Republic vs. Bolante

Filing a second petition for a freeze order over accounts already covered by a prior freeze order — where the prior order has lapsed but the parties, rights asserted, reliefs sought, and factual bases are identical — constitutes forum shopping, and a trial court does not commit grave abuse of discretion in denying a bank inquiry order where the AMLC's evidence consists merely of a Senate committee report and testimony derived therefrom, insufficient to establish probable cause linking the subject accounts to an unlawful activity.

The Republic, acting through the Anti-Money Laundering Council (AMLC), sought to investigate and freeze bank deposits and investments believed to be proceeds of the so-called "fertilizer fund scam" — the alleged misuse of ₱728 million in government funds released for the purchase of farm inputs under the Ginintuang Masaganang Ani Program. The investigation targeted accounts held by Livelihood Corporation (LIVECOR), Molugan Foundation, Assembly of Gracious Samaritans, Inc. (AGS), and their officers, as well as former Undersecretary of Agriculture Jocelyn I. Bolante. The legal framework governing the AMLC's authority to freeze monetary instruments and inquire into bank deposits is found in Republic Act No. 9160 (the Anti-Money Laundering Act of 2001), as amended, and the Rules of Procedure in Cases of Civil Forfeiture, Asset Preservation, and Freezing of Monetary Instruments (A.M. No. 05-11-04-SC). The Supreme Court's ruling in Republic vs. Eugenio — which held that Section 11 of R.A. 9160, as then worded, did not authorize ex parte proceedings for bank inquiry orders — significantly altered the procedural landscape midstream, prompting the AMLC to shift from seeking bank inquiry orders to seeking freeze orders.

In April 2005, the Philippine National Bank submitted to the AMLC a series of suspicious transaction reports involving the accounts of Livelihood Corporation (LIVECOR), Molugan Foundation (Molugan), and Assembly of Gracious Samaritans, Inc. (AGS). The reports indicated that LIVECOR transferred a total of ₱172.6 million to Molugan over a 15-month period from 2004 to 2005. On 30 April 2004, LIVECOR transferred ₱40 million to AGS, which received another ₱38 million from Molugan on the same day — curiously, AGS returned the ₱38 million to Molugan also on that same day. These transactions were flagged as suspicious because they had no underlying legal or trade obligation, purpose, or economic justification, and were not commensurate with the financial capacity of Molugan and AGS, both of which were capitalized at only ₱50,000 each. Samuel S. Bombeo served as president, secretary, and treasurer of Molugan and was the lone signatory to its account, while Bombeo shared signatory responsibility for AGS with Ariel Panganiban.

On 7 March 2006, the Senate furnished the AMLC a copy of Committee Report No. 54, prepared by the Committee on Agriculture and Food and the Committee on Accountability of Public Officers and Investigations. The report narrated that former Undersecretary of Agriculture Jocelyn I. Bolante had requested the Department of Budget and Management to release ₱728 million to the Department of Agriculture for the purchase of farm inputs under the Ginintuang Masaganang Ani Program. The funds were used to purchase liquid fertilizers from Freshan Philippines, Inc., which were distributed to local government units and congressional districts beginning January 2004. A Commission on Audit (COA) Audit Report characterized the use of the funds as marked by massive irregularities, overpricing, violations of the procurement law, and wanton wastage of government resources. Committee Report No. 54 also stated that Bolante was concurrently appointed by President Gloria Macapagal Arroyo as acting Chairman of LIVECOR while serving as Undersecretary of Agriculture.

Based on these reports, the AMLC issued Resolution No. 75 on 18 September 2006, finding probable cause to believe that the accounts of LIVECOR, Molugan, and AGS were related to the fertilizer fund scam, and that the acts involved may constitute violations of Section 3(e) of R.A. 3019 (Anti-Graft and Corrupt Practices Act) and R.A. 7080 (Plunder Law). The AMLC authorized the filing of a petition for a bank inquiry order covering six accounts. The petition was filed ex parte before the RTC, docketed as AMLC SP Case No. 06-003, and on 17 November 2006, the trial court found probable cause and issued the order prayed for. Further investigation by the AMLC Secretariat identified a total of 70 bank accounts as part of the related web of accounts. The AMLC issued Resolution No. 90 on 26 October 2007, authorizing the filing of a petition for a bank inquiry order covering all 70 accounts.

