FIRST DIVISION

G.R. No. 156605, August 28, 2007

EDWARD T. MARCELO, MARCELO FIBERGLASS CORP.,
PHIL-ASIA AGRO INDUSTRIES CORP., PHILIPPINE SPECIAL
SERVICES CORP., PROVIDENT INTERNATIONAL RESOURCES
CORP., MARCELO CHEMICAL & PIGMENT CORP., FARMERS
FERTILIZER CORP., INSULAR RUBBER CO., INC., HYDRONICS
CORPORATION OF THE PHILIPPINES, MARCELO RUBBER &
LATEX PRODUCTS, INC., POLARIS MARKETING CORP., H.
MARCELO & CO., INC., MARCELO STEEL CORP., PHILIPPINE
CASINO OPERATORS CORP., and MARIA CRISTINA FERTILIZER
CORP., Petitioners,
vs.
SANDIGANBAYAN and THE PRESIDENTIAL COMMISSION ON
GOOD GOVERNMENT, Respondents.
PONENTE: GARCIA, J.

Facts:
On 16 February 1987, the PCGG sequestered MFCs properties.
On 27 July 1987, the PCGG filed a Complaint [CC:21] with
Sandiganbayan against Marcelo, Fabian Ver and Ferdinand
and Imelda Marcos for recovery of ill-gotten alleging in the
main that Marcelo and Ver, taking advantage of their
relationship with Marcoses, obtained from the Republic, thru
Philippine Navy, a favored contract for the construction of
high-speed fiberglass boats at the cost of millions of pesos.

On 17 May 1989, Marcelo filed his Answer to the 2nd Amended

Complaint. The Republic filed its Reply on 30 June 1989. On 5
June 1991, the Republic served a Request for Admission on
Marcelo. On 15 August 1991, Marcelo filed his Response to
PCGGs Request for Admission, included is his counter-request
for admission. On 30 October 1991, the Republic was granted
leave to file a 3rd Amended Complaint impleading additional
petitioner corps. alleged as beneficially owned and dummies
of individual defendants. These corporations filed their
Answers.
The Republic filed its Pre-Trial Brief and later Marcelo filed his
Pre-Trial Brief With Written Interrogatories, First Set and
Request for Admission (to admit the truth of the matters
stated in his 15 August 1991 reply to the Republics 5 June
1991 request for admission). On 15 October 1996, MFC filed
its Pre-Trial Brief With Written Interrogatories, First Set and
Request for Admission; the other petitioner corps [defendants]
likewise filed their Pre-Trial Briefs with Written Interrogatories
First Set. The Republic filed an answer to that of Marcelos.

On 15 August 1997, petitioners moved for summary judgment

mainly on the ground that: (1) lack of genuine issue; (2) The
Republic failed to respond to Marcelos Pre-Trial Briefs request
for admission of truth in his 15 August 1991 Response. Thus,
they are deemed admitted [Sec.2, Rule 26]; and (3) The
Republic refused to answer the written interrogatories and
reply to the request for admission of facts stated in MFCs
Pre-Trial Brief. The Republic Opposed. On 27 August 2001, the
Sandiganbayan denied Marcelos and MFCs motions. They
moved to reconsider but was denied on 19 November 1992.
Hence, the present petition for certiorari.

Issue:
Whether or not the failure of Republic to answer petitioners
requests for admission constitutes implied admission of
petitioners defenses on the part of the Republic; hence, there
will be no more genuine factual issues to be tried by
Sandiganbayan, and that summary judgment will lie. [YES]

Ruling:

Petition is Granted. Sandiganbayan Resolution is

Reversed.

Before discussing the merits of the petition, the Court

deems it appropos to delve into Criminal Case No.
20224 which involved the subject PN-MFC boat supply
contract.

In a Commission on Audit (COA) Report dated March 12,

1992 (COA Report), the COA alleged that the PN disbursed for
the boat supply contract P337,700,000.00. The disbursement,
so the report claims, was contrary to pertinent laws and COA
rules governing the disbursement of public funds, such as:

(a) There was no certificate of availability of funds;

(b) No performance bond was posted, as required;

(c) No demand for delivery was made despite failure to

deliver after payment of 80% of the contract price;

(d) Default provision was not invoked or enforced against

MFC; and,

(e) Payments were not made in accordance with the

terms of the contract.

On the basis of the COA Report,

an Information, docketed as Criminal Case No. 20224, was
filed against Marcelo, then Rear Admiral Simeon Alejandro and
three other PN officials for violation of Sec. 3(e) of the
Anti-Graft Law (R.A. No. 3019, as amended) penalizing as
corrupt practice the act of a public officer and/or the
conspiring private individual , inter alia, of causing injury to
the government by giving unwarranted benefits to a private
party through evident bad faith, manifest partiality or gross
inexcusable negligence. As alleged, the giving of
unwarranted benefits stems from the disbursement
of P337,437,000 to MFC in partial payment of undelivered 55
units of high speed boats.

Following a review, however, on motion of Alejandro et

al., the Ombudsman approved an Order[27] of April 14, 1999,
for the withdrawal of the Information, on the strength
of, inter alia, the ensuing findings of the Special Investigator
embodied in the same Order:

Further, the failure to deliver the boats was for

reasons not attributable to MFC. First, in breach of
contractual stipulations, the PN incurred delay in making the
down payments until the foreign exchange crisis
supervened. Second, due to the dollar crisis, the Central
Bank (CB) refused to authorize the opening of (LCs) to
finance the importation of the boat components. The CB
finally authorized the opening of the LCs only two years after
the first request was made, and it was for restricted LCs.
Third, when the shipment of the 55 MTU diesel engines
arrived in the Philippinesbetween June and December 1986,
they were taken to the MFC manufacturing plant
in Malabon so that boat manufacture could be
commenced. However, before the manufacture could start,
the PCGG, on February 16, 1987, sequestered not only the
imported boat components but also all the properties of MFC
and padlocked its manufacturing plant. xxx..

