The Supreme Court has affirmed that ownership of shares of stock includes the right to dividends and interests accruing to those shares. This ruling clarifies that when the government recovers ill-gotten wealth in the form of stock, it is also entitled to all benefits derived from that stock, ensuring the full recovery of public funds. This reinforces the principle that ownership entails all associated rights and benefits.

Unraveling Ownership: Who Reaps the Rewards of Recovered Shares?

This case revolves around the Republic of the Philippines’ efforts to recover ill-gotten wealth from the Marcoses and their associates, specifically involving shares of stock in the Philippine Long Distance Telephone Company (PLDT). The Republic sought to recover 2.4 million shares, claiming these were part of the Marcoses’ illegally acquired assets. The dispute centered on 111,415 shares of stock in the Philippine Telecommunications Investment Corporation (PTIC) registered under Prime Holdings, Inc., allegedly controlled by the Cojuangcos. The central legal question was whether the recovery of these shares by the Republic also included the right to the dividends and interests that had accrued over time.

The Sandiganbayan initially dismissed the complaint regarding the PLDT shares, but the Supreme Court, in G.R. No. 153459, reversed this decision, declaring the Republic the rightful owner of 111,415 PTIC shares registered under Prime Holdings. Following this victory, the Republic sought a writ of execution to enforce the decision, including a demand for PTIC to account for all cash and stock dividends declared and/or issued by PLDT since 1986, along with compounded interests. The Sandiganbayan granted the motion for the reconveyance of the shares but initially denied the prayer for accounting of dividends.

Subsequently, upon the Republic’s motion for reconsideration, the Sandiganbayan reversed its position and directed PTIC to deliver the cash and stock dividends, including compounded interests, pertaining to the 111,415 shares. The court reasoned that since the Supreme Court had declared the Republic the owner of the shares, it was also entitled to the fruits thereof. The Cojuangcos contested this decision, arguing that the Supreme Court’s decision did not explicitly address the disposition of dividends and interests accruing to the shares. Despite this, the Sandiganbayan partly granted the Cojuangcos’ motion by including legal interests but not compounding them from the accounting and remittance to the Republic.

The Supreme Court addressed the main issues of whether the Sandiganbayan gravely abused its discretion by ordering the accounting, delivery, and remittance of the dividends when the Supreme Court’s decision did not explicitly discuss it. It also addressed whether the Republic, having transferred the shares to a third party, was still entitled to the dividends, interests, and earnings. The Supreme Court emphasized the definition of a dividend, explaining that it is a portion of the profits of a corporation set aside for distribution among stockholders. The Court cited Nielson & Co. v. Lepanto Consolidated Mining Co., No. L-21601, December 28, 1968, 26 SCRA 540, 569, defining dividends in their technical and ordinary sense.

The Supreme Court underscored that ownership entails rights, including the right to receive the fruits of the thing owned. The Court, in Distilleria Washington, Inc. v. La Tondeña Distillers, Inc., G.R. No. 120961, October 2, 1997, 280 SCRA 116, 125, reiterated that ownership is a relation in law where a thing pertaining to one person is completely subjected to his will, including the right to receive from the thing what it produces. The Court noted that even though the inclusion of dividends was not explicitly stated in the dispositive portion of its earlier decision, it was clear from the body of the decision that the Republic was entitled to the entire block of shares and the fruits thereof.

The Court rejected the literal interpretation sought by the petitioners and highlighted exceptions to the general rule that only the dispositive portion of a decision is subject to execution. It explained that when there is ambiguity or extensive discussion of an issue in the body of the decision, those parts may be considered. Citing Insular Life v. Toyota Bel-Air, G.R. No. 137884, March 28, 2008, the Supreme Court reiterated that the dispositive part of a decision must find support from the decision’s ratio decidendi.

Further, the Supreme Court dismissed the argument that the Republic had lost its right to the dividends after transferring the shares to Metro Pacific Assets Holdings, Inc. The Court explained that dividends are payable to stockholders of record as of the date of declaration, unless otherwise agreed. The Court also cited Section 63 of the Corporation Code, emphasizing that while a transfer of shares is valid between parties, it is only effective against the corporation once recorded in its books. Thus, the Republic was entitled to the dividends accruing from the shares from 1986 until the transfer to Metro Pacific in 2007 and served as a trustee for those dividends after the transfer, subject to their agreement.

Sec. 63. Certificate of stock and transfer of shares. — The capital stock of stock corporations shall be divided into shares for which certificates signed by the president or vice-president, countersigned by the secretary or assistant secretary, and sealed with the seal of the corporation shall be issued in accordance with the by-laws. Shares of stock so issued are personal property and may be transferred by delivery of the certificate or certificates indorsed by the owner or his attorney-in-fact or other person legally authorized to make the transfer. No transfer, however, shall be valid, except as between the parties, until the transfer is recorded in the books of the corporation showing the names of the parties to the transaction, the date of the transfer, the number of the certificate or certificates and the number of shares transferred.

Ultimately, the Supreme Court denied the petition and affirmed the Sandiganbayan’s resolutions, holding that the Republic was entitled to the dividends accruing from the recovered shares. This decision underscores the principle that ownership of shares of stock includes the right to the benefits derived from those shares, especially in cases involving the recovery of ill-gotten wealth. The Court’s ruling ensures that the government can fully recover assets illegally acquired and prevent unjust enrichment.

FAQs

What was the key issue in this case?	The key issue was whether the Republic of the Philippines, having recovered ill-gotten shares of stock, was also entitled to the dividends and interests that accrued on those shares.
What did the Supreme Court rule?	The Supreme Court ruled that the Republic was indeed entitled to the dividends and interests, as ownership of the shares necessarily included the right to the fruits thereof.
Why did the Cojuangcos contest the decision?	The Cojuangcos argued that the Supreme Court’s original decision did not explicitly mention the dividends and interests, and therefore, they should not be included in the recovery.
What is a dividend?	A dividend is a portion of a company’s profits that is distributed to its shareholders as a return on their investment.
What does ownership entail?	Ownership entails a bundle of rights, including the right to possess, use, enjoy, dispose of, and receive the fruits or benefits from the owned property.
What happens to dividends when shares are transferred?	Dividends are typically payable to the stockholder of record on the date of declaration, unless otherwise agreed upon by the parties involved in the transfer.
What is the significance of recording share transfers?	Recording share transfers in the corporation’s books is crucial for the transfer to be valid against third parties and the corporation itself, ensuring that the corporation knows who is entitled to the dividends.
How does this case affect future ill-gotten wealth recovery?	This case clarifies that when the government recovers ill-gotten shares, it is also entitled to all the financial benefits derived from those shares, ensuring a more complete recovery of public funds.

In conclusion, the Supreme Court’s decision in this case reaffirms the principle that ownership of property, including shares of stock, carries with it the right to all the benefits and fruits that accrue to that property. This ruling ensures that the government can fully recover ill-gotten wealth, preventing unjust enrichment and reinforcing the public trust.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: Imelda O. Cojuangco, et al. vs. Sandiganbayan, G.R. NO. 183278, April 24, 2009