Republic of SUPREME Manila SECOND DIVISION

the

Philippines COURT

G.R. No. 82797 February 27, 1991 GOOD EARTH EMPORIUM INC., and LIM KA PING, petitioners, vs. HONORABLE COURT OF APPEALS and ROCES-REYES REALTY INC., respondents. A.E. Dacanay for petitioners. Antonio Quintos Law Office for private respondent. PARAS, J.:p This is a petition for review on certiorari of the December 29, 1987 decision * of the Court of Appeals in CA-G.R. No. 11960 entitled "ROCES-REYES REALTY, INC. vs. HONORABLE JUDGE REGIONAL TRIAL COURT OF MANILA, BRANCH 44, GOOD EARTH EMPORIUM, INC. and LIM KA PING" reversing the decision of respondent Judge ** of the Regional Trial Court of Manila, Branch 44 in Civil Case No. 85-30484, which reversed the resolution of the Metropolitan Trial Court Of Manila, Branch 28 in Civil Case No. 09639, *** denying herein petitioners' motion to quash the alias writ of execution issued against them. As gathered from the records, the antecedent facts of this case, are as follows: A Lease Contract, dated October 16, 1981, was entered into by and between ROCES-REYES REALTY, INC., as lessor, and GOOD EARTH EMPORIUM, INC., as lessee, for a term of three years beginning November 1, 1981 and ending October 31, 1984 at a monthly rental of P65,000.00 (Rollo, p. 32; Annex "C" of Petition). The building which was the subject of the contract of lease is a five-storey building located at the corner of Rizal Avenue and Bustos Street in Sta. Cruz, Manila. From March 1983, up to the time the complaint was filed, the lessee had defaulted in the payment of rentals, as a consequence of which, private respondent ROCES-REYES REALTY, INC., (hereinafter designated as ROCES for brevity) filed on October 14, 1984, an ejectment case (Unlawful Detainer) against herein petitioners, GOOD EARTH EMPORIUM, INC. and LIM KA PING, hereinafter designated as GEE, (Rollo, p. 21; Annex "B" of the Petition). After the latter had tendered their responsive pleading, the lower court (MTC, Manila) on motion of Roces rendered judgment on the pleadings dated April 17, 1984, the dispositive portion of which states:

Judgment is hereby rendered ordering defendants (herein petitioners) and all persons claiming title under him to vacate the premises and surrender the same to the plaintiffs (herein respondents); ordering the defendants to pay the plaintiffs the rental of P65,000.00 a month beginning March 1983 up to the time defendants actually vacate the premises and deliver possession to the plaintiff; to pay attorney's fees in the amount of P5,000.00 and to pay the costs of this suit. (Rollo, p. 111; Memorandum of Respondents) On May 16, 1984, Roces filed a motion for execution which was opposed by GEE on May 28, 1984 simultaneous with the latter's filing of a Notice of Appeal (Rollo, p. 112, Ibid.). On June 13, 1984, the trial court resolved such motion ruling: After considering the motion for the issuance of a writ of execution filed by counsel for the plaintiff (herein respondents) and the opposition filed in relation thereto and finding that the defendant failed to file the necessary supersedeas bond, this court resolved to grant the same for being meritorious. (Rollo, p. 112) On June 14, 1984, a writ of execution was issued by the lower court. Meanwhile, the appeal was assigned to the Regional Trial Court (Manila) Branch XLVI. However, on August 15, 1984, GEE thru counsel filed with the Regional Trial Court of Manila, a motion to withdraw appeal citing as reason that they are satisfied with the decision of the Metropolitan Trial Court of Manila, Branch XXVIII, which said court granted in its Order of August 27, 1984 and the records were remanded to the trial court (Rollo, p. 32; CA Decision). Upon an ex-parte Motion of ROCES, the trial court issued an Alias Writ of Execution dated February 25, 1985 (Rollo, p. 104; Annex "D" of Petitioner's Memorandum), which was implemented on February 27, 1985. GEE thru counsel filed a motion to quash the writ of execution and notice of levy and an urgent Exparte Supplemental Motion for the issuance of a restraining order, on March 7, and 20, 1985, respectively. On March 21, 1985, the lower court issued a restraining order to the sheriff to hold the execution of the judgment pending hearing on the motion to quash the writ of execution (Rollo, p. 22; RTC Decision). While said motion was pending resolution, GEE filed a Petition for Relief from judgment before another court, Regional Trial Court of Manila, Branch IX, which petition was docketed as Civil Case No. 80-30019, but the petition was dismissed and the injunctive writ issued in connection therewith set aside. Both parties appealed to the Court of Appeals; GEE on the order of dismissal and Roces on denial of his motion for indemnity,

both docketed as CA-G.R. No. 15873-CV. Going back to the original case, the Metropolitan Trial Court after hearing and disposing some other incidents, promulgated the questioned Resolution, dated April 8, 1985, the dispositive portion of which reads as follows: Premises considered, the motion to quash the writ is hereby denied for lack of merit. The restraining orders issued on March 11 and 23, 1985 are hereby recalled, lifted and set aside. (Rollo, p. 20, MTC Decision) GEE appealed and by coincidence. was raffled to the same Court, RTC Branch IX. Roces moved to dismiss the appeal but the Court denied the motion. On certiorari, the Court of Appeals dismissed Roces' petition and remanded the case to the RTC. Meantime, Branch IX became vacant and the case was re-raffled to Branch XLIV. On April 6, 1987, the Regional Trial Court of Manila, finding that the amount of P1 million evidenced by Exhibit "I" and another P1 million evidenced by the pacto de retro sale instrument (Exhibit "2") were in full satisfaction of the judgment obligation, reversed the decision of the Municipal Trial Court, the dispositive portion of which reads: Premises considered, judgment is hereby rendered reversing the Resolution appealed from quashing the writ of execution and ordering the cancellation of the notice of levy and declaring the judgment debt as having been fully paid and/or Liquidated. (Rollo, p. 29). On further appeal, the Court of Appeals reversed the decision of the Regional Trial Court and reinstated the Resolution of the Metropolitan Trial Court of Manila, the dispositive portion of which is as follows: WHEREFORE, the judgment appealed from is hereby REVERSED and the Resolution dated April 8, 1985, of the Metropolitan Trial Court of Manila Branch XXXIII is hereby REINSTATED. No pronouncement as to costs. (Rollo, p. 40). GEE's Motion for Reconsideration of April 5, 1988 was denied (Rollo, p. 43). Hence, this petition. The main issue in this case is whether or not there was full satisfaction of the judgment debt in favor of respondent corporation which would justify the quashing of the Writ of Execution. A careful study of the common exhibits (Exhibits 1/A and 2/B) shows that nowhere in any of said exhibits was there any writing alluding to or referring to any settlement between the parties of petitioners' judgment obligation (Rollo, pp. 45-48). Moreover, there is no indication in the receipt, Exhibit "1", that it was in payment, full or partial, of the judgment

