Dela Cruz vs. Wellex Group, Inc.

The right of the State to recover ill-gotten wealth, including from transferees thereof, is imprescriptible under Section 15, Article XI of the 1987 Constitution and Section 6 of the Anti-Plunder Law, and this imprescriptibility prevails over the Civil Code provisions on subrogation and prescription, such that a borrower of funds traceable to ill-gotten wealth cannot invoke prescription as a defense against the State's enforcement of the loan and mortgage contracts.

Wellex Group, Inc. is the registered owner of 450,000,000 shares of stock of Waterfront Philippines, Inc. (Waterfront Shares). Sometime in 2000, Equitable-PCI Bank (now BDO) entered into an Investment Management Agreement (IMA) with a certain Jose Velarde—an alias used by former President Joseph Ejercito Estrada—whereby BDO agreed to manage Velarde's assets by investing the same and taking possession of profits and losses on his behalf. On February 4, 2000, IMA Account No. 101-78056-1 was opened under Jose Velarde's name, and on the same day Wellex borrowed ₱500,000,000 from that account, mortgaging the Waterfront Shares as security. The loan matured on January 29, 2001, but Wellex failed to settle the obligation, and BDO did not institute foreclosure proceedings. On April 4, 2001, former President Estrada was charged with Plunder before the Sandiganbayan, docketed as Criminal Case No. 26558. During trial, the prosecution proved Estrada's ownership of the Jose Velarde accounts, and Estrada himself admitted signing bank documents as Jose Velarde to fund Wellex's loan. On September 12, 2007, the Sandiganbayan convicted Estrada of Plunder, with forfeiture of all ill-gotten wealth, including the IMA Account and its assets. The present case is the third Supreme Court proceeding arising from this controversy, following G.R. No. 187951 (2012 Decision) and G.R. No. 211098 (2016 Decision).

Sometime in 2000, Equitable-PCI Bank, now Banco de Oro (BDO), and a certain Jose Velarde entered into an Investment Management Agreement (IMA), whereby BDO agreed to manage Jose Velarde's assets by investing the same and taking possession of the profits and losses on his behalf. The IMA likewise allowed BDO to grant loans using the funds under investment management, subject to applicable regulations. On February 4, 2000, IMA Account No. 101-78056-1 was opened under Jose Velarde's name. On the same day, Wellex Group, Inc. (Wellex) borrowed ₱500,000,000 from the IMA Account and mortgaged the 450,000,000 Waterfront Philippines, Inc. shares (Waterfront Shares), covered by Stock Certificate Nos. 0000026465 through 0000026473, as security for the loan. The loan obligation matured on January 29, 2001, but Wellex was unable to settle it. BDO, as investment manager of the IMA Account, did not institute any foreclosure proceeding against the Waterfront Shares.

Meanwhile, on April 4, 2001, former President Joseph Ejercito Estrada was charged with Plunder before the Sandiganbayan, docketed as Criminal Case No. 26558. During the trial, the prosecution proved Estrada's ownership of the Jose Velarde accounts in BDO. Estrada himself admitted to signing bank documents as Jose Velarde to fund Wellex's ₱500,000,000 loan, including copies of the IMA and a debit-credit instruction allowing the transfer of ₱500,000,000 from the savings account to the IMA Account. On September 12, 2007, the Sandiganbayan found Estrada guilty of Plunder, with the penalty of forfeiture of all ill-gotten wealth, including the IMA Account and the assets therein, in favor of the State. On September 24, 2008, the Sandiganbayan issued a Resolution directing Sheriff Edgardo A. Urieta to cause the forfeiture of, among others, the IMA Account, including the Waterfront Shares.

Wellex sought to intervene in the Plunder Case and moved for reconsideration of the 2008 Sandiganbayan Resolution, arguing that the Waterfront Shares should have been excluded from the forfeiture order. The Sandiganbayan denied the motion on April 2, 2009, and Sheriff Urieta scheduled the public auction of the Waterfront Shares for May 15, 2009. Aggrieved, Wellex filed a Petition for Certiorari before the Supreme Court, docketed as G.R. No. 187951. In its Decision dated June 25, 2012, the Court affirmed the inclusion of the Waterfront Shares among the forfeited assets, ruling that the IMA Account and its assets were traceable to the account adjudged as Estrada's ill-gotten wealth.