On 14 February 2008, the Supreme Court promulgated Republic vs. Eugenio, ruling that Section 11 of R.A. 9160, as then worded, did not authorize ex parte proceedings for the issuance of a bank inquiry order; notice to account holders was required. In response, the AMLC shifted strategy and issued Resolution No. 40 on 21 May 2008, authorizing the filing of a petition for a freeze order before the CA. The Republic filed an ex parte petition docketed as CA-G.R. AMLC No. 00014, and the CA issued a freeze order effective for 20 days. After a summary hearing, the CA extended the effectivity for 30 days until 19 August 2008, and then for four months until 20 December 2008, covering 31 accounts with existing balances. Meanwhile, the Republic also filed an ex parte application before the RTC, docketed as AMLC Case No. 07-001, seeking a bank inquiry order over the same 70 accounts; the RTC granted the order on 25 July 2008.

After the Supreme Court denied with finality the motion for reconsideration in Eugenio on 20 October 2008, the Republic filed an Amended and Supplemental Application in AMLC Case No. 07-001, now seeking a bank inquiry order after notice to the account holders, covering the original 70 accounts plus the six accounts from AMLC SP Case No. 06-003 — a total of 76 accounts. Believing that the finality of Eugenio constituted a supervening event, the AMLC issued Resolution No. 5 on 26 January 2009, authorizing the filing of a new petition for a freeze order against 24 of the 31 accounts previously frozen. The Republic filed an Urgent Ex Parte Petition docketed as CA-G.R. AMLC No. 00024, and the CA issued a freeze order effective for 20 days on 4 February 2009. After a summary hearing, the CA, in its Resolution dated 27 February 2009, denied the application to extend the freeze order, finding that the Republic had committed forum shopping. The CA noted that the parties, accounts, rights asserted, and reliefs sought in CA-G.R. AMLC No. 00024 were identical to those in CA-G.R. AMLC No. 00014, and that the extension sought was effectively a further extension of the prior freeze order, proscribed under Section 53 of A.M. No. 05-11-04-SC, which limits extensions to a period not exceeding six months.

Meanwhile, in the RTC proceedings on the amended bank inquiry application, the trial court issued its Resolution dated 3 July 2009 denying the application. The RTC found no probable cause, noting that the Republic relied on only two pieces of evidence: Senate Committee Report No. 54 and the testimony of AMLC witness Thelma Espina. The trial court held that the Senate report could not be taken "hook, line and sinker" because the Senate conducts inquiries only in aid of legislation, and that Espina's testimony merely relied on the same report without independent verification. The RTC gave credence to the COA Audit Report, which, while outlining irregularities, showed that none of the fertilizer fund was channeled to LIVECOR, Molugan, or AGS. The RTC also noted Bolante's evidence that he had ceased to be a member of LIVECOR's board of trustees on 1 February 2003 — more than 14 months before the suspicious transfers occurred — and that the transfers from LIVECOR to Molugan and AGS came from the ₱60 million Priority Development Assistance Fund of Senator Joker Arroyo. The RTC denied the Republic's motion for reconsideration on 13 November 2009.

• No Forum Shopping — Litis Pendentia: The Republic argued that CA-G.R. AMLC No. 00014 had already attained finality when CA-G.R. AMLC No. 00024 was filed, and therefore the principle of litis pendentia — which presupposes the pendency of at least one case when a second case is filed — did not apply.
• Supervening Event: The Republic maintained that the finality of Republic vs. Eugenio constituted a supervening event that prevented the AMLC from concluding its financial investigation within the auspices of the bank inquiry order and freeze order previously granted, thereby justifying the filing of a new petition for a freeze order.
• Grave Abuse of Discretion by RTC: The Republic argued that the RTC's determination of the absence of probable cause was tainted with grave abuse of discretion, ignoring what it characterized as the glaring existence of probable cause linking the subject bank deposits and investments to the fertilizer fund scam.

• Forum Shopping: Whether the Republic committed forum shopping in filing CA-G.R. AMLC No. 00024 before the CA.
• Grave Abuse of Discretion — Probable Cause for Bank Inquiry Order: Whether the RTC committed grave abuse of discretion in ruling that there exists no probable cause to allow an inquiry into the total of 76 deposits and investments of respondents.

