PCGG vs. Sandiganbayan

Res judicata does not bar a local action compelling a government agency to withdraw a request for foreign legal assistance where there is no identity of parties, subject matter, or causes of action between the local suit and the foreign court's decision affirming the legal assistance.

On April 7, 1986, the Office of the Solicitor General (OSG) requested Swiss authorities to locate and freeze assets suspected of being ill-gotten wealth amassed by the Marcoses and their associates. Pursuant to this request, the Zurich District Attorney ordered Swiss banks on May 29, 1986, to freeze specified accounts, including those of Officeco Holdings, N.V. (Officeco) with Bankers Trust A.G. (BTAG). Officeco's appeals to the Attorney General of the Canton of Zurich and the Swiss Federal Court were dismissed, with the Swiss Federal Court ruling on May 31, 1989, affirming the freeze orders and the propriety of legal assistance extended to the Philippine government. In late 1992, Officeco made representations with the PCGG and the OSG to officially advise Swiss authorities to unfreeze its assets. The PCGG required Officeco to present countervailing evidence instead of acting on the request.

• The IMAC Request and Swiss Freeze Orders: On April 7, 1986, the OSG wrote to the Federal Office for Police Matters in Berne, Switzerland, requesting assistance to locate, freeze, and sequester the ill-gotten wealth of the Marcoses and their associates. On May 29, 1986, the Zurich District Attorney ordered Swiss banks to freeze the accounts of the accused, including Officeco's account with BTAG.
• Swiss Appellate Proceedings: Officeco appealed the District Attorney's order to the Attorney General of the Canton of Zurich, who affirmed the order. Officeco further appealed to the Swiss Federal Court, which dismissed the appeal on May 31, 1989, ruling on the propriety of the temporary measures and the legal assistance extended to the Philippine government.
• Representations with the PCGG: In late 1992, Officeco made representations with the OSG and the PCGG, requesting them to officially advise the Swiss government to unfreeze Officeco's assets. The PCGG required Officeco to present countervailing evidence to support its request.
• Filing of Civil Case No. 0164: Instead of submitting countervailing evidence, Officeco filed a complaint with the Sandiganbayan on September 12, 1994, docketed as Civil Case No. 0164. The complaint prayed that the PCGG and OSG be compelled to advise the Swiss government to exclude Officeco's account from the freeze order and unconditionally release it.
• Procedural Dispute: The OSG filed a joint answer on November 24, 1994. Subsequently, the PCGG filed a motion to dismiss on May 12, 1995, which the Sandiganbayan denied on January 11, 1996. The Sandiganbayan likewise denied PCGG's motion for reconsideration on March 29, 1996.

• Res Judicata: Petitioner argued that the Swiss Federal Court decision affirming the freeze orders is conclusive upon Officeco's claims, barring relitigation under the doctrine of res judicata or conclusiveness of judgment.
• Act of State Doctrine: Petitioner maintained that the Sandiganbayan would inevitably review the Swiss freeze orders, violating the act of state doctrine, which prohibits courts from sitting in judgment on the acts of a foreign government done within its territory.
• Exhaustion of Administrative Remedies: Petitioner alleged that Officeco failed to exhaust administrative remedies under Sections 5 and 6 of the PCGG Rules and Regulations Implementing Executive Orders No. 1 and No. 2, stripping it of a cause of action.
• Mandamus Does Not Lie: Petitioner contended that the complaint is essentially one for mandamus, but the act sought is discretionary; no grave abuse of discretion was committed because the denial was based on Officeco's failure to present countervailing evidence.

• Authority of Counsel: Respondent initially questioned the competence of PCGG lawyers to appear without OSG authorization, an issue later rendered moot by a deputization agreement among the PCGG Chairman, the Solicitor General, the Chief Presidential Legal Counsel, and the Secretary of Justice.
• Inapplicability of Res Judicata: Respondent argued that the Swiss proceedings and the local action lack identity of parties, subject matter, and causes of action.
• Inapplicability of Act of State Doctrine: Respondent countered that the Sandiganbayan is not reviewing the acts of the Swiss government but the propriety of the PCGG's stance.
• Cause of Action Arising from Inaction: Respondent asserted that the PCGG's failure to act on its requests within the period prescribed by Republic Act No. 6713 gave rise to a valid cause of action, and that the release of similarly situated accounts upon the request of Security Bank and Trust Company constituted a violation of equal protection.

• Res Judicata: Whether the doctrine of res judicata bars Civil Case No. 0164 based on the Swiss Federal Court decision.
• Act of State Doctrine: Whether the act of state doctrine precludes the Sandiganbayan from taking cognizance of the case.
• Exhaustion of Administrative Remedies: Whether Officeco failed to exhaust administrative remedies under the PCGG Rules.
• Cause of Action: Whether the complaint states a cause of action, particularly whether mandamus lies or an equal protection violation is sufficiently alleged.

