MAGSAYSAY-LABRADOR vs.

COURT OF APPEALS
G.R. No. 58168. December 19, 1989.
Fernan, C.J.

FACTS: Private respondent Adelaida Rodriguez Magsaysay filed an action against Subic Land
Corporation (SUBIC), among others, to annul the deed of assignment and deed of mortgage
executed in favor of the latter by her late husband. Private respondent alleged that the subject
land of the two deeds was acquired through conjugal funds. Since her consent to the disposition
of the same was not obtained, she claimed that the acts of assignment and mortgage were
done to defraud the conjugal partnership. She further contended that the same were done
without consideration and hence null and void. Petitioners, sisters of the deceased husband of
the private respondent, filed a motion for intervention on the ground that their brother conveyed
to them one-half of his shareholdings in SUBIC, or about 41%. The trial court denied the motion
for intervention ruling that petitioners have no legal interest because SUBIC has a personality
separate and distinct from its stockholders. The CA confirmed the denial on appeal. Hence, this
petition.

ISSUE: Whether petitioners, as stockholders of SUBIC, have a legal interest in the action for
annulment of the deed of assignment and deed of mortgage in favor of the corporation.

HELD: NO. The Court noted that the interest which entitles person to intervene in a suit
between other parties must be in the matter in litigation and of such direct and immediate
character that the intervenor will either gain or lose by the direct legal operation and effect of the
judgment. In the instant petition, it was said that the interest, if it exists at all, of petitioners-
movants is indirect, contingent, remote, conjectural, consequential and collateral. At the very
least, their interest is purely inchoate, or in sheer expectancy of a right in the management of
the corporation and to share in the profits thereof and in the properties and assets thereof on
dissolution, after payment of the corporate debts and obligations. While a share of stock
represents a proportionate or aliquot interest in the property of the corporation, it does not vest
the owner thereof with any legal right or title to any of the property, his interest in the corporate
property being equitable or beneficial in nature. Shareholders are in no legal sense the owners
of corporate property, which is owned by the corporation as a distinct legal person.
KUKAN INTERNATIONAL CORPORATION VS. HON. AMOR REYES
G.R. NO. 182729, SEPTEMBER 29, 2010

FACTS:
Private respondent Romeo M. Morales doing business under the name RM Morales Trophies
and Plaques was awarded a P5 million contract for the supply and installation of signages in a
building constructed in Makati sometime in March 1998. The contract price was later reduced to
P3,388,502 because some items were deleted from the contract. Morales complied with his
contractual obligations but he was paid only the amount of P1,976,371.07 leaving a balance of
P1,412,130.93. He filed a case against Kukan, Inc., for sum of money with the RTC of Manila
docketed as Civil Case No. 99-93173. Kukan Inc., stopped participating in the proceedings in
November 2000, hence, it was declared in default and Morales presented his evidence ex-parte
against petitioner. On November 28, 2002, the RTC rendered a decision in favor of Morales and
against Kunkan, Inc. ordering the latter to pay the sum of P1,201,724.00 with legal interest of
12% per annum until fully paid; P50,000.00 as moral damages,P20,000.00 as attorney's fees and
P7,960.06 as litigation expenses. The counterclaimfiled by Kunkan, Inc. was dismissed. The
decision became final and executory During the execution, the sheriff levied the personal
properties found at the office of Kukan, Inc.. Claiming it owned the properties levied, Kukan
International Corporation (KIC) fied an Affidavit of Third Party Claim. Morales filed an
Omnibus Motion praying to applythe principle of piercing the veil of corporate entity. He alleged
that Kankun, Inc. and KIC are one and the same corporation His Motion was denied. On Motion
of Morales the presiding Judge of Branch 17 of RTC Manila inhibited himself from hearing the
case. It was raffled to Branch 21 which granted the Motion filed by Morales on March 12, 2007
and decreed that Kukan, Inc. and Kukan International Inc., as one and the same corporation; that
the levy made on the properties of KIC is valid; and ordering Kunkan International Corp. and
Michael Chan as jointly and severally liable to pay the award pursuant to the Decision dated
November 28, 2002. KIC filed a Motion for Reconsideration which was denied.KIC brought the
case to the Court of Appeals which rendered the Decision n January 23, 2008 denying KIC's
petition. The CA also denied its Motion for Reconsideration in the Resolution dated June 7,
2007.

Hence, this case.

ISSUE/S: One of the issues raised is whether or not the trial court and the appellate court
correctly applied the principle of piercing the veil of corporate entity.

HELD: The Supreme Court ruled that the doctrine of piercing the veil of corporate entity finds
noapplication in this case. According to the Supreme Court, the principle of piercing the veil of
corporate entity and the resulting treatment of two related corporation as one and the same
juridical person applies only to established liability and not to confer jurisdiction. In this case,
the Supreme Court ruled that KIC was not made a party defendant in Civil Case No. 99-93173. It
entered a special but not a voluntary appearance in the trial court to assert that it was a separate
entity and has a separate legal personality from Kunkan, Inc. KIC was not impleaded nor served
with summons. Hence, it could only assert its claim through the affidavits, comments and
motions filed by special apperance before
the RTC that it is a separate juridical entity.
The Supreme stated that the doctrine of piercing the veil of corporate entity comes to play

during the trial of the case after the court has already acquired jurisdiction over the corporation.
To justify the piercing of the veil of corporate fiction, it must be shown by clear and
convincing proof that the separate and distinct personality of the corporation was purposely
employed to evade a legitimate and binding comittment and perpetuate a fraud or like a
wrongdoings.
In those instances when the Court pierced the veil of corporate fiction of two corporations,
there was a confluence of the following factors:
1.

A first corporation is dissolved;

2. The assets of the first corporation is transferred to a second corporation to avoid a financial
liability of the first corporation; and
3. Both corporations are owned and controlled by the same persons such that the second
corporation should be considered as a continuation and successor of the first corporation.
In this case, the second and third factors are conspicuously absent. There is, therefore, no
compelling justification for disregarding the fiction of corporate entity separating Kukan, Inc.
from KIC. In applying the principle, both the RTC and the CA miserably failed to identify the
presence of the abovementioned factors. The High Court stated that neither should the level of
paid-up capital of Kukan, Inc. upon its incorporation be viewed as a badge of fraud, for it is in
compliance with Sec. 13 of the Corporation Code, which only requires a minimum paid-up
capital of PhP 5,000. The suggestion that KIC is but a continuation and successor of Kukan, Inc.,
owned and controlled as they are by the same stockholders, stands without factual basis. The fact
that Michael Chan, a.k.a. Chan Kai Kit, owns 40% of the outstanding capital stock of both
corporations standing alone, is insufficient to establish identity. There must be at least a
substantial identity of stockholders for both corporations in order to consider this factor to be
constitutive of corporate identity.

Petition granted.
PIONEER INSURANCE SURETY CORPORATION v. MORNING STAR et al.
Topic: The Corporation and the State

FACTS:
 Morning Start is a travel and tours agency with Benny Wong, Estelita Wong,
Arsenio Chua, Sonny Chua, and Wong Yan Tak as shareholders and members of
the board of directors
 International Air Transport Association (IATA) is a Canadian corporation
licensed to do business in the Philippines
 IATA appointed Morning Star as an accredited travel agent
 IATA and Morning Star entered into a passengers sales agency agreement in
which Morning Star is tasked to report all air transport ticket sales to IATA
 Pioneer Insurance Surety Corp. is the surety company of Morning Star
 Morning Star accumulated over Php 100m and USD 457k of debt from IATA
which was paid for by Pioneer Insurance
 Pioneer Insurance filed a case against Morning Start and its shareholders for a
sum of money
 Pioneer’s arguments included:
 They included the individual respondents because they, as shareholders
and members of the board of directors, were grossly negligent and were
in bad faith when they handled Morning Star (massive debt was caused
by their gross negligence and bad faith)
 Cited Section 31 of the Corporation Code
 Individual respondents argued that:
 The shareholders are separate and distinct from the corporation, hence
they cannot be sued
 RTC: Morning Star and the individual respondents are liable
 CA: absolved the individual respondents and only held Morning Star liable for
the debt

ISSUE: WON the individual respondents should be held liable for the company’s debt

HELD:
 NO
 The SC maintained that the corporation’s personality is separate and distinct
from those that represent the corporation
 This separate corporate personality shields corporate officers acting in good
faith and within the scope of their authority from personal liability except for
situations enumerated by law and jurisprudence
 The Court also found that the individual respondents DID NOT act in bad faith
 Bad faith imports a dishonest purpose or some moral obliquity and
conscious doing of a wrong, not simply bad judgement or negligence
 Also, individual respondents did no exhibit gross negligence because the
Court found out that the same board of directors were also managing another
corporation which did fairly well compared to Morning Star. The mere fact that
Morning Star incurred huge losses and that it has no assets at the time it
contracted the large financial obligations did not amount to gross negligence
by the members of the board of directors (individual respondents).
Francisco Motors Corporation vs CA Case Digest
Francisco Motors Corporation vs. Court of Appeals
[GR 100812, 25 June 1999]

Facts: On 23 January 1985, Francisco Motors Corp. filed a complaint against Spouses Gregorio
and Librada Manuel to recover P3,412.06, representing the balance of the jeep body purchased
by the Manuels from Francisco Motors; an additional sum of P20,454.80 representing the unpaid
balance on the cost of repair of the vehicle; and P6,000.00 for cost of suit and attorney's fees. To
the original balance on the price of jeep body were added the costs of repair. In their answer, the
Manuel spouses interposed a counterclaim for unpaid legal services by Gregorio Manuel in the
amount of P50,000 which was not paid by the incorporators, directors and officers of Francisco
Motors. The trial court decided the case on 26 June 1985, in favor of Francisco Motors in regard
to its claim for money, but also allowed the counter-claim of the Manuel spouses. Both parties
appealed. On 15 April 1991, the Court of Appeals sustained the trial court's decision. Hence, the
present petition for review on certiorari.

Issue: Whether the Francisco Motors Corporation should be liable for the legal services of
Gregorio Manuel rendered in the intestate proceedings over Benita Trinidad’s estate (of the
Francisco family).

Held: Basic in corporation law is the principle that a corporation has a separate personality
distinct from its stockholders and from other corporations to which it may be connected.
However, under the doctrine of piercing the veil of corporate entity, the corporation's separate
juridical personality may be disregarded, for example, when the corporate identity is used to
defeat public convenience, justify wrong, protect fraud, or defend crime. Also, where the
corporation is a mere alter ego or business conduit of a person, or where the corporation is so
organized and controlled and its affairs are so conducted as to make it merely an instrumentality,
agency, conduit or adjunct of another corporation, then its distinct personality may be ignored. In
these circumstances, the courts will treat the corporation as a mere aggrupation of persons and
the liability will directly attach to them.
The legal fiction of a separate corporate personality in those cited instances, for reasons of public
policy and in the interest of justice, will be justifiably set aside. Herein, however, given the facts
and circumstances of this case, the doctrine of piercing the corporate veil has no relevant
application. The rationale behind piercing a corporation's identity in a given case is to remove the
barrier between the corporation from the persons comprising it to thwart the fraudulent and
illegal schemes of those who use the corporate personality as a shield for undertaking certain
proscribed activities. In the present case, instead of holding certain individuals or persons
responsible for an alleged corporate act, the situation has been reversed. It is the Francisco
Motors Corporation (FMC) as a corporation which is being ordered to answer for the personal
liability of certain individual directors, officers and incorporators concerned. Hence, the doctrine
has been turned upside down because of its erroneous invocation. In fact, the services of
Gregorio Manuel were solicited as counsel for members of the Francisco family to represent
them in the intestate proceedings over Benita Trinidad's estate. These estate proceedings did not
involve any business of FMC. Manuel's move to recover unpaid legal fees through a
counterclaim against FMC, to offset the unpaid balance of the purchase and repair of a jeep body
could only result from an obvious misapprehension that FMC's corporate assets could be used to
answer for the liabilities of its individual directors, officers, and incorporators. Such result if
permitted could easily prejudice the corporation, its own creditors, and even other stockholders;
hence, clearly inequitous to FMC.
Furthermore, considering the nature of the legal services involved, whatever obligation said
incorporators, directors and officers of the corporation had incurred, it was incurred in their
personal capacity. When directors and officers of a corporation are unable to compensate a party
for a personal obligation, it is far-fetched to allege that the corporation is perpetuating fraud or
promoting injustice, and be thereby held liable therefor by piercing its corporate veil. While there
are no hard and fast rules on disregarding separate corporate identity, we must always be mindful
of its function and purpose. A court should be careful in assessing the milieu where the doctrine
of piercing the corporate veil may be applied. Otherwise an injustice, although unintended, may
result from its erroneous application. The personality of the corporation and those of its
incorporators, directors and officers in their personal capacities ought to be kept separate in this
case. The claim for legal fees against the concerned individual incorporators, officers and
directors could not be properly directed against the corporation without violating basic principles
governing corporations. Moreover, every action — including a counterclaim — must be
prosecuted or defended in the name of the real party in interest. It is plainly an error to lay the
claim for legal fees of private respondent Gregorio Manuel at the door of FMC rather than
individual members of the Francisco family.
BASECO VS PCGG

