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PCU RECEIVER'S PRELIMINARY REPORT by ajizai

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									                      REPUBLIC OF THE PHILIPPINES
                        REGIONAL TRIAL COURT
                   NATIONAL CAPITAL JUDICIAL REGION
                          MANILA, BRANCH 24



EMERITO P. NACPIL, ANICETO B.
FONTANILLA AND SOFRONIO A. LARCIA,
for themselves and on behalf of PHILIPPINE
CHRISTIAN UNIVERSITY
                                   Plaintiffs,


             -versus-                        CIVIL CASE No. 06-11-6047


OSCAR S. SUAREZ, DANIEL C. ARICHEA,
JR., ELMER BOLOCON, ERME CAMBA,
JOSUE   ERNACIO,   OSCAR    FERRER,
EVERETT MENDOZA, REUEL NORMAN O.
MARIGZA, DAVID SANTOS AND LEO
SORIANO
                           Defendants.




             PRELIMINARY REPORT
              OF THE COURT APPOINTED RECEIVER




                              SUBMITTED BY:

                 MR. PACIFICO BRIONES ANIAG
                              19 November 2008
                            TABLE OF CONTENTS



I.      Overview                                           3

II.     Corporate Organization: Authority and Existence    8

III.    Capital Structure                                 14

IV.     Directors and Officers                            16

V.      Permits and Licenses                              30

VI.     Tax                                               33

VII.    Financials                                        37

VIII.   Property                                          47

IX.     Contracts and Agreements                          58

X.      Academics                                         66

XI.     Litigation                                        68

XII.    Insurance Policies                                73

XIII.   Employment Arrangements                           74

XIV. Specific Issues                                      95




                                                           2
                                           I. OVERVIEW


A. The Receiver’s Mandate


This Preliminary Report was prepared by the Court-appointed Receiver pursuant to the
Order dated 15 September 2008 (“Order”) issued by this Honorable Court. Pursuant to
the Order and the Interim Rules of Procedure for Intra-Corporate Controversies (“Interim
Rules”), the Receiver is mandated to render a report on the affairs of Philippine Christian
Center of Learning, Inc./Philippine Christian University (the “University”), and on such
other relevant matters within sixty (60) days from the time he assumes office. The
Receiver took his oath of office on 23 September 2008 and accordingly, he has until 22
November 2008 within which to submit his report.

Under the Interim Rules1 as well as the Order, the Receiver is primarily tasked among
others with taking over the affairs of the University. Jurisprudence holds that the order
of Receivership pursuant to the Interim Rules operates to divest the officers of
management in favor of the court-appointed receiver or management committee.2
Accordingly, on 25 September 2008, the Branch Sheriff served a copy of the Order to the
University and the counsel of the defendants, allowing the Receiver to take over the
affairs of the University.

On 26 September 2008, the Receiver sent a memorandum to Dr. Oscar S. Suarez, through
his executive assistant, informing him that the Receiver shall, effective immediately, take
over all the duties and functions of the President as Chief Executive Officer of the
University including those stated in the By-laws thereof. Dr Suarez and his staff were
directed to effect the turn-over of all the documents, records and properties held in trust
in as President of the University, to the Receiver or the latter’s duly authorized
representatives not later than the close of the business hours of Monday, 29 September
2008. Among the first acts of the Receiver was to safeguard the funds of the University
in the latter’s bank accounts, and to inventory and collate the other assets .

The Receiver thereafter enlisted the services of the following to study the status of the
University and carry out his mandate:

      1. Dr. Betty Molina in relation to matters pertaining to the academic program,
      2. Mr. Isagani Arceo in relation to matters pertaining to finance and accounting, and
      3. The Law Firm of Belo Gozon Elma Parel Asuncion Parel Asuncion and Lucila,
         specifically Attorneys Roberto Rafael V. Lucila, Caryl Miriam Y. Lopez,
         Josephine B. Faustino, Edizer A. Enriquez and Christine Joanne F. De Claro for
         legal matters (the “Firm”).

The Receiver likewise employed Mr. Pablo Perez as executive assistant to assist him with
the daily concerns of the University.

The Receiver and his team endeavored to apprise themselves of the status of the
University, in addition to taking care of its day-to-day affairs, in accordance with the
Order and the Interim Rules.




1
    Section 2, Rule 9
2
    Sy Chim vs. Sy Siy Ho & Sons, Inc. (G.R. No. 164958, January 27, 2006) 480 SCRA 465


                                                                                          3
B. Actions and Activities


The following is a summary of the acts and the actions taken by the Receiver thus far:

1. Change of Bank Signatories

To protect the cash and bank funds of the University, the Receiver changed the bank
signatories. The Receiver currently has signing authority over the bank accounts of the
University, in keeping with his mandate to perform the duties of a trustee with respect to
the University’s assets.


2. Termination of the Existing Security Agency Agreement

The Receiver has terminated the services of the current security agency of the University
in view of financial difficulties of the latter. The contract entered into by Dr. Suarez on
behalf of the University with Golden Armour Security & Allied Services last 16
September 2008 was too expensive considering that the rates of guards for the Manila
and Dasmariñas Campus were Php28,402.50 an Php22,590.00 respectively. The Receiver
gave notice to terminate the agreement in a letter dated 3 November 2008. Pursuant to
clause 15 of the said contract, the University shall continue to avail of the services of the
Agency for a period of sixty (60) days from receipt of the letter.

In the meantime, bidding shall be conducted to find a substitute security agency.


3. Termination of the Services of the University’s Retained Legal Counsel

The Receiver learned that the University has an existing retainer agreement with the law
firm Sobreviñas Hayudini Bodegon Navarro and San Juan (“Sobrevinas”), which is the
same counsel for the defendants.

Sobrevinas continues to be retained by the defendants in the prosecution of the appeal
from the Order to the Court of Appeals. The Receiver believes that Sobrevinas can not
continue to represent the University under the management of the Receiver pursuant to
the Order and at the same time represent the defendants who assailed the validity of the
said Order. Hence, the Receiver has written Sobrevinas explaining that there is a clear
conflict of interest in representing these defendants and requested said legal counsel to
withdraw as counsel in the cases it is handling. While Sobrevinas objects to the existence
of a conflict of interest, it has agreed to withdraw from the cases handled and submit the
files to the Receiver together with a status report in a letter dated 5 November 2008. The
Receiver however, is still waiting for the inventory and turn over of these case files and
documents.


4. Appeal to the National Collegiate Athletic Association (“NCAA”)

The Receiver has learned that Dr. Suarez has entered into a Memorandum of
Understanding (“MOU”) with the NCAA and the College of St. Benilde sometime May
2008. Under the terms of the MOU, the University agreed to take a voluntary, indefinite
leave of absence after the end of NCAA Season 84, without prejudice to rejoining the
league subject to re-application. This was apparently brought about by charges of fraud
with respect to the players of the University. It is notable that the MOU was entered into
without authority from the Board of Trustees.



                                                                                           4
The Receiver has written to the NCAA in a letter dated 29 October 2008, requesting for
reconsideration of the MOU, pending further study of remedies available to the
University and members of the NCAA. The Receiver assured the NCAA that it was
taking measures to investigate the allegations, and has in fact formed a committee to
study the same.


5. Referral of matters and cases to the Firm

The Receiver mandated the Firm to investigate, make inquiries or otherwise conduct
legal due diligence on the transactions of Philippine Christian University particularly the
allegations mentioned in the Complaint dated 12 October 2006 (“Complaint”) and the
Order. This authority includes full power to summon any trustee, officer and employee
for examination and clarificatory questions under oath on any matter related therein. The
Firm has advised the Receiver and his staff on any and all matters that have legal
implications and consequences, in their discharge of their duties and functions.

The following labor cases were also referred to the Firm as per the Receiver’s letter dated
9 October 2008: i) “Noemi S. Sayson v. Philippine Christian University, et al”, NLRC
Case No. 00-09-13388-08; ii) “Estrellita P. Bautista and Irma N. Yacapin v. Philippine
Christian University and Dr. Oscar Suarez”, NLRC Case No. 08-11506-08; and, iii)
“PCU College Faculty Union and Dr. Maria Leonano v. Philippine Christian
University”, NCMB Case No. NS 08-119-08.

The case of “Gloria A. Bumanglag v. Philippine Christian University and Dr. Oscar
Suarez” docketed as NLRC Case No.08-11505-08 was referred back to Atty. Rodrigo O.
Celicious, the acting Dean of the College of Law.

Soon after the Receiver took over the management of the University, the Faculty Union
sent a notice of strike to the Receiver. After the meeting of the Receiver, assisted by the
Firm, with the Faculty Union on the current problems of the University, the Faculty
Union has graciously agreed not to continue its strike vote.


6. Engagement of an External Auditor

The Receiver noted that the University has no audited financial statements for the years
2006 and 2007. The Receiver has engaged the auditing firm Virgilio R. Santos & Co. to
audit the books of the University, since this was the most reasonable and inexpensive
auditing firm available to do the job among the auditing firms canvassed.


C. Brief Summary of the Report

Given the time constraints and the state of the condition of the University at the time of
his assumption into office, the Receiver could not make a complete and comprehensive
study of the University and its affairs within the sixty (60) day period stated in the Order.
Hence, the Receiver submits this preliminary report with the following findings, and
highlights thus far:

   1. The University, as the Corporate entity Philippine Christian Center for Learning,
      Inc., is apparently the result of an incomplete merger of Philippine Christian
      Colleges and Union Theological Seminary of the Philippines, whose juridical
      entities have not been dissolved, but whose franchises have been revoked for
      failure to comply with the SEC reportorial requirements.




                                                                                           5
      2. The confirmation of the losses as alleged in the Complaint for the years 2003,
         2005 and 2005. These losses suffered by the University are reflected by the
         disparity between the current total of the balances of cash, cash equivalents and
         short-term investments of PCU in the amount of PhP89,746,678.29, inclusive of
         the PhP41 million from NAPOCOR, compared to PhP260,331.422.00 in 2000.

      3. The Accounts Receivable (A/R) from students which ballooned from
         Php29,715,353.00 in 2000 to Php188,377,366.39 as of 30 September 2008 is a
         clear sign of mismanagement, as this indicates the failure to implement credit and
         collection policies. Notably, the total A/R as of 30 September 2007 amounted to
         Php193,610,861.27. Considering that the amount is significant, it should be
         subjected to a detailed audit to determine the existence of the A/R.

      4. The total price for the construction contracts entered into with Arquiza
         Construction and the University from 2007 up to the present totaled
         Php27,860,278.00. These construction contracts were not subjected to a bidding
         process.

      5. All of the canteens operated by the University are subsidized because they are
         continuously incurring losses. The financial consultant has observed that the
         accounting system in place is weak and that there are poor internal control in
         place.

      6. There are contractual and tax issues that need to be addressed given their potential
         impact on the financial and operational affairs of the University.

      7. The lack of corporate authority for the Php32 million loan from then Equitable
         PCI Bank and its subsequent investment in Terra Nova, and the failure of such
         investment to service the bank loan secured by the bank deposit of the University.

      8. The disbursements made in connection with the NIBA Case in the amounts of
         US$20,000.00,      Php940,625.25 and US$5,000.00 were highly irregular
         considering that the payments were made without having finalized the
         compromise agreement between PCU and NIBA where such payments were
         intended. Moreover, the Php940,625.25 payment was made without any
         supporting disbursement voucher and proof of receipt.

      9. The total amount of payments reflected in the disbursement vouchers to Toledano
         De La Rosa and Associates, the architects engaged by the University in
         connection with the Master Development Plan amounted to Php13,293,354.89.


D. Recommendations

The Receiver recommends further study and audit on the transactions of the University
and a determination of the measures to be done to address the financial and operational
problems that it currently faces. In the meantime, the Receiver makes the following
recommendations based on the preliminary findings:

 1.      That the matter of the corporate status of the University be referred to the Firm
         for recommendations on the resolution of its present corporate dilemma;

 2.      That the matter of the tax and contractual obligations of the University and the
         Php32 million loan, the NAPOCOR arrangements that caused the disbursement of
         about 50% of the expropriation indemnity due the University, and the NIBA US
         dollar disbursements that did not resolve the dispute subject of the case in



                                                                                           6
     Pakistan, be referred to the Firm for recommendations on the actions to be taken
     by the University; and,

3.   That a plan be crafted to address the worsening financial and operational
     conditions of the University.




                                                                                   7
                               II. CORPORATE ORGANIZATION
                                 AUTHORITY AND EXISTENCE


A.         Determine whether the University is a corporation duly organized and
           validity existing.


Under the current Corporation Code, a private corporation acquires its juridical
personality and is deemed incorporated from the date the SEC issues a certificate of
incorporation under its official seal. From then on, the incorporators, members and their
successors shall constitute a corporate body under the name stated in the articles of
incorporation

A corporation shall exist for the period of time mentioned in its articles of incorporation
unless said period is extended or the corporation is sooner dissolved in accordance with
law. Prior to the current Corporation Code, no maximum period was required to be stated
in the articles of incorporation of educational institutions. The current Corporation Code
which took effect on 1 May 1980 required all corporations to amend their articles of
incorporation within two (2) years from the effectivity of the same to reflect the new
requirements imposed, including a maximum term of fifty (50) years3. In the Opinion
dated 25 September 1990 issued by the SEC to Atty. Sabino Padilla, Jr., the SEC
discussed the effect of failing to amend the articles of incorporation to include the 50 year
corporate term, as follows:

           “…[T]he Commission, in several occasions has ruled that, failure on their
           part to amend their articles pf incorporation to comply with the applicable
           provisions of the Code on or before May 1, 1982 the expiry date of the
           two (2) year period, the Commission will consider the provisions therein
           as written into the articles of incorporation as of May 1, 1980, the date of
           effectivity of the Corporation Code (SEC opinions dated April 26 and
           June 29, 1982) Thus applying this ruling in the instant case, the 50-year
           period should be counted from May 1, 1980.”4

The fifty (50) year period for educational institutions therefore, which did not indicate a
term of existence and did not subsequently amend the same to comply with the current
Corporation Code, is deemed to commence on 1 May 1980.


Union Theological Seminary, Philippines (“UTS”)

The Articles of Incorporation of UTS was registered with the Mercantile Register of the
Bureau of Commerce and Industry as Union Theological Seminary of the Philippines on
4 December 1919, while its By-Laws were adopted on 15 October 1919.

The documents obtained from the SEC show that the articles were amended twice, the
most recent amendment approved by the SEC on 18 May 1950. The articles of UTS do
not contain a term of existence.

Per SEC records, the corporate franchise has been revoked by the SEC. We are still
trying to obtain a certified true copy of the order.




3
    Section 148, Corporation Code
4
    This opinion was reiterated in the SEC Opinion 04-03 dated 4 February 2003 to Atty. Francisco Collado,


                                                                                                         8
Philippine Christian College (“PCC” or “PCU”)

PCC was incorporated on 11 January 1947 as Manila Union University. This name was
later amended to Philippine Christian College. The Director of Higher Education allowed
PCC to use the name Philippine Christian University on 6 October 1976.

The original certificate of incorporation was not available on file.

The articles do not indicate any term of existence.

Per SEC records, the corporate franchise was revoked as of 7 July 2003, pursuant to the
SEC Order dated 27 May 2003, for failing to comply with the reportorial requirements.
PCC has until 2 July 2009 to file a petition to set aside the order of revocation with the
SEC, otherwise, the order of revocation shall become final and executory5.


Philippine Christian Center of Learning, Inc. (“PCCLI” or the “University”)

PCCLI was incorporated on 19 September 1978. PCCLI is registered under Reg. No.
86960. Article IV states that the term for which PCCLI shall exist shall be fifty years.

The By-Laws however, were not available from the SEC. The By-Laws do not seem to
be registered. Atty. Sofronio Larcia, one of the plaintiffs and former corporate secretary,
mentioned that the By-Laws were not registered. We are currently still in the process of
obtaining a certification from the SEC on whether or not the By-laws were filed however.
The request is still being processed, since the SEC records are apparently kept in a
separate warehouse.

The Corporation Code requires every corporation to adopt a code of By-Laws within one
(1) month from receipt of its certificate of incorporation. Adoption of By-Laws requires
the affirmative vote of at least a majority of the members of non-stock corporations. The
By-Laws are effective only upon the issuance of a certification that the By-Laws are not
inconsistent with the Corporation Code.

Failure to file the By-Laws will subject the corporation to penalties and possibly
revocation or cancellation of its certificate of registration. A corporation continues to
exist notwithstanding its failure to submit the By-Laws until the revocation is lawfully
ordered by the SEC.6

SEC Memorandum Circular No. 11 states that non-stock corporations who failed to file
their by-laws within one month from receipt of the certificate of incorporation shall be
fined in the amount of P25.00 for every month of delay, but in no case shall the aggregate
fines exceed P100.00. Corporations which have no by-laws but are active or operating are
required to submit their General Information Sheet (“GIS”) to the SEC within thirty (30)
days to be counted after the end of one (1) year from the date of incorporation and every
year thereafter until their by-laws are filed and approved by the SEC. Non-compliance
with the filing of the GIS shall subject the corporation to a fine.

The current amount of fine for non-filing of the GIS is Php10,000.00 plus Php100.00 per
day of delay.7

A photocopy of the Pre-Subscription Agreement dated 27 January 1978 entered into
between UTS and PCC indicates an intention to be merged under PCCLI:

5
  SEC Circular No. 4, Series of 2008
6
  Lopez, R. The Corporation Code of the Philippines Vol. II. (1994) pp. 655-656
7
  Sec Memorandum, Circular No. 5, Series of 2005, Consolidated Scale of Fines


                                                                                         9
           “Declaration of Policy. – the parties envision a Christian Center of
           Learning to be called Philippine Christian Center of Learning
           which shall be forever dedicated to the appreciation of Christian
           values, and that for the realization of this policy, the two parties
           shall relinquish their respective prerogative which they now
           enjoy as separate legal entities. Henceforth, the energies, talents
           and resources of the two institutions shall be dedicated to the
           attainment of the mission of the Philippine Christian Center for
           Learning under the direction of a single Board of Trustees. For
           this purpose, the following covenants shall be binding on the
           parties:

               That the Philippine Christian College agrees to form with the
               Union Theological Seminary the Philippine Christian Center
               for Learning to be located in the Dasmariñas, Cavite campus of
               the Union Theological Seminary. Such a move would release
               the Taft Avenue, Manila properties of the Union Theological
               Seminary for investment purposes to generate income to
               support the educational program to be carried out on the
               Dasmariñas campus.

               That the Union Theological Seminary is committed as it hereby
               commits to contribute all its properties of lands with all
               improvements therein as described in Annex A and made an
               integral part hereof, to the Philippine Christian Center of
               Learning. The parties intend that the Manila and Nueva Ecija
               properties therein should be developed for income production
               to support the educational program of the Philippine Christian
               Center of Learning, not the least of which in theological
               education.
                                           xxx

               That Philippine Christian Colleges is committed as it hereby
               commits to contribute all its properties of lands with all
               improvements thereon as described in Annex B, and made an
               integral part hereof, to the total resources of the Philippine
               Center of Learning and that these properties shall be developed
               together with the Manila and Nueva Ecija properties of Union
               Theological Seminary, for income-producing purposes and that
               income is to be used to support the educational program in the
               Dasmariñas, Cavite campus ” (Emphasis supplied)

It can be gleaned from the records that the intention was a merger of the two
corporations. Notably, the payroll and all funds for UTS and PCU are controlled by
PCCLI. PCC and UTS do not have separate sets of trustees.

Prior to the enactment of the current Corporation Code in 1980, there were no express
provisions dealing with mergers and consolidations, but the same were justified under
general provisions of the old Corporation Law, such as through a sale of all the assets of
the absorbed corporation to the surviving corporation, the dissolution of the selling
(absorbed) corporation by way of shortening its term of corporate existence through an
amendment of its articles of incorporation, and the investment of its funds in any other
corporation or business8.


8
    Lopez, R. The Corporation Code of the Philippines Vol. II. (1994) p. 928


                                                                                       10
Merger has been defined as follows:

                 “…[M]erger means the absorption of one or more
                 corporations by another existing corporation, which retains
                 the identity and takes over the rights, privileges, franchises
                 and properties of the absorbed corporation(s). The absorbed
                 corporation continues its existence while the life or lives of
                 the other corporation(s) is/are terminated.”9

As can be seen further in the report, the merger does not seem to have been implemented
in the legal sense as the juridical personalities of PCC and UTS were not terminated
through the creation of PCCLI. The titles to the properties are still in the name of PCU
and UTS. The trustees of both PCC and UTS have not organized and met subsequent to
the last corporate act available on record, which was the merger..


B.      Determine the purposes of the University.

A corporation can only engage in purposes stated in its articles of incorporation. A
corporation may have as many purposes as it may wish, but the articles of incorporation
must specify a single primary purpose and list other purposes as secondary.


1.      Union Theological Seminary, Philippines

Article II of the articles of UTS states:

                 “The Object of this corporation shall be to establish and
                 conduct a Theological Seminary and other allied
                 departments of education for the purpose of training young
                 men for the Gospel ministry and young men and women for
                 other forms of Christian service.”


2.      Philippine Christian College

The primary purpose for which PCC is formed is as follows:

                  “SECOND- That the purposes for which the corporation is
                 formed is to establish, conduct and maintain a university,
                 colleges, or schools devoted to the cause of Christian
                 education, the development of Christian character, the
                 training of leaders and the strengthening of democratic
                 institutions; as incidental thereto, to provide courses of
                 study of university grade for professional or business life or
                 for general culture; to establish classical, mathematical, or
                 scientific business, technical and general courses of study
                 including correspondence; to conduct institutes, training
                 schools, course of study and home classes; to provide for
                 the holding and giving of lectures, exhibitions, public
                 meetings, convocations and conferences adapted directly to
                 advance the calling of education; to secure, print and
                 publish books, and courses of study of this corporation; and


9
 Lopez, R. The Corporation Code of the Philippines Vol. II. (1994) p. 929, citing SEC opinion dated June
11, 1986, Mr. Luis Liwanag II


                                                                                                      11
              to grant diplomas, titles and degrees as may be authorized
              by the Government;

              (b) To purchase, build lease, construct or otherwise acquire
              such lands and buildings, dormitories and offices as may be
              necessary or useful to carry out the objects and purposes of
              this corporation;

              (c) To employ and dismiss from time to time administrative
              officers, instructors, professors and other teachers and
              employees, and prescribe and enforce rules and regulations
              for their conduct in the discharge of duties as such;

              (d) To prescribe and approve courses and curricula of
              instructions in all departments of learning and morals
              which shall be taught in accordance with Christian
              principles;

              (e) To admit students and prescribe and enforce
              requirements for their admission and rules and regulations
              for their conduct as such to charge and collect tuitions, fees
              and other lawful dues;

              (f) To do all such other things and transact generally all
              business as may be directly or indirectly conducive to the
              attainment of the above objects and which are permitted by
              the laws of the Philippines unto corporations of like class
              and kinds.“


3.     Philippine Christian Center of Learning, Inc.

The purposes for which PCCLI is formed is as follows:

              “To organize, support, operate and maintain schools,
              colleges or Universities in Manila and Dasmariñas,
              Province of Cavite in the pursuit of its program of
              education which shall emphasize Christian values and the
              validity of the Christian way of life; and to establish,
              maintain, promote and support with adequate funds,
              facilities, plants and qualified personnel a continuing
              program of theological education in the form of residential,
              theological education by extension, continuing ministerial
              education, and graduate theological education.

                 To promote creative relationships among member
                 schools, other institutions and churches in the
                 Philippines and the rest of the world;

                 To participate in the formulation and maintenance of a
                 high standard of Christian education; to work for its
                 continuing improvement and renewal;

                 To receive and acquire from any person, firm or entity,
                 whether resident or non-resident of the Philippines, by
                 donation, grant, endowment, trust, lease or contribution,
                 moneys, personal and real properties, and other specie


                                                                               12
of property or interest in property which shall be used
exclusively to carry out the purposes and objectives of
the corporation;

To do and perform all acts and things which are
necessary or expedient, suitable or proper for the
furtherance or accomplishment of the purposes and the
attainment of any or all of the objectives herein stated,
or which will appear, at any time as conducive and
useful for the activities of the corporation; and

To open savings or current accounts in any banking
institution and to dedicate said funds and its fruits in
undertaking any of the activities of the corporation




                                                            13
                              III. CAPITAL STRUCTURE


The discussions in Sections III and IV pertains solely to PCCLI, since it is the only active
corporation.


A.     Determine the University’s capital structure

PCCLI is incorporated as a religious, non-stock, non-profit educational corporation, and
no part of its assets or properties shall ever be declared by way of dividends, nor in any
manner shall the sale of assets or properties be distributed for the benefit or profit of any
individual.

Half of the members of PCCLI are nominated by the United Christ of Christ in the
Philippines (“UCCP”) while the other half are nominated by the United Methodist
Church (“UMC”).


B.     Determine whether the University’s capital structure meets the capital
       requirements set by law

Section 4 (2) of Article XIV of the Constitution states that educational institutions, other
than those established by religious groups and mission boards, shall be owned solely by
citizens of the Philippines or corporations or associations at least sixty per centum of the
capital of which is owned by such citizens.


C.     Review the entries in the University’s Membership Book

The Membership Book of PCCLI could not be located. The last two corporate secretaries,
Reverend Connie Semy P. Mella and Atty. Sofronio Larcia both stated that they have not
seen the University’s Membership Book.


D.     Determine the rules for membership

Article IV of the By-Laws available from the PCCLI, states:

               Article IV. Membership of the Corporation

               The members of the Philippine Christian Center of
               Learning, Inc. shall be the members of the Board of
               Trustees of the Philippine Christian College and Union
               Theological Seminary as of March 12, 1978, who shall
               serve for a term of five (5) years, and such members
               nominated by the United Church of Christ in the
               Philippines and the United Methodist Church in the
               Philippines or their respective legal successors in equal
               number but in no case shall each church have more than
               twenty (20) representatives.

There are no other provisions on membership provided in the By-Laws or Articles of
Incorporation. The Corporation Code provides however that membership in a non-stock
corporation and all rights arising therefrom are personal and non-transferable, unless the
articles of incorporation or the by-laws otherwise provide. Membership shall be



                                                                                          14
terminated in the manner and for the causes provided in the articles of incorporation or
the by-laws.


E.     Determine if there are any important matters that should be noted in the
       members’ meetings

The election of directors and the transactions of such business as may properly come
before the meeting, such as approval of certain corporate acts, are done in the regular
meetings of members of the corporation. The By-Laws however, do not provide a date
for the regular meeting of the members. The minutes of members’ meetings show
however, that the members traditionally meet during the month of March.

The PCCLI’s By-Laws do not provide how special meetings of members may be called,
or the manner of in which notices to members should be sent. In the absence of specific
provisions in the By-Laws, the Corporation Code declares that the regular meetings of
stockholders or members shall be held annually on any date in April of every year as
determined by the board of trustees, provided, that written notice of regular meetings
shall be sent to all members of record at least two (2) weeks prior to the meeting, Special
meetings of members shall be held at any time deemed necessary provided that at least
one (1) week written notice shall be sent to all members.

Notice of any meeting may be waived, expressly or impliedly, by any member.

The By-Laws likewise do not specify a quorum for members meetings. The Corporation
Code states that unless otherwise required by law or the By-Laws, a quorum shall consist
of the majority of the members.

The records reveal that the members of PCCLI met on the following dates, since 2001:

                                      1 March 2001
                                     12 March 2002
                                      3 March 2003
                                     16 March 2004
                                     14 March 2005
                                     6 October 2005
                                   16 September 2006

No other meetings appear to have been held since 16 September 2006.




                                                                                        15
                          IV. DIRECTORS AND OFFICERS


Generally, it is the corporation’s board of directors that exercises the corporate powers,
conducts the business, and controls and holds its properties. Corporate acts are generally
authorized by the affirmative vote of the majority of the members of the board of
directors.

While the task of formulating the broad policies of the corporation lies with the board, the
task of actual management and carrying on the details of business operations and
corporate policy are delegated to the officers elected by the board and over whom it
exercises supervision.

Section 4(2), Article XIV of the Constitution further provides that the control and
administration of educational institutions shall be vested in citizens of the Philippines.


A.     Determine the number of trustees and officers of the University

The articles of incorporation of PCCLI obtained from the SEC state that the number of
trustees are ten (10). While the copy shows that the original number typed was fifteen
(15), this was crossed out and replaced with the number ten (10). Five (5) names of the
original trustees were likewise crossed out; such that the remaining number of initial
trustees was ten (10). Trustees were to serve for a term of 1 (one) year while succeeding
members of the board of trustees shall serve for a term of three (3) years.

A handwritten annotation beside the portions crossed out state “Corrections made by
Atty. R. Corpuz.”

The By-Laws of PCCLI on the other hand (A copy of the By-Laws was found at the
Office of the President at the University, and not with the SEC) state that the board of
trustees shall be composed of fifteen (15) members, who shall be elected by the members
of the corporation and who shall hold office for one year, provided that only five (5)
trustees will be elected in all subsequent annual elections.

The minutes of the meetings of the members of PCCLI show that three (3) members are
elected yearly, with three (3) members with terms expiring each year. This is similar to
what is provided for by default in Section 107 of the Corporation Code:

                                            xxx

               Unless otherwise provided in the articles of incorporation
               on the by-laws, the board of trustees of incorporated
               schools, colleges, or other institutions of learning shall, as
               soon as organized, so classify themselves that the term of
               office of one-fifth (1/5) of their number shall expire every
               year. Trustees thereafter elected to fill vacancies, occurring
               before the expiration of a particular term, shall hold office
               only for the unexpired period. Trustees elected thereafter to
               fill vacancies caused by expiration of term shall hold office
               for five (5) years. A majority of the trustees shall constitute
               a quorum for the transaction of business. The powers and
               authority of trustees shall be defined in the by-laws.

The By-Laws further state that during elections, the number of trustees nominated by
United Methodist Church and the United Church of Christ in the Philippines shall be two
(2) and three (3) alternately each year.


                                                                                         16
In practice however, the number of trustees nominated by each church is one (1) and two
(2) alternately, since they elect only three (3) trustees in a year.