Also in 2009, Wellex filed a Complaint for Recovery of Possession, Delivery of Stock Certificates and Injunction with the RTC of Makati City, docketed as Civil Case No. 09-399, claiming ownership of the Waterfront Shares, full payment of its loan obligation, and entitlement to the return of the shares. With the filing of the complaint, Sheriff Urieta and the Sandiganbayan Security and Sheriff Services (SSSS) agreed to maintain the status quo and defer the public auction pending resolution. Sheriff Urieta, the SSSS, and BDO then filed Motions to Dismiss on grounds of lack of jurisdiction and failure to state a cause of action. The RTC granted the motions on January 9, 2012, and denied Wellex's reconsideration on January 15, 2014. Wellex elevated the matter to the Supreme Court via Petition for Review on Certiorari, docketed as G.R. No. 211098. In its Decision dated April 20, 2016, the Court granted Wellex's petition, reiterating that the forfeiture did not affect the validity of the loan between Wellex and BDO but merely subrogated the State to BDO's rights as creditor. The Court remanded the case to the RTC for "further proceedings," directing the State to affirm its claims as creditor against the loan and mortgage.

Upon remand, the SSSS consistently maintained that "further proceedings" referred only to execution matters, not a new trial, since the Court had already declared with finality that the Waterfront Shares rightfully belonged to the forfeited assets. The SSSS filed a Manifestation and Motion for Clarification on December 29, 2017, which the RTC denied on February 9, 2018, while also setting the case for pre-trial. The RTC then proceeded with pre-trial and trial. On May 16, 2019, the RTC rendered a Decision sustaining Wellex's defense of prescription, finding that the State failed to institute a collection action or foreclosure within ten years from the loan's maturity on January 29, 2001, and ordering Sheriff Urieta and the SSSS to deliver the Waterfront Shares to Wellex. Petitioners Sheriff Albert A. Dela Cruz and the SSSS then filed the present Petition for Review on Certiorari before the Supreme Court.

• Interpretation of "Further Proceedings": Petitioners argued that the phrase "further proceedings" in the dispositive portion of the 2016 Decision only contemplated proper execution proceedings, not a new trial on the merits of Wellex's complaint, since the Court had already definitively ruled in its 2012 and 2016 Decisions that the Waterfront Shares rightfully belonged to the forfeited assets in favor of the State.
• State Ownership of Waterfront Shares: Petitioners maintained that the State owned the Waterfront Shares by virtue of the forfeiture order and that the RTC erred in conducting a full trial on the issue of possession or ownership.
• Imprescriptibility of the State's Right: Petitioners contended that the State is immune from the defense of prescription in plunder cases pursuant to Section 6 of Republic Act No. 7080 (the Anti-Plunder Law), which provides that the right of the State to recover properties unlawfully acquired by public officers from them or from their nominees or transferees shall not be barred by prescription, laches, or estoppel.

• Procedural Defect: Wellex argued that the Petition for Review was procedurally defective for being filed out of time, contending that the petitioners were ultimately questioning the RTC's conduct of further proceedings rather than the RTC Decision itself, and that the decision to conduct further proceedings was already questioned in the petitioners' Manifestation and Motion for Clarification denied by the RTC on February 9, 2018, making the Petition for Review a lost appeal from that interlocutory order.
• Prescription as Subrogee's Limitation: Wellex argued that the State, as subrogee to BDO's rights as creditor, merely stepped into BDO's shoes and acquired no right greater than BDO's, such that the State was subject to the same defenses Wellex could have raised against BDO, including prescription of the loan obligation.

• Timeliness of Petition: Whether the Petition for Review is procedurally defective for being filed out of time.
• Scope of "Further Proceedings": Whether the RTC erred in construing the phrase "further proceedings" in the dispositive portion of the 2016 Decision as a mandate to proceed with a new trial of the case.
• Prescription: Whether the RTC committed reversible error in upholding Wellex's claim of prescription.

• Timeliness of Petition: No. The 2018 RTC Order was interlocutory and not appealable; the petitioners correctly waited for the final RTC Decision and raised the interlocutory order as reversible error on appeal.
• Scope of "Further Proceedings": No. The RTC correctly proceeded with trial, as "further proceedings" meant the State must affirm its claims as creditor against the loan and mortgage, and Wellex must be afforded the opportunity to assert claims or defenses against the State.
• Prescription: Yes. The RTC erred in upholding Wellex's defense of prescription because the right of the State to recover ill-gotten wealth is imprescriptible under Section 15, Article XI of the 1987 Constitution and Section 6 of the Anti-Plunder Law, which prevail over the Civil Code provisions on subrogation and prescription.

