EN BANC

[G.R. Nos. 147062-64. December 14, 2001]

REPUBLIC OF THE PHILIPPINES, represented by thePRESIDENTIAL COMMISSION ON GOODGOVERNMENT (PCGG), petitioner, vs. COCOFEDet al. and BALLARES et al.,[1] EDUARDO M.COJUANGCO JR. and the SANDIGANBAYAN(First Division) respondents.

D E C I S I O NPANGANIBAN, J.:

The right to vote sequestered shares of stock registered in thenames of private individuals or entities and alleged to have beenacquired with ill-gotten wealth shall, as a rule, be exercised by theregistered owner. The PCGG may, however, be granted such votingright provided it can (1) show prima facie evidence that the wealthand/or the shares are indeed ill-gotten; and (2) demonstrate imminentdanger of dissipation of the assets, thus necessitating their continuedsequestration and voting by the government until a decision, rulingwith finality on their ownership, is promulgated by the proper court.

However, the foregoing “two-tiered” test does not apply when thesequestered stocks are acquired with funds that are prima facie publicin character or, at least, are affected with public interest. Inasmuch asthe subject UCPB shares in the present case were undisputablyacquired with coco levy funds which are public in character, then theright to vote them shall be exercised by the PCGG. In sum, the“public character” test, not the “two-tiered” one, applies in the instantcontroversy.

The Case

Before us is a Petition for Certiorari with a prayer for the issuanceof a temporary restraining order and/or a writ of preliminary injunctionunder Rule 65 of the Rules of Court, seeking to set aside the February28, 2001 Order[2] of the First Division of the Sandiganbayan[3] in CivilCase Nos. 0033-A, 0033-B and 0033-F. The pertinent portions of theassailed Order read as follows:

“In view hereof, the movants COCOFED, et al. and Ballares, et al. as well as Eduardo Cojuangco, et al., who were acknowledged to be registered stockholders of the UCPB are authorized, as are all other registered stockholders of the United Coconut Planters Bank, until further orders from this Court, to exercise their rights to vote their shares of stock and themselves to be voted upon in the United Coconut Planters Bank (UCPB) at the scheduled Stockholders’ Meeting on March 6, 2001 or on any subsequent continuation or resetting thereof, and to perform such acts as will normally follow in the exercise of these rights as registered stockholders.

“Since by way of form, the pleadings herein had been labeled as praying for an injunction, the right of the movants to exercise their right as abovementioned will be subject to the posting of a nominal bond in the amount of FIFTY THOUSAND PESOS (P50,000.00) jointly for the defendants COCOFED, et al. and Ballares, et al., as wellas all other registered stockholders of sequestered shares in that bank, and FIFTY THOUSAND PESOS (P50,000.00) for Eduardo Cojuangco, Jr., et al., to answer for any undue damage or injury to theUnited Coconut Planters Bank as may be attributed to their exercise of their rights as registered stockholders.”[4]

The Antecedents

The very roots of this case are anchored on the historic eventsthat transpired during the change of government in 1986. Immediatelyafter the 1986 EDSA Revolution, then President Corazon C. Aquinoissued Executive Order (EO) Nos. 1,[5] 2[6] and 14.[7]

“On the explicit premise that ‘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,’ the Presidential Commission on Good Government (PCGG) was created by Executive Order No. 1 to assist the President in the recovery of the ill-gotten wealth thus accumulated whether located in the Philippines or abroad.”[8]

Executive Order No. 2 states that the ill-gotten assets andproperties 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 personalproperties in the Philippines and in various countries of the world.[9]

Executive Order No. 14, on the other hand, empowered thePCGG, with the assistance of the Office of the Solicitor General andother government agencies, inter alia, to file and prosecute all casesinvestigated by it under EO Nos. 1 and 2.

Pursuant to these laws, the PCGG issued and implementednumerous sequestrations, freeze orders and provisional takeovers ofallegedly ill-gotten companies, assets and properties, real or personal.[10]

Among the properties sequestered by the Commission wereshares of stock in the United Coconut Planters Bank (UCPB)registered in the names of the alleged “one million coconut farmers,”the so-called Coconut Industry Investment Fund companies (CIIFcompanies) and Private Respondent Eduardo Cojuangco Jr.(hereinafter “Cojuangco”).

In connection with the sequestration of the said UCPB shares, thePCGG, on July 31, 1987, instituted an action for reconveyance,reversion, accounting, restitution and damages docketed as Case No.0033 in the Sandiganbayan.

On November 15, 1990, upon Motion[11] of Private RespondentCOCOFED, the Sandiganbayan issued a Resolution[12] lifting thesequestration of the subject UCPB shares on the ground that hereinprivate respondents -- in particular, COCOFED and the so-called CIIF

companies – had not been impleaded by the PCGG as parties-defendants in its July 31, 1987 Complaint for reconveyance,reversion, accounting, restitution and damages. The Sandiganbayanruled that the Writ of Sequestration issued by the Commission wasautomatically lifted for PCGG’s failure to commence thecorresponding judicial action within the six-month period ending onAugust 2, 1987 provided under Section 26, Article XVIII of the 1987Constitution. The anti-graft court noted that though these entitieswere listed in an annex appended to the Complaint, they had not beennamed as parties-respondents.

This Sandiganbayan Resolution was challenged by the PCGG in aPetition for Certiorari docketed as GR No. 96073 in this Court. Meanwhile, upon motion of Cojuangco, the anti-graft court ordered theholding of elections for the Board of Directors of UCPB. However, thePCGG applied for and was granted by this Court a Restraining Orderenjoining the holding of the election. Subsequently, the Court liftedthe Restraining Order and ordered the UCPB to proceed with theelection of its board of directors. Furthermore, it allowed thesequestered shares to be voted by their registered owners.

The victory of the registered shareholders was fleeting becausethe Court, acting on the solicitor general’s Motion forClarification/Manifestation, issued a Resolution on February 16, 1993,declaring that “the right of petitioners [herein private respondents] tovote stock in their names at the meetings of the UCPB cannot beconceded at this time. That right still has to be established by thembefore the Sandiganbayan. Until that is done, they cannot be deemedlegitimate owners of UCPB stock and cannot be accorded the right tovote them.”[13] The dispositive portion of the said Resolution reads asfollows:

“IN VIEW OF THE FOREGOING, the Court recalls and sets aside the Resolution dated March 3, 1992 and, pending resolution on the meritsof the action at bar, and until further orders, suspends the effectivity ofthe lifting of the sequestration decreed by the Sandiganbayan on November 15, 1990, and directs the restoration of the status quo ante,so as to allow the PCGG to continue voting the shares of stock under

sequestration at the meetings of the United Coconut Planters Bank.”[14]

On January 23, 1995, the Court rendered its final Decision in GRNo. 96073, nullifying and setting aside the November 15, 1990Resolution of the Sandiganbayan which, as earlier stated, lifted thesequestration of the subject UCPB shares. The express impleading ofherein Respondents COCOFED et al. was deemed unnecessarybecause “the judgment may simply be directed against the shares ofstock shown to have been issued in consideration of ill-gottenwealth.”[15] Furthermore, the companies “are simply the res in theactions for the recovery of illegally acquired wealth, and there is, inprinciple, no cause of action against them and no ground to impleadthem as defendants in said case.”[16]

A month thereafter, the PCGG -- pursuant to an Order of theSandiganbayan -- subdivided Case No. 0033 into eight Complaintsand docketed them as Case Nos. 0033-A to 0033-H.

Six years later, on February 13, 2001, the Board of Directors ofUCPB received from the ACCRA Law Office a letter written on behalfof the COCOFED and the alleged nameless one million coconutfarmers, demanding the holding of a stockholders’ meeting for thepurpose of, among others, electing the board of directors. Inresponse, the board approved a Resolution calling for a stockholders’meeting on March 6, 2001 at three o’clock in the afternoon.

On February 23, 2001, “COCOFED, et al. and Ballares, et al.” filedthe “Class Action Omnibus Motion”[17] referred to earlier inSandiganbayan Civil Case Nos. 0033-A, 0033-B and 0033-F, askingthe court a quo:

“1. To enjoin the PCGG from voting the UCPB shares ofstock registered in the respective names of the more than onemillion coconut farmers; and

“2. To enjoin the PCGG from voting the SMC sharesregistered in the names of the 14 CIIF holding companiesincluding those registered in the name of the PCGG.”[18]

On February 28, 2001, respondent court, after hearing the partieson oral argument, issued the assailed Order.

Hence, this Petition by the Republic of the Philippines representedby the PCGG.[19]

The case had initially been raffled to this Court’s Third Divisionwhich, by a vote of 3-2,[20] issued a Resolution[21] requiring the partiesto maintain the status quo existing before the issuance of thequestioned Sandiganbayan Order dated February 28, 2001. OnMarch 7, 2001, Respondent COCOFED et al. moved that the instantPetition be heard by the Court en banc.[22] The Motion wasunanimously granted by the Third Division.

On March 13, 2001, the Court en banc resolved to accept theThird Division’s referral.[23] It heard the case on Oral Argument inBaguio City on April 17, 2001. During the hearing, it admitted theintervention of a group of coconut farmers and farm workerorganizations, the Pambansang Koalisyon ng mga Samahang Magsasaka at Manggagawa ng Niyugan (PKSMMN). The coalitionclaims that its members have been excluded from the benefits of thecoconut levy fund. Inter alia, it joined petitioner in praying for theexclusion of private respondents in voting the sequestered shares.

Issues

Petitioner submits the following issues for our consideration:[24]

“A.

Despite the fact that the subject sequestered shares were purchased with coconut levy funds (which were declared public in character) and the continuing effectivity of Resolution dated February 16, 1993 in G.R. No. 96073 which allows the PCGG to vote said sequestered shares, Respondent Sandiganbayan, with grave abuse of discretion, issued its Order dated February 28, 2001 enjoining PCGG from votingthe sequestered shares of stock in UCPB.

“B.

The Respondent Sandiganbayan violated petitioner’s right to due process by taking cognizance of the Class Action Omnibus Motion dated 23 February 2001 despite gross lack of sufficient notice and by issuing the writ of preliminary injunction despite the obvious fact that there was no actual pressing necessity or urgency to do so.”

In its Resolution dated April 17, 2001, the Court defined the issueto be resolved in the instant case simply as follows:

“Did the Sandiganbayan commit grave abuse of discretion when itissued the disputed Order allowing respondents to vote UCPB shares of stock registered in the name of respondents?”

This Court’s Ruling

The Petition is impressed with merit.

Main Issue: Who May Vote the Sequestered Shares of Stock?

Simply stated, the gut substantive issue to be resolved in thepresent Petition is: “Who may vote the sequestered UCPB shareswhile the main case for their reversion to the State is pending in theSandiganbayan?”

This Court holds that the government should be allowed tocontinue voting those shares inasmuch as they were purchased withcoconut levy funds -- funds that are prima facie public in character or,at the very least, are “clearly affected with public interest.”

General Rule: Sequestered Shares Are Voted by the Registered Holder

At the outset, it is necessary to restate the general rule that the registered owner of the shares of a corporation exercises the right andthe privilege of voting.[25] This principle applies even to shares that are sequestered by the government, over which the PCGG as a mere conservator cannot, as a general rule, exercise acts of dominion.[26]

On the other hand, it is authorized to vote these sequestered shares registered in the names of private persons and acquired with allegedlyill-gotten wealth, if it is able to satisfy the two-tiered test devised by theCourt in Cojuangco v. Calpo[27] and PCGG v. Cojuangco Jr.,[28] as follows:

(1) Is there prima facie evidence showing that the said shares areill-gotten and thus belong to the State?

