Virata vs. Sandiganbayan

The expanded Second Amended Complaint in Civil Case No. 0035 sufficiently states causes of action against petitioners, the PCGG retains authority to file and prosecute ill-gotten wealth cases notwithstanding the 1987 Constitution, the PCGG has not become functus officio, and the PCGG Charter does not violate the equal protection clause or constitute a bill of attainder or an ex post facto law; no preliminary investigation is required in a purely civil suit for recovery of ill-gotten wealth.

Cesar E.A. Virata, former Prime Minister under the Marcos administration, and Placido L. Mapa, Jr., a former ranking government official, were among forty-five defendants impleaded in Civil Case No. 0035 before the Sandiganbayan — a suit for reconveyance, reversion, accounting, restitution, and damages filed by the Republic through the Presidential Commission on Good Government (PCGG), assisted by the Solicitor General, against Benjamin (Kokoy) Romualdez and others for recovery of ill-gotten wealth allegedly accumulated during Ferdinand E. Marcos's twenty-year rule. The PCGG was created under Executive Order No. 1, issued on February 28, 1986, pursuant to the revolutionary government's authority under Proclamation No. 3 (the Freedom Constitution), with the mandate to recover ill-gotten wealth amassed by the former President, his immediate family, relatives, and close associates. Executive Orders Nos. 2 and 14 further defined and empowered the PCGG to investigate and prosecute cases before the Sandiganbayan. The 1987 Constitution, while imposing deadlines for sequestration and freeze orders, did not divest the PCGG of its investigatory and prosecutorial powers.

On July 31, 1987, the Republic of the Philippines, represented by the PCGG and assisted by the Solicitor General, filed a complaint with the Sandiganbayan against Benjamin (Kokoy) Romualdez and forty-four others for the recovery of ill-gotten wealth allegedly acquired in flagrant breach of trust and fiduciary obligations as public officers during Ferdinand E. Marcos's twenty-year rule from December 30, 1965 to February 25, 1986. The complaint alleged that the defendants, acting singly and collectively and in unlawful concert with one another, engaged in misappropriation and theft of public funds, plunder of the nation's wealth, extortion, blackmail, bribery, embezzlement, and other acts of corruption. The complaint was docketed as Civil Case No. 0035 and underwent three amendments: the Amended Complaint on August 20, 1987, the Second Amended Complaint on November 4, 1987, and the expanded Second Amended Complaint on January 20, 1988, which impleaded additional co-defendants including Jose F.S. Bengzon, Jr., Jose Vicente Jimenez, Amando Faustino, Jr., Leonardo C. Cruz, Eugenia Munoz, Rex Drilon, Jose Mantecon, and Kurt Bachmann, Jr.

The expanded Second Amended Complaint alleged under the heading "The Parties" that petitioners Virata and Mapa, together with other co-defendants, were dummies, nominees, or agents of the Marcoses and the Romualdezes for having allowed themselves to be incorporators, directors, board members, and/or stockholders of corporations beneficially held and/or controlled by said defendants. Under "General Averments of Defendants' Illegal Acts," the complaint charged that Ferdinand E. Marcos, together with other defendants acting singly or collectively and in unlawful concert, embarked upon a systematic plan to accumulate ill-gotten wealth through, among others, massive and unlawful withdrawal of funds from the National Treasury and other financial institutions, confiscation and appropriation of large private enterprises, conversion of government-owned and controlled corporations into private enterprises, awarding of disadvantageous contracts, misappropriation of government financial institution funds, raiding of government banking institutions, extortion and receipt of improper payments, establishment of monopolies, and sale of government property under disadvantageous terms.

