STRATEGIC ALLIANCE DEV’T CORP1. V RADSTOCK SECURITIES, LTD.

, ET AL (2009)
The Philippine National Construction Corp. (PNCC) (previously Construction Dev’t Corp. Of the
Philippines or CDCP) was incorporated under the Corporation Code.

In 1978 and 1981, Basay Mining Corp. (later CDCP Mining Corp.), an affiliate of PNCC, ,
obtained loans from Marubeni Corp wherein PNCC, without a board resolution authorizing the
same, obliged to pay solidarily with Basay. For 20 years, PNCC consistently refused to admit
liability for the Marubeni loans. However, in October 2010, PNCC passed a board resolution
recognizing a P 10.7 billion liability to Marubeni Corp. 3 months later, Marubeni assigned its
credit to Radstock for only US$ 2 million (or less than P 100 million, in stark contrast to the
P10.7 billion admitted receivable from PNCC).

Radstock immediately started actions for the collection of the amount. TC issued a writ of
preliminary attachment against PNCC and garnished the latter’s bank accounts and real
properties. It denied PNCC’s MTD. CA also denied PNCC’s peition for certiorari.

Later, PNCC and Radstock entered into a compromise agreeement whereby PNCC shall pay a
reduced amount of P 6.185 billion instead of the total amount of the debt, which as of 2006
has ballooned to P17 billion. COA found the terms of the compromise as “fair and above
board.” The CA also approved it.

In the SC, the bone of contention is the PNCC Board’s power to compromise the obligation. To
resolve that question, it must first be determined if PNCC is a GOCC or an “autonomous entity”
that is “jsut like any private corporation.”

RATIO: PNCC may not compromise the obligation. Under the Revised Administrative Code2
(RAC), compromise of claims from a “government agency” exceeding P100,000 must be
submitted ro Congress. The Administrative Code applies to PNCC because it is a government
agency. It is a government agency because PNCC is a GOCC. As provided in Sec. 2 on the
Introductory Provisions of the RAC, “agency of the government” refers to “any of the various
unit of the government, including a...GOCC....”

The dissenters’position that PNCC has the power to compromise becase it was incorporated
under the Corporation Code and is therefore an “autonomous entity” and is “just like any other
private coporation” is wrong. PNCC is not “jsut like any other private corporation”
because it is idisputably a GOCC. Neither is PNCC an “autonomous entity” because
it is under the DTI, over which the President exercises control.

Furthermore, the dissenter’s assertion that PNCC is an autonomous entity is inconsistent with
its position that Sec. 36(2) of the Government Auditing Code is the governing law determining
PNCC’s power to compromise. The same provision states that it applies to governing
bodies of GOCCs. The phrase GOCC refers to both those created by special charter
as well as those incorporated under the Corporation Code. As held in Felciano v COA,
the COA’s jurisdiction extends not only to government agencies or instrumentalities but also to
GOCCs with original charters and other GOCC’s without original charters (i.e., those created
under the Corporation Code but are owned and controlled by the government).

Thus, PNCC is a GOCC. As such, it is a government agency to which the provisions of RAC
regarding compromises apply. Therefore, it has no power to compromise the Marubeni loan.
Only the Congress can do so. Since the compromise agreement was not approved by
Congress, it is void.

1
Who is STRADEC? It’s one of the parties who tried to intervene. It filed an MR when the CA approved the compromise,
alleging that it has a claim against PNCC as a bidder of the National Government’s shares, receivables, securities and
interests in PNCC.
2
Sec. 20(1) Chap. IV, Subtitle B, Title 1, Book V of the Administrative Code of 1987: If the liability exceeeds P100,000, any
compromise of the same must be submitted to Congress.