MANILA ELECTRIC COMPANY, PETITIONER, VS. THE HONORABLE SANDIGANBAYAN, PHILIPPINE COMMISSION ON GOOD GOVERNMENT AND SINING MAKULAY, INC., RESPONDENTS.

The question presented in this petition for certiorari and
prohibition is whether the Sandiganbayan has jurisdiction over a private claim
demanded by petitioner against private respondent Sining Makulay, Inc., arising
from an alleged violation of a lease agreement duly entered into by the
parties. Respondent Sandiganbayan ruled
in the affirmative in a Resolution dated October 22, 1991 and it is this ruling
which petitioner now seeks to set aside.

Petitioner MERALCO is a domestic corporation engaged in the
distribution and sale of electrical power within its franchise areas. It likewise leases to various companies
specific spaces in its distribution poles for their lines and attachments
(Rollo, pp. 137-138).

Private respondent Sining Makulay, Inc. (SMI) is likewise a
domestic corporation which provides Community Antenna Television Service (CATV)
to its customers (Rollo, p. 26).

On January 26, 1979, MERALCO entered into an agreement with SMI
whereby the former agreed to lease to the latter specific spaces in its
distribution poles at a rental rate of P26.00 per pole for a period of one year
for its Community Antenna Television Service (CATV) (Rollo, pp. 26-­33).

Unknown to petitioner, respondent SMI was also using its
distribution poles not only for CATV but for cables providing computer data
channels as well to various banking institutions. This practice became
known to MERALCO (Rollo, p. 34).

Soon after the discovery of the above practice, petitioner
advised SMI, among others, that the use of distribution poles for data
transmission for certain clients and purposes other than for community antenna
television services was a violation of their Joint Pole Agreement.

In its reply, SMI’s president and PCGG Representative Manuel
Francisco Jr. denied having violated the Joint Pole Agreement because it
believed that data transmission was a CATV-related service (Rollo, p. 52).

On the other hand, petitioner insists that SMI’s use of the
cables for data transmission other than that for CATV exposed it to an
unwarranted risk. Thus, it served a
notice of termination of the agreement to SMI and at the same time demanded the
removal of private respondent’s attachments to the distribution poles within
six (6) months from receipt thereof (Rollo, p. 53).

In the interim, the government filed Civil Case No. 0034 entitled
“Republic of the Philippines vs. Roberto Benedicto, et. al.”, before
the Sandiganbayan for the recovery of alleged ill-gotten wealth amassed by the
defendants named therein. Neither
MERALCO nor SMI were party litigants in this civil case, but the latter was
placed under sequestration as one of the companies allegedly owned by
Benedicto.

In an “Urgent Motion for Preliminary Injunction” filed
in Civil Case No. 0034 pending before the Second Division of respondent
Sandiganbayan, SMI prayed that an order be issued requiring MERALCO to appear
before the court for a hearing thereon. In said motion, SMI prayed that petitioner be enjoined from withholding
the use of the distribution poles by SMI and thus prevent the irreparable
damage and prejudice to the movant.

During the hearing on the motion MERALCO asked and was granted
fifteen (15) days to file its formal opposition and comment to the said motion
(Rollo, p. 66). Thereafter, MERALCO
submitted its Comment alleging lack of jurisdiction of the Sandiganbayan over
petitioner and subject matter of the motion (Rollo, pp. 68-75). As aforesaid, respondent Sandiganbayan ruled
otherwise.

From these antecedents, MERALCO now comes before this Court
reiterating its claim that:

I

“THE SANDIGANBAYAN DID NOT ACQUIRE JURISDICTION OVER THE
PETITIONER.

II

“THE SANDIGANBAYAN HAS NO JURISDICTION OVER THE SUBJECT MATTER
OF THE MOTION” (Rollo, pp. 9; 13).

MERALCO, not being a party litigant before the Sandiganbayan, it
would initially appear that respondent court did commit grave abuse of
discretion when it assumed jurisdiction over petitioner. A closer look, however, reveals otherwise.

It is not disputed that respondent SMI was sequestered by the
PCGG. Under section 2 of the
President’s Executive Order No. 14 issued on May 7, 1986, all cases of the
Commission regarding “the x x x Assets, and Properties Illegally Acquired
or Misappropriated by Former President Ferdinand Marcos, Mrs. Imelda Romualdez
Marcos, their Close Relatives, Subordinates, Business Associates, Dummies,
Agents, or Nominees,” whether civil or criminal, are lodged within the
“exclusive and original jurisdiction of the Sandiganbayan” and all
incidents arising from, or incidental to, or related to, such cases necessarily
fall likewise under the Sandiganbayan’s exclusive and original jurisdiction,
subject to review on certiorari exclusively by the Supreme Court (PCGG
v. Peña, 159 SCRA 556 [1988]).

