PCGG vs. Sandiganbayan

A writ of preliminary injunction may not issue against the implementation of a PCGG sequestration order where the applicant fails to demonstrate a clear and unmistakable right to be protected and an urgent and paramount necessity for the writ to prevent serious damage; moreover, sequestration orders signed by a single commissioner prior to the promulgation of the PCGG Rules and Regulations on April 11, 1986 cannot be invalidated for lack of the two-commissioner requirement embodied in those rules.

Tourist Duty Free Shops, Inc. (TDFSI) was authorized under Presidential Decree No. 1193, as amended by P.D. No. 1394, to establish, operate, and maintain duty and tax free stores at international airports and seaports and selected hotels, tourist resorts, and commercial centers throughout the country. The Presidential Commission on Good Government (PCGG), created under Executive Order No. 1, was tasked with recovering ill-gotten wealth accumulated by former President Ferdinand E. Marcos, his family, and their cronies. Executive Order No. 14 later vested the Sandiganbayan with exclusive and original jurisdiction over ill-gotten wealth cases to be prosecuted by the PCGG with the assistance of the Office of the Solicitor General. The Republic, through the PCGG, also filed Civil Case No. 0008 for reconveyance, reversion, accounting, restitution, and damages against the Marcoses and the alleged stockholders and owners of TDFSI.

Tourist Duty Free Shops, Inc. (TDFSI) was a corporation authorized under Presidential Decree No. 1193, as amended by P.D. No. 1394, to establish, operate, and maintain duty and tax free stores at international airports and seaports, as well as at selected hotels, tourist resorts, and commercial or trading centers throughout the country. On March 11, 1986, the PCGG issued a Sequestration Order signed by then Commissioner Mary Concepcion Bautista, directing TDFSI to refrain from entering into new contracts or transactions, making disbursements except in the ordinary course of business, and withdrawing funds from its accounts. On the same date, the PCGG issued a Freeze Order directing the Manager of Rizal Commercial Banking Corporation (RCBC) to freeze any withdrawals, transfers, or remittances from TDFSI's funds in the said bank.

On May 2, 1986, TDFSI filed a Petition for Certiorari, Prohibition and Injunction before the Supreme Court to annul and stop the enforcement of the Sequestration Order, docketed as G.R. No. 74302. On May 27, 1986, the Court issued a Resolution in favor of the PCGG, sustaining the sequestration order and denying TDFSI's prayer for a temporary restraining order, while permitting TDFSI to sell existing stocks under PCGG supervision with proceeds deposited in a special trust account. Upon the issuance of Executive Order No. 14 vesting the Sandiganbayan with jurisdiction over ill-gotten wealth cases, and on TDFSI's own petition, the Court dismissed G.R. No. 74302 without prejudice on October 8, 1991, the dismissal becoming final on October 16, 1991.

Meanwhile, on July 21, 1987, the Republic, represented by the PCGG, filed Civil Case No. 0008 for Reconveyance, Reversion, Accounting, Restitution and Damages against the Marcoses and the alleged stockholders and owners of TDFSI. Following the dismissal of G.R. No. 74302, TDFSI filed on December 18, 1991 a Complaint for Injunction and Specific Performance against the PCGG, Bank of America (BA), and RCBC before the Sandiganbayan, docketed as Civil Case No. 0142. TDFSI assailed the Sequestration Order for having been signed by only one of five PCGG Commissioners and issued without the requisite investigation, and claimed that the order was deemed automatically lifted because no action for recovery of TDFSI's assets had been filed and no list of sequestered assets had been made. TDFSI also questioned the PCGG's prevention of RCBC and BA from allowing withdrawals without PCGG approval, arguing that the continued refusal had prevented TDFSI from investing its funds and stood to cause irreparable damage through lost opportunities.

The Sandiganbayan initially dismissed Civil Case No. 0142 on June 15, 1992 without prejudice, finding the issues intimately related to those in Civil Case No. 0008. TDFSI's motion for reconsideration was denied on September 23, 1992. When the case was elevated to the Supreme Court in G.R. No. 107395, the Court reversed on January 26, 2000, holding that litis pendentia was absent due to lack of identity of parties and causes of action, and that no res judicata would arise from either case. Civil Case No. 0142 was consequently remanded.

