Title
Argana vs. Republic
Case
G.R. No. 147227
Decision Date
Nov 19, 2004
The Republic sought forfeiture of alleged ill-gotten assets of a former mayor. A compromise agreement ceding 75% of properties to the government was rescinded due to extrinsic fraud, as the government received only 0.15% of the value. The Supreme Court upheld rescission, ruling the agreement grossly disadvantageous and unenforceable.
fraud allegations
grave abuse of discretion
authority

Case Summary (G.R. No. 147227)

Factual Background

The action arose from a petition for forfeiture filed by the Republic of the Philippines on July 29, 1987 seeking recovery of alleged ill-gotten assets of the late Maximino A. Argana, former Mayor of Muntinlupa. The properties involved comprised numerous titles aggregating 481.77422 hectares, of which 409.50817 hectares were registered in the name of the late Mayor and his spouse. Petitioners denied unlawful acquisition and answered the forfeiture petition, while negotiations for an amicable settlement proceeded over several years.

Formation and Terms of the Compromise Agreement

On September 18, 1997, the PCGG, through Commissioners Reynaldo S. Guiao and Herminio A. Mendoza, executed a Compromise Agreement with petitioners, represented by petitioner Maria Felicidad Argana. The agreement purported to cede to the Republic a total of 361.9203 hectares in Pangil and Famy, Laguna, described as 75.12% of the sequestered land by area. In consideration, respondents agreed to dismiss or withdraw all pending civil, criminal and administrative cases filed, litigated or investigated by the Republic against petitioners. The remainder of the sequestered area, aggregated as 24.88% or 120.05392 hectares, was allocated among heirs, siblings, foreclosed interests and other persons.

Pre-Approval Communications and Judicial Approval

Following execution, the PCGG transmitted the Compromise Agreement to the Office of the Solicitor General (OSG) and sought the OSG’s filing of a motion for judicial approval. The OSG requested clarification whether the agreement covered all sequestered assets and sought presidential approval prior to submission. The PCGG replied that the properties listed comprised all sequestered assets subject of litigation and emphasized that the PCGG accepted the compromise in view of perceived insufficiency of evidence. President Fidel V. Ramos approved the Compromise Agreement on May 27, 1998. The OSG filed on June 4, 1998 a Motion to Approve Compromise Agreement, and the Sandiganbayan promulgated a Decision on July 31, 1998 approving the agreement and rendering judgment in accordance therewith.

Motion to Rescind: Filing and Allegations

On October 5, 1998 the OSG, together with the PCGG, filed a Motion to Rescind Compromise Agreement and to Set Aside Judgment by Compromise. The motion alleged that the compromise was grossly disadvantageous to the Republic, that petitioners had engaged in fraud and insidious misrepresentation, and that the partition of assets had been effected by reference to land area rather than to value. The motion asserted that petitioners obtained properties worth almost Four Billion Pesos (P4,000,000,000.00) while the Republic received properties allegedly worth Three Million Six Hundred Twenty Thousand Pesos (P3,620,000.00), and it sought rescission or reformation of the compromise.

Petitioners’ Response and Procedural Objections

Petitioners answered the Motion to Rescind and maintained that the Sandiganbayan’s July 31, 1998 Decision had become final and executory. They contended that the PCGG lawyers had no authority to rescind the agreement without PCGG En Banc and presidential consent; that the Motion to Rescind was untimely and defective for lack of an Affidavit of Merit and for omission of a Certification against Forum-Shopping; that the Sandiganbayan had lost jurisdiction after approval of the compromise; and that rescission was unavailable because the Compromise Agreement had been implemented.

Sandiganbayan Proceedings on the Motion to Rescind

The Sandiganbayan treated the Motion to Rescind as a petition for relief under Rule 38 in a Resolution dated September 22, 1999 and set the matter for hearing. On April 11, 2000 the Third Division issued a Resolution granting the Motion to Rescind and setting aside the July 31, 1998 Decision. The court found that the Motion to Rescind was timely filed and that the OSG had presumed authority to file it. Substantively, the Sandiganbayan concluded that extrinsic fraud attended execution of the Compromise Agreement because the assessed or market values of the properties were deliberately omitted and a percentage sharing by area was presented so as to create the appearance of adherence to the PCGG’s customary 75%-25% mode of compromise, whereas the allocation by value was manifestly different. The Sandiganbayan characterized the transaction as unconscionable and violative of Section 3(g) of R.A. No. 3019. Petitioners’ motions for reconsideration and voluntary inhibition were denied by Orders dated February 22, 2001.

