PCGG vs. Sandiganbayan

A petition for certiorari cannot substitute for an appeal where the Sandiganbayan resolution finally adjudicates the validity of a sequestration. A writ of sequestration is invalid if either issuance or service falls outside the eighteen-month constitutional period, and the six-month judicial action requirement is not satisfied by merely listing or mentioning a corporation in a complaint against its stockholders without impleading it as a defendant.

The Presidential Commission on Good Government (PCGG) is the government agency exercising 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. Section 26, Article XVIII of the 1987 Constitution limits that authority to eighteen months after ratification, requires a prima facie case, and deems the sequestration or freeze order automatically lifted if no judicial action or proceeding is commenced within six months. Aerocom Investors & Managers, Inc. is a corporation whose shares were held by Manuel H. Nieto and Jose L. Africa, who were among the defendants in the PCGG's ill-gotten wealth litigation.

On July 22, 1987, the PCGG filed Civil Case No. 0009 in the Sandiganbayan for reconveyance, reversion, accounting, restitution, and damages against Manuel H. Nieto, Jose L. Africa, Roberto S. Benedicto, Potenciano Illusorio, Juan Ponce Enrile, and Ferdinand E. Marcos, Jr. The complaint alleged that the defendants acted as dummies of the late strongman and devised schemes and strategems to monopolize the telecommunications industry. Annexed to the complaint was a listing of the assets of Nieto and Africa, among which were their shares of stock in Aerocom Investors & Managers, Inc.

Almost a year later, the PCGG sought to sequester Aerocom under a writ of sequestration dated June 15, 1988. The writ was served on and received under protest by Aerocom's president on August 3, 1988. Seven days after receipt, on August 10, 1988, Aerocom filed a complaint against the PCGG, docketed as Civil Case No. 0044, asking the Sandiganbayan to nullify the writ on the ground that it was served beyond the eighteen-month period from the ratification of the 1987 Constitution under Section 26, Article XVIII. In its amended answer dated May 19, 1992, the PCGG alleged that Aerocom had no cause of action because the writ was issued on June 15, 1988, well within the eighteen-month deadline counted from February 2, 1987, when the 1987 Constitution was ratified.

During the pendency of Civil Case No. 0044, Aerocom filed on July 5, 1995 a Manifestation and Motion praying that the Sandiganbayan direct the PCGG to release and distribute the dividends pertaining to Aerocom's shares in all corporations where it owned shares of stock. The PCGG opposed the release, arguing that Aerocom's mention in Annex "A" of the complaint in Civil Case No. 0009 was a clear indication that its shares were likewise sequestered.

On January 31, 1996, the Sandiganbayan granted Aerocom's Manifestation and Motion and ordered the PCGG to release the dividends pertaining to Aerocom, except the dividends on the sequestered shares of stock registered in the names of Manuel Nieto and Jose Africa in POTC, ETPI, and Aerocom. It found that Annex "A" did not show that Aerocom, as a corporation, was itself sequestered; what was sequestered were the shares of stock of Nieto and Africa in Aerocom. It further found that the PCGG was estopped from denying Aerocom's non-sequestration status because it had released cash dividends due Aerocom from the Philippine Overseas Telecommunications Corporation per its Resolutions dated June 29, 1993 and May 6, 1994. The Sandiganbayan also noted that there was no dispute that Aerocom, as a corporation, had a juridical personality separate and distinct from its stockholders.

After the Sandiganbayan denied the PCGG's motion for reconsideration on May 7, 1996, the PCGG filed the present petition for certiorari on August 16, 1996, assailing the order for the release of the dividends as having been issued with grave abuse of discretion. The Supreme Court granted the PCGG's prayed-for temporary restraining order on September 2, 1996; Aerocom filed its comment on September 11, 1996, and the PCGG filed its reply on November 21, 1996. The Sandiganbayan's factual findings that mattered to the Supreme Court were that Aerocom itself had not been sequestered, that the writ had been served beyond the eighteen-month period, and that no judicial action against Aerocom had been filed within six months from the issuance of the writ.

