Strategic Alliance Development Corp. vs. Radstock Securities Limited

G.R.
Number 607 SCRA 413, 2009
Date of December 4, 2009

Promulgation
Petitioner STRATEGIC ALLIANCE DEVELOPMENT CORPORATION
Respondent RADSTOCK SECURITIES LIMITED and PHILIPPINE NATIONAL

CONSTRUCTION CORPORATION
Ponente CARPIO
Facts  Construction Development Corporation of the Philippines (CDCP) was

incorporated in 1966.
 It was granted a franchise to construct, operate and maintain toll facilities in
the North and South Luzon Tollways and Metro Manila Expressway.
 CDCP Mining Corporation (CDCP Mining), an affiliate of CDCP, obtained
loans from Marubeni Corporation of Japan (Marubeni).
 A CDCP official issued letters of guarantee for the loans although there was no
CDCP Board Resolution authorizing the issuance of such letters of guarantee.
 CDCP Mining secured the Marubeni loans when CDCP and CDCP Mining
were still privately owned and managed.
 In 1983, CDCP’s name was changed to Philippine National Construction
Corporation (PNCC) in order to reflect that the Government already owned
90.3% of PNCC and only 9.70% is under private ownership.
 Meanwhile, the Marubeni loans to CDCP Mining remained unpaid.
 On 20 October 2000 and 22 November 2000, the PNCC Board of Directors
(PNCC Board) passed Board Resolutions admitting PNCC’s liability to
Marubeni.
 Previously, for two decades the PNCC Board consistently refused to admit any
liability for the Marubeni loans.
 In January 2001, Marubeni assigned its entire credit to Radstock Securities
Limited (Radstock), a foreign corporation.
 Radstock immediately sent a notice and demand letter to PNCC.
 PNCC and Radstock entered into a Compromise Agreement.
 Under this agreement, PNCC shall payRadstock the reduced amount of
P6,185,000,000.00 in full settlement of PNCC’s guarantee of CDCP Mining’s
debt allegedly totaling P17,040,843,968.00 (judgment debt asof 31 July 2006).
 To satisfy its reduced obligation, PNCC undertakes to (1) "assign to a third
party assignee to be designated by Radstock all its rights and interests" to the
listed real properties of PNCC; (2) issue to Radstock or its assignee common
shares of the capital stock of PNCC issued at par value which shall comprise
20% of the outstanding capital stock of PNCC; and (3) assign to Radstock or
its assignee 50% of PNCC’s 6% share, for the next 27 years, in the gross toll
revenues of the Manila North Tollways Corporation.
 Strategic Alliance Development Corporation (STRADEC) moved for
reconsideration. STRADEC alleged that it has a claim against PNCC as a
bidder of the National Government’s shares, receivables, securities and
interests in PNCC.
Issue/s Whether or not the Compromise Agreement between PNCC and Radstock is valid
in relation to the Constitution, existing laws, and public policy.
Ruling  Radstock is a private corporation incorporated in the British Virgin Islands.

 Its office address is at Suite 14021Duddell Street, Central Hongkong.
 As a foreign corporation, with unknown owners whose nationalities are also
unknown, Radstock is not qualified to own land in the Philippines pursuant to
Section 7, in relation to Section3, Article XII of the Constitution.
 Consequently, Radstock is also disqualified to own the rights to ownership of
lands in the Philippines. Contrary to the OGCC’s claim, Radstock cannot own
the rights to ownership of any land in the Philippines because Radstock cannot
lawfully own the land itself.
 Otherwise, there will be a blatant circumvention of the Constitution, which
prohibits a foreign private corporation from owning land in the Philippines. In
addition, Radstock cannot transfer the rights to ownership of land in the
Philippines if it cannot own the land itself.
 It is basic that an assignor or seller cannot assign or sell something he does not
own at the time the ownership, or the rights to the ownership, are to be
transferred to the assignee or buyer.
 The Corporation Code defines a sale or disposition of substantially all assets

and property of a corporation as one by which the corporation "would be
rendered incapable of continuing the business or accomplishing the purpose
for which it was incorporated" - any sale or disposition short of this will not
need stockholder ratification, and may be pursued by the majority vote of the
Board of Directors.

Strategic Alliance Development Corp. vs. Radstock Securities Limited

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Strategic Alliance Development Corp. vs. Radstock Securities Limited

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G.R.

Number 607 SCRA 413, 2009

Date of December 4, 2009

Petitioner STRATEGIC ALLIANCE DEVELOPMENT CORPORATION

Respondent RADSTOCK SECURITIES LIMITED and PHILIPPINE NATIONAL

Facts  Construction Development Corporation of the Philippines (CDCP) was

Ruling  Radstock is a private corporation incorporated in the British Virgin Islands.

 The Corporation Code defines a sale or disposition of substantially all assets

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