obligation. Likewise, there is no indication in the pacto de retro sale which was drawn in favor of Jesus Marcos Roces and Marcos V. Roces and not the respondent corporation, that the obligation embodied therein had something to do with petitioners' judgment obligation with respondent corporation. Finding that the common exhibit, Exhibit 1/A had been signed by persons other than judgment creditors (RocesReyes Realty, Inc.) coupled with the fact that said exhibit was not even alleged by GEE and Lim Ka Ping in their original motion to quash the alias writ of execution (Rollo, p. 37) but produced only during the hearing (Ibid.) which production resulted in petitioners having to claim belatedly that there was an "overpayment" of about half a million pesos (Rollo, pp. 25-27) and remarking on the utter absence of any writing in Exhibits "1/A" and "2/B" to indicate payment of the judgment debt, respondent Appellate Court correctly concluded that there was in fact no payment of the judgment debt. As aptly observed by the said court: What immediately catches one's attention is the total absence of any writing alluding to or referring to any settlement between the parties of private respondents' (petitioners') judgment obligation. In moving for the dismissal of the appeal Lim Ka Ping who was then assisted by counsel simply stated that defendants (herein petitioners) are satisfied with the decision of the Metropolitan Trial Court (Records of CA, p. 54). Notably, in private respondents' (petitioners') Motion to Quash the Writ of Execution and Notice of Levy dated March 7, 1985, there is absolutely no reference to the alleged payment of one million pesos as evidenced by Exhibit 1 dated September 20, 1984. As pointed out by petitioner (respondent corporation) this was brought out by Linda Panutat, Manager of Good Earth only in the course of the latter's testimony. (Rollo, p. 37) Article 1240 of the Civil Code of the Philippines provides that: Payment shall be made to the person in whose favor the obligation has been constituted, or his successor in interest, or any person authorized to receive it. In the case at bar, the supposed payments were not made to Roces-Reyes Realty, Inc. or to its successor in interest nor is there positive evidence that the payment was made to a person authorized to receive it. No such proof was submitted but merely inferred by the Regional Trial Court (Rollo, p. 25) from Marcos Roces having signed the Lease Contract as President which was witnessed by Jesus Marcos Roces. The latter, however, was no longer

President or even an officer of Roces-Reyes Realty, Inc. at the time he received the money (Exhibit "1") and signed the sale with pacto de retro (Exhibit "2"). He, in fact, denied being in possession of authority to receive payment for the respondent corporation nor does the receipt show that he signed in the same capacity as he did in the Lease Contract at a time when he was President for respondent corporation (Rollo, p. 20, MTC decision). On the other hand, Jesus Marcos Roces testified that the amount of P1 million evidenced by the receipt (Exhibit "1") is the payment for a loan extended by him and Marcos Roces in favor of Lim Ka Ping. The assertion is home by the receipt itself whereby they acknowledged payment of the loan in their names and in no other capacity. A corporation has a personality distinct and separate from its individual stockholders or members. Being an officer or stockholder of a corporation does not make one's property also of the corporation, and vice-versa, for they are separate entities (Traders Royal Bank v. CA-G.R. No. 78412, September 26, 1989; Cruz v. Dalisay, 152 SCRA 482). Shareowners are in no legal sense the owners of corporate property (or credits) which is owned by the corporation as a distinct legal person (Concepcion Magsaysay-Labrador v. CA-G.R. No. 58168, December 19, 1989). As a consequence of the separate juridical personality of a corporation, the corporate debt or credit is not the debt or credit of the stockholder, nor is the stockholder's debt or credit that of the corporation (Prof. Jose Nolledo's "The Corporation Code of the Philippines, p. 5, 1988 Edition, citing Professor Ballantine). The absence of a note to evidence the loan is explained by Jesus Marcos Roces who testified that the IOU was subsequently delivered to private respondents (Rollo, pp. 97-98). Contrary to the Regional Trial Court's premise that it was incumbent upon respondent corporation to prove that the amount was delivered to the Roces brothers in the payment of the loan in the latter's favor, the delivery of the amount to and the receipt thereof by the Roces brothers in their names raises the presumption that the said amount was due to them. There is a disputable presumption that money paid by one to the other was due to the latter (Sec. 5(f) Rule 131, Rules of Court). It is for GEE and Lim Ka Ping to prove otherwise. In other words, it is for the latter to prove that the payments made were for the satisfaction of their judgment debt and not vice versa. The fact that at the time payment was made to the two Roces brothers, GEE was also indebted to respondent corporation for a larger amount, is not supportive of the Regional Trial Court's conclusions that the payment was in

