Republic of the Philippines vs. Sandiganbayan

An action for intervention in an ill-gotten wealth case pending before the Sandiganbayan falls within that court's exclusive and original jurisdiction as an incident arising from or related to the principal case, and where intervenors unite with the defendants in resisting the plaintiff's claims without seeking affirmative relief, the intervention does not constitute a suit against the State requiring its consent.

The Republic of the Philippines, acting through the Presidential Commission on Good Government (PCGG), filed Civil Case No. 0025 before the Sandiganbayan against Ferdinand E. Marcos, Imelda Romualdez Marcos, and their alleged cronies for reconveyance, reversion, accounting, restitution, and damages involving ill-gotten wealth. Among the properties listed in the complaint were lots and shares of stock registered in the name of Bacolod Real Estate Development Corporation (BREDCO) and Marsteel Consolidated, Inc. (MCI). Private respondent Simplicio A. Palanca was a stockholder of BREDCO who, together with other stockholders, had transferred 70% of BREDCO's subscribed capital stock to MCI under an arrangement they characterized as an accommodation to enable MCI to secure financing for a reclamation and port development project. The PCGG had sequestered the assets of MARSTEEL, MCI, and BREDCO in September 1986.

In 1961, Bacolod Real Estate Development Corporation (BREDCO) was awarded by Bacolod City a contract to undertake the reclamation and port development of the city. By 1975, a sizeable portion of land had been reclaimed and corresponding Torrens titles issued in BREDCO's name. In that year, BREDCO engaged MARSTEEL as a contractor to complete the project, with power to negotiate loans and to mortgage all reclaimed lots and other assets as security. For its services, MARSTEEL was to receive 65% of the excess of all revenues over all disbursements, and BREDCO conveyed to MARSTEEL 65% of each lot already reclaimed and that to be reclaimed.

In 1977, MARSTEEL assigned to MCI, which owned 100% of its capital stock, all its rights, interests, obligations, and undertakings in the project. To enable MCI to expand its base of negotiation for loans, the BREDCO stockholders transferred to MCI their respective shares of stock amounting to 70% of the capital stock of BREDCO. In return, they were to be entitled to a share of 35% of the excess of all revenues over all disbursements of the projects, with payment due regardless of the fact that they ceased to be stockholders of BREDCO by implementation of the agreement.

In September 1986, the PCGG sequestered all assets, properties, records, and documents of MARSTEEL, MCI, and BREDCO. On July 29, 1987, the Republic filed a complaint before the Sandiganbayan against Ferdinand E. Marcos, et al. for reconveyance, reversion, accounting, restitution, and damages, docketed as Civil Case No. 0025. The complaint listed among the alleged ill-gotten wealth the BREDCO lots and shares of stock, and prayed that these be reconveyed to the Republic. Notably, the bodies of the complaints did not mention anything about BREDCO, its project, lots, and stocks, nor about MCI.

On September 3, 1987, before Civil Case No. 0025 could be set for hearing, private respondent Simplicio A. Palanca, in his own behalf as a stockholder of BREDCO and other stockholders similarly situated, filed a Motion for Leave to Intervene with an attached Answer in Intervention. They alleged that the BREDCO lots were registered not in the names of any of the defendants but in the name of BREDCO, and that the shares of stock were carried in the name of Marsteel Consolidated, Inc. They asserted that if any defendant came to have any interest in BREDCO through MCI and MARSTEEL, it was only by way of accommodation, as the BREDCO stockholders had transferred 70% of the subscribed capital to enable MCI to secure financing. The petitioner filed a Motion to Dismiss the Answer in Intervention on grounds of lack of jurisdiction and absence of legal interest. The Sandiganbayan, in its resolution dated June 3, 1988, granted the motion to intervene and admitted the Answer in Intervention; the petitioner's motion for reconsideration was denied by resolution dated August 25, 1988. The Sandiganbayan found that Palanca and his co-stockholders had a legal interest in the matter in litigation, namely their 70% of the capital stock of BREDCO or its equivalent of 35% of the excess of all revenues over all disbursements, and that they would be adversely affected by any judgment ordering reconveyance of the sequestered assets to the Republic.