The By-Laws of the University provide that the following are the officers of PCCLI:

Corporate Officers

    Chairman
    Vice-chairman
    Secretary
    Treasurer

Executive Officers

    President
    Vice-President for Theological Education
    Vice-President for Academic Affairs
    Vice-President for Business Finance


B.     Determine the trustees and officers of the University and their qualification
for their positions

According to the minutes of the University, the trustees of the University, before the
Regional Trial Court appointed the Receiver, were as follows:

                 Name                                  Date Elected               Expiration of Term
Bishop Leo Soriano (UMC)                              6 March 2001                       2006
Mr. Benjamin Justo (UMC)                              6 March 2001                       2006
Judge Josue Ernacio (UCCP)                            6 March 2001                       2006
Bishop Solito Toquero (UMC)                          12 March 2002                       2007
Atty. Sofronio Larcia (UCCP)                         12 March 2002                       2007
Mr. Aniceto Fontanilla (UCCP)                        12 March 2002                       2007
Dr. Anselmo Lupdag (UMC)                              3 March 2003                      2008
Dr. Daniel Arichea, Jr. (UMC)                         3 March 2003                      2008*
Bishop Elmer Bolocon (UCCP)                           3 March 2003                       2008
Rev. Reuel Marigza (UCCP)                            16 March 2004                       2009
Bishop Erme Camba (UCCP)                             16 March 2004                      2009
Mr. Dave Santos (UMC)                                16 March 2004                      2009*
Rev. Connie Semy P. Mella (UMC)                      14 March 2005                       2010
Dr. Oscar S. Suarez (UCCP)                           14 March 2005                       2010
Atty. Oscar Ferrer (UMC)                             6 October 2005                        **
Rev. Jonathan Ulanday (UMC)                          6 October 2005                       ***
Judge Rustico Panganiban (UMC)                     16 September 2006                      **
Bishop Emerito P. Nacpil (UMC)                     16 September 2006                      **
Bishop Jose Gamboa Jr. (UMC)                       16 September 2006                      **

*Dr. Arichea and Mr. Santos were recalled as members by the Coordinating Council of the Philippine
Central Conference of the UMC, effective 24 September 2005 as reflected in the minutes of the minutes of
the corporation dated 6 October 2005. Atty. Oscar Ferrer and Rev. Jonathan Ulanday were likewise
recommended to the Board of Trustees. The minutes state that the members of the corporation agreed to
accept and note the changes in the UMC representation to the PCU Corporation and Board of Trustees.

** The term of office was not specified, although it is presumed that it was meant to be for the expiration of
the term of those who were replaced before the expiration of term, or for the full five years for those who
replaced trustees whose terms expired




                                                                                                          17
*** Rev. Ulanday was replaced by the UMC, and other trustees were nominated during the meeting of the
corporation held on 16 September 2006. The members of the corporation voted to elect the nominees of the
UMC to the Board of Trustees.

Notably, there were only thirteen instead of fifteen trustees. During the last meeting of
the members held on 16 September 2006, no trustees from the UCCP side were elected.
According to the minutes:

                 “On the case of the UCCP, by consensus the Corporation
                 agreed that in view of the previous action of the
                 Corporation referring membership of the UCP back to them
                 and in view of the effect of that in terms of reverting to the
                 status quo, the present members of the UCCP to the Board
                 of Trustees are therefore being recognized.”



A trustee of a non-stock corporation must first and foremost be a member of the
corporation. As of 16 September 2006, all members of the Board of Trustees were
likewise members of the corporation.

The Corporation Code requires that a majority of the trustees of a corporation must be
residents of the Philippines. Based on the GIS filed with the SEC in 2005, at least eight
(8) out of the fifteen (15) trustees were residents of the Philippines.

The following were the last appointed officers of the University by the Board of Trustees,
according to the minutes:

                    Position                       Name                       Date Elected by the
                                                                               Board of Trustees
Corporate       Chairman        Rev. Reuel Norman O. Marigza*                 10 November 2005
Officers        Vice Chairman   Dr. Anselmo Lupdag                            10 November 2005
                Secretary       Rev. Connie Semy P. Mella                     10 November 2005
                Treasurer       Rosalinda M. Aquino                             17 March 2005
                                (for a term of 5 years)
Executive       President       Oscar S. Suarez                                 17 March 2005
Officers                        (for a term of 5 years)
                Vice-President Dr. Romeo del Rosario                              2 July 2005
                for Theological (for a term of 1 year)
                Education
                Vice-President Prof. Jovita Reyes                               5 October 2001
                for Academic (for a term of 5 years)
                Affairs
                Vice-President
                for    Business
                Finance

*He was initially elected as Vice Chairman on 17 March 2005, however, and “succeeded” to the position
of Chairman on 10 November 2005

The Corporation Code provides that the President must be a director or a trustee, and that
the Secretary is a resident and citizen of the Philippines. As a matter of policy, the SEC
requires that the treasurer be a resident of the Philippines. The president cannot hold the
position of treasurer or secretary concurrently.


C.      Determine the procedure for the election and removal of trustees




                                                                                                     18
Under the Corporation Code, elections of trustees require the presence of a majority of
the members of the corporation. Unless otherwise provided for in the by-laws or articles
of incorporation, members may cast as many votes as there are trustees to be elected but
may not cast more than one vote for one candidate. Candidates receiving the highest
number of votes shall be declared elected.

The Corporation Code states that trustees may be removed from office with or without
cause, by a vote of at least two thirds (2/3) of the members entitled to vote provided that
such removal shall take place either at a meeting after notice to the members of the
intention to propose such removal

Neither the Articles of Incorporation nor By-Laws provide for terms for the removal of
trustees.

The By-Laws state that vacancies created in the Board of Trustees by death, resignation,
removal, incapacity to act or otherwise, shall be filled in by a vote of at least a majority of
the remaining trustees, the nominee coming from the church who nominated the trustee to
the vacated position. The new trustee shall serve only for the unexpired period of time.

The Corporation Code provides that vacancies other than by removal by the members or
by expiration of term may be filled by a vote of at least a majority of the remaining
directors, if still constituting a quorum, otherwise, said vacancies must be filled by the
members of the corporation in a regular or special meeting. The trustee so elected to fill a
vacancy shall be elected only for the unexpired term of his predecessor.


D.       Determine the procedures governing trustees’ meetings

As stated earlier, corporate powers are generally exercised by the board of trustees. The
procedures by which the board of trustees functions are governed by the corporation’s
by-laws and the Corporation Code.

Under the By-Laws, regular meetings shall be held twice a year, semi-annually, to be
called by the Chairman of the Board within two (2) weeks before the end of every regular
school semester.

According to the By-Laws, eight (8) members of the Board of Trustees shall constitute a
quorum. Every decision by majority vote, provided a quorum is present, shall be valid as
a corporate act.


E.       Determine the existence and composition of any executive committee

The PCCLI’s By-Laws do not provide for the creation of an executive committee. The
By-Laws state however, that the Board of Trustees may create any number of committees
to which specific responsibilities may be assigned, provided that there shall always be a
Commission on Theological Education and a Committee on Finance.

Under the Corporation Code, the by-laws of a corporation may create an executive
committee of not less than three (3) members of the board, to be appointed by the board.
The executive committee may act by a majority vote of all its members, on such matters
within the competence of the board, as may be delegated to it in the by-laws or on a
majority vote of the board, except with respect certain acts10. The executive committee
10
  Sec. 35. Executive committee. - The by-laws of a corporation may create an executive committee,
composed of not less than three members of the board, to be appointed by the board. Said committee may
act, by majority vote of all its members, on such specific matters within the competence of the board, as
may be delegated to it in the by-laws or on a majority vote of the board, except with respect to: (1) approval


                                                                                                           19
formed under section 35 of the Corporation Code should be distinguished from other
committees which are within the competence of the board to create at any time and
whose actions require confirmation by the board itself. The former is as powerful as the
board of trustees, as it actually performs certain duties of the board and in effect is acting
as the board.11

The records of the University show that an Executive Committee has been formed. Given
the fact that the By-Laws are not registered and that the creation of an executive
committee is not expressly provided for in the By-Laws, the acts of the Executive
Committee must be confirmed first by the Board of Trustees to be considered acts of the
corporation.

The members of the Executive Committee, which were confirmed in the minutes of the
meeting of the Board of Trustees as of 15 March 2002, were as follows:

Executive Committee

Bishop Solito K. Toquero             –        Chairman
Rev. Reuel Marigza                   –        Vice Chairman
Atty. Sofronio Larcia                –        Secretary
Bishop Elmer Bolocon                 –        Member
Bishop Benjamin Justo                -        Member

On 17 March 2005, the Board of Trustees elected Bishop Leo A. Soriano as UMC
member-at-large to the Executive Committee.


F.       Determine the remuneration granted to the directors of the University

The By-Laws do not mention compensation for trustees. The Corporation Code states
that in the absence of any provisions in the by-laws fixing their compensation, directors
or trustees shall not receive any compensation other than reasonable per diems. Such
compensation may be granted however, by the vote of a majority of the members12.


G.       Determine the duties of the trustees of the PCCLI

The Corporation Code provides that unless otherwise provided therein, the corporate
powers of all corporations shall be exercised, all business conducted, and all property of
such corporations controlled and held by the board of directors or trustees.

Trustees have a fiduciary duty to the corporation. As such, they are expected to act with
reasonable diligence and skill and with the utmost loyalty to the corporation’s interests.

Trustees are jointly and severally responsible for all damages resulting from the
following acts;

         i.       Willfully and knowingly voting for or assenting to patently unlawful acts
                  of the corporation;


of any action for which shareholders' approval is also required; (2) the filing of vacancies in the board; (3)
the amendment or repeal of by-laws or the adoption of new by-laws; (4) the amendment or repeal of any
resolution of the board which by its express terms is not so amendable or repealable; and (5) a distribution
of cash dividends to the shareholders.
11
   SEC Opinion dated September 27, 1993 issued to Atty. Earnest A. Soberano
12
   See Section 30 of the Corporation Code which allows stock corporations to grant compensation when
voted upon by a majority of the outstanding capital stock


                                                                                                            20
       ii.     Directing the affairs of the corporation with bad faith or with gross
               negligence; and
       iii.    Acquiring any personal or pecuniary interest in conflict with their duty as
               directors.

When a director or trustee attempts to acquire or acquires any interest adverse to the
corporation in respect of any matter which has been reposed on him in confidence, he
shall be liable as trustee for the corporation, and must account for the profits which
otherwise would have accrued thereto.

In addition, the Corporation Code provides that a contract entered into between the
corporation and any of its directors or trustees is voidable, at the option of the
corporation, unless all of the following conditions are present:

       The presence of the director in the board meeting in which the contract was
              approved was not necessary to constitute a quorum;
       The vote of the director was not necessary for the approval of the contract;
       The contract is fair and reasonable under the circumstances; and
       In the case of an officer, the contract with such officer had been previously
              authorized by the board of directors.

If the first two (2) conditions are absent, the contract may be ratified by a vote of at least
two thirds (2/3) of the members, provided that full disclosure of the adverse interest of
the director involved is made at the meeting ratifying the contract, and provided further,
that the contract is fair and reasonable under the circumstances.


H.     Determine if there are any important matters that should be noted in the
       Board meetings

The records show that the following meetings were held from the year 2001:

                                       9 March 2001
                                      5 October 2001
                                      15 March 2002
                                      9 October 2002
                                       6 March 2003
                                    24 September 2003
                                      19 March 2004
                                       13 April 2004
                                       21 May 2004
                                       25 June 2004
                                    15 September 2004
                                      17 March 2005
                                       30 May 2005
                                        2 July 2005
                                       31 July 2005
                                    11 September 2005
                                    10 November 2005
                                    10 December 2005
                                      18 March 2006


The following table summarizes some of the notable actions of the Board of Trustees
(“BOT”) of PCCLI since 2001:




                                                                                           21
09-Mar-01   01-899: To retain Bishop Bolocon as chairman of the BOT

            01-900: To retain the same members to compose the Executive Committee:
             Bishop Elmer Bolocon- Chair
             Bishop Jose Gamboa - Vice-Chair
             Justice Delilah Magtolis - Board Secretary
             Atty. Rodolfo Beltran - Member
             Mrs. Erlinda Velarga - Member

            01-915: To confirm all the above actions taken by the Excom

05-Oct-01   01-935: To elect Prof. Jovita Reyes as VP for Academic Affairs for five years effective
            October 5, 2001

            01-936: To confirm the actions taken by the Excom in the following meetings: April 11,
            2001; April 18, 2001 and July 31, 2001

            01-973: to create a task force composed of the Chair of the Finance Committee, the
            President, the treasurer and the Chief Accountant to perform the following functions and
            to report and make recommendations to the Finance Committee
            a. To review work functions and reportorial requirements of departments- Treasury,
            Accounting and Internal Audit
            b. to compare amount of funds with the Treasury against figures in the Accounting
            records
            c. to determine actual cash positions as of:
            May 31, 2000- end of term of previous administration
            October 1, 2000 - assumption of office of incumbent Treasurer
            May 31, 2001 - end of first year of the new administration
            d. to determine the amount of funds already earmarked by the BOT and disbursed by the
            present administration taken from accumulated savings as of May 31, 2000 and prior
            period
            e. to analyze present problems being encountered in the handling of the University
            finances

            01-991: To approve the opening of an account with Rizal Banking Commercial
            Banking Corporation (RCBC) and the Hong Kong Shanghai Bank

15-Mar-02   02-996: To authorize the withdrawal and/or payment on behalf of the Corporation of
            funds kept and deposited with all depository banks of the Corporation, by checks, notes,
            drafts,, bills acceptances, orders or other instruments for withdrawal/payment signed by
            either
            BISHOP SOLITO TOQUERO, Chairman of the Board, or
            MRS. ROSALINDA AQUINO, Treasurer and countersigned by either
            DR. OSCAR S. SUAREZ, the President, or
            DR, MARIANO APILADO, the VPTE or
            PROF. JOVITA G. REYES, the VPAA, and further authorize all said banks to rely upon
            the authority until receipt by them of a certified copy of a resolution of the Board
            revoking or modifying these resolutions

            02-1008: To authorize the operationalization of the decentralized administration of the
            UTS financial operation

            02-1009: To designate BISHOP TOQUERO or MRS. ROSALINDA AQUINO to sign
            and either DR. SUAREZ or DR. MARIANO APILADO to countersign the PCU, UTS,
            and Dasmariñas checks

            02-1025: To approve the putting up of an Internet Cafe, subject to the approval of the
            budget for the project by the Finance Committee

            O2-1027: To approve the construction of the University façade as proposed by the
            alumni in Dasmariñas and to approve in principle, pending submission of details, the
            relocation of PCU Gate to the area from the highway leading to the College Building as


                                                                                            22
well as the conversion of the old basketball court to a covered gym in coordination with
the alumni association, with counterpart budget of P200,000 from the University.

02-1028: To approve the construction of the gym/court as requested by the elementary
school, Manila, subject to approval of the proposed budget of P715,423 by the Finance
Committee

02-1032: Renovation of the Tutuban shed

02-1043: to confirm the membership of the members of the Board in the different
Committees, as follows:

Executive Committee

Rev. Bishop Solito toquero - Chairman
Rev. Reul Marigza- Vice Chairman
Atty. Sofronio Larcia- Secretary
Bishop Elmer Bolocon - Member
Bishop Benjamin Justo – Member

Education and Personnel Committee

Bishop Garbriel Garol           -       Chairman
Mrs. Erlinda Velarga            -       Member
Atty. Rodolfo Beltran           -       Member
Judge Josue Ernacio             -       Member
Bishop Jose Gamboa, Jr.         -       Member
Bishop Benjamin Justo           -       Member
Atty. Sofronio Larcia           -       Member
Dr. Everett Mendoza             -       Member
Judge Rustico V. Panganiban     -       Member
Justice Crisolito S. Pascual    -       Member

Finance Committee

Mrs. Erlinda Velarga            -       Member
Artty. Rodolfo C. Beltran       -       Member
Bishop Elmer Bolocon            -       Member
Mr. Aniceto Fontanilla          -       Member
Atty. Sofronio Larcia           -       Member
Rev. Reuel Marigza              -       Member
Judge Rustico V. Panganiban     -       Member
Justice Crisolito S. Pascual    -       Member
Bishop Leo Soriano              -       Member
Bishop Solito Toquero           -       Member

Buildings and Grounds Committee

Rev. Reuel Marigza              -       Member
Bishop Benjamin Justo           -       Member
Dr. Everett Mendoza             -       Member
Bishop Gabriel Garol            -       Member
Bishop Elmer Bolocon            -       Member
Bishop Leo Soriano              -       Member
Mr. Aniceto Fontanilla          -       Member
Bishop Jose Gamboa, Jr.         -       Member
Bishop Solito Toquero           -       Member
Judge Josue Ernacio             -       Member




                                                                                23
09-Oct-02   02-1061: To retain the same University official signatories and include other signatories

            02-1082: To authorize the allocation of P5 million budget for the PCU Master
            Development Plan with a request that the president try to source fund from external
            sources

            02-1053: To approve certain specific acts of the Excom

06-Mar-03   02-1096: To confirm the following actions of the PCU Executive Committee and
            Finance Committee:
              i. To authorize the President to continue the efforts now being made by the
            administration to ensure that the tax exemption privilege of the University is recognized
            by the BIR
              ii. To authorize the Administration to negotiate with NAPOCOR a settlement of the
            expropriation case
              iii. To authorize the administration to use P12 million from the Unutilized Funds to
            cover part of the P30 million supplemental budget requested


            03-2032: To create Task Force P10 million to discuss with the auditors and report to the
            next Finance Committee on the allegedly missing P10 Million.
            The committee shall be composed of the following:
              Dr. Oscar Suarez
              Atty. Sofronio Larcia
              Prof. Aniceto Fontanilla
              Mrs. Rosalinda Aquino
              Mr. Alfredo Olano, internal Auditor
              Joaquin Cunanan, Auditing Firm

            03-2035: To authorize the immediate investment of investible funds of the university in
            Trust Accounts with at least two of the following banks:
            1. Metropolitan Bank and Trust Company
            2. Equitable PCI Bank
            3. Standard Chartered Bank

            authorizing that all documents of investment, deposit and/or withdrawal of said funds be
            signed by either
             Bishop Solito Toquero, Chairman of the Board, or
             Mrs. Rosalinda Aquino, University Treasurer
            and countersigned by either:
             Dr. Oscar P. Suarez, University President, or
             Prof. Jovita Reyes, Vice President for Academic Affairs
             Prof. Aniceto Fontanilla as consultant

24-Sep-03   03-1148: To confirm the actions of the Excom in its meeting on March 31, 2003 as
            presented

            03-1151:To authorize the President, Dr. Oscar S. Suarez , to take the appropriate and
            necessary action towards the settlement of claims of the PCU/UTS subject of Civil Case
            no. 1226-95 of the RTC of Cavite, Br. 22 entitled "National Power Corporation v. Italit
            Construction Corp. et. al." negotiate and agree with the NPC and/or the other appropriate
            government officers or agencies in arriving at and fixing the compensation for the
            portions of the property of PCU/UTS covered by TCT 11506 and 11507 of the Register
            of Deeds for the Province of Cavite affected by the expropriation proceedings subject of
            said case; collect, receive and accept on behalf of PCU-UTS such amounts agreed upon;
            enlist the assistance of any person or entity; sign, execute and deliver such contracts,
            agreements, documents or writings; and do and perform such other acts and things
            necessary and appropriate to accomplish the foregoing authority

            03-1152: To allocate the total amount to be collected from the NAPOCOR case to UTS,
            provided that it follows the financial operation requirements of the University




                                                                                            24
19-Mar-04   04-1171: To appoint the following UTS Officials as the official signatories on UTS
            checks and financial transactions: Dr. Anselmo D. Lupdag, OIC, PCU-UTS, and Mrs.
            Merced Hayag, Head of Treasury, Dasmariñas Campus or the Chairman, UTS
            Committee on Budget

            04-1179: To confirm the actions of the Excom in its meeting September 27, 2003

            04-1180: To hold in abeyance the implementation of Execom Action 03-569 until after
            donors are consulted

            04-1181-1185: to confirm actions of the Execom in the following meetings:
            October 6, 14, 27 2003, November 13, 2003 and December 3, 2003 (should be 2003, but
            they typed in 2004) except action 03-583 "to authorize the PCU President to look for
            other alternative courses to facilitate the settlement of the NAPOCOR case."

            04-1208: To request administration to negotiate with the BIR on the Real estate Tax
            Exemption for PCU-Dasmariñas not later than July 31, 2004

            04-1209: To approve the PCU Investment Policies and Guidelines

            04-1212: To approve the amount of P6M for the Master Development Plan for PCU and
            UTS in addition to the P5M previously approved by the BOT

            04-1213 To create an Ad-hoc committee to evaluate the performance of the PCU
            President, the VPAA and the University Treasurer

            04-1214: To appoint as members of the Ad-Hoc Committee:
             Dr. Anselmo D. Lupdag
             Mrs. Erlinda T. Velarga
             Rev. Reuel Norman O. Marigza

13-Apr-04   04-1218: To suspend the rules on special meetings and accommodate other matters for
            deliberation and action

            04-1219: To approve in principle the development plan for the Elementary and High
            School Departments as presented by Architect de la Rosa

            04-1221: To appoint Mr. Mathew Salcedo, Mr. Don Dia and Dr. Eric Torres as the
            financial consultants of PCU

            04-1222: To explore other forms of financing schemes from different financial
            institutions in the country

            04-1223: To request the legal counsel to draft a Memorandum of Agreement (MOA) for
            the financing scheme of the development plan for the PCU high School and Elementary
            Departments. This MOA shall be presented to the board before signing

            04-1219: To approve in principle the development plan for the Elementary and High
            School Departments as presented by Architect de la Rosa

            04-1220: To create a Management team to prepare a Feasibility Study for the
            development plan of the PCU High School and Elementary Departments and eventually
            to oversee its implementation. Members thereof shall be composed of the following:
              Dr. Revelino Gaercia
              Mr. Aniceto B. Fontanilla
              Mr. Nasser Hernaez
              Arch. Leah de La Rosa- Architectural consultant




                                                                                            25
21-May-04   04-1227: To confirm the Certificate of Appointment of Mr. Matthew Salcedo, Mr. Don
            Dia and Dr. Enrico Torres as Financial Advisers of PCU to provided directions and plans
            for the maximum returns of the investible funds of PCU with banking and/or financial
            institutions accredited by CPU namely, Metrobank, PCIB, Standard Chartered Bank and
            such other banks that may be accredited by PCU, with the end in view of obtaining a fair
            and substantial return on investment with a minimum of 18%.

            04-1227b: To hire Mr. Matthew Salcedo, Mr. Don Dia and Dr. Enrico Torres to perform
            the following:
            a. To assist in securing and negotiating the most workable and suitable financial loan
            package from domestic or international institutions in the form of Credit Lines and/or
            Term Loan facilities of ONE BILLION PESOS (Php1,000,000,000.00) or more as may
            be required in the development projects of the University in its Taft Avenue and Vazquez
            Street, Manila and Dasmariñas;
            b. To assist in securing and negotiating for the most efficient terms and conditions of the
            financial loan package for the beneficial interest of the PCU;
            c. To assist PCU in the finalization and documentation of the financial loan package as
            approved to facilitate the early and timely release of the loan proceeds in accordance to
            the agreed schedules draw downs as indicated in the project feasibility of the PCU;
            To mandate the Finance Committee, through its Chairman, Mrs. Erlinda Velarga,
            to gather comparative rates of financial advisers and send it to the members of the
            Board through email.

            04-1227c: To authorize the President to negotiate with Arch. Leah dela Rosa for the
            preparation of a Master Development Plan for PCU.

            04-1228: To approve the Internet Café Project of the Dasmariñas Campus through a
            bank loan provided that the usage rate per hour be set at P30.00.

            04-1229: To amend BOT Action 04-1210 and set the maximum exposure of investible
            funds of the University equivalent to not more than 30% of total investments/ deposits/
            placements.

            04-1231: To accept the PCU-UTS Merger Review Panel Report and endorse the same to
            the UCCP and the UMC.

            04-1232: To appoint the following to document and translate into amendments and
            revisions in the corporation papers of the merger the adjustments, modifications and
            changes as identified and defined in the Report, to wit:
              Bishop Daniel C. Arichea, Jr.
              Atty. Joel L. Bodegon
              Dr. Perla Rizalina M. Tayko
              Rev. Reuel Norman O. Marigza
              Atty. Ester S. Dalisay
              Dr. Evertett L. Mendoza
              Mr. Rafael G. Fernando




                                                                                             26
25-Jun-04   04-1237 To appoint Prof. Aniceto B. Fontanilla as acting Board Secretary for this
            particular meeting

            04-1240: To approve Guidelines for Financial Strategy of PCU
            1. It must be used for cash generating projects only
            2. It must be preceded with due diligence
            3. It must be payable in 5 years
            4. It must not be dollar denominated
            5. It must have a fixed interest rate
            6. It must be approved by the board of trustees
            7. It must not use current real estate property as collateral

            04-1241: To approve the Development Guidelines for PCU
            1. It must not disrupt the academic programs of the University
            2. It must honor historical land marks/ecological sites
            3. It must be vision-mission enhancing
            4. It must preserve PCU as an institution for learning
            5. It must be consistent with the University’s Land Use Policy
            6. It must not have any major deviation from the project plan


            04-1241: To organize the PCU/UTS Internal Project Management Team to be composed
            of the following:
              Bishop Daniel C. Arichea, Jr.
              Rev. Reuel Norman O. Marigza
              Prof. Aniceto Fontanilla
              Mr. Dave Santos
              Dr. Oscar Suarez- ex officio

            04-1242: to approve the development of the Malvar, Taft and Dasmariñas Properties of
            PCU-UTS

            04-1243: To approve the Five Year Master Development Plan of the Malvar, Taft and
            Dasmariñas properties of the PCU-UTS

            04-1244: To appoint the Toledano, De La Rosa and Associates as the Design, Planning
            and Development Consultants to the Five-Year Master Development Plan of the Malvar,
            Taft and Dasmariñas Properties of the PCU-UTS including the preparation of the Project
            Feasibility Study

            04-1245: To appoint Matthew Salcedo, Mr. Don Mario Dia and Dr. Enrico Torres as
            financial consultants for the Five-year Master Development of the Malvar, Taft and
            Dasmariñas Properties of PCU-UTS

            04-1246: to approve the Memorandum of Agreement with Mr. Matthew Salcedo, Mr.
            Don Mario Dia and Dr. Enrico Tores as financial consultants for the Five-Year Master
            Development Plan of the Malvar, Taft and Dasmariñas properties of PCU-UTS as
            corrected

            04-1247: to confirm the approval of the following Modes of Financing
              Internal- Tuition Fees, Development Grants, etc.,
              External - Bank Loans, bonds, etc.

            04-1248: to approve that the development plan for the PCU-UTS should include the
            acquisition of properties as necessary

            04-1249: To accept the forty (40) hectares land donation for Mrs. Sally Salcedo with
            appreciation and thanks




                                                                                           27
15-Sep-04   04-126: To request legal counsel to prepare a MOA with SDC for possible tie-up with
            PCU

            04-1625: To confirm the actions of the Executive Committee reflected in the minutes of
            the Joint Meeting of the Executive Committee and the Finance Committee on May 17,
            2004

            04-1265: To confirm the actions of the Executive Committee reflected in the minutes of
            the Executive committee meeting on June 6, 2004

17-Mar-05   05-1294: To request the Legal Counsel and Mr. Dave Santos with the President to
            negotiate with Mr. Quiambao on his fees and to report to the Execom on the proceedings
            of the consultations

            5-1318 to 05-1320: To elect the following:
              Bishop Toequro- Chairman of the BOT
              Rev. Marigza - Vice Chairman
              Connie Semy P. Mella - Corporate Secretary

            05-1324: To re-elect Dr. Oscar S. Suarez as University President for another 5 years

            05-1306: To ratify the University Manual as amended
30-May-05   05-1131: That the BOT create an Ad hoc Investigating Committee to look into the
            matters raised by Atty. Larcia and that this committee be composed of 3 members; one
            from UCCP, one from the UMC and one outside of the 2 churches who will act as chair;
            and this committee will then report its findings to the board.

            05-1332: That the members of the Ad hoc Committee be:
             Justice Raoul Victorino- IUE
              Atty. Oscar Ferrer - UMC
              Mr. Dominador Capacete - UCCP

            05-1333: To authorize the UCCP Fact Finding Committee to have access to the
            documents needed in relation to the complaint filed by Atty. Sofronio Larcia against Dr.
            Oscar S. Suarez provided it will be coursed through official channels

            05-1334: To allow the Ad hoc Investigating Committee to make the necessary
            recommendation whether to place the President under preventive suspension or not.

            05-1336: To approve the financing option indicated in the two letters and to authorize the
            President to continue with the negotiation with the funding agencies in consultation with
            IMC until such time that the details of the agreement that will govern the negotiation will
            be completed.

            05-1337: To request the Funding Agency to appoint a Monitoring Agency other
            than the Terra Nova Trading Corporation

02-Jul-05   05-1344: Approval of appointment of Dr. Romeo del Rosario as Vice President for
            Theological Education

31-Jul-05   05-1335: To hold in abeyance approval of the recommendation until the BOT has been
            furnished a copy of the MOA

            05-1361: To review the appointment/engagement of the Financial Adviser, and that the
            same matter be included in the next Special meeting of the Board of Trustees

11-Sep-05   05-1369: That while PCU Ad hoc Committee is still conducting its investigation, the
            University should not engage the services of the Financial Advisers




                                                                                             28
10-Nov-05   05-345: Not to sustain the ruling of the chair that Bishop Arichea and Mr. Dave Santos
            are still members of the Board

            05-360: That the BOT be directed to exhaust all means to have the Php32 M that appears
            to be in the possession of Terra Nova at this time returned to the coffers of the
            University by the end of the year

            05-361: that the negotiation for the Php 10M Bridge Fund Financing be suspended

            05-362: that the BOT continue developing a Master Plan for the future of the University
            with the best advantage accruing to the University--that would assure and not jeopardize
            the future of the University

            05-355: To elect Dr. Lupdag as Vice-chairman of the BOT

            05-356: To elect Rev. Connie Semy P. Mella as Corporate Secretary

            03-357: To elect Bishop Leo A Soriano as UMC member at large to the Execom
            Ruled: to hire an independent auditor to conduct fraud audit, authorization for the
            chairman to sign the contract with Punongbayan and authorization to shoulder expenses
            to auditor

            Ruled: Voluntary leave of absence of president

10-Dec-05   05-367: that all action numbers/sequencing in the minutes of the BOT meetings from
            March 17, 2005 to the present to be corrected accordingly

            05-373: That the leave of absence of the President starting December 1, 2005 up to the
            signing of the contract of the audit firm will not be credited towards the allowable leave
            of the President

            05-377: To accept the report of the MDP-IMC

            05-376: To authorize Dave Santos to continue to function as Acting Chair and be
            likewise authorized to sign all disbursements relative to the IMC until Mr. Dave Santos'
            membership in the Board be settled

            05-381: That the initial budget of the IMC be verified by the accountant so as to know
            the financial status of the committee and that this be reported to the Execom in its
            meeting

18-Mar-06   Voted: To approve in principle the termination of the Memorandum of Agreement with
            Toledano de la Rosa and Associates and refer it to legal counsel for appropriate action.