The undisputed facts also show that the down

payments made by the PN were used for the importation of
boat engines, gearboxes and other components needed for
the construction of the boats, and that the PN could not
lawfully demand the delivery of the boats from MFC since the
latters obligation to deliver the boats had not yet arisen.

xxx xxx xxx

Moreover, a corporation is a distinct juridical entity . In

this case, the party that entered into the Contract with PN for
the construction of speed boats was MFC, which exclusively
assumed the obligation to put up a performance bond; it was
to MFC that down payments were made by PN; and it was
MFC which, was solely obligated to build the boats and
deliver them to PN. Under the circumstances, if MFC
committed any culpable act, it alone bears the
responsibility therefor.
 xxx xxx xxx

As discussed earlier, there is no injury or prejudice to

the government. The down payments made by the PN to
MFC were used to import MTU engines and other boat parts,
which were seized by the PCGG . Also, the facts show that no
party received any unwarranted benefits, advantage or
preference under the contract. It must be emphasized that
none of the down payments or money subject of this case
inured to the benefit of MFC or Marcelo .

As no injury or prejudice was caused to the

Government and no party received any unwarranted benefit
under the Contract, it is baseless to say that undue injury
was caused or unwarranted benefits given through manifest
partiality, evident bad faith or gross inexcusable negligence.
xxx the elements of the crime charged are not present in this
case. [28] (Underscoring and words in brackets added)

The main issue tendered in this joint petition turns on

whether or not respondent Sandiganbayan committed grave
abuse of discretion amounting to lack or excess of
jurisdiction in denying the motion for summary judgment of
Marcelo, MFC and the other petitioner corporations. According
to the petitioners, the pleadings of the parties, and the
admissions and documentary evidence of the [Republic] show
that there is no genuine issue as to any material fact and that
[they] are entitled to a [summary] judgment as a matter of
law.[29] They thus urgently urge the reversal of the assailed
Resolutions and the consequent dismissal of Civil Case No. 21.

The petition is impressed with merit.

It needs to stress at the outset that Civil Case No. 21 is

one of several suits involving ill-gotten or unexplained wealth
that the Republic, through the PCGG, has initiated. The Court
has resolved several similar cases, establishing in the process
doctrinal teachings. As it were, several sub-issues in the
present petition may have already been addressed, if not
rendered moot and academic, in those cases. Accordingly, this
petition shall be resolved taking into stock and in the light of
the relevant holdings and doctrines in those cases, foremost of
which is Baseco v. PCGG.[30] There, the Court made it
abundantly clear that the right and duty of the Government to
recover ill-gotten wealth are undisputed. The Court added the
caveat, however, that plain and valid that right may be, a
balance must still be sought to the end that proper respect be
accorded and adequate protection assured, the fundamental
rights of private property and free enterprise. Among the
things we stressed in BASECO is the need, in ill-gotten wealth
cases, to give due regard to the basic rights of the parties,
with particular emphasis on the right to property and the
requirement of evidentiary substantiation.
It is the petitioners main posture, positing the propriety
of summary judgment in Civil Case No. 21, that there is no
more genuine factual issues to be tried by the Sandiganbayan,
the Republic, for failing to answer the petitioners requests for
admission, having already admitted certain vital facts in this
case. Excepting, the Republic counters that the said requests
for admission were sufficiently denied by its allegations in the
complaint.

In denying the motions for summary judgment, the

Sandiganbayan wrote:

The answers of [the Republic] to the written

interrogatories propounded by Marcelo indubitably show the
existence of genuine factual issues between the parties,
such as, whether or not Marcelo President of [MFC] was the
real beneficiary of the amounts collected from the [Republic]
by [MFC] through the alleged favored contract mentioned in
the complaint; and whether or not [MFC] was used as
conduit by Marcelo allegedly to amass ill-gotten wealth.

It must be stressed that the crucial factual question

that serves as underpinning of the alleged causes of action
invoked by the [Republic] in this case is whether or not the
subject contract, including the amendments, was a favored
contract, unlawfully obtained by the defendants in
conspiracy with one another. Corollary thereto, whether or
not the other [petitioner] corporations allegedly owned or
controlled beneficially by the individual defendants were the
fruits of the alleged ill-gotten wealth obtained through the
said contract or whether individual defendants Marcelo
and Ver acted as dummies or agents of former President
Marcos in the defendant corporations.
xxx xxx xxx