• Grave Abuse of Discretion: PCGG assailed the Sandiganbayan order for release of dividends as having been issued with grave abuse of discretion.
• Timeliness of Issuance: PCGG argued that issuance of the writ on June 15, 1988 was well within the eighteen-month constitutional deadline counted from February 2, 1987, and that mere issuance within that period sufficed even if service on Aerocom occurred later.
• Sufficiency of Complaint and Annex: PCGG maintained that Aerocom's mention in Annex "A" of the complaint in Civil Case No. 0009 indicated that its shares were likewise sequestered, and that filing Civil Case No. 0009 against the Nieto, Africa, et al. group was enough compliance with the "judicial action" requirement.
• State Immunity from Estoppel: PCGG contended that the State should not be held vulnerable to estoppel for the acts of past officials, and that Atty. Sanchez's opinion was illegal and prejudicial.

• Improper Remedy: Aerocom maintained that certiorari was improper because the Sandiganbayan's January 31, 1996 and May 7, 1996 Resolutions had finally adjudicated the pivotal issue in Civil Case No. 0044—whether Aerocom's sequestration was in order—and were reviewable only by appeal under Rule 45.
• Invalid Sequestration: Aerocom urged that the writ of sequestration was served beyond the eighteen-month period from ratification of the 1987 Constitution under Section 26, Article XVIII, and should be nullified.
• Release of Dividends: Aerocom prayed that the PCGG be directed to release and distribute the dividends pertaining to its shares in all corporations where it owns shares of stock.

• Propriety of Certiorari: Whether the PCGG's petition for certiorari was the proper remedy to review the Sandiganbayan Resolutions that adjudicated the validity of Aerocom's sequestration.
• Timeliness of Sequestration: Whether a writ of sequestration is valid when issued within the eighteen-month period but served after the expiration of that period.
• Judicial Action Requirement: Whether the mention of Aerocom in the complaint and Annex "A" in Civil Case No. 0009, without impleading Aerocom as a defendant, satisfied the constitutional requirement of a judicial action or proceeding within six months from issuance of the writ.
• Estoppel Against PCGG: Whether the PCGG was estopped from denying Aerocom's non-sequestered status and from refusing the release of dividends based on its prior resolutions and actions.
• Release of Dividends: Whether the Sandiganbayan gravely abused its discretion in ordering the release of dividends pertaining to Aerocom.

• Propriety of Certiorari: No. The Sandiganbayan resolutions finally adjudicated the validity of the sequestration; the proper remedy was an appeal under Rule 45 within fifteen days, not certiorari. Certiorari cannot substitute for an appeal lost through fault or negligence.
• Timeliness of Sequestration: No. Section 26, Article XVIII requires both issuance and service within the eighteen-month period; service on August 3, 1988 was beyond the deadline whether it expired on July 26 or August 2, 1988.
• Judicial Action Requirement: No. The mere mention or annexation of Aerocom in a complaint against Nieto and Africa did not satisfy the six-month judicial action requirement; Aerocom had to be impleaded as a defendant consistent with its separate juridical personality and due process.
• Estoppel Against PCGG: Yes. The PCGG was estopped from denying Aerocom's non-sequestered status after its own resolutions approved the release of POTC dividends; no irregularity or negligence on the part of Atty. Sanchez was shown.
• Release of Dividends: Affirmed. The Sandiganbayan did not gravely abuse its discretion; its order releasing dividends except those on the sequestered shares of Nieto and Africa was affirmed.