                                                                                             29
                             V. PERMITS AND LICENSES


A.     Determine if the University has all the necessary post-registration permits or
       registrations to enable it to carry out its business


1. SEC requirements

The SEC requires non-stock corporations to register a membership book as part of the
corporate books and records.

We were not able to find a copy of the Membership Book of PCCLI. As discussed earlier,
the previous corporate secretaries, Rev. Connie Semy P. Mella and Atty. Sofronio A.
Larcia stated that they did not see any Membership Book of the University.

There was no copy of the Membership book for UTS and PCC as well.


2. Local Government Permits and Licenses

Under Philippine law, a business establishment must first secure a mayor’s permit from
the local government unit where it intends to operate before it can set up an office and
commence its business operations. Before a mayor’s permit can be secured, the business
establishment is required to secure a barangay clearance certificate, sanitary/plumbing
permit, fire safety inspection certificate and a community tax certificate, among others.
These permits and licenses are renewed on a yearly basis.

Without at least a mayor’s permit, the local government unit can order the closure of a
business establishment until the required permits are secured and the corresponding fees
and penalties paid. The rest of the permits are minor ones and the failure or omission of
an establishment to secure them will not result in the closure of the establishment.
However, this may subject the violating establishment to the payment of penalties when it
applies for the renewal of its business permits.

We were able to obtain a copy of the Barangay Clearance in the name of PCU dated 16
January 2008. A copy of the Mayor’s Permit of PCU could not be found, although the
receipt for the fees for obtaining a Mayor’s Permit was provided for the year 2008.

A Mayor’s Permit in the name of PCCLI was issued by the Office of the Mayor,
Municipality of Dasmariñas, for Union Theological Seminary, Aguinaldo Highway,
Barangay Sampaloc 1. The Mayor’s Permit is valid until 31 December 2008.

Another Mayor’s Permit in the name of PCCLI was issued by the Office of the Mayor,
municipality of Dasmariñas, for Philippine Christian University, Aguinaldo Highway,
Barangay Sampaloc 1. The Mayor’s Permit is valid until 31 December 2008.

Under the Local Government Code of 1991, every corporation shall pay an annual
community tax of Php500.00 and an additional tax, which in no way shall exceed
Php10,000.00 based on the value of its real property and gross receipts. The tax must be
paid in the place where the principal office of the corporation is located. The tax should
be paid no later than the last day of February of each year. If the tax is not paid within the
time prescribed, an interest of 24% per annum will be imposed.

We were able to get a copy of the Community Tax Certificate in the name of PCU issued
on 21 January 2008 by the City Treasurer of Manila.


                                                                                           30
3. Bureau of Internal Revenue (“BIR”) requirements

   i.      tax identification number
   ii.     registration as withholding tax agent
   iii.    registration as a Value-Added (“VAT”) taxpayer
   iv.     procurement and registration of the books of account

The University has a BIR Certificate of Registration in the name of PCU. The TIN of
PCU is 000-803-463-000. The date of registration was 6 October 1946. The
registration is for income tax and withholding tax for compensation and expanded
withholding tax.

UTS has a separate registration as withholding agent. The Certificate of Registration
shows that the date of registration was 25 July, 1994 and its TIN is 94-5440-002552.

According to Ms. Eva Francisco, the Chief Accountant and OIC Treasurer, PCU is
not VAT registered.

PCU applied and was granted a Permit to Use Computerized Accounting System
dated 30 September 2004, with permit no. 0904-33-00027 and is valid until revoked.


4. Social Security System (“SSS”) Requirements

   i.      registration of the University as an employer
   ii.     procurement of the University’s SSS identification number; and
   iii.    contributions

The registration with the SSS could no longer be located, however based on the R-5
SSS forms, PCU Taft’s Employer’s ID No. is 03-000690-0, while PCU Dasmariñas’
is 0357843004. UTS is registered with the SSS with Employer’s ID No. 0304134004.

Mrs. Denia Gonzales was asked to provide evidence of the most recent payments
made on SSS contributions. The contribution payment returns show that PCU
remitted the amount of 441,094 on 29 September 2008.

The contribution payment return for PCU Dasmariñas however, shows that the
amount of Php220, 778.00 was remitted on 8 January 2008. UTS on the other hand
paid Php32,584.00 on 12 December 2007.


5. Registration with the Pag-Ibig Fund

   i.      registration of the University as an employer
   ii.     contributions

The original registration could not be located, however, the receipts show that PCU
Taft, PCU Dasmariñas and have made payments on 10 and 17 October 2008 in the
amounts of Php58,017.39 and Php5,923.64 respectively.

UTS paid the amount of Php33,680.04 on 17 October 2008.




                                                                                  31
     6. Philippine Health Insurance Corporation

     The University’s registration could no longer be located, however PCU Taft, PCU
     Dasmariñas and UTS have been making payments. The Philhealth Employer No. of
     PCU Taft is 20-103930079-5, while UTS’ is 20-061-3-00252. PCU Dasmariñas uses
     its SSS No.

     The receipts show that UTS made payments in the amount of Php6,212.50 for
     October 2003. PCU Taft paid Php139,600.00 on 24 September 2008, while PCU
     Dasmariñas paid Php35,675.00 29 March 2001.


B.      Confirm that there is no pending or threatened proceeding against the
        University, or any ground, which could result in the revocation or suspension
        of government registrations/permits

Notably however, there is a need to ascertain whether the University is updated in its SSS
and Philhealth contributions, as the receipts provided show that they are not up-to-date.
Other than these, there seems to be no pending or threatened proceeding which could
result in the revocation or suspension of the government registration permits.


C.      Confirm that all the permits/registrations of the University are valid and
        currently existing

The registration and permits of the University in so far as those discussed in this section
appear to be valid and current.




                                                                                        32
                                       VI. TAX


A.   Determine whether the University has registered for internal revenue and
     local tax purposes.

     Per BIR Registration Nos. 1RC0000128740, Philippine Christian University
     (“PCU”) in Taft Avenue, Manila is registered for internal revenue purposes with
     Revenue Region No. 006, Revenue District Number 033 since 6 October 1946 for
     the following types of taxes: a) Income Tax; b) Withholding Tax-Compensation;
     and c) Expanded Withholding Tax.

     Union Theological Seminary (“UTS”) in Dasmariñas, Cavite is registered with
     the BIR–Trece Martirez City, RDO No. 54 per RDO Control No. 001-029-124
     since 25 July 1994 as withholding tax agent.

     For local taxation purposes, PCU’s real properties are registered with the City of
     Manila with Tax Declarations Nos. 117-13-694-001-010, 99-00401, 01-00402
     and 02-00403. UTS’s real properties are registered with the Municipality of
     Dasmariñas, Cavite with Tax Declaration Nos. 05-017-02255, 8582, 8583, 14230
     and 14231.

     PCU and UTS also regularly pay their Community Tax in the City of Manila and
     Municipality of Dasmariñas, respectively.


B.   Obtain details of tax concessions, holidays and incentives granted to the
     University

     Per BIR Ruling ENPS-004-2003 dated 21 April 2003, PCU is exempt from
     paying its internal revenue taxes on all revenues derived in pursuance of its
     purpose as an educational institution and used actually, directly and exclusively
     for such purpose. It is however, subject to internal revenue taxes on income from
     trade, business or other activity, the conduct of which is not related to the exercise
     or performance as an educational institution.

     According to PCU’s Treasury and Accounting Manager, Eva Francisco (“Ms.
     Francisco”), UTS is exempt from paying real property tax for the land where its
     campus is located since the year 2004, it having been classified as Agricultural
     Land. However, no document (i.e. ruling of the city/provincial assessor or tax
     declaration stating therein its tax exemption) has been presented for confirmation
     as of this date.


C.   Determine whether income tax returns have been filed and the taxes due paid

     For the fiscal years under review (May 2006 to May 2008), the consolidated
     income of PCU and UTS under the name Philippine Christian Center of Learning,
     Inc. (“PCCLI”) was filed with the BIR Revenue Region No. 6 in Manila, RDO
     No. 33 through tentative income tax returns. No taxable income was declared in
     the said income tax returns. For the fiscal year 2006, operation of PCCLI resulted
     to a net income of Php428,414.00 but all revenues were declared as tax exempt.
     Operation for the fiscal year 2007 resulted to a net loss of Php35,303,175.00
     where all revenues were likewise declared as tax exempt. For the fiscal year
     2008, although its operation resulted to a net income of Php21,898,041.00, all
     revenues were declared by PCCLI as tax exempt. To date, no amended income
     tax return has been filed by PCCLI for the aforementioned fiscal years.


                                                                                        33
In the said income tax returns, only income from tuition fees or those revenues
derived in pursuance of its purpose as an educational institution were declared by
PCCLI, excluding therein income derived from trade, business or other activity
not related to the exercise or performance as an educational institution (i.e. rental
income). Upon inquiry with Ms. Francisco, such non-declaration of rental income
in the said income tax returns was made upon advice of PCCLI’s external
auditors.

For its 2008 local taxes, PCU has paid its real property taxes to the City of Manila
for its land located in Taft Avenue and Pedro Gil, Manila covered by Tax
Declaration No. 117-13-694-001-010 per official receipt no. RAB-023787 in the
amount of Php22,803.37. However, no evidence of payments for the real
property taxes of PCU’s commercial machineries covered by Tax Declaration
Nos. 99-00401, 01-00402, 02-00403 were available for examination.

PCU also paid its Community Tax in the City of Manila for the year 2008 as
evidenced by Community Tax Certificate No. 00065923 in the amount of
Php10,500.00.

Noted however is a BIR tax assessment for PCCLI’s operation for the fiscal year
2002. From an assessed internal revenue tax liability of Php68,978,803.68 per
BIR Pre-assessment Notice dated 6 December 2006, the assessed tax liability was
decreased to Php22,069,272.22 per BIR Post Reporting Notice dated 9 July 2007,
broken down as follows:

       Income Tax                                Php 11,786,983.36
       Withholding Tax on compensation                1,838,202.74
       Expanded Withholding Tax                         927,499.30
       Final withholding tax                          7,516,586.82

       Total deficiency taxes                    Php 22,069,272.22*

       * - inclusive of surcharges, interests and compromise penalty

The Php11,786,983.36 income tax deficiency were based on BIR’s
audit/investigation where undeclared and uncollected rental income, disallowed
expenses and unwithhold compensation income taxes were found.

In the above-mentioned audit conducted by the BIR, deficiency in the remitted
withholding tax on compensation was also found in the amount of
Php1,838,202.74 while the deficiency in Expanded Withholding Tax amounting
to Php927,499.30 was based on BIR’s contention that the land occupied by
PCU was not actually donated by UCCP and UMC to PCCLI (amounting to
Php9,000,000.00) but is actually being rented by PCCLI, hence subject to 5%
tax. The Final Withholding Tax deficiency of Php7,516,586.82 is based on
PCCLI’s interest income from bank deposit as reported in its 2002 Statement of
Receipts and Expenses in the amount of Php18,492,686.00.

According Ms. Francisco, PCCLI, through its letter-protest dated 30 March 2007
signed by its president, Oscar S. Suarez, filed a protest with the BIR for the above
stated tax assessment on 2 April 2007. A series of conferences and re-
investigation were conducted by the BIR after they filed the said protest. The last
conference conducted by the BIR was held last 17 September 2007 were she
attended and asked for a compromise of the said assessment verbally. However,
no action was ever taken by the BIR in PCCLI’s request for compromise. Since
then, no action was ever taken by PCCLI in order to pursue the compromise of the
above stated tax assessment of the BIR.


                                                                                  34
D.   Determine whether the University has withheld and remitted income taxes on
     income payments, as required under the Tax Code, and whether the
     corresponding tax returns have been filed.

     According to Ms. Francisco, PCU has regularly withheld the income taxes on
     compensation of its employees and the expanded withholding tax of their
     purchases from different suppliers. For the year 2006 to 2007, the amount of
     expanded withholding tax and the withholding tax for compensation of regular
     employees and the date of filing are as follows:

     Year     Expanded                Withholding Tax           Date Filed
              Withholding Tax         on Compensation

     2005     Php1,827,593.06         Php10,883,208.85          8 February 2006
     2006       1,837,712,.52            12,063,841.86          26 February 2007/
                                                                31 January 2007
     2007        2,135,730.37            15,071,085.67          31 January 2008

     The Expanded Withholding Tax pertains to taxes withheld for PCU’s purchases
     from suppliers including those withheld for income tax of its contractual and part
     time employees. The Withholding Tax on Compensation pertains to income taxes
     withheld for the compensation of PCU’s regular employees. Noted is the tax
     return for the Withholding Tax on Compensation for the year 2005 amounting to
     Php10,883,208.85 where the said return does not bear the stamp receipt of the
     BIR. According to John Garduque, PCU’s Accounting Supervisor, said tax return
     where filed and submitted to the BIR at the same time that the tax return for the
     2005 Expanded Withholding Tax was filed with the BIR but he cannot find in
     their file a copy of the tax return bearing such stamp receipt of the BIR.

     Also of note is the BIR’s deficiency tax assessment for PCCLI’s operation for the
     fiscal year 2002 where a non-withholding of income tax for compensation in the
     amount of Php24,628,333.84 and non-remittance of Php897,632.32 withholding
     tax was found by the BIR. According to Ms. Francisco, the BIR has not fully
     shown the basis for such assessment both in the attached annexes of the
     assessment and during the conferences conducted previously by the BIR when
     PCCLI were required to explain such findings. To date, such deficiency tax
     assessment of the BIR has not yet been resolved.


E.   Determine details of transactions within the last ten years which could have
     an adverse taxation consequence for the University.

     For the last ten years, PCU has been leasing out commercial lot spaces within its
     Campuses. As previously stated, these rental income earned by PCU is not
     declared for taxation purposes. Based on available lease contracts examined, the
     following are the monthly rental income of PCU for the year 2008:

        1.   Potato Madness               -   Php 6,000.00
        2.   Philippine Seven Corp.       -      57,000.00
        3.   Value Lane                   -      35,000.00
        4.   Greenwich                    -      64,228.89
        5.   Tapa King                    -      56,672.00
        6.   Raymond O. Bang-I            -      56,672.00




                                                                                    35
     The above rental income, which is not being declared for taxation purposes, could
     have an adverse tax consequence for PCCLI considering that under the BIR ruling
     being relied upon by PCCLI for tax exemption, only revenues derived in
     pursuance of its purpose as an educational institution were declared by PCCLI are
     tax exempt. Under the same ruling, income derived from trade, business or other
     activity not related to the exercise or performance as an educational institution is
     excluded from the tax exemption. Unless and until PCCLI secures a BIR ruling
     stating that this rental income should also be exempted from income tax, there is a
     great probability that PCCLI would be assessed for income taxes on such rental
     income. In fact, BIR has already assessed PCCLI for deficiency income tax for
     the year 2002 based on its findings of undeclared rental income for that year in
     the amount of Php7,862,281.32 and uncollected rental income of
     Php10,334,747.00 (See paragraph C above).


F.   Obtain the name and address of the University’s tax advisers

     According to Ms. Francisco, PCCLI does not have a retained tax
     adviser/consultant.




                                                                                      36
                                VII. FINANCIALS


A.   Obtain schedule of all indebtedness owed by the University and details of any
     borrowings or other amounts currently outstanding to the bankers of the
     University

     PCU does not maintain a Schedule of Accounts Payable. As of 30 September
     2008, the following are the breakdown of the total accounts payable of PCU
     appearing in its Trial Balance:

     SSS, PhilHealth, Pag-ibig and
       Withholding tax                     Php     1,211,818.13
     PERAA Retirement Fund                         1,542,322.99
     Insurance payable                                10, 273.78
     Other Payables                               35,534,322.09
     Accounts Payable                             15,131,873.44
     Canteen Rental Deposit                           130,000.00
     Deferred Credits                             16,758,556.60


     Majority of the balance of the account Other Payables came from an account
     entitled “Notes Payable-EPCIB” amounting to Php30,647,434.06. According to
     Ms. Francisco, this notes payable pertains to the Php32M back to back Money
     Max Loan obtained by PCU from EPCIB (now, BDO), the balance of Php32
     million has been reduced by Php2M as a consequence of PCU’s payment of
     principal of the said loan last 30 July 2008. While the loan matures in 2009, Ms.
     Francisco said that the University made the voluntary payment on the principal
     upon the recommendation of Dr. Suarez to decrease the amount of interest
     payments. (See also Section XIV, Specific Issues, The Php32Million Back to Back
     Loan).

     For the Accounts Payable account, majority of its balance came from an account
     entitled “Retirement Payable” in the amount of Php13,520,886.33 which
     according to Ms. Francisco pertains to payments by PCU of retirement benefits to
     its retired employees and was only reflected as accounts payable in the Trial
     Balance due to accounting timing difference. Said Retirement Payable account
     was created in order to put up an account for the availment by its retired
     employees of their retirement benefits but was subsequently re-classified as an
     expense in the subsequent accounting period.

     Included also in the said account is “A/P-Book Sale” account with a balance of
     Php1,398,948.86 which according to Ms. Francisco pertains to PCU’s sale of
     school text books being sold on consignment basis the proceeds of which is
     payable to the book publishers. The Deferred Credits Account, according to Ms.
     Francisco pertains to deposit/tuition fees paid by PCU’s enrollees during
     enrollment but not yet recognized as revenue upon its receipt for the current fiscal
     year. Such enrollment proceeds shall only be recognized as revenue on the
     following fiscal year when the school year for such tuition fees begins.


B.   Obtain details of all loans granted by the University, including all loans and
     indebtedness to directors, employees or stockholders of the University or any
     other University in which any such directors, employee or stockholder is
     interested




                                                                                      37
     PCU does not maintain a schedule of accounts receivables. Based on its Trial
     Balance as of 30 September 2008, the loans and accounts receivable balance of
     PCU are as follows:

            A/R-Students                  Php149,059,596.46
            A/R-Tuition Employee               1,187,521.53
            A/R-Others                        43,363,743.28

     Majority of the balance of A/R Students account came from the accounts “A/R
     MBA” with a net balance of Php44,550,008.39; “AR High School” with a balance
     of Php33,789,573.45; “A/R HRM/ND/BSPT/Nursing” with a balance of
     Php18,885,633.08; “A/R Business Administration & Accountancy” with a
     balance of Php18,020,549.68; and “A/R Comp. Science Assoc. In Comp.
     Tech./Com Eng.” with a balance of Php14,378,838.58. According to Ms.
     Francisco, the large amount of receivables from PCU students was caused by the
     poor implementation of credit and collection policy.

     The A/R-Others account mainly came from the “A/R-Mathew Salcedo” account
     amounting to Php33,212,173.59. According to Ms. Francisco, this account
     pertains to the Php32M back to back loan of PCU with EPCIB (now, BDO) where
     said amount was made as an accountability of Mr. Mathew Salcedo as a
     consequence of the latter’s authority to invest the same. Noted also in this
     account are the following: “Advances for liquidation” account with a balance of
     Php9,399,520.64; “Advances to Faculty and Staff” with a balance of
     Php7,127,900.15; “A/R CS Puno” with a balance of Php144,651.80 and “A/R O
     Suarez” with a balance of Php752,416.88. “CS Puno” pertains to the former
     president of PCU/PCCLI while “O Suarez” is the incumbent president of
     PCU/PCCLI. According to Ms. Francisco, the receivables from Puno and Suarez
     pertain to unliquidated cash advances and were previously being deducted from
     their salary. However, since Mr. Puno was separated from PCU, such
     unliquidated cash advances were no longer collected.


C.   Review all outstanding mortgages, charges (whether registered or not) and
     any other security arrangements and documents relating to or affecting the
     University

     According to Ms. Francisco, PCCLI has no outstanding mortgages or other
     security arrangements with any third person except the Php32M back to back loan
     of PCU where its time deposit amounting to Php32M with EPCIB (now, BDO)
     was used as security for its loan of the same amount from the same bank which
     was subsequently invested by PCU to Terra Nova. (See also Section XIV, Specific
     Issues, The Php32Million Back to Back Loan).


D.   Obtain details and copies of all guarantees, indemnities and other contingent
     obligation (i) given by the University in relation to the obligations of any
     other person, and (ii) given by any person in relation to the obligations of the
     University

     According to Ms. Francisco, PCCLI has no existing guarantees, indemnities or
     other contingent obligation in relation to any obligation of a third person or vice
     versa.




                                                                                     38
E.   Review all installment purchase agreements, finance leases, letters of credit,
     performance and other bonds

     According to Ms. Francisco, PCCLI has no existing installment purchase
     agreements, finance leases, letters of credit, performance and other bonds.


F.   Obtain details of all contracts or commitments for capital or development
     expenditures not in the ordinary course of business

     On 25 June 2004 PCU adopted a Php5 Billion Master Development Plan for the
     development of the properties of United Church of Christ in the Philippines
     (“UCCP”) and United Methodist Church (“UMC”) to make them profitable and
     sustain the pursuit of their teaching ministry. In the implementation thereof, the
     amount of Php28M was allocated to Toledano, Dela Rosa and Associates for the
     architectural and engineering designs of the Taft, Dasmariñas and Malvar
     properties of PCCLI.

     (Please see also discussion in Section XIV, Master Development Plan and Section
     IX. Contracts and Agreements)


G.   Obtain details of all material contingent liabilities and commitments not
     recorded in the books of the University

     1) As discussed in paragraph C above, PCCLI has a pending BIR tax deficiency
        assessment for the fiscal year 2002 amounting to Php22,069,272.22.
        Considering that the BIR has not acted upon PCCLI’s protest and/or request
        for compromise since 17 September 2007 such assessment may be deemed
        final and collectible already against PCCLI;

     2) Another contingent liability of PCCLI is the claim of US$2,547,376.00 for
        damages against PCU by National Institute of Business Administration
        (NIBA) of Lahore, Pakistan in the case entitled “Colonel (Retired) Ayub Ali
        Rana, in his capacity as Chairman and Proprietor of National Institute of
        Business Administration (NIBA), Pakistan, The National Institute of Business
        Administration (NIBA) versus Philippine Christian University (PCU) Manila,
        et. al.” docketed as Civil Case No. 07117578 pending before the RTC of
        Manila, Branch 32 for Recognition/Enforcement of a Foreign Judgment (the
        “NIBA Case”).

        This case arose from a complaint for damages filed by a certain Colonel
        (Retired) Ayub Ali Rana (“Rana”) against Dr. Carlito S. Puno (“Puno”) and
        PCU before the Court of Senior Civil Judge 1st Class Lahore, Pakistan (the
        “Pakistan Court”) docketed as Civil Suit No. 486/1 (the “Pakistan Case”) for
        Puno and/or PCU’s alleged unilateral and unjustified termination of a
        Memorandum of Agreement dated 25 October 1992 where NIBA and PCU
        collaborated to jointly offer academic programs at the NIBA campuses in
        Pakistan. After hearing in the said Pakistan Case, judgment was rendered by
        the Pakistan Court against Puno and PCU on 2 September 2005 ordering the
        latter to pay complainant Rana the sum of US$2,547,376.00 as damages. On
        18 July 2007, the NIBA case was filed before the RTC of Manila which was
        subsequently raffled to its Branch 32. The NIBA Case is now in its pre-trial
        stage.




                                                                                    39
H.      Obtain details of annual financial statements of the University with reports
        of directors and auditors for the last three financial years of the University

        For the last three fiscal years 2006 to 2008, PCCLI has submitted “tentative”
        financial statements to the BIR since the audit of these financial statements has
        not yet been completed by its external auditors. Consequently, PCCLI’s external
        auditor has not yet expressed an opinion on the fairness of its financial statements.

        The tentative financial statement of PCCLI shows the following figures:

         Year          Asset            Liabilities           Capital        Income/ (Loss)
         2006    P 484,824,449.00   P 127,083,107.00     P 357,741,342.00   P 428,414.00
         2007      533,534,380.00     206,811,364.00       326,723,016.00   (35,303,175.00)
         2008      521,149,905.00     175,664,085.00        345,485820.00    21,898,041.00


I.      Obtain the name and addresses of the University’s accountant and auditor
        (including authority to release information)

        PCCLI’s external auditor is Virgilio R. Santos & Co. with office address at Suite
        411 Pasda Mansion, 77 Panay Avenue, Quezon City, Philippines.


J.      Findings and Recommendations of the Financial Consultant

The following is a summary of the reports rendered by Mr. Isagani G. Arceo (”financial
consultant”) in the exercise of his oversight functions over the following offices:
Treasury, Accounting, Personnel/HRD, General Services, Health Services, and Auxiliary
Services, including the PCU Arcade and Business Rental, and as consultant for finance to
the Receiver.


1.      PCU Investments

On 20 October 2008, the financial consultant reported to the Receiver that he requested
Ms. Eva Francisco, the OIC Treasurer to furnish him a copy of the schedule of PCU
investments, including photocopies of the certificates as soon as possible, in order to
safeguard the cash of PCU. The OIC Treasurer however, was not able to comply
immediately since the University was busy preparing for Foundation Week.

After the school activities were over, she provided the photocopies of certificates of
various investments in BDO and BPI without however, the requested schedule of
investments. After two weeks of inquiries and several follow-ups, the following had been
observed:

     1. The Treasurer does not maintain an updated schedule of investments where she
        can refer most of the time for future negotiations.

     2. The copies of investment certificates that she is currently holding and keeping in
        the PCU vault are all expired and incomplete based on the records provided by the
        banks.

     3. The Treasurer normally relies on the interest rates quoted by the banks for the
        expiring investments that require roll-over. No negotiations for higher interest
        rates had been made in order to maximize the return of PCU investments.




                                                                                          40
     4.    The list of investments furnished by the banks does not agree or reconcile with
          the Trial Balance as of 25 September 2008, the day the Receiver took over the
          management of PCU. Comparison of the Trial Balance and bank confirmations
          as of 25 September 2008 reveals the following:

                                     Bank Confirmation              Trial Balance

          BDO TAFT

          PESO       304803069837        28,739,557.07                39,136,209.04
                     304803069605         1,008,329.77                 1,047,417.38
                     304802554507         2,480,342.23                 2,460,000.00
                     304802554072            27,383.67                    27,300.00

           USD          480126372           10,412.25                      10,000.00
                        0005255             36,100.00                      -

          BDO SINGALONG

          PESO           223006               1,014,648.86                 -

          BPI TAFT                            7,341,683.58                 6,517,849.89
                                              9,072,788.84                   -
                                                                           2,206,871.31

          EPCI SINGA 6364-01532-0             32,647,434.06                32,647,434.06


The following actions were recommended to be taken by the Receiver:

      •   To request the banks to furnish copies of certificate of investments and to make
          adjusting entries to reconcile the books with bank records.

      •   To request the treasurer to prepare and maintain a schedule of investments with
          the banks and make reconciliation every month and furnish Accounting with a
          copy.

      •   To require the Treasure canvass interest rates from different banks before any
          roll-over is being made in order to maximize earnings of the PCU investments.

On 8 November 2008, the financial consultant reported that as of 30 September 2008, the
total of the balances of cash and cash equivalents and short-term investments of PCU was
only Php89,746,678.29. This amount included the proceeds of land sold to NAPOCOR of
around P41 million.

The financial consultant noted that the audited report in 2000 showed that the balances of
the said account were Php260,331.422.00. The difference in the amount of
Php170,584,743.71 was obviously used to finance the huge losses amounting to more
than Php20 million in 2003, Php42 million plus in 2004 and P34 million plus in 2005.
While the results of PCU operations for the school year 2006, 2007, and 2008 are still not
available, the preliminary estimate shows that the University shall be suffering
tremendous losses as well.


2.        Accounts Receivable (“A/R”)

On 20 October 2008, the financial consultant reported the following on A/R:




                                                                                          41
   •   We have noticed that as per record the A/R – students continue to increase and the
       balance as of 25 September 2008 is Php147,494,181.36, broken down as follows:

                      A/R – ARTS & SCIENCE                 = P 2,316,366.85
                      A/R – BUS ADM & ACCOUNTANCY            18,020,549.68
                      A/R – COMPUTER SCIENCE                   8,805,340.19
                      A/R – EDUCATION                          2,253,217.16
                      A/R - MASSCOM                            2,651,351.92
                      A/R – NURSING/ PHYSICAL THERAPY            710,913.71
                      A/R – SECRETARIAL                        1,011,944.87
                      A/R – SOCIAL WORK                          659,732.41
                      A/R – COLLEGE OF LAW                       986,008.14
                      A/R – MA                                 4,707,438.96
                      A/R – MBA                              39,267,899.32
                      A/R – HIGH SCHOOL                      34,035,327.45
                      A/R – ELEMENTARY                       13,482,787.36
                      A/R – KIDDIE                               988,085.70
                      A/R – EFS                                   33,265.00
                      A/R – KOREAN PROGRAM                        12,000.00
                      A/R – NIBA                                 850,175.98
                      A/R – NIBM                                  15,020.64
                      A/R – ISPEAC                               624,826.00
                      A/R – BUS. ADM & ACCOUNTANCY/SEC         6,048,402.71
                      A/R – ARTS & SCIENCE                   10,455,907.57
                      A/R – COM. SCIENCE                     15,753,963.58
                      A/R – HRM/ND/BSPT/NURSING              21,040,045.08
                      A/R – EXTESION ILOILO                    3,166,460.50
                      A/R – HEMC                                 352,800.00
                      A/R – OLD ACCOUNTS                   ( 2,625,401.52 )

                       TOTAL                                185,624,429.76
                       LESS – ALLOW. FOR DOUBTFUL ACCTS      38,130,248.40

                      NET A/R STUDENTS                      147,494,181.36


   •   Results of the various interviews with A/R accountants and their comments are as
       follows:

                  -   The policy on no permit no exam has not been strictly
                      implemented.
                  -   The accounts of students, who have dropped from their classes,
                      must also be reversed or cleared from the books.
                  -   Collections from extension classes were not deposited to the banks,
                      hence their accounts remain outstanding. There were cases in the
                      past where the coordinators/secretary had misused the funds that
                      were supposed to be deposited to PCU accounts. Legal cases were
                      filed in the court already against erring employees.
                  -   Some employees are not updating the accounts of their children
                      and yet no reclassification entries have been made from A/R –
                      students to A/R – employees.
                  -   There is no coordination between Accounting and professors or
                      head of the departments to lessen the incidences of non collection
                      of tuition fees and other fees.

