JG Summit Holdings v. CA, Sept. 24, 2003, G.R. No. 124293

JG Summit Holdings INC. vs. Court of Appeals | G.R. No. 124293 January 31, 2005

Facts:  The National Investment and Development Corporation (NIDC), a government corporation, entered into a Joint Venture Agreement (JVA) with Kawasaki Heavy Industries, Ltd. of Kobe, Japan (KAWASAKI) for the construction, operation and management of the Subic National Shipyard Inc., (SNS) which subsequently became the Philippine Shipyard and Engineering Corporation (PHILSECO).

Under the JVA, the NDC and KAWASAKI will contribute P330M for the capitalization of PHILSECO in the proportion of 60%-40% respectively.  One of its salient features is the grant to the parties of the right of first refusal should either of them decide to sell, assign or transfer its interest in the joint venture.

NIDC transferred all its rights, title and interest in PHILSECO to the Philippine National Bank (PNB). Such interests were subsequently transferred to the National Government pursuant to an Administrative Order.

When the former President Aquino issued Proclamation No. 50 establishing the Committee on Privatization (COP) and the Asset Privatization Trust (APT) to take title to, and possession of, conserve, manage and dispose of non-performing assets of the National Government, a trust agreement was entered into between the National Government and the APT wherein the latter was named the trustee of the National Government’s share in PHILSECO.

In the interest of the national economy and the government, the COP and the APT deemed it best to sell the National Government’s share in PHILSECO to private entities.  After a series of negotiations between the APT and KAWASAKI , they agreed that the latter’s right of first refusal under the JVA be “exchanged” for the right to top by 5%, the highest bid for the said shares.  They further agreed that KAWASAKI woul.d be entitled to name a company in which it was a stockholder, which could exercise the right to top.  KAWASAKI then informed APT that Philyards Holdings, Inc. (PHI) would exercise its right to top.

At the public bidding, petitioner J.G. Summit Holdings Inc. submitted a bid of Two Billion and Thirty Million Pesos (Php2,030,000,000.00) with an acknowledgement of KAWASAKI/PHILYARDS right to top.

As petitioner was declared the highest bidder, the COP approved the sale “subject to the right of Kawasaki Heavy Industries, Inc. / PHILYARDS Holdings Inc. to top JG’s bid by 5% as specified in the bidding rules.”

On the other hand, the respondent by virtue of right to top by 5%, the highest bid for the said shares timely exercised the same.

Petitioners, in their motion for reconsideration, raised, inter alia, the issue on the maintenance of the 60%-40% relationship between the NIDC and KAWASAKI arising from the Constitution because PHILSECO is a landholding corporation and need not be a public utility to be bound by the 60%-40% constitutional limitation.

ISSUE: Whether under the 1977 Joint Venture Agreement, KAWASAKI can purchase only a maximum of 40% of PHILSECO’s total capitalization.

The right of first refusal is meant to protect the original or remaining joint venturer(s) or shareholder(s) from the entry of third persons who are not acceptable to it as co-venturer(s) or co-shareholder(s). The joint venture between the Philippine Government and KAWASAKI is in the nature of a partnership³⁶ which, unlike an ordinary corporation, is based on delectus personae.³⁷ No one can become a member of the partnership association without the consent of all the other associates. The right of first refusal thus ensures that the parties are given control over who may become a new partner in substitution of or in addition to the original partners. Should the selling partner decide to dispose all its shares, the non-selling partner may acquire all these shares and terminate the partnership. No person or corporation can be compelled to remain or to continue the partnership. Of course, this presupposes that there are no other restrictions in the maximum allowable share that the non-selling partner may acquire such as the constitutional restriction on foreign ownership in public utility. The theory that KAWASAKI can acquire, as a maximum, only 40% of PHILSECO’s shares is correct only if a shipyard is a public utility. In such instance, the non-selling partner who is an alien can acquire only a maximum of 40% of the total capitalization of a public utility despite the grant of first refusal. The partners cannot, by mere agreement, avoid the constitutional proscription. But as afore-discussed, PHILSECO is not a public utility and no other restriction is present that would limit the right of KAWASAKI to purchase the Government’s share to 40% of Philseco’s total capitalization.

Furthermore, the phrase “under the same terms” in section 1.4 cannot be given an interpretation that would limit the right of KAWASAKI to purchase PHILSECO shares only to the extent of its original proportionate contribution of 40% to the total capitalization of the PHILSECO. Taken together with the whole of section 1.4, the phrase “under the same terms” means that a partner to the joint venture that decides to sell its shares to a third party shall make a similar offer to the non-selling partner. The selling partner cannot make a different or a more onerous offer to the non-selling partner.

