J.A.B. Bulao & Associates

 

WE CONCUR:

 

 

 

 

PRESBITERO J. VELASCO, JR.

Associate Justice

Chairperson

 

 

 

        ROBERTO A. ABAD                        JOSE CATRAL MENDOZA

            Associate Justice                                         Associate Justice

 

      ESTELA M. PERLAS-BERNABE

                                                  Associate Justice

 

 

ATTESTATION

 

        I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

 

 

 

 

 

                                        PRESBITERO J. VELASCO, JR.

             Associate Justice

            Third Division, Chairperson

 

 

CERTIFICATION

 

        Pursuant to Section 13, Article VIII of the Constitution and the Division Chairperson’s Attestation, I certify that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

 

 

 

 

                                                        RENATO C. CORONA

                                                                  Chief Justice

 

 

CASE 2012-0057: FERDINAND R. MARCOS, JR VS. REPUBLIC OF THE PHILIPPINES, REPRESENTED BY THE PRESIDENTIAL COMMISSION ON GOOD  GOVERNMENT (G.R. NO. 189434, 25 APRIL 2012, SERENO, J.); IMELDA ROMUALDEZ-MARCOS VS. REPUBLIC OF THE PHILIPPINES (G.R. NO. 189505)

 

==============================

 

DISPOSITIVE:

 

WHEREFORE, the instant Petition is DENIED. The Decision dated 2 April 2009 of the Sandiganbayan is AFFIRMED. All assets, properties, and funds belonging to Arelma, S.A., with an estimated aggregate amount of     USD 3,369,975 as of 1983, plus all interests and all other income that accrued thereon, until the time or specific day that all money or monies are released and/or transferred to the possession of the Republic of the Philippines, are hereby forfeited in favor of Respondent Republic of the Philippines.

          SO ORDERED.

 

==============================

 

 

 

 

 

Republic of the Philippines Supreme Court BaguioCity   SECOND DIVISION
FERDINAND R. MARCOS, JR.                                     Petitioner,                        – versus –   REPUBLIC OF THE PHILIPPINES, represented by the Presidential Commission on Good  Government,                                     Respondent.     x – – – – – – – – – – – – – – – – – – – – – – – – – – x IMELDA ROMUALDEZ-MARCOS,                                     Petitioner ,                        – versus –   REPUBLIC OF THE PHILIPPINES,                                     Respondent.	G.R. No. 189434                       G.R. No. 189505   Present:   BRION, J.,*                      Acting Chairperson, ABAD,** PEREZ, SERENO, and REYES, JJ.    Promulgated:            April 25, 2012

x – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – -x

 

D E C I S I O N

SERENO, J.:

 

          These two consolidated Petitions filed under Rule 45 of the 1997 Rules of Civil Procedure pray for the reversal of the 2 April 2009 Decision of the Sandiganbayan in Civil Case No. 0141 entitled Republic of the Philippines v. Heirs of Ferdinand E. Marcos and Imelda R. Marcos.^[1][1] The anti-graft court granted the Motion for Partial Summary Judgment filed by respondent Republic of thePhilippines (Republic) and declared all assets and properties ofArelma,S.A., an entity created by the late Ferdinand E. Marcos, forfeited in favor of the government.

          On 17 December 1991, the Republic, through the Presidential Commission on Good Government (PCGG), filed a Petition for Forfeiture^[2][2] before the Sandiganbayan pursuant to the forfeiture law, Republic Act No. 1379 (R.A. 1379)^[3][3] in relation to Executive Order Nos. 1, 2 and 14.^[4][4] The petition was docketed as Civil Case No. 0141.

          Respondent Republic, through the PCGG and the Office of the Solicitor General (OSG), sought the declaration of Swiss bank accounts totaling USD 356 million (now USD 658 million), and two treasury notes worth USD 25 million and USD 5 million, as ill-gotten wealth.^[5][5] The Swiss accounts, previously held by five groups of foreign foundations,^[6][6] were deposited in escrow with the Philippine National Bank (PNB), while the treasury notes were frozen by the Bangko Sentral ng Pilipinas (BSP).

Respondent also sought the forfeiture of the assets of dummy corporations and entities established by nominees of Marcos and his wife, Petitioner Imelda Romualdez-Marcos, as well as real and personal properties manifestly out of proportion to the spouses’ lawful income. This claim was based on evidence collated by the PCGG with the assistance of the United States Justice Department and the Swiss Federal Police Department.^[7][7] The Petition for Forfeiture described among others, a corporate entity by the name “Arelma, Inc.,” which maintained an account and portfolio in Merrill Lynch, New York, and which was purportedly organized for the same purpose of hiding ill-gotten wealth.^[8][8]

Before the case was set for pretrial, the Marcos children and PCGG Chairperson Magtanggol Gunigundo signed several Compromise Agreements (a General Agreement and Supplemental Agreements) all dated 28 December 1993 for a global settlement of the Marcos assets. One of the “whereas” clauses in the General Agreement specified that the Republic “obtained a judgment from the Swiss Federal Tribunal on December 21, 1990, that the Three Hundred Fifty-six Million U.S. dollars (USD 356 million) belongs in principle to the Republic of the Philippines provided certain conditionalities are met xxx.” This Decision was in turn based on the finding of Zurich District Attorney Peter Cosandey that the deposits in the name of the foundations were of illegal provenance.^[9][9]

On 18 October 1996, respondent Republic filed a Motion for Summary Judgment and/or judgment on the pleadings (the 1996 Motion) pertaining to the forfeiture of the USD 356 million. The Sandiganbayan denied the 1996 Motion on the sole ground that the Marcoses had earlier moved for approval of the Compromise Agreements, and that this latter Motion took precedence over that for summary judgment. Petitioner Imelda Marcos filed a manifestation claiming she was not a party to the Motion for Approval of the Compromise Agreements, and that she owned 90% of the funds while the remaining 10% belonged to the Marcos estate.^[10][10]

On 10 March 2000, the Republic filed another Motion for Summary Judgment (the 2000 Motion), based on the grounds that: (1) the essential facts that warrant the forfeiture of the funds subject of the Petition under R.A. 1379 are admitted by respondents in their pleadings and other submissions; and (2) the respondent Marcoses’ pretrial admission that they did not have any interest or ownership over the funds subject of the action for forfeiture tendered no genuine issue or controversy as to any material fact.

In a 19 September 2000 Decision, the Sandiganbayan initially granted the 2000 Motion, declaring that the Swiss deposits held in escrow at the PNB were ill-gotten wealth, and, thus, forfeited in favor of the State.^[11][11] In a Resolution dated 31 January 2002, the Sandiganbayan reversed its earlier ruling and denied the 2000 Motion. Alleging grave abuse of discretion on the part of the court in rendering the later Resolution, the Republic filed a Petition for Certiorari with the Supreme Court. In G.R. No. 152154 entitled Republic of the Philippines v. Sandiganbayan (for brevity, the “Swiss Deposits Decision”),^[12][12] this Court set aside the 31 January 2002 Sandiganbayan Resolution and reinstated the 19 September 2000 Decision, including the declaration that the Swiss deposits are ill-gotten wealth. On 18 November 2003, the Court denied with finality petitioner Marcoses’ Motion for Reconsideration.

On 16 July 2004, the Republic filed a Motion for Partial Summary Judgment (2004 Motion) to declare “the funds, properties, shares in and interests of ARELMA, wherever they may be located, as ill-gotten assets and forfeited in favor of the Republic of the Philippines pursuant to R.A. 1379 in the same manner (that) the Honorable Supreme Court forfeited in favor of the petitioner the funds and assets of similar ‘Marcos foundations’ such as AVERTINA, VIBUR, AGUAMINA, MALER and PALMY.”^[13][13] Petitioner contends that: (1) respondents are deemed to have admitted the allegations of the Petition as regards Arelma; and (2) there is no dispute that the combined lawful income of the Marcoses is grossly disproportionate to the deposits of their foundations and dummy corporations, including Arelma. Ferdinand Marcos, Jr., Imelda Marcos, and Imee Marcos-Manotoc filed their respective Oppositions. Irene Marcos-Araneta filed a Motion to Expunge on the ground that the proceedings in Civil Case No. 0141 had already terminated.

 On 2 April 2009, the Sandiganbayan rendered the assailed Decision granting respondent’s Motion for Partial Summary Judgment.^[14][14] It found that the proceedings in Civil Case No. 0141 had not yet terminated, as the Petition for Forfeiture included numerous other properties, which the Sandiganbayan and Supreme Court had not yet ruled upon. The Republic’s 1996 Motion was merely held in abeyance to await the outcome of the global settlement of the Marcos assets. Further, this development had prompted the Republic to file the 2000 Motion, which was clearly limited only to the Swiss accounts amounting to USD 356 million. Thus, according to the Sandiganbayan, its 19 September 2000 Decision as affirmed by the Supreme Court in G.R. No. 152154, was in the nature of a separate judgment over the Swiss accounts and did not preclude a subsequent judgment over the other properties subject of the same Petition for Forfeiture, such as those of Arelma.^[15][15] The Sandiganbayan held as follows:

WHEREFORE, considering all the foregoing, the Motion for Partial Summary Judgment dated July 16, 2004 of petitioner is hereby GRANTED.  Accordingly, Partial Summary Judgment is hereby rendered declaring the assets, investments, securities, properties, shares, interests, and funds of Arelma, Inc., presently under management and/or in an account at the Meryll (sic) Lynch Asset Management, New York, U.S.A., in the estimated aggregate amount of US$3,369,975.00 as of 1983, plus all interests and all other income that accrued thereon, until the time or specific day that all money or monies are released and/or transferred to the possession of the Republic of the Philippines, are hereby forfeited in favor of petitioner Republic of the Philippines.

SO ORDERED.^[16][16]

On 22 October 2009, Ferdinand R. Marcos, Jr. filed the instant Rule 45 Petition, questioning the said Decision.^[17][17] One week later, Imelda Marcos filed a separate Rule 45 Petition^[18][18] on essentially identical grounds, which was later consolidated with the first Petition. The grievances of both petitioners boil down to the following issues:

1.                 Whether the forfeiture proceeding, Civil Case No. 0141 with the Sandiganbayan is criminal in nature, such that summary judgment is not allowed;

2.                 Whether petitioner Republic complied with Section 3, subparagraphs c, d, and e of R.A. 1375;

3.                  Whether Civil Case No. 0141 has been terminated such that a motion for partial summary judgment may no longer be allowed; and

4.                 Whether in this case there are genuine, triable issues which would preclude the application of the rule on summary judgment.    

I.      Forfeiture proceedings are civil in nature

          Petitioner Ferdinand Marcos, Jr. argues that R.A. 1379 is a penal law; therefore a person charged under its provisions must be accorded all the rights granted to an accused under the Constitution and penal laws.^[19][19] He asserts that the Marcoses were entitled to all the substantial rights of an accused, one of these being the right “to present their evidence to a full blown trial as per Section 5 of R.A. 1379.”^[20][20] He relies on the 1962 case, Cabal v. Kapunan,^[21][21] where the Court ruled that:

We are not unmindful of the doctrine laid down in Almeda vs. Perez, L-18428 (August 30, 1962) in which the theory that, after the filing of respondents’ answer to a petition for forfeiture under Republic Act No. 1379, said petition may not be amended as to substance pursuant to our rules of criminal procedure, was rejected by this Court upon the ground that said forfeiture proceeding is civil in nature. This doctrine refers, however, to the purely procedural aspect of said proceeding, and has no bearing on the substantial rights of the respondents therein, particularly their constitutional right against self-incrimination.

          This argument fails to convince. Petitioner conveniently neglects to quote from the preceding paragraphs of Cabal, which clearly classified forfeiture proceedings as quasi-criminal, not criminal. And even so, Cabal declared that forfeiture cases partake of a quasi-criminal nature only in the sense that the right against self-incrimination is applicable to the proceedings, i.e., in which the owner of the property to be forfeited is relieved from the compulsory production of his books and papers:

Generally speaking, informations for the forfeiture of goods that seek no judgment of fine or imprisonment against any person are deemed to be civil proceedings in rem. Such proceedings are criminal in nature to the extent that where the person using the res illegally is the owner or rightful possessor of it, the forfeiture proceeding is in the nature of a punishment.

xxx                   xxx                   xxx

Proceedings for forfeitures are generally considered to be civil and in the nature of proceedings in rem. The statute providing that no judgment or other proceedings in civil cases shall be arrested or reversed for any defect or want of form is applicable to them. In some aspects, however, suits for penalties and forfeitures are of quasi-criminal nature and within the reason of criminal proceedings for all the purposes of * * * that portion of the Fifth Amendment which declares that no person shall be compelled in any criminal case to be a witness against himself. The proceeding is one against the owner, as well as against the goods; for it is his breach of the laws which has to be proved to establish the forfeiture and his property is sought to be forfeited.

                     xxx                   xxx                   xxx

As already observed, the various constitutions provide that no person shall be compelled in any criminal case to be a witness against himself. This prohibition against compelling a person to take the stand as a witness against himself applies only to criminal, quasi-criminal, and penal proceedings, including a proceeding civil in form for forfeiture of property by reason of the commission of an offense, but not a proceeding in which the penalty recoverable is civil or remedial in nature. (Emphasis supplied.)^[22][22]

The right of the Marcoses against self-incrimination has been amply protected by the provisions of R.A. 1379, which prohibits the criminal prosecution of individuals for or on account of any transaction, matter or thing concerning which they are compelled — after having claimed the privilege against self-incrimination — to testify or produce evidence, documentary or otherwise.^[23][23] Since this case’s inception in 1991, petitioners have participated in the hearings, argued their case, and submitted their pleadings and other documents, never once putting at issue their right against self-incrimination or the violation thereof.^[24][24]

More importantly, the factual context in the present case is wholly disparate from that in Cabal, which was originally initiated as an action in personam. Manuel C. Cabal, then Chief of Staff of the Armed Forces of the Philippines, was charged with “graft, corrupt practices, unexplained wealth, conduct unbecoming of an officer and gentleman, dictatorial tendencies, giving false statements of his assets and liabilities in 1958 and other equally reprehensible acts.”^[25][25] In contradistinction, the crux of the present case devolves solely upon the recovery of assets presumptively characterized by the law as ill-gotten, and owned by the State; hence, it is an action in rem. In Republic v. Sandiganbayan, this Court settled the rule that forfeiture proceedings are actions in rem and therefore civil in nature.^[26][26] Proceedings under R.A. 1379 do not terminate in the imposition of a penalty but merely in the forfeiture of the properties illegally acquired in favor of the State.^[27][27] 

As early as Almeda v. Judge Perez,^[28][28] we have already delineated the difference between criminal and civil forfeiture and classified the proceedings under R.A. 1379 as belonging to the latter, viz:

“Forfeiture proceedings may be either civil or criminal in nature, and may be in rem or in personam. If they are under a statute such that if an indictment is presented the forfeiture can be included in the criminal case, they are criminal in nature, although they may be civil in form; and where it must be gathered from the statute that the action is meant to be criminal in its nature it cannot be considered as civil. If, however, the proceeding does not involve the conviction of the wrongdoer for the offense charged the proceeding is of a civil nature; and under statutes which specifically so provide, where the act or omission for which the forfeiture is imposed is not also a misdemeanor, such forfeiture may be sued for and recovered in a civil action.”