• Timeliness of Petition: The 2018 RTC Order denying the petitioners' Manifestation and Motion for Clarification and setting the case for pre-trial was an interlocutory order, as it did not terminate or finally dispose of the case but left further proceedings to be conducted. Under Section 1(a) of Rule 41 of the Rules of Court, no appeal may be taken from an interlocutory order. The narrow exception—filing a special civil action for certiorari under Rule 65—was unavailable because the petitioners did not allege grave abuse of discretion on the part of the RTC. Accordingly, the petitioners correctly awaited the RTC's final Decision and filed an appeal raising the interlocutory order as reversible error. The petition was also properly filed directly with the Supreme Court under Section 2 of Rule 41, as only questions of law were raised: the proper interpretation of "further proceedings" and the legal question of whether the State's right to recover ill-gotten wealth prescribes. The resolution of these issues rested solely on what the law provides, without requiring review of the probative value of evidence.

• Scope of "Further Proceedings": The petitioners' characterization of the State's right over the Waterfront Shares was mistaken. The State does not own the Waterfront Shares; the forfeiture of the IMA Account did not transfer ownership from Wellex to the State. The Waterfront Shares were mere collateral for the original loan contract between Wellex and BDO. When the State was subrogated to BDO's rights as creditor and mortgagee, it acquired only BDO's rights over the shares. As a mere mortgagee, the State cannot unilaterally sell the mortgaged shares and apply the proceeds as payment, as this would constitute pactum commissorium prohibited under Article 2088 of the Civil Code. The State must avail of the same remedies available to BDO: demand payment from Wellex, and if unpaid, institute either foreclosure proceedings or an action for collection before the proper forum. The 2016 Decision's language was clear—the State must affirm in Civil Case No. 09-399 its claims as creditor against Wellex, while Wellex may raise claims or defenses against the State. Although the case was appropriate for summary judgment because the existence and validity of the loan and mortgage and Wellex's non-payment were already settled with finality, and Wellex's defense of prescription raised no genuine issue, the RTC correctly proceeded with trial because the State did not file a motion for summary judgment and the RTC could not render one motu proprio under the prior provisions of the Rules of Court.

• Prescription: The RTC upheld Wellex's defense of prescription on the theory that the State, as subrogee, merely stepped into BDO's shoes and acquired no greater right, such that Wellex's obligation was extinguished when no collection or foreclosure action was filed within ten years of the loan's maturity. This position was bereft of merit. While the State is indeed a subrogee susceptible to defenses Wellex may have against the original creditor, the defense of prescription is unavailable because the right of the State to recover ill-gotten wealth does not prescribe. Section 6 of the Anti-Plunder Law expressly provides that the right of the State to recover properties unlawfully acquired by public officers from them or from their nominees or transferees shall not be barred by prescription, laches, or estoppel. This provision was lifted from Section 15, Article XI of the 1987 Constitution, which contains identical language. Under the doctrine of constitutional supremacy, the Constitution is deemed written in every statute, and any law or contract violating it is null and void. Moreover, between a general law (the Civil Code) and a special law (the Anti-Plunder Law), the latter prevails, as a special law reveals legislative intent more clearly. The Court had already ruled with finality that the funding for Wellex's loan was traceable to Estrada's ill-gotten wealth. Wellex, as a borrower, is a transferee of the ill-gotten wealth: under the Civil Code, a person who receives a loan of money acquires ownership thereof, and Black's Law Dictionary defines "transferee" as one to whom a property interest is conveyed. The imprescriptibility provisions do not distinguish between transferees in good faith and bad faith; where the law does not distinguish, courts should not distinguish. The framers of the 1987 Constitution deliberately rejected limiting the provision to transferees in bad faith, with Commissioner Davide objecting to any such qualification and Commissioner Azcuna ultimately withdrawing his proposed amendment to that effect. Additionally, Article 1108(4) of the Civil Code expressly provides that prescription does not run against the State and its subdivisions. Because Wellex's sole affirmative defense of prescription is inapplicable, Wellex must now pay its obligation, and the State should avail of the mutually exclusive remedies of collection or foreclosure before a proper forum.

• Imprescriptibility of the State's Right to Recover Ill-Gotten Wealth — Under Section 15, Article XI of the 1987 Constitution and Section 6 of the Anti-Plunder Law (RA No. 7080), the right of the State to recover properties unlawfully acquired by public officials or employees, from them or from their nominees or transferees, shall not be barred by prescription, laches, or estoppel. This imprescriptibility extends to civil actions for recovery of ill-gotten wealth and applies to all transferees, regardless of good or bad faith. The Court applied this doctrine to hold that Wellex, as a borrower of funds traceable to ill-gotten wealth, is a transferee and cannot invoke prescription against the State's enforcement of the loan and mortgage contracts.

