REPUBLIC OF THE
Petitioner,
Present:
CARPIO, J., Chairperson,
- versus - ABAD,
VILLARAMA, JR.,*
PEREZ,** and
MENDOZA, JJ.
SANDIGANBAYAN (SECOND DIVISION),
TERNATE DEVELOPMENT CORPORATION,
FANTASIA FILIPINA RESORTS, INC.,
MONTE SOL DEVELOPMENT
CORPORATION, OCEAN VILLAS
CONDOMINIUM CORPORATION,
OLAS
CORPORATION, PHILIPPINE
VILLAGE HOTEL, PHILROAD
CONSTRUCTION CORPORATION,
CLUB, INC., SILAHIS INTERNATIONAL
HOTEL, SULO DOBBS FOOD
SERVICES, INC., NOTION AND Promulgated:
POTIONS, INC., and SUN AND
SHADE MERCHANDISE, INC.,
Respondents. July 13, 2010
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ABAD, J.:
This case is about
the propriety of amending a complaint for recovery of alleged ill-gotten wealth
by impleading corporate entities already listed down in the original complaint
as assets and shell corporations of the defendant individuals.
The Facts
and the Case
From 1986 to 1988, the Presidential Commission
on Good Government (PCGG) issued various sequestration orders against the assets,
records, and documents of several corporations owned by Modesto Enriquez,
Trinidad Diaz-Enriquez, Rebecco Panlilio, Erlinda Enriquez-Panlilio, Leandro
Enriquez, Don M. Ferry, Roman A. Cruz, Jr., and Gregorio R. Castillo
(collectively the Enriquez group), all of whom were alleged associates of the
spouses Ferdinand and Imelda Marcos. The
corporations were:
Corporation
Date
of Sequestration
Philippine Village Hotel
(Philippine Village) June
6, 1986[1]
Philroad Construction
Corporation (Philroad)
Silahis International Hotel
(Silahis) May
31, 1986[2]
Fantasia Filipina Resorts,
Inc. (Fantasia)
Monte Sol Development
Corporation (Monte Sol)
Olas
(Olas
(Puerto
Azul)
Ternate Development
Corporation (
and April 4, 1988.[3]
On July 23, 1987 petitioner Republic of the
Philippines (the Government), through the PCGG, filed a complaint[4]
with the Sandiganbayan against former President Marcos, his wife Imelda, and
the Enriquez group of individuals for reconveyance, reversion, accounting,
restitution, and damages, in Civil Case 0014.
Annexed to the complaint was a
list of corporations where the individual defendants allegedly owned shares of
stock.[5]
The list included the above-named respondent
corporations and, in addition, respondents Notions and Potions, Inc. (Notions
and Potions), Ocean Villas Condominium Corp. (Ocean Villas), Sulo Dobbs Food
Services (Sulo Dobbs), and Sun and Shade Merchandise, Inc. (Sun and Shade),
among others.
In October 1991 the Government moved for the admission
of an amended complaint[6]
in Civil Case 0014 to implead respondent corporations, except for Notions and
Potions and Sun and Shade, as defendants.
It alleged that the corporations were beneficially owned or controlled
by the individual defendants and that the latter used them as fronts to defeat
public convenience, protect fraudulent schemes, or evade obligations and
liabilities under the law.
Meantime, respondents Silahis, Philippine
Village, and
The Government elevated the matter to this
Court through certiorari in G.R.
