ROMERO, J.:

Behind the innocuous title of the case is the unraveling of a tale of the government's dashed hopes of taking off for an industrial economy through the setting up of an integrated steel plant that it supported in the sixties through gargantuan investments therein; of how the said enterprise floundered after repeatedly defaulting in its obligations leading to the inevitable foreclosure of its assets; of how it laid low for fourteen years spanning the martial law regime only to resurface now to claim what it vigorously insists is its own; and how the government, through the highest reaches of officialdom, is now waging an equally relentless fight to permanently keep what it considers to belong to it by just and legitimate title in order that it may resume its interrupted economic dream.

In legalese, this is a special civil action for certiorari which seeks to annul and set aside the trial court's Order dated August 31, 1990 which denied petitioners' motion to dismiss and also the Order dated December 27, 1990 which likewise denied petitioners' motion for reconsideration.

The historical antecedents of the present petition hark back to 1955 when Republic Act No. 1396 was enacted authorizing National Shipyards and Steel Corporation (NASSCO) to establish a pig-iron smelting plant. When NASSCO started negotiations with the United States Export-Import Bank (EXIMBANK) for a $62.3 million loan, the latter suggested that the management of the project be placed in the hands of the private sector. After a public bidding, the Jacinto Steel, Inc. (JSI) was entrusted with the implementation of the project. Later, in October 1963, Iligan Integrated Steel Mills, Inc. (IISMI) was incorporated with the Jacintos and the Government, through the GSIS, SSS and NASSCO as principal investors and about fifty other minority stockholders.^[1]

On January 22, 1964, an agreement was entered into by the Government, IISMI and the EXIMBANK whereby the latter would provide the funds required to launch the project into commercial operation, including provisions for overruns and other financial assistance. On the same date, IISMI and the Government entered into a collateral agreement whereby the Government committed to extend equity and non-equity funds to IISMI during the construction period, including an amount of no less than P34 million. Pursuant to a Second Collateral Agreement dated July 26, 1966, the Development Bank of the Philippines granted IISMI additional loans which were secured by real and chattel mortgages over all of IISMI's assets.

In order to forestall a threatened foreclosure due to defaults in loan payments, IISMI instituted on June 1, 1971 an injunction suit against the Republic of the Philippines, Development Bank of the Philippines (DBP), Central Bank of the Philippines (CB), Board of Investments (BOI) and the Sheriff of Lanao del Norte and Iligan City. The complaint^[2] which was docketed as Civil Case No. 1701 alleged that the inability of IISMI to meet its obligations was due to "(g)overnment violations of its commitments to the Integrated Steel Project" which "were all in pursuance of the concerted and single-minded plan of the defendants to foreclose the mortgaged properties of the plaintiff and/or take over the management and ownership of IISMI or its properties, plants, or mills."

The preliminary injunction issued by the court^[3] on August 11, 1971 was questioned by the DBP in G.R. No. L-34188 and the CB in G.R. No. L-33986. When the motion to dismiss filed by the Republic and the BOI on the grounds of improper venue and non-suability of the State was denied, the parties likewise questioned the denial order in G.R. No. L-33949. Subsequently, this Court ordered the consolidation of these petitions and set them all for a joint hearing.^[4]

While these cases were pending before the Court, then President Marcos issued Proclamation 1081 on September 21, 1972 declaring a state of martial law. He thereafter issued four Letters of Instructions^[5] directing the Secretary of National Defense to take over and control the operation of IISMI and other Jacinto-held companies "for the duration of the present national emergency or until otherwise ordered" because the acts of management of IISMI "indicated that IISMI disposed of property by fraudulent means and that the funds or money earned was (sic) not properly accounted for, and neither were they applied for payment of obligations due the Government and the government-owned corporations."

