Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. L-23145 November 29, 1968

TESTATE ESTATE OF IDONAH SLADE PERKINS, deceased. RENATO D. TAYAG,

ancillary administrator-appellee,
vs.
BENGUET CONSOLIDATED, INC., oppositor-appellant.

Cirilo F. Asperillo, Jr., for ancillary administrator-appellee.

Ross, Salcedo, Del Rosario, Bito and Misa for oppositor-appellant.

FERNANDO, J.:

Confronted by an obstinate and adamant refusal of the domiciliary administrator, the County
Trust Company of New York, United States of America, of the estate of the deceased Idonah
Slade Perkins, who died in New York City on March 27, 1960, to surrender to the ancillary
administrator in the Philippines the stock certificates owned by her in a Philippine corporation,
Benguet Consolidated, Inc., to satisfy the legitimate claims of local creditors, the lower court,
then presided by the Honorable Arsenio Santos, now retired, issued on May 18, 1964, an order
of this tenor: "After considering the motion of the ancillary administrator, dated February 11,
1964, as well as the opposition filed by the Benguet Consolidated, Inc., the Court hereby (1)
considers as lost for all purposes in connection with the administration and liquidation of the
Philippine estate of Idonah Slade Perkins the stock certificates covering the 33,002 shares of
stock standing in her name in the books of the Benguet Consolidated, Inc., (2) orders said
certificates cancelled, and (3) directs said corporation to issue new certificates in lieu thereof, the
same to be delivered by said corporation to either the incumbent ancillary administrator or to the
Probate Division of this Court."1

From such an order, an appeal was taken to this Court not by the domiciliary administrator, the
County Trust Company of New York, but by the Philippine corporation, the Benguet
Consolidated, Inc. The appeal cannot possibly prosper. The challenged order represents a
response and expresses a policy, to paraphrase Frankfurter, arising out of a specific problem,
addressed to the attainment of specific ends by the use of specific remedies, with full and ample
support from legal doctrines of weight and significance.

The facts will explain why. As set forth in the brief of appellant Benguet Consolidated, Inc.,
Idonah Slade Perkins, who died on March 27, 1960 in New York City, left among others, two
stock certificates covering 33,002 shares of appellant, the certificates being in the possession of
the County Trust Company of New York, which as noted, is the domiciliary administrator of the
estate of the deceased.2 Then came this portion of the appellant's brief: "On August 12, 1960,
Prospero Sanidad instituted ancillary administration proceedings in the Court of First Instance of
Manila; Lazaro A. Marquez was appointed ancillary administrator, and on January 22, 1963, he
was substituted by the appellee Renato D. Tayag. A dispute arose between the domiciary
administrator in New York and the ancillary administrator in the Philippines as to which of them
was entitled to the possession of the stock certificates in question. On January 27, 1964, the
Court of First Instance of Manila ordered the domiciliary administrator, County Trust Company,
to "produce and deposit" them with the ancillary administrator or with the Clerk of Court. The
domiciliary administrator did not comply with the order, and on February 11, 1964, the ancillary
administrator petitioned the court to "issue an order declaring the certificate or certificates of
stocks covering the 33,002 shares issued in the name of Idonah Slade Perkins by Benguet
Consolidated, Inc., be declared [or] considered as lost."3

It is to be noted further that appellant Benguet Consolidated, Inc. admits that "it is immaterial"
as far as it is concerned as to "who is entitled to the possession of the stock certificates in
question; appellant opposed the petition of the ancillary administrator because the said stock
certificates are in existence, they are today in the possession of the domiciliary administrator, the
County Trust Company, in New York, U.S.A...."4

It is its view, therefore, that under the circumstances, the stock certificates cannot be declared or
considered as lost. Moreover, it would allege that there was a failure to observe certain
requirements of its by-laws before new stock certificates could be issued. Hence, its appeal.

As was made clear at the outset of this opinion, the appeal lacks merit. The challenged order
constitutes an emphatic affirmation of judicial authority sought to be emasculated by the wilful
conduct of the domiciliary administrator in refusing to accord obedience to a court decree. How,
then, can this order be stigmatized as illegal?

As is true of many problems confronting the judiciary, such a response was called for by the
realities of the situation. What cannot be ignored is that conduct bordering on wilful defiance, if
it had not actually reached it, cannot without undue loss of judicial prestige, be condoned or
tolerated. For the law is not so lacking in flexibility and resourcefulness as to preclude such a
solution, the more so as deeper reflection would make clear its being buttressed by indisputable
principles and supported by the strongest policy considerations.

It can truly be said then that the result arrived at upheld and vindicated the honor of the judiciary
no less than that of the country. Through this challenged order, there is thus dispelled the
atmosphere of contingent frustration brought about by the persistence of the domiciliary
administrator to hold on to the stock certificates after it had, as admitted, voluntarily submitted
itself to the jurisdiction of the lower court by entering its appearance through counsel on June
27, 1963, and filing a petition for relief from a previous order of March 15, 1963.
Thus did the lower court, in the order now on appeal, impart vitality and effectiveness to what
was decreed. For without it, what it had been decided would be set at naught and nullified.
Unless such a blatant disregard by the domiciliary administrator, with residence abroad, of what
was previously ordained by a court order could be thus remedied, it would have entailed, insofar
as this matter was concerned, not a partial but a well-nigh complete paralysis of judicial
authority.

1. Appellant Benguet Consolidated, Inc. did not dispute the power of the appellee ancillary
administrator to gain control and possession of all assets of the decedent within the jurisdiction
of the Philippines. Nor could it. Such a power is inherent in his duty to settle her estate and
satisfy the claims of local creditors.5 As Justice Tuason speaking for this Court made clear, it is a
"general rule universally recognized" that administration, whether principal or ancillary,
certainly "extends to the assets of a decedent found within the state or country where it was
granted," the corollary being "that an administrator appointed in one state or country has no
power over property in another state or country."6

It is to be noted that the scope of the power of the ancillary administrator was, in an earlier case,
set forth by Justice Malcolm. Thus: "It is often necessary to have more than one administration
of an estate. When a person dies intestate owning property in the country of his domicile as well
as in a foreign country, administration is had in both countries. That which is granted in the
jurisdiction of decedent's last domicile is termed the principal administration, while any other
administration is termed the ancillary administration. The reason for the latter is because a grant
of administration does not ex proprio vigore have any effect beyond the limits of the country in
which it is granted. Hence, an administrator appointed in a foreign state has no authority in the
[Philippines]. The ancillary administration is proper, whenever a person dies, leaving in a
country other than that of his last domicile, property to be administered in the nature of assets of
the deceased liable for his individual debts or to be distributed among his heirs."7

It would follow then that the authority of the probate court to require that ancillary
administrator's right to "the stock certificates covering the 33,002 shares ... standing in her name
in the books of [appellant] Benguet Consolidated, Inc...." be respected is equally beyond
question. For appellant is a Philippine corporation owing full allegiance and subject to the
unrestricted jurisdiction of local courts. Its shares of stock cannot therefore be considered in any
wise as immune from lawful court orders.

Our holding in Wells Fargo Bank and Union v. Collector of Internal Revenue 8 finds application.
"In the instant case, the actual situs of the shares of stock is in the Philippines, the corporation
being domiciled [here]." To the force of the above undeniable proposition, not even appellant is
insensible. It does not dispute it. Nor could it successfully do so even if it were so minded.

2. In the face of such incontrovertible doctrines that argue in a rather conclusive fashion for the
legality of the challenged order, how does appellant, Benguet Consolidated, Inc. propose to carry
the extremely heavy burden of persuasion of precisely demonstrating the contrary? It would
assign as the basic error allegedly committed by the lower court its "considering as lost the stock
certificates covering 33,002 shares of Benguet belonging to the deceased Idonah Slade
Perkins, ..."9 More specifically, appellant would stress that the "lower court could not "consider
as lost" the stock certificates in question when, as a matter of fact, his Honor the trial Judge
knew, and does know, and it is admitted by the appellee, that the said stock certificates are in
existence and are today in the possession of the domiciliary administrator in New York."10

There may be an element of fiction in the above view of the lower court. That certainly does not
suffice to call for the reversal of the appealed order. Since there is a refusal, persistently adhered
to by the domiciliary administrator in New York, to deliver the shares of stocks of appellant
corporation owned by the decedent to the ancillary administrator in the Philippines, there was
nothing unreasonable or arbitrary in considering them as lost and requiring the appellant to issue
new certificates in lieu thereof. Thereby, the task incumbent under the law on the ancillary
administrator could be discharged and his responsibility fulfilled.

Any other view would result in the compliance to a valid judicial order being made to depend on
the uncontrolled discretion of the party or entity, in this case domiciled abroad, which thus far
has shown the utmost persistence in refusing to yield obedience. Certainly, appellant would not
be heard to contend in all seriousness that a judicial decree could be treated as a mere scrap of
paper, the court issuing it being powerless to remedy its flagrant disregard.

It may be admitted of course that such alleged loss as found by the lower court did not
correspond exactly with the facts. To be more blunt, the quality of truth may be lacking in such a
conclusion arrived at. It is to be remembered however, again to borrow from Frankfurter, "that
fictions which the law may rely upon in the pursuit of legitimate ends have played an important
part in its development."11

Speaking of the common law in its earlier period, Cardozo could state fictions "were devices to
advance the ends of justice, [even if] clumsy and at times offensive." 12 Some of them have
persisted even to the present, that eminent jurist, noting "the quasi contract, the adopted child,
the constructive trust, all of flourishing vitality, to attest the empire of "as if" today." 13 He
likewise noted "a class of fictions of another order, the fiction which is a working tool of
thought, but which at times hides itself from view till reflection and analysis have brought it to
the light."14

What cannot be disputed, therefore, is the at times indispensable role that fictions as such played
in the law. There should be then on the part of the appellant a further refinement in the
catholicity of its condemnation of such judicial technique. If ever an occasion did call for the
employment of a legal fiction to put an end to the anomalous situation of a valid judicial order
being disregarded with apparent impunity, this is it. What is thus most obvious is that this
particular alleged error does not carry persuasion.

3. Appellant Benguet Consolidated, Inc. would seek to bolster the above contention by its
invoking one of the provisions of its by-laws which would set forth the procedure to be followed
in case of a lost, stolen or destroyed stock certificate; it would stress that in the event of a contest
or the pendency of an action regarding ownership of such certificate or certificates of stock
allegedly lost, stolen or destroyed, the issuance of a new certificate or certificates would await
the "final decision by [a] court regarding the ownership [thereof]."15

Such reliance is misplaced. In the first place, there is no such occasion to apply such by-law. It is
admitted that the foreign domiciliary administrator did not appeal from the order now in
question. Moreover, there is likewise the express admission of appellant that as far as it is
concerned, "it is immaterial ... who is entitled to the possession of the stock certificates ..." Even
if such were not the case, it would be a legal absurdity to impart to such a provision
conclusiveness and finality. Assuming that a contrariety exists between the above by-law and the
command of a court decree, the latter is to be followed.

It is understandable, as Cardozo pointed out, that the Constitution overrides a statute, to which,
however, the judiciary must yield deference, when appropriately invoked and deemed
applicable. It would be most highly unorthodox, however, if a corporate by-law would be
accorded such a high estate in the jural order that a court must not only take note of it but yield
to its alleged controlling force.

The fear of appellant of a contingent liability with which it could be saddled unless the appealed
order be set aside for its inconsistency with one of its by-laws does not impress us. Its obedience
to a lawful court order certainly constitutes a valid defense, assuming that such apprehension of
a possible court action against it could possibly materialize. Thus far, nothing in the
circumstances as they have developed gives substance to such a fear. Gossamer possibilities of a
future prejudice to appellant do not suffice to nullify the lawful exercise of judicial authority.

4. What is more the view adopted by appellant Benguet Consolidated, Inc. is fraught with
implications at war with the basic postulates of corporate theory.

We start with the undeniable premise that, "a corporation is an artificial being created by
operation of law...."16 It owes its life to the state, its birth being purely dependent on its will. As
Berle so aptly stated: "Classically, a corporation was conceived as an artificial person, owing its
existence through creation by a sovereign power."17 As a matter of fact, the statutory language
employed owes much to Chief Justice Marshall, who in the Dartmouth College decision defined
a corporation precisely as "an artificial being, invisible, intangible, and existing only in
contemplation of law."18

The well-known authority Fletcher could summarize the matter thus: "A corporation is not in
fact and in reality a person, but the law treats it as though it were a person by process of fiction,
or by regarding it as an artificial person distinct and separate from its individual stockholders....
It owes its existence to law. It is an artificial person created by law for certain specific purposes,
the extent of whose existence, powers and liberties is fixed by its charter." 19 Dean Pound's terse
summary, a juristic person, resulting from an association of human beings granted legal
personality by the state, puts the matter neatly.20
There is thus a rejection of Gierke's genossenchaft theory, the basic theme of which to quote
from Friedmann, "is the reality of the group as a social and legal entity, independent of state
recognition and concession."21 A corporation as known to Philippine jurisprudence is a creature
without any existence until it has received the imprimatur of the state according to law. It is
logically inconceivable therefore that it will have rights and privileges of a higher priority than
that of its creator. More than that, it cannot legitimately refuse to yield obedience to acts of its
state organs, certainly not excluding the judiciary, whenever called upon to do so.

As a matter of fact, a corporation once it comes into being, following American law still of
persuasive authority in our jurisdiction, comes more often within the ken of the judiciary than
the other two coordinate branches. It institutes the appropriate court action to enforce its right.
Correlatively, it is not immune from judicial control in those instances, where a duty under the
law as ascertained in an appropriate legal proceeding is cast upon it.

To assert that it can choose which court order to follow and which to disregard is to confer upon
it not autonomy which may be conceded but license which cannot be tolerated. It is to argue that
it may, when so minded, overrule the state, the source of its very existence; it is to contend that
what any of its governmental organs may lawfully require could be ignored at will. So
extravagant a claim cannot possibly merit approval.

5. One last point. In Viloria v. Administrator of Veterans Affairs, 22 it was shown that in a
guardianship proceedings then pending in a lower court, the United States Veterans
Administration filed a motion for the refund of a certain sum of money paid to the minor under
guardianship, alleging that the lower court had previously granted its petition to consider the
deceased father as not entitled to guerilla benefits according to a determination arrived at by its
main office in the United States. The motion was denied. In seeking a reconsideration of such
order, the Administrator relied on an American federal statute making his decisions "final and
conclusive on all questions of law or fact" precluding any other American official to examine the
matter anew, "except a judge or judges of the United States court."23 Reconsideration was
denied, and the Administrator appealed.

In an opinion by Justice J.B.L. Reyes, we sustained the lower court. Thus: "We are of the
opinion that the appeal should be rejected. The provisions of the U.S. Code, invoked by the
appellant, make the decisions of the U.S. Veterans' Administrator final and conclusive when
made on claims property submitted to him for resolution; but they are not applicable to the
present case, where the Administrator is not acting as a judge but as a litigant. There is a great
difference between actions against the Administrator (which must be filed strictly in accordance
with the conditions that are imposed by the Veterans' Act, including the exclusive review by
United States courts), and those actions where the Veterans' Administrator seeks a remedy from
our courts and submits to their jurisdiction by filing actions therein. Our attention has not been
called to any law or treaty that would make the findings of the Veterans' Administrator, in
actions where he is a party, conclusive on our courts. That, in effect, would deprive our tribunals
of judicial discretion and render them mere subordinate instrumentalities of the Veterans'
Administrator."
It is bad enough as the Viloria decision made patent for our judiciary to accept as final and
conclusive, determinations made by foreign governmental agencies. It is infinitely worse if
through the absence of any coercive power by our courts over juridical persons within our
jurisdiction, the force and effectivity of their orders could be made to depend on the whim or
caprice of alien entities. It is difficult to imagine of a situation more offensive to the dignity of
the bench or the honor of the country.

