Trans Middle East (Phils.) vs. Sandiganbayan

The registered owner of sequestered shares generally exercises the right to vote them, and may only be deprived of such right if the PCGG establishes (1) prima facie evidence that the shares are ill-gotten and belong to the State, and (2) an imminent danger of dissipation necessitating continued sequestration and PCGG authority to vote. A writ of sequestration alone does not legally justify barring the registered owner from voting; the TRO affirmed in the 1995 Decision became functus officio once the Sandiganbayan, pursuant to the authority granted by the Supreme Court, modified or terminated it through subsequent resolutions.

TMEE was the registered owner of 6,119,067 common shares of stock in the then PCBank, now Equitable-PCI Bank. On 15 April 1986, these shares were sequestered by the PCGG on the theory that they actually belonged to Benjamin Romualdez and constituted illegally acquired wealth. A complaint, docketed as Civil Case No. 0035, was filed against Romualdez before the Sandiganbayan for the recovery of these shares, and TMEE was allowed to intervene. The PCGG Rules and Regulations promulgated on 11 April 1986 required writs of sequestration to be issued by at least two commissioners, a requirement relevant to the validity of the sequestration order at issue.

TMEE was the registered owner of 6,119,067 common shares of stock in the then PCBank, now Equitable-PCI Bank. On 15 April 1986, these shares were sequestered by the PCGG on the theory that they actually belonged to Benjamin Romualdez and constituted illegally acquired wealth. A complaint, docketed as Civil Case No. 0035, was filed against Romualdez before the Sandiganbayan for the recovery of these shares, and TMEE was allowed to intervene, seeking to enjoin the PCGG from voting the shares.

In 1991, the Sandiganbayan issued resolutions that enjoined the PCGG from voting TMEE's shares and authorized TMEE to exercise its voting rights. These resolutions were challenged before the Supreme Court through petitions docketed as G.R. Nos. 105808 and 105809, and the Court issued a TRO enjoining their implementation. The cases were consolidated and resolved in a 23 January 1995 consolidated decision entitled Republic vs. Sandiganbayan, which confirmed and maintained the TRO, decreeing that it "shall continue in force and effect during the continuation of the proceedings in the corresponding civil actions in the Sandiganbayan, subject to the latter's power to modify or terminate the same in the exercise of its sound discretion in light of such evidence as may subsequently be adduced." In a subsequent Resolution dated 22 July 1997, the Court directed the Sandiganbayan to promptly adjudicate the ownership issue and prohibited both the PCGG and TMEE from voting the sequestered shares until the Sandiganbayan determined whether there was prima facie factual foundation for the sequestration and reasonable ground for apprehension of dissipation.

In January and February of 1997, TMEE filed two motions before the Sandiganbayan urging the nullification or lifting of the writ of sequestration, contending that no valid writ was ever issued because the sequestration was effected through a letter dated 15 April 1986 signed by only one PCGG commissioner, in violation of the PCGG Rules and Regulations promulgated on 11 April 1986. TMEE manifested its willingness to deposit the shares in escrow to allay any fear of dissipation. In April 1998, the PCGG filed a Motion for Issuance of Restraining Order seeking to enjoin the EPCIB stockholders' meeting scheduled for 30 April 1998. In a Resolution dated 29 April 1998, the Sandiganbayan dismissed the PCGG's fears as unfounded, recognized TMEE's right to vote the shares registered in its name, and allowed it to vote at the stockholders' meeting, requiring TMEE to post a bond of ₱150,000.00.

On 10 January 2003, the Sandiganbayan issued a Resolution granting TMEE's motion to nullify the writ of sequestration, ruling that Sequestration Order No. 86-0056 dated 15 April 1986 was null and void for having been issued by only one PCGG Commissioner in direct contravention of Section 3 of the PCGG's own Rules and Regulations. The Sandiganbayan ordered that the shares, including the interests earned thereon, be deposited with the Land Bank of the Philippines in escrow. The PCGG filed motions for reconsideration of both the 1998 and 2003 resolutions, which remained unresolved. TMEE alleged that it voted the subject shares from 1998 up to 2005.

