PCGG v. Sandiganbayan

G.R. No. 152500 (September 14, 2011)

SC upheld PCGG's sequestration of Tourist Duty Free Shops, stressing due process in asset recovery.

Facts:

The case involves the Presidential Commission on Good Government (PCGG) and the Tourist Duty Free Shops, Inc. (TDFSI), along with the Bank of America and Rizal Commercial Banking Corporation (RCBC). The background of the case traces back to the issuance of Presidential Decree No. 1193, which authorized TDFSI to establish and operate duty and tax-free stores in the Philippines. Following the 1986 EDSA Revolution, the PCGG issued a Sequestration Order against TDFSI to prevent the disposition of its assets, citing the need to recover ill-gotten wealth associated with former President Ferdinand Marcos.

On March 11, 1986, the PCGG issued a Sequestration Order that restricted TDFSI from entering into new contracts, making disbursements, or withdrawing funds, except for the payment of salaries. A Freeze Order was also issued to RCBC to prevent any withdrawals from TDFSI's accounts. In response, TDFSI filed a petition for certiorari and injunction against the enforcement of the Sequestration Order, which was initially dismissed by the Supreme Court but later allowed to be re-filed in the Sandiganbayan.

In December 1991, TDFSI filed a complaint for injunction and specific performance against the PCGG and the banks, arguing that the Sequestration Order was invalid due to procedural deficiencies, including the lack of a proper investigation and the fact that it was signed by only one commissioner. The Sandiganbayan initially dismissed TDFSI's complaint but later reversed this decision, allowing the case to proceed.

On July 26, 2001, the Sandiganbayan granted TDFSI's motion for a writ of preliminary mandatory and prohibitory injunction, effectively lifting the Sequestration Order pending further proceedings. The PCGG contested this decision, arguing that the Sandiganbayan acted with grave abuse of discretion and that the Sequestration Order was valid.

Legal Issues:

  1. Whether the Sandiganbayan acted arbitrarily and committed grave abuse of discretion in issuing the writ of preliminary mandatory and prohibitory injunction against the PCGG's Sequestration Order.
  2. The validity of the Sequestration Order issued by the PCGG, particularly regarding procedural compliance with the relevant laws and regulations.
  3. The implications of res judicata, litis pendentia, and the law of the case in the context of the ongoing litigation.

Arguments:

  • PCGG's Arguments:

    • The Sandiganbayan's issuance of the injunction contravened the Supreme Court's prior resolution affirming the validity of the Sequestration Order.
    • The funds of TDFSI constituted ill-gotten wealth, and the injunction would undermine the PCGG's mandate to recover such assets.
    • The Sandiganbayan's decision disregarded established legal principles, including the necessity of a clear legal right and the potential for irreparable harm to the state.

  • TDFSI's Arguments:

    • The Sequestration Order was invalid due to procedural violations, including the lack of a proper investigation and the fact that it was signed by only one commissioner.
    • The continued enforcement of the Sequestration Order would cause irreparable harm to TDFSI, preventing it from conducting business and leading to lost opportunities.
    • The absence of a pending case against TDFSI for the recovery of ill-gotten wealth meant that the Sequestration Order should be lifted.

Court's Decision and Legal Reasoning:

The Supreme Court granted the petition of the PCGG, setting aside the Sandiganbayan's resolutions that had issued the writ of preliminary mandatory and prohibitory injunction. The Court held that the Sandiganbayan had gravely abused its discretion in issuing the injunction, as the evidence presented by TDFSI did not sufficiently establish a clear legal right that warranted such relief.

The Court emphasized that the Sequestration Order was issued in accordance with the PCGG's mandate to recover ill-gotten wealth and that the procedural deficiencies cited by TDFSI did not invalidate the order, particularly since it was issued before the promulgation of the PCGG's rules requiring multiple commissioners' signatures. The Court also clarified that the dismissal of the earlier case did not constitute a final judgment on the merits, allowing TDFSI to re-file its complaint.

The Court reiterated the importance of the PCGG's role in preserving assets that may be deemed ill-gotten and highlighted that the issuance of injunctions against such orders should be approached with caution, given the potential implications for the state's recovery efforts.

Significant Legal Principles Established:

  1. The validity of Sequestration and Freeze Orders issued by the PCGG prior to the adoption of its rules cannot be invalidated based solely on procedural grounds if the orders were issued in good faith and within the scope of the PCGG's authority.
  2. The principles of res judicata, litis pendentia, and the law of the case do not apply when a case is dismissed without prejudice, allowing for re-litigation of the issues in a subsequent action.
  3. The issuance of a writ of preliminary injunction requires a clear showing of a legal right and the necessity to prevent irreparable harm, which must be substantiated by evidence.