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VICENTE B. CHUIDIAN v. SANDIGANBAYAN

FACTS:

The instant petition involves transactions entered into by the government in the penultimate days of the Marcos administration. Petitioner Vicente B. Chuidian was alleged to be a dummy or nominee of Ferdinand and Imelda Marcos in several companies illegally acquired by the Marcos spouses. Chuidian, a favored business associate of the Marcoses, allegedly used false pretenses to induce the officers of the Philippine Export and Foreign Loan Guarantee Corporation (PHILGUARANTEE), the Board of Investments (BOI), and the Central Bank to facilitate the procurement and issuance of a loan guarantee in favor of the Asian Reliability Company, Incorporated (ARCI) in September 1980. ARCI, owned 98% by Chuidian, was granted a loan guarantee of US$25,000,000. Although ARCI represented that the loan proceeds would be used to establish projects in the Philippines, Chuidian invested the proceeds in corporations in the United States. ARCI defaulted on the loan payments, and Philguarantee ended up suing Chuidian before the Santa Clara County Superior Court in June 1985. Chuidian claimed that he was a victim of the systematic plunder by the Marcoses and had filed an action in the Federal Courts of the United States to recover the companies illegally taken from him. In November 1985, Philguarantee entered into a compromise agreement with Chuidian. Under the agreement, Chuidian would assign and surrender title to all his companies to the Philippine government, and in return, Philguarantee would absolve Chuidian from all civil and criminal liability and desist from pursuing any suit against him. The Philippine government would pay Chuidian US$5,300,000. Initial and succeeding payments were made, and the remaining balance was to be paid through an irrevocable letter of credit (L/C) from the Philippine National Bank (PNB). However, with the advent of the Aquino administration, the newly-established Presidential Commission on Good Government (PCGG) sequestered Chuidian’s assets, including the L/C. Philguarantee then filed a motion to vacate the stipulated judgment, but the court denied it, leading to an appeal. Additionally, Chuidian filed a lawsuit against PNB in the United States District Court, seeking to compel the bank to pay the proceeds of the L/C.

The case involves a dispute between the Philippine National Bank (PNB) and Dynetics, Incorporated, represented by Francisco R. Chuidian. Dynetics, Incorporated had obtained a standby letter of credit (L/C) from PNB in the amount of Four Million Four Hundred Thousand Dollars (US$4,400,000.00). PNB refused to honor the L/C claiming that the settlement agreement between PNB and Chuidian was void due to illegality, duress, and fraud. The Federal Court ruled in favor of PNB, excusing the bank from making payment on the L/C. The government of the Philippines, through the Presidential Commission on Good Government (PCGG), filed a case against Chuidian and others, seeking the reconveyance, reversion, accounting, and restitution of illegally acquired assets. The PCGG alleged that Chuidian engaged in various unlawful acts, including executing a court settlement with Philguarantee that was disadvantageous to the government. While the case was pending, the government filed a motion for attachment of the L/C, arguing that Chuidian embezzled or fraudulently misapplied funds, concealed or disposed of the property subject to the action, and resided outside the country. Chuidian opposed the motion, arguing that the plaintiff's affidavit was defective, there was no fiduciary relationship, and he did not commit fraud or dispose of property with intent to defraud. The Sandiganbayan granted the motion for attachment, finding that the motion itself contained the requisites of an affidavit, there was no fiduciary relationship between Chuidian and the government, and Chuidian's arguments lacked merit.

The case involves a motion filed by Chuidian to lift the attachment on his property and to require the Republic to deposit the funds in an interest-bearing account. The Sandiganbayan had issued a writ of attachment on the property based on allegations of fraud committed by Chuidian in obtaining a bank loan and diverting the proceeds. The Sandiganbayan justified the attachment on the grounds that Chuidian's absence from the country was a potent ground for the provisional remedy. Chuidian argued that his return to the Philippines and the absence of evidence of fraud or concealment warranted the lifting of the attachment. He also denied disposing of assets to defraud the Republic and claimed that the allegations had already been resolved in courts in California. Chuidian raised the issue of due process and argued that the attachment deprived him of his property. He further contended that the Republic's failure to prosecute the case for an unreasonable length of time constituted laches and warranted the dismissal of the case. Chuidian also filed a motion to require the Republic to deposit the funds in an interest-bearing account.

Philippines. Second, Chuidian's belated appearance before the Sandiganbayan is not a sufficient reason to lift the attachment. Third, the attachment was not solely based on Chuidian's absence but also on the ground that he is an alleged dummy of Ferdinand Marcos and his cronies. Fourth, the foreign judgment cannot be a basis for lifting the attachment as it would undermine the jurisdiction of the Sandiganbayan. Chuidian argued that these issues were not adequately addressed in the earlier resolution and requested for a reconsideration.

In response, the Republic argued that the Sandiganbayan's denial of Chuidian's motion to lift attachment was proper considering that his belated appearance does not warrant the lifting of the attachment. The Republic maintained that the foreign judgment cannot be used as a basis to lift the attachment because it would undermine the jurisdiction of the Sandiganbayan.