Incidentally, the instant motions for summary

judgment were filed before the [anti-graft] Court could issue
an order under Section 1, Rule 9[31] of the Rules of Court
relative to the written interrogatories. Moreover, the factual
details alleged and conclusions of fact and law adduced in
the said pleadings largely rely on the terms and conditions of
the [favored] contract and its amendments which are
precisely being questioned to be a favored contract. From
the allegations of the defendants, it is apparent that the
[Republic] extended enormous sums of money . Even
assuming that the factual background alleged in the Answer
of Marcelo which was reiterated in the Answer of [MFC], to
be true or to have been established or admitted, still, a
genuine factual issue remains to be tried and that is whether
or not the subject contract was a favored contract as it
appears from the record that the implementation of its terms,
as narrated by the defendants, had resulted in the
expenditure of hundreds of millions of pesos on the part of
the [Republic] without a single delivery having been made or
required to be made . The factual issue of whether or not the
subject contract is a favored one, which we take to mean as
disadvantageous to the government, is not settled by the
allegation that the contract was implemented in the midst of
a foreign exchange crisis and that the government failed to
comply with the staggered payments which the government
was required to tender before any delivery could be made by
the [MFC] under the terms of the contract. For the defendant
to invoke the terms of the contract to excuse the
non-delivery of the subject matter thereof simply begs the
questions because the very stipulations of the contract are in
issue in this case.[32] (Words in brackets added)
 We examine the records and found that summary
judgment is in order. Under Section 3, Rule 35 of the Rules of
Court, summary judgment may be allowed where, save for the
amount of damages, there is no genuine issue as to any
material fact and the moving party is entitled to a judgment as
a matter of law. Summary or accelerated judgment is a
procedural technique aimed at weeding out sham claims or
defenses at an early stage of the litigation, thereby avoiding
the expense of time involved in a trial. Even if the pleadings
appear, on their face, to raise issues, summary judgment may
still ensue as a matter of law if the affidavits, depositions and
admissions show that such issues are not genuine.[33] The
presence or absence of a genuine issue as to any material fact
determines, at bottom, the propriety of summary judgment. A
genuine issue, as opposed to fictitious or contrived one, is an
issue of fact that requires the presentation of evidence. To the
moving party rests the onus of demonstrating the absence of
any genuine issue of fact, or that the issue posed in the
complaint is patently unsubstantial so as not to constitute a
genuine issue for trial.[34] In Estrada v. Consolacion,[35] the
Court stated that when the moving party is a defending party,
his pleadings, depositions or affidavits must show that his
defenses or denials are sufficient to defeat the claimants claim.
The affidavits or depositions shall show that there is no
defense to the cause of action or the cause of action has no
merits, as the case may be. In fine, in proceedings for
summary judgment, the burden of proof is upon the plaintiff to
prove the cause of action and to show that the defense is
interposed solely for the purpose of delay. After the plaintiff
discharges its burden, the defendants has the burden to show
facts sufficient to entitle him to defend.

With the view we take of the case, there is really no more

genuine issues to be tried in this case, the Republic having
failed or refused to answer the requests for admission and the
written interrogatories of the petitioners. As it were, the
Republic only answered petitioner Marcelos request for
admission or interrogatories. But then the Republics answer
serves only to highlight and confirm the fact that petitioner
Marcelos participation in all the transactions subject of this
case is as President of MFC, [36] thus:

1.0 Regarding the Specific Averments of Illegal Acts in

paragraph 11, sub-paragraph (d), of the Third Amended
Complaint which reads:
(d) illegally securing a loan
with a foreign bank with the
Guarantee of the Government, upon
the personal behest of defendant
Ferdinand E. Marcos, which loan
remains unpaid to date

1.1. Was the alleged loan for defendant Marcelo personally?

ANSWER: The loan was for the [MFC] of which

Marcelo is the President, who stands to benefit from
the proceeds of the loan.

1.2. In the affirmative, what documents indicate that the

loan was for defendant . Marcelo personally?

ANSWER: The loan was negotiated by Marcelo in

his capacity as President of [MFC] with the Swiss
Bank Corporation. The Monetary Board [in] August 12,
1983 approved the loan.

2.0 Regarding the Specific Averments of Illegal Acts in

paragraph 11, sub-paragraph (c), of the Third Amended
Complaint which reads:
(c) unlawfully received and
collected from plaintiff hundreds of
millions of pesos by way of advances
representing 79% of the contract
price for the construction of the
aforementioned high-speed
fiberglass boats, without, to date,
delivering a single boat to the
prejudice and damage of Plaintiff
and the Filipino people
2.1 Was the amount allegedly received and
collected from plaintiff for the personal
account of defendant Edward T. Marcelo?

ANSWER: The amounts collected from plaintiff

were for the account of [MFC] but only as conduit. The
real beneficiary of the amount is Marcelo. The
Contract to Buildand its Amended Contractprovide
that payments should be by CONFIRMED
IRREVOCABLE, DIVISIBLE LETTER OF CREDIT
established in favor of the BUILDER. However,
payments were made directly to [MFC] as shown in
Land Bank application for Cashiers Check;

2.2 In the affirmative, what documents indicate

that the amount allegedly received and
collected went to the personal account of
defendant Edward T. Marcelo?

ANSWER: The defendant, as President of [MFC]

stands to benefit from the proceeds of the amount
collected. The Amended Article of
Incorporationshows that Marcelo is the President of
the Corporation, a wholly owned family corporation.

3.0 Regarding the Specific Averments of Illegal Acts in

paragraph 11, sub-paragraph (b), of the Third Amended
Complaint which reads:
(b) securing the approval of
direct payments on the
above-mentioned contracts, in
violation of the stipulation that
payment should be by confirmed,
irrevocable and divisible letter of
credit

3.1 Was the direct payment allegedly secured

for Marcelo personally?

ANSWER: The direct payment was secured by

defendant as President of [MFC] as shown in his letter
 dated November 4, 1982 requesting for release of the
first downpayment of P127,710.00.

3.2 In the affirmative, what documents indicate

that the direct payments allegedly
secured went to the personal account of
defendant Edward T. Marcelo?

ANSWER: The defendant, as President of [MFC]

stands to benefit from the proceeds of the direct
payments made by plaintiff.

4.0 Regarding the Specific Averments of Illegal Acts in

paragraph 11, sub-paragraph (a), of the Third Amended
Complaint which reads:
(a) unlawfully obtaining a
favored contract with the [PN] for
the construction of high-speed
fiberglass boats at the cost of
hundreds of millions of pesos

4.1 Is Marcelo personally a party to the

contract referred to by plaintiff?