Yet that would be the effect, even if unintended, of the proposition to which appellant Benguet
Consolidated seems to be firmly committed as shown by its failure to accept the validity of the
order complained of; it seeks its reversal. Certainly we must at all pains see to it that it does not
succeed. The deplorable consequences attendant on appellant prevailing attest to the necessity of
negative response from us. That is what appellant will get.

That is all then that this case presents. It is obvious why the appeal cannot succeed. It is always
easy to conjure extreme and even oppressive possibilities. That is not decisive. It does not settle
the issue. What carries weight and conviction is the result arrived at, the just solution obtained,
grounded in the soundest of legal doctrines and distinguished by its correspondence with what a
sense of realism requires. For through the appealed order, the imperative requirement of justice
according to law is satisfied and national dignity and honor maintained.

WHEREFORE, the appealed order of the Honorable Arsenio Santos, the Judge of the Court of
First Instance, dated May 18, 1964, is affirmed. With costs against oppositor-appelant Benguet
Consolidated, Inc.

Makalintal, Zaldivar and Capistrano, JJ., concur.

Concepcion, C.J., Reyes, J.B.L., Dizon, Sanchez and Castro, JJ.,
Case 2

Stonehill vs Diokno

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. L-19550 June 19, 1967

HARRY S. STONEHILL, ROBERT P. BROOKS, JOHN J. BROOKS and KARL BECK,

petitioners,
vs.
HON. JOSE W. DIOKNO, in his capacity as SECRETARY OF JUSTICE; JOSE
LUKBAN, in his capacity as Acting Director, National Bureau of Investigation; SPECIAL
PROSECUTORS PEDRO D. CENZON, EFREN I. PLANA and MANUEL VILLAREAL,
JR. and ASST. FISCAL MANASES G. REYES; JUDGE AMADO ROAN, Municipal
Court of Manila; JUDGE ROMAN CANSINO, Municipal Court of Manila; JUDGE
HERMOGENES CALUAG, Court of First Instance of Rizal-Quezon City Branch, and
JUDGE DAMIAN JIMENEZ, Municipal Court of Quezon City, respondents.

Paredes, Poblador, Cruz and Nazareno and Meer, Meer and Meer and Juan T. David for
petitioners.
Office of the Solicitor General Arturo A. Alafriz, Assistant Solicitor General Pacifico P. de
Castro, Assistant Solicitor General Frine C. Zaballero, Solicitor Camilo D. Quiason and
Solicitor C. Padua for respondents.

CONCEPCION, C.J.:

Upon application of the officers of the government named on the margin 1 hereinafter referred
to as Respondents-Prosecutors several judges2 hereinafter referred to as Respondents-
Judges issued, on different dates,3 a total of 42 search warrants against petitioners herein 4
and/or the corporations of which they were officers, 5 directed to the any peace officer, to search
the persons above-named and/or the premises of their offices, warehouses and/or residences, and
to seize and take possession of the following personal property to wit:
Books of accounts, financial records, vouchers, correspondence, receipts, ledgers, journals,
portfolios, credit journals, typewriters, and other documents and/or papers showing all business
transactions including disbursements receipts, balance sheets and profit and loss statements and
Bobbins (cigarette wrappers).

as "the subject of the offense; stolen or embezzled and proceeds or fruits of the offense," or
"used or intended to be used as the means of committing the offense," which is described in the
applications adverted to above as "violation of Central Bank Laws, Tariff and Customs Laws,
Internal Revenue (Code) and the Revised Penal Code."

Alleging that the aforementioned search warrants are null and void, as contravening the
Constitution and the Rules of Court because, inter alia: (1) they do not describe with
particularity the documents, books and things to be seized; (2) cash money, not mentioned in the
warrants, were actually seized; (3) the warrants were issued to fish evidence against the
aforementioned petitioners in deportation cases filed against them; (4) the searches and seizures
were made in an illegal manner; and (5) the documents, papers and cash money seized were not
delivered to the courts that issued the warrants, to be disposed of in accordance with law on
March 20, 1962, said petitioners filed with the Supreme Court this original action for certiorari,
prohibition, mandamus and injunction, and prayed that, pending final disposition of the present
case, a writ of preliminary injunction be issued restraining Respondents-Prosecutors, their agents
and /or representatives from using the effects seized as aforementioned or any copies thereof, in
the deportation cases already adverted to, and that, in due course, thereafter, decision be
rendered quashing the contested search warrants and declaring the same null and void, and
commanding the respondents, their agents or representatives to return to petitioners herein, in
accordance with Section 3, Rule 67, of the Rules of Court, the documents, papers, things and
cash moneys seized or confiscated under the search warrants in question.

In their answer, respondents-prosecutors alleged, 6 (1) that the contested search warrants are
valid and have been issued in accordance with law; (2) that the defects of said warrants, if any,
were cured by petitioners' consent; and (3) that, in any event, the effects seized are admissible in
evidence against herein petitioners, regardless of the alleged illegality of the aforementioned
searches and seizures.

On March 22, 1962, this Court issued the writ of preliminary injunction prayed for in the
petition. However, by resolution dated June 29, 1962, the writ was partially lifted or dissolved,
insofar as the papers, documents and things seized from the offices of the corporations above
mentioned are concerned; but, the injunction was maintained as regards the papers, documents
and things found and seized in the residences of petitioners herein.7

Thus, the documents, papers, and things seized under the alleged authority of the warrants in
question may be split into two (2) major groups, namely: (a) those found and seized in the
offices of the aforementioned corporations, and (b) those found and seized in the residences of
petitioners herein.
As regards the first group, we hold that petitioners herein have no cause of action to assail the
legality of the contested warrants and of the seizures made in pursuance thereof, for the simple
reason that said corporations have their respective personalities, separate and distinct from the
personality of herein petitioners, regardless of the amount of shares of stock or of the interest of
each of them in said corporations, and whatever the offices they hold therein may be. 8 Indeed, it
is well settled that the legality of a seizure can be contested only by the party whose rights have
been impaired thereby,9 and that the objection to an unlawful search and seizure is purely
personal and cannot be availed of by third parties. 10 Consequently, petitioners herein may not
validly object to the use in evidence against them of the documents, papers and things seized
from the offices and premises of the corporations adverted to above, since the right to object to
the admission of said papers in evidence belongs exclusively to the corporations, to whom the
seized effects belong, and may not be invoked by the corporate officers in proceedings against
them in their individual capacity. 11 Indeed, it has been held:

. . . that the Government's action in gaining possession of papers belonging to the corporation
did not relate to nor did it affect the personal defendants. If these papers were unlawfully seized
and thereby the constitutional rights of or any one were invaded, they were the rights of the
corporation and not the rights of the other defendants. Next, it is clear that a question of the
lawfulness of a seizure can be raised only by one whose rights have been invaded. Certainly,
such a seizure, if unlawful, could not affect the constitutional rights of defendants whose
property had not been seized or the privacy of whose homes had not been disturbed; nor could
they claim for themselves the benefits of the Fourth Amendment, when its violation, if any, was
with reference to the rights of another. Remus vs. United States (C.C.A.)291 F. 501, 511. It
follows, therefore, that the question of the admissibility of the evidence based on an alleged
unlawful search and seizure does not extend to the personal defendants but embraces only the
corporation whose property was taken. . . . (A Guckenheimer & Bros. Co. vs. United States,
[1925] 3 F. 2d. 786, 789, Emphasis supplied.)

With respect to the documents, papers and things seized in the residences of petitioners herein,
the aforementioned resolution of June 29, 1962, lifted the writ of preliminary injunction
previously issued by this Court, 12 thereby, in effect, restraining herein Respondents-Prosecutors
from using them in evidence against petitioners herein.

In connection with said documents, papers and things, two (2) important questions need be
settled, namely: (1) whether the search warrants in question, and the searches and seizures made
under the authority thereof, are valid or not, and (2) if the answer to the preceding question is in
the negative, whether said documents, papers and things may be used in evidence against
petitioners herein.1wph1.t

Petitioners maintain that the aforementioned search warrants are in the nature of general
warrants and that accordingly, the seizures effected upon the authority there of are null and void.
In this connection, the Constitution 13 provides:
The right of the people to be secure in their persons, houses, papers, and effects against
unreasonable searches and seizures shall not be violated, and no warrants shall issue but upon
probable cause, to be determined by the judge after examination under oath or affirmation of the
complainant and the witnesses he may produce, and particularly describing the place to be
searched, and the persons or things to be seized.

Two points must be stressed in connection with this constitutional mandate, namely: (1) that no
warrant shall issue but upon probable cause, to be determined by the judge in the manner set
forth in said provision; and (2) that the warrant shall particularly describe the things to be
seized.

None of these requirements has been complied with in the contested warrants. Indeed, the same
were issued upon applications stating that the natural and juridical person therein named had
committed a "violation of Central Ban Laws, Tariff and Customs Laws, Internal Revenue (Code)
and Revised Penal Code." In other words, no specific offense had been alleged in said
applications. The averments thereof with respect to the offense committed were abstract. As a
consequence, it was impossible for the judges who issued the warrants to have found the
existence of probable cause, for the same presupposes the introduction of competent proof that
the party against whom it is sought has performed particular acts, or committed specific
omissions, violating a given provision of our criminal laws. As a matter of fact, the applications
involved in this case do not allege any specific acts performed by herein petitioners. It would be
the legal heresy, of the highest order, to convict anybody of a "violation of Central Bank Laws,
Tariff and Customs Laws, Internal Revenue (Code) and Revised Penal Code," as alleged in
the aforementioned applications without reference to any determinate provision of said laws
or

To uphold the validity of the warrants in question would be to wipe out completely one of the
most fundamental rights guaranteed in our Constitution, for it would place the sanctity of the
domicile and the privacy of communication and correspondence at the mercy of the whims
caprice or passion of peace officers. This is precisely the evil sought to be remedied by the
constitutional provision above quoted to outlaw the so-called general warrants. It is not
difficult to imagine what would happen, in times of keen political strife, when the party in power
feels that the minority is likely to wrest it, even though by legal means.

Such is the seriousness of the irregularities committed in connection with the disputed search
warrants, that this Court deemed it fit to amend Section 3 of Rule 122 of the former Rules of
Court 14 by providing in its counterpart, under the Revised Rules of Court 15 that "a search
warrant shall not issue but upon probable cause in connection with one specific offense." Not
satisfied with this qualification, the Court added thereto a paragraph, directing that "no search
warrant shall issue for more than one specific offense."

The grave violation of the Constitution made in the application for the contested search warrants
was compounded by the description therein made of the effects to be searched for and seized, to
wit:
Books of accounts, financial records, vouchers, journals, correspondence, receipts, ledgers,
portfolios, credit journals, typewriters, and other documents and/or papers showing all business
transactions including disbursement receipts, balance sheets and related profit and loss
statements.

Thus, the warrants authorized the search for and seizure of records pertaining to all business
transactions of petitioners herein, regardless of whether the transactions were legal or illegal.
The warrants sanctioned the seizure of all records of the petitioners and the aforementioned
corporations, whatever their nature, thus openly contravening the explicit command of our Bill
of Rights that the things to be seized be particularly described as well as tending to defeat
its major objective: the elimination of general warrants.

Relying upon Moncado vs. People's Court (80 Phil. 1), Respondents-Prosecutors maintain that,
even if the searches and seizures under consideration were unconstitutional, the documents,
papers and things thus seized are admissible in evidence against petitioners herein. Upon mature
deliberation, however, we are unanimously of the opinion that the position taken in the Moncado
case must be abandoned. Said position was in line with the American common law rule, that the
criminal should not be allowed to go free merely "because the constable has blundered," 16 upon
the theory that the constitutional prohibition against unreasonable searches and seizures is
protected by means other than the exclusion of evidence unlawfully obtained, 17 such as the
common-law action for damages against the searching officer, against the party who procured
the issuance of the search warrant and against those assisting in the execution of an illegal
search, their criminal punishment, resistance, without liability to an unlawful seizure, and such
other legal remedies as may be provided by other laws.

However, most common law jurisdictions have already given up this approach and eventually
adopted the exclusionary rule, realizing that this is the only practical means of enforcing the
constitutional injunction against unreasonable searches and seizures. In the language of Judge
Learned Hand:

As we understand it, the reason for the exclusion of evidence competent as such, which has been
unlawfully acquired, is that exclusion is the only practical way of enforcing the constitutional
privilege. In earlier times the action of trespass against the offending official may have been
protection enough; but that is true no longer. Only in case the prosecution which itself controls
the seizing officials, knows that it cannot profit by their wrong will that wrong be repressed.18

In fact, over thirty (30) years before, the Federal Supreme Court had already declared:

If letters and private documents can thus be seized and held and used in evidence against a
citizen accused of an offense, the protection of the 4th Amendment, declaring his rights to be
secure against such searches and seizures, is of no value, and, so far as those thus placed are
concerned, might as well be stricken from the Constitution. The efforts of the courts and their
officials to bring the guilty to punishment, praiseworthy as they are, are not to be aided by the
sacrifice of those great principles established by years of endeavor and suffering which have
resulted in their embodiment in the fundamental law of the land.19

This view was, not only reiterated, but, also, broadened in subsequent decisions on the same
Federal Court. 20 After reviewing previous decisions thereon, said Court held, in Mapp vs. Ohio
(supra.):

. . . Today we once again examine the Wolf's constitutional documentation of the right of privacy
free from unreasonable state intrusion, and after its dozen years on our books, are led by it to
close the only courtroom door remaining open to evidence secured by official lawlessness in
flagrant abuse of that basic right, reserved to all persons as a specific guarantee against that very
same unlawful conduct. We hold that all evidence obtained by searches and seizures in violation
of the Constitution is, by that same authority, inadmissible in a State.

Since the Fourth Amendment's right of privacy has been declared enforceable against the States
through the Due Process Clause of the Fourteenth, it is enforceable against them by the same
sanction of exclusion as it used against the Federal Government. Were it otherwise, then just as
without the Weeks rule the assurance against unreasonable federal searches and seizures would
be "a form of words," valueless and underserving of mention in a perpetual charter of
inestimable human liberties, so too, without that rule the freedom from state invasions of privacy
would be so ephemeral and so neatly severed from its conceptual nexus with the freedom from
all brutish means of coercing evidence as not to permit this Court's high regard as a freedom
"implicit in the concept of ordered liberty." At the time that the Court held in Wolf that the
amendment was applicable to the States through the Due Process Clause, the cases of this Court
as we have seen, had steadfastly held that as to federal officers the Fourth Amendment included
the exclusion of the evidence seized in violation of its provisions. Even Wolf "stoutly adhered"
to that proposition. The right to when conceded operatively enforceable against the States, was
not susceptible of destruction by avulsion of the sanction upon which its protection and
enjoyment had always been deemed dependent under the Boyd, Weeks and Silverthorne Cases.
Therefore, in extending the substantive protections of due process to all constitutionally
unreasonable searches state or federal it was logically and constitutionally necessarily that
the exclusion doctrine an essential part of the right to privacy be also insisted upon as an
essential ingredient of the right newly recognized by the Wolf Case. In short, the admission of
the new constitutional Right by Wolf could not tolerate denial of its most important
constitutional privilege, namely, the exclusion of the evidence which an accused had been forced
to give by reason of the unlawful seizure. To hold otherwise is to grant the right but in reality to
withhold its privilege and enjoyment. Only last year the Court itself recognized that the purpose
of the exclusionary rule to "is to deter to compel respect for the constitutional guaranty in the
only effectively available way by removing the incentive to disregard it" . . . .

The ignoble shortcut to conviction left open to the State tends to destroy the entire system of
constitutional restraints on which the liberties of the people rest. Having once recognized that
the right to privacy embodied in the Fourth Amendment is enforceable against the States, and
that the right to be secure against rude invasions of privacy by state officers is, therefore
constitutional in origin, we can no longer permit that right to remain an empty promise. Because
it is enforceable in the same manner and to like effect as other basic rights secured by its Due
Process Clause, we can no longer permit it to be revocable at the whim of any police officer
who, in the name of law enforcement itself, chooses to suspend its enjoyment. Our decision,
founded on reason and truth, gives to the individual no more than that which the Constitution
guarantees him to the police officer no less than that to which honest law enforcement is
entitled, and, to the courts, that judicial integrity so necessary in the true administration of
justice. (emphasis ours.)