G.R. No. 75885 May 27, 1987

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

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

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

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

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

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

a. The Basic Sequestration Order
The sequestration order which, in the view of the petitioner corporation, initiated all its misery
was issued on April 14, 1986 by Commissioner Mary Concepcion Bautista. It was addressed to
three of the agents of the Commission, hereafter simply referred to as PCGG. It reads as follows:
RE: SEQUESTRATION ORDER
By virtue of the powers vested in the Presidential Commission on Good Government, by
authority of the President of the Philippines, you are hereby directed to sequester the following
companies.
1. Bataan Shipyard and Engineering Co., Inc. (Engineering Island Shipyard and Mariveles
Shipyard)
2. Baseco Quarry
3. Philippine Jai-Alai Corporation
4. Fidelity Management Co., Inc.
5. Romson Realty, Inc.
6. Trident Management Co.

7. New Trident Management

8. Bay Transport

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

You are hereby ordered:

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

business activities.

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

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

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

b. Order for Production of Documents

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

1. Stock Transfer Book

2. Legal documents, such as:

2.1. Articles of Incorporation

2.2. By-Laws

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

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

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

2.6. Existing contracts with suppliers/contractors/others.

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

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

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

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

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

8. Updated schedule of Accounts Receivable and Accounts Payable.

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

10. Schedule of company investments and placements. 2

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

c. Orders Re Engineer Island

(1) Termination of Contract for Security Services

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

(2) Change of Mode of Payment of Entry Charges

On July 15, 1986, the same Capt. Zabala issued a Memorandum addressed to "Truck Owners and
Contractors," particularly a "Mr. Buddy Ondivilla National Marine Corporation," advising of the
amendment in part of their contracts with BASECO in the sense that the stipulated charges for
use of the BASECO road network were made payable "upon entry and not anymore subject to
monthly billing as was originally agreed upon." 4
d. Aborted Contract for Improvement of Wharf at Engineer Island
On July 9, 1986, a PCGG fiscal agent, S. Berenguer, entered into a contract in behalf of
BASECO with Deltamarine Integrated Port Services, Inc., in virtue of which the latter undertook
to introduce improvements costing approximately P210,000.00 on the BASECO wharf at
Engineer Island, allegedly then in poor condition, avowedly to "optimize its utilization and in
return maximize the revenue which would flow into the government coffers," in consideration of
Deltamarine's being granted "priority in using the improved portion of the wharf ahead of
anybody" and exemption "from the payment of any charges for the use of wharf including the
area where it may install its bagging equipments" "until the improvement remains in a condition
suitable for port operations." 5 It seems however that this contract was never consummated.
Capt. Jorge B. Siacunco, "Head- (PCGG) BASECO Management Team," advised Deltamarine
by letter dated July 30, 1986 that "the new management is not in a position to honor the said
contract" and thus "whatever improvements * * (may be introduced) shall be deemed
unauthorized * * and shall be at * * (Deltamarine's) own risk." 6
e. Order for Operation of Sesiman Rock Quarry, Mariveles, Bataan
By Order dated June 20, 1986, Commissioner Mary Bautista first directed a PCGG agent, Mayor
Melba O. Buenaventura, "to plan and implement progress towards maximizing the continuous
operation of the BASECO Sesiman Rock Quarry * * by conventional methods;" but afterwards,
Commissioner Bautista, in representation of the PCGG, authorized another party, A.T. Abesamis,
to operate the quarry, located at Mariveles, Bataan, an agreement to this effect having been
executed by them on September 17, 1986. 7

f. Order to Dispose of Scrap, etc.

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

g. The TAKEOVER Order

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

* * To provisionally takeover in the public interest or to prevent its disposal or dissipation,

business enterprises and properties taken over by the government of the Marcos Administration
or by entities or persons close to former President Marcos, until the transactions leading to such
acquisition by the latter can be disposed of by the appropriate authorities.

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

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

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

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

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

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

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

h. Termination of Services of BASECO Officers

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

2. Petitioner's Plea and Postulates

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

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

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

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

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

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

b. Re Order to Produce Documents

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

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

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

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

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

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

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

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

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

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

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

9) allowing "indiscriminate diggings" at Engineer Island to retrieve gold bars supposed to

have been buried therein. 22

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

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

4. The Governing Law

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

b. Executive Order No. 1

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

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

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

1. To sequester or place or cause to be placed under its control or possession any building or
office wherein any ill-gotten wealth or properties may be found, and any records pertaining
thereto, in order to prevent their destruction, concealment or disappearance which would
frustrate or hamper the investigation or otherwise prevent the Commission from accomplishing
its task.

2. To provisionally take over in the public interest or to prevent the disposal or dissipation,
business enterprises and properties taken over by the government of the Marcos Administration
or by entities or persons close to former President Marcos, until the transactions leading to such
acquisition by the latter can be disposed of by the appropriate authorities.

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

So that it might ascertain the facts germane to its objectives, it was granted power to conduct
investigations; require submission of evidence by subpoenae ad testificandum and duces tecum;
administer oaths; punish for contempt. 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, shares
of stocks, buildings, shopping centers, condominiums, mansions, residences, estates, and other
kinds of real and personal properties in the Philippines and in various countries of the world." 31

Upon these premises, the President-

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

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

3) prohibited "any person from transferring, conveying, encumbering or otherwise

depleting or concealing such assets and properties or from assisting or taking part in their
transfer, encumbrance, concealment or dissipation under pain of such penalties as are prescribed
by law;" and
4) required "all persons in the Philippines holding such assets or properties, whether located in
the Philippines or abroad, in their names as nominees, agents or trustees, to make full disclosure
of the same to the Commission on Good Government within thirty (30) days from publication of
* (the) Executive Order, * *. 32

d. Executive Order No. 14

A third executive order is relevant: Executive Order No. 14, 33 by which the PCGG is
empowered, "with the assistance of the Office of the Solicitor General and other government
agencies, * * to file and prosecute all cases investigated by it * * as may be warranted by its
findings." 34 All such cases, whether civil or criminal, are to be filed "with the 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 by a preponderance of evidence;" and that,
moreover, the "technical rules of procedure and evidence shall not be strictly applied to* *
(said)civil cases." 36

5. Contemplated Situations

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

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

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

b) otherwise stated, that "there are assets and properties purportedly pertaining to former
President Ferdinand E. Marcos, and/or his wife Mrs. Imelda Romualdez Marcos, their close
relatives, subordinates, business associates, dummies, agents or nominees which had been or
were acquired by them directly or indirectly, through or as a result of the improper or illegal use
of funds or properties owned by the Government of the Philippines or any of its branches,
instrumentalities, enterprises, banks or financial institutions, or by taking undue advantage of
their office, authority, influence, connections or relationship, resulting in their unjust enrichment
and causing grave damage and prejudice to the Filipino people and the Republic of the
Philippines"; 39

c) that "said assets and properties are in the form of bank accounts. deposits, trust. accounts,
shares of stocks, buildings, shopping centers, condominiums, mansions, residences, estates, and
other kinds of real and personal properties in the Philippines and in various countries of the
world;" 40 and

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

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

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

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

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

* * Democracy, as a way of life enshrined in the Constitution, embraces as its necessary

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

a. Need of Evidentiary Substantiation in Proper Suit

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

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

7. Provisional Remedies Prescribed by Law

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

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

a. Sequestration

By the clear terms of the law, the power of the PCGG to sequester property claimed to be "ill-
gotten" means to place or cause to be placed under its possession or control said property, or any
building or office wherein any such property and any records pertaining thereto may be found,
including "business enterprises and entities,"-for the purpose of preventing the destruction,
concealment or dissipation of, and otherwise conserving and preserving, the same-until it can be
determined, through appropriate judicial proceedings, whether the property was in truth will-
gotten," i.e., acquired through or as a result of improper or illegal use of or the conversion of
funds belonging to the Government or any of its branches, instrumentalities, enterprises, banks or
financial institutions, or by taking undue advantage of official position, authority relationship,
connection or influence, resulting in unjust enrichment of the ostensible owner and grave damage
and prejudice to the State. 44 And this, too, is the sense in which the term is commonly
understood in other jurisdictions. 45

b. "Freeze Order"

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

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

d. No Divestment of Title Over Property Seized

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

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

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

There is thus no cause for the apprehension voiced by BASECO 50 that sequestration, freezing
or provisional takeover is designed to be an end in itself, that it is the device through which
persons may be deprived of their property branded as "ill-gotten," that it is intended to bring
about a permanent, rather than a passing, transitional state of affairs. That this is not so is quite
explicitly declared by the governing rules.

Be this as it may, the 1987 Constitution should allay any lingering fears about the duration of
these provisional remedies. Section 26 of its Transitory Provisions, 51 lays down the relevant
rule in plain terms, apart from extending ratification or confirmation (although not really
necessary) to the institution by presidential fiat of the remedy of sequestration and freeze orders:

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

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

The sequestration or freeze order is deemed automatically lifted if no judicial action or

proceeding is commenced as herein provided. 52

f. Kinship to Attachment Receivership

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

g. Remedies, Non-Judicial

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

h. Orders May Issue Ex Parte

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

8. Requisites for Validity

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

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

a. Prima Facie Evidence as Basis for Orders

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

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

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

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

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

9. Constitutional Sanction of Remedies

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

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

10. PCGG not a "Judge"; General Functions

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

11. Facts Preclude Grant of Relief to Petitioner

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

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

12. Organization and Stock Distribution of BASECO

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

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

1. Jose A. Rojas
1,248 shares

2. Severino G. de la Cruz

1,248 shares

3. Emilio T. Yap

2,508 shares

4. Jose Fernandez

1,248 shares

5. Jose Francisco

128 shares

6. Manuel S. Mendoza

96 shares

7. Anthony P. Lee

1,248 shares

8. Hilario M. Ruiz

32 shares

9. Constante L. Fariñas

8 shares

10. Fidelity Management, Inc.

65,882 shares

11. Trident Management

7,412 shares

12. United Phil. Lines

1,240 shares
13. Renato M. Tanseco

8 shares

14. Fidel Ventura

8 shares

15. Metro Bay Drydock

136,370 shares

16. Manuel Jacela

1 share

17. Jonathan G. Lu

1 share

18. Jose J. Tanchanco

1 share

19. Dioscoro Papa

128 shares

20. 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

14. Subsequent Reduction of Price; Intervention of Marcos

Unaccountably, the price of P52,000,000.00 was reduced by more than one-half, to

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

15. Acquisition of 300 Hectares from Export Processing Zone Authority

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

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

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

17. Loans Obtained

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

18. Reports to President Marcos

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

a. BASECO President's Report

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

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

b. Romualdez' Report

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

MEMORANDUM:
FOR : The President

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

FROM: Capt. A.T. Romualdez.