• Propriety of Certiorari: The Sandiganbayan's January 31, 1996 Resolution and its May 7, 1996 Resolution denying reconsideration virtually passed upon the pivotal issue in Aerocom's complaint for nullity of the writ—whether Aerocom's sequestration was in order. Its finding that Aerocom was not validly sequestered was a final adjudication on the merits, reviewable by the appellate court only through an appeal under Rule 45 within the statutory fifteen-day period. Certiorari is not a substitute for an appeal where the latter remedy was available but lost through the fault or negligence of the petitioner. An error of judgment committed in the exercise of jurisdiction is not correctable through the original civil action of certiorari.
• Timeliness of Sequestration: The first paragraph of Section 26, Article XVIII speaks of "The authority to issue," but the Court rejected the PCGG's theory that mere issuance within the eighteen-month period sufficed. The obvious intendment of the eighteen-month period and the six-month judicial-action limit is to protect property rights and safeguard against overzealous exercise of the State's power of sequestration, described in Justice Melencio-Herrera's concurring opinion in BASECO vs. PCGG as an "extra-ordinary, harsh and severe remedy" that should be confined to lawful parameters and exercised with fairness, due process, and justice. Section 26 therefore requires both issuance of the writ and notification to, or acquisition of jurisdiction over, the entity to be sequestered via valid service within the eighteen-month period. A writ runs the risk of being struck down as invalid if the twin requirements of issuance and service are not satisfied within the deadline. Whether the period expired on July 26, 1988 under Aerocom's computation or on August 2, 1988 under the PCGG's position, service on August 3, 1988 was late. Accepting the PCGG's theory would allow ante-dating and subterfuge, validating whimsical takeovers; service is an imperative measure to assure genuine issuance within the deadline.
• Judicial Action Requirement: The PCGG could not justify its failure, as found by the Sandiganbayan, to file the corresponding judicial action against Aerocom within six months by relying on Aerocom's mention in Civil Case No. 0009 and Annex "A" despite Aerocom not being impleaded as party-defendant. Republic vs. Sandiganbayan, 240 SCRA 376, relied on by PCGG, had no rightful application because its pronouncements presupposed a valid and existing sequestration of the unimpleaded corporation. Here, there was no existing sequestration because the writ was invalid. The suit against Nieto and Africa as shareholders could not ipso facto be a suit against the unimpleaded Aerocom without violating the fundamental principle that a corporation has a legal personality distinct and separate from its stockholders. PCGG vs. Interco, reiterated in Republic vs. Sandiganbayan, Sipalay Trading Corp. and Allied Banking Corp., held that failure to implead corporations as defendants and merely annexing a list violates due process by disregarding their distinct and separate personality without a hearing. Where stocks are allegedly fruits of ill-gotten wealth, fair play demands that the corporations be impleaded because a judgment in favor of the government may substantially and decisively affect them, stripping them of everything without being heard. The "corresponding judicial action or proceeding" must include the corporation as defendant; short of being impleaded, the corporation has no standing, cannot adequately defend itself, and may not be heard. Allowing amendment to implead them later would effectively allow complaints beyond the periods fixed by Section 26. The Court also warned that government eagerness to recover ill-gotten wealth should not run berserk, override principles, or justify unreasonable intrusions into constitutionally forbidden areas.
• Estoppel Against PCGG: During the pendency of Aerocom's complaint, the PCGG approved the release of cash dividends declared in 1989, 1991, and 1993 accruing to Aerocom's shares in POTC through a Certification dated June 29, 1993 and Resolution No. 94-066 dated May 6, 1994. These were based on a Memorandum by Atty. Ismael B. Sanchez, former PCGG legal counsel, who advised no objection to release. The Memorandum noted that the Sandiganbayan had ruled that PCGG had no authority to withhold dividends to stockholders whose POTC shares were not and had never been sequestered; that there was nothing in the records to show a sequestration order against the shares of Nieto Jr. and Aerocom in POTC; that a distinction must be made between sequestration of the corporation itself and sequestration of corporate shareholdings in another corporation; and that the sequestration referred to Aerocom as a corporation. It also noted the writ's "midnight" timing, lack of prima facie showing, non-implementation, and absence of any action against Aerocom within six months, citing Interco. The Sandiganbayan thus found PCGG estopped from denying Aerocom's non-sequestered status and refusing release. The PCGG's claim that the State should not be vulnerable to estoppel for acts of past officials was not persuasive. While the State is immune from estoppel, that concept, as clarified in Republic vs. Sandiganbayan, et al., 226 SCRA 314, refers to acts and mistakes of its officials, especially those which are irregular. The PCGG presented no convincing evidence of irregularity or negligence by Atty. Sanchez; PCGG Chairman Magtanggol Gunigundo and the other Commissioners signed Resolution No. 94-066 allowing release. Consistency and fair play required the PCGG to honor the release after its commissioners had collectively confirmed the commitment in writing. The Court adopted the Sandiganbayan's language through Justice Escareal that a contrary ruling would be illogical, irrational, inequitable, and pernicious, opening the door to capricious adventurism and disregard for the majesty of the law.
• Release of Dividends: Because the writ was invalid, no existing sequestration supported withholding Aerocom's dividends; because Aerocom was not impleaded in a timely judicial action, its separate personality and due process rights barred treating it as sequestered through its stockholders; and because the PCGG was estopped by its prior approvals, the Sandiganbayan's order releasing the dividends except those on the sequestered shares of Nieto and Africa in POTC, ETPI, and Aerocom was affirmed. No grave abuse of discretion attended the order.