favor of the latter, especially in the case at bar where the amount was not receipted for by respondent corporation and there is absolutely no indication in the receipt from which it can be reasonably inferred, that said payment was in satisfaction of the judgment debt. Likewise, no such inference can be made from the execution of the pacto de retro sale which was not made in favor of respondent corporation but in favor of the two Roces brothers in their individual capacities without any reference to the judgment obligation in favor of respondent corporation. In addition, the totality of the amount covered by the receipt (Exhibit "1/A") and that of the sale with pacto de retro(Exhibit "2/B") all in the sum of P2 million, far exceeds petitioners' judgment obligation in favor of respondent corporation in the sum of P1,560,000.00 by P440,000.00, which militates against the claim of petitioner that the aforesaid amount (P2M) was in full payment of the judgment obligation. Petitioners' explanation that the excess is interest and advance rentals for an extension of the lease contract (Rollo, pp. 25-28) is belied by the absence of any interest awarded in the case and of any agreement as to the extension of the lease nor was there any such pretense in the Motion to Quash the Alias Writ of Execution. Petitioners' averments that the respondent court had gravely abused its discretion in arriving at the assailed factual findings as contrary to the evidence and applicable decisions of this Honorable Court are therefore, patently unfounded. Respondent court was correct in stating that it "cannot go beyond what appears in the documents submitted by petitioners themselves (Exhibits "1" and "2") in the absence of clear and convincing evidence" that would support its claim that the judgment obligation has indeed been fully satisfied which would warrant the quashal of the Alias Writ of Execution. It has been an established rule that when the existence of a debt is fully established by the evidence (which has been done in this case), the burden of proving that it has been extinguished by payment devolves upon the debtor who offers such a defense to the claim of the plaintiff creditor (herein respondent corporation) (Chua Chienco v. Vargas, 11 Phil. 219; Ramos v. Ledesma, 12 Phil. 656; Pinon v. De Osorio, 30 Phil. 365). For indeed, it is well-entrenched in Our jurisprudence that each party in a case must prove his own affirmative allegations by the degree of evidence required by law (Stronghold Insurance Co. v. CA, G.R. No. 83376, May 29,1989; Tai Tong Chuache & Co. v. Insurance Commission, 158 SCRA 366).

The appellate court cannot, therefore, be said to have gravely abused its discretion in finding lack of convincing and reliable evidence to establish payment of the judgment obligation as claimed by petitioner. The burden of evidence resting on the petitioners to establish the facts upon which their action is premised has not been satisfactorily discharged and therefore, they have to bear the consequences. PREMISES CONSIDERED, the petition is hereby DENIED and the Decision of the Respondent court is hereby AFFIRMED, reinstating the April 8, 1985 Resolution of the Metropolitan Trial Court of Manila. SO ORDERED. [G.R. No. 140923. September 16, 2005] MANUEL M. MENDOZA and EDGARDO A. YOTOKO, petitioners, vs. BANCO REAL DEVELOPMENT BANK (now LBC Development Bank),respondent. DECISION SANDOVAL-GUTIERREZ, J.: [1] Before us is a petition for review on certiorari , assailing [2] the Decision of the Court of Appeals dated September 21, 1998 in CA-G.R. No. 41544, entitled BANCO REAL DEVELOPMENT BANK, plaintiff, versus, TECHNICA VIDEO INC., ET. AL., MANUEL M. MENDOZA, ET. AL., defendants and Resolution dated December 3, 1999. The petition alleges inter alia that on August 7, 1985, the Board of Directors of Technical Video, Inc. (TVI) passed a Resolution authorizing its President, Eduardo A. Yotoko, petitioner, or its General Manager-Secretary-Treasurer, Manuel M. Mendoza, also a petitioner, to apply for and secure a loan from the Pasay City Banco Real Development Bank (now LBC Development Bank), herein respondent. On September 11, 1985, respondent bank extended a loan of P500,000.00 to TVI. In his capacity as General Manager, petitioner Mendoza executed a promissory note and chattel mortgage over 195 units of Beta video machines and their equipment and accessories belonging to TVI in favor of respondent bank. On October 3, 1986, TVI and two other video firms, Fox Video and Galactica Video, organized a new corporation named FGT Video Network Inc. (FGT). It was registered [3] with the Securities and Exchange Commission. Petitioner Mendoza was the concurrent President of FGT and Operating General Manager of TVI. Thus, the office of TVI had to be transferred to the building of FGT for easier monitoring of the distribution and marketing aspects of the business.

For TVIs failure to pay its loan upon maturity, respondent bank, on January 26, 1987, filed with the Office of the Clerk of Court of the Regional Trial Court (RTC), Pasay City, a petition for Extra Judicial Foreclosure and Sale of Chattel Mortgage. [4] However, the Sheriffs Report/Return dated January 27, 1987 shows that TVI is no longer doing business at its given address; that its General Manager, Mr. Manuel M. Mendoza, is presently employed at FGT Video Network with offices at the Philcemcor Bldg., No. 4 Edsa cor. Connecticut St., Greenhills, San Juan, Metro Manila; that when asked about the whereabouts of the video machines, in the presence of the representative of respondent bank and its counsel, Mr. Mendoza denied any knowledge of their whereabouts; and that action on respondents petition is indefinitely postponed until further notice from the bank. Respondent then wrote TVI demanding the surrender of the video machines. In his letter dated February 19, 1987, petitioner Mendoza requested the bank to give him additional time to enable us to pay our total obligations and proposed a repayment scheme to start not later than [5] March 10, 1987. Still, no payment was received by the bank. TVI simply refused and ignored the demand and kept silent as to the whereabouts of the video machines. Meanwhile, in a case entitled Republic of the Philippines, plaintiff vs. FGT Video Network Inc., Manuel Mendoza, Alfredo C. Ongyangco, Eric Apolonio, Susan Yang ang Eduardo A. Yotoko, defendants, the RTC, Branch 167, Pasig City issued a search warrant. The agents of the National Bureau of Investigation (NBI) confiscated at the offices of FGT 638 machines and equipment including the 195 Beta machines mortgaged with respondent bank. On May 29, 1987, upon motion of FGT and herein petitioners, the same court issued another Order directing the NBI to release and return the said machines to them. However, Columbia Pictures Inc., Orion Pictures Corp., Paramount Pictures Corp., Universal City Studios Inc., The Walt Disney Company and Warner Bros. filed with this [6] Court a petition forcertiorari assailing the Order of the lower court. On June 18, 1987, this Court issued a temporary restraining order enjoining the RTC from enforcing its assailed order. The machines and equipment were left in the custody of the NBI until the petition for certiorari shall have been resolved with finality. On July 13, 1990, respondent bank filed with the RTC, [7] Branch 110, Pasig City, a complaint for collection of a [8] sum of money against TVI, FGT and petitioners. Only petitioners filed their joint answer to the complaint.