ANSWER: Yes, defendant is signatory to the

contract as President of [MFC]. Defendant Marcelos
letter-requestdated November 4, 1982, to then
President Marcos who approved it in his marginal
notedated November 10, 1982. [37] (Words in bracket
added.)

It is basic that a corporation is clothed with a personality

distinct from that of its officers,[38] its stockholders and from
other corporations it may be connected.[39] Under the doctrine
of piercing the veil of corporate existence, however, the
corporations separate personality may be disregarded when
the separate identity is used to protect a dishonest or
fraudulent act, justify a wrong, or defend a crime. In such
instance, the wrongdoing must clearly and convincingly be
established;[40] it cannot be presumed.[41] Absent malice or
bad faith, the officer or shareholder cannot be made
personally liable for corporate obligations and cannot be held
liable to third persons who have claims against the
corporation.
A reading of the Republics answers to Marcelos
interrogatories leads us to view, like the Ombudsman,[42] that
there was nothing irregular with the boat supply contract.
Neither were the circumstances leading to the contract award
tainted with irregularity. For, the answers yield nothing more
than a reiteration of mere conclusions of fact stated in the
underlying complaint. The complaint does not even state how
the conclusion was arrived at that Marcelo was the real
beneficiary of the amounts collected under the contract,
absent factual averments that would support the same. The
Republics argument that since MFC did not allege in its motion
for summary judgment that it is not used as a front by Marcelo,
then the two should be treated as one and the same,[43] is
simply specious. There is no such principle as presumption of
piercing the veil of corporate fiction. Nor could it be simply
assumed that by the mere bare allegation or conclusion of law,
in an answer to written interrogatories, that Marcelo is a
conduit of the Marcoses, a genuine issue has been created. On
this score, the Sandiganbayan was certainly in error.
As the Court distinctly notes, the complaint in Civil Case
No. 21 imputes an unlawful or at least a highly improper act
against petitioner Marcelo in that he obtained a favored
contract with the PN, collected hundreds of million of pesos by
way of advances and illegally secured a foreign loan with
sovereign guarantee courtesy of then Pres. Marcos. The
complaint, however fails to disclose why the contract
characterization favored was, a conclusion of law, as it were.
The Court will go further. The complaint violates fundamental
rules of pleading. For one, it yields a substantial lack of specific
averments constituting the Republics cause or causes of
action against the petitioners, particularly Marcelo. In fine, the
complaint does not state with definiteness how or in what
specific manner the petitioners committed the alleged illegal
and fraudulent acts so broadly enumerated therein. For
another, it is replete with sweeping generalizations,
conclusions of fact and law, and contains inferences derived
from facts that are not found in the complaint. In short, the
complaint is an embodiment, a concrete example, of how one
should not prepare a legal complaint. The Courts disposition
in Remitere v. Montinola Vda. De Yulo[44] should be
enlightening:

It is not stated anywhere in the complaint why the sale

was absolutely void, nor were there stated any particular
facts or circumstances upon which the alleged nullity of the
sale or transaction is predicated. The averment that "the
public sale was and still is absolutely a void sale . is a
conclusion of law or an inference from facts not stated
in the pleading. A pleading should state the ultimate
facts essential to the rights of action or defense
asserted, as distinguished from a mere conclusion of fact,
or conclusion of law. An allegation that a contract is
valid or void, as in the instant case, is a mere
conclusion of law.

xxx xxx xxx

Not being statements of ultimate facts which

constitute the basis of a right of the plaintiffs-appellants, nor
are they statements of ultimate facts which constitute the
wrongful acts or omissions of the defendants-appellees that
violated the right of the plaintiffs-appellants the
allegations of the complaint in the present case have
not fulfilled the requirements of Section 3, Rule 6 of
the Rules of Court xxx that the complaint should
contain a "concise statement of the ultimate facts
constituting the plaintiff's cause or causes of action.
(Emphasis added.)

It cannot be over-emphasized that the Republic cannot

any more prove malice or wrongdoing on the part of either
Marcelo or MFC, or that the separate corporate identity of
MFC was used for unlawful means. For, the Republic has
veritably acknowledged the regularity of the boat-construction
contract by its failure to answer written interrogatories and
the request for admission propounded by petitioner MFC. To
be precise, the Republic did not answer the following written
interrogatories[45] of MFC:

1.0 Regarding the Specific Averments of Illegal Acts in

paragraph 11, sub-paragraph (d), of the Third Amended
Complaint which reads:

(d) illegally securing a loan with a

foreign bank with the Guarantee of the
Government, upon the personal behest of
defendant Ferdinand E. Marcos, which
loan remains unpaid to date

1.1. Was there any loan with a foreign bank ever availed of for
Republic to say that the loan remains unpaid to date?

1.2. Who availed of such loan with a foreign bank?

1.2. When was such loan with a foreign bank availed of?

1.3. How much of such loan with a foreign bank was availed of?

1.4. What is the name of the foreign bank from which such loan
was secured and availed of?

1.5. Why was the loan with foreign bank secured?

1.6. In 1982, what were the loan options proposed by the

Republic[s] Philippine National Bank for plaintiff Republic[s]
[PN] to pay for the domestic/deferred letter of credit which
the latter was supposed to open in favor of defendant [MFC]?

1.7. In 1983, without a long term foreign loan to pay for the
letter of credit which [the] [PN] was to open with [the] Land
Bank of the Philippines, was plaintiff Republic[s] Central
Bank of the Philippines willing to approve the importations
by defendant [MFC] under the boat-building contract?
1.8. What specific provision of law in 1982 was violated
for plaintiff Republic to conclude that securing a loan with a
foreign bank with the guarantee of the government is illegal?