104065, 104168, and 105205. Acting on
these cases and several others, the Court in Republic of the
Philippines v. Sandiganbayan[9] set aside
the writ of injunction. It held that the
corporations need not be formally impleaded to maintain the existing
sequestrations. Moreover, a complaint
which identified and alleged that the corporations served as repositories of
ill-gotten wealth may be considered a judicial action as contemplated in the
Constitution. Lastly, the Court said that
even assuming the corporations had to be impleaded, the complaints could be
amended at any time during the pendency of the actions.[10]
Here, the Sandiganbayan eventually admitted
the amended complaint in Civil Case 0014.[11] Respondents
Respondents Fantasia, Silahis, Philippine
Village, Philroad, Puerto Azul, Sulo Dobbs, and Ocean Villas later followed
suit and filed a similar motion.[13] In
addition, respondents Philippine Village, Silahis, Monte Sol,
On February 7, 2002 the Sandiganbayan granted
the motions to dismiss.[14]
Citing the Republic case, it
held that impleading the corporations as defendants was unnecessary. The Government filed a motion for
reconsideration but the Sandiganbayan denied the same, further pointing out
that the amended complaint stated no cause of action against the defendant corporations. It also lifted the orders of sequestration
against them.[15] Aggrieved, the Government filed this petition
for certiorari under Rule 65 of the Rules of
Court.
With the filing of the petition, the Sandiganbayan
in Civil Case 0014 allowed the postponement of pre-trial hearings in deference
to this Court. But since the Court did
not issue a temporary restraining order, the Sandiganbayan resumed hearings in
the case on October 1, 2007. But the Government
failed to appear despite due notice. Consequently,
the Sandiganbayan dismissed the case against the remaining individual
defendants without prejudice.[16]
The Issues
Presented
The threshold issue presented in this case is
whether or not the present petition for certiorari under Rule 65 is the
proper remedy in assailing the resolutions of the Sandiganbayan.
The substantive issues are:
1. Whether
or not the Sandiganbayan gravely abused its discretion in dismissing the
complaint against respondent corporations on the grounds that there was no need
for it and that the amendment did not state a cause of action against such
corporations; and
2. Whether
or not the Sandiganbayan gravely abused its discretion in lifting the
sequestration orders against the subject corporations.
The Court’s Rulings
One.
With respect to the threshold issue, the Government clearly availed
itself of the wrong remedy in filing this special civil action of certiorari under Rule 65 of the Rules of
Court. An order of dismissal is a
final order,[17] which is
the proper subject of an appeal through a petition for review. Where
appeal is available, the special civil action of certiorari will not be
entertained even if it is filed on ground of grave abuse of discretion as in
this case. The remedies of appeal and special
civil action of certiorari are
mutually exclusive. One cannot take the
place of the other. [18] And, while there are known exceptions to this
rule, none has been shown here.
At any rate, even if the procedural flaw is disregarded, the Court finds
that the Sandiganbayan committed no grave abuse of discretion in dismissing the
complaint and lifting the sequestration orders against respondent corporations.
Two.
For an act to
be struck down as having been done with grave abuse of discretion, such abuse
must be patent and gross, a screaming aberration, to use a phrase. The Sandiganbayan’s dismissal of the complaint
as against respondent corporations cannot be regarded as falling in this
category. For one thing, the Sandiganbayan
merely relied on this Court’s ruling in the Republic case that
impleading corporations, which are alleged to have been capitalized with
ill-gotten wealth, is unnecessary since judgment may be rendered against the
individual defendants, divesting them of their shares of stock.[19]
In the more recent case of Universal
Broadcasting Corporation v. Sandiganbayan
(5th Dvision),[20] the
Court again said that when corporations are organized with ill-gotten wealth
but are not themselves guilty of wrongdoing and are merely the res of the actions, there is no need to
implead them. Judgment may simply be
directed against the shares of stock that were issued in consideration of
ill-gotten wealth.[21]
Nor did the Sandiganbayan gravely abuse its discretion when it dismissed
the complaint against respondent corporations on the ground that it stated no
cause of action against them. A cause of
action has three elements: 1) plaintiff’s right under the law; (2) the
defendant’s obligation to abide by such right; and (3) defendant’s subsequent
violation of the same that entitles the plaintiff to sue for recompense. [22] The complaint makes no allegations that
respondent corporations have done some acts that have violated a right vested
by law in the Government.