On 2 May 2006, the PCGG filed a Motion for Execution of the 1995 Supreme Court Decision, arguing that the Decision became final and executory by virtue of an entry of judgment dated 2 April 1996 which was allegedly received by the PCGG only on 2 March 2006. The PCGG prayed for an order permitting it to vote the sequestered shares or, in the alternative, to order "re-enforced and/or reissued" the TRO affirmed by the Supreme Court in the 1995 Decision. On 9 May 2006, the PCGG filed an Urgent Ex-Parte Motion to Reinforce/Re-issue TRO, alleging that the Romualdezes were bent on disposing of their shares and that there was a danger the sequestered shares might dissipate. On 22 May 2006, the Sandiganbayan issued the assailed Resolution declaring that the TRO "is still existing and in full force and effect." The following day, the EPCIB stockholders' meeting was held, and TMEE was not allowed to vote its shares, preventing it from electing any representative to the Board of Directors despite having enough shares to be entitled to at least one board seat.

• Grave Abuse of Discretion: TMEE argued that the Sandiganbayan committed grave abuse of discretion in issuing the 22 May 2006 Resolution declaring the TRO still in effect, considering that the Sandiganbayan's own 1998 and 2003 Resolutions had already modified or terminated the TRO.
• Procedural Justification for Certiorari: TMEE argued that the filing of a motion for reconsideration was not required because the assailed Resolution was promulgated one day before the scheduled stockholders' meeting, making such a motion inadequate and not speedy.
• Voting Rights: TMEE maintained that as the registered owner of the shares, it was entitled to vote them, and that the PCGG failed to establish the requisites for depriving it of such right.
• Entitlement to Board Seat: TMEE asserted that it had 51,827,640 EPCIB shares, equivalent to 7.13% of the outstanding capital stock, sufficient to elect one seat in the 15-seat Board of Directors through cumulative voting.

• Failure to File Motion for Reconsideration: The respondent Board of Directors of EPCIB argued that TMEE's failure to file a motion for reconsideration with the Sandiganbayan precluded the immediate resort to the special civil action of certiorari.
• Nature of the Petition: The respondents argued that the petition, which was accompanied by a prayer for writ of preliminary injunction and/or TRO, was effectively an original action for injunction beyond the jurisdiction of the Court, since TMEE failed to pray for the annulment of the 22 May 2006 Sandiganbayan Resolution in its original petition.
• Continued Effect of the TRO: The respondents contended that the 1998 Resolution merely allowed TMEE to vote its shares for the stockholders' meeting on 30 April 1998, and not at other stockholders' meetings, and that the TRO remained in effect because the motions for reconsideration to the 1998 and 2003 Resolutions had not been resolved.
• No Serious Challenge to Voting: The EPCIB Board of Directors alleged that TMEE merely consented to a common slate of nominees previously agreed upon, rather than formally voting its shares in recent years.

• Procedural — Motion for Reconsideration: Whether the failure of TMEE to file a motion for reconsideration before the Sandiganbayan precluded the resort to certiorari.
• Procedural — Nature of the Petition: Whether the petition should be dismissed for failure to include a prayer for the annulment of the Sandiganbayan Resolution, thereby making it an original action for injunction beyond the Court's jurisdiction.
• Substantive — Clear Legal Right to Injunctive Relief: Whether the PCGG had a clear legal right to injunctive relief to prevent TMEE from voting its shares, grounded on either the 1986 sequestration order or the 1995 Decision affirming the 1992 TRO.
• Substantive — Effect of the 1998 and 2003 Resolutions: Whether the 1998 and 2003 Resolutions of the Sandiganbayan modified or terminated the TRO affirmed in the 1995 Decision, notwithstanding the pendency of motions for reconsideration.
• Substantive — Prescription of Execution: Whether the PCGG's motion to execute the 1995 Decision was barred by prescription.
• Substantive — Entitlement to Board Seat: Whether TMEE was entitled to a seat on the EPCIB Board of Directors.

