Supreme Court stops order for PNB to deposit $4.4-M in Marcos ill-gotten wealth case

The Supreme Court has permanently stopped the Sandiganbayan from enforcing an order for the Lucio Tan-led Philippine National Bank (PNB) to remit to the government $4.4 million that is part of a still pending Marcos ill-gotten wealth case filed decades ago.

The First Division made permanent its temporary restraining order (TRO) against a Sandiganbayan resolution that rejected PNB motions against its order to deposit the proceeds with the Land Bank of the Philippines to be held in escrow, according to a September 25 resolution released recently.

In the latest court action in an issue that traces its roots to 1985 and originally involved an alleged Marcos dummy who has since died, the SC set aside and annulled the November 6, 2007 Sandiganbayan resolution.

The 15-page resolution of the First Division has the SC calling its own two decisions from 2001 and 2006 "patently wrong" considering the nature of a letter of credit. The PNB has been wanting to be released from the obligation of depositing the proceeds of this financial device.

"In view of the foregoing nature of a letter of credit, it becomes virtually impossible for PNB to comply with the directive to deposit the proceeds of the L/C No. SFD-005-85 in an interest bearing account," the SC ruled.

The High Court noted that the letter of credit was sequestered by the Presidential Commission on Good Government (PCGG) in 1986 and thus "had not been presented for payment in accordance with its terms," prompting the bank not to make any payment from 1986 to 1990, when the credit letter expired.

"All the foregoing show that there can be no proceeds to speak of," the SC held.

Timeline

The $4.4 million, or around P224 million in the current exchange rate, is part of the amount the government agreed to pay Vicente Chuidian, an alleged Marcos dummy, for the purchase of his stocks in two companies in 1985.

This was in his agreement with the Philippine Export and Foreign Loan Guarantee Corporation (PhilGuarantee), now called the Philippine Export-Import Credit Agency, that had him surrendering his companies to the government in exchange for absolution from all liability for a $25-million loan he had failed to pay for.

The deal said Chuidian would get $5.3 million. He got an initial $700,000 and was supposed to get the remaining $4.6 million through a letter of credit agreement between the PNB and Dynetics, Inc., one of the companies.

He was able to make two drawings worth $200,000 before his assets were sequestered by the PCGG in 1986.

The government filed a civil forfeiture case against the Marcos spouses in 1987. In 1993, the Sandiganbayan ordered the seizure of proceeds from the Chuidian letter of credit agreement as part of the case.

Four years later, the Sandiganbayan granted Chuidian's motion to deposit the proceeds to an interest bearing account. The anti-graft court said the national government was obliged to pay but that the liability remained with the PNB for accounting and monitoring.

The SC upheld the Sandiganbayan ruling in 2001, finding no reason to release PNB from liability. The High Court at the time said the transfer of assets from the PNB to the government in 1987 had no effect because there was no valid substitution of debtor.

The SC would maintain in 2006 that PNB is still the original debtor and Chuidian still the payee until the government proves he has no right to claim the proceeds. The Sandiganbayan will determine who will eventually get the amount when it resolves the civil forfeiture case, the SC said.

Citing the 2001 and 2006 SC rulings, the Sandiganbayan said the PNB should remit the proceeds. But instead of complying, the PNB filed several motions, including one for Dynetics and/or PhilGuarantee to be required to make a deposit first before the proceeds are remitted to the Sandiganbayan.

The Sandiganbayan denied these motions in the assailed and now-annulled resolution, prompting the issue to once again be brought to the highest Philippine court.

This time, the SC said its decisions in 2001 and 2006, though final by now, may be revisited and vacated because they fall under an exception to the doctrine of immutability of final judgments.

"Our previous Decisions ordering PNB to deposit the proceeds of the letter of credit to an interest bearing account is patently wrong in light of the very nature of a letter of credit," the SC said.

A letter of credit, it said, is an engagement by a bank or another person "made at the request of a customer that the issuer will honor drafts or other demands for payment upon compliance with the conditions specified in the credit."

This, the court said, entails certain conditions and even requires the borrower, in this case Dynetics, to deposit with the PNB the peso equivalent of the "relevant drawdown" -- an obligation that is "absolute, unconditional, and irrevocable."

But Dynetics did not surrender assets to the PNB, and the PNB did not create any account for Dynetics, the SC noted, adding that Chuidian could not have collected from the bank unless he presented the required documents.

The PNB has also attacked the legality and validity of the letter of credit itself before the Pasay Regional Trial Court. That, the SC said, will determine the bank's liability under the credit letter.

Retired chief justice Lucas Bersamin chaired the First Division but was on official business at the time of the vote. Other division members were Justices Estela Perlas-Bernabe, Francis Jardeleza, Alexander Gesmundo, and Rosmari Carandang.

Associate Justice Rodil Zalameda was designated as an additional member. Gesmundo took no part. —LDF, GMA News