On October 23, 1973, the Court ordered the lower court "to resume proceedings in Civil Case No. 1701 by receiving further evidence which the parties may desire to present relative to all the issues they have so far raised and, thereafter, to resolve all the incidents related to the writ of preliminary injunction said court has issued and every other incident in the said case and/or render final judgment in the main case on the merits."^[6]

On January 10, 1974, the lower court^[7] issued an Order dissolving the writ of preliminary injunction.^[8] It held that there was mismanagement of the financial affairs of IISMI by its corporate officials through the diversion of its profits to other Jacinto-controlled corporations especially to Ferro Products Inc. (FERRO), its known marketing instrumentality and biggest single buyer, which led to its failure to meet its different due and demandable obligations to DBP. More specifically, mismanagement was shown by the setting up of an unrealistic pricing scheme where, while the floating exchange rate jacked up the cost of materials by 50%, the selling price of goods sold to FERRO was increased by only 25% and FERRO resold the goods at prices higher by 30%, thus realizing in the process additional gross profits of 5%; by giving FERRO extraordinarily long credit terms of 90-180 days; by unduly postponing FERRO's payments of its matured payables through reinvoicing; by unjustifiably delaying the collecting trade and non-trade receivables from FERRO and other Jacinto-controlled corporations; by heavily loading the selling expenses of IISMI with other nonlegitimate charges which created an economic imbalance between its income and expenses; by giving interest-free loans and direct advances from IISMI funds to the Jacintos and their corporations; by passing on to IISMI travel and representation expenses of the Jacintos and their own corporations thus, using IISMI funds to pay expenses of some Jacinto-controlled corporations; by making IISMI borrow at 12% interest per annum from Jacinto-controlled corporations instead of IISMI collecting receivables from its debtors especially FERRO; by appropriating IISMI's money to the Jacintos' private benefit; by debiting IISMI for goods and shipments actually received not by IISMI but by the Jacintos and their corporations; and by importing raw materials for Jacinto-controlled corporations through the use of DBP guaranties intended for IISMI.

Likewise, the court found that there were attempts to hide these corporate malpractices by "window dressing" of the financial statements and records of IISMI and of the Jacinto-controlled corporations. This consisted in understating profits to create the impression that losses were not due to improper operations but rather to other factors like the floating exchange rate; painting a favorable but unreal cash position on the part of IISMI; creating an ostensibly favorable asset position by including as IISMI's assets goods returned by FERRO to the Security Bank and Trust Co.; by overstating the inventories account; and by understating the account receivables from FERRO and other Jacinto-controlled corporations by intercepting legitimate payables to IISMI.

Moreover, the lower court rejected the claim of IISMI that its failure to meet its obligations was due to the floating exchange rate, holding that IISMI could only claim a loss of P51.9 million owing to the floating rate as importations before February 1970 were sold at pre-devaluation prices even after devaluation. However, no such loss could be claimed after June 1970 since price adjustments could and should have been instituted by IISMI after that time. Furthermore, despite the disposition of the processed raw materials, IISMI failed to use the proceeds to liquidate its accounts which, as of June 30, 1972 had ballooned to P407 million. Such failure compelled DBP to assume payments in its capacity as guarantor to assume payments due to IISMI's creditors.

Lastly, the court held that IISMI cannot pin the blame for the delay in payments of its obligations on the alleged delay in the release of DBP, SSS and GSIS funds. The bulk of IISMI's obligations arose from subsequent raw material importations guaranteed by DBP. These accounts were only incurred by IISMI after DBP, SSS and GSIS had released their respective funds to IISMI.

Thus, the lower court concluded:

"It is settled jurisprudence that an applicant for writ of preliminary injunction should be able to establish a clear case, free from doubt and dispute. Since injunction is an equitable remedy, an applicant must also come to court with clean hands. As discussed above, the evidence show that IISMI has failed to satisfy both basic requirements to entitle it to a writ of preliminary injunction."^[9]

"1. Setting aside and declaring as null and void:

1.1 The extra-judicial foreclosure conducted by the provincial sheriff of Iligan City on February 26, 1974 of the mortgage contract dated August 1, 1966, additional mortgage dated January 13, 1967, addendum to chattel mortgage dated January 13, 1967, additional mortgage dated May 20, 1968 and additional mortgage dated December 22, 1969, all executed by IISMI in favor of DBP.