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

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

* * (that) their replacements (be effected) so we can register their names in the stock book prior
to the implementation of your instructions to pass a board resolution to legalize the transfers
under SEC regulations;

2. By getting their replacements, the families cannot question us later on; and

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

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

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

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

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

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

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

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

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

8. List of BASECO's fixed assets;

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

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

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

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

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

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

19. Marcos' Response to Reports

President Marcos lost no time in acting on his subordinates' recommendations, particularly as

regards the "spin-off" and the "linkage scheme" relative to "BASECO's amortization payments."

a. Instructions re "Spin-Off"

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

a. Equity participation of government shall be through LUSTEVECO and NDC in the

amount of P115,903,000 consisting of the following obligations of BASECO which are hereby
authorized to be converted to equity of the said new corporation, to wit:

1. NDC P83,865,000 (P31.165M loan & P52.2M Reparation)

2. LUSTEVECO P32,538,000 (Reparation)

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

For immediate compliance. 92

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

b. Letter of Instructions No. 670

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

* * 1) the shipbuilding equipment procured by BASECO through reparations be transferred to

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

xxx xxx xxx

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

20. Evidence of Marcos'

Ownership of BASECO

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

Other evidence submitted to the Court by the Solicitor General proves that President Marcos not
only exercised control over BASECO, but also that he actually owns well nigh one hundred
percent of its outstanding stock.
It will be recalled that according to petitioner- itself, as of April 23, 1986, there were 218,819
shares of stock outstanding, ostensibly owned by twenty (20) stockholders. 96 Four of these
twenty are juridical persons: (1) Metro Bay Drydock, recorded as holding 136,370 shares; (2)
Fidelity Management, Inc., 65,882 shares; (3) Trident Management, 7,412 shares; and (4) United
Phil. Lines, 1,240 shares. The first three corporations, among themselves, own an aggregate of
209,664 shares of BASECO stock, or 95.82% of the outstanding stock.

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

More specifically, found in Malacanang (and now in the custody of the PCGG) were:

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

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

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

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

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

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

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

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

21. Facts Justify Issuance of Sequestration and Takeover Orders

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

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

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

22. Executive Orders Not a Bill of Attainder

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

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

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

Seizures

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

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

While an individual may lawfully refuse to answer incriminating questions unless protected by
an immunity statute, it does not follow that a corporation, vested with special privileges and
franchises, may refuse to show its hand when charged with an abuse ofsuchprivileges * * 113
Relevant jurisprudence is also cited by the Solicitor General. 114

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

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

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

xxx xxx xxx

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

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

24. Scope and Extent of Powers of the PCGG

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

a. PCGG May Not Exercise Acts of Ownership

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

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

b. PCGG Has Only Powers of Administration

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

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

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

d. Voting of Sequestered Stock; Conditions Therefor

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

In the case at bar, there was adequate justification to vote the incumbent directors out of office
and elect others in their stead because the evidence showed prima facie that the former were just
tools of President Marcos and were no longer owners of any stock in the firm, if they ever were
at all. This is why, in its Resolution of October 28, 1986; 118 this Court declared that —
Petitioner has failed to make out a case of grave abuse or excess of jurisdiction in respondents'
calling and holding of a stockholders' meeting for the election of directors as authorized by the
Memorandum of the President * * (to the PCGG) dated June 26, 1986, particularly, where as in
this case, the government can, through its designated directors, properly exercise control and
management over what appear to be properties and assets owned and belonging to the
government itself and over which the persons who appear in this case on behalf of BASECO
have failed to show any right or even any shareholding in said corporation.

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

25. No Sufficient Showing of Other Irregularities

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

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

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

[G.R. No. 100812. June 25, 1999]

FRANCISCO MOTORS CORPORATION, petitioner, vs. COURT OF APPEALS and

SPOUSES GREGORIO and LIBRADA MANUEL, respondents.
DECISION
QUISUMBING, J.:

This petition for review on certiorari, under Rule 45 of the Rules of Court, seeks to annul the
decision[1] of the Court of Appeals in C.A. G.R. CV No. 10014 affirming the decision rendered
by Branch 135, Regional Trial Court of Makati, Metro Manila. The procedural antecedents of
this petition are as follows:

On January 23, 1985, petitioner filed a complaint[2] against private respondents to recover three
thousand four hundred twelve and six centavos (P3,412.06), representing the balance of the jeep
body purchased by the Manuels from petitioner; an additional sum of twenty thousand four
hundred fifty-four and eighty centavos (P20,454.80) representing the unpaid balance on the cost
of repair of the vehicle; and six thousand pesos (P6,000.00) for cost of suit and attorney’s fees.
[3] To the original balance on the price of jeep body were added the costs of repair.[4] In their
answer, private respondents interposed a counterclaim for unpaid legal services by Gregorio
Manuel in the amount of fifty thousand pesos (P50,000) which was not paid by the incorporators,
directors and officers of the petitioner. The trial court decided the case on June 26, 1985, in
favor of petitioner in regard to the petitioner’s claim for money, but also allowed the counter-
claim of private respondents. Both parties appealed. On April 15, 1991, the Court of Appeals
sustained the trial court’s decision.[5] Hence, the present petition.

For our review in particular is the propriety of the permissive counterclaim which private
respondents filed together with their answer to petitioner’s complaint for a sum of money.
Private respondent Gregorio Manuel alleged as an affirmative defense that, while he was
petitioner’s Assistant Legal Officer, he represented members of the Francisco family in the
intestate estate proceedings of the late Benita Trinidad. However, even after the termination of
the proceedings, his services were not paid. Said family members, he said, were also
incorporators, directors and officers of petitioner. Hence to counter petitioner’s collection suit,
he filed a permissive counterclaim for the unpaid attorney’s fees.[6]

For failure of petitioner to answer the counterclaim, the trial court declared petitioner in default
on this score, and evidence ex-parte was presented on the counterclaim. The trial court ruled in
favor of private respondents and found that Gregorio Manuel indeed rendered legal services to
the Francisco family in Special Proceedings Number 7803- “In the Matter of Intestate Estate of
Benita Trinidad”. Said court also found that his legal services were not compensated despite
repeated demands, and thus ordered petitioner to pay him the amount of fifty thousand
(P50,000.00) pesos.[7]

Dissatisfied with the trial court’s order, petitioner elevated the matter to the Court of Appeals,
posing the following issues:
“I.

WHETHER OR NOT THE DECISION RENDERED BY THE LOWER COURT IS NULL

AND VOID AS IT NEVER ACQUIRED JURISDICTION OVER THE PERSON OF THE
DEFENDANT.

II.

WHETHER OR NOT PLAINTIFF-APPELLANT NOT BEING A REAL PARTY IN THE

ALLEGED PERMISSIVE COUNTERCLAIM SHOULD BE HELD LIABLE TO THE CLAIM
OF DEFENDANT-APPELLEES.

III.

WHETHER OR NOT THERE IS FAILURE ON THE PART OF PLAINTIFF-APPELLANT TO

ANSWER THE ALLEGED PERMISSIVE COUNTERCLAIM.”[8]

Petitioner contended that the trial court did not acquire jurisdiction over it because no summons
was validly served on it together with the copy of the answer containing the permissive
counterclaim. Further, petitioner questions the propriety of its being made party to the case
because it was not the real party in interest but the individual members of the Francisco family
concerned with the intestate case.

In its assailed decision now before us for review, respondent Court of Appeals held that a
counterclaim must be answered in ten (10) days, pursuant to Section 4, Rule 11, of the Rules of
Court; and nowhere does it state in the Rules that a party still needed to be summoned anew if a
counterclaim was set up against him. Failure to serve summons, said respondent court, did not
effectively negate trial court’s jurisdiction over petitioner in the matter of the counterclaim. It
likewise pointed out that there was no reason for petitioner to be excused from answering the
counterclaim. Court records showed that its former counsel, Nicanor G. Alvarez, received the
copy of the answer with counterclaim two (2) days prior to his withdrawal as counsel for
petitioner. Moreover when petitioner’s new counsel, Jose N. Aquino, entered his appearance,
three (3) days still remained within the period to file an answer to the counterclaim. Having
failed to answer, petitioner was correctly considered in default by the trial court.[9] Even
assuming that the trial court acquired no jurisdiction over petitioner, respondent court also said,
but having filed a motion for reconsideration seeking relief from the said order of default,
petitioner was estopped from further questioning the trial court’s jurisdiction.[10]

On the question of its liability for attorney’s fees owing to private respondent Gregorio Manuel,
petitioner argued that being a corporation, it should not be held liable therefor because these fees
were owed by the incorporators, directors and officers of the corporation in their personal
capacity as heirs of Benita Trinidad. Petitioner stressed that the personality of the corporation,
vis-à-vis the individual persons who hired the services of private respondent, is separate and
distinct,[11] hence, the liability of said individuals did not become an obligation chargeable
against petitioner.
Nevertheless, on the foregoing issue, the Court of Appeals ruled as follows:

“However, this distinct and separate personality is merely a fiction created by law for
convenience and to promote justice. Accordingly, this separate personality of the corporation
may be disregarded, or the veil of corporate fiction pierced, in cases where it is used as a cloak or
cover for found (sic) illegality, or to work an injustice, or where necessary to achieve equity or
when necessary for the protection of creditors. (Sulo ng Bayan, Inc. vs. Araneta, Inc., 72 SCRA
347) Corporations are composed of natural persons and the legal fiction of a separate corporate
personality is not a shield for the commission of injustice and inequity. (Chemplex Philippines,
Inc. vs. Pamatian, 57 SCRA 408)

“In the instant case, evidence shows that the plaintiff-appellant Francisco Motors Corporation is
composed of the heirs of the late Benita Trinidad as directors and incorporators for whom
defendant Gregorio Manuel rendered legal services in the intestate estate case of their deceased
mother. Considering the aforestated principles and circumstances established in this case, equity
and justice demands plaintiff-appellant’s veil of corporate identity should be pierced and the
defendant be compensated for legal services rendered to the heirs, who are directors of the
plaintiff-appellant corporation.”[12]

Now before us, petitioner assigns the following errors:

“I.

THE COURT OF APPEALS ERRED IN APPLYING THE DOCTRINE OF PIERCING THE

VEIL OF CORPORATE ENTITY.

II.

THE COURT OF APPEALS ERRED IN AFFIRMING THAT THERE WAS JURISDICTION

OVER PETITIONER WITH RESPECT TO THE COUNTERCLAIM.”[13]

Petitioner submits that respondent court should not have resorted to piercing the veil of corporate
fiction because the transaction concerned only respondent Gregorio Manuel and the heirs of the
late Benita Trinidad. According to petitioner, there was no cause of action by said respondent
against petitioner; personal concerns of the heirs should be distinguished from those involving
corporate affairs. Petitioner further contends that the present case does not fall among the
instances wherein the courts may look beyond the distinct personality of a corporation.
According to petitioner, the services for which respondent Gregorio Manuel seeks to collect fees
from petitioner are personal in nature. Hence, it avers the heirs should have been sued in their
personal capacity, and not involve the corporation.[14]

With regard to the permissive counterclaim, petitioner also insists that there was no proper
service of the answer containing the permissive counterclaim. It claims that the counterclaim is a
separate case which can only be properly served upon the opposing party through summons.
Further petitioner states that by nature, a permissive counterclaim is one which does not arise out
of nor is necessarily connected with the subject of the opposing party’s claim. Petitioner avers
that since there was no service of summons upon it with regard to the counterclaim, then the
court did not acquire jurisdiction over petitioner. Since a counterclaim is considered an action
independent from the answer, according to petitioner, then in effect there should be two
simultaneous actions between the same parties: each party is at the same time both plaintiff and
defendant with respect to the other,[15] requiring in each case separate summonses.

In their Comment, private respondents focus on the two questions raised by petitioner. They
defend the propriety of piercing the veil of corporate fiction, but deny the necessity of serving
separate summonses on petitioner in regard to their permissive counterclaim contained in the
answer.

