional provision on searches and seizures was derived almost verbatim from the

60

Fourth Amendment to the United States Constitution. In the many years of judicial
construction and interpretation of the said constitutional provision, our courts have
invariably regarded as doctrinal the pronouncement made on the Fourth Amendment by
federal courts, especially the Federal Supreme Court and the Federal Circuit Courts of
Appeals.
The U.S. doctrines and pertinent cases on standing to move for the suppression or return of
documents, papers and effects which are the fruits of an unlawful search and seizure, may be
summarized as follows; (a) ownership of documents, papers and effects gives "standing;" (b)
ownership and/or control or possession actual or constructive of premises searched
gives "standing"; and (c) the "aggrieved person" doctrine where the search warrant and the
sworn application for search warrant are "primarily" directed solely and exclusively against
the "aggrieved person," gives "standing."
An examination of the search warrants in this case will readily show that, excepting three,
all were directed against the petitioners personally. In some of them, the petitioners were
named personally, followed by the designation, "the President and/or General Manager" of
the particular corporation. The three warrants excepted named three corporate defendants.
But the "office/house/warehouse/premises" mentioned in the said three warrants were also
the same "office/house/warehouse/premises" declared to be owned by or under the control of
the petitioners in all the other search warrants directed against the petitioners and/or "the
President and/or General Manager" of the particular corporation. (see pages 5-24 of
Petitioners' Reply of April 2, 1962). The searches and seizures were to be made, and were
actually made, in the "office/house/warehouse/premises" owned by or under the control of
the petitioners.
Ownership of matters seized gives "standing."
Ownership of the properties seized alone entitles the petitioners to bring a motion to return
and suppress, and gives them standing as persons aggrieved by an unlawful search and
seizure regardless of their location at the time of seizure. Jones vs. United States, 362 U.S.
257, 261 (1960) (narcotics stored in the apartment of a friend of the defendant); Henzel vs.
United States, 296 F. 2d. 650, 652-53 (5th Cir. 1961), (personal and corporate papers of
corporation of which the defendant was president), United States vs. Jeffers, 342 U.S. 48
(1951) (narcotics seized in an apartment not belonging to the defendant); Pielow vs. United
States, 8 F. 2d 492, 493 (9th Cir. 1925) (books seized from the defendant's sister but
belonging to the defendant); Cf. Villano vs. United States, 310 F. 2d 680, 683 (10th Cir.
1962) (papers seized in desk neither owned by nor in exclusive possession of the defendant).
In a very recent case (decided by the U.S. Supreme Court on December 12, 1966), it was
held that under the constitutional provision against unlawful searches and seizures, a person
places himself or his property within a constitutionally protected area, be it his home or his
office, his hotel room or his automobile:

61

Where the argument falls is in its misapprehension of the fundamental nature and scope of
Fourth Amendment protection. What the Fourth Amendment protects is the security a man
relies upon when he places himself or his property within a constitutionally protected area,
be it his home or his office, his hotel room or his automobile. There he is protected from
unwarranted governmental intrusion. And when he puts some thing in his filing cabinet, in
his desk drawer, or in his pocket, he has the right to know it will be secure from an
unreasonable search or an unreasonable seizure. So it was that the Fourth Amendment could
not tolerate the warrantless search of the hotel room in Jeffers, the purloining of the
petitioner's private papers in Gouled, or the surreptitious electronic surveilance in
Silverman. Countless other cases which have come to this Court over the years have
involved a myriad of differing factual contexts in which the protections of the Fourth
Amendment have been appropriately invoked. No doubt, the future will bring countless
others. By nothing we say here do we either foresee or foreclose factual situations to which
the Fourth Amendment may be applicable. (Hoffa vs. U.S., 87 S. Ct. 408 (December 12,
1966). See also U.S. vs. Jeffers, 342 U.S. 48, 72 S. Ct. 93 (November 13, 1951). (Emphasis
supplied).
Control of premises searched gives "standing."
Independent of ownership or other personal interest in the records and documents seized, the
petitioners have standing to move for return and suppression by virtue of their proprietary or
leasehold interest in many of the premises searched. These proprietary and leasehold
interests have been sufficiently set forth in their motion for reconsideration and need not be
recounted here, except to emphasize that the petitioners paid rent, directly or indirectly, for
practically all the premises searched (Room 91, 84 Carmen Apts; Room 304, Army & Navy
Club; Premises 2008, Dewey Boulevard; 1436 Colorado Street); maintained personal offices
within the corporate offices (IBMC, USTC); had made improvements or furnished such
offices; or had paid for the filing cabinets in which the papers were stored (Room 204, Army
& Navy Club); and individually, or through their respective spouses, owned the controlling
stock of the corporations involved. The petitioners' proprietary interest in most, if not all, of
the premises searched therefore independently gives them standing to move for the return
and suppression of the books, papers and affects seized therefrom.
In Jones vs. United States, supra, the U.S. Supreme Court delineated the nature and extent of
the interest in the searched premises necessary to maintain a motion to suppress. After
reviewing what it considered to be the unduly technical standard of the then prevailing
circuit court decisions, the Supreme Court said (362 U.S. 266):
We do not lightly depart from this course of decisions by the lower courts.
persuaded, however, that it is unnecessarily and ill-advised to import into
surrounding the constitutional right to be free from unreasonable searches and
subtle distinctions, developed and refined by the common law in evolving the

62

We are
the law
seizures
body of

private property law which, more than almost any other branch of law, has been shaped by
distinctions whose validity is largely historical. Even in the area from which they derive, due
consideration has led to the discarding of those distinctions in the homeland of the common
law. See Occupiers' Liability Act, 1957, 5 and 6 Eliz. 2, c. 31, carrying out Law Reform
Committee, Third Report, Cmd. 9305. Distinctions such as those between "lessee",
"licensee," "invitee," "guest," often only of gossamer strength, ought not be determinative in
fashioning procedures ultimately referable to constitutional safeguards. See also Chapman
vs. United States, 354 U.S. 610, 616-17 (1961).
It has never been held that a person with requisite interest in the premises searched must
own the property seized in order to have standing in a motion to return and suppress. In
Alioto vs. United States, 216 F. Supp. 48 (1963), a Bookkeeper for several corporations
from whose apartment the corporate records were seized successfully moved for their return.
In United States vs. Antonelli, Fireworks Co., 53 F. Supp. 870, 873 (W D. N. Y. 1943), the
corporation's president successfully moved for the return and suppression is to him of both
personal and corporate documents seized from his home during the course of an illegal
search:
The lawful possession by Antonelli of documents and property, "either his own or the
corporation's was entitled to protection against unreasonable search and seizure. Under the
circumstances in the case at bar, the search and seizure were unreasonable and unlawful. The
motion for the return of seized article and the suppression of the evidence so obtained should
be granted. (Emphasis supplied).
Time was when only a person who had property in interest in either the place searched or the
articles seize had the necessary standing to invoke the protection of the exclusionary rule.
But in MacDonald vs. Unite States, 335 U.S. 461 (1948), Justice Robert Jackson joined by
Justice Felix Frankfurter, advanced the view that "even a guest may expect the shelter of the
rooftree he is under against criminal intrusion." This view finally became the official view of
the U.S. Supreme Court and was articulated in United States vs. Jeffers, 432 U.S 48 (1951).
Nine years later, in 1960, in Jones vs. Unite States, 362 U.S. 257, 267, the U.S. Supreme
Court went a step further. Jones was a mere guest in the apartment unlawfully searched but
the Court nonetheless declared that the exclusionary rule protected him as well. The concept
of "person aggrieved by an unlawful search and seizure" was enlarged to include "anyone
legitimately on premise where the search occurs."
Shortly after the U.S. Supreme Court's Jones decision the U.S. Court of Appeals for the
Fifth Circuit held that the defendant organizer, sole stockholder and president of a
corporation had standing in a mail fraud prosecution against him to demand the return and
suppression of corporate property. Henzel vs. United States, 296 F 2d 650, 652 (5th Cir.
1961), supra. The court conclude that the defendant had standing on two independent
grounds: First he had a sufficient interest in the property seized, and second he had an

