PCGG vs Sandiganbayan, et al.

PCGG vs Sandiganbayan, et al.

G.R. Nos. 151809-12. April 12, 2005.

Facts:

In 1976, General Bank and Trust Company (GENBANK) encountered financial difficulties. GENBANK had extended considerable financial support to Filcapital Development Corporation causing it to incur daily overdrawings on its current account with the Central Bank. It was later found by the Central Bank that GENBANK had approved various loans to directors, officers, stockholders and related interests totaling P172.3 million, of which 59% was classified as doubtful and P0.505 million as uncollectible. As a bailout, the Central Bank extended emergency loans to GENBANK which reached a total of P310 million. Despite the mega loans, GENBANK failed to recover from its financial woes. On March 25, 1977, the Central Bank issued a resolution declaring GENBANK insolvent and unable to resume business with safety to its depositors, creditors and the general public, and ordering its liquidation. A public bidding of GENBANK's assets was held from March 26 to 28, 1977, wherein the Lucio Tan group submitted the winning bid. Subsequently, former Solicitor General Estelito P. Mendoza filed a petition with the then Court of First Instance praying for the assistance and supervision of the court in GENBANK's liquidation as mandated by Section 29 of Republic Act No. 265.

In February 1986, the EDSA I revolution toppled the Marcos government. One of the first acts of President Corazon C. Aquino was to establish the Presidential Commission on Good Government (PCGG) to recover the alleged ill-gotten wealth of former President Ferdinand Marcos, his family and his cronies. Pursuant to this mandate, the PCGG, on July 17, 1987, filed with the Sandiganbayan a complaint for "reversion, reconveyance, restitution, accounting and damages" against respondents Lucio Tan, Carmen Khao Tan, Florencio T. Santos, Natividad P. Santos, Domingo Chua, Tan Hui Nee, Mariano Tan Eng Lian, Estate of Benito Tan Kee Hiong, Florencio N. Santos, Jr., Harry C. Tan, Tan Eng Chan, Chung Poe Kee, Mariano Khoo, Manuel Khoo, Miguel Khoo, Jaime Khoo, Elizabeth Khoo, Celso Ranola, William T. Wong, Ernesto B. Lim, Benjamin T. Albacita, Willy Co, Allied Banking Corporation (Allied Bank), Allied Leasing and Finance Corporation, Asia Brewery, Inc., Basic Holdings Corp., Foremost Farms, Inc., Fortune Tobacco Corporation, Grandspan Development Corp., Himmel Industries, Iris Holdings and Development Corp., Jewel Holdings, Inc., Manufacturing Services and Trade Corp., Maranaw Hotels and Resort Corp., Northern Tobacco Redrying Plant, Progressive Farms, Inc., Shareholdings, Inc., Sipalay Trading Corp., Virgo Holdings & Development Corp., (collectively referred to herein as respondents Tan, et al.), then President Ferdinand E. Marcos, Imelda R. Marcos, Panfilo O. Domingo, Cesar Zalamea, Don Ferry and Gregorio Licaros. The case was docketed as Civil Case No. 0005 of the Second Division of the Sandiganbayan. In connection therewith, the PCGG issued several writs of sequestration on properties allegedly acquired by the above-named persons by taking advantage of their close relationship and influence with former President Marcos.

Respondents Tan, et al. repaired to this Court and filed petitions for certiorari, prohibition and injunction to nullify, among others, the writs of sequestration issued by the PCGG. After the filing of the parties' comments, this Court referred the cases to the Sandiganbayan for proper disposition. These cases were docketed as Civil Case Nos. 0096-0099. In all these cases, respondents Tan, et al. were represented by their counsel, former Solicitor General Estelito P. Mendoza, who has then resumed his private practice of law.