Private respondents maintain both trial and appellate courts found that respondent Gregorio
Manuel was employed as assistant legal officer of petitioner corporation, and that his services
were solicited by the incorporators, directors and members to handle and represent them in
Special Proceedings No. 7803, concerning the Intestate Estate of the late Benita Trinidad. They
assert that the members of petitioner corporation took advantage of their positions by not
compensating respondent Gregorio Manuel after the termination of the estate proceedings
despite his repeated demands for payment of his services. They cite findings of the appellate
court that support piercing the veil of corporate identity in this particular case. They assert that
the corporate veil may be disregarded when it is used to defeat public convenience, justify
wrong, protect fraud, and defend crime. It may also be pierced, according to them, where the
corporate entity is being used as an alter ego, adjunct, or business conduit for the sole benefit of
the stockholders or of another corporate entity. In these instances, they aver, the corporation
should be treated merely as an association of individual persons.[16]

Private respondents dispute petitioner’s claim that its right to due process was violated when
respondents’ counterclaim was granted due course, although no summons was served upon it.
They claim that no provision in the Rules of Court requires service of summons upon a
defendant in a counterclaim. Private respondents argue that when the petitioner filed its
complaint before the trial court it voluntarily submitted itself to the jurisdiction of the court. As a
consequence, the issuance of summons on it was no longer necessary. Private respondents say
they served a copy of their answer with affirmative defenses and counterclaim on petitioner’s
former counsel, Nicanor G. Alvarez. While petitioner would have the Court believe that
respondents served said copy upon Alvarez after he had withdrawn his appearance as counsel for
the petitioner, private respondents assert that this contention is utterly baseless. Records disclose
that the answer was received two (2) days before the former counsel for petitioner withdrew his
appearance, according to private respondents. They maintain that the present petition is but a
form of dilatory appeal, to set off petitioner’s obligations to the respondents by running up more
interest it could recover from them. Private respondents therefore claim damages against
petitioner.[17]

To resolve the issues in this case, we must first determine the propriety of piercing the veil of
corporate fiction.

Basic in corporation law is the principle that a corporation has a separate personality distinct
from its stockholders and from other corporations to which it may be connected.[18] However,
under the doctrine of piercing the veil of corporate entity, the corporation’s separate juridical
personality may be disregarded, for example, when the corporate identity is used to defeat public
convenience, justify wrong, protect fraud, or defend crime. Also, where the corporation is a
mere alter ego or business conduit of a person, or where the corporation is so organized and
controlled and its affairs are so conducted as to make it merely an instrumentality, agency,
conduit or adjunct of another corporation, then its distinct personality may be ignored.[19] In
these circumstances, the courts will treat the corporation as a mere aggrupation of persons and
the liability will directly attach to them. The legal fiction of a separate corporate personality in
those cited instances, for reasons of public policy and in the interest of justice, will be justifiably
set aside.

In our view, however, given the facts and circumstances of this case, the doctrine of piercing the
corporate veil has no relevant application here. Respondent court erred in permitting the trial
court’s resort to this doctrine. The rationale behind piercing a corporation’s identity in a given
case is to remove the barrier between the corporation from the persons comprising it to thwart
the fraudulent and illegal schemes of those who use the corporate personality as a shield for
undertaking certain proscribed activities. However, in the case at bar, instead of holding certain
individuals or persons responsible for an alleged corporate act, the situation has been reversed. It
is the petitioner as a corporation which is being ordered to answer for the personal liability of
certain individual directors, officers and incorporators concerned. Hence, it appears to us that the
doctrine has been turned upside down because of its erroneous invocation. Note that according
to private respondent Gregorio Manuel his services were solicited as counsel for members of the
Francisco family to represent them in the intestate proceedings over Benita Trinidad’s estate.
These estate proceedings did not involve any business of petitioner.

Note also that he sought to collect legal fees not just from certain Francisco family members but
also from petitioner corporation on the claims that its management had requested his services and
he acceded thereto as an employee of petitioner from whom it could be deduced he was also
receiving a salary. His move to recover unpaid legal fees through a counterclaim against
Francisco Motors Corporation, to offset the unpaid balance of the purchase and repair of a jeep
body could only result from an obvious misapprehension that petitioner’s corporate assets could
be used to answer for the liabilities of its individual directors, officers, and incorporators. Such
result if permitted could easily prejudice the corporation, its own creditors, and even other
stockholders; hence, clearly inequitous to petitioner.

Furthermore, considering the nature of the legal services involved, whatever obligation said
incorporators, directors and officers of the corporation had incurred, it was incurred in their
personal capacity. When directors and officers of a corporation are unable to compensate a party
for a personal obligation, it is far-fetched to allege that the corporation is perpetuating fraud or
promoting injustice, and be thereby held liable therefor by piercing its corporate veil. While
there are no hard and fast rules on disregarding separate corporate identity, we must always be
mindful of its function and purpose. A court should be careful in assessing the milieu where the
doctrine of piercing the corporate veil may be applied. Otherwise an injustice, although
unintended, may result from its erroneous application.
The personality of the corporation and those of its incorporators, directors and officers in their
personal capacities ought to be kept separate in this case. The claim for legal fees against the
concerned individual incorporators, officers and directors could not be properly directed against
the corporation without violating basic principles governing corporations. Moreover, every
action —including a counterclaim — must be prosecuted or defended in the name of the real
party in interest.[20] It is plainly an error to lay the claim for legal fees of private respondent
Gregorio Manuel at the door of petitioner (FMC) rather than individual members of the
Francisco family.

However, with regard to the procedural issue raised by petitioner’s allegation, that it needed to be
summoned anew in order for the court to acquire jurisdiction over it, we agree with respondent
court’s view to the contrary. Section 4, Rule 11 of the Rules of Court provides that a
counterclaim or cross-claim must be answered within ten (10) days from service. Nothing in the
Rules of Court says that summons should first be served on the defendant before an answer to
counterclaim must be made. The purpose of a summons is to enable the court to acquire
jurisdiction over the person of the defendant. Although a counterclaim is treated as an entirely
distinct and independent action, the defendant in the counterclaim, being the plaintiff in the
original complaint, has already submitted to the jurisdiction of the court. Following Rule 9,
Section 3 of the 1997 Rules of Civil Procedure,[21] if a defendant (herein petitioner) fails to
answer the counterclaim, then upon motion of plaintiff, the defendant may be declared in default.
This is what happened to petitioner in this case, and this Court finds no procedural error in the
disposition of the appellate court on this particular issue. Moreover, as noted by the respondent
court, when petitioner filed its motion seeking to set aside the order of default, in effect it
submitted itself to the jurisdiction of the court. As well said by respondent court:

“Further on the lack of jurisdiction as raised by plaintiff-appellant[,] [t]he records show that upon
its request, plaintiff-appellant was granted time to file a motion for reconsideration of the
disputed decision. Plaintiff-appellant did file its motion for reconsideration to set aside the order
of default and the judgment rendered on the counterclaim.

“Thus, even if the court acquired no jurisdiction over plaintiff-appellant on the counterclaim, as
it vigorously insists, plaintiff-appellant is considered to have submitted to the court’s jurisdiction
when it filed the motion for reconsideration seeking relief from the court. (Soriano vs. Palacio,
12 SCRA 447). A party is estopped from assailing the jurisdiction of a court after voluntarily
submitting himself to its jurisdiction. (Tejones vs. Gironella, 159 SCRA 100). Estoppel is a bar
against any claims of lack of jurisdiction. (Balais vs. Balais, 159 SCRA 37).”[22]

WHEREFORE, the petition is hereby GRANTED and the assailed decision is hereby
REVERSED insofar only as it held Francisco Motors Corporation liable for the legal obligation
owing to private respondent Gregorio Manuel; but this decision is without prejudice to his filing
the proper suit against the concerned members of the Francisco family in their personal capacity.
No pronouncement as to costs.

SO ORDERED.

Bellosillo, (Chairman), Puno, Mendoza, and Buena, JJ., concur.

GOSIACO VS CHING

G.R. No. 173807

Petitioner,

DECISION

TINGA, J.:

The right to recover due and demandable pecuniary obligations incurred by juridical
persons such as corporations cannot be impaired by procedural rules. Our rules of procedure
governing the litigation of criminal actions for violation of Batas Pambansa Blg. 22 (B.P. 22)
have given the appearance of impairing such substantive rights, and we take the opportunity
herein to assert the necessary clarifications.

Before us is a Rule 45 petition[1] which seeks the reversal of the Decision[2] of the Court of
Appeals in CA-GR No. 29488. The Court of Appeals' decision affirmed the decision[3] of the
Regional Trial Court of Pasig, Branch 68 in Criminal Case No. 120482. The RTC's decision
reversed the decision[4] of the Metropolitan Trial Court of San Juan, Branch 58 in Criminal
Case No. 70445 which involved a charge of violation of B.P. Blg. 22 against respondents Leticia
Ching (Ching) and Edwin Casta (Casta).

On 16 February 2000, petitioner Jaime Gosiaco (petitioner) invested P8,000,000.00 with

ASB Holdings, Inc. (ASB) by way of loan. The money was loaned to ASB for a period of 48
days with interest at 10.5% which is equivalent to P112,000.00. In exchange, ASB through its
Business Development Operation Group manager Ching, issued DBS checks no. 0009980577
and 0009980578 for P8,000,000.00 and P112,000.00 respectively. The checks, both signed by
Ching, were drawn against DBS Bank Makati Head Office branch. ASB, through a letter dated
31 March 2000, acknowledged that it owed petitioner the abovementioned amounts.[5]

Upon maturity of the ASB checks, petitioner went to the DBS Bank San Juan Branch to
deposit the two (2) checks. However, upon presentment, the checks were dishonored and
payments were refused because of a stop payment order and for insufficiency of funds. Petitioner
informed respondents, through letters dated 6 and 10 April 2000,[6] about the dishonor of the
checks and demanded replacement checks or the return of the money placement but to no avail.
Thus, petitioner filed a criminal complaint for violation of B.P. Blg. 22 before the Metropolitan
Trial Court of San Juan against the private respondents.
 Ching was arraigned and tried while Casta remained at large. Ching denied liability and
claimed that she was a mere employee of ASB. She asserted that she did not have knowledge as
to how much money ASB had in the banks. Such responsibility, she claimed belonged to another
department.

On 15 December 2000, petitioner moved[7] that ASB and its president, Luke Roxas, be
impleaded as party defendants. Petitioner, then, paid the corresponding docket fees. However, the
MTC denied the motion as the case had already been submitted for final decision.[8]

On 8 February 2001, the MTC acquitted Ching of criminal liability but it did not absolve
her from civil liability. The MTC ruled that Ching, as a corporate officer of ASB, was civilly
liable since she was a signatory to the checks.[9]

Both petitioner and Ching appealed the ruling to the RTC. Petitioner appealed to the RTC
on the ground that the MTC failed to hold ASB and Roxas either jointly or severally liable with
Ching. On the other hand, Ching moved for a reconsideration which was subsequently denied.
Thereafter, she filed her notice of appeal on the ground that she should not be held civilly liable
for the bouncing checks because they were contractual obligations of ASB.

On 12 July 2005, the RTC rendered its decision sustaining Ching's appeal. The RTC
affirmed the MTC’s ruling which denied the motion to implead ASB and Roxas for lack of
jurisdiction over their persons. The RTC also exonerated Ching from civil liability and ruled that
the subject obligation fell squarely on ASB. Thus, Ching should not be held civilly liable.[10]

Petitioner filed a petition for review with the Court of Appeals on the grounds that the RTC
erred in absolving Ching from civil liability; in upholding the refusal of the MTC to implead
ASB and Roxas; and in refusing to pierce the corporate veil of ASB and hold Roxas liable.

On 19 July 2006, the Court of Appeals affirmed the decision of the RTC and stated that the
amount petitioner sought to recover was a loan made to ASB and not to Ching. Roxas’ testimony
further bolstered the fact that the checks issued by Ching were for and in behalf of ASB. The
Court of Appeals ruled that ASB cannot be impleaded in a B.P. Blg. 22 case since it is not a
natural person and in the case of Roxas, he was not the subject of a preliminary investigation.
Lastly, the Court of Appeals ruled that there was no need to pierce the corporate veil of ASB
since none of the requisites were present.[11]

Hence this petition.

Petitioner raised the following issues: (1) is a corporate officer who signed a bouncing
check civilly liable under B.P. Blg. 22; (2) can a corporation be impleaded in a B.P. Blg. 22 case;
and (3) is there a basis to pierce the corporate veil of ASB?
 B.P. Blg. 22 is popularly known as the Bouncing Checks Law. Section 1 of B.P. Blg. 22
provides:

xxx xxx xxx

Where the check is drawn by a corporation, company or entity, the person or persons, who
actually signed the check in behalf of such drawer shall be liable under this Act.

