Victor Africa v.
Sandiganbayan Facts:
November 11, 2013
Abad, J.
Edited digest of Katrina Rivera from PoliLawRev
SUMMARY: ETPI was formed with 60% of its capital stock controlled by
the group of Benedicto, Africa and Nieto (BAN) while 40% was held by
Cable & Wireless, Ltd. In 1986, PCGG sequestered the ETPI shares if the
BAN group upon a prima facie finding that these belonged to favoured
Marcos cronies. PCGG dominated the Board of Directors of EPTI since
1991 and performed its functions for the past 22 years. However, Africa
subsequently questioned the validity of ETPI’s votes in a a special
stockholder’s meeting to increase ETPI’s authorized capital stock
arguing that PCGG has no right to votes such shares under the two-
tiered test. Sandiganbayan ruled that the PCGG’s votes during the
annual stockholders’ meetings were invalid. SC reversed and ruled that
PCGG’s votes are valid.
DOCTRINE:Under the two-tiered test, the government, thru PCGG, may
vote sequestered shares if (1) there is a prima facie evidence that the
shares are ill-gotten and (2) there is imminent danger of dissipation of
assets while the case is pending. However, the two- tiered test
contemplates a situation where the registered stockholders were in
control and had been dissipating company assets and the PCGG wanted
to vote the sequestered shares to save the company. It does not apply
when the PCGG had voted the shares and is in control of the
sequestered corporation.
Since the law does not prescribe a period for registration of shares in
the books of the corporation, the action to enforce the right to have it
done does not begin until a demand for it had been made and was
refused.
Eastern Telecommunications Philippines, Inc. (ETPI) was formed with
60% of its capital stock controlled by the group of Benedicto, Africa and
Nieto (BAN) while 40% was held by Cable & Wireless, Ltd.
In 1986, the Presidential Commission on Good Government (PCGG)
sequestered the ETPI shares of the BAN group upon a prima facie
finding that these belonged to favoured Marcos cronies. PCGG filed with
the Sandiganbayan (SB) Civil Cases 009 to recover these shares.
Victor Africa filed with the SB a motion for the holding of ETPI’s 1992
annual stockholder’s meeting to settle the conflict between two sets of
ETPI Board of Directors. This motion was granted by the SB and the
PCGG was allowed to vote the Benedicto shares (12.8%), the shares
seized from Malacanang (3.1%) and the shares that Nieto admitted as
belonging to President Marcos (8%). However, in G.R. 107789, the SC
temporarily enjoined the holding of the stockholder’s meeting.
In 1996, PCGG held a special stockholder’s meeting to increase ETPI’s
authorized capital stock. PCGG voted the sequestered shares of stock in
the meeting and approved the increase in the authorized capital stock
of ETPI. Africa questioned in the SC, in G.R. 147214, the validity of
PCGG’s vote in the stockholder’s meeting.
In 2001, Aerocom Investors and Managers, Inc. (Aerocom) notified ETPI
of its intent to sell ETPI’s Class B shares to A.G.N. Philippines, Inc.
(AGNP), to enable ETPI to decide whether to exercise its option of first
refusal. ETPI Board waived the option. However, the Africa-led group
informed ETPI that they are reserving their right to exercise the option
until after a validly constituted ETPI Board could waive the company’s
option. Nevertheless, Aerocom still transferred its shares to AGNP.
Africa filed an MR alleging that the SB, before allowing the transfer in its
book, should first determine whether the PCGG validly voted the
sequestered shares that elected the ETPI’s board.
[G.R. 172222] In G.R. 107789 and G.R. 147214, the Court held that for
PCGG to be able to vote the sequestered shares and amend its Articles
of Incorporation to increase its capital stock, it needs to satisfy the two-
tiered test that: (1) there is prima facie evidence that the shares are ill-
gotten; and (2) there is an imminent danger of dissipation. The Court
also ruled that the two petitions shall be referred to the SB for it to
determine whether the two-tiered test is complied with.
[G.R. 174493] The SB ruled that the PCGG’s votes during the annual
stockholders’ meetings were invalid for failure to satisfy the two-tiered
test. PCGG failed to prove that ETPI’s assets were in imminent danger of
dissipation as to warrant PCGG’s intervention. The PCGG-dominated
Board of Directors filed a petition for certiorari arguing that the two-
tiered test did not apply to ETPI.
[G.R. 184636] Based on the ruling of the Court invalidating the PCGG
votes in the stockholders’ meeting, Africa filed a petition with the SB to
allow him to hold a stockholders’ meeting to elect a new ETPI Board of
Directors. SB denied his petition.
All cases were ordered by the Court to be consolidated.
ISSUES and RULING
1. [G.R. 174493] Whether or not the two-tiered test is applicable to the
ETPI stockholders’ meetings? NO because PCGG is in control.
2. [G.R. 172222] Whether or not the Sandiganbayan acted with grave
abuse of discretion in allowing Aerocom to transfer its shares of
stock to AGNP? NO
3. [G.R. 184636] Whether or not the Sandiganbayan has jurisdiction to
order the holding of a stockholder’s meeting based on Africa’s
petition? YES
RATIO:
[G.R. 174493]Whether or not the PCGG’s vote using sequestered shares
validly elected a PCGG-dominated Board should by now be academic
considering that such board had been performing its functions for the
past 22 years from 1991 to this date with neither the Sandiganbayan
nor this Court enjoining it from doing so or ordering the holding of a
new election. Since neither the Sandiganbayan nor this Court enjoined
that Board from assuming control, it cannot now be said that the PCGG
had cast an invalid vote, rendering void all the Board’s actions in the
last 22 years.
Besides the second tier of the two-tiered test assumes a situation where
the registered shareholders had been dissipating company assets and
the PCGG wanted to step in, vote the sequestered shares, and seize
control of its board of directors to save those assets. It does not apply
when the PCGG had voted the shares and is in control of the
sequestered corporation.
[G.R. 172222]There was no legal impediment which prevented the
Board from waiving ETPI’s right of first refusal when Aerocom notified
it of its intent to sell its shares to AGNP. The Board was justified in
exercising its function to waive its right of first refusal because neither
the SB nor the SC enjoined the Board from performing its powers and
functions.
[G.R. 184636] The SB has authority to order the holding of a
stockholders’ meeting at ETPI. Section 2 of EO 14 dated 7 May 1986
vests in the SB exclusive jurisdiction over all cases regarding “the
Funds, Moneys, Assets and Properties Illegally Acquired or
Misappropriated by Former Pres. Marcos, Mrs. Imelda Marcos, et al.,”
including all incidents arising from, incidental to, or related to, such
cases. Hence, it follows that the SB can issue the requested order.