The following actions were recommended:

   •   To request the accounting to prepare aging of A/R for all students with
       outstanding accounts.

   •   To implement immediately the policy on no permit no exam.


                                                                                      42
     •   To hold a meeting with all the persons concerned to discuss on how to lessen the
         problems on non collection of tuition fees, etc.

     •   To request the external auditor to write – off A/R from students where probable
         collections are very slim.

     •   To ask the auditor to reclassify the receivable from students to A/R employees on
         the uncollected accounts from the children of the employees.

On 8 November 2008, the financial consultant reported the following on A/R:

For the school year 2000, the reported accounts receivable-students balance was
Php29,715,353.00, however, as of 30 September 2008 this account shot up to
Php188,377,366.39 or an increase of 634%. Based on our investigation, the huge increase
can be attributed to the following:

     •   The school has become lax in implementing the school policy of no permit no
         exam.

     •   The accounting was very accommodating to students who have unpaid arrears,
         because they can still enroll in the succeeding semesters.

     •   The collections from extension classes are not properly managed, because, of
         poor accounting system and internal control in place. For example, the extension
         classes from Saudi has an outstanding receivable balance of P1.7 million, and
         based on our investigation only Php280 Thousand were received from the
         coordinator this year. We received also reports from students who enrolled on
         extension classes at Bangko Sentral and they told us that they were allowed to pay
         their account on a scheme of pay-when-able basis, so as a result many of them are
         not updating their accounts.

     •   We were also told that accounts of students who dropped out from their classes,
         their accounts remain open and no adjustments have been made.

     •   No aging of accounts of receivable per students has ever been maintained by
         PCU.


3.       PCU Arcade and Canteens

On 20 October 2008, the financial consultant reported the following on the PCU Arcade
to the Receiver:

     •   We have noticed that PCU Arcade is operating under the supervision of Ms. Razel
         Mercado acting as the manager and under her are the College Canteen, High
         School Canteen, Elementary Canteen, and Convenience Store.

     •   Our initial observations reveal that the all of these Auxiliary services of PCU are
         operating with less internal control and no complete set of book of accounts are
         kept or maintained by the said department. In fact, when we asked the manager if
         the PCU Arcade is making money or not, she told us that she doesn’t know,
         because, they only have records on daily sales and purchases, but other related
         expenses they have none.

     •   Further investigations from various staff of PCU Arcade reveal the following
         unacceptable accounting practices and controls:


                                                                                         43
                  -   The key of the cash register is left in the hands of the cashiers and
                      therefore they can easily reset the cash register machines anytime
                      they wish with no trace of the transactions for the whole day.
                  -   The cashiers count the money without the presence of any person
                      and just turnover it to the office of the manager. The only
                      supporting document for this is a piece of paper printed in the Cash
                      Register.
                  -   One employee holds two positions- as cashier and as purchaser of
                      various requirements of the PCU Arcade. What is worse, she is
                      also the custodian of the blank checks of the PCU Arcade and is
                      responsible as well for preparing the checks to various suppliers
                      while being the Petty Cash Custodian.
                  -   The cashier maintains Petty Cash amounting to Php108,000.00 to
                      cover expenses for the PCU Arcade and replenishment is being
                      done on a regular basis.

The following actions were recommended:

   •   To request the manager to get hold of all the keys of cash register and assign her
       to be the one in-charge of resetting the machines.

   •   To set a schedule for visits of all cashiers in order to collect the proceeds of their
       sales and reset the machines for internal control and easy monitoring.

   •   To segregate the duties and responsibilities of the cashier and the purchaser.

   •   To assign the manager control of the checks and to prohibit others from gaining
       access to the same. The checkbooks must be placed in a safety vault.

   •   To have a daily comparison of sales and purchases and see to it that their gross
       margins are within their targeted goals.

   •   To keep a complete set of books so that a financial report can be prepared.

   •   To limit the time from 7:00 am to 5:00 pm to avoid losses due to payment of
       overtime.

On 8 November 2008, the financial consultant reported to the Receiver that PCU operates
the following: Main canteen, Elem. & High School canteen, Dasmariñas canteen, and the
convenience store. The financial consultant reported that all of these canteens are being
subsidized by PCU because they are continuously incurring losses. This should not be the
case because the canteen already has its own market that is capable of generating
additional income for the school. Upon investigation, the following observations were
made:

   •   The accounting system is weak and no books of account are being maintained.

   •   The internal controls are very poor because no segregation of responsibilities and
       accountabilities are in place.

   •   Some employees who are retireable are assigned to the canteen because there are
       no available jobs for them elsewhere. These employees are receiving higher
       salaries.




                                                                                          44
4.      Un-liquidated cash advances

The financial consultant reported that as of 30 September 2008, the total un-liquidated
cash advances of officers and employees appearing in the Trial Balance of PCU amounts
to Php9,399,520.64. After investigation, it appeared that the bulk of said cash advances
were from prior years amounting to more or less Php7.8 Million. This is a clear violation
of the accounting policy set by PCU that any cash advances made by its officers and
employees must be liquidated within 5 days after the completion of the project or events.
When the accounting staff in-charge was asked about this, she had informed the financial
consultant that whenever she followed up the officers and employees for the liquidation
of their cash advances, they just promised her to do so but nothing happened.
Management should have been very strict in the implementation of the policy for cash
advances so that it would not be abused.


5.       Mary Johnston College of Nursing (“MJCN”) Trust Account

The Trial Balance of PCU as of 30 September 2008, showed that a MJCN trust account
had a credit balance of Php18,101,789.82. After investigation, it appeared that PCU
maintained this account for all the transactions of MJCN at Tondo Manila. Further
analysis of the said account revealed that all income and expenses, including the assets
bought by MJCN, are lodged in this account. This is not a good accounting practice
because, in the consolidation process, the net result of the operation of MJCN, whether
savings or deficit, is not considered. Further, the assets or liabilities at the end of the
accounting period are not recognized.


6.      PCU Constructions

Sometime in 2005, the Board of Trustees of PCU had approved the creation of MDP-
IMC sitting en banc as the Bidding Committee for PCU Master Development Plan
Projects.13 A review of the policy guidelines formulated and approved by the MDP-IMC
show clearly that all constructions for PCU Master Development Plan Projects will be
under open bidding to be participated in by their accredited contractors. However, in spite
of this very clear guideline, a majority of the projects were assigned to Arquiza
Construction without any bidding at all. The files show that while Arquiza Construction
occasionally submitted estimates or bills of materials for evaluation and approval, most
of the bills of materials were prepared by the director of General Services and which was
approved by the President.

Noting this irregular procedure, the Receiver invited an independent contractor to
estimate one of the ongoing constructions being done by Arquiza Construction. After
receiving the results of the estimate made by the independent contractor, it was learned
that the estimate made by the General Services which was contracted to Arquiza
Construction were over priced by more or less Php200 Thousand.


7.      D. Sycip Scholarship Trust Fund

The D. Sycip Scholarship Trust Fund managed by Equitable PCI Bank was confirmed to
have a balance of Php1,256,148.84 as of 30 June 2006. This was taken off the books
however and it is not clear who is currently responsible for the administration of the fund.
In addition, many trust funds are not moving and no status report is being submitted to
13
  Based on an unsigned Memorandum dated 15 August 2006 captioned “Bidding Award and Guidelines
for the Packet Development Projects at the Manila Dasmariñas Campuses” provided by Engineer Gomez,
director of General Services. The action was approved by the Executive Committee in its meeting on 3
February 2005, but was not ratified by the Board of Trustees.


                                                                                                   45
the grantors. The financial consultant has studied the existing investments of PCU but
currently cannot trace these various trust funds to the said list of investments.




                                                                                   46
                                 VIII. PROPERTY


A.      Determine if the University has real and personal properties

PERSONAL PROPERTIES

Shares of Stocks:

     a. Certificate No. 37031

               Series K 10% Cumulative Convertible Preferred Stock, P10.00 Par Value
               Issuer:            PLDT
               Registered owner:  Philippine Christian University
               No. of Shares:     80


     b. Certificate No. 038807

               Series R 10% Cumulative Convertible Preferred Stock, P10.00 Par Value
               Issuer:            PLDT
               Registered owner:   Philippine Christian University
               No. of Shares:     320


     c. Certificate No. 038806

               Series R 10% Cumulative Convertible Preferred Stock, P10.00 Par Value
               Issuer:            PLDT
               Registered owner:   Philippine Christian University
               No. of Shares:     150


     d. Certificate No. 038808

               Series R 10% Cumulative Convertible Preferred Stock, P10.00 Par Value
               Issuer:            PLDT
               Registered owner:   Philippine Christian University
               No. of Shares:     300


     e. Certificate No. 038823


               Series R 10% Cumulative Convertible Preferred Stock, P10.00 Par Value
               Issuer:            PLDT
               Registered owner:   Philippine Christian University
               No. of Shares:     150


     f. Certificate No. 038824

               Series R 10% Cumulative Convertible Preferred Stock, P10.00 Par Value
               Issuer:            PLDT
               Registered owner:   Philippine Christian University
               No. of Shares:     150



                                                                                   47
g. Certificate No. 038825

          Series R 10% Cumulative Convertible Preferred Stock, P10.00 Par Value
          Issuer:            PLDT
          Registered owner:   Philippine Christian University
          No. of Shares:     150


h. Certificate No. 114598

          Series V 10% Cumulative Convertible Preferred Stock, P10.00 Par Value
          Issuer:            PLDT
          Registered owner:  Philippine Christian University
          No. of Shares:     350


i. Certificate No. 114599

          Series V 10% Cumulative Convertible Preferred Stock, P10.00 Par Value
          Issuer:            PLDT
          Registered owner:  Philippine Christian University
          No. of Shares:     350


j. Certificate No. 114600

          Series V 10% Cumulative Convertible Preferred Stock, P10.00 Par Value
          Issuer:            PLDT
          Registered owner:  Philippine Christian University
          No. of Shares:     350


k. Certificate No. 114601

          Series V 10% Cumulative Convertible Preferred Stock, P10.00 Par Value
          Issuer:            PLDT
          Registered owner:  Philippine Christian University
          No. of Shares:     350


l. Certificate No. 056234

          Series V 10% Cumulative Convertible Preferred Stock, P10.00 Par Value
          Issuer:            PLDT
          Registered owner:  Philippine Christian University
          No. of Shares:     500


m. Certificate No. 056235

          Series V 10% Cumulative Convertible Preferred Stock, P10.00 Par Value
          Issuer:            PLDT
          Registered owner:  Philippine Christian University
          No. of Shares:     500




                                                                              48
n. Certificate No. 056236

          Series V 10% Cumulative Convertible Preferred Stock, P10.00 Par Value
          Issuer:            PLDT
          Registered owner:  Philippine Christian University
          No. of Shares:     500


o. Certificate No. 056237

          Series V 10% Cumulative Convertible Preferred Stock, P10.00 Par Value
          Issuer:            PLDT
          Registered owner:  Philippine Christian University
          No. of Shares:     500


p. Certificate No. 075238

          Series T 10% Cumulative Convertible Preferred Stock, P10.00 Par Value
          Issuer:             PLDT
          Registered owner:   Philippine Christian University
          No. of Shares:      350


q. Certificate No. 075057

          Series T 10% Cumulative Convertible Preferred Stock, P10.00 Par Value
          Issuer:             PLDT
          Registered owner:   Philippine Christian University
          No. of Shares:      350


r. Certificate No. 068532

          Series T 10% Cumulative Convertible Preferred Stock, P10.00 Par Value
          Issuer:             PLDT
          Registered owner:   Philippine Christian University
          No. of Shares:      350

s. Certificate No. 068533


          Series T 10% Cumulative Convertible Preferred Stock, P10.00 Par Value
          Issuer:             PLDT
          Registered owner:   Philippine Christian University
          No. of Shares:      350


t. Certificate No. 068534

          Series T 10% Cumulative Convertible Preferred Stock, P10.00 Par Value
          Issuer:             PLDT
          Registered owner:   Philippine Christian University
          No. of Shares:      350




                                                                              49
   u. Certificate No. 176678

               Series T 10% Cumulative Convertible Preferred Stock, P10.00 Par Value
               Issuer:             PLDT
               Registered owner:   Philippine Christian University
               No. of Shares:      350


Vehicles under the Name of PCU:

       Toyota Corolla 2000

               Registered owner       :     Philippine Christian University
               CR No. 67677592 issued on 18 September 2000 (original on file)
               Motor No.               :    2E-3228179
               Serial/Chassis No.     :     EE110-8300505
               License Plate No.      :     WFJ470
               Color                  :     Green
               Latest Registration on 20 October 2008 (original on file)

According to Ms. Eva Francisco, PCU Treasurer, she is the one paying for the remaining
amortization of this vehicle under BOT Action No. 97-245 or the University Car Plan
Policy. Upon full payment, a Deed of Absolute Sale will be executed by PCU in her
favor. We have yet to get hold of a copy of the car plan.


       Tamaraw FX

               Registered owner      :       Philippine Christian University
               CR No.                :       65905323
               Motor No.             :       7K-0346036
               Serial/Chassis No.    :       KF808017094
               License Plate No.     :       WMX380
               Color                 :       Dark Green

On file is a Deed of Absolute Sale of the Tamaraw (dated and Notarized 1 June 2006),
executed by PCU, through Suarez, in favor of Jovita G. Reyes, a retired professor of
PCU. The sale was pursuant to the University Car Plan Policy.


       Toyota Revo 2001

               Registered owner      :       Philippine Christian University
               CR No.                :       72628097 issued on 29 June 2001
               Motor No.             :       2L-9678217
               Serial/Chassis No.    :       LF80-8007248
               License Plate No.     :       WTG856
               Color                 :       Ivory Over Moonlight

According to Ms. Eva Francisco, ownership of this vehicle had already been transferred
to Ms. Rosalinda Aquino, the former Treasurer of PCU pursuant to the University Car
Plan. On file is a written request from Ms. Aquino for the transfer of the vehicle to her
name stating full payment of the vehicle. However, no copy of the Deed of Sale in her
favor can be obtained.




                                                                                        50
Vehicles over which PCU has interest but in the name of third persons:


       Nissan Sentra 1995

              Registered owner       :     Crisolito Pascual
              CR No.                 :     2684612-2 issued on May 17, 1995 (photocopy)
              Motor No.              :     GA16-672555B
              Serial/Chassis No.     :     BAYALHFB14-B05215
              License Plate No.      :     UBJ214
              Color                  :     Silver
              Latest Registration on 16 April 2008 (photocopy)

According to Ms. Francisco, the original documents are with Arsenio Juan, Jr., the
assigned driver for the vehicle.

This vehicle was purchased by PCU from Mr. Crisolito Pascual. On file is a Deed of
Absolute Sale (dated 30 April 2002 and notarized 7 May 2002) executed by Crisolito
Pascual in favor of PCU. However, PCU did not obtain a new registration in its name.


       Mitsubishi L300

              Registered owner       :     Raymond Mendoza
              CR No.                 :     2710590-1 issued on 5 May 2004
                                           (photocopy only)
              Motor No.              :     4D56AN8556
              Serial/Chassis No.     :     PAEL35NY13B003932
              License Plate No.      :     XMX475
              Color                  :     White
              Latest Registration on 15 May 2007

According to Ms. Eva Francisco, this vehicle is a subject of an agreement between
Raymond Mendoza and PCU wherein PCU has the right to make use of the vehicle but it
shall exclusively purchase textbooks from Mr. Mendoza during the five year period.
After the five year period, Mr. Mendoza will execute a Deed of Absolute Sale in favor of
PCU. The five year-period will end early next year. There is a need to ascertainwhat kind
of arrangement is this.

A copy of the contract has been requested from Ms. Eva Francisco but none has been
provided.


       Isuzu 2006

              Registered owner       :     Raymond Mendoza
              CR No.                 :     4560259-4 issued on 22 December 2006
              Motor No.              :
              Serial/Chassis No.     :
              License Plate No.      :     ZGK639
              Color                  :     White
              Latest Registration on 22 December 2006

According to Ms. Eva Francisco, this vehicle is a subject of an agreement between
Raymond Mendoza and PCU wherein PCU has the right to make use of the vehicle but it
shall exclusively purchase textbooks from Mr. Mendoza during the five year period.



                                                                                      51
After the five year period, Mr. Mendoza will execute a Deed of Absolute Sale in favor of
PCU. It is not known when the five year period commenced.

A copy of the contract has been requested from Ms. Eva Francisco but none has been
provided.


       Toyota Hilux 1997

                  Registered owner      :       Oscar Suarez
                  CR No.                :       67516582 issued on 16 August 2000
                                                (photocopy only)
                  Motor No.              :      2L-9397894
                  Serial/Chassis No.     :      LN85-7095980
                  License Plate No.      :      URG318
                  Color                  :
                  Latest Registration on 7 August 2008 (original on file)

It appears that when this vehicle was purchased, it was registered in the name of Oscar
Suarez. Consequently, Oscar Suarez executed a Deed of Absolute Sale in favor of PCU
but PCU did not obtain a certificate of registration in its name anymore.

On file is the Deed of Absolute Sale (dated and notarized 21 August 2001) executed by
Oscar Suarez in favor of PCU.


Other Vehicles:

       Hyundai Starex Van

                  Registered owner      :       Oscar Suarez
                  CR No.                :       68575983 issued on 18 August 2000
                                                (photocopy only)
                  Motor No.             :       D4BHY924109
                  Serial/Chassis No.    :        KMJWW7HPYU244367
                  License Plate No.     :       WPC 675

It appears that when this vehicle was purchased, it was registered in the name of Oscar
Suarez. Based on the documents examined, portion of the purchased price was paid for
by Oscar Suarez pursuant to the University Car Plan Policy. Considering that the vehicle
is already in his name, he did not anymore execute a Deed of Sale in favor of PCU.

On file is a Certification of Payment dated 9 December 2005 executed by Eva Francisco
as Chief Accountant and Alfredo A. Olano as Internal Auditor, stating that Suarez paid
Php255,000.00 or the 30% of the total cost of the Hyundai Starex RV SVX WPC 675 in
accordance with BOT Action No. 97-245 (Car Plan Policy) approved by the BOT in
October 1997.


Investments:

a.     Trust Agreement dated 2 June 2004 and notarized 25 June 2004

       Parties:          Philippine Christian Center of Learning, Inc., as the Trustor
                         represented by Oscar Suarez, President and Rosalinda Aquino,
                         Treasurer



                                                                                     52
                      Banco De Oro as the Trustee, represented by Ador A. Abrogena,
                      SVP and Ma. Lourdes T. De Vera, FVP

       Amount:        Php34,162,382.71 (Fund)

On file is a Secretary’s Certificate notarized 7 June 2004 executed by Sofronio A. Larcia,
certifying, among others, that in a meeting of the Executive Committee on 6 June 2004, a
resolution was adopted authorizing the University to create a trust for up to a maximum
of 30% of its funds with BDO as Trustee.

Significant provisions of the Trust Agreement:

       1. The Trustor directs the Trustee to hold, invest, and reinvest the Fund and keep
          the same invested, in its sole discretion, without distinction between principal
          and income (Section 2).

       2. The Trustee shall not be liable for any loss or depreciation in value of the
          property and assets of the Fund, resulting from any of the investment or
          reinvestment operations made by it pursuant to the agreement (Section 4,
          paragraph b).

       3. A fixed rate of interest or return on the Fund is neither assured nor guaranteed
          by the Trustee and that the agreement is not covered by the PDIC, and the
          losses, if any, shall be for the account of the Trustor. Where funds are placed
          in fixed income generating investments, a quotation of income expectation or
          like terms is neither assured nor guaranteed by the Trustee, and it does not
          therefore, entitle the Trustor to a fixed interest or return on their investment
          (Section 4, last paragraph).

       4. The Trustor may withdraw the income or principal of the Fund upon its giving
          of a written instruction to the Trustee (Section 5).

       5. The Trustor reserves the right to terminate the Agreement upon 30 calendar
          days prior notice in writing to the Trustee (Section 8).

       It was not confirmed whether this Trust Agreement is still in force.


Others:

a.     Machinery (Declared under Tax Declaration No. 99-00401) in the name of PCU
       Specifications:     44 units Personal Computer (Computer Lab 1)
                           45 units Personal Computer (Computer Lab 2)
       Market Value:       Php3,252,280.00
       Assessed Value:     Php1,300,510.00

b.     Machinery (Declared under Tax Declaration No. 99-00402) in the name of PCU
       Specifications:     44 units Personal Computer (Computer Lab 1)
                           45 units Personal Computer (Computer Lab 2)
                           46 units Personal Computer (Computer Lab 3)
                           45 units Personal Computer (Computer Lab 4)
       Market Value:       Php6,902,760.00
       Assessed Value:     Php2,761,100.00

c.     Machinery (Declared under Tax Declaration No. 99-00403) in the name of PCU
       Specifications:     44 units Personal Computer (Computer Lab 1)
                           45 units Personal Computer (Computer Lab 2)


                                                                                       53
                                   46 units Personal Computer (Computer Lab 3)
                                   45 units Personal Computer (Computer Lab 4)
                                   45 units Personal Computer (Computer Lab 5)
                                   42 units Personal Computer (Computer Lab 8)
                                   42 units Personal Computer (Computer Lab 9)
                                   35 units Personal Computer (Computer Lab 10)
        Market Value:              Php12,138,876.00
        Assessed Value:            Php4,855,550.00


REAL PROPERTIES

The following titles on file reported below were photocopies provided by the OIC
Treasurer. Notably, none of the titles are in the name of PCCLI.


a.      TCT No. RT-68264 (374652) of the Register of Deeds of Quezon City
        Registered owner:  PCU as Trustee for and in behalf of Samahan ng
                           Nagkakaisa sa Camarin, Inc. (SNKI)
        Location:          Novaliches, Quezon City
        Lot Area:          Five parcels of land of 5,000 square meters each

On file is a letter dated 3 August 2006 Habitat for Humanity, addressed to PCU through
Oscar Suarez, requesting for the Release of the Titles to SNKI.


b.      TCT No. 114226 of the Register of Deeds of Manila
        Registered owner:   PCU
        Location:           Malate, Manila14
        Lot Area:           2,534 square meters


c.      TCT No. 244084 of the Register of Deeds of Manila
        Registered owner:   Philippine Central Conference of the United
                            Methodist Church
        Location:           Malate, Manila15
        Lot Area:           973.40 square meters


d.      TCT No. 115694 of the Register of Deeds of Manila
        Registered owner:   Philippine Christian College
        Location:           Malate, Manila16
        Lot Area:           3,750 square meters


e.      TCT No. 59577 of the Register of Deeds of Manila
        Registered owner:   Philippine Central Conference of the
                            Methodist Church
        Location:           Manila17
        Lot Area:           728.9 square meters


f.      TCT No. T-1089259 of the Register of Deeds of Cavite
14
   Ellinwood quarters near the Elementary
15
   Taft
16
   High School
17
   Taft


                                                                                   54
       Registered owner:   Union Theological Seminary, Phils., Inc. (In favor
                           Of the Board of Founders, Nanking, Theological Seminary,
                           NY, USA)
       Location:           Dasmariñas, Cavite
       Lot Area:           37,130 square meters
       Tax Declaration No: 05-017-02255
       Actual Use per TD: Residential
       Assessed Value:     Pph2,896,140.00

The title bears an annotation of Quitclaim in Favor of Union Theological Seminary,
Philippines, Inc. (Entry No. 8657) which provides for the Cancellation of the Phrase (In
favor of the Board of Founders, Nanking, Theological Seminary, NY, USA)


g.     TCT No. T-1089260 of the Register of Deeds of Cavite
       Registered owner:  Union Theological Seminary, Phils., Inc. (In favor
                          Of the Board of Founders, Nanking, Theological Seminary,
                          NY, USA)
       Location:          Dasmariñas, Cavite
       Lot Area:          111,692 square meters

The following annotations appear on the Title:

       a. Quitclaim in Favor of Union Theological Seminary, Philippines, Inc. (Entry
          No. 8657) which provides for the Cancellation of the Phrase (In favor of the
          Board of Founders, Nanking, Theological Seminary, NY, USA)

       b.   A Notice of Lis Pendens (Entry No. 9471-105) for:

                      DARAB Case No. 0402-048-98
                      Nestor V. Villanueva et.al., complainants, vs. The
                      President, Union Technological Seminary, Philippines and
                      Philippine Christian University as principal defendant, and
                      Atty. Luis P. Bueno, Jr. in his capacity as PARO, Cavite as
                      necessary and indispensable party defendants.

        c. Joint Affidavit of Adverse Claim executed by Rodolfo Beltran and Bishop
            Emerito P. Nacpil.


h.     TCT No. T-1093743 of the Register of Deeds of Cavite
       Registered owner:  Union Theological Seminary, Phils., Inc. (In favor
                          Of the Board of Founders, Nanking, Theological Seminary,
                          NY, USA)
       Location:          Dasmariñas, Cavite
       Lot Area:          3,116 square meters

The title bears an annotation of Quitclaim in Favor of Union Theological Seminary,
Philippines, Inc. (Entry No. 8657) which provides for the Cancellation of the Phrase ((In
favor of the Board of Founders, Nanking, Theological Seminary, NY, USA)


i.     TCT No. T-1089258 of the Register of Deeds of Cavite
       Registered owner:  Union Theological Seminary, Phils., Inc. (In favor
                          Of the Board of Founders, Nanking, Theological Seminary,
                          NY, USA)
       Location:          Dasmariñas, Cavite


                                                                                      55
       Lot Area:             247,792 square meters



The following annotations appear on the Title:

              a. Quitclaim in Favor of Union Theological Seminary, Philippines, Inc.
                 (Entry No. 8657) which provides for the Cancellation of the Phrase (In
                 favor of the Board of Founders, Nanking, Theological Seminary, NY,
                 USA)

              b. A Notice of Lis Pendens (Entry No. 9471-105) for:

                      DARAB Case No. 0402-048-98
                      Nestor V. Villanueva et.al., complainants, vs. The
                      President, Union Technological Seminary, Philippines and
                      Philippine Christian University as principal defendant, and
                      Atty. Luis P. Bueno, Jr. in his capacity as PARO, Cavite as
                      necessary and indispensable party defendants.

              c. Joint Affidavit of Adverse Claim executed by Rodolfo Beltran and
                 Bishop Emerito P. Nacpil.

j.     TCT No. (T-11505) RT-6821
       Registered owner:  Union Theological Seminary, Phils., Inc. (In favor
                          Of the Board of Founders, Nanking, Theological Seminary,
                          NY, USA)
       Location:          Cavite
       Lot Area:          288,956 square meters

The title bears an annotation of Quitclaim in Favor of Union Theological Seminary,
Philippines, Inc. (Entry No. 8657) which provides for the Cancellation of the Phrase (In
favor of the Board of Founders, Nanking, Theological Seminary, NY, USA)


k.     TCT No. (T-11506) RT-6822
       Registered owner:  Union Theological Seminary, Phils., Inc. (In favor
                          Of the Board of Founders, Nanking, Theological Seminary,
                          NY, USA)
       Location:          Cavite
       Lot Area:          285, 608 square meters

The following annotations appear on the Title:

              a. Quitclaim in Favor of Union Theological Seminary, Philippines, Inc.
                 (Entry No. 8657) which provides for the Cancellation of the Phrase (In
                 favor of the Board of Founders, Nanking, Theological Seminary, NY,
                 USA)

              b.    A Mortgage in favor of Philippine American Life Insurance Company
                   for the sum of Php95,000.00.


l.     TCT No. (T-11507) RT-6823
       Registered owner:  Union Theological Seminary, Phils., Inc. (In favor
                          Of the Board of Founders, Nanking, Theological Seminary,
                          NY, USA)


                                                                                     56
       Location:             Cavite
       Lot Area:             396,614 square meters


The following annotations appear on the Title:

              a. Quitclaim in Favor of Union Theological Seminary, Philippines, Inc.
                 (Entry No. 8657) which provides for the Cancellation of the Phrase (In
                 favor of the Board of Founders, Nanking, Theological Seminary, NY,
                 USA)

              b. A Mortgage in favor of Philippine American Life Insurance Company
                 for the sum of Php95,000.00




                                                                                    57
                        IX. CONTRACTS AND AGREEMENTS


A.        Determine if the University has entered into any contracts/agreements

The following contracts described below were those made available to the Receiver and
his team by the OIC Treasurer, Mrs. Eva Francisco and the Director of General Services,
Engineer Edwin Gomez.


1.        Lease Contracts

a.        Memorandum of Agreement (Not notarized)

Lessor:                PCU represented by Oscar Suarez (signed)
Lessee:                Potato Madness represented by Jennifer Carpio (signed)
Spaced leased:         University Canteen (Food Cart)
Term:                  Monthly basis
Amount:                Php5,000.00 for the rent
                       Php1,000.00 for the utilities
Date:                  27 November 2007
Effectivity:           December 2007

No document showing that the agreement has been terminated. The last payment on
record is Php6,000.00 dated 15 August 2008 for the month of July, 2008.


b.        Contract of Lease with 7-11 (Notarized on 28 June 2006)

Lessor:                PCCLI represented by Bishop Erme R. Camba, OIC-President (no
                       CTC)
Lessee:                Philippine Seven Corp. represented by Teodoro Wenceslao
                       (Development Division Manager) and Atty. Evelyn S. Enriquez
                       (Legal and Corporate Service Division Manager)
Term of Lease:         5 years commencing on 1 January 2005, expiring
                       on 31 December 2009 (renewable)
Amount:                Initially, Pph55,000.00 per month with yearly escalation rate of 5%
Date:                  28 June 2006

In a letter dated 12 February 2008, the monthly rental of the lessee was reduced to
Php57,000.00 instead of Php63,669.38 (as provided in the Lease Contract). This rental
fee is applicable from January 2008 to December 2008.