(2) Is there an imminent danger of dissipation, thus necessitatingtheir continued sequestration and voting by the PCGG, while the mainissue is pending with the Sandiganbayan?

Sequestered Shares Acquired with Public Funds Are an Exception

From the foregoing general principle, the Court in Baseco v.PCGG[29] (hereinafter “Baseco”) and Cojuangco Jr. v. Roxas[30]

(“Cojuangco-Roxas”) has provided two clear “public character”exceptions under which the government is granted the authority tovote the shares:

(1) Where government shares are taken over by private personsor entities who/which registered them in their own names, and

(2) Where the capitalization or shares that were acquired withpublic funds somehow landed in private hands.

The exceptions are based on the common-sense principle thatlegal fiction must yield to truth; that public property registered in thenames of non-owners is affected with trust relations; and that theprima facie beneficial owner should be given the privilege of enjoyingthe rights flowing from the prima facie fact of ownership.

In Baseco, a private corporation known as the Bataan Shipyardand Engineering Co. was placed under sequestration by the PCGG.Explained the Court:

“The facts show that the corporation known as BASECO was owned and controlled by President Marcos ‘during his administration, throughnominees, 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.”[31]

Given this factual background, the Court discussed PCGG’s rightover BASECO in the following manner:

“Now, in the special instance of a business enterprise shown by evidence to have been ‘taken over by the government of the Marcos Administration or by entities or persons close to former President Marcos,’ the PCGG is given power and authority, as already adverted to, to ‘provisionally take (it) over in the public interest or to prevent * * (its) disposal or dissipation;’ and since the term is obviously employed in reference to going concerns, or business enterprises in operation, something more than mere physical custody is connoted; the PCGG may in this case exercise some measure of control in the operation, running, or management of the business itself.”[32]

Citing an earlier Resolution, it ruled further:

“‘Petitioner has failed to make out a case of grave abuse or excess of jurisdiction in respondents' calling and holding of a stockholders' meeting for the election of directors as authorized by the Memorandum of the President * * (to the PCGG) dated June 26, 1986,particularly, where as in this case, the government can, through its designated directors, properly exercise control and management over what appear to be properties and assets owned and belonging to the government itself and over which the persons who appear in this caseon behalf of BASECO have failed to show any right or even any shareholding in said corporation.”[33] (Italics supplied)

The Court granted PCGG the right to vote the sequestered sharesbecause they appeared to be “assets belonging to the governmentitself.” The Concurring Opinion of Justice Ameurfina A. Melencio-Herrera, in which she was joined by Justice Florentino P. Feliciano,explained this principle as follows:

“I have no objection to according the right to vote sequestered stock incase of a take-over of business actually belonging to the government or whose capitalization comes from public funds but which, somehow,landed in the hands of private persons, as in the case of BASECO. Tomy mind, however, caution and prudence should be exercised in the case of sequestered shares of an on-going private business enterprise, specially the sensitive ones, since the true and real ownership of said shares is yet to be determined and proven more conclusively by the Courts.”[34] (Italics supplied)

The exception was cited again by the Court in Cojuangco-Roxas[35] in this wise:

“The rule in this jurisdiction is, therefore, clear. The PCGG cannot perform acts of strict ownership of sequestered property. It is a mere conservator. It may not vote the shares in a corporation and elect the members of the board of directors. The only conceivable exception isin a case of a takeover of a business belonging to the government or whose capitalization comes from public funds, but which landed in private hands as in BASECO.”[36] (Italics supplied)

The “public character” test was reiterated in many subsequentcases; most recently, in Antiporda v. Sandiganbayan.[37] Expresslyciting Cojuangco-Roxas,[38] this Court said that in determining theissue of whether the PCGG should be allowed to vote sequesteredshares, it was crucial to find out first whether these werepurchased with public funds, as follows:

“It is thus important to determine first if the sequestered corporate shares came from public funds that landed in private hands.”[39]

In short, when sequestered shares registered in the names ofprivate individuals or entities are alleged to have been acquired withill-gotten wealth, then the two-tiered test is applied. However, whenthe sequestered shares in the name of private individuals or entitiesare shown, prima facie, to have been (1) originally governmentshares, or (2) purchased with public funds or those affected withpublic interest, then the two-tiered test does not apply. Rather, the

public character exceptions in Baseco v. PCGG and Cojuangco Jr. v.Roxas prevail; that is, the government shall vote the shares.

UCPB Shares Were Acquired With Coconut Levy Funds

In the present case before the Court, it is not disputed that themoney used to purchase the sequestered UCPB shares came fromthe Coconut Consumer Stabilization Fund (CCSF), otherwise knownas the coconut levy funds.

This fact was plainly admitted by private respondent’s counsel,Atty. Teresita J. Herbosa, during the Oral Arguments held on April 17,2001 in Baguio City, as follows:

“Justice Panganiban:

“In regard to the theory of the Solicitor General that the funds used to purchase [both] the original 28 million and the subsequent 80 million came from the CCSF, Coconut Consumers Stabilization Fund, do you agree with that?

“Atty. Herbosa:

“Yes, Your Honor.

x x x x x x x x x

“Justice Panganiban:

“So it seems that the parties [have] agreed up to that point that the funds used to purchase 72% of the former First United Bank came from the Coconut Consumer Stabilization Fund?

“Atty. Herbosa:

“Yes, Your Honor.”[40]

Indeed in Cocofed v. PCGG,[41] this Court categorically declared thatthe UCPB was acquired “with the use of the Coconut ConsumersStabilization Fund in virtue of Presidential Decree No. 755, promulgated onJuly 29, 1975.”

Coconut Levy Funds Are Affected With Public Interest

Having conclusively shown that the sequestered UCPB shareswere purchased with coconut levies, we hold that these funds andshares are, at the very least, “affected with public interest.”

The Resolution issued by the Court on February 16, 1993 inRepublic v. Sandiganbayan[42] stated that coconut levy funds were“clearly affected with public interest”; thus, herein private respondents– even if they are the registered shareholders – cannot be accordedthe right to vote them. We quote the said Resolution in part, asfollows:

“The coconut levy funds being ‘clearly affected with public interest, it follows that the corporations formed and organized from those funds, and all assets acquired therefrom should also be regarded as ‘clearly affected with public interest.’”[43]

x x x x x x x x x

“Assuming, however, for purposes of argument merely, the lifting of sequestration to be correct, may it also be assumed that the lifting of sequestration removed the character of the coconut levy companies ofbeing affected with public interest, so that they and their stock and assets may now be considered to be of private ownership? May it be assumed that the lifting of sequestration operated to relieve the holders of stock in the coconut levy companies – affected with public interest – of the obligation of proving how that stock had been legitimately transferred to private ownership, or that those stockholders who had had some part in the collection, administration, or disposition of the coconut levy funds are now deemed qualified to acquire said stock, and freed from any doubt or suspicion that they had taken advantage of their special or fiduciary relation with the agencies in charge of the coconut levies and the funds thereby accumulated? The obvious answer to each of the questions is a negative one. It seems plain that the lifting of sequestration has no relevance to the nature of the coconut levy companies or their stock orproperty, or to the legality of the acquisition by private persons of their interest therein, or to the latter’s capacity or disqualification to acquire

stock in the companies or any property acquired from coconut levy funds.

“This being so, the right of the [petitioners] to vote stock in their names at the meetings of the UCPB cannot be conceded at this time. That right still has to be established by them before the Sandiganbayan. Until that is done, they cannot be deemed legitimateowners of UCPB stock and cannot be accorded the right to vote them.”[44] (Italics supplied)

It is however contended by respondents that this Resolution wasin the nature of a temporary restraining order. As such, it wassupposedly interlocutory in character and became functus oficio whenthis Court decided GR No. 96073 on January 23, 1995.

This argument is aptly answered by petitioner in its Memorandum,which we quote:

“The ruling made in the Resolution dated 16 February 1993 confirmingthe public nature of the coconut levy funds and denying claimants their purported right to vote is an affirmation of doctrines laid down in the cases of COCOFED v. PCGG supra, Baseco v. PCGG, supra, and Cojuangco v. Roxas, supra. Therefore it is of no moment that the Resolution dated 16 February 1993 has not been ratified. Its jurisprudential bases remain.” [45] (Italics supplied)

Granting arguendo that the Resolution is interlocutory, the truthremains: the coconut levy funds are still “clearly affected with publicinterest.” That was the truth in 1989 as quoted by this Court in itsFebruary 16, 1993 Resolution, and so it is today. Said the Court in1989:

“The utilization and proper management of the coconut levy funds, raised as they were by the State’s police and taxing powers, are certainly the concern of the Government. It cannot be denied that it was the welfare of the entire nation that provided the prime moving factor for the imposition of the levy. It cannot be denied that the coconut industry is one of the major industries supporting the national

economy. It is, therefore, the State’s concern to make it a strong and secure source not only of the livelihood of a significant segment of the population but also of export earnings the sustained growth of which isone of the imperatives of economic stability. The coconut levy funds are clearly affected with public interest. Until it is demonstrated satisfactorily that they have legitimately become private funds, they must prima facie and by reason of the circumstances in which they were raised and accumulated be accounted subject to the measures prescribed in E.O. Nos. 1, 2, and 14 to prevent their concealment, dissipation, etc., which measures include the sequestration and other orders of the PCGG complained of.”[46] (Italics supplied)

To repeat, the foregoing juridical situation has not changed. It isstill the truth today: “the coconut levy funds are clearly affected withpublic interest.” Private respondents have not “demonstratedsatisfactorily that they have legitimately become private funds.”

If private respondents really and sincerely believed that the finalDecision of the Court in Republic v. Sandiganbayan (GR No. 96073,promulgated on January 23, 1995) granted them the right to vote, whydid they wait for the lapse of six long years before definitivelyasserting it (1) through their letter dated February 13, 2001,addressed to the UCPB Board of Directors, demanding the holding ofa shareholders’ meeting on March 6, 2001; and (2) through theirOmnibus Motion dated February 23, 2001 filed in the court a quo,seeking to enjoin PCGG from voting the subject sequestered sharesduring the said stockholders’ meeting? Certainly, if they even halfbelieved their submission now -- that they already had such right in1995 -- why are they suddenly and imperiously claiming it only now?

It should be stressed at this point that the assailed SandiganbayanOrder dated February 28, 2001 -- allowing private respondents to votethe sequestered shares -- is not based on any finding that the coconutlevies and the shares have “legitimately become private funds.” Neither is it based on the alleged lifting of the TRO issued by thisCourt on February 16, 1993. Rather, it is anchored on the grosslymistaken application of the two-tiered test mentioned earlier in this

Decision.

To stress, the two-tiered test is applied only when the sequesteredasset in the hands of a private person is alleged to have beenacquired with ill-gotten wealth. Hence, in PCGG v. Cojuangco,[47] weallowed Eduardo Cojuangco Jr. to vote the sequestered shares of theSan Miguel Corporation (SMC) registered in his name but alleged tohave been acquired with ill-gotten wealth. We did so on hisrepresentation that he had acquired them with borrowed funds andupon failure of the PCGG to satisfy the “two-tiered” test. This testwas, however, not applied to sequestered SMC shares that werepurchased with coco levy funds.