On remand, the Sandiganbayan granted TDFSI's motion for a writ of preliminary mandatory and prohibitory injunction on July 26, 2001, upon posting of a ₱100,000 bond, enjoining the PCGG from further implementing the sequestration order and enjoining the defendant-banks from requiring prior PCGG approval before allowing TDFSI to withdraw funds. The writ was issued on August 3, 2001. The Sandiganbayan found that the PCGG did not observe its own Rules and Regulations in issuing the Sequestration Order — no investigation was conducted, no notice or opportunity to adduce evidence was given, no public hearing was held, and the order was signed by only one Commissioner. On January 23, 2002, the Sandiganbayan denied PCGG's motion for reconsideration, declared the Sequestration Order void for failure to comply with Executive Order No. 1, and increased the injunction bond to ₱1 million. The PCGG then elevated the matter to the Supreme Court via the present petition for certiorari and prohibition under Rule 65.

• Res Judicata / Law of the Case: PCGG insisted that the Sandiganbayan contravened the Court's May 27, 1986 Resolution in G.R. No. 74302, which had denied TDFSI's similar application for an injunctive writ and affirmed the validity of the Sequestration Order. PCGG argued that the issuance of the injunctive writ was therefore violative of the principles of res judicata, litis pendentia, and law of the case, as the same grounds had already been invoked, considered, and passed upon.
• Ill-Gotten Wealth Status: PCGG maintained that in view of the Court's pronouncement in G.R. No. 74302 and judicial admissions in Civil Case No. 0008, it could no longer be disputed that the funds of TDFSI subject of the sequestration order constitute ill-gotten wealth of the Marcoses.
• Validity of Single-Commissioner Orders: PCGG argued that it is settled, in light of G.R. No. 74302, that sequestration orders signed by one commissioner but issued prior to the adoption of the PCGG Rules are valid, and that corporate entities merely constituting the res in recovery of ill-gotten wealth cases need not be impleaded as party defendants.
• Prejudgment: PCGG contended that the assailed orders, particularly the grant of the injunctive writ, amount to a prejudgment of Civil Case No. 0142 and render nugatory any judgment that may eventually be promulgated by the Sandiganbayan in that case.
• Absence of Injunction Requisites: PCGG argued that the injunctive writ was issued in utter disregard of the basic requirements that the applicant must have a clear and unmistakable legal right and that the applicant will sustain irreparable damage or injury unless the writ is issued.
• Insufficiency of Bond: PCGG maintained that the amount of the bond fixed by the Sandiganbayan was devoid of any basis and insufficient to cover whatever damages the PCGG and the Filipino people may suffer as a result of the injunctive writ.
• Counterbond Not an Estoppel: PCGG argued that its posting of a counterbond cannot operate to estop it from questioning the assailed orders, as it posted the bond out of sheer necessity and urgency upon the Sandiganbayan's order to immediately effect the lifting of the injunctive writ and prevent dissipation of sequestered assets, without waiving the grounds raised in its motions for reconsideration.
• Grave Damage to the Republic: PCGG contended that the injunctive writs caused and will continue to cause grave and irreparable damage and prejudice to the Republic and the Filipino people, contrary to the PCGG's constitutionally and statutorily enshrined mandate of recovering ill-gotten wealth.
• Denial of Accounting: PCGG argued that the Sandiganbayan's denial of its motion for accounting of the funds and deposits subject of the sequestration order amounted to a capricious and whimsical abdication of its duty as legal custodian of those funds.

• Res Judicata / Law of the Case: Whether the Court's May 27, 1986 Resolution in G.R. No. 74302, which denied TDFSI's prayer for injunctive relief and sustained the sequestration order, bars TDFSI from relitigating the validity of the Sequestration Order in Civil Case No. 0142 under the doctrines of res judicata, litis pendentia, or law of the case.
• Validity of Single-Commissioner Sequestration Order: Whether a sequestration order signed by only one PCGG Commissioner and issued prior to the promulgation of the PCGG Rules and Regulations on April 11, 1986 may be invalidated for non-compliance with the two-commissioner requirement.
• Non-Impleading of Sequestered Corporation: Whether the failure to implead TDFSI as a defendant in Civil Case No. 0008 for recovery of ill-gotten wealth renders the sequestration order functus officio or automatically lifted.
• Propriety of Preliminary Injunction: Whether the Sandiganbayan gravely abused its discretion in issuing the writ of preliminary mandatory and prohibitory injunction, given the documentary evidence presented by TDFSI.