63

adequate interest in the premises searched (just like in the case at bar). A postal inspector
had unlawfully searched the corporation' premises and had seized most of the corporation's
book and records. Looking to Jones, the court observed:
Jones clearly tells us, therefore, what is not required qualify one as a "person aggrieved by
an unlawful search and seizure." It tells us that appellant should not have been precluded
from objecting to the Postal Inspector's search and seizure of the corporation's books and
records merely because the appellant did not show ownership or possession of the books and
records or a substantial possessory interest in the invade premises . . . (Henzel vs. United
States, 296 F. 2d at 651). .
Henzel was soon followed by Villano vs. United States, 310 F. 2d 680, 683, (10th Cir. 1962).
In Villano, police officers seized two notebooks from a desk in the defendant's place of
employment; the defendant did not claim ownership of either; he asserted that several
employees (including himself) used the notebooks. The Court held that the employee had a
protected interest and that there also was an invasion of privacy. Both Henzel and Villano
considered also the fact that the search and seizure were "directed at" the moving defendant.
Henzel vs. United States, 296 F. 2d at 682; Villano vs. United States, 310 F. 2d at 683.
In a case in which an attorney closed his law office, placed his files in storage and went to
Puerto Rico, the Court of Appeals for the Eighth Circuit recognized his standing to move to
quash as unreasonable search and seizure under the Fourth Amendment of the U.S.
Constitution a grand jury subpoena duces tecum directed to the custodian of his files. The
Government contended that the petitioner had no standing because the books and papers
were physically in the possession of the custodian, and because the subpoena was directed
against the custodian. The court rejected the contention, holding that
Schwimmer legally had such possession, control and unrelinquished personal rights in the
books and papers as not to enable the question of unreasonable search and seizure to be
escaped through the mere procedural device of compelling a third-party naked possessor to
produce and deliver them. Schwimmer vs. United States, 232 F. 2d 855, 861 (8th Cir. 1956).
Aggrieved person doctrine where the search warrant s primarily directed against said person
gives "standing."
The latest United States decision squarely in point is United States vs. Birrell, 242 F. Supp.
191 (1965, U.S.D.C. S.D.N.Y.). The defendant had stored with an attorney certain files and
papers, which attorney, by the name of Dunn, was not, at the time of the seizing of the
records, Birrell's attorney. * Dunn, in turn, had stored most of the records at his home in the
country and on a farm which, according to Dunn's affidavit, was under his (Dunn's) "control
and management." The papers turned out to be private, personal and business papers
together with corporate books and records of certain unnamed corporations in which Birrell
did not even claim ownership. (All of these type records were seized in the case at bar).

64

Nevertheless, the search in Birrell was held invalid by the court which held that even though
Birrell did not own the premises where the records were stored, he had "standing" to move
for the return of all the papers and properties seized. The court, relying on Jones vs. U.S.,
supra; U.S. vs. Antonelli Fireworks Co., 53 F. Supp. 870, Aff'd 155 F. 2d 631: Henzel vs.
U.S., supra; and Schwimmer vs. U.S., supra, pointed out that
It is overwhelmingly established that the searches here in question were directed solely and
exclusively against Birrell. The only person suggested in the papers as having violated the
law was Birrell. The first search warrant described the records as having been used "in
committing a violation of Title 18, United States Code, Section 1341, by the use of the mails
by one Lowell M. Birrell, . . ." The second search warrant was captioned: "United States of
America vs. Lowell M. Birrell. (p. 198)
Possession (actual or constructive), no less than ownership, gives standing to move to
suppress. Such was the rule even before Jones. (p. 199)
If, as thus indicated Birrell had at least constructive possession of the records stored with
Dunn, it matters not whether he had any interest in the premises searched. See also Jeffers v.
United States, 88 U.S. Appl. D.C. 58, 187 F. 2d 498 (1950), affirmed 432 U.S. 48, 72 S. Ct.
93, 96 L. Ed. 459 (1951).
The ruling in the Birrell case was reaffirmed on motion for reargument; the United States
did not appeal from this decision. The factual situation in Birrell is strikingly similar to the
case of the present petitioners; as in Birrell, many personal and corporate papers were seized
from premises not petitioners' family residences; as in Birrell, the searches were
"PRIMARILY DIRECTED SOLETY AND EXCLUSIVELY" against the petitioners. Still
both types of documents were suppressed in Birrell because of the illegal search. In the case
at bar, the petitioners connection with the premises raided is much closer than in Birrell.
Thus, the petitioners have full standing to move for the quashing of all the warrants
regardless whether these were directed against residences in the narrow sense of the word, as
long as the documents were personal papers of the petitioners or (to the extent that they were
corporate papers) were held by them in a personal capacity or under their personal control.
Prescinding a from the foregoing, this Court, at all events, should order the return to the
petitioners all personal and private papers and effects seized, no matter where these were
seized, whether from their residences or corporate offices or any other place or places. The
uncontradicted sworn statements of the petitioners in their, various pleadings submitted to
this Court indisputably show that amongst the things seized from the corporate offices and
other places were personal and private papers and effects belonging to the petitioners.
If there should be any categorization of the documents, papers and things which where the
objects of the unlawful searches and seizures, I submit that the grouping should be: (a)

65

personal or private papers of the petitioners were they were unlawfully seized, be it their
family residences offices, warehouses and/or premises owned and/or possessed (actually or
constructively) by them as shown in all the search and in the sworn applications filed in
securing the void search warrants and (b) purely corporate papers belonging to corporations.
Under such categorization or grouping, the determination of which unlawfully seized papers,
documents and things are personal/private of the petitioners or purely corporate papers will
have to be left to the lower courts which issued the void search warrants in ultimately
effecting the suppression and/or return of the said documents.
And as unequivocally indicated by the authorities above cited, the petitioners likewise have
clear legal standing to move for the suppression of purely corporate papers as "President
and/or General Manager" of the corporations involved as specifically mentioned in the void
search warrants.
Finally, I must articulate my persuasion that although the cases cited in my disquisition were
criminal prosecutions, the great clauses of the constitutional proscription on illegal searches
and seizures do not withhold the mantle of their protection from cases not criminal in origin
or nature.
Footnotes
1Hon. Jose W. Diokno, in his capacity as Secretary of Justice, Jose Lukban, in his capacity
as Acting Director, National Bureau of Investigation, Special Prosecutors Pedro D. Cenzon,
Efren I. Plana and Manuel Villareal, Jr. and Assistant Fiscal Maneses G. Reyes, City of
Manila.

