The Supreme Court has denied the petition of Palm Avenue Holding Co., Inc. and Palm Avenue Realty Development Corporation (Palm Companies) seeking payment of interest on sequestered funds, ruling that the Presidential Commission on Good Government (PCGG) did not become a debtor of the companies by sequestering their assets.
In a Decision on G.R. No. 279225, the Court affirmed the Resolutions of the Sandiganbayan dated February 6, 2025 and March 18, 2025 in Civil Case No. 0035, which held that the Palm Companies are not entitled to interest on the sequestered funds.
The Case
Through a Writ of Sequestration dated October 27, 1986, the PCGG sequestered all the assets, properties, records, and documents of the Palm Companies. Among the sequestered assets were 16,237,339 Common Class A shares of stock in Benguet Corporation registered in the name of the Palm Companies. The sequestration was based on a letter from the Palm Companies' attorney-in-fact, which identified Benjamin "Kokoy" Romualdez as the beneficial owner of said shares.
On July 31, 1987, the Republic, represented by the PCGG, filed before the Sandiganbayan a complaint against Romualdez for reconveyance, reversion, accounting, restitution, and damages, docketed as Civil Case No. 0035. The Palm Companies were later ordered impleaded, and the PCGG filed an Amended Complaint dated January 17, 1997, which the Sandiganbayan admitted on October 15, 2021.
The sequestered shares generated cash dividends, and some shares were sold between 1988 and 1990. The Palm Companies' sequestered assets included funds amounting to PHP 198,192,002.65, consisting of cash dividends and proceeds from the sale of the sequestered shares. These funds were placed in an escrow account (PHP 91,883,576.68) and a CARP account (PHP 106,308,425.97).
The Palm Companies filed a Motion to Order Payment of Interest in Balance of the Sequestered Funds, arguing that the PCGG had no authority to place the funds under the CARP account without a judicial declaration that they were ill-gotten, and that as a custodian in custodia legis, the PCGG should have placed them in an escrow account to earn interest.
The Issue
The Court addressed whether the Palm Companies are entitled to interest on the sequestered funds placed in the CARP account, and whether the State was unjustly enriched by placing those funds in the CARP account.
The Ruling
The Court denied the petition. Its dispositive portion reads: "ACCORDINGLY, the Petition for Review on Certiorari is DENIED for lack of merit. The Resolutions dated February 6, 2025 and March 18, 2025 of the Sandiganbayan in Civil Case No. 0035 are AFFIRMED. The Motion to Order Payment of Interest on Balance of the Sequestered Funds filed by petitioners Palm Avenue Holding Co., Inc. and Palm Avenue Realty Development Corporation is DENIED for lack of merit."
By the Numbers
- Writ of Sequestration dated October 27, 1986
- 16,237,339 Common Class A shares of stock in Benguet Corporation
- Complaint filed July 31, 1987
- Total sequestered funds: PHP 198,192,002.65
- Escrow account: PHP 91,883,576.68
- CARP account: PHP 106,308,425.97
- Escrow account interest earned: PHP 273,425,965.37
- CARP account interest earned before transfer: PHP 4,477,607.20
- Escrow funds released: PHP 331,145,012.05, inclusive of interest earnings
The Court's Reasoning
The Court distinguished between the exercise of eminent domain and police power. It explained that in eminent domain cases, property interests are appropriated for a public purpose, which necessitates payment of just compensation, and interest runs as a matter of law to compensate for delay. In such cases, the government is deemed a debtor who has incurred a debt on account of the taking.
In contrast, the Court held that a writ of sequestration is merely temporary and provisional, and no compensable taking occurs. Sequestration is not intended to deprive the owner of title. While the owner may be deprived of the use of the property, this restriction is only by virtue of the State's police power to prevent dissipation of assets until it can be determined through appropriate judicial proceedings whether the property was ill-gotten. Hence, the PCGG does not become a debtor of the petitioners by virtue of the sequestration.
The Court also rejected the claim of unjust enrichment. It explained that unjust enrichment requires that a person is benefited without a valid basis and that such benefit is derived at the expense of another. The Court found that beyond bare conclusions, the petitioners failed to explain how the State was benefited by the transfer, noting the records were bereft of evidence that the funds were appropriated or utilized by the government or created any benefits or profits while sequestered. The retention was based on a valid writ of sequestration and the lawful exercise of police power.
The Court concluded that the petitioners' claim for interest, temperate damages, and exemplary damages must be denied for lack of legal or factual basis.
Source: Supreme Court Decision in G.R. No. 279225, Palm Avenue Holding Co., Inc. and Palm Avenue Realty Development Corporation v. Sandiganbayan, Civil Case No. 0035.
This report summarizes a public Supreme Court decision and is not legal advice.