1.9. Who required and why was the Guarantee of Government

secured for the loan with a foreign bank?

1.10. In 1982, without the guarantee of the Republic[s] National

Government, was plaintiff Republics own [PNB] Bank willing
to lend plaintiff Republic[s] own [PN] the amounts to pay for
the latters opening of a domestic/deferred letter of credit in
favor of defendant [MFC]?

1.11. In 1982, who in [the] National Government has power to

approve the issuance of [the] National Governments guarantee
of a loan?

1.12. In 1982, in what a particular form, document or writing

should the approval of the issuance of plaintiff Republic[s]
National Governments guarantee of a loan appear?

2.0 Regarding the Specific Averments of Illegal Acts in

paragraph 11, sub- paragraph (c), of the Third Amended
Complaint which reads:

(c) unlawfully received and collected from Plaintiff

hundreds of millions of pesos by way of advances
representing 79% of the contract price for the
construction of the aforementioned high-speed
fiberglass boats, without, to date, delivering a
single boat to the prejudice and

2.1. How much exactly was received and collected

from plaintiff Republic

2.2 Who among the defendants received and collected such

amount?

2.3. What does plaintiff Republic mean by the word advances?

2.3.1.Were the amounts received and collected borrowed from
plaintiff Republic?

2.3.2. If they were borrowed, what are the loan documents

evidencing the loan?

2.3.3. If they were not borrowed, why were they received and
collected from plaintiff Republic?

2.4. In its 5 June 1991 Request for

Admission, plaintiff Republic asserts and acknowledges
that there is an upward adjustment of the contract price
from P425.7 Million to P926.524 Million. This was the
agreement in November 1985. What is the contract
price plaintiff Republic is referring to in
the aforequoted allegations in the Third Amended
Complaint?

2.4.1. Under the June 1983 amendment to the contract, the

parties agreed that the foreign exchange risk shall be for
the account of the Philippines. With the contract price
of P425.7 Million in June 1982 at the exchange rate of P8.00
to US$1.00, what is the additional amount assumed by
the plaintiffRepublic [PN] by November 1985 when the
exchange rate had changed to P18.00 to US$1.00?

2.5. What are the pre-conditions for the delivery by defendant

[MFC] of any boat under the contract?

2.6. Which of these preconditions have been satisfied

for plaintiff Republic to rightfully complain of the
non-delivery of the boats to date?

2.7. Article VIII, part B, of the contract stipulates that delivery

of the boats shall be effected provided that [PN] shall have
fulfilled all its obligations as stipulated in this contract.
Has plaintiff Republic fulfilled all its obligations as
stipulated in the contract?

2.8. Article XIII, part A of the contract signed and executed

on 18 June 1982, stipulates and
obligates plaintiff Republic to make the following
payments:
 1. THIRTY (30) PERCENT of the total contract
price as downpayment upon the signing of the
Contract on 18 December 1982.

2. TWENTY (20) PERCENT of the total contract price

xxx for the engines, gear boxes,
fiberglass materials, radar and communication
equipment xxx after SIX (6) MONTHS from date
of the execution of this contract xxx or by 18
December 1982.

2.8.1. How many payments were received by defendant [MFC]

from plaintiff Republic?

2.8.2. On what dates were each of such payments received?

2.8.3. What were the amounts received on each of such dates?

2.8.4. How many years, months and/or days had elapsed

from 18 June 1992 before each of such payment was
received?

2.8.5. How many years, months and/or days had elapsed

before or after 18 November 1995 when each payment
was received?

2.8.6. What percentage of the adjusted contract price

of P926.524 Million was received in each of the payment
was received?

2.9. Article XIII, part A, of the contract further stipulates and

obligates plaintiff Republic to open a CONFIRMED,
IRREVOCABLE, DIVISIBLE LETTER OF CREDIT in favor of
defendant Marcelo Fiberglass Corporation.

2.9.1. When did plaintiff Republic open such a [L/C] for either
the full value of the contract price or any part thereof?

2.9.2. What efforts did plaintiff Republic exert on its own to

comply with this obligation?

2.10. Article X, part A, of the contract further provides:

If, at any time, either the construction of the boat, or any
performance required hereunder as a prerequisite to the
delivery of the boat, is delayed due to acts of state, xxx by
destruction of the shipyard xxx by fire and/or other causes
beyond the control of either contracting party, the time of
delivery of the boat under this Contract shall be extended for
a period of time corresponding to the duration and cause of
such events.

2.10.1. Was not the construction of the boats and a

prerequisite to the delivery of the boats delayed by an act of
state or by cause beyond the control ofdefendant [MFC]
when the state, plaintiff Republic, paid the 20% of the
original contract price, intended for the engines, gear boxes,
fiberglass materials, radar and communication equipment of
the boats, only in November 1985 or almost three years past
due and when the contract price to be paid had increased
because of the change foreign exchange rate?

2.10.2. Was not the construction of the boats and a

prerequisite to the delivery of the boats delayed by an act of
state and by cause beyond the control of defendant [MFC]
when the state, plaintiff Republic never delivered the full
20% of the increased contract price intended for the very
engines, gear boxes, fiberglass materials, radar and
communication equipment of the boats?

2.10.3. Was not the construction of the boats delayed by an act

of state or by cause beyond the control of defendant [MFC]
when the Central Bank . from 1982 to 1986, because of the
dollar crisis which was aggravated by the murder of
Senator Benigno S. Aquino on 21 August 1983, refused or
could not provide the foreign exchange necessary for [MFC]
to import the engines, gear boxes, fiberglass materials and
radio and communications equipment for the boats?