EN BANC
[G.R. No. L-32409. February 27, 1971.]
BACHE & CO. (PHIL.), INC. and FREDERICK E. SEGGERMAN, Petitioners, v. HON.
JUDGE VIVENCIO M. RUIZ, MISAEL P. VERA, in his capacity as Commissioner of
Internal Revenue, ARTURO LOGRONIO, RODOLFO DE LEON, GAVINO
VELASQUEZ, MIMIR DELLOSA, NICANOR ALCORDO, JOHN DOE, JOHN DOE,
JOHN DOE, and JOHN DOE, Respondents.
San Juan, Africa, Gonzales & San Agustin, for Petitioners.
Solicitor General Felix Q. Antonio, Assistant Solicitor General Crispin V . Bautista,
Solicitor Pedro A. Ramirez and Special Attorney Jaime M. Maza for Respondents.
DECISION

66

VILLAMOR, J.:
This is an original action of certiorari, prohibition and mandamus, with prayer for a writ of
preliminary mandatory and prohibitory injunction. In their petition Bache & Co. (Phil.), Inc.,
a corporation duly organized and existing under the laws of the Philippines, and its
President, Frederick E. Seggerman, pray this Court to declare null and void Search Warrant
No. 2-M-70 issued by respondent Judge on February 25, 1970; to order respondents to desist
from enforcing the same and/or keeping the documents, papers and effects seized by virtue
thereof, as well as from enforcing the tax assessments on petitioner corporation alleged by
petitioners to have been made on the basis of the said documents, papers and effects, and to
order the return of the latter to petitioners. We gave due course to the petition but did not
issue the writ of preliminary injunction prayed for therein.
The pertinent facts of this case, as gathered from record, are as follows:chanrob1es virtual
1aw library
On February 24, 1970, respondent Misael P. Vera, Commissioner of Internal Revenue, wrote
a letter addressed to respondent Judge Vivencio M. Ruiz requesting the issuance of a search
warrant against petitioners for violation of Section 46(a) of the National Internal Revenue
Code, in relation to all other pertinent provisions thereof, particularly Sections 53, 72, 73,
208 and 209, and authorizing Revenue Examiner Rodolfo de Leon, one of herein
respondents, to make and file the application for search warrant which was attached to the
letter.
In the afternoon of the following day, February 25, 1970, respondent De Leon and his
witness, respondent Arturo Logronio, went to the Court of First Instance of Rizal. They
brought with them the following papers: respondent Veras aforesaid letter-request; an
application for search warrant already filled up but still unsigned by respondent De Leon; an
affidavit of respondent Logronio subscribed before respondent De Leon; a deposition in
printed form of respondent Logronio already accomplished and signed by him but not yet
subscribed; and a search warrant already accomplished but still unsigned by respondent
Judge.
At that time respondent Judge was hearing a certain case; so, by means of a note, he
instructed his Deputy Clerk of Court to take the depositions of respondents De Leon and
Logronio. After the session had adjourned, respondent Judge was informed that the
depositions had already been taken. The stenographer, upon request of respondent Judge,
read to him her stenographic notes; and thereafter, respondent Judge asked respondent
Logronio to take the oath and warned him that if his deposition was found to be false and
without legal basis, he could be charged for perjury. Respondent Judge signed respondent de
Leons application for search warrant and respondent Logronios deposition, Search Warrant
No. 2-M-70 was then sign by respondent Judge and accordingly issued.

67

Three days later, or on February 28, 1970, which was a Saturday, the BIR agents served the
search warrant petitioners at the offices of petitioner corporation on Ayala Avenue, Makati,
Rizal. Petitioners lawyers protested the search on the ground that no formal complaint or
transcript of testimony was attached to the warrant. The agents nevertheless proceeded with
their search which yielded six boxes of documents.
On March 3, 1970, petitioners filed a petition with the Court of First Instance of Rizal
praying that the search warrant be quashed, dissolved or recalled, that preliminary
prohibitory and mandatory writs of injunction be issued, that the search warrant be declared
null and void, and that the respondents be ordered to pay petitioners, jointly and severally,
damages and attorneys fees. On March 18, 1970, the respondents, thru the Solicitor
General, filed an answer to the petition. After hearing, the court, presided over by
respondent Judge, issued on July 29, 1970, an order dismissing the petition for dissolution of
the search warrant. In the meantime, or on April 16, 1970, the Bureau of Internal Revenue
made tax assessments on petitioner corporation in the total sum of P2,594,729.97, partly, if
not entirely, based on the documents thus seized. Petitioners came to this Court.
The petition should be granted for the following reasons:chanrob1es virtual 1aw library
1. Respondent Judge failed to personally examine the complainant and his witness.
The pertinent provisions of the Constitution of the Philippines and of the Revised Rules of
Court are:jgc:chanrobles.com.ph
"(3) The right of the people to be secure in their persons, houses, papers and effects against
unreasonable searches and seizures shall not be violated, and no warrants shall issue but
upon probable cause, to be determined 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." (Art. III, Sec. 1,
Constitution.)
"SEC. 3. Requisites for issuing search warrant. A search warrant shall not issue but upon
probable cause in connection with one specific offense to be determined by the judge or
justice of the peace 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.
"No search warrant shall issue for more than one specific offense.
"SEC. 4. Examination of the applicant. The judge or justice of the peace must, before
issuing the warrant, personally examine on oath or affirmation the complainant and any
witnesses he may produce and take their depositions in writing, and attach them to the
record, in addition to any affidavits presented to him." (Rule 126, Revised Rules of Court.)

68

The examination of the complainant and the witnesses he may produce, required by Art. III,
Sec. 1, par. 3, of the Constitution, and by Secs. 3 and 4, Rule 126 of the Revised Rules of
Court, should be conducted by the judge himself and not by others. The phrase "which shall
be determined by the judge after examination under oath or affirmation of the complainant
and the witnesses he may produce," appearing in the said constitutional provision, was
introduced by Delegate Francisco as an amendment to the draft submitted by the SubCommittee of Seven. The following discussion in the Constitutional Convention (Laurel,
Proceedings of the Philippine Constitutional Convention, Vol. III, pp. 755-757) is
enlightening:jgc:chanrobles.com.ph
"SR. ORENSE. Vamos a dejar compaero los piropos y vamos al grano.
En los casos de una necesidad de actuar inmediatamente para que no se frusten los fines de
la justicia mediante el registro inmediato y la incautacion del cuerpo del delito, no cree Su
Seoria que causaria cierta demora el procedimiento apuntado en su enmienda en tal forma
que podria frustrar los fines de la justicia o si Su Seoria encuentra un remedio para esto
casos con el fin de compaginar los fines de la justicia con los derechos del individuo en su
persona, bienes etcetera, etcetera.
"SR. FRANCISCO. No puedo ver en la practica el caso hipottico que Su Seoria pregunta
por la siguiente razon: el que solicita un mandamiento de registro tiene que hacerlo por
escrito y ese escrito no aparecer en la Mesa del Juez sin que alguien vaya el juez a presentar
ese escrito o peticion de sucuestro. Esa persona que presenta el registro puede ser el mismo
denunciante o alguna persona que solicita dicho mandamiento de registro. Ahora toda la
enmienda en esos casos consiste en que haya peticion de registro y el juez no se atendra
solamente a sea peticion sino que el juez examiner a ese denunciante y si tiene testigos
tambin examiner a los testigos.
"SR. ORENSE. No cree Su Seoria que el tomar le declaracion de ese denunciante por
escrito siempre requeriria algun tiempo?.
"SR. FRANCISCO. Seria cuestio de un par de horas, pero por otro lado minimizamos en
todo lo posible las vejaciones injustas con la expedicion arbitraria de los mandamientos de
registro. Creo que entre dos males debemos escoger. el menor.
xxx
"MR. LAUREL. . . . The reason why we are in favor of this amendment is because we are
incorporating in our constitution something of a fundamental character. Now, before a judge
could issue a search warrant, he must be under the obligation to examine personally under
oath the complainant and if he has any witness, the witnesses that he may produce . .
."cralaw virtua1aw library

