Philippine Supreme Court Jurisprudence > Year 2001 > March 2001 Decisions > G.R. No. 142476 March 20, 2001 - REPUBLIC OF THE PHIL. v. SANDIGANBAYAN:

The issue in the petition is whether or not the Republic of the Philippines may withdraw funds derived from the sale of an erroneously sequestered aircraft and ordered by this Court to be deposited in escrow for the benefit of the person who may be legally entitled to the funds.chanrob1es virtua1 1aw 1ibrary

Before us is the petition for certiorari and mandamus under Section 65 of the 1997 Rules of Procedure, as amended, filed by the Republic of the Philippines (Republic) assailing the Resolution of the Sandiganbayan dated September 3, 1999 in Civil Case No. 0033, "Republic of the Philippines v. Eduardo M. Cojuangco, Jr., Et. Al." and its Resolution dated February 17, 2000.

On July 31, 1987, petitioner Republic and the Presidential Commission on Good Government (PCGG) filed with respondent Sandiganbayan the said Civil Case No. 0033 for reconveyance, reversion, accounting, restitution and damages against Eduardo Cojuangco, Jr. and 60 other defendants. On the strength of this complaint, the PCGG issued several sequestration orders, one of which covers an aircraft, more particularly described as follows:chanrob1es virtual 1aw library

Avions Dassault — Breguet Falcon 50

Jet Model — 1982

Manufacturer’s Serial No. 082

Cert. of Reg. No. RP-C754

The records show that:chanrob1es virtual 1aw library

1. The Falcon jet was leased by the United Coconut Chemicals Inc. (Unichem) from Faysound Ltd., a company in the United States;

2. The lease over the aircraft lapsed in 1987, at which time the aircraft should have been returned by Unichem to Faysound Ltd., its owner-lessor;

3. In Civil Case No. 0033, Cojuangco or any of the defendants has not claimed ownership or interest in the Falcon jet;

4. Unichem has not been sequestered. Only the shares of Cojuangco in Unichem were sequestered; and

5. But no one, not even the owner, Faysound Ltd., came forward or questioned before the Sandiganbayan the legality of PCGG’s sequestration of the aircraft.

On March 20, 1989, or two (2) years after the lease of the Falcon Falcon jet expired, the PCGG filed with the Sandiganbayan a "Motion For Authority To Sell Sequestered Aircraft Pending Litigation" on the ground that it is fast deteriorating. The Sandiganbayan, in its Resolution dated May 18, 1989, denied PCGG’s motion, holding that it found "no justification prima facie or otherwise . . . for the seizure from the lessee." Forthwith, the PCGG filed with this Court a petition for certiorari (G.R. No. 88336) alleging in the main that the Sandiganbayan acted with grave abuse of discretion in denying its motion to sell the aircraft and praying that the Resolution of May 18, 1989 be nullified. On June 6, 1989, this Court issued a temporary restraining order directing the Sandiganbayan to cease and desist from enforcing its assailed May 18, 1989 Resolution. This TRO aimed to "prevent the Sandiganbayan from taking further actions proceeding upon or pursuant to its assumption that the airplane has been unlawfully sequestered and should not be in the custody of the PCGG, since that was the bone of contention to be resolved at that posture of the case."cralaw virtua1aw library

Relying on the temporary restraining order issued by this Court, the PCGG, on September 28, 1989, sold the aircraft to Walter Fuller Aircraft, Inc., (Fuller Aircraft), a US corporation, for US $7,138,168.65 which was deposited in escrow with the PNB. 1 The sale was without authority from the Sandiganbayan.chanrob1es virtua1 1aw 1ibrary

On December 26, 1990, the Supreme Court en banc dismissed PCGG’s petition in G.R. No. 88336, now in 192 SCRA 743, holding that "the decision to sell the aircraft is not within the limited administrative powers of the PCGG but requires the sanction of the Sandiganbayan which can grant or withhold the same in the exercise of sound discretion and on the basis of the evidence before it." The dispositive portion of this Court’s Decision reads:chanrob1es virtual 1aw library

‘WHEREFORE, the petition at bar is hereby DISMISSED. The PCGG is hereby ordered to deposit the proceeds of the sale of the subject aircraft under a special time deposit with the Philippine National Bank for the account of the Sandiganbayan in escrow for the person or persons, natural or juridical, who may be adjudged lawfully entitled thereto. The Solicitor General is also ordered to submit to this Court, within ten (10) days from notice hereof, certified true copies of the bill of the sale and all other pertinent documents regarding the sale of said aircraft to Walter Fuller Aircraft, Inc." 2

According to petitioner Republic, the Certificate of Time Deposit No. 463109 dated July 28, 1999 shows that as of that date, the amount of US$8,568,905.55 was deposited with the PNB for the account of the Sandiganbayan in trust for the beneficial owner. 3

Meanwhile, Faysound Ltd., filed with the District Court of Arkansas in the United States an action (No. LR-C-89-834) to recover the Falcon jet from Fuller Aircraft, the buyer in the 1989 PCGG sale.