The Sandiganbayan denied Chuidian's motion for reconsideration, affirming its previous resolutions denying the lifting of attachment and the requirement to deposit the attached L/C in an interest-bearing account.

ISSUES:

  1. Whether the Republic's failure to prosecute its action for an unreasonable length of time warrants the dismissal of the case for laches.

  2. Whether the foreign judgment can be used as a basis for lifting the attachment.

  3. Whether the Sandiganbayan has jurisdiction to hear and decide the ill-gotten wealth cases lodged before it.

  4. What can the petitioner do to quash the attachment of the Letter of Credit (L/C)?

  5. Whether there is a final foreign judgment which the Philippine courts must defer to.

  6. Whether PNB is excused from performance of the L/C agreement due to the freeze and sequestration orders issued by the PCGG.

  7. Whether fraud is a ground for the issuance of the preliminary attachment.

  8. Whether there are compelling reasons to lift the attachment.

  9. Whether the Sandiganbayan committed grave abuse of discretion in issuing the resolutions.

  10. Whether the petitioner failed to avail of the proper recourse to lift the attachment.

  11. Whether the Deed of Transfer validly substituted the debtor.

  12. Whether the PNB is released from any liability under the Letter of Credit (L/C).

    • Whether the petitioner is deemed to be the lawful payee-beneficiary of the Letter of Credit (L/C) until it is proven to be ill-gotten and he has no right over it.
    • Whether the Sandiganbayan erred in relieving the Philippine National Bank (PNB) of its liability as the original debtor.

RULING:

  1. The motion to lift attachment should be granted and the preliminary attachment must be lifted. The Republic's failure to prosecute its action for an unreasonable length of time constitutes laches.

  2. The foreign judgment can be used as a basis for lifting the attachment. It does not amount to an abdication of the jurisdiction of the Sandiganbayan to defer to the judgment of foreign courts.

  3. The Sandiganbayan has jurisdiction to hear and decide the ill-gotten wealth cases lodged before it.

  4. The petitioner has two courses of action available to quash the attachment of the L/C:

  5. To file a counterbond in accordance with Rule 57, Section 12; or

  6. To quash the attachment on the ground that it was irregularly or improvidently issued, as provided for in Section 13 of the same Rule.

  7. There is no showing of any final foreign judgment by the California Supreme Court, and therefore res judicata does not apply.

  8. PNB is excused from performance of the L/C agreement as long as the freeze and sequestration orders remain in effect.

  9. Fraud is a ground for the issuance of the preliminary attachment, and the hearing on a motion to dissolve the attachment would be tantamount to a trial of the merits of the action.

  10. No, there are no compelling reasons to lift the attachment.

  11. No, the Sandiganbayan did not commit grave abuse of discretion in issuing the resolutions.

  12. Yes, the petitioner failed to avail of the proper recourse to lift the attachment.

  13. No, the Deed of Transfer did not validly substitute the debtor.

  14. No, the PNB is not released from any liability under the L/C.

    • The petitioner is deemed to be the lawful payee-beneficiary of the L/C until it is proven that the L/C is ill-gotten and he has no right over it. Provisional remedies, such as freeze orders and sequestration, are not meant to deprive the owner or possessor of their title or any right to the property, but rather to preserve it until its lawful ownership is determined.
    • The Sandiganbayan erred in relieving PNB of its liability as the original debtor. Any substitution of debtor requires the consent of the petitioner, who is the lawful payee-beneficiary of the L/C.

PRINCIPLES:

  • Laches is the failure to assert one's rights for an unreasonable length of time, leading to the loss or prejudice of the other party.

  • The Sandiganbayan has the authority to consider foreign judgments as a basis for its decision.

  • The Sandiganbayan has jurisdiction over ill-gotten wealth cases.

  • The determination of the existence of grounds to discharge a writ of attachment rests in the sound discretion of the lower courts.

  • A defendant whose property or asset has been attached may apply for an order discharging the attachment upon giving a counterbond.

  • A party whose property has been attached may apply to discharge the attachment on the ground that it was improperly or irregularly issued.

  • Supervening events which may or may not justify the discharge of the writ are not within the purview of the rule on discharging the attachment for improper or irregular issuance.

  • Res judicata requires that the former judgment or order must be final.

  • The Philippine courts must respect the acts of the state, such as the freeze and sequestration orders issued by the PCGG.

  • Fraud is a ground for the issuance of a preliminary attachment, and the merits of the action should be ventilated at the regular trial, not during the motion to dissolve the attachment.

  • A motion to dissolve a writ of attachment should be based on the grounds specified in Rule 57 of the Rules of Court.

  • The attachment is a provisional remedy to ensure the safety and preservation of the attached property until a judgment is obtained.

  • The only ways to quash a writ of attachment are by filing a counterbond or by moving to quash on the ground of improper and irregular issuance.

  • Novation, which involves substituting a new debtor in place of the original one, requires the consent of the creditor.

  • Provisional remedies, such as freeze orders and sequestration, are not meant to deprive the owner or possessor of their title or any right to the property, but rather to preserve it until its lawful ownership is determined.

  • Any substitution of debtor requires the consent of the lawful payee-beneficiary of a Letter of Credit.