On February 5, 1991, the PCGG filed motions to disqualify respondent Mendoza as counsel for respondents Tan, et al. with the Second Division of the Sandiganbayan in Civil Case Nos. 0005 and 0096-0099. The motions alleged that respondent Mendoza, as then Solicitor General and counsel to Central Bank, "actively intervened" in the liquidation of GENBANK, which was subsequently acquired by respondents Tan, et al. and became Allied Banking Corporation. Respondent Mendoza allegedly "intervened" in the acquisition of GENBANK by respondents Tan, et al. when, in his capacity as then Solicitor General, he advised the Central Bank's officials on the procedure to bring about GENBANK's liquidation and appeared as counsel for the Central Bank in connection with its petition for assistance in the liquidation of GENBANK which he filed with the Court of First Instance (now Regional Trial Court) of Manila and was docketed as Special Proceeding No. 107812. The motions to disqualify invoked Rule 6.03 of the Code of Professional Responsibility. Rule 6.03 prohibits former government lawyers from accepting "engagement or employment in connection with any matter in which he had intervened while in said service."

On April 22, 1991, the Second Division of the Sandiganbayan issued a resolution denying PCGG's motion to disqualify respondent Mendoza in Civil Case No. 0005. It found that the PCGG failed to prove the existence of an inconsistency between respondent Mendoza's former function as Solicitor General and his present employment as counsel of the Lucio Tan group. It noted that respondent Mendoza did not take a position adverse to that taken on behalf of the Central Bank during his term as Solicitor General. It further ruled that respondent Mendoza's appearance as counsel for respondents Tan, et al. was beyond the one-year prohibited period under Section 7(b) of Republic Act No. 6713 since he ceased to be Solicitor General in the year 1986. The said section prohibits a former public official or employee from practicing his profession in connection with any matter before the office he used to be with within one year from his resignation, retirement or separation from public office. The PCGG did not seek any reconsideration of the ruling.

Issue:

            Whether or not the present engagement of Atty. Mendoza as counsel for respondents Tan, et al. in Civil Cases Nos. 0096-0099 violates the interdiction embodied in Rule 6.03 of the Code of Professional Responsibility

Held:

            No. The Supreme Court ruled that Atty. Mendoza can be a counsel if Tan, et al. in Civil Cases Nos. 0096-0099 without violating Rule 6.03 of the Code of Professional Responsibility. The act of respondent Mendoza as Solicitor General involved in the case at bar is "advising the Central Bank, on how to proceed with the said bank's liquidation and even filing the petition for its liquidation with the CFI of Manila." In fine, the Court should resolve whether his act of advising the Central Bank on the legal procedure to liquidate GENBANK is included within the concept of "matter" under Rule 6.03. the Supreme Court held that this advice given by respondent Mendoza on the procedure to liquidate GENBANK is not the "matter" contemplated by Rule 6.03 of the Code of Professional Responsibility. It is given that respondent Mendoza had nothing to do with the decision of the Central Bank to liquidate GENBANK. It is also given that he did not participate in the sale of GENBANK to Allied Bank. The "matter" where he got himself involved was in informing Central Bank on the procedure provided by law to liquidate GENBANK thru the courts and in filing the necessary petition in Sp. Proc. No. 107812 in the then Court of First Instance. The subject "matter" of Sp. Proc. No. 107812, therefore, is not the same nor is related to but is different from the subject “matter” in Civil Case No. 0096. Civil Case No. 0096 involves the sequestration of the stocks owned by respondents Tan, et al., in Allied Bank on the alleged ground that they are ill-gotten. The case does not involve the liquidation of GENBANK. Nor does it involve the sale of GENBANK to Allied Bank. Whether the shares of stock of the reorganized Allied Bank are ill-gotten is far removed from the issue of the dissolution and liquidation of GENBANK. GENBANK was liquidated by the Central Bank due, among others, to the alleged banking malpractices of its owners and officers. In other words, the legality of the liquidation of GENBANK is not an issue in the sequestration cases. Indeed, the jurisdiction of the PCGG does not include the dissolution and liquidation of banks. It goes without saying that Code 6.03 of the Code of Professional Responsibility cannot apply to respondent Mendoza because his alleged intervention while a Solicitor General in Sp. Proc. No. 107812 is an intervention on a matter different from the matter involved in Civil Case No. 0096.