Under "Specific Averments of Defendants' Illegal Acts," the complaint charged that Virata actively collaborated in giving MERALCO undue advantage by reducing the electric franchise tax from 5% to 2% of gross receipts and the tariff duty on fuel oil imports by public utilities from 20% to 10%; collaborated in securing approval of the so-called Year Program for the Extension of MERALCO's Services to Areas Within the 60-Kilometer Radius of Manila, which required government capital investment amounting to millions of pesos; and collaborated in the manipulation of the formation of Erectors Holdings, Inc. without infusing additional capital solely to make it assume the obligation of Erectors Incorporated with Philguarantee in the amount of ₱527,387,440.71. Mapa, for his part, was charged under the general averment that he acted as a dummy, nominee, and/or agent by allowing himself to be used as an instrument in accumulating ill-gotten wealth or to be an incorporator, director, or member of corporations beneficially held and/or controlled by the Marcoses and the Romualdezes. The complaint set forth five causes of action: breach of public trust, abuse of right and power, unjust enrichment, accounting, and liability for damages.

Petitioners filed separate motions to dismiss the expanded complaint before the Sandiganbayan, raising seven grounds including failure to state a cause of action, lack of PCGG authority, the PCGG having become functus officio, and unconstitutionality of the PCGG Charter as violative of equal protection, a bill of attainder, and an ex post facto law, as well as denial of due process for absence of preliminary investigation. The Sandiganbayan denied the motions to dismiss on October 28, 1988, and denied the motions for reconsideration on January 20, 1989, on the ground that they were mere repetitions of prior arguments. Petitioners thereafter separately filed the instant petitions for certiorari and prohibition with the Supreme Court.

• Sufficiency of Cause of Action: Petitioners argued that the Sandiganbayan acted without or in excess of jurisdiction or with grave abuse of discretion in finding that the complaint sufficiently states a cause of action against petitioner Virata, maintaining that the allegations were mere general conclusions and inferences unsupported by statements of ultimate facts.
• PCGG Authority to File and Prosecute: Petitioners contended that the PCGG and the Solicitor General lacked authority to file and prosecute the complaint, asserting that the 1987 Constitution vests such authority upon the Office of the Tanodbayan.
• PCGG as Functus Officio: Petitioners claimed that the PCGG had become functus officio because the persons originally named in Executive Order No. 1 to compose it had long ceased to be members thereof.
• Equal Protection: Petitioners argued that the PCGG Charter constitutes discriminatory legislation violative of the equal protection clause of the 1987 Constitution.
• Bill of Attainder: Petitioners maintained that the PCGG Charter is unconstitutional and void as a bill of attainder.
• Ex Post Facto Law: Petitioners asserted that the PCGG Charter is unconstitutional as an ex post facto law.
• Due Process: Petitioners argued that Virata was denied due process of law because no preliminary investigation, with prior notice and opportunity to be heard, was conducted by the authorized governmental agency.

• Nature of the Action: Respondent countered that the case is a purely civil suit for recovery of ill-gotten wealth filed pursuant to Executive Orders Nos. 1, 2, and 14, completely separate and distinct from proceedings under Republic Act No. 1379, and therefore no preliminary investigation similar to criminal cases was required.
• Sufficiency of Cause of Action: Respondent argued that the expanded complaint contained five causes of action based on both general and specific averments of defendants' illegal acts, and that on a motion to dismiss for failure to state a cause of action, the truth of all facts well pleaded is hypothetically admitted.
• PCGG Authority: Respondent maintained that the PCGG's power to file and prosecute cases was confirmed by the 1987 Constitution and sustained by the Supreme Court in multiple prior decisions.
• Constitutionality of PCGG Charter: Respondent argued that a reasonable standard or classification exists, that sequestration and freeze orders are mere provisional remedies, that no penal or criminal taint is imparted to the conduct described, and that there is no divestment of title over property seized.

• Sufficiency of Cause of Action: Whether the expanded Second Amended Complaint sufficiently states a cause of action against petitioners.
• PCGG Authority: Whether the PCGG and the Solicitor General have the authority to file and prosecute the complaint notwithstanding the provisions of the 1987 Constitution on the Office of the Tanodbayan.
• Functus Officio: Whether the PCGG has become functus officio.
• Equal Protection: Whether the PCGG Charter constitutes discriminatory legislation violative of the equal protection clause.
• Bill of Attainder: Whether the PCGG Charter is unconstitutional as a bill of attainder.
• Ex Post Facto Law: Whether the PCGG Charter is unconstitutional as an ex post facto law.
• Due Process: Whether petitioner Virata was denied due process by the absence of a preliminary investigation.