2.10.4. Was not a prerequisite to the delivery of the boats

delayed by an act of state or by cause beyond the control of
defendant [MFC] when the State, plaintiff Republic never
opened or could not open the required [L/C]?
2.10.5. Was not the construction of the boats further delayed
by an act of state or by cause beyond the control of
defendant [MFC] when the state, plaintiffRepublic,
sequestered on 17 February 1987 all assets of [MFC],
padlocked its offices and shipyard/plant, and barred entry by
anyone thereto up to this day?

2.10.6. Was not the construction of the boats further delayed

by an act of state or by cause beyond the control of
defendant [MFC] when the State, plaintiffRepublic,
negligently caused in 1994 the destruction by fire of the
shipyard/plant of defendant [MFC] while under its full and
exclusive sequestration, control and custody?

2.10.7. Considering that the foregoing causes of the delay in

the construction of the boats and delay in the prerequisite to
the delivery of the boats, most of which are still existing up
to this day, is not the extension of time granted in the
contract for the delivery of the boats still continuing?

xxx xxx xxx

3.2. Is such direct payment in violation of the stipulation in the

amended contract of June 1983 which allows the payment of
the 30% downpayment either by bank draft or [L/C]?

xxx xxx xxx

3.3. Is plaintiff Republic aware of its own

documentary evidence consisting of the 22 December
1983 letter of its own Defense Ministry, through then
Minister Juan Ponce Enrile, who explained therein that:

The Office of Budget and Management (OBM)

released the amount of P127.71
M. representing the
30% downpayment required in the
contract. The amount was subsequently paid to
MFC to save for the government front-end fee
and other bank charges amounting
to P1,915,650.00
3.4. Does plaintiff Republic know that, for the reason stated by
its own Defense Ministry, it was itself who requested
defendant [MFC] to accept payment and that the latter
merely acceded to the request?

3.4. Who secured the approval of, and who approved the direct
payments?

3.4.1. What is the basis of plaintiff Republic in identifying such

person (s) as the one who secured the approval?

xxx

4.1. What does plaintiff Republic mean by the phrase favored

contract?

4.1.2. What circumstances made the contract being referred

to a favored one?

4.2. What specific provision of law was violated

for plaintiff Republic to conclude that the contract or the act
of obtaining it is unlawful?

4.2.1. Is obtaining the contract unlawful because it is a favored

one?

4.2.2. Or, is the contract favored because obtaining it is

unlawful?

4.2.3. What is the reason for the answers to the two preceding
questions?

4.3. Without using unlawful favored or words of similarly

sweeping conclusionary import, what is wrong with
obtaining that contract with the [PN] for the construction of
high speed fiberglass boats at the costs of hundreds of
millions of pesos?

4.4. What did plaintiff Republic, its then Ministry of National

Defense, its [AFP] and its [PN] do to the offer made in 1979
by defendant [MFC] to construct the boats required by the
[PN] until the contract was signed on 18 June 1982?
 4.5. What did plaintiff Republic, its then Ministry of National
Defense, its [AFP], and its [PN] do to comply with the
contract entered into on 18 June 1983 up to the time
defendant [MFC] was sequestered in February 1987?

4.6. With its sovereignty and all resources and powers , what
efforts did plaintiff Republic exert to know what itself, its
then Ministry of National Defense, its [AFP] and its [PN] did
within the periods of almost four (4) years each referred to
in the two preceding questions? (Words in brackets
added.)

The Republic did not also answer the written interrogatories of

the other defendant corporations. In effect, the Republic
admitted the non-participation of the other defendant
corporations in the contracts in question. This is evident
from the following written interrogatories which were
deemed admitted by the Republic:
1.1. What is the specific involvement of, or the specific acts done
by, each of the other Defendant Corporations in securing the
alleged loan?

xxx xxx xxx

2.1. How much exactly was received and collected by each of the Other
Defendant Corporations from plaintiff?

2.2. When did each of the Other Defendant Corporations receive

the amounts allegedly received from plaintiff, if any?

2.3. What documents indicate that each of the Other Defendant

Corporations received such amount allegedly received from
plaintiff?

xxx xxx xxx

4.1. Which of the other defendant corporations is a party or

signatory to the contract referred to by plaintiff?
4.2. What is the specific involvement of, or the specific acts done
by, each of the other defendant corporations in obtaining the
contract referred to by plaintiff?
 The Republic cannot plausibly evade the consequences of
its failure to answer written interrogatories and requests for
admission. If the plaintiff fails or refuses to answer the
interrogatories, it may be a good basis for the dismissal of his
complaint for non-suit unless he can justify such failure or
refusal.[46]

To be sure, the Rules of Court prescribes the procedures

and defines all the consequence/s for refusing to comply with
the different modes of discovery. The case of Republic v.
Sandiganbayan,[47] a case for recovery of
ill-gotten wealth where the defendants served upon the PCG
G written interrogatories but the latter refused to make a
discovery, is relevant. Some excerpts of what the Court said
thereat:
The message is plain. It is the duty of each contending
party to lay before the court the facts in issue--fully and
fairly; xxx

Initially, that undertaking of laying the facts before the

court is accomplished by the pleadings filed by the
parties; "ultimate facts" are set forth in the pleadings; xxx.
The law says that every pleading "shall contain in a concise
and direct statement of the ultimate facts on which the party
pleading relies for his claim or defense, as the case may be,
omitting the statement of mere evidentiary facts."

Parenthetically, if this requirement is not

observed, i.e., the ultimate facts are alleged too generally or
"not averred with sufficient definiteness or particularity to
enable x x (an adverse party) properly to prepare his
responsive pleading or to prepare for trial," a bill of
particulars seeking a "more definite statement" may be
ordered . xxx.