In the first place a proceeding under the Act (Rep. Act No. 1379) does not terminate in the imposition of a penalty but merely in the forfeiture of the properties illegally acquired in favor of the state. (Sec. 6) In the second place the procedure outlined in the law leading to forfeiture is that provided for in a civil action. Thus there is a petition (Sec. 3), then an answer (Sec. 4), and lastly, a hearing. The preliminary investigation which is required prior to the filing of the petition, in accordance with Sec. 2 of the Act, is provided expressly to be one similar to a preliminary investigation in a criminal case. If the investigation is only similar to that in a criminal case, but the other steps in the proceedings are those for civil proceedings, it stands to reason that the proceeding is not criminal. xxx. (citations omitted)

Forfeiture cases impose neither a personal criminal liability, nor the civil liability that arises from the commission of a crime (ex delicto). The liability is based solely on a statute that safeguards the right of the State to recover unlawfully acquired properties.^[29][29] Executive Order No. 14 (E.O. No. 14), Defining the Jurisdiction Over Cases Involving the Ill-gotten Wealth of Former President Ferdinand Marcos, authorizes the filing of forfeiture suits that will proceed independently of any criminal proceedings. Section 3 of E.O. 14 empowered the PCGG to file independent civil actions separate from the criminal actions.^[30][30]

Thus, petitioners cannot equate the present case with a criminal case and assail the proceedings before the Sandiganbayan on the bare claim that they were deprived of a “full-blown trial.” In affirming the Sandiganbayan and denying petitioners’ Motion for Reconsideration in the Swiss Deposits Decision, the Court held:

Section 5 of RA 1379 provides:

The court shall set a date for a hearing which may be open to the public, and during which the respondent shall be given ample opportunity to explain, to the satisfaction of the court, how he has acquired the property in question.

And pursuant to Section 6 of the said law, if the respondent is unable to show to the satisfaction of the court that he has lawfully acquired the property in question, then the court shall declare such property forfeited in favor of the State.

xxx                               xxx                               xxx

A careful analysis of Section 5 of RA 1379 readily discloses that the word “hearing” does not always require the formal introduction of evidence in a trial, only that the parties are given the occasion to participate and explain how they acquired the property in question.  If they are unable to show to the satisfaction of the court that they lawfully acquired the property in question, then the court shall declare such property forfeited in favor of the State. There is no provision in the law that a full blown trial ought to be conducted before the court declares the forfeiture of the subject property.  Thus, even if the forfeiture proceedings do not reach trial, the court is not precluded from determining the nature of the acquisition of the property in question even in a summary proceeding.^[31][31]

As forfeiture suits under R.A. 1379 are civil in nature, it follows that Rule 35 of the Rules of Court on Summary Judgment may be applied to the present case. This is consistent with our ruling in the Swiss Deposits Decision upholding the summary judgment rendered by the Sandiganbayan over the Swiss deposits, which are subject of the same Petition for Forfeiture as the Arelma assets.

II. Republic complied with Section 3 (c), (d), and (e) of R.A. 1375

Petitioner Marcos, Jr. argues that there are genuine issues of fact as borne by the Pre-trial Order, Supplemental Pre-trial Order, and the Pre-trial Briefs of the parties. He laments that the Republic was unable to meet the necessary averments under the forfeiture law, which requires a comparison between the approximate amount of property acquired during the incumbency of Ferdinand Marcos, and the total amount of governmental salaries and other earnings.^[32][32] While the Petition contained an analysis of Ferdinand Marcos’s income from 1965 to 1986 (during his incumbency), there was purportedly no mention of the latter’s income from 1940 to 1965 when he was a practicing lawyer, congressman and senator; other earnings until the year 1985; and real properties that were auctioned off to satisfy the estate tax assessed by the Bureau of Internal Revenue.^[33][33]

          Petitioner Marcos, Jr. implores us herein to revisit and reverse our earlier ruling in the Swiss Deposits Decision and argues that the pronouncements in that case are contrary to law and its basic tenets. The Court in that case allegedly applied a lenient standard for the Republic, but a strict one for the Marcoses. He finds fault in the ruling therein which was grounded on public policy and the ultimate goal of the forfeiture law, arguing that public policy is better served if the Court gave more importance to the substantive rights of the Marcoses.

          In accordance with the principle of immutability of judgments, petitioners can no longer use the present forum to assail the ruling in the Swiss Deposits Decision, which has become final and executory. Aside from the fact that the method employed by petitioner is improper and redundant, we also find no cogent reason to revisit the factual findings of the Sandiganbayan in Civil Case No. 0141, which this Court in the Swiss Deposits Decision found to be thorough and convincing. In the first place, using a Rule 45 Petition to question a judgment that has already become final is improper, especially when it seeks reconsideration of factual issues, such as the earnings of the late President from 1940 to 1965 and the existence of real properties that petitioners claim were auctioned off to pay the taxes. Secondly, petitioners never raised the existence of these earnings and real properties at the outset and never mentioned these alleged other incomes by way of defense in their Answer. In their Answer, and even in their subsequent pleadings, they merely made general denials of the allegations without stating facts admissible in evidence at the hearing. As will be discussed later, both the Sandiganbayan and the Supreme Court found that the Marcoses’ unsupported denials of matters patently and necessarily within their knowledge were inexcusable, and that a trial would have served no purpose at all.^[34][34]

          R.A. 1379 provides that whenever any public officer or employee has acquired during his incumbency an amount of property manifestly out of proportion to his salary as such public officer and to his other lawful income, said property shall be presumed prima facie to have been unlawfully acquired.^[35][35] The elements that must concur for this prima facie presumption to apply are the following: (1) the offender is a public officer or employee; (2) he must have acquired a considerable amount of money or property during his incumbency; and (3) said amount is manifestly out of proportion to his salary as such public officer or employee and to his other lawful income and income from legitimately acquired property.

          Thus, in determining whether the presumption of ill-gotten wealth should be applied, the relevant period is incumbency, or the period in which the public officer served in that position. The amount of the public officer’s salary and lawful income is compared against any property or amount acquired for that same period.  In the Swiss Deposits Decision, the Court ruled that petitionerRepublicwas able to establish the prima facie presumption that the assets and properties acquired by the Marcoses “were manifestly and patently disproportionate to their aggregate salaries as public officials.”^[36][36]

          For a petition to flourish under the forfeiture law, it must contain the following:

(a)          The name and address of the respondent.

(b)         The public officer or employment he holds and such other public offices or employment which he has previously held.

(c)          The approximate amount of property he has acquired during his incumbency in his past and present offices and employments.

(d)         A description of said property, or such thereof as has been identified by the Solicitor General.

(e)          The total amount of his government salary and other proper earnings and incomes from legitimately acquired property, and

(f)          Such other information as may enable the court to determine whether or not the respondent has unlawfully acquired property during his incumbency.^[37][37] (Emphasis supplied)

          Petitioners claim that the Republic failed to comply with subparagraphs c, d, and e above, because the latter allegedly never took into account the years when Ferdinand Marcos served as a war veteran with back pay, a practicing lawyer, a trader and investor, a congressman and senator. We find this claim to be a haphazard rehash of what has already been conclusively determined by the Sandiganbayan and the Supreme Court in the Swiss Deposits Decision. The alleged “receivables from prior years” were without basis, because Marcos never had a known law office nor any known clients, and neither did he file any withholding tax certificate that would prove the existence of a supposedly profitable law practice before he became President. As discussed in the Swiss Deposits Decision:

The Solicitor General made a very thorough presentation of its case for forfeiture:

xxx                                           xxx                                           xxx

4. Respondent Ferdinand E. Marcos (now deceased and represented by his Estate/Heirs) was a public officer for several decades continuously and without interruption as Congressman, Senator, Senate President and President of the Republic of thePhilippinesfrom December 31, 1965 up to his ouster by direct action of the people of EDSA on February 22-25, 1986.

5. Respondent Imelda Romualdez Marcos (Imelda, for short) the former First Lady who ruled with FM (Ferdinand Marcos) during the 14-year martial law regime, occupied the position of Minister of Human Settlements from June 1976 up to the peaceful revolution in February 22-25, 1986. She likewise served once as a member of the Interim Batasang Pambansa during the early years of martial law from 1978 to 1984 and as Metro Manila Governor in concurrent capacity as Minister of Human Settlements.

xxx                                           xxx                                           xxx

11. At the outset, however, it must be pointed out that based on the Official Report of the Minister of Budget, the total salaries of former President Marcos as President from 1966 to 1976 was ₱60,000 a year and from 1977 to 1985, ₱100,000 a year; while that of the former First Lady, Imelda R. Marcos, as Minister of Human Settlements from June 1976 to February 22-25, 1986 was ₱75,000 a year.^[38][38]

          The Sandiganbayan found that neither the late Ferdinand Marcos nor petitioner Imelda Marcos filed any Statement of Assets and Liabilities, as required by law, from which their net worth could be determined. Coupled with the fact that the Answer consisted of general denials and a standard plea of “lack of knowledge or information sufficient to form a belief as to the truth of the allegations” – what the Court characterized as “foxy replies” and mere pretense – fairness dictates that what must be considered as lawful income should only be the accumulated salaries of the spouses and what are shown in the public documents they submitted, such as their Income Tax Return (ITR) and their Balance Sheets. The amounts representing the combined salaries of the spouses were admitted by petitioner Imelda Marcos in paragraph 10 of her Answer, and reflected in the Certification dated May 27, 1986 issued by then Minister of Budget and Management Alberto Romulo:

Ferdinand E. Marcos, as President

1966-1976	at ₱60,000/year	₱660,000
1977-1984	at ₱100,000/year	800,000
1985	at ₱110,000/year	110,000
		₱1,570,00

Imelda R. Marcos, as Minister

June 1976-1985

at ₱75,000/year

₱718,000

In addition to their accumulated salaries from 1966 to 1985 are the Marcos couple’s combined salaries from January to February 1986 in the amount of ₱30,833.33. Hence, their total accumulated salaries amounted to ₱2,319,583.33. Converted to U.S. dollars on the basis of the corresponding peso-dollar exchange rates prevailing during the applicable period when said salaries were received, the total amount had an equivalent value of $304,372.43.^[39][39]

          The date contained in the ITRs and Balance Sheets filed by the Marcoses are summarized in Schedules A to D submitted as evidence by the Republic. Schedule A showed that from 1965 to 1984, the Marcoses reported Php 16,408,442.00 or USD 2,414,484.91 in total income, comprised of:

Income Source		Amount		Percentage
Official Salaries	–	₱2,627,581.00	–	16.01%
Legal Practice	–	11,109,836.00	–	67.71%
Farm Income	–	149,700.00	–	.91%
Others	–	2,521,325.00	–	15.37%
Total		₱16,408,442.00	–	100.00%

          The amount reported by the Marcos couple as their combined salaries more or less coincided with the Official Report submitted by the Minister of Budget. Yet what appeared anomalous was the Php 11,109,836 representing “Legal Practice,” which accounted for 67% or more than three-fourths of their reported income. Out of this anomalous amount, Php 10,649,836, or 96% thereof, represented “receivables from prior years” during the period 1967 to 1984. The Court cited the Solicitor General’s findings:

In the guise of reporting income using the cash method under Section 38 of the National Internal Revenue Code, FM made it appear that he had an extremely profitable legal practice before he became a President (FM being barred by law from practicing his law profession during his entire presidency) and that, incredibly, he was still receiving payments almost 20 years after. The only problem is that in his Balance Sheet attached to his 1965 ITR immediately preceding his ascendancy to the presidency he did not show any Receivables from client at all, much less the ₱10.65-M that he decided to later recognize as income. There are no documents showing any withholding tax certificates. Likewise, there is nothing on record that will show any known Marcos client as he has no known law office. As previously stated, his net worth was a mere ₱120,000.00 in December, 1965. The joint income tax returns of FM and Imelda cannot, therefore, conceal the skeletons of their kleptocracy.^[40][40]

          In addition, the former President also reported a total of                   Php 2,521,325 which he referred to as “Miscellaneous Items” and “Various Corporations” under “Other Income” for 1972-1976. Spouses Marcos did not declare any income from any deposits that may be subject to a 5% withholding tax, nor did they file any capital gains tax returns from 1960 to 1965. The Bureau of Internal Revenue attested that there are no records pertaining to the tax transactions of the spouses inBaguioCity,Manila,Quezon City, and Tacloban.

          The Balance Sheet attached to the couple’s ITR for 1965 indicates an ending net worth of Php 120,000, which covered the year immediately preceding their ascendancy to the presidency. As previously mentioned, the combined salaries of the spouses for the period 1966 to 1986, or in the two decades that they stayed in power, totaled only USD 304,372.43. In stark contrast, as shown by Schedule D, computations establish the total net worth of the spouses for the years 1965 until 1984 in the total amount of            USD 957,487.75, assuming that the income from legal practice is real and valid.^[41][41] The combined salaries make up only 31.79% of the spouses’ total net worth from 1965 to 1984. This means petitioners are unable to account for or explain more than two-thirds of the total net worth of the Marcos spouses from 1965 to 1984.

Thus, for the final time, we soundly reiterate that the Republic was able to establish the prima facie presumption that the assets and properties acquired by the Marcoses were manifestly and patently disproportionate to their aggregate salaries as public officials. The Republic presented further evidence that they had bigger deposits beyond their lawful incomes, foremost of which were the Swiss accounts deposited in the names of five foundations spirited away by the couple to different countries. Petitioners herein thus failed to overturn this presumption when they merely presented vague denials and pleaded “lack of sufficient knowledge” in their Answer.

In any case, petitioners may no longer question the findings of the Sandiganbayan affirmed by the Supreme Court in the Swiss Deposits Decision, as these issues have long become the “law of the case” in the original Petition for Forfeiture. As held in Philippine Coconut Producers Federation, Inc. (COCOFED) v. Republic:^[42][42]

Law of the case … is a term applied to an established rule that when an appellate court passes on a question and remands the case to the lower court for further proceedings, the question there settled becomes the law of the case upon subsequent appeal. It means that whatever is once irrevocably established as the controlling legal rule or decision between the same parties in the same case continues to be the law of the case, … so long as the facts on which such decision was predicated continue to be the facts of the case before the court.     

            Otherwise put, the principle means that questions of law that have been previously raised and disposed of in the proceedings shall be controlling in succeeding instances where the same legal question is raised, provided that the facts on which the legal issue was predicated continue to be the facts of the case before the court.

In the case at bar, the same legal issues are being raised by petitioners. In fact, petitioner Marcos Jr. admits outright that what he seeks is a reversal of the issues identical to those already decided by the Court in the Swiss Deposits Decision.^[43][43] He may not resuscitate, via another petition for review, the same issues long laid to rest and established as the law of the case.

III. Civil Case No. 0141 has not yet terminated

          Petitioners next argue that the “law of the case” doctrine should be applied, not to the ruling affirming the forfeiture, but to the grant of the summary judgment over the Swiss accounts as affirmed by the Supreme Court in the Swiss Deposits Decision. They contend that since the Court’s Decision mentioned only the deposits under the five Swiss foundations, then the Republic can no longer seek partial summary judgment for forfeiture over the Arelma account. And since the said Decision has long become final and has in fact been executed, they insist that the Sandiganbayan has lost its jurisdiction over the case.

          Petitioners are under the mistaken impression that the Swiss Deposits Decision serves as the entire judgment in Civil Case No. 0141. Just because respondent Republic succeeded in obtaining summary judgment over the Swiss accounts does not mean it is precluded from seeking partial summary judgment over a different subject matter covered by the same petition for forfeiture. In fact, Civil Case No. 0141 pertains to the recovery of all the assets enumerated therein, such as (1) holding companies, agro-industrial ventures and other investments; (2) landholdings, buildings, condominium units, mansions; (3) New York properties; (4) bills amounting to Php 27,744,535, time deposits worth Php 46.4 million, foreign currencies and jewelry seized by the United States customs authorities in Honolulu, Hawaii; (5) USD 30 million in the custody of the Central Bank in dollar-denominated Treasury Bills; shares of stock, private vehicles, and real estate in the United States, among others.^[44][44]

          In the enumeration of properties included in the Petition, the Arelma assets were described as “Assets owned by Arelma, Inc., a Panamanian corporation organized in Liechtenstein, for sole purpose (sic) of maintaining an account in Merrill Lynch, New York.”^[45][45] Paragraph 59 of the Petition for Forfeiture states:

59. FM and Imelda used a number of their close business associations or favorite cronies in opening bank accounts abroad for the purpose of laundering their filthy riches. Aside from the foundations and corporations established by their dummies/nominees to hide their ill-gotten wealth as had already been discussed, several other corporate entities had been formed for the same purpose, to wit:

(1). ARELMA, INC – (T)his was organized for the sole purpose of maintaining an account and portfolio in Merrill Lynch,New York.