• Sufficiency of Cause of Action: Yes. The expanded complaint sufficiently states viable causes of action, the essential elements — a legal right of the plaintiff, a correlative obligation of the defendant, and an act or omission violative of said right — being present in the allegations.
• PCGG Authority: Yes. The PCGG's power to file and prosecute all cases investigated by it under Executive Orders Nos. 1, 2, and 14 remains in full force and effect and was not taken away by the 1987 Constitution.
• Functus Officio: No. The PCGG never became functus officio; an office is separate and distinct from the holder thereof, and Executive Order No. 1 created the Commission as an institution, not merely designated its original members.
• Equal Protection: No. The PCGG Charter does not violate the equal protection clause; there is a valid and reasonable basis for the classification.
• Bill of Attainder: No. The executive orders cannot reasonably be construed as a determination or declaration of guilt, and no punishment is inflicted by them; judgment of guilt is to be handed down by the Sandiganbayan.
• Ex Post Facto Law: No. The PCGG Charter does not alter the legal rules of evidence or the quantum of proof required for an adverse judgment; the plaintiff's burden of preponderance of evidence in civil cases and proof beyond reasonable doubt in criminal cases remains unchanged.
• Due Process: No. The case is a civil suit, not a criminal case; accordingly, no previous inquiry similar to preliminary investigation in criminal cases need be conducted.

• Sufficiency of Cause of Action: The essential elements of a cause of action are a legal right of the plaintiff, a correlative obligation of the defendant, and an act or omission of the defendant violative of said legal right. The test of sufficiency is whether, admitting the facts alleged, the court could render a valid judgment in accordance with the prayer. On a motion to dismiss for failure to state a cause of action, the truth of all facts well pleaded is hypothetically admitted, and if the court doubts the truth of the facts averred, it must not dismiss the complaint but require an answer and proceed to hear the case on the merits. The expanded complaint contains five causes of action based on both general and specific averments of defendants' illegal acts, including breach of public trust, abuse of right and power, unjust enrichment, accounting, and liability for damages. Any ambiguity or vagueness in the pleading is not a ground for dismissal but for a bill of particulars.

• PCGG Authority: Sections 1 and 2 of Executive Order No. 14, enacted on May 8, 1986, empower the PCGG, with the assistance of the Solicitor General, to file and prosecute all cases investigated by it under Executive Orders Nos. 1 and 2, and to file all such cases with the Sandiganbayan. The 1987 Constitution did not divest the PCGG of this power but merely fixed a deadline for the exercise of its authority to issue sequestration or freeze orders and provided safeguards for their issuance. The Constitution's provisions on the Ombudsman do not make the power of investigation exclusive; rather, the Ombudsman's authority is concurrent with other similarly authorized agencies, including the PCGG. Section 15(11) of Republic Act No. 6770, which gives the Ombudsman power to investigate ill-gotten wealth amassed after February 25, 1986, is a tacit recognition that the PCGG's authority over ill-gotten wealth amassed before that date is maintained. This continuing power has been sustained in multiple decisions including BASECO vs. PCGG, PCGG vs. Peña, and Cojuangco, Jr. vs. PCGG.

• Functus Officio: The claim that the PCGG became functus officio because its original members had ceased to serve is groundless. An office is separate and distinct from the holder thereof. Executive Order No. 1 expressly created a Commission — "There is hereby created a Commission to be known as the Presidential Commission on Good Government" — and the departure of its original members does not dissolve the institution itself.