In a letter dated 10 March 2008 addressed to Oscar Suarez, Philippine Seven Corp.
requested for the renewal of the Lease Contract in view of the impending expiration on
December 2009. The record does not show whether the request was accepted or not.


c.        Compromise Agreement

First Party:           Food Integrated Network, Inc. rep. by Benjamin Go, Pres.
Second Party:          Phil. Christian Center of Learning, Inc. rep. by Oscar Suarez
Date:                  19 August 2005

The purpose of the agreement is to put an end to an ejectment case filed by PCU against
Go and pending before the Court of Appeals (CA-G.R. SP No. 83380). The agreement
was approved by the CA in a Decision dated 2 February 2006


                                                                                       58
Mr. Go agreed to pay the amount of Pph8M as full and final settlement to be paid as
follows:
    - the amount of Php1M to be paid within one month from the execution of the
       agreement
    - the remaining Php7M to be paid in 35 equal monthly installments at Php200T a
       month beginning on 30 September 2005.

On file is a list of 37 checks supposedly turned over on 19 August 2005 by Mr. Go to
PCU pursuant to the agreement, with two checks in the amount of Php500T and the rest
of the checks in the amount of Php100T each for a total amount of Php4.5M. These
checks are dated from 1 September 2005 to 15 March 2007.

Still on file is a list of 35 checks of Php100T each supposedly turned over on 22 August
2007 by Mr. Go to PCU pursuant to the agreement, for a total amount of Php3.5M. These
checks are dated from 31 March 2007 to 31 August 2008.

In a letter dated 29 July 2006, Mr. Go requested Mr. Suarez to defer to another dates the
deposit of five of the checks dated 15 August, 31 August , 15 September, 30 September,
15 October and 31 October 2006.

In a letter dated 29 March 2007, Mr. Go submitted five checks of Php100T each dated 12
May, 21 May, 21 June, 21 July and 21 August 2007 to replace checks dated 30
September, 15 October, 31 October, 15 November and 30 November 2006.

Considering the terms of the agreement and the subsequent replacement of checks, the
compromise amount is supposed to have been fully paid on August 2007.

However, upon confirmation with Ms. Eva Francisco, there are still six checks for
Php100,000.00 each issued by Mr. Go that have not yet been deposited by PCU. One of
the checks is to be replaced by Mr. Go and the other five checks are yet to be deposited.
The checks were not deposited because of a request from Mr. Go to defer the deposit of
the said checks.

d.     Contract of Lease with Value Lane/Worldquest Internet

The contract was previously a sub-lease with Benjamin Go who was earlier evicted
pursuant to a court order. Value Lane thereafter requested in a letter 25 October 2004,
addressed to Mr. Suarez, to continue with the lease under the same terms as their sub-
lease with Mr. Go. The request was approved through Rosalinda Aquino in a letter dated
6 December 2004, which letter states that the new contract of lease will commence on
January 2005. However, the record does not show that a formal agreement was
subsequently executed.

In letters dated 15 February 2005 and 20 July 2005, Value Lane requested for a reduction
of leased space from 118.5 sq.m. to 98.02 sq.m. and for a corresponding reduction in
rental fee to Php33,500.00. In a letter dated 22 July 2005, Ms. Aquino granted the request
but the approved reduced rental fee was Php38,000.00 instead of Php33,500.00.

In a letter dated 13 October 2005, Value Lane again requested for a reduction of the
rental fee to Php35,000.00 up to December 2005. It seems that the request was approved
because the same letter bears a handwritten note of approval. However, an undated
document shows a list of post dated checks received from Value Lane as rental fee for the
months of October to December 2005 and January 2005 to December 2005 which show
that the amount of rental is still Php38,000.00 per month.




                                                                                       59
In a letter dated 17 January 2007, Ms. Eva Francisco requested Value Lane to remit
another set of 12 post dated checks at Php38,000.00 each as rental fee for the year 2007.
There is no document showing that the checks were actually received.

In a letter dated 16 February 2008, Ms. Eva Francisco denied a request of Value Lane to
reduce the monthly rent from Php38,000.00 to Php35,000.00. At the same time, Ms.
Francisco requested Value Lane to remit another set of 12 postdated checks to cover
periods January to December 2008.

It seems that the agreement is still subsisting because Value Lane is still being billed by
PCU for electric and water consumption, the current being August 2008.


e.        Contract of Lease with Greenwich

In a letter dated 25 October 2004, Danilo C. Bunag, Business Development Officer of
Greenwich Pizza Corporation requested for the continuance of the lease of PCU’s
property which they are currently occupying pursuant to their agreement with Mr. Go
(see discussion on ejectment above). In a letter dated 6 December 2004, Ms. Aquino
informed Mr. Bunag of Mr. Suarez’ approval to continue with the lease until December
2004 at the same rate they pay Mr. Go. The letter also states that a new contract of lease
will start on January 2005. The new contract (and its amendment) was actually signed on
6 July 2005.

Lessor:                  PCCLI, rep. by Oscar Suarez, Pres. (no CTC)
Lessee:                  Greenwich Pizza Corporation represented by Ma. Regina B.
                         Navarrete, General Manager
Term:                    5 years beginning January 2005 and expiring on December 2009
                         Subject to lessee’s option to renew

Term      Rental Schedule              Rent/Month        Escalation   Rent/Month Inclusive
                                                                      of Withholding Tax
1         Jan 1, 2005 – Dec 31, 2005   51,000.00                      53,684.21
2         Jan 1, 2006 – Dec 31, 2006   54,570.00         7%           57,442.11
3         Jan 1, 2007 – Dec 31, 2007   58,389.90         7%           61,463.05
4         Jan 1, 2008 – Dec 31, 2008   64,228.89         10%          67,609.36
5         Jan 1, 2009 – Dec 31, 2009   70,651.78         10%          74,370.29


f.        Contract of Lease with Tapa King

Lessor:                  PCCLI, represented by Oscar Suarez, President (no CTC)
Lessee:                  S-5 Inc. represented by Ma. Encarnita V. Vergel De Dios,
                         Treasurer In Trust and Managing Director
Term:                    5 years, beginning 1 September 2005 and ending 31 August 2010
                         Renewable

Term         Rental Schedule                Rent/Month                Escalation
1            Sept 1, 2005 - Dec 31, 2005    45,000.00
2            Jan 1, 2006 - Dec 31, 2006     48,150.00                 7%
3            Jan 1, 2007 - Dec 31, 2007     51,520.00                 7%
4            Jan 1, 2008 - Dec 31, 2008     56,672.00                 10%
5            Jan 1, 2009 - Dec 31, 2009     62,340.00                 10%
6            Jan 1, 2010 - Aug 31, 2010     68,574.00                 10%

In a letter dated 17 January 2007, Ms. Francisco requested Tapa King to remit 12
postdated checks at Php51,520.00 as rental fee for the year 2007. In response to the letter,



                                                                                         60
Tapa King wrote on 20 February 2007 requesting for a reduction of rental fee from
Php45,000.00 to Php35,000.00 or a moratorium on the increase of lease rental for 2007.

In a letter dated 21 May 2007, Ms. Francisco reminded Tapa King of its unpaid rental
fees for periods October 2006 to 31 May 2007. It is also stated in the letter that the rental
fee was maintained at Php45,000.00 per month, pursuant to Tapa King’s request.

In a letter dated 9 August 2007, PCCLI, through its lawyer De Guia Law Offices,
demanded the payment from S-5 Inc. of the unpaid rental obligations as of 31 July 2007
in the total amount of Php542,761.23. The subsequent exchange of letters shows that
Tapa King still failed to pay its overdue and current rental obligations.

In a statement of account as of 31 July 2008 prepared by Ms. Francisco and noted by Mr.
Suarez, the total outstanding obligation of Tapa King is at Php884,700.00. The Statement
of Account also shows that the rental fee was maintained at Php45,000.00 per month.

In a letter dated 7 November 2008, PCU, through the law firm of BGEPAL, demanded
from Tapa King the total amount of P927,900.00 inclusive of penalties as provided in the
Contract of Lease.


g.        Contract of Lease/Ukay-Ukay/Mr. Raymond O. Bang-I

Lessor:                 PCCLI, rep. by Oscar Suarez, Pres. (no CTC)
Lessee:                 Country Rovers Thrift Shop, rep. by Mr. Bang-I
Term:                   4 years from May 2005 to 31 December 2009 (renewable)

Term         Rental Schedule              Rent/Month                   Escalation
1            May 1, 2005 - Dec 31, 2005   45,000.00
2            Jan 1, 2006 - Dec 31, 2006   48,150.00                    7%
3            Jan 1, 2007 - Dec 31, 2007   51,520.00                    7%
4            Jan 1, 2008 - Dec 31, 2008   56,672.00                    10%
5            Jan 1, 2009 - Dec 31, 2009   62,340.00                    10%


In a letter dated 23 January 2008, Ms. Francisco requested Mr. Bang-I to remit the 12
post dated checks at P56,672.00 each as rental fee for the year 2008


2.        Construction Contracts

The table below summarizes the construction contracts entered into by the University
entered into within the last three years provided to the Receiver and his team by Engineer
Edwin Gomez, Director of General Services. According to Engineer Gomez, this is not a
comprehensive list as the contracts which were part of the Master Development Plan
were supposed to be in the possession of the Investment Management Committee (IMC).
Per records, the last chairman of the IMC was Mr. Dave Santos.

There were no bid abstracts provided to accompany these contracts. All the construction
contracts were awarded to Arquiza Construction. The total amount of these construction
contracts is Php27,860,278.00.

                    Signatory of    Signatory of
                        PCU           Arquiza
 No.       Date                                        Price             Scope of Work
                    (Employer/      Construction
                      Owner)        (Contractor)




                                                                                          61
1    6-Feb-07    Dr. Oscar S.   Engr. Mylvin M.     83,850.00    closing     of    Administrative
                 Suarez         Arquiza                          Bldg., re-tiling of 2 units toilet,
                                                                 etc
2    8-Feb-07    Dr. Oscar S.   Engr. Mylvin M.    395,171.00    improvement works at PCU
                 Suarez         Arquiza                          High School Bldg., Malate,
                                                                 Manila
3    7-Mar-07    Dr. Oscar S.   Engr. Mylvin M.    520,850.00    re-roofing of Salakot Chapel
                 Suarez         Arquiza                          and concrete gutter water
                                                                 proofing       at      UTS-PCU
                                                                 Compound, Dasmariñas, Cavite

4    22-Mar-     Dr. Oscar S.   Engr. Mylvin M.   1,495,000.00   repair of 16 classrooms of High
       07        Suarez         Arquiza                          School Building at PCU
                                                                 Dasmariñas Cavite
5    30-Mar-     Dr. Oscar S.   Engr. Mylvin M.    380,000.00    painting works at PCU High
       07        Suarez         Arquiza                          School Building at Malate,
                                                                 Manila
6    19-Apr-     Dr. Oscar S.   Engr. Mylvin M.   1,350,412.00   repair of 2 Buildings, 14
       07        Suarez         Arquiza                          Classrooms of High School
                                                                 Building at PCU Dasmariñas,
                                                                 Cavite
7    13-Jun-07   Dr. Oscar S.   Engr. Mylvin M.   1,513,494.00   completion of UTS Couples
                 Suarez         Arquiza                          Housing        (formerly     12
                                                                 classroom E/S Bldg) at UTS-
                                                                 PCU Dasmariñas, Cavite
8    13-Jun-07   Dr. Oscar S.   Engr. Mylvin M.    352,395.00    repair/rehabilitation of USHS
                 Suarez         Arquiza                          toilet, Dasmariñas Cavite

9    3-Jul-07    Dr. Oscar S.   Engr. Mylvin M.    250,000.00    construction of 4 comfort
                 Suarez         Arquiza                          rooms for Kiddie Kollege and
                                                                 SPED, installation of tiles for 4
                                                                 classrooms/     hallway,     and
                                                                 construction of septic tank at
                                                                 PCU Elementary School Bldg. ,
                                                                 Malate Manila

10   30-Jul-07   Dr. Oscar S.   Engr. Mylvin M.    361,860.00    additional works for conversion
                 Suarez         Arquiza                          of UTS Couples Housing,
                                                                 UTS-PCU, Dasmariñas Cavite

11   30-Jul-07   Dr. Oscar S.   Engr. Mylvin M.   1,156,400.00   improvements of different UTS
                 Suarez         Arquiza                          projects      (UTS     Library,
                                                                 Administration Bldg. and other
                                                                 projects)           UTS-PCU,
                                                                 Dasmariñas
12   30-Jul-07   Dr. Oscar S.   Engr. Mylvin M.   2,355,202.00   improvements for various UTS
                 Suarez         Arquiza                          projects (Salakot Chapel) at
                                                                 UTS-PCU            Compound,
                                                                 Dasmariñas
13   15-Aug-     Dr. Oscar S.   Engr. Mylvin M.    970,732.00    rehabilitation of Refectory
        07       Suarez         Arquiza                          Building, UTS-PCU Campus,
                                                                 Dasmariñas
14   15-Aug-     Dr. Oscar S.   Engr. Mylvin M.    244,339.00    additional works for the repair
        07       Suarez         Arquiza                          of UTS Library

15   15-Aug-     Dr. Oscar S.   Engr. Mylvin M.    317,719.00    additional works at PCU
        07       Suarez         Arquiza                          Elementary, Kiddie Kollege
                                                                 and     repair  of    ceiling,
                                                                 elementary canteen at Malvar
                                                                 St., Manila
16   15-Aug-     Dr. Oscar S.   Engr. Mylvin M.    696,679.00    repair of Mission Center
        07       Suarez         Arquiza                          Building, UTS-PCU Cmpd.,
                                                                 Dasmariñas Cavite




                                                                                               62
17    25-Oct-    Dr. Oscar S.   Engr. Mylvin M.    740,259.00    improvements/ rehabilitation of
        07       Suarez         Arquiza                          PCU-USHS Perimeter Fence
                                                                 and Entrance Gate at Malvar
                                                                 St., Malate,
18   9-Nov-07    Dr. Oscar S.   Engr. Mylvin M.    388,025.00    additional work/change order
                 Suarez         Arquiza                          (re-alignment of UTS Library,
                                                                 vinyl floor tiles) UTS-PCU
                                                                 Compound, Dasmariñas Cavite

19   15-Nov-     Dr. Oscar S.   Engr. Mylvin M.    439,000.00    additional work/change order
        07       Suarez         Arquiza                          (re-alignment of UTS Library,
                                                                 vinyl floor tiles) UTS-PCU
                                                                 Compound, Dasmariñas Cavite

20   11-Dec-     Dr. Oscar S.   Engr. Mylvin M.    812,308.00
       07        Suarez         Arquiza                          repair of USHS classrooms and
                                                                 high school gumnasium at
                                                                 Malvar St., Malate
21   11-Dec-     Dr. Oscar S.   Engr. Mylvin M.    220,000.00
       07        Suarez         Arquiza                          repair of College Gymnasium
                                                                 at Taft Avenue, Manila
22   25-Jan-08   Dr. Oscar S.   Engr. Mylvin M.    749,306.00    improvement        of     USHS
                 Suarez         Arquiza                          Facilities, Malvar St., Malate,
                                                                 Manila
23   15-Feb-     Dr. Oscar S.   Engr. Mylvin M.    679,634.00    repair     of    high     school
       08        Suarez         Arquiza                          gymnasium and 2 USHS
                                                                 classrooms at Malvar St.,
                                                                 Malate, Manila
24   11-Apr-     Dr. Oscar S.   Engr. Mylvin M.    311,936.00    repair of A-2 rooms, HRM Bar
       08        Suarez         Arquiza                          Rooms, roofing and ceiling at
                                                                 PCU Taft
25   3-Mar-08    Dr. Oscar S.   Engr. Mylvin M.   1,057,198.00   (a) repair of wooden trussers,
                 Suarez         Arquiza                          roofing sheets and gutters at
                                                                 Academic Bldg.; (b) repair of
                                                                 outside     perimeter    ceiling,
                                                                 gutters and downspout of
                                                                 Administration Bldg. (Deck
                                                                 Portion); and (c) fabrication of
                                                                 frames for tarpaulin at PCU
                                                                 Taft

26   11-Apr-     Dr. Oscar S.   Engr. Mylvin M.    209,096.00    improvement/repairs           on
       08        Suarez         Arquiza                          Academic and Administrative
                                                                 Bldg., PCU Taft Campus, P.
                                                                 Gil St.
27   2-May-08    Dr. Oscar S.   Engr. Mylvin M.    444,859.00    rehabilitation of Elementary
                 Suarez         Arquiza                          School Building (Phase 3)
                                                                 Malvar St., Malate Manila
28   2-May-08    Dr. Oscar S.   Engr. Mylvin M.    344,704.00    rehabilitation of Elementary
                 Suarez         Arquiza                          School Building (Phase 2)
                                                                 Malvar St., Malate Manila
29   2-May-08    Dr. Oscar S.   Engr. Mylvin M.    794,037.00    rehabilitation of Elementary
                 Suarez         Arquiza                          School Building (Phase 1)
                                                                 Malvar St., Malate Manila
30   26-May-     Dr. Oscar S.   Engr. Mylvin M.    491,030.00    repainting of College Building
        08       Suarez         Arquiza                          exterior walls only, hallways
                                                                 and lobby PCU-Dasmariñas
                                                                 Cavite
31   26-May-     Dr. Oscar S.   Engr. Mylvin M.    197,440.00    repainting of front fence and
        08       Suarez         Arquiza                          exterior walls of Academic
                                                                 Building along Taft Avenue
32   26-May-     Dr. Oscar S.   Engr. Mylvin M.    229,400.00    fabrication of 124 units of desk
        08       Suarez         Arquiza                          table for CBAA and CNAH
                                                                 Department




                                                                                             63
 33     12-Jun-08     Dr. Oscar S.       Engr. Mylvin M.          162,112.00    excavation and masonry works
                      Suarez             Arquiza                                and steel grating at High
                                                                                School      Canal    at    PCU
                                                                                Dasmariñas Cavite
 34     12-Jun-08     Dr. Oscar S.       Engr. Mylvin M.          768,405.00    rehabilitation of Administration
                      Suarez             Arquiza                                Dept. toilet at PCU Dasmariñas

 35     12-Jun-08     Dr. Oscar S.       Engr. Mylvin M.        1,381,827.00    improvements of basketball
                      Suarez             Arquiza                                court-gym at PCU Dasmariñas,
                                                                                Cavite
 36     12-Jun-08     Dr. Oscar S.       Engr. Mylvin M.          236,740.00    rehabilitation of Elementary
                      Suarez             Arquiza                                School Building (additional
                                                                                works
 37      8-Jul-08     Dr. Oscar S.       Engr. Mylvin M.          555,959.00    replacement/repair of roofing
                      Suarez             Arquiza                                Extension       and   Chemistry
                                                                                Laboratory of High School
                                                                                Dept. at PCU, Dasmariñas
                                                                                Cavite
 38      8-Jul-08     Dr. Oscar S.       Engr. Mylvin M.          225,371.00    repair of College staircase
                      Suarez             Arquiza                                roofing at PCU, Dasmariñas,
                                                                                Cavite
 39      24-Jul-08    Dr. Oscar S.       Engr. Mylvin M.        1,185,187.00    improvement works for PCU
                      Suarez             Arquiza                                High School and Elementary
                                                                                School Departments at PCU
                                                                                Manila
 40      29-Jul-08    Dr. Oscar S.       Engr. Mylvin M.          615,469.00    improvement works for PCU
                      Suarez             Arquiza                                Kiddie Kollege at Dasmariñas,
                                                                                Cavite
 41      12-Aug-      Dr. Oscar S.       Engr. Mylvin M.        1,719,203.00    rehabilitation of 2nd and 3rd
            08        Suarez             Arquiza                                floors toilet at Academic Bldg.,
                                                                                at PCU Taft Avenue, Manila

 42      15-Sep-      Dr. Oscar S.       Engr. Mylvin M.          457,670.00    additional works for basketball
           08         Suarez             Arquiza                                court-gym and partial repair of
                                                                                old high school building at
                                                                                PCU Dasmariñas Cavite

TOTAL                                                       Php 27,860,278.00



Contracts were also entered into between the University and Toledano de la Rosa and
Associates. Copies of these contracts however, other than a photocopy of the
Memorandum of Agreement notarized on 1 January 2005, were not available. The
disbursement vouchers show a total of Php13,293,354.89 was paid to Toledano de la
Rosa and Associate since 2004. (See further discussion in Section XIV, Master
Development Plan):

                                                                Disbursement
        Payee                     Particulars                     Voucher           Date           Amount
      Toledano       Professional fee for the preparation
      de la Rosa     of preliminary project studies &
      and            Master Development Program of
1     Associates     PCU Campus                                    116217         15-Jun-04      1,028,700.00
      Toledano
      de la Rosa
      and            Refund of Expanded w/ tax as
2     Associates     General Building Contractors                  116753          6-Aug-04          91,440.00
      Toledano
      de la Rosa     Partial payment of preparation of
      and            architectural and engineering designs
3     Associates     of PCU Taft Facade                            117062         10-Sep-04        165,000.00
      Toledano       2nd payment for the Architectural
      de la Rosa     and Engineering designs of PCU Taft
4     and            Facade                                        117274          1-Oct-04          75,000.00



                                                                                                            64
     Associates

     Toledano     Partial payment for the preparation of
     de la Rosa   the architectural and engineering
     and          designs of PCU Taft Academic
5    Associates   Building, Extension                      117397   13-Oct-04      201,500.00
     Toledano     Partial payment for the preparation of
     de la Rosa   the architectural and engineering
     and          designs of PCU Taft Academic
6    Associates   Building                                 117544    4-Nov-04      110,500.00
     Toledano
     de la Rosa   Partial Payment for the Master
     and          Development Planning of PCU Taft
7    Associates   Campus Shopping Arcade                   118764   28-Mar-05    1,263,000.00
     Toledano
     de la Rosa   30% Down payment for MDP-PCU
     and          Union Science Schools and Shopping
8    Associates   Arcade                                   119153    6-May-05      200,000.00
     Toledano
     de la Rosa   Payment for additional structural
     and          engineering design of PCU-Taft
9    Associates   Academic Building ext.                   119271   20-May-05       37,730.00
     Toledano
     de la Rosa   partial payment for the Master
     and          Development Planning of PCU-Taft
10   Associates   and Shopping Arcade                      119351    1-Jun-05      500,000.00
     Toledano
     de la Rosa   Partial payment-master development
     and          plan of PCU-USS and Shopping
11   Associates   Arcade, net of expanded w/ tax           119494   16-Jun-05    2,924,320.00
     Toledano
     de la Rosa   Partial payment of Master
     and          Development Planning of PCU-UTS
12   Associates   Dasmariñas                               119625   29-Jun-05    2,500,000.00
     Toledano
     de la Rosa
     and          Payment for structural design of the
13   Associates   academic building extension              119738    11-Jul-05      47,775.00

     Toledano     PCU-USS (Elem. and HS) Master
     de la Rosa   Development Plan Accomplishment
     and          billing for module 1, net of share in
14   Associates   partial payment and 2% expanded tax      120411   19-Sep-05    1,562,124.46

     Toledano     PCU Taft- Master Development Plan
     de la Rosa   Accomplishment billing for Module
     and          1, net of share in partial payment and
15   Associates   2% expanded tax                          120410   19-Sep-05      552,924.09

     Toledano     PCU-UTS Dasmariñas Master
     de la Rosa   Development Plan accomplishment
     and          billing for Module 1 net share in
16   Associates   partial payment and 2% expanded tax      120952   18-Nov-05    2,033,341.34

                                                                             Php13,293,354.89




                                                                                          65
                                      X. ACADEMICS


The following report has been prepared by the Dr. Betty I. Molina in her capacity as
academic consultant to the Receiver:


A.        University Autonomy

The first concern was the autonomy status of the University. Autonomy granted to any
educational institution is the ultimate measure of academic excellence of that institution.
All universities exert every effort and does not spare expenses to be able to attain such
status.

The Vice President for Academic Affairs (“VPAA”) informed Dr. Molina that PCU’s 5
years autonomy status (2001-2005) was not renewed. PCU has sent a letter of
reconsideration to CHED and this is pending up to now.

Action Taken:

The VPAA and Dr. Molina reviewed the identified deficiencies of PCU’s academic
programs which may be the reason for CHED’s inaction and to immediately address such
problems:

     1.      Faculty qualifications

             Some faculty do not have the required academic degrees. An immediate
             faculty development program must be implemented.

             Recruitment of qualified faculty (part-time) especially for the programs
             preparing for accreditation in February 2008 (Social Work, Education and
             Nursing).

     2.      Immediate administration of the Faculty Instrument to determine merit
             increases of faculty (this is an incentive for faculty to pursue their graduate
             studies).

Review of facilities, equipment and supplies required to attain the minimum
requirements of the Accrediting Agency and to immediately recommend to the
Receiver to address such needEvaluate the performance of all the Deans especially in the
light of some complaints/concerns of some faculty and students.

A thorough evaluation of new degree offerings (MAN, BSHRTM, BSTM) to make sure
that such degree programs meet the minimum requirements of CHED especially on
faculty and facilities.


B.        Stability of the Academic program

1.        We wish to report that the academic program and the academic community
          (student and faculty) do not seem to be affected by changes in the University. We
          have exerted effort to “insulate” the academic program in order not to unduly
          cause alarm and anxiety among the students. Status quo was maintained among
          the VPAA, the Deans and the faculty.

          This was necessary since the changes occurred at the close of the 1st semester and
          the enrollment of students for the 2nd semester. This period is very crucial as


                                                                                         66
       students may transfer to other schools. We are happy that enrollment this 2nd
       semester may exceed the enrollment of last year’s 2nd semester.

       The Receiver was able to calm the anxieties/complaints of some faculty who were
       in the verge of a walk-out. We are hoping to help solve/respond to the legitimate
       demands of these faculty and we have attended to some already in the limited
       time we were here.


2.     Faculty Concerns

      i. On the matter of extension of the services of retirable faculty, we recommend
         that we adhere to University rules and no extension of services of retirable
         faculty be approved. We recommend instead that retired faculty with proven
         teaching expertise be rehired when such retired faculty applies to teach.

     ii. We have corrected the status of staff turned faculty by recommending the
         immediate granting of tenure of said faculty and restoring all her benefits,
         without necessarily going against established rules in the University.


C.     Other Matters:

CHED and PRC personnel visited the Social Work program on 14 November 2008, as
part of their supervisory functions on schools.

Faculty, curriculum, instruction methodology, performance in licensure examinations,
facilities especially books and journals, etc. were looked into. Dr. Molina is confident
that the University has one of the best social work program and can develop the
program as a Center of Excellence in the NCR, which is a “must” requirement to firm up
the University Autonomy status.




                                                                                     67
                                    XI. LITIGATION


The University is involved in a number of litigations, including both civil and labor
cases.


A.     Civil Cases

1.     Emerito P. Nacpil, Aniceto B.
       Fontanilla and Sofronio A. Larcia,
       for themselves and on behalf of
       Philippine Christian University, v.
       Oscar S, Suarez, Daniel C. Arichea,
       Jr., Elmer Bolocon, Erme Camba,
       Josue Ernacio, Oscar Ferrer, Everett
       Mendoza, Reuel Norman Marigza,
       David Santos and Leo Soriano
       Civil Case No. 06-116047
       (Br. 24, RTC Manila)
       Court of Appeals


The case pending before the Regional Trial Court (RTC) was filed on 17 October 2006
and is in the nature of an intra-corporate controversy wherein plaintiffs sued on the
following causes of action: i) mismanagement of the affairs of the University resulting in
the continued decline of enrolment, dissipation of its assets and operational losses; ii) the
controversy with regard to the National Institute of Business Administration (NIBA); iii)
the issue regarding the NAPOCOR expropriation case; iv) the issue regarding the Master
Development Plan; v) the controversy surrounding the Php32 Million back-to-back loan
which was “invested” in Terra Nova Trading; and, vi) the remittance made by defendant
Suarez of US$50,000.00 supposedly for a request for a grant from the World Bank.

The plaintiffs prayed that a receiver be appointed, and thereafter, a management
committee be formed for PCU, that the defendants be ordered to submit an accounting of
the transactions alleged in the complaint and that the legal fees of the plaintiffs in the
amount of Php500,000.00 be reimbursed by the defendants.

In an Order dated 15 September 2008, the Court appointed Mr. Pacifico B. Aniag as
Receiver for PCU. On 25 September 2008, the Receiver took over the operations of the
University and has been holding office since then.

Defendants filed with the Court of Appeals a Petition for Certiorari under Rule 65 with
Prayer for the Issuance of a Writ of Preliminary Injunction and/or Temporary Restraining
Order last 26 September 2008, on the following grounds:

       a.      That Judge Antonio Eugenio, Jr. acted with grave abuse of discretion
               amounting to excess of jurisdiction in placing the University under
               receivership; and,

       b.      That, assuming the propriety of the Order placing the University under
               receivership, Mr. Aniag be disqualified for conflict of interest and for
               committing acts in excess of his authorized power.




                                                                                          68
2.      Colonel (Retired) Ayub Ali Rana, in
       his capacity as Chairman and
       Proprietor of National Institute of
       Business Administration (NIBA),
       Pakistan, The National Institute of
       Business Administration (NIBA), v.
       Philippine Christian University
       (PCU) Manila, et. al.
       Civil Case No. 07-117578
       (Br. 32, RTC Manila)


The case is an action to enforce the judgment of the Court of Civil Judge Lahore-Pakistan
finding the University, as represented by its former President, Dr. Carlito Puno, liable to
pay NIBA US$2,547,376.00 in damages. Dr. Puno had terminated an agreement with
NIBA to offer joint graduate and undergraduate programs in the NIBA campuses in
different cities of Pakistan, and entered into a similar agreement with the National
Institute of Business Management of Peshawar, Pakistan.

The case is now in its pre-trial stage.

The University’s counsel of record, Sobreviñas Hayudini Navarro & San Juan Law
Offices has offered to withdraw its representation after receiving a letter dated 5
November 2008 from the court-appointed Receiver terminating their services as retainer
and citing their conflict of interest in representing the University in this case, while
representing the defendants in Civil Case No. 06-116047 while accepting payment for
their legal services from the University. They have, however, not offered to withdraw
from Civil Case No. 06-116047 or from any other case they handle for the University, if
any. They have likewise not provided a final and complete status report and an inventory
of all the cases and matters they handle for the University, as per the receiver’s request.


B.     Labor Cases

1.     Philippine Christian University v.
       PCU- Integrated Sciences School
       Faculty Union, et al
       NLRC NCR Case No. 00-10-09076-
       06
       Court of Appeals

Dr. Suarez, in his capacity as President of the University filed a petition before the NLRC
to declare a strike of the three (3) PCU Unions, namely: the PCU Integrated Sciences
School Faculty Union (PCU-ISSFU); the PCU Faculty Union; and, the PCU Staff Union,
illegal.