In their joint answer, petitioners specifically denied the allegations in the complaint, raising the defense that the loan is purely a corporate indebtedness of TVI. On April 29, 1991, the trial court rendered a Decision, holding that: As by these considerations, the Court finds that TVI was the mere alter ego or business conduit of Yotoko and Mendoza, and additionally considering 1) that Mendoza disclaimed knowledge of the whereabouts of the TVI mortgaged property at the time plaintiffs petition for extrajudicial foreclosure was being effected, and 2) that Mendoza and Yotoko transferred the mortgaged property to FGT without first securing plaintiffs consent despite their awareness that under the chattel mortgage, such consent was necessary, the doctrine of corporate entity must be pierced and the two must be held personally liable for TVIs obligation to plaintiff for said doctrine cannot be used to defeat public convenience, justify wrong, protect fraud or avoid a legal obligation. The dispositive portion of the trial courts Decision reads: WHEREFORE, judgment is hereby rendered in favor of plaintiff and against defendants TECHNICA VIDEO, INC., Mendoza and Yotoko, ordering them, 1) to pay plaintiff the sum of P500,000.00 plus interests, charges and penalties as agreed upon in the promissory note of September 11, 1985, until the same is fully paid; 2) to pay plaintiff the sum equivalent to ten (10%) of the total unpaid obligation as and for attorneys fees, and 3) to pay the costs. SO ORDERED. Upon appeal by herein petitioners, the Court of Appeals rendered its Decision dated September 21, 1998, affirming in toto the Decision of the trial court. Petitioners motion for reconsideration was denied in its Resolution dated December 3, 1999. Hence, the instant petition. The basic issue for our resolution is whether herein petitioners are personally liable for TVIs indebtedness of P500,000.00 with respondent bank. Both the trial court and the Appellate Court found that the petitioners transferred the Beta video machines from TVI to FGT without the consent of respondent bank. Also, upon inquiry of the sheriff, petitioner Mendoza declined knowledge of the whereabouts of the mortgaged video machines. Moreover, the fact that the NBI seized the video machines from FGT glaringly shows that petitioners transferred the same from TVI. More importantly, a comparison of the list of video machines in the Chattel Mortgage Contract and the list of video machines seized by

the NBI from FGT shows that they have the same serial numbers. The courts below also found that TVI is petitioners mere alter ego or business conduit. They control the affairs of TVI. Among its stockholders or directors, they were the only ones who became incorporators of FGT. They transferred the assets of TVI to FGT. The general rule is that obligations incurred by a corporation, acting through its directors, officers or employees, are its sole liabilities. However, the veil with which the law covers and isolates the corporation from its directors, officers or employees will be lifted when the corporation is used by any of them as a cloak or cover for [9] fraud or illegality or injustice. Here, the fraud was committed by petitioners to the prejudice of respondent bank. It bears emphasis that as reported by the sheriff, TVI is no longer doing business at its given address and its whereabouts cannot be established as yet. Both the trial court and the Court of Appeals thus concluded that petitioners succeeded to hide the chattels, preventing the sheriff to foreclose the mortgage. Obviously, they acted in bad faith to defraud respondent bank. In fine, we hold that the Appellate Court, in affirming the Decision of the trial court, correctly ruled that petitioners, not TVI, are the ones personally liable to respondent bank for the payment of the loan. WHEREFORE, the petition is DENIED. Costs against petitioners. SO ORDERED. Panganiban, (Chairman), Corona, CarpioMorales, and Garcia, JJ., concur. Republic of the Philippines SUPREME COURT\ Manila SECOND DIVISION G.R. No. 108670 September 21, 1994 LBC EXPRESS, INC., petitioner, vs. THE COURT OF APPEALS, ADOLFO M. CARLOTO, and RURAL BANK OF LABASON, INC., respondents. Emmanuel D. Agustin for petitioner. Bernardo P. Concha for private respondents. PUNO, J.: In this Petition for Review on Certiorari, petitioner LBC 1 questions the decision of respondent Court of Appeals

