REPUBLIC OF THE PHILIPPINES REPRESENTED BY THE PRESIDENTIAL COMMISSION ON GOOD GOVERNMENT (PCGG), PETITIONER, VS. SANDIGANBAYAN (SECOND DIVISION) AND ROBERTO S. BENEDICTO, RESPO…

Republic versus Benedicto

The Case

This is a petition for certiorari filed by the Republic of the Philippines, acting through the Presidential Commission on Good Government, against the Second Division of the Sandiganbayan and Roberto S. Benedicto. The Republic asks the Supreme Court to nullify two resolutions of the Sandiganbayan that ordered the Commission to deliver two hundred twenty seven sequestered shares of stock in the Negros Occidental Golf and Country Club, or in default, to pay their value at one hundred fifty thousand pesos per share. The case matters because it fixes the duties of the Commission as sequestrator and receiver over property it has taken, and because it marks the outer limit of the State's plea of immunity from suit when the State itself has gone to court.

Procedural History

The Republic, through the Commission, filed a complaint for reconveyance, reversion, accounting, reconstitution and damages against Benedicto and others before the Sandiganbayan, docketed as Civil Case Number 0034, one of the suits for the recovery of ill-gotten wealth. The parties later entered into a Compromise Agreement, which the Sandiganbayan approved in a decision dated October 2, 1992, rendering judgment in accordance with its terms. When disputes arose over implementation, the Sandiganbayan issued a resolution on December 6, 1994 granting Benedicto's motion for release from sequestration and placing the shares under the custody of its Clerk of Court. On March 28, 1995, it issued a clarificatory resolution directing the Commission to deliver the two hundred twenty seven shares free from all liens, or in default to pay their value at one hundred fifty thousand pesos per share, deductible from the Republic's cash share in the Compromise Agreement. After the Commission failed to comply, the Sandiganbayan issued a resolution on February 23, 1996 granting a final extension of fifteen days. The Commission moved for reconsideration, and Benedicto moved to enforce the judgment by levy. On March 13, 1997, the Sandiganbayan denied reconsideration as to the shares and granted the motion to enforce. The Republic then came to the Supreme Court by petition for certiorari under Rule 65.

Facts

Pursuant to its mandate, the Commission issued writs placing under sequestration all properties owned or registered in the name of Benedicto or of corporations he controlled. Among these were two hundred twenty seven shares in the Negros Occidental Golf and Country Club, registered in his name or in the names of his corporations. Commission representatives then sat on the club's Board of Directors. In October 1986, the Board passed a resolution assessing a monthly membership due of one hundred fifty pesos for each share, removing the old exemption for second and subsequent shares. On March 29, 1987, the Board raised the due to two hundred fifty pesos per share.

As sequestrator, the Commission did not pay the dues on the two hundred twenty seven shares, which totaled two million nine hundred fifty nine thousand four hundred seventy one pesos. The shares were declared delinquent and set for auction. The Commission filed a complaint for injunction before the Regional Trial Court of Bacolod City to stop the sale, but the complaint was dismissed. On August 5, 1989, the auction sale pushed through.

On November 3, 1990, the Republic and Benedicto entered into a Compromise Agreement containing a general release clause, under which the Republic bound itself to lift the sequestration on the shares, acknowledging that Benedicto could have acquired them out of his income from business and profession. The Sandiganbayan approved the agreement in October 1992. When the Commission failed to comply with the subsequent orders to return the shares or pay their value, the Sandiganbayan issued the assailed resolutions, prompting this petition.

Issues

• Whether or not the Sandiganbayan gravely abused its discretion in holding the Commission at fault for not paying the membership dues on the sequestered shares, a failure that led to their foreclosure sale.
• Whether or not the Republic may invoke state immunity from suit to escape the order to pay the value of the delinquent shares.

Applicable Provisions

Rule 65 of the Rules of Court governs the petition, and the Court states the ground for the writ in these terms:

The extraordinary writ of certiorari may be availed only upon a showing, in the minimum, that the respondent tribunal or officer exercising judicial or quasi-judicial functions has acted without or in excess of its or his jurisdiction, or with grave abuse of discretion.

This fixes the narrow doorway through which the Republic must pass, since it attacks the Sandiganbayan's findings rather than its power to act. The Court also defines the standard itself:

The term grave abuse of discretion connotes capricious and whimsical exercise of judgment as is equivalent to excess, or a lack of jurisdiction.

On this definition turns the first issue, because the Court measures the Sandiganbayan's orders against it. On immunity, the Court applies the settled exception that when the State is the plaintiff, it descends to the level of a private individual and opens itself to the defenses and claims of the other side.

Ruling

On the first issue, the Court held that there was no grave abuse of discretion. The Commission itself did not dispute that it was a receiver over the sequestered shares, and a receiver is bound to pay outstanding debts pertaining to the sequestered property. Membership dues are obligations attached to the shares, which are themselves made liable through delinquency sale upon default. The Commission's injunction suit was, in the Court's words, a case of acting too little and too late. Worse, the Commission's own fiscal agents, sitting on the club's Board, had agreed to the resolutions imposing the dues. The Court stressed that it behooved the fiscal agents to preserve, like a responsible father of the family, the value of the shares under their administration. The assailed resolutions merely directed compliance with a compromise agreement the Commission freely entered into, and the question of liability had long become final and executory.

On the second issue, the Court held that immunity could not be invoked. When the State itself is the plaintiff, it descends to the level of a private individual and opens itself to whatever counterclaims or defenses the defendant may have. By filing the complaint and entering into the Compromise Agreement, the Republic stripped itself of immunity and placed itself on the same level as its adversary. The Court noted that the agreement had aimed at the immediate recovery of alleged ill-gotten wealth without further litigation, an objective that came to naught, as Benedicto had since passed away with the trial still in progress.

Doctrine

A sequestrator or receiver holds sequestered property with the duty to preserve its value, and that duty includes paying the obligations attached to the property, such as membership dues on shares, and taking timely measures to prevent loss through delinquency sale. The failure to do so, especially where the sequestrator's own representatives consented to the imposition of the dues, is not grave abuse of discretion correctible by certiorari. Certiorari corrects errors of jurisdiction, not errors of judgment. Finally, the State's immunity from suit cannot be invoked when the State itself is the plaintiff, for by suing it descends to the level of a private individual, and by entering into a compromise agreement it impliedly consents to be sued on its obligations under that contract.

Disposition

The Supreme Court dismissed the petition, leaving the Sandiganbayan's resolutions in force and the Commission liable to deliver the shares or pay their value.

Remember This

Memorize the line that the sequestrator must preserve the property like a responsible father of the family, and that the State which sues descends to the level of a private individual and waives its immunity. Examiners use this case on the powers and duties of the Presidential Commission on Good Government as sequestrator, on the limits of certiorari against errors of judgment, and on the suitor-State exception to state immunity.