BASECO vs. PCGG

The PCGG's authority to issue sequestration and provisional takeover orders under Executive Orders Nos. 1 and 2 is constitutional and valid as provisional remedies to conserve assets pending judicial determination of ill-gotten wealth; a corporation, as an artificial being created by the state and vested with special privileges, is not entitled to the constitutional privilege against self-incrimination; and where evidence establishes that a corporation's stockholders are mere dummies or nominees of a former president who acquired government assets through undue advantage of public office, the corporation lacks standing to challenge the government's recovery of its own properties.

Following the EDSA Revolution in February 1986, President Corazon Aquino assumed power and established a revolutionary government under the Freedom Constitution (Proclamation No. 3). A primary mandate of the new government was to recover the "ill-gotten wealth" amassed by former President Ferdinand Marcos, his family, and close associates during the previous regime. To accomplish this, President Aquino issued Executive Order No. 1 creating the Presidential Commission on Good Government (PCGG), tasked with investigating and recovering these assets, including the authority to sequester and provisionally take over business enterprises and properties. Bataan Shipyard & Engineering Co., Inc. (BASECO), a shipyard company that had acquired significant assets from government-owned corporations such as the National Shipyard and Steel Corporation (NASSCO), became one of the primary targets of the PCGG's sequestration and takeover efforts, leading to this constitutional challenge.

• BASECO was incorporated on August 30, 1972, by a consortium of Filipino shipowners with an authorized capital stock of P60,000,000.00.
• In February 1973, BASECO acquired the Bataan National Shipyard from government-owned National Shipyard & Steel Corporation (NASSCO) for P52,000,000.00, which was subsequently reduced to P24,311,550.00 in October 1973 pursuant to a Memorandum Agreement bearing the handwritten approval and signature of President Ferdinand Marcos.
• In October 1974, BASECO acquired 300 hectares of land in Mariveles from the Export Processing Zone Authority (EPZA).
• In July 1975, BASECO acquired the Engineer Island Shops and remaining NASSCO equipment through another contract also bearing President Marcos' handwritten approval.
• BASECO obtained substantial loans from government financial institutions, including $19,000,000.00 from the National Development Company (NDC) and P12,400,000.00 from the GSIS, which allegedly remained unpaid.
• Evidence submitted by the Solicitor General showed that stock certificates representing 95% of BASECO's outstanding shares (held by Metro Bay Drydock, Fidelity Management, Inc., and Trident Management) were found in Malacañang after Marcos fled the country in February 1986, endorsed in blank, along with deeds of assignment from the owners of these holding companies.
• On April 14, 1986, the PCGG issued a sequestration order covering BASECO and its affiliate companies.
• On July 14, 1986, the PCGG issued a provisional takeover order, designating a management team headed by Capt. Jorge B. Siacunco to conduct all aspects of BASECO's operations, install key officers, and enter into contracts.
• The PCGG ordered the termination of services of BASECO's incumbent officers, including President Hilario M. Ruiz, and subsequently elected a new board of directors composed of PCGG representatives.
• The PCGG also issued orders requiring the production of corporate documents from 1973 to 1986, terminated security service contracts, amended lease contract terms, and authorized the disposal of scrap materials.

• BASECO contended that Executive Orders Nos. 1 and 2 are unconstitutional and void because they constitute bills of attainder, targeting specific persons without judicial trial and disregarding the presumption of innocence.
• It argued that the sequestration and takeover orders violated due process because they were issued without prior notice and hearing, and that the PCGG acted as both prosecutor and judge in violation of the constitutional separation of powers.
• It asserted that the orders violated the constitutional prohibition against unreasonable searches and seizures and the right against self-incrimination, particularly regarding the order to produce corporate records.
• It claimed that the PCGG violated the non-impairment clause by terminating existing contracts for security services and amending lease agreements.
• It argued that the PCGG exceeded its authority by exercising acts of ownership and dominion, such as voting sequestered shares, replacing the board of directors, and terminating officers, rather than merely conserving assets as a provisional remedy.
• It maintained that there was no adequate remedy provided by law to challenge the validity of the takeover orders expeditiously.