• Forum Shopping: Yes. The Republic committed forum shopping because the second petition for a freeze order (CA-G.R. AMLC No. 00024) shared identity of parties, identity of rights asserted and relief sought, and identity of causes of action with the first petition (CA-G.R. AMLC No. 00014), such that any judgment in one would amount to res judicata in the other.
• Grave Abuse of Discretion — Probable Cause for Bank Inquiry Order: No. The RTC did not commit grave abuse of discretion in denying the application for a bank inquiry order, the AMLC having failed to present sufficient evidence establishing probable cause that the subject accounts were related to an unlawful activity.

• Forum Shopping: Forum shopping is committed in three ways: (1) filing multiple cases based on the same cause of action with the same prayer where the previous case remains unresolved (litis pendentia); (2) filing multiple cases based on the same cause of action with the same prayer where the previous case has been finally resolved (res judicata); and (3) filing multiple cases based on the same cause of action but with different prayers (splitting causes of action). All three elements of litis pendentia were present: (1) identity of parties — the Republic was petitioner in both, and the 24 accounts in CA-G.R. AMLC No. 00024 were part of the 31 accounts previously frozen in CA-G.R. AMLC No. 00014, with the same account holders named as respondents; (2) identity of rights asserted and relief sought, founded on the same facts — both petitions sought freeze orders against accounts believed related to the fertilizer fund scam, both highlighted the role of Senate Committee Report No. 54, and both were filed pursuant to the AMLC's investigative authority under R.A. 9160; and (3) identity such that any judgment in one would amount to res judicata in the other — the CA Resolution in CA-G.R. AMLC No. 00014 extending the freeze order until 20 December 2008 had attained finality, was rendered by a court with jurisdiction, was a judgment on the merits, and involved identity of parties, subject matter, and causes of action. The Republic's argument that Eugenio was a supervening event was rejected: supervening events refer to facts transpiring after judgment has become final, or new circumstances developing after finality, including matters parties were not aware of prior to or during trial. Eugenio was promulgated five months before CA-G.R. AMLC No. 00014 was filed, and it was precisely because of Eugenio that CA-G.R. AMLC No. 00014 was filed in the first place. The Republic's attempt to circumvent the six-month extension limit under Section 53 of A.M. No. 05-11-04-SC by allowing the prior freeze order to lapse and filing a new petition was an impermissible evasion of the rule.

• Grave Abuse of Discretion — Probable Cause for Bank Inquiry Order: Probable cause, as defined in Rule 10.2 of the Revised Rules and Regulations Implementing R.A. 9160, refers to facts and circumstances that would lead a reasonably prudent person to believe that an unlawful activity or money laundering offense has been committed and that the account sought to be examined is related to it. The power to determine probable cause is lodged in the trial court, which must exercise its own determinative function — not mechanically accept the AMLC's assertion. The RTC found the AMLC's evidence wanting: it consisted of only two pieces — Senate Committee Report No. 54 and the testimony of witness Thelma Espina. Senate committee reports stand on the same level as other evidence and are subject to judicial scrutiny; courts have discretion to accept or reject them, and no grave error could be ascribed to the RTC for refusing to give probative value to the report. The report provided a description of the alleged unlawful activity and named Bolante as the alleged mastermind, but the critical link — that Bolante was acting Chairman of LIVECOR — was rebutted by evidence that Bolante had ceased to be on LIVECOR's board of trustees 14 months before the suspicious transfers occurred. The COA Audit Report, which the RTC credited, showed that none of the ₱728 million fertilizer fund was released to LIVECOR, Molugan, or AGS. The RTC also noted that the transfers from LIVECOR to Molugan and AGS came from Senator Arroyo's ₱60 million PDAF. The AMLC had already been granted an ex parte bank inquiry order 15 months before Eugenio was promulgated, yet failed to develop additional evidence; the same evidence used in 2006 was still the evidence presented in 2008. When weighed against respondents' evidence, presented after notice and opportunity to contest pursuant to Eugenio, the AMLC's evidence was insufficient. The RTC's determination was not arbitrary, capricious, or whimsical, and grave abuse of discretion was not established.

