Strategic Alliance vs. Radstock Securities.pdf

Strategic Alliance vs. Radstock Securities

!• 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, an affiliate of CDCP, obtained loans from Marubeni Corporation of Japan. 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.
 


• Later on, 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. 
 


• 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.
 


• Later, 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 pay Radstock the reduced amount of P6,185,000,000.00 from P17,040,843,968.00

! 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; 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
 Whether or not the Compromise Agreement between PNCC (Board?) and Radstock is valid
 


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• NO • Radstock is a private corporation incorporated in the British Virgin Islands. As a foreign corporation, with unknown owners whose nationalities are also unknown, Radstock is not qualified to own land in the Philippines. • Radstock is also disqualified to own the rights to ownership of lands and transfer rights to ownership of lands in the Phils.

!DOCTRINE:

• In this jurisdiction, the members of the board of directors have a three- fold duty: duty of obedience, duty of diligence, and duty of loyalty. • Accordingly, the members of the board of directors • (1) shall direct the affairs of the corporation only in accordance with the purposes for which it was organized;

• (2) shall not willfully and knowingly vote for or assent to patently unlawful acts of the corporation or act in bad faith or with gross negligence in directing the affairs of the corporation; and •(3) shall not acquire any personal or pecuniary interest in conflict with their duty as such directors or trustees.

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