The exercise of first refusal presupposes that the non-selling partner is aware of the terms of the conditions attendant to the sale for it to have a guided choice. While the right of first refusal protects the non-selling partner from the entry of third persons, it cannot also deprive the other partner the right to sell its shares to third persons if, under the same offer, it does not buy the shares.

Apart from the right of first refusal, the parties also have preemptive rights under section 1.5 in the unissued shares of Philseco. Unlike the former, this situation does not contemplate transfer of a partner’s shares to third parties but the issuance of new Philseco shares. The grant of preemptive rights preserves the proportionate shares of the original partners so as not to dilute their respective interests with the issuance of the new shares. Unlike the right of first refusal, a preemptive right gives a partner a preferential right over the newly issued shares only to the extent that it retains its original proportionate share in the joint venture.

The case at bar does not concern the issuance of new shares but the transfer of a partner’s share in the joint venture. Verily, the operative protective mechanism is the right of first refusal which does not impose any limitation in the maximum shares that the non-selling partner may acquire.

RULING: The court upheld the validity of the mutual rights of first refusal under the JVA between KAWASAKI and NIDC.

The right of first refusal is a property right of PHILSECO shareholders, KAWASAKI and NIDC, under the terms of their JVA.  This right allows them to purchase the shares of their co-shareholder before they are offered to a third party.  The agreement of co-shareholders to mutually grant this right to each other, by itself, does not constitute a violation of the provisions of the Constitution limiting land ownership to Filipinos and Filipino corporations.  As PHILYARDS correctly puts it, if PHILSECO still owns the land, the right of first refusal can be validly assigned to a qualified Filipino entity in order to maintain the 60%-40% ration.  This transfer by itself, does not amount to a violation of the Anti-Dummy Laws, absent proof of any fraudulent intent.  The transfer could be made either to a nominee or such other party which the holder of the right of first refusal feels it can comfortably do business with.

Alternatively, PHILSECO may divest of its landholdings, in which case KAWASAKI, in exercising its right of first refusal, can exceed 40% of PHILSECO’s equity.  In fact, in can even be said that if the foreign shareholdings of a landholding corporation exeeds 40%, it is not the foreign stockholders’ ownership of the shares which is adversely affected but the capacity of the corporation to won land—that is, the corporation becomes disqualified to own land.

This finds support under the basic corporate law principle that the corporation and its stockholders are separate judicial entities.  In this vein, the right of first refusal over shares pertains to the shareholders whereas the capacity to own land pertains to the corporation. Hence, the fact that PHILSECO owns land cannot deprive stockholders of their right of first refusal. No law disqualifies a person from purchasing shares in a landholding corporation even if the latter will exceed the allowed foreign equity, what the law disqualifies is the corporation from owning land.

Bardillon v Barangau Masili, G.R. No. 146886, April 30, 2003

Bardillon v Barangau Masili  GR. 146886 April 30, 2003

Nature: Petition for Review. An expropriation suit is incapable of pecuniary estimation. Accordingly, it falls within the jurisdiction of regional trial courts, regardless of the value of the subject property.

Keywords: Jurisdiction, Expropriation, barangay hall, Barangay Masili

PANGANIBAN J.

Facts:

Two lots measuring 144 square meters was to be expropriated by Brgy. Masili for the purpose of constructing a barangay hall.  However, the barangay and the lot owners could not agree with the purchase price of Php 200,000.The first complaint was filed before the MTC.  Whereas, the second complaint was filed before the RTC.The MTC dismissed the complaint for lack of interest of the petitioner lot owners. The RTC stated that the MTC has no jurisdiction over the case.  It also ruled in favor of Brgy Masili.

Issues:

1.            WON the MTC has jurisdiction over the case of expropriation;

2.            WON the State is barred from expropriating the property by reason of res judicata; and

3.            Legality of entry into the premises subject of expropriation

Ratio:a

Ruling:

The SC held that the expropriation proceedings is within the jurisdiction of the RTC because it is incapable of pecuniary estimation. 

As discussed:

“xx An expropriation suit does not involve the recovery of a sum of money.  Rather, it deals with the exercise by the government of its authority and right to take property for public use. As such, it is incapable of pecuniary estimation and should be filed with the regional trial courts. xx”

As regards to the second issue, the principle of res judicata does not apply against the inherent powers of the State.  