69

The implementing rule in the Revised Rules of Court, Sec. 4, Rule 126, is more emphatic
and candid, for it requires the judge, before issuing a search warrant, to "personally examine
on oath or affirmation the complainant and any witnesses he may produce . . ."cralaw
virtua1aw library
Personal examination by the judge of the complainant and his witnesses is necessary to
enable him to determine the existence or non-existence of a probable cause, pursuant to Art.
III, Sec. 1, par. 3, of the Constitution, and Sec. 3, Rule 126 of the Revised Rules of Court,
both of which prohibit the issuance of warrants except "upon probable cause." The
determination of whether or not a probable cause exists calls for the exercise of judgment
after a judicial appraisal of facts and should not be allowed to be delegated in the absence of
any rule to the contrary.
In the case at bar, no personal examination at all was conducted by respondent Judge of the
complainant (respondent De Leon) and his witness (respondent Logronio). While it is true
that the complainants application for search warrant and the witness printed-form
deposition were subscribed and sworn to before respondent Judge, the latter did not ask
either of the two any question the answer to which could possibly be the basis for
determining whether or not there was probable cause against herein petitioners. Indeed, the
participants seem to have attached so little significance to the matter that notes of the
proceedings before respondent Judge were not even taken. At this juncture it may be well to
recall the salient facts. The transcript of stenographic notes (pp. 61-76, April 1, 1970, Annex
J-2 of the Petition) taken at the hearing of this case in the court below shows that per
instruction of respondent Judge, Mr. Eleodoro V. Gonzales, Special Deputy Clerk of Court,
took the depositions of the complainant and his witness, and that stenographic notes thereof
were taken by Mrs. Gaspar. At that time respondent Judge was at the sala hearing a case.
After respondent Judge was through with the hearing, Deputy Clerk Gonzales, stenographer
Gaspar, complainant De Leon and witness Logronio went to respondent Judges chamber
and informed the Judge that they had finished the depositions. Respondent Judge then
requested the stenographer to read to him her stenographic notes. Special Deputy Clerk
Gonzales testified as follows:jgc:chanrobles.com.ph
"A And after finishing reading the stenographic notes, the Honorable Judge requested or
instructed them, requested Mr. Logronio to raise his hand and warned him if his deposition
will be found to be false and without legal basis, he can be charged criminally for perjury.
The Honorable Court told Mr. Logronio whether he affirms the facts contained in his
deposition and the affidavit executed before Mr. Rodolfo de Leon.
"Q And thereafter?
"A And thereafter, he signed the deposition of Mr. Logronio.
"Q Who is this he?

70

"A The Honorable Judge.


"Q The deposition or the affidavit?
"A The affidavit, Your Honor."cralaw virtua1aw library
Thereafter, respondent Judge signed the search warrant.
The participation of respondent Judge in the proceedings which led to the issuance of Search
Warrant No. 2-M-70 was thus limited to listening to the stenographers readings of her
notes, to a few words of warning against the commission of perjury, and to administering the
oath to the complainant and his witness. This cannot be consider a personal examination. If
there was an examination at all of the complainant and his witness, it was the one conducted
by the Deputy Clerk of Court. But, as stated, the Constitution and the rules require a
personal examination by the judge. It was precisely on account of the intention of the
delegates to the Constitutional Convention to make it a duty of the issuing judge to
personally examine the complainant and his witnesses that the question of how much time
would be consumed by the judge in examining them came up before the Convention, as can
be seen from the record of the proceedings quoted above. The reading of the stenographic
notes to respondent Judge did not constitute sufficient compliance with the constitutional
mandate and the rule; for by that manner respondent Judge did not have the opportunity to
observe the demeanor of the complainant and his witness, and to propound initial and
follow-up questions which the judicial mind, on account of its training, was in the best
position to conceive. These were important in arriving at a sound inference on the allimportant question of whether or not there was probable cause.
1. The search warrant was issued for more than one specific offense.
Search Warrant No. 2-M-70 was issued for" [v]iolation of Sec. 46(a) of the National Internal
Revenue Code in relation to all other pertinent provisions thereof particularly Secs. 53, 72,
73, 208 and 209." The question is: Was the said search warrant issued "in connection with
one specific offense," as required by Sec. 3, Rule 126?
To arrive at the correct answer it is essential to examine closely the provisions of the Tax
Code referred to above. Thus we find the following:chanrob1es virtual 1aw library
Sec. 46(a) requires the filing of income tax returns by corporations.
Sec. 53 requires the withholding of income taxes at source.
Sec. 72 imposes surcharges for failure to render income tax returns and for rendering false
and fraudulent returns.
Sec. 73 provides the penalty for failure to pay the income tax, to make a return or to supply

71

the information required under the Tax Code.


Sec. 208 penalizes" [a]ny person who distills, rectifies, repacks, compounds, or
manufactures any article subject to a specific tax, without having paid the privilege tax
therefore, or who aids or abets in the conduct of illicit distilling, rectifying, compounding, or
illicit manufacture of any article subject to specific tax . . .," and provides that in the case of
a corporation, partnership, or association, the official and/or employee who caused the
violation shall be responsible.
Sec. 209 penalizes the failure to make a return of receipts, sales, business, or gross value of
output removed, or to pay the tax due thereon.
The search warrant in question was issued for at least four distinct offenses under the Tax
Code. The first is the violation of Sec. 46(a), Sec. 72 and Sec. 73 (the filing of income tax
returns), which are interrelated. The second is the violation of Sec. 53 (withholding of
income taxes at source). The third is the violation of Sec. 208 (unlawful pursuit of business
or occupation); and the fourth is the violation of Sec. 209 (failure to make a return of
receipts, sales, business or gross value of output actually removed or to pay the tax due
thereon). Even in their classification the six above-mentioned provisions are embraced in
two different titles: Secs. 46(a), 53, 72 and 73 are under Title II (Income Tax); while Secs.
208 and 209 are under Title V (Privilege Tax on Business and Occupation).
Respondents argue that Stonehill, Et. Al. v. Diokno, Et Al., L-19550, June 19, 1967 (20
SCRA 383), is not applicable, because there the search warrants were issued for "violation
of Central Bank Laws, Internal Revenue (Code) and Revised Penal Code;" whereas, here
Search Warrant No 2-M-70 was issued for violation of only one code, i.e., the National
Internal Revenue Code. The distinction more apparent than real, because it was precisely on
account of the Stonehill incident, which occurred sometime before the present Rules of
Court took effect on January 1, 1964, that this Court amended the former rule by inserting
therein the phrase "in connection with one specific offense," and adding the sentence "No
search warrant shall issue for more than one specific offense," in what is now Sec. 3, Rule
126. Thus we said in Stonehill:jgc:chanrobles.com.ph
"Such is the seriousness of the irregularities committed in connection with the disputed
search warrants, that this Court deemed it fit to amend Section 3 of Rule 122 of the former
Rules of Court that a search warrant shall not issue but upon probable cause in connection
with one specific offense. Not satisfied with this qualification, the Court added thereto a
paragraph, directing that no search warrant shall issue for more than one specific offense."
1. The search warrant does not particularly describe the things to be seized.
The documents, papers and effects sought to be seized are described in Search Warrant No.
2-M-70 in this manner:jgc:chanrobles.com.ph