affirming the judgment of the Regional Trial Court of Dipolog City, Branch 8, awarding moral and exemplary damages, reimbursement of P32,000.00, and costs of suit; but deleting the amount of attorney's fees. Private respondent Adolfo Carloto, incumbent PresidentManager of private respondent Rural Bank of Labason, alleged that on November 12, 1984, he was in Cebu City transacting business with the Central Bank Regional Office. He was instructed to proceed to Manila on or before November 21, 1984 to follow-up the Rural Bank's plan of payment of rediscounting obligations with Central Bank's 2 main office in Manila. He then purchased a round trip plane ticket to Manila. He also phoned his sister Elsie Carloto-Concha to send him ONE THOUSAND PESOS (P1,000.00) for his pocket money in going to Manila and some rediscounting papers thru petitioner's LBC Office at 3 Dipolog City. On November 16, 1984, Mrs. Concha thru her clerk, Adelina Antigo consigned thru LBC Dipolog Branch the pertinent documents and the sum of ONE THOUSAND PESOS (P1,000.00) to respondent Carloto at No. 2 Greyhound Subdivision, Kinasangan, Pardo, Cebu City. This was evidenced by LBC Air Cargo, Inc., Cashpack Delivery Receipt No. 34805. On November 17, 1984, the documents arrived without the cashpack. Respondent Carloto made personal follow-ups on that same day, and also on November 19 and 20, 1984 at LBC's office in Cebu but petitioner failed to deliver to him the cashpack. Consequently, respondent Carloto said he was compelled to go to Dipolog City on November 24, 1984 to claim the money at LBC's office. His effort was once more in vain. On November 27, 1984, he went back to Cebu City at LBC's office. He was, however, advised that the money has been returned to LBC's office in Dipolog City upon shipper's request. Again, he demanded for the ONE THOUSAND PESOS (P1,000.00) and refund of FORTY-NINE PESOS (P49.00) LBC revenue charges. He received the money only on December 15, 1984 less the revenue charges. Respondent Carloto claimed that because of the delay in the transmittal of the cashpack, he failed to submit the rediscounting documents to Central Bank on time. As a consequence, his rural bank was made to pay the Central Bank THIRTY-TWO THOUSAND PESOS (P32,000.00) as 4 penalty interest. He allegedly suffered embarrassment and humiliation.

Petitioner LBC, on the other hand, alleged that the cashpack was forwarded via PAL to LBC Cebu City branch 5 on November 22, 1984. On the same day, it was delivered at respondent Carloto's residence at No. 2 Greyhound Subdivision, Kinasangan, Pardo, Cebu City. However, he was not around to receive it. The delivery man served instead a claim notice to insure he would personally receive the money. This was annotated on Cashpack Delivery Receipt No. 342805. Notwithstanding the said notice, respondent Carloto did not claim the cashpack at LBC Cebu. On November 23, 1984, it was returned to the shipper, Elsie Carloto-Concha at Dipolog City. Claiming that petitioner LBC wantonly and recklessly disregarded its obligation, respondent Carloto instituted an action for Damages Arising from Non-performance of Obligation docketed as Civil Case No. 3679 before the Regional Trial Court of Dipolog City on January 4, 1985. On June 25, 1988, an amended complaint was filed where respondent rural bank joined as one of the plaintiffs and prayed for the reimbursement of THIRTY-TWO THOUSAND PESOS (P32,000.00). After hearing, the trial court rendered its decision, the dispositive portion of which reads: WHEREFORE, judgment is hereby rendered: 1. Ordering the defendant LBC Air Cargo, Inc. to pay unto plaintiff Adolfo M. Carloto and Rural Bank of Labason, Inc., moral damages in the amount of P10,000.00; exemplary damages in the amount of P5,000.00; attorney's fees in the amount of P3,000.00 and litigation expenses of P1,000.00; 2. Sentencing defendant LBC Air Cargo, Inc., to reimburse plaintiff Rural Bank of Labason, Inc. the sum of P32,000.00 which the latter paid as penalty interest to the Central Bank of the Philippines as penalty interest for failure to rediscount its due bills on time arising from the defendant's failure to deliver the cashpack, with legal interest computed from the date of filing of this case; and 3. Ordering defendant to pay the costs of these proceedings. 6 SO ORDERED. On appeal, respondent court modified the judgment by deleting the award of attorney's fees. Petitioner's Motion for Reconsideration was denied in a Resolution dated January 11, 1993. Hence, this petition raising the following questions, to wit: 1. Whether or not respondent Rural Bank of Labason Inc., being an artificial person should be awarded moral damages.

2. Whether or not the award of THIRTY-TWO THOUSAND PESOS (P32,000.00) was made with grave abuse of discretion. 3. Whether or not the respondent Court of Appeals gravely abused its discretion in affirming the trial court's decision ordering petitioner LBC to pay moral and exemplary damages despite performance of its obligation. We find merit in the petition. The respondent court erred in awarding moral damages to the Rural Bank of Labason, Inc., an artificial person. Moral damages are granted in recompense for physical suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral shock, 7 social humiliation, and similar injury. A corporation, being an artificial person and having existence only in legal contemplation, has no feelings, no emotions, no senses; therefore, it cannot experience physical suffering and 8 mental anguish. Mental suffering can be experienced only by one having a nervous system and it flows from real ills, 9 sorrows, and griefs of life all of which cannot be suffered by respondent bank as an artificial person. We can neither sustain the award of moral damages in favor of the private respondents. The right to recover moral damages is based on equity. Moral damages are recoverable only if the case falls under Article 2219 of the 10 Civil Code in relation to Article 21. Part of conventional wisdom is that he who comes to court to demand equity, must come with clean hands. In the case at bench, respondent Carloto is not without fault. He was fully aware that his rural bank's obligation would mature on November 21, 1984 and his bank has set 11 aside cash for these bills payable. He was all set to go to Manila to settle this obligation. He has received the documents necessary for the approval of their rediscounting application with the Central Bank. He has also received the plane ticket to go to Manila. Nevertheless, he did not immediately proceed to Manila but instead tarried for days allegedly claiming his ONE THOUSAND PESOS (P1,000.00) pocket money. Due to his delayed trip, he failed to submit the rediscounting papers to the Central Bank on time and his bank was penalized THIRTY-TWO THOUSAND PESOS (P32,000.00) for failure to pay its obligation on its due date. The undue importance given by respondent Carloto to his ONE THOUSAND PESOS (P1,000.00) pocket money is inexplicable for it was not indispensable for him to follow up his bank's rediscounting application with Central Bank. According to said respondent, he needed the money to "invite people for 12 a snack or dinner." The attitude of said respondent