• Forum Shopping — Committed in three ways: (1) filing multiple cases based on the same cause of action with the same prayer, where the previous case is still pending (litis pendentia); (2) filing multiple cases based on the same cause of action with the same prayer, where the previous case has been finally resolved (res judicata); and (3) filing multiple cases based on the same cause of action but with different prayers (splitting causes of action, ground is litis pendentia or res judicata). The Court applied this framework to hold that the Republic's second freeze order petition constituted forum shopping, as all elements of litis pendentia were present and the prior CA Resolution had attained finality, giving rise to res judicata.

• Elements of Litis Pendentia — (1) Identity of parties, or those representing the same interests in both actions; (2) identity of rights asserted and relief sought, with the relief founded on the same facts; and (3) identity of the two preceding particulars, such that any judgment rendered in one proceeding will, regardless of which party is successful, amount to res judicata in the other. The Court found all three present between CA-G.R. AMLC No. 00014 and CA-G.R. AMLC No. 00024.

• Requisites of Res Judicata — (1) The former judgment is final; (2) it is rendered by a court having jurisdiction over the subject matter and the parties; (3) it is a judgment or order on the merits; and (4) there is identity of parties, subject matter, and causes of action between the first and second actions. The CA Resolution extending the freeze order in CA-G.R. AMLC No. 00014 met all four requisites, barring the proceedings in CA-G.R. AMLC No. 00024.

• Supervening Events — Refer to facts which transpire after judgment has become final and executory, or to new circumstances which developed after judgment acquired finality, including matters which the parties were not aware of prior to or during trial as they were not yet in existence. The Court held that the promulgation and finality of Republic vs. Eugenio did not qualify as a supervening event because it was promulgated five months before the first freeze order petition was filed and was known to the parties throughout the proceedings.

• Probable Cause for Bank Inquiry Orders — Defined as facts and circumstances which would lead a reasonably discreet, prudent, or cautious person to believe that an unlawful activity and/or money laundering offense is about to be, is being, or has been committed, and that the account or monetary instrument sought to be examined is related to said activity. The trial court exercises a determinative — not mechanical — function in assessing probable cause; it cannot simply take the AMLC's word. The Court held the RTC did not gravely abuse its discretion where the AMLC's evidence was limited to a Senate committee report and derivative testimony, insufficient to link the accounts to the fertilizer fund scam.

• Six-Month Limit on Freeze Order Extensions — Under Section 53 of A.M. No. 05-11-04-SC, the original 20-day effectivity of a freeze order may be extended by the CA for good cause for a period not exceeding six months. The Court noted that the Republic sought to evade this limitation by allowing the extended freeze order in CA-G.R. AMLC No. 00014 to lapse and filing a new petition, which was impermissible.

• "In a clear illustration of the phrase, out of the frying pan and into the fire, the Republic vigorously resisted the application of forum shopping on the ground of litis pendentia, only to unwittingly admit that it had possibly committed forum shopping on the ground of res judicata." — This passage captures the Court's observation that the Republic's own argument against litis pendentia — that the prior case had attained finality — effectively conceded the presence of res judicata, the second mode of forum shopping.

• "The court receiving the application for inquiry order cannot simply take the AMLC's word that probable cause exists that the deposits or investments are related to an unlawful activity. It will have to exercise its own determinative function in order to be convinced of such fact." — This quotation from Republic vs. Eugenio, cited and reaffirmed in the decision, articulates the standard that the trial court must independently evaluate probable cause rather than defer to the AMLC's assertion.

• "As it stands, the evidence relied upon by the AMLC in 2006 was still the same evidence it used to apply for a bank inquiry order in 2008. Regrettably, this evidence proved to be insufficient when weighed against that presented by the respondents, who were given notice and the opportunity to contest the issuance of the bank inquiry order pursuant to Eugenio." — This passage encapsulates the Court's conclusion that the AMLC failed to develop its case despite having had access to a bank inquiry order for over a year before Eugenio was promulgated, and that the same evidence was inadequate once respondents were given the opportunity to contest.

