Republic of the
SUPREME COURT
Manila
SECOND DIVISION
RODOLFO M.
CUENCA, G.R. No. 146214
Petitioner,
- versus -
HON.
ALBERTO P. ATAS, Present:
JULITO F.
FABRERO, and HON.
NATHANIEL A. LOBIGAS, in CARPIO
MORALES, J.,
their capacity as Hearing Officers Acting Chairperson,
of the SECURITIES AND TINGA,
EXCHANGE COMMISSION; VELASCO, JR.,
PHILIPPINE NATIONAL NACHURA,*
and
CONSTRUCTION CORPORATION, REYES,* JJ.
ASSET PRIVATIZATION TRUST,
PHILIPPINE NATIONAL BANK,
DEVELOPMENT BANK OF
THE
DEVELOPMENT COMPANY,
PHILIPPINE EXPORT AND
FOREIGN LOAN GUARANTEE
CORPORATION, and
GOVERNMENT SERVICE Promulgated:
INSURANCE SYSTEM,
Respondents.
October 5, 2007
x-----------------------------------------------------------------------------------------x
D E C I S I
O N
VELASCO, JR., J.:
The Case
In this Petition for Review
on Certiorari[1] of
the adverse November 29, 2000 Decision[2]
of the Court of Appeals (CA) in CA-G.R. SP No. 60366, petitioner Rodolfo M.
Cuenca, in effect, questions the July 10, 2000 Decision[3]
of the Securities and Exchange Commission (SEC) Securities Investigation and
Clearing Department (SICD) in SICD SEC Case No. 05-96-5357 entitled Rodolfo M. Cuenca v. Philippine National
Construction Corporation (PNCC), et al., which declared defendants-government
financial institutions (GFIs) as majority stockholders of the PNCC. The SICD Decision was affirmed by the SEC in
SEC Case No. AC 807, which, in turn, was upheld by the CA in its assailed
The Facts
Petitioner was an incorporator, President, and Chief
Executive Officer of the then Construction Development Corporation of the
However,
its unpaid obligations ballooned so much that by 1983, it became impossible for
it to settle its maturing and overdue accounts with various GFIs, namely, the
Philippine National Bank (PNB), Development Bank of the Philippines (DBP), National
Development Company (NDC), Government Service Insurance System (GSIS), Land
Bank of the Philippines (LBP), and Philippine Export and Foreign Loan Guarantee
Corporation (PEFLGC), now known as the Trade and Investment Development
Corporation of the Philippines.
On
On
April 25, 1983, a special stockholders’ meeting, presided by petitioner, was
held whereby stockholders representing more than two-thirds (2/3) of the
outstanding capital stock of CDCP approved the increase of its authorized
capital stock from PhP 1.6 to 2.7 billion in accordance with LOI 1295. Thus, the CDCP, pursuant to said letter,
converted some of its obligations to GFIs into equity.
Consequently,
CDCP issued common shares to DBP, NDC, GSIS, LBP, PEFLGC, and preferred “D”
shares to PNB in consideration for the extinguishment of some of CDCP’s
outstanding loan obligations to said GFIs, all of which were duly recorded in
its corporate books. Subsequently, in
December 1983, the SEC approved the increase of CDCP’s authorized capital stock,
and the corresponding CDCP Certificates of Stock were issued in the names of
DBP, GSIS, LBP, PEFLGC, and PNB, to wit:
Certificates of stock issued Name No. of shares issued to GFIs
Cert. of Stock No. 40269[5] DBP 26,987,477
common shares
Cert. of Stock No. 40270[6] PEFLGC 37,584,577
common shares
Cert. of Stock No. 40271[7] GSIS 47,490,000
common shares
Cert. of Stock No. 40272 LBP 657,836 common shares
Cert. of Stock No.
The
total subscription of the above issuance of shares of stock pursuant to LOI 1295
amounted to PhP 1,405,202,000 or 1.4 billion.