1.2 The certificate of sale issued by the provincial sheriff of Iligan City in consequence of the extra-judicial foreclosure of the mortgages referred to in 1.1 of this prayer;

2. Ordering all defendants, jointly and severally, to restore and/or return to IISMI all the properties subject of the extrajudicial foreclosure of the mortgages referred to in 1.1 or 1.2 of this prayer portion;

3. Ordering the Register of Deeds, Iligan City, to cancel Transfer Certificate of Title No. P-25, 959 (a.f.) of the Registry of Deeds for Iligan City and to issue replacement transfer certificates of title in the name of IISMI."^[13]

"The Respondent Judge's unlawful refusal to immediately dismiss, and the continuing pendency of, Civil Case No. 111-1549 has coated the Jacinto claim with a misleading veneer of plausibility which is obstructing and causing inevitable delays in (i) the government's and NDC's plans to privatize NSC at the earliest possible time and under optional conditions generating the maximum returns for NDC, the country and the Filipino people; (ii) NSC's Integrated Steel Mill Project and (iii) the development of the nation's steel industry as well as the country's industrialization both of which have already suffered an incalculable fall due to IISMI's ruin masterminded and engineered by Jacinto and his family."^[23]

"x x x the Court finds no other alternative but to terminate the present proceedings in this Court, so as to give way to further proceedings in the Court below, wherein all pertinent issues arising from the developments which have taken place since August 17, 1972 may be appropriately and fully threshed out, considering that the factual matters involved therein would require the formal and proper presentation of varied and voluminous evidence which the Court is not adequately equipped to receive."^[35] (underscoring supplied)

"Sec. 49 Effect of Judgments

x x x x x x x x x                                                                                                                                   

(b) In other cases the judgment or order is, with respect to the matter directly adjudged or as to any other matter that could have been raised in relation thereto, conclusive between the parties and their successors in interest by title subsequent to the commencement of the action or special proceeding, litigating for the same thing and under the same title and in the same capacity; (underscoring supplied)

x x x x x x x x x"

"We cannot accept the petitioners' contention that the period during which authoritarian rule was in force had interrupted prescription and that the same began to run only on February 25, 1986, when the Aquino government took power. It is true that under Article 1154:

'ART. 1154. The period during which the obligee was prevented by a fortuitous event from enforcing his right is not reckoned against him.'

fortuitous events have the effect of tolling the period of prescription. However, we cannot say, as a universal rule, that the period from September 21, 1972 through February 25, 1986 involves a force majeure. Plainly, we cannot box in the 'dictatorial'; period within the term without distinction, and without, by necessity, suspending all liabilities, however demandable, incurred during that period, including perhaps those ordered by this Court to be paid. While this Court is cognizant of acts of the last regime, especially political acts, that might have indeed precluded the enforcement of liability against that regime and/or its minions, the Court is not inclined to make quite a sweeping pronouncement, considering especially the unsettling effects such a pronouncement is likely to bring about. It is our opinion that claims should be taken on a case-to-case basis. This selective rule is compelled, among others, by the fact that not all those imprisoned or detained by the past dictatorship were true political oppositionists, or, for that matter, innocent of any crime or wrongdoing. Indeed, not a few of them were manipulators and scoundrels."^[51] (underscoring supplied)