The case stemmed from a mass action by the members of the union, demanding the
resignation of Dr. Suarez as President.

Unfortunately, files of this case could not be found in the Office of the President.
Unfortunately, the University does not keep a single file for all cases filed for or against
it. Information on the case came about through information that the De Guia & De Guia
Law Office was handling several cases for the University. Acting on this piece of
information, the Receiver, in a letter dated 7 November 2008, wrote Atty. Macario de
Guia and requested his firm submit a list of all cases they handle for the University, as
well as an updated status report on each. To date, neither Atty. De Guia, nor his law
firm, has complied with the request.


                                                                                         69
2.     Gloria Bumanglag v. Philippine
       Christian University and Dr. Oscar
       Suarez
       NLRC Case No.08-11505-08


Prof. Bumanglag filed a case of illegal suspension after a five (5)-day suspension was
imposed on her by the Grievance Committee for confiscating a student’s cellular phone.

The parties have already submitted their Position Papers and are awaiting the resolution
of the Labor Arbiter.


3.     Noemi     Sayson      v.     Philippine
       Christian University, et al.
       NLRC Case No. 00-09-13388-08

Ms. Sayson was the representative of the College Faculty Union in the Grievance
Committee investigating the case of Prof. Bumanglag. After voting, majority of the
members of the committee voted to impose a five (5)-day suspension on Prof.
Bumanglag, while the minority (one of which was Ms. Sayson) voted for the imposition
of a reprimand only. After the votation, Ms. Sayson was caught circulating an “Open
Letter to the PCU Community” attacking some administrators. Dean Belen Pascual, who
was one of those assailed in the letter, filed an administrative complaint against Ms.
Sayson. An Ad Hoc Committee was therefore formed by Mr. Suarez. The committee
investigated and thereafter ruled that the open letter was libelous and that Ms. Sayson had
taken part in the writing of the same. The committee then imposed a two (2)-month
sanction.

Ms. Sayson then filed with the NLRC a case for illegal suspension against the University
and the members of the Ad Hoc Committee.

The Receiver has agreed to reinstate Ms. Sayson even before the lapse of the two-month
suspension. During the hearing before the labor arbiter last 27 October 2008, the parties
agreed to suspend the proceedings of the case for one (1) month to give the Receiver time
to determine whether or not she was validly suspended. The next hearing is set on 27
November 2008.


4.     Irma Yacapin and Estrellita Bautista
       v. Philippine Christian University
       and Dr. Oscar Suarez
       NLRC RAB Case No. NCR-08-
       11506-08


This is a case for illegal dismissal filed by two teachers, Ms. Yacapin and Ms. Bautista.
These teachers were not re-hired for failing to get a satisfactory ranking. They allege that
they are already tenured but the University insists that their years of service was
interrupted. Hence, they were unable to complete the required probationary period.

The University filed a Motion to Drop One Party Complainant due to improper joinder of
parties last 15 September 2008, while the complainants filed their opposition thereto on
22 September 2008.

To date, we have not received a resolution from the Labor Arbiter on the motion.


                                                                                         70
5.     PCU College Faculty Union v.
       Philippine Christian University
       NCMB-NCR-NS-08-119-08


The union and the University were in the process of negotiating a new CBA as the last
one expired on 31 May 2008.

During the negotiations, the union demanded a one thousand five hundred peso
(Php1,500.00) increase in their salaries which management rejected. A counter-offer of
three hundred sixty pesos (Php360.00) was made, but because of the hostility between
certain members of the union and management, there was a deadlock in the negotiations
and the same was referred to the National Conciliation and Mediation Board (“NCMB”).
However, despite several meetings with the mediator, no agreement between the parties
could be had. The union thereafter submitted a notice of strike vote, which was supposed
to be held last 10 October 2008. Before the said date, the court-appointed Receiver
explained to the union officers that the University is under receivership for the time being
and that, even while the audit by the external auditor is on-going, it suffering from a weak
financial condition. The union members met and, instead of conducting a strike vote,
agreed to stay their demand for increase until the audited financial statements of the
University are released.

The case was therefore dismissed without prejudice.


6.     Fe Prudenciado v. Philippine
       Christian University
       NLRC NCR Case No. 00-08-04960-
       01


The only document disclosed regarding this case is an Order of the labor arbiter dated 5
September 2008 granting the complainant’s Motion for Re-computation and awarding the
complainant a separation pay of one (1) month salary for every year of service from the
time of employment up to 20 February 2008 in lieu of reinstatement.

According to the Order, “it is very clear from the record that respondent is willing to
recompute the backwages from 19 April 2002 up to 20 February 2008 (Minutes of
Conference dated 20 February 2008).” The labor arbiter further ordered the NLRC’s
Examination and Computation Unit (NLRC NCR) to conduct an ocular inspection of
pertinent records of the University to determine the actual updated amount of the total
compensation due the complainant and all other applicable benefits and their monetary
equivalent.


C.     Threatened Litigation

1.     NCAA Suspension

A complaint was lodged against the University for alleged commission of falsification of
documents in order for certain varsity athletes to be allowed to play for the school. Dr.
Suarez signed a Memorandum of Understanding with the NCAA sometime 2008 which
in effect withdrew the University’s membership in the association.




                                                                                         71
The Receiver thereafter submitted a letter requesting for reconsideration of the
withdrawal from the NCAA, assuring the association that an investigation is being made
on the matter and that the appropriate disciplinary action will be imposed on those found
guilty. To date, there is no resolution promulgated by the NCAA with regard to the
Receiver’s request for reconsideration.


2.     Complaint of the parent of NCAA courtside reporter

Atty. Luis Sanchez, the father of NCAA courtside reporter, Janina Sanchez, wrote a letter
of complaint to the University complaining about malicious statements made in an
internet blog about his daughter. Because of all the comments made in said blog, his
daughter had been receiving nasty and cruel messages on her phone.

Atty. Sanchez has demanded that the issue be looked into.


3.     Arquiza Construction

The Receiver requested for a repricing of the works being done by the construction
company for the University and ordered that payments to it be stopped. The construction
company, however, stopped construction and sent the University a demand letter

Further negotiations are being made so that the parties can reach an amicable settlement
of the issue without having to go to court.


4.     Tapa King

Tapa King, one of the lessees of the University’s commercial spaces, has been remiss in
paying for its rent. The University, through counsel, has recently sent a demand letter.




                                                                                      72
                        XII.     INSURANCE POLICIES


a.   Fire Insurance Policy

     Insurer:           The Mercantile Insurance, Co., Inc.
     Insured:           PCU-TAFT
     Policy No.:        36101
     Date Issued:       18 December 2007
     Term:              366 days from 12/18/07 to 12/18/08
     Amount Insured:    Php83,231,830.00 covering Building 1 to 12 of the
                        College Campus and its contents
     Amount of Premium: Php99,878.20 exclusive of applicable taxes


b.   Fire Insurance Policy

     Insurer:           The Mercantile Insurance, Co., Inc.
     Insured:           PCU-UTS DASMARIÑAS, CAVITE
     Policy No.:        36154
     Date Issued:       18 December 2007
     Term:              366 days from 12/18/07 to 12/18/08
     Amount Insured:    Php32,749,200.00 covering Building 1 to 26 of the
                        College Campus and its contents
     Amount of Premium: Php39,749.04 exclusive of applicable taxes


c.   Group Personal Accident Insurance

     Insurer:                MAA General Assurance Phils., Inc.
     Insured:                PCU
     Risk Insured:           1004 Students and 33 Faculty and Staff
     Term:                   From 07/11/08 to 07/11/09
     Amount Insured:         Php67,405,000.00
     Amount of Premium:      Php17,060.32 exclusive of applicable taxes




                                                                            73
                     XIII. EMPLOYMENT ARRANGEMENTS


A.     PCCLI Employees

Director of HR/Personnel, Prof. Denia Gonzales, provided BELO GOZON ELMA
PAREL ASUNCION & LUCILA (the “Firm”) with a schedule of names of all employees
of PCCLI, including both Manila and Dasmariñas campuses and UTS, and their
respective designations.

The organizational chart of PPCLI/PCU is hereto attached as Annex “A”.


Administrative Employees

Ms. Gonzales provided the Firm with a list of the names of the twenty-seven (27)
administrative employees employed by the University, herein attached as Annex “B”.
Pursuant to Section 1(b), Article X of the By-Laws of PCCLI, the President may hire and
terminate University employees other than the Chairman and Vice Chairman of the
Board, the Corporate Secretary, the Treasurer and faculty members, provided that such
actions shall be reported by him to the Board of Trustees. Since the Board of Trustees
last met in 16 March 2006, the appointments have not yet been reported to the same.

The appointment papers, signed by Dr. Suarez, of Dr. De Lara as Vice President for
Academic Affairs (VPAA) and Mrs. Eva Francisco as Treasurer states that their
appointments of both are on an OIC (Officer-In-Charge) status until the Board of
Trustees elects other persons to said positions. On the other hand, Rev. Dr. Ferdinand
Anno, who is the OIC-VP for Theological Education (VPTE), was appointed by the
Commission of Theological Education (CTE) during the CTE Special Meeting last 22
September 2008. The CTE also gave Dr. Anno a one (1) school year appointment
retroactive to June 2008, provided, that such extension shall not be affected by the United
Methodist Church (UMC) nominees until the termination of his contract. According to
the By-Laws, the VPTE shall be nominated exclusively by the CTE, and such nomination
shall be ratified by the Board of Trustees. Dr. Anno’s appointment has not yet been
ratified by the Board since it has not met since 2006.

The appointment papers of Dr. De Lara and Ms. Francisco are hereto attached as
Annexes “C” and “D”. A copy of excerpts from the minutes of the CTE Special
Meeting dated 22 September 2008 appointing Dr. Anno as OIC-VPTE is attached as
Annex “E” hereto.

It is also worthy to note that no VPFA has been elected by the Board of Trustees. The
Board of Trustees, in their meeting dated 19 March 2004 voted to approve the
recommendation of the PCU Corporation on the appointment of the VPFA not later than
1 July 2004 following proper procedures on recruitment, selection and hiring. However,
according to the minutes of the meeting of the Board of Trustees dated 17 March 2005,
the salary being offered for the position seemed to be the main issue for the inability to
attract and select the VPFA. The Board then voted to set the salary range to fifty
thousand pesos (Php50,000.00) to one hundred thousand pesos (Php100,000.00) but not
to exceed the basic salary of the University President.

Department Heads

Ms. Gonzales provided the Firm with a list of the names of the fourteen (14) department
heads of the Manila and Dasmariñas campuses. Pursuant to Section 1(b), Article X of the
By-Laws of PCCLI, the President may hire and terminate University employees other
than the Chairman and Vice Chairman of the Board, the Corporate Secretary, the


                                                                                        74
Treasurer and faculty members, provided that such actions shall be reported by him to the
Board of Trustees. Since the Board of Trustees last met in 2006, the said appointments
have not yet been reported to the same.


Coordinators

Ms. Gonzales provided the Firm with a list of the names of the twenty-one (21)
coordinators of the Manila and Dasmariñas campuses. Pursuant to Section 1(b), Article
X of the By-Laws of PCCLI, the President may hire and terminate University employees
other than the Chairman and Vice Chairman of the Board, the Corporate Secretary, the
Treasurer and faculty members, provided that such actions shall be reported by him to the
Board of Trustees. Since the Board of Trustees has not met since 2006, the said
appointments have not yet been reported to the same.

Based on the disclosed materials, the following coordinators do not have appointment
papers: Enrique Ronquillo, Rosemarie Hermano, Rzel Mercado, Renelda Alano and
Merced Hayag.

The list of Department Heads and Coordinators is herein attached as Annex “F”.


Faculty

The list of faculty members herein attached as Annex “G” includes department heads
and coordinators if they are also part of the teaching staff. The University, including both
PCU Manila and Dasmariñas campuses and UTS, employs one hundred sixty-eight (168)
tenured, seventeen (17) full-time semestral, eighty-two part-time and six (6) probationary
members of the faculty.


Staff

Ms. Gonzales provided the Firm with a schedule of names of the non-teaching staff
herein attached as Annex “H”. The University, including both PCU Manila and
Dasmariñas campuses and UTS, employs two hundred fifteen (215) permanent and
seventeen (17) contractual staff members.


B.      Schedule of Compensation/Benefits of Employees

Mrs. Eva Francisco, Chief Accountant/OIC Treasurer provided the Firm with only
schedules of compensation, honoraria and benefits of the Taft Campus employees.

The following is a table indicating the benefits received by the employees.

                 Benefit                               Cash or Equivalent
13th month pay                             One (1) month salary
50% availment                              Employees with twenty (20) years of service or
                                           above can advance 50% of their retirement
                                           benefits
Additional medical allowance               Php1,500.00
Bereavement leave                          Maximum of nine (9) days
CBA signing bonus                          Php3,000.00
Christmas bonus                            Php4,000.00
Compassionate gift                         Maximum of Php15,000.00 for employee’s
                                           dependents


                                                                                         75
Death benefits                            Php30,000.00 for the death of an employee
Educational benefits                      100% tuition fee discount
Emergency leave                           Seven (7) days
Emergency loan                            Php15,000.00 payable in one (1) year
Health insurance                          Php5,490.00
Life, Accident and Disability insurance   Policy value of Php300,000.00, premium of
                                          Php660.00
Maternity leave                           Sixty (60) days for normal delivery, seventy-
                                          eight (78) days for caesarian
Maternity leave benefits                  50% of monthly salary while on maternity
                                          leave
Paternity leave                           Seven (7) days
Retirement benefits                       Maximum of 1.25% of monthly salary for
                                          every year of service (20 years of service and
                                          above)
Rice subsidy                              Php4,000.00
Salary loan                               Maximum of three (3) months salary payable
                                          in two (2) years
Serious injury leave with pay             Employees       seriously    injured   in    the
                                          performance of work will continue to receive
                                          his salary up to six (6) months
Service award                             Php200 per year of service on the 10th year and
                                          every 5 years thereafter
Sick leave                                15 days
Summer pay                                One (1) month salary
Union leave                               Union officers are entitled to two hundred
                                          (200) days per year
Vacation leave                            15 days
Housing benefit for President             Php22,000.00 monthly
Car for President, VPAA and Treasurer


C.     Employment/Appointment Contracts

Mrs. Gonzales provided sample contracts of employment for PCCLI employees, as
follows:


Appointment as regular employee

The sample document entitled “Personnel Appointment and Information” provides:

       The employee as appointed on regular status with a disclosed salary rate.

       The employee shall faithfully comply with all the policies, rules and regulations
          of the University.

       The faculty shall enjoy all the privileges and benefits extended to all regular
          employees of the University.


Appointment as Faculty on a semestral basis

The sample document entitled “Appointment (Semestral)” states the following:




                                                                                       76
       a. The faculty member is reappointed on a semestral basis with a disclosed
          monthly salary.

       b. The faculty member may be assigned to other related duties during the
          effectivity of his employment.

       c. The faculty member shall comply with all the policies, rules and regulations
          of the University, as well as with all the rules and regulations promulgated by
          the Commission on Higher Education (CHED).

       d. The faculty member is required to put in forty (40) hours a week for residence
          and teaching responsibilities.


Appointment as Faculty on a part-time basis

The sample document entitled “Appointment (Part-Time)” contains the following
provisions:

       a. The faculty member is appointed on an hourly basis for a particular semester
          with a disclosed hourly rate.

       b. Teaching load on the next succeeding semester or during summer period will
          depend on the availability of subjects.

       c. Teaching of subjects by the faculty member under this particular employment
          shall be done outside his regular office hours in his place of full time
          employment.

       d. The faculty member shall comply with all the policies, rules and regulations
          of the University, as well as with the rules and regulations promulgated by
          CHED.


Contract for Probationary Employment

The contract contains the following provisions:

       a. Probationary employment shall not exceed five (5) months. During the
          period, the employee shall be observed and evaluated regularly to determine
          whether or not said employee possesses the skills, expertise and knowledge
          required of the job.

       b. Should the employee fail to attain a Very Satisfactory rating on the evaluation,
          he will not be rehired for failure to qualify.

       c. The employee is expected to report at his workplace at the agreed time and
          place and, unless requested to perform an additional task, shall remain there
          until completion of the working hours. Absences or tardiness more than twice
          a month will not be permitted.

       d. The employee shall faithfully comply with all the policies, rules and
          regulations of the University




                                                                                       77
D.     Review all collective bargaining or other comparable agreements with unions
       or other third parties.

The University has three (3) collective bargaining agents, all of which have executed
separate collective bargaining agreements: 1) the PCU College Faculty Union- PTGWO
(“Faculty Union”); 2) the PCU Integrated Science Faculty Union (“PCU-ISSFU”); and,
3) the PCU Staff Union.


PCU College Faculty Union- PTGWO

To be eligible for membership in the union, one must be a tenured full-time college
faculty member. The Collective Bargaining Agreement (“CBA”) provides union
members the following benefits:

       a)     security of tenure;
       b)     two (2) union representatives shall sin the Faculty Ranking Committee;
       c)     two (2) union representatives shall be included in the committee on
              revision/review of the University Manual;
       d)     guarantee of assignment of a full load consisting of eighteen (18) units per
              semester and preference in assignment of overload up to twelve (12) units
              per semester;
       e)     deductions shall only be made on the actual teaching hours missed by the
              teacher;
       f)     the union shall be represented in the University Faculty Evaluation
              committee;
       g)     each union member shall receive a Christmas bonus in the amount of four
              thousand pesos (Php4,000.00) and signing bonus of three thousand pesos
              (Php3,000.00) each, aside from the 13th month pay;
       h)     rice subsidy in the amount of one thousand five hundred pesos
              (Php1,500.00);
       i)     school privileges and benefits for the union member, his spouse, children
              or if, he is single, his nieces, nephews or unmarried brothers or sisters;
       j)     sabbatical leave;
       k)     bereavement leave;
       l)     paternity leave;
       m)     fifteen (15) days sick leave. Any unused sick leave credits within the year
              is convertible to cash which shall be computed based on current salary. At
              the time the tenured faculty member resigns, retires or dies, all unused sick
              leave credits within the year shall be commuted to cash;
       n)     union leave;
       o)     medical, hospitalization, dental and accident insurance benefits, plus an
              additional sum every year as additional medical/sickness benefit for all
              faculty members and immediate members of their families; and,
       p)     funeral benefit of thirty thousand pesos (Php30,000.00) if a union member
              dies and fifteen thousand pesos (Php15,000.00) funeral assistance in case
              of death of any of his immediate family members.

The CBA also provides for a grievance procedure wherein any grievance must first be
resolved between the persons concerned. If a solution cannot be worked out within three
(3) working days, it should be brought to the next higher authority in writing for
resolution. If a resolution cannot be reached at that level within seven (7) working days,
then the case shall be brought to the University Grievance Committee wherein there shall
be two (2) faculty union representatives sitting. The Grievance Committee should decide
within ten (10) working days; otherwise, it will be brought to the President. If at any
level a case cannot be resolved within the stipulate time, a mutual agreement should be
sought between the parties. If no agreement is reached, the case shall be elevated to the


                                                                                        78
next higher authority at the end of the stipulated period. In case of failure to get a
satisfactory decision, the grievance shall be brought to arbitration after a period of fifteen
(15) working days from the date of receipt of the complaint.

The parties have also agreed that there shall be no lockout, strike, slowdown, mass leave
or stoppage of work or acts of similar nature which would interfere with the normal
business operations and work schedules of the University.

The CBA with the Faculty Union has a life of three (3) years. The last CBA expired last
31 May 2008.

During the negotiations for the new CBA, the union demanded a one thousand five
hundred pesos (Php1,500.00) increase in their salaries which management rejected. A
counter-offer of three hundred sixty pesos (Php360.00) was made, but because of the
hostility between certain members of the union and management, there was a deadlock in
the negotiations and the same was refereed to the National Conciliation and Mediation
Board (“NCMB”). However, despite, several meetings with the mediator, no agreement
between the parties could be had. The union thereafter submitted a notice of strike vote,
which was supposed to be held last 10 October 2008. Before the said date, the court-
appointed receiver was able to explain to the union officers that the University is under
receivership and that, even while the audit by the external auditor is on-going, it suffering
from a weak financial condition. The union members met and, instead of conducting a
strike vote, they agreed to stay their demand for increase until the audited financial
statements of the University are released.

By virtue of Section 2, Article XXIV of the CBA, the agreement automatically continues
to be in force and effect until a new CBA is signed.


PCU Integrated Science School Faculty Union

According to the CBA, all tenured faculty members of the PCU Science Elementary
School (“SES”), Science High School (“SHS”), and Pre-School in all its campuses. The
CBA provides union members with the following benefits:

       a)      the University shall effect payroll deductions of union membership fees,
               monthly dues, agency fees, assessments, special contributions and other
               obligations required of union members, provided that such deduction shall
               be pursuant to an authorization signed by the covered employee.
               However, no deductions shall be made during the period that the union
               member does not earn by reason of leave without pay for a period of not
               less than one (1) month. Deduction of union dues shall resume upon the
               union member’s resumption of work;

       b)      creation of a Work Improvement Committee composed of five (5)
               representatives each from the University and the Union;

       c)      the University shall allow one (1) union representative to sit as a member
               of the Bidding Committee;

       d)      a total of sixty-four (64) days of union leave every year;

       e)      job security, i.e., vacancies that may occur in the teaching force can only
               be filled up by a qualified teacher and shall be opened to all qualified
               applicants, including those coming from outside. Any interested faculty
               union member may be given preference;



                                                                                           79
f)   in the event that the University ceases operation, it shall grant affected
     union members a separation pay of seventy-five percent (75%) of monthly
     basic salary for every year of service if the employee has rendered less
     than five (5) years service, one hundred percent (100%) of monthly basic
     salary for every year of service if the employee has rendered five (5) to
     nine (9) years of service, one hundred twenty-five percent (125%) of
     monthly basic salary for every year of service if the employee has
     rendered ten (10) to nineteen (19) years of service and one hundred fifty
     percent (150%) of monthly basic salary for every year of service if the
     employee has rendered more than twenty (20) years of service;

g)   in case of inevitable lay-off or authorized termination of employment due
     to retrenchment, redundancy, closure and other similar situations, the
     “LAST IN, FIRST OUT” (LIFO) policy only after due consideration of
     the need for the services of a particular faculty, his qualifications and
     expertise and the availability of other faculty members with longer service
     to teach the subjects handled by the concerned faculty affected by the
     LIFO policy;

h)   in case of justifiable transfer or re-assignment of rank-and-file staff
     employees involving union members, the University shall notify the union
     in writing at least fifteen (15) working days before the intended transfer or
     re-assignment. Except under unavoidable circumstances, transfer or
     reassignment shall be effected on a yearly basis;

i)   suspensions shall take into consideration the gravity of the offense but
     shall not exceed thirty (30) days as provided by law;

j)   after three (3) years, any record of disciplinary action taken against union
     members shall not be considered relative to merit increase;

k)   faculty members seriously injured in the performance of their actual work
     shall continue to receive their equivalent monthly salary as provided by
     law while recuperating, without prejudice to the other benefits which may
     accrue from other sources;

l)   faculty members are hired on a twelve (12)-month period. They are not
     required to report during summer except during enrolment period and as
     such, are not entitled to vacation leave;

m)   fifteen (15) days sick leave. Any unused sick leave within the year is
     convertible to cash and shall be computed based on current salary;

n)   seven (7)-day emergency leave;

o)   bereavement leave;

p)   sabbatical leave covering a maximum period of two (2) semesters;

q)   if a faculty union member is assigned to do task/s or assist students on
     special activities which are held or done on a Saturday, Sunday, holiday or
     not a regular school day, he/she shall be given honorarium as incentive for
     the service rendered;

r)   annual medical and dental check-up;

s)   Comprehensive Hospital Insurance;



                                                                               80
t)    one thousand five hundred pesos (Php1,500.00) as additional sickness
      benefit for immediate members of the family;

u)    service awards;

v)    group life, accident and disability insurance plan;

w)    emergency loan of up to fifteen thousand pesos (Php15,000.00) payable in
      one (1) year without interest;

x)    up to three (3) months salary loan with a service charge of two hundred
             pesos (Php200.00). The principal loan will be charged an interest
      of     eighteen percent (18%) if documents were not submitted within
      one (1) month after the release of said loan, payable in two (2) years
      provided the employee’s take home pay is not less than fifty percent
      (50%) of his/her basic pay;

y)    in the event of optional retirement at age sixty (60) and above, but below
      sixty-five (65), the University shall grant an equivalent of one (1) month
      salary per year of service for employees who have rendered ten (10) to
      nineteen (19) years of service and an equivalent of one and one-fourth (1
      ¼) salary per year of service for employees who have rendered at least
      twenty (20) years of service. However, if a union member dies before the
      mandatory retirement, an amount equal to his/her retirement pay shall be
      paid to his designated beneficiary or legal heirs, without prejudice to other
      benefits which may accrue from other sources;

z)    union members fifty (50) years old and above and with at least fifteen (15)
      years of continuous and uninterrupted service may apply for retirement
      before reaching the age of sixty (60) and shall be paid one (1) month for
      every year of service if the employee rendered fifteen (15) to nineteen (19)
      years of service and one and one-fourth (1 ¼) months for every year of
      service if the employee rendered at least twenty (20) years of service;

aa)   union members may voluntarily resign before the age of fifty (50), for
      which the University shall grant a gratuity pay of seven (7) days per year
      of service for employees who have rendered five (5) to nine (9) years of
      service, one-half (1/2) month per year of service for employees who have
      rendered ten (10) to fourteen (14) years of service, one (1) month salary
      per year of service for employees who have rendered fifteen (15) to
      nineteen (19) years of service and an equivalent of one and one-fourth (1
      ¼) salary per year of service for employees who have rendered at least
      twenty (20) years of service;

bb)   employees who have rendered continuous and uninterrupted service for at
      least twenty (20) years may apply for a loan equivalent to fifty percent
      (50%) of their earned retirement benefits, subject to existing policy
      guidelines which shall be reviewed periodically;

cc)   the optional, mandatory and early retirement shall be allotted to only five
      (5) union members every academic year;

dd)   educational benefits for the employee, his legitimate spouse and children
      and one unmarried niece, nephew, brother or sister living with and
      dependent upon an unmarried employee;




                                                                                81
       ee)     thirty thousand pesos (Php30,00.00) to the legitimate beneficiaries of an
               employee who dies and a death benefit of fifteen thousand pesos
               (Php15,000.00) to an employee upon the death of a legitimate dependent;

       ff)     guaranteed teaching load of at least two hundred forty (240) minutes a day
               and preference in the assignment of overload; and,

       gg)     Christmas bonus of four thousand pesos (Php4,000.00), 13th month pay,
               rice ration of one hundred kilos (100kg) of premium quality rice and
               signing bonus of three thousand pesos (Php3,000.00).

Under the CBA, a grievance is defined as any misunderstanding, differences of opinion
or controversy between the University and any union member with respect to the
meaning, interpretation or application of any provision of the CBA. However, issues
involving infractions of the code of conduct shall not be subject of grievance unless it is
the policy itself being questioned. An employee having a grievance shall present it first
to his immediate superior and try to settle the grievance within three (3) working days. If
no satisfactory solution or agreement is arrived the case shall be promptly elevated to the
University Grievance Committee and the provisions of the University handbook in
settlement of grievance will apply. In the event that the grievance is not resolved to the
satisfaction of parties, they shall submit the matter to arbitration wherein they shall select
a voluntary arbitrator from among the list of certified arbitrators of the Department of
Labor and Employment (DOLE) within five (5) days after failure to arrive at a
settlement. The arbitrator shall be mutually acceptable to the parties or failing to do so
the parties shall select the arbitrator by lottery. The cost of arbitration shall be borne by
the parties in the proportion of two-thirds (2/3) by the loser and one-thirds (1/3) by the
winner.

The CBA has a life of five (5) years, which expires on 31 May 2010. It shall be subject
to automatic extension for yearly periods, unless a written notice by either party is given
to the other within sixty (60) days prior to the expiration indicating its intention to
negotiate a superseding contract.