Thus,
with the implementation of LOI 1295, respondents-GFIs became the majority
stockholders of CDCP to the extent of 70% of the authorized capital stocks. The
change in the corporation’s ownership was made public through various
announcements.[9] CDCP was later renamed to PNCC to reflect the
Philippine Government stockholding, and became a government-acquired asset
corporation. Consequently, the various GFIs were given seats in the Board of
Directors of PNCC and participated in the management of the company.
On
Meanwhile,
sometime in 1988, pursuant to Administrative Order Nos. 14 and 64, DBP, PNB,
PEFLGC, and NDC transferred their interests in PNCC to the Republic of the
On
May 31, 1996, more than a decade after LOI 1295 was implemented, petitioner
filed a complaint before the SEC SICD docketed as SEC Case No. 05-96-5357
entitled Rodolfo M. Cuenca v. PNCC, et
al., for the SEC to determine and
declare whether the GFIs were registered stockholders of PNCC and the number of
shares held by each of them and to compel PNCC to call and hold regular
stockholders’ meetings and election of directors every year.
Petitioner
averred that while PNCC issued the above specified certificates of stock to the
GFIs pursuant to LOI 1295, the GFIs however refused to cancel and never did
cancel the loans in their books as payment for the shares issued in their names
by PNCC as “they considered it to be a diminution of the value of their
investments.” Thus, petitioner claimed
that some of the GFIs refused to accept delivery of the stock certificates from
PNCC while others were not even aware of the issuance of the certificates of
stock in their names. Consequently,
respondents-GFIs continued to charge and receive payments for their loan and
interest charges from PNCC though these loans were supposed to have been
converted into common stock in 1983 pursuant to LOI 1295.
In
March 1998, with the idea of spinning-off its toll-way operations, PNCC
scheduled a special stockholders’ meeting on
On
April 14, 1998, the date of the special stockholders’ meeting of PNCC, the SEC
SICD, through its hearing officer, granted petitioner’s urgent application and
issued a TRO enjoining the GFIs from voting their shares of stock in PNCC.[10] Thereafter, the parties presented their
respective preliminary evidence during the hearings for the issuance of a
preliminary injunction.
Meanwhile,
despite the pendency of SICD SEC Case No. 05-96-5357, petitioner filed a Third
Amended Complaint[11]
before the Makati City Regional Trial Court (RTC), Branch 142, docketed as
Civil Case No. 95-1356 and entitled Rodolfo
M. Cuenca, for and in behalf of PNCC v. APT, et al. for (1) enforcement and strict compliance with LOI
1295; (2) cancellation of all penalties, interest, and surcharges accrued after
December 31, 1982; (3) enjoinment of the GFIs from receiving any real or
personal properties from PNCC; and (4) cancellation of the transfer of Lot 3,
Block 1, RL-04-000001 covered by Transfer Certificate of Title (TCT) No. 34996
to APT.
On
In
the meantime, on
On
Consequently,
SEC SICD Director Daisy Besa-De Asis designated respondents Hearing Officers
Alberto P. Atas, Julito F. Fabrero, and Nathaniel A. Lobigas as the three
(3)-person Hearing Panel.
During
the hearings of the instant case, through a
On
In
the preliminary conference on
On
June 13 and 14, 2000, PNCC adopted the testimonial and documentary evidence it
presented during the hearing on the preliminary injunction as part of its
evidence-in-chief and adduced further additional witnesses and documentary
evidence to substantiate the new matter presented in its amended answer. The GFIs adopted PNCC’s evidence which was orally
offered by PNCC over petitioner’s objection.
The
Hearing Panel scheduled the reception of petitioner’s rebuttal evidence on June
19 and 20, 2000. However, on
On
The Ruling of the SEC SICD
On
WHEREFORE,
plaintiff’s Complaint is hereby dismissed for lack of merit and the Orders
dated
The
Hearing Panel found that the evidence presented by PNCC and GFIs constituted
substantial proof of the implementation of LOI 1295. It reasoned that not only did PNCC issue the
shares of stock as shown in its stock ledger cards but such fact was
corroborated by Caval Securities Registry, Inc., PNCC’s stock transfer agent,
which prepared PNCC’s September 15, 1987 Schedule of Subscription.[26] Moreover, prior to the filing of the instant
case, the GFIs have been nominating their representatives to PNCC’s Board of
Directors which is an attribute of ownership of shares of stock in PNCC.