• Certiorari Is Not a Substitute for Appeal — Certiorari is a special civil action for correcting errors of jurisdiction; an error of judgment committed in the exercise of jurisdiction is not correctable through certiorari. Where a resolution finally adjudicates the merits and appeal under Rule 45 is available, certiorari will not lie, especially if the appeal was lost through the petitioner's fault or negligence. Applied: PCGG should have appealed the Sandiganbayan resolutions, which finally adjudicated the validity of Aerocom's sequestration, instead of filing certiorari.
• Sequestration Requires Issuance and Service Within the Eighteen-Month Period — Under Section 26, Article XVIII of the 1987 Constitution, the authority to issue sequestration or freeze orders remains operative for not more than eighteen months after ratification. The Court interpreted this to require both issuance of the writ and service on the entity to be sequestered within the eighteen-month period. Applied: the writ dated June 15, 1988 was served on August 3, 1988, beyond the deadline, rendering it invalid.
• Judicial Action Must Implead the Corporation — The six-month judicial action requirement is not satisfied by merely mentioning or annexing a list of corporations in a complaint against stockholders; the corporation must be impleaded as a defendant. This follows from the corporation's separate juridical personality and due process. Applied: Aerocom was not impleaded in Civil Case No. 0009, so the complaint against Nieto and Africa did not satisfy the constitutional requirement.
• Automatic Lifting of Sequestration — Section 26, Article XVIII provides that the sequestration or freeze order is deemed automatically lifted if no judicial action or proceeding is commenced within six months. Applied: no action was filed against Aerocom within six months from June 15, 1988, and the writ was invalid in any event.
• Separate Juridical Personality of Corporations — A corporation has a legal personality distinct and separate from its stockholders. Applied: the suit against Nieto and Africa as shareholders could not ipso facto be a suit against Aerocom, and a judgment affecting Aerocom's shares could not be rendered without impleading Aerocom and affording it due process.
• State Immunity from Estoppel; Irregular Acts Exception — The State is generally immune from estoppel, but this immunity is understood to refer to acts and mistakes of its officials, especially those which are irregular. Where no irregularity or negligence is shown, the government agency may be bound by its prior acts. Applied: PCGG was estopped from denying Aerocom's non-sequestered status after its commissioners approved the release of dividends, absent proof of irregularity or negligence by Atty. Sanchez.
• Sequestration as Extraordinary, Harsh, and Severe Remedy — Sequestration is an extraordinary, harsh, and severe remedy that must be confined to lawful parameters and exercised with fairness, due process, and justice. Applied: the Court used this characterization to reject a broad interpretation of the PCGG's authority and to require strict compliance with the eighteen-month period.