• Equal Protection: The constitutionality of laws is presumed, and to justify nullification, there must be a clear and unequivocal breach of the Constitution, not a doubtful or argumentative implication. Petitioners failed to rebut the presumption of constitutionality. A valid and reasonable basis for the classification exists: persons similarly situated are charged and accorded due process; sequestration, freeze/hold orders, and provisional takeover are mere provisional remedies applicable generally to unearthed instances of ill-gotten wealth; there is no preclusion of enactments imparting penal or criminal taint to conduct bereft of such character; and there is no divestment of title over property seized. The imperative need for the Government to create a commission to recover ill-gotten wealth amassed by the former President, his immediate family, relatives, and close associates furnishes a reasonable classification.

• Bill of Attainder: A bill of attainder is a legislative act which inflicts punishment without judicial trial, its essence being the substitution of a legislative for a judicial determination of guilt. Nothing in the executive orders can reasonably be construed as a determination or declaration of guilt. On the contrary, the executive orders make clear that any judgment of guilt is to be handed down by a judicial tribunal — the Sandiganbayan — upon complaint filed and prosecuted by the PCGG. No punishment is inflicted by the executive orders. The executive orders may not, therefore, be regarded as a bill of attainder.

• Ex Post Facto Law: The claim that the PCGG Charter is an ex post facto law is untenable because nothing has been altered in terms of the quantum of proof required for an adverse judgment. For both civil and criminal cases covered by the PCGG Charter, the plaintiff's burden to establish a preponderance of evidence in civil cases and proof beyond reasonable doubt in criminal cases has not been altered or modified.

• Due Process: The challenged case is a civil suit, not a criminal case. It is completely separate and distinct from the proceedings contemplated in Republic Act No. 1379. Accordingly, no previous inquiry similar to preliminary investigation in criminal cases need be conducted. The requirements of due process and fairness — due notice, hearing, and opportunity to adduce evidence — are matters involved prior to the filing of the complaint, since such filing connotes that a prima facie case had been found and determined by the PCGG in accordance with its Rules and Regulations promulgated on April 11, 1986.

• Hypothetical Admission in Motion to Dismiss — In a motion to dismiss based on failure to state a cause of action, the question is the sufficiency of the allegations in the complaint itself; the truth of the facts alleged is hypothetically admitted. The test is whether, admitting the facts alleged, the court could render a valid judgment in accordance with the prayer. If the court doubts the truth of the facts averred, it must not dismiss the complaint but require an answer and proceed to hear the case on the merits. The Court applied this doctrine to hold that the expanded complaint's allegations, if hypothetically admitted, sufficiently stated causes of action.

• Sufficiency of Cause of Action — The essential elements of a cause of action are: (1) a legal right of the plaintiff, (2) a correlative obligation of the defendant, and (3) an act or omission of the defendant violative of said legal right. The Court applied this three-element test to the expanded complaint and found all elements present.

• Presumption of Constitutionality — The constitutionality of laws is presumed. To justify nullification, there must be a clear and unequivocal breach of the Constitution, not a doubtful or argumentative implication. A law shall not be declared invalid unless the conflict with the Constitution is clear beyond a reasonable doubt. The Court relied on this presumption to sustain the PCGG Charter against challenges based on equal protection, bill of attainder, and ex post facto law.

• Bill of Attainder — A bill of attainder is a legislative act which inflicts punishment without judicial trial. Its essence is the substitution of a legislative for a judicial determination of guilt. The Court held that the PCGG Charter is not a bill of attainder because it does not determine guilt or inflict punishment; guilt is to be adjudicated by the Sandiganbayan upon complaint by the PCGG.

• Distinction Between Office and Holder — An office is separate and distinct from the holder thereof. The Court applied this principle to reject the claim that the PCGG became functus officio upon the departure of its original members, since Executive Order No. 1 created the Commission as an institution.

• Concurrent Investigatory Authority — The Ombudsman's power of investigation under the 1987 Constitution is not exclusive but concurrent with other similarly authorized agencies of the government, including the PCGG. The Court applied this principle to hold that the 1987 Constitution did not repeal the PCGG's power to investigate and conduct preliminary investigations of ill-gotten wealth cases.

