The Supreme Court recently ordered the Sandiganbayan to take cognizance of a civil case where the propriety of the dilution of the government’s shares, from 32.79% to 15.998%, in Domestic Satellite Philippines, Inc. (Domsat) is in issue.

In a 12-page decision penned by Justice Antonio T. Carpio, the Court’s First Division held that the said case filed by the Presidential Commission on Good Government’s (PCGG) questioning the said dilution brought about by the management contract between Domsat and Investa Corporation (Investa) properly lies within the jurisdiction of the Sandiganbayan. The Court further held that the Sandiganbayan should now also rule upon the propriety of the said management contract.

The Court thus set aside the Sandiganbayan’s dismissal of the case for lack of jurisdiction. The Sandiganbayan had ruled that the acts of the Board of Directors of Domsat, which the Government claims amount to fraud, are proper subjects of an intracorporate dispute which lies within the jurisdiction of the Securities and Exchange Commission (SEC).

The Court pointed out that contrary to the Sandiganbayan’s ruling, the suit is not just an intra-corporate dispute between owners but one that involves the propriety of a contract covering ill-gotten shares. It stressed that the PCGG brought the suit as conservator of the sequestered Domsat shares.

The Court ruled that as the case clearly pertains to the percentage share of the Republic in Domsat as represented by the sequestered Domsat shares, which are properties that are claimed to be illegally acquired or misappropriated by former President Ferdinand E. Marcos, his family, cronies, or dummies, the case properly lies within the Sandiganbayan’s jurisdiction.

In 1986, the PCGG ordered the sequestration and immediate takeover of Domsat. Three years later, Domsat elected a new Board of Directors believed to be nominees of several Marcos cronies. This Board entered into a management contract with Investa. Under the contract, Investa would be paid 10,000 Domsat shares worth Php1 million per semester starting on July 25, 1989. By March 3, 1998, when the government filed the case before the anti-graft court, Investa already owned 75% of Domsat, while the government was left with 15.998%. (GR No. 135466, Republic v. Investa, May 7, 2008)