The
Hearing Panel also took cognizance of the April 14, 2000 Deed of Confirmation[27]
and the June 7, 2000 Supplement to Deed of Confirmation[28]
executed by the GFIs, which erased all doubts on the implementation of LOI 1295
by the conversion of the GFIs’ loan receivables from PNCC into the latter’s
equity. Thus, with the clear
consideration of loan receivables for the shares of stock, the shares issued to
the GFIs cannot in any way be considered “watered stocks.” It cited Section 62 of the Corporation Code
which expressly allows the issuance of shares of stock in consideration for
previously incurred indebtedness.
Moreover,
the Notes to the Financial Statements[29]
on the Report on Examinations of Financial Statements[30]
for comparative periods of
On
the other hand, the Hearing Panel found the pieces of evidence presented by
petitioner, most of which were the same ones presented by respondents, to be
inconsequential and insufficient to overthrow the weight of the evidence
presented by respondents that a conversion of PNCC’s debt into equity was
implemented. It ratiocinated that the
“badges of fraud” pointed out by petitioner are inconsequential as no clear and
convincing evidence was presented by petitioner, and that allegations cannot
take the place of proof. Likewise, the
lack of a subscription agreement was not fatal to the shares of stock issued to
the GFIs as LOI 1295 in no uncertain terms mandated such conversion of
debt-to-equity which was duly approved by the stockholders of PNCC in
increasing its authorized capital stock precisely pursuant to LOI 1295.
Anent
the August 15, 1995 Memorandum of Agreement[32]
executed by the Department of Finance (DOF), APT, and PNCC, whereby PNCC
assigned to APT and the DOF Lot 3, Block 1, RL-04-000001 covered by TCT No.
34996, such did not by far prove that PNCC paid its obligations to PNB and DBP,
which transferred their assets to the National Government, and the shares PNCC
issued to these GFIs were without consideration. Evidence shows that PNCC owed PNB PhP 1.79
billion and DBP PhP 629 million, but what were converted into equity were only
PhP 255 million for PNB and PhP 269.874 million for DBP, thus leaving
outstanding balances of PhP 1.535 billion for PNB and PhP 359 million for
DBP. These outstanding and unconverted
loan credits were the subject of the assignment of receivables to APT.
In fine, the Hearing Panel cited
the resolution of the 1992 case of Children’s Garden of the Philippines v.
APT,[33]
where this Court ruled that the implementation of LOI 1295 was already a fait
accompli; thus, there was clear recognition by the Court of the factual
conversion of GFIs’ loan credits to PNCC shares.
As
regards NDC, the Hearing Panel dismissed the complaint against it for failure
of petitioner to state a cause of action as the issuance of 14,699,000 shares
of common stock of PNCC in favor of NDC in 1987 was pursuant to LOI 1136 and not
LOI 1295, and the shares were issued for valuable consideration.
The Ruling
of the SEC En Banc
With the
adverse ruling against him, petitioner timely filed his Notice of Appeal[34]
and Petition for Review on Certiorari and/or Memorandum on Appeal.[35]
Aside from assailing the July 10, 2000 SEC SICD Decision, petitioner also
assailed the July 3, 2000 Omnibus Order terminating the presentation of his
rebuttal evidence and submitting the case for decision on the merits, and the
June 27, 2000 Preliminary Conference Order[36]
barring him from presenting additional witnesses as part of his evidence-in-chief. Petitioner raised before the SEC en banc
the allegations that the Hearing Panel conspired with PNCC in railroading the
trial and issuing the questioned Orders and Decision.
Among other
things, petitioner assails the “speed,” taking only seven (7) days from the
date the case was submitted for decision, with which the Hearing Panel came out
with a “grammar-perfect” decision. It
concluded that it was PNCC which prepared the decision, pointing out numerous
instances where the text of the assailed decision is identical to or very
similar to some portions of PNCC’s petitions in another case.