• State Immunity from Suit: Petitioner contended that the Republic, being the sovereign state, cannot be sued without its consent, and that the intervention is, in legal effect, a suit or counter-suit against the sovereign state.
• Jurisdiction of the Sandiganbayan: Petitioner argued that the cause of action of the intervenors does not fall within the jurisdiction of the Sandiganbayan as expressly spelled out in Presidential Decree No. 1606 and Executive Order No. 14.
• No Legal Interest: Petitioner maintained that the intervenors have no legal interest in the matter in litigation and that the subject matter is not in custodia legis of the respondent court.
• Claims Among Cronies: Petitioner asserted that the intervenors' claims are claims between and/or among Ferdinand and Imelda Marcos and their cronies, cognizable not by the Sandiganbayan but by regular courts or other fora, and that there is only one case filed by the Republic against the named defendants grounded on causes of action entirely distinct from any cause of action which intervenors may have against Mr. Marcos and his cronies.

• Legal Interest in the Matter in Litigation: Respondent argued that the BREDCO lots are registered in the name of BREDCO, not in the names of any of the defendants, and that the shares of stock are carried in the name of Marsteel Consolidated, Inc., not in the names of any defendants, and therefore should not be involved in the action.
• Accommodation Transfer: Respondent asserted that the transfer of 70% of BREDCO's subscribed capital stock to MCI was merely by way of accommodation to enable MCI to secure adequate financing for the reclamation and port development project, and that the BREDCO stockholders retained a 35% interest in the excess of all revenues over all disbursements.
• Defensive Posture: Respondent maintained that in intervening, they sought merely to exclude the BREDCO lots and stocks, or at least their 35% interest, from any possible judgment directing reconveyance to the plaintiff, and that they prayed for no damages against the Republic, occupying a defensive position.

• Jurisdiction: Whether the Sandiganbayan has jurisdiction over the action for intervention, or whether it acted with grave abuse of discretion amounting to lack or excess of jurisdiction in admitting the intervention.
• Legal Interest: Whether the intervenors have a legal interest in the matter in litigation sufficient to warrant intervention under the Rules of Court.
• State Immunity: Whether the intervention constitutes a suit against the sovereign state without its consent.

• Jurisdiction: Yes. The Sandiganbayan has exclusive and original jurisdiction over the intervention, it being merely incidental to and related to Civil Case No. 0025, over which the Sandiganbayan already has exclusive and original jurisdiction.
• Legal Interest: Yes. The intervenors established a legal interest in the matter in litigation through their 70% of BREDCO's capital stock transferred by accommodation, or its equivalent 35% interest in project revenues, and they stand to be adversely affected by any disposition of the sequestered properties.
• State Immunity: No. The intervention is not a suit against the State because the intervenors merely united with the defendants in resisting the plaintiff's claims and sought no affirmative relief against any party.

• Jurisdiction: The jurisdiction of the Sandiganbayan over ill-gotten wealth cases was settled in Presidential Commission on Good Government vs. Hon. Emmanuel G. Penal, where the Court held that all cases of the PCGG regarding funds, moneys, assets, and properties illegally acquired by former President Marcos, Mrs. Imelda Marcos, their close relatives, subordinates, business associates, dummies, agents, or nominees, whether civil or criminal, are lodged within the exclusive and original jurisdiction of the Sandiganbayan, and all incidents arising from, incidental to, or related to such cases necessarily fall likewise under the Sandiganbayan's exclusive and original jurisdiction. Intervention is not an independent action but is ancillary and supplemental to an existing litigation. Because the private respondents' action for intervention in Civil Case No. 0025 is not an independent action, it is merely incidental to or related to the said civil case, and the Sandiganbayan's jurisdiction extends to it. Any error the Sandiganbayan may have committed in the exercise of its jurisdiction amounts to an error of judgment correctable by appeal, not certiorari. However, given the public interest involved, the Court proceeded to review the other issues raised.

