Carandang vs. Desierto

A corporation is considered a government-owned or controlled corporation only when the Government directly or indirectly owns or controls at least a majority or 51% share of the capital stock. Where the government's uncontested ownership is merely 32.4%, the corporation remains private, and its officers are not public officials subject to the jurisdiction of the Ombudsman or the Sandiganbayan.

Roberto S. Benedicto was a stockholder of Radio Philippines Network, Inc. (RPN), a private corporation registered with the Securities and Exchange Commission. In March 1986, the government sequestered RPN's properties. On November 3, 1990, the Presidential Commission on Good Government (PCGG) entered into a compromise agreement with Benedicto, who ceded his shares in RPN to the government. A dispute arose as to whether the ceded shares represented 72.4% or only 32.4% of RPN's outstanding capital stock, a matter that remained unresolved in the Sandiganbayan. Carandang assumed office as general manager and chief operating officer of RPN on July 28, 1998, following a recommendation by President Joseph Estrada to the PCGG, and subsequent appointment by RPN's Board of Directors.

Roberto S. Benedicto was a stockholder of Radio Philippines Network, Inc. (RPN), a private corporation duly registered with the Securities and Exchange Commission. In March 1986, the Government ordered the sequestration of RPN’s properties, assets, and business. On November 3, 1990, the Presidential Commission on Good Government (PCGG) entered into a compromise agreement with Benedicto, whereby he ceded to the Government all his shares of stock in RPN. The Sandiganbayan (Second Division) directed the transfer of shares representing 72.4% of RPN’s total issued and outstanding capital stock to the PCGG. However, Benedicto moved for reconsideration, clarifying that his ceded shares represented only 32.4% of RPN’s outstanding capital stock, excluding the 40% held by Far East Managers and Investors, Inc. (FEMIE). This motion remained unresolved.

On July 28, 1998, Antonio M. Carandang assumed office as general manager and chief operating officer of RPN, having been appointed by RPN’s Board of Directors upon the recommendation of President Joseph Estrada to the PCGG. On April 19, 1999, Carandang and other RPN officials were charged with grave misconduct before the Ombudsman for entering into a contract with AF Broadcasting Incorporated, where Carandang was an incorporator, director, and stockholder. The Ombudsman suspended Carandang on May 7, 1999, and on January 26, 2000, found him guilty of grave misconduct, ordering his dismissal from the service. The Court of Appeals affirmed this decision on February 12, 2001, reasoning that RPN had shed its private status upon sequestration and was a GOCC.

Separately, on January 17, 2000, the Ombudsman charged Carandang in the Sandiganbayan with violation of Section 3(g) of Republic Act No. 3019 for allegedly giving unwarranted benefits to On Target Media Concept, Inc. by pre-terminating an existing block time contract and substituting it with a more onerous co-production agreement. Carandang moved to quash the information, arguing that the Sandiganbayan lacked jurisdiction because he was not a public official and RPN was not a GOCC. The Sandiganbayan denied the motion to quash on October 17, 2001, and subsequently denied his motion for reconsideration on March 14, 2002. Carandang then elevated both the administrative and criminal cases to the Supreme Court via separate petitions, which were consolidated on November 20, 2006.

• Lack of Jurisdiction: Petitioner argued that the Ombudsman and the Sandiganbayan had no jurisdiction over him because he was not a public official or employee.
• Status of RPN: Petitioner maintained that RPN was not a government-owned or controlled corporation, as it was a private corporation registered with the SEC and the government's ownership did not constitute a majority of its capital stock.
• No Financial Interest: Petitioner argued that he had no financial and material interest in the contract requiring the approval of his office, having severed ties with AF Broadcasting Corporation prior to assuming office in RPN.

• Status of RPN as GOCC: Respondent Ombudsman argued that RPN shed its private status upon sequestration by the government in 1986 and became a GOCC within the constitutional precept.
• Carandang as Public Officer: Respondent contended that Carandang was a public officer because he was a presidential appointee whose function related to public duty, representing the interest of the Philippine Government in RPN.
• Grave Misconduct: Respondent argued that despite severing ties with AF Broadcasting Corporation, Carandang's past association made it improbable that he was oblivious to the developments and unaware of the contracts, thus sustaining the finding of grave misconduct.

• Jurisdiction of the Ombudsman: Whether the Ombudsman had administrative jurisdiction over Carandang.
• Jurisdiction of the Sandiganbayan: Whether the Sandiganbayan had criminal jurisdiction over Carandang for violation of Republic Act No. 3019.
• Status of RPN: Whether Radio Philippines Network, Inc. (RPN) was a government-owned or controlled corporation (GOCC).
• Status of Carandang: Whether Carandang was a public official subject to the jurisdiction of the Ombudsman and the Sandiganbayan.