The SC has this to say:

“xx Res judicata literally means a matter adjudged, judicially acted upon or decided, or settled by judgment. It provides that a final judgment on the merits rendered by a court of competent jurisdiction is conclusive as to the rights of the parties and their privies; and constitutes an absolute bar to subsequent actions involving the same claim, demand or cause of action.

The following are the requisites of res judicata: (1) the former judgment must be final; (2) the court that rendered it had jurisdiction over the subject matter and the parties; (3) it is a judgment on the merits; and (4) there is -- between the first and the second actions -- an identity of parties, subject matter and cause of action.

Since the MTC had no jurisdiction over expropriation proceedings, the doctrine of res judicata finds no application even if the Order of dismissal may have been an adjudication on the merits. xx”

The entry in the premises of the expropriated property was held to be justified by the SC.  It ruled that:

“xx The requirements for the issuance of a writ of possession in an expropriation case are expressly and specifically governed by Section 2 of Rule 67 of the 1997 Rules of Civil Procedure.  On the part of local government units, expropriation is also governed by Section 19 of the Local Government Code. 

Accordingly, in expropriation proceedings, the requisites for authorizing immediate entry are as follows: (1) the filing of a complaint for expropriation sufficient in form and substance; and (2) the deposit of the amount equivalent to 15 percent of the fair market value of the property to be expropriated based on its current tax declaration.

In the instant case, the issuance of the Writ of Possession in favor of respondent after it had filed the Complaint for expropriation and deposited the amount required was proper, because it had complied with the foregoing requisites.

The issue of the necessity of the expropriation is a matter properly addressed to the RTC in the course of the expropriation proceedings.  If petitioner objects to the necessity of the takeover of her property, she should say so in her Answer to the Complaint. The RTC has the power to inquire into the legality of the exercise of the right of eminent domain and to determine whether there is a genuine necessity for it. xx”

People vs. Tee, G.R. No. 140546-47, Jan. 20, 2003

People vs. Tee, G.R. No. 140546-47, Jan. 20, 2003

Nature: Automatic Review for consolidated judgment of RTC

  

Keywords: Requisites of a Valid Warrant, Section 8, Article II of RA 6425 as amended by Section 13 of RA 7659 – An Act to Impose the Death Penalty on Certain Heinous Crimes, other Special Penal Laws, and for other purposes

Summary: RTC – denied the Motion to Quash the search warrant; SC – judgment of RTC affirmed with modification of penalties

Facts:

Appellant is a Chinese national in his forties, a businessman, and a resident of Baguio City. A raid conducted by operatives of the National Bureau of Investigation (NBI) and Philippine National Police Narcotics Command (PNP NARCOM) at premises allegedly leased by appellant and at his residence yielded huge quantities of marijuana.

Appellant moved to quash the search warrant on the ground that it was too general and hence, void for vagueness, and that the NBI had not complied with the requirements for the issuance of a valid search warrant. The pendency of said motion, however, did not stop the filing of the appropriate charges against appellant. In an information dated July 24, 1998, the City Prosecutor of Baguio City charged Modesto Tee, alias “Estoy Tee,” with illegal possession of marijuana.

Issue:

Whether or not the search warrant is valid.

Ratio:

Yes. Judgment affirmed with modification of penalties.

Ruling:

SC held that the appellant’s contention has no leg to stand on. The constitutional requirement of reasonable particularity of description of the things to be seized is primarily meant to enable the law enforcers serving the warrant to: (1) readily identify the properties to be seized and thus prevent them from seizing the wrong items; and (2) leave said peace officers with no discretion regarding the articles to be seized and thus prevent unreasonable searches and seizures. What the Constitution seeks to avoid are search warrants of broad or general characterization or sweeping descriptions, which will authorize police officers to undertake a fishing expedition to seize and confiscate any and all kinds of evidence or articles relating to an offense. However, it is not required that technical precision of description be required, particularly, where by the nature of the goods to be seized, their description must be rather general, since the requirement of a technical description would mean that no warrant could issue.

The search warrant in the present case, given its nearly similar wording, undetermined amount of marijuana or Indian hemp, in our view, has satisfied the Constitutions requirements on particularity of description. The description therein is: (1) as specific as the circumstances will ordinarily allow; (2) expresses a conclusion of fact not of law by which the peace officers may be guided in making the search and seizure; and (3) limits the things to be seized to those which bear direct relation to the offense for which the warrant is being issued.^[40] Said warrant imposes a meaningful restriction upon the objects to be seized by the officers serving the warrant. Thus, it prevents exploratory searches, which might be violative of the Bill of Rights.