• Constitutional Supremacy — If a law or contract violates any norm of the Constitution, it is null and void. The Constitution is the fundamental, paramount, and supreme law of the nation, deemed written in every statute. The Court relied on this doctrine to establish that the imprescriptibility provisions of the 1987 Constitution and the Anti-Plunder Law prevail over the Civil Code's provisions on subrogation and prescription.

• Special Law Prevails Over General Law — Between a general law and a special law, the latter prevails because a special law reveals legislative intent more clearly and should be deemed an exception to the general law. The Court applied this principle to hold that the Anti-Plunder Law, as a special law dealing with ill-gotten wealth, prevails over the Civil Code, a general law, on the question of prescription.

• Ubi Lex Non Distinguit Nec Nos Distinguere Debemus — Where the law does not distinguish, courts should not distinguish. No distinction should be made in the application of the law where none has been indicated. The Court applied this rule to hold that the imprescriptibility provisions apply to all transferees of ill-gotten wealth, whether in good faith or bad faith, since the Constitution and the Anti-Plunder Law do not distinguish between the two.

• Prescription Does Not Run Against the State — Article 1108(4) of the Civil Code expressly provides that prescription, both acquisitive and extinctive, does not run against the State and its subdivisions. This rule applies regardless of the nature of the government property, whether real or personal. The Court applied this doctrine as an additional basis for rejecting Wellex's defense of prescription.

• Mutually Exclusive Remedies of Collection and Foreclosure — A mortgage creditor may institute against the mortgage debtor either a personal action for debt or a real action to foreclose the mortgage, but not both. The invocation or grant of one remedy precludes the other. The Court applied this rule to direct the State to elect and pursue either collection of Wellex's loan obligation or foreclosure of the mortgaged Waterfront Shares before a proper forum.

• Pactum Commissorium — Under Article 2088 of the Civil Code, the creditor cannot appropriate the things given by way of pledge or security, or dispose of them. The Court cited this prohibition to explain why the State, as mere mortgagee, cannot unilaterally sell the Waterfront Shares and apply the proceeds as payment.

• "The State does not own the Waterfront Shares. The forfeiture of the IMA Account, together with its assets, did not in any way cause the transfer of ownership over the Waterfront Shares from Wellex to the State." — This passage clarifies the nature of the State's right over the Waterfront Shares as merely that of a mortgagee-subrogee, not an owner, and is central to the Court's reasoning on why "further proceedings" required the State to affirm its claims as creditor rather than simply execute on the forfeiture.

• "the right of the State to recover properties unlawfully acquired by public officers from them or from their nominees or transferees shall not be barred by prescription, laches, or estoppel." — This is the verbatim text of Section 6 of the Anti-Plunder Law (and Section 15, Article XI of the 1987 Constitution), the controlling constitutional and statutory provision on which the Court's reversal of the RTC's ruling on prescription rests.

• "Based on the foregoing, it is beyond doubt that the framers of the 1987 Constitution intended Section 15, Article XI thereof to apply to all kinds of transferees of properties unlawfully acquired by public officials." — This statement crystallizes the Court's conclusion from the Constitutional Commission deliberations that the imprescriptibility provision applies to all transferees regardless of good or bad faith, resolving the interpretive question at the heart of the prescription issue.

• "these remedies of collection and foreclosure are mutually exclusive. The invocation or grant of one remedy precludes the other." — This formulation of the mutually exclusive nature of collection and foreclosure remedies, quoted from Pineda vs. De Vega, defines the procedural framework the State must follow to enforce the loan and mortgage against Wellex.

• The Wellex Group, Inc. vs. Sandiganbayan, 689 Phil. 44 (2012) (G.R. No. 187951) — Controlling prior decision establishing with finality that the Waterfront Shares were part of forfeited assets and that the funding for Wellex's loan was traceable to Estrada's ill-gotten wealth. The present decision relies on this as law of the case.

• The Wellex Group, Inc. vs. Sheriff Urieta, 785 Phil. 594 (2016) (G.R. No. 211098) — Controlling prior decision remanding the case to the RTC for "further proceedings," holding that the State was subrogated to BDO's rights as creditor and must avail of the same remedies available to BDO. The present decision interprets the scope of "further proceedings" and builds upon the subrogation framework established here.