• Procedural — Motion for Reconsideration: No. The general rule requiring a motion for reconsideration before certiorari does not apply when special circumstances warrant immediate or more direct action; the assailed Resolution was promulgated one day before the scheduled stockholders' meeting, making a motion for reconsideration inadequate and not speedy.
• Procedural — Nature of the Petition: No. The petition was properly treated as one for certiorari, with injunction sought only as ancillary relief, as determined by the material allegations contained in the petition; the Supplemental Petition expressly sought the nullification of the Sandiganbayan Resolution, and any defect was viewed with liberality given that TMEE had only one calendar day to prepare the petition.
• Substantive — Clear Legal Right to Injunctive Relief: No. The PCGG failed to demonstrate a clear legal right to injunctive relief; the 1986 sequestration order was nullified in 2003, and the 1995 Decision had already been modified or terminated by the 1998 and 2003 Resolutions of the Sandiganbayan.
• Substantive — Effect of the 1998 and 2003 Resolutions: The 1998 and 2003 Resolutions modified or terminated the TRO; being interlocutory orders, they were immediately enforceable notwithstanding pending motions for reconsideration, and the Sandiganbayan was bound to respect its own extant rulings.
• Substantive — Prescription of Execution: Yes. The motion to execute the 1995 Decision was barred by prescription; under Article 1144 of the Civil Code, an action based upon a judgment must be brought within ten years from the time the right of action accrues, and the entry of judgment was dated 2 April 1996.
• Substantive — Entitlement to Board Seat: Yes. TMEE's 7.13% stock interest in the outstanding capital stock was sufficient to elect one seat in the 15-seat EPCIB Board of Directors under Section 24 of the Corporation Code.

• Procedural — Motion for Reconsideration: The Court recognized that as a general rule, certiorari does not lie unless a motion for reconsideration is first filed. However, this rule does not apply when special circumstances warrant immediate or more direct action. The assailed Sandiganbayan Resolution was promulgated one day before the scheduled stockholders' meeting of EPCIB, and TMEE could no longer have relied on the Sandiganbayan to reverse itself overnight. The filing of a motion for reconsideration would not have been an adequate or speedy remedy, justifying the immediate resort to certiorari.

• Procedural — Nature of the Petition: The Court ruled that the nature of an action is determined based on the material allegations contained in the petition. The petition was replete with imputations of grave abuse of discretion on the part of the Sandiganbayan, indicating that the nature of the petition was one for certiorari, with injunction sought only as ancillary relief. The Supplemental Petition expressly sought the nullification of the Sandiganbayan Resolution. The Court viewed the defect with liberality, considering that TMEE had only one calendar day to prepare the petition, and the forced haste could not be attributed to TMEE's fault.

• Substantive — Clear Legal Right to Injunctive Relief: The Court applied the settled doctrine that for injunctive relief to avail, the party must demonstrate the existence of a clear legal right; in the absence of such right, the issuance of injunctive relief constitutes grave abuse of discretion. The Court identified two putative sources of the PCGG's claimed legal right: the 1986 sequestration order and the 1995 Decision affirming the 1992 TRO. Neither provided foundational recognition of a clear legal right. The Court cited the general rule that the registered owner of shares of a corporation, even if sequestered by the PCGG, exercises the right and privilege of voting on them, and the PCGG as a mere conservator cannot exercise acts of dominion by voting these shares. The registered owner may only be deprived of voting rights if the PCGG establishes (1) prima facie evidence that the shares are ill-gotten and belong to the State, and (2) an imminent danger of dissipation. The Sandiganbayan had not made such findings; in fact, its 1998 Resolution declared that TMEE possessed a prima facie right as registered owner and that there were no strong grounds for apprehension of dissipation. The nullification of the sequestration order in 2003 further militated against any recognition that the sequestration order established a clear legal right.

• Substantive — Effect of the 1998 and 2003 Resolutions: The Court analyzed the 1995 Decision as consisting of two phases: the affirmation of the TRO as a default stance, and the modification or termination of the TRO by the Sandiganbayan in light of subsequently adduced evidence. Once the condition set in the second phase occurred, the first phase ended. The Sandiganbayan did modify the TRO through its 1998 Resolution, which directed the bank to "acknowledge the right of [TMEE] to vote the shares of stocks registered in its name and allow it to vote at the Stockholders' Meeting scheduled on April 30, 1998." The Court interpreted the dispositive portion as containing two directives: recognition of TMEE's right to vote its shares, not subjected to any limitation as to time, and allowance to vote at the 1998 meeting. The 2003 Resolution went further in declaring null and void the 1986 sequestration order. The Court reasoned that if the sequestration order was null and void from the beginning, the earlier TRO became functus officio and could not continue to exist. The Court cited Valarao vs. Pascual for the principle that interlocutory orders are not instantly appealable and are not interrupted by a motion for reconsideration; they must be obeyed as proceedings progress. The Court noted that from 1998 to 2005, the 1998 and 2003 Resolutions had been respected by the Sandiganbayan and the parties, and TMEE was able to elect at least one nominee to the Board. The Sandiganbayan could reverse its earlier rulings only on the evidentiary foundations prescribed in the 1995 Decision, pertaining to the existence of a valid basis for sequestration or the danger of dissipation, and until it did so, it was bound to respect its own extant rulings.

