In Republic vs. Hon. Bernardo V. Saludares and Hung Ming Kuk, the Supreme Court addressed the jurisdictional conflict between the Regional Trial Court (RTC) and the Presidential Commission on Good Government (PCGG) regarding properties owned by Lianga Bay Logging Company, Inc. (LBLC). The Court ruled that while the RTC had jurisdiction over the collection suit filed against LBLC, it could not issue a writ of attachment on properties already under sequestration by the PCGG. This decision clarifies the limits of judicial authority when dealing with assets subject to government sequestration, emphasizing the PCGG’s role as conservator and the need to preserve the status quo pending final determination of ownership.

When a Collection Suit Collides with Government Sequestration

This case revolves around a claim for a sum of money filed by Hung Ming Kuk against Lianga Bay Logging Company, Inc. (LBLC) in the Regional Trial Court (RTC) of Lianga, Surigao del Sur. The Republic of the Philippines, through the PCGG, challenged the RTC’s jurisdiction, arguing that LBLC’s properties were already under sequestration. This sequestration was based on the allegation that the shares of stocks in LBLC owned by Peter A. Sabido formed part of “illegally acquired wealth.” The central legal question is whether the RTC had the authority to issue a writ of attachment on properties that the PCGG had already sequestered. The court had to reconcile the jurisdiction of the RTC over civil cases with the PCGG’s mandate to recover ill-gotten wealth.

The facts reveal a complex interplay of legal actions. The PCGG issued a writ of sequestration on April 2, 1986, placing LBLC’s assets under its control. Subsequently, the Republic filed a complaint with the Sandiganbayan for reconveyance and damages against Peter A. Sabido, among others. Sabido then filed a motion to lift the writs of sequestration, which the Sandiganbayan initially granted but was later nullified by the Supreme Court. Meanwhile, Hung Ming Kuk filed a complaint for a sum of money against LBLC in the RTC, leading to the issuance of a writ of preliminary attachment. This writ is the core of the present controversy because it was issued on properties already under sequestration.

The petitioner, the Republic of the Philippines, argued that the RTC lacked jurisdiction over the case because the sequestered assets were under custodia legis of the PCGG. They cited Baseco vs. PCGG, 150 SCRA 181 (1987), to support the argument that the assets are under the PCGG’s control pending a final determination by the Sandiganbayan. On the other hand, the private respondent, Hung Ming Kuk, maintained that his complaint was simply for a sum of money, representing a valid debt owed to him by LBLC. He also argued that the attachment order was issued after the Sandiganbayan had initially lifted the writ of sequestration. However, this argument was weakened by the Supreme Court’s subsequent reversal of the Sandiganbayan’s order.

The Supreme Court addressed the issue of jurisdiction by distinguishing the present case from PCGG vs. Peña, 159 SCRA 556 (1988). In Peña, the Court held that regional trial courts could not interfere with the PCGG’s actions. However, the Court clarified that the present case involved a collection suit arising from a legitimate business contract. Importantly, the PCGG had not taken over LBLC’s business operations. Therefore, the Court determined that the RTC had jurisdiction over the complaint for the payment of money allegedly owed by LBLC to Hung Ming Kuk, as the amount in question fell within the RTC’s jurisdictional threshold as defined under Section 19 of B.P. Blg. 129, as amended by R.A. No. 7691, which states:

“Sec. 19. Jurisdiction in civil cases. — Regional Trial Courts shall exercise exclusive original jurisdiction: … (8) In all other cases in which the demand, exclusive of interest, damages of whatever kind, attorney’s fees, litigation expenses, and costs or the value of the property in controversy exceeds One hundred thousand pesos (P100,000.00) or, in such other cases in Metro Manila, where the demand, exclusive of the above-mentioned items exceeds Two hundred thousand pesos (P200,000).”

Despite recognizing the RTC’s jurisdiction over the collection suit, the Supreme Court ruled against the validity of the writ of attachment. The Court emphasized that the LBLC’s properties were already under custodia legis by virtue of the PCGG’s writ of sequestration. The Court underscored that a valid writ of sequestration issued by the PCGG could not be interfered with by the RTC, as the PCGG is a coordinate and co-equal body. This reaffirms the principle established in BASECO vs. PCGG, 150 SCRA 181, 182 (1987), where sequestration is defined as:

“…the process, which may be employed as a conservatory writ whenever the right of the property is involved, to preserve, pending litigation, specific property subject to conflicting claims of ownership or liens and privileges.”