• "Consequently, an error of judgment that the court may commit in the exercise of its jurisdiction is not correctable through the original civil action of certiorari." — States the procedural ratio: certiorari cannot be used to review the Sandiganbayan's final adjudication on the merits, which required an appeal.
• "A writ of sequestration, therefore, runs the risk of being struck down as invalid if and when the twin requirements of issuance and service are not satisfied within the deadline." — Canonical formulation of the Court's interpretation of Section 26, Article XVIII, requiring both issuance and service within the eighteen-month period.
• "failure to implead these corporations as defendants and merely annexing a list of such corporations to the complaints is a violation of their right to due process for it would in effect be disregarding their distinct and separate personality without a hearing." — Defines the due process and separate personality requirement for the six-month judicial action.
• "While we agree with the statement that the State is immune from estoppel, this concept, as clarified by this Court thru Mr. Justice Melo in Republic v. Sandiganbayan, et al., “is understood to refer to acts and mistakes of its officials especially those which are irregular.”" — States the estoppel doctrine applied to PCGG's prior approvals.

• Purefoods Corp. vs. NLRC, 171 SCRA 415 — Cited for the rule that certiorari is not a substitute for appeal and that an error of judgment in the exercise of jurisdiction is not correctable by certiorari.
• BASECO vs. PCGG, 150 SCRA 181 — Cited through Justice Melencio-Herrera's concurring opinion characterizing sequestration as an extraordinary, harsh, and severe remedy that must be confined to lawful parameters and exercised with fairness, due process, and justice.
• National Marketing Corp. vs. Tecson, 29 SCRA 70 — Cited by Aerocom on the computation of the eighteen-month period under Article 13 of the Civil Code; the Court noted that under either computation, service on August 3, 1988 was late.
• Republic vs. Sandiganbayan, 240 SCRA 376 — Relied on by the PCGG but distinguished; its pronouncements presupposed a valid and existing sequestration of the unimpleaded corporation, which did not exist because the writ against Aerocom was invalid.
• PCGG vs. Interco, G.R. No. 92755 — Cited for the rule that a sequestration or freeze order is automatically lifted if no judicial action is commenced within six months, and for the requirement of impleading the corporation.
• Republic vs. Sandiganbayan, Sipalay Trading Corp. and Allied Banking Corp., 255 SCRA 438 — Reiterated PCGG vs. Interco and adopted Justice Padilla's dissent in Republic vs. Sandiganbayan; failure to implead corporations and mere annexation of a list violates due process and the corporations' separate personality.
• Republic vs. Sandiganbayan, et al., 226 SCRA 314 — Cited to clarify that State immunity from estoppel refers to acts and mistakes of officials, especially irregular ones; also source of Justice Escareal's statement on consistency and fair play.

• Section 26, Article XVIII, 1987 Constitution — Provides that the authority to issue sequestration or freeze orders under Proclamation No. 3 dated March 25, 1986 remains operative for not more than eighteen months after ratification; that a sequestration or freeze order shall issue only upon showing of a prima facie case; that the order and list of sequestered or frozen properties shall be registered with the proper court; that judicial action or proceeding must be filed within six months from ratification for pre-ratification orders or from issuance for post-ratification orders; and that the order is deemed automatically lifted if no judicial action or proceeding is commenced. Applied: the writ against Aerocom was invalid because service occurred after the eighteen-month period, and no judicial action against Aerocom was commenced within six months.
• Proclamation No. 3 dated March 25, 1986 — The constitutional provision refers to sequestration or freeze orders issued under this Proclamation in relation to the recovery of ill-gotten wealth. Applied as the source of the PCGG's sequestration authority whose temporal limits were at issue.
• Article 13, Civil Code — Cited by Aerocom in computing the eighteen-month period; the Court noted that whether the period expired on July 26, 1988 under this computation or on August 2, 1988 under the PCGG's position, service on August 3, 1988 was beyond the deadline.
• Rule 45, Rules of Court — The Sandiganbayan's final adjudication on the merits was reviewable by the appellate court only through an appeal under Rule 45, filed within the statutory fifteen-day period. Applied: the PCGG's certiorari petition was improper.

Regalado, Puno, and Mendoza, JJ., concur. Melo, J., is on leave.