(2). Found among Malacañang documents is a letter dated September 21, 1972 by J.L. Sunier, Senior Vice President of SBC to Mr. Jose V. Campos, a known Marcos crony (See Annex “V-21” hereof). In the said letter, instructions were given by Sunier to their Panama office to constitute a Panamanian company, the name of which will be either Larema, Inc. or Arelma, Inc., or Relma, Inc. this company will have the same set-up as Maler; the appointment of Sunier and Dr. Barbey as attorneys and appointment of selected people in Panama as directors; the opening of direct account in the name of the new company with Merrill Lynch, New York, giving them authority to operate the account, but excluding withdrawals of cash, securities or pledging of portfolio; and sending of money in favor of the new company under reference AZUR in order to cut links with the present account already opened with Merrill Lynch under an individual’s name.

(3). Also found was a letter dated November 14, 1972 and signed by Jose Y. Campos (Annex “V-21-a” hereof). The letter was addressed to SEC, Geneva, and Sunier duly authorized by their “mutual friend” regarding the opening of an account of Arelma, Inc. with Merrill Lynch, New York to the attention of Mr. Saccardi, Vice-President.

(4). On May 19, 1983, J. L. Sunier wrote a letter with a reference “SAPPHIRE” and a salutation “Dear Excellency” stating, among others, the current valuation by Merrill Lynch of the assets of Arelma, Inc. amounting to $3,369,975 (Annex “V-21-b” hereof).

(5). Included in the documents sent by SBC, Geneva, through the Swiss Federal Department of Justice and Police were those related to Arelma, Inc. as follows:

(a) Opening bank documents for Account No. 53.145 A.R. dated September 17, 1972, signed by Dr. Barbey and Mr. Sunier. This was later on cancelled as a result of the change in attorneys and authorized signatories of the company (Annexes “V-21-c” and “V-21-d” hereof). 

(b) Opening bank documents for Account No. 53. 145 A.R. signed by new attorneys led by Michel Amandruz (Annexes “V-21-e” and “V-21-f” hereof).

(c). Bank statements for Account No. 53.145 A.R. with ending balance of $26.10 as of 12-31-85 (Annex “V-21-g” and “V-21-h” hereof).

(d). An informative letter stating that Account 53. 145 A.R. was related to an account opened with Merrill Lynch Asset Management, Inc., New Yorkfor Arelma, Inc. The opening of this account slowly made Account 53. 145 A.R. an inactive account (See Annexes “V-21-I” and “V-21-j” hereof).^[46][46]

          When the Marcos family fled Manilain 1986, they left behind several documents that revealed the existence of secret bank deposits in Switzerlandand other financial centers.^[47][47] These papers, referred to by respondent as Malacañang documents, detailed how “Arelma, Inc.”^[48][48] was established. Attached as Annex V-21 was the Letter of Instruction sent to the Panamanian branch of the Sunier company to open Arelma. The latter was to have the same set-up as Maler, one of the five Swiss foundations, subject of the 2000 Motion. Annexes “V-21-c” to “V-21-j” pertained to documents to be used to open an account with Merrill Lynch Asset Management, Inc. inNew York.

          The Swiss Deposits Decision dealt only with the summary judgment as to the five Swiss accounts, because the 2000 Motion for Partial Summary Judgment dated 7 March 2000 specifically identified the five Swiss accounts only. It did not include the Arelma account. There was a prayer for general reliefs in the 1996 Motion, but as has been discussed, this prayer was dismissed by the Sandiganbayan. The dismissal was based solely on the existence of the Compromise Agreements for a global settlement of the Marcos assets, which the Supreme Court later invalidated. The 2000 Motion for Summary Judgment was confined only to the five accounts amounting to USD 356 million held by five Swiss foundations.

          As clarified by the Solicitor General during the hearing of 24 March 2000 in the Sandiganbayan:

PJ: The Court is of the impression and the Court is willing to be corrected, that ones (sic) the plaintiff makes a claim for summary judgment it in fact states it no longer intends to present evidence and based on this motion to render judgment, is that correct?

SOL. BALLACILLO: Yes, your Honors.

PJ: In other words, on the basis of pre-trial, you are saying…because if we are talking of a partial claim, then there is summary judgment, unless there is preliminary issue to the claim which is a matter of stipulation.

SOL. BALLACILLO: We submit, your Honors, that there can be partial summary judgment on this matter.

PJ: But in this instance, you are making summary judgment on the entire case?

SOL. BALLACILLO: With respect to the $365 million.

PJ: In the complaint you asked for the relief over several topics. You have $356 million, $25 million and $5 million. Now with regards to the $365 million, you are asking for summary judgment?

 SOL. BALLACILLO: Yes, your Honor.

PJ: And, therefore, you are telling us now, “that’s it, we need not have to prove.”

SOL. BALLACILLO: Yes, your Honors.^[49][49] (Emphasis supplied.)

          The Court’s discussion clearly did not include the Arelma account. The dispositive portion of the Swiss Deposits Decision states:

WHEREFORE, the petition is hereby GRANTED. The assailed Resolution of the Sandiganbayan dated January 31, 2002 is SET ASIDE. The Swiss deposits which were transferred to and are now deposited in escrow at the Philippine National Bank in the estimated aggregate amount of US$658,175,373.60 as of January 31, 2002, plus interest, are hereby forfeited in favor of petitioner Republic of the Philippines.^[50][50]

          Thus, the other properties, which were subjects of the Petition for Forfeiture, but were not included in the 2000 Motion, can still be subjects of a subsequent motion for summary judgment. To rule otherwise would run counter to this Court’s long established policy on asset recovery which, in turn, is anchored on considerations of national survival.

          E.O. 14, Series of 1986,^[51][51] and Section 1(d) of Proclamation No. 3^[52][52] declared the national policy after the Marcos regime. The government aimed to implement the reforms mandated by the people: protecting their basic rights, adopting a provisional constitution, and providing for an orderly transition to a government under a new constitution. The said Proclamation further states that “The President shall give priority to measures to achieve the mandate of the people to recover ill-gotten properties amassed by the leaders and supporters of the previous regime and protect the interest of the people through orders of sequestration or freezing of assets or accounts.” One of the “whereas” clauses of E.O. 14 entrusts the PCGG with the “just and expeditious recovery of such ill-gotten wealth in order that the funds, assets and other properties may be used to hasten national economic recovery.” These clauses are anchored on the overriding considerations of national interest and national survival, always with due regard to the requirements of fairness and due process.  

          With the myriad of properties and interconnected accounts used to hide these assets that are in danger of dissipation, it would be highly unreasonable to require the government to ascertain their exact locations and recover them simultaneously, just so there would be one comprehensive judgment covering the different subject matters.

          In any case, the Sandiganbayan rightly characterized their ruling on the 2004 Motion as a separate judgment, which is allowed by the Rules of Court under Section 5 of Rule 36:

Separate judgments.—When more than one claim for relief is presented in an action, the court, at any stage, upon a determination of the issues material to a particular claim and all counterclaims arising out of the transaction or occurrence which is the subject matter of the claim, may render a separate judgment disposing of such claim. The judgment shall terminate the action with respect to the claim so disposed of and the action shall proceed as to the remaining claims. In case a separate judgment is rendered, the court by order may stay its enforcement until the rendition of a subsequent judgment or judgments and may prescribe such conditions as may be necessary to secure the benefit thereof to the party in whose favor the judgment is rendered.^[53][53]

          Rule 35 on summary judgments, admits of a situation in which a case is not fully adjudicated on motion,^[54][54] and judgment is not rendered upon all of the reliefs sought. In Philippine Business Bank v. Chua,^[55][55] we had occasion to rule that a careful reading of its Section 4 reveals that a partial summary judgment was never intended to be considered a “final judgment,” as it does not “[put] an end to an action at law by declaring that the plaintiff either has or has not entitled himself to recover the remedy he sues for.” In this case, there was never any final or complete adjudication of Civil Case No. 0141, as the Sandiganbayan’s partial summary judgment in the Swiss Deposits Decision made no mention of the Arelma account.

          Section 4 of Rule 35 pertains to a situation in which separate judgments were necessary because some facts existed without controversy, while others were controverted. However, there is nothing in this provision or in the Rules that prohibits a subsequent separate judgment after a partial summary judgment on an entirely different subject matter had earlier been rendered. There is no legal basis for petitioners’ contention that a judgment over the Swiss accounts bars a motion for summary judgment over the Arelma account.

          Thus, the Swiss Deposits Decision has finally and thoroughly disposed of the forfeiture case only as to the five Swiss accounts. Respondent’s 2004 Motion is in the nature of a separate judgment, which is authorized under Section 5 of Rule 36. More importantly respondent has brought to our attention the reasons why a motion for summary judgment over the Arelma account was prompted only at this stage. In Republic of the Philippines v. Pimentel,^[56][56] a case filed by human rights victims in the United States decided by the US Supreme Court only in 2008, the antecedents of the Arelma account were described as follows:

            In 1972, Ferdinand Marcos, then President of the Republic, incorporatedArelma,S.A.(Arelma), under Panamanian law. Around the same time, Arelma opened a brokerage account with Merrill Lynch, Pierce, Fenner & Smith Inc. (Merrill Lynch) inNew York, in which it deposited $2 million. As of the year 2000, the account had grown to approximately $35 million.

Alleged crimes and misfeasance by Marcos during his presidency became the subject of worldwide attention and protest. A class action by and on behalf of some 9,539 of his human rights victims was filed against Marcos and his estate, among others. The class action was tried in the United States District Court for the District of Hawaii and resulted in a nearly $2 billion judgment for the class. See Hilao v. Estate of Marcos, 103 F.3d 767 (C.A.9 1996). We refer to that litigation as the Pimentel case and to its class members as the Pimentel class. In a related action, the Estate of Roger Roxas and Golden Budha [sic] Corporation (the Roxas claimants) claim a right to execute against the assets to satisfy their own judgment against Marcos’ widow, Imelda Marcos. See Roxas v. Marcos, 89 Hawaii 91, 113-115, 969 P.2d 1209, 1231-1233 (1998).

The Pimentel class claims a right to enforce its judgment by attaching the Arelma assets held by Merrill Lynch. The Republic and the Commission claim a right to the assets under a 1955 Philippine law providing that property derived from the misuse of public office is forfeited to the Republic from the moment of misappropriation. See An Act Declaring Forfeiture in Favor of the State Any Property Found To Have Been Unlawfully Acquired by Any Public Officer or Employee and Providing for the Proceedings Therefor, Rep. Act No. 1379, 51:9 O.G. 4457 (June 18, 1955).

After Marcos fled thePhilippinesin 1986, the Commission was created to recover any property he wrongfully took. Almost immediately the Commission asked the Swiss Government for assistance in recovering assets-including shares in Arelma-that Marcos had moved toSwitzerland. In compliance the Swiss Government froze certain assets and, in 1990, that freeze was upheld by the Swiss Federal Supreme Court. In 1991, the Commission asked the Sandiganbayan, a Philippine court of special jurisdiction over corruption cases, to declare forfeited to the Republic any property Marcos had obtained through misuse of his office. That litigation is still pending in the Sandiganbayan. (Citations omitted.)

          The pursuit of the Arelma account encountered several hindrances, as it was subject to not one, but two claims of human rights victims in foreign courts: the Pimentel class and the Roxas claimants. The government and the PCGG were able to obtain a Stay Order at the appellate level, but the trial court judge vacated the stay and awarded the Arelma assets to the Pimentel class of human rights victims.

          As early as 1986, the PCGG had already sought assistance from the Swiss government to recover the Arelma assets; however, it was only in 2000 that the Swiss authorities turned over two Stock Certificates, which were assets of Arelma. The transfer by Switzerlandof the Stock Certificates to the Republic was made under the same conditions as the bank deposits of the five Swiss foundations.^[57][57]

          Meanwhile, the Pimentel case was tried as a class action before Judge Manuel Real of the United States District Court for the Central District of California. Judge Real was sitting by designation in the District of Hawaii after the Judicial Panel on Multidistrict Litigation consolidated the various human rights Complaints against Marcos in that court.^[58][58] Judge Real directed Merrill Lynch to file an action for interpleader in the District of Hawaii, where he presided over the matter, and where the Republic and the PCGG were named as defendants. In Pimentel, the Court further narrates how Judge Real ruled that the pending litigation in Philippine courts could not determine entitlement to the Arelma assets:

After being named as defendants in the interpleader action, the Republic and the Commission asserted sovereign immunity under the Foreign Sovereign Immunities Act of 1976 (FSIA), 28 U.S.C. § 1604. They moved to dismiss pursuant to Rule 19(b), based on the premise that the action could not proceed without them… Judge Real initially rejected the request by the Republic and the Commission to dismiss the interpleader action. They appealed, and the Court of Appeals reversed. It held the Republic and the Commission are entitled to sovereign immunity and that under Rule 19(a) they are required parties (or “necessary” parties under the old terminology). See In re Republic of the Philippines, 309 F.3d 1143, 1149-1152 (C.A.9 2002). The Court of Appeals entered a stay pending the outcome of the litigation in the Sandiganbayan over the Marcos assets.

After concluding that the pending litigation in the Sandiganbayan could not determine entitlement to the Arelma assets, Judge Real vacated the stay, allowed the action to proceed, and awarded the assets to the Pimentel class. A week later, in the case initiated before the Sandiganbayan in 1991, the Republic asked that court to declare the Arelma assets forfeited, arguing the matter was ripe for decision. The Sandiganbayan has not yet ruled. In the interpleader case the Republic, the Commission, Arelma, and PNB appealed the District Court’s judgment in favor of the Pimentel claimants. This time the Court of Appeals affirmed. Dismissal of the interpleader suit, it held, was not warranted under Rule 19(b) because, though the Republic and the Commission were required (“necessary”) parties under Rule 19(a), their claim had so little likelihood of success on the merits that the interpleader action could proceed without them. One of the reasons the court gave was that any action commenced by the Republic and the Commission to recover the assets would be barred by New York’s 6-year statute of limitations for claims involving the misappropriation of public property.^[59][59] (Citations omitted)

          The American Supreme Court reversed the judgment of the Court of Appeals for the Ninth Circuit and remanded the case with instructions to order the District Court to dismiss the interpleader action. The former held that the District Court and the Court of Appeals failed to give full effect to sovereign immunity when they held that the action could proceed without the Republic and the Commission:

Comity and dignity interests take concrete form in this case. The claims of the Republic and the Commission arise from events of historical and political significance for the Republic and its people. The Republic and the Commission have a unique interest in resolving the ownership of or claims to the Arelma assets and in determining if, and how, the assets should be used to compensate those persons who suffered grievous injury under Marcos. There is a comity interest in allowing a foreign state to use its own courts for a dispute if it has a right to do so. The dignity of a foreign state is not enhanced if other nations bypass its courts without right or good cause. Then, too, there is the more specific affront that could result to the Republic and the Commission if property they claim is seized by the decree of a foreign court.^[60][60]

          Thus it was only in 2008 that the Republic was finally able to obtain a favorable judgment from the American Supreme Court with regard to the different claims against the Arelma assets. Petitioners never intervened or lifted a finger in any of the litigation proceedings involving the enforcement of judgment against the Arelma assets abroad. We find merit in respondent’s observation that petitioner Imelda Marcos’s participation in the proceedings in the Philippines, particularly her invocation of her right against undue deprivation of property, is inconsistent with her and Ferdinand Marcos, Jr.’s insistence that the properties in question do not belong to them, and that they are mere beneficiaries.^[61][61]

          Indeed, it is clear that the Arelma assets are in danger of dissipation. Even as the United States Supreme Court gave weight to the likely prejudice to be suffered by the Republic when it dismissed the interpleader in Pimentel, it also considered that the “balance of equities may change in due course. One relevant change may occur if it appears that the Sandiganbayan cannot or will not issue its ruling within a reasonable period of time. If the Sandiganbayan rules that the Republic and the Commission have no right to the assets, their claims in some later interpleader suit would be less substantial than they are now.”^[62][62]

IV. Petitioners’ sham denials justify the application of summary judgment

As already settled in the Swiss Deposits Decision and reiterated in the discussion above as the law of the case, the lawful income of the Marcoses is only USD 304,372.43. As discussed in paragraph 9 of the Petition for Forfeiture, Annex V-21-b states that Arelma’s assets as of 19 May 1983 were worth USD 3,369,975.00.^[63][63] The entirety of the lawful income of the Marcoses represents only 9% of the entire assets of Arelma, which petitioners remain unable to explain.