speaks ill of his ways of business dealings and cannot be countenanced by this Court. Verily, it will be revolting to our sense of ethics to use it as basis for awarding damages in favor of private respondent Carloto and the Rural Bank of Labason, Inc. We also hold that respondents failed to show that petitioner LBC's late delivery of the cashpack was motivated by personal malice or bad faith, whether intentional or thru gross negligence. In fact, it was proved during the trial that the cashpack was consigned on November 16, 1984, a Friday. It was sent to Cebu on November 19, 1984, the next business day. Considering this circumstance, petitioner cannot be charged with gross neglect of duty. Bad faith under the law can not be presumed; it must be 13 established by clearer and convincing evidence. Again, the unbroken jurisprudence is that in breach of contract cases where the defendant is not shown to have acted fraudulently or in bad faith, liability for damages is limited to the natural and probable consequences of the branch of the obligation which the parties had foreseen or could reasonable have foreseen. The damages, however, will not 14 include liability for moral damages. Prescinding from these premises, the award of exemplary damages made by the respondent court would have no legal leg to support itself. Under Article 2232 of the Civil Code, in a contractual or quasi-contractual relationship, exemplary damages may be awarded only if the defendant had acted in "a wanton, fraudulent, reckless, oppressive, or malevolent manner." The established facts of not so warrant the characterization of the action of petitioner LBC. IN VIEW WHEREOF, the Decision of the respondent court dated September 30, 1992 is REVERSED and SET ASIDE; and the Complaint in Civil Case No. 3679 is ordered DISMISSED. No costs. SO ORDERED. Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. L-78412 September 26, 1989 TRADERS ROYAL BANK, petitioner, vs. THE HONORABLE COURT OF APPEALS, HON. BALTAZAR M. DIZON, Presiding Judge, Regional Trial Court, Branch 113, Pasay City and ALFREDO CHING, respondents. San Juan, Africa, Gonzalez and San Agustin for petitioner. Balgos and Perez for respondents.

GRINO-AQUINO, J.: This petition for certiorari assails the Court of Appeals' decision dated April 29, 1987 in CA-G.R. SP No. 03593, entitled "Alfredo Ching vs. Hon. Baltazar M. Dizon and Traders Royal Bank" nullifying the Regional Trial Court's orders dated August 15,1983 and May 24,1984 and prohibiting it from further proceeding in Civil Case No. 1028-P. On March 30,1982, the Philippine Blooming Mills, Inc. (PBM) and Alfredo Ching jointly submitted to the Securities and Exchange Commission a petition for suspension of payments (SEC No. 2250) where Alfredo Ching was joined as co-petitioner because under the law, he was allegedly entitled, as surety, to avail of the defenses of PBM and he was expected to raise most of the stockholders' equity of Pl00 million being required under the plan for the rehabilitation of PBM. Traders Royal Bank was included among PBM's creditors named in Schedule A accompanying PBM's petition for suspension of payments. On May 13, 1983, the petitioner bank filed Civil Case No. 1028-P in the Regional Trial Court, Branch CXIII in Pasay City, against PBM and Alfredo Ching, to collect P22,227,794.05 exclusive of interests, penalties and other bank charges representing PBM's outstanding obligation to the bank. Alfredo Ching, a stockholder of PBM, was impleaded as co-defendant for having signed as a surety for PBM's obligations to the extent of ten million pesos (Pl0,000,000) under a Deed of Suretyship dated July 21, 1977. In its en banc decision in SEC-EB No. 018 (Chung Ka Bio, et al. vs. Hon. Antonio R. Manabat, et al.), the SEC declared that it had assumed jurisdiction over petitioner Alfredo Ching pursuant to Section 6, Rule 3 of the new Rules of Procedure of the SEC providing that "parties in interest without whom no final determination can be had of an action shall be joined either as complainant, petitioner or respondent" to prevent multiplicity of suits. On July 9, 1982, the SEC issued an Order placing PBM's business, including its assets and liabilities, under rehabilitation receivership, and ordered that "all actions for claims listed in Schedule A of the petition pending before any court or tribunal are hereby suspended in whatever stage the same may be, until further orders from the Commission" (p. 22, Rollo). As directed by the SEC, said order was published once a week for three consecutive weeks in the Bulletin Today, Philippine Daily Express and Times Journal at the expense of PBM and Alfredo Ching. PBM and Ching jointly filed a motion to dismiss Civil Case No. 1028-P in the RTC, Pasay City, invoking the pendency

in the SEC of PBM's application for suspension of payments (which Ching co-signed) and over which the SEC had already assumed jurisdiction. Before the motion to dismiss could be resolved, the court dropped PBM from the complaint, on motion of the plaintiff bank, for the reason that the SEC had already placed PBM under rehabilitation receivership. On August 15, 1983, the trial court denied Ching's motion to dismiss the complaint against himself. The court pointed out that "P.D. 1758 is only concerned with the activities of corporations, partnerships and associations. Never was it intended to regulate and/or control activities of individuals" (p.11, Rollo). Ching's motion for reconsideration of that order was denied on May 24,1984. Respondent Judge argued that under P ' D. 902-A, as amended, the SEC may not validly acquire jurisdiction over an individual, like Ching (p. 62, Rollo). Ching filed a petition for certiorari and prohibition in the Court of Appeals (CA-G.R. SP No. 03593) to annul the orders of respondent Judge and to prohibit him from further proceeding in the civil case. The main issue raised in the petition was whether the court a quo could acquire jurisdiction over Ching in his personal and individual capacity as a surety of PBM in the collection suit filed by the bank, despite the fact that PBM's obligation to the bank had been placed under receivership by the SEC. On April 29, 1987, the Court of Appeals granted the writs prayed for. It nullified the questioned orders of respondent Judge and prohibited him from further proceeding in Civil Case No. 1028-P, except to enter an order dismissing the case. The pertinent ruling of the Court of Appeals reads: In sum, since the SEC had assumed jurisdiction over petitioner in SEC Case No. 2250 and reiterating the propriety of such assumption in SEC-EB No. 018; and since under PD 902-A, as amended by PD 1758, ... upon appointment of a ... rehabilitation receiver... pursuant to this Decree, all actions for claims against corporation ... under management or receivership pending before any court, tribunal, board or body shall be suspended accordingly ... respondent judge clearly acted without jurisdiction in taking cognizance of the civil case in the court a quo brought by respondent bank to enforce the surety agreement against petitioner for the purpose of collecting payment of PBM's outstanding obligations. Respondent bank should have questioned the SEC's assumption of jurisdiction over petitioner in an appellate forum and not in the court a quo, a tribunal with which the SEC enjoys a co-equal and coordinate rank. (p. 27, Rollo.)