In the present case, the sequestered UCPB shares are confirmedto have been acquired with coco levies, not with alleged ill-gottenwealth. Hence, by parity of reasoning, the right to vote them is notsubject to the “two-tiered test” but to the public character of theiracquisition, which per Antiporda v. Sandiganbayan cited earlier, mustfirst be determined.

Coconut Levy Funds Are Prima Facie Public Funds

To avoid misunderstanding and confusion, this Court will even bemore categorical and positive than its earlier pronouncements: thecoconut levy funds are not only affected with public interest;they are, in fact, prima facie public funds.

Public funds are those moneys belonging to the State or to anypolitical subdivision of the State; more specifically, taxes, customsduties and moneys raised by operation of law for the support of thegovernment or for the discharge of its obligations.[48] Undeniably,coconut levy funds satisfy this general definition of public funds,because of the following reasons:

1. Coconut levy funds are raised with the use of the police andtaxing powers of the State.

2. They are levies imposed by the State for the benefit of thecoconut industry and its farmers.

3. Respondents have judicially admitted that the sequesteredshares were purchased with public funds.

4. The Commission on Audit (COA) reviews the use of coconutlevy funds.

5. The Bureau of Internal Revenue (BIR), with the acquiescenceof private respondents, has treated them as public funds.

6. The very laws governing coconut levies recognize their publiccharacter.

We shall now discuss each of the foregoing reasons, any one ofwhich is enough to show their public character.

1. Coconut Levy Funds Are Raised Through the State’s Police and Taxing Powers.

Indeed, coconut levy funds partake of the nature of taxes which, ingeneral, are enforced proportional contributions from persons andproperties, exacted by the State by virtue of its sovereignty for thesupport of government and for all public needs.[49]

Based on this definition, a tax has three elements, namely: a) it isan enforced proportional contribution from persons and properties; b)it is imposed by the State by virtue of its sovereignty; and c) it is leviedfor the support of the government. The coconut levy funds fallsquarely into these elements for the following reasons:

(a) They were generated by virtue of statutory enactmentsimposed on the coconut farmers requiring the payment of prescribedamounts. Thus, PD No. 276, which created the Coconut ConsumerStabilization Fund (CCSF), mandated the following:

“a. A levy, initially, of P15.00 per 100 kilograms of copra resecada or its equivalent in other coconut products, shall be imposed on every first sale, in accordance with the mechanics established under RA 6260, effective at the start of business hours on August 10, 1973.

“The proceeds from the levy shall be deposited with the Philippine National Bank or any other government bank to the account of the

Coconut Consumers Stabilization Fund, as a separate trust fund which shall not form part of the general fund of the government.”[50]

The coco levies were further clarified in amendatory laws,specifically PD No. 961[51] and PD No. 1468[52] -- in this wise:

“The Authority (Philippine Coconut Authority) is hereby empowered to impose and collect a levy, to be known as the Coconut Consumers Stabilization Fund Levy, on every one hundred kilos of copra resecada, or its equivalent in other coconut products delivered to, and/or purchased by, copra exporters, oil millers, desiccators and other end-users of copra or its equivalent in other coconut products. The levy shall be paid by such copra exporters, oil millers, desiccatorsand other end-users of copra or its equivalent in other coconut products under such rules and regulations as the Authority may prescribe. Until otherwise prescribed by the Authority, the current levybeing collected shall be continued.”[53]

Like other tax measures, they were not voluntary payments ordonations by the people. They were enforced contributions exactedon pain of penal sanctions, as provided under PD No. 276:

“3. Any person or firm who violates any provision of this Decree or the rules and regulations promulgated thereunder, shall, in addition to penalties already prescribed under existing administrative and special law, pay a fine of not less than P2,500 or more than P10,000, or suffercancellation of licenses to operate, or both, at the discretion of the Court.”[54]

Such penalties were later amended thus:

“Whenever any person or entity willfully and deliberately violates any of the provisions of this Act, or any rule or regulation legally promulgated hereunder by the Authority, the person or persons responsible for such violation shall be punished by a fine of not more than P20,000.00 and by imprisonment of not more than five years. If the offender be a corporation, partnership or a juridical person, the penalty shall be imposed on the officer or officers authorizing,

permitting or tolerating the violation. Aliens found guilty of any offenses shall, after having served his sentence, be immediately deported and, in the case of a naturalized citizen, his certificate of naturalization shall be cancelled.”[55]

(b) The coconut levies were imposed pursuant to the laws enactedby the proper legislative authorities of the State. Indeed, the CCSFwas collected under PD No. 276, issued by former PresidentFerdinand E. Marcos who was then exercising legislative powers.[56]

(c) They were clearly imposed for a public purpose. There isabsolutely no question that they were collected to advance thegovernment’s avowed policy of protecting the coconut industry. ThisCourt takes judicial notice of the fact that the coconut industry is oneof the great economic pillars of our nation, and coconuts and theirbyproducts occupy a leading position among the country’s exportproducts; that it gives employment to thousands of Filipinos; that it is agreat source of the State’s wealth; and that it is one of the importantsources of foreign exchange needed by our country and, thus, pivotalin the plans of a government committed to a policy of currencystability.

Taxation is done not merely to raise revenues to support thegovernment, but also to provide means for the rehabilitation and thestabilization of a threatened industry, which is so affected with publicinterest as to be within the police power of the State, as held in CaltexPhilippines v. COA[57] and Osmeña v. Orbos.[58]

Even if the money is allocated for a special purpose and raised byspecial means, it is still public in character. In the case before us, thefunds were even used to organize and finance State offices. InCocofed v. PCGG,[59] the Court observed that certain agencies orenterprises “were organized and financed with revenues derived fromcoconut levies imposed under a succession of laws of the latedictatorship x x x with deposed Ferdinand Marcos and his cronies asthe suspected authors and chief beneficiaries of the resulting coconutindustry monopoly.”[60] The Court continued: “x x x. It cannot bedenied that the coconut industry is one of the major industries

supporting the national economy. It is, therefore, the State’s concernto make it a strong and secure source not only of the livelihood of asignificant segment of the population, but also of export earnings thesustained growth of which is one of the imperatives of economicstability. x x x.”[61]

2. Coconut Funds Are Levied for the Benefit of the Coconut Industry and Its Farmers.

Just like the sugar levy funds, the coconut levy funds constitutestate funds even though they may be held for a special publicpurpose.

In fact, Executive Order No. 481 dated May 1, 1998 specificallylikens the coconut levy funds to the sugar levy funds, both beingspecial public funds acquired through the taxing and policepowers of the State. The sugar levy funds, which are strikinglysimilar to the coconut levies in their imposition and purpose, weredeclared public funds by this Court in Gaston v. Republic PlantersBank,[62] from which we quote:

“The stabilization fees collected are in the nature of a tax which is within the power of the State to impose for the promotion of the sugar industry (Lutz vs. Araneta, 98 Phil. 148). They constitute sugar liens (Sec. 7[b], P.D. No. 388). The collections made accrue to a ‘Special Fund,’ a ‘Development and Stabilization Fund,’ almost identical to the ‘Sugar Adjustment and Stabilization Fund’ created under Section 6 of Commonwealth Act 567. The tax collected is not in a pure exercise ofthe taxing power. It is levied with a regulatory purpose, to provide means for the stabilization of the sugar industry. The levy is primarily in the exercise of the police power of the State. (Lutz vs. Araneta, supra.).”[63]

The Court further explained:[64]

“The stabilization fees in question are levied by the State upon sugar millers, planters and producers for a special purpose – that of ‘financing the growth and development of the sugar industry and all its

components, stabilization of the domestic market including the foreign market.’ The fact that the State has taken possession of moneys pursuant to law is sufficient to constitute them as state funds, even though they are held for a special purpose (Lawrence v. American Surety Co., 263 Mich 586. 294 ALR 535, cited in 42 Am. Jur., Sec. 2., p. 718). Having been levied for a special purpose, the revenues collected are to be treated as a special fund, to be, in the language of the statute, ‘administered in trust’ for the purpose intended. Once the purpose has been fulfilled or abandoned, the balance, if any, is to be transferred to the general funds of the Government. That is the essence of the trust intended (see 1987 Constitution, Art. VI, Sec. 29[3], lifted from the 1935 Constitution, Article VI, Sec. 23[1]. (Italics supplied)

“The character of the Stabilization Fund as a special fund is emphasized by the fact that the funds are deposited in the Philippine National Bank and not in the Philippine Treasury, moneys from which may be paid out only in pursuance of an appropriation made by law (1987 Constitution, Article VI, Sec. 29[1], 1973 Constitution, Article VIII, Sec. 18[1]).

“That the fees were collected from sugar producers, planters and millers, and that the funds were channeled to the purchase of shares of stock in respondent Bank do not convert the funds into a trust fund for their benefit nor make them the beneficial owners of the shares so purchased. It is but rational that the fees be collected from them since it is also they who are to be benefited from the expenditure of the funds derived from it. The investment in shares of respondent Bank isnot alien to the purpose intended because of the Bank’s character as a commodity bank for sugar conceived for the industry’s growth and development. Furthermore, of note is the fact that one-half (1/2) or P0.50 per picul, of the amount levied under P.D. No. 388 is to be utilized for the ‘payment of salaries and wages of personnel, fringe benefits and allowances of officers and employees of PHILSUCOM’ thereby immediately negating the claim that the entire amount levied is in trust for sugar, producers, planters and millers.

“To rule in petitioners’ favor would contravene the general principle that revenues derived from taxes cannot be used for purely private purposes or for the exclusive benefit of private persons. The Stabilization Fund is to be utilized for the benefit of the entire sugar industry, ‘and all its components, stabilization of the domestic market including the foreign market,’ the industry being of vital importance to the country’s economy and to national interest.”

In the same manner, this Court has also ruled that the oilstabilization funds were public in character and subject to audit byCOA. It ruled in this wise:

“Hence, it seems clear that while the funds collected may be referred to as taxes, they are exacted in the exercise of the police power of theState. Moreover, that the OPSF is a special fund is plain from the special treatment given it by E.O. 137. It is segregated from the general fund; and while it is placed in what the law refers to as a ‘trust liability account,’ the fund nonetheless remains subject to the scrutiny and review of the COA. The Court is satisfied that these measures comply with the constitutional description of a ‘special fund.’ Indeed, the practice is not without precedent.”[65]

In his Concurring Opinion in Kilosbayan v. Guingona,[66] JusticeFlorentino P. Feliciano explained that the funds raised by the On-lineLottery System were also public in nature. In his words:

“x x x. In the case presently before the Court, the funds involved are clearly public in nature. The funds to be generated by the proposed lottery are to be raised from the population at large. Should the proposed operation be as successful as its proponents project, those funds will come from well-nigh every town and barrio of Luzon. The funds here involved are public in another very real sense: they will belong to the PCSO, a government owned or controlled corporation and an instrumentality of the government and are destined for utilization in social development projects which, at least in principle, are designed to benefit the general public. x x x. The interest of a private citizen in seeing to it that public funds, from whatever source they may have been derived, go only to the uses directed and

permitted by law is as real and personal and substantial as the interest of a private taxpayer in seeing to it that tax monies are not intercepted on their way to the public treasury or otherwise diverted from uses prescribed or allowed by law. It is also pertinent to note that the more successful the government is in raising revenues by non-traditional methods such as PAGCOR operations and privatization measures, the lesser will be the pressure upon the traditional sources of public revenues, i.e., the pocket books of individual taxpayers and importers.”[67]

Thus, the coconut levy funds -- like the sugar levy and the oilstabilization funds, as well as the monies generated by the On-lineLottery System -- are funds exacted by the State. Being enforcedcontributions, they are prima facie public funds.

