The Supreme Court ruled that the Presidential Commission on Good Government, as conservator of sequestered assets, must preserve them but is not required to invest them or generate profits from them.

In a decision penned by Associate Justice Ramon Paul L. Hernando, the SC First Division denied the petition of Palm Avenue Holding Co., Inc. and Palm Avenue Realty Development Corporation and affirmed the Sandiganbayan resolutions rejecting their claims for interest and damages arising from the transfer of their sequestered funds to the Comprehensive Agrarian Reform Program (CARP) account. 

“As aptly argued by the OSG, to rule that the PCGG’s duty includes ensuring the accrual of fruits on the assets would unduly conflate preservation with profit generation,” the Court said. 

FACTS AND ISSUE

The case stemmed from the PCGG’s 1986 sequestration of the assets, properties, records and documents of the Palm Companies, including shares in Benguet Corporation, on the ground that they had allegedly benefited from their association with former President Ferdinand E. Marcos and his family. 

In 1987, the Republic, through the PCGG, filed a complaint for reconveyance, reversion, accounting, restitution and damages before the Sandiganbayan, which later ordered the sale of the Benguet shares after finding that they were deteriorating in value and required immediate disposition. 

The sale yielded PHP 198.19 million in proceeds, portions of which were placed in escrow and the CARP account while ownership remained unresolved. 

The Sandiganbayan initially ordered the PCGG to place the funds in an interest-bearing account but later reversed the ruling, holding that the agency was required to conserve and preserve the funds but had no obligation to ensure that they earned interest. 

The Palm Companies challenged the ruling before the SC, arguing that the PCGG exceeded its role as conservator by transferring the funds to the CARP account and deprived them of potential interest income, entitling them to interest and damages. 

The issue was whether the Republic could be held liable for interest, temperate and exemplary damages arising from the PCGG’s transfer and administration of the sequestered funds. 

RULING

The SC denied the petition for lack of merit, finding no legal or factual basis to hold the government liable for damages over the transfer of the funds. 

The Court explained that sequestration is a conservatory and provisional measure meant to preserve assets suspected to be ill-gotten while their ownership is judicially determined, rather than to permanently deprive their owners or possessors of the property. 

It held that the PCGG fulfilled its duty by preserving the funds and was not required to invest them or ensure that they generated profits, while the companies failed to establish negligence through clear and convincing evidence. 

The Court further found that transferring the funds to the CARP account did not amount to an exercise of ownership beyond the PCGG’s authority as conservator. 

“The PCGG’s duty as sequestrator, and the degree of care required from the PCGG, is to ensure the return of the sequestered properties and funds as far as possible in the same condition as it was at the time of sequestration with all the fruits and gains to which it is entitled, should allegations of its being ill-gotten cannot be proven,” the Court said. 

The SC also found no basis for actual, temperate or exemplary damages, as the companies failed to prove definite pecuniary losses or any wrongful act by the PCGG.

It likewise rejected the claims for interest and unjust enrichment, finding no basis for compensatory interest and no showing that the government benefited or profited from the funds, as well as the companies’ reliance on eminent-domain principles, since sequestration is temporary, does not transfer ownership and does not constitute a compensable taking.

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