• Legal Interest: Under Section 2, Rule 12 of the Rules of Court, a person may be permitted to intervene if he has legal interest in the matter in litigation, or in the success of either of the parties, or when he is so situated as to be adversely affected by a distribution or other disposition of property in the custody of the court. The intervenors satisfied all three grounds. First, they had a legal interest in their 70% of the capital stock of BREDCO transferred to MCI by way of accommodation, or its equivalent 35% of the excess of all revenues over all disbursements to which they were entitled as owners of existing interests in the project. Second, the BREDCO lots and stocks were sequestered and in custodia legis, and in the event of a judgment ordering reconveyance to the Republic, the intervenors stood to be adversely affected. Third, the legal interest of Palanca and his co-stockholders in the matter in litigation and the possibility of a judgment ordering reconveyance invested them with legal interest in the success of the defendants, at least insofar as the BREDCO lots and shares are concerned.

• State Immunity: Under Section 2(c) of Rule 12, where the intervenor unites with the defendant in resisting the claims of the plaintiff, the intervention may be made in the form of an answer to the complaint. In Froilan vs. Pan Oriental Shipping Co., the Court held that by filing a complaint in intervention, the Government in effect waived its right to non-suability. However, in Lim vs. Brownell, Jr. and Kagawa, the Court distinguished that where the State intervenes merely to unite with the defendant in resisting the plaintiff's claims and asks no affirmative relief, it does not waive its immunity. Applying this distinction, the private respondents intervened merely to unite with the defendants in resisting the claims of the Republic and asked no affirmative relief against any party. Their purpose was to exclude the BREDCO lots and stocks, or at least their 35% interest, from any possible judgment directing reconveyance. They occupied a defensive position, and the fact that they interjected themselves into the litigation at their own initiative did not alter the essential nature of their intervention. The intervention was therefore not a suit or counter-suit against the Republic.

• Jurisdiction of the Sandiganbayan over Incidents of Ill-Gotten Wealth Cases — The Sandiganbayan's exclusive and original jurisdiction extends not only to the principal causes of action involving recovery of alleged ill-gotten wealth but also to all incidents arising from, incidental to, or related to such cases, including disputes over the sale of shares, the propriety of ancillary writs or provisional remedies, and sequestration. The Court applied this by holding that an action for intervention, being ancillary and supplemental to an existing litigation rather than an independent action, falls within the Sandiganbayan's jurisdiction when the principal case is pending before it.

• Intervention under Rule 12 of the Rules of Court — A person may intervene before or during trial if (a) he has legal interest in the matter in litigation, (b) he has legal interest in the success of either of the parties, or (c) he is so situated as to be adversely affected by a distribution or other disposition of property in the custody of the court. The Court found all three grounds satisfied: the intervenors had legal interest in their transferred shares and revenue entitlement, they had legal interest in the success of the defendants regarding the BREDCO properties, and they would be adversely affected by any reconveyance order since the properties were in custodia legis.

• State Immunity and Intervention — When the State files a complaint in intervention, it waives its right to non-suability and descends to the level of defendants, as held in Froilan vs. Pan Oriental Shipping Co. However, where a party intervenes merely to unite with the defendant in resisting the plaintiff's claims and seeks no affirmative relief, the intervention does not constitute a suit against the State. The Court applied this by noting that the private respondents asked for no affirmative relief against the Republic and occupied a purely defensive posture.

• Certiorari vs. Appeal — The writ of certiorari issues for the correction of errors of jurisdiction only or grave abuse of discretion amounting to lack or excess of jurisdiction, not for errors of judgment. Where a court has jurisdiction over the subject matter, any error it commits in the exercise of that jurisdiction is an error of judgment correctable by appeal, not certiorari.

• "Intervention is not an independent action, but is ancillary and supplemental to an existing litigation. Hence, the private respondents' action for intervention in Civil Case No. 0025, not being an independent action, is merely incidental to, or related to, the said civil case. Since the respondent Sandiganbayan has the exclusive and original jurisdiction over Civil Case No. 0025, it has likewise original and exclusive jurisdiction over the private respondents' action for intervention therein." — This passage establishes the ratio decidendi on the jurisdictional issue, articulating why the Sandiganbayan's jurisdiction extends to incidents of intervention in ill-gotten wealth cases.

• "In the present case, the private respondents intervened in Civil Case No. 0025 merely to unite with the defendants therein in resisting the claims of petitioner, as plaintiff, and for that reason asked for no affirmative relief against any party in their answer in intervention." — This passage defines the critical distinction that prevents the intervention from being treated as a suit against the State, applying the doctrine from Lim vs. Brownell to the facts.

