A squabble has erupted between power distributor Manila Electric Co. (Meralco) and government-owned minority shareholder Land Bank of the Philippines, which cried foul over a sudden cancellation of its shares on the eve of a deal with other government financial institutions to sell their shareholdings jointly to a deep-pocketed group believed to be allied with the beverage and food group San Miguel Corp.

The Philippine Stock Exchange on Tuesday slapped a one-hour trading halt on trading of Meralco shares until 10 a.m. as a result of the legal dispute. ?With the conflicting positions taken by [Land Bank] and Meralco on the subject shares, the investing public is hereby advised to exercise prudence in making any investment decision,? the PSE said in a memo.

Meralco canceled about 42 million Meralco shares owned by Land Bank and issued new shares in favor of one Josefina Lubrica, citing an Oct. 24 order of the Regional Agrarian Reform Adjudicator regarding a piece of contested land under the government?s agrarian reform program.

Meralco said that since the cancellation of Land Bank?s stock certificates and the issuance of new ones were based on an involuntary sale and a final decision of the Supreme Court, Land Bank?s consent was unnecessary for transferring the subject shares.

Land Bank said the premise cited by Meralco was null and void, as a new Regional Adjudicator of the Department of Agrarian Reform (DAR) had issued an order Dec. 15 recalling and withdrawing the Oct. 24 order. It said such an order affirmed that it remained as the true owner of the 42 million Meralco shares.

In a letter to Meralco president Jesus Francisco, Land Bank president Gilda Pico said Land Bank should have been notified about the DAR demand for compliance, so Meralco would not have rushed into canceling the shares without hearing Land Bank?s side of issue.

The letter also cited a resolution issued by the Supreme Court on Oct. 24, 2005, in a case titled Land Bank of the Philippines vs Federico Suntay represented by his assignee, Josefina Lubrica.

Land Bank said a part of an agricultural land in Occidental Mindoro province had been expropriated based on the government?s land reform program and valued by the DAR at P4.25 million. The property had many claimants, one of whom was Federico Suntay.

Ownership of the property is being disputed by many parties and is the subject of various pending cases before numerous courts, the bank said.

Land Bank said Suntay rejected the DAR valuation of the property and questioned it before Regional Agrarian Reform Adjudicator Conchita Minas, who ruled in January 2001 that the fair compensation for the land was P157.54 million.

Land Bank disagreed with that valuation and filed a ?petition for determination of just compensation? with the Regional Trial Court of Occidental Mindoro as a Special Agrarian Court (SAC).

The SAC dismissed Land Bank?s petition for being filed out of time and for being a subsequent appeal. The Court of Appeals upheld the SAC order, prompting Land Bank to raise the case to the Supreme Court. As this transpired, Regional Agrarian Reform Adjudicator Conchita Minas issued a writ of execution in September 2005 to enforce her 2001 decision on just compensation for the contested property.

Sheriffs auctioned in October 2005 Land Bank?s Meralco stockholding, totaling 53.56 million shares, at a bargain price of P1.00 each, or a total price of P53.56 million.

Land Bank said it was never notified of the auction sale.

Land Bank also furnished the Philippine Stock Exchange with a copy of a Court of Appeals order dated Dec. 4 stopping DAR sheriffs, Suntay and Lubrica from enforcing an Oct. 30 order for Land Bank to pay the Suntay group P157.54 million as just compensation for the contested land.

Some analysts said the action against Land Bank might have been intended to scuttle the joint sale of a combined 10-percent stake in Meralco to Global 5000 Investment, a local investment fund led by business magnate Iñigo Zobel, former trade minister Roberto Ongpin and condiments magnate Jose Campos Jr.

Global 5000 is widely believed to be allied with San Miguel, which recently bought a 27-percent stake in Meralco from the state-run pension fund Government Service Insurance System. It is thus believed to have the swing votes needed in a widely anticipated battle for control of Meralco, which holds the power distribution franchise in Metro Manila and nearby areas. Edited by INQUIRER.net