In their Answer to the Petition for Forfeiture, petitioners employ the same tactic, consisting of general denials based on a purported lack of knowledge regarding the whereabouts of the Arelma assets. Paragraph 32 of the said pleading states:

Respondents specifically DENY paragraph 59 of the Petition insofar as it alleges that the Marcoses used their cronies and engaged in laundering their filthy riches for being false and conclusory of the truth being that the Marcoses did not engage in any such illegal acts and that all the properties they acquired were lawfully acquired; and specifically DENY the rest for lack of knowledge or information sufficient to form a belief as to the truth of the allegation since Respondents are not privy to the alleged transactions.^[64][64]

This particular denial mimics petitioners’ similar denials of the allegations in the forfeiture Petition pertaining to the Swiss accounts and is practically identical to paragraphs 7 to 37 of the Answer. The Swiss Deposits Decision has characterized these as “sham” denials:

17. Respondents specifically DENY paragraph 18 of the Petition for lack of knowledge or information sufficient to form a belief as to the truth of the allegation since Respondents cannot remember with exactitude the contents of the alleged ITRs.

18. Respondents specifically DENY paragraph 19 of the Petition for lack of knowledge or information sufficient to form a belief as to the truth of the allegation since Respondents cannot remember with exactitude the contents of the alleged ITRs and that they are not privy to the activities of the BIR.

19. Respondents specifically DENY paragraph 20 of the Petition for lack of knowledge or information sufficient to form a belief as to the truth of the allegation since Respondents cannot remember with exactitude the contents of the alleged ITRs.

20. Respondents specifically DENY paragraph 21 of the Petition for lack of knowledge or information sufficient to form a belief as to the truth of the allegation since Respondents cannot remember with exactitude the contents of the alleged ITRs.

21. Respondents specifically DENY paragraph 22 of the Petition for lack of knowledge or information sufficient to form a belief as to the truth of the allegation since Respondents cannot remember with exactitude the contents of the alleged ITRs.

22. Respondents specifically DENY paragraph 23 insofar as it alleges that Respondents clandestinely stashed the country’s wealth inSwitzerland and hid the same under layers and layers of foundation and corporate entities for being false, the truth being that Respondents aforesaid properties were lawfully acquired.

23. Respondents specifically DENY paragraphs 24, 25, 26, 27, 28, 29 and 30 of the Petition for lack of knowledge or information sufficient to form a belief as to the truth of the allegation since Respondents were not privy to the transactions regarding the alleged Azio-Verso-Vibur Foundation accounts, except that as to Respondent Imelda R. Marcos she specifically remembers that the funds involved were lawfully acquired.

24. Respondents specifically DENY paragraphs 31, 32, 33, 34, 35, 36,37, 38, 39, 40, and 41 of the Petition for lack of knowledge or information sufficient to form a belief as to the truth of the allegations since Respondents are not privy to the transactions and as to such transaction they were privy to they cannot remember with exactitude the same having occurred a long time ago, except that as to Respondent Imelda R. Marcos she specifically remembers that the funds involved were lawfully acquired.

25. Respondents specifically DENY paragraphs 42, 43, 44, 45, and 46, of the Petition for lack of knowledge or information sufficient to form a belief as to the truth of the allegations since Respondents were not privy to the transactions and as to such transaction they were privy to they cannot remember with exactitude the same having occurred a long time ago, except that as to Respondent Imelda R. Marcos she specifically remembers that the funds involved were lawfully acquired.

26. Respondents specifically DENY paragraphs 49, 50, 51 and 52, of the Petition for lack of knowledge or information sufficient to form a belief as to the truth of the allegations since Respondents were not privy to the transactions and as to such transaction they were privy to they cannot remember with exactitude the same having occurred a long time ago, except that as to Respondent Imelda R. Marcos she specifically remembers that the funds involved were lawfully acquired.

Upon careful perusal of the foregoing, the Court finds that respondent Mrs. Marcos and the Marcos children indubitably failed to tender genuine issues in their answer to the petition for forfeiture. A genuine issue is an issue of fact which calls for the presentation of evidence as distinguished from an issue which is fictitious and contrived, set up in bad faith or patently lacking in substance so as not to constitute a genuine issue for trial. Respondents’ defenses of “lack of knowledge for lack of privity” or “(inability to) recall because it happened a long time ago” or, on the part of Mrs. Marcos, that “the funds were lawfully acquired” are fully insufficient to tender genuine issues. Respondent Marcoses’ defenses were a sham and evidently calibrated to compound and confuse the issues.^[65][65] (Emphasis supplied.)

In the case at bar, petitioners give the same stock answer to the effect that the Marcoses did not engage in any illegal activities, and that all their properties were lawfully acquired. They fail to state with particularity the ultimate facts surrounding the alleged lawfulness of the mode of acquiring the funds in Arelma (which totaled USD 3,369,975.00 back in 1983), considering that the entirety of their lawful income amounted only to USD 304,372.43, or only 9% of the entire Arelma fund. Then, as now, they employ what the Court in G.R. No. 152154 characterized as a “negative pregnant,” not just in denying the criminal provenance of the Arelma funds, but in the matter of ownership of the said funds. As discussed by the Court in the first Republic case, cited by the Sandiganbayan:

Evidently, this particular denial had the earmark of what is called in the law on pleadings as a negative pregnant, that is, a denial pregnant with the admission of the substantial facts in the pleading responded to which are not squarely denied. It was in effect an admission of the averments it was directed at. Stated otherwise, a negative pregnant is a form of negative expression which carries with it an affirmation or at least an implication of some kind favorable to the adverse party. It is a denial pregnant with an admission of the substantial facts alleged in the pleading. Where a fact is alleged with qualifying or modifying language and the words of the allegation as so qualified or modified are literally denied, it has been held that the qualifying circumstances alone are denied while the fact itself is admitted.^[66][66]

Due to the insufficiency of petitioners’ denial of paragraph 59 which in effect denies only the qualifying circumstances, and by virtue of the Court’s ruling in the Swiss Deposits Decision, petitioners are deemed to have admitted the factual antecedents and the establishment of Arelma. In paragraph 32 of their Answer, they only deny the first few sentences of paragraph 59, while conveniently neglecting to address subparagraphs 1 to 5 and the opening bank documents described in 5 (a) to (d) of the Petition for Forfeiture. Paragraphs 1 and 2 of the Petition discusses the establishment of a Panamanian company to be named either “Larema, Inc. or Arelma, Inc., or Relma, Inc.;” the appointment of several people as directors; and the opening of a direct account with Merrill Lynch. Paragraphs 3 to 5 also of the Petition for Forfeiture detail correspondences between a “J.L. Sunier” and a letter addressed to Malacañang with the salutation “Dear Excellency.”

Regarding the averment of petitioners that they lack knowledge sufficient to form a belief as to the truth of the above allegations in the Petition for Forfeiture, the Court’s discussion in the Swiss Deposits Decision bears reiterating:

Here, despite the serious and specific allegations against them, the Marcoses responded by simply saying that they had no knowledge or information sufficient to form a belief as to the truth of such allegations. Such a general, self-serving claim of ignorance of the facts alleged in the petition for forfeiture was insufficient to raise an issue. Respondent Marcoses should have positively stated how it was that they were supposedly ignorant of the facts alleged.^[67][67]

Petitioners cannot escape the fact that there is manifest disparity between the amount of the Arelma funds and the lawful income of the Marcoses as shown in the ITRs filed by spouses Marcos. The Swiss Deposits Decision found that the genuineness of the said ITRs and balance sheets of the Marcos spouses have already been admitted by petitioners themselves:

Not only that. Respondents’ answer also technically admitted the genuineness and due execution of the Income Tax Returns (ITRs) and the balance sheets of the late Ferdinand E. Marcos and Imelda R. Marcos attached to the petition for forfeiture, as well as the veracity of the contents thereof.

The answer again premised its denials of said ITRs and balance sheets on the ground of lack of knowledge or information sufficient to form a belief as to the truth of the contents thereof. Petitioner correctly points out that respondents’ denial was not really grounded on lack of knowledge or information sufficient to form a belief but was based on lack of recollection. By reviewing their own records, respondent Marcoses could have easily determined the genuineness and due execution of the ITRs and the balance sheets. They also had the means and opportunity of verifying the same from the records of the BIR and the Office of the President. They did not.

When matters regarding which respondents claim to have no knowledge or information sufficient to form a belief are plainly and necessarily within their knowledge, their alleged ignorance or lack of information will not be considered a specific denial. An unexplained denial of information within the control of the pleader, or is readily accessible to him, is evasive and is insufficient to constitute an effective denial.^[68][68] (Footnotes omitted.)

We find that petitioners have again attempted to delay the goal of asset recovery by their evasiveness and the expedient profession of ignorance. It is well-established that a profession of ignorance about a fact that is necessarily within the pleader’s knowledge or means of knowing is as ineffective as no denial at all. On a similar vein, there is a failure by petitioners to properly tender an issue, which as correctly ruled by the Sandiganbayan, justifies the Republic’s resort to summary judgment.

Summary judgment may be allowed where there is no genuine issue as to any material fact and where the moving party is entitled to a judgment as a matter of law.^[69][69] In Yuchengco v. Sandiganbayan, the Court has previously discussed the importance of summary judgment in weeding out sham claims or defenses at an early stage of the litigation in order to avoid the expense and loss of time involved in a trial, viz:

Even if the pleadings appear, on their face, to raise issues, summary judgment may still ensue as a matter of law if the affidavits, depositions and admissions show that such issues are not genuine. The presence or absence of a genuine issue as to any material fact determines, at bottom, the propriety of summary judgment. A “genuine issue”, as differentiated from a fictitious or contrived one, is an issue of fact that requires the presentation of evidence. To the party who moves for summary judgment rests the onus of demonstrating clearly the absence of any genuine issue of fact, or that the issue posed in the complaint is patently unsubstantial so as not to constitute a genuine issue for trial.^[70][70]

Even if in the Answer itself there appears to be a tender of issues requiring trial, yet when the relevant affidavits, depositions, or admissions demonstrate that those issues are not genuine but sham or fictitious, the Court is justified in dispensing with the trial and rendering summary judgment for plaintiff.^[71][71]

Summary judgment, or accelerated judgment as it is sometimes known, may also call for a hearing so that both the movant and the adverse party may justify their positions. However, the hearing contemplated (with 10-day notice) is for the purpose of determining whether the issues are genuine or not, not to receive evidence of the issues set up in the pleadings. In Carcon Development Corporation v. Court of Appeals, ^[72][72] the Court ruled that a hearing is not de riguer. The matter may be resolved, and usually is, on the basis of affidavits, depositions, and admissions. This does not mean that the hearing is superfluous; only that the court is empowered to determine its necessity.

It is the law itself that determines when a summary judgment is proper. Under the rules, summary judgment is appropriate when there are no genuine issues of fact that call for the presentation of evidence in a full-blown trial. Even if on their face the pleadings appear to raise issues, when the affidavits, depositions and admissions show that such issues are not genuine, then summary judgment as prescribed by the rules must ensue as a matter of law. What is crucial to a determination, therefore, is the presence or absence of a genuine issue as to any material fact. When the facts as pleaded appear uncontested or undisputed, then summary judgment is called for.^[73][73]

Guided by the principles above indicated, we hold that under the circumstances obtaining in the case at bar, summary judgment is proper. The Sandiganbayan did not commit a reversible error in granting the corresponding 2004 Motion for Summary Judgment filed by respondent. The latter is well within its right to avail itself of summary judgment and obtain immediate relief, considering the insufficient denials and pleas of ignorance made by petitioners on matters that are supposedly within their knowledge.

These denials and pleas constitute admissions of material allegations under paragraph 59 of the Petition for Forfeiture – a tact they have employed repeatedly in Civil Case No. 0141. As discussed, the purpose of summary judgment is precisely to avoid long drawn litigations and useless delays.^[74][74] We also affirm the Sandiganbayan’s findings that the moving party, the Republic, is now entitled to judgment as a matter of law.

WHEREFORE, the instant Petition is DENIED. The Decision dated 2 April 2009 of the Sandiganbayan is AFFIRMED. All assets, properties, and funds belonging to Arelma, S.A., with an estimated aggregate amount of     USD 3,369,975 as of 1983, plus all interests and all other income that accrued thereon, until the time or specific day that all money or monies are released and/or transferred to the possession of the Republic of the Philippines, are hereby forfeited in favor of Respondent Republic of the Philippines.

          SO ORDERED.

 

 

MARIA LOURDES P. A. SERENO

Associate Justice

 

 

 

 

 

WE CONCUR:

 

 

ARTURO D. BRION

Associate Justice

Acting Chairperson

 

 

 

                ROBERTO A. ABAD                                 JOSE PORTUGAL PEREZ               

                 Associate Justice                                          Associate Justice

 

 

 

 

 

 

BIENVENIDO L. REYES

Associate Justice

 

 

 

 

A T T E S T A T I O N

 

          I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

 

                                                            ARTURO D. BRION

                                                          Associate Justice

                                                          Acting Chairperson

 

 

C E R T I F I C A T I O N

 

          Pursuant to Section 13, Article VIII of the Constitution and the Division Chairperson’s Attestation, I certify that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

 

RENATO C. CORONA

                                                                             Chief Justice

 

 

 

CASE 2012-0056: INSULAR INVESTMENT AND TRUST  CORPORATION VS. CAPITAL ONE EQUITIES CORP. (NOW KNOWN AS CAPITAL ONE HOLDINGS CORP.) AND PLANTERS DEVELOPMENT BANK (G.R. NO. 183308, APRIL 25, 2012, MENDOZA, J.) SUBJECT/S: INTERPRETATION OF CONTRACTS; LEGAL COMPENSATION; UNJUST ENRICHMENT. (BRIEF TITLE: INSULAR INVESTMENT VS. CAPITAL ONE EQUITIES ET AL.)

 

====================

 

DISPOSITIVE:

 

WHEREFORE, the petition is PARTIALLY GRANTED.  The June 6, 2008 Decision of the Court of Appeals in C.A.-G.R. CV No. 79320 is SET ASIDE. Accordingly, the June 16, 2003 RTC Decision is REINSTATED though MODIFIED to read as follows:

 

FOR THE REASONS GIVEN, judgment is hereby rendered –

 

a] ordering Planters Development Bank to pay plaintiff ₱136,790,000.00 with interest at the rate of six (6%) percent per annum from March 21, 1995 until full payment;

 

b] ordering Insular and Trust Investment Corporation to pay Capital One Equities Corporation ₱17,156,608.00 with legal interest at the rate of six (6%) percent per annum from June 10, 1994 until full payment; and

 

c] dismissing the counterclaim of Planters Development Bank.