PCU Staff Union

The CBA provides that the bargaining unit shall cover all rank-and-file staff members
employed by the University, including positions which will subsequently be created
within the bargaining unit. The CBA provides for the following benefits:

       a)      job security, i.e., the University shall not contract out services/functions
               that are performed by regular employees;

       b)      in the event that the University ceases operation, it shall grant affected
               rank-and-file staff members separation pay equivalent to two hundred
               percent (200%) of his/her monthly basic income per year of service;

       c)      in case of inevitable lay-off or authorized termination of employment due
                       to retrenchment, redundancy, closure and other similar situations,
               the     “LAST IN, FIRST OUT” retrenchment program shall be followed
               and the University shall grant to any affected staff union member an
               equivalent of not less than one hundred percent (100%) of his/her monthly
               basic salary per year of service;

       d)      in case of justifiable transfer or re-assignment of rank-and-file staff
               employees involving union members, as agreed upon by both parties



                                                                                           82
     concerned, the University shall notify the union in writing at least fifteen
     (15) working days before the intended transfer or re-assignment;

e)   contractual employees performing services directly related to the principal
     business operation of the University and who have rendered six (6)
     months of continued service or one (1) year of staggered service shall be
     deemed regular employees;

f)    all pre-existing practices and benefits that are not expressly provided for
     in the CBA but which are being extended by the University to all regular
     employees in accordance with University policies and by operation of law
     and sound industrial relation practices shall be maintained by the
     University;

g)   except in cases of preventive suspension, no employee shall be suspended
     for more than five (5) days;

h)   after three (3) years, any record of disciplinary action taken against staff
     union members shall not in any way influence the result of evaluation
     relative to merit increase;

i)   The University shall effect payroll deductions of union membership fees,
     monthly dues, agency fees, assessments, special contributions and other
     obligations required to all union members and covered employees;

j)   no deductions shall be made during the period which an employee does
     not earn any pay. However, union dues not deducted on account of the
     foregoing shall be deducted from the salary of the worker upon his
     resumption of work;

k)   the normal work week shall consist of five (5) working days and the
     regular hours of employees shall be forty (40) hours a week at the rate of
     eight (8) hours a day;

l)   any regular rank-and-file staff member who reported for work and who is
            unable to complete his eight –hour workday or who reported for
     work for reasons beyond his/her control must inform his/her immediate
     superior, so as not to incur unauthorized absences/tardiness. Further, a
     grace period of fifteen (15) minutes at the start of the workday shall be
     allowed before deduction for tardiness is effected;

m)   the creation of a Work Management Committee, composed of five (5)
     representatives each from the University and the union;

n)   the University shall allow two (2) staff union representatives to sit as
     members of the Bidding Committee;

o)   union leave;

p)   union members seriously injured in the performance of their work shall
     continue to receive his/her equivalent monthly salary up to six (6) months
     while recuperating, without prejudice to other benefits which may accrue
     from other sources;

q)   fifteen (15)-day vacation leave with pay. Unused vacation leave is
     convertible to cash and shall be computed based on the current salary.
     Unused vacation leave credits may also be availed of by a union member


                                                                              83
      upon his/her illness or physical disability, provided all his sick leave
      credits with pay shall be exhausted;

r)    fifteen (15)-day sick leave with pay. Any unused sick leave within the
      year is convertible to cash and shall be computed based on current salary;

s)    maternity and paternity leaves;

t)    seven (7)-day emergency leave;

u)    bereavement leave;

v)    annual medical and dental check-up for union members and members of
      their immediate families;

w)    comprehensive hospital insurance for health care hospitalization
      amounting to five thousand one hundred pesos (Php5,100.00) subject to
      yearly increase;

x)    one thousand five hundred pesos (Php1,500.00) as additional sickness
      benefit every year;

y)    service awards;

z)    group life, accident and disability insurance amounting to three thousand
      pesos (Php3,000.00), the premium of which shall be shouldered by the
      University;

aa)   emergency loan of fifteen thousand pesos (Php15,000.00) payable in one
      (1) year without interest, three (3)-month salary loan without interest
      payable in two (2) years provided the take home pay is not less than fifty
      percent (50%) of his basic salary;

bb)   in the event of optional retirement at age sixty (60) and above, but below
      sixty-five (65), the University shall grant an equivalent of one (1) month
      salary per year of service for employees who have rendered ten (10) to
      nineteen (19) years of service and an equivalent of one and one-fourth (1
      ¼) salary per year of service for employees who have rendered at least
      twenty (20) years of service. However, if a union member dies before the
      mandatory retirement, an amount equal to his/her retirement pay shall be
      paid to his designated beneficiary or legal heirs, without prejudice to other
      benefits which may accrue from other sources;

cc)   union members may avail of early retirement, for which the University
      shall grant a gratuity pay of seven (7) days per year of service for
      employees who have rendered five (5) to nine (9) years of service, one-
      half (1/2) month per year of service for employees who have rendered ten
      (10) to fourteen (14) years of service, one (1) month salary per year of
      service for employees who have rendered fifteen (15) to nineteen (19)
      years of service and an equivalent of one and one-fourth (1 ¼) salary per
      year of service for employees who have rendered at least twenty (20) years
      of service. However, if a union member dies before the mandatory age for
      retirement, an amount equal to his/her retirement pay shall be paid to his
      designated beneficiary or legal heirs, without prejudice to other benefits
      which may accrue from other sources;




                                                                                84
       dd)    employees who have rendered continuous service for at least twenty (20)
              years can avail of fifty percent (50%) of their earned retirement benefits;

       ee)    educational benefits for the employee, his legitimate spouse and children
              and one unmarried niece, nephew, brother or sister living with and
              dependent upon an unmarried employee;

       ff)    thirty thousand pesos (Php30,00.00) to the legitimate beneficiaries of an
              employee who dies and a compassionate gift of fifteen thousand pesos
              (Php15,000.00) to an employee upon the death of an immediate family
              member;

       gg)    merit increases every three (3) years. For this purpose, the University
              shall allow four (4) union representatives to sit as members of the Staff
              Merit and Ranking Committee;

       hh)    rice subsidy of two thousand pesos (Php2,000.00);

       ii)    the University shall provide the Union with a commercial space facility
              for the “Workers Income Augmentation Program”; and,

       jj)    Christmas bonus of four thousand pesos (Php4,000.00), 13th month pay
              and signing bonus of three thousand pesos per union member.

The CBA defines a grievance as any misunderstanding, differences of opinion or
controversy between the University and the Union and or any employee of the University
with respect to the interpretation or application of any of the provisions of the CBA
including questions involving any ruling, practice, company policy, managerial action
and any other dispute involving Labor-Management relations, or other established
working conditions. Any union member who is subjected to an investigation due to
alleged irregularities in his/her conduct towards any member/non-member of the PCU
community or in the performance of his/her duties or any question of morality, shall
undergo the process provided in the provisions for the grievance machinery and shall be
accorded the following rights:

       a. To be informed of the charges against him;

       b. To be afforded the opportunity to refute the charges and/or evidence against
          him;

       c. To confront the complainant and the witnesses in his defense;

       d. To be assisted by union representative’s or by legal counsel of his own choice.

Should any difference arise between the University and any union member or any other
matter relating to working conditions not covered by the same, the union member, who
shall be accompanied by union representative/s, shall present his grievance to his
immediate superior and try to settle the grievance immediately. If no satisfactory
solution or agreement is arrived at, the case shall be promptly elevated and submitted to
the University President for review and decision. In the event that the grievance is still
not resolved to the satisfaction of both parties, the matter shall be referred to the
Grievance Committee, which shall be composed of four (4) representatives each from the
University and the Union. The chairman shall be chosen alternately by the members of
the committee from among themselves. If the committee fails to settle the grievance
within a period of seven (7) working days, the same could be elevated by the interested
party for settlement through Voluntary Arbitration. The selection of a voluntary
arbitrator shall be done by nominating five (5) possible arbitrators each from the list of


                                                                                       85
voluntary arbitrators accredited by DOLE. The nominee shall be the one commonly
chosen by both parties. However, if there is no common choice, each party shall take
turns in canceling one (1) name until two (2) candidates are left. Then a lot is drawn
from the remaining candidates. The name that will be drawn shall be the arbitrator and
he shall be promptly notified. In the event that the selected candidate is not available or
inhibits himself for any reason, the other candidate shall be chosen and notified. The
expenses of the arbitration shall be shared by the parties in the proportion of two-thirds
(2/3) by the loser and one-third (1/3) by the winner.

The CBA is effective from 1 June 2005 until midnight of 31 May 2010, provided that the
five-year term shall be considered only for the purpose of union representation and all
benefits shall be renegotiated not later than three (3) years from effectivity of the CBA or
within sixty (60) days prior to 31 May 2010. The CBA shall be automatically extended
for yearly periods unless a written notice by either party indicating its intention to
negotiate a succeeding contract is given to the other within sixty (60) days prior to its
expiration.


E.     University Handbook

The University Handbook (Handbook) currently in effect was ratified by the Board of
Trustees during their meeting dated 17 March 2005.

The Handbook provides, among others, employment requirements, personnel policies,
salaries and benefits, employment status, and management of grievance.


1.     Faculty

According to the Handbook, teachers are either full-time (tenured, regular or
probationary) or part-time.

Full-time teachers are required to put in forty (40) hours a week for residence and
teaching responsibilities. College teachers are given at least eighteen (18) hours teaching
load per week while Basic Education teachers are normally assigned a minimum regular
teaching load of two hundred forty (240) minutes a day within the eight (8)-hour a
regular work schedule.

Probationary full-time teachers are teachers on their first year of teaching at PCU. The
probationary contract is renewable every semester. After a satisfactory probationary
period of up to three (3) years, the faculty is recommended by the department
chairperson/dean to the VPAA for regular status.

Regular full-time teachers are those granted a ten (10)-month status if they acquire the
required Master’s degree and/or license when applicable and if they have satisfactorily
completed the probationary period. They are entitled to the benefits given to regular
employees. Church workers on Episcopal assignment who have the necessary
qualifications shall be considered regular and shall be entitled to the same benefits.

Tenured full-time teachers are regular faculty members with at least a Master’s degree, at
least an Assistant Professor rank, five (5) years teaching experience at PCU and a very
satisfactory performance rating.

Part-time teachers are contractual employees who teach twelve (12) hours a week or less
for one (1) semester. They are usually employed to handle subjects within their expertise
when no full-time teachers are available.



                                                                                         86
Faculty members are evaluated according to several criteria: i) length of service; ii)
academic qualifications; iii) performance; and, iv) commitment to university ideals and
mission.

Full-time teachers are required to put in forty (40) hours a week for residence and
teaching responsibilities, and are not allowed to take outside employment/teaching loads
without prior approval of the VPAA. A full-time college faculty is normally assigned an
eighteen (18)-hour teaching load per week equivalent to eighteen (18) units per semester,
while a full-time basic education teacher is normally assigned a twenty (20)-hour
teaching load per week. The University may also assign overload of up to twelve (12)
units a semester and tenured faculty members shall be given first preference in the
assignment of said overload. While regular ten (10)-month faculty members shall be
given priority, equal or higher qualification and performance rating shall be considered in
assignment of summer load.

Qualified staff may teach a maximum of nine (9) units, provided these are outside his
regular working hours, it is with the approval of his immediate supervisor and he is paid
an hourly rate based on assigned ranks.


2.      Staff

The University Handbook does not tackle the length of the probationary period, although
the sample contract for probationary contract provided by Ms. Gonzales provides that
probationary employment does not exceed five (5) months. During this period, the
employee shall be observed and evaluated regularly to determine whether or not he
possesses the skills, expertise and knowledge required. Should the employee fail to attain
a Very Satisfactory rating on the evaluation, he will not be rehired for failure to qualify.


3.      Transfer of employees

The Handbook defines a transfer as the movement of an employee from one job to
another, requiring approximately the same degree of skills, duties and responsibilities,
with no diminution in pay or in rank. Such transfer is lateral and may be effected in the
following situations: i) staff to staff position; ii) staff to faculty position; or, iii) faculty to
staff position.

In case of justifiable transfer or re-assignment of personnel involving union members, the
University shall notify the union in writing and convene a meeting prior to the intended
transfer or re-assignment.

In case of transfer from staff to faculty, the three (3)-year probationary period required of
faculty members shall be reduced to one (1) year provided the following conditions are
met satisfactorily:

        a. Proven competence as evidenced by very satisfactory/excellent teaching
           performance on a part-time or a full-time status;

        b. Minimum qualification of a Master’s degree required by the discipline being
           taught;

        c. Has been with the University for at least three (3) years as a staff at any level.




                                                                                                 87
4.     Ranking

Promotion is the movement of an employee from one position of a lower level to a higher
one. This involves increased responsibilities and duties, and normally carries a higher
pay and status.

Employees are ranked based on the following criteria: academic qualifications and
experience; performance; service to PCU and community.


5.     Personnel evaluation

A review of employee performance shall be regularly undertaken for the purpose of
maintaining a satisfactory standard of service for each employee’s particular job.

Aside from the performance appraisal, a comprehensive evaluation that considers
performance, academic qualifications, professional growth, length of service and
commitment is done every three (3) years. For cases found to have merits, a one-step, or
maximum of two-step, adjustment within the same rank and its corresponding salary shall
be given based on the salary matrix.


6.     Retirement

Early retirement. Upon recommendation by the President and approval of the Board of
Trustees, any eligible employee may retire not earlier than the first day of the month next
following his birthday after attaining the age of fifty (50) years. The employee must have
served the University for at least fifteen (15) years of continuous service.

Optional retirement. Upon recommendation by the President and approval of the Board
of Trustees, any eligible employee may apply for optional retirement on the first day of
the month next following his birthday after attaining the age of sixty (60).

Mandatory retirement. All eligible employees reaching their sixty-fifth (65th) birthday
shall be retired from service.

Upon recommendation by the President and approval of the Board of Trustees, an
extension of service of a retiring employee may be granted for a definite period but in no
case whatsoever shall the extension exceed a total of one (1) year. No such extension
shall postpone the mandatory age of retirement beyond the first day of the month next
following the birthday on which the mandatory age is reached. However, the extension
of service shall be by initiative of the PCU administration if the employee’s service or
expertise is still needed, subject to the approval of the Board upon recommendation of the
President.

On the other hand, PCU retirees may be rehired on a year-to-year contractual basis,
subject to several conditions, which includes among others, assessment as new
employees on a contractual basis although entitled to salary adjustment.


7.     Termination

The services of an employee may be terminated due to any of the following causes:

       a. Resignation
       b. Abandonment of office
       c. Termination for cause


                                                                                        88
       d.   Physical disability
       e.   Reduction in work force/retrenchment
       f.   Unsatisfactory service during probation
       g.   Expiration of term of contract
       h.   Death


8.     Benefits

       a. Educational financial assistance for the employee, his legitimate spouse and
          legal dependents, and if the employee is unmarried, a niece or nephew

       b. Leave benefits such as: vacation leave, sick leave, emergency leave, terminal
          leave for employees who have rendered at least fifteen (15) years of service,
          sabbatical leave for full-time regular faculty members, official time to attend
          conferences, maternity leave, paternity leave, bereavement leave
       c. Retirement/Separation from service benefits
       d. Compassionate gift and Funeral assistance
       e. Hospitalization/Medical/Dental benefits
       f. Loans
       g. Other benefits from CBA


9.     Management of Grievance

The Handbook provides for a system of adjudicating grievances, as well as a list of
offenses and their corresponding sanctions, without prejudice top the provisions of the
Labor Code and other related laws and regulations.


F.     Emoluments and terms of employment of officers and directors.

According to the By-Laws of PCCLI, the University shall be governed by a Board of
Trustees, composed of fifteen (15) members. The members of the Board shall be elected
by the members of the Corporation. They shall hold office for one (1) year, provided that
only five (5) Trustees will be elected annually. Five (5) of the incorporating Trustees
shall hold office for one (1) year, another five (5) shall hold office for two (2) years and
the remaining five (5) shall hold office for three (3) years. The By-Laws further provide
that the Trustees shall not receive any salary or compensation as such.

The By-Laws also provide that the Board of Trustees shall elect the following:

       Chairman of the Board, Vice Chairman of the Board, Secretary, Treasurer, each
          for a one (1) year term

       President, Vice President for Theological Education (VPTE), VP for Academic
          Affairs (VPAA), VP for Finance and Administration (VPFA), each for a term
          of five (5) years.

The Trustees likewise approve the salaries of such officers.

According to the University Handbook, the VPAA, VPFA and Treasurer are appointed
for a term of five (5) years each, renewable by the Board of Trustees for another five (5)
years, on condition that he is below sixty-five (65) years at the recommendation of the
President, on the basis of the need of the University and the quality of his performance.
He should not be above fifty-five (55) years at the time of first appointment and is
retireable at sixty-five (65).


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G.     Compliance with social legislation requirements.

Director of HR/Personnel, Ms. Gonzales, and Chief Accountant/OIC Treasurer, Mrs. Eva
Francisco, both could not provide the Firm with documents regarding the University’s
registration with the Social Security System (SSS), the Pag-Ibig Fund and the Philippine
Health Insurance Corporation (PhilHealth). However, Ms. Gonzales provided the Firm
with the receipts of the University’s most recent payments.

With regard to SSS, it is noted that UTS does not appear to have paid for 2008 as the
receipt provided is dated 10 December 2007.

With regard to PhilHealth returns for the Taft Campus, Dasmariñas Campus and the
UTS, it appears that only the Taft Campus is up-to-date in its remittance to PhilHealth as
the return for the Dasmariñas campus covers the period November 2000 to March 2001,
while the UTS return covers only October 2003.


H.     Review laws of the Philippines pertaining to labor matters.

1.     Security of Tenure

Pursuant to the guarantee of security of tenure, an employee cannot be terminated from
his employment except for just or authorized cause defined under the Labor Code. An
employee who is unjustly dismissed from work is entitled to: i) reinstatement without
loss of seniority rights and other privileges; ii) full backwages, inclusive of allowances;
and, iii) other benefits or their monetary equivalent computed from the time his
compensation was withheld from him up to the time of his actual reinstatement. He may
also be entitled to damages.

Teachers are considered regular employees and not independent contractors. Although
they may be required to sign contracts with a fixed term, they are not contractual
employees whose tenure is subject to the term of their respective contracts.


2.     Causes of lawful termination and suspension

In every case of termination, the law requires the observance of substantive and
procedural due process.

An employer may terminate an employee for any of the following just causes:

       a. Serious misconduct or willful disobedience by the employee of the lawful
          orders of his employer or representative in connection with his work;

       b. Gross and habitual neglect by the employee of his duties;

       c. Fraud and willful breach of the employee of the trust reposed in him by his
          employer or duly authorized representative;

       d. Commission of a crime or offense by the employee against the person of his
          employer or any immediate member of his family or his duly authorized
          representative; and,

       e. Other causes analogous to the foregoing just causes.




                                                                                        90
The employer may also terminate the employment of any employee due to the following
authorized causes:

       a. Installation of labor-saving devices;

       b. Redundancy;

       c. Retrenchment to prevent losses;

       d. Closing or cessation of operation of the establishment; or

       e. The employee is found to be suffering from any disease and his continued
          employment is prohibited by law or is prejudicial to his health as well as to
          the health of his co-employees.

Sec. 94 of the Manual of Regulations for Private Schools (Manual) further provides that,
in addition to the just causes enumerated in the Labor Code, the employment of school
personnel, including faculty, may be terminated for any of the following causes:

       a. Gross inefficiency and incompetence in the performance of his duties such as,
          but not necessarily limited to habitual and inexcusable absences and tardiness
          from his classes, willful abandonment of employment or assignment;

       b. Negligence in keeping school or student records, or tampering with or
          falsification of the same;

       c. Conviction of a crime, or an attempt on or a criminal act against the life of any
          school official, personnel, student, or upon the property or interest of the
          school;

       d. Notoriously undesirable;

       e. Disgraceful or immoral conduct;

       f. The sale of tickets or the collection of any contributions in any form, or for
          any purpose or project whatsoever, whether voluntary or otherwise, from
          pupils, students and school personnel, except membership fees of pupils and
          students in the Red Cross, the Girl Scouts of the Philippines and the Boy
          Scouts of the Philippines;

       g. In the event of phasing out, closure or cessation of the educational program or
          course or the school itself; and,

       h. Other causes analogous to the foregoing as may be provided for in the
          regulations prescribed by the Secretary of the Department of Education,
          Culture and Sports (DECS) or in the school rules or in a collective bargaining
          agreement.

Further, Sec. 95 of the Manual provides that suspension of any school personnel may be
preventive or punitive. Preventive suspension not to exceed thirty (30) days may be
imposed on any school personnel pending investigation of the charges against him if his
continued presence poses a serious and imminent threat to the school and its property,
and to his life, the life of the pupils, students or school personnel. Punitive suspension,
on the other hand, is the imposition of a penalty on an erring school personnel after
conviction for an offense or a misconduct committed.




                                                                                        91
3.     Procedure for termination

In terminating an employee based on just causes, the law requires the following:

       a. A written notice served on the employee specifying the ground(s) for
          termination, and giving the employee reasonable opportunity to explain his
          side;

       b. A hearing or conference during which the employee concerned, with the
          assistance of counsel, if he so desires, is given the opportunity to respond to te
          charge, present his evidence, or rebut the evidence presented against him;

       c. A written notice of termination served on the employee, indicating that upon
          due consideration of all the circumstances, grounds have been established to
          justify his termination.

For termination of employment based on the authorized causes, the requirement of due
process shall be deemed complied with upon service of a written notice to the employee
and the appropriate Regional Office of the Department of Labor and Employment
(DOLE) at least thirty (30) days before the effectivity of the termination, specifying the
ground(s) for termination.

If the termination is brought about by the completion of a contact or a phase thereof, or
by failure of an employee to meet the standards of the employer in the case of
probationary employment, it shall be sufficient that a written notice is served to the
employee within a reasonable time from the effective date of termination.

Note that failure to comply with the above requirements taints the dismissal with
illegality. This procedure is mandatory, such that any judgment reached by management
without following the said procedure is void.

An employer should likewise comply with the requirement of due process in terminating
a managerial employee.


4.     Terms and Conditions of Employment

The normal workday is eight (8) hours. The law provides for payment of additional
compensation for overtime and night work, and special rates for work performed on rest
days and holidays. All employees are entitled to a rest period of not less than twenty-four
(24) consecutive hours for every six (6) consecutive normal working days. The law also
mandates the payment of minimum wage, plus a 13th month pay.

5.     Separation Pay

As a general rule, an employee whose service is terminated for just cause is not entitled
to separation pay. However, the Labor Code requires payment of separation pay in cases
of termination based on authorized causes. The separation pay is half (1/2) month or one
(1) month pay for each year of service depending on the ground for termination.


6.     Retirement benefits

While no law mandates the establishment of a retirement plan, an employee reaching the
age of sixty (60) or more, but not beyond sixty-five (65), and who has completed at least
five (5) years of service is entitled to retirement pay of at least half (1/2) month salary for
every year of service.


                                                                                            92
7.     SSS

Subject to certain exceptions, all employees in the private sector are required to be
members of and contribute to the SSS and Pag-Ibig Fund. Counterpart contributions are
mandatory for employers.

The employer is responsible for remitting the contributions of the employees and its
counterpart contributions.


8.     National Health Insurance Program (NHIP)

Under the National Health Insurance Act of 1995, all citizens of the Philippines are
covered by the NHIPO. All private sector employees who are registered with the SSS as
of 1 July 1999 are deemed automatic members of NHIP. Other private sector employees
must register with the Philippine Health Insurance Corporation (PhilHealth). Employers
must also register with PhilHealth.

The employer is also responsible for remitting the contributions of the employees and its
counterpart contributions. The contributions may be remitted to an accredited collecting
bank within ten (10) calendar days from the end of each month.

9.     13th Month Pay

The law also requires the payment of a 13th month pay. The 13th month pay is a scheme
for augmenting the minimum wage by requiring employers to pay an extra month’s
compensation. Half of the 13th month pay may be paid in June (start of the school year in
the Philippines) and the other half in December (Christmas season).

Overtime and overload pay are excluded from the 13th month pay.


10.    Other Compulsory Benefits

Subject to certain exceptions, workers should be paid their regular daily wage during
regular holidays. The employer may require an employee to work on a regular holiday
but the employee shall be paid a compensation equivalent to twice his regular rate. If the
holiday falls on the scheduled rest day of the employee, he shall be entitled to an
additional premium pay of at least thirty percent (30%) of his regular holiday rate of two
hundred percent (200%) based on his regular wage rate.

Executive Order No. 203 lists only ten (10) regular holidays, namely:

               New Year’s Day                        January 1
               Holy Thursday                         (movable date)
               Good Friday                           (movable date)
               Araw ng Kagitingan                    April 9
               Labor Day                             May 1
               Independence Day                      June 12
               National Heroes Day                   last Sunday of August
               Bonifacio Day                         November 30
               Christmas Day                         December 25
               Rizal Day                             December 30

It also lists two (2) nationwide special days, namely:



                                                                                       93
               All Saints Day                November 14
               Last Day of the Year          December 31

Qualified employees who have rendered at least one (1) year of service are entitled to a
service incentive leave of at least five (5) days per year with pay.

Holiday pay and service incentive leave do not apply to managerial employees.

Private school teachers who are paid on an annual basis and are engaged in school work
other than teaching should be paid the daily rate even during regular holidays. On the
other hand, school personnel paid on a monthly basis who receive their salary throughout
the year without deductions, regardless of the actual number of working days per month,
are deemed paid for the ten regular holidays and are no longer entitled to additional pay.
Private school teachers in the college level are not entitled to holiday pay for the regular
holidays falling within the semestral vacation although they are entitled to be paid for
holidays falling within the Christmas break; and personnel earning a daily wage who are
paid for the actual number of days worked are not entitled to holiday pay (assuming, that
they do not work on these holidays) since these are considered “no class” days.




                                                                                         94
                                         XIV. SPECIFIC ISSUES


A.         Master Development Plan

In their Complaint, the plaintiffs claim that the defendants, without any feasibility study,
and purporting to act as a Board, adopted a Php5-Billion Master Development Plan
(“Plan”) for PCU. Pursuant to the Plan, the defendants caused and/or authorized and/or
made contracts and paid or agreed to pay substantial amount of money.

The Complaint also states that under PCU policies and requirements, transactions
involving the amount of at least Php100,000.00 go through a prescribed bidding process
while transactions involving the amount of Pph1 Million or more must also be approved
by the Board.

The record18 shows that as early as 2002, Mr. Suarez has already conceived of the idea of
a Master Development Plan for PCU.

According to the minutes of the meeting on 9 October 2002, the Board of Trustees
authorized the allocation of Php5 million for the PCU Master Development Plan with a
request that the President try to source fund from external sources. On 19 March 2004,
the Board of Trustees approved the additional amount of Php6M.

On 28 April 2004, Mr. Suarez issued a Certificate of Appointment appointing,
designating and authorizing Matthew Salcedo, Don Mario Dia and Enrico Torres as
financial advisers of PCU “to provide directions and plans for the maximum returns of
the investible funds of PCU with banking and/or financial institutions.” The said
Certificate of Appointment was confirmed by the Board of Trustees in a Special Meeting
held on 21 May 2004.

The record shows that the Board of Trustees19 held a Special Meeting on 25 June 2004 at
Island Cove, Kawit, Cavite. In the said meeting, the Board voted to:

           a.        approve the development of the Malvar, Taft and Dasmariñas properties of
                     PCU-UTS (BOT Action 04-1242);

           b.        approve the Five-Year Master Development Plan of the Malvar, Taft and
                     Dasmariñas properties of PCU-UTS (BOT Action 04-1243);

           c.        appoint the Toledano, De La Rosa and Associates as the Design, Planning
                     and Development Consultants of the Five-Year Master Development Plan
                     of the Malvar, Taft and Dasmariñas properties of PCU-UTS including the
                     preparation of the Project Feasibility Study (BOT Action 04-1244);

           d.        appoint Mr. Matthew Salcedo, Mr. Don Mario Dia and Dr. Enrico Torres
                     as financial consultants for the Five-Year Master Development Plan of the
                     Malvar, Taft and Dasmariñas properties of PCU-UTS(BOT Action 04-
                     1245);



18
     President’s Report 2004-2005
19
     One of the attendees is Prof. Aniceto Fontanilla, who is one of the plaintiffs


                                                                                           95
           e.      approve the Memorandum of Agreement with Mr. Matthew Salcedo, Mr.
                   Don Mario Dia and Dr. Enrico Torres as financial consultants for the Five-
                   Year Master Development Plan of the Malvar, Taft and Dasmariñas
                   properties of PCU-UTS as corrected (BOT Action 04-1246);

           f.      confirm the approval of the following modes of financing:

                   Internal        -       Tuition fees, Development, Grants, etc.
                   External        -       Bank Loans, Bonds, etc. (BOT Action 04-1247)

           g.      approve that the development plan for PCU-UTS should include the
                   acquisition of properties as necessary (BOT Action 04-1248).

In the letter dated 15 June 2004, Metrobank informed Mr. Salcedo, as PCU’s financial
consultant, of the approval of the Php30 Million Omnibus Line for PCCLI to be secured
by “assignment of trust deposits or trust placements or UNISA or Regular Time Deposits
or a combination of any of the deposit accounts at 95% LV.” In another letter dated 25
June 2004, Banco de Oro informed PCCLI, through Mr. Suarez, that it has approved
PCCLI’s Php30 Million Omnibus Line to be secured by Hold-Out on Trust Placement. In
an undated document entitled “Proposed Utilization Plan for Php60 M Credit Line”, it is
stated that one of the purposes of the credit is for the financing of the Master Plan and
Feasibility Studies for the Campus Redevelopment Projects. But whether or not PCU has
actually made a draw down or whether or not the proceeds have actually been used for
the Plan, is yet to be confirmed.

There was no specific approval for the Php30 Million Omnibus Line on record.
However, the Executive Committee in a meeting dated 6 June 2004 granted authority to
sign promissory notes with Banco De Oro to Mr. Suarez and other signatories. This
resolution was subsequently approved in the Board of Trustees Meeting dated 15
September 2004.

In the Memorandum dated 28 July 2004, Dr. Enrico Torres (one of the financial
advisers), informed the Board of Trustees, through its Financial Committee, of the
placement of an initial investment of Php34,162,382.71 with BDO’s Trust Department
earning a fixed interest rate of 11.32% per annum for a period of one year. In the same
Memorandum, it is stated that the financial advisers are in the process of the approval of
a Php30 Million Omnibus Credit Line with Equitable PCI Bank and a Php30 M Omnibus
Credit Line with BPI. Whether or not PCU has actually made a draw down and/or
whether the proceeds have actually been used for the Plan, has yet to be confirmed.


The Php32Million Back to Back Loan

The records point to a connection between the authority given to Mr. Matthew Salcedo et.
al. as financial advisers for the Master Development Plan and the subsequent investment
of Php32M in Terra Nova.

On or about September 2004,20 PCU obtained a loan from Equitable PCI Singalong-
Pedro Gil Branch in the principal amount of Php32M. The said loan is secured by PCU’s
time deposit with the said branch in the same amount.

On 16 September 2004, Mr. Suarez together with Rosalinda Aquino as Treasurer, issued
a Letter of Authorization addressed to the Branch Manager of Equitable, authorizing the
assignment of the Money Max Account of PCU with Equitable PCI Bank (Singalong-P.


20
     Promissory Note is dated 22 September 2004


                                                                                          96
Gil Branch) in the amount of Php32,647,434.06 to Terra Nova Trading, allegedly, “on
behalf of PCU’s investment program”.

Subsequently, the proceeds of the loan were credited to the account of the Terra Nova
with the same branch, which account was later on debited. The proceeds of the loan were
supposedly invested with Terra Nova Trading.

On 23 November 2004, Mr. Salcedo issued an Investment Certificate certifying that he
designated Terra Nova Trading to serve as a special purpose vehicle for the legal
investment of PCU in the amount of Php32M for 36 months.