3. Respondents Judicially Admit That the Levies Are GovernmentFunds.

Equally important as the fact that the coconut levy funds wereraised through the taxing and police powers of the State isrespondents’ effective judicial admission that these levies aregovernment funds. As shown by the attachments to their pleadings,[68] respondents concede that the Coconut Consumers StabilizationFund (CCSF) and the Coconut Investment Development Fund“constitute government funds x x x for the benefit of coconut farmers.”

“Collections on both levies constitute government funds. However, unlike other taxes that the Government levies and collects such as income tax, tariff and customs duties, etc., the collections on the CCSF and CIDF are, by express provision of the laws imposing them, for a definite purpose, not just for any governmental purpose. As stated above part of the collections on the CCSF levy should be spentfor the benefit of the coconut farmers. And in respect of the collections on the CIDF levy, P.D. 582 mandatorily requires that the same should be spent exclusively for the establishment, operation andmaintenance of a hybrid coconut seed garden and the distribution, for free, to the coconut farmers of the hybrid coconut seednuts produced

from that seed garden.

“On the other hand, the laws which impose special levies on specific industries, for example on the mining industry, sugar industry, timber industry, etc., do not, by their terms, expressly require that the collections on those levies be spent exclusively for the benefit of the industry concerned. And if the enabling law thus so provide, the fact remains that the governmental agency entrusted with the duty of implementing the purpose for which the levy is imposed is vested with the discretionary power to determine when and how the collections should be appropriated.”[69]

4. The COA Audit Shows the Public Nature of the Funds.

Under COA Office Order No. 86-9470 dated April 15, 1986,[70] theCOA reviewed the expenditure and use of the coconut levies allocatedfor the acquisition of the UCPB. The audit was aimed at ascertainingwhether these were utilized for the purpose for which they had beenintended.[71] Under the 1987 Constitution, the powers of the COA areas follows:

“The Commission on Audit shall have the power, authority, and duty toexamine, audit, and settle all accounts pertaining to the revenue and receipts of, and expenditures or uses of funds and property, owned or held in trust by, or pertaining to, the Government, or any of its subdivisions, agencies, or instrumentalities x x x.”[72]

Because these funds have been subjected to COA audit, therecan be no other conclusion than that they are prima facie public incharacter.

5. The BIR Has Pronounced That the Coconut Levy Funds Are Taxes.

In response to a query posed by the administrator of the PhilippineCoconut Authority regarding the character of the coconut levy funds,the Bureau of Internal Revenue has affirmed that these funds are

public in character. It held as follows: “[T]he coconut levy is not apublic trust fund for the benefit of the coconut farmers, but is in thenature of a tax and, therefore, x x x public funds that are subject togovernment administration and disposition.”[73]

Furthermore, the executive branch treats the coconut levies aspublic funds. Thus, Executive Order No. 277, issued on September24, 1995, directed the mode of treatment, utilization, administrationand management of the coconut levy funds. It provided as follows:

‘(a) The coconut levy funds, which include all income, interests, proceeds or profits derived therefrom, as well as all assets, properties and shares of stocks procured or obtained with the use of such funds, shall be treated, utilized, administered and managed as public funds consistent with the uses and purposes under the laws which constituted them and the development priorities of the government, including the government’s coconut productivity, rehabilitation, research extension, farmers organizations, and market promotions programs, which are designed to advance the development of the coconut industry and the welfare of the coconut farmers.”[74] (Italics supplied)

Doctrinally, acts of the executive branch are prima facie valid andbinding, unless declared unconstitutional or contrary to law.

6. Laws Governing Coconut Levies Recognize Their Public Nature.

Finally and tellingly, the very laws governing the coconut leviesrecognize their public character. Thus, the third Whereas clause ofPD No. 276 treats them as special funds for a specific public purpose. Furthermore, PD No. 711 transferred to the general funds of the Stateall existing special and fiduciary funds including the CCSF. On theother hand, PD No. 1234 specifically declared the CCSF as a specialfund for a special purpose, which should be treated as a specialaccount in the National Treasury.

Moreover, even President Marcos himself, as the sole

legislative/executive authority during the martial law years, struck offthe phrase which is a private fund of the coconut farmers from theoriginal copy of Executive Order No. 504 dated May 31, 1978, and wequote:

“WHEREAS, by means of the Coconut Consumers Stabilization Fund (‘CCSF’), which is the private fund of the coconut farmers (deleted), essential coconut-based products are made available to household consumers at socialized prices.” (Emphasis supplied)

The phrase in bold face -- which is the private fund of thecoconut farmers -- was crossed out and duly initialed by its author,former President Marcos. This deletion, clearly visible in “AttachmentC” of petitioner’s Memorandum,[75] was a categorical legislative intentto regard the CCSF as public, not private, funds.

Having Been Acquired With Public Funds, UCPB Shares Belong, Prima Facie, to the Government

Having shown that the coconut levy funds are not only affectedwith public interest, but are in fact prima facie public funds, this Courtbelieves that the government should be allowed to vote thequestioned shares, because they belong to it as the prima faciebeneficial and true owner.

As stated at the beginning, voting is an act of dominion that shouldbe exercised by the share owner. One of the recognized rights of anowner is the right to vote at meetings of the corporation. The right tovote is classified as the right to control.[76] Voting rights may be for thepurpose of, among others, electing or removing directors, amending acharter, or making or amending bylaws.[77] Because the subject UCPBshares were acquired with government funds, the governmentbecomes their prima facie beneficial and true owner.

Ownership includes the right to enjoy, dispose of, exclude andrecover a thing without limitations other than those established by lawor by the owner.[78] Ownership has been aptly described as the mostcomprehensive of all real rights.[79] And the right to vote shares is a

mere incident of ownership. In the present case, the government hasbeen shown to be the prima facie owner of the funds used topurchase the shares. Hence, it should be allowed the rights andprivileges flowing from such fact.

And paraphrasing Cocofed v. PCGG, already cited earlier, theRepublic should continue to vote those shares until and unless privaterespondents are able to demonstrate, in the main cases pendingbefore the Sandiganbayan, that “they [the sequestered UCPB shares]have legitimately become private.”

Procedural and Incidental Issues: Grave Abuse of Discretion,Improper Arguments and Intervenors’ Relief

Procedurally, respondents argue that petitioner has failed todemonstrate that the Sandiganbayan committed grave abuse ofdiscretion, a demonstration required in every petition under Rule 65.[80]

We disagree. We hold that the Sandiganbayan gravely abused itsdiscretion when it contravened the rulings of this Court in Baseco andCojuangco-Roxas -- thereby unlawfully, capriciously and arbitrarilydepriving the government of its right to vote sequestered sharespurchased with coconut levy funds which are prima facie public funds.

Indeed, grave abuse of discretion may arise when a lower court ortribunal violates or contravenes the Constitution, the law or existingjurisprudence. In one case,[81] this Court ruled that the lower court’sresolution was “tantamount to overruling a judicial pronouncement ofthe highest Court x x x and unmistakably a very grave abuse ofdiscretion.”[82]

The Public Character of Shares Is a Valid Issue

Private respondents also contend that the public nature of thecoconut levy funds was not raised as an issue before theSandiganbayan. Hence, it could not be taken up before this Court.

Again we disagree. By ruling that the two-tiered test should be

applied in evaluating private respondents’ claim of exercising votingrights over the sequestered shares, the Sandiganbayan effectivelyheld that the subject assets were private in character. Thus, to meetthis issue, the Office of the Solicitor General countered that the shareswere not private in character, and that quite the contrary, they wereand are public in nature because they were acquired with coco levyfunds which are public in character. In short, the main issue of whomay vote the shares cannot be determined without passing upon thequestion of the public/private character of the shares and the fundsused to acquire them. The latter issue, although not specificallyraised in the Court a quo, should still be resolved in order to fullyadjudicate the main issue.

Indeed, this Court has “the authority to waive the lack of properassignment of errors if the unassigned errors closely relate to errorsproperly pinpointed out or if the unassigned errors refer to mattersupon which the determination of the questions raised by the errorsproperly assigned depend.”[83]

Therefore, “where the issues already raised also rest on otherissues not specifically presented as long as the latter issues bearrelevance and close relation to the former and as long as they arisefrom matters on record, the Court has the authority to include them inits discussion of the controversy as well as to pass upon them.”[84]

No Positive Relief For Intervenors

Intervenors anchor their interest in this case on an alleged rightthat they are trying to enforce in another Sandiganbayan casedocketed as SB Case No. 0187.[85] In that case, they seek therecovery of the subject UCPB shares from herein private respondentsand the corporations controlled by them. Therefore, the rights soughtto be protected and the reliefs prayed for by intervenors are still beinglitigated in the said case. The purported rights they are invoking aremere expectancies wholly dependent on the outcome of that case inthe Sandiganbayan.

Clearly, we cannot rule on intervenors’ alleged right to vote at this

time and in this case. That right is dependent upon theSandiganbayan’s resolution of their action for the recovery of saidsequestered shares. Given the patent fact that intervenors are notregistered stockholders of UCPB as of the moment, their assertedrights cannot be ruled upon in the present proceedings. Hence, nopositive relief can be given them now, except insofar as they joinpetitioner in barring private respondents from voting the subjectshares.

Epilogue

In sum, we hold that the Sandiganbayan committed grave abuseof discretion in grossly contradicting and effectively reversing existingjurisprudence, and in depriving the government of its right to vote thesequestered UCPB shares which are prima facie public in character.

In making this ruling, we are in no way preempting theproceedings the Sandiganbayan may conduct or the final judgment itmay promulgate in Civil Case Nos. 0033-A, 0033-B and 0033-F. Ourdetermination here is merely prima facie, and should not bar the anti-graft court from making a final ruling, after proper trial and hearing, onthe issues and prayers in the said civil cases, particularly in referenceto the ownership of the subject shares.

We also lay down the caveat that, in declaring the coco levy fundsto be prima facie public in character, we are not ruling in any finalmanner on their classification -- whether they are general or trust orspecial funds -- since such classification is not at issue here. Suffice itto say that the public nature of the coco levy funds is decreed by theCourt only for the purpose of determining the right to vote the shares,pending the final outcome of the said civil cases.

Neither are we resolving in the present case the question ofwhether the shares held by Respondent Cojuangco are, as he claims,the result of private enterprise. This factual matter should also betaken up in the final decision in the cited cases that are pending in thecourt a quo. Again suffice it to say that the only issue settled here isthe right of PCGG to vote the sequestered shares, pending the final

outcome of said cases.

This matter involving the coconut levy funds and the sequesteredUCPB shares has been straddling the courts for about 15 years. What we are discussing in the present Petition, we stress, is just anincident of the main cases which are pending in the anti-graft court --the cases for the reconveyance, reversion and restitution to the Stateof these UCPB shares.

The resolution of the main cases has indeed been long overdue. Every effort, both by the parties and the Sandiganbayan, should beexerted to finally settle this controversy.