WHEREFORE, the decision of the Regional Trial Court of Baguio City, Branch 6, in Criminal Case No. 15800-R, convicting appellant MODESTO TEE alias ESTOY TEE of violation of Section 8 of Republic Act No. 6425, as amended, is AFFIRMED with the MODIFICATION that appellant is hereby sentenced to suffer the penalty of reclusion perpetua. The fine of ONE MILLION (P1,000,000.00) PESOS imposed on him is sustained. Appellant is likewise directed to pay the costs of suit. SO ORDERED.

Doctrine:

The void-for-vagueness doctrine holds that a law is facially invalid if men of common intelligence must necessarily guess at its meaning and differ as to its application. However, this Court has imposed certain limitations by which a criminal statute, as in the challenged law at bar, may be scrutinized. This Court has declared that facial invalidation or an "on-its-face" invalidation of criminal statutes is not appropriate.

Garcia vs. People of the Philippines, G.R. No. 144785, Sept. 11, 2003

Garcia vs. People of the Philippines, G.R. No. 144785, Sept. 11, 2003

Nature:  Appeal from the decision of the Court of Appeals affirming in toto the decision of the Regional Trial Court, which found petitioner Yolanda Garcia guilty beyond reasonable doubt of the crime of estafa, and sentenced her to suffer the penalty of imprisonment ranging from six (6) years and one (1) day to ten (10) years and one (1) day of prision mayor, to indemnify the complainant in the amount of P87,000.00, and to pay the costs.

Keywords:  Estafa, vegetable dealer, bouncing cheques,

Summary:  For more than a year, petitioner had been buying assorted vegetables from Dolores Apolonio in Divisoria, Manila. Petitioner always paid in cash. However, in May 1995, petitioner thrice bought vegetables from Apolonio using three checks: one postdated June 20, 1995 for P28,000.00, drawn by her husband, Manuel Garcia; the second postdated July 25, 1995 for P34,000.00, drawn by her daughter Gigi Garcia; and the third postdated August 15, 1995 for P25,000.00, drawn by her nephew Jose Nadongga Jr. When the three checks were presented for payment, they were all dishonored for insufficiency of funds.

YNARES-SANTIAGO, J.

Facts:  That on or about and during the period comprised between June 20, 1995, and August 15, 1995, inclusive, in the City of Manila, Philippines, the said accused did then and there willfully, unlawfully and feloniously defraud one DOLORES S. APOLONIO in the following manner, to wit: the said accused by means of false manifestations and fraudulent representations which she made to said DOLORES S. APOLONIO to the effect that accused has three (3) checks which according to her have sufficient funds and if encashed, the same will not be dishonored; and by means of other deceits of similar import, induced and succeeded in inducing the said DOLORES S. APOLONIO to accept the following checks:

Name of Bank Check No. Amount Date Payable to

Phil Natl Bank 046884 P28,000.00 6-20-95 Cash

-do- 047416 34,000.00 8-15-95 -do-

Pilipinas Bank 60042087 25,000.00 7-25-95 Garcia

Vegetable Dealer

as payments of assorted vegetables which accused purchased and received from said DOLORES S. APOLONIO in the total amount of P87,000.00, said accused knowing fully well that the said manifestations and representations were all false and untrue as said checks when presented to the bank for payment were all dishonored for the reason Drawn Against Insufficient Funds, and were made solely for the purpose of obtaining, as in fact she did obtain assorted vegetables in the amount of P87,000.00; which once in her possession and with intent to defraud, she willfully, unlawfully and feloniously misappropriated, misapplied and converted the said assorted vegetables or the value thereof to her own personal use and benefit, to the damage and prejudice of the said owner in the aforesaid amount of P87,000.00, Philippine Currency.

Petitioner pleaded not guilty.

Issue:  WON Petitioner’s constitutional right to be informed of the nature and cause of the accusation against her was violated because, although she was charged with estafa under Article 315, Section 2[a], as amended, which penalizes false manifestations or fraudulent representations in defraudation of another, she was instead convicted of estafa under Article 315, Section 2[d] which penalizes the issuance of postdated checks that were not funded or were insufficiently funded.

Held:  NO.