72

"Unregistered and private books of accounts (ledgers, journals, columnars, receipts and
disbursements books, customers ledgers); receipts for payments received; certificates of
stocks and securities; contracts, promissory notes and deeds of sale; telex and coded
messages; business communications, accounting and business records; checks and check
stubs; records of bank deposits and withdrawals; and records of foreign remittances,
covering the years 1966 to 1970."cralaw virtua1aw library
The description does not meet the requirement in Art III, Sec. 1, of the Constitution, and of
Sec. 3, Rule 126 of the Revised Rules of Court, that the warrant should particularly describe
the things to be seized.
In Stonehill, this Court, speaking thru Mr. Chief Justice Roberto Concepcion,
said:jgc:chanrobles.com.ph
"The grave violation of the Constitution made in the application for the contested search
warrants was compounded by the description therein made of the effects to be searched for
and seized, to wit:chanrob1es virtual 1aw library
Books of accounts, financial records, vouchers, journals, correspondence, receipts, ledgers,
portfolios, credit journals, typewriters, and other documents and/or paper showing all
business transactions including disbursement receipts, balance sheets and related profit and
loss statements.
"Thus, the warrants authorized the search for and seizure of records pertaining to all
business transactions of petitioners herein, regardless of whether the transactions were legal
or illegal. The warrants sanctioned the seizure of all records of the petitioners and the
aforementioned corporations, whatever their nature, thus openly contravening the explicit
command of our Bill of Rights that the things to be seized be particularly described as
well as tending to defeat its major objective: the elimination of general warrants."cralaw
virtua1aw library
While the term "all business transactions" does not appear in Search Warrant No. 2-M-70,
the said warrant nevertheless tends to defeat the major objective of the Bill of Rights, i.e.,
the elimination of general warrants, for the language used therein is so all-embracing as to
include all conceivable records of petitioner corporation, which, if seized, could possibly
render its business inoperative.
In Uy Kheytin, Et. Al. v. Villareal, etc., Et Al., 42 Phil. 886, 896, this Court had occasion to
explain the purpose of the requirement that the warrant should particularly describe the place
to be searched and the things to be seized, to wit:jgc:chanrobles.com.ph
". . . Both the Jones Law (sec. 3) and General Orders No. 58 (sec. 97) specifically require
that a search warrant should particularly describe the place to be searched and the things to

73

be seized. The evident purpose and intent of this requirement is to limit the things to be
seized to those, and only those, particularly described in the search warrant to leave the
officers of the law with no discretion regarding what articles they shall seize, to the end that
unreasonable searches and seizures may not be made, that abuses may not be
committed. That this is the correct interpretation of this constitutional provision is borne out
by American authorities."cralaw virtua1aw library
The purpose as thus explained could, surely and effectively, be defeated under the search
warrant issued in this case.
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 (People v. Rubio;
57 Phil. 384); 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 (idem., dissent of
Abad Santos, J.,); or when the things described are limited to those which bear direct
relation to the offense for which the warrant is being issued (Sec. 2, Rule 126, Revised Rules
of Court). The herein search warrant does not conform to any of the foregoing tests. If the
articles desired to be seized have any direct relation to an offense committed, the applicant
must necessarily have some evidence, other than those articles, to prove the said offense;
and the articles subject of search and seizure should come in handy merely to strengthen
such evidence. In this event, the description contained in the herein disputed warrant should
have mentioned, at least, the dates, amounts, persons, and other pertinent data regarding the
receipts of payments, certificates of stocks and securities, contracts, promissory notes, deeds
of sale, messages and communications, checks, bank deposits and withdrawals, records of
foreign remittances, among others, enumerated in the warrant.
Respondents contend that certiorari does not lie because petitioners failed to file a motion
for reconsideration of respondent Judges order of July 29, 1970. The contention is without
merit. In the first place, when the questions raised before this Court are the same as those
which were squarely raised in and passed upon by the court below, the filing of a motion for
reconsideration in said court before certiorari can be instituted in this Court is no longer a
prerequisite. (Pajo, etc., Et. Al. v. Ago, Et Al., 108 Phil., 905). In the second place, the rule
requiring the filing of a motion for reconsideration before an application for a writ of
certiorari can be entertained was never intended to be applied without considering the
circumstances. (Matutina v. Buslon, Et Al., 109 Phil., 140.) In the case at bar time is of the
essence in view of the tax assessments sought to be enforced by respondent officers of the
Bureau of Internal Revenue against petitioner corporation, On account of which immediate
and more direct action becomes necessary. (Matute v. Court of Appeals, Et Al., 26 SCRA
768.) Lastly, the rule does not apply where, as in this case, the deprivation of petitioners
fundamental right to due process taints the proceeding against them in the court below not
only with irregularity but also with nullity. (Matute v. Court of Appeals, Et Al., supra.)

74

It is next contended by respondents that a corporation is not entitled to protection against


