Republic vs. Sandiganbayan

The inclusion of sequestered corporations in an ill-gotten wealth recovery complaint as instruments, repositories, or fruits of illegally acquired wealth — without formally impleading them as defendants — satisfies the "corresponding judicial action or proceeding" requirement under Section 26, Article XVIII of the 1987 Constitution, and a sequestration order signed by only one commissioner remains valid when issued prior to the promulgation of the PCGG Rules and Regulations requiring the authority of at least two commissioners.

The Presidential Commission on Good Government (PCGG) was created by Executive Order No. 1, promulgated on February 28, 1986, to assist the President in recovering ill-gotten wealth amassed by former President Ferdinand Marcos, his relatives, friends, and business associates. Executive Order No. 14 conferred on the Sandiganbayan exclusive and original jurisdiction over all cases of ill-gotten wealth and provided that technical rules of procedure and evidence shall not be strictly applied. Section 26, Article XVIII of the 1987 Constitution required that for sequestration orders issued before the Constitution's ratification, the corresponding judicial action or proceeding must be filed within six months from ratification, failing which the sequestration is deemed automatically lifted. The PCGG promulgated its Rules and Regulations on April 11, 1986, including Section 3 requiring the authority of at least two commissioners for the issuance of sequestration orders.

On March 19, 1986, pursuant to powers vested in it by the President under Executive Order No. 1, the PCGG issued a writ of sequestration against all assets, movable and immovable, of Provident International Resources Corporation and Philippine Casino Operators Corporation. The writ was signed "For The Commission" by then Commissioner Mary Concepcion Bautista. Among the properties of Provident International Resources Corporation were eleven parcels of land totaling 59,455 square meters, including a five-storey building later leased to the Philippine Tourism Authority as a duty-free shop.

On July 29, 1987, the Republic of the Philippines, through the Solicitor General, filed before the Sandiganbayan a complaint docketed as Civil Case No. 0021 against Edward T. Marcelo, Fabian C. Ver, Ferdinand E. Marcos, and Imelda R. Marcos for reconveyance, reversion, accounting, restitution, and damages. The complaint sought to recover alleged ill-gotten wealth from the named defendants. Among the corporations listed in the complaint as being held and/or controlled by defendant Marcelo, and among the assets apparently acquired illegally by the defendants, were the respondent corporations. The corporations were not, however, impleaded as parties-defendants in the original complaint.

On September 11, 1991, respondent corporations filed before the Sandiganbayan a petition for mandamus, docketed as Civil Case No. 0132, praying for the lifting of the writ of sequestration and the restoration of their sequestered assets, properties, records, and documents, on the ground that the PCGG had failed to file the appropriate judicial action against them within the period prescribed under Section 26, Article XVIII of the 1987 Constitution. On October 30, 1991, the complaint in Civil Case No. 0021 was amended to include both respondent corporations as parties-defendants.

On December 4, 1991, the Sandiganbayan issued the first assailed resolution, granting the respondent corporations' motion for judgment on the pleadings, declaring the writs of sequestration automatically lifted as of August 2, 1987, and ordering the PCGG to restore the corporations' assets, properties, records, and documents. The Sandiganbayan relied on PCGG vs. International Copra Export Corporation ("PCGG vs. Interco") and Republic vs. Sandiganbayan and Olivares ("Republic vs. Olivares"), which held that the mere listing or inclusion of corporations among properties allegedly amassed by individual party-defendants does not justify the failure to implead said corporations in a proper judicial action within the constitutional period. The PCGG filed a motion for reconsideration, which the Sandiganbayan denied on October 27, 1993, characterizing the motion as a mere rehash and additionally noting that the sequestration order had been signed by only one commissioner in violation of Section 3 of the PCGG Rules and Regulations.