In a judgment dated October 29, 1990, the District Court ordered that title to the Falcon jet be returned by Fuller Aircraft to Faysound, Ltd., thus:jgc:chanrobles.com.ph

"Pursuant to the Memorandum Opinion filed contemporaneously herewith, summary judgment is hereby granted in favor of plaintiff Faysound Limited. On the motion for summary judgment filed by defendant Walter Fuller Aircraft Sales, Inc., the same is hereby denied and judgment on said motion is rendered in favor of plaintiff Faysound Limited.

In conformity with this ruling, title to the Falcon 50, which is the subject of this litigation, is vested in the plaintiff Faysound Limited free and clear of any and all encumbrances save for the costs of any repairs made on said plane by the Falcon Jet Corporation. The claim for storage charged on behalf of Falcon Jet is denied since Faysound bears no responsibility for the presence of the plane at the Falcon Jet facility in Little Rock Arkansas. At any rate, Falcon Jet interpled the plane into the custody of the Court and under these circumstances cannot claim storage for the plane. Storage charges may be claimed by Falcon jet against Faysound Limited beginning with the date of this judgment." 4

Considering that it was deprived of the aircraft sold to it, Fuller Aircraft sued the Republic and PCGG for breach of warranty with damages (No. CA3-90-2785-R) in the District Court of Texas, Dallas Division. On December 2, 1993, this court rendered against the Republic and PCGG a decision 5 which partly reads:jgc:chanrobles.com.ph

"BE IT REMEMBERED, in accordance with the Court’s findings of Fact and Conclusions of Law, made on the 21st day of October, 1993, as follows:jgc:chanrobles.com.ph

"IT IS ORDERED, ADJUDGED, AND DECREED, that judgment be and the same is hereby entered in favor of the Plaintiff Walter Fuller Aircraft Sales, Inc. and against the Defendants The Republic of the Philippines and the Presidential Commission on Good Government, jointly and severally, in the amount of Fourteen Million Nine-Hundred Twenty-Eight Thousand Four Hundred Fifty-Seven Dollars and Twenty-Nine Cents ($14,928,457.29). The principal amount of this judgment includes prejudgment interest at the rate of 10% compounded on the attorney’s fees award, for the period from April 9, 1990, through October 27, 1993, as follows:chanrob1es virtual 1aw library

$9,750,000.00

975,000.00 interest through April 1991

——————

$10,725,000.00

1,072,500.00 interest through April 1992

——————

$11,795,000.00

1,179,750.00 interest through April 1993

——————

$12,977,250.00

718,193.01 interest through October

—————— 27, 1992 at $3,555.41 per

day ($1,297.275 divided

$13,945,443.01 by 365 days x 202 days)

IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that the Defendants, jointly and severally, shall pay post judgment interest at the legal rate of 3.385% per annum pursuant to 18 U.S.C. & 1961 from and after October 28, 1993, until such time as this Judgment is satisfied in full." chanrob1es virtua1 1aw 1ibrary

On October 14, 1996, the PCGG, in order to settle the money judgment against it, entered into an "Agreement" 6 with Fuller Aircraft providing, among others, that the Republic of the Philippines agreed to pay Fuller $11 million on October 15, 1996 and $3 million, in equal monthly installments, beginning November 15, 1996 and ending October 15, 1997 in settlement of Fuller Aircraft’s claim which, per decision of the Texas Court, amounts to $14,928,457.29.

On April 13, 1998, the PCGG filed with the Sandiganbayan an "Ex-Parte Motion to Withdraw" dated April 7, 1998 wherein it sought that:jgc:chanrobles.com.ph

". . . the plaintiffs Urgent Motion to Withdraw Funds Deposited in Escrow dated October 9, 1996, be deemed withdrawn and the PNB be immediately directed to release the funds on deposit to the Bureau of Treasury for transmission to Walter Fuller Sales Inc.. with the above Agreement and decisions of the US Federal Courts."cralaw virtua1aw library

On September 3, 1999, the Sandiganbayan issued the first questioned Resolution denying petitioner’s motion to release the "Falcon Jet escrow account" because: (a) it does not appear from the records that the person lawfully entitled to the escrow deposit has been determined; (b) the motion contravenes the ruling of the Supreme Court in Republic v. Sandiganbayan 7 requiring the PCGG to deposit the proceeds of the sale of the sequestered aircraft with the PNB; and (c) although the records disclose two authenticated copies of foreign judgments, 8 there is no indication that copies of the deed of sale of me aircraft and the compromise agreement have been duly authenticated.