• "It is a well-settled rule that in a motion to dismiss based on the ground that the complaint fails to state a cause of action, the question submitted to the court for determination is the sufficiency of the allegations in the complaint itself. Whether these allegations are true or not is beside the point, for their truth is hypothetically admitted. The issue rather is: admitting them to be true, may the court render a valid judgment in accordance with the prayer in the complaint? ... So rigid is the norm prescribed that if the court should doubt the truth of the facts averred, it must not dismiss the complaint but require an answer and proceed to hear the case on the merits." — This passage articulates the controlling standard for testing the sufficiency of a complaint on a motion to dismiss, and is the ratio decidendi for the Court's ruling that the expanded complaint stated valid causes of action.

• "Neither will this Court sustain the theory that the executive orders in question are a bill of attainder. A bill of attainder is a legislative act which inflicts punishment without judicial trial. Its essence is the substitution of a legislative for a judicial determination of guilt." — This passage defines the doctrine of bill of attainder as applied to executive issuances creating the PCGG, and is the canonical formulation relied upon to reject the petitioners' constitutional challenge.

• "The power of the PCGG to file and prosecute, with the assistance of the Solicitor General, all cases investigated by it pursuant to Executive Order No. 14, in relation to Executive Orders No. 1 and No. 2, remains in full force and effect. It was not taken away by the provisions of the 1987 Constitution on the Tanodbayan." — This passage states the Court's holding on the continuing authority of the PCGG notwithstanding the 1987 Constitution, a central issue in the case.

• "The constitutionality of laws is presumed. To justify nullification of a law, there must be a clear and unequivocal breach of the Constitution, not a doubtful or argumentative implication; a law shall not be declared invalid unless the conflict with the Constitution is clear beyond a reasonable doubt." — This passage restates the fundamental presumption of constitutionality and the standard for judicial review of legislation, applied to reject all constitutional challenges to the PCGG Charter.

• Bataan Shipyard & Engineering Co., Inc. (BASECO) vs. PCGG, 150 SCRA 181 — Controlling precedent sustaining the constitutionality of the PCGG Charter and its authority to file and prosecute cases; followed and relied upon extensively in the decision to reject challenges based on bill of attainder, equal protection, and PCGG authority.
• PCGG vs. Peña, 159 SCRA 566 (1988) — Controlling precedent confirming the ample powers and authority vested in the PCGG by the President under the Freedom Constitution and the 1987 Constitution; followed.
• Cojuangco, Jr. vs. PCGG, G.R. Nos. 92319-20, October 2, 1990, 190 SCRA 226 — Followed for the proposition that the PCGG's power of investigation includes the authority to conduct preliminary investigation, and that the Ombudsman's investigatory power is concurrent, not exclusive.
• Adamos vs. J.M. Tuason & Co., Inc., 25 SCRA 529 — Followed for the rule on hypothetical admission of facts in a motion to dismiss for failure to state a cause of action.
• Militante vs. Edrosolano, 39 SCRA 473 — Followed for the prescription of the proper judicial attitude of utmost care and circumspection in passing upon a motion to dismiss on the ground of absence of cause of action.
• Roman Cruz vs. Sandiganbayan, G.R. No. 94595, February 26, 1991 — Followed for sustaining the PCGG's continuing power.
• Yu Cong Eng vs. Trinidad, 47 Phil. 385 — Cited for the principle that the presumption is always in favor of constitutionality and that to doubt is to sustain.