• Proper Judicial Action: Petitioner contended that Civil Case No. 0021, filed on July 29, 1987, against Edward Marcelo et al. and later amended to implead respondent corporations, constituted the proper judicial action contemplated under Section 26, Article XVIII of the Constitution, warranting continuance of the sequestration.
• Piercing the Veil of Corporate Fiction: Petitioner maintained that the records bore prima facie evidence that respondent corporations, wholly owned and controlled by the individual defendants, were used to hide ill-gotten wealth, justifying application of the doctrine of piercing the veil of corporate fiction.
• Mootness of Non-Impleading: Petitioner asserted that the issue of non-impleading had been rendered moot and academic by the amendment of the complaint to include respondent corporations as parties-defendants.
• Action In Rem: Petitioner postulated that Civil Case No. 0021 was an action in rem or quasi in rem, the respondent corporations being the res or subject matter of the case.
• Validity of Single-Commissioner Signature: Petitioner averred that one signatory to the sequestration order complied with the PCGG Rules because the order was signed "For The Commission," and that during the organizational stage of the PCGG, the rule was that any commissioner could issue a sequestration order provided it had the conformity, verbal or written, of another commissioner, as reflected in the minutes of the PCGG meeting of October 15, 1987.
• Propriety of Certiorari: Petitioner invoked certiorari under Rule 65 as the proper remedy, given the public interest and urgency of the ill-gotten wealth recovery program.

• Wrong Remedy: Respondent corporations prayed for denial of the petition on the ground that petitioner failed to take the appropriate remedy, which should have been an appeal under Rule 45 rather than certiorari under Rule 65, since the petition did not raise a question of jurisdiction.
• Finality of Assailed Resolutions: Respondent corporations contended that Republic vs. Sandiganbayan, Lobregat, et al., which modified PCGG vs. Interco and Republic vs. Olivares, could not apply because the assailed Sandiganbayan resolutions had already become final and executory prior to the promulgation of that decision.
• Invalidity of Sequestration Order: Respondent corporations argued that the sequestration order signed by only one PCGG commissioner was null and void.

• Judicial Action Requirement: Whether a proper judicial action was filed against respondent corporations in compliance with, and within the period contemplated in, Section 26, Article XVIII of the Constitution.
• Validity of Sequestration Order: Whether the sequestration order issued on March 19, 1986 against respondent corporations was valid and effective despite having been signed by only one commissioner, contrary to the PCGG Rules and Regulations requiring the authority of at least two commissioners.
• Propriety of Certiorari: Whether certiorari under Rule 65 was the proper mode of appeal to assail the Sandiganbayan resolutions.

• Judicial Action Requirement: Yes. The listing of respondent corporations in Civil Case No. 0021 as instruments, repositories, or fruits of ill-gotten wealth constituted faithful compliance with Section 26, Article XVIII of the Constitution, pursuant to Republic vs. Lobregat.

• Validity of Sequestration Order: Yes. The sequestration order signed by one commissioner on March 19, 1986 was valid, the PCGG Rules requiring two-commissioner authority having been promulgated only on April 11, 1986 and not given retroactive effect.

• Propriety of Certiorari: Yes. Certiorari under Rule 65 was allowed as an exception to the general rule, the case involving purely a question of law, public interest, and urgency.

• Judicial Action Requirement: The Court found this issue settled by Republic vs. Lobregat, which consolidated twenty petitions presenting the same question: whether inclusion of sequestered corporations in ill-gotten wealth complaints as "dummies" or instruments of illegal acquisition — without formally impleading them — satisfies the constitutional requirement of filing the corresponding judicial action within six months. The Court ruled in the affirmative, explaining that corporations organized with ill-gotten wealth but not themselves guilty of misappropriation, fraud, or other illicit conduct are simply the res in the actions for recovery; there is in principle no cause of action against them and no ground to implead them as defendants. Judgments may be directed against the shares of stock shown to have been issued in consideration of ill-gotten wealth. Even where impleading might be proper, the omission is a mere procedural defect correctible by amendment at any stage of the proceedings, even on appeal. The instant petition fell squarely within Republic vs. Lobregat: respondent corporations were listed in the original complaint as having been illegally accumulated by the defendants in breach of public trust, and were subsequently impleaded by amended complaint. The Court clarified the apparent contradiction between Republic vs. Lobregat and the earlier Interco and Olivares rulings by reference to Republic vs. Sandiganbayan, Sipalay Trading Corporation and Allied Banking Corporation, which drew the critical distinction that in Interco and Olivares, the PCGG had failed to present even prima facie evidence of the alleged hidden ownership, whereas in the present case prima facie evidence justified the sequestration.