Thus, respondent Sandiganbayan correctly held that:

“There can be no dispute whatsoever that MOVANT (Sining
Makulay, Inc.) is one of the sequestered assets listed in Annex A of the
complaint in this case. Legally and
technically, it is under custodia
legis as ruled in BASECO vs. PCGG, 150 SCRA 181, although under the
administration of the PCGG, which is mandated under Executive Order Nos. 1, 2
and 14, as amended, to sequester or provisionally take over, place or cause to
be placed under its control or possession any building or office wherein any
“ill-gotten wealth or properties” may be found x x x in order to
prevent their destruction, concealment or disappearance x x x. Thus, under Executive Order No. 2, it is
specifically prohibited that such assets and properties be transferred,
conveyed, encumbered or otherwise depleted or concealed, under pain of such
penalties as are prescribed by law. And, under Executive Order No. 14, as amended, exclusive and original
jurisdiction over cases filed and prosecuted by the PCGG under Executive Orders
Nos. 1 and 2 are vested in this Court.

“II. Considering, therefore, that MOVANT is a
sequestered corporation and that its main asset or line of business is the
continued existence and maintenance of the franchise x x x and which, for
alleged unjustified and unmeritorious reasons, the latter (MERALCO) seeks to
terminate, then the end result will be that MOVANT may cease to operate and its
assets, properties, equipment and accounts deteriorate and eventually dissipate
and disappear. Such a situation cannot
be allowed to happen, until and unless there will be a final adjudication and
disposition of the issue as to whether these assets, etc. are ill-gotten wealth
or not, since it may result in damage or prejudice being caused to the
plaintiff Republic of the Philippines or any of the defendants therein.”
(Rollo, pp. 21-23)

While the contractual dispute between the two companies may
appear to be of private concern, the same has necessarily fallen under the
jurisdiction of the Sandiganbayan by virtue of the sequestration of SMI. An action that MERALCO may choose to pursue
against SMI arising from the alleged breach of contract under the circumstances
would ultimately lead to remedies which must be pursued before respondent
Sandiganbayan, as an incident of Civil Case No. 0034.

After filing the instant petition, MERALCO received, a notice of
resolution rendered by respondent Sandiganbayan which granted the “Joint
Motion To Approve Compromise Agreement” in Civil Case No. 0034 entered
into between the Republic of the Philippines, represented by the PCGG, and the
defendant Roberto S. Benedicto.

In view of this development, petitioner MERALCO additionally
raised the following issue:

III

“WHETHER OR NOT THE COMPROMISE AGREEMENT IN CIVIL CASE NO.
0034 RENDERED AS MOOT AND ACADEMIC THE INSTANT PETITION/CASE.” (Rollo, p.
142)

MERALCO submits
the affirmative. Respondents argue
otherwise considering that in the execution of the compromise agreement,
respondent court retains jurisdiction and authority to grant the relief prayed
for by SMI in its motion for the issuance of a writ of preliminary injunction.

The Court disagrees with SMI’s argument. The said compromise agreement provides:

“COMPROMISE
AGREEMENT

“WHEREAS, this Compromise Agreement covers the remaining
claims and cases of the Philippine Government against Roberto S. Benedicto,
including his associates and nominees x x x;

“WHEREAS, specifically, these claims are the subject matter of
the following cases:

x x x

“3. Sandiganbayan Civil Case No. 34

x x x

“WHEREAS, sometime in December, 1986, the parties herein
entered into a temporary arrangement pendente
lite, covering the management and operations of Mr. Benedicto’s
media business, to wit: x x x, Sining
Makulay (CATV) x x x, for the purpose of maintaining the status quo of Mr.
Benedicto’s proprietary interest during the pendency of the sequestration
proceedings;

“WHEREAS, in March 1990 the cases of Mr. Benedicto in the
United States were settled thru a plea bargaining agreement approved by the New
York Court, and a “Settlement and Partial Release of Claims” approved
by the Los Angeles Court, California, U.S.A.;

“WHEREAS, on July 20 and 23, 1990 the Swiss cases, involving
Benedicto’s bank deposits were terminated with the withdrawal by Benedicto of
his opposition to and the appeals filed against the grant of international
legal cooperation as requested by the Philippine Authorities from Switzerland;
and on the part of the Republic of the Philippines, by a request to the Swiss
authorities to unfreeze all assets (deposits) with the Swiss Federal and
Cantonal authorities in order to comply with the Agreement;