The truth is that "evidentiary matters' may be

inquired into and learned by the parties before the
trial. Indeed, it is the purpose and policy of the law
that the parties - before the trial if not indeed even
before the pre-trial - should discover or inform
themselves of all the facts relevant to the action, not
only those known to them individually, but also those
known to their adversaries; in other words, the
desideratum is that civil trials should not be carried on
in the dark; and the Rules of Court make this ideal
possible through the deposition-discovery
mechanism set forth in Rules 24 to 29. xxx

xxx xxx xxx.

In line with this principle of according liberal treatment

to the deposition-discovery mechanism, such modes of
discovery as (a) depositions under Rule 24,(b)
interrogatories to parties under Rule 25, and (c) requests
for admissions under Rule 26, may be availed of without
leave of court, and generally, without court
intervention. The Rules of Court explicitly provide that
leave of court is not necessary to avail of said modes
of discovery after an answer to the complaint has
been served. xxx.

On the other hand, leave of court is required as

regards discovery in accordance with Rule 27, or under Rule
28, which may be granted upon due application and a
showing of due cause.

To ensure that availment of the modes of

discovery is otherwise untrammeled and efficacious, the
'law imposes serious sanctions on the party who
refuses to make discovery, such as dismissing the action
or proceeding or part thereof, ; taking the matters
inquired into as established in accordance with the
claim of the party seeking discovery; refusal to allow
the disobedient party support or oppose designated
claims or defenses; xxx

xxx xxx xxx

.
One last word. xxx all that is entailed to activate or put
in motion the process of discovery by interrogatories to
parties under Rule 25 of the Rules of Court, is simply the
delivery directly to a party of a letter setting forth a list of
questions with the request that they be answered
 individually. That is all. The service of such a communication
on the party has the effect of imposing on him the obligation
of answering the questions "separately and fully in writing
under oath," and serving "a copy of the answers on the party
submitting the interrogatories " The sanctions for refusing to
make discovery have already been mentioned. So, too,
discovery under Rule 26 is begun by nothing more complex
than the service on a party of a letter or other written
communication containing a request that specific facts
therein set forth be admitted in writing. That is all. Again, the
receipt of such a communication by the party has the effect
of imposing on him the obligation of serving the party
requesting admission with "a sworn statement either
denying specifically the matters of which an admission is
requested or setting forth in detail the reasons why he
cannot truthfully either admit or deny those
matters," failing in which "(e)ach of the matters of
which admission is requested shall be deemed
admitted." xxx. (emphasis supplied)

While earlier touched upon, other considerations obtain

which should have impelled the Sandiganbayan to grant the
motion for summary judgment. We refer to the defect in the
Republics complaint itself. We start with the very PN-MFC
contract itself which served as the main prop of the Republics
case. There is no dispute that the Republic did not attach to its
complaint a copy of what it claims to be a favored contract, let
alone set out therein the relevant terms and conditions of the
contract, or pertinent averments as would show, in general,
why the same is unlawful or grossly disadvantageous to the
State as would merit the tag favored. The rule obtains that
when a claim is based on a written instrument or document,
the substance of such instrument or document shall be set
forth in the pleading, and the original or a copy thereof shall be
attached to the pleading as an exhibit which shall be deemed
to be a part of the pleading, or said copy may with like effect
be set forth therein:[48]

"SECTION 7. Action or defense based on

document. Whenever an action or defense is
 based upon a written instrument or document,
the substance of such instrument or document
shall be set forth in the pleading, and the original
or a copy thereof shall be attached to the
pleading as an exhibit, which shall be deemed to
be a part of the pleading, or said copy may with
like effect be set forth in the pleading."

The record reveals that it was petitioner Marcelo no less

who brought out the contract first, as an attachment to
his Answer.
On the alleged illegal advances, the particulars on the
matter are not alleged; the circumstances that would justify
its conclusion that
either petitioner Marcelo or MFC received the 79% monetary
equivalent of the contract without delivering a single boat
could not be found. Again, the specific information was
volunteered by Marcelo himself in his answer.
As to the allegation that the petitioners secured a loan
with a foreign bank with the guarantee of the government,
upon the personal behest of defendant Ferdinand Marcos,
which loan remains unpaid to date, a copy of the alleged loan
document is not appended to the complaint. Neither is there a
reference to the pertinent provisions of the loan agreement
made in the complaint, nor were the circumstances
surrounding the alleged incurring of the obligation
enumerated. This is material in the sense that the petitioners
deny that there was any loan at all obtained.

On the allegation that petitioners secured the approval of

direct payments on the alleged favored boat supply contract in
violation of the stipulation that payment should be by
confirmed, irrevocable and divisible letter of credit, the
existence of a cause of action based on the allegation could
not be determined since a copy of the contract was not
attached to the complaint, nor was there made a reference to
the particular stipulation claimed to have been violated.
 With respect to the allegation that the petitioners acted
as dummies, nominees or agents of Ferdinand E. Marcos in
corporations such as the Philippine Casino Operators
Corporation, beneficially owned and/or controlled by the
latter, it is noted that allegation partakes of a conclusion of
fact unsupported by a particular averment of circumstances
that will show why such inference or conclusion was arrived at.
In this regard, we are reminded of the Courts ruling
in Republic v. Sandiganbayan:[49]

Under paragraph 6-A of the Amended Complaint, the

Companies alleged to be beneficially owned or controlled by
defendants Lucio Tan, Ferdinand and Imelda Marcos and/or
the other individual defendants were identified and
enumerated, including herein corporate respondents. But
except for this bare allegation, the complaint provided
no further information with respect to the manner by
which herein corporate respondents are beneficially
owned or controlled by the individual defendants.
Clearly, the allegation is a conclusion of law that is
bereft of any factual basis. (emphasis supplied)