• Validity of Sequestration Order: The questioned sequestration order was issued on March 19, 1986, prior to the promulgation of the PCGG Rules and Regulations on April 11, 1986, which for the first time required the authority of at least two commissioners. The Court applied the fundamental rule that no statute, decree, ordinance, rule, or regulation shall be given retroactive effect unless explicitly so stated. No provision in the PCGG Rules expressly or impliedly gave them retroactive effect or abrogated previous writs issued before their promulgation. The Rules merely provided that they "shall be effective immediately," understood as upon promulgation. The Court distinguished this case from Republic vs. Sandiganbayan, Romualdez and Dio Island Resort, where the sequestration order was issued on April 14, 1986 — after the Rules took effect — by a task force head who was not even a commissioner, and where no prior prima facie determination had been made by the PCGG. In the present case, there was no question as to the presence of prima facie evidence justifying the sequestration, and the two-commissioner requirement simply did not exist at the time the order was issued.

• Propriety of Certiorari: While decisions of the Sandiganbayan are normally brought before the Supreme Court under Rule 45, certiorari under Rule 65 is allowed where the issue is purely one of law, where public interest is involved, and in case of urgency. The recovery of ill-gotten wealth is a matter of paramount public policy, and the Court emphasized that strong public policy should not be set at naught by technical rules of procedure or narrow constructions of constitutional provisions that frustrate their clear intent.

• Corporations as Res in Ill-Gotten Wealth Recovery Actions — Corporations organized with ill-gotten wealth but not themselves guilty of misappropriation, fraud, or other illicit conduct are the object or thing involved in the action — the res — and need not be impleaded as defendants. There is no cause of action against them; judgment may simply be directed against the shares of stock shown to have been issued in consideration of ill-gotten wealth. The Court applied this doctrine to hold that listing the respondent corporations in Civil Case No. 0021 as instruments or repositories of ill-gotten wealth satisfied the constitutional requirement of filing the corresponding judicial action.

• Non-Retroactivity of Rules and Regulations — No statute, decree, ordinance, rule, or regulation shall be given retrospective effect unless explicitly stated. Only penal laws favorable to the accused are given retroactive effect. The Court applied this principle to hold that the PCGG Rules promulgated on April 11, 1986, requiring two-commissioner authority for sequestration orders, could not invalidate a writ issued on March 19, 1986, before those Rules existed.

• Exception to Rule 45 Exclusivity for Sandiganbayan Appeals — While decisions of the Sandiganbayan are normally appealed under Rule 45, certiorari under Rule 65 is allowed where the issue is purely legal, public interest is involved, and urgency exists, or where appeal would be slow, inadequate, and insufficient. The Court applied this exception to entertain the petition despite the availability of appeal.

• Amendment to Implead Indispensable or Necessary Parties — The omission to implead necessary or indispensable parties is a mere technical defect curable at any stage of the proceedings, even after judgment, and amendments to implead them should be freely allowed. The Court relied on this doctrine to hold that even if impleading the corporations had been procedurally required, the defect was correctible by amendment, which was in fact done.

• "And as to corporations organized with ill-gotten wealth, but are not themselves guilty of misappropriation, fraud or other illicit conduct — in other words, the companies themselves are the object or thing involved in the action, the res thereof — there is no need to implead them either. Indeed, 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." — This passage, quoted from Republic vs. Lobregat, articulates the canonical formulation of the doctrine that sequestered corporations which are mere repositories of ill-gotten wealth are the res of the recovery action and need not be impleaded as defendants.

