Whether PCGG Has Authority to Direct Agencies Such as SEC, BSP and PDIC, in Denying the PNB-Allied Bank Merger

DOJ OPINION NO. 042 , s. 2012 June 13, 2012 Undersecretary John Phillip P. Sevilla Officer-in-Charge Department of Finance Roxas Blvd. Corner Pablo Ocampo, Sr. Street Manila Dear Undersecretary Sevilla : Subject of herein request for opinion is the issue of whether or not Presidential Commission on Good Government (PCGG) has the authority to direct agencies, such as the Securities and Exchange Commission (SEC), Bangko Sentral ng Pilipinas (BSP) and the Philippine Deposit Insurance Corporation (PDIC), in denying the application of merger of the Philippine National Bank (PNB) and Allied Banking Corporation (Allied) pursuant to Executive Order No. 2, series of 1986. We take it that your query arose in view of the letters sent by PCGG to these concerned agencies. As a backgrounder, the facts of which you provided, PCGG was established by virtue of said E.O. 2, primarily to recover alleged ill-gotten wealth of former President Marcos, his family, and his cronies. Pursuant to this mandate, PCGG filed with the Sandiganbayan Civil Case No. 0005 against Lucio Tan, et al. (the PCGG Case), for the recovery of the Allied shares (among other assets of the Lucio Tan Group). Several writs of sequestration including the Allied shares were issued by PCGG which were all declared void by Sandiganbayan and later upheld by the ruling of the Supreme Court in PCGG v. Tan, et al. 1 In July 2008, while the PCGG Case was pending with the Sandiganbayan, PNB and Allied sought PDIC's consent to the proposed merger, with PNB as the surviving entity. Pursuant to PDIC's mandate under Section 21 (c) of R.A. 3591, as amended, the PDIC Board granted its consent to the proposed merger, which consent had a one-year validity. Unfortunately, said consent expired last 2009. On 18 December 2008, PCGG filed an Application for Temporary Restraining Order (TRO) and/or Writ of Preliminary Injunction before the Sandiganbayan to enjoin the merger on the basis of E.O. 2, invoking PCGG's authority to prohibit any person from transferring, conveying, encumbering or otherwise depleting or concealing assets and properties in which the Marcoses and their allies have any interest or participation. ACaDTH Thereafter, PCGG sent letters to SEC, BSP and PDIC requesting these agencies to deny any merger application by PNB and Allied on the basis that there is no final and executory decision issued by Sandiganbayan. Hence, this request. The provision in question is paragraph 2, E.O. 2, which mandates PCGG to "prohibit any person from transferring, conveying, encumbering or otherwise depleting or concealing such assets and or properties or from assisting or taking part in their transfer, encumbrance, concealment, or dissipation under pain of such as penalties as are prescribed by law. " 2 The general rule in statutory construction is that statutes that are in derogation of common or general rights, are generally strictly construed and rigidly confined to cases already within their scope or purpose. 3 It has been held that of two reasonably possible constructions, one which would diminish or restrict fundamental right of the people and the other of which would not do so, the latter construction would be adopted so as to allow full enjoyment of such fundamental right. 4 In resolving to render the Writs of Sequestration issued by PCGG as null and void, the Sandiganbayan used this line of argument when it declared that inasmuch as sequestration tends to impede or limit the exercise of property rights by private citizens, it should be strictly construed against the state, pursuant to the above-state legal maxim. It went on further to state that even the exercise of the inherent and plenary police power of the state to impose restrictions on property rights is subject to the conditions of reasonableness, public welfare, and necessity. 5 In the same case, the Supreme Court's Decision quoted a substantial portion of the Sandiganbayan's resolution of Civil Cases Nos. 0096-0099, wherein the latter court found it relevant to quote Madame Justice Ameurfina Melencio-Herrera, to wit: "Sequestration is an extraordinary, harsh, and even severe remedy. It should be confined to its lawful parameters and exercised, with due regard, in the words of its enabling laws, to the requirements of fairness, due process and justice." 6 Based on the foregoing premises, we hold the view that paragraph 2 of E.O. 2, should not be construed as delimiting the mandates of the concerned agencies as far as approving or disapproving the application of merger by PNB and Allied. Moreover, there are no sequestration orders to stand on since the writs of sequestration of Allied Bank shares were already declared void by the Sandiganbayan and later upheld by the Supreme Court in PCGG v. Tan, et al. (Ibid.) . As held by the Sandiganbayan, under Section 80 of the Corporation Code, the liabilities, obligations and actions against the merged corporations are not erased or do not pass into oblivion. There is no fear that the shares will disappear in the merging process. The planned merger will likewise not pre-empt the ruling or decision of the Sandiganbayan in Civil Case No. 0005 on whether Allied Bank is ill-gotten or not. Incidentally, Civil Case No. 0005 was recently decided by the Sandiganbayan in a Decision dated June 11, 2012, the dispositive portion of which reads, as follows: "Thus, absent any convincing evidence to hold otherwise, it follows that plaintiff failed to prove that the Marcoses accumulated ill-gotten wealth and that defendants collaborated with them. DAaIEc "In conclusion, it is plaintiff's burden to prove the allegations in its Second Amended Complaint. For relief to be granted, the operative act on how and in what manner the Marcoses and their alleged associates participated in and/or benefitted from acts of Pres. Marcos must be clearly shown through a preponderance of evidence. This burden, plaintiff failed to discharge, hence, this Court is left with no choice but to dismiss the instant case against the defendants." Thus, paragraph 2 of E.O. 2 should not be construed as precluding the concerned agencies in pursuing their mandates under their respective charters. To do otherwise and not act on the same may even result in suits filed against them by involved parties. However, we shall defer to SEC, BSP and PDIC on the evaluation and final disposition of the subject merger application in accordance with their respective mandates and existing laws in processing said application. This view arises not only from practical considerations but also out of due respect and deference for the competence and expertise of the agencies concerned having the primary jurisdiction to decide on the matter at hand. Please be guided accordingly. TDSICH Very truly yours, (SGD.) LEILA M. DE LIMA Secretary Footnotes 1. G.R. Nos. 173553-56, 07 December 2007. 2. Emphasis supplied. 3. Realty Investment, Inc. v. Valderama ,84 Phil. 842; Herrerias v. Javellana , 84 Phil. 608. 4. Provincial Chapter of Laguna, Nacionalista Party v. Commission on Elections , 122 SCRA 423. 5. Supra, footnote #1. 6. Quoted from Justice Melencio-Herrera's "Concurring Opinion with Qualifications" in BASECO v. PCGG (150 SCRA 181, 253, 27 May 1987).