unreasonable search and seizures. Again, we find no merit in the contention.
"Although, for the reasons above stated, we are of the opinion that an officer of a
corporation which is charged with a violation of a statute of the state of its creation, or of an
act of Congress passed in the exercise of its constitutional powers, cannot refuse to produce
the books and papers of such corporation, we do not wish to be understood as holding that a
corporation is not entitled to immunity, under the 4th Amendment, against unreasonable
searches and seizures. A corporation is, after all, but an association of individuals under an
assumed name and with a distinct legal entity. In organizing itself as a collective body it
waives no constitutional immunities appropriate to such body. Its property cannot be taken
without compensation. It can only be proceeded against by due process of law, and is
protected, under the 14th Amendment, against unlawful discrimination . . ." (Hale v. Henkel,
201 U.S. 43, 50 L. ed. 652.)
"In Linn v. United States, 163 C.C.A. 470, 251 Fed. 476, 480, it was thought that a different
rule applied to a corporation, the ground that it was not privileged from producing its books
and papers. But the rights of a corporation against unlawful search and seizure are to be
protected even if the same result might have been achieved in a lawful way." (Silverthorne
Lumber Company, Et. Al. v. United States of America, 251 U.S. 385, 64 L. ed. 319.)
In Stonehill, Et. Al. v. Diokno, Et Al., supra, this Court impliedly recognized the right of a
corporation
to
object
against
unreasonable
searches
and
seizures,
thus:jgc:chanrobles.com.ph
"As regards the first group, we hold that petitioners herein have no cause of action to assail
the legality of the contested warrants and of the seizures made in pursuance thereof, for the
simple reason that said corporations have their respective personalities, separate and distinct
from the personality of herein petitioners, regardless of the amount of shares of stock or the
interest of each of them in said corporations, whatever, the offices they hold therein may be.
Indeed, it is well settled that the legality of a seizure can be contested only by the party
whose rights have been impaired thereby, and that the objection to an unlawful search and
seizure is purely personal and cannot be availed of by third parties. Consequently, petitioners
herein may not validly object to the use in evidence against them of the documents, papers
and things seized from the offices and premises of the corporations adverted to above, since
the right to object to the admission of said papers in evidence belongs exclusively to the
corporations, to whom the seized effects belong, and may not be invoked by the corporate
officers in proceedings against them in their individual capacity . . ."cralaw virtua1aw
library
In the Stonehill case only the officers of the various corporations in whose offices
documents, papers and effects were searched and seized were the petitioners. In the case at
bar, the corporation to whom the seized documents belong, and whose rights have thereby

75

been impaired, is itself a petitioner. On that score, petitioner corporation here stands on a
different footing from the corporations in Stonehill.
The tax assessments referred to earlier in this opinion were, if not entirely as claimed by
petitioners at least partly as in effect admitted by respondents based on the
documents seized by virtue of Search Warrant No. 2-M-70. Furthermore, the fact that the
assessments were made some one and one-half months after the search and seizure on
February 25, 1970, is a strong indication that the documents thus seized served as basis for
the assessments. Those assessments should therefore not be enforced.
PREMISES CONSIDERED, the petition is granted. Accordingly, Search Warrant No. 2-M70 issued by respondent Judge is declared null and void; respondents are permanently
enjoined from enforcing the said search warrant; the documents, papers and effects seized
thereunder are ordered to be returned to petitioners; and respondent officials the Bureau of
Internal Revenue and their representatives are permanently enjoined from enforcing the
assessments mentioned in Annex "G" of the present petition, as well as other assessments
based on the documents, papers and effects seized under the search warrant herein nullified,
and from using the same against petitioners in any criminal or other proceeding. No
pronouncement as to costs.
Reyes, J.B.L., J., concurs with Mr. Justice Barredo.
Castro, J., concurs in the result.
Separate Opinions
BARREDO, J., concurring:chanrob1es virtual 1aw library
I concur.
I agree with the ruling that the search warrants in question violates the specific injunction of
Section 3, Rule 126 that "No search warrant shall issue for more than one specific offense."
There is no question in my mind that, as very clearly pointed out by Mr. Justice Villamor,
the phrase "for violation of Section 46 (a) of the National Internal Revenue Code in relation
to all other pertinent provisions thereof, particularly Sections 53, 72, 73, 208 and 209" refers
to more than one specific offense, considering that the violation of Section 53 which refers
to withholding of income taxes at the sources, Section 208 which punishes pursuit of
business or occupation without payment of the corresponding specific or privilege taxes, and
Section 209 which penalizes failure to make a return of receipts sales, business or gross
value output actually removed or to pay the taxes thereon in connection with Title V on
Privilege Taxes on Business and Occupation can hardly be absorbed in a charge of alleged
violation of Section 46(a), which merely requires the filing of income tax returns by
corporations, so as to constitute with it a single offense. I perceive here the danger that the

76

result of the search applied for may be used as basis not only for a charge of violating
Section 46(a) but also and separately of Section 53, 208 and 209. Of course, it is to be
admitted that Sections 72 and 73, also mentioned in the application, are really directly
related to Section 46(a) because Section 72 provides for surcharges for failure to render,
returns and for rendering false and fraudulent returns and Section 73 refers to the penalty for
failure to file returns or to pay the corresponding tax. Taken together, they constitute one
single offense penalized under Section 73. I am not and cannot be in favor of any scheme
which amounts to an indirect means of achieving that which not allowed to be done directly.
By merely saying that a party is being charged with violation of one section of the code in
relation to a number of other sections thereof which in truth have no clear or direct bearing
with the first is to me condemnable because it is no less than a shotgun device which
trenches on the basic liberties intended to be protected by the unequivocal limitations
imposed by the Constitution and the Rules of Court on the privilege to secure a search
warrant with the aggravating circumstance of being coupled with an attempt to mislead the
judge before whom the application for its issuance is presented.
I cannot close this brief concurrence without expressing my vehement disapproval of the
action taken by respondent internal revenue authorities in using the documents and papers
secured during the search, the legality of which was pending resolution by the court, as basis
of an assessment, no matter how highly motivated such action might have been. This smacks
of lack of respect, if not contempt for the court and is certainly intolerable. At the very least,
it appears as an attempt to render the court proceedings moot and academic, and dealing as
this case does with constitutionally protected rights which are part and parcel of the basic
concepts of individual liberty and democracy, the government agents should have been the
first ones to refrain from trying to make a farce of these court proceedings. Indeed, it is to be
regretted that the government agents and the court have acted irregularly, for it is highly
doubtful if it would be consistent with the sacredness of the rights herein found to have been
violated to permit the filing of another application which complies with the constitutional
requirements above discussed and the making of another search upon the return of the
papers and documents now in their illegal possession. This could be an instance wherein
taxes properly due the State will probably remain unassessed and unpaid only because the
ones in charge of the execution of the laws did not know how to respect basic constitutional
rights and liberties.

EN BANC
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

77

RAMON DIAZ, COMMISSIONER RAUL R. DAZA, COMMISSIONER QUINTIN S.


DOROMAL, CAPT. JORGE B. SIACUNCO, et al., respondents.
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

78

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.
1. Yearly list of stockholders with their corresponding share/stockholdings from 1973 to
1986 duly certified by the Corporate Secretary.
2. Audited Financial Statements such as Balance Sheet, Profit & Loss and others from
1973 to December 31, 1985.
3. Monthly Financial Statements for the current year up to March 31, 1986.

79

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


5. Inventory listings of assets up dated up to March 31, 1986.
6. Updated schedule of Accounts Receivable and Accounts Payable.
7. Complete list of depository banks for all funds with the authorized signatories for
withdrawals thereof.
8. 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 VicePresident 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

80

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;

81

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
1. 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 Court1) 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

82

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

83

premises at Mariveles * * rolls of cable wires, worth P600,000.00 on May 11, 1986; 21
9) allowing "indiscriminate diggings" at Engineer Island to retrieve gold bars supposed to
have been buried therein. 22
1. 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.
1. 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 preciselyThe 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

84

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. 29 It 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,

85

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 President1) 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
Sandiganbayan which 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

86

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
1. 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
1. 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

87

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 "illgotten 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

88

efforts to recover the same.


