G.R. No. 217428 . March 25, 2019
LAND BANK OF THE PHILIPPINES, PETITIONER, V. OSCAR S. REYES, IN HIS CAPACITY AS PRESIDENT AND CHIEF EXECUTIVE OFFICER OF THE MANILA ELECTRIC COMPANY (MERALCO), SIMEON KEN R. FERRER, IN HIS CAPACITY AS CORPORATE SECRETARY OF MERALCO, OR THEIR SUCCESSORS-IN-INTEREST, AND MANILA ELECTRIC COMPANY, RESPONDENTS.

FACTS

Petitioner Land Bank of the Philippines (LBP) filed a petition to charge respondents with indirect contempt for allegedly failing to fully comply with the Supreme Court’s final and executory Decision dated December 14, 2011 in G.R. No. 188376 (LBP v. Suntay). In that prior case, the Court nullified the levy and auction sale of LBP’s 42,002,750 MERALCO shares, which were executed to satisfy a just compensation claim against the Agrarian Reform Fund (ARF). The Court ruled that just compensation payments must be sourced exclusively from the ARF and that LBP’s proprietary assets, acquired in its banking capacity, could not be levied for such purpose. The Court ordered the restoration of LBP’s shares and dividends.
Following the issuance of a Writ of Execution, MERALCO partially complied by restoring 38,635,950 shares and delivering corresponding cash and property dividends. However, MERALCO failed to restore the remaining 3,366,800 shares and certain dividends, contending these specific shares had been traded and transferred to third parties through the Philippine Depository & Trust Corporation (PDTC) system prior to the Court’s Decision, making immediate restoration impossible.

ISSUE

Whether respondents are guilty of indirect contempt for willfully disobeying the final and executory Decision in LBP v. Suntay by failing to restore all levied shares and dividends.

RULING

The Supreme Court DISMISSED the petition for indirect contempt. The legal logic centers on the element of willfulness required for a finding of contempt. Contempt of court is a willful disregard or disobedience of a lawful order; the act must be done willfully and for an illegitimate purpose. Good faith is a defense.
The Court found that respondents did not act willfully. MERALCO demonstrated it had taken concrete steps toward compliance by restoring the majority of the shares and dividends. Its inability to restore the specific 3,366,800 shares stemmed from the fact that these shares had been traded and transferred to innocent third parties through the PDTC system before the Court’s nullifying Decision was rendered. Under the Securities Regulation Code, such transfers are considered final. MERALCO’s actions were not a defiant refusal but a recognition of practical and legal impediments. Since petitioner failed to prove that respondents’ partial compliance was motivated by a willful intent to disobey the Court’s order, the essential element of willfulness was absent. The power to punish for contempt is exercised on a preservative, not vindictive, principle.