G.R. No. L-74910, L-75075, L-75094, L-76397, L-79459, L-79520. August 10, 1988.
ANDRES SORIANO III, et al., petitioners, vs. HON. MANUEL YUZON, etc., et al., respondents. EDUARDO COJUANGCO, JR., et al., petitioners, vs. SECURITIES AND EXCHANGE COMMISSION, et al., respondents. CLIFTON U. GANAY, petitioner, vs. PRESIDENTIAL COMMISSION ON GOOD GOVERNMENT, respondent. BOARD OF DIRECTORS OF SAN MIGUEL CORPORATION, et al., petitioners, vs. SECURITIES AND EXCHANGE COMMISSION, et al., respondents. EDUARDO COJUANGCO, JR., et al., petitioners, vs. HON. PEDRO N. LAGGUI, etc., et al., respondents. NEPTUNIA CORPORATION LTD., et al., petitioners, vs. PRESIDENTIAL COMMISSION ON GOOD GOVERNMENT, et al., respondents.

FACTS

These consolidated cases revolve around the sequestration by the Presidential Commission on Good Government (PCGG) of 33,133,266 San Miguel Corporation (SMC) shares, representing approximately 31% of its outstanding stock, registered in the names of fourteen corporations. These shares were subject to a voting trust agreement. On March 26, 1986, these apparent corporate owners sold the shares to Andres Soriano III under an “Agreement” stipulating installment payments and automatic reversion upon default. The PCGG sequestered the shares on April 7, 1986, alleging they constituted ill-gotten wealth of Eduardo Cojuangco, Jr., an associate of former President Ferdinand Marcos. After a brief lifting, sequestration was reimposed on May 19, 1986, following conflicting representations from SMC regarding the shares’ true ownership.
Subsequently, the PCGG directed SMC’s corporate secretary not to count the sequestered shares for quorum and voting at a May 27, 1986 stockholders’ meeting, which was recessed. For the reconvened meeting on June 4, 1986, the PCGG announced its intention to vote the shares and had qualifying shares issued to its nominees through the shares’ nominee, Anscor-Hagedorn Securities, Inc. The PCGG nominees were consequently elected to the SMC board. Meanwhile, Soriano suspended further payments on the purchase price, leading the seller corporations to rescind the sale agreement. Multiple petitions were filed challenging the PCGG’s actions and the jurisdiction of various bodies over the dispute.

ISSUE

The core legal issue is whether the PCGG acted within its authority in sequestering the SMC shares and, more specifically, in voting those shares to elect its own nominees to the SMC Board of Directors.

RULING

The Supreme Court ruled that the PCGG’s act of voting the sequestered shares to elect its nominees was a grave abuse of discretion and beyond its legal authority. The Court’s legal logic is anchored on the distinction between the power to sequester and the power to exercise ownership rights. Sequestration is merely a conservatory measure to preserve assets alleged to be ill-gotten. It does not confer upon the PCGG the rights of an owner, such as the right to vote the shares. By voting the shares to install its own representatives on the corporate board, the PCGG effectively assumed management and control of SMC. This constitutes an exercise of dominion, which is a power reserved to the actual owner, to be determined only after a judicial finding that the assets are indeed ill-gotten wealth. The Court emphasized that until such a judicial determination is made, the PCGG’s role is limited to preservation; it cannot use