Ratio:  Section 14(2) of Article III of the 1987 Constitution provides that an accused has the right to be informed of the nature and cause of the accusation against him. Indeed, Section 6, Rule 110 of the Revised Rules of Criminal Procedure requires that the acts and omissions complained of as constituting the offense must be alleged in the Information. Section 8 thereof provides that the Information shall state the designation of the offense given by the statute and aver the acts or omissions constituting the offense. The real nature of the crime charged is determined by the facts alleged in the Information and not by the title or designation of the offense contained in the caption of the Information. It is fundamental that every element of which the offense is comprised must be alleged in the Information. What facts and circumstances are necessary to be alleged in the Information must be determined by reference to the definition and essential elements of the specific crimes.

Article 315, paragraph 2(a) of the Revised Penal Code provides that swindling or estafa by false pretenses or fraudulent acts executed prior to or simultaneously with the commission of the fraud is committed by using fictitious name, or falsely pretending to possess power, influence, qualifications, property, credit, agency, business or imaginary transactions, or by other similar deceits. The elements of estafa under this penal provision are: (1) the accused defrauded another by means of deceit; and (2) damage or prejudice capable of pecuniary estimation is caused to the offended party or third party.

A careful reading of the Information clearly shows that petitioner was charged with estafa under Article 315, paragraph 2 (a) of the Revised Penal Code. The Information alleged that petitioner by means of false manifestations and fraudulent representations x x x to the effect that accused has three checks which according to her have sufficient funds and if encashed the same will not be dishonored; x x x induced x x x Dolores S. Apolonio to accept the following checks x x x as payment of assorted vegetables x x x in the total amount of P87,000.00.

There is, however, no basis for petitioner to conclude that she was convicted for estafa under Article 315, paragraph 2(d) of the Revised Penal Code which penalizes any person who shall defraud another by postdating or issuing a check or issuing a check in payment of an obligation when the offender has no funds in the bank or his funds deposited therein are not sufficient to cover the amount of check. The elements of this form of estafa are: (1) postdating or issuing a check in payment of an obligation contracted at the time the check was issued; (2) lack or insufficiency of funds to cover the check; and (3) damage to the payee thereof.

While the typographical error in the dispositive portion of the trial courts decision did not help in clearing this matter by saying that, x x x the Court finds the accused guilty beyond reasonable doubt of the crime of Estafa under Art. 315, Sec. 2(2) of the Revised Penal Code, x x x,[9] the body of the trial courts decision clearly discusses the elements of estafa under Article 315, paragraph 2(a), thus:

The elements of estafa are (1) that the accused defrauded another by abuse of confidence or by means of deceit; and (2) that the damage or prejudice capable of pecuniary estimation is caused to the offended party.

In other words, whether petitioner was charged under either paragraph 2(a) or 2(d) of Article 315 of the Revised Penal Code, she would still be guilty of estafa because damage and deceit, which are essential elements of the offense, have been established with satisfactory proof. The fraudulent act was committed prior to or simultaneous with the issuance of the bad check. The guarantee and the simultaneous delivery of the checks by petitioner were the enticement and the efficient cause of the defraudation committed against Apolonio who suffered damage amounting to P87,000.00 as a result of the fraud committed by petitioner in paying him underfunded checks drawn by three different persons.

Fraud, in its general sense, is deemed to comprise anything calculated to deceive, including all acts, omissions, and concealment involving a breach of legal or equitable duty, trust, or confidences justly reposed, resulting in damage to another, or by which an undue and unconscientious advantage is taken of another. It is a generic term embracing all multifarious means which human ingenuity can device, and which are resorted to by one individual to secure an advantage over another by false suggestions or by suppression of truth and includes all surprise, trick, cunning, dissembling and any unfair way by which another is cheated. Deceit is a specie of fraud.

In fact, the Court of Appeals saw through petitioners deceit when it observed, thus:

Appellants scheme is obvious. She wanted to get vegetables from Apolonio for free. In order to escape from any criminal liability, she asked her husband, daughter and nephew to issue the bouncing checks. And certainly, the scheme was deceitful. The appellant could not have been unaware of the insufficient funds of her relatives to support the checks they issued but she tendered the checks to Apolonio with the assurance that they were funded. Appellant could have exerted efforts to settle her account upon notice of the dishonored checks if she were in good faith.

Ruling:  WHEREFORE, in light of the foregoing, the Court hereby AFFIRMS with MODIFICATION the decision of the trial court finding Yolanda Garcia guilty of estafa under Article 315, paragraph 2[a] of the Revised Penal Code, and sentencing her to suffer the indeterminate penalty of four (4) years and two (2) months of prision correccional, as minimum, to fourteen (14) years of reclusion temporal, as maximum, and to indemnify the complainant in the amount of P87,000.00. With costs.