• Res Judicata / Law of the Case: No. The May 27, 1986 Resolution in G.R. No. 74302 was merely an interlocutory order that died with the dismissal of the main case, which was dismissed without prejudice; it was not a judgment on the merits and thus cannot constitute res judicata, litis pendentia, or law of the case.
• Validity of Single-Commissioner Sequestration Order: Yes, the order is valid. Sequestration orders signed by one Commissioner and issued prior to the adoption of the PCGG Rules and Regulations on April 11, 1986 cannot be invalidated for non-compliance with the two-commissioner requirement, as those rules were nonexistent at the time of issuance.
• Non-Impleading of Sequestered Corporation: No, the sequestration is not rendered functus officio. As to corporations allegedly organized with ill-gotten wealth but not themselves guilty of misappropriation, fraud, or other illicit conduct, there is no need to implead them; even where impleading is necessary, its absence is a mere technical defect curable at any stage of the proceedings.
• Propriety of Preliminary Injunction: No. The Sandiganbayan gravely abused its discretion in issuing the injunctive writ, as TDFSI's documentary evidence did not establish a clear and unmistakable right to be protected or that the implementation of the sequestration and freeze orders was violative of its rights.

• Res Judicata / Law of the Case: The Court examined the nature of the May 27, 1986 Resolution in G.R. No. 74302 and found that it merely disposed of the preliminary issue of whether to grant TDFSI's prayer for a temporary restraining order. The case was subsequently dismissed without prejudice upon TDFSI's own petition following the issuance of Executive Order No. 14. Res judicata requires, among other elements, a judgment on the merits — defined as one rendered after a determination of which party is right, as distinguished from a judgment upon a preliminary or formal point. A dismissal without prejudice indicates the absence of a decision on the merits and leaves the parties free to litigate the matter in a subsequent action as though the dismissed action had not been commenced. The interlocutory order could not survive the main case of which it was but an incident; it died with the dismissal of G.R. No. 74302. TDFSI's right to re-file carried with it the right to apply for provisional remedies. The elements of res judicata — finality, jurisdiction, judgment on the merits, and identity of parties, subject matter, and cause of action — were not all present, the third requisite being plainly wanting.

• Validity of Single-Commissioner Sequestration Order: The PCGG Rules and Regulations were promulgated on April 11, 1986, and Section 3 thereof requires that a sequestration order be issued upon the authority of at least two Commissioners. The questioned Sequestration Order was issued on March 11, 1986, prior to the promulgation of those rules. The Court held that the PCGG cannot reasonably be expected to abide by rules that were nonexistent at the time the subject orders were issued, relying on established jurisprudence that sequestration and freeze orders signed by only one Commissioner and issued prior to the adoption of the PCGG Rules cannot be invalidated.

• Non-Impleading of Sequestered Corporation: The Court noted that on July 21, 1987, the Republic filed Civil Case No. 0008 for reconveyance against the Marcoses and the alleged stockholders and owners of TDFSI. While no case had been commenced against TDFSI itself, the Court applied the well-established doctrine that as to corporations allegedly organized with ill-gotten wealth but not themselves guilty of misappropriation, fraud, or other illicit conduct, there is no need to implead them. Their impleading is not proper on the strength alone of their being formed with ill-gotten funds, absent any other particular wrongdoing on their part. Even where impleading is necessary, the sequestration is not rendered functus officio, as the defect is merely technical and curable at any stage of the proceedings. The Sandiganbayan therefore could not nullify the sequestration and freeze orders on this basis alone.

• Propriety of Preliminary Injunction: The Court examined the documentary evidence TDFSI presented before the Sandiganbayan — its complaint, General Information Sheet, the authorizing presidential decrees, the Sequestration Order, correspondence with Bank of America, a letter inquiring whether a recovery case had been filed, and a certification that none had been filed — and found that these merely showed that TDFSI is a corporation, that a sequestration order signed by a PCGG Commissioner was issued against it, and that no action for recovery of ill-gotten wealth had been filed at the time of inquiry. Under Section 3, Rule 58 of the Rules of Court, a writ of preliminary injunction requires that the applicant be entitled to the relief demanded and that the commission or non-performance of the acts complained of would probably work injustice to the applicant. Two requisites must concur: the existence of a clear and unmistakable right to be protected, and an urgent and paramount necessity for the writ to prevent serious damage. The Court concluded that the evidence did not, in any way, show that TDFSI had a right to be protected or that the implementation of the sequestration and freeze orders was violative of its rights. The Court further noted the nature and purpose of sequestration and freeze orders as described in Bataan Shipyard & Engineering Co., Inc. vs. PCGG: to place property under PCGG's possession or control to prevent destruction, concealment, or dissipation until it can be determined through appropriate judicial proceedings whether the property is ill-gotten. Pending such determination, there is an obvious and imperative need for preliminary, provisional measures, and their implementation should not be restrained unless there is a clear ground to do so. The Sandiganbayan's conclusions were contrary to established jurisprudence, constituting grave abuse of discretion amounting to lack or excess of jurisdiction.