• The PCGG, through the Solicitor General, argued that the executive orders were valid exercises of legislative power under the Freedom Constitution and were expressly ratified by Section 26, Article XVIII of the 1987 Constitution.
• It maintained that sequestration and provisional takeover are provisional remedies akin to preliminary attachment and receivership, which may be issued ex parte to prevent the dissipation, concealment, or destruction of ill-gotten wealth pending judicial determination.
• It contended that corporations, as artificial beings created by the state, are not entitled to the constitutional privilege against self-incrimination and may be compelled to produce their books and records.
• It submitted overwhelming evidence that BASECO was owned and controlled by President Marcos through nominees and dummies, having acquired government assets through undue advantage of public office, and that the stockholders were no longer the real owners of the shares.
• It argued that the PCGG, as a conservator and administrator, had the authority to manage the business to prevent dissipation, including the power to vote shares and replace directors in cases of provisional takeover involving businesses taken over by the Marcos government.

• Procedural Issues: N/A
• Substantive Issues:
  • Whether Executive Orders Nos. 1 and 2 are unconstitutional as bills of attainder or for violating due process.
  • Whether the sequestration and provisional takeover orders violate the constitutional rights against self-incrimination and unreasonable searches and seizures.
  • Whether the PCGG exceeded its authority by exercising acts of ownership (voting shares, replacing directors) rather than mere conservation.
  • Whether BASECO has legal standing to institute the action given the evidence of Marcos' actual ownership through dummies.

• Procedural: N/A
• Substantive:
  • Executive Orders Nos. 1 and 2 are constitutional and do not constitute bills of attainder because they do not determine guilt or inflict punishment but merely provide provisional remedies pending judicial determination by the Sandiganbayan.
  • Sequestration and provisional takeover are valid provisional remedies akin to preliminary attachment and receivership under the Rules of Court; they may be issued ex parte based on a prima facie showing without prior notice and hearing, provided there is subsequent opportunity to contest, consistent with the requirements of Section 26, Article XVIII of the 1987 Constitution.
  • Corporations do not enjoy the constitutional privilege against self-incrimination; as creatures of the state receiving special privileges, they must show their hand when charged with abuse of such privileges, and may be compelled to produce corporate records.
  • The PCGG cannot exercise acts of dominion or ownership over sequestered property; it acts only as a conservator, caretaker, or administrator. However, in cases of "provisional takeover" of businesses taken over by the Marcos government, the PCGG may exercise control over operations, including voting shares and replacing directors, when justified by demonstrably weighty grounds to prevent dissipation, and always with prudence and circumspection.
  • BASECO lacks standing to sue because evidence establishes that its stockholders are mere dummies or nominees of President Marcos; granting relief would effectively restore government assets to the former president.

• Corporation as an Artificial Being — A corporation is a creature of the state, vested with special privileges and franchises, and holds them subject to the laws of the state. As such, it is not entitled to all constitutional protections afforded to natural persons, specifically the privilege against self-incrimination, and may be compelled to produce its books and records when charged with abuse of its privileges.
• Sequestration and Provisional Takeover as Provisional Remedies — Sequestration is the placing of property under the PCGG's possession or control to prevent destruction, concealment, or dissipation pending judicial determination; provisional takeover involves assumption of control over business operations. Both are conservatory measures akin to preliminary attachment and receivership, temporary and contingent in nature, and do not divest the owner of title.
• Bill of Attainder — A legislative act which inflicts punishment without judicial trial, substituting legislative determination for judicial determination of guilt. Executive orders providing for provisional remedies pending court proceedings are not bills of attainder.
• Standing (Real Party in Interest) — Where the stockholders of a corporation are mere dummies, nominees, or alter egos of a former president who acquired government assets through undue advantage of public office, the corporation lacks standing to challenge the government's recovery of its own properties.