• Substantive — Prescription of Execution: The Court found it highly suspect that the PCGG would await more than ten years before moving to execute the 1995 Decision. Entry of Judgment was dated 2 April 1996. Under Article 1144 of the Civil Code, an action based upon a judgment must be brought within ten years from the time the right of action accrues. Nothing in the rules of procedure provides that the entry of judgment be served on the parties or reckons the date of finality from the moment the entry of judgment is received by the parties. The PCGG's filing of motions in May 2006 was barred by prescription after 2 April 2006.

• Substantive — Entitlement to Board Seat: The Court noted that there was no serious dispute that TMEE would have been entitled to one seat on the Board had it been able to vote its shares. TMEE's shares constituted 7.13% of the outstanding capital stock, and Section 24 of the Corporation Code allows a stockholder to cumulate all of its shares in voting for directors. A 7.13% stock interest in a 15-seat Board is sufficient to elect one seat. The Court found that annulling the entire election would be too drastic since only one of the 15 seats should be necessarily affected; the more prudent step was to declare that one nominee of TMEE was entitled to be seated immediately on the Board of Directors.

• Registered Owner's Right to Vote Sequestered Shares — The registered owner of shares of a corporation, even if sequestered by the PCGG, exercises the right and privilege of voting on them. The PCGG, as a mere conservator, cannot as a rule exercise acts of dominion by voting these shares. The registered owner may only be deprived of voting rights, and the PCGG authorized to exercise the same, if it establishes (1) prima facie evidence that the shares are ill-gotten and belong to the State, and (2) an imminent danger of dissipation necessitating continued sequestration and authority to vote by the PCGG while the main issue is pending. The existence of the writ of sequestration alone does not legally justify barring the registered owner from voting.

• Functus Officio Doctrine Applied to TRO — A temporary restraining order becomes functus officio when the order that grounded its existence is nullified. If the sequestration order against TMEE was declared null and void, the earlier TRO could not continue to exist, as the TRO was grounded on the subsistence of the sequestration order. The nullification of the sequestration order as void from the beginning rendered the TRO without legal basis.

• Interlocutory Orders and Pending Motions for Reconsideration — An interlocutory order is not instantly appealable, and there is no period or action to suspend or interrupt by a motion for reconsideration. A special civil action for certiorari does not suspend the immediate enforceability of an interlocutory order absent a temporary restraining order or an injunction. Interlocutory orders must be obeyed as the proceedings progress, notwithstanding pending motions for reconsideration.

• Clear Legal Right Requirement for Injunctive Relief — For injunctive relief to avail, the party seeking it must demonstrate the existence of a clear legal right. In the absence of a clear legal right, the issuance of the injunctive relief constitutes grave abuse of discretion. The PCGG failed to establish a clear legal right grounded on either the 1986 sequestration order or the 1995 Decision, as the sequestration order was nullified and the TRO had been modified or terminated.

• Prescription of Action Based on Judgment — Under Article 1144 of the Civil Code, an action based upon a judgment must be brought within ten years from the time the right of action accrues, or within ten years counted from the time the judgment became final. The date of finality of the judgment or final order is deemed to be the date of its entry, and nothing in the rules provides that the entry of judgment be served on the parties or reckons finality from receipt by the parties.

• "The registered owner of sequestered shares may only be deprived of these voting rights, and the PCGG authorized to exercise the same, only if it is able to establish that (1) there is prima facie evidence showing that the said shares are ill-gotten and thus belong to the State; and (2) there is an imminent danger of dissipation, thus necessitating the continued sequestration of the shares and authority to vote thereupon by the PCGG while the main issue is pending before the Sandiganbayan." — This passage articulates the controlling doctrine on the voting rights of registered owners of sequestered shares, establishing the two requisites for deprivation of such rights.

• "The TRO cannot continue to exist if the sequestration order is null and void from the beginning. Based on the 2003 Sandiganbayan Resolution, the sequestration order against TMEE is deemed void as of 15 April 1986, or more than 20 years ago." — This passage applies the functus officio doctrine, explaining that the nullification of the sequestration order necessarily terminated the TRO that was grounded on the subsistence of that order.