B.P. Blg. 22 was enacted to address the rampant issuance of bouncing checks as payment for pre-
existing obligations. The circulation of bouncing checks adversely affected confidence in trade
and commerce. The State criminalized such practice because it was deemed injurious to public
interests[12] and was found to be pernicious and inimical to public welfare.[13] B.P. Blg. 22
punishes the act of making and issuing bouncing checks. It is the act itself of issuing the checks
which is considered malum prohibitum. The law is an offense against public order and not an
offense against property.[14] It penalizes the issuance of a check without regard to its purpose. It
covers all types of checks.[15] Even checks that were issued as a form of deposit or guarantee
were held to be within the ambit of B.P. Blg. 22.[16]

When a corporate officer issues a worthless check in the corporate name he may be held
personally liable for violating a penal statute.[17] The statute imposes criminal penalties on
anyone who with intent to defraud another of money or property, draws or issues a check on any
bank with knowledge that he has no sufficient funds in such bank to meet the check on
presentment.[18] Moreover, the personal liability of the corporate officer is predicated on the
principle that he cannot shield himself from liability from his own acts on the ground that it was
a corporate act and not his personal act.[19] As we held in Llamado v. Court of Appeals:[20]

Petitioner's argument that he should not be held personally liable for the amount of the check
because it was a check of the Pan Asia Finance Corporation and he signed the same in his
capacity as Treasurer of the corporation, is also untenable. The third paragraph of Section 1 of
BP Blg. 22 states: “Where the check is drawn by a corporation, company or entity, the person or
persons who actually signed the check in behalf of such drawer shall be liable under this Act.”

The general rule is that a corporate officer who issues a bouncing corporate check can only
be held civilly liable when he is convicted. In the recent case of Bautista v. Auto Plus Traders
Inc.,[21] the Court ruled decisively that the civil liability of a corporate officer in a B.P. Blg. 22
case is extinguished with the criminal liability. We are not inclined through this case to revisit so
recent a precedent, and the rule of stare decisis precludes us to discharge Ching of any civil
liability arising from the B.P. Blg. 22 case against her, on account of her acquittal in the criminal
charge.

We recognize though the bind entwining the petitioner. The records clearly show that it is ASB is
civilly obligated to petitioner. In the various stages of this case, petitioner has been proceeding
from the
premise that he is unable to pursue a separate civil action against ASB itself for the recovery of
the amounts due from the subject checks. From this premise, petitioner sought to implead ASB
as a defendant to the B.P. Blg. 22 case, even if such case is criminal in nature.[22]

What supplied the notion to the petitioner that he was unable to pursue a separate civil
action against ASB? He cites the Revised Rules on Criminal Procedure, particularly the
provisions involving B.P. Blg. 22 cases, which state that:

Rule 111, Section 1—Institution of criminal and civil action.

xxx

(b) The criminal action for violation of Batas Pambansa Blg. 22 shall be deemed to include the
corresponding civil action. No reservation to file such civil action separately shall be allowed.

Upon filing of the aforesaid joint criminal and civil actions, the offended party shall pay
in full the filing fees based on the amount of the check involved, which shall be considered as the
actual damages claimed. Where the complainant or information also seeks to recover liquidated,
moral, nominal, temperate or exemplary damages, the offended party shall pay the filing fees
based on the amounts alleged therein. If the amounts are not so alleged but any of these damages
are subsequently awarded by the court, the filing fees based on the amount awarded shall
constitute a first lien on the judgment.

Where the civil action has been filed separately and trial thereof has not yet commenced,
it may be consolidated with the criminal action upon application with the court trying the latter
case. If the application is granted, the trial of both actions shall proceed in accordance with
section 2 of this Rule governing consolidation of the civil and criminal actions.[23]

We are unable to agree with petitioner that he is entitled to implead ASB in the B.P. Blg.
22 case, or any other corporation for that matter, even if the Rules require the joint trial of both
the criminal and civil liability. A basic maxim in statutory construction is that the interpretation
of penal laws is strictly construed against the State and liberally construed against the accused.
Nowhere in B.P. Blg. 22 is it provided that a juridical person may be impleaded as an accused or
defendant in the prosecution for violations of that law, even in the litigation of the civil aspect
thereof.

Nonetheless, the substantive right of a creditor to recover due and demandable obligations
against a debtor-corporation cannot be denied or diminished by a rule of procedure. Technically,
nothing in Section 1(b) of Rule 11 prohibits the reservation of a separate civil action against the
juridical person on whose behalf the check was issued. What the rules prohibit is the
reservation of a separate civil
action against the natural person charged with violating B.P. Blg. 22, including such corporate
officer who had signed the bounced check.

In theory the B.P. Blg. 22 criminal liability of the person who issued the bouncing check in
behalf of a corporation stands independent of the civil liability of the corporation itself, such civil
liability arising from the Civil Code. B.P. Blg. 22 itself fused this criminal liability of the signer
of the check in behalf of the corporation with the corresponding civil liability of the corporation
itself by allowing the complainant to recover such civil liability not from the corporation, but
from the person who signed the check in its behalf. Prior to the amendments to our rules on
criminal procedure, it though clearly was permissible to pursue the criminal liability against the
signatory, while going after the corporation itself for the civil liability.

However, with the insistence under the amended rules that the civil and criminal liability
attaching to the bounced check be pursued jointly, the previous option to directly pursue the civil
liability against the person who incurred the civil obligation–the corporation itself–is no longer
that clear. In theory, the implied institution of the civil case into the criminal case for B.P. Blg. 22
should not affect the civil liability of the corporation for the same check, since such implied
institution concerns the civil liability of the signatory, and not of the corporation.

Let us pursue this point further. B.P. Blg. 22 imposes a distinct civil liability on the signatory of
the check which is distinct from the civil liability of the corporation for the amount represented
from the check. The civil liability attaching to the signatory arises from the wrongful act of
signing the check despite the insufficiency of funds in the account, while the civil liability
attaching to the corporation is itself the very obligation covered by the check or the consideration
for its execution. Yet these civil liabilities are mistaken to be indistinct. The confusion is
traceable to the singularity of the amount of each.

If we conclude, as we should, that under the current Rules of Criminal Procedure, the civil action
that is impliedly instituted in the B.P. Blg. 22 action is only the civil liability of the signatory, and
not that of the corporation itself, the distinctness of the cause of action against the signatory and
that against the corporation is rendered beyond dispute. It follows that the actions involving
these liabilities should be adjudged according to their respective standards and merits. In the B.P.
Blg. 22 case, what the trial court should determine whether or not the signatory had signed the
check with knowledge of the insufficiency of funds or credit in the bank account, while in the
civil case the trial court should ascertain whether or not the obligation itself
is valid and demandable. The litigation of both questions could, in theory, proceed independently
and simultaneously without being ultimately conclusive on one or the other.
It might be argued that under the current rules, if the signatory were made liable for the amount
of the check by reason of the B.P. Blg. 22 case, such signatory would have the option of
recovering the same amount from the corporation. Yet that prospect does not ultimately satisfy
the ends of justice. If the signatory does not have sufficient assets to answer for the amount of the
check–a distinct possibility considering the occasional large-scale transactions engaged in by
corporations – the corporation would not be subsidiarily liable to the complainant, even if it in
truth the controversy, of which the criminal case is just a part, is traceable to the original
obligation of the corporation. While the Revised Penal Code imposes subsidiary civil liability to
corporations for criminal acts engaged in by their employees in the discharge of their duties, said
subsidiary liability applies only to felonies,[24] and not to crimes penalized by special laws such
as B.P. Blg. 22. And nothing in B.P. Blg. 22 imposes such subsidiary liability to the corporation
in whose name the check is actually issued. Clearly then, should the check signatory be unable to
pay the obligation incurred by the corporation, the complainant would be bereft of remedy unless
the right of action to collect on the liability of the corporation is recognized and given flesh.

There are two prevailing concerns should civil recovery against the corporation be pursued even
as the B.P. Blg. 22 case against the signatory remains extant. First, the possibility that the
plaintiff might be awarded the amount of the check in both the B.P. Blg. 22 case and in the civil
action against the corporation. For obvious reasons, that should not be permitted. Considering
that petitioner herein has no chance to recover the amount of the check through the B.P. Blg. 22
case, we need not contend with that possibility through this case. Nonetheless, as a matter of
prudence, it is best we refer the matter to the Committee on Rules for the formulation of proper
guidelines to prevent that possibility.

The other concern is over the payment of filing fees in both the B.P. Blg. 22 case and the civil
action against the corporation. Generally, we see no evil or cause for distress if the plaintiff were
made to pay filing fees based on the amount of the check in both the B.P. Blg. 22 case and the
civil action. After all, the plaintiff therein made the deliberate option to file two separate cases,
even if the recovery of the amounts of the check against the corporation could evidently be
pursued through the civil action alone.

Nonetheless, in petitioner’s particular case, considering the previous legal confusion on

whether he is authorized to file the civil case against ASB, he should, as a matter of equity, be
exempted from paying the filing fees based on the amount of the checks should he pursue the
civil action against ASB. In a similar vein and for a similar reason, we likewise find that
petitioner should not be barred by prescription should he file the civil action as the period should
not run from the date the checks were issued but from the date this decision attains finality. The
courts should not be bound strictly by the statute of limitations or the doctrine of laches when to
do so, manifest wrong or injustice would result.[25]

WHEREFORE, the petition is DENIED, without prejudice to the right of petitioner Jaime
U. Gosiaco to pursue an independent civil action against ASB Holdings Inc. for the amount of
the subject checks, in accordance with the terms of this decision. No pronouncements as to costs.
 Let a copy of this Decision be REFERRED to the Committee on Revision of the Rules for
the formulation of the formal rules of procedure to govern the civil action for the recovery of the
amount covered by the check against the juridical person which issued it.

SO ORDERED.

[1]Rollo. pp. 3-44.

[2]Dated 19 July 2006 and penned by Associate Justice Santiago Javier Ranada and concurred in
by Associate Justices Portia Alino-Hormachuelos, Chairperson Fourth Division, and Amelita G.
Tolentino. id. at 88-95.

[3]Dated 12 July 2005 and penned by Judge Santiago G. Estrella; id. at 83-87.

[4] Dated 08 February 2001 and pendered by Judge Maxwel S. Rosete; id. at 73-82.

[5]The letter was signed by Luke Roxas; id. at 60

[6]Id. at 62.

[7]Id. at 67-71

[8]Records, p. 764.

[9]See note 4.

[10]See note 3.

[11]See note 2.

[12]Lozano v. Martinez, Nos. L-63419, L-66839-42, L-71654, 74524-25, L-75122-49,

L-75812-13, 75765-67, L-75789, 18 December 1986, 146 SCRA 323.

[13]People v. Laggui, G.R. Nos. 76262-63, 18 March 1989, 171 SCRA 305, 311.

[14]See Note 12.

[15]Id.

[16]Que v. People, Nos. L-75217-18, 21 September 1987, 154 SCRA 160.

[17]§ 1643 18B AM. JUR. 2D CORPORATIONS citing Semones v. Southern Bell Tel. &
Tel.Co., 106 N.C. App. 334, 416 S.E.2d 909 (1992).

[18]Id. citing Walker v. State, 467 N.E.2d 1248 (Ind. Ct. App. 3d Dist.1984).

[19]68 A.L.R. 2D 1269.

 [20]Llamado v. Court of Appeals, G.R. No. 99032, 26 March 1997, 270 SCRA 423.

[21] G.R. No. 166405, 6 August 2008.

[22]A traditional theory in criminal law is that a corporation cannot be prosecuted . B.P. 22
clearly adheres to the traditional theory, as nothing therein holds a juridical person liable for the
violation of the said law. Nonetheless, a more modern rule pronounces that a corporation may be
criminally liable for actions or omissions made by its officers or agents in its behalf. And that
while a corporation cannot be imprisoned, it may be fined, its charter may be revoked by the
state, or other sanctions may be imposed by law. See Cox, James. Corporations. 2nd ed. Aspen
Publishers. New York. © 2003 p. 130.