1. 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 "illgotten 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

89

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 "illgotten," and resultant recovery thereof by the Government is warranted.
e. State of Seizure Not To Be Indefinitely Maintained; The Constitutional Command

90

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

91

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
1. 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." 62 Executive Order No. 2 declares that with respect to claims on allegedly "illgotten" 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

92

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
1. 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."

93

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
1. 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.
1. 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.
1. 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

94

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. 75 Their names and
the number of shares respectively held by them are as follows:
1. Jose A. Rojas
1,248 shares
1. Severino G. de la Cruz
1,248 shares
1. Emilio T. Yap
2,508 shares
1. Jose Fernandez
1,248 shares
1. Jose Francisco
128 shares
1. Manuel S. Mendoza
96 shares
1. Anthony P. Lee
1,248 shares
1. Hilario M. Ruiz

95

32 shares
1. Constante L. Farias
8 shares
1. Fidelity Management, Inc.
65,882 shares
1. Trident Management
7,412 shares
1. United Phil. Lines
1,240 shares
1. Renato M. Tanseco
8 shares
1. Fidel Ventura
8 shares
1. Metro Bay Drydock
136,370 shares
1. Manuel Jacela
1 share
1. Jonathan G. Lu
1 share
1. Jose J. Tanchanco
1 share
1. Dioscoro Papa
128 shares

96

1. Edward T. Marcelo
4 shares
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
1. 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.
1. 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
1. Acquisition of Other Assets of NASSCO; Intervention of Marcos

97

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 semiexpendable 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.
1. 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
1. 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

98

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;
By getting their replacements, the families cannot question us later on; and
We will owe no further favors from them. 87

99

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.
1. Marcos' Response to Reports

100

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 Farias 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.
Farias 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

101

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
1. 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:

102

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 Malacaang 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,

103

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.
1. 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.

104

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.
1. 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.
1. 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

105

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 selfincrimination, 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

106

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.
1. 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

107

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

108

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.
1. No Sufficient Showing of Other Irregularities
As to the other irregularities complained of by BASECO, i.e., the cancellation or revision,

109

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

110

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 governmentowned 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

111

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 Malacaang 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.

112

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.

113

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 Malacaang 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

114

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
Malacaang 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

115

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 illgotten 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

116

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,

117

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 "illgotten 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-

118

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

119

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.

120

(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 bylaws 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.

121

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.
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.

122

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

123

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 governmentowned 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 Malacaang 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

124

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

125

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 Malacaang 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

126

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
Malacaang 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

127

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 illgotten 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

128

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

129

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 "illgotten 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).

130

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 illgotten 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.

131

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.

132

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-

133

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

134

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.
Footnotes
1 Annex A, petition, rollo, p. 26.
2 Annex B, petition, rollo, p. 27.
3 Annex C, petition, rollo p. 28.
4 Annex D-A petition, rollo p. 38.
5 Annex E, petition, rollo p. 39.
6 Annex F, petition, rollo p. 41.
7 Annex G, petition, rollo, p. 42; Annex G-1, Suppl. Pleading, rollo, pp. 150 et seq.
8 Annex-H, petition, rollo, p. 43; see also Suppl. Pleading, rollo, pp, 136- 137.
9 Annex J, petition, rollo, p. 56.
10 Annexes K, L, M, N and O, petition, rollo pp. 57-61.
11 Rollo, p. 23.
12 Id p. 11; emphasis supplied.
13 Id., p. 12.
14 Id., p. 6.
15 Id., pp. 6-7.
16 Id., p. 7.
17 Id.

135

18 Id., p. 8.
19 Id., p. 9.
20 Id., pp. 603-605.
21 Id., p. 8; Annex I, petition.
22 Id., p. 9.
23 Promulgated on March 25, 1986.
24 ART. II, Sec. 1, d; emphasis supplied.
25 Whereas Clauses (Preamble).
26 Sec. 1.
27 Sec. 2, a; emphasis supplied.
28 Sec. 3, [b], [c], and [d]; emphasis supplied.
29 Sec. 3, [a], [e], [f].
30 Sec. 3, [h].
31 First two Whereas Clauses; emphasis supplied.
32 Emphasis supplied.
33 Effective May 7, 1986.
34 Sec 1; emphasis supplied.
35 Sec. 1; emphasis supplied.
36 Sec. 3.
37 Sec. 1, [d], ART. II, Provisional Constitution, Proclamation No. 3.
38 Sec. 2, [a], Ex. Order No. 1.
39 First Whereas Clause, Ex. Order No. 2.
40 Second Whereas Clause, Ex. Order No. 2.

136

41 Sec. 3 [c], Ex. Order No. 1.


42 Tuason, J., in Guido v. Rural Progress Administration, 84 Phil, 847, emphasis supplied.
43 Sec. 3 [c], Ex. Order No. 1.
44 Except for the statement as to the duration of the writ of sequestration, this is
substantially the definition of sequestration set out in Section 1 (B) of the Rules and
Regulations of the PCGG (Rollo, pp. 195-196). The term is used in the Revised AntiSubversion Law, (P.D. No. 885, to mean "the seizure of private property or assets in the
hands of any person or entity in order to prevent the utilization, transfer or conveyance of
the same for purposes inimical to national security, or when necessary to protect the interest
of the Government or any of its instrumentalities. It shall include the taking over and
assumption of the management, control and operation of the private property or assets
seized" (reiterated in P.D. No. 1835, the Anti-Subversion Law of 1981, repealed by P.D. No.
1975 prom. on May 2, 1985) (See Phil. Law Dictionary, Moreno, 1982 ed., pp. 568-569).
45 As employed under the statutory and code provisions of some states, the writ of
sequestration is merely, but essentially, a conservatory measure, somewhat in the nature of a
judicial deposit. It is a process which may be employed as a conservatory writ whenever the
right of the property is involved, to preserve, pending litigation, specific property subject to
conflicting claims of ownership or liens and privileges * *" 79 C.J.S. 1047, "In Louisiana. A
mandate of the court, ordering the sheriff, in certain cases to take in his possession, and to
keep, a thing of which another qqqimrson has the possession, until after the decision of a
suit, in order that it be delivered to him who shall be adjudged entitled to have the property
or possession of that thing. * *." Bouvier's Law Dictionary, 3rd qqqRev Vol. 2, p. 3046.
"Sequester" means, according to Black's Law Dictionary, "to deposit a thing which is the
subject of a controversy in the hands of a third person, to hold for the contending parties; to
take a thing which is the subject of a controversy out of the possession of the contending
parties, and deposit it in the hands of a third person.
46 Ex. Order No. 2.
47 See e.g., de la Rama v. Villarosa, 8 SCRA 413, citing 5 Am. Jur., 14; Tayabas Land Co. v.
Sharruf, et al., 41 Phil. 382.
48 Sec. 3 [c], Ex. Order No. 1.
49 Id.
50 Rollo, pp. 693-695.
51 ART. XVIII.