• "It is elementary that the right against self-incrimination has no application to juridical persons."
• "While an individual may lawfully refuse to answer incriminating questions unless protected by an immunity statute, it does not follow that a corporation, vested with special privileges and franchises, may refuse to show its hand when charged with an abuse of such privileges."
• "The PCGG cannot exercise acts of dominion over property sequestered, frozen or provisionally taken over... the PCGG is a conservator, not an owner."
• "A bill of attainder is a legislative act which inflicts punishment without judicial trial... Its essence is the substitution of a legislative for a judicial determination of guilt."
• "Sequestration and freezing are remedies applicable generally to unearthed instances of 'ill-gotten wealth.'... 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."

• People v. Ferrer — Cited for the definition of a bill of attainder as a legislative act inflicting punishment without judicial trial.
• Wilson v. United States — Cited for the principle that corporations are not entitled to the privilege against self-incrimination and must produce their records when charged with abuse of statutory privileges.
• Oklahoma Press Publishing Co. v. Walling — Cited for the doctrine that corporations are not within the privilege against self-incrimination.
• Hal v. Henkel — Cited for the principle that a corporation is a creature of the state and must show its hand when charged with abuse of privileges.
• Guido v. Rural Progress Administration — Cited for the social function of property and the constitutional protection of property rights.
• Caltex (Phil.) v. Castillo — Cited for the requirements of due process.

• 1987 Constitution, Article XVIII, Section 26 — Ratifies the authority to issue sequestration or freeze orders; requires a prima facie case; mandates registration with the proper court and filing of judicial action within six months; limits the authority to eighteen months subject to congressional extension.
• Proclamation No. 3 (Freedom Constitution), Article II, Section 1(d) — Mandates the President to give priority to measures to recover ill-gotten properties and protect the people through orders of sequestration or freezing of assets.
• Executive Order No. 1 (February 28, 1986) — Creates the PCGG and grants it authority to sequester and provisionally take over business enterprises owned or controlled by former President Marcos and his associates.
• Executive Order No. 2 (March 12, 1986) — Freezes assets and properties of Marcos and his associates pending outcome of appropriate proceedings.
• Executive Order No. 14 (May 7, 1986) — Empowers the PCGG to file and prosecute cases with the Sandiganbayan; provides that technical rules of procedure shall not be strictly applied to civil cases for recovery of ill-gotten wealth.
• Rules of Court, Rule 57 (Preliminary Attachment) and Rule 59 (Receivership) — Cited as analogous provisional remedies to sequestration and takeover.

• Chief Justice Teehankee — Emphasized that the government was merely recovering its own properties stolen through "organized pillage"; stressed that the PCGG acts under the state's police power; noted that BASECO's lawyers, having been fired by the new PCGG-appointed board, could not validly withdraw the petition because they represented dummies who lacked legal standing.
• Justice Padilla — Stated that "calling a spade a spade," the discovery of 95% of BASECO's stock certificates in Malacañang endorsed in blank, combined with Marcos' control over policy decisions, conclusively proved Marcos' ownership; held that the government had the right and duty to take full control even ahead of judicial proceedings.
• Justice Melencio-Herrera — Qualified concurrence agreeing that voting sequestered stock is an act of ownership that should generally be confined to cases where the business actually belongs to the government (as in BASECO); urged caution and prudence in exercising such power over private enterprises and recommended filing forfeiture proceedings to bring assets under judicial supervision.
• Justice Gutierrez, Jr. — Concurring and dissenting: Agreed with the principles governing PCGG powers but dissented from validating the specific acts of replacing the board and voting shares without prior court approval, arguing these were acts of ownership requiring judicial supervision; criticized the PCGG for failing to immediately file the required court proceedings to determine ownership.

• Justice Cruz — Dissented from the validation of the takeover, arguing that voting shares and reorganizing the board are acts of ownership that the PCGG cannot exercise without a court order; maintained that due process requires judicial supervision even when dealing with assets allegedly owned by Marcos; emphasized that provisional remedies must be limited to conservation, not management or ownership acts.