WHEREFORE, the Petition is hereby GRANTED and the assailedOrder SET ASIDE. The PCGG shall continue voting the sequesteredshares until Sandiganbayan Civil Case Nos. 0033-A, 0033-B and0033-F are finally and completely resolved. Furthermore, theSandiganbayan is ORDERED to decide with finality the aforesaid civilcases within a period of six (6) months from notice. It shall report tothis Court on the progress of the said cases every three (3) months,on pain of contempt. The Petition in Intervention is DISMISSEDinasmuch as the reliefs prayed for are not covered by the main issuesin this case. No costs.

SO ORDERED.

FIRST DIVISION

[G.R. No. 150793. November 19, 2004]

FRANCIS CHUA, petitioner, vs. HON. COURT OFAPPEALS and LYDIA C. HAO, respondents.

D E C I S I O NQUISUMBING, J.:

Petitioner assails the Decision,[1] dated June 14, 2001, of theCourt of Appeals in CA-G.R. SP No. 57070, affirming the Order, datedOctober 5, 1999, of the Regional Trial Court (RTC) of Manila, Branch19. The RTC reversed the Order, dated April 26, 1999, of theMetropolitan Trial Court (MeTC) of Manila, Branch 22. Alsochallenged by herein petitioner is the CA Resolution,[2] datedNovember 20, 2001, denying his Motion for Reconsideration.

The facts, as culled from the records, are as follows:

On February 28, 1996, private respondent Lydia Hao, treasurer ofSiena Realty Corporation, filed a complaint-affidavit with the CityProsecutor of Manila charging Francis Chua and his wife, Elsa Chua,of four counts of falsification of public documents pursuant to Article172[3] in relation to Article 171[4] of the Revised Penal Code. Thecharge reads:

That on or about May 13, 1994, in the City of Manila, Philippines, the said accused, being then a private individual, did then and there willfully, unlawfully and feloniously commit acts of falsification upon a public document, to wit: the said accused prepared, certified, and falsified the Minutes of the Annual Stockholders meeting of the Board of Directors of the Siena Realty Corporation, duly notarized before a Notary Public, Atty. Juanito G. Garcia and entered in his Notarial Registry as Doc No. 109, Page 22, Book No. IV and Series of 1994, and therefore, a public document, by making or causing it to appear in

said Minutes of the Annual Stockholders Meeting that one LYDIA HAOCHUA was present and has participated in said proceedings, when in truth and in fact, as the said accused fully well knew that said Lydia C.Hao was never present during the Annual Stockholders Meeting held on April 30, 1994 and neither has participated in the proceedings thereof to the prejudice of public interest and in violation of public faithand destruction of truth as therein proclaimed.

CONTRARY TO LAW.[5]

Thereafter, the City Prosecutor filed the Information docketed asCriminal Case No. 285721[6] for falsification of public document,before the Metropolitan Trial Court (MeTC) of Manila, Branch 22,against Francis Chua but dismissed the accusation against ElsaChua.

Herein petitioner, Francis Chua, was arraigned and trial ensuedthereafter.

During the trial in the MeTC, private prosecutors Atty. Evelyn Sua-Kho and Atty. Ariel Bruno Rivera appeared as private prosecutors andpresented Hao as their first witness.

After Hao’s testimony, Chua moved to exclude complainant’scounsels as private prosecutors in the case on the ground that Haofailed to allege and prove any civil liability in the case.

In an Order, dated April 26, 1999, the MeTC granted Chua’smotion and ordered the complainant’s counsels to be excluded fromactively prosecuting Criminal Case No. 285721. Hao moved forreconsideration but it was denied.

Hence, Hao filed a petition for certiorari docketed as SCA No. 99-94846,[7] entitled Lydia C. Hao, in her own behalf and for the benefit ofSiena Realty Corporation v. Francis Chua, and the Honorable Hipolitodela Vega, Presiding Judge, Branch 22, Metropolitan Trial Court ofManila, before the Regional Trial Court (RTC) of Manila, Branch 19.

The RTC gave due course to the petition and on October 5, 1999,the RTC in an order reversed the MeTC Order. The dispositive portion

reads:

WHEREFORE, the petition is GRANTED. The respondent Court is ordered to allow the intervention of the private prosecutors in behalf ofpetitioner Lydia C. Hao in the prosecution of the civil aspect of Crim. Case No. 285721, before Br. 22 [MeTC], Manila, allowing Attys. Evelyn Sua-Kho and Ariel Bruno Rivera to actively participate in the proceedings.

SO ORDERED.[8]

Chua moved for reconsideration which was denied.

Dissatisfied, Chua filed before the Court of Appeals a petition forcertiorari. The petition alleged that the lower court acted with graveabuse of discretion in: (1) refusing to consider material facts; (2)allowing Siena Realty Corporation to be impleaded as co-petitioner inSCA No. 99-94846 although it was not a party to the criminalcomplaint in Criminal Case No. 285721; and (3) effectively amendingthe information against the accused in violation of his constitutionalrights.

On June 14, 2001, the appellate court promulgated its assailedDecision denying the petition, thus:

WHEREFORE, premises considered, the petition is hereby DENIED DUE COURSE and DISMISSED. The Order, dated October 5, 1999 as well as the Order, dated December 3, 1999, are hereby AFFIRMEDin toto.

SO ORDERED.[9]

Petitioner had argued before the Court of Appeals that respondenthad no authority whatsoever to bring a suit in behalf of theCorporation since there was no Board Resolution authorizing her tofile the suit.

For her part, respondent Hao claimed that the suit was broughtunder the concept of a derivative suit. Respondent maintained that

when the directors or trustees refused to file a suit even when therewas a demand from stockholders, a derivative suit was allowed.

The Court of Appeals held that the action was indeed a derivativesuit, for it alleged that petitioner falsified documents pertaining toprojects of the corporation and made it appear that the petitioner wasa stockholder and a director of the corporation. According to theappellate court, the corporation was a necessary party to the petitionfiled with the RTC and even if private respondent filed the criminalcase, her act should not divest the Corporation of its right to be a partyand present its own claim for damages.

Petitioner moved for reconsideration but it was denied in aResolution dated November 20, 2001.

Hence, this petition alleging that the Court of Appeals committedreversible errors:

I. … IN RULING THAT LYDIA HAO’S FILING OF CRIMINALCASE NO. 285721 WAS IN THE NATURE OF A DERIVATIVESUIT

II. … IN UPHOLDING THE RULING OF JUDGE DAGUNA THATSIENA REALTY WAS A PROPER PETITIONER IN SCA NO.[99-94846]

III. … IN UPHOLDING JUDGE DAGUNA’S DECISIONALLOWING LYDIA HAO’S COUNSEL TO CONTINUE ASPRIVATE PROSECUTORS IN CRIMINAL CASE NO. 285721

IV. … IN [OMITTING] TO CONSIDER AND RULE UPON THEISSUE THAT JUDGE DAGUNA ACTED IN GRAVE ABUSE OFDISCRETION IN NOT DISMISSING THE PETITION IN SCANO. [99-94846] FOR BEING A SHAM PLEADING.[10]

The pertinent issues in this petition are the following: (1) Is thecriminal complaint in the nature of a derivative suit? (2) Is SienaRealty Corporation a proper petitioner in SCA No. 99-94846? and (3)Should private prosecutors be allowed to actively participate in thetrial of Criminal Case No. 285721.

On the first issue, petitioner claims that the Court of Appeals erred

when (1) it sustained the lower court in giving due course torespondent’s petition in SCA No. 99-94846 despite the fact that theCorporation was not the private complainant in Criminal Case No.285721, and (2) when it ruled that Criminal Case No. 285721 was inthe nature of a derivative suit.

Petitioner avers that a derivative suit is by nature peculiar only tointra-corporate proceedings and cannot be made part of a criminalaction. He cites the case of Western Institute of Technology, Inc. v.Salas,[11] where the court said that an appeal on the civil aspect of acriminal case cannot be treated as a derivative suit. Petitioner assertsthat in this case, the civil aspect of a criminal case cannot be treatedas a derivative suit, considering that Siena Realty Corporation was notthe private complainant.

Petitioner misapprehends our ruling in Western Institute. In thatcase, we said:

Here, however, the case is not a derivative suit but is merely an appeal on the civil aspect of Criminal Cases Nos. 37097 and 37098 filed with the RTC of Iloilo for estafa and falsification of public document. Among the basic requirements for a derivative suit to prosper is that the minority shareholder who is suing for and on behalfof the corporation must allege in his complaint before the proper forumthat he is suing on a derivative cause of action on behalf of the corporation and all other shareholders similarly situated who wish to join. . . .This was not complied with by the petitioners either in their complaint before the court a quo nor in the instant petition which, in part, merely states that “this is a petition for review on certiorari on pure questions of law to set aside a portion of the RTC decision in Criminal Cases Nos. 37097 and 37098” since the trial court’s judgment of acquittal failed to impose civil liability against the private respondents. By no amount of equity considerations, if at all deserved,can a mere appeal on the civil aspect of a criminal case be treated as a derivative suit.[12]

Moreover, in Western Institute, we said that a mere appeal in thecivil aspect cannot be treated as a derivative suit because the appeal

lacked the basic requirement that it must be alleged in the complaintthat the shareholder is suing on a derivative cause of action for and inbehalf of the corporation and other shareholders who wish to join.

Under Section 36[13] of the Corporation Code, read in relation toSection 23,[14] where a corporation is an injured party, its power to sueis lodged with its board of directors or trustees.[15] An individualstockholder is permitted to institute a derivative suit on behalf of thecorporation wherein he holds stocks in order to protect or vindicatecorporate rights, whenever the officials of the corporation refuse tosue, or are the ones to be sued, or hold the control of the corporation.In such actions, the suing stockholder is regarded as a nominal party,with the corporation as the real party in interest.[16]

A derivative action is a suit by a shareholder to enforce acorporate cause of action. The corporation is a necessary party to thesuit. And the relief which is granted is a judgment against a thirdperson in favor of the corporation. Similarly, if a corporation has adefense to an action against it and is not asserting it, a stockholdermay intervene and defend on behalf of the corporation.[17]

Under the Revised Penal Code, every person criminally liable fora felony is also civilly liable.[18] When a criminal action is instituted, thecivil action for the recovery of civil liability arising from the offensecharged shall be deemed instituted with the criminal action, unless theoffended party waives the civil action, reserves the right to institute itseparately or institutes the civil action prior to the criminal action.[19]

In Criminal Case No. 285721, the complaint was instituted byrespondent against petitioner for falsifying corporate documentswhose subject concerns corporate projects of Siena RealtyCorporation. Clearly, Siena Realty Corporation is an offended party.Hence, Siena Realty Corporation has a cause of action. And the civilcase for the corporate cause of action is deemed instituted in thecriminal action.

However, the board of directors of the corporation in this case didnot institute the action against petitioner. Private respondent was theone who instituted the action. Private respondent asserts that she filed

a derivative suit in behalf of the corporation. This assertion isinaccurate. Not every suit filed in behalf of the corporation is aderivative suit. For a derivative suit to prosper, it is required that theminority stockholder suing for and on behalf of the corporation mustallege in his complaint that he is suing on a derivative cause of actionon behalf of the corporation and all other stockholders similarlysituated who may wish to join him in the suit.[20] It is a condition sinequa non that the corporation be impleaded as a party because notonly is the corporation an indispensable party, but it is also the presentrule that it must be served with process. The judgment must be madebinding upon the corporation in order that the corporation may get thebenefit of the suit and may not bring subsequent suit against the samedefendants for the same cause of action. In other words, thecorporation must be joined as party because it is its cause of actionthat is being litigated and because judgment must be a res adjudicataagainst it.[21]

In the criminal complaint filed by herein respondent, nowhere is itstated that she is filing the same in behalf and for the benefit of thecorporation. Thus, the criminal complaint including the civil aspectthereof could not be deemed in the nature of a derivative suit.

