Title
Kant Kwong vs. Presidential Commission on Good Government
Case
G.R. No. L-79484
Decision Date
Dec 7, 1987
Foreign investors challenged PCGG's indefinite hold-order, citing violation of their constitutional right to travel and due process; Supreme Court ruled in their favor, lifting the order due to lack of justification and procedural lapses.
foreign investors
constitutional right
lift

Case Summary (G.R. No. L-79484)

Petitioners’ Mandamus Petition and the Issuance of Hold-Orders

Petitioners filed an original action for mandamus seeking an order compelling respondent PCGG “to lift without delay” the Hold-Orders issued against them. They alleged that the Hold-Orders violated their constitutional right to travel, that the orders were issued in grave abuse of authority, and that they were not involved in ill-gotten wealth or in transactions connected therewith.

The PCGG had ordered the two garment corporations sequestered on 25 March 1986, based on the thesis that the Marcoses—through nominees and dummies—appeared to control sixty-seven percent (67%) of the firms’ shareholdings. On 13 February 1987, Secretary Ramon A. Diaz wrote the Minister of Public Information advising the latter that petitioners had been included in the PCGG Hold-Order list. On 12 March 1987, petitioners filed before the PCGG an Urgent Motion to Lift Hold-Order, requesting that it be set for hearing on 16 March 1987. The motion was not calendared for that date.

On 19 March 1987, the PCGG denied the motion in an order stating, in substance, that based on records in its possession, petitioners allegedly obstructed the release of corporate funds needed for operations; delayed the cashing of letters of credit; failed to remit payments due for past shipments; withheld documents covering substantial past shipments; and engaged in acts to discredit the Officer-in-Charge of the corporations and the Commission, thereby requiring their presence in the country to resolve enumerated issues so that operations would not be obstructed and production would not be delayed.

Opposition and Grounds Relied Upon

Petitioners anchored their mandamus petition on four grounds: (a) that the Hold-Order was a gross and unlawful violation of their constitutional right to travel and locomotion; (b) that it was not authorized by Executive Orders Nos. 1, 2 and 14, nor by the PCGG’s Rules and Regulations; (c) that it constituted harassment motivated by ill-will and vindictiveness, violating due process and fair play; and (d) that it had caused damages and suffering to petitioners and their families.

The PCGG and its officials, in opposing the petition, argued that in the performance of an official duty involving discretion, the official could be compelled by mandamus only to act, and not to act in a particular manner. The Court later treated this submission as not controlling where there was gross abuse of discretion and manifest injustice.

Legal Framework Under Executive Order and PCGG Rules

The Court recited that Executive Order No. 1, dated 28 February 1986, created the PCGG and entrusted it principally with the recovery of ill-gotten wealth accumulated by former President Ferdinand E. Marcos and related persons, including through the takeover or sequestration of business enterprises and entities owned or controlled by them during Marcos’s administration, directly or through nominees.

Under Section 3 of Executive Order No. 1, the PCGG was empowered to conduct investigations; sequester or place under its control any property and records pertaining to ill-gotten wealth; enjoin or restrain acts that would frustrate or make ineffectual its efforts; and promulgate rules and regulations necessary to carry out its purposes.

Pursuant to these delegations, the PCGG issued its Rules and Regulations on 11 April 1986. The Court highlighted the pertinent rule on Hold-Orders, which stated that the Commission could issue writs of sequestration and freeze and/or hold orders to enable it to accomplish its task of recovering ill-gotten wealth. The Rules defined a Hold-Order as an order to temporarily prevent a person from leaving the country where departure would prejudice, hamper, or otherwise obstruct the Commission’s task in enforcing Executive Orders Nos. 1 and 2, because the person was known or suspected to be involved in the properties or transactions covered.

The PCGG’s Denial and the Subsequent Lift as to One Petitioner

After petitioners’ Urgent Motion to Lift was denied on 19 March 1987, the case proceeded on petitioners’ claims that the restraint had become unlawful.