Indeed, the non-exclusionary rule is contrary, not only to the letter, but also, to the spirit of the
constitutional injunction against unreasonable searches and seizures. To be sure, if the applicant
for a search warrant has competent evidence to establish probable cause of the commission of a
given crime by the party against whom the warrant is intended, then there is no reason why the
applicant should not comply with the requirements of the fundamental law. Upon the other hand,
if he has no such competent evidence, then it is not possible for the Judge to find that there is
probable cause, and, hence, no justification for the issuance of the warrant. The only possible
explanation (not justification) for its issuance is the necessity of fishing evidence of the
commission of a crime. But, then, this fishing expedition is indicative of the absence of evidence
to establish a probable cause.

Moreover, the theory that the criminal prosecution of those who secure an illegal search warrant
and/or make unreasonable searches or seizures would suffice to protect the constitutional
guarantee under consideration, overlooks the fact that violations thereof are, in general,
committed By agents of the party in power, for, certainly, those belonging to the minority could
not possibly abuse a power they do not have. Regardless of the handicap under which the
minority usually but, understandably finds itself in prosecuting agents of the majority, one
must not lose sight of the fact that the psychological and moral effect of the possibility 21 of
securing their conviction, is watered down by the pardoning power of the party for whose
benefit the illegality had been committed.

In their Motion for Reconsideration and Amendment of the Resolution of this Court dated June
29, 1962, petitioners allege that Rooms Nos. 81 and 91 of Carmen Apartments, House No. 2008,
Dewey Boulevard, House No. 1436, Colorado Street, and Room No. 304 of the Army-Navy
Club, should be included among the premises considered in said Resolution as residences of
herein petitioners, Harry S. Stonehill, Robert P. Brook, John J. Brooks and Karl Beck,
respectively, and that, furthermore, the records, papers and other effects seized in the offices of
the corporations above referred to include personal belongings of said petitioners and other
effects under their exclusive possession and control, for the exclusion of which they have a
standing under the latest rulings of the federal courts of federal courts of the United States. 22

We note, however, that petitioners' theory, regarding their alleged possession of and control over
the aforementioned records, papers and effects, and the alleged "personal" nature thereof, has
Been Advanced, not in their petition or amended petition herein, but in the Motion for
Reconsideration and Amendment of the Resolution of June 29, 1962. In other words, said theory
would appear to be readjustment of that followed in said petitions, to suit the approach intimated
in the Resolution sought to be reconsidered and amended. Then, too, some of the affidavits or
copies of alleged affidavits attached to said motion for reconsideration, or submitted in support
thereof, contain either inconsistent allegations, or allegations inconsistent with the theory now
advanced by petitioners herein.

Upon the other hand, we are not satisfied that the allegations of said petitions said motion for
reconsideration, and the contents of the aforementioned affidavits and other papers submitted in
support of said motion, have sufficiently established the facts or conditions contemplated in the
cases relied upon by the petitioners; to warrant application of the views therein expressed,
should we agree thereto. At any rate, we do not deem it necessary to express our opinion
thereon, it being best to leave the matter open for determination in appropriate cases in the
future.

We hold, therefore, that the doctrine adopted in the Moncado case must be, as it is hereby,
abandoned; that the warrants for the search of three (3) residences of herein petitioners, as
specified in the Resolution of June 29, 1962, are null and void; that the searches and seizures
therein made are illegal; that the writ of preliminary injunction heretofore issued, in connection
with the documents, papers and other effects thus seized in said residences of herein petitioners
is hereby made permanent; that the writs prayed for are granted, insofar as the documents,
papers and other effects so seized in the aforementioned residences are concerned; that the
aforementioned motion for Reconsideration and Amendment should be, as it is hereby, denied;
and that the petition herein is dismissed and the writs prayed for denied, as regards the
documents, papers and other effects seized in the twenty-nine (29) places, offices and other
premises enumerated in the same Resolution, without special pronouncement as to costs.

It is so ordered.

Reyes, J.B.L., Dizon, Makalintal, Bengzon, J.P., Zaldivar and Sanchez, JJ., concur.

CASTRO, J., concurring and dissenting:

From my analysis of the opinion written by Chief Justice Roberto Concepcion and from the
import of the deliberations of the Court on this case, I gather the following distinct conclusions:

1. All the search warrants served by the National Bureau of Investigation in this case are general
warrants and are therefore proscribed by, and in violation of, paragraph 3 of section 1 of Article
III (Bill of Rights) of the Constitution;

2. All the searches and seizures conducted under the authority of the said search warrants were
consequently illegal;

3. The non-exclusionary rule enunciated in Moncado vs. People, 80 Phil. 1, should be, and is
declared, abandoned;
4. The search warrants served at the three residences of the petitioners are expressly declared
null and void the searches and seizures therein made are expressly declared illegal; and the writ
of preliminary injunction heretofore issued against the use of the documents, papers and effect
seized in the said residences is made permanent; and

5. Reasoning that the petitioners have not in their pleadings satisfactorily demonstrated that they
have legal standing to move for the suppression of the documents, papers and effects seized in
the places other than the three residences adverted to above, the opinion written by the Chief
Justice refrains from expressly declaring as null and void the such warrants served at such other
places and as illegal the searches and seizures made therein, and leaves "the matter open for
determination in appropriate cases in the future."

It is precisely the position taken by the Chief Justice summarized in the immediately preceding
paragraph (numbered 5) with which I am not in accord.

I do not share his reluctance or unwillingness to expressly declare, at this time, the nullity of the
search warrants served at places other than the three residences, and the illegibility of the
searches and seizures conducted under the authority thereof. In my view even the exacerbating
passions and prejudices inordinately generated by the environmental political and moral
developments of this case should not deter this Court from forthrightly laying down the law not
only for this case but as well for future cases and future generations. All the search warrants,
without exception, in this case are admittedly general, blanket and roving warrants and are
therefore admittedly and indisputably outlawed by the Constitution; and the searches and
seizures made were therefore unlawful. That the petitioners, let us assume in gratia argumente,
have no legal standing to ask for the suppression of the papers, things and effects seized from
places other than their residences, to my mind, cannot in any manner affect, alter or otherwise
modify the intrinsic nullity of the search warrants and the intrinsic illegality of the searches and
seizures made thereunder. Whether or not the petitioners possess legal standing the said warrants
are void and remain void, and the searches and seizures were illegal and remain illegal. No
inference can be drawn from the words of the Constitution that "legal standing" or the lack of it
is a determinant of the nullity or validity of a search warrant or of the lawfulness or illegality of
a search or seizure.

On the question of legal standing, I am of the conviction that, upon the pleadings submitted to
this Court the petitioners have the requisite legal standing to move for the suppression and return
of the documents, papers and effects that were seized from places other than their family
residences.

Our constitutional provision on searches and seizures was derived almost verbatim from the
Fourth Amendment to the United States Constitution. In the many years of judicial construction
and interpretation of the said constitutional provision, our courts have invariably regarded as
doctrinal the pronouncement made on the Fourth Amendment by federal courts, especially the
Federal Supreme Court and the Federal Circuit Courts of Appeals.
The U.S. doctrines and pertinent cases on standing to move for the suppression or return of
documents, papers and effects which are the fruits of an unlawful search and seizure, may be
summarized as follows; (a) ownership of documents, papers and effects gives "standing;" (b)
ownership and/or control or possession actual or constructive of premises searched gives
"standing"; and (c) the "aggrieved person" doctrine where the search warrant and the sworn
application for search warrant are "primarily" directed solely and exclusively against the
"aggrieved person," gives "standing."

An examination of the search warrants in this case will readily show that, excepting three, all
were directed against the petitioners personally. In some of them, the petitioners were named
personally, followed by the designation, "the President and/or General Manager" of the
particular corporation. The three warrants excepted named three corporate defendants. But the
"office/house/warehouse/premises" mentioned in the said three warrants were also the same
"office/house/warehouse/premises" declared to be owned by or under the control of the
petitioners in all the other search warrants directed against the petitioners and/or "the President
and/or General Manager" of the particular corporation. (see pages 5-24 of Petitioners' Reply of
April 2, 1962). The searches and seizures were to be made, and were actually made, in the
"office/house/warehouse/premises" owned by or under the control of the petitioners.

Ownership of matters seized gives "standing."

Ownership of the properties seized alone entitles the petitioners to bring a motion to return and
suppress, and gives them standing as persons aggrieved by an unlawful search and seizure
regardless of their location at the time of seizure. Jones vs. United States, 362 U.S. 257, 261
(1960) (narcotics stored in the apartment of a friend of the defendant); Henzel vs. United States,
296 F. 2d. 650, 652-53 (5th Cir. 1961), (personal and corporate papers of corporation of which
the defendant was president), United States vs. Jeffers, 342 U.S. 48 (1951) (narcotics seized in
an apartment not belonging to the defendant); Pielow vs. United States, 8 F. 2d 492, 493 (9th Cir.
1925) (books seized from the defendant's sister but belonging to the defendant); Cf. Villano vs.
United States, 310 F. 2d 680, 683 (10th Cir. 1962) (papers seized in desk neither owned by nor
in exclusive possession of the defendant).

In a very recent case (decided by the U.S. Supreme Court on December 12, 1966), it was held
that under the constitutional provision against unlawful searches and seizures, a person places
himself or his property within a constitutionally protected area, be it his home or his office, his
hotel room or his automobile:

Where the argument falls is in its misapprehension of the fundamental nature and scope of
Fourth Amendment protection. What the Fourth Amendment protects is the security a man relies
upon when he places himself or his property within a constitutionally protected area, be it his
home or his office, his hotel room or his automobile. There he is protected from unwarranted
governmental intrusion. And when he puts some thing in his filing cabinet, in his desk drawer, or
in his pocket, he has the right to know it will be secure from an unreasonable search or an
unreasonable seizure. So it was that the Fourth Amendment could not tolerate the warrantless
search of the hotel room in Jeffers, the purloining of the petitioner's private papers in Gouled, or
the surreptitious electronic surveilance in Silverman. Countless other cases which have come to
this Court over the years have involved a myriad of differing factual contexts in which the
protections of the Fourth Amendment have been appropriately invoked. No doubt, the future will
bring countless others. By nothing we say here do we either foresee or foreclose factual
situations to which the Fourth Amendment may be applicable. (Hoffa vs. U.S., 87 S. Ct. 408
(December 12, 1966). See also U.S. vs. Jeffers, 342 U.S. 48, 72 S. Ct. 93 (November 13, 1951).
(Emphasis supplied).

Control of premises searched gives "standing."

Independent of ownership or other personal interest in the records and documents seized, the
petitioners have standing to move for return and suppression by virtue of their proprietary or
leasehold interest in many of the premises searched. These proprietary and leasehold interests
have been sufficiently set forth in their motion for reconsideration and need not be recounted
here, except to emphasize that the petitioners paid rent, directly or indirectly, for practically all
the premises searched (Room 91, 84 Carmen Apts; Room 304, Army & Navy Club; Premises
2008, Dewey Boulevard; 1436 Colorado Street); maintained personal offices within the
corporate offices (IBMC, USTC); had made improvements or furnished such offices; or had paid
for the filing cabinets in which the papers were stored (Room 204, Army & Navy Club); and
individually, or through their respective spouses, owned the controlling stock of the corporations
involved. The petitioners' proprietary interest in most, if not all, of the premises searched
therefore independently gives them standing to move for the return and suppression of the
books, papers and affects seized therefrom.

In Jones vs. United States, supra, the U.S. Supreme Court delineated the nature and extent of the
interest in the searched premises necessary to maintain a motion to suppress. After reviewing
what it considered to be the unduly technical standard of the then prevailing circuit court
decisions, the Supreme Court said (362 U.S. 266):

We do not lightly depart from this course of decisions by the lower courts. We are persuaded,
however, that it is unnecessarily and ill-advised to import into the law surrounding the
constitutional right to be free from unreasonable searches and seizures subtle distinctions,
developed and refined by the common law in evolving the body of private property law which,
more than almost any other branch of law, has been shaped by distinctions whose validity is
largely historical. Even in the area from which they derive, due consideration has led to the
discarding of those distinctions in the homeland of the common law. See Occupiers' Liability
Act, 1957, 5 and 6 Eliz. 2, c. 31, carrying out Law Reform Committee, Third Report, Cmd.
9305. Distinctions such as those between "lessee", "licensee," "invitee," "guest," often only of
gossamer strength, ought not be determinative in fashioning procedures ultimately referable to
constitutional safeguards. See also Chapman vs. United States, 354 U.S. 610, 616-17 (1961).

It has never been held that a person with requisite interest in the premises searched must own the
property seized in order to have standing in a motion to return and suppress. In Alioto vs. United
States, 216 F. Supp. 48 (1963), a Bookkeeper for several corporations from whose apartment the
corporate records were seized successfully moved for their return. In United States vs. Antonelli,
Fireworks Co., 53 F. Supp. 870, 873 (W D. N. Y. 1943), the corporation's president successfully
moved for the return and suppression is to him of both personal and corporate documents seized
from his home during the course of an illegal search:

The lawful possession by Antonelli of documents and property, "either his own or the
corporation's was entitled to protection against unreasonable search and seizure. Under the
circumstances in the case at bar, the search and seizure were unreasonable and unlawful. The
motion for the return of seized article and the suppression of the evidence so obtained should be
granted. (Emphasis supplied).

Time was when only a person who had property in interest in either the place searched or the
articles seize had the necessary standing to invoke the protection of the exclusionary rule. But in
MacDonald vs. Unite States, 335 U.S. 461 (1948), Justice Robert Jackson joined by Justice Felix
Frankfurter, advanced the view that "even a guest may expect the shelter of the rooftree he is
under against criminal intrusion." This view finally became the official view of the U.S.
Supreme Court and was articulated in United States vs. Jeffers, 432 U.S 48 (1951). Nine years
later, in 1960, in Jones vs. Unite States, 362 U.S. 257, 267, the U.S. Supreme Court went a step
further. Jones was a mere guest in the apartment unlawfully searched but the Court nonetheless
declared that the exclusionary rule protected him as well. The concept of "person aggrieved by
an unlawful search and seizure" was enlarged to include "anyone legitimately on premise where
the search occurs."

Shortly after the U.S. Supreme Court's Jones decision the U.S. Court of Appeals for the Fifth
Circuit held that the defendant organizer, sole stockholder and president of a corporation had
standing in a mail fraud prosecution against him to demand the return and suppression of
corporate property. Henzel vs. United States, 296 F 2d 650, 652 (5th Cir. 1961), supra. The court
conclude that the defendant had standing on two independent grounds: First he had a
sufficient interest in the property seized, and second he had an adequate interest in the
premises searched (just like in the case at bar). A postal inspector had unlawfully searched the
corporation' premises and had seized most of the corporation's book and records. Looking to
Jones, the court observed:

Jones clearly tells us, therefore, what is not required qualify one as a "person aggrieved by an
unlawful search and seizure." It tells us that appellant should not have been precluded from
objecting to the Postal Inspector's search and seizure of the corporation's books and records
merely because the appellant did not show ownership or possession of the books and records or
a substantial possessory interest in the invade premises . . . (Henzel vs. United States, 296 F. 2d
at 651). .

Henzel was soon followed by Villano vs. United States, 310 F. 2d 680, 683, (10th Cir. 1962). In
Villano, police officers seized two notebooks from a desk in the defendant's place of
employment; the defendant did not claim ownership of either; he asserted that several employees
(including himself) used the notebooks. The Court held that the employee had a protected
interest and that there also was an invasion of privacy. Both Henzel and Villano considered also
the fact that the search and seizure were "directed at" the moving defendant. Henzel vs. United
States, 296 F. 2d at 682; Villano vs. United States, 310 F. 2d at 683.