Indeed, the amended complaint states that it is a civil action against the
individual defendants for their alleged misappropriation and theft of public funds,
plunder of the nation’s wealth, extortion, blackmail, bribery, embezzlement and
other acts of corruption, betrayal of public trust and brazen abuse of power.[23] Here, the Government makes no allegations that
respondent corporations as such committed these acts.
The Government claims that its Answer to Interrogatories[24] enumerates
the documentary evidence it intended to use to prove its case against the corporations. But the Government cannot prove more than it
alleged in its complaint. Its Answer to
Interrogatories is not part of its complaint.
Besides, the evidence described in that document referred to alleged anomalous
transfers and sales of shares of stock by the individual defendants. The document does not refer to corporate
acts.
Three. The Government argues that, assuming the dismissal of the
complaint as to respondent corporations was justified, the Sandiganbayan did
not have to lift the sequestration orders against them. But, while it is true that impleading respondent
corporations is not necessary for maintaining the sequestration orders already
issued against them, such sequestration orders should still be quashed for an
altogether another reason. The April 11,
1986 PCGG Rules and Regulations required the signatures of at least two
commissioners on a sequestration order.[25] The Court has held that the two signatures are
the best evidence of the Commission’s approval; otherwise, the order is as in
this case null and void.[26]
What is more, sequestration orders may only issue upon a showing of a prima facie case that the properties are
ill-gotten wealth. Section 26, Article
XVIII of the Constitution mandates this.
In Presidential Commission on Good
Government v. Tan,[27]
the Court said that while sequestration orders may issue ex parte, a prima facie factual
foundation that the sequestered properties are ill-gotten wealth is required.[28]
Here, the June 6 and May 31, 1986 sequestration orders against Philippine
Village, Philroad, and Silahis were signed only by one commissioner. They are, therefore, void. The
Court also notes that the March 10, 1986 order was issued solely against
With all the sequestration orders, there is no
clear showing of a prima facie case that the sequestered properties were
ill-gotten wealth. As discussed earlier,
the amended complaint stated no cause of action against the respondent corporations
while, except for general averments, the orders themselves did not state the reasons
behind their issuance. Confronted with this, the Government simply
asserts that the PCGG may be presumed to have acted pursuant to law and based
on prima facie evidence.
But, the Government cannot simply rely on such
a presumption which undermines the basic constitutional principle that public
officers and employees must at all times be accountable to the people.[29] Indeed, sequestration is an extraordinary and harsh remedy. As such, it should be confined to its lawful
parameters and exercised, with due regard, in the words of its enabling laws,
to the requirements of fairness, due process and justice.[30]
Besides, the lifting of the orders will not necessarily be fatal to the
main case since it does not ipso facto mean that the sequestered properties
are not ill-gotten. The effect of
the lifting of the sequestration simply means that the government may not act
as conservator or may not exercise administrative or housekeeping powers over the
corporations.[31] Historically, such option has not fared well.
WHEREFORE, the Court DISMISSES the
petition for lack of merit and AFFIRMS
the challenged resolutions of the Sandiganbayan dated February 7, 2002 and June
14, 2002.
SO ORDERED.
ROBERTO A. ABAD
Associate Justice
WE CONCUR:
ANTONIO T. CARPIO
Associate Justice
MARTIN
S. VILLARAMA, JR. JOSE PORTUGAL
PEREZ
Associate Justice Associate Justice
JOSE CATRAL
Associate Justice
ATTESTATION
I
attest that the conclusions in the above Decision had been reached in
consultation before the case was assigned to the writer of the opinion of the
Court’s Division.
ANTONIO T. CARPIO
Associate Justice
Chairperson, Second Division
CERTIFICATION
Pursuant
to Section 13, Article VIII of the Constitution and the Division Chairperson’s
Attestation, I certify that the conclusions in the above Decision had been
reached in consultation before the case was assigned to the writer of the
opinion of the Court’s Division.