Subsequently,
the SEC en banc issued its August 8, 2000 Order denying petitioner’s
appeal and affirming in toto the July 10, 2000 Decision of the SEC SICD.
The decretal portion states:
FINDING NO REVERSIBLE ERROR, therefore, the herein Appeal should be, as it is hereby DISMISSED.
The 10th July 2000 Decision in SICD Case No. 05-96-5357 is herewith AFFIRMED in toto.
Costs adjudged against the appellant.[37]
The SEC en
banc found that petitioner banked on sweeping speculations and assumptions
except the significant and substantial proof to corroborate the serious charges
leveled against the Hearing Panel. It
reasoned that petitioner had not shown malice, bad faith, or corrupt purpose on
the part of the Hearing Panel to warrant the reversal of the assailed Decision.
Moreover,
it pointed out that petitioner failed to procedurally appreciate the import of
the mandatory requirements set forth in the SEC Rules of Procedure in effect at
that time, as the Hearing Panel merely adhered to Rule V, Sec. 4 of said Rules
of Procedure, which provides that “hearings shall be commenced not later than
15 days from the date of the termination of the preliminary conference and
completed within 20 days from the date of the first hearing.” Besides, according
to the SEC en banc, the proceedings in
the SEC SICD were summary in nature; thus, “speed” seemed to ensue when the
case was heard and decided.
On the
issue of violation or infringement of petitioner’s right to due process, the
SEC en banc found no basis for it, as the summary nature of the
proceedings below has to be followed by the Hearing Panel. Moreover, the SEC en banc found a
dearth of evidence to lend support to petitioner’s contention.
Finally,
the SEC en banc likewise relied on the GFIs’ ratification of their
subscription to the shares issued by PNCC pursuant to LOI 1295 to erase any
doubt about its implementation and the extinguishment of PNCC’s unpaid loan
credits to the extent of such issuance of shares of stock.
The Ruling
of the Court of Appeals
Aggrieved,
on
Thereafter,
through its assailed November 29, 2000 Decision,[39]
the CA denied and dismissed the petition for review for lack of merit; thus, it
upheld the SEC en banc order affirming the SEC SICD decision which
dismissed petitioner’s complaint. The CA
found that neither the SEC en banc nor the SEC Hearing Panel committed
grave abuse of discretion amounting to lack or excess of jurisdiction in
rendering their respective orders and decision.
The
appellate court failed to see any rhyme or reason in finding fault in or to
disturb the findings of the SEC en banc on its ruling regarding the
alleged suspicious and compelling badges of fraud pointing to a conspiracy
between the Hearing Panel and PNCC. It
quoted with approbation the quasi-judicial agency’s disquisition on this
matter. Moreover, it reasoned that there
was nothing startling or irregular in the fact that the text of the same
decision was similar in language with the text of the pleadings filed by PNCC
as the Hearing Panel is allowed by the Rules to adopt any part of the position
papers or draft decisions the parties had filed in their resolution or decision. As regards the constitution of the three-person
Hearing Panel, the CA held that by not filing a motion for reconsideration of
the order granting the constitution of the panel, petitioner could not now
evoke suspicion on it.
The CA
further upheld the summary proceedings before the Hearing Panel for being in
accord with the SEC’s New Rules of Procedure, and, thus, such could not be
prejudicial to petitioner. As regards
the admission of PNCC’s amended answer, the CA held that such could not be
considered as a conspiratorial act as petitioner did not oppose such admission.
On the
issue of the preliminary conference brief being merely permissive, the CA noted
that during the June 5, 2000 hearing, it was specifically ordered by the
Hearing Panel for the parties to file their respective briefs with attached
affidavits of their witnesses before the actual preliminary conference. Thus, petitioner could have prepared and
filed his brief before the June 13, 2000 preliminary conference. However, petitioner chose to remain silent
and simply adopted his previous preliminary conference brief. Petitioner never made known to the Hearing
Panel his assertion that the filing of his brief was merely permissive. Besides, it was the Hearing Panel who had the
say on whether preliminary conference briefs should be filed or not.