• "Basic is the rule that no statute, decree, ordinance, rule or regulation (and even policies) shall be given retrospective effect unless explicitly stated so." — This states the fundamental principle of prospectivity that the Court applied to uphold the validity of the sequestration order signed by one commissioner before the PCGG Rules requiring two-commissioner authority were promulgated.

• "Substantial justice to all parties, not mere legalisms or perfection of form, should now be relentlessly pursued. Eleven years have passed since the government started its search for and reversion of such alleged ill-gotten wealth. The definitive resolution of such cases on the merits is thus long overdue." — This passage reflects the Court's policy of setting aside technicalities in ill-gotten wealth cases and directing their resolution on the merits with all deliberate speed.

• Republic vs. Sandiganbayan, Lobregat, et al., 240 SCRA 376 (January 23, 1995) — Controlling precedent directly on point. The Court held that listing sequestered corporations in ill-gotten wealth complaints as instruments or repositories of illegally acquired wealth satisfies the judicial action requirement of Section 26, Article XVIII, without need of formally impleading them. The present case was held to fall squarely within this ruling.

• PCGG vs. International Copra Export Corporation ("PCGG vs. Interco"), G.R. No. 92755 (Resolutions dated October 2, 1990 and July 26, 1991) — Distinguished. The Court clarified that Interco ruled against the PCGG because there was no prima facie evidence that the alleged hidden owner held any stock in the corporation, unlike the present case where prima facie evidence justified the sequestration.

• Republic vs. Sandiganbayan and Olivares, 200 SCRA 530 (August 12, 1991) — Distinguished. The Court explained that the Olivares (PJI) case involved unsequestered shares of stock and the PCGG's failure to substantiate its theory of clandestine ownership, rendering it inapplicable to the present case.

• Republic vs. Sandiganbayan, Sipalay Trading Corporation and Allied Banking Corporation, G.R. Nos. 112708-09 (March 29, 1996) — Followed for its clarification of the apparent conflict between Lobregat and Interco/Olivares, drawing the critical distinction based on the presence or absence of prima facie evidence of hidden ownership.

• Republic vs. Sandiganbayan, Romualdez and Dio Island Resort, G.R. No. 88126 (July 12, 1996) — Distinguished. The sequestration order there was issued after the PCGG Rules took effect and by a non-commissioner task force head, with no prior prima facie determination by the PCGG, unlike the present case where the order predated the Rules and was signed by a commissioner.

• BASECO vs. PCGG, 150 SCRA 181 (May 27, 1987) — Cited for the basic requisites of a valid sequestration order: authority of at least two commissioners and a prima facie basis, issued upon the affirmation or complaint of an interested party or motu proprio when reasonable grounds exist.

• Section 26, Article XVIII (Transitory Provisions), 1987 Constitution — Provides that sequestration or freeze orders issued before the Constitution's ratification require the filing of the corresponding judicial action or proceeding within six months from ratification; otherwise the order is deemed automatically lifted. The Court held that listing respondent corporations in Civil Case No. 0021 as instruments and repositories of ill-gotten wealth constituted the "corresponding judicial action or proceeding" contemplated by this provision.

• Section 3, PCGG Rules and Regulations (promulgated April 11, 1986) — Requires that a writ of sequestration may be issued only upon the authority of at least two commissioners. The Court held this provision inapplicable to the March 19, 1986 sequestration order because the Rules were promulgated after the order was issued and were not given retroactive effect.

• Executive Order No. 1 (February 28, 1986) — Created the PCGG to assist the President in recovering ill-gotten wealth. The sequestration order against respondent corporations was issued pursuant to the powers vested by this issuance.

• Executive Order No. 14 — Conferred on the Sandiganbayan exclusive and original jurisdiction over all cases of ill-gotten wealth and provided that technical rules of procedure and evidence shall not be strictly applied.

Narvasa, C.J., Davide, Jr., Melo, and Francisco, JJ., concurred.