In an attempt to determine whether an authority was granted for the above transactions,
the following documents, among others, were made available for examination:

   a.     Resolution No. 04-1221 during the Board of Trustees Special Meeting of 13
          April 2004, appointing Matthew Salcedo, Mr. Don Dia and Dr. Eric Torres as
          financial consultants of PCU.

   b.     Certificate of Appointment dated and notarized 28 April 2004 executed by
          Oscar S. Suarez, certifying that he is appointing, designating and authorizing
          Matthew Salcedo, Don Mario Y. Dia and Enrico L. Torres as financial
          advisers to PCU, particularly, to provide directions and plans for the
          maximum returns of the investible funds of PCU with the end in view of
          obtaining a fair and substantial return on investment with a minimum of 1%
          and a maximum of 22% or higher premium.

   c.     Resolution No. 04-1227 of the Board of Trustees Special Meeting of 21 May
          2004 resolving to confirm the Certificate of Appointment dated 28 April 2004.

   d.     Resolution No. 04-1227 (?)of the Board of Trustees Special Meeting of 21
          May 2004 resolving to hire Matthew Salcedo, Don Dia and Enrico Torres to
          perform the following:

          1. To assist in securing and negotiating the most workable and suitable
             financial loan package from domestic or international institutions in the
             form of Credit Lines and/or Term Loan facilities of ONE BILLION
             PESOS (Php1,000,000,000.00) or more as may be required in the
             development projects of the University in its Taft Ave. and Vasquez St.,
             Manila and Dasmariñas;

          2. To assist in securing and negotiating for the most efficient terms and
             conditions of the financial loan package for the beneficial interest of the
             PCU and

          3. To assist PCU in the finalization and documentation of the financial loan
             package as approved to facilitate the early and timely release of the loan
             proceeds in accordance to the agreed schedule draw downs as indicated in
             the project feasibility of the PCU and

          4. To mandate the Finance Committee, through its Chairman Mrs. Llinda
             Velarga, to gather comparative rates of financial advisers and send it to the
             members of the Board through email.

This Board of Trustees Resolution is erroneously referred to in some documents as 04-
1228. However, this Resolution is for the approval of the Internet Café Project of the
Dasmariñas Campus through a bank loan.



                                                                                       97
The above documents reveal that Matthew Salcedo or any of the financial advisers have
no authority to invest the funds of PCU in Terra Nova. The only document which seems
to support any authorization is the Letter of Oscar Suarez dated 14 October 2004
addressed to Matthew Salcedo informing the latter of his designation as Financial
Advisor as well as of his authorities. In the said letter dated 14 October 2004, Mr. Suarez
designated Mr. Salcedo to handle and manage the investment of PCU investible funds.
The letter states that the designation was pursuant to the instruction of the PCU Board of
Trustees and pursuant to Mr. Salcedo’s appointment as financial advisor. The designation
was accepted by Mr. Salcedo and conformed to by Dave Santos, as Chair of the Board of
Trustees Finance Committee.

       To quote, the letter provides that:

       “October 14, 2004

       MR. MATTHEW C. SALCEDO
       B101 Marina Bay Townhomes
       Asia World, Parañaque City

       Dear Mr. Salcedo:

       Pursuant to the instruction of the PCU Board of Trustees (BOT), through
       the Master Development Plan-Internal Management Committee (MDP-
       IMC) and your appointment by the Board of Trustees as PCU Financial
       Advisor, you are hereby designated to handle and manage the investment
       of the PCU investible funds (PCU funds) in the amount the MDP-IMC
       may authorize, set aside and release for the purpose.

       By virtue of your designation, you shall:

               a.     Invest the PCU funds in placements, investments and other
                      profitable venture as would ensure at least fourteen to
                      eighteen percent interest (14% to 18%) income per annum
                      for PCU;
               b.     Ensure that the funds invested are secured, returnable and
                      remittable upon the instructions of PCU President;
               c.     Make periodic report of your investments of the PCU
                      Funds to the PCU President, Chairperson of the BOT
                      Finance Committee and the University Treasurer;
               d.     Transfer all interest earned from your investments of the
                      PCU Funds hereunder to the PCU account with Equitable
                      PCI Bank, Pedro Gil-Singalong Branch at the end of every
                      quarter; and
               e.     Allow review and verification of your investments by the
                      University Legal Counsel by making available to him any
                      and all pertinent papers, documents and other records
                      appertaining to said investments.

       It is understood that you shall handle and be responsible for opening a
       commercial account with Equitable PCIBank, Pedro Gil-Singalong
       Branch, for such special purpose vehicle, as you may deem necessary and
       proper to implement the purpose of your designation hereunder.

       Kindly indicate your acceptance of your designation in the space provided
       below.

       Very truly yours,


                                                                                        98
       PHILIPPINE CHRISTIAN UNIVERSITY
       By:
       (Sgd)
       DR. OSCAR S. SUAREZ
       President

       I ACCEPT:                            CONFORME:
       (Sgd)                                (Sgd)
       MATTHEW SALCEDO                      DAVE T. SANTOS
       Financial Advisor                    BOT Finance Committee Chair”

The records do not show that the said designation of authorities, particularly, the
authority to invest the PCU funds, was confirmed or ratified by the Board of Trustees in
their subsequent meetings. Thus, while the designation of Matthew Salcedo as financial
adviser was authorized by the University, through its Board of Trustees, as confirmed by
the Board of Trustees Resolutions quoted above, Salcedo’s authority to invest the funds
of PCU is not sanctioned by any Board Resolution.

Also important is the Investment Certificate issued by Matthew Salcedo on 23 November
2004 which provides for an investment period of 36 months of the Php32 Million at the
rate of 18% percent per annum. Considering that the investment period has already
lapsed, a demand may be properly made upon Matthew Salcedo for the release of the
Php32 Million and the accrued interest income on the investment.

It has been confirmed that Matthew Salcedo and Marlene Suarez, the wife of Oscar
Suarez, are incorporators and the major stockholders of Terra Nova Trading as borne out
by its Articles of Incorporation on file with the Securities and Exchange Commission.
Terra Nova Trading has the SEC Company Registration No. CS200419582 and as of
present, is using the corporate name Terra Nova Ventures Corporation. It is therefore
indubitable that Mr. Salcedo invested the funds of the University in a corporation where
he and the wife of Dr. Suarez have substantial financial interest.

As regards the authority for the negotiation of a credit accommodation on behalf of the
University, the documents submitted to the Equitable PCI Bank, such as Secretary’s
Certificate are necessary as this will confirm whether the authority of the University to
incur obligations are backed-up with Board Resolutions.

It appears from the documents provided by Equitable PCI Bank that PCU submitted a
Secretary’s Certificate executed on 9 August 2004 by the supposed corporate secretary
Aniceto B. Fontanilla, stating that in the Board of Trustees Meeting on 6 March 2003, a
Resolution was adopted authorizing Bishop Solito K. Toquero, Rosalinda Aquino on one
hand and Oscar Suarez and Jovita Reyes on the other, to apply for, negotiate and obtain
loans or other credit accommodations from Equitable PCI Bank and to mortgage or
encumber properties of PCU, among others.

On the other hand, the minutes of the Board of Trustees Meeting of 6 March 2003 shows
that the Board authorized only the following:

              “To authorize the immediate investment of investible funds
              of the University in Trust Accounts with at least two of the
              following banks:

              1. Metropolitan Bank and Trust Company
              2. Equitable PCI Bank
              3. Standard Chartered Bank



                                                                                      99
                  authorizing that all documents of investment, deposit
                  and/or withdrawal of said funds be signed by either

                  Bishop Solito Toquero, Chairman of the Board, or
                  Mrs. Rosalinda Aquino, University Treasurer

                  and countersigned by either:

                  Dr. Oscar P. Suarez, University President, or
                  Prof. Jovita Reyes, Vice President for Academic Affairs

                  with Prof. Aniceto Fontanilla as consultant

The resolution therefore, does not authorize obtaining a loan from the said banks, as the
same contemplates merely placement of readily investible funds. The secretary’s
certificate relied upon therefore is not covered by a board resolution. Further, the minutes
show that the corporate secretary of the University at that time was Atty. Sofronio Larcia.

Considering that the documents in possession of the bank show a seemingly regular and
valid transaction, the recourse of the University is to go after Mr. Matthew Salcedo and
Terra Nova, without prejudice to any solidary liability of the Board of Trustees and the
officers of PCU who consented to the transaction.


Appointment of Toledano, dela Rosa and Associates as the Design, Planning and
Development Consultants of the Five-Year Master Development Plan

During the same Board of Trustees Meeting of 25 June 2004, the Board of Trustees
approved the appointment of Toledano, De La Rosa and Associates as the Design,
Planning and Development Consultants of the Five-Year Master Development Plan of the
Malvar, Taft and Dasmariñas properties of PCU-UTS including the preparation of the
Project Feasibility Study (BOT Action 04-1244). Toledano et.al. undertook to plan and
design the Master Development Plan for PCU through a Memorandum of Agreement
notarized on 1 January 2005 with PCCLI for an amount of Php13,293,354.89.

PCU, has disbursed a total of Php25,376,054.89 in favor of Toledano et.al., supposedly as
payment for their services. It is unclear however as of now, which amounts were owing
pursuant to the Memorandum of Agreement. The disbursements are summarized below:

                                                           Disbursement
       Payee                    Particulars                  Voucher       Date        Amount
     Toledano      Professional fee for the preparation
     de la Rosa    of preliminary project studies &
     and           Master Development Program of
 1   Associates    PCU Campus                                116217       15-Jun-04   1,028,700.00
     Toledano
     de la Rosa
     and           Refund of Expanded w/ tax as
 2   Associates    General Building Contractors              116753       6-Aug-04      91,440.00
     Toledano
     de la Rosa    Partial payment of preparation of
     and           architectural and engineering designs
 3   Associates    of PCU Taft Facade                        117062       10-Sep-04    165,000.00
     Toledano
     de la Rosa    2nd payment for the Architectural
     and           and Engineering designs of PCU Taft
 4   Associates    Facade                                    117274        1-Oct-04     75,000.00




                                                                                             100
     Toledano     Partial payment for the preparation of
     de la Rosa   the architectural and engineering
     and          designs of PCU Taft Academic
 5   Associates   Building, Extension                      117397   13-Oct-04      201,500.00
     Toledano     Partial payment for the preparation of
     de la Rosa   the architectural and engineering
     and          designs of PCU Taft Academic
 6   Associates   Building                                 117544    4-Nov-04      110,500.00
     Toledano
     de la Rosa   Partial Payment for the Master
     and          Development Planning of PCU Taft
 7   Associates   Campus Shopping Arcade                   118764   28-Mar-05    1,263,000.00
     Toledano
     de la Rosa   30% Down payment for MDP-PCU
     and          Union Science Schools and Shopping
 8   Associates   Arcade                                   119153    6-May-05      200,000.00
     Toledano
     de la Rosa   Payment for additional structural
     and          engineering design of PCU-Taft
 9   Associates   Academic Building ext.                   119271   20-May-05       37,730.00
     Toledano
     de la Rosa   partial payment for the Master
     and          Development Planning of PCU-Taft
10   Associates   and Shopping Arcade                      119351    1-Jun-05      500,000.00
     Toledano
     de la Rosa   Partial payment-master development
     and          plan of PCU-USS and Shopping
11   Associates   Arcade, net of expanded w/ tax           119494   16-Jun-05    2,924,320.00
     Toledano
     de la Rosa   Partial payment of Master
     and          Development Planning of PCU-UTS
12   Associates   Dasmariñas                               119625   29-Jun-05    2,500,000.00
     Toledano
     de la Rosa
     and          Payment for structural design of the
13   Associates   academic building extension              119738    11-Jul-05      47,775.00

     Toledano     PCU-USS (Elem. and HS) Master
     de la Rosa   Development Plan Accomplishment
     and          billing for module 1, net of share in
14   Associates   partial payment and 2% expanded tax      120411   19-Sep-05    1,562,124.46

     Toledano     PCU Taft- Master Development Plan
     de la Rosa   Accomplishment billing for Module
     and          1, net of share in partial payment and
15   Associates   2% expanded tax                          120410   19-Sep-05      552,924.09

     Toledano     PCU-UTS Dasmariñas Master
     de la Rosa   Development Plan accomplishment
     and          billing for Module 1 net share in
16   Associates   partial payment and 2% expanded tax      120952   18-Nov-05    2,033,341.34

                                                                             Php13,293,354.89

On 18 March 2006, the Board of Trustees voted to approve in principle the termination of
the Memorandum of Agreement with Toledano de la Rosa and Associates and refer the
same to legal counsel for appropriate action.

PCU through Mr. Oscar Suarez, inquired from their retained counsel of Sobreviñas
Hayudini Bodegon Navarro & San Juan whether PCU can legally pre-terminate its
contract with Toledano et.al. for failure to comply with its obligations under their
agreement. In an unsigned letter dated 20 July 2006, Atty. Yvette Navarro opined that
PCU is entitled to stop payments since the PCU Technical Review Team found that the
modules submitted by the architect did not comply with the terms of reference.




                                                                                         101
The Master Development Plan-Internal Management Committee:

In the same Board of Trustees Meeting of 25 June 2004, the Board of Trustees voted to
organize the PCU/UTS Internal Project Management Team to be composed of Bishop
Daniel C. Arichea, Jr., Rev. Reuel Norman O. Marigza, Prof. Aniceto B. Fontanilla, Mr.
Dave T. Santos, and Dr. Oscar s. Suarez as Ex-Officio Member (BOT Action No. 04-
1241).

Subsequently, in a meeting of 9 January 2005, the Committee was renamed Master
Development Plan-Internal Management Committee (MDP-IMC) (IMC-0715-04-03). Its
responsibilities consist of the following (IMC-0715-04-02):

       a.     review all contracts and recommend for approval, modification and/or
              revision;

       b.     review, coordinate, monitor and approved all loans, sources of funds,
              release of funds, project cash flow, and repayment schedules;

       c.     review and approve all construction and development plan, shortlist and
              select all suppliers, contractors and subcontractors, and review the
              performance of the design and planning consultant and all other
              contractors/consultants;

       d.     review all academic programs and all the hardware and software
              component of these programs; and
       e.     review, modify, recommend and/or approved all business proposals that
              will be integrated into the master development.

The MDP-IMC therefore appears to be the body in-charge of the PCU Master
Development Plan.

In the same meeting, the MDP-IMC approved to set an initial of Php2 Million as the
operating funds of the MDP-IMC to cover cost of the full time coordinator and the costs
of Meetings, travel, honorarium/allowances, Office Supplies, Communication, Computer
and other related expenses (IMC-0715-04-07).

In its subsequent meetings, the following actions, among others, were taken by the MDP-
IMC:

       a. The IMC approved the Php60 Million the reimbursement of the Php12.5
          Million reimbursement of the Php12.5 Million ongoing development projects
          through the Php60 Million credit lines (IMC-0807-04-09);

       b. To approve the proposed MOA with Mr. Dan Villa for the marketing/PR
          campaign of the Union High School Alumni Homecoming in November 2004.
          Payment of the total contracted price of Php75,000.00 will be advanced by
          PCU which will be taken from the Php60 Million credit line. This amount will
          be paid from the proceeds of the promotion (IMC-0830-04-11);

       c. To approve the salary of the Project Coordinator of Php30,000.00 a month and
          to hold office at Shalom Center with a monthly rental of Php20,000.00 (IMC-
          0830-04-12);

       d. To recommend to the Board of Trustees the approval of the Notice to Proceed
          (NTP) for the Toledano, dela Rosa and Associates (TDA) for the master
          planning and architectural and engineering designs of the Taft, Dasmariñas


                                                                                      102
           and the Malvar properties with a total project cost of Php28,792,000.00 (IMC-
           1017-04-15);

       e. To approve the inclusion of Php90,000.00 for the geotechnical investigation
          of Malvar and Taft campus as required by the Master Plan (IMC-0128-05-48);

       f. To approve the inclusion of Php485,000.00 for the topographic survey of
          Dasmariñas campus as required by the Master Plan (IMC-0128-05-49);

       g. The IMC approve the releasing of 30% down payment which is about
          Php9.6M upon the release of the Notice to Proceed (IMC-0128-05-50);


B.     NIBA

The second cause of action arose from Mr. Suarez’s alleged release of corporate funds
amounting to US$40,000.00 without the necessary board approvals and
irregular/unaccounted use thereof in connection with the settlement of PCU’s pending
case filed by NIBA of Lahore, Pakistan, docketed as Suit No. 242-1998 before the Court
of Civil Judge Lahore-Pakistan (the “Case”). NIBA is PCU’s former partner in a joint
program to offer BBA, MBA and PhD courses in the different cities in Pakistan (the
“joint program”) which was allegedly terminated unilaterally by its former president, Dr.
Carlito Puno;

The Complaint alleges that upon recommendation of Mr. Suarez, the PCU Board
authorized him to settle the Case in view of NIBA’s intention to re-open the joint
program with PCU’s new administrators. To re-open the Joint Program, PCU’s Executive
Committee recommended an investment of US$50,000.00 but the Board withheld action
thereon as it was referred to the Board’s Finance Committee for study and comment
thereon. This investment proposal never came back to the PCU Board for approval.

On 9 March 2001, the Board of Trustees ratified the resolution Executive Committee,
which included the following authority:

              “2. To settle with NIBA the case filed against PCU by
              continuing its educational tie-up with PCU

              2.A. To refer to the Finance Committee the investment of
              US$50,000 for the continuance of the NIBA program

              2.B to inform Mr. Abdullah Khan of the action of the
              Executive Committee that it has approved the continuance
              of the extension program with NIBA, and that PCU does
              not recognize the PCU-NIBM agreement and that NIBM
              has to coordinate with NIBA regarding the requirements for
              the “release of academic degrees” to NIBM graduating
              students, and the handling of current and new enrollees at
              NIBM.”

In 2001, a draft Memorandum of Agreement (“MOA”) was prepared by both PCU and
NIBA for signature by Mr. Suarez and NIBA’s Chairman, Ret. Col. Ayub Rana. A copy
of the draft MOA was found in the records of the Office of the President of PCU.
Briefly, the MOA provides for the re-opening of the Joint Program of NIBA and PCU in
Lahore, Pakistan and in consideration thereof, the Case filed by NIBA against PCU at
Pakistan shall be withdrawn and NIBA shall cause the dismissal thereof. However, the
MOA was never signed by PCU and NIBA’s representatives during that year or



                                                                                     103
subsequently thereafter. Based on the files, no compromise agreement was also entered
into by NIBA and PCU during that year.

On 21 June 2001, despite the absence of any compromise agreement between NIBA and
PCU and the Case not having been withdrawn by NIBA, Mr. Suarez, through his
handwritten memorandum and in the absence of a board resolution, ordered the Treasury
Department of PCU to prepare a bank draft for US$20,000.00 to be paid to NIBA as
additional investment of PCU. On 22 June 2001 a bank draft was prepared by PCU’s
Treasury which was recorded in PCU’s books as “additional investment with NIBA
(Pakistan)” as evidenced by Disbursement Voucher No. 106293. Although the payee
recorded in the Disbursement Voucher is NIBA, the “Received by” portion of the said
voucher indicates that the payment was received by a certain “MC Magno”.

On 12 June 2001, another payment to NIBA was made by PCU to NIBA through a
demand draft in the amount of Php940,625.25 converted to pesos. This time, such
payment was not recorded in the Disbursement Voucher of PCU. It appears that the
payment was not recorded in the books of PCU at the time the release of the payment was
made in violation of PCU’s policy that all payments or release of funds must be recorded
in the books prior to or at the time of its release and supported by disbursement vouchers.
The said payment of Php940,625.25 was recorded in the books of PCU only in 31
October 2001 after such release of fund was found as a reconciling item in the cash
balances of PCU at EPCIB-Dollar Account. Consequently, such release of fund was
recorded in the books of PCU through a Journal Voucher entry only and not through
Disbursement Voucher entry. No supporting documents were available for such payment
which will show that Mr. Suarez authorized this payment.

On 7 August 2002, another payment to NIBA was made by PCU amounting to
US$5,000.00 upon the order of Mr. Suarez through his handwritten memorandum dated
7 August 2002 addressed to PCU’s Treasury Department. This time, the said
memorandum indicates that such payment is intended as partial payment of PCU and
NIBA’s settlement and aid to jumpstart NIBA. Such payment was recorded in PCU’s
books through a Disbursement Voucher entry with particular “3rd release of investment to
MBA Program-NIBA”. The supporting Disbursement Voucher No. 112290 was
supported by a withdrawal slip signed by “Rosalinda M. Aquino” and “Dr. Oscar S.
Suarez” and a letter request dated 7 August 2002 signed by NIBA’s Director, Aamir
Ayub Rana. It appears from the supporting voucher that the payment was received by
Mr. Rana on 7 August 2002.

In sum, PCU’s payments which were recorded in its books as Investments with NIBA are
as follows:

       21 June 2001           -      US$20,000.00
       12 June 2001           -      Php940,625.25
       7 August 2002          -      US$5,000.00


Both the US$20,000.00 and US$ 5,000.00 payments have supporting documents to prove
that Mr. Suarez authorized these payments. The Php 940,625.25, however, has no
available supporting documents presented as of this writing.

On 17 March 2005, at the meeting of the PCU’s Board and after having made the above-
mentioned payments to NIBA, Mr. Suarez abandoned PCU’s joint educational program
with NIBA and announced that he found a new partner in Pakistan which is Skill
Development Council.

Several correspondences between Mr. Suarez and NIBA from 6 March 2006 to 26 July
2006 were found in the records of the Office of the President. The subject of these


                                                                                       104
correspondences is the possibility of amicable settlement between NIBA and PCU after
the Pakistan Court had rendered judgment against PCU in the Pakistan Case. In those
letters, NIBA, through Mr. Rana, advised Mr. Suarez of the decision rendered by the
Pakistan Court in favor of NIBA. Mr. Suarez then requested from Mr. Rana a certified
copy of the judgment as well as possible settlement between PCU and NIBA in relation
to the execution of the said Judgment;

Per letter dated 17 July 2008 sent by Mr. Suarez to Mr. S.J. Earl P. Canlas, Secretary
Philippine Central Conference, a case for enforcement of a Foreign Judgment filed by
NIBA against PCU is now pending with the RTC of Manila, Branch 32 which is
docketed as Civil Case No. 07-117578;

Upon confirmation with the RTC of Manila, Branch 32, the above case entitled: “Colonel
(Retired) Ayub Ali Rana, in his capacity as Chairman and Proprietor of National
Institute of Business Administration (NIBA), Pakistan, The National Institute of Business
Administration (NIBA) versus Philippine Christian University (PCU) Manila, et. al.” is
now in its pre-trial stage. The plaintiffs in this case are enforcing the judgment of the
Pakistan Court in the Pakistan Case whereby PCU together with Carlito S. Puno, was
held liable to pay NIBA US$2,547,376.00 for damages.

The above circumstances point to the fact that NIBA and PCU never reached a
compromise agreement despite the above payments of PCU as authorized by Mr. Suarez.
Such payments remain unaccounted for and appear to have been made without any
benefit to PCU.

It is therefore recommended that the receipt by NIBA of the above-mentioned payments
be confirmed from NIBA itself and determine the purpose for the above payments as
understood by NIBA, through Mr. Rana, and Mr. Suarez.


C.     National Power Corporation (“NAPOCOR”)


The Complaint alleges as its third cause of action, that a complaint for expropriation for a
right of way was filed, affecting the properties owned by UTS. The case was captioned
“National Power Corporation v. Italit Construction and Development Corp. et. al, and
docketed as Civil Case No. 1226-95 in the Regional Trial Court of Cavite, Branch 22.

The minutes of the meeting of the Board of Trustees on 24 September 2003, show that
the UTS property subject to the case, was classified as agricultural and therefore, of low
value.

The Board of Trustees thereafter, decided to authorize the President, Dr. Suarez, to take
appropriate and necessary action towards the settlement of claims in the case, negotiate
and agree with NAPOCOR and /or the appropriate government officers or agencies in
arriving at and fixing the compensation for property, to collect, receive and accept on
behalf of PCU/UTS such amounts agreed upon; enlist the assistance of any person or
entity; sign, execute and deliver such contracts, agreements, documents or writings; and
do and perform such other acts and things necessary and appropriate to accomplish the
said authority.

The minutes of the Executive Committee dated 3 December 2003 state that Dr. Suarez
reported that a MOA was being prepared by PCU and Mr. Quiambao. According to the
minutes:

               “…the services include, among others, the reclassification
               of the land from agricultural to residential and for it to be


                                                                                        105
              classified outside of CARP. Dr. Suarez added that Mr.
              Quiambao’s fee is whatever in excess of One Thousand
              Pesos (P1,000) per square meter to be collected from
              NAPOCOR.”


Due to the objections on grounds of legality and immorality, the Executive Committee
approved the following resolution:

               “To authorize the PCU President to look for other
              alternative courses to facilitate the settlement of the
              NAPOCOR case.”

On 19 March 2004, Dr. Suarez confirmed that he signed a memorandum of agreement
with Mr. Quiambao. The Board of Trustees entered into a lengthy discussion on the
matter. They voted however, not to ratify the resolution of the Executive Committee
dated 3 December 2003.

A photocopy of the Memorandum of Agreement (“MOA”)dated 14 December 2004, and
notarized on 7 February 2005 was provided by the former Corporate Secretary, Reverend
Connie Semy P. Mella executed by Dr. Suarez on behalf of UTS and Raymundo L.
Quiambao. Notably the date of the document, and its notarization happened after the
meeting of the Board on 19 March 2004. The key terms of the MOA were as follows:

   •   UTS shall receive a guaranteed amount of Php40,246,000.00 or Php1,00.00 per
       square meter of the expropriated area of 40,246 square meters
   •   Mr. Quiambao is guaranteed to receive an amount of Php16,000,000
   •   UTS and Mr. Quiambao agree to divide the excess collection equally between
       both of them after deducting the guaranteed amount of Php56,246,000.00
   •   A brokers fee of 5% on the total collection shall be paid to Mr. Quiambao
   •   UTS shall execute a special power of attorney in favor of Mr. Quiambao to
       represent the former in all transactions with NPC/TRANSCO

The minutes of a subsequent Board of Trustees meeting held on 17 March 2005 show
that some documents have already been signed by Dr. Suarez in favor of Mr. Quiambao.
According to the minutes:

              “Dr. Suarez distributed copies of the agreement he signed
              with the broker and explained the difficulties encountered
              by the broker in pursuing the claim and NAPOCOR.”

                                          xxx

              “Dr. Suarez said that the gross amount expected is about
              P80 but out of the gross, payable and fees will have to be
              paid, but PCU is assured of P40M. He said that under the
              original agreement between him and Mr. Quiambao, all
              attorney’s fees and administrative cost shall be charged to
              the latter’s share. However, Atty. Larcia said that this does
              not seem to be the case in the new document presented to
              the Board where Mr. Quiambao shall be entitled to the
              following fees:

              a) One hundred percent (100%) of gross amount         to be
              collected in excess of PHP1,000 per square            meter
              corresponding to the area of 29,700 square meters     of the
              area verified to have been affected by the             NPC


                                                                                 106
               Transmission Line provided the said amount shall not
               exceed Sixteen Million Pesos (PHP16,000,000.00);

               b) Fifty percent (50%) of the additional gross amount to be
               collected in excess of the amount stated in the immediate
               foregoing number, if any, on the best effort basis;

               c) All attorney’s fees and court expenses, administrative
               costs for services covering trace back of technical
               descriptions, conduct of actual site verification, resurvey of
               the properties and approval of the requisite resurvey plan,
               issuance of valid and certified inscription of technical
               descriptions on the corresponding title or titles on the
               properties, and other similar services and statutory
               expenses shall be paid by UTS; and

               d. Broker’s Fee of Five (5%) from the actual amount to be
               collected by UTS traversed by the NPC Transmission Line
               shall be paid to the undersigned immediately upon
               presentation of the NPC check to UTS

A copy of the said document has not yet been found in the Office of the President.
However, a signed and conformed copy dated 23 January 2004 (signed by Mr. Quiambao
and conformed to by Dr. Suarez) of the same was attached to the Complaint as Annex
“E-3”. The document contains the same amounts of compensation to be received by Mr.
Quiambao as those stated in the minutes.


The resolution approved by the Board of Trustees dated 17 March 2005 was as follows:

               “To request Legal Counsel and Mr. Dave Santos with the
               President to negotiate with Mr. Quiambao on his fees and
               to report to the Execom on the proceeding and
               consultations”.


According to Complaint, NAPOCOR paid PCU the amount of Php82.1 million through a
check. The proceeds from the NAPOCOR check were not received by PCU, but were
received by Mr. Quiambao, pursuant to a certain Special Power of Attorney (the SPA
was not available, but was mentioned in the letter agreement between PCU and Mr.
Quiambao). Mr. Quiambao, thereafter, made out a check in the amount of Php41 million
to PCU. The amount of Php41 million allegedly represents the net amount due to PCU.
The computation is as follows:


 Guaranteed amount per MOA                                     40,246,000.00

 Share in excess after guaranteed amount                       12,930,603.00

                                                               53,176,603.00
 Less payments to Broker

     Expenditures for PCU/UTS claim                             9,517,772.00

     Broker's fee                                               2,658,831.00

                                                               12,176,603.00
 Amount due to UTS


                                                                                  107
                                                                    41,000,000.00




The break down of expenses, as stated in the Audit Report was as follows:

                                  Description                                        Amount

 Re-survey the three titles, rectify errors, secure LRA approval, seggregate
 areas and correction of technical descriptions by Office of Ms. Jocelyn
 Tangonan, CPA, MBA                                                             Php3,085,065.00
 Splitting of expropriated titles from 2 sets to 7 sets to remove Lis Pendens
 and Adverse claim at the back of the titles, By; Garja Trading                       500,000.00
 Conversion/re-classification of areas affected and secure tax exemption by
 China Gold Enterprises c/o Mr. Daryl Viernes                                        1,500,000.00

 DARAB Case Decision by Atty. Confucius Amistad                                       320,000.00
 Collaborating lawyer's fee; appearances and expenses paid to Atty. Ricardo
 M. Angobung, Atty. Y. Busmente and Atty. K. Barinaga                                 588,000.00
 Commissioner's Fee and expenses for Ms. Lyn Astorga, VP for Sales Fil-
 Estate, Inc.                                                                          10,000.00

 Paid to BIR-Capital Gains Tax on 2-24-05 c/o Grace Rivera                           2,414,763.00
 Paid Realty Tax Arrears to Provincial Treasurer of Dasmariñas, Cavite.
 OR#421051 & 52 2-28-05                                                               292,527.00

 Paid RD-Registration Fee OR# 504555555803-0                                          239,562.00

 RLQ-5% Commission (Broker's Fee)                                                    2,658,830.00

 Sheriff's fees and expenses                                                          400,000.00
 Administrative, representations, transportation and out of pocket expenses
 from 2003 to June 3, 2005                                                            167,855.00

                                                                                    12,176,602.00


 Net amount due PCU/UTS                                                             41,000,000.00

 Gross amount for PCU/UTS                                                           53,176,602.00


The Audit Report dated 13 February 2006 recommended that the PCU verify the
existence and validity of the reimbursable expenses of Mr. Quiambao from these third
parties. The Audit Report also stated that the amount of unsupported expenses was
Php1,318,000.00

Further verification must be made on the legality of the agreements executed by Mr.
Suarez.




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