On the
issue of the limitation on the presentation of petitioner’s rebuttal evidence,
the CA likewise found it untenable as he could have filed a reply to traverse
the new one-paragraph allegation in the amended answer or, in the alternative,
referred to supporting documents and affidavits negating such new matter in his
preliminary conference brief. Petitioner
did neither. The CA then opined that
“[petitioner] could not now cry foul over his lapses as due process is not
violated where a person is given the opportunity to be heard but chooses not to
give his side.”
Likewise,
the CA reasoned that petitioner could not assail the findings of facts and
conclusions of law by the Hearing Panel as such are based on the aggregate
evidence presented by the parties. It
pointed out that the evidence presented during the hearings for the issuance of
a preliminary injunction was preliminary or only a sample to support the
issuance of the injunctive writ. Verily,
the CA ruled that the findings of the Hearing Officer in the issuance of the
TRO and injunctive writ could not pre-empt the conclusive findings of the
tribunal after due trial and presentation of all the evidence adduced by the
parties. Thus, the CA was convinced that
petitioner was indeed accorded due process and given ample opportunity to
ventilate his case.
In fine, the appellate court likewise held
the applicability of Children’s Garden of the Philippines[40] and the
fact that the assailed issuance of shares of stock to the GFIs was for valuable
consideration, that is, the existing loan credit obligations. The CA then ruled
that petitioner was guilty of forum shopping for having raised substantially
the same issues before the SEC and RTC.
Hence, the
instant petition is now before the Court.
Parenthetically,
on June 19, 2000, petitioner filed a Notice of Dismissal and Motion to Dismiss
Third Amended Complaint[41]
in Civil Case No. 95-1356 before the Makati City RTC, Branch 142. Petitioner reasoned that based on the
position taken and the admissions made by PNCC and the GFIs in other cases,
with respect to the validity of LOI 1295, he was no longer certain if it was
proper for him to maintain suit for the enforcement and implementation of said
law. The trial court promptly dismissed
Civil Case No. 95-1356 through its June 23, 2000 Order.[42]
Similarly, sometime
in September 2000, PNCC filed a motion to dismiss CA-G.R. SP No. 58117
before the CA Ninth Division, as said case had been rendered moot
and academic by the July 10, 2000 Decision of the SEC SICD Hearing Panel, which
lifted and revoked the preliminary injunction granted through the assailed SEC
SICD September 8, 1998 Order.
Consequently, CA-G.R. SP No. 58117 was dismissed through the September 19, 2000 CA
Resolution.[43]
The Issues
Petitioner
raises the following grounds for our consideration:
I
THE COURT OF APPEALS HAS COMMITTED REVERSIBLE ERROR IN NOT FINDING THAT THE SEC EN BANC GROSSLY ERRED IN NOT HOLDING THAT THE PROCEEDINGS BELOW WERE PROCEDURALLY FLAWED BECAUSE THE HEARING PANEL HAD RAILROADED THE TRIAL IN FAVOR OF RESPONDENT PNCC.
A. The Court of Appeals has committed reversible
error in not finding that the SEC en banc grossly erred in not holding that the
Hearing Panel, in issuing the Omnibus Order dated
i. Respondent PNCC’s Motion to Terminate Plaintiff’s Rebuttal Evidence was a mere scrap of paper and should not have been given due course by the Hearing Panel.
ii. The premature termination of petitioner’s rebuttal evidence was a denial of his right to due process.
iii. The cancellation of the 19 and
iv. The Hearing Panel grossly erred in finding that petitioner could not have presented new or significant evidence on rebuttal, and that petitioner had already presented sufficient rebuttal evidence, considering that said findings contradict each other and are presumptuous and bereft of any factual basis.
