PCGG Sequestration Powers: High Court Safeguards Property Owners Against Abuse in Ill-Gotten Wealth Recovery

The Supreme Court recently affirmed that the Presidential Commission on Good Government (PCGG) must strictly follow its own rules when sequestering properties, and that only genuinely ill-gotten wealth may be subject to sequestration. In Presidential Commission on Good Government v. C&O Investment and Realty Corp. (G.R. No. 255014, August 30, 2023), the Court denied the PCGG's petition and upheld the Sandiganbayan's ruling lifting a sequestration over a Baguio City property. The ruling reinforces important safeguards for property owners against overreach in the government's recovery of ill-gotten wealth.

Background of the Case

In May 1986, the PCGG sequestered a lot covered by Transfer Certificate of Title No. T-3034 issued in the name of Ramon U. Cojuangco. The PCGG acted under Executive Order Nos. 1 and 2, Series of 1986, which mandate the agency to recover wealth illegally acquired by former President Ferdinand Marcos, his family, and associates.

Respondents C&O Investment and Realty Corporation and Miguel Cojuangco later filed a petition to nullify the sequestration. They argued that C&O had purchased the property from the Spouses Cojuangco in 1976 through a Deed of Absolute Sale but inadvertently failed to transfer the title. More importantly, they pointed out that the property was acquired in 1955—long before Marcos became President—and therefore could not be considered ill-gotten wealth.

The Sandiganbayan's Ruling

The Sandiganbayan granted the respondents' petition and lifted the sequestration. It held that the property should not be considered ill-gotten wealth because the title itself showed acquisition in 1955, prior to Marcos's presidency. The court also noted that the Deed of Absolute Sale showed the property had already been sold to C&O before the sequestration letter was issued.

Significantly, the Sandiganbayan observed that the sequestration letter was issued by an Acting Director of the PCGG's IRS department, not by at least two Commissioners as required by the PCGG's own Rules and Regulations. This made the sequestration void from the beginning.

The Supreme Court's Decision

The Supreme Court affirmed the Sandiganbayan's ruling on three key grounds.

First, the property was not ill-gotten wealth. The Court cited Bataan Shipyard & Engineering Co., Inc. v. PCGG (234 Phil. 180 [1987]), which defines sequestration as placing property under PCGG control to prevent dissipation until courts determine whether it was truly ill-gotten. Since the subject property was acquired in 1955, a decade before Marcos became President, it could not have been acquired through illegal use of government funds. The Court held that the property was not a proper object of sequestration under Executive Order No. 1.

Second, the sequestration order was void for lack of authority. The PCGG's Rules and Regulations require that a writ of sequestration be issued upon the authority of at least two Commissioners. In this case, only an Acting Director issued the letter. Citing Republic v. Sandiganbayan (First Division) (328 Phil. 210 [1996]) and Republic v. Sandiganbayan (Second Division) (839 Phil. 992 [2018]), the Court reiterated that the PCGG cannot delegate its quasi-judicial power to sequester to subordinates. Any such delegation is invalid and ineffective.

Third, estoppel cannot validate a void act. The PCGG argued that the respondents were barred by estoppel and laches. The Court rejected this, citing Republic v. Sandiganbayan (Fourth Division) (651 Phil. 341 [2010]), which held that a void sequestration order produces no effect and cannot be validated under estoppel. As the Court stated, "no estoppel can be predicated on an illegal act."

Strict Construction Against the State

The Court emphasized that sequestration, because it impedes proprietary rights, is construed strictly against the State. The PCGG bears the burden of proving that a sequestration order was issued in accordance with law. In this case, the PCGG failed to overcome that burden.

Practical Takeaways

• Sequestration requires proper authority. Only the PCGG Commission En Banc, through at least two Commissioners, may validly issue a sequestration order. Orders issued by directors, task force heads, or other subordinates are void.
• Only genuinely ill-gotten wealth may be sequestered. Property acquired before Marcos's presidency, or otherwise shown to be legitimately owned, falls outside the PCGG's mandate.
• Void acts cannot be cured by estoppel. A property owner cannot be barred from challenging an invalid sequestration merely because of delay or prior conduct.
• Documentary evidence matters. A photocopy of a deed may be admitted if no objection is raised under the Best Evidence Rule; evidence not objected to is deemed admitted.
• Burden of proof rests on the PCGG. The government must prove that sequestration was lawful, not the property owner who challenges it.

This article is general information and not legal advice. For your specific situation, consult a lawyer or ask ASG Legal AI.