In a case in which an attorney closed his law office, placed his files in storage and went to
Puerto Rico, the Court of Appeals for the Eighth Circuit recognized his standing to move to
quash as unreasonable search and seizure under the Fourth Amendment of the U.S. Constitution
a grand jury subpoena duces tecum directed to the custodian of his files. The Government
contended that the petitioner had no standing because the books and papers were physically in
the possession of the custodian, and because the subpoena was directed against the custodian.
The court rejected the contention, holding that

Schwimmer legally had such possession, control and unrelinquished personal rights in the books
and papers as not to enable the question of unreasonable search and seizure to be escaped
through the mere procedural device of compelling a third-party naked possessor to produce and
deliver them. Schwimmer vs. United States, 232 F. 2d 855, 861 (8th Cir. 1956).

Aggrieved person doctrine where the search warrant s primarily directed against said person
gives "standing."

The latest United States decision squarely in point is United States vs. Birrell, 242 F. Supp. 191
(1965, U.S.D.C. S.D.N.Y.). The defendant had stored with an attorney certain files and papers,
which attorney, by the name of Dunn, was not, at the time of the seizing of the records, Birrell's
attorney. * Dunn, in turn, had stored most of the records at his home in the country and on a
farm which, according to Dunn's affidavit, was under his (Dunn's) "control and management."
The papers turned out to be private, personal and business papers together with corporate books
and records of certain unnamed corporations in which Birrell did not even claim ownership. (All
of these type records were seized in the case at bar). Nevertheless, the search in Birrell was held
invalid by the court which held that even though Birrell did not own the premises where the
records were stored, he had "standing" to move for the return of all the papers and properties
seized. The court, relying on Jones vs. U.S., supra; U.S. vs. Antonelli Fireworks Co., 53 F. Supp.
870, Aff'd 155 F. 2d 631: Henzel vs. U.S., supra; and Schwimmer vs. U.S., supra, pointed out
that

It is overwhelmingly established that the searches here in question were directed solely and
exclusively against Birrell. The only person suggested in the papers as having violated the law
was Birrell. The first search warrant described the records as having been used "in committing a
violation of Title 18, United States Code, Section 1341, by the use of the mails by one Lowell
M. Birrell, . . ." The second search warrant was captioned: "United States of America vs. Lowell
M. Birrell. (p. 198)

Possession (actual or constructive), no less than ownership, gives standing to move to suppress.
Such was the rule even before Jones. (p. 199)
If, as thus indicated Birrell had at least constructive possession of the records stored with Dunn,
it matters not whether he had any interest in the premises searched. See also Jeffers v. United
States, 88 U.S. Appl. D.C. 58, 187 F. 2d 498 (1950), affirmed 432 U.S. 48, 72 S. Ct. 93, 96 L.
Ed. 459 (1951).

The ruling in the Birrell case was reaffirmed on motion for reargument; the United States did not
appeal from this decision. The factual situation in Birrell is strikingly similar to the case of the
present petitioners; as in Birrell, many personal and corporate papers were seized from premises
not petitioners' family residences; as in Birrell, the searches were "PRIMARILY DIRECTED
SOLETY AND EXCLUSIVELY" against the petitioners. Still both types of documents were
suppressed in Birrell because of the illegal search. In the case at bar, the petitioners connection
with the premises raided is much closer than in Birrell.

Thus, the petitioners have full standing to move for the quashing of all the warrants regardless
whether these were directed against residences in the narrow sense of the word, as long as the
documents were personal papers of the petitioners or (to the extent that they were corporate
papers) were held by them in a personal capacity or under their personal control.

Prescinding a from the foregoing, this Court, at all events, should order the return to the
petitioners all personal and private papers and effects seized, no matter where these were seized,
whether from their residences or corporate offices or any other place or places. The
uncontradicted sworn statements of the petitioners in their, various pleadings submitted to this
Court indisputably show that amongst the things seized from the corporate offices and other
places were personal and private papers and effects belonging to the petitioners.

If there should be any categorization of the documents, papers and things which where the
objects of the unlawful searches and seizures, I submit that the grouping should be: (a) personal
or private papers of the petitioners were they were unlawfully seized, be it their family
residences offices, warehouses and/or premises owned and/or possessed (actually or
constructively) by them as shown in all the search and in the sworn applications filed in securing
the void search warrants and (b) purely corporate papers belonging to corporations. Under such
categorization or grouping, the determination of which unlawfully seized papers, documents and
things are personal/private of the petitioners or purely corporate papers will have to be left to
the lower courts which issued the void search warrants in ultimately effecting the suppression
and/or return of the said documents.

And as unequivocally indicated by the authorities above cited, the petitioners likewise have clear
legal standing to move for the suppression of purely corporate papers as "President and/or
General Manager" of the corporations involved as specifically mentioned in the void search
warrants.

Finally, I must articulate my persuasion that although the cases cited in my disquisition were
criminal prosecutions, the great clauses of the constitutional proscription on illegal searches and
seizures do not withhold the mantle of their protection from cases not criminal in origin or
nature.

Case 3

EN BANC

[G.R. No. L-32409. February 27, 1971.]

BACHE & CO. (PHIL.), INC. and FREDERICK E. SEGGERMAN, Petitioners, v.

HON. JUDGE VIVENCIO M. RUIZ, MISAEL P. VERA, in his capacity as
Commissioner of Internal Revenue, ARTURO LOGRONIO, RODOLFO DE LEON,
GAVINO VELASQUEZ, MIMIR DELLOSA, NICANOR ALCORDO, JOHN DOE, JOHN DOE,
JOHN DOE, and JOHN DOE, Respondents.

San Juan, Africa, Gonzales & San Agustin, for Petitioners.

Solicitor General Felix Q. Antonio, Assistant Solicitor General Crispin

V . Bautista, Solicitor Pedro A. Ramirez and Special Attorney Jaime M.
Maza for Respondents.

D E C I S I O N

VILLAMOR, J.:

This is an original action of certiorari, prohibition and mandamus, with

prayer for a writ of preliminary mandatory and prohibitory injunction. In
their petition Bache & Co. (Phil.), Inc., a corporation duly organized and
existing under the laws of the Philippines, and its President, Frederick E.
Seggerman, pray this Court to declare null and void Search Warrant No. 2-M-70
issued by respondent Judge on February 25, 1970; to order respondents to
desist from enforcing the same and/or keeping the documents, papers and
effects seized by virtue thereof, as well as from enforcing the tax
assessments on petitioner corporation alleged by petitioners to have been
made on the basis of the said documents, papers and effects, and to order the
return of the latter to petitioners. We gave due course to the petition but
did not issue the writ of preliminary injunction prayed for therein.

The pertinent facts of this case, as gathered from record, are as follows: chanrob1es virtual 1aw library

On February 24, 1970, respondent Misael P. Vera, Commissioner of Internal

Revenue, wrote a letter addressed to respondent Judge Vivencio M. Ruiz
requesting the issuance of a search warrant against petitioners for violation
of Section 46(a) of the National Internal Revenue Code, in relation to all
other pertinent provisions thereof, particularly Sections 53, 72, 73, 208 and
209, and authorizing Revenue Examiner Rodolfo de Leon, one of herein
respondents, to make and file the application for search warrant which was
attached to the letter.

In the afternoon of the following day, February 25, 1970, respondent De Leon
and his witness, respondent Arturo Logronio, went to the Court of First
Instance of Rizal. They brought with them the following papers: respondent
Veras aforesaid letter-request; an application for search warrant already
filled up but still unsigned by respondent De Leon; an affidavit of
respondent Logronio subscribed before respondent De Leon; a deposition in
printed form of respondent Logronio already accomplished and signed by him
but not yet subscribed; and a search warrant already accomplished but still
unsigned by respondent Judge.

At that time respondent Judge was hearing a certain case; so, by means of a
note, he instructed his Deputy Clerk of Court to take the depositions of
respondents De Leon and Logronio. After the session had adjourned, respondent
Judge was informed that the depositions had already been taken. The
stenographer, upon request of respondent Judge, read to him her stenographic
notes; and thereafter, respondent Judge asked respondent Logronio to take the
oath and warned him that if his deposition was found to be false and without
legal basis, he could be charged for perjury. Respondent Judge signed
respondent de Leons application for search warrant and respondent
Logronios deposition, Search Warrant No. 2-M-70 was then sign by respondent
Judge and accordingly issued.

Three days later, or on February 28, 1970, which was a Saturday, the BIR
agents served the search warrant petitioners at the offices of petitioner
corporation on Ayala Avenue, Makati, Rizal. Petitioners lawyers protested
the search on the ground that no formal complaint or transcript of testimony
was attached to the warrant. The agents nevertheless proceeded with their
search which yielded six boxes of documents.

On March 3, 1970, petitioners filed a petition with the Court of First

Instance of Rizal praying that the search warrant be quashed, dissolved or
recalled, that preliminary prohibitory and mandatory writs of injunction be
issued, that the search warrant be declared null and void, and that the
respondents be ordered to pay petitioners, jointly and severally, damages and
attorneys fees. On March 18, 1970, the respondents, thru the Solicitor
General, filed an answer to the petition. After hearing, the court, presided
over by respondent Judge, issued on July 29, 1970, an order dismissing the
petition for dissolution of the search warrant. In the meantime, or on April
16, 1970, the Bureau of Internal Revenue made tax assessments on petitioner
corporation in the total sum of P2,594,729.97, partly, if not entirely, based
on the documents thus seized. Petitioners came to this Court.

The petition should be granted for the following reasons: chanrob1es virtual 1aw library

1. Respondent Judge failed to personally examine the complainant and his

witness.

The pertinent provisions of the Constitution of the Philippines and of the

Revised Rules of Court are: jgc:chanrobles.com.ph

"(3) The right of the people to be secure in their persons, houses, papers
and effects against unreasonable searches and seizures shall not be violated,
and no warrants shall issue but upon probable cause, to be determined by the
judge after examination under oath or affirmation of the complainant and the
witnesses he may produce, and particularly describing the place to be
searched, and the persons or things to be seized." (Art. III, Sec. 1,
Constitution.)

"SEC. 3. Requisites for issuing search warrant. A search warrant shall not
issue but upon probable cause in connection with one specific offense to be
determined by the judge or justice of the peace after examination under oath
or affirmation of the complainant and the witnesses he may produce, and
particularly describing the place to be searched and the persons or things to
be seized.

"No search warrant shall issue for more than one specific offense.

"SEC. 4. Examination of the applicant. The judge or justice of the peace

must, before issuing the warrant, personally examine on oath or affirmation
the complainant and any witnesses he may produce and take their depositions
in writing, and attach them to the record, in addition to any affidavits
presented to him." (Rule 126, Revised Rules of Court.)

The examination of the complainant and the witnesses he may produce, required
by Art. III, Sec. 1, par. 3, of the Constitution, and by Secs. 3 and 4, Rule
126 of the Revised Rules of Court, should be conducted by the judge himself
and not by others. The phrase "which shall be determined by the judge after
examination under oath or affirmation of the complainant and the witnesses he
may produce," appearing in the said constitutional provision, was introduced
by Delegate Francisco as an amendment to the draft submitted by the Sub-
Committee of Seven. The following discussion in the Constitutional Convention
(Laurel, Proceedings of the Philippine Constitutional Convention, Vol. III,
pp. 755-757) is enlightening: jgc:chanrobles.com.ph

"SR. ORENSE. Vamos a dejar compaero los piropos y vamos al grano.

En los casos de una necesidad de actuar inmediatamente para que no se frusten

los fines de la justicia mediante el registro inmediato y la incautacion del
cuerpo del delito, no cree Su Seoria que causaria cierta demora el
procedimiento apuntado en su enmienda en tal forma que podria frustrar los
fines de la justicia o si Su Seoria encuentra un remedio para esto casos con
el fin de compaginar los fines de la justicia con los derechos del individuo
en su persona, bienes etcetera, etcetera.

"SR. FRANCISCO. No puedo ver en la practica el caso hipottico que Su Seoria

pregunta por la siguiente razon: el que solicita un mandamiento de registro
tiene que hacerlo por escrito y ese escrito no aparecer en la Mesa del Juez
sin que alguien vaya el juez a presentar ese escrito o peticion de sucuestro.
Esa persona que presenta el registro puede ser el mismo denunciante o alguna
persona que solicita dicho mandamiento de registro. Ahora toda la enmienda en
esos casos consiste en que haya peticion de registro y el juez no se atendra
solamente a sea peticion sino que el juez examiner a ese denunciante y si
tiene testigos tambin examiner a los testigos.

"SR. ORENSE. No cree Su Seoria que el tomar le declaracion de ese

denunciante por escrito siempre requeriria algun tiempo?.

"SR. FRANCISCO. Seria cuestio de un par de horas, pero por otro lado
minimizamos en todo lo posible las vejaciones injustas con la expedicion
arbitraria de los mandamientos de registro. Creo que entre dos males debemos
escoger. el menor.

x x x
"MR. LAUREL. . . . The reason why we are in favor of this amendment is
because we are incorporating in our constitution something of a fundamental
character. Now, before a judge could issue a search warrant, he must be under
the obligation to examine personally under oath the complainant and if he has
any witness, the witnesses that he may produce . . ." cralaw virtua1aw library

The implementing rule in the Revised Rules of Court, Sec. 4, Rule 126, is
more emphatic and candid, for it requires the judge, before issuing a search
warrant, to "personally examine on oath or affirmation the complainant and
any witnesses he may produce . . ."cralaw virtua1aw library

Personal examination by the judge of the complainant and his witnesses is

necessary to enable him to determine the existence or non-existence of a
probable cause, pursuant to Art. III, Sec. 1, par. 3, of the Constitution,
and Sec. 3, Rule 126 of the Revised Rules of Court, both of which prohibit
the issuance of warrants except "upon probable cause." The determination of
whether or not a probable cause exists calls for the exercise of judgment
after a judicial appraisal of facts and should not be allowed to be delegated
in the absence of any rule to the contrary.

In the case at bar, no personal examination at all was conducted by

respondent Judge of the complainant (respondent De Leon) and his witness
(respondent Logronio). While it is true that the complainants application
for search warrant and the witness printed-form deposition were subscribed
and sworn to before respondent Judge, the latter did not ask either of the
two any question the answer to which could possibly be the basis for
determining whether or not there was probable cause against herein
petitioners. Indeed, the participants seem to have attached so little
significance to the matter that notes of the proceedings before respondent
Judge were not even taken. At this juncture it may be well to recall the
salient facts. The transcript of stenographic notes (pp. 61-76, April 1,
1970, Annex J-2 of the Petition) taken at the hearing of this case in the
court below shows that per instruction of respondent Judge, Mr. Eleodoro V.
Gonzales, Special Deputy Clerk of Court, took the depositions of the
complainant and his witness, and that stenographic notes thereof were taken
by Mrs. Gaspar. At that time respondent Judge was at the sala hearing a case.
After respondent Judge was through with the hearing, Deputy Clerk Gonzales,
stenographer Gaspar, complainant De Leon and witness Logronio went to
respondent Judges chamber and informed the Judge that they had finished the
depositions. Respondent Judge then requested the stenographer to read to him
her stenographic notes. Special Deputy Clerk Gonzales testified as follows: jgc:chanrobles.com.ph
"A And after finishing reading the stenographic notes, the Honorable Judge
requested or instructed them, requested Mr. Logronio to raise his hand and
warned him if his deposition will be found to be false and without legal
basis, he can be charged criminally for perjury. The Honorable Court told Mr.
Logronio whether he affirms the facts contained in his deposition and the
affidavit executed before Mr. Rodolfo de Leon.

"Q And thereafter?

"A And thereafter, he signed the deposition of Mr. Logronio.

"Q Who is this he?

"A The Honorable Judge.

"Q The deposition or the affidavit?

"A The affidavit, Your Honor."cralaw virtua1aw library

Thereafter, respondent Judge signed the search warrant.