 

       Any amount not paid upon the finality of this decision shall be subject to interest at the increased rate of twelve (12%) percent per annum reckoned from the date of finality of this decision until full payment thereof.

 

No pronouncement as to costs.

 

SO ORDERED.

 

 

====================

 

 

SUBJECTS/DOCTRINES/DIGEST

 

 

THE CONTRACT EXPRESSLY STATES THAT IITC, AS PRINCIPAL SOLD TREASURY BILLS  TO COEC AND IITC AS PRINCIPAL PURCHASED  TREASURY BILLS FROM PDB. BUT IITC ARGUES THAT IT WAS NOT A SELLER NOR BUYER BUT JUST A CONDUIT.  IS IITC CORRECT.

 

 

NO.  WHEN THE WORDS OF THE DOCUMENTS IN QUESTION ARE CLEAR AND READILY UNDERSTANDABLE BY ANY ORDINARY READER, THERE IS NO NEED FOR THE INTERPRETATION OR CONSTRUCTION THEREOF.^[1][34]

 

 

^{XXXXXXXXXXXXXXXXXXXXXXXX}

 

 

HOW SHOULD THE COURTS ENFORCE A CONTRACT?

 

 

ACCORDING TO ITS EXPRESS TERMS, INTERPRETATION BEING RESORTED TO ONLY WHEN SUCH LITERAL APPLICATION IS IMPOSSIBLE.^[2][36]

 

 

This argument is far-fetched and borders on the incredible.  At the outset, it should be pointed out that there is no ambiguity whatsoever in the language of the documents used.   The confirmations of sale and purchase unequivocally state that IITC acted as a principal buyer and seller of treasury bills.  The language used is as clear as day and cannot be more explicit.  Thus, because the words of the documents in question are clear and readily understandable by any ordinary reader, there is no need for the interpretation or construction thereof.^[3][34]  This was emphasized in the case of Pichel v. Alonzo:^[4][35]

 

Xxx. To begin with, We agree with petitioner that construction or interpretation of the document in question is not called for.  A perusal of the deed fails to disclose any ambiguity or obscurity in its provisions, nor is there doubt as to the real intention of the contracting parties.  The terms of the agreement are clear and unequivocal, hence the literal and plain meaning thereof should be observed.  Such is the mandate of the Civil Code of thePhilippines which provides that:

 

“Art. 1370.  If the terms of a contract are clear and leave no doubt upon the intention of the contracting parties, the literal meaning of its stipulation shall control…”

 

Pursuant to the aforequoted legal provision, the first and fundamental duty of the courts is the application of the contract according to its express terms, interpretation being resorted to only when such literal application is impossible.^[5][36] (Emphases supplied)

XXXXXXXXXXXXXXXXXXXXXX

 

 

WHEN DOES LEGAL COMPENSATION TAKE PLACE?

 

 

WHEN  TWO PERSONS, IN THEIR OWN RIGHT, ARE CREDITORS AND DEBTORS OF EACH OTHER.

 

 

XXXXXXXXXXXXX

 

 

WHAT ARE THE REQUISITES OF LEGAL COMPENSATION?

 

 

IN ORDER THAT COMPENSATION MAY BE PROPER, IT IS NECESSARY:

 

 

(1) THAT EACH ONE OF THE OBLIGORS BE BOUND PRINCIPALLY, AND THAT HE BE AT THE SAME TIME A PRINCIPAL CREDITOR OF THE OTHER;

 

 

(2) THAT BOTH DEBTS CONSIST IN A SUM OF MONEY, OR IF THE THINGS DUE ARE CONSUMABLE, THEY BE OF THE SAME KIND, AND ALSO OF THE SAME QUALITY IF THE LATTER HAS BEEN STATED;

 

 

(3) THAT THE TWO DEBTS BE DUE;

 

 

(4) THAT THEY BE LIQUIDATED AND DEMANDABLE;

 

 

(5) THAT OVER NEITHER OF THEM THERE BE ANY RETENTION OR CONTROVERSY, COMMENCED BY THIRD PERSONS AND COMMUNICATED IN DUE TIME TO THE DEBTOR.     

 

 

XXXXXXXXXXXX

 

 

WHEN THESE REQUISITES ARE PRESENT, HOW DOES COMPENSATION TAKES EFFECT.

 

 

BY OPERATION OF LAW. IT EXTINGUISHES BOTH DEBTS TO THE CONCURRENT AMOUNT EVEN THOUGH THE CREDITORS AND DEBTORS ARE NOT AWARE OF THE COMPENSATION.

 

 

Set-off allowed

 

IITC argues that the RTC and the CA erred in holding that COEC can validly set off its claims for the undelivered IITC T-Bills against the COEC T-Bills.^[6][45]  IITC reiterates that COEC did not become a creditor of IITC because the former did not pay the latter for the purchased treasury bills.  Rather, it was PDB which received the proceeds of the payment from COEC.^[7][46]  In addition, their obligations do not consist of a sum or money.  Neither are they of the same kind because the obligations call for the delivery of specific determinate things – treasury bills with specific maturity dates and various interest rates.  Thus, legal compensation cannot take place.^[8][47]

 

        COEC, on the other hand, points out that it has already unquestionably proven that IITC acted as a principal, and not as a conduit, in the sale of treasury bills to COEC.^[9][48]  Furthermore, it asserts that the treasury bills in question are generic in nature because the confirmations of sale and purchase do not mention specific treasury bills with serial numbers.^[10][49]  The securities were sold as indeterminate objects which have a monetary equivalent, as acknowledged by the parties in the Tripartite Agreement.^[11][50]  As such, because both IITC and COEC are principal creditors of the other over debts which consist of consumable things or a sum of money, the RTC correctly ruled that COEC may validly set-off its claims for undelivered treasury bills against that of IITC’s claims.^[12][51]

 

X

The Court finds in favor of respondent COEC.

 

The applicable provisions of law are Articles 1278, 1279 and 1290 of the Civil Code of thePhilippines:

 

Art. 1278.  Compensation shall take place when two persons, in their own right, are creditors and debtors of each other.

 

Art. 1279.  In order that compensation may be proper, it is necessary:

 

(1) That each one of the obligors be bound principally, and that he be at the same time a principal creditor of the other;

 

(2) That both debts consist in a sum of money, or if the things due are consumable, they be of the same kind, and also of the same quality if the latter has been stated;

 

(3) That the two debts be due;

 

(4) That they be liquidated and demandable;

 

(5) That over neither of them there be any retention or controversy, commenced by third persons and communicated in due time to the debtor. 

 

xxx

 

Art. 1290.  When all the requisites mentioned in Article 1279 are present, compensation takes effect by operation of law, and extinguishes both debts to the concurrent amount, even though the creditors and debtors are not aware of the compensation.

 

XXXXXXXXXXXXXXX

 

 

IITC ARGUES THERE IS NO LEGAL COMPENSATION BETWEEEN IITC AND COEC BECAUSE THE SUBJECT ARE TREASURY BILLS WITH DIFFERENT MATURITY DATES. IS IITC CORRECT?

 

 

NO. THE COEC T-BILLS AND THE IITC T-BILLS ARE BOTH GOVERNMENT SECURITIES WHICH, WHILE HAVING DIFFERING INTEREST RATES AND DATES OF MATURITY, HAVE EACH BEEN ASSIGNED A CERTAIN FACE VALUE TO DETERMINE THEIR MONETARY EQUIVALENT.

 

 

        Based on the foregoing, in order for compensation to be valid, the five requisites mentioned in the abovequoted Article 1279 should be present, as in the case at bench.  The lower courts have already determined, to which this Court concurs, that IITC acted as a principal in the purchase of treasury bills from PDB and in the subsequent sale to COEC of the COEC T-Bills.  Thus, COEC and IITC are principal creditors of each other in relation to the sale of the COEC T-Bills and IITC T-Bills, respectively.

 

        IITC also claims that the COEC T-Bills cannot be set-off against the IITC T-Bills because the latter are specific determinate things which consist of treasury bills with specific maturity dates and various interest rates.^[13][52]  IITC’s actions belie its own assertion.  The fact that IITC accepted the assignment by COEC of Central Bank Bills with an aggregate face value of P20,000,000.00 as payment of part of the IITC T-Bills is evidence of IITC’s willingness to accept other forms of security as satisfaction of COEC’s obligation.  It should be noted that the second requisite only requires that the thing be of the same kind and quality.  The COEC T-Bills and the IITC T-Bills are both government securities which, while having differing interest rates and dates of maturity, have each been assigned a certain face value to determine their monetary equivalent.  In fact, in the Tripartite Agreement, the COEC-IITC Agreement and in the memoranda of the parties, the parties recognized the monetary value of the treasury bills in question, and, in some instances, treated them as sums of money.^[14][53]  Thus, they are of the same kind and are capable of being subject to compensation.

 

        The third, fourth and fifth requirements are clearly present and are not denied by the parties.  Both debts are due and demandable because both remain unsatisfied, despite payment made by IITC for the IITC T-Bills and by COEC for the COEC T-Bills.  Moreover, COEC readily admits that it has an outstanding balance in favor of IITC.^[15][54]  Conversely, IITC has been found by the lower courts to be liable, as principal seller, for the delivery of the COEC T-Bills.^[16][55]  The debts are also liquidated because their existence and amount are determined.^[17][56]  Finally, there exists no retention or controversy over the COEC T-Bills and the IITC T-Bills.

 

        Because all the stipulations under Article 1279 are present in this case, compensation can take place.  COEC is allowed to set-off its obligation to deliver the IITC T-Bills against IITC’s obligation to deliver the COEC T-Bills.

 

XXXXXXXXXXXXXXXXXXX

 

 

HOW MUCH IS THE INTEREST TO BE CHARGED AGAINST IITC FOR ITS FAILURE TO DELIVER TREASURY BILLS BASED ON AGREEMENT?

 

 

BECAUSE THE OBLIGATION AROSE FROM A CONTRACT OF SALE AND PURCHASE OF GOVERNMENT SECURITIES, AND NOT FROM A LOAN OR FORBEARANCE OF MONEY, THE APPLICABLE INTEREST RATE IS 6% FROM JUNE 10, 1994, WHEN IITC RECEIVED THE DEMAND LETTER FROM COEC.^[18][60]  AFTER THE JUDGMENT BECOMES FINAL AND EXECUTORY, THE LEGAL INTEREST RATE INCREASES TO 12% UNTIL THE OBLIGATION IS SATISFIED.

 

 

Lastly, as regards the legal interest which should be imposed on the award, the Court directs the attention of the parties to the case of Eastern Shipping Lines v. Court of Appeals,^[19][58]

 

1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or forbearance of money, the interest due should be that which may have been stipulated in writing.  Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded.  In the absence of stipulation, the rate of interest shall be 12% per annum to be computed from default, i.e., from judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the Civil Code.

 

2. When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the amount of damages awarded may be imposed at the discretion of the court at the rate of 6% per annum.  No interest, however, shall be adjudged on unliquidated claims or damages except when or until the demand can be established with reasonable certainty.  Accordingly, where the demand is established with reasonable certainty, the interest shall begin to run from the time the claim is made judicially or extrajudicially (Art. 1169, Civil Code) but when such certainty cannot be so reasonably established at the time the demand is made, the interest shall begin to run only from the date the judgment of the court is made (at which time the quantification of damages may be deemed to have been reasonably ascertained). The actual base for the computation of legal interest shall, in any case, be on the amount finally adjudged.

 

3. When the judgment of the court awarding a sum of money becomes final and executory, the rate of legal interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be 12% per annum from such finality until its satisfaction, this interim period being deemed to be by then an equivalent to a forbearance of credit.^[20][59] (Emphases supplied)

 

 

        Because the obligation arose from a contract of sale and purchase of government securities, and not from a loan or forbearance of money, the applicable interest rate is 6% from June 10, 1994, when IITC received the demand letter from COEC.^[21][60]  After the judgment becomes final and executory, the legal interest rate increases to 12% until the obligation is satisfied.

 

        In sum, the Court finds that after compensation is effected, IITC still owes COEC P17,141,347.49 worth of treasury bills, subject to the interest rate of 6% per annum from June 10, 1994, then subsequently to the increased interest rate of 12% from the date of finality of this decision until full payment.

 

XXXXXXXXXXXXXXXX

 

 

SC RULED THAT PDB MUST PAY IITC OTHERWISE PDB WILL REAP UNJUST ENRICHMENT. WHAT IS THE LEGAL BASIS?

 

 

ART. 22 OF THE CIVIL CODE: EVERY PERSON WHO THROUGH AN ACT OF PERFORMANCE BY ANOTHER, OR ANY OTHER MEANS, ACQUIRES OR COMES INTO POSSESSION OF SOMETHING AT THE EXPENSE OF THE LATTER WITHOUT JUST OR LEGAL GROUND, SHALL RETURN THE SAME TO HIM.

 

 

XXXXXXXXXXXXX

 

 

WHEN IS THERE UNJUST ENRICHMENT?

 

 

WHEN A PERSON UNJUSTLY RETAINS A BENEFIT TO THE LOSS OF ANOTHER, OR WHEN A PERSON RETAINS MONEY OR PROPERTY OF ANOTHER AGAINST THE FUNDAMENTAL PRINCIPLES OF JUSTICE, EQUITY AND GOOD CONSCIENCE.

 

 

XXXXXXXXXXXXXXXX

 

 

WHAT ARE THE CONDITIONS REQUIRED FOR THE APPLICATION OF THE PRINCIPLE OF UNJUST ENRICHMENT?

 

 

(1) THAT A PERSON IS BENEFITED WITHOUT A VALID BASIS OR JUSTIFICATION, AND

 

 

(2) THAT SUCH BENEFIT IS DERIVED AT THE EXPENSE OF ANOTHER

 

XXXXXXXXXXXXX

 

 

WHAT IS THE OBJECTIVE OF THE PRINCIPLE OF UNJUST ENRICHMENT?

 

 

TO PREVENT ONE FROM ENRICHING HIMSELF AT THE EXPENSE OF ANOTHER WITHOUT JUST CAUSE OR CONSIDERATION.^[22][78]

 

 

To rule otherwise would be to allow unjust enrichment on the part of PDB to the detriment of IITC.  Article 22 of the Civil Code of thePhilippinesprovides that:

 

Art. 22.  Every person who through an act of performance by another, or any other means, acquires or comes into possession of something at the expense of the latter without just or legal ground, shall return the same to him.

 

        In the recent case of Flores v. Spouses Lindo,^[23][77] this Court expounded on the subject matter:

 

There is unjust enrichment “when a person unjustly retains a benefit to the loss of another, or when a person retains money or property of another against the fundamental principles of justice, equity and good conscience.”  The principle of unjust enrichment requires two conditions: (1) that a person is benefited without a valid basis or justification, and (2) that such benefit is derived at the expense of another.

 

The main objective of the principle against unjust enrichment is to prevent one from enriching himself at the expense of another without just cause or consideration.^[24][78]

 

 

        The Court cannot condone a decision which is manifestly partial.  Neither shall the Court be a party to the perpetration of injustice.  As the last bastion of justice, this Court shall always rule pursuant to the precepts of fairness and equity in order to dispel any doubt in the integrity and competence of the Judiciary.

 

 

=====================

 

 

Republic of the Philippines

Supreme Court

Baguio City

 

THIRD DIVISION

 

 

INSULAR INVESTMENT AND TRUST  CORPORATION,                                        Petitioner,       – versus –       CAPITAL ONE EQUITIES CORP. (now known as CAPITAL ONE HOLDINGS CORP.) and PLANTERS DEVELOPMENT BANK, Respondents.