The Bank assails that decision in this petition for review alleging that the appellate court erred; 1. in holding that jurisdiction over respondent Alfredo Ching was assumed by the SEC because he was a co-signer or surety of PBM and that the lower court may not assume jurisdiction over him so as to avoid multiplicity of suits; and 2. in holding that the jurisdiction assumed by the SEC over Ching was to the exclusion of courts or tribunals of coordinate rank. The petition for review is meritorious. Although Ching was impleaded in SEC Case No. 2250, as a co-petitioner of PBM, the SEC could not assume jurisdiction over his person and properties. The Securities and Exchange Commission was empowered, as rehabilitation receiver, to take custody and control of the assets and properties of PBM only, for the SEC has jurisdiction over corporations only not over private individuals, except stockholders in an intra-corporate dispute (Sec. 5, P.D. 902-A and Sec. 2 of P.D. 1758). Being a nominal party in SEC Case No. 2250, Ching's properties were not included in the rehabilitation receivership that the SEC constituted to take custody of PBM's assets. Therefore, the petitioner bank was not barred from filing a suit against Ching, as a surety for PBM. An anomalous situation would arise if individual sureties for debtor corporations may escape liability by simply co- filing with the corporation a petition for suspension of payments in the SEC whose jurisdiction is limited only to corporations and their corporate assets. The term "parties-in-interest" in Section 6, Rule 3 of the SEC's New Rules of Procedure contemplates only private individuals sued or suing as stockholders, directors, or officers of a corporation. Ching can be sued separately to enforce his liability as surety for PBM, as expressly provided by Article 1216 of the New Civil Code: ART. 1216. The creditor may proceed against any of the solidary debtors or all of them simultaneously. The demand made against one of them shall not be an obstacle to those which may subsequently be directed against the others, as long as the debt has not been fully collected. It is elementary that a corporation has a personality distinct and separate from its individual stockholders or members. Being an officer or stockholder of a corporation does not make one's property the property also of the corporation, for they are separate entities (Adelio Cruz vs. Quiterio Dalisay, 152 SCRA 482). Ching's act of joining as a co-petitioner with PBM in SEC Case No. 2250 did not vest in the SEC jurisdiction over his

person or property, for jurisdiction does not depend on the consent or acts of the parties but upon express provision of law (Tolentino vs. Social Security System, 138 SCRA 428; Lee vs. Municipal Trial Court of Legaspi City, Br. I, 145 SCRA 408). WHEREFORE, the petition for review is granted. The decision of the Court of Appeals in CA-G.R. SP No. 03593 is set aside. Respondent Judge of the Regional Trial Court in Pasay City is ordered to reinstate Civil Case No. 1028-P and to proceed therein against the private respondent Alfredo Ching. Costs against the private respondent. SO ORDERED. Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. 75885 May 27, 1987 BATAAN SHIPYARD & ENGINEERING CO., INC. (BASECO), petitioner, vs. PRESIDENTIAL COMMISSION ON GOOD GOVERNMENT, CHAIRMAN JOVITO SALONGA, COMMISSIONER MARY CONCEPCION BAUTISTA, COMMISSIONER 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. 2 10. Schedule of company investments and placements. 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 3 Finance, 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 4 to monthly billing as was originally agreed upon." 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 5 condition suitable for port operations." 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 6 at * * (Deltamarine's) own risk." 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 7 September 17, 1986. 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 8 guidelines and safeguards including audit and verification. 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 9 their affiliated companies." 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 Court1) declare unconstitutional and void Executive Orders Numbered 1 and 2; 2) annul the sequestration order dated April- 14, 1986, and all other orders subsequently issued and acts done on the basis thereof, inclusive of the takeover order of July 14, 1986 and the termination of the services of the BASECO executives. 11 a. Re Executive Orders No. 1 and 2, and the Sequestration and Takeover Orders While BASECO concedes that "sequestration without resorting to judicial action, might be made within the context of Executive Orders Nos. 1 and 2 before March 25, 1986 when the Freedom Constitution was promulgated, under the principle that the law promulgated by the ruler under a revolutionary regime is the law of the land, it ceased to be acceptable when the same ruler opted to promulgate the Freedom Constitution on March 25, 1986 wherein under Section I of the same, Article IV (Bill of Rights) of the 1973 Constitution was adopted providing, among others, that "No person shall be deprived of life, liberty and property without due process of law." (Const., Art. I V, Sec. 1)." 12