"From the latest pleadings of petitioners, however, supported, as they are, by official reports which are more specific and factual, the situation relative to the equities in these cases appears to Us to have changed considerably. And in the face of this circumstance, counsel for IISMI have not been able to present sufficiently documented denials and rebuttals of the new allegations of petitioners, albeit they excuse themselves by alleging that they have lost contact with their clients, the principal private investors who used to be in control of respondent corporation. It is claimed that said private investors have gone abroad to places unknown to said counsel, for which reason, precisely, the latter are even asking for leave to be allowed to withdraw their representation. Under the circumstances, and considering that to await the uncertain return of the private investors would jeopardize the efforts of the government to make the national project herein involved, as conceived in the triangular agreement among the Republic, the Exim Bank and IISMI itself, namely, the establishment of an integrated steel complex to meet the requirements of the industry and economy of the whole country, totally operative without further loss of time, the Court is of the considered opinion that all the matters here in dispute should be referred to the respondent court for further proceedings and appropriate resolution. Indeed, having in view the nature and volume of the evidence which the parties would have to present in connection with the factual issues raised by petitioners regarding what they claim to have discovered or unearthed after the Secretary of National Defense took over the 'management, control and operation' of IISMI, may be justly and comprehensively resolved only after such evidence have been received by the trial court, rather than this Court, since it has the ready adequate machinery for the purpose. And with such additional evidence, the trial court would naturally be in a better position than before to rule on the injunctions which have given rise to these proceedings.

xxx                                                                                                                                
Anent the prayer of all the counsel of IISMI to be given leave to withdraw their representation of said respondent, it is important to note that said request is not accompanied by proof of their client's consent to such withdrawal. Ordinarily, under Section 26 of Rule 138, such consent is required. And even in the instances where the same section dispenses with the client's consent, it is generally the rule that the client should be notified of the petition of counsel. But it is not inconceivable that under peculiar circumstances, the court may be justified in relieving a lawyer from continuing his appearance in an action or proceeding, without hearing the client, as, for instance, when a situation develops, like in the cases at bar where the client stops having any contact with the lawyer, who is thereby left without the usual means which are indispensable in the successful or, at least, proper defense of the client's cause, such as, actual knowledge of relevant facts, the identity of usable witnesses, pertinent documents and other evidence, not to speak of the money needed for even the minimum of litigation expenses and the possible advances of attorney's fees. Understandably, no responsible lawyer can be expected to do justice to any cause under such conditions, and, it would be an unjust imposition to compel him to continue his services in relation thereto. While perhaps the absence of legal counsel may create an apparent denial of the party's inherent right to legal assistance, in these particular cases, it can rightly be said that in a large sense and for obvious reasons, movant counsel's clients have it in their power to remedy the situation."^[52] (underscoring supplied)

a)  PCGG Order dated February 19, 1987 which said that "the takeover of the assets of IISMI was effected thru Letters of Instructions Nos. 27, 35, 39 and 49" and that "due process may not have been observed when DBP foreclosed the IISMI."

b)  Memorandum-Letter dated December 5, 1986 by Atty. Prospero C. Nograles, DBP Chief Legal counsel, which states that the "IISMI case established a clear example of aggression by the past regime and smacks of an abuse of human rights through the use of sheer force by the military."

c)  Opinion No. 003, series of 1987, dated January 14, 1987 by Atty. Ariel F. Aguirre of the Office of the Government Corporate Counsel (OGCC) which concluded that LOI No. 27 "directing the then Secretary of National Defense to take over or cause the take over of the management, control and operation of IISMI was an arbitrary and unprecedented excuse of undefinable state power" and that LOI Nos. 35, 39, and 49 "likewise suffer the same infirmity" and

d)  Letter dated February 13, 1987 by Undersecretary Silvestre H. Bello III of the Department of Justice stating that "we find no cogent reason to disagree with both opinions (of Messrs. Nograles and Aguirre) upon the facts as presented and hereby confirm the same."

"We share the opinion dated December 5, 1986 of the then DBP counsel (now Congressman) Prospero Nograles that the foreclosure proceedings on IISMI were legally flawed because at the time of foreclosure the mortgaged assets were in the possession of the military pursuant to Letter of Instruction No. 27 ordering the military to take over the IISMI plant."^[62]

"We could have recommended that the Jacintos be given a fresh period of time to pay their loan to DBP. One big obstacle, however, is that DBP sold the foreclosed IISMI assets to the National Steel Corporation in 1981. We do not believe that the NSC would be willing to return the assets to the Jacintos after paying P983 million for them to DBP.

