Hon. Ernesto F. Herrera

June 4, 1993 Hon. Ernesto F. Herrera Senate 2nd Floor, Marbella II Bldg., Roxas Boulevard, Malate, Manila S i r : This refers to your letter of April 2, 1993 requesting comments on P.S. Resolution No. 358 entitled: "Resolution Directing The Committee on Ways and Means and Other Appropriate Committees To Inquire, In Aid of Legislation, Into the PCGG Report Recommending The Sequestration, Allegedly As Ill-Gotten Wealth, Of The Additional 43 % Worth of Shares In the Philippine Telecommunications Investment Corporation (PTIC) That Could Enable The Government To Get Management of PLDT And Thereby Assure The Government of Higher Revenues." "Sequestration" is defined by the PCGG in its Rules and Regulations, implementing Executive Order Nos. 1 and 2, dated April 11, 1986 , as follows: "Sequestration" means taking into custody or placing under the Commission's control or possession any asset, fund or other property, as well as relevant records, papers and documents, in order to prevent their concealment, destruction, impairment or dissipation pending determination of the question whether the said asset, fund or property is ill-gotten wealth under Executive Order Nos. 1 and 2." (Sec. 1-B) As the term is further defined, "sequestration" is the provisional seizure or setting apart of specific property upon which a party to a suit has a claim of ownership, or a right, lien or privilege, so as to preserve it pending the litigation, in order that it may be subjected to any final judgment or decree that may be rendered in the course. (70 Am. Jur. 2d. Sec. 1) It is a "provisional remedy, or an auxiliary process, issued as an incident of a main action, and not an original process, except where the statute specifically provides that the writ may be issued even in the absence of a principal demand pending before the Court granting it." (Am Jur. Supra, Sec. 2) As a conservatory process, the writ of sequestration is intended to preserve the sequestered property during the pendency of the main suit to which the writ is auxiliary process. It operates to protect a property right, resting on the property seized; it does not in any manner increase or diminish the rights of either parties to the action in which the property is sequestered, but it simply preserves the sequestered property in status quo. The writ of sequestration creates no lien or privilege in, or title to, the property which is the subject of the sequestration proceedings, and it does not divest the title of the owner, or otherwise affect the question of title. (CJS. sec. 2C) Pending the outcome of the main suit as may be filed, there should be no transfer of title of shares of stock in the stock and transfer book. Sequestration as noted in the corporate book, merely "operates to preserve property during the litigation in order that it may be subjected to such orders or judgment as the Court may make or render." (70 Am. Jur. 2d, sec. 26, citing Jackson v. The Praetorians, Tex Civ. App., 80 S.W. 2d 322) Sequestration does not divest the defendant of all his interest in the property. (Am. Jr. Supr., citing Forest V. Forest, 22 N.Y. Sup. Ct. (9Bosev) 686) LibLex Thus, the Supreme Court, in the case on Bataan Shipyard & Engineering Co., Inc. (BASECO) versus Presidential Commission on Good Government, Chairman Jovito Salonga, Commissioner Mary Conception Bautista, Commissioner Ramon Diaz, Commissioner Raul R. Daza, Commissioner Quintin S. Doromal, Capt. Jorge B. Siacunco, et al. (G.R. No. 75885, May 27, 1987) states: "the PCGG cannot exercise acts of dominion over property sequestered frozen or provisionally taken over. As already earlier stressed with no little insistence, the act of sequestration, freezing or provisional takeover of property does not import or bring about a divestment of title over said property; does not make the PCGG the owner thereof. In relation to the property sequestered, frozen or provisionally taken over, the PCGG is a conservator, not an owner . Therefore, it cannot perform acts of strict ownership; and this is specially true in the situations contemplated by the sequestration rules where, unlike cases of receivership, for example, no court exercises effective supervision or can upon due application and hearing, grant authority for the performance of acts of dominion. Equally evident is that the resort to the provisional remedies in question should entail the least possible interference with business operations for activities so that, in the event that the accusation of the business enterprise being "ill-gotten" be not proven, it may be returned to its rightful owner as far as possible in the same condition as it was at the time of sequestration . The PCGG may thus exercise only powers of administration over the property or business sequestered or provisionally taken over, much like a court-appointed receiver, such as to bring and defend actions in its own name; receive rents; collect debts due; pay outstanding debts; and generally do such other acts and things as may be necessary to fulfill its mission as conservator and administrator. In this context, it may in addition enjoin or restrain any actual or threatened commission of acts by any person or entity that may render moot and academic, or frustrate or otherwise make ineffectual its efforts to carry out its task; punish for direct or indirect contempt in accordance with the Rules of Court; and seek and secure the assistance of any office, agency or instrumentality of the government. In the case of sequestered businesses generally (i.e. going concerns, businesses in current operation) as in the case of sequestered objects, its essential role, as already discussed is that of conservator, caretaker, "watchdog" or overseer. It is not that of manager, or innovator, much less an owner . (Emphasis supplied) It is therefore clear that "Sequestration" is not meant to deprive the owner or possessor of his title. The PCGG merely serves as conservator, not owner of the business. It is only the fiduciary trustee of whom the highest degree of diligence and rectitude are, in the premises, required. However, in order to enable the PCGG to perform its functions as conservator, the Supreme Court held in San Miguel Case that: ". . . the Court considers and so holds that in order to enable the PCGG to perform its functions as conservator of the sequestered shares of stock pending final determination by the courts as to whether or not the same constitute ill-gotten wealth or final compromise agreement between parties, the PCGG must be represented in the Board of Directors of the corporation and of its majority-owned subsidiaries or affiliates and in the Executive Committee (or its equivalent) and the Audit Committee thereof, in at least an ex-officio (i.e. non-voting) capacity. The PCGG representative must have a right of full access to and inspection of (including the right to obtain copies of) the books, records and all other papers of the corporation relating to its business, as well as the right to receive copies of reports to the Board of Directors, its Executive (or equivalent) and Audit Committees." (Emphasis supplied) While under Executive Order No. 14 the PCGG is empowered, with the assistance of the Office of the Solicitor General and other government agencies, to sequester shares of stocks as may be warranted by its investigation and findings, the PCGG should be very careful in exercising such power since the true and real ownership of the property to be sequestered is yet to be determined and proven before the courts. All such cases are to be filed with the Sandiganbayan which shall have exclusive and original jurisdiction to decide, hear, determine and adjudicate cases, including the essential issues of whether or not the property to be sequestered shall be forfeited and transferred in the name of the Government. It is thus believed that only after due process can the PCGG legally sequester shares and exercise acts of management over the same, and unless and until the sequestration case is finally terminated resolving ownership of the sequestered shares in favor of the Government, the above-mentioned 43% share of PTIC cannot be treated as Government property from where it can get additional revenue. Very truly yours, (SGD.) ROSARIO N. LOPEZ Chairman