Tuesday, July 10, 2012

Rule on Succession: Marcos Siblings on Civil Case of Ill-Gotten Wealth

SC Reinstates Marcos Children as Defendants in Ill-Gotten Wealth Case; Scores Conduct of Prosecution by PCGG and OSG


The Supreme Court has reinstated the children of the late President Ferdinand E. Marcos and former first lady Imelda R. Marcos siblings – Ma. Imelda “Imee” R. Marcos-Manotoc, Senator Ferdinand “Bongbong” R. Marcos, Jr., and Irene R. Marcos-Araneta – as defendants in the ill-gotten wealth case in connection with the Marcoses’ accumulation of at least P200 billion and use of the media networks IBC-13, BBC-2, and RPN-9 for the family’s personal benefit, among others, now pending before the Sandiganbayan. This even as it found wanting the conduct of the prosecution of the case by the Presidential Commission on Good Government (PCGG) and the Office of the Solicitor General (OSG).

In a 27-page decision penned by Justice Maria Lourdes P.A. Sereno, the Court’s Second Division partially granted the petition of the Republic to maintain the Marcos siblings as defendants in Civil Case No. 0002 before the anti-graft court. It also directed that a copy of the decision be furnished to the Office of the President (OP) so that it may look into the circumstances of this case and determine the liability, if any, of the lawyers of the OSG and the PCGG in the manner by which this case was handled in the Sandiganbayan.

When the Marcoses filed their respective Demurrers to Evidence to the charges, the Sandiganbayan, on December 6, 2005, issued the assailed resolution granting all the Demurrers to Evidence except the one filed by Imelda R. Marcos primarily because she had categorically admitted that she and her husband owned properties enumerated in the Complaint, while stating that these properties had been lawfully acquired. Aside from the P200 billion and use of media networks, the Marcoses were being sued for the alleged use of De Soleil Apparel for dollar salting and illegal acquisition and operation of the bus company Pantranco North Express, Inc. (Pantranco).

“While it was not proven that respondents conspired in accumulating ill-gotten wealth, they may be in possession, ownership, or control of such ill-gotten wealth, or the proceeds thereof as heirs of the Marcos couple. Thus, their lack of participation in any illegal act does not remove the character of the property as ill-gotten and, therefore, as rightfully belonging to the State,” explained the Court.

The Court further noted that under the rules of succession, the heirs instantaneously became co-owners of the Marcos properties upon the death of the former President. The property rights and obligations to the extent of the value of the inheritance of a person are transmitted to another through the decedent’s death. In this concept, nothing prevents the heirs from exercising their right to transfer or dispose of the properties that constitute their legitimines, even absent their declaration or absent the partition or the distribution of the estate.

“In sum, the Marcos siblings are maintained as respondents, because (1) the action pending before the Sandiganbayan is one that survives death, and, therefore, the rights to the estate must be duly protected; (2) they allegedly control, possess or own ill-gotten wealth, through their direct involvement in accumulating or acquiring such wealth may not have been proven,” the Court held.

In the same decision, the Court also bewailed the prosecution’s failure to adhere to something as basic as the best evidence rule which “raises serious doubts on the level and quality of effort given to the government’s cause.” The Court encouraged the OP, the OSG, and the PCGG to conduct the appropriate investigation and consequent action on this matter.

The Court noted that despite the prosecution’s having the expansive resources of government, the members of the prosecution did not even bother to provide any reason whatsoever for their failure to present the original documents or the witnesses to support the government’s claims. Even worse was presenting in evidence a photocopy of the transcript of stenographic notes (TSN) of the PCGG proceedings instead of the original, or a certified true copy of the original, which the prosecutors themselves should have had in their custody. “Such manner of legal practice deserves the reproof of this Court. We are constrained to call attention to this apparently serious failure to follow a most basic rule in law, given the special circumstance surrounding this case,” the Court held.

“The best evidence rule has been recognized as an evidentiary standard since the 18th century. For three centuries, it has been practiced as one of the most basic rules in law…Thus, it is deeply disturbing that the PCGG and the OSG – the very agencies sworn to protect the interest of the state and its people – could conduct their prosecution in the manner that they did. To emphasize, the PCGG is a highly specialized office focused on the recovery of ill-gotten wealth, while the OSG is the principal legal defender of the government. The lawyers of these government agencies are expected to be the best in the legal profession,” held the Court. (GR No. 171701, Republic v. Marcos-Manotoc, February 8, 2012)

Emphasis and links provided by Broker Rem Ramirez 0922.883.9308 broker.ramirez@yahoo.com.ph

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Monday, July 9, 2012

Northrail Project is not an Executive Agreement

SC Rules China-Based Northrail Contractor Not Immune from Suit; Allows RTC to Hear Validity of Northrail Contract and Loan Agreements`


The Supreme Court has unanimously held that the China National Machinery & Equipment Corp. Group (CNMEG)’s Contract Agreement with North Luzon Railways Corporation (Northrail) for the construction of a railway line from Manila to San Fernando, La Union (Northrail Project) is not an executive agreement and that CNMEG “is not entitled to immunity from suit.” Thus it remanded Civil Case No. 06-203 to the Makati Regional Trial Court (RTC), Branch 145 for further proceedings on the validity of the said Contract Agreement, as well as the counterpart financial agreement (Loan Agreement) between the Philippine government and the Export Import Bank of China (EXIM Bank).