Furthermore, the Court drew parallels between attachment and receivership, on one hand, and sequestration, freeze order, and provisional takeover on the other. These measures are ancillary remedies in prosecuting the ill-gotten wealth of the previous Marcos regime. An order of attachment allows a sheriff to seize a defendant’s property to secure a judgment, preventing its disposal or dissipation pending the action. The Supreme Court noted that when a writ of attachment has been levied on real property or any interest therein belonging to the judgment debtor, the levy creates a lien which nothing can destroy but its dissolution, as quoted in Consolidated Bank and Trust Corporation (Solidbank) vs. Intermediate Appellate Court, 150 SCRA 591, 598 (1987), citing Chua Pua Hermanos vs. Register of Deeds of Batangas, 50 Phil. 670 (1921). This well-settled rule is likewise applicable to a writ of sequestration.

The court clarified that attachment is a proceeding in rem, targeting a specific property of a debtor. The attaching creditor acquires a specific lien upon the attached property, which ripens into a judgment against the res when the order of sale is made. Such a proceeding effectively finds that the property attached is an indebted thing and results in its virtual condemnation to pay for the owner’s debt. The Court noted that the attachment lien continues until the debt is paid, a sale is had under execution issued in the judgment, or the judgment is satisfied, discharged, or vacated in some manner provided by law. The Supreme Court, therefore, held that the RTC’s order of attachment was null and void because the properties were already under the PCGG’s control. This highlights the principle that properties under sequestration are in custodia legis, and their disposition or encumbrance is subject to the PCGG’s authority.

In its ruling, the Court affirmed the default order issued by the RTC but held its execution in abeyance until the sequestration case involving LBLC before the Sandiganbayan is determined. This approach acknowledges the RTC’s jurisdiction over the collection suit while respecting the PCGG’s authority over the sequestered assets. By partially granting the petition, the Supreme Court balanced the rights of the private respondent to pursue a legitimate claim with the government’s interest in recovering ill-gotten wealth. This case serves as a reminder of the importance of respecting the legal processes and jurisdictional boundaries in cases involving government sequestration.

FAQs

What was the key issue in this case?	The key issue was whether the Regional Trial Court (RTC) could issue a writ of attachment on properties already under sequestration by the Presidential Commission on Good Government (PCGG).
What is a writ of sequestration?	A writ of sequestration is a legal tool used by the PCGG to preserve assets believed to be ill-gotten, preventing their dissipation or concealment pending judicial determination of their ownership. It places the property under the PCGG’s control.
What is a writ of attachment?	A writ of attachment is a court order that allows a sheriff to seize a defendant’s property to secure a potential judgment, preventing the defendant from disposing of the property during the lawsuit.
Why did the Supreme Court invalidate the RTC’s writ of attachment?	The Supreme Court invalidated the writ of attachment because the properties were already under the PCGG’s control due to a valid writ of sequestration. The Court held that the PCGG’s authority could not be interfered with by a coordinate court.
Did the Supreme Court rule that the RTC had no jurisdiction over the case?	No, the Supreme Court clarified that the RTC had jurisdiction over the collection suit filed by Hung Ming Kuk against LBLC. The claim fell within the RTC’s jurisdictional amount for civil cases.
What is the significance of the term “custodia legis” in this case?	“Custodia legis” means “under the custody of the law.” The Supreme Court used this term to describe the status of the sequestered properties, emphasizing that they were under the PCGG’s legal control and not subject to interference from other courts.
What was the PCGG’s role in this case?	The PCGG acted as a conservator of the sequestered properties, with the power to administer and preserve them pending the final determination of whether they were ill-gotten. The PCGG’s primary concern was to prevent the dissipation of the assets.
What happens to the default order issued by the RTC?	The Supreme Court affirmed the default order issued by the RTC but held its execution in abeyance. This means that LBLC is still liable for the debt, but the payment is deferred until the sequestration case is resolved.
What is the practical implication of this ruling?	The ruling clarifies that while courts can hear cases involving companies with sequestered assets, they cannot issue orders that interfere with the PCGG’s control over those assets. This protects the government’s ability to recover ill-gotten wealth.

In conclusion, the Supreme Court’s decision in Republic vs. Hon. Bernardo V. Saludares and Hung Ming Kuk provides important clarity on the jurisdictional boundaries between the RTC and the PCGG in cases involving sequestered assets. While acknowledging the RTC’s authority to hear collection suits, the Court firmly established the primacy of the PCGG’s control over properties under sequestration, ensuring the preservation of assets pending the resolution of ill-gotten wealth claims.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: Republic vs. Hon. Bernardo V. Saludares and Hung Ming Kuk, G.R. No. 111174, March 09, 2000