It declares that its objection to the constitutionality of the Executive Orders "as well as the Sequestration Order * * and Takeover Order * * issued purportedly under the authority of said Executive Orders, rests on four fundamental considerations: First, no notice and hearing 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 20 7) planning to elect its own Board of Directors; 8) allowing willingly or unwillingly its personnel to take, steal, carry away from petitioner's premises at Mariveles * * 21 rolls of cable wires, worth P600,000.00 on May 11, 1986; 9) allowing "indiscriminate diggings" at Engineer Island to 22 retrieve gold bars supposed to have been buried therein. 3. Doubts, Misconceptions regarding Sequestration, Freeze and Takeover Orders Many misconceptions and much doubt about the matter of sequestration, takeover and freeze orders have been engendered by misapprehension, or incomplete comprehension if not indeed downright ignorance of the law governing these remedies. It is needful that these misconceptions and doubts be dispelled so that uninformed and useless debates about them may be avoided, and arguments tainted b sophistry or intellectual dishonesty be quickly exposed and discarded. Towards this end, this opinion will essay an exposition of the law on the matter. In the process many of the objections raised by BASECO will be dealt with. 4. The Governing Law a. Proclamation No. 3 The impugned executive orders are avowedly meant to carry out the explicit command of the Provisional 23 Constitution, ordained by Proclamation No. 3, 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 24 accounts." 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 25 close associates both here and abroad." Upon these premises, the Presidential Commission on Good 26 Government was created, "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 thetakeover 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 27 powers, authority, influence, connections or relationship. 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 illgotten 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 28 task under this order. 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 29 for contempt. It was given power also to promulgate such rules and regulations as may be necessary to carry out the 30 purposes of * * (its creation). 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 31 world." Upon these premises, the President1) froze "all assets and properties in the Philippines in which former President Marcos and/or his wife, Mrs. Imelda Romualdez Marcos, their close relatives, subordinates, business associates, dummies, agents, or nominees have any interest or participation; 2) prohibited former President Ferdinand Marcos and/or his wife * *, their close relatives, subordinates, business associates, duties, agents, or nominees from transferring, conveying, encumbering, concealing or dissipating said assets or properties in the Philippines and abroad, pending the outcome of appropriate proceedings in the Philippines to determine whether any such assets or properties were acquired by them through or as a result of improper or illegal use of or the conversion of funds belonging to the Government of the Philippines or any of its branches, instrumentalities, enterprises, banks or financial institutions, or by taking undue advantage of their official position, authority, relationship, connection or influence to unjustly enrich themselves at the expense and to the grave damage and prejudice of the Filipino people and the Republic of the Philippines; 3) prohibited "any person from transferring, conveying, encumbering or otherwise depleting or concealing such assets and properties or from assisting or taking part in their transfer, encumbrance, concealment or dissipation under pain of such penalties as are prescribed by law;" and 4) required "all persons in the Philippines holding such assets or properties, whether located in the Philippines or abroad, in their names as nominees, agents or trustees, to make full disclosure of the same to the Commission on Good Government within thirty (30) days from publication 32 of * (the) Executive Order, * *. d. Executive Order No. 14 A third executive order is relevant: Executive Order No. 33 14, 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 34 findings." All such cases, whether civil or criminal, are to be filed "with the Sandiganbayan which shall have 35 exclusive and original jurisdiction thereof." 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 36 strictly applied to* * (said)civil cases." 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 37 leaders and supporters of the previous regime"; 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 38 powers, authority, influence, Connections or relationship; 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 39 Philippines"; 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 40 world;" 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 41 Marcos. 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 42 backbone of every progressive and happy country. 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 43 or persons close to former President Marcos." 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 willgotten," 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 44 the State. And this, too, is the sense in which the term is 45 commonly understood in other jurisdictions. 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 46 dissipation." 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 47 sense an involuntary depositary thereof. 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 48 dissipation of the enterprises." 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 ongoing 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 49 authorities." 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 50 BASECO 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 51 remedies. Section 26 of its Transitory Provisions, 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 thaneighteen 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 52 herein provided. f. Kinship to Attachment Receivership As thus described, sequestration, freezing and provisional takeover are akin to the provisional remedy of preliminary 53 attachment, or receivership. 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 54 intentionally or otherwise, pending the action. 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 55 possession over it. All these remedies sequestration, freezing, provisional, takeover, attachment and receivership are provisional, temporary, designed forparticular 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 56 property of a delinquent taxpayer. 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." 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 replevinsuits, sequestration and provisional takeover 58 writs may issue ex parte. 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 59 of the people;" 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 selfevident, that "any transfer, disposition, concealment or disappearance of said assets and properties would frustrate, obstruct or hamper the efforts of the Government" 60 at the just recovery thereof. 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 61 nullification. 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 62 the requirements of fairness and due process." 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 63 authorities." 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 64 warranted. A similar requirement is now found in Section 26, Art. XVIII of the 1987 Constitution, which requires that a

57

"sequestration or freeze order shall be issued only upon 65 showing of a prima facie case." 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 66 capricious, are condemned and struck down. 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, 67 Section 26, Article XVIII of the 1987 Constitution 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 68 and regulating the use of liberty and property," and as "the most essential, insistent and illimitable of powers * * in the promotion of general welfare and the public 69 interest," and said to be co-extensive with self-protection and * * not inaptly termed (also) the'law of overruling 70 necessity." " 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 evidenceestablishing 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 71 this case, the Sandiganbayan. There can therefore be no serious regard accorded to the accusation, leveled by 72 BASECO, 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 73 is located at Mariveles Bataan." 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 74 P3,035,000.00 has been paid by the incorporators. 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 75 Book. Their names and the number of shares respectively held by them are as follows: 1. Jose A. Rojas 2. Severino G. de la Cruz 3. Emilio T. Yap 4. Jose Fernandez 5. Jose Francisco 6. Manuel S. Mendoza 7. Anthony P. Lee 8. Hilario M. Ruiz 9. Constante L. Farias 10. Fidelity Management, Inc. 11. Trident Management 12. United Phil. Lines 13. Renato M. Tanseco 1,248 shares 1,248 shares 2,508 shares 1,248 shares 128 shares 96 shares 1,248 shares 32 shares 8 shares 65,882 shares 7,412 shares 1,240 shares 8 shares

14. Fidel Ventura 15. Metro Bay Drydock 16. Manuel Jacela 17. Jonathan G. Lu 18. Jose J. Tanchanco 19. Dioscoro Papa 20. Edward T. Marcelo TOTAL

8 shares 136,370 shares 1 share 1 share 1 share 128 shares 4 shares 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 semiannually, 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 76 of turnover of the shipyard to BASECO. 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