• Chua vs. Metropolitan Bank and Trust Co., 613 Phil. 143 (2009) — Cited for the three ways forum shopping is committed. Applied as the controlling framework for determining whether the Republic's filing of a second freeze order petition constituted forum shopping.
• Quinsay vs. CA, 393 Phil. 838 (2000) — Cited by the CA for the proposition that forum shopping concurs not only when a final judgment in one case amounts to res judicata in another, but also when the elements of litis pendentia are present. The Supreme Court agreed with this formulation.
• Republic vs. Eugenio, 569 Phil. 98 (2008) — Central precedent holding that Section 11 of R.A. 9160, as then worded, did not authorize ex parte bank inquiry orders; notice to account holders was required. The promulgation and finality of this ruling drove the AMLC's shift to seeking freeze orders and was the basis for the Republic's supervening-event argument, which the Court rejected.
• Neri vs. Senate Committee on Accountability of Public Officers and Investigations, 586 Phil. 135 (2008) — Cited by the RTC for the principle that the Senate cannot assume the power reposed in prosecutorial bodies and courts to determine who are liable for a crime or illegal activity, supporting the RTC's refusal to accept Senate Committee Report No. 54 as conclusive.
• Ligot vs. Republic, 705 Phil. 477 (2013) — Cited for the definition of probable cause as the sufficiency of the relation between an unlawful activity and the property or monetary instrument, applied in evaluating the bank inquiry order application.
• Subido Pagente Certeza Mendoza and Binay Law Offices vs. CA, G.R. No. 216914, 6 December 2016 — Recently promulgated decision upholding the constitutionality of Section 11 of R.A. 9160 as amended by R.A. 10167, which restored the AMLC's authority to file ex parte applications for bank inquiry orders. Cited to note that the Eugenio ruling no longer applies insofar as it requires notice, due to the legislative amendment.
• Natalia Realty, Inc. vs. CA, 440 Phil. 1 (2002) — Cited for the definition of supervening events as facts transpiring after judgment becomes final, used to reject the Republic's supervening-event argument.
• Manotok Realty, Inc. vs. CLT Realty Development Corp., 565 Phil. 59 (2007) — Cited for the principle that Senate reports stand on the same level as other evidence and are subject to judicial scrutiny, supporting the RTC's discretion to reject Senate Committee Report No. 54.

• Section 11, Republic Act No. 9160 (Anti-Money Laundering Act of 2001), as amended — Governs the authority to inquire into bank deposits. As originally worded, it was construed in Eugenio as requiring notice to account holders before a bank inquiry order could issue. Upon enactment of R.A. 10167 on 18 June 2012, Section 11 was amended to allow ex parte applications for bank inquiry orders. The constitutionality of the amended provision was upheld in Subido vs. CA.
• Section 10, Republic Act No. 9160, as amended — Authorizes the Court of Appeals, upon ex parte application by the AMLC and upon determination of probable cause, to issue a freeze order effective for 20 days, extendible after summary hearing.
• Section 53, A.M. No. 05-11-04-SC (Rules of Procedure in Cases of Civil Forfeiture, Asset Preservation, and Freezing of Monetary Instruments) — Provides that a freeze order is effective for 20 days, and that the court may, for good cause, extend its effectivity for a period not exceeding six months. The Republic's attempt to circumvent this six-month limit by filing a new petition was held to be impermissible.
• Section 3(e), Republic Act No. 3019 (Anti-Graft and Corrupt Practices Act) — Penalizes causing undue injury to any party, including the Government, or giving unwarranted benefits through manifest partiality, evident bad faith, or gross inexcusable negligence. The AMLC identified this as one of the predicate offenses potentially committed in the fertilizer fund scam.
• Republic Act No. 7080 (Plunder Law) — Defines and penalizes the crime of plunder. The AMLC identified this as another potential predicate offense in the fertilizer fund scam.
• Rule 10.2, Revised Rules and Regulations Implementing R.A. 9160, as amended by R.A. 9194 — Defines probable cause for the issuance of a freeze order as facts and circumstances leading a reasonably prudent person to believe that an unlawful activity or money laundering offense has been committed and that the account is related to it. The Court applied this definition, supplemented by Ligot vs. Republic, in evaluating the bank inquiry order application.

Teresita J. Leonardo-De Castro (Associate Justice), Mariano C. Del Castillo (Associate Justice), Estela M. Perlas-Bernabe (Associate Justice), Alfredo Benjamin S. Caguioa (Associate Justice). No separate concurring opinions were noted.