Perhaps the Office of the President and/or the Department of Justice could summon the parties to explore avenues of an out-of-court settlement. For, really if there are incontrovertible badges of confiscation of the Jacintos' property by the Marcos dictatorship, this Government should not perpetuate that injustice."^[63]

"As a matter of policy and by well-settled precedents, this Department has consistently declined to render an opinion on questions that are fundamentally judicial or which might subsequently be the subject of litigation before the courts, particularly, those questions which involve the interest of private parties who may take issue with said opinion and bring the matter before the courts (see DOJ Ops. No. 125, s. 1958; No. 112, s. 1971; No. 76, s. 1977 and No. 117, s. 1985).

Nonetheless, we are stating our comments and observations on the 'issuances' mentioned in your request to assist DTI in resolving the controversy regarding the IISMI assets in question vis-a-vis the implementation of its program of privatization as mandated by existing policies.

At the outset, it must be stressed that the Memorandum dated March 7, 1986, issued by the former head of the Ministry of National Defense (MND) for the President, which the counsel for the Jacintos claimed to have been confirmed by the subject four (4) 'issuances', merely advised the President of the action taken by the said official in his capacity as sequestrator with respect to the Jacinto assets. The directive, referred to in the said Memorandum, which was to return the said assets to their 'rightful owners' proceeded from the view of their sequestrator that the 'continued sequestration' of said assets had become untenable due to the dismantling and abolition of the old regime.

To begin with, the IISMI assets were not owned by the Jacintos but by IISMI; it appears that IISMI, in turn, was owned by public and private stockholders among whom the Jacintos were just a minority. In fact, we note from the memorandum of NSC's legal counsel that the Government, through the GSIS and the SSS, was the single biggest stockholder of IISMI. Moreover, the IISMI assets were no longer under sequestration at the time of the toppling of the Marcos regime. The said assets have long been in the possession of NSC which purchased and holds the same, not by virtue of sequestration, but as an incident of its ownership, otherwise known as 'jus possidendi'. Hence, we do not see the relevance of the aforesaid memorandum of March 7, 1986, insofar as the former IISMI assets, now owned by NSC, are concerned. The NSC was a purchaser of the IISMI assets for value and in good faith. With reference to the said assets no question of 'continued sequestration' can be raised. It must also be emphasized that the NSC bought said property not from the sequestrator, but from a mortgagee, DBP, which had foreclosed the mortgage from the said assets.

With reference to the four so-called issuances it suffices here to note that the DBP, through its Chairman's letter dated February 8, 1988, has clarified that the Nograles opinion contained in this memorandum of December 5, 1986 merely represent his own personal opinion, that it 'does not represent DBP's position with respect to the Jacinto family's claim regarding the plant and assets of . . . IISMI' and that, contrary to the conclusion of Atty. Nograles

'1. DBP effected the foreclosure of the IISMI plant and assets in good faith and after obtaining judicial clearance. The foreclosure was, and remains, valid, legal, binding and final.

2. The foreclosure was a necessary, last resort measure which DBP had to take in order to protect the Government's interests and huge exposure in IISMI after IISMI continued unabatedly to default on its obligations to DBP despite numerous extensions and other relief measures granted by DBP.'

The same observation can be made with respect to the letter dated February 13, 1987 of Undersecretary of Justice Silvestre H. Bello III, confirming the Nograles opinion. It is clear that the facts or circumstances surrounding the former IISMI assets have not been fully disclosed to the latter by Atty. Nograles. In fact, the aforementioned DBP Counsel secured the said letter after then Minister of Justice Neptali A. Gonzales has sent him a letter dated January 27, 1987 which declined his request for an approval of his Memorandum.

The lack of full disclosure of the facts and circumstances referred to above is also evident in the case of Opinion No. 003 dated January 14, 1987 of the Deputy Government Corporate Counsel, the pertinent portion of which reads:

'Considering that we have no access to the pertinent documents relative to the transactions of proceedings affecting the IISMI and you did not also furnish us copies thereof and considering further the urgency of your request for our comments, we will endeavor to delve into the issues in the light of your factual account contained in your memorandum to the Chairman and Vice-Chairman of the DBP's Board of Governors and which was the basis of the opinion you articulated therein.'

