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VICTOR AFRICA v. SANDIGANBAYAN

FACTS:

The case involves Civil Case 0009, filed by the government with the Sandiganbayan for reversion, forfeiture, and accounting of ill-gotten wealth involving the sequestered shares of stock of Eastern Telecommunications Philippines, Inc. (ETPI). In 1972, Eastern Extension Australasia and China Telegraph Company, Ltd. (Eastern Extension), a subsidiary of Cable & Wireless, Ltd., formed ETPI with 60% of the capital stock going to the BAN group and 40% to Cable & Wireless. After the fall of the Marcos government, the PCGG sequestered the ETPI shares of the BAN group. PCGG filed a case to recover these shares. Various incidents followed, including a motion for a stockholders' meeting filed by petitioner Victor Africa and a subsequent dispute over the meeting. The PCGG granted its petition to hold a special stockholders' meeting to increase ETPI's authorized capital stock. Aerocom expressed intent to sell its shares to AGNP, which ETPI waived its option of first refusal. The Supreme Court held that the PCGG needed to satisfy certain requirements to vote sequestered shares, leading to the referral of the case to the Sandiganbayan. Meanwhile, the transfer of Aerocom's shares was delayed, and a motion was filed for the issuance of new stock certificates.

This case involves three consolidated cases before the Supreme Court. In G.R. 174493, petitioner Africa filed a motion for reconsideration before the Sandiganbayan, arguing for the determination of the validity of PCGG's votes in electing the board of directors of ETPI. The Sandiganbayan denied the motion, leading to the filing of a petition for certiorari before the Supreme Court. In G.R. 172222, Aerocom transferred its shares to AGNP and requested the transfer of the stock certificates and recording of entries in ETPI's stock and transfer book. The Sandiganbayan granted the request after finding compliance with ETPI's Articles of Incorporation. In G.R. 184636, petitioner Africa filed a petition to hold a stockholders' meeting to elect a new ETPI Board of Directors. The Sandiganbayan denied the petition, stating that it did not have the power to decide on the holding of a stockholders' meeting, and Africa did not meet the required ownership of the corporation's outstanding capital stock. Africa filed a petition before the Supreme Court questioning the Sandiganbayan's actions.

ISSUES:

  1. Whether the PCGG's vote using sequestered shares validly elected a PCGG-dominated Board.

  2. Whether the PCGG's vote during the 1997 shareholders' meeting to approve the increase in authorized capital stock was valid.

  3. Whether the Sandiganbayan was correct in allowing the registration of Aerocom's sale of shares to AGNP.

  4. Whether the Sandiganbayan has authority to order the holding of a stockholders' meeting at ETPI.

  5. Whether the PCGG can vote the sequestered shares of ETPI.

RULING:

  1. The court ruled that the PCGG's vote using sequestered shares validly elected a PCGG-dominated Board. The court found that in 1991, the PCGG held a stockholders' meeting and voted the sequestered shares to elect a new Board of Directors. Since neither the Sandiganbayan nor the court enjoined that board from assuming control and performing its functions for the past 22 years, it cannot be said that the PCGG cast an invalid vote.

  2. The court held that the PCGG's vote during the 1997 shareholders' meeting to approve the increase in authorized capital stock was valid. The court found that in 1997, it was the PCGG elected board that remained in control and had been successfully guarding company assets. The Sandiganbayan incorrectly applied the two-tiered test, which applies to a situation where the registered stockholders were in control and had been dissipating company assets. Since there was no danger of asset dissipation in 1997, the PCGG's vote should not be invalidated.

  3. The court held that the Sandiganbayan did not commit an error in allowing the registration of Aerocom's sale of shares to AGNP. The court found that the PCGG voted the sequestered shares during the 1991 stockholders' meeting, and since neither the Sandiganbayan nor the court enjoined that Board from performing its functions, there was no legal impediment preventing the waiver of ETPI's right of first refusal and the subsequent registration of the sale.

  4. The Sandiganbayan has authority to order the holding of a stockholders' meeting at ETPI. The Sandiganbayan has exclusive jurisdiction over all cases regarding "the Funds, Moneys, Assets and Properties Illegally Acquired or Misappropriated" including "all incidents arising from, incidental to, or related to, such cases."

  5. The issue of whether the PCGG can vote the sequestered shares of ETPI will be determined in a separate case. The Sandiganbayan is directed to set an irrevocable deadline for the PCGG to complete the presentation of its evidence in the forfeiture case involving the sequestered ETPI shares. The Sandiganbayan may provisionally determine whether there is sufficient evidence to allow the sequestration to continue for all or some of the shares. The Sandiganbayan may then order the holding of a stockholders' meeting to elect a new Board of Directors, where the sequestered shares may be voted based on the court's provisional findings.

PRINCIPLES:

  • The court affirmed that PCGG was justified in seeking a change in the management of the company if there was an imminent danger of asset dissipation.

  • The court clarified that the two-tiered test applies to a situation where the registered stockholders were in control and had been dissipating company assets.

  • The court held that the absence of a specific period for registration of transfer does not render the transfer irregular. The action to enforce the right to registration does not begin to toll until a demand for it had been made and was refused.

  • Sandiganbayan has exclusive jurisdiction over cases regarding illegally acquired or misappropriated funds, assets, and properties.

  • The Sandiganbayan has authority to order the holding of a stockholders' meeting at ETPI.

  • The PCGG can vote the sequestered shares of ETPI based on the provisional findings of the Sandiganbayan.