• "For injunctive relief to avail to the PCGG, it must be able to demonstrate the existence of a clear legal right to be entitled to such relief. In the absence of a clear legal right, the issuance of the injunctive relief constitutes grave abuse of discretion." — This passage states the clear legal right requirement for injunctive relief, which the PCGG failed to satisfy, leading to the finding of grave abuse of discretion.

• "An interlocutory order is not instantly appealable and therefore there is no period nor action to suspend or interrupt by a motion for reconsideration; it is even well settled that a special civil action for certiorari does not suspend the immediate enforceability of an interlocutory order absent a temporary restraining order or an injunction." — This passage, quoting Valarao vs. Pascual, establishes that the 1998 and 2003 Resolutions, being interlocutory, were immediately enforceable notwithstanding the pending motions for reconsideration.

• Republic vs. Sandiganbayan, 310 Phil. 401 (1995) — Controlling precedent; the 1995 consolidated decision that confirmed and maintained the TRO, granting the Sandiganbayan the power to modify or terminate it in the exercise of sound discretion in light of subsequently adduced evidence.
• Republic vs. Sandiganbayan, 355 Phil. 181 (1998) — Followed; cited for the ruling that a writ of sequestration must bear the signatures of two commissioners, as their signatures are the best evidence of their approval thereof.
• Republic vs. Sandiganbayan, 328 Phil. 210 (1996) — Followed; affirmed that the PCGG Rules provision requiring at least two commissioners to issue a writ of sequestration was "couched in clear and simple language [and] leaves no room for interpretation."
• Valarao vs. Pascual, 441 Phil. 226 (2002) — Followed; established that interlocutory orders are immediately enforceable notwithstanding pending motions for reconsideration, and that certiorari does not suspend their effectivity absent a TRO or injunction.
• Cojuangco, Jr. vs. Roxas, G.R. Nos. 91925 & 93005, 16 April 1991, 195 SCRA 797 — Cited for the general rule that the registered owner of shares exercises the right to vote them, even if sequestered.
• PCGG vs. Cojuangco, Jr., G.R. No. 133197, 27 January 1999, 302 SCRA 217 — Cited for the doctrine that the registered owner may only be deprived of voting rights upon establishment of prima facie evidence of ill-gotten wealth and imminent danger of dissipation.
• Del Mar vs. Pagcor, G.R. No. 138298, 29 November 2000, 346 SCRA 485 — Cited for the principle that the Court has discretionary power to take cognizance of a petition if compelling reasons or the nature and importance of the issues raised warrant the immediate exercise of its jurisdiction.
• People vs. Dacudao, G.R. No. 81389, 21 February 1989, 170 SCRA 489 — Cited for the exception to the general rule requiring a motion for reconsideration before certiorari when special circumstances warrant immediate or more direct action.

• Section 3, PCGG Rules and Regulations (11 April 1986) — Provides that a writ of sequestration or a freeze or hold order may be issued by the Commission upon the authority of at least two Commissioners. The Sandiganbayan nullified Sequestration Order No. 86-0056 for having been issued by only one PCGG Commissioner in direct contravention of this provision.
• Article 1144, Civil Code — Provides that an action based upon a judgment must be brought within ten years from the time the right of action accrues. The Court applied this provision to bar the PCGG's motion to execute the 1995 Decision, filed more than ten years after the entry of judgment on 2 April 1996.
• Section 2, Rule 37, Rules of Court — Provides that the date of finality of the judgment or final order shall be deemed to be the date of its entry. The Court applied this rule to reckon the prescriptive period from the date of entry of judgment, not from the date of receipt by the parties.
• Section 24, Corporation Code — Allows a stockholder to cumulate all of its shares in voting for directors. The Court applied this provision to determine that TMEE's 7.13% stock interest was sufficient to elect one seat in the 15-seat EPCIB Board of Directors.
• Rule 65, Rules of Court — Governs the special civil action of certiorari. The Court applied this rule to take cognizance of the petition, notwithstanding the failure to file a motion for reconsideration, given the special circumstances warranting immediate action.

Chief Justice Artemio V. Panganiban; Associate Justices Reynato S. Puno, Leonardo A. Quisumbing, Consuelo Ynares-Santiago, Angelina Sandoval-Gutierrez, Antonio T. Carpio, Ma. Alicia Austria-Martinez, Renato C. Corona, Conchita Carpio Morales, Romeo J. Callejo, Sr., Adolfo S. Azcuna, Minita V. Chico-Nazario, Cancio C. Garcia, and Presbitero J. Velasco, Jr.