• Res Judicata: Res judicata does not apply because the fourth requisite—identity of parties, subject matter, and causes of action—is absent. The PCGG's interest in recovering ill-gotten wealth differs from the Swiss court's interest in settling the propriety of legal assistance. The subject matter in Switzerland was the propriety of legal assistance and temporary measures, whereas in the local case it is the propriety of PCGG's stance regarding Officeco's account. The causes of action differ because a judgment in the local case will not be inconsistent with the Swiss judgment; it merely compels the PCGG to make representations with Swiss authorities, not the automatic lifting of the freeze order.
• Act of State Doctrine: The act of state doctrine finds no application. The Sandiganbayan will not examine the Swiss freeze orders or require Swiss officials to submit to its adjudication; it will only review the propriety of maintaining PCGG's position. International law does not strictly require the doctrine's application, and the usual method for an individual to seek relief is to exhaust local remedies and seek executive intervention, which is precisely what Officeco is doing.
• Exhaustion of Administrative Remedies: Sections 5 and 6 of the PCGG Rules apply only to sequestration, freeze, and hold orders issued by the PCGG in the Philippines, not to freeze orders issued by a foreign government. The PCGG cannot grant the remedy of lifting a foreign freeze order, and treating the request under its rules would contradict its act of state doctrine argument by requiring a review of the Swiss court's decision.
• Cause of Action: The complaint sufficiently states a cause of action. Under Section 5(a) of Republic Act No. 6713, public officials must respond to requests within fifteen working days; inaction constitutes a denial, warranting judicial relief. Hypothetically admitting the allegations—eleven years of inaction without proof linking the account to the Marcoses, and the PCGG's favorable action on similarly situated accounts—reveals a viable cause of action based on mandamus and equal protection.

• Res Judicata — A final judgment on the merits by a court of competent jurisdiction is conclusive as to the rights of the parties and constitutes an absolute bar to subsequent actions involving the same claim, demand, or cause of action. Requisites: (1) final former judgment; (2) judgment on the merits; (3) rendered by a court with jurisdiction; (4) identity of parties, subject matter, and causes of action. Applied to deny the defense because the Swiss decision and the local complaint lacked identity of parties, subject matter, and causes of action.
• Act of State Doctrine — Courts of one country will not sit in judgment on the acts of the government of another done within its territory. Applied to deny the defense because the Sandiganbayan is not reviewing the Swiss freeze orders but the PCGG's stance, and international law does not mandate the doctrine's application when local remedies and executive intervention are the proper recourse.
• Hypothetical Admission in Motion to Dismiss — A motion to dismiss based on failure to state a cause of action hypothetically admits the truth of the facts alleged, as well as inferences fairly deducible therefrom. Applied to uphold the complaint's sufficiency, as the allegations of prolonged inaction and unequal treatment state a valid cause of action subject to proof during trial.

• "Every sovereign state is bound to respect the independence of every other state, and the courts of one country will not sit in judgment on the acts of the government of another, done within its territory. Redress of grievances by reason of such acts must be obtained through the means open to be availed of by sovereign powers as between themselves." — Quoting Underhill v. Hernandez, defining the act of state doctrine.
• "Since neither the PCGG nor the OSG replied to the requests of Officeco within fifteen (15) days as required by law, such inaction is equivalent to a denial of these requests. As such, no other recourse was left except for judicial relief." — Establishing the basis for the cause of action under Republic Act No. 6713.
• "Even if the Sandiganbayan finds for Officeco, the same will not automatically result in the lifting of the questioned freeze orders. It will merely serve as a basis for requiring the PCGG (through the OSG) to make the appropriate representations with the Swiss government agencies concerned." — Explaining why there is no identity of causes of action and no inconsistency with the Swiss Federal Court decision.

• Underhill v. Hernandez, 168 U.S. 250 — Followed as the classic American statement of the act of state doctrine, cited to clarify that the doctrine does not bar the Sandiganbayan from reviewing the PCGG's stance rather than the foreign sovereign's acts.
• Banco Nacional de Cuba v. Sabbatino, 376 U.S. 398 — Followed to clarify that international law does not require the application of the act of state doctrine, and the usual method for relief is exhausting local remedies and seeking executive intervention.
• Tolentino v. Board of Accountancy, 90 Phil. 83 — Followed for the definition of equal protection, applied to the allegation that similarly situated accounts were released while Officeco's remained frozen.

• Section 5(a), Republic Act No. 6713 — Requires public officials to respond to letters and requests within fifteen working days from receipt. Applied to establish that the PCGG and OSG's inaction on Officeco's requests constituted a denial, giving rise to a cause of action.
• Sections 5 and 6, PCGG Rules and Regulations Implementing Executive Orders No. 1 and No. 2 — Provide the procedure for contesting sequestration, freeze, or hold orders before the PCGG. Held inapplicable because they refer only to orders issued by the PCGG in the Philippines, not foreign freeze orders.
• Section 1, Article III, 1987 Constitution — Guarantees equal protection of the laws. Potentially violated if allegations are proven that similarly situated accounts were released upon request while Officeco's remained frozen.

Quisumbing, Carpio, Carpio-Morales, Velasco, Jr.