137

52 Emphasis supplied.
53 BASECO's counsel agrees (Rollo, p. 690).
54 Rule 57, Rules of Court.
55 Rule 59, Rules of Court.
56 C.A. No. 466; Chap. II, Title IX, National Internal Revenue Code of 1977; rollo, pp. 197198.
57 Rollo, p. 692.
58 Secs. 3 and 4, Rule 57; Sec. 3, Rule 59; Secs. 1-3, Rule 60, Rules of Court; see, e.g.,
Filinvest Credit Corp. v. Relova, 117 SCRA 420: see, too, 79 C.J.S., 1047 to the following
effect. "The conservatory writ of sequestration has been held to be a process of the most
extensive application, under which the whole of a person's estate may be seized. This writ of
sequestration, like other conservatory remedies by which the property of defendant is taken
from his possession before judgment without notice, and on the ex parte showing of
plaintiff, is a remedy stricti juris, summary in its nature. * *.
59 Sec. 1 [d], ART. II, Freedom Constitution (Proclamation No. 3); Ex. No. 14.
60 Ex. Order No. 1.
61 What is anathema to due process is not so much the absence of previous notice but the
absolute absence thereof and lack of opportunity to be heard. See Caltex (Phil.) v. Castillo,
et al., 21 SCRA 1071, citing Fuentes v. Binamira, L-14965, Aug. 31, 1961; Bermejo v.
Barrios, 31 SCRA 764; Cornejo v. Sec. of Justice, et al., 57 SCRA 663; Superior Concrete
Products, Inc. v. WCC, 82 SCRA 270; Tajonera v. Lamaroza, 110 SCRA 440.
62 Last Whereas Clause.
63 Also, Last Whereas Clause.
64 Rollo, p. 206.
65 See footnote No. 50, supra.
66 A decision with absolutely nothing to support it is a nullity * *" (Ang Tibay v. C.I.R., 69
Phil. 635, 642, citing Edwards v. McCoy, 22 Phil. 598.
67 Eff., Feb. 2,1987.
68 Freund, The Police Power (Chicago, 1904), cited by Cruz, I.A., Constitutional Law; 4th

138

ed., p. 42.
69 Smith, Bell & Co. v. Natividad, 40 Phil. 136, citing U.S. v. Toribio, 15 Phil. 85; Churchill
and Tait v. Rafferty, 32 Phil. 580, and Rubi v. Provincial Board of Mindoro, 39 Phil. 660.
70 Rubi v. Provincial Board, supra.
71 Ex. Order No. 14.
72 Rollo, pp. 695-697.
73 Par. 6, petition; rollo, p. 4.
74 Annex 100, Solicitor General's Comment and Memorandum; rollo, p. 178.
75 Annex P, petition.
76 Annex 101, Solicitor General's Comment; etc.; rollo, pp. 367, 184.
77 Annex 102, Id., rollo, pp. 384, 185.
78 Annex 103, Id., rollo, pp. 393, 185.
79 Annex 104, Id., rollo, p. 404.
80 Annex 9 [par. 3], and Annex 1 [p 4] of the Solicitor General's Manifestation dated Sept.
24, 1986.
81 Id.
82 Annex 9 of Solicitor General's aforesaid Manifestation.
83 Annex 8, Id.
84 Annex I, Id.
85 See footnotes No. 80-82, supra.
86 Emphasis supplied.
87 Rollo, p. 72; emphasis supplied.
88 Id., pp. 71-72.
89 See par. 20, infra.

139

90 Emphasis supplied; see par. 17, "Loans Obtained," supra.


91 Emphasis supplied.
92 Rollo, p. 81.
93 Annex 6 of Solicitor General's Manifestation, etc., dtd. Sept. 24, 1986, supra.
94 Rollo, pp. 192, 688.
95 Id., pp. 190-192.
96 Annex P, petition, supra.
97 Comment and Memorandum (in amplification of oral arguments) filed by the Solicitor
General on October 15, 1986 (rollo, pp. 178 et seq); Resolution, Oct. 28, 1986 (rollo, p. 611A).
98 Annexes 1 to 19 and 19-A, Id.
99 Annexes 20 to 99, inclusive, Id.
100 Reply to Respondents' Manifestation, etc. dtd. Nov. 5, 1986; rollo. pp. 682 et seq.
101 Rollo, p. 117.
102 Id., p. 126; emphasis supplied.
103 Id., pp. 128-129; emphasis supplied.
104 Id., p. 177 (A).
105 Id., pp. 682, et seq.
106 Id., p. 739.
107 Id., p. 760.
108 Compliance dtd. Dec. 20, 1986; rollo, p. 775.
109 Annex P, petition, supra.
110 Art. IV, Sec. 1 (12), 1973 Constitution.
111 Peo. v. Ferrer, 48 SCRA 382, 395-396, citing Cummings v. U.S., 4 Wall. (71 U.S.) 277
(1867), accord, Ex parte Garland, 4 Wall. (71 U.S.) 333 (1867), it being observed that this

140

definition "was adopted by this Court in People vs. Carlos, 78 Phil. 535, 544 (1947) and in
People vs. Montenegro, 91 Phil. 883, 885 (1952)."
112 Id., at pp, 396-397, citing de Veau v. Braisted, 363 U.S. 144, 160 (1960); United States
v. Lovett, 328 U.S. 303, 315 (1946).
113 Martin, Law & Jurisprudence on the Freedom Constitution of the Philippines, 1986 ed.,
p. 310, citing Hal v. Henkel, 201 U.S. 43.
114 Rollo, pp. 215-217.
115 See Sec. 7, Rule 59, Rules of Court.
116 Sec. 3, d, f, g, Ex. Order No. 1.
117 Sec. 4 [c], Exh. Ord. No. 1.
118 Rollo p. 611.
119 See Supplemental Pleading, rollo, pp. 136 et seq. and Urgent Motion to Resolve Plea for
Restraining Order filed Oct. 16, 1986, rollo, pp. 413 et seq.
TEEHANKEE, C.J., concurring:
1 Executive Order No. 1, section 2.
2 Gutierrez, J., concurring and dissenting opinion.
3 Lone dissenting opinion of Cruz, J.
4 Text reproduced in Par. 7, sub-par. 3 of main opinion.
5 Main opinion, par. 24.
6 The other two provisional remedies are the issuance of sequestration and (2) freeze orders.
See main opinion, par. 7.
7 Main opinion par. 20.
8 Idem.
9 Main opinion, par. 21.
10 Chief Justice Taney, cited in Morfe vs. Mutuc, 22 SCRA 424 (1968).
11 Annotation, 35 SCRA 500, citing Primicias vs. Fugoso, 80 Phil. 71; Ignacio vs. Elas, 55

141

O.G. 2162.
12 Churchill vs. Rafferty, 32 Phil. 580, citing 8 Cyc., 863.
13 Annotation, 35 SCRA 500, at p. 501, citing Coke 139.
14 Vol. 16 AMJUR 2d, Constitutional Law, Sec. 370.
15 BERNAS Primer on the 1973 Constitution, p. 32, 1983 ed.
16 Churchill vs. Rafferty, 32 Phil. 580, citing Noble State Bank vs. Haskell (219 US [1911]
575).
17 Vol. 16 AMJUR 2d, Constitutional Law, Sec. 420.
18 Vol. 16 AMJUR 2d, Constitutional Law, Sec. 370.
19 Jovito R. Salonga: "The Practical and Legal Aspects of the Recovery of Ill-gotten
Wealth," Gregorio Araneta Memorial Lecture delivered on August 25, 1986 at the Ateneo
Law School.
20

142