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STRATEGIC ALLIANCE DEVT CORP.

, PETITIONER
V.

RADSTOCK SECURITIES, LTD., ET AL1


GRS NO 178158 & 180428 DECEMBER 4, 2009.
CARPIO, J.
SV: PNCCs affiliate the Basay Mining corp, obtained loans from the Marubeni Corp. for 20 years it
denied liability of such loan. However in 2010, it issued a board resolution admitting liability. Marubeni
corp assigned its credit to Radstock, a foreign corporation. Radstock then initiated proceeding for the
collection of said loans. PNCC and Radstock entered into a compromise agreement wherein they agreed
to settle the loan at a lower amount.
SC: PNCC cannot enter into the compromise agreement. It is not a private corporation but a GOCC, as
such any compromise agreement it will enter into that exceeds P100,000 must go through congress first.
90.3% of PNCC is in fact owned by the government and its board is composed of public officers.
1. The Philippine National Construction Corp. (PNCC) (previously Construction Devt Corp. Of the
Philippines or CDCP) was incorporated under the Corporation Code.
2. In 1978 and 1981, Basay Mining Corp. (later CDCP Mining Corp.), an affiliate of PNCC, ,
obtained loans from Marubeni Corp wherein PNCC, without a board resolution authorizing the
same, obliged to pay solidarily with Basay. For 20 years, PNCC consistently refused to admit
liability for the Marubeni loans.
3. However, in October 2000, PNCC passed a board resolution recognizing a P 10.7 billion liability
to Marubeni Corp.
4. 3 months later, Marubeni assigned its credit to Radstock for only US$ 2 million (or less than P
100 million, in stark contrast to the P10.7 billion admitted receivable from PNCC).

STRATEGIC ALLIANCE DEVELOPMENT CORPORATION, Petitioner,

vs.
RADSTOCK SECURITIES LIMITED and PHILIPPINE NATIONAL CONSTRUCTION CORPORATION,
Respondents.
ASIAVEST MERCHANT BANKERS BERHAD, Intervenor.
x - - - - - - - - - - - - - - - - - - - - - - -x
G.R. No. 180428
LUIS SISON, Petitioner,
vs.
PHILIPPINE NATIONAL CONSTRUCTION CORPORATION and RADSTOCK SECURITIES LIMITED,
Respondents.

5. Radstock immediately started actions for the collection of the amount. TC issued a writ of
preliminary attachment against PNCC and garnished the latters bank accounts and real
properties. It denied PNCCs Motion to Dismiss. CA also denied PNCCs peition for certiorari.
6. Later, PNCC and Radstock entered into a compromise agreeement whereby PNCC shall pay a
reduced amount of P 6.185 billion instead of the total amount of the debt, which as of 2006 has
ballooned to P17 billion. COA found the terms of the compromise as fair and above board. The
CA also approved it.
7. Strategic Alliance Development Corporation (STRADEC) moved for reconsideration. STRADEC
alleged that it has a claim against PNCC as a bidder of the National Governments shares,
receivables, securities and interests in PNCC.
ISSUE: Does the PNCC have the power to enter into the compromise agreement? NO

PNCC may not compromise the obligation. Under the Revised Administrative Code (RAC),
compromise of claims from a government agency exceeding P100,000 must be submitted to
Congress. The Administrative Code applies to PNCC because it is a government agency. It is a
government agency because PNCC is a GOCC. As provided in Sec. 2 on the Introductory
Provisions of the RAC, agency of the government refers to any of the various unit of the
government, including a...GOCC....

The dissenters position that PNCC has the power to compromise because it was incorporated
under the Corporation Code and is therefore an autonomous entity and is just like any other
private corporation is wrong. PNCC is not just like any other private corporation because it is
indisputably a GOCC. Neither is PNCC an autonomous entity because it is under the DTI, over
which the President exercises control.

The government nominees in the board are public officers subject to the Anti-graft and
corrupt practices act, and are accountable to the Government and the Filipino People

90.3% of the PNCC is owned by the government, to call it an autonomous entity which
can enter into compromises and transfer ownership of all its assets to a private third party
without the approval required in the Administrative code is to invite plunder of all such
government owned corporations

Furthermore, the dissenters assertion that PNCC is an autonomous entity is inconsistent with its
position that Sec. 36(2) of the Government Auditing Code is the governing law determining
PNCCs power to compromise.
o

The same provision states that it applies to governing bodies of GOCCs. The phrase
GOCC refers to both those created by special charter as well as those incorporated under
the Corporation Code.

As held in Feliciano v COA, the COAs jurisdiction extends not only to government
agencies or instrumentalities but also to GOCCs with original charters and other GOCCs
without original charters (i.e., those created under the Corporation Code but are owned
and controlled by the government).

Thus, PNCC is a GOCC. As such, it is a government agency to which the provisions of RAC
regarding compromises apply. Therefore, it has no power to compromise the Marubeni loan.

Only the Congress can do so. Since the compromise agreement was not approved by Congress, it
is void.

*there were other issues discussed

The toll fees of the north and south Luzon expressways are public funds. (PNCC was
granted a 30-year franchise to construct, operate and maintain the toll facilities). The
government owns the assets and facilities hence the government also owns the toll fees
and income derived from these facilities. And since it is public fund, the congress must
enact a law first to enable the toll fees to be used as payment for the compromise money.
Without the appropriation law, PNCC cannot pay Radstock, otherwise they may be liable
for malversation of public funds.

Radstock is a private corporation incorporated in the British Virgin Islands and is not
qualified to own land in the Philippines. Transfer of properties under the compromise
agreement will not become effective.

PNCC properties are government properties; public bidding is required for their disposal.
Hence, the PNCC cannot just dispose parcels of land by way of dacion en pago in favor
of Radstock.

PNCC must follow rules on preference of credit. Transfer of properties cannot prejudice
the creditors of the corporation (including the government).

Petition granted under GR no 180428. The board resolution admitting liability is void ab initio for
causing undue injury to the government. The compromise agreement is inexistent and void ab
initio for being contrary to the Constitution. Stradec is declared to have no legal standing to sue,
its interest is dependent on the outcome of a particular civil case which has already been decided.