• Jurisdiction of the Ombudsman: No. The Ombudsman lacked jurisdiction because Carandang was not a public official.
• Jurisdiction of the Sandiganbayan: No. The Sandiganbayan lacked jurisdiction over the criminal case for the same reason.
• Status of RPN: No. RPN was not a government-owned or controlled corporation because the government's total share in its capital stock was only 32.4%, falling short of the 51% threshold.
• Status of Carandang: No. Carandang was a private individual, appointed by RPN's Board of Directors pursuant to its By-Laws, and not subject to the administrative authority of the Ombudsman or the criminal jurisdiction of the Sandiganbayan.

• Jurisdiction of the Ombudsman: The Ombudsman's jurisdiction over administrative cases is limited to officials and employees of government-owned or controlled corporations. Since RPN was not a GOCC, Carandang was not a public official, and the Ombudsman had no authority to try him for grave misconduct.
• Jurisdiction of the Sandiganbayan: The Sandiganbayan's jurisdiction over violations of RA 3019 extends to public officials, including presidents, directors, and managers of GOCCs. Because RPN was not a GOCC, the Sandiganbayan had no jurisdiction over the criminal complaint against Carandang.
• Status of RPN: Under Section 2 of Presidential Decree No. 2029 and Section 2(13) of Executive Order No. 292, a GOCC requires the government to own or control at least a majority or 51% of the capital stock. The government's uncontested share in RPN was only 32.4%. The 40% contested portion (FEMIE shares) could not be counted because Benedicto's motion for reconsideration on this matter remained unresolved. Furthermore, the PCGG and the Office of the President had expressly opined that RPN was not a GOCC due to the 32.4% government ownership.
• Status of Carandang: Carandang's appointment by President Estrada was merely a recommendation to the PCGG, which then voted in his favor. It was RPN's Board of Directors that formally appointed him pursuant to RPN's By-Laws. As an officer of a private corporation, he was a private individual.

• Definition of Government-Owned or Controlled Corporations — A GOCC is an agency organized as a stock or non-stock corporation vested with functions relating to public needs, and owned by the government directly or indirectly either wholly or to the extent of at least 51% of its capital stock. The three requisites are: (1) organized as a stock or non-stock corporation; (2) vested with functions relating to public needs; and (3) owned by the government to the extent of at least 51% of its capital stock. In this case, RPN failed the third requisite because the government owned only 32.4% of its capital stock.
• Administrative Agency Construction — The construction of a statute given by administrative agencies deserves respect. The uniform administrative constructions by the PCGG and the Office of the President that RPN was not a GOCC were highly persuasive.

• "It is clear, therefore, that a corporation is considered a government-owned or -controlled corporation only when the Government directly or indirectly owns or controls at least a majority or 51% share of the capital stock." — This passage articulates the controlling statutory criterion for determining whether a corporation is a GOCC.
• "Consequently, RPN was neither a government-owned nor a controlled corporation because of the Government’s total share in RPN’s capital stock being only 32.4%." — This applies the 51% rule to the facts, conclusively determining RPN's private status.
• "In fine, Carandang was correct in insisting that being a private individual he was not subject to the administrative authority of the Ombudsman and to the criminal jurisdiction of the Sandiganbayan." — This summarizes the ultimate conclusion on jurisdiction based on the private status of the corporation and its officer.

• Leyson, Jr. vs. Office of the Ombudsman, G.R. No. 134990, April 27, 2000 — Cited to establish the three requisites for a GOCC under the Administrative Code of 1987, specifically the requirement of at least 51% government ownership. The case was followed, with the Court noting that below 51% shares removes a firm from the definition of a GOCC.
• Azarcon vs. Sandiganbayan, G.R. No. 116033, February 26, 1997 — Cited to support the conclusion that Carandang, as a private individual, was not subject to the administrative authority of the Ombudsman or the criminal jurisdiction of the Sandiganbayan.
• Philippine Amusement and Gaming Corporation (PAGCOR) vs. Philippine Gaming Jurisdiction, Incorporated (PEJI), G.R. No. 177333, April 24, 2009 — Cited for the doctrine that the construction of a statute given by administrative agencies deserves respect.

• Section 2, Presidential Decree No. 2029 — Defines a GOCC as a stock or non-stock corporation owned or controlled by the government to the extent of at least a majority of its outstanding capital stock. Applied to show RPN did not meet this threshold.
• Section 2(13), Executive Order No. 292 (Administrative Code of 1987) — Defines a GOCC as an agency owned by the government to the extent of at least 51% of its capital stock. Applied as the primary statutory criterion to determine RPN's status.
• Section 13, Republic Act No. 6770 (Ombudsman Act of 1989) — Defines the Ombudsman's power to act on complaints against officers or employees of the government, including GOCCs. Applied to show the Ombudsman's jurisdiction is limited to GOCCs.
• Section 3(g), Republic Act No. 3019 (Anti-Graft and Corrupt Practices Act) — Prohibits entering into a manifestly disadvantageous contract. This was the criminal charge against Carandang, which was dismissed for lack of jurisdiction.

Conchita Carpio Morales (Chairperson), Arturo D. Brion, Martin S. Villarama, Jr., and Maria Lourdes P.A. Sereno.