We turn now to the second issue, is the corporation a proper partyin the petition for certiorari under Rule 65 before the RTC? Note thatthe case was titled “Lydia C. Hao, in her own behalf and for thebenefit of Siena Realty Corporation v. Francis Chua, and theHonorable Hipolito dela Vega, Presiding Judge, Branch 22,Metropolitan Trial Court of Manila.” Petitioner before us now claimsthat the corporation is not a private complainant in Criminal Case No.285721, and thus cannot be included as appellant in SCA No. 99-94846.

Petitioner invokes the case of Ciudad Real & Dev’t. Corporation v.Court of Appeals.[22] In Ciudad Real, it was ruled that the Court ofAppeals committed grave abuse of discretion when it upheld thestanding of Magdiwang Realty Corporation as a party to the petitionfor certiorari, even though it was not a party-in-interest in the civil casebefore the lower court.

In the present case, respondent claims that the complaint wasfiled by her not only in her personal capacity, but likewise for thebenefit of the corporation. Additionally, she avers that she hasexhausted all remedies available to her before she instituted the case,not only to claim damages for herself but also to recover the damagescaused to the company.

Under Rule 65 of the Rules of Civil Procedure,[23] when a trialcourt commits a grave abuse of discretion amounting to lack orexcess of jurisdiction, the person aggrieved can file a special civilaction for certiorari. The aggrieved parties in such a case are theState and the private offended party or complainant.[24]

In a string of cases, we consistently ruled that only a party-in-interest or those aggrieved may file certiorari cases. It is settled thatthe offended parties in criminal cases have sufficient interest andpersonality as “person(s) aggrieved” to file special civil action ofprohibition and certiorari.[25]

In Ciudad Real, cited by petitioner, we held that the appellate courtcommitted grave abuse of discretion when it sanctioned the standingof a corporation to join said petition for certiorari, despite the finality ofthe trial court’s denial of its Motion for Intervention and the subsequentMotion to Substitute and/or Join as Party/Plaintiff.

Note, however, that in Pastor, Jr. v. Court of Appeals[26] we heldthat if aggrieved, even a non-party may institute a petition forcertiorari. In that case, petitioner was the holder in her own right ofthree mining claims and could file a petition for certiorari, the fastestand most feasible remedy since she could not intervene in the probateof her father-in-law’s estate.[27]

In the instant case, we find that the recourse of the complainant tothe respondent Court of Appeals was proper. The petition wasbrought in her own name and in behalf of the Corporation. Although,the corporation was not a complainant in the criminal action, thesubject of the falsification was the corporation’s project and thefalsified documents were corporate documents. Therefore, thecorporation is a proper party in the petition for certiorari because the

proceedings in the criminal case directly and adversely affected thecorporation.

We turn now to the third issue. Did the Court of Appeals and thelower court err in allowing private prosecutors to actively participate inthe trial of Criminal Case No. 285721?

Petitioner cites the case of Tan, Jr. v. Gallardo,[28] holding thatwhere from the nature of the offense or where the law defining andpunishing the offense charged does not provide for an indemnity, theoffended party may not intervene in the prosecution of the offense.

Petitioner’s contention lacks merit. Generally, the basis of civilliability arising from crime is the fundamental postulate that every mancriminally liable is also civilly liable. When a person commits a crimehe offends two entities namely (1) the society in which he lives in orthe political entity called the State whose law he has violated; and (2)the individual member of the society whose person, right, honor,chastity or property has been actually or directly injured or damagedby the same punishable act or omission. An act or omission isfelonious because it is punishable by law, it gives rise to civil liabilitynot so much because it is a crime but because it caused damage toanother. Additionally, what gives rise to the civil liability is really theobligation and the moral duty of everyone to repair or make whole thedamage caused to another by reason of his own act or omission,whether done intentionally or negligently. The indemnity which aperson is sentenced to pay forms an integral part of the penaltyimposed by law for the commission of the crime.[29] The civil actioninvolves the civil liability arising from the offense charged whichincludes restitution, reparation of the damage caused, andindemnification for consequential damages.[30]

Under the Rules, where the civil action for recovery of civil liabilityis instituted in the criminal action pursuant to Rule 111, the offendedparty may intervene by counsel in the prosecution of the offense.[31]

Rule 111(a) of the Rules of Criminal Procedure provides that, “[w]hena criminal action is instituted, the civil action arising from the offensecharged shall be deemed instituted with the criminal action unless the

offended party waives the civil action, reserves the right to institute itseparately, or institutes the civil action prior to the criminal action.”

Private respondent did not waive the civil action, nor did shereserve the right to institute it separately, nor institute the civil actionfor damages arising from the offense charged. Thus, we find that theprivate prosecutors can intervene in the trial of the criminal action.

Petitioner avers, however, that respondent’s testimony in theinferior court did not establish nor prove any damages personallysustained by her as a result of petitioner’s alleged acts of falsification.Petitioner adds that since no personal damages were proven therein,then the participation of her counsel as private prosecutors, who weresupposed to pursue the civil aspect of a criminal case, is notnecessary and is without basis.

When the civil action is instituted with the criminal action, evidenceshould be taken of the damages claimed and the court shoulddetermine who are the persons entitled to such indemnity. The civilliability arising from the crime may be determined in the criminalproceedings if the offended party does not waive to have it adjudgedor does not reserve the right to institute a separate civil action againstthe defendant. Accordingly, if there is no waiver or reservation of civilliability, evidence should be allowed to establish the extent of injuriessuffered.[32]

In the case before us, there was neither a waiver nor a reservationmade; nor did the offended party institute a separate civil action. Itfollows that evidence should be allowed in the criminal proceedings toestablish the civil liability arising from the offense committed, and theprivate offended party has the right to intervene through the privateprosecutors.

WHEREFORE, the instant petition is DENIED. The Decision,dated June 14, 2001, and the Resolution, dated November 20, 2001,of the Court of Appeals in CA-G.R. SP No. 57070, affirming the Order,dated October 5, 1999, of the Regional Trial Court (RTC) of Manila,Branch 19, are AFFIRMED. Accordingly, the private prosecutors arehereby allowed to intervene in behalf of private respondent Lydia Hao

in the prosecution of the civil aspect of Criminal Case No. 285721before Branch 22, of Metropolitan Trial Court (MeTC) of Manila. Costsagainst petitioner.

SO ORDERED.

Davide, Jr., C.J., (Chairman), Ynares-Santiago, Carpio, andAzcuna, JJ., concur.

Republic of the PhilippinesSUPREME COURTManilaSECOND DIVISION

G.R. No. 152392 May 26, 2005

EXPERTRAVEL & TOURS, INC., petitioner, vs.COURT OF APPEALS and KOREAN AIRLINES, respondent.

D E C I S I O N

CALLEJO, SR., J.:

Before us is a petition for review on certiorari of the Decision1 of the Court ofAppeals (CA) in CA-G.R. SP No. 61000 dismissing the petition for certiorari andmandamus filed by Expertravel and Tours, Inc. (ETI).

The Antecedents

Korean Airlines (KAL) is a corporation established and registered in theRepublic of South Korea and licensed to do business in the Philippines. Itsgeneral manager in the Philippines is Suk Kyoo Kim, while its appointed counselwas Atty. Mario Aguinaldo and his law firm.

On September 6, 1999, KAL, through Atty. Aguinaldo, filed a Complaint2 againstETI with the Regional Trial Court (RTC) of Manila, for the collection of theprincipal amount of P260,150.00, plus attorney’s fees and exemplary damages.The verification and certification against forum shopping was signed by Atty.Aguinaldo, who indicated therein that he was the resident agent and legalcounsel of KAL and had caused the preparation of the complaint.

ETI filed a motion to dismiss the complaint on the ground that Atty. Aguinaldowas not authorized to execute the verification and certificate of non-forumshopping as required by Section 5, Rule 7 of the Rules of Court. KAL opposedthe motion, contending that Atty. Aguinaldo was its resident agent and wasregistered as such with the Securities and Exchange Commission (SEC) asrequired by the Corporation Code of the Philippines. It was further alleged thatAtty. Aguinaldo was also the corporate secretary of KAL. Appended to the saidopposition was the identification card of Atty. Aguinaldo, showing that he wasthe lawyer of KAL.

During the hearing of January 28, 2000, Atty. Aguinaldo claimed that he hadbeen authorized to file the complaint through a resolution of the KAL Board ofDirectors approved during a special meeting held on June 25, 1999. Upon his

motion, KAL was given a period of 10 days within which to submit a copy of thesaid resolution. The trial court granted the motion. Atty. Aguinaldo subsequentlyfiled other similar motions, which the trial court granted.

Finally, KAL submitted on March 6, 2000 an Affidavit3 of even date, executed byits general manager Suk Kyoo Kim, alleging that the board of directorsconducted a special teleconference on June 25, 1999, which he and Atty.Aguinaldo attended. It was also averred that in that same teleconference, theboard of directors approved a resolution authorizing Atty. Aguinaldo to executethe certificate of non-forum shopping and to file the complaint. Suk Kyoo Kimalso alleged, however, that the corporation had no written copy of the aforesaidresolution.

On April 12, 2000, the trial court issued an Order4 denying the motion todismiss, giving credence to the claims of Atty. Aguinaldo and Suk Kyoo Kim thatthe KAL Board of Directors indeed conducted a teleconference on June 25,1999, during which it approved a resolution as quoted in the submitted affidavit.

ETI filed a motion for the reconsideration of the Order, contending that it wasinappropriate for the court to take judicial notice of the said teleconferencewithout any prior hearing. The trial court denied the motion in its Order5 datedAugust 8, 2000.

ETI then filed a petition for certiorari and mandamus, assailing the orders of theRTC. In its comment on the petition, KAL appended a certificate signed by Atty.Aguinaldo dated January 10, 2000, worded as follows:

SECRETARY’S/RESIDENT AGENT’S CERTIFICATE

KNOW ALL MEN BY THESE PRESENTS:

I, Mario A. Aguinaldo, of legal age, Filipino, and duly elected and appointedCorporate Secretary and Resident Agent of KOREAN AIRLINES, a foreigncorporation duly organized and existing under and by virtue of the laws of theRepublic of Korea and also duly registered and authorized to do business in thePhilippines, with office address at Ground Floor, LPL Plaza Building, 124 AlfaroSt., Salcedo Village, Makati City, HEREBY CERTIFY that during a specialmeeting of the Board of Directors of the Corporation held on June 25, 1999 atwhich a quorum was present, the said Board unanimously passed, voted uponand approved the following resolution which is now in full force and effect, to wit:

RESOLVED, that Mario A. Aguinaldo and his law firm M.A. Aguinaldo &

Associates or any of its lawyers are hereby appointed and authorized to takewith whatever legal action necessary to effect the collection of the unpaidaccount of Expert Travel & Tours. They are hereby specifically authorized toprosecute, litigate, defend, sign and execute any document or paper necessaryto the filing and prosecution of said claim in Court, attend the Pre-TrialProceedings and enter into a compromise agreement relative to the above-mentioned claim.