• "the exclusive jurisdiction conferred on the Sandiganbayan would evidently extend not only to the principal causes of action, i.e., the recovery of alleged ill-gotten wealth, but also to 'all incidents arising from, incidental to, or related to, such cases,' such as the dispute over the sale of the shares, the propriety of the issuance of ancillary writs or provisional remedies relative thereto, the sequestration thereof, which may not be made the subject of separate actions or proceedings in another forum." — This passage, quoted from the Court's earlier consolidated rulings, articulates the broad scope of the Sandiganbayan's jurisdiction over all incidents related to ill-gotten wealth cases.

• Presidential Commission on Good Government vs. Hon. Emmanuel G. Penal, etc., et al., G.R. No. 77663, April 12, 1988, 159 SCRA 556 — Controlling precedent establishing that the Sandiganbayan's exclusive and original jurisdiction extends to all incidents arising from, incidental to, or related to PCGG cases involving ill-gotten wealth. The Court relied on this ruling to hold that the intervention fell within the Sandiganbayan's jurisdiction.

• Soriano III vs. Yuzon, 164 SCRA 226 — One of six subsequent cases decided jointly that reiterated the broad jurisdictional rule from the Penal case. The Court quoted this case for the proposition that the Sandiganbayan's jurisdiction extends to all incidents related to ill-gotten wealth cases.

• Froilan vs. Pan Oriental Shipping Co., 95 Phil. 905 — Followed for the proposition that when the State files a complaint in intervention, it waives its right to non-suability. The Court distinguished this case from the facts at bar, where the private respondents—not the State—intervened and sought no affirmative relief.

• Lim vs. Brownell, Jr. and Kagawa, 107 Phil. 344 — Followed and applied for the proposition that where a party intervenes merely to unite with the defendant in resisting the plaintiff's claims and asks no affirmative relief, the intervention does not constitute a suit against the State. This case was directly on point and controlled the State immunity issue.

• Garcia vs. David, 67 Phil. 279 — Cited for the principle that intervention is not an independent action but is ancillary and supplemental to existing litigation.

• Joaquin vs. Herrera, 37 Phil. 705 — Cited for the doctrine of intervention pro interesse suo, where a person whose property is in the custody of a court in a controversy between others may intervene to assert a superior right, especially where such interest cannot be otherwise properly protected.

• Silverio vs. Hon. Court of Appeals, G.R. No. L-39861, March 17, 1986, 141 SCRA 527 — Cited for the distinction between errors of judgment correctable by appeal and errors of jurisdiction correctable by certiorari.

• Section 2, Rule 12, Rules of Court — Governs intervention, permitting a person to intervene if he has legal interest in the matter in litigation, or in the success of either of the parties, or when he is so situated as to be adversely affected by a distribution or other disposition of property in the custody of the court. The Court found all three grounds satisfied by the intervenors.

• Section 2(c), Rule 12, Rules of Court — Provides that where the intervenor unites with the defendant in resisting the claims of the plaintiff, the intervention may be made in the form of an answer to the complaint. The Court applied this to characterize the intervenors' posture as defensive rather than an affirmative suit against the State.

• Executive Order No. 14, Section 2 (May 7, 1986) — Lodges within the exclusive and original jurisdiction of the Sandiganbayan all cases of the PCGG regarding funds, moneys, assets, and properties illegally acquired by former President Marcos, Mrs. Imelda Marcos, their close relatives, subordinates, business associates, dummies, agents, or nominees, whether civil or criminal. The Court relied on this provision as construed in PCGG vs. Penal to establish the Sandiganbayan's jurisdiction over the intervention.

• Presidential Decree No. 1606 — Defines the jurisdiction of the Sandiganbayan. Petitioner invoked this decree to argue that the intervenors' cause of action does not fall within the Sandiganbayan's jurisdiction; the Court rejected this argument.

Fernan (C.J.), Narvasa, Melencio-Herrera, Gutierrez, Jr., Cruz, Paras, Feliciano, Gancayco, Bidin, Sarmiento, Cortes, Griño-Aquino, Medialdea, and Regalado, JJ., concurred. No separate concurring opinions were noted.