The PCGG then filed a motion for reconsideration but the same was denied by the Sandiganbayan in its Resolution dated February 17, 2000.

Hence, the instant petition. Petitioner Republic contends that respondent Sandiganbayan gravely abused its discretion when it denied PCGG’S motion to release the funds deposited in escrow with the PNB to the Bureau of Treasury for transmission to Fuller Aircraft.

The Sandiganbayan failed to file a comment on the instant petition. Thus, this Court has no way of determining why it failed to resolve in more than one decade who is lawfully entitled to the escrow deposit.

As shown by the records, Faysound Ltd. is the owner of the Falcon jet. In fact, this is admitted by petitioner Republic itself. As mentioned earlier, Cojuangco or any of the defendants in Civil Case No. 0033 has no interest in it. Clearly, this aircraft was erroneously sequestered. It is thus patently illegal for the PCGG to sell it to Fuller Aircraft.

Petitioner does not disclaim its financial obligation to Fuller Aircraft under the "Agreement." Because of its failure to fulfill the same, Petitioner, as previously stated, filed with the Sandiganbayan a motion for the release of the escrow deposit to the Bureau of Treasury for transmittal to Fuller Aircraft. Petitioner alleged that for the delay in the final settlement of its financial liability, the Government of the Philippines must pay an interest surcharge in favor of Fuller Aircraft in the sum of US$2,000.00 a day. Moreover, petitioner is under heavy diplomatic pressure.

Considering the circumstances obtaining in this case, we rule that petitioner Republic cannot be held liable under the "Agreement." It must be stressed that petitioner did not authorize the PCGG to enter into such contract with Fuller Aircraft. Granting that the PCGG was so authorized, however, it exceeded its authority. Worse, the sale of the aircraft was without the approval of the Sandiganbayan. This Court, in G.R. No. 88336, held:jgc:chanrobles.com.ph

". . . From the preceding discussion of the cases herein before cited and the contending submissions of the parties in the present recourse, we cannot but make the observation that the decision to sell the aircraft is not within the limited administrative powers of the PCGG but requires the sanction of the Sandiganbayan which can grant or withhold the same in the exercise of sound discretion and on the basis of the evidence before it. Without such approval by the judicial authority concerned, and no abuse of discretion on its part having been established, it irresistibly follows that any sale of said aircraft under the circumstances obtaining in this case would constitute a prohibited and invalid disposition by the PCGG." (Emphasis supplied.)

Moreover, inasmuch as the sale of the aircraft by the PCGG to Fuller Aircraft is void, it follows that the "Agreement" between the PCGG and Fuller Aircraft is likewise a nullity.

Correspondingly, petitioner Republic cannot be bound by the terms of the said "Agreement" and thus, there can be no cause of action against it.

In Chavez v. Sandiganbayan, 9 this Court ruled that the PCGG or any of its member may be held civilly liable if they did not act in good faith and within the scope of their authority in the performance of their official duties. Likewise, in Director of Bureau of Communications v. Aligaen, 10 this Court held that unauthorized acts by its government officials or officers are not acts of the State.chanrob1es virtua1 1aw 1ibrary

Petitioner must, therefore, take immediate appropriate action against the PCGG personnel involved in the unauthorized sale of the aircraft.

Meanwhile, it is the legal duty of petitioner Republic to return to Fuller Aircraft, through the PCGG, the escrow deposit in the sum of US $8,568,905.55 as of July 1999. Otherwise, petitioner may enrich itself unjustly and may be held liable for keeping the said amount indefinitely to the prejudice of Fuller Aircraft whose right to the escrow deposit has not been questioned by any party in Civil Case No. 0033.

WHEREFORE, the petition is GRANTED. The challenged Resolutions dated September 3, 1999 and February 17, 2000 are REVERSED and SET ASIDE. Respondent Sandiganbayan is directed to order the release of the subject escrow account to the PCGG for transmission to Walter Fuller Aircraft Sales, Inc. Within ten (10) days from its compliance, the PCGG is ordered to submit to the Sandiganbayan the corresponding report. No costs.

SO ORDERED.

Melo, Vitug, Panganiban and Gonzaga-Reyes, JJ., concur.

Endnotes:

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1. Petition, Rollo, p. 5.

2. Per Republic v. Sandiganbayan, 192 SCRA 743 (1990).

3. Rollo, p. 32.

4. Annex "D" of the Petition, Rollo, pp. 47-48.

5. Annex "E" of the Petition, Rollo, pp. 50-51.

6. Rollo, pp. 52-54.

7. Supra.

8. Certified true xerox copies of the said decisions were obtained from the Sandiganbayan by Atty. Julieta Y Carreon, Clerk of Court, Third Division, Supreme Court.

9. 193 SCRA 282 (1991).

10. 33 SCRA 368 (1970).