IN WITNESS WHEREOF, I have hereunto affixed my signature this 10 th day ofJanuary, 1999, in the City of Manila, Philippines.

(Sgd.)

MARIO A. AGUINALDOResident Agent

SUBSCRIBED AND SWORN to before me this 10th day of January, 1999, Atty.Mario A. Aguinaldo exhibiting to me his Community Tax Certificate No.14914545, issued on January 7, 2000 at Manila, Philippines.

Doc. No. 119;Page No. 25;Book No. XXIVSeries of 2000.

(Sgd.) ATTY. HENRY D. ADASANotary Public Until December 31, 2000PTR #889583/MLA 1/3/20006

On December 18, 2001, the CA rendered judgment dismissing the petition,ruling that the verification and certificate of non-forum shopping executed byAtty. Aguinaldo was sufficient compliance with the Rules of Court. According tothe appellate court, Atty. Aguinaldo had been duly authorized by the boardresolution approved on June 25, 1999, and was the resident agent of KAL. Assuch, the RTC could not be faulted for taking judicial notice of the saidteleconference of the KAL Board of Directors.

ETI filed a motion for reconsideration of the said decision, which the CA denied.Thus, ETI, now the petitioner, comes to the Court by way of petition for reviewon certiorari and raises the following issue:

DID PUBLIC RESPONDENT COURT OF APPEALS DEPART FROM THEACCEPTED AND USUAL COURSE OF JUDICIAL PROCEEDINGS WHEN ITRENDERED ITS QUESTIONED DECISION AND WHEN IT ISSUED ITSQUESTIONED RESOLUTION, ANNEXES A AND B OF THE INSTANTPETITION?7

The petitioner asserts that compliance with Section 5, Rule 7, of the Rules ofCourt can be determined only from the contents of the complaint and not bydocuments or pleadings outside thereof. Hence, the trial court committed graveabuse of discretion amounting to excess of jurisdiction, and the CA erred inconsidering the affidavit of the respondent’s general manager, as well as theSecretary’s/Resident Agent’s Certification and the resolution of the board ofdirectors contained therein, as proof of compliance with the requirements ofSection 5, Rule 7 of the Rules of Court. The petitioner also maintains that theRTC cannot take judicial notice of the said teleconference without prior hearing,nor any motion therefor. The petitioner reiterates its submission that theteleconference and the resolution adverted to by the respondent was a merefabrication.

The respondent, for its part, avers that the issue of whether modern technologyis used in the field of business is a factual issue; hence, cannot be raised in apetition for review on certiorari under Rule 45 of the Rules of Court. On themerits of the petition, it insists that Atty. Aguinaldo, as the resident agent andcorporate secretary, is authorized to sign and execute the certificate of non-forum shopping required by Section 5, Rule 7 of the Rules of Court, on top ofthe board resolution approved during the teleconference of June 25, 1999. Therespondent insists that "technological advances in this time and age are ascommonplace as daybreak." Hence, the courts may take judicial notice that thePhilippine Long Distance Telephone Company, Inc. had provided a record ofcorporate conferences and meetings through FiberNet using fiber-optictransmission technology, and that such technology facilitates voice and imagetransmission with ease; this makes constant communication between a foreign-based office and its Philippine-based branches faster and easier, allowing forcost-cutting in terms of travel concerns. It points out that even the E-CommerceLaw has recognized this modern technology. The respondent posits that thecourts are aware of this development in technology; hence, may take judicialnotice thereof without need of hearings. Even if such hearing is required, therequirement is nevertheless satisfied if a party is allowed to file pleadings byway of comment or opposition thereto.

In its reply, the petitioner pointed out that there are no rulings on the matter ofteleconferencing as a means of conducting meetings of board of directors forpurposes of passing a resolution; until and after teleconferencing is recognizedas a legitimate means of gathering a quorum of board of directors, such cannotbe taken judicial notice of by the court. It asserts that safeguards must first beset up to prevent any mischief on the public or to protect the general public fromany possible fraud. It further proposes possible amendments to the CorporationCode to give recognition to such manner of board meetings to transact business

for the corporation, or other related corporate matters; until then, the petitionerasserts, teleconferencing cannot be the subject of judicial notice.

The petitioner further avers that the supposed holding of a special meeting onJune 25, 1999 through teleconferencing where Atty. Aguinaldo was supposedlygiven such an authority is a farce, considering that there was no mention ofwhere it was held, whether in this country or elsewhere. It insists that theCorporation Code requires board resolutions of corporations to be submitted tothe SEC. Even assuming that there was such a teleconference, it would beagainst the provisions of the Corporation Code not to have any record thereof.

The petitioner insists that the teleconference and resolution adverted to by therespondent in its pleadings were mere fabrications foisted by the respondentand its counsel on the RTC, the CA and this Court.

The petition is meritorious.

Section 5, Rule 7 of the Rules of Court provides:

SEC. 5. Certification against forum shopping.— The plaintiff or principal partyshall certify under oath in the complaint or other initiatory pleading asserting aclaim for relief, or in a sworn certification annexed thereto and simultaneouslyfiled therewith: (a) that he has not theretofore commenced any action or filedany claim involving the same issues in any court, tribunal or quasi-judicialagency and, to the best of his knowledge, no such other action or claim ispending therein; (b) if there is such other pending action or claim, a completestatement of the present status thereof; and (c) if he should thereafter learn thatthe same or similar action or claim has been filed or is pending, he shall reportthat fact within five (5) days therefrom to the court wherein his aforesaidcomplaint or initiatory pleading has been filed.

Failure to comply with the foregoing requirements shall not be curable by mereamendment of the complaint or other initiatory pleading but shall be cause forthe dismissal of the case without prejudice, unless otherwise provided, uponmotion and after hearing. The submission of a false certification or non-compliance with any of the undertakings therein shall constitute indirectcontempt of court, without prejudice to the corresponding administrative andcriminal actions. If the acts of the party or his counsel clearly constitute willfuland deliberate forum shopping, the same shall be ground for summary dismissalwith prejudice and shall constitute direct contempt, as well as a cause foradministrative sanctions.

It is settled that the requirement to file a certificate of non-forum shopping is

mandatory8 and that the failure to comply with this requirement cannot beexcused. The certification is a peculiar and personal responsibility of the party,an assurance given to the court or other tribunal that there are no other pendingcases involving basically the same parties, issues and causes of action. Hence,the certification must be accomplished by the party himself because he hasactual knowledge of whether or not he has initiated similar actions orproceedings in different courts or tribunals. Even his counsel may be unaware ofsuch facts.9 Hence, the requisite certification executed by the plaintiff’s counselwill not suffice.10

In a case where the plaintiff is a private corporation, the certification may besigned, for and on behalf of the said corporation, by a specifically authorizedperson, including its retained counsel, who has personal knowledge of the factsrequired to be established by the documents. The reason was explained by theCourt in National Steel Corporation v. Court of Appeals,11 as follows:

Unlike natural persons, corporations may perform physical actions only throughproperly delegated individuals; namely, its officers and/or agents.

…

The corporation, such as the petitioner, has no powers except those expresslyconferred on it by the Corporation Code and those that are implied by or areincidental to its existence. In turn, a corporation exercises said powers throughits board of directors and/or its duly-authorized officers and agents. Physicalacts, like the signing of documents, can be performed only by natural personsduly-authorized for the purpose by corporate by-laws or by specific act of theboard of directors. "All acts within the powers of a corporation may be performedby agents of its selection; and except so far as limitations or restrictions whichmay be imposed by special charter, by-law, or statutory provisions, the samegeneral principles of law which govern the relation of agency for a naturalperson govern the officer or agent of a corporation, of whatever status or rank, inrespect to his power to act for the corporation; and agents once appointed, ormembers acting in their stead, are subject to the same rules, liabilities andincapacities as are agents of individuals and private persons."

…

… For who else knows of the circumstances required in the Certificate but itsown retained counsel. Its regular officers, like its board chairman and president,may not even know the details required therein.

Indeed, the certificate of non-forum shopping may be incorporated in thecomplaint or appended thereto as an integral part of the complaint. The rule isthat compliance with the rule after the filing of the complaint, or the dismissal ofa complaint based on its non-compliance with the rule, is impermissible.However, in exceptional circumstances, the court may allow subsequentcompliance with the rule.12 If the authority of a party’s counsel to execute acertificate of non-forum shopping is disputed by the adverse party, the former isrequired to show proof of such authority or representation.

In this case, the petitioner, as the defendant in the RTC, assailed the authority ofAtty. Aguinaldo to execute the requisite verification and certificate of non-forumshopping as the resident agent and counsel of the respondent. It was, thus,incumbent upon the respondent, as the plaintiff, to allege and establish that Atty.Aguinaldo had such authority to execute the requisite verification andcertification for and in its behalf. The respondent, however, failed to do so.

The verification and certificate of non-forum shopping which was incorporated inthe complaint and signed by Atty. Aguinaldo reads:

I, Mario A. Aguinaldo of legal age, Filipino, with office address at Suite 210Gedisco Centre, 1564 A. Mabini cor. P. Gil Sts., Ermita, Manila, after havingsworn to in accordance with law hereby deposes and say: THAT -

1. I am the Resident Agent and Legal Counsel of the plaintiff in the aboveentitled case and have caused the preparation of the above complaint;

2. I have read the complaint and that all the allegations contained therein aretrue and correct based on the records on files;

3. I hereby further certify that I have not commenced any other action orproceeding involving the same issues in the Supreme Court, the Court ofAppeals, or different divisions thereof, or any other tribunal or agency. If Isubsequently learned that a similar action or proceeding has been filed or ispending before the Supreme Court, the Court of Appeals, or different divisionsthereof, or any tribunal or agency, I will notify the court, tribunal or agency withinfive (5) days from such notice/knowledge.

(Sgd.)

MARIO A. AGUINALDOAffiantCITY OF MANILA

SUBSCRIBED AND SWORN TO before me this 30th day of August, 1999,affiant exhibiting to me his Community Tax Certificate No. 00671047 issued on

January 7, 1999 at Manila, Philippines.

Doc. No. 1005;Page No. 198;Book No. XXISeries of 1999.

(Sgd.)

ATTY. HENRY D. ADASANotaryPublicUntil December 31, 2000PTR No. 320501 Mla. 1/4/9913

As gleaned from the aforequoted certification, there was no allegation that Atty.Aguinaldo had been authorized to execute the certificate of non-forum shoppingby the respondent’s Board of Directors; moreover, no such board resolution wasappended thereto or incorporated therein.

While Atty. Aguinaldo is the resident agent of the respondent in the Philippines,this does not mean that he is authorized to execute the requisite certificationagainst forum shopping. Under Section 127, in relation to Section 128 of theCorporation Code, the authority of the resident agent of a foreign corporationwith license to do business in the Philippines is to receive, for and in behalf ofthe foreign corporation, services and other legal processes in all actions andother legal proceedings against such corporation, thus:

SEC. 127. Who may be a resident agent. – A resident agent may either be anindividual residing in the Philippines or a domestic corporation lawfullytransacting business in the Philippines: Provided, That in the case of anindividual, he must be of good moral character and of sound financial standing.