To stress, the Rules of Court require every pleading

to contain in a methodical and logical form, a plain, concise
and direct statement of the ultimate facts on which the party
pleading relies for his claim or defense.[50] A transgression of
this rule is fatal. [51]
In view of the absence of specific averments in the
Republics complaint, the same is defective for it presents no
basis upon which the court should act, or for the defendant to
meet it with an intelligent answer.[52] The complaint, to stress,
did not present the very documents claimed to be the source
of the Marcelo-Marcos vinculum: it did not attach the alleged
boat supply contract which is the main cause of action against
the petitioners; the unpaid loan document from which another
claimed cause of action arose; and other relevant documents
and information. The Republic tags, at every turn, the PN-MFC
contract to be a favored contract, without, however, so much
as stating with sufficient particularity the circumstances that
led it to arrive at such conclusion.

The foregoing is nonetheless true with respect to the

case against the other petitioner corporations (except MFC).
There is no cause of action against them. Not only because the
complaint does not, as to them, spell out specific illegal acts
and omissions committed by them, but also on account of our
ruling in Republic v. Sandiganbayan,[53] or what subsequent
opinions would later refer to as The Final Dispositions case,
which proscribes their being impleaded in the case. Thus:

As regards actions in which the complaints seek

recovery of defendants' shares of stock in existing
corporations (e.g., San Miguel Corporation, etc.) because
(they were) allegedly purchased with misappropriated public
funds, the impleading of said firms would clearly appear to
be unnecessary. If warranted by the evidence, judgments
may be handed down against the corresponding defendants
divesting them of ownership of their stock, the acquisition
thereof being illegal and consequently burdened with a
constructive trust, and imposing on them the obligation of
surrendering them to the Government.

Quite the same thing may be said of illegally obtained

funds deposited in banks. The impleading of the banks
would also appear unnecessary. xxx.

xxx xxx xxx

And as to corporations organized with ill-gotten wealth,

but are not guilty of misappropriation, fraud or other illicit
conduct in other words, the companies themselves are the
object or thing involved in the action, the res thereof there
is no need to implead them either. Indeed,
their impleading is not proper on the strength alone of
having been formed with ill-gotten funds, absent any other
particular wrongdoing on their part. The judgment may
simply be directed against the shares of stock shown to have
been issued in consideration of ill-gotten wealth.
 Such showing of having been formed with, or having
received ill-gotten funds, however strong or convincing,
does not, without more, warrant identifying the corporations
in question with the persons who formed or made use of
them to give the color or appearance of lawful, innocent
acquisition to illegally amassed wealth at the least, not so as
(to) place on the Government the onus of impleading the
former together with the latter in actions to recover such
wealth. xxx. In this light, they are simply the res in the
actions for the recovery of illegally acquired wealth, and
there is, in principle, no cause of action against them and no
ground to implead them as defendants in said actions.

The Government is, thus, not to be faulted for not

making such corporations defendants in the actions referred
to. It is even conceivable that had this been attempted,
motions to dismiss would have lain to frustrate such
attempts. (Underscoring supplied)

It does not escape our notice that, in line with our ruling
in Republic immediately adverted to, petitioner corporations
were perhaps not originally impleaded because it was
unnecessary, they being perceived to have been formed with
ill-gotten wealth. As against them, there is no cause of action
other than that they constitute the res of the action. However,
the fact that they were subsequently impleaded in Civil Case
No. 21 could only mean that a cause of action exists against
them, one that must be specifically alleged in the amended
complaint. It appears, however, that their inclusion was made
without the corresponding insertion of general or specific
averments of illegal acts they are alleged to have committed
as should constitute the cause of action against them. It may
not be said that those general and specific averments already
existing in the complaint before the amendment apply to them,
because they refer only to the boat building contract, a
transaction for which only Marcelo and MFC have been
specifically made answerable.
 The Republics argument in their Opposition to the
Motions for Summary Judgment that the Final
Dispositions case suggested that the other petitioner
corporations should be impleaded does not commend itself for
concurrence. On the contrary, we categorically ruled therein
that their impleading is not at all proper.

In all then, we hold that the Sandiganbayan committed

grave abuse of discretion in denying the petitioners separate
motions for a summary judgment. To us, the petitioners were
entitled to a summary judgment owing to the interplay of the
following premises:
1. The Republics complaint, as couched and
presented to the Sandiganbayan does not contain concise
and direct statement of the ultimate facts on which it
relies for its claim against petitioners Marcelo and MFC.
Worse still, it does not specify the act or omission by which
the other petitioners wronged the Republic. In net effect,
the complaint no less does not present genuine ill-gotten
wealth issue; and

2. In view of the Republics failure to respond

to MFCs interrogatories, the Republic veritably conceded
the regularity of the PN-MFC contract, that no wrongdoing
was committed vis--vis the conclusion of that contract and
that the separate personality of MFC was not used for
unlawful means to activate the piercing of corporate veil
principle. The questions in the interrogatories were simple
and direct and the answers thereto would have constituted
the fact/s sought to be established. We do not see any
reason why the Republic could not have answered them.
They refer to relevant matters that could clarify the
important facts left out by, to borrow from Republic v.
Sandiganbayan,[54] the roaming generalities in the
complaint.

Assume the element of regularity and the bona fides of the

transaction and no genuine issue as to any material fact would
come into fore.
 With the foregoing disquisitions, each of the petitioners
counterclaim for damages need not detain us long. Suffice it to
state that resolution thereof entails factual determination
which is not proper in a certiorari proceeding.