The participation of respondent Judge in the proceedings which led to the

issuance of Search Warrant No. 2-M-70 was thus limited to listening to the
stenographers readings of her notes, to a few words of warning against the
commission of perjury, and to administering the oath to the complainant and
his witness. This cannot be consider a personal examination. If there was an
examination at all of the complainant and his witness, it was the one
conducted by the Deputy Clerk of Court. But, as stated, the Constitution and
the rules require a personal examination by the judge. It was precisely on
account of the intention of the delegates to the Constitutional Convention to
make it a duty of the issuing judge to personally examine the complainant and
his witnesses that the question of how much time would be consumed by the
judge in examining them came up before the Convention, as can be seen from
the record of the proceedings quoted above. The reading of the stenographic
notes to respondent Judge did not constitute sufficient compliance with the
constitutional mandate and the rule; for by that manner respondent Judge did
not have the opportunity to observe the demeanor of the complainant and his
witness, and to propound initial and follow-up questions which the judicial
mind, on account of its training, was in the best position to conceive. These
were important in arriving at a sound inference on the all-important question
of whether or not there was probable cause.

2. The search warrant was issued for more than one specific offense.
Search Warrant No. 2-M-70 was issued for" [v]iolation of Sec. 46(a) of the
National Internal Revenue Code in relation to all other pertinent provisions
thereof particularly Secs. 53, 72, 73, 208 and 209." The question is: Was the
said search warrant issued "in connection with one specific offense," as
required by Sec. 3, Rule 126?

To arrive at the correct answer it is essential to examine closely the

provisions of the Tax Code referred to above. Thus we find the following:chanrob1es virtual 1aw library

Sec. 46(a) requires the filing of income tax returns by corporations.

Sec. 53 requires the withholding of income taxes at source.

Sec. 72 imposes surcharges for failure to render income tax returns and for
rendering false and fraudulent returns.

Sec. 73 provides the penalty for failure to pay the income tax, to make a
return or to supply the information required under the Tax Code.

Sec. 208 penalizes" [a]ny person who distills, rectifies, repacks, compounds,
or manufactures any article subject to a specific tax, without having paid
the privilege tax therefore, or who aids or abets in the conduct of illicit
distilling, rectifying, compounding, or illicit manufacture of any article
subject to specific tax . . .," and provides that in the case of a
corporation, partnership, or association, the official and/or employee who
caused the violation shall be responsible.

Sec. 209 penalizes the failure to make a return of receipts, sales, business,
or gross value of output removed, or to pay the tax due thereon.

The search warrant in question was issued for at least four distinct offenses
under the Tax Code. The first is the violation of Sec. 46(a), Sec. 72 and
Sec. 73 (the filing of income tax returns), which are interrelated. The
second is the violation of Sec. 53 (withholding of income taxes at source).
The third is the violation of Sec. 208 (unlawful pursuit of business or
occupation); and the fourth is the violation of Sec. 209 (failure to make a
return of receipts, sales, business or gross value of output actually removed
or to pay the tax due thereon). Even in their classification the six above-
mentioned provisions are embraced in two different titles: Secs. 46(a), 53,
72 and 73 are under Title II (Income Tax); while Secs. 208 and 209 are under
Title V (Privilege Tax on Business and Occupation).

Respondents argue that Stonehill, Et. Al. v. Diokno, Et Al., L-19550, June
19, 1967 (20 SCRA 383), is not applicable, because there the search warrants
were issued for "violation of Central Bank Laws, Internal Revenue (Code) and
Revised Penal Code;" whereas, here Search Warrant No 2-M-70 was issued for
violation of only one code, i.e., the National Internal Revenue Code. The
distinction more apparent than real, because it was precisely on account of
the Stonehill incident, which occurred sometime before the present Rules of
Court took effect on January 1, 1964, that this Court amended the former rule
by inserting therein the phrase "in connection with one specific offense,"
and adding the sentence "No search warrant shall issue for more than one
specific offense," in what is now Sec. 3, Rule 126. Thus we said in
Stonehill: jgc:chanrobles.com.ph

"Such is the seriousness of the irregularities committed in connection with

the disputed search warrants, that this Court deemed it fit to amend Section
3 of Rule 122 of the former Rules of Court that a search warrant shall not
issue but upon probable cause in connection with one specific offense. Not
satisfied with this qualification, the Court added thereto a paragraph,
directing that no search warrant shall issue for more than one specific
offense."

3. The search warrant does not particularly describe the things to be seized.

The documents, papers and effects sought to be seized are described in Search
Warrant No. 2-M-70 in this manner: jgc:chanrobles.com.ph

"Unregistered and private books of accounts (ledgers, journals, columnars,

receipts and disbursements books, customers ledgers); receipts for payments
received; certificates of stocks and securities; contracts, promissory notes
and deeds of sale; telex and coded messages; business communications,
accounting and business records; checks and check stubs; records of bank
deposits and withdrawals; and records of foreign remittances, covering the
years 1966 to 1970." cralaw virtua1aw library

The description does not meet the requirement in Art III, Sec. 1, of the
Constitution, and of Sec. 3, Rule 126 of the Revised Rules of Court, that the
warrant should particularly describe the things to be seized.

In Stonehill, this Court, speaking thru Mr. Chief Justice Roberto Concepcion,
said:jgc:chanrobles.com.ph

"The grave violation of the Constitution made in the application for the
contested search warrants was compounded by the description therein made of
the effects to be searched for and seized, to wit: chanrob1es virtual 1aw library

Books of accounts, financial records, vouchers, journals, correspondence,

receipts, ledgers, portfolios, credit journals, typewriters, and other
documents and/or paper showing all business transactions including
disbursement receipts, balance sheets and related profit and loss
statements.

"Thus, the warrants authorized the search for and seizure of records
pertaining to all business transactions of petitioners herein, regardless of
whether the transactions were legal or illegal. The warrants sanctioned the
seizure of all records of the petitioners and the aforementioned
corporations, whatever their nature, thus openly contravening the explicit
command of our Bill of Rights that the things to be seized be particularly
described as well as tending to defeat its major objective: the
elimination of general warrants." cralaw virtua1aw library

While the term "all business transactions" does not appear in Search Warrant
No. 2-M-70, the said warrant nevertheless tends to defeat the major objective
of the Bill of Rights, i.e., the elimination of general warrants, for the
language used therein is so all-embracing as to include all conceivable
records of petitioner corporation, which, if seized, could possibly render
its business inoperative.

In Uy Kheytin, Et. Al. v. Villareal, etc., Et Al., 42 Phil. 886, 896, this
Court had occasion to explain the purpose of the requirement that the warrant
should particularly describe the place to be searched and the things to be
seized, to wit: jgc:chanrobles.com.ph

". . . Both the Jones Law (sec. 3) and General Orders No. 58 (sec. 97)
specifically require that a search warrant should particularly describe the
place to be searched and the things to be seized. The evident purpose and
intent of this requirement is to limit the things to be seized to those, and
only those, particularly described in the search warrant to leave the
officers of the law with no discretion regarding what articles they shall
seize, to the end that unreasonable searches and seizures may not be
made, that abuses may not be committed. That this is the correct
interpretation of this constitutional provision is borne out by American
authorities."cralaw virtua1aw library

The purpose as thus explained could, surely and effectively, be defeated

under the search warrant issued in this case.

A search warrant may be said to particularly describe the things to be seized

when the description therein is as specific as the circumstances will
ordinarily allow (People v. Rubio; 57 Phil. 384); or when the description
expresses a conclusion of fact not of law by which the warrant officer
may be guided in making the search and seizure (idem., dissent of Abad
Santos, J.,); or when the things described are limited to those which bear
direct relation to the offense for which the warrant is being issued (Sec. 2,
Rule 126, Revised Rules of Court). The herein search warrant does not conform
to any of the foregoing tests. If the articles desired to be seized have any
direct relation to an offense committed, the applicant must necessarily have
some evidence, other than those articles, to prove the said offense; and the
articles subject of search and seizure should come in handy merely to
strengthen such evidence. In this event, the description contained in the
herein disputed warrant should have mentioned, at least, the dates, amounts,
persons, and other pertinent data regarding the receipts of payments,
certificates of stocks and securities, contracts, promissory notes, deeds of
sale, messages and communications, checks, bank deposits and withdrawals,
records of foreign remittances, among others, enumerated in the warrant.

Respondents contend that certiorari does not lie because petitioners failed
to file a motion for reconsideration of respondent Judges order of July 29,
1970. The contention is without merit. In the first place, when the questions
raised before this Court are the same as those which were squarely raised in
and passed upon by the court below, the filing of a motion for
reconsideration in said court before certiorari can be instituted in this
Court is no longer a prerequisite. (Pajo, etc., Et. Al. v. Ago, Et Al., 108
Phil., 905). In the second place, the rule requiring the filing of a motion
for reconsideration before an application for a writ of certiorari can be
entertained was never intended to be applied without considering the
circumstances. (Matutina v. Buslon, Et Al., 109 Phil., 140.) In the case at
bar time is of the essence in view of the tax assessments sought to be
enforced by respondent officers of the Bureau of Internal Revenue against
petitioner corporation, On account of which immediate and more direct action
becomes necessary. (Matute v. Court of Appeals, Et Al., 26 SCRA 768.) Lastly,
the rule does not apply where, as in this case, the deprivation of
petitioners fundamental right to due process taints the proceeding against
them in the court below not only with irregularity but also with nullity.
(Matute v. Court of Appeals, Et Al., supra.)

It is next contended by respondents that a corporation is not entitled to

protection against unreasonable search and seizures. Again, we find no merit
in the contention.

"Although, for the reasons above stated, we are of the opinion that an
officer of a corporation which is charged with a violation of a statute of
the state of its creation, or of an act of Congress passed in the exercise of
its constitutional powers, cannot refuse to produce the books and papers of
such corporation, we do not wish to be understood as holding that a
corporation is not entitled to immunity, under the 4th Amendment, against
unreasonable searches and seizures. A corporation is, after all, but an
association of individuals under an assumed name and with a distinct legal
entity. In organizing itself as a collective body it waives no constitutional
immunities appropriate to such body. Its property cannot be taken without
compensation. It can only be proceeded against by due process of law, and is
protected, under the 14th Amendment, against unlawful discrimination . . ."
(Hale v. Henkel, 201 U.S. 43, 50 L. ed. 652.)

"In Linn v. United States, 163 C.C.A. 470, 251 Fed. 476, 480, it was thought
that a different rule applied to a corporation, the ground that it was not
privileged from producing its books and papers. But the rights of a
corporation against unlawful search and seizure are to be protected even if
the same result might have been achieved in a lawful way." (Silverthorne
Lumber Company, Et. Al. v. United States of America, 251 U.S. 385, 64 L. ed.
319.)

In Stonehill, Et. Al. v. Diokno, Et Al., supra, this Court impliedly

recognized the right of a corporation to object against unreasonable searches
and seizures, thus:jgc:chanrobles.com.ph

"As regards the first group, we hold that petitioners herein have no cause of
action to assail the legality of the contested warrants and of the seizures
made in pursuance thereof, for the simple reason that said corporations have
their respective personalities, separate and distinct from the personality of
herein petitioners, regardless of the amount of shares of stock or the
interest of each of them in said corporations, whatever, the offices they
hold therein may be. Indeed, it is well settled that the legality of a
seizure can be contested only by the party whose rights have been impaired
thereby, and that the objection to an unlawful search and seizure is purely
personal and cannot be availed of by third parties. Consequently, petitioners
herein may not validly object to the use in evidence against them of the
documents, papers and things seized from the offices and premises of the
corporations adverted to above, since the right to object to the admission of
said papers in evidence belongs exclusively to the corporations, to whom the
seized effects belong, and may not be invoked by the corporate officers in
proceedings against them in their individual capacity . . ."cralaw virtua1aw library

In the Stonehill case only the officers of the various corporations in whose
offices documents, papers and effects were searched and seized were the
petitioners. In the case at bar, the corporation to whom the seized documents
belong, and whose rights have thereby been impaired, is itself a petitioner.
On that score, petitioner corporation here stands on a different footing from
the corporations in Stonehill.
The tax assessments referred to earlier in this opinion were, if not entirely
as claimed by petitioners at least partly as in effect admitted by
respondents based on the documents seized by virtue of Search Warrant No.
2-M-70. Furthermore, the fact that the assessments were made some one and
one-half months after the search and seizure on February 25, 1970, is a
strong indication that the documents thus seized served as basis for the
assessments. Those assessments should therefore not be enforced.

PREMISES CONSIDERED, the petition is granted. Accordingly, Search Warrant No.

2-M-70 issued by respondent Judge is declared null and void; respondents are
permanently enjoined from enforcing the said search warrant; the documents,
papers and effects seized thereunder are ordered to be returned to
petitioners; and respondent officials the Bureau of Internal Revenue and
their representatives are permanently enjoined from enforcing the assessments
mentioned in Annex "G" of the present petition, as well as other assessments
based on the documents, papers and effects seized under the search warrant
herein nullified, and from using the same against petitioners in any criminal
or other proceeding. No pronouncement as to costs.

Concepcion, C.J., Dizon, Makalintal, Zaldivar, Fernando, Teehankee and

Makasiar, JJ., concur.

Reyes, J.B.L., J., concurs with Mr. Justice Barredo.

Castro, J., concurs in the result.

Case 4

Bataan shipyard and engineering co. Inc v PCGG 150 scra 181 may 22 19987

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. 75885 May 27, 1987

BATAAN SHIPYARD & ENGINEERING CO., INC. (BASECO), petitioner,

vs.
PRESIDENTIAL COMMISSION ON GOOD GOVERNMENT, CHAIRMAN JOVITO
SALONGA, COMMISSIONER MARY CONCEPCION BAUTISTA, COMMISSIONER
RAMON DIAZ, COMMISSIONER RAUL R. DAZA, COMMISSIONER QUINTIN S.
DOROMAL, CAPT. JORGE B. SIACUNCO, et al., respondents.

Apostol, Bernas, Gumaru, Ona and Associates for petitioner.

Vicente G. Sison for intervenor A.T. Abesamis.

NARVASA, J.:

Challenged in this special civil action of certiorari and prohibition by a private

corporation known as the Bataan Shipyard and Engineering Co., Inc. are: (1) Executive
Orders Numbered 1 and 2, promulgated by President Corazon C. Aquino on February
28, 1986 and March 12, 1986, respectively, and (2) the sequestration, takeover, and
other orders issued, and acts done, in accordance with said executive orders by the
Presidential Commission on Good Government and/or its Commissioners and agents,
affecting said corporation.

1. The Sequestration, Takeover, and Other Orders Complained of

a. The Basic Sequestration Order

The sequestration order which, in the view of the petitioner corporation, initiated all its
misery was issued on April 14, 1986 by Commissioner Mary Concepcion Bautista. It
was addressed to three of the agents of the Commission, hereafter simply referred to
as PCGG. It reads as follows:

RE: SEQUESTRATION ORDER

By virtue of the powers vested in the Presidential Commission on Good Government,

by authority of the President of the Philippines, you are hereby directed to sequester
the following companies.

1. Bataan Shipyard and Engineering Co., Inc. (Engineering Island Shipyard and
Mariveles Shipyard)

2. Baseco Quarry

3. Philippine Jai-Alai Corporation

4. Fidelity Management Co., Inc.

5. Romson Realty, Inc.

6. Trident Management Co.

7. New Trident Management

8. Bay Transport

9. And all affiliate companies of Alfredo "Bejo" Romualdez

You are hereby ordered:

1. To implement this sequestration order with a minimum disruption of these companies'

business activities.

2. To ensure the continuity of these companies as going concerns, the care and
maintenance of these assets until such time that the Office of the President through the
Commission on Good Government should decide otherwise.

