G.R. No. 172222 - Africa vs. Sandiganbayan

In 1972, following instructions from the Marcos government, Eastern Extension Australasia and China Telegraph Company, Ltd. (Eastern Extension), a subsidiary of foreign-owned Cable & Wireless, Ltd., was directed to reorganize its Philippine telecommunications business.
Eastern Extension, in response, negotiated with Philippine Overseas Telecoms Corporation, controlled by Manuel Nieto, Jr. and represented by Atty. Jose Africa, for the formation of Eastern Telecommunications Philippines, Inc. (ETPI).
The resulting corporate structure allocated 60% of ETPI’s capital stock to a group later referred to as the BAN group (consisting of Roberto Benedicto, Atty. Africa, and Nieto) and retained 40% with Cable & Wireless, which was responsible for operations under a management contract.

ETPI generated substantial dividends for the BAN group, which later distributed its shares to three separate corporations: Aerocom Investors, Universal Molasses, and Polygon Investors and Managers.
Following the fall of the Marcos government on March 14, 1986, the Presidential Commission on Good Government (PCGG) sequestered the ETPI shares belonging to the BAN group and its related entities, relatives, and associates on a prima facie basis of ill-gotten wealth.
On July 22, 1987, PCGG initiated a case with the Sandiganbayan (Civil Case 009) to recover the sequestered shares.

Petitioner Victor Africa, representing the interests of fellow registered stockholders, filed a motion with the Sandiganbayan calling for the holding of a stockholders’ meeting to resolve the dual Board of Directors conflict—one elected in 1991 (influenced by the PCGG’s vote of sequestered shares) and another subsequently elected by registered stockholders.
On November 13, 1992, the Sandiganbayan granted Africa’s motion ordering a meeting to elect a new board, with specified PCGG votes limited to certain shares.
The Court, however, temporarily enjoined the meeting on November 26, 1992, pending further judicial determination.

Complying with Executive Order 109 and Republic Act 7925, on December 13, 1996, the PCGG obtained approval to hold a special stockholders’ meeting to increase ETPI’s authorized capital stock.

During the meeting held on March 17, 1997, the PCGG voted the sequestered shares to approve the capital stock increase.

Victor Africa contested the validity of PCGG’s vote in the stockholders’ meeting before the Court in G.R. 147214.
In G.R. 172222, further controversy arose when Aerocom Investors, on January 8, 2001, notified ETPI of its intent to sell its Class A/B shares to A.G.N. Philippines, Inc. (AGNP), leading later to the transfer of shares and subsequent registration issues in ETPI’s Stock and Transfer Book.
Africa filed motions and petitions contesting various actions, including the registration of Aerocom’s share transfer and the authority to call a new stockholders’ meeting for electing a new board due to alleged irregularities in voting with sequestered shares.

The Court in prior cases (G.R. 107789 and G.R. 147214) established a two-tiered test requiring:

Prima facie evidence that shares are ill-gotten.
Imminent danger of dissipation of assets to justify PCGG’s intervention in stockholders’ meetings.

The Sandiganbayan and subsequent actions of the PCGG-dominated Board of Directors revolved around whether PCGG’s vote during the 1991 and 1997 meetings was valid under the two-tiered test.
Various motions for reconsideration and petitions by Africa led to the consolidation of cases under G.R. Nos. 172222, 174493, and 184636 before the Supreme Court.

In G.R. 174493, whether the two-tiered test—that requires (a) a prima facie showing of ill-gotten shares and (b) an imminent danger of dissipation—applies to the PCGG’s right to vote the sequestered shares during the 1991 and 1997 ETPI stockholders’ meetings.

In G.R. 172222, whether the Sandiganbayan committed grave abuse of discretion by allowing the registration of Aerocom Investors’ share transfer to AGNP in the ETPI books despite Africa’s challenge regarding the PCGG-dominated board’s waiver of the right of first refusal.

In G.R. 184636, whether the Sandiganbayan had jurisdiction to order the holding of a stockholders’ meeting at the request of petitioner Victor Africa, considering:

ETPI’s articles of incorporation vest the authority to call such meetings in its Board of Directors.
Africa’s alleged lack of holding at least 20% of the corporation’s outstanding capital stock, as required by ETPI’s by-laws.