G.R. No. 183308   Present:   VELASCO, JR., J., Chairperson, PERALTA, ABAD, MENDOZA, and PERLAS-BERNABE, JJ.         Promulgated:          April 25, 2012

 

x —————————————————————————————- x

 

D E C I S I O N

 

MENDOZA, J.:

 

 

This is a petition for review on certiorari under Rule 45 of the 1997 Revised Rules of Civil Procedure assailing the June 6, 2008 Decision^[25][1] of the Court of Appeals (CA) in C.A.-G.R. CV No. 79320 entitled “Insular Investment and Trust Corporation v. Capital One Equities Corporation (now known as Capital One Holdings Corporation) and Planters Development Bank.”

 

THE FACTS

 

Based on the records of the case and on the September 2, 1999 Partial Stipulation of Facts and Documents^[26][2] (the Partial Stipulation) agreed upon by the parties, the facts are as follows:

 

Petitioner Insular Investment and Trust Corporation (IITC) and respondents Capital One Equities Corporation (COEC) and Planters Development Bank (PDB) are regularly engaged in the trading, sale and purchase of Philippine treasury bills.

 

On various dates in 1994, IITC purchased from COEC treasury bills with an aggregate face value of P260,683,392.51 (the IITC T-Bills), as evidenced by the confirmations of purchase issued by IITC.  The purchase price for the said treasury bills were fully paid by IITC to COEC which was able to deliver P121,050,000.00 worth of treasury bills to IITC.

 

On May 2, 1994, COEC purchased treasury bills with a face value of P186,774,739.49 (the COEC T-Bills).  IITC issued confirmations of sale in favor of COEC covering the said transaction.  COEC paid the purchase price by issuing the following checks:

 

 

Both IITC and PDB received the proceeds of the checks.

 

On May 2, 1994, PDB issued confirmations of sale in favor of IITC for the sale of treasury bills and IITC, in turn, issued confirmations of purchase in favor of PDB over treasury bills with a total face value of P186,790,000.00.

 

Thereafter, PDB sent a letter^[27][3] dated May 4, 1994 to IITC undertaking to deliver treasury bills worth P186,790,000.00, which IITC purchased from PDB on May 2, 1994, as soon as they would be available.

 

On May 10, 1994, COEC wrote a letter to IITC demanding the physical delivery of the treasury bills which the former purchased from the latter on May 2, 1994.

 

In its May 18, 1994 Letter^[28][4] to PDB, IITC requested, on behalf of COEC, the delivery to IITC of treasury bills worth P186,790,000.00 which had been paid in full by COEC.  COEC was furnished with a copy of the said letter.

 

On May 30, 1994, COEC protested the tenor of IITC’s letter to PDB and took exception to IITC’s assertion that it merely acted as a facilitator with regard to the sale of the treasury bills.

 

 

 

IITC sent COEC a letter^[29][5] dated June 3, 1994, demanding that COEC deliver to it (IITC) the P139,833,392.00 worth of treasury bills or return the full purchase price.  In either case, it also demanded that COEC (1) pay IITC the amount of P1,729,069.50 representing business opportunity lost due to the non-delivery of the treasury bills, and (2) deliver treasury bills worth P121,050,000 with the same maturity dates originally purchased by IITC.

 

COEC sent a letter-reply^[30][6] dated June 9, 1994 to IITC in which it acknowledged its obligation to deliver the treasury bills worth P139,833,392.00^[31][7] which it sold to IITC and formally demanded the delivery of the treasury bills worth P186,774,739.49 which it purchased from IITC.  COEC also demanded the payment of lost profits in the amount of P3,253,250.00.  Considering that COEC and IITC both have claims against each other for the delivery of treasury bills, COEC proposed that a legal set-off be effected, which would result in IITC owing COEC the difference of P46,941,446.49.

 

In its June 13, 1994 letter to COEC, IITC rejected the suggestion for a legal setting-off of obligations, alleging that it merely acted as a facilitator between PDB and COEC.

 

On June 27, 1994, COEC replied to IITC’s letter, reiterating its demand and its position stated in its June 9, 1994 letter.

 

On July 1, 1994, IITC, COEC and PDB entered into a Tripartite Agreement^[32][8] (the Tripartite Agreement) wherein PDB assigned to IITC, which in turn assigned to COEC, Central Bank Bills with a total face value of P50,000,000.00.  These assignments were made in consideration of (a) IITC relinquishing all its rights to claim delivery under the confirmation of sale issued by PDB to IITC to the extent of P50,000,000.00 (face value) and (b) COEC relinquishing all its rights to claim delivery of the COEC T-Bills under the IITC confirmations of sale to COEC to the extent of P50,000,000.00 (face value).   

 

On the same day, COEC and IITC entered into an Agreement^[33][9] (the COEC-IITC Agreement) whereby COEC reassigned to IITC the Central Bank bills subject of the Tripartite Agreement to the extent of P20,000,000.00 in consideration of which IITC relinquished all its rights to claim from COEC the IITC T-Bills covered by the COEC confirmation of sale to the extent of an aggregate P20,000,000.00 face value.

 

        Despite repeated demands, however, PDB failed to deliver the balance of P136,790,000.00 worth of treasury bills which IITC purchased from PDB allegedly for COEC.  COEC was likewise unable to deliver the remaining IITC T-Bills amounting to P119,633,392.00.  Neither PDB and COEC returned the purchase price for the duly paid treasury bills.^[34][10]

 

This prompted IITC to file the Amended Complaint^[35][11] dated March 20, 1995 before the Regional Trial Court, Branch 138, Makati City (RTC), praying that COEC be ordered to deliver treasury bills worth P119,633,392.00 to IITC or pay the monetary equivalent plus legal interests; and, in the alternative, that PDB be ordered to comply with its obligations under the conduit transaction involving treasury bills worth P136,790,000.00 by delivering the treasury bills to IITC, in addition to actual and exemplary damages and attorney’s fees.

 

        COEC filed its Answer to Amended Complaint^[36][12] dated April 10, 1995, admitting that it owed IITC treasury bills worth P119,633,392.00.  It countered, however, that IITC had an outstanding obligation to deliver to COEC treasury bills worth P136,774,739.49.^[37][13]  COEC prayed that IITC be required to deliver P17,141,347.49 (the amount IITC still owed COEC after a legal off-setting of their debts against each other) to COEC in addition to moral and exemplary damages and attorney’s fees.^[38][14] 

 

PDB, for its part, insisted in its Answer Ad Cautelam^[39][15] that it had no knowledge or participation in the sale by IITC of treasury bills to COEC.  It admitted that it sent a letter dated May 4, 1994 to IITC, undertaking to deliver treasury bills worth P186,790,000.00 which IITC purchased from PDB.  PDB posited, however, that IITC was not entitled to the delivery of the said treasury bills because IITC did not remit payment to PDB.  Neither did the subject securities become available to PDB.

 

In its Judgment^[40][16] dated June 16, 2003, the RTC found that COEC still owed IITC P119,633,392.00 worth of treasury bills, pursuant to their transaction in early 1994.  As regards the sale of treasury bills by IITC to COEC, however, the RTC determined that IITC was not merely a conduit in the purchase a sale of treasury bills between PDB and COEC.  Rather, IITC acted as a principal in two transactions: as a buyer of treasury bills from PDB and as a seller to COEC.  Taking into consideration the Tripartite Agreement, IITC was still liable to pay COEC the sum of P136,790,000.00.  Since IITC and COEC were both debtors and creditors of each other, the RTC off-set their debts, resulting in a difference of ₱17,056,608.00 in favor of COEC. As to PDB’s liability, it ruled that PDB had the obligation to pay P136,790,000.00 to IITC.  Thus, the trial court ordered (a) IITC to pay COEC P17,056,608.00 with interest at the rate of 6% from June 10, 1994 until full payment and (b) PDB to pay IITC P136,790,000.00 with interest at the rate of 6% from March 21, 1995 until full payment.

 

        Aggrieved, all parties appealed to the CA which promulgated its decision on June 6, 2008.  The CA affirmed the RTC finding that IITC was not a mere conduit but rather a direct seller to COEC of the treasury bills.^[41][17]  The CA, however, absolved PDB from any liability, ruling that because PDB was not involved in the transactions between IITC and COEC, IITC should have alleged and proved that PDB sold treasury bills to IITC.^[42][18]  Moreover, PDB only undertook to deliver treasury bills worth P186,790,000.00 to IITC “as soon as they are available.”^[43][19]  But, the said treasury bills did not become available.  Neither did IITC remit payment to PDB.  As such, PDB incurred no obligation to deliver P186,790,000.00 worth of treasury bills to IITC.

 

        Hence, this petition.

 

THE ISSUES

 

IITC raises the following grounds for the grant of its petition:

 

A. The petition is not dismissible.  The issue of whether IITC acted as a conduit is a question of law.  Assuming for the sake of argument that the petition involves questions of fact, the Supreme Court may take cognizance of the petition under exceptional circumstances.

 

 

B. The Court of Appeals gravely erred and acted contrary to law and jurisprudence and the evidence on record in holding that IITC did not act as a conduit of Capital One and Plantersbank in the 2 May 1994 sale of COEC T-bills.

 

 

C. The Court of Appeals erred and acted contrary to law and the evidence on record in ruling that Plantersbank did not have any obligation to delivery the COEC T-Bills to IITC under IITC’s alternative cause of action.

 

D. The Court of Appeals erred and acted contrary to law in holding that Capital One could validly set off its claims for the undelivered COEC T-Bills against the fully paid IITC T-Bills.

 

E. The Court of Appeals further erred and acted contrary to law in holding that Capital One and Plantersbank were not guilty of fraud.

 

F. The Court of Appeals violated IITC’s right to due process in affirming, without citing any basis whatsoever, the erroneous holding of the trial court that there was insufficient evidence to prove the actual and consequential damages sustained by IITC.^[44][20]

 

COEC puts forth the following issues:

 

Whether the Court of Appeals correctly held that IITC did not act as a conduit of Capital One and Plantersbank in the May 2, 1994 sale of the COEC T-Bills by IITC to Capital One.

 

Whether the Court of Appeals correctly held that Capital One may validly set off its claim for the undelivered COEC T-Bills against the balance of the IITC T-Bills.

 

Whether the Court of Appeals correctly affirmed the holding of the trial court that Capital One and Plantersbank are not guilty of fraud.

 

Whether the Petition raises questions of fact, and whether it is defective.

 

Whether Capital One is entitled to the correction of the mathematical error in the computation of the money judgment in its favor.^[45][21]

 

 

For its part, PDB identifies the principal issue to be “whether it was obliged to deliver to petitioner Insular the treasury bills which the latter sold, as principal, to Capital One, and/or pay the value thereof.”^[46][22]  The following are stated as corollary issues:

Whether petitioner Insular was acting as “facilitator” or “conduit” in the May 2, 1994 sales of the treasury bills;

 

Whether petitioner Insular may raise in this petition the issue of it being merely as “facilitator” or “conduit” after the Trial Court and Court of Appeals found that petitioner Insular was not a “facilitator” or “conduit.”

 

Whether respondents Plantersbank and Capital One were guilty of fraud in their transactions with petitioner Insular.

 

Whether petitioner Insular was entitled to actual and consequential damages.^[47][23]

 

The numerous issues can be simplified as follows:

 

(1)    Whether IITC acted as a conduit in the transaction between COEC and PDB;

 

(2)   Whether COEC can set-off its obligation to IITC as against the latter’s obligation to it; and

 

(3)   Whether PDB has the obligation to deliver treasury bills to IITC.

 

 

THE COURT’S RULING

 

        The petition is partly meritorious.

 

Question of fact;

IITC did not act as conduit

 

        Petitioner IITC insists that the issue of whether it acted as a conduit is a question of law which can properly be the subject of a petition for review before this Court.  Because the parties already entered into a stipulation of facts and documents, the facts are no longer at issue; rather, the court must now determine the applicable law based on the admitted facts, thereby making it a question of law.  Even assuming that the determination of IITC’s role in the two transactions is a pure question of fact, it falls under the exceptions when the Court may decide to review a question of fact.^[48][24]

 

        Respondent COEC, on the other hand, argues that IITC raises questions of fact.  An issue is one of fact when: (a) there is a doubt or difference as to the truth or falsehood of the alleged facts, (b) the issues raised invite a calibration, assessment, re-examination and re-evaluation of the evidence presented, (c) it questions the probative value of evidence presented or the proofs presented by one party are clear, convincing and adequate.  Because the question of whether IITC was merely a conduit satisfies all the conditions enumerated, then it is a question of fact which this Court cannot pass upon.  In addition, COEC calls attention to the principle that findings of fact of the trial court, especially when approved by the Court of Appeals, are binding and conclusive on the Supreme Court.^[49][25]

 

        PDB also maintains that the finding of the RTC that IITC did not act as a conduit between PDB and COEC was supported by substantial evidence and was sustained by the CA.  Thus, it is already binding and conclusive upon this Court, whose jurisdiction is limited to reviewing only errors of law and not of fact.^[50][26]

 

Respondents are correct. 

 

The issue raised by IITC is factual in nature as it requires the Court to delve into the records and review the evidence presented by the parties to determine the validity of the findings of both the RTC and the CA as to IITC’s role in the transactions in question.  These are purely factual issues which this Court cannot review.^[51][27]  Well-established is the principle that factual findings of the trial court, when adopted and confirmed by the Court of Appeals, are binding and conclusive on this Court and will generally not be reviewed on appeal.^[52][28]

 

        As discussed in The Insular Life Assurance Company, Ltd. v. Court of Appeals:^[53][29]

 

It is a settled rule that in the exercise of the Supreme Court’s power of review, the Court is not a trier of facts and does not normally undertake the re-examination of the evidence presented by the contending parties during the trial of the case considering that the findings of facts of the CA are conclusive and binding on the Court.  However, the Court had recognized several exceptions to this rule, to wit: (1) when the findings are grounded entirely on speculation, surmises or conjectures; (2) when the inference made is manifestly mistaken, absurd or impossible; (3) when there is grave abuse of discretion; (4) when the judgment is based on a misapprehension of facts; (5) when the findings of facts are conflicting; (6) when in making its findings the Court of Appeals went beyond the issues of the case, or its findings are contrary to the admissions of both the appellant and the appellee; (7) when the findings are contrary to the trial court; (8) when the findings are conclusions without citation of specific evidence on which they are based; (9) when the facts set forth in the petition as well as in the petitioner’s main and reply briefs are not disputed by the respondent; (10) when the findings of fact are premised on the supposed absence of evidence and contradicted by the evidence on record; and (11) when the Court of Appeals manifestly overlooked certain relevant facts not disputed by the parties, which, if properly considered, would justify a different conclusion.^[54][30]

 

        Contrary to IITC’s claim, the circumstances surrounding the case at bench do not justify the application of any of the exceptions.  At any rate, even if the Court would be willing to disregard this time-honored principle, the inevitable conclusion would be the same as that made by the RTC and the CA – that IITC did not act as a conduit but rather as a principal in two separate transactions, one as the purchaser of treasury bills from PDB and, in another, as the seller of treasury bills to COEC.

 

        The evidence against IITC cannot be denied. 

 

        The confirmations of sale issued by IITC to COEC unmistakably show that the former, as principal, sold the treasury bills to the latter:^[55][31]

 

Gentlemen:

 

As principal, we confirm having sold to you on a without recourse basis the following securities against which you shall pay us clearing funds on value date.

 

 

IITC’s confirmations of purchase to PDB likewise reflect that it acted as the principal in the transaction:^[56][32]

 

Gentlemen:

 

As principal, we confirm having purchased from you on a without recourse basis the following securities against which we shall pay you clearing funds on value date.

 

 

        There is nothing in these documents which mentions that IITC merely acted as a conduit in the sale and purchase of treasury bills between PDB and COEC.  On the contrary, the confirmations of sale and of purchase all clearly and expressly indicate that IITC acted as a principal seller to COEC and as a principal buyer from PDB. 