• Res Judicata — Requires four elements: (a) the former judgment must be final; (b) the court which rendered judgment had jurisdiction over the parties and subject matter; (c) it must be a judgment on the merits; and (d) there must be identity of parties, subject matter, and cause of action between the first and second actions. A judgment on the merits is one rendered after a determination of which party is right, as distinguished from a judgment rendered upon some preliminary, formal, or merely technical point. A dismissal without prejudice indicates the absence of a decision on the merits and leaves the parties free to litigate the matter in a subsequent action. In this case, the dismissal of G.R. No. 74302 without prejudice was not a judgment on the merits, so res judicata did not bar TDFSI from refiling.

• Interlocutory Orders Do Not Survive the Main Case — A provisional remedy, like any other interlocutory order, cannot survive the main case of which it is but an incident. The findings of fact and opinion of a court when issuing or denying a writ of preliminary injunction are interlocutory in nature and made before trial on the merits. The May 27, 1986 interlocutory order died with the dismissal of G.R. No. 74302, and TDFSI's right to re-file carried with it the right to apply for provisional remedies.

• Requisites for Preliminary Injunction — Two requisites must exist to warrant the issuance of an injunctive relief: (1) the existence of a clear and unmistakable right that must be protected; and (2) an urgent and paramount necessity for the writ to prevent serious damage. Before a writ of preliminary injunction may issue, there must be a clear showing that there exists a right to be protected and that the acts against which the writ is to be directed are violative of that established right. TDFSI's documentary evidence failed to establish either requisite.

• Nature and Purpose of Sequestration and Freeze Orders — Sequestration means placing property under PCGG's possession or control to prevent destruction, concealment, or dissipation until it can be determined through appropriate judicial proceedings whether the property is ill-gotten. A freeze order prohibits the possessor from transferring, conveying, encumbering, or otherwise depleting the property, akin to a garnishment. Pending determination of whether properties are ill-gotten, there is an obvious and imperative need for preliminary, provisional measures, and implementation of these orders should not be restrained unless there is a clear ground to do so.

• Validity of Sequestration Orders Issued Prior to PCGG Rules — Sequestration and freeze orders signed by only one Commissioner and issued prior to the adoption of the PCGG Rules and Regulations on April 11, 1986 cannot be invalidated for non-compliance with the two-commissioner requirement of Section 3 of those rules, as the rules were nonexistent at the time of issuance.

• Non-Impleading of Sequestered Corporations — As to corporations allegedly organized with ill-gotten wealth but not themselves guilty of misappropriation, fraud, or other illicit conduct, there is no need to implead them as party defendants. Impleading is not proper on the strength alone of their being formed with ill-gotten funds, absent any other particular wrongdoing. Even where impleading is necessary, the sequestration is not rendered functus officio, as the defect is merely technical and curable at any stage of the proceedings.

• "Without making a definitive conclusion as to the validity of the Sequestration and Freeze Orders being the main issue in Civil Case No. 0142 which is yet to be decided by the Sandiganbayan, we conclude that the pieces of evidence enumerated above do not, in any way, show that TDFSI has a right to be protected and that the implementation of the Sequestration and Freeze Orders is violative of its rights." — This passage articulates the ratio decidendi on the impropriety of the injunctive writ: the Court refrained from ruling on the validity of the sequestration order while holding that the evidence before the Sandiganbayan was insufficient to justify injunctive relief.

• "The implementation of these orders should, therefore, not be restrained unless there is a clear ground to do so. More so in this case, considering that the Sandiganbayan's conclusions are contrary to established jurisprudence." — This passage establishes the governing principle that sequestration and freeze orders, as provisional measures necessary to preserve assets pending judicial determination, should not be enjoined absent a clear ground, reinforcing the Sandiganbayan's grave abuse of discretion.