SEC. 128. Resident agent; service of process. – The Securities and ExchangeCommission shall require as a condition precedent to the issuance of the licenseto transact business in the Philippines by any foreign corporation that suchcorporation file with the Securities and Exchange Commission a written power ofattorney designating some persons who must be a resident of the Philippines,on whom any summons and other legal processes may be served in all actionsor other legal proceedings against such corporation, and consenting that serviceupon such resident agent shall be admitted and held as valid as if served uponthe duly-authorized officers of the foreign corporation as its home office.14

Under the law, Atty. Aguinaldo was not specifically authorized to execute acertificate of non-forum shopping as required by Section 5, Rule 7 of the Rulesof Court. This is because while a resident agent may be aware of actions filedagainst his principal (a foreign corporation doing business in the Philippines),such resident may not be aware of actions initiated by its principal, whether inthe Philippines against a domestic corporation or private individual, or in the

country where such corporation was organized and registered, against aPhilippine registered corporation or a Filipino citizen.

The respondent knew that its counsel, Atty. Aguinaldo, as its resident agent, wasnot specifically authorized to execute the said certification. It attempted to showits compliance with the rule subsequent to the filing of its complaint bysubmitting, on March 6, 2000, a resolution purporting to have been approved byits Board of Directors during a teleconference held on June 25, 1999, allegedlywith Atty. Aguinaldo and Suk Kyoo Kim in attendance. However, such attempt ofthe respondent casts veritable doubt not only on its claim that such ateleconference was held, but also on the approval by the Board of Directors ofthe resolution authorizing Atty. Aguinaldo to execute the certificate of non-forumshopping.

In its April 12, 2000 Order, the RTC took judicial notice that because of the onsetof modern technology, persons in one location may confer with other persons inother places, and, based on the said premise, concluded that Suk Kyoo Kim andAtty. Aguinaldo had a teleconference with the respondent’s Board of Directors inSouth Korea on June 25, 1999. The CA, likewise, gave credence to therespondent’s claim that such a teleconference took place, as contained in theaffidavit of Suk Kyoo Kim, as well as Atty. Aguinaldo’s certification.

Generally speaking, matters of judicial notice have three material requisites: (1)the matter must be one of common and general knowledge; (2) it must be welland authoritatively settled and not doubtful or uncertain; and (3) it must beknown to be within the limits of the jurisdiction of the court. The principal guide indetermining what facts may be assumed to be judicially known is that ofnotoriety. Hence, it can be said that judicial notice is limited to facts evidencedby public records and facts of general notoriety.[15] Moreover, a judicially noticedfact must be one not subject to a reasonable dispute in that it is either: (1)generally known within the territorial jurisdiction of the trial court; or (2) capableof accurate and ready determination by resorting to sources whose accuracycannot reasonably be questionable.16

Things of "common knowledge," of which courts take judicial matters coming tothe knowledge of men generally in the course of the ordinary experiences of life,or they may be matters which are generally accepted by mankind as true andare capable of ready and unquestioned demonstration. Thus, facts which areuniversally known, and which may be found in encyclopedias, dictionaries orother publications, are judicially noticed, provided, they are of such universalnotoriety and so generally understood that they may be regarded as formingpart of the common knowledge of every person. As the common knowledge of

man ranges far and wide, a wide variety of particular facts have been judiciallynoticed as being matters of common knowledge. But a court cannot take judicialnotice of any fact which, in part, is dependent on the existence or non-existenceof a fact of which the court has no constructive knowledge.17

In this age of modern technology, the courts may take judicial notice thatbusiness transactions may be made by individuals through teleconferencing.Teleconferencing is interactive group communication (three or more people intwo or more locations) through an electronic medium. In general terms,teleconferencing can bring people together under one roof even though they areseparated by hundreds of miles.18 This type of group communication may beused in a number of ways, and have three basic types: (1) video conferencing -television-like communication augmented with sound; (2) computer conferencing- printed communication through keyboard terminals, and (3) audio-conferencing-verbal communication via the telephone with optional capacity fortelewriting or telecopying.19

A teleconference represents a unique alternative to face-to-face (FTF) meetings.It was first introduced in the 1960’s with American Telephone and Telegraph’sPicturephone. At that time, however, no demand existed for the new technology.Travel costs were reasonable and consumers were unwilling to pay the monthlyservice charge for using the picturephone, which was regarded as more of anovelty than as an actual means for everyday communication.20 In time, peoplefound it advantageous to hold teleconferencing in the course of business andcorporate governance, because of the money saved, among other advantagesinclude:

1. People (including outside guest speakers) who wouldn’t normally attend adistant FTF meeting can participate.

2. Follow-up to earlier meetings can be done with relative ease and littleexpense.

3. Socializing is minimal compared to an FTF meeting; therefore, meetings areshorter and more oriented to the primary purpose of the meeting.

4. Some routine meetings are more effective since one can audio-conferencefrom any location equipped with a telephone.

5. Communication between the home office and field staffs is maximized.

6. Severe climate and/or unreliable transportation may necessitate

teleconferencing.

7. Participants are generally better prepared than for FTF meetings.

8. It is particularly satisfactory for simple problem-solving, information exchange,and procedural tasks.

9. Group members participate more equally in well-moderated teleconferencesthan an FTF meeting.21

On the other hand, other private corporations opt not to hold teleconferencesbecause of the following disadvantages:

1. Technical failures with equipment, including connections that aren’t made.

2. Unsatisfactory for complex interpersonal communication, such as negotiationor bargaining.

3. Impersonal, less easy to create an atmosphere of group rapport.

4. Lack of participant familiarity with the equipment, the medium itself, andmeeting skills.

5. Acoustical problems within the teleconferencing rooms.

6. Difficulty in determining participant speaking order; frequently one personmonopolizes the meeting.

7. Greater participant preparation time needed.

8. Informal, one-to-one, social interaction not possible.22

Indeed, teleconferencing can only facilitate the linking of people; it does not alterthe complexity of group communication. Although it may be easier tocommunicate via teleconferencing, it may also be easier to miscommunicate.Teleconferencing cannot satisfy the individual needs of every type of meeting.23

In the Philippines, teleconferencing and videoconferencing of members of boardof directors of private corporations is a reality, in light of Republic Act No. 8792.The Securities and Exchange Commission issued SEC Memorandum CircularNo. 15, on November 30, 2001, providing the guidelines to be complied withrelated to such conferences.24 Thus, the Court agrees with the RTC thatpersons in the Philippines may have a teleconference with a group of persons in

South Korea relating to business transactions or corporate governance.

Even given the possibility that Atty. Aguinaldo and Suk Kyoo Kim participated ina teleconference along with the respondent’s Board of Directors, the Court is notconvinced that one was conducted; even if there had been one, the Court is notinclined to believe that a board resolution was duly passed specificallyauthorizing Atty. Aguinaldo to file the complaint and execute the requiredcertification against forum shopping.

The records show that the petitioner filed a motion to dismiss the complaint onthe ground that the respondent failed to comply with Section 5, Rule 7 of theRules of Court. The respondent opposed the motion on December 1, 1999, onits contention that Atty. Aguinaldo, its resident agent, was duly authorized to suein its behalf. The respondent, however, failed to establish its claim that Atty.Aguinaldo was its resident agent in the Philippines. Even the identificationcard25 of Atty. Aguinaldo which the respondent appended to its pleading merelyshowed that he is the company lawyer of the respondent’s Manila RegionalOffice.

The respondent, through Atty. Aguinaldo, announced the holding of theteleconference only during the hearing of January 28, 2000; Atty. Aguinaldo thenprayed for ten days, or until February 8, 2000, within which to submit the boardresolution purportedly authorizing him to file the complaint and execute therequired certification against forum shopping. The court granted the motion.26

The respondent, however, failed to comply, and instead prayed for 15 more daysto submit the said resolution, contending that it was with its main office in Korea.The court granted the motion per its Order27 dated February 11, 2000. Therespondent again prayed for an extension within which to submit the saidresolution, until March 6, 2000.28 It was on the said date that the respondentsubmitted an affidavit of its general manager Suk Kyoo Kim, stating, inter alia,that he and Atty. Aguinaldo attended the said teleconference on June 25, 1999,where the Board of Directors supposedly approved the following resolution:

RESOLVED, that Mario A. Aguinaldo and his law firm M.A. Aguinaldo &Associates or any of its lawyers are hereby appointed and authorized to takewith whatever legal action necessary to effect the collection of the unpaidaccount of Expert Travel & Tours. They are hereby specifically authorized toprosecute, litigate, defend, sign and execute any document or paper necessaryto the filing and prosecution of said claim in Court, attend the Pre-trialProceedings and enter into a compromise agreement relative to the above-mentioned claim.29

But then, in the same affidavit, Suk Kyoo Kim declared that the respondent"do[es] not keep a written copy of the aforesaid Resolution" because no recordsof board resolutions approved during teleconferences were kept. This belied therespondent’s earlier allegation in its February 10, 2000 motion for extension oftime to submit the questioned resolution that it was in the custody of its mainoffice in Korea. The respondent gave the trial court the impression that it neededtime to secure a copy of the resolution kept in Korea, only to allege later (via theaffidavit of Suk Kyoo Kim) that it had no such written copy. Moreover, Suk KyooKim stated in his affidavit that the resolution was embodied in theSecretary’s/Resident Agent’s Certificate signed by Atty. Aguinaldo. However, nosuch resolution was appended to the said certificate.

The respondent’s allegation that its board of directors conducted ateleconference on June 25, 1999 and approved the said resolution (with Atty.Aguinaldo in attendance) is incredible, given the additional fact that no suchallegation was made in the complaint. If the resolution had indeed beenapproved on June 25, 1999, long before the complaint was filed, the respondentshould have incorporated it in its complaint, or at least appended a copy thereof.The respondent failed to do so. It was only on January 28, 2000 that therespondent claimed, for the first time, that there was such a meeting of theBoard of Directors held on June 25, 1999; it even represented to the Court thata copy of its resolution was with its main office in Korea, only to allege later thatno written copy existed. It was only on March 6, 2000 that the respondentalleged, for the first time, that the meeting of the Board of Directors where theresolution was approved was held via teleconference.

Worse still, it appears that as early as January 10, 1999, Atty. Aguinaldo hadsigned a Secretary’s/Resident Agent’s Certificate alleging that the board ofdirectors held a teleconference on June 25, 1999. No such certificate wasappended to the complaint, which was filed on September 6, 1999. Moreimportantly, the respondent did not explain why the said certificate was signedby Atty. Aguinaldo as early as January 9, 1999, and yet was notarized one yearlater (on January 10, 2000); it also did not explain its failure to append the saidcertificate to the complaint, as well as to its Compliance dated March 6, 2000. Itwas only on January 26, 2001 when the respondent filed its comment in the CAthat it submitted the Secretary’s/Resident Agent’s Certificate30 dated January10, 2000.

The Court is, thus, more inclined to believe that the alleged teleconference onJune 25, 1999 never took place, and that the resolution allegedly approved bythe respondent’s Board of Directors during the said teleconference was a mereconcoction purposefully foisted on the RTC, the CA and this Court, to avert the

dismissal of its complaint against the petitioner.

IN LIGHT OF ALL THE FOREGOING, the petition is GRANTED. The Decisionof the Court of Appeals in CA-G.R. SP No. 61000 is REVERSED and SETASIDE. The Regional Trial Court of Manila is hereby ORDERED to dismiss,without prejudice, the complaint of the respondent.

SO ORDERED.

Puno, Acting C.J., (Chairman), Austria-Martinez, and Chico-Nazario, JJ., concur.Tinga, J., out of the country.