 

        IITC then tries to shift the blame to PDB and COEC by alleging that it was the two parties which conceptualized the two-step or conduit transaction and dictated the documents to be used.  As such, they cannot be allowed to “take advantage of the ambiguity created by the documentation which it, in conspiracy with Plantersbank, concocted to render IITC, an innocent party, liable.”^[57][33]

 

        This argument is far-fetched and borders on the incredible.  At the outset, it should be pointed out that there is no ambiguity whatsoever in the language of the documents used.   The confirmations of sale and purchase unequivocally state that IITC acted as a principal buyer and seller of treasury bills.  The language used is as clear as day and cannot be more explicit.  Thus, because the words of the documents in question are clear and readily understandable by any ordinary reader, there is no need for the interpretation or construction thereof.^[58][34]  This was emphasized in the case of Pichel v. Alonzo:^[59][35]

 

Xxx. To begin with, We agree with petitioner that construction or interpretation of the document in question is not called for.  A perusal of the deed fails to disclose any ambiguity or obscurity in its provisions, nor is there doubt as to the real intention of the contracting parties.  The terms of the agreement are clear and unequivocal, hence the literal and plain meaning thereof should be observed.  Such is the mandate of the Civil Code of thePhilippines which provides that:

 

“Art. 1370.  If the terms of a contract are clear and leave no doubt upon the intention of the contracting parties, the literal meaning of its stipulation shall control…”

 

Pursuant to the aforequoted legal provision, the first and fundamental duty of the courts is the application of the contract according to its express terms, interpretation being resorted to only when such literal application is impossible.^[60][36] (Emphases supplied)

 

        COEC and PDB did not take advantage of any vagueness in the documents in question.  They only seek to enforce the intention of the parties, in accordance with the terms of the confirmations of sale and purchase voluntarily entered into by the parties.

 

The Court also finds it hard to believe that an entity would carelessly and imprudently expose itself to liability in the amount of millions of pesos by failing to ensure that the documents used in the transaction would be a faithful account of its true nature. It is important to note that the confirmations of sale were issued by IITC itself using its own documents.  Therefore, it defies imagination how COEC and PDB could have foisted off these forms on IITC against its will. 

 

In addition, a comparison of the confirmations of sale issued by IITC in favor of COEC as against the confirmations of sale issued by PDB in favor of IITC indicates that there is a difference in the interest rates of the treasury bills and in the face values:

 

PDB Confirmations of Sale to IITC^[61][37]

 

 

 

IITC Confirmations of Sale to COEC^[62][38]

 

 

IITC offered a lower interest rate of 17% to COEC, in contrast to the 17.15% interest rate given to it by PDB.  There is also a notable difference in the face value of the treasury bills and in the total price paid for each set.  If, as IITC insists, it only acted as a conduit to the sale between PDB and COEC, then there should be no disparity in the terms (the interest rate, the face value and the total price) of the sale of the treasury bills.  Obviously, this is not the case.  The figures lead to no other conclusion but that there were two separate transactions in both of which IITC played a principal role – as a buyer from PDB of treasury bills with an aggregate face value of P186,790,000.00 at an interest rate of 17.15% and as a seller to COEC of treasury bills with an aggregate face value of P186,774,739.49 at an interest rate of 17%.

 

        Again, IITC attempts to hold PDB and COEC responsible for this questionable variation, alleging that it was PDB and COEC which dictated the details of the purchase and sale of the treasury bills.  IITC heavily relies on the fact that COEC directly paid PDB the amount of P182,191,269.26 representing the amount covered in the confirmations of sale issued by PDB to strengthen its position that it merely acted as a conduit between PDB and COEC.^[63][39] This was further supported by the internal trading sheets of IITC where the following handwritten notations were made: (1) in Purchase Trading Sheet No. 10856 covering the purchase of treasury bills by IITC from PDB: “don’t prepare any check; payment will come from Capital One (See STS 10811)”, and (2) in Sale Trading Sheet No. 10811 covering the sale of treasury bills by IITC to COEC: “for STS 10810 and 10811 will receive 2 checks payable to the ff: 1. Planters Devt Bank – P182,191,269.59  2. IITC – 24,116.11”

 

The Court is not convinced.  That COEC directly paid PDB is of no moment and does not necessarily mean that COEC recognized IITC’s conduit role in the transaction.  Neither does it disprove the findings of both the RTC and the CA that IITC acted as principal in the two transactions – the purchase of treasury bills from PDB and the subsequent sale thereof to COEC.  The Court agrees with the explanation of the RTC:

 

The Court is aware that in the trading business, agreements are concluded even before the goods being traded are received by the “would be seller.”  Buyers in turn conclude their transactions even before they are paid.  For this reason, the mere fact that in document for internal use, the instruction that “payment will come from Capital One” will not, by itself, prove that plaintiff was a mere conduit.  Neither could it be considered as circumstantial to establish the fact in issue.  At most, the instructions merely identified the source of funds but whether those funds are to be received by the plaintiff as purchase price or for remittance to whoever is entitled to it, none was indicated.  The Court may look at the instruction differently if the entries were – “no payment required; COEC to pay PDB directly” or “this is a conduit transaction; servicing to be done by COEC” or “COEC to pay PDB directly.”^[64][40]

 

 

IITC also insists that the fact that the P24,116.11 which it claims to be a facilitation fee is exactly the difference between the principal amounts of the treasury bills purchased from PDB and the treasury bills sold to COEC constitutes “the smoking gun or the veritable elephant in the living room.”^[65][41]  To IITC, it is apparent that the amount is a facilitation fee, adding credence to its contention that it only acted as a conduit. 

 

The Court cannot sustain that view.  There is nothing to prove that the amount of P24,116.11 received by IITC from COEC was a facilitation fee.  As explained by COEC, the amount could easily have been the margin or spread earned by IITC in the buy-and-sell transaction.^[66][42] This is, however, not for the Court to determine.  As such, the Court relies on the findings of the RTC on this matter:

 

Plaintiff’s other evidence to prove its conduit role was the delivery to it by COEC by way of its corporate check of P24,116.11 in payment of plaintiff’s conduit fee.  The Court is hesitant to give probative value to this proof because nowhere does it appear in the trading sheets or any other document that it was collected by plaintiff and received by it from COEC in that concept.  Business practice is to issue an official receipt because it is an income, but none was presented.  The testimonial evidence was refuted.  COEC presented controverting evidence on the original mode of payment which was requested to be changed by witness Bombaes.  COEC presented the unsigned check and voucher.  The latter was duly accomplished and bears the signatures or initials of the approving officers.  On this particular issue, COEC’s evidence deserves more weight.^[67][43]

 

 

        Finally, as correctly observed by the RTC, the actions of IITC after the transaction were not those of a conduit but of a principal:

The Court notes with particular interest the events which transpired on May 4, 1994, two (2) days after plaintiff through witnessMendozalearned of the non-delivery by PDB of the treasury bills.  WitnessMendozawent to the office of PDB and secured the letter, Exhibit E, which contains the undertaking of PDB to deliver the treasury bills.  This was procured by plaintiff and addressed to the plaintiff.  The language used by PDB was “purchase[d] from us” and plaintiff accepted it.

 

Plaintiff failed to explain the reason for demanding delivery of the treasury bills when it was not the buyer as it so claims.  It also failed to object to the use by PDB of the words “purchase[d] from us,” something which it could easily do or should do considering the amount involved.

 

The conduct of the plaintiff after concluding the May 2, 1994 transaction [was] [that] of a buyer.^[68][44]

 

 

        From the foregoing, it is clear that IITC acted as principal purchaser from PDB and principal seller to COEC, and not simply as a conduit between PDB and COEC.

 

Set-off allowed

 

IITC argues that the RTC and the CA erred in holding that COEC can validly set off its claims for the undelivered IITC T-Bills against the COEC T-Bills.^[69][45]  IITC reiterates that COEC did not become a creditor of IITC because the former did not pay the latter for the purchased treasury bills.  Rather, it was PDB which received the proceeds of the payment from COEC.^[70][46]  In addition, their obligations do not consist of a sum or money.  Neither are they of the same kind because the obligations call for the delivery of specific determinate things – treasury bills with specific maturity dates and various interest rates.  Thus, legal compensation cannot take place.^[71][47]

 

        COEC, on the other hand, points out that it has already unquestionably proven that IITC acted as a principal, and not as a conduit, in the sale of treasury bills to COEC.^[72][48]  Furthermore, it asserts that the treasury bills in question are generic in nature because the confirmations of sale and purchase do not mention specific treasury bills with serial numbers.^[73][49]  The securities were sold as indeterminate objects which have a monetary equivalent, as acknowledged by the parties in the Tripartite Agreement.^[74][50]  As such, because both IITC and COEC are principal creditors of the other over debts which consist of consumable things or a sum of money, the RTC correctly ruled that COEC may validly set-off its claims for undelivered treasury bills against that of IITC’s claims.^[75][51]

 

The Court finds in favor of respondent COEC.

 

The applicable provisions of law are Articles 1278, 1279 and 1290 of the Civil Code of thePhilippines:

 

Art. 1278.  Compensation shall take place when two persons, in their own right, are creditors and debtors of each other.

 

Art. 1279.  In order that compensation may be proper, it is necessary:

 

(1) That each one of the obligors be bound principally, and that he be at the same time a principal creditor of the other;

 

(2) That both debts consist in a sum of money, or if the things due are consumable, they be of the same kind, and also of the same quality if the latter has been stated;

 

(3) That the two debts be due;

 

(4) That they be liquidated and demandable;

 

(5) That over neither of them there be any retention or controversy, commenced by third persons and communicated in due time to the debtor. 

 

xxx

 

Art. 1290.  When all the requisites mentioned in Article 1279 are present, compensation takes effect by operation of law, and extinguishes both debts to the concurrent amount, even though the creditors and debtors are not aware of the compensation.

 

 

        Based on the foregoing, in order for compensation to be valid, the five requisites mentioned in the abovequoted Article 1279 should be present, as in the case at bench.  The lower courts have already determined, to which this Court concurs, that IITC acted as a principal in the purchase of treasury bills from PDB and in the subsequent sale to COEC of the COEC T-Bills.  Thus, COEC and IITC are principal creditors of each other in relation to the sale of the COEC T-Bills and IITC T-Bills, respectively.

 

        IITC also claims that the COEC T-Bills cannot be set-off against the IITC T-Bills because the latter are specific determinate things which consist of treasury bills with specific maturity dates and various interest rates.^[76][52]  IITC’s actions belie its own assertion.  The fact that IITC accepted the assignment by COEC of Central Bank Bills with an aggregate face value of P20,000,000.00 as payment of part of the IITC T-Bills is evidence of IITC’s willingness to accept other forms of security as satisfaction of COEC’s obligation.  It should be noted that the second requisite only requires that the thing be of the same kind and quality.  The COEC T-Bills and the IITC T-Bills are both government securities which, while having differing interest rates and dates of maturity, have each been assigned a certain face value to determine their monetary equivalent.  In fact, in the Tripartite Agreement, the COEC-IITC Agreement and in the memoranda of the parties, the parties recognized the monetary value of the treasury bills in question, and, in some instances, treated them as sums of money.^[77][53]  Thus, they are of the same kind and are capable of being subject to compensation.

 

        The third, fourth and fifth requirements are clearly present and are not denied by the parties.  Both debts are due and demandable because both remain unsatisfied, despite payment made by IITC for the IITC T-Bills and by COEC for the COEC T-Bills.  Moreover, COEC readily admits that it has an outstanding balance in favor of IITC.^[78][54]  Conversely, IITC has been found by the lower courts to be liable, as principal seller, for the delivery of the COEC T-Bills.^[79][55]  The debts are also liquidated because their existence and amount are determined.^[80][56]  Finally, there exists no retention or controversy over the COEC T-Bills and the IITC T-Bills.

 

        Because all the stipulations under Article 1279 are present in this case, compensation can take place.  COEC is allowed to set-off its obligation to deliver the IITC T-Bills against IITC’s obligation to deliver the COEC T-Bills.

 

Correction of the amount due

 

Having established that compensation or set-off is allowed between COEC and IITC, the Court will now delve into the proper amount of the award and the applicable interest rates.

 

The RTC, in its Judgment, ordered IITC to pay COEC the amount of P17,056,608 with interest at the rate of 6% per annum until full payment.  In arriving at the said amount, the trial court used, as its basis, COEC’s claim against IITC for P186,790,000 worth of treasury bills less P50,000,000 which it received under the Tripartite Agreement.  Then it deducted from this the P139,633,392.00 face value of the undelivered treasury bills by COEC to IITC less the P20,000,000 which COEC assigned to IITC pursuant to the COEC-IITC Agreement.^[81][57]

 

As correctly pointed out by COEC, there was a mistake in the arithmetic subtraction made by the RTC.  Using the figures provided by the lower court, the correct result should have been P17,156,608.00, P100,000.00 more than what was adjudged in favor of COEC.  To illustrate:

 

 

Aside from the error in the RTC’s mathematical computation, a review of the records, particularly the March 20, 1995 Amended Complaint filed by IITC, the April 10, 1995 Answer to Amended Complaint (With Counterclaim) filed by COEC and the September 2, 1999 Partial Stipulation of Facts and Documents submitted by IITC, COEC and PDB to the trial court, reveals that there was some confusion as to the correct basis to be used for calculating the amount due to COEC.  In COEC’s Answer and in the Partial Stipulation, it explicitly stated that it purchased from IITC treasury bills with a face value of P186,774,739.49, as evidenced by the Confirmations of Sale issued by IITC.  If this figure is used in computing COEC’s award, the resulting amount would be P17,141,347.49, which is consistent with COEC’s counterclaim.

 

Lastly, as regards the legal interest which should be imposed on the award, the Court directs the attention of the parties to the case of Eastern Shipping Lines v. Court of Appeals,^[82][58]

 

1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or forbearance of money, the interest due should be that which may have been stipulated in writing.  Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded.  In the absence of stipulation, the rate of interest shall be 12% per annum to be computed from default, i.e., from judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the Civil Code.

 

2. When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the amount of damages awarded may be imposed at the discretion of the court at the rate of 6% per annum.  No interest, however, shall be adjudged on unliquidated claims or damages except when or until the demand can be established with reasonable certainty.  Accordingly, where the demand is established with reasonable certainty, the interest shall begin to run from the time the claim is made judicially or extrajudicially (Art. 1169, Civil Code) but when such certainty cannot be so reasonably established at the time the demand is made, the interest shall begin to run only from the date the judgment of the court is made (at which time the quantification of damages may be deemed to have been reasonably ascertained). The actual base for the computation of legal interest shall, in any case, be on the amount finally adjudged.

 

3. When the judgment of the court awarding a sum of money becomes final and executory, the rate of legal interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be 12% per annum from such finality until its satisfaction, this interim period being deemed to be by then an equivalent to a forbearance of credit.^[83][59] (Emphases supplied)

 

 

        Because the obligation arose from a contract of sale and purchase of government securities, and not from a loan or forbearance of money, the applicable interest rate is 6% from June 10, 1994, when IITC received the demand letter from COEC.^[84][60]  After the judgment becomes final and executory, the legal interest rate increases to 12% until the obligation is satisfied.

 

        In sum, the Court finds that after compensation is effected, IITC still owes COEC P17,141,347.49 worth of treasury bills, subject to the interest rate of 6% per annum from June 10, 1994, then subsequently to the increased interest rate of 12% from the date of finality of this decision until full payment.