[23]Section 1, Rule 111(b), 2000 Rules of Civil Procedure. Justice Florenz D. Regalado
explained the rationale for the implementation of the abovementioned rule. The reason was to
declog the courts of B.P. 22 cases because ordinarily payment of docket fees is not required in a
criminal case for actual damages because prior to its amendment, it became the practice of
creditors to use the courts as their personal collection agencies by the mere expediency of filing a
B.P. Blg. 22 case. See FLORENZ D. REGALADO, REMEDIAL LAW COMPENDIUM, Vol. II.
9th revised ed. pp. 293-294.

[24]See REVISED PENAL CODE, Art. 103. “Art. 103. Subsidiary civil liability of other
persons. — The subsidiary liability established in the next preceding article shall also apply to
employers, teachers, persons, and corporations engaged in any kind of industry for felonies
committed by their servants, pupils, workmen, apprentices, or employees in the discharge of their
duties. “

[25]Santiago v. Court of Appeals, G.R. No.103959, 21 August 1997, 278 SCRA98,113, citing
Rañeses v. Intermediate Appellate Court, G.R. No. 76518, 13 July 1990, 187 SCRA 404, and as
cited in Cometa v. Court of Appeals, G.R. No. 141855, 6 February 2001, 351 SCRA294, 310.
CHING VS SEC. OF JUSTICE

DECISION
CALLEJO, SR., J.:

Before the Court is a petition for review on certiorari of the Decision[1] of the Court of
Appeals (CA) in CA-G.R. SP No. 57169 dismissing the petition for certiorari, prohibition and
mandamus filed by petitioner Alfredo Ching, and its Resolution[2] dated June 28, 2004 denying
the motion for reconsideration thereof.

Petitioner was the Senior Vice-President of Philippine Blooming Mills, Inc. (PBMI).
Sometime in September to October 1980, PBMI, through petitioner, applied with the Rizal
Commercial Banking Corporation (respondent bank) for the issuance of commercial letters of
credit to finance its importation of assorted goods.[3]

Respondent bank approved the application, and irrevocable letters of credit were issued in favor
of petitioner. The goods were purchased and delivered in trust to PBMI. Petitioner signed 13 trust
receipts[4] as surety, acknowledging delivery of the following goods:
T/R
Nos.
Date Granted
Maturity Date
Principal
Description of Goods
1845
12-05-80
03-05-81
P1,596,470.05
79.9425 M/T “SDK” Brand Synthetic Graphite Electrode
1853
12-08-80
03-06-81
P198,150.67
3,000 pcs. (15 bundles) Calorized Lance Pipes
1824
11-28-80
02-26-81
P707,879.71
One Lot High Fired Refractory Tundish Bricks
1798
11-21-80
02-19-81
P835,526.25
5 cases spare parts for CCM
1808
11-21-80
02-19-81
P370,332.52
200 pcs. ingot moulds
2042
01-30-81
04-30-81
P469,669.29
High Fired Refractory Nozzle Bricks
1801
11-21-80
02-19-81
P2,001,715.17
Synthetic Graphite Electrode [with] tapered pitch filed nipples
1857
12-09-80
03-09-81
P197,843.61
3,000 pcs. (15 bundles calorized lance pipes [)]
1895
12-17-80
03-17-81
P67,652.04
Spare parts for Spectrophotometer
1911
12-22-80
03-20-81
P91,497.85
50 pcs. Ingot moulds
2041
01-30-81
04-30-81
P91,456.97
50 pcs. Ingot moulds
2099
02-10-81
05-11-81
P66,162.26
8 pcs. Kubota Rolls for rolling mills
2100
02-10-81
05-12-81
P210,748.00
Spare parts for Lacolaboratory Equipment[5]

Under the receipts, petitioner agreed to hold the goods in trust for the said bank, with
authority to sell but not by way of conditional sale, pledge or otherwise; and in case such goods
were sold, to turn over the proceeds thereof as soon as received, to apply against the relative
acceptances and payment of other indebtedness to respondent bank. In case the goods remained
unsold within the specified period, the goods were to be returned to respondent bank without any
need of demand. Thus, said “goods, manufactured products or proceeds thereof, whether in the
form of money or bills, receivables, or accounts separate and capable of identification” were
respondent bank’s property.

When the trust receipts matured, petitioner failed to return the goods to respondent bank, or to
return their value amounting to P6,940,280.66 despite demands. Thus, the bank filed a criminal
complaint for estafa[6] against petitioner in the Office of the City Prosecutor of Manila.

After the requisite preliminary investigation, the City Prosecutor found probable cause estafa
under Article 315, paragraph 1(b) of the Revised Penal Code, in relation to Presidential Decree
(P.D.) No. 115, otherwise known as the Trust Receipts Law. Thirteen (13) Informations were
filed against the petitioner before the Regional Trial Court (RTC) of Manila. The cases were
docketed as Criminal Cases No. 86-42169 to 86-42181, raffled to Branch 31 of said court.

Petitioner appealed the resolution of the City Prosecutor to the then Minister of Justice.
The appeal was dismissed in a Resolution[7] dated March 17, 1987, and petitioner moved for
its reconsideration. On December 23, 1987, the Minister of Justice granted the motion, thus
reversing the
previous resolution finding probable cause against petitioner.[8] The City Prosecutor was ordered
to move for the withdrawal of the Informations.

This time, respondent bank filed a motion for reconsideration, which, however, was denied on
February 24, 1988.[9] The RTC, for its part, granted the Motion to Quash the Informations filed
by petitioner on the ground that the material allegations therein did not amount to estafa.[10]

In the meantime, the Court rendered judgment in Allied Banking Corporation v. Ordoñez,[11]
holding that the penal provision of P.D. No. 115 encompasses any act violative of an obligation
covered by the trust receipt; it is not limited to transactions involving goods which are to be sold
(retailed), reshipped, stored or processed as a component of a product ultimately sold. The Court
also ruled that “the non-payment of the amount covered by a trust receipt is an act violative of
the obligation of the entrustee to pay.”[12]

On February 27, 1995, respondent bank re-filed the criminal complaint for estafa against
petitioner before the Office of the City Prosecutor of Manila. The case was docketed as I.S. No.
95B-07614.

Preliminary investigation ensued. On December 8, 1995, the City Prosecutor ruled that
there was no probable cause to charge petitioner with violating P.D. No. 115, as petitioner’s
liability was only civil, not criminal, having signed the trust receipts as surety.[13] Respondent
bank appealed the resolution to the Department of Justice (DOJ) via petition for review, alleging
that the City Prosecutor erred in ruling:

1. That there is no evidence to show that respondent participated in the

misappropriation of the goods subject of the trust receipts;
2. That the respondent is a mere surety of the trust receipts; and

3. That the liability of the respondent is only civil in nature.[14]

On July 13, 1999, the Secretary of Justice issued Resolution No. 250[15] granting the petition
and reversing the assailed resolution of the City Prosecutor. According to the Justice Secretary,
the petitioner, as Senior Vice-President of PBMI, executed the 13 trust receipts and as such, was
the one responsible for the offense. Thus, the execution of said receipts is enough to indict the
petitioner as the official responsible for violation of P.D. No. 115. The Justice Secretary also
declared that petitioner could not contend that P.D. No. 115 covers only goods ultimately
destined for sale, as this issue had already been settled in Allied Banking Corporation v.
Ordoñez,[16] where the Court ruled that P.D. No. 115 is “not limited to transactions in goods
which are to be sold (retailed), reshipped, stored or processed as a component of a product
ultimately sold but covers failure to turn over the proceeds of the sale of entrusted goods, or to
return said goods if unsold or not otherwise disposed of in accordance with the terms of the trust
receipts.”

The Justice Secretary further stated that the respondent bound himself under the terms of the
trust receipts not only as a corporate official of PBMI but also as its surety; hence, he could be
proceeded against in two (2) ways: first, as surety as determined by the Supreme Court in its
decision in Rizal Commercial Banking Corporation v. Court of Appeals;[17] and second, as the
corporate official responsible for the offense under P.D. No. 115, via criminal prosecution.
Moreover, P.D. No. 115 explicitly allows the prosecution of corporate officers “without prejudice
to the civil liabilities arising from the criminal offense.” Thus, according to the Justice Secretary,
following Rizal Commercial Banking Corporation, the civil liability imposed is clearly separate
and distinct from the criminal liability of the accused under P.D. No. 115.

Conformably with the Resolution of the Secretary of Justice, the City Prosecutor filed 13
Informations against petitioner for violation of P.D. No. 115 before the RTC of Manila. The
cases were docketed as Criminal Cases No. 99-178596 to 99-178608 and consolidated for trial
before Branch 52 of said court. Petitioner filed a motion for reconsideration, which the Secretary
of Justice denied in a Resolution[18] dated January 17, 2000.

Petitioner then filed a petition for certiorari, prohibition and mandamus with the CA, assailing
the resolutions of the Secretary of Justice on the following grounds:

1. THE RESPONDENTS ARE ACTING WITH AN UNEVEN HAND AND IN FACT, ARE
ACTING OPPRESSIVELY AGAINST ALFREDO CHING WHEN THEY ALLOWED HIS
PROSECUTION DESPITE THE FACT THAT NO EVIDENCE HAD BEEN PRESENTED TO
PROVE HIS PARTICIPATION IN THE ALLEGED TRANSACTIONS.

2. THE RESPONDENT SECRETARY OF JUSTICE COMMITTED AN ACT IN GRAVE

ABUSE OF DISCRETION AND IN EXCESS OF HIS JURISDICTION WHEN THEY
CONTINUED PROSECUTION OF THE PETITIONER DESPITE THE LENGTH OF TIME
INCURRED IN THE TERMINATION OF THE PRELIMINARY INVESTIGATION THAT
SHOULD JUSTIFY THE DISMISSAL OF THE INSTANT CASE.

3. THE RESPONDENT SECRETARY OF JUSTICE AND ASSISTANT CITY PROSECUTOR

ACTED IN GRAVE ABUSE OF DISCRETION AMOUNTING TO AN EXCESS OF
JURISDICTION WHEN THEY CONTINUED THE PROSECUTION OF THE PETITIONER
DESPITE LACK OF SUFFICIENT BASIS.[19]

In his petition, petitioner incorporated a certification stating that “as far as this Petition is
concerned, no action or proceeding in the Supreme Court, the Court of Appeals or different
divisions thereof, or any tribunal or agency. It is finally certified that if the affiant should learn
that a similar action or proceeding has been filed or is pending before the Supreme Court, the
Court of Appeals, or different divisions thereof, of any other tribunal or agency, it hereby
undertakes to notify this Honorable Court within five (5) days from such notice.”[20]

In its Comment on the petition, the Office of the Solicitor General alleged that -
A.
THE HONORABLE SECRETARY OF JUSTICE CORRECTLY RULED THAT PETITIONER
ALFREDO CHING IS THE OFFICER RESPONSIBLE FOR THE OFFENSE CHARGED AND
THAT THE ACTS OF PETITIONER FALL WITHIN THE AMBIT OF VIOLATION OF P.D.
[No.] 115 IN RELATION TO ARTICLE 315, PAR. 1(B) OF THE REVISED PENAL CODE.

B.

THERE IS NO MERIT IN PETITIONER’S CONTENTION THAT EXCESSIVE DELAY HAS

MARRED THE CONDUCT OF THE PRELIMINARY INVESTIGATION OF THE CASE,
JUSTIFYING ITS DISMISSAL.

C.

THE PRESENT SPECIAL CIVIL ACTION FOR CERTIORARI, PROHIBITION AND

MANDAMUS IS NOT THE PROPER MODE OF REVIEW FROM THE RESOLUTION OF
THE DEPARTMENT OF JUSTICE. THE PRESENT PETITION MUST THEREFORE BE
DISMISSED.[21]

On April 22, 2004, the CA rendered judgment dismissing the petition for lack of merit, and on
procedural grounds. On the procedural issue, it ruled that (a) the certification of non-forum
shopping executed by petitioner and incorporated in the petition was defective for failure to
comply with the first two of the three-fold undertakings prescribed in Rule 7, Section 5 of the
Revised Rules of Civil Procedure; and (b) the petition for certiorari, prohibition and mandamus
was not the proper remedy of the petitioner.