3. To report to the Commission on Good Government periodically.

Further, you are authorized to request for Military/Security Support from the
Military/Police authorities, and such other acts essential to the achievement of this
sequestration order. 1
b. Order for Production of Documents

On the strength of the above sequestration order, Mr. Jose M. Balde, acting for the PCGG, addressed a letter dated April 18, 1986 to the
President and other officers of petitioner firm, reiterating an earlier request for the production of certain documents, to wit:

1. Stock Transfer Book

2. Legal documents, such as:

2.1. Articles of Incorporation

2.2. By-Laws

2.3. Minutes of the Annual Stockholders Meeting from 1973 to 1986

2.4. Minutes of the Regular and Special Meetings of the Board of Directors from 1973 to 1986

2.5. Minutes of the Executive Committee Meetings from 1973 to 1986

2.6. Existing contracts with suppliers/contractors/others.

3. Yearly list of stockholders with their corresponding share/stockholdings from 1973 to 1986 duly certified by the Corporate Secretary.
4. Audited Financial Statements such as Balance Sheet, Profit & Loss and others from 1973 to December 31, 1985.

5. Monthly Financial Statements for the current year up to March 31, 1986.

6. Consolidated Cash Position Reports from January to April 15, 1986.

7. Inventory listings of assets up dated up to March 31, 1986.

8. Updated schedule of Accounts Receivable and Accounts Payable.

9. Complete list of depository banks for all funds with the authorized signatories for withdrawals thereof.

2
10. Schedule of company investments and placements.

The letter closed with the warning that if the documents were not submitted within five days, the officers
would be cited for "contempt in pursuance with Presidential Executive Order Nos. 1 and 2."

c. Orders Re Engineer Island

(1) Termination of Contract for Security Services

A third order assailed by petitioner corporation, hereafter referred to simply as BASECO, is that issued on
April 21, 1986 by a Capt. Flordelino B. Zabala, a member of the task force assigned to carry out the basic
sequestration order. He sent a letter to BASECO's Vice-President for Finance, 3 terminating the contract
for security services within the Engineer Island compound between BASECO and "Anchor and
FAIRWAYS" and "other civilian security agencies," CAPCOM military personnel having already been
assigned to the area,

(2) Change of Mode of Payment of Entry Charges

On July 15, 1986, the same Capt. Zabala issued a Memorandum addressed to "Truck Owners and
Contractors," particularly a "Mr. Buddy Ondivilla National Marine Corporation," advising of the
amendment in part of their contracts with BASECO in the sense that the stipulated charges for use of the
BASECO road network were made payable "upon entry and not anymore subject to monthly billing as
was originally agreed upon." 4

d. Aborted Contract for Improvement of Wharf at Engineer Island

On July 9, 1986, a PCGG fiscal agent, S. Berenguer, entered into a contract in behalf of BASECO with
Deltamarine Integrated Port Services, Inc., in virtue of which the latter undertook to introduce
improvements costing approximately P210,000.00 on the BASECO wharf at Engineer Island, allegedly
then in poor condition, avowedly to "optimize its utilization and in return maximize the revenue which
would flow into the government coffers," in consideration of Deltamarine's being granted "priority in using
the improved portion of the wharf ahead of anybody" and exemption "from the payment of any charges
for the use of wharf including the area where it may install its bagging equipments" "until the
improvement remains in a condition suitable for port operations." 5 It seems however that this contract
was never consummated. Capt. Jorge B. Siacunco, "Head- (PCGG) BASECO Management Team,"
advised Deltamarine by letter dated July 30, 1986 that "the new management is not in a position to honor
the said contract" and thus "whatever improvements * * (may be introduced) shall be deemed
unauthorized * * and shall be at * * (Deltamarine's) own risk." 6
e. Order for Operation of Sesiman Rock Quarry, Mariveles, Bataan

By Order dated June 20, 1986, Commissioner Mary Bautista first directed a PCGG agent, Mayor Melba
O. Buenaventura, "to plan and implement progress towards maximizing the continuous operation of the
BASECO Sesiman Rock Quarry * * by conventional methods;" but afterwards, Commissioner Bautista, in
representation of the PCGG, authorized another party, A.T. Abesamis, to operate the quarry, located at
Mariveles, Bataan, an agreement to this effect having been executed by them on September 17, 1986. 7

f. Order to Dispose of Scrap, etc.

By another Order of Commissioner Bautista, this time dated June 26, 1986, Mayor Buenaventura was
also "authorized to clean and beautify the Company's compound," and in this connection, to dispose of or
sell "metal scraps" and other materials, equipment and machineries no longer usable, subject to specified
guidelines and safeguards including audit and verification. 8

g. The TAKEOVER Order

By letter dated July 14, 1986, Commissioner Ramon A. Diaz decreed the provisional takeover by the
PCGG of BASECO, "the Philippine Dockyard Corporation and all their affiliated companies." 9 Diaz
invoked the provisions of Section 3 (c) of Executive Order No. 1, empowering the Commission

* * To provisionally takeover in the public interest or to prevent its disposal or dissipation, business
enterprises and properties taken over by the government of the Marcos Administration or by entities or
persons close to former President Marcos, until the transactions leading to such acquisition by the latter
can be disposed of by the appropriate authorities.

A management team was designated to implement the order, headed by Capt. Siacunco, and was given
the following powers:

1. Conducts all aspects of operation of the subject companies;

2. Installs key officers, hires and terminates personnel as necessary;

3. Enters into contracts related to management and operation of the companies;

4. Ensures that the assets of the companies are not dissipated and used effectively and efficiently;
revenues are duly accounted for; and disburses funds only as may be necessary;

5. Does actions including among others, seeking of military support as may be necessary, that will ensure
compliance to this order;

6. Holds itself fully accountable to the Presidential Commission on Good Government on all aspects
related to this take-over order.

h. Termination of Services of BASECO Officers

Thereafter, Capt. Siacunco, sent letters to Hilario M. Ruiz, Manuel S. Mendoza, Moises M. Valdez,
Gilberto Pasimanero, and Benito R. Cuesta I, advising of the termination of their services by the PCGG.
10
2. Petitioner's Plea and Postulates

It is the foregoing specific orders and acts of the PCGG and its members and agents which, to repeat, petitioner BASECO would have this
Court nullify. More particularly, BASECO prays that this Court-

1) declare unconstitutional and void Executive Orders Numbered 1 and 2;

2) annul the sequestration order dated April- 14, 1986, and all other orders subsequently issued and acts done on the basis thereof,
inclusive of the takeover order of July 14, 1986 and the termination of the services of the BASECO executives. 11

a. Re Executive Orders No. 1 and 2, and the Sequestration and Takeover Orders

While BASECO concedes that "sequestration without resorting to judicial action, might be made within the context of Executive Orders Nos.
1 and 2 before March 25, 1986 when the Freedom Constitution was promulgated, under the principle that the law promulgated by the ruler
under a revolutionary regime is the law of the land, it ceased to be acceptable when the same ruler opted to promulgate the Freedom
Constitution on March 25, 1986 wherein under Section I of the same, Article IV (Bill of Rights) of the 1973 Constitution was adopted
providing, among others, that "No person shall be deprived of life, liberty and property without due process of law." (Const., Art. I V, Sec. 1)."
12

It declares that its objection to the constitutionality of the Executive Orders "as well as the Sequestration Order * * and Takeover Order * *
issued purportedly under the authority of said Executive Orders, rests on four fundamental considerations: First, no notice and hearing was
accorded * * (it) before its properties and business were taken over; Second, the PCGG is not a court, but a purely investigative agency and
therefore not competent to act as prosecutor and judge in the same cause; Third, there is nothing in the issuances which envisions any
proceeding, process or remedy by which petitioner may expeditiously challenge the validity of the takeover after the same has been
effected; and Fourthly, being directed against specified persons, and in disregard of the constitutional presumption of innocence and general
rules and procedures, they constitute a Bill of Attainder." 13

b. Re Order to Produce Documents

It argues that the order to produce corporate records from 1973 to 1986, which it has apparently already complied with, was issued without
court authority and infringed its constitutional right against self-incrimination, and unreasonable search and seizure. 14

c. Re PCGG's Exercise of Right of Ownership and Management

BASECO further contends that the PCGG had unduly interfered with its right of dominion and management of its business affairs by

1) terminating its contract for security services with Fairways & Anchor, without the consent and against the will of the contracting parties;
and amending the mode of payment of entry fees stipulated in its Lease Contract with National Stevedoring & Lighterage Corporation, these
acts being in violation of the non-impairment clause of the constitution; 15

2) allowing PCGG Agent Silverio Berenguer to enter into an "anomalous contract" with Deltamarine Integrated Port Services, Inc., giving the
latter free use of BASECO premises; 16

3) authorizing PCGG Agent, Mayor Melba Buenaventura, to manage and operate its rock quarry at Sesiman, Mariveles; 17

4) authorizing the same mayor to sell or dispose of its metal scrap, equipment, machinery and other materials; 18

5) authorizing the takeover of BASECO, Philippine Dockyard Corporation, and all their affiliated companies;

6) terminating the services of BASECO executives: President Hilario M. Ruiz; EVP Manuel S. Mendoza; GM Moises M. Valdez; Finance
Mgr. Gilberto Pasimanero; Legal Dept. Mgr. Benito R. Cuesta I; 19

20
7) planning to elect its own Board of Directors;

8) allowing willingly or unwillingly its personnel to take, steal, carry away from petitioner's premises at
Mariveles * * rolls of cable wires, worth P600,000.00 on May 11, 1986; 21
9) allowing "indiscriminate diggings" at Engineer Island to retrieve gold bars supposed to have been
buried therein. 22

3. Doubts, Misconceptions regarding Sequestration, Freeze and Takeover Orders

Many misconceptions and much doubt about the matter of sequestration, takeover and freeze orders
have been engendered by misapprehension, or incomplete comprehension if not indeed downright
ignorance of the law governing these remedies. It is needful that these misconceptions and doubts be
dispelled so that uninformed and useless debates about them may be avoided, and arguments tainted b
sophistry or intellectual dishonesty be quickly exposed and discarded. Towards this end, this opinion will
essay an exposition of the law on the matter. In the process many of the objections raised by BASECO
will be dealt with.

4. The Governing Law

a. Proclamation No. 3

The impugned executive orders are avowedly meant to carry out the explicit command of the Provisional
Constitution, ordained by Proclamation No. 3, 23 that the President-in the exercise of legislative power
which she was authorized to continue to wield "(until a legislature is elected and convened under a new
Constitution" "shall give priority to measures to achieve the mandate of the people," among others to
(r)ecover ill-gotten properties amassed by the leaders and supporters of the previous regime and protect
the interest of the people through orders of sequestration or freezing of assets or accounts." 24

b. Executive Order No. 1

Executive Order No. 1 stresses the "urgent need to recover all ill-gotten wealth," and postulates 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." 25 Upon these premises, the
Presidential Commission on Good Government was created, 26 "charged with the task of assisting the
President in regard to (certain specified) matters," among which was precisely-

* * The recovery of all in-gotten wealth accumulated by former President Ferdinand E. Marcos, his
immediate family, relatives, subordinates and close associates, whether located in the Philippines or
abroad, including the takeover or sequestration of all business enterprises and entities owned or
controlled by them, during his administration, directly or through nominees, by taking undue advantage of
their public office and/or using their powers, authority, influence, connections or relationship. 27

In relation to the takeover or sequestration that it was authorized to undertake in the fulfillment of its
mission, the PCGG was granted "power and authority" to do the following particular acts, to wit:

1. To sequester or place or cause to be placed under its control or possession any building or office
wherein any ill-gotten wealth or properties may be found, and any records pertaining thereto, in order to
prevent their destruction, concealment or disappearance which would frustrate or hamper the
investigation or otherwise prevent the Commission from accomplishing its task.

2. To provisionally take over in the public interest or to prevent the disposal or dissipation, business
enterprises and properties taken over by the government of the Marcos Administration or by entities or
persons close to former President Marcos, until the transactions leading to such acquisition by the latter
can be disposed of by the appropriate authorities.
3. To enjoin or restrain any actual or threatened commission of acts by any person or entity that may
render moot and academic, or frustrate or otherwise make ineffectual the efforts of the Commission to
carry out its task under this order. 28

So that it might ascertain the facts germane to its objectives, it was granted power to conduct
investigations; require submission of evidence by subpoenae ad testificandum and duces tecum;
administer oaths; punish for contempt. 29 It was given power also to promulgate such rules and
regulations as may be necessary to carry out the purposes of * * (its creation). 30

c. Executive Order No. 2

Executive Order No. 2 gives additional and more specific data and directions respecting "the recovery of
ill-gotten properties amassed by the leaders and supporters of the previous regime." It declares that:

1) * * the Government of the Philippines is in possession of evidence showing that there are assets and
properties purportedly pertaining to former Ferdinand E. Marcos, and/or his wife Mrs. Imelda Romualdez
Marcos, their close relatives, subordinates, business associates, dummies, agents or nominees which
had been or were acquired by them directly or indirectly, through or as a result of the improper or illegal
use of funds or properties owned by the government of the Philippines or any of its branches,
instrumentalities, enterprises, banks or financial institutions, or by taking undue advantage of their office,
authority, influence, connections or relationship, resulting in their unjust enrichment and causing grave
damage and prejudice to the Filipino people and the Republic of the Philippines:" and

2) * * said assets and properties 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 personal properties in the Philippines and in various countries of the world." 31

Upon these premises, the President-

1) froze "all assets and properties in the Philippines in which former President Marcos and/or his wife,
Mrs. Imelda Romualdez Marcos, their close relatives, subordinates, business associates, dummies,
agents, or nominees have any interest or participation;

2) prohibited former President Ferdinand Marcos and/or his wife * *, their close relatives, subordinates,
business associates, duties, agents, or nominees from transferring, conveying, encumbering, concealing
or dissipating said assets or properties in the Philippines and abroad, pending the outcome of appropriate
proceedings in the Philippines to determine whether any such assets or properties were acquired by
them through or as a result of improper or illegal use of or the conversion of funds belonging to the
Government of the Philippines or any of its branches, instrumentalities, enterprises, banks or financial
institutions, or by taking undue advantage of their official position, authority, relationship, connection or
influence to unjustly enrich themselves at the expense and to the grave damage and prejudice of the
Filipino people and the Republic of the Philippines;

3) prohibited "any person from transferring, conveying, encumbering or otherwise depleting or concealing
such assets and properties or from assisting or taking part in their transfer, encumbrance, concealment or
dissipation under pain of such penalties as are prescribed by law;" and

4) required "all persons in the Philippines holding such assets or properties, whether located in the
Philippines or abroad, in their names as nominees, agents or trustees, to make full disclosure of the
same to the Commission on Good Government within thirty (30) days from publication of * (the)
Executive Order, * *. 32

d. Executive Order No. 14

A third executive order is relevant: Executive Order No. 14, 33 by which the PCGG is empowered, "with
the assistance of the Office of the Solicitor General and other government agencies, * * to file and
prosecute all cases investigated by it * * as may be warranted by its findings." 34 All such cases, whether
civil or criminal, are to be filed "with the Sandiganbayan which shall have exclusive and original
jurisdiction thereof." 35 Executive Order No. 14 also pertinently provides that civil suits for restitution,
reparation of damages, or indemnification for consequential damages, forfeiture proceedings provided for
under Republic Act No. 1379, or any other civil actions under the Civil Code or other existing laws, in
connection with * * (said Executive Orders Numbered 1 and 2) may be filed separately from and proceed
independently of any criminal proceedings and may be proved by a preponderance of evidence;" and
that, moreover, the "technical rules of procedure and evidence shall not be strictly applied to* * (said)civil
cases." 36

5. Contemplated Situations

The situations envisaged and sought to be governed are self-evident, these being:

37
1) that "(i)ll-gotten properties (were) amassed by the leaders and supporters of the previous regime";

a) more particularly, that ill-gotten wealth (was) accumulated by former President Ferdinand E. Marcos,
his immediate family, relatives, subordinates and close associates, * * located in the Philippines or
abroad, * * (and) business enterprises and entities (came to be) owned or controlled by them, during * *
(the Marcos) administration, directly or through nominees, by taking undue advantage of their public
office and/or using their powers, authority, influence, Connections or relationship; 38

b) otherwise stated, that "there are assets and properties purportedly pertaining to former President
Ferdinand E. Marcos, and/or his wife Mrs. Imelda Romualdez Marcos, their close relatives, subordinates,
business associates, dummies, agents or nominees which had been or were acquired by them directly or
indirectly, through or as a result of the improper or illegal use of funds or properties owned by the
Government of the Philippines or any of its branches, instrumentalities, enterprises, banks or financial
institutions, or by taking undue advantage of their office, authority, influence, connections or relationship,
resulting in their unjust enrichment and causing grave damage and prejudice to the Filipino people and
the Republic of the Philippines"; 39

c) that "said assets and properties 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 personal properties in the Philippines and in various countries of the world;" 40 and

2) that certain "business enterprises and properties (were) taken over by the government of the Marcos
Administration or by entities or persons close to former President Marcos. 41

6. Government's Right and Duty to Recover All Ill-gotten Wealth

There can be no debate about the validity and eminent propriety of the Government's plan "to recover all
ill-gotten wealth."
Neither can there be any debate about the proposition that assuming the above described factual
premises of the Executive Orders and Proclamation No. 3 to be true, to be demonstrable by competent
evidence, the recovery from Marcos, his family and his dominions of the assets and properties involved,
is not only a right but a duty on the part of Government.