 

PDB has an obligation to deliver

the treasury bills to IITC

 

        The CA, in absolving PDB from all liability, reasoned that: (1) PDB was not involved in the transactions for the purchase and sale of treasury bills between IITC and COEC; (2) IITC failed to allege in its Amended Complaint and prove during the trial that PDB directly and principally sold to IITC P186,790,000 worth of treasury bills; (3) while PDB undertook, in its May 4, 1994 letter to deliver to IITC the said treasury bills, the obligation did not ripen because the bills did not become available to PDB and IITC did not remit any payment to PDB; (4) IITC did not demand delivery of the treasury bills; (5) IITC merely sued PDB as an alternative defendant, implying that IITC did not have a principal and direct cause of action against PDB on the treasury bills; and (6) there was nothing in the records to support the trial court’s finding that PDB owed IITC P186,790,000 worth of treasury bills.^[85][61]

 

        PDB essentially echoes the reasons set forth by the CA and reiterated that because IITC did not pay for the treasury bills subject of its (PDB) May 4 undertaking, then IITC had no right to demand delivery of the said securities from PDB.  Moreover, the check payments made by COEC to PDB were not in payment of the treasury bills purchased by IITC from PDB, but for COEC’s other obligations with PDB.  The total amount of the checks P182,191,269.26 did not correspond to the treasury bills worth P186,790,000 which COEC allegedly purchased from PDB with IITC acting as conduit.  PDB also points out that COEC did not interpose a cross-claim against it precisely because COEC was aware that it had no claim against PDB.^[86][62]  Also, the checks clearly indicated that they were made in payment for the account of COEC.^[87][63]

 

IITC insists that it alleged in its Amended Complaint (by way of alternative cause of action) that PDB directly and principally sold to IITC treasury bills worth P186,790,000.00.  By suing PDB as an alternative defendant, IITC did not acknowledge that PDB could not be held principally liable.  On the contrary, by bringing suit against PDB under an alternative cause of action, IITC set forth a claim against PDB as the principal seller of the treasury bills.  In addition, IITC categorically refuted PDB’s allegation that the former did not pay for the treasury bills purchased from the latter.  The judicial admissions of PDB during the course of the trial and in the Partial Stipulation, that PDB received the proceeds of the manager’s checks issued by COEC as payment for COEC’s purchase of treasury bills from IITC, contradict PDB’s defense that no payment was made by IITC for the said treasury bills.  Payment by COEC to PDB, upon IITC’s instructions, should be treated as a payment by a third person with the knowledge of the debtor, under Article 1236 of the Civil Code.  Thus, when PDB accepted COEC’s checks, it became duty bound to deliver the treasury bills sold to IITC as the principal buyer.^[88][64] 

 

Lastly, IITC points out the absurdity of the CA decision in allowing COEC to offset its liability to IITC against its liability to deliver the treasury bills purchased by COEC.  The parties do not deny that COEC paid for the purchase price of the subject treasury bills by issuing manager’s checks in the name of PDB and IITC.  As such, unless COEC’s payment to PDB is credited as payment by IITC to PDB for the securities purchased by IITC, under that theory that IITC acted as a principal buyer, there would be no obligation on the part of IITC against which a set-off can be effected by COEC.^[89][65]

 

        On this point, the Court agrees with IITC.

 

        First, while it is true that PDB was not involved in the sale of the COEC T-Bills, it is irrelevant to the issue because it is IITC which interposed a claim, albeit an alternative one, against PDB for having sold to IITC treasury bills worth P186,790,000.00.  This was alleged in IITC’s Amended Complaint and was deemed by the RTC to have been successfully proven.^[90][66]  The findings of the RTC are supported by the confirmations of sale issued by PDB in favor of IITC and PDB’s letter dated May 4, 1994 undertaking to deliver the treasury bills worth P186,790,000.00 to  IITC.^[91][67]  The due execution and the veracity of the contents of the aforesaid documents have been admitted by the parties.^[92][68]

 

        Second, it is erroneous to say that IITC never made any demand upon PDB.  IITC’s letter dated May 18, 1994 addressed to PDB confirms that it demanded delivery by PDB of the treasury bills covered by the confirmations of sale issued by PDB in its favor.  Although the demand was made on behalf of COEC, which allegedly purchased the treasury bills from PDB, consistent with IITC’s assertion that it only facilitated the sale, it was nevertheless a demand for delivery.  Even if this were to be considered an invalid demand because it was not made by IITC as the principal party to the transaction with PDB, the filing of the Amended Complaint by IITC is equivalent to demand, in keeping with the rule that the filing of a complaint constitutes judicial demand.^[93][69] 

 

        Third, the CA ruling that IITC impliedly did not have a principal cause of action because it merely sued PDB as an alternative defendant is an extremely flawed and baseless supposition which runs counter to established law and jurisprudence.  The filing of a suit against an alternative defendant and under an alternative cause of action should not be taken against IITC.  Section 13, Rule 3 and Section 2, Rule 8 of the Rules of Civil Procedure explicitly allows such filing:

 

Rule 13, Section 13: Alternative defendants. — Where the plaintiff is uncertain against who of several persons he is entitled to relief, he may join any or all of them as defendants in the alternative, although a right to relief against one may be inconsistent with a right of relief against the other. (13a)

 

Rule 8, Section 2: Alternative causes of action or defenses. – A party may set forth two or more statements of a claim or defense alternatively or hypothetically, either in one cause of action or defense or in separate causes of action or defenses.  When two or more statements are made in the alternative and one of them if made independently would be sufficient, the pleading is not made insufficient by the insufficiency of one or more of the alternative statements.

 

        As discussed earlier, the Court is not granting IITC’s primary cause of action against COEC because IITC acted, not as a mere conduit for the sale of shares by PDB to COEC as alleged by IITC, but rather as a principal purchaser of securities from PDB and then later as a principal seller to COEC.  By reason of this determination, COEC is allowed to offset its outstanding obligation to deliver the remaining IITC T-Bills against the latter’s obligation to deliver the COEC T-Bills.  Consequently, IITC’s alternative action against the alternative defendant PDB should be considered in order for IITC to be able to recover from PDB the P186,790,000.00 worth of treasury bills which had already been fully paid for. 

 

To ascertain whether IITC was able to adequately state an alternative cause of action against PDB in its Amended Complaint, the Court refers to Perpetual Savings Bank v. Fajardo^[94][70] where the test for determining the existence of a cause of action was extensively discussed:

 

The familiar test for determining whether a complaint did or did not state a cause of action against the defendants is whether or not, admitting hypothetically the truth of the allegations of fact made in the complaint, a judge may validly grant the relief demanded in the complaint. In Rava Development Corporation v. Court of Appeals, the Court elaborated on this established standard in the following manner:

 

“The rule is that a defendant moving to dismiss a complaint on the ground of lack of cause of action is regarded as having hypothetically admitted all the averments thereof. The test of the sufficiency of the facts found in a petition as constituting a cause of action is whether or not, admitting the facts alleged, the court can render a valid judgment upon the same in accordance with the prayer thereof (Consolidated Bank and Trust Corp. v. Court of Appeals, 197 SCRA 663 [1991]).

 

In determining the existence of a cause of action, only the statements in the complaint may properly be considered. It is error for the court to take cognizance of external facts or hold preliminary hearings to determine their existence. If the allegation in a complaint furnish sufficient basis by which the complaint may be maintained, the same should not be dismissed regardless of the defenses that may be assessed by the defendants (supra).

 

A careful review of the records of this case reveals that the allegations set forth in the complaint sufficiently establish a cause of action. The following are the requisites for the existence of a cause of action: (1) a right in favor of the plaintiff by whatever means and under whatever law it arises or is created; (2) an obligation on the part of the named defendant to respect, or not to violate such right; and (3) an act or omission on the part of the said defendants constituting a violation of the plaintiff’s right or a breach of the obligation of the defendant to the plaintiff (Heirs of Ildefonso Coscolluela, Sr., Inc. v. Rico General Insurance Corporation, 179 SCRA 511 [1989]).”^[95][71]  (Emphases supplied)

 

Following the disquisition above, IITC’s Amended Complaint, while not a model of superb draftsmanship in its struggle to maintain IITC’s conduit theory, adequately sets forth a cause of action against PDB.  Under its claim against PDB as alternative defendant, IITC alleged that, even if it acted as a direct buyer from PDB, (1) IITC is entitled to the delivery of the treasury bills worth P186,790,000.00 covered by the confirmations of sale issued by PDB, (2) PDB has an obligation to deliver the same to IITC, and (3) PDB failed to deliver the said securities to IITC.^[96][72]

 

It would be the height of injustice to hold IITC accountable for the delivery of the COEC T-Bills to COEC without similarly holding PDB liable for the release of the treasury bills worth P186,790,000.00 to IITC, which cannot be accomplished without allowing IITC’s alternative cause of action against PDB to prosper.

 

        The Court now tackles the main argument of PDB for sustaining the ruling of the CA absolving it from liability – that IITC allegedly failed to make the required payment for the purchase.  PDB claims that the manager’s checks which it received from COEC were payment by the latter for its other obligations to the former.  Conspicuously, PDB failed to elaborate on the supposed obligations of COEC. 

 

        This flimsy allegation is patently untrue.  In its Memorandum,^[97][73] COEC denied that the checks were payment for an account which it had with PDB, as PDB so desperately alleges.  COEC clarified that the manager’s checks payable to PDB were issued by COEC upon the instructions of IITC in payment for the COEC T-Bills.  PDB’s theory was negated by COEC itself as the issuer of the checks.  Moreover, PDB already judicially admitted, through the Partial Stipulation, that the checks were given by COEC as payment for the COEC T-Bills.  Section 4, Rule 129 of the Revised Rules of Evidence provides that:

 

Sec. 4. Judicial admissions. – An admission, verbal or written, made by a party in the course of the proceedings in the same case, does not require proof. The admission may be contradicted only by showing that it was made through palpable mistake or that no such admission was made.

 

As such, PDB cannot now gainsay itself by claiming that the checks were payment by COEC for certain unidentified obligations to PDB.  “It is well-settled that judicial admissions cannot be contradicted by the admitter who is the party himself and binds the person who makes the same, and absent any showing that this was made thru palpable mistake, no amount of rationalization can offset it.”^[98][74]

 

Since it has been sufficiently established that it was IITC which instructed that payment be made to PDB, it is apparent that the said checks were delivered to PDB in consideration of a transaction between PDB and IITC.  On May 2, 1994, the same date the checks were issued, IITC purchased treasury bills with a combined face value of P186,790,000.00 from PDB for the total price of P182,191,269.56.  The Court notes that the P182,191,269.26 aggregate amount of the checks issued by COEC to PDB is almost exactly equal to the total price of the treasury bills which IITC purchased from PDB.^[99][75]  The payment by COEC on behalf of IITC can be considered as payment made by a third-party to the transaction between IITC and PDB which is allowed under Article 1236 of the Civil Code of the Philippines.^[100][76]

 

        The Court finds no logical reason either for PDB to execute the May 4, 1994 Letter to IITC undertaking to deliver treasury bills worth P186,790,000.00 if it had not received the payment from IITC.  Especially so because there is nothing in the letter to indicate that PDB was still awaiting payment for the said securities.  There is no other reasonable conclusion but that PDB received payment, in the form of three manager’s checks issued by COEC, for the treasury bills purchased by IITC, and that having failed to promptly deliver the treasury bills despite having encashed the checks, PDB then executed the foregoing letter of undertaking.

 

        Also telling is PDB’s participation in the Tripartite Agreement with IITC and COEC where it assigned P50,000,000 worth of Central Bank Bills to IITC, in consideration of which, IITC relinquished its right to claim delivery under the confirmations of sale issued by PDB to the extent of P50,000,000.  While the agreement stipulated that it was not in any way an admission of any liability by any one of them against another, the fact that PDB agreed to execute such an agreement is indicative of the existence of its obligation to IITC.  In its Answer Ad Cautelam filed before the RTC, PDB explained that it gave up P50,000,000 worth of Central Bank Bills simply to assist COEC and IITC meet their financial difficulties.  The Court finds this allegation highly inconceivable, preposterous and even ludicrous because no company in its right mind would willingly part with such a huge amount of bank bills for no consideration whatsoever except for solely altruistic reasons.

 

        Finally, PDB’s argument that it had no obligation to deliver the treasury bills purchased by IITC because the same did not become available to PDB is evidently a frantic last ditch attempt to evade liability.  That the subject securities did not become available to PDB should not be the concern of IITC.  For as long as payment was made, PDB was obliged to deliver the securities subject of its confirmations of sale.

 

        PDB’s adroit maneuvering coupled with IITC’s poorly conceived conduit theory led the CA to reach an erroneous conclusion.  This Court, however, will not be similarly blinded.  There is simply an incongruity in the CA decision.  Accordingly, this Court rules that PDB should be liable for the delivery of P186,790,000.00 worth of treasury bills to IITC, or payment of the same, reduced by P50,000,000.00 which the former assigned to the latter under the Tripartite Agreement.  The total liability of PDB is P136,790,000.00, computed as follows:

 

PDB’s Liability
Amount of treasury bills purchased by IITC	P186,790,000.00
Amount assigned by PDB to IITC	50,000,000.00
TOTAL	P136,790,000.00

 

 

This shall be subject to interest at the rate of 6% per annum from the date of the filing of the Amended Complaint on March 21, 1995, considered as the date of judicial demand, then to 12% per annum from the date of finality of this decision until full payment.

 

To rule otherwise would be to allow unjust enrichment on the part of PDB to the detriment of IITC.  Article 22 of the Civil Code of thePhilippinesprovides that:

 

Art. 22.  Every person who through an act of performance by another, or any other means, acquires or comes into possession of something at the expense of the latter without just or legal ground, shall return the same to him.

 

        In the recent case of Flores v. Spouses Lindo,^[101][77] this Court expounded on the subject matter:

 

There is unjust enrichment “when a person unjustly retains a benefit to the loss of another, or when a person retains money or property of another against the fundamental principles of justice, equity and good conscience.”  The principle of unjust enrichment requires two conditions: (1) that a person is benefited without a valid basis or justification, and (2) that such benefit is derived at the expense of another.

 

The main objective of the principle against unjust enrichment is to prevent one from enriching himself at the expense of another without just cause or consideration.^[102][78]

 

 

        The Court cannot condone a decision which is manifestly partial.  Neither shall the Court be a party to the perpetration of injustice.  As the last bastion of justice, this Court shall always rule pursuant to the precepts of fairness and equity in order to dispel any doubt in the integrity and competence of the Judiciary.

 

WHEREFORE, the petition is PARTIALLY GRANTED.  The June 6, 2008 Decision of the Court of Appeals in C.A.-G.R. CV No. 79320 is SET ASIDE. Accordingly, the June 16, 2003 RTC Decision is REINSTATED though MODIFIED to read as follows:

 

 

 

FOR THE REASONS GIVEN, judgment is hereby rendered –

 

a] ordering Planters Development Bank to pay plaintiff ₱136,790,000.00 with interest at the rate of six (6%) percent per annum from March 21, 1995 until full payment;

 

b] ordering Insular and Trust Investment Corporation to pay Capital One Equities Corporation ₱17,156,608.00 with legal interest at the rate of six (6%) percent per annum from June 10, 1994 until full payment; and

 

c] dismissing the counterclaim of Planters Development Bank.

 

       Any amount not paid upon the finality of this decision shall be subject to interest at the increased rate of twelve (12%) percent per annum reckoned from the date of finality of this decision until full payment thereof.

 

No pronouncement as to costs.

 

SO ORDERED.

 

 

 

 

                                                JOSE CATRAL MENDOZA

                                                        Associate Justice

 

 

 

 

 

WE CONCUR:

 

 

 

 

 

PRESBITERO J. VELASCO, JR.

Associate Justice

Chairperson

 

 

 

 

 

DIOSDADO M. PERALTA                        ROBERTO A. ABAD

           Associate Justice                                   Associate Justice

 

 

 

 

ESTELA M. PERLAS-BERNABE

Associate Justice       

 

 

A T T E S T A T I O N

 

I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

 

 

        PRESBITERO J. VELASCO, JR.

                      Associate Justice

                                                               Chairperson, Third Division

 

 

C E R T I F I C A T I O N

 

Pursuant to Section 13, Article VIII of the Constitution and the Division Chairperson’s Attestation, I certify that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

 

 

 

                                                           RENATO C. CORONA

                                                                   Chief Justice