In a 23-page decision penned by Justice Maria Lourdes P. A. Sereno, the Court En Banc denied CNMEG’s petition assailing the dismissal by the Court of Appeals of its (CNMEG’s) petition for certiorari assailing the RTC’s denial of its (CNMEG’s) motion to dismiss Civil Case No. 06-203 for lack of jurisdiction.

The Court stressed that the Contract Agreement was not concluded between the government of the Philippines and China but between Northrail and CNMEG, which is neither a government nor a government  agency of China but a corporation duly organized and created under the laws of the People’s Republic of China.

“Since the Contract Agreement explicitly provides that Philippine Law shall be applicable, the parties have effectively conceded that their rights and obligations thereunder are not governed by international law…It is therefore clear from therefore clear from the foregoing reasons that the Contract Agreement does not partake of the nature of an executive agreement. It is merely an ordinary commercial contract that can be questioned before the local courts,” the Court held.

The Court further ruled that CNMEG engaged in a propriety activity hence was not covered by sovereign immunity. The Memorandum of Understanding (MOU) between CNMEG and Northrail shows that CNMEG sought the construction of the Luzon Railways as a proprietary or commercial venture in the ordinary course of its business. “Clearly, it was CNMEG that initiated the undertaking, and not the Chinese government,” ruled the Court.

The Court further held that based on the MOU, the Loan Agreement, and the letter of Chinese Ambassador to the Philippines Wang Chungui stating CNMEG and not the Chinese government initiated the Northrail Project, it was clear that the Northrail Project was a purely commercial transaction.

The Court held that even assuming arguendo that CNMEG performs governmental functions, such claim does not automatically vest it with immunity. Following the Court’s ruling in Deutshe Gesellschaft Für Technische Zusammernarbeit v. CA, in the absence of evidence to the contrary, CNMEG is to be presumed as a government-owned and-controlled corporation without an original charter. As a result, it has the capacity to sue and be sued under Section 36 of the Corporation Code.  In this connection, the Court noted CNMEG failed to present a certification from the Department of Foreign Affairs that it is entitled to sovereign or diplomatic immunity.

The Court also held that an agreement to submit any dispute to arbitration may be construed as an implicit waiver of immunity from suit. Under the contract agreement, CNMEG and Northrail, if any dispute arises, are bound to submit the matter to the HKIAC for arbitration.

In September 2002, CNMEG entered into a MOU with Northrail for the conduct of a feasibility study on a possible railway line from Manila to San Fernando, La Union or known as the Northrail Project.

In August 2003, the EXIM Bank and the Department of Finance (DOF) entered into a MOU, wherein China agreed to extend Preferential Buyer’s Credit to the Philippine government to finance the Northrail Project. The Chinese government designated EXIM Bank as the lender, while the Philippine government named the DOF as the borrower. Under the August 30 MOU, EXIM Bank agreed to extend an amount not exceeding US$400,000,000 in favor of the DOF, payable in 20 years, with a 5-year grace period, and at the rate of 3% per annum.

In October 2003, Ambassador Wang wrote the DOF of CNMEG’s designation as the Prime Contractor for the Northrail Project.

On December 30, 2003, Northrail and CNMEG executive a Contract of Agreement for the Construction of Section 1, Phase 1 of the North Luzon Railway System from Caloocan to Malolos on a turnkey basis. The contract price for the Northrail Project was pegged at US$421,050,000.

On February 26, 2004, the Philippine government and EXIM Bank entered into a counterpart financial agreement – Buyer Credit Loan Agreement No. BLA 04055, where EXIM Bank agreed to extend Preferential Buyer’s Credit in the amount of US$400M in favor of RP to finance the construction of Phase I of the Northrail Project.

On February 13, 2006, respondent taxpayers filed in the Makati RTC a complaint for annulment of contract and injunction against CNMEG, the Office of the Executive Secretary, the DOF, the Department of Budget and Management (DBM), the National Economic Development Authority (NEDA), and Northrail before the RTC. The RTC set the case for hearing on the issuance of injunctive reliefs, prompting CNMEG to file an Urgent Motion for Reconsideration of this order. Before the RTC could rule on this, CNMEG filed a motion to dismiss the case arguing the RTC did not have jurisdiction over it.

On May 15, 2007, the RTC issued an omnibus order denying CNMEG’s motion to dismiss eventually prompting CNMEG to elevate case to the CA. (GR No. 185572, China National Machinery & Equipment Corp. Group v. Judge Santamaria, February 7, 2012)

Emphasis, title and links provided by Broker Rem Ramirez 0922.883.9308 broker.ramirez@yahoo.com.ph

For bar questions and law subjects reviewers, visit www.onlinereview.com.ph