B. The Court of Appeals has committed reversible
error in not finding that the SEC en banc grossly erred in not holding that the
Hearing Panel, in issuing the Preliminary Conference Order dated
II
THE COURT OF APPEALS
HAS COMMITTED REVERSIBLE ERROR IN UPHOLDING THE SEC EN BANC ORDER DATED
A. Badges of fraud abound in the pages of the
Decision dated
B. The SEC en banc’s and the Hearing Panel’s findings of fact are inexplicably the opposite of the findings of fact previously made by Hearing Officer Gallegos and the SEC en banc, even though both sets of findings of fact are based on the very same evidence.
C. The Court of Appeals has committed reversible error in finding that petitioner is guilty of forum shopping.
D. The Court of Appeals has committed reversible error in not ruling that the SEC en banc grossly erred in not holding that the Hearing Panel committed reversible error and grave abuse of discretion in considering evidence not formally offered and admitted.
E. The
Court of Appeals has committed reversible error in not ruling that the SEC en
banc grossly erred in not holding that the Hearing Panel committed reversible
error and grave abuse of discretion in making findings of fact not supported by
the evidence on record and in disregarding “overwhelming” evidence.[44]
Petitioner challenges the CA decision
on the ground that he was denied due process. He also claims that the CA erred in ruling
that the factual findings of the SEC SICD Hearing Panel, as affirmed by the SEC
en banc, were conclusive on it. Finally,
he faults the CA for its failure to appreciate circumstances that would not
only show denial of due process but of fraud and conspiracy in railroading the
instant case against him.
The Court’s Ruling
The
petition is bereft of merit.
Procedural
Due Process
Procedural
due process, in gist, is the necessity for notice and an opportunity to be
heard before judgment is rendered. Its
essence is encapsulated in the immortal cry of Themistocles to Alcibiades: “Strike––but hear me first.”[45] Thus, as long as a party is given the
opportunity to defend his/her interests in due course, the party would have no
reason to complain, for it is this opportunity to be heard that makes up the
essence of due process.[46]
In
administrative and quasi-judicial proceedings where the magistrates or
tribunals hearing the case are not bound by the niceties and finer points of
judicial due process, the “cardinal primary” requirements of procedural due
process, as gleaned by Justice Laurel from an array of American decisions, were
enumerated in Tibay v. Court of Industrial Relations, as follows:
(1) The first of these rights is the right to a hearing, which includes the right of the party interested or affected to present his own case and submit evidence in support thereof. x x x
(2) Not only must the party be given an opportunity to present his case and to adduce evidence tending to establish the rights which he asserts but the tribunal must consider the evidence presented. x x x
(3) While the duty to deliberate does not impose the obligation to decide right, it does imply a necessity which cannot be disregarded, namely, that of having something to support its decision. x x x
(4) Not only must there be some evidence to support a finding or conclusion (City of Manila vs. Agustin, G. R. No. 45844, promulgated November 29, 1937, XXXVI O.G. 1335), but the evidence must be “substantial.” x x x
(5) The decision must be rendered on the evidence presented at the hearing, or at least contained in the record and disclosed to the parties affected. x x x
(6) The [c]ourt x x x or any of its judges, therefore, must act on its or his own independent consideration of the law and facts of the controversy, and not simply accept the views of a subordinate in arriving at a decision. x x x
(7)
[The court] should, in all controversial questions, render its decision
in such a manner that the parties to the proceeding can know the various issues
involved, and the reasons for the decisions rendered. The performance of this duty is inseparable
from the authority conferred upon it.[47]
(Emphasis supplied.)
Prescinding
from the above requirements, it is thus clear that the proceedings before the
SEC SICD Hearing Panel are bound by these requirements. To determine whether petitioner was denied
due process as alleged, we will scrutinize the proceedings below.
Proceedings
before the Hearing Panel
For
clarity, we reiterate the significant and relevant events that transpired which
are mainly being assailed by petitioner.
It is
undisputed that the instant case was pending for over four (4) years before the
SEC SICD, that is, from May 31, 1996 until the rendition of the SEC SICD Decision on July
10, 2000. In the intervening
time, petitioner was granted a 20-day TRO on