On the merits of the petition, the CA ruled that the assailed resolutions of the Secretary of
Justice were correctly issued for the following reasons: (a) petitioner, being the Senior Vice-
President of PBMI and the signatory to the trust receipts, is criminally liable for violation of P.D.
No. 115; (b) the issue raised by the petitioner, on whether he violated P.D. No. 115 by his
actuations, had already been resolved and laid to rest in Allied Bank Corporation v. Ordoñez;[22]
and (c) petitioner was estopped from raising the

City Prosecutor’s delay in the final disposition of the preliminary investigation because he failed
to do so in the DOJ.

Thus, petitioner filed the instant petition, alleging that:

I
THE COURT OF APPEALS ERRED WHEN IT DISMISSED THE PETITION ON THE
GROUND THAT THE CERTIFICATION OF NON-FORUM SHOPPING INCORPORATED
THEREIN WAS DEFECTIVE.

II

THE COURT OF APPEALS ERRED WHEN IT RULED THAT NO GRAVE ABUSE OF

DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION WAS
COMMITTED BY THE SECRETARY OF JUSTICE IN COMING OUT WITH THE
ASSAILED RESOLUTIONS.[23]

The Court will delve into and resolve the issues seriatim.

The petitioner avers that the CA erred in dismissing his petition on a mere technicality. He
claims that the rules of procedure should be used to promote, not frustrate, substantial justice. He
insists that the Rules of Court should be construed liberally especially when, as in this case, his
substantial rights are adversely affected; hence, the deficiency in his certification of non-forum
shopping should not result in the dismissal of his petition.

The Office of the Solicitor General (OSG) takes the opposite view, and asserts that indubitably,
the certificate of non-forum shopping incorporated in the petition before the CA is defective
because it failed to disclose essential facts about pending actions concerning similar issues and
parties. It asserts that petitioner’s failure to comply with the Rules of Court is fatal to his
petition. The OSG cited Section 2, Rule 42, as well as the ruling of this Court in Melo v. Court of
Appeals.[24]

We agree with the ruling of the CA that the certification of non-forum shopping petitioner
incorporated in his petition before the appellate court is defective. The certification reads:
It is further certified that as far as this Petition is concerned, no action or proceeding in the
Supreme Court, the Court of Appeals or different divisions thereof, or any tribunal or agency.

It is finally certified that if the affiant should learn that a similar action or proceeding has been
filed or is pending before the Supreme Court, the Court of Appeals, or different divisions thereof,
of any other tribunal or agency, it hereby undertakes to notify this Honorable Court within five
(5) days from such notice.[25]

Under Section 1, second paragraph of Rule 65 of the Revised Rules of Court, the petition
should be accompanied by a sworn certification of non-forum shopping, as provided in the third
paragraph of Section 3, Rule 46 of said Rules. The latter provision reads in part:

SEC. 3. Contents and filing of petition; effect of non-compliance with requirements. —

The petition shall contain the full names and actual addresses of all the petitioners and
respondents, a concise statement of the matters involved, the factual background of the case and
the grounds relied upon for the relief prayed for.

xxx

The petitioner shall also submit together with the petition a sworn certification that he has
not theretofore commenced any other action involving the same issues in the Supreme Court, the
Court of Appeals or different divisions thereof, or any other tribunal or agency; if there is such
other action or proceeding, he must state the status of the same; and if he should thereafter learn
that a similar action or proceeding has been filed or is pending before the Supreme Court, the
Court of Appeals, or different divisions thereof, or any other tribunal or agency, he undertakes to
promptly inform the aforesaid courts and other tribunal or agency thereof within five (5) days
therefrom. xxx

Compliance with the certification against forum shopping is separate from and independent of
the avoidance of forum shopping itself. The requirement is mandatory. The failure of the
petitioner to comply with the foregoing requirement shall be sufficient ground for the dismissal
of the petition without prejudice, unless otherwise provided.[26]

Indubitably, the first paragraph of petitioner’s certification is incomplete and unintelligible.

Petitioner failed to certify that he “had not heretofore commenced any other action involving the
same issues in the Supreme Court, the Court of Appeals or the different divisions thereof or any
other tribunal or agency” as required by paragraph 4, Section 3, Rule 46 of the Revised Rules of
Court.

We agree with petitioner’s contention that the certification is designed to promote and
facilitate the orderly administration of justice, and therefore, should not be interpreted with
absolute literalness. In his works on the Revised Rules of Civil Procedure, former Supreme Court
Justice Florenz Regalado states that, with respect to the contents of the certification which the
pleader may prepare, the rule of substantial compliance may be availed of.[27] However, there
must be a special circumstance or compelling reason which makes the strict application of the
requirement clearly unjustified. The instant petition has not alleged any such extraneous
circumstance. Moreover, as worded, the certification cannot even be regarded as substantial
compliance with the procedural requirement. Thus, the CA was not informed whether, aside from
the petition before it, petitioner had commenced any other action involving the same issues in
other tribunals.

On the merits of the petition, the CA ruled that the petitioner failed to establish that the
Secretary of Justice committed grave abuse of discretion in finding probable cause against the
petitioner for violation of estafa under Article 315, paragraph 1(b) of the Revised Penal Code, in
relation to P.D. No. 115. Thus, the appellate court ratiocinated:

Be that as it may, even on the merits, the arguments advanced in support of the petition are not
persuasive enough to justify the desired conclusion that respondent Secretary of Justice gravely
abused its discretion in coming out with his assailed Resolutions. Petitioner posits that, except
for his being the Senior Vice-President of the PBMI, there is no iota of evidence that he was a
participes crimines in violating the trust receipts sued upon; and that his liability, if at all, is
purely civil because he signed the said trust receipts merely as a xxx surety and not as the
entrustee. These assertions are, however, too dull that they cannot even just dent the findings of
the respondent Secretary, viz:

“x x x it is apropos to quote section 13 of PD 115 which states in part, viz:

‘xxx If the violation or offense is committed by a corporation, partnership, association or other

judicial entities, the penalty provided for in this Decree shall be imposed upon the directors,
officers, employees or other officials or persons therein responsible for the offense, without
prejudice to the civil liabilities arising from the criminal offense.’

“There is no dispute that it was the respondent, who as senior vice-president of PBM, executed
the thirteen (13) trust receipts. As such, the law points to him as the official responsible for the
offense. Since a corporation cannot be proceeded against criminally because it cannot commit
crime in which personal violence or malicious intent is required, criminal action is limited to the
corporate agents guilty of an act amounting to a crime and never against the corporation itself
(West Coast Life Ins. Co. vs. Hurd, 27 Phil. 401; Times, [I]nc. v. Reyes, 39 SCRA 303). Thus,
the execution by respondent of said receipts is enough to indict him as the official responsible for
violation of PD 115.

“Parenthetically, respondent is estopped to still contend that PD 115 covers only goods which are
ultimately destined for sale and not goods, like those imported by PBM, for use in manufacture.
This issue has already been settled in the Allied Banking Corporation case, supra, where he was
also a party, when the Supreme Court ruled that PD 115 is ‘not limited to transactions in goods
which are to be sold (retailed), reshipped, stored or processed as a component or a product
ultimately sold’ but ‘covers failure to turn over the proceeds of the sale of entrusted goods, or to
return said goods if unsold or disposed of in accordance with the terms of the trust receipts.’
“In regard to the other assigned errors, we note that the respondent bound himself under the
terms of the trust receipts not only as a corporate official of PBM but also as its surety. It is
evident that these are two (2) capacities which do not exclude the other. Logically, he can be
proceeded against in two (2) ways: first, as surety as determined by the Supreme Court in its
decision in RCBC vs. Court of Appeals, 178 SCRA 739; and, secondly, as the corporate official
responsible for the offense under PD 115, the present case is an appropriate remedy under our
penal law.

“Moreover, PD 115 explicitly allows the prosecution of corporate officers ‘without prejudice to
the civil liabilities arising from the criminal offense’ thus, the civil liability imposed on
respondent in RCBC vs. Court of Appeals case is clearly separate and distinct from his criminal
liability under PD 115.’”[28]

Petitioner asserts that the appellate court’s ruling is erroneous because (a) the transaction
between PBMI and respondent bank is not a trust receipt transaction; (b) he entered into the
transaction and was sued in his capacity as PBMI Senior Vice-President; (c) he never received
the goods as an entrustee for PBMI, hence, could not have committed any dishonesty or abused
the confidence of respondent bank; and (d) PBMI acquired the goods and used the same in
operating its machineries and equipment and not for resale.

The OSG, for its part, submits a contrary view, to wit:

34. Petitioner further claims that he is not a person responsible for the offense allegedly because
“[b]eing charged as the Senior Vice-President of Philippine Blooming Mills (PBM), petitioner
cannot be held criminally liable as the transactions sued upon were clearly entered into in his
capacity as an officer of the corporation” and that [h]e never received the goods as an entrustee
for PBM as he never had or took possession of the goods nor did he commit dishonesty nor
“abuse of confidence in transacting with RCBC.” Such argument is bereft of merit.

35. Petitioner’s being a Senior Vice-President of the Philippine Blooming

Mills does not exculpate him from any liability. Petitioner’s responsibility as the corporate
official of PBM who received the goods in trust is premised on Section 13 of P.D. No. 115,
which provides:

Section 13. Penalty Clause. The failure of an entrustee to turn over the proceeds of the sale of
the goods, documents or instruments covered by a trust receipt to the extent of the amount owing
to the entruster or as appears in the trust receipt or to return said goods, documents or
instruments if they were not sold or disposed of in accordance with the terms of the trust receipt
shall constitute the crime of estafa, punishable under the provisions of Article Three hundred and
fifteen, paragraph one (b) of Act Numbered Three thousand eight hundred and fifteen, as
amended, otherwise known as the Revised Penal Code. If the violation or offense is committed
by a corporation, partnership, association or other juridical entities, the penalty provided for in
this Decree shall be imposed upon the directors, officers, employees or other officials or persons
therein responsible for the offense, without prejudice to the civil liabilities arising from the
criminal offense. (Emphasis supplied)
36. Petitioner having participated in the negotiations for the trust receipts and having received
the goods for PBM, it was inevitable that the
petitioner is the proper corporate officer to be proceeded against by virtue of the PBM’s violation
of P.D. No. 115.[29]

The ruling of the CA is correct.

In Mendoza-Arce v. Office of the Ombudsman (Visayas),[30] this Court held that the acts
of a quasi-judicial officer may be assailed by the aggrieved party via a petition for certiorari and
enjoined (a) when necessary to afford adequate protection to the constitutional rights of the
accused; (b) when necessary for the orderly administration of justice; (c) when the acts of the
officer are without or in excess of authority; (d) where the charges are manifestly false and
motivated by the lust for vengeance; and (e) when there is clearly no prima facie case against the
accused.[31] The Court also declared that, if the officer conducting a preliminary investigation
(in that case, the Office of the Ombudsman) acts without or in excess of his authority and
resolves to file an Information despite the absence of probable cause, such act may be nullified
by a writ of certiorari.[32]

Indeed, under Section 4, Rule 112 of the 2000 Rules of Criminal Procedure,[33] the Information
shall be prepared by the Investigating Prosecutor against the respondent only if he or she finds
probable cause to hold such respondent for trial. The Investigating Prosecutor acts without or in
excess of his authority under the Rule if the Information is filed against the respondent despite
absence of evidence showing probable cause therefor.[34] If the Secretary of Justice reverses the
Resolution of the Investigating Prosecutor who found no probable cause to hold the respondent
for trial, and orders such prosecutor to file the Information despite the absence of probable cause,
the Secretary of Justice acts contrary to law, without authority and/or in excess of authority. Such
resolution may
likewise be nullified in a petition for certiorari under Rule 65 of the Revised Rules of Civil
Procedure.[35]

A preliminary investigation, designed to secure the respondent against hasty, malicious and
oppressive prosecution, is an inquiry to determine whether (a) a crime has been committed; and
(b) whether there is probable cause to believe that the accused is guilty thereof. It is a means of
discovering the person or persons who may be reasonably charged with a crime. Probable cause
need not be based on clear and convincing evidence of guilt, as the investigating officer acts
upon probable cause of reasonable belief. Probable cause implies probability of guilt and
requires more than bare suspicion but less than evidence which would justify a conviction. A
finding of probable cause needs only to rest on evidence showing that more likely than not, a
crime has been committed by the suspect.[36]

However, while probable cause should be determined in a summary manner, there is a

need to examine the evidence with care to prevent material damage to a potential accused’s
constitutional right to liberty and the guarantees of freedom and fair play[37] and to protect the
State from the burden of unnecessary expenses in prosecuting alleged offenses and holding trials
arising from false, fraudulent or groundless charges.[38]

In this case, petitioner failed to establish that the Secretary of Justice committed grave
abuse of discretion in issuing the assailed resolutions. Indeed, he acted in accord with law and
the evidence.