Notably, on 24 September 1987, acting on an urgent motion filed by petitioner Yim Kam Shing, the Court lifted, effective immediately, the Hold-Order issued against him, for the purpose of allowing him to leave for Hongkong for urgent medical treatment. The main decision still addressed the continued validity of Hold-Orders as against petitioners generally, and the question of whether the PCGG’s continued maintenance of such restraint—under the circumstances—had become tainted with grave abuse.

The Court’s Findings on Expiration and Staleness of Grounds

The Court held that the validity of the Hold-Orders issued on 13 February 1987 had already expired under the PCGG Rules and Regulations. Specifically, the Court cited the rule stating that a Hold-Order “shall be valid only for a maximum period of six months,” unless extended by the Commission en banc for good reasons. The PCGG neither extended the Hold-Orders nor advanced “good reasons” for extension.

The Court also found that the grounds relied upon at the time of issuance had become stale. The PCGG’s denial order had justified continued restraint on the need for petitioners’ presence to resolve enumerated issues tied to alleged obstruction of operations and funds, including withholding of documents, delay in cashing letters of credit, failure to remit payments, and campaigns to discredit officers and the Commission.

However, the Court observed that developments after sequestration rendered those reasons no longer controlling. The PCGG had already appointed an Officer-in-Charge for the two corporations, with authority to operate and manage them. It had also taken over the management and operations of the sequestered corporations and initiated changes aimed at protecting both government interests and workers. The Court noted that since the take-over, the PCGG had accomplished multiple operational and financial measures, including halting losses and posting a profit sufficient to allow tax payments; discontinuing a marketing agreement and organizing a Manila-based marketing and procurement office; securing new orders at higher prices; replacing technicians with Filipino technicians; upgrading wages and benefits; instituting cost-saving measures; and partially collecting unpaid export bills. Based on these accomplishments, the Court reasoned that operations were no longer obstructed, production no longer delayed, and funding available.

The Court further noted that one of the justifications offered by the PCGG was that petitioners had frustrated and hampered its investigative task. The Court took judicial notice that a civil case entitled “Republic of the Philippines vs. Ferdinand E. Marcos, et als.” had been filed before the Sandiganbayan on 16 July 1987, thereby indicating that the PCGG’s investigative task related to the sequestered garment firms and any alleged connection to ill-gotten wealth had, to all appearances, terminated. This, in the Court’s view, further weakened any continuing necessity for petitioners’ presence in the country.

Denial of Fair Play and Due Process Under PCGG Rules and Executive Order No. 14

The Court also concluded that petitioners had been denied the rudiments of fair play. It emphasized that the PCGG Rules and Regulations provided that the person against whom a writ of sequestration or freeze or hold order was directed could request the lifting in writing, personally or through counsel, within five (5) days from receipt of the writ or order (or, for hold orders, from date of knowledge). The Commission could lift the writ or order after due hearing or motu proprio for good cause shown, and only by taking into consideration the evidence and circumstances.

Despite these procedural safeguards, the Court found that no hearing had been set after the Hold-Orders were issued. Petitioners’ request for a hearing had been disregarded, and their motion to lift had been summarily denied. The Court further observed that the issues spelled out against petitioners had remained unresolved for approximately nine (9) months, for which the PCGG was faulted for disregarding the requirements of fairness and due process mandated by Executive Order No. 14, including its “5th Whereas clause,” which required the PCGG to accomplish its vital task with due regard to fairness and due process.

Constitutional Right to Travel and the Limits of Police Power

The Court ruled that although the right to travel was not absolute and could yield to the State’s inherent police power underlying the PCGG’s authority, no “good reasons” were shown to justify continued enforcement of the Hold-Orders after their expiration and after the alleged necessity for petitioners’ presence had become obsolete.

The Court treated petitioners as foreign nationals whose recognized equity interest in the sequestered firms was acknowledged by the PCGG itself. It noted the absence of any showing that those interests appeared prima facie to be ill-gotten wealth. It also stressed that no charges had been filed against them before the Sandiganbayan, and that petitioners faced no criminal indictment and had not been provisionally released on bail under any circumstance that woul

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