RENATO
C. CORONA
Chief Justice
* Designated as additional member in lieu of Associate Justice Diosdado M. Peralta, per Special Order No. 858 dated July 1, 2010.
** Designated as additional member in lieu of Associate Justice Antonio Eduardo B. Nachura, per Special Order No. 863 dated July 5, 2010.
[1] Rollo, p. 485.
[2]
[3]
[4]
[5]
[6]
[7] Section 26. The authority to issue sequestration or freeze orders under Proclamation No. 3 dated March 25, 1986 in relation to the recovery of ill-gotten wealth shall remain operative for not more than eighteen months after the ratification of this Constitution. However, in the national interest, as certified by the President, the Congress may extend said period.
A sequestration or freeze order shall be issued only upon showing of a prima facie case. The order and the list of the sequestered or frozen properties shall forthwith be registered with the proper court. For orders issued before the ratification of this Constitution, the corresponding judicial action or proceeding shall be filed within six months from its ratification. For those issued after such ratification, the judicial action or proceeding shall be commenced within six months from the issuance thereof.
The sequestration or freeze order is deemed automatically lifted if no judicial action of proceeding is commenced as herein provided.
[8] Rollo, pp. 129-131.
[9] 310 Phil. 401 (1995).
[10]
[11] Rollo, pp. 147-159.
[12]
[13]
[14]
[15]
[16]
[17] San
Miguel Bukid Homeowners Association, Inc. v. The City of
[18] Madrigal Transport, Inc. v. Lapanday Holdings Corporation, 479 Phil. 768, 782-783 (2004).
[19] Supra note 9, at 509-511.
[20] G.R. No. 160677, August 10, 2007, 529 SCRA 782, 787-788.
[21] In Republic
v. Sandiganbayan [supra note 9, at
510-511], the Court held that there is no need to implead firms which
are merely the res of the actions in ill-gotten wealth cases and that
judgment may simply be directed against the assets, thus:
C. Impleading Unnecessary Re Firms which are the Res of
the Actions
And as
to corporations organized with ill-gotten wealth, but are not themselves guilty
of misappropriation, fraud or other illicit conduct – in other words, the
companies themselves are the object or thing involved in the action, the res thereof – there is no need to
implead them either. Indeed, their impleading is not proper on the
strength alone of their having been formed with ill-gotten funds, absent any
other particular wrongdoing on their part. The judgment may simply be
directed against the shares of stock shown to have been issued in consideration
of ill-gotten wealth.
x
x x x
x x x In
this light, they are simply the res in the actions for the recovery of
illegally acquired wealth, and there is, in principle, no cause of action
against them and no ground to implead them as defendants in said actions. (Italics adopted, bold supplied)
[22] Camarines Sur IV Electric Cooperative, Inc. v. Aquino, G.R. No. 167691, September 23, 2008, 566 SCRA 263, 268.
[23] Rollo, pp. 83-84.
[24]
[25] Section 3 of the Rules reads: “Sec. 3. Who may issue. A writ of sequestration or a freeze or hold order may be issued by the Commission upon the authority of at least two Commissioners, based on the affirmation or complaint of an interested party or motu proprio when the Commission has reasonable grounds to believe that the issuance thereof is warranted.”
[26] Trans Middle East (Phils.) v. Sandiganbayan, G.R. No. 172556, June 9, 2006, 490 SCRA 455, 483, citing Republic of the Philippines v. Sandiganbayan, 355 Phil. 181, 194 (1998).
[27] G.R. Nos. 173553-56, December 7, 2007, 539 SCRA 464, 479.
[28]
[29]
[30] Concurring Opinion of Justice Ameurfina Melencio-Herrera in the case of Bataan Shipyard & Engineering Co., Inc., supra note 28, at 250.
[31] Presidential Commission on Good Government v. Sandiganbayan, 418 Phil. 8, 20 (2001).