• "Obviously, the third requisite is wanting. Res judicata or bar by prior judgment is a doctrine which holds that a matter that has been adjudicated by a court of competent jurisdiction must be deemed to have been finally and conclusively settled if it arises in any subsequent litigation between the same parties and for the same cause." — This passage defines res judicata and explains why it did not apply, the dismissal of G.R. No. 74302 having been without prejudice and thus not a judgment on the merits.

• "To be sure, the provisional remedy, like any other interlocutory order, cannot survive the main case of which it is but an incident." — This passage states the doctrinal principle that interlocutory orders, including provisional remedies, do not survive the dismissal of the main case, explaining why the May 27, 1986 Resolution could not bar TDFSI from seeking injunctive relief anew.

• Bataan Shipyard & Engineering Co., Inc. (BASECO) vs. PCGG, 234 Phil. 180 (1987) — Controlling precedent on the nature and purpose of sequestration and freeze orders. The Court quoted extensively from this case to define sequestration as placing property under PCGG control to prevent dissipation pending judicial determination, and to establish that owners have the "opportunity to contest" such orders through the courts.

• Republic of the Philippines vs. Sandiganbayan, 336 Phil. 304 (1997) — Followed on two points: (1) sequestration orders signed by one Commissioner and issued prior to the PCGG Rules cannot be invalidated; and (2) corporations allegedly organized with ill-gotten wealth but not themselves guilty of wrongdoing need not be impleaded, and even where impleading is necessary, the defect is merely technical and curable.

• PCGG vs. Tan, G.R. No. 173553-56, December 7, 2007, 539 SCRA 464 — Followed to reinforce the principle from BASECO that owners of sequestered properties have the "opportunity to contest" PCGG actions, which includes resort to the courts as in Civil Case No. 0142.

• Cruz vs. Caraos, G.R. No. 138208, April 23, 2007, 521 SCRA 510 — Cited for the elements of res judicata and the definition of a judgment on the merits versus a judgment on a preliminary or technical point.

• G & S Transport Corp. vs. CA, 432 Phil. 7 (2002) — Cited for the doctrine that a provisional remedy, like any other interlocutory order, cannot survive the main case of which it is but an incident, and for the requisites of preliminary injunction.

• Philippwealth, Inc. vs. Pfizer, Inc., G.R. No. 167715, November 17, 2010, 635 SCRA 140 — Cited for the statutory requirements of a writ of preliminary injunction under Section 3, Rule 58 of the Rules of Court and the two requisites for injunctive relief.

• Heirs of Enrique Diaz vs. Virata, G.R. No. 162037, August 7, 2006, 498 SCRA 141 — Cited for the principle that discontinuance of a case not on the merits does not bar another action on the same subject matter.

• Section 3, Rule 58, Rules of Court — Sets forth the requirements for the issuance of a writ of preliminary injunction: (a) the applicant is entitled to the relief demanded; (b) the commission or non-performance of the acts complained of during litigation would probably work injustice to the applicant; and (c) a party is doing or threatening acts probably in violation of the applicant's rights and tending to render judgment ineffectual. The Court applied this provision to hold that TDFSI's evidence did not satisfy these requirements.

• Executive Order No. 1 — Created the Presidential Commission on Good Government. The Sandiganbayan relied on this issuance to declare the sequestration order void for failure to comply with its requirement that the PCGG as a body issue the order; the Supreme Court reversed, holding the order valid as it predated the PCGG Rules.

• Executive Order No. 2 — Regarding funds, monies, assets, and properties illegally acquired by former President Marcos and his associates. Referenced in connection with the PCGG's mandate and the Rules and Regulations implementing Executive Order Nos. 1 and 2.

• Executive Order No. 14 — Defined the jurisdiction of the Sandiganbayan over cases involving ill-gotten wealth. Its issuance prompted the dismissal of G.R. No. 74302 without prejudice and the re-filing of the case before the Sandiganbayan.

• Section 3, PCGG Rules and Regulations (April 11, 1986) — Requires that a writ of sequestration or freeze order be issued upon the authority of at least two Commissioners. The Court held this provision inapplicable to the March 11, 1986 Sequestration Order, which was issued before the rules were promulgated.

• Presidential Decree No. 1193, as amended by P.D. No. 1394 — Authorized TDFSI to establish and operate duty and tax free stores. Provided the statutory backdrop for TDFSI's corporate existence and operations.

Presbitero J. Velasco, Jr. (Chairperson), Roberto A. Abad, Jose Catral Mendoza, and Maria Lourdes P. A. Sereno (designated as additional member per Special Order No. 1028 dated June 21, 2011). No separate concurring opinions were noted.