• Executive Order No. 1 (February 28, 1986) — Created the Presidential Commission on Good Government with the mandate to recover ill-gotten wealth amassed by the former President, his immediate family, relatives, and close associates. Applied as the foundational charter of the PCGG, establishing its institutional existence separate from its original members.
• Executive Order No. 2 (March 12, 1986) — Defined the scope of the PCGG's authority regarding sequestration and recovery of ill-gotten wealth. Applied alongside Executive Order No. 1 as part of the PCGG Charter.
• Executive Order No. 14, Sections 1 and 2 (May 8, 1986) — Empowered the PCGG, with the assistance of the Solicitor General, to file and prosecute all cases investigated by it, and to file all such cases with the Sandiganbayan, which shall have exclusive and original jurisdiction thereof. Applied as the direct statutory basis for the PCGG's authority to file and prosecute Civil Case No. 0035.
• Section 26, Article XVIII, 1987 Constitution — Maintained the PCGG's authority to issue sequestration or freeze orders for not more than eighteen months after ratification of the Constitution, without revoking its power of investigation. Applied to show that the Constitution did not divest the PCGG of its prosecutorial powers.
• Section 15, Article XI, 1987 Constitution — Provides that the right of the State to recover properties unlawfully acquired by public officials or employees shall not be barred by prescription, laches, or estoppel. Cited as constitutional recognition of the State's right to recover ill-gotten wealth.
• Section 13(1), 1987 Constitution — Vests in the Ombudsman the right and power to investigate any act or omission of any public official which appears to be illegal, unjust, improper, or inefficient. Applied to show that this power is general and concurrent, not exclusive, and therefore did not repeal the PCGG's authority.
• Section 15(1), Republic Act No. 6770 — Gives the Ombudsman primary jurisdiction over cases cognizable by the Sandiganbayan, but such authority is concurrent with other investigatory agencies including the PCGG. Applied to confirm the PCGG's continuing investigatory authority.
• Articles 19, 20, and 21, Civil Code of the Philippines — Cited in the complaint's second cause of action for abuse of right and power. Referenced as the legal basis for the complaint's allegations of abuse of right.

Fernan, C.J., Cruz, Paras, Padilla, Griño-Aquino, Medialdea, and Regalado, JJ., concurred in full with the majority opinion. Narvasa, J., took no part. Melencio-Herrera, J., was on leave.

Feliciano, J., concurred with the majority's conclusions on all points except Part A (sufficiency of cause of action), as to which he dissented, adopting the reasoning of Justice Gutierrez that the general averments constituted mere conclusions of law and mixed fact and law, and that the specific averments naming Virata and Mapa, even if hypothetically admitted, would not justify judgment against them.

• Gutierrez, Jr., J. — Dissented in full, voting to grant the petitions. The dissent argued that the complaints, insofar as they referred to Virata and Mapa, consisted of mere inferences and general conclusions that could not give rise to any cause of action. The specific averments against Virata — collaboration in reducing MERALCO's franchise tax (effected through P.D. 551, applicable to all electric franchise grantees and sustained by the Court in Philippine Consumer Foundation, Inc. vs. Board of Energy and Meralco), collaboration in the MERALCO expansion program (studied and endorsed by the entire Marcos Cabinet and continuing under the Aquino administration), and alleged involvement in the formation of Erectors Holdings, Inc. (supported only by innuendo and speculation) — were insufficient to state ultimate facts showing a legal causal relation. As to Mapa, the sole allegation was that he acted as a dummy by being an incorporator or director of unnamed corporations controlled by the Marcoses and Romualdezes, which was a conclusion unsupported by any statement of ultimate facts and without identification of the corporations involved. The dissent invoked Salonga vs. Cruz Paño, 134 SCRA 438 (1985), for the principle that a person's right to be free from unwarranted and vexatious prosecution must be respected, and argued that the inclusion of Virata and Mapa with 43 other defendants constituted oppressive harassment rather than legitimate prosecution, validating a dangerous political act by lesser functionaries.

• Feliciano, J. — Concurred with the majority on all issues except Part A (sufficiency of cause of action), as to which he dissented. Justice Feliciano adopted the reasoning of Justice Gutierrez that the "General Averments of Defendants' Illegal Acts" constituted general conclusions, some of law and some of mixed fact and law, and that the "Specific Averments" naming Virata and Mapa were defective for failure to state a cause of action, in that the averments, if hypothetically admitted as true, would nonetheless not justify the trial court in rendering judgment against them. He voted to grant the petitions for certiorari and prohibition on this ground.