Petition for Certiorari and Issues Presented to the Supreme Court

Petitioners filed a petition for certiorari with the Supreme Court on April 27, 2001. The Court distilled the issues to be resolved: (1) whether certiorari was the proper remedy; (2) whether the OSG and PCGG lawyers had authority to file the Motion to Rescind; (3) whether the Motion to Rescind complied with Rule 38; (4) whether the Sandiganbayan acted with grave abuse of discretion in granting the Motion to Rescind; and (5) whether the members of the Sandiganbayan Third Division should have inhibited themselves from resolving petitioners’ motions.

Petitioners’ Principal Contentions on Merits and Procedure

Petitioners argued that the Sandiganbayan denied their substantive and procedural due process by refusing voluntary inhibition and by exhibiting prejudgment; that PCGG lawyers lacked authority to seek rescission without En Banc and presidential approval; that the Motion to Rescind was defective because it was not filed by a party, was filed out of time, lacked an Affidavit of Merit, and omitted a Certification against Forum-Shopping; that there was no factual or legal basis for the finding of fraud; that the Sandiganbayan lost jurisdiction upon approving the compromise; and that rescission was barred because the Compromise Agreement had been implemented.

Respondent’s Principal Contentions

Respondent contended that the petition for certiorari was improper because petitioners had remedies at law; that the Sandiganbayan correctly denied inhibition for lack of clear and convincing proof of bias; that no law required prior En Banc or presidential approval of pleadings by government lawyers and that R.A. No. 1379 expressly authorizes the OSG to prosecute forfeiture actions; that the Motion to Rescind satisfied Rule 38 and was timely within the six-month period; that the court which rendered judgment retains jurisdiction to entertain a petition for relief from that judgment; that the Compromise Agreement was unconscionable and void for fraud and public policy; that judicial notice of relative land values was proper; and that the compromise had not been implemented because it required presidential and judicial approvals.

Supreme Court on the Proper Remedy and Jurisdiction

The Court held that a special civil action for certiorari was a proper remedy to assail the Sandiganbayan’s interlocutory order setting the case for pre-trial following annulment of its judgment, because such an order is interlocutory and not appealable. The Court relied upon Rule 65 and precedent holding that no appeal lies from an order setting the case for further proceedings after a compromise judgment is set aside.

Supreme Court on Authority of OSG and PCGG Counsel to File Motion to Rescind

The Court ruled that petitioners’ claim that the Motion to Rescind was a mere scrap of paper for lack of En Banc or presidential authorization was untenable. The Court observed that no statute required prior approval of pleadings filed by government lawyers from the PCGG En Banc or the President and that R.A. No. 1379 expressly vested the OSG with authority to prosecute forfeiture of unlawfully acquired property. Because the OSG had originally instituted Civil Case No. 0026 and because the PCGG was the authorized representative in the compromise, the filing of a motion to rescind by the OSG assisted by PCGG counsel was within the OSG’s duty to protect the Republic’s interest.

Supreme Court on Timeliness and Rule 38 Requirements

Addressing timeliness, the Court recognized that a petition for relief under Rule 38 ordinarily must be filed within sixty days from knowledge of the judgment and within six months from entry. The Court applied the rule that judgment by compromise is considered entered on the date the court approved it, which here was July 31, 1998, and that the sixty-day period expired on September 29, 1998. The Motion to Rescind was filed October 5, 1998, seven days beyond the sixty-day period but within the six-month period. The Court exercised the recognized exceptions and accepted the motion as timely, finding no grave abuse in the Sandiganbayan’s liberal admission given the gravity of alleged fraud against the Republic. The Court further found that the record contained an Affidavit of Merit attached to the Motion to Rescind and that the absence of a separate affidavit does not mandate denial where the verified petition supplies the requisite facts. The Court also held that a Certification against Forum-Shopping is not required for a petition for relief under Rule 38 because such petition is not an initiatory pleading.

Supreme Court on Voluntary Inhibition

The Court sustained the Sandiganbayan’s denial of petitioners’ Urgent Motion for Voluntary Inhibition. Applying the standard that the decision to inhibit rests within a judge’s sound discretion and must be supported by clear and convincing evidence, the Court found petitioners’ allegations of partiality and prejudgment to be speculative and insufficient. The Sandiganbayan’s language in its

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