Section 4 of P.D. No. 115 defines a trust receipt transaction, thus:

Section 4. What constitutes a trust receipt transaction. A trust receipt transaction, within the
meaning of this Decree, is any transaction by and between a person referred to in this Decree as
the entruster, and another person referred to in this Decree as entrustee, whereby the entruster,
who owns or holds absolute title or security interests over certain specified goods, documents or
instruments, releases the same to the possession of the entrustee upon the latter’s execution and
delivery to the entruster of a signed document called a “trust receipt” wherein the entrustee binds
himself to hold the designated goods, documents or instruments in trust for the entruster and to
sell or otherwise dispose of the goods, documents or instruments with the obligation to turn over
to the entruster the proceeds thereof to the extent of the amount owing to the entruster or as
appears in the trust receipt or the goods, documents or instruments themselves if they are unsold
or not otherwise disposed of, in accordance with the terms and conditions specified in the trust
receipt, or for other purposes substantially equivalent to any of the following:

1. In case of goods or documents, (a) to sell the goods or procure their sale; or (b) to manufacture
or process the goods with the purpose of ultimate sale; Provided, That, in the case of goods
delivered under trust receipt for the purpose of manufacturing or processing before its ultimate
sale, the entruster shall retain its title over the goods whether in its original or processed form
until the entrustee has complied fully with his obligation under the trust receipt; or (c) to load,
unload, ship or otherwise deal with them in a manner preliminary or necessary to their sale; or

2. In the case of instruments a) to sell or procure their sale or exchange; or b) to deliver them to a
principal; or c) to effect the consummation of some transactions involving delivery to a
depository or register; or d) to effect their presentation, collection or renewal.

The sale of goods, documents or instruments by a person in the business of selling goods,
documents or instruments for profit who, at the outset of the transaction, has, as against the
buyer, general property rights in such goods, documents or instruments, or who sells the same to
the buyer on credit, retaining title or other interest as security for the payment of the purchase
price, does not constitute a trust receipt transaction and is outside the purview and coverage of
this Decree.

An entrustee is one having or taking possession of goods, documents or instruments under a trust
receipt transaction, and any successor in interest of such person for the purpose of payment
specified in the trust receipt agreement.[39] The entrustee is obliged to: (1) hold the goods,
documents or instruments in trust for the entruster and shall dispose of them strictly in
accordance with the terms and conditions of the trust receipt; (2) receive the proceeds in trust for
the entruster and turn over the same to the entruster to the extent of the amount owing to the
entruster or as appears on the trust receipt; (3) insure the goods for their total value against loss
from fire, theft, pilferage or other casualties; (4) keep said goods or proceeds thereof whether in
money or whatever form, separate and capable of identification as property of the entruster; (5)
return the goods, documents or instruments in the event of non-sale or upon demand of the
entruster; and (6) observe all other terms and conditions of the trust receipt not contrary to the
provisions of the decree.[40]

The entruster shall be entitled to the proceeds from the sale of the goods, documents or
instruments released under a trust receipt to the entrustee to the extent of the amount owing to
the entruster or as appears in the trust receipt, or to the return of the goods, documents or
instruments in case of non-sale, and to the enforcement of all other rights conferred on him in the
trust receipt; provided, such are not contrary to the provisions of the document.[41]

In the case at bar, the transaction between petitioner and respondent bank falls under the
trust receipt transactions envisaged in P.D. No. 115. Respondent bank imported the goods and
entrusted the same to PBMI under the trust receipts signed by petitioner, as entrustee, with the
bank as entruster. The agreement was as follows:

And in consideration thereof, I/we hereby agree to hold said goods in trust for the said BANK as
its property with liberty to sell the same within ____days from the date of the execution of this
Trust Receipt and for the Bank’s account, but without authority to make any other disposition
whatsoever of the said goods or any part thereof (or the proceeds) either by way of conditional
sale, pledge or otherwise.

I/we agree to keep the said goods insured to their full value against loss from fire, theft, pilferage
or other casualties as directed by the BANK, the sum insured to be payable in case of loss to the
BANK, with the understanding that the BANK is, not to be chargeable with the storage premium
or insurance or any other expenses incurred on said goods.

In case of sale, I/we further agree to turn over the proceeds thereof as soon as received to the
BANK, to apply against the relative acceptances (as described above) and for the payment of any
other indebtedness of mine/ours to the BANK. In case of non-sale within the period specified
herein, I/we agree to return the goods under this Trust Receipt to the BANK without any need of
demand.

I/we agree to keep the said goods, manufactured products or proceeds thereof, whether in the
form of money or bills, receivables, or accounts separate and capable of identification as
property of the BANK.[42]

It must be stressed that P.D. No. 115 is a declaration by legislative authority that, as a matter of
public policy, the failure of person to turn over the proceeds of the sale of the goods covered by a
trust receipt or to return said goods, if not sold, is a public nuisance to be abated by the
imposition of penal sanctions.[43]

The Court likewise rules that the issue of whether P.D. No. 115 encompasses transactions
involving goods procured as a component of a product ultimately sold has been resolved in the
affirmative in Allied Banking Corporation v. Ordoñez.[44] The law applies to goods used by the
entrustee in the operation of its machineries and equipment. The non-payment of the amount
covered by the trust receipts or the non-return of the goods covered by the receipts, if not sold or
otherwise not disposed of, violate the entrustee’s obligation to pay the amount or to return the
goods to the entruster.

In Colinares v. Court of Appeals,[45] the Court declared that there are two possible situations in
a trust receipt transaction. The first is covered by the provision which refers to money received
under the obligation involving the duty to deliver it (entregarla) to the owner of the merchandise
sold. The second is covered by the provision which refers to merchandise received under the
obligation to return it (devolvera) to the owner.[46] Thus, failure of the entrustee to turn over the
proceeds of the sale of the goods covered by the trust receipts to the entruster or to return said
goods if they were not disposed of in accordance with the terms of the trust receipt is a crime
under P.D. No. 115, without need of proving intent to defraud. The law punishes dishonesty and
abuse of confidence in the handling of money or goods to the prejudice of the entruster,
regardless of whether the latter is the owner or not. A mere failure to deliver the proceeds of the
sale of the goods, if not sold, constitutes a criminal offense that causes prejudice, not only to
another, but more to the public interest.[47]

The Court rules that although petitioner signed the trust receipts merely as Senior Vice-President
of PBMI and had no physical possession of the goods, he cannot avoid prosecution for violation
of P.D. No. 115.

The penalty clause of the law, Section 13 of P.D. No. 115 reads:

Section 13. Penalty Clause. The failure of an entrustee to turn over the proceeds of the sale of the
goods, documents or instruments covered by a trust receipt to the extent of the amount owing to
the entruster or as appears in the trust receipt or to return said goods, documents or instruments if
they were not sold or disposed of in accordance with the terms of the trust receipt shall constitute
the crime of estafa, punishable under the provisions of Article Three hundred and fifteen,
paragraph one (b) of Act Numbered Three thousand eight hundred and fifteen, as amended,
otherwise known as the Revised Penal Code. If the violation or offense is committed by a
corporation, partnership, association or other juridical entities, the penalty provided for in this
Decree shall be imposed upon the directors, officers, employees or other officials or persons
therein responsible for the offense, without prejudice to the civil liabilities arising from the
criminal offense.

The crime defined in P.D. No. 115 is malum prohibitum but is classified as estafa under
paragraph 1(b), Article 315 of the Revised Penal Code, or estafa with abuse of confidence. It
may be committed by a corporation or other juridical entity or by natural persons. However, the
penalty for the crime is imprisonment for the periods provided in said Article 315, which reads:

ARTICLE 315. Swindling (estafa). – Any person who shall defraud another by any of the means
mentioned hereinbelow shall be punished by:
1st. The penalty of prision correccional in its maximum period to prision mayor in its minimum
period, if the amount of the fraud is over 12,000 pesos but does not exceed 22,000 pesos; and if
such amount exceeds the latter sum, the penalty provided in this paragraph shall be imposed in
its maximum period, adding one year for each additional 10,000 pesos; but the total penalty
which may be imposed shall not exceed twenty years. In such cases, and in connection with the
accessory penalties which may be imposed and for the purpose of the other provisions of this
Code, the penalty shall be termed prision mayor or reclusion temporal, as the case may be;

2nd. The penalty of prision correccional in its minimum and medium periods, if the amount of
the fraud is over 6,000 pesos but does not exceed 12,000 pesos;

3rd. The penalty of arresto mayor in its maximum period to prision correccional in its minimum
period, if such amount is over 200 pesos but does not exceed 6,000 pesos; and

4th. By arresto mayor in its medium and maximum periods, if such amount does not exceed 200
pesos, provided that in the four cases mentioned, the fraud be committed by any of the following
means; xxx

Though the entrustee is a corporation, nevertheless, the law specifically makes the officers,
employees or other officers or persons responsible for the offense, without prejudice to the civil
liabilities of such corporation and/or board of directors, officers, or other officials or employees
responsible for the offense. The rationale is that such officers or employees are vested with the
authority and responsibility to devise means necessary to ensure compliance with the law and, if
they fail to do so, are held criminally accountable; thus, they have a responsible share in the
violations of the law.[48]

If the crime is committed by a corporation or other juridical entity, the directors, officers,
employees or other officers thereof responsible for the offense shall be charged and penalized for
the crime, precisely because of the nature of the crime and the penalty therefor. A corporation
cannot be arrested and imprisoned; hence, cannot be penalized for a crime punishable by
imprisonment.[49] However, a corporation may be charged and prosecuted for a crime if the
imposable penalty is fine. Even if the statute prescribes both fine and imprisonment as penalty, a
corporation may be prosecuted and, if found guilty, may be fined.[50]

A crime is the doing of that which the penal code forbids to be done, or omitting to do what it
commands. A necessary part of the definition of every crime is the designation of the author of
the crime upon whom the penalty is to be inflicted. When a criminal statute designates an act of
a corporation or a crime and prescribes punishment therefor, it creates a criminal offense which,
otherwise, would not exist and such can be
committed only by the corporation. But when a penal statute does not
expressly apply to corporations, it does not create an offense for which a corporation may be
punished. On the other hand, if the State, by statute, defines a crime that may be committed by a
corporation but prescribes the penalty therefor to be suffered by the officers, directors, or
employees of such corporation or other persons responsible for the offense, only such individuals
will suffer such penalty.[51] Corporate officers or employees, through whose act, default or
omission the corporation commits a crime, are themselves individually guilty of the crime.[52]
The principle applies whether or not the crime requires the consciousness of wrongdoing. It
applies to those corporate agents who themselves commit the crime and to those, who, by virtue
of their managerial positions or other similar relation to the corporation, could be deemed
responsible for its commission, if by virtue of their relationship to the corporation, they had the
power to prevent the act.[53] Moreover, all parties active in promoting a crime, whether agents
or not, are principals.[54] Whether such officers or employees are benefited by their delictual
acts is not a touchstone of their criminal liability. Benefit is not an operative fact.

In this case, petitioner signed the trust receipts in question. He cannot, thus, hide behind the
cloak of the separate corporate personality of PBMI. In the words of Chief Justice Earl Warren,
a corporate officer cannot protect himself behind a corporation where he is the actual, present
and efficient actor.[55]

IN LIGHT OF ALL THE FOREGOING, the petition is DENIED for lack of merit. Costs against
the petitioner.