“WHEREAS, following the termination of the United States and
Swiss cases, and also without admitting the merits of their respective claims
and counter-claims presently involved in uncertain, protracted, and expensive
litigation, the Republic of the Philippines, solely motivated by the desire for
immediate accomplishment of its recovery mission and Mr. Benedicto, being
interested to lead a peaceful and normal pursuit of his endeavors, the parties
have decided to withdraw and/or dismiss their mutual claims and counter-claims
under the cases pending in the Philippines, earlier referred to;

“NOW, THEREFORE, for and in consideration of the foregoing
premises, parties hereunto agree as they hereby agree to execute the following
reciprocal cessions and concessions:

x x x

“II. Lifting of
Sequestrations; Extension of Absolute Immunity and Recognition of the Freedom
to Travel:

“a) The government hereby lifts the
sequestration over the assets listed in Annex “C” hereof, the same
being within the capacity of Mr. Benedicto to acquire from the exercise of his
profession and conduct of business, x x x.” (Rollo, pp. 164-168,
underscoring supplied)

Annex “C” of the compromise agreement is titled
“FOR RELEASE FROM SEQUESTRATION”. Included in the list is all of Benedicto’s shareholdings, whether
personal or through nominees, in private respondent SMI (Rollo, p. 225).

Private respondent SMI admitted that it is one of the sequestered
companies released to and returned by the respondent PCGG to its rightful owner
under the approved compromise agreement (Rollo, p. 242).

In the questioned resolution of the respondent Sandiganbayan, one
of the premises upon which the court based its conclusion was the fact that the
movant was then a sequestered company, thus:

“II. Considering, therefore, that MOVANT (private
respondent SMI) is a sequestered corporation and that its main asset or line of
business is the continued existence and maintenance of the franchise which is
the subject of the Agreement dated January 26, 1979 entered into between it and
MERALCO, and which, for alleged
unjustified and unmeritorious reasons, the latter seeks to terminate, then the
end result will be that the MOVANT may cease to operate and its assets,
properties, equipment and accounts deteriorate and eventually dissipate and
disappear. Such a situation cannot be
allowed to happen, until and unless there will be a final adjudication and
disposition of the issue as to whether these assets, etc. are ill-gotten wealth
or not, since it may result in damage or prejudice being caused to the
plaintiff Republic of the Philippines or any of the defendants therein.

“III. It is precisely to
cover situations such as the one involved herein that the Supreme Court had
ruled in PCCG vs. Peña, supra, thus:

‘All cases of the Commission x x x, and all incidents arising from,
incidental to, or related to (them), such cases necessarily fall likewise under
the Sandiganbayan’s exclusive and original jurisdiction subject to review on certiorari
exclusively by the Supreme Court.’

x x x

“Since the instant incident arose from, is incidental to, or
related to cases which the PCGG has filed with this Court under its exclusive
and original jurisdiction and constitute matters rela­tive to the sequestration
of defendant Roberto Benedicto’s sequestered assets and properties, then it
surely follows that this incident is within the competency of this Court to
pass upon.” (Rollo, pp. 23-24).

The situation has now changed
with the settlement of the Civil Case No. 0034. SMI is at present no longer under sequestration and is in private
hands. Thus, whatever results in the
contractual dispute between MERALCO and SMI would not cause any prejudice to
the government nor to any of the defendants in said case.

SMI argues that the Sandiganbayan continues to have jurisdiction
over Civil Case No. 0034, including its related incidents, even after the
approval of the compromise agreement for purposes of execution and enforcement
of the terms and conditions of the settlement.

The argument is beside the point. It is beyond question that under the compromise agreement, SMI is
released from sequestration and its private
ownership by Roberto S. Benedicto is not challenged. Article 2037 of the New Civil Code provides that “[a]
compromise [agreement] has upon the parties the effect and authority of res judicata.” In this
regard, the assailed resolution of respondent Sandiganbayan is deemed to have
been superseded and abandoned by the said compromise agreement, the validity of
which has been upheld by this Court in Republic v. Sandiganbayan, et al., (GR
No. 108292, September 10, 1993).

WHEREFORE, the petition is DISMISSED for being moot and
academic. The questioned resolution
dated October 22, 1991 of respondent Sandiganbayan is SET ASIDE for having
become functus oficio.

SO ORDERED.

Feliciano, Padilla, Davide, Jr., Romero, Bellosillo, Melo,
Puno, Vitug, and Kapunan, JJ., concur.

Narvasa, C.J., Cruz, and
Regalado, JJ., on leave.

Quiason, J., no part.