But however plain and valid that right and duty may be, still a balance must be sought with the equally
compelling necessity that a proper respect be accorded and adequate protection assured, the
fundamental rights of private property and free enterprise which are deemed pillars of a free society such
as ours, and to which all members of that society may without exception lay claim.

* * Democracy, as a way of life enshrined in the Constitution, embraces as its necessary components
freedom of conscience, freedom of expression, and freedom in the pursuit of happiness. Along with
these freedoms are included economic freedom and freedom of enterprise within reasonable bounds and
under proper control. * * Evincing much concern for the protection of property, the Constitution distinctly
recognizes the preferred position which real estate has occupied in law for ages. Property is bound up
with every aspect of social life in a democracy as democracy is conceived in the Constitution. The
Constitution realizes the indispensable role which property, owned in reasonable quantities and used
legitimately, plays in the stimulation to economic effort and the formation and growth of a solid social
middle class that is said to be the bulwark of democracy and the backbone of every progressive and
happy country. 42

a. Need of Evidentiary Substantiation in Proper Suit

Consequently, the factual premises of the Executive Orders cannot simply be assumed. They will have to
be duly established by adequate proof in each case, in a proper judicial proceeding, so that the recovery
of the ill-gotten wealth may be validly and properly adjudged and consummated; although there are some
who maintain that the fact-that an immense fortune, and "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," and they have resorted to all sorts of clever schemes and manipulations to
disguise and hide their illicit acquisitions-is within the realm of judicial notice, being of so extensive
notoriety as to dispense with proof thereof, Be this as it may, the requirement of evidentiary substantiation
has been expressly acknowledged, and the procedure to be followed explicitly laid down, in Executive
Order No. 14.

b. Need of Provisional Measures to Collect and Conserve Assets Pending Suits

Nor may it be gainsaid that pending the institution of the suits for the recovery of such "ill-gotten wealth"
as the evidence at hand may reveal, there is an obvious and imperative need for preliminary, provisional
measures to prevent the concealment, disappearance, destruction, dissipation, or loss of the assets and
properties subject of the suits, or to restrain or foil acts that may render moot and academic, or effectively
hamper, delay, or negate efforts to recover the same.

7. Provisional Remedies Prescribed by Law

To answer this need, the law has prescribed three (3) provisional remedies. These are: (1) sequestration;
(2) freeze orders; and (3) provisional takeover.

Sequestration and freezing are remedies applicable generally to unearthed instances of "ill-gotten
wealth." The remedy of "provisional takeover" is peculiar to cases where "business enterprises and
properties (were) taken over by the government of the Marcos Administration or by entities or persons
close to former President Marcos." 43
a. Sequestration

By the clear terms of the law, the power of the PCGG to sequester property claimed to be "ill-gotten"
means to place or cause to be placed under its possession or control said property, or any building or
office wherein any such property and any records pertaining thereto may be found, including "business
enterprises and entities,"-for the purpose of preventing the destruction, concealment or dissipation of,
and otherwise conserving and preserving, the same-until it can be determined, through appropriate
judicial proceedings, whether the property was in truth will- gotten," i.e., acquired through or as a result of
improper or illegal use of or the conversion of funds belonging to the Government or any of its branches,
instrumentalities, enterprises, banks or financial institutions, or by taking undue advantage of official
position, authority relationship, connection or influence, resulting in unjust enrichment of the ostensible
owner and grave damage and prejudice to the State. 44 And this, too, is the sense in which the term is
commonly understood in other jurisdictions. 45

b. "Freeze Order"

A "freeze order" prohibits the person having possession or control of property alleged to constitute "ill-
gotten wealth" "from transferring, conveying, encumbering or otherwise depleting or concealing such
property, or from assisting or taking part in its transfer, encumbrance, concealment, or dissipation." 46 In
other words, it commands the possessor to hold the property and conserve it subject to the orders and
disposition of the authority decreeing such freezing. In this sense, it is akin to a garnishment by which the
possessor or ostensible owner of property is enjoined not to deliver, transfer, or otherwise dispose of any
effects or credits in his possession or control, and thus becomes in a sense an involuntary depositary
thereof. 47

c. Provisional Takeover

In providing for the remedy of "provisional takeover," the law acknowledges the apparent distinction
between "ill gotten" "business enterprises and entities" (going concerns, businesses in actual operation),
generally, as to which the remedy of sequestration applies, it being necessarily inferred that the remedy
entails no interference, or the least possible interference with the actual management and operations
thereof; and "business enterprises which were taken over by the government government of the Marcos
Administration or by entities or persons close to him," in particular, as to which a "provisional takeover" is
authorized, "in the public interest or to prevent disposal or dissipation of the enterprises." 48 Such a
"provisional takeover" imports something more than sequestration or freezing, more than the placing of
the business under physical possession and control, albeit without or with the least possible interference
with the management and carrying on of the business itself. In a "provisional takeover," what is taken into
custody is not only the physical assets of the business enterprise or entity, but the business operation as
well. It is in fine the assumption of control not only over things, but over operations or on- going activities.
But, to repeat, such a "provisional takeover" is allowed only as regards "business enterprises * * taken
over by the government of the Marcos Administration or by entities or persons close to former President
Marcos."

d. No Divestment of Title Over Property Seized

It may perhaps be well at this point to stress once again the provisional, contingent character of the
remedies just described. Indeed the law plainly qualifies the remedy of take-over by the adjective,
"provisional." These remedies may be resorted to only for a particular exigency: to prevent in the public
interest the disappearance or dissipation of property or business, and conserve it pending adjudgment in
appropriate proceedings of the primary issue of whether or not the acquisition of title or other right thereto
by the apparent owner was attended by some vitiating anomaly. None of the remedies is meant to
deprive the owner or possessor of his title or any right to the property sequestered, frozen or taken over
and vest it in the sequestering agency, the Government or other person. This can be done only for the
causes and by the processes laid down by law.

That this is the sense in which the power to sequester, freeze or provisionally take over is to be
understood and exercised, the language of the executive orders in question leaves no doubt. Executive
Order No. 1 declares that the sequestration of property the acquisition of which is suspect shall last "until
the transactions leading to such acquisition * * can be disposed of by the appropriate authorities." 49
Executive Order No. 2 declares that the assets or properties therein mentioned shall remain frozen
"pending the outcome of appropriate proceedings in the Philippines to determine whether any such
assets or properties were acquired" by illegal means. Executive Order No. 14 makes clear that judicial
proceedings are essential for the resolution of the basic issue of whether or not particular assets are "ill-
gotten," and resultant recovery thereof by the Government is warranted.

e. State of Seizure Not To Be Indefinitely Maintained; The Constitutional Command

There is thus no cause for the apprehension voiced by BASECO 50 that sequestration, freezing or
provisional takeover is designed to be an end in itself, that it is the device through which persons may be
deprived of their property branded as "ill-gotten," that it is intended to bring about a permanent, rather
than a passing, transitional state of affairs. That this is not so is quite explicitly declared by the governing
rules.

Be this as it may, the 1987 Constitution should allay any lingering fears about the duration of these
provisional remedies. Section 26 of its Transitory Provisions, 51 lays down the relevant rule in plain terms,
apart from extending ratification or confirmation (although not really necessary) to the institution by
presidential fiat of the remedy of sequestration and freeze orders:

SEC. 26. The authority to issue sequestration or freeze orders under Proclamation No. 3 dated March 25,
1986 in relation to the recovery of ill-gotten wealth shag remain operative for not more than eighteen
months after the ratification of this Constitution. However, in the national interest, as certified by the
President, the Congress may extend said period.

A sequestration or freeze order shall be issued only upon showing of a prima facie case. The order and
the list of the sequestered or frozen properties shall forthwith be registered with the proper court. For
orders issued before the ratification of this Constitution, the corresponding judicial action or proceeding
shall be filed within six months from its ratification. For those issued after such ratification, the judicial
action or proceeding shall be commenced within six months from the issuance thereof.

The sequestration or freeze order is deemed automatically lifted if no judicial action or proceeding is
commenced as herein provided. 52

f. Kinship to Attachment Receivership

As thus described, sequestration, freezing and provisional takeover are akin to the provisional remedy of
preliminary attachment, or receivership. 53 By attachment, a sheriff seizes property of a defendant in a
civil suit so that it may stand as security for the satisfaction of any judgment that may be obtained, and
not disposed of, or dissipated, or lost intentionally or otherwise, pending the action. 54 By receivership,
property, real or personal, which is subject of litigation, is placed in the possession and control of a
receiver appointed by the Court, who shall conserve it pending final determination of the title or right of
possession over it. 55 All these remedies sequestration, freezing, provisional, takeover, attachment and
receivership are provisional, temporary, designed for-particular exigencies, attended by no character
of permanency or finality, and always subject to the control of the issuing court or agency.

g. Remedies, Non-Judicial

Parenthetically, that writs of sequestration or freeze or takeover orders are not issued by a court is of no
moment. The Solicitor General draws attention to the writ of distraint and levy which since 1936 the
Commissioner of Internal Revenue has been by law authorized to issue against property of a delinquent
taxpayer. 56 BASECO itself declares that it has not manifested "a rigid insistence on sequestration as a
purely judicial remedy * * (as it feels) that the law should not be ossified to a point that makes it
insensitive to change." What it insists on, what it pronounces to be its "unyielding position, is that any
change in procedure, or the institution of a new one, should conform to due process and the other
prescriptions of the Bill of Rights of the Constitution." 57 It is, to be sure, a proposition on which there can
be no disagreement.

h. Orders May Issue Ex Parte

Like the remedy of preliminary attachment and receivership, as well as delivery of personal property in
replevin suits, sequestration and provisional takeover writs may issue ex parte. 58 And as in preliminary
attachment, receivership, and delivery of personality, no objection of any significance may be raised to
the ex parte issuance of an order of sequestration, freezing or takeover, given its fundamental character
of temporariness or conditionality; and taking account specially of the constitutionally expressed
"mandate of the people to recover ill-gotten properties amassed by the leaders and supporters of the
previous regime and protect the interest of the people;" 59 as well as the obvious need to avoid alerting
suspected possessors of "ill-gotten wealth" and thereby cause that disappearance or loss of property
precisely sought to be prevented, and the fact, just as self-evident, that "any transfer, disposition,
concealment or disappearance of said assets and properties would frustrate, obstruct or hamper the
efforts of the Government" at the just recovery thereof. 60

8. Requisites for Validity

What is indispensable is that, again as in the case of attachment and receivership, there exist a prima
facie factual foundation, at least, for the sequestration, freeze or takeover order, and adequate and fair
opportunity to contest it and endeavor to cause its negation or nullification. 61

Both are assured under the executive orders in question and the rules and regulations promulgated by
the PCGG.

a. Prima Facie Evidence as Basis for Orders

Executive Order No. 14 enjoins that there be "due regard to the requirements of fairness and due
process." 62 Executive Order No. 2 declares that with respect to claims on allegedly "ill-gotten" assets and
properties, "it is the position of the new democratic government that President Marcos * * (and other
parties affected) be afforded fair opportunity to contest these claims before appropriate Philippine
authorities." 63 Section 7 of the Commission's Rules and Regulations provides that sequestration or
freeze (and takeover) orders issue upon the authority of at least two commissioners, based on the
affirmation or complaint of an interested party, or motu proprio when the Commission has reasonable
grounds to believe that the issuance thereof is warranted. 64 A similar requirement is now found in Section
26, Art. XVIII of the 1987 Constitution, which requires that a "sequestration or freeze order shall be issued
only upon showing of a prima facie case." 65
b. Opportunity to Contest

And Sections 5 and 6 of the same Rules and Regulations lay down the procedure by which a party may
seek to set aside a writ of sequestration or freeze order, viz:

SECTION 5. Who may contend.-The person against whom a writ of sequestration or freeze or hold order
is directed may request the lifting thereof in writing, either personally or through counsel within five (5)
days from receipt of the writ or order, or in the case of a hold order, from date of knowledge thereof.

SECTION 6. Procedure for review of writ or order.-After due hearing or motu proprio for good cause
shown, the Commission may lift the writ or order unconditionally or subject to such conditions as it may
deem necessary, taking into consideration the evidence and the circumstance of the case. The resolution
of the commission may be appealed by the party concerned to the Office of the President of the
Philippines within fifteen (15) days from receipt thereof.

Parenthetically, even if the requirement for a prima facie showing of "ill- gotten wealth" were not expressly
imposed by some rule or regulation as a condition to warrant the sequestration or freezing of property
contemplated in the executive orders in question, it would nevertheless be exigible in this jurisdiction in
which the Rule of Law prevails and official acts which are devoid of rational basis in fact or law, or are
whimsical and capricious, are condemned and struck down. 66

9. Constitutional Sanction of Remedies

If any doubt should still persist in the face of the foregoing considerations as to the validity and propriety
of sequestration, freeze and takeover orders, it should be dispelled by the fact that these particular
remedies and the authority of the PCGG to issue them have received constitutional approbation and
sanction. As already mentioned, the Provisional or "Freedom" Constitution recognizes the power and
duty of the President to enact "measures to achieve the mandate of the people to * * * (recover ill- gotten
properties amassed by the leaders and supporters of the previous regime and protect the interest of the
people through orders of sequestration or freezing of assets or accounts." And as also already adverted
to, Section 26, Article XVIII of the 1987 Constitution 67 treats of, and ratifies the "authority to issue
sequestration or freeze orders under Proclamation No. 3 dated March 25, 1986."

The institution of these provisional remedies is also premised upon the State's inherent police power,
regarded, as t lie power of promoting the public welfare by restraining and regulating the use of liberty
and property," 68 and as "the most essential, insistent and illimitable of powers * * in the promotion of
general welfare and the public interest," 69 and said to be co-extensive with self-protection and * * not
inaptly termed (also) the'law of overruling necessity." " 70

10. PCGG not a "Judge"; General Functions

It should also by now be reasonably evident from what has thus far been said that the PCGG is not, and
was never intended to act as, a judge. Its general function is to conduct investigations in order to collect
evidence establishing instances of "ill-gotten wealth;" issue sequestration, and such orders as may be
warranted by the evidence thus collected and as may be necessary to preserve and conserve the assets
of which it takes custody and control and prevent their disappearance, loss or dissipation; and eventually
file and prosecute in the proper court of competent jurisdiction all cases investigated by it as may be
warranted by its findings. It does not try and decide, or hear and determine, or adjudicate with any
character of finality or compulsion, cases involving the essential issue of whether or not property should
be forfeited and transferred to the State because "ill-gotten" within the meaning of the Constitution and
the executive orders. This function is reserved to the designated court, in this case, the Sandiganbayan.
71 72
There can therefore be no serious regard accorded to the accusation, leveled by BASECO, that the
PCGG plays the perfidious role of prosecutor and judge at the same time.