• Presidential Ad Hoc Fact-Finding Committee on Behest Loans vs. Desierto, 375 Phil. 697 (1999) — Cited for the proposition that Section 15, Article XI of the 1987 Constitution applies to civil actions for recovery of ill-gotten wealth, supporting the Court's conclusion that the imprescriptibility provision governs Civil Case No. 09-399.

• Republic of the Philippines vs. Grijaldo, 122 Phil. 1060 (1965) — Cited for the rule that prescription does not run against the State when it brings suit in the exercise of its sovereign functions to protect its interests over public property, applying Article 1108(4) of the Civil Code.

• Ramiscal vs. Commission on Audit, 819 Phil. 597 (2017) — Followed for the principle that Article 1108(4) of the Civil Code—prescription does not run against the State—applies regardless of the nature of the government property, whether real or personal.

• Pineda vs. De Vega, 851 Phil. 1106 (2019) — Cited for the doctrine that the remedies of personal action for collection and real action for foreclosure are mutually exclusive, which the Court applied in directing the State to elect and pursue one remedy against Wellex.

• Chavez vs. Judicial and Bar Council, 691 Phil. 173 (2012) — Cited for the principle of verba legis: where the words of a statute or the Constitution are clear, plain, and free from ambiguity, they must be given their literal meaning and applied without attempted interpretation.

• Francisco vs. House of Representatives, 460 Phil. 830 (2003) — Cited for the principle that in case of ambiguity in constitutional provisions, the words should be interpreted in accordance with the intent of the framers, which the Court used to examine the Constitutional Commission deliberations on Section 15, Article XI.

• Section 15, Article XI, 1987 Constitution — Provides that the right of the State to recover properties unlawfully acquired by public officials or employees, from them or from their nominees or transferees, shall not be barred by prescription, laches, or estoppel. The Court held this provision applies to Wellex as a transferee of ill-gotten wealth and bars its defense of prescription.

• Section 6, Republic Act No. 7080 (Anti-Plunder Law) — Provides that the crime of plunder prescribes in twenty years, but the right of the State to recover properties unlawfully acquired by public officers from them or from their nominees or transferees shall not be barred by prescription, laches, or estoppel. The Court noted this provision was lifted from Section 15, Article XI of the 1987 Constitution and applied it as a special law prevailing over the Civil Code.

• Article 2088, Civil Code — Prohibits pactum commissorium, providing that the creditor cannot appropriate the things given by way of pledge or security or dispose of them. The Court cited this to explain why the State, as mere mortgagee, cannot unilaterally sell the Waterfront Shares.

• Article 1108(4), Civil Code — Provides that prescription, both acquisitive and extinctive, does not run against the State and its subdivisions. The Court applied this as an additional basis for rejecting Wellex's defense of prescription.

• Article 1231, Civil Code — Enumerates the modes of extinguishment of obligations, including prescription. The Court noted that Wellex initially invoked payment as a mode of extinguishment (which it failed to prove) and then shifted to prescription.

• Articles 1142, 1144, and 1155, Civil Code — Article 1142 provides that a mortgage action prescribes after ten years; Article 1144 provides that actions upon a written contract must be brought within ten years from the time the right of action accrues; Article 1155 defines the interruptions of prescription of actions. The RTC relied on these provisions to uphold Wellex's defense of prescription, which the Supreme Court reversed.

• Article 1933, Civil Code — Defines a simple loan as a contract whereby one party delivers to another money or other consumable thing upon the condition that the same amount of the same kind and quality shall be paid. The Court cited this to establish that a borrower is a transferee of the money borrowed.

• Article 1953, Civil Code — Provides that a person who receives a loan of money or any other fungible thing acquires the ownership thereof. The Court relied on this to conclude that Wellex, as borrower, acquired ownership of the loan proceeds and is therefore a transferee of ill-gotten wealth.

• Section 1(a), Rule 41, Rules of Court — Provides that no appeal may be taken from an interlocutory order. The Court applied this to hold that the 2018 RTC Order was interlocutory and not separately appealable.

• Section 2, Rule 41, Rules of Court — Provides that where only questions of law are raised, the appeal shall be to the Supreme Court by petition for review on certiorari under Rule 45. The Court applied this to uphold the propriety of the petitioners' direct appeal to the Supreme Court.

Caguioa (Chairperson), Gaerlan, and Dimaampao, JJ., concurred. Inting, J., was on leave.