Aside from the fact that the opinion of the OGCC is merely persuasive and has no binding force, the admitted absence of a full consideration of the pertinent facts involved, and the fact that the opinion (OGCC's) was prematurely rendered and based on a personal opinion (Atty. Nograles') give us cogent reasons to conclude that the aforesaid opinion of the OGCC has no relevance or pertinency to your privatization plans for NSC.

Upon the other hand, the PCGG pronouncement that due process may not have been observed in the foreclosure by the DBP of the IISMI assets was embodied in the same issuance wherein the PCGG acknowledged that it had no jurisdiction to act on the matter and dismissing the Jacinto's claim for lack of jurisdiction, as it raised judicial questions which must be addressed to the regular courts of justice. Given the absence of jurisdiction, the PCGG's opinions about due process are of the same character as an obiter dictum or a dictum not necessarily involved in the case or which was made without full consideration of the point or which a tribunal is not required to decide and therefore, lacks the force of an adjudication (Morales vs. Paredes, 55 Phil. 565, 567 [1931]; People vs. Macadaeg, et al., 91 Phil. 410, 413 [1952]). Worse, since PCGG ruled itself without jurisdiction over the questions raised, it follows that it had no jurisdiction to render an obiter dictum. Accordingly, the above-mentioned pronouncement of the PCGG also served no useful purpose or was a surplusage, since it would not bind the parties to the case nor any court, which the PCGG conceded as the sole authority to pass upon the questions raised in the Jacinto petition and to grant the relief therein prayed for. We took note, however, of the issue of prescription of any judicial action that the Jacintos may file, raised by the NSC Legal Counsel which is likewise an issue addressed to the court."^[67]

""x x x the Court is of the considered opinion that all the matters here in dispute should be referred to the respondent court for further proceedings and appropriate resolution. Indeed, having in view the nature and volume of the evidence which the parties would have to present in connection with the factual issues raised by petitioners regarding what they claim to have discovered or unearthed after the Secretary of National Defense took over the 'management, control and operation' of IISMI, may be justly and comprehensively resolved only after such evidence have been received by the trial court, rather than this Court, since it has the ready adequate machinery for the purpose. And with such additional evidence, the trial court would naturally be in a better position than before to rule on the injunctions which have given rise to these proceedings." (At p. 348, Underlining supplied)

"6. That the acts of the Management of Iligan Integrated Steel Mills, Inc. even after the submission of the case between the Government and IISMI in the Supreme Court and the Courts of Justice indicated that IISMI disposed of property by fraudulent means, and that funds or money earned were not property accounted for, and neither were they applied for payment of obligations due the government and the government-owned corporations."

"In order to protect the interests of the Government in the Iligan Integrated Steel Mills, Inc. and in furtherance of Letter of Instruction No. 27 dated October 14, 1972, you are hereby ordered to take over and control the assets of the following corporation x x x."

x x x x x x x x x

"The passports of Fernando Jacinto and his children were cancelled. Their lawyers were constrained to withdraw their appearances on the IISMI cases because of the change in the membership of the Board of Directors of IISMI and the incarceration of the executives of IISMI who would have been witnesses in the case. JSI itself was sequestered. The replacement directors, who were all government appointed, could not be expected to protect the Jacinto properties in preference over the interests of government. The courts while remaining open were cowed into submission by the dictatorial regime. Fernando Jacinto could not have come back even if his passport was not cancelled because he would have been arrested and kept in prison indefinitely. JACINTO and his family were even accorded 'refugee status' by the international community in recognition of their persecution by the Marcos regime. All Jacinto resources were taken over by the Government. Any action attempted from the time of sequestration of the IISMI and other Jacinto interests would have been futile, if not suicidal.

Indeed, IISMI, JACINTO and JSI were virtually paralyzed from commencing this suit for as long as Pres. Marcos was in power." (Comment, pp. 18-19)