11. Facts Preclude Grant of Relief to Petitioner

Upon these premises and reasoned conclusions, and upon the facts disclosed by the record, hereafter to
be discussed, the petition cannot succeed. The writs of certiorari and prohibition prayed for will not be
issued.

The facts show that the corporation known as BASECO was owned or controlled by President Marcos
"during his administration, through nominees, 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.

12. Organization and Stock Distribution of BASECO

BASECO describes itself in its petition as "a shiprepair and shipbuilding company * * incorporated as a
domestic private corporation * * (on Aug. 30, 1972) by a consortium of Filipino shipowners and shipping
executives. Its main office is at Engineer Island, Port Area, Manila, where its Engineer Island Shipyard is
housed, and its main shipyard is located at Mariveles Bataan." 73 Its Articles of Incorporation disclose that
its authorized capital stock is P60,000,000.00 divided into 60,000 shares, of which 12,000 shares with a
value of P12,000,000.00 have been subscribed, and on said subscription, the aggregate sum of
P3,035,000.00 has been paid by the incorporators. 74 The same articles Identify the incorporators,
numbering fifteen (15), as follows: (1) Jose A. Rojas, (2) Anthony P. Lee, (3) Eduardo T. Marcelo, (4) Jose
P. Fernandez, (5) Generoso Tanseco, (6) Emilio T. Yap, (7) Antonio M. Ezpeleta, (8) Zacarias Amante, (9)
Severino de la Cruz, (10) Jose Francisco, (11) Dioscoro Papa, (12) Octavio Posadas, (13) Manuel S.
Mendoza, (14) Magiliw Torres, and (15) Rodolfo Torres.

By 1986, however, of these fifteen (15) incorporators, six (6) had ceased to be stockholders, namely: (1)
Generoso Tanseco, (2) Antonio Ezpeleta, (3) Zacarias Amante, (4) Octavio Posadas, (5) Magiliw Torres,
and (6) Rodolfo Torres. As of this year, 1986, there were twenty (20) stockholders listed in BASECO's
Stock and Transfer Book. 75 Their names and the number of shares respectively held by them are as
follows:

1. Jose A. Rojas 1,248 shares

2. Severino G. de la Cruz 1,248 shares

3. Emilio T. Yap 2,508 shares

4. Jose Fernandez 1,248 shares

5. Jose Francisco 128 shares

6. Manuel S. Mendoza 96 shares

7. Anthony P. Lee 1,248 shares

8. Hilario M. Ruiz 32 shares

9. Constante L. Farias 8 shares

10. Fidelity Management, Inc. 65,882 shares

11. Trident Management 7,412 shares

12. United Phil. Lines 1,240 shares

13. Renato M. Tanseco 8 shares

14. Fidel Ventura 8 shares

15. Metro Bay Drydock 136,370 shares

16. Manuel Jacela 1 share

17. Jonathan G. Lu 1 share

 18. Jose J. Tanchanco 1 share

19. Dioscoro Papa 128 shares

20. Edward T. Marcelo 4 shares

TOTAL 218,819 shares.

13 Acquisition of NASSCO by BASECO

Barely six months after its incorporation, BASECO acquired from National Shipyard & Steel Corporation,
or NASSCO, a government-owned or controlled corporation, the latter's shipyard at Mariveles, Bataan,
known as the Bataan National Shipyard (BNS), and except for NASSCO's Engineer Island Shops and
certain equipment of the BNS, consigned for future negotiation all its structures, buildings, shops,
quarters, houses, plants, equipment and facilities, in stock or in transit. This it did in virtue of a "Contract
of Purchase and Sale with Chattel Mortgage" executed on February 13, 1973. The price was
P52,000,000.00. As partial payment thereof, BASECO delivered to NASSCO a cash bond of
P11,400,000.00, convertible into cash within twenty-four (24) hours from completion of the inventory
undertaken pursuant to the contract. The balance of P41,600,000.00, with interest at seven percent (7%)
per annum, compounded semi-annually, was stipulated to be paid in equal semi-annual installments over
a term of nine (9) years, payment to commence after a grace period of two (2) years from date of
turnover of the shipyard to BASECO. 76

14. Subsequent Reduction of Price; Intervention of Marcos

Unaccountably, the price of P52,000,000.00 was reduced by more than one-half, to P24,311,550.00,
about eight (8) months later. A document to this effect was executed on October 9, 1973, entitled
"Memorandum Agreement," and was signed for NASSCO by Arturo Pacificador, as Presiding Officer of
the Board of Directors, and David R. Ines, as General Manager. 77 This agreement bore, at the top right
corner of the first page, the word "APPROVED" in the handwriting of President Marcos, followed by his
usual full signature. The document recited that a down payment of P5,862,310.00 had been made by
BASECO, and the balance of P19,449,240.00 was payable in equal semi-annual installments over nine
(9) years after a grace period of two (2) years, with interest at 7% per annum.

15. Acquisition of 300 Hectares from Export Processing Zone Authority

On October 1, 1974, BASECO acquired three hundred (300) hectares of land in Mariveles from the
Export Processing Zone Authority for the price of P10,047,940.00 of which, as set out in the document of
sale, P2,000.000.00 was paid upon its execution, and the balance stipulated to be payable in
installments. 78

16. Acquisition of Other Assets of NASSCO; Intervention of Marcos

Some nine months afterwards, or on July 15, 1975, to be precise, BASECO, again with the intervention
of President Marcos, acquired ownership of the rest of the assets of NASSCO which had not been
included in the first two (2) purchase documents. This was accomplished by a deed entitled "Contract of
Purchase and Sale," 79 which, like the Memorandum of Agreement dated October 9, 1973 supra also
bore at the upper right-hand corner of its first page, the handwritten notation of President Marcos reading,
"APPROVED, July 29, 1973," and underneath it, his usual full signature. Transferred to BASECO were
NASSCO's "ownership and all its titles, rights and interests over all equipment and facilities including
structures, buildings, shops, quarters, houses, plants and expendable or semi-expendable assets,
located at the Engineer Island, known as the Engineer Island Shops, including all the equipment of the
Bataan National Shipyards (BNS) which were excluded from the sale of NBS to BASECO but retained by
BASECO and all other selected equipment and machineries of NASSCO at J. Panganiban Smelting
Plant." In the same deed, NASSCO committed itself to cooperate with BASECO for the acquisition from
the National Government or other appropriate Government entity of Engineer Island. Consideration for
the sale was set at P5,000,000.00; a down payment of P1,000,000.00 appears to have been made, and
the balance was stipulated to be paid at 7% interest per annum in equal semi annual installments over a
term of nine (9) years, to commence after a grace period of two (2) years. Mr. Arturo Pacificador again
signed for NASSCO, together with the general manager, Mr. David R. Ines.

17. Loans Obtained

It further appears that on May 27, 1975 BASECO obtained a loan from the NDC, taken from "the last
available Japanese war damage fund of $19,000,000.00," to pay for "Japanese made heavy equipment
(brand new)." 80 On September 3, 1975, it got another loan also from the NDC in the amount of
P30,000,000.00 (id.). And on January 28, 1976, it got still another loan, this time from the GSIS, in the
sum of P12,400,000.00. 81 The claim has been made that not a single centavo has been paid on these
loans. 82

18. Reports to President Marcos

In September, 1977, two (2) reports were submitted to President Marcos regarding BASECO. The first
was contained in a letter dated September 5, 1977 of Hilario M. Ruiz, BASECO president. 83 The second
was embodied in a confidential memorandum dated September 16, 1977 of Capt. A.T. Romualdez. 84
They further disclose the fine hand of Marcos in the affairs of BASECO, and that of a Romualdez, a
relative by affinity.

a. BASECO President's Report

In his letter of September 5, 1977, BASECO President Ruiz reported to Marcos that there had been "no
orders or demands for ship construction" for some time and expressed the fear that if that state of affairs
persisted, BASECO would not be able to pay its debts to the Government, which at the time stood at the
not inconsiderable amount of P165,854,000.00. 85 He suggested that, to "save the situation," there be a
"spin-off (of their) shipbuilding activities which shall be handled exclusively by an entirely new corporation
to be created;" and towards this end, he informed Marcos that BASECO was
* * inviting NDC and LUSTEVECO to participate by converting the NDC shipbuilding loan to BASECO
amounting to P341.165M and assuming and converting a portion of BASECO's shipbuilding loans from
REPACOM amounting to P52.2M or a total of P83.365M as NDC's equity contribution in the new
corporation. LUSTEVECO will participate by absorbing and converting a portion of the REPACOM loan of
Bay Shipyard and Drydock, Inc., amounting to P32.538M. 86

b. Romualdez' Report

Capt. A.T. Romualdez' report to the President was submitted eleven (11) days later. It opened with the
following caption:

MEMORANDUM:

FOR : The President

SUBJECT: An Evaluation and Re-assessment of a Performance of a Mission

FROM: Capt. A.T. Romualdez.

Like Ruiz, Romualdez wrote that BASECO faced great difficulties in meeting its loan obligations due
chiefly to the fact that "orders to build ships as expected * * did not materialize."

He advised that five stockholders had "waived and/or assigned their holdings inblank," these being: (1)
Jose A. Rojas, (2) Severino de la Cruz, (3) Rodolfo Torres, (4) Magiliw Torres, and (5) Anthony P. Lee.
Pointing out that "Mr. Magiliw Torres * * is already dead and Mr. Jose A. Rojas had a major heart attack,"
he made the following quite revealing, and it may be added, quite cynical and indurate recommendation,
to wit:

* * (that) their replacements (be effected) so we can register their names in the stock book prior to the
implementation of your instructions to pass a board resolution to legalize the transfers under SEC
regulations;

2. By getting their replacements, the families cannot question us later on; and

87
3. We will owe no further favors from them.

88
He also transmitted to Marcos, together with the report, the following documents:

89
1. Stock certificates indorsed and assigned in blank with assignments and waivers;

2. The articles of incorporation, the amended articles, and the by-laws of BASECO;

3. Deed of Sales, wherein NASSCO sold to BASECO four (4) parcels of land in "Engineer Island", Port
Area, Manila;

4. Transfer Certificate of Title No. 124822 in the name of BASECO, covering "Engineer Island";

5. Contract dated October 9, 1973, between NASSCO and BASECO re-structure and equipment at
Mariveles, Bataan;
6. Contract dated July 16, 1975, between NASSCO and BASECO re-structure and equipment at
Engineer Island, Port Area Manila;

7. Contract dated October 1, 1974, between EPZA and BASECO re 300 hectares of land at Mariveles,
Bataan;

8. List of BASECO's fixed assets;

9. Loan Agreement dated September 3, 1975, BASECO's loan from NDC of P30,000,000.00;

10. BASECO-REPACOM Agreement dated May 27, 1975;

11. GSIS loan to BASECO dated January 28, 1976 of P12,400,000.00 for the housing facilities for
BASECO's rank-and-file employees. 90

Capt. Romualdez also recommended that BASECO's loans be restructured "until such period when
BASECO will have enough orders for ships in order for the company to meet loan obligations," and that

An LOI may be issued to government agencies using floating equipment, that a linkage scheme be
applied to a certain percent of BASECO's net profit as part of BASECO's amortization payments to make
it justifiable for you, Sir. 91

It is noteworthy that Capt. A.T. Romualdez does not appear to be a stockholder or officer of BASECO, yet
he has presented a report on BASECO to President Marcos, and his report demonstrates intimate
familiarity with the firm's affairs and problems.

19. Marcos' Response to Reports

President Marcos lost no time in acting on his subordinates' recommendations, particularly as regards the
"spin-off" and the "linkage scheme" relative to "BASECO's amortization payments."

a. Instructions re "Spin-Off"

Under date of September 28, 1977, he addressed a Memorandum to Secretary Geronimo Velasco of the
Philippine National Oil Company and Chairman Constante Farias of the National Development
Company, directing them "to participate in the formation of a new corporation resulting from the spin-off
of the shipbuilding component of BASECO along the following guidelines:

a. Equity participation of government shall be through LUSTEVECO and NDC in the amount of
P115,903,000 consisting of the following obligations of BASECO which are hereby authorized to be
converted to equity of the said new corporation, to wit:

1. NDC P83,865,000 (P31.165M loan & P52.2M Reparation)

2. LUSTEVECO P32,538,000 (Reparation)

b. Equity participation of government shall be in the form of non- voting shares.

For immediate compliance. 92

Mr. Marcos' guidelines were promptly complied with by his subordinates. Twenty-two (22) days after
receiving their president's memorandum, Messrs. Hilario M. Ruiz, Constante L. Farias and Geronimo Z.
Velasco, in representation of their respective corporations, executed a PRE-INCORPORATION
AGREEMENT dated October 20, 1977. 93 In it, they undertook to form a shipbuilding corporation to be
known as "PHIL-ASIA SHIPBUILDING CORPORATION," to bring to realization their president's
instructions. It would seem that the new corporation ultimately formed was actually named "Philippine
Dockyard Corporation (PDC)." 94

b. Letter of Instructions No. 670

Mr. Marcos did not forget Capt. Romualdez' recommendation for a letter of instructions. On February 14,
1978, he issued Letter of Instructions No. 670 addressed to the Reparations Commission REPACOM the
Philippine National Oil Company (PNOC), the Luzon Stevedoring Company (LUSTEVECO), and the
National Development Company (NDC). What is commanded therein is summarized by the Solicitor
General, with pithy and not inaccurate observations as to the effects thereof (in italics), as follows:

* * 1) the shipbuilding equipment procured by BASECO through reparations be transferred to NDC

subject to reimbursement by NDC to BASECO (of) the amount of s allegedly representing the handling
and incidental expenses incurred by BASECO in the installation of said equipment (so instead of NDC
getting paid on its loan to BASECO, it was made to pay BASECO instead the amount of P18.285M); 2)
the shipbuilding equipment procured from reparations through EPZA, now in the possession of BASECO
and BSDI (Bay Shipyard & Drydocking, Inc.) be transferred to LUSTEVECO through PNOC; and 3) the
shipbuilding equipment (thus) transferred be invested by LUSTEVECO, acting through PNOC and NDC,
as the government's equity participation in a shipbuilding corporation to be established in partnership with
the private sector.

xxx xxx xxx

And so, through a simple letter of instruction and memorandum, BASECO's loan obligation to NDC and
REPACOM * * in the total amount of P83.365M and BSD's REPACOM loan of P32.438M were wiped out
and converted into non-voting preferred shares. 95

20. Evidence of Marcos'

Ownership of BASECO

It cannot therefore be gainsaid that, in the context of the proceedings at bar, the actuality of the control by
President Marcos of BASECO has been sufficiently shown.

Other evidence submitted to the Court by the Solicitor General proves that President Marcos not only
exercised control over BASECO, but also that he actually owns well nigh one hundred percent of its
outstanding stock.

It will be recalled that according to petitioner- itself, as of April 23, 1986, there were 218,819 shares of
stock outstanding, ostensibly owned by twenty (20) stockholders. 96 Four of these twenty are juridical
persons: (1) Metro Bay Drydock, recorded as holding 136,370 shares; (2) Fidelity Management, Inc.,
65,882 shares; (3) Trident Management, 7,412 shares; and (4) United Phil. Lines, 1,240 shares. The first
three corporations, among themselves, own an aggregate of 209,664 shares of BASECO stock, or
95.82% of the outstanding stock.

Now, the Solicitor General has drawn the Court's attention to the intriguing circumstance that found in
Malacanang shortly after the sudden flight of President Marcos, were certificates corresponding to more
than ninety-five percent (95%) of all the outstanding shares of stock of BASECO, endorsed in blank,
together with deeds of assignment of practically all the outstanding shares of stock of the three (3)
corporations above mentioned (which hold 95.82% of all BASECO stock), signed by the owners thereof
although not notarized. 97

More specifically, found in Malacanang (and now in the custody of the PCGG) were:

1) the deeds of assignment of all 600 outstanding shares of Fidelity Management Inc. which
supposedly owns as aforesaid 65,882 shares of BASECO stock;

2) the deeds of assignment of 2,499,995 of the 2,500,000 outstanding shares of Me