MANILA— The Supreme Court (SC) has ruled that the Presidential Commission on Good Government (PCGG) is not required to pay interest or damages on funds it sequestered, saying its responsibility is to preserve the assets rather than generate income from them.

In a Decision penned by Associate Justice Ramon Paul L. Hernando, the SC First Division dismissed the petition filed by Palm Avenue Holding Co., Inc. and Palm Avenue Realty Development Corporation (Palm Companies), which sought interest on funds placed under government custody.

The PCGG sequestered in 1986 shares of stock in Benguet Corporation registered in the names of the Palm Companies as part of the government’s efforts to recover alleged ill-gotten wealth. The action was based on a letter identifying Benjamin “Kokoy” Romualdez as the beneficial owner of the shares.

The shares subsequently generated income, with some of them sold. The proceeds were deposited into an escrow account and a Comprehensive Agrarian Reform Program (CARP) account.

The escrow account generated more than PHP 273 million in interest, while the funds transferred to the CARP account had earned more than PHP 4 million before the transfer. The funds no longer earned interest after being placed in the CARP account.

The Sandiganbayan later ordered the release of the funds, including the interest earned, to the Palm Companies while it continued to determine whether the assets were ill-gotten.

The Palm Companies then asked the Sandiganbayan to require the PCGG to pay 12% annual interest, compounded until full payment, on the CARP funds that had not earned interest. They argued that the money should have remained in the escrow account.

The Sandiganbayan initially granted the request and ordered the PCGG to pay 6% interest. It later reversed the ruling, finding that the PCGG was not obligated to ensure that the sequestered funds continued earning interest.

The SC upheld the reversal.

The Court said the law creating the PCGG allows it to sequester assets suspected of being ill-gotten while courts determine whether they were unlawfully acquired. The measure is intended to prevent such assets from being concealed, destroyed or depleted while under government custody.

It said the PCGG acts as a caretaker of sequestered property rather than its owner or investment manager. Its obligation is satisfied when the assets are protected, preserved and returned without loss, including actual profits and interest earned during sequestration.

The Court stressed that the PCGG is not required to increase the value of sequestered assets or generate profits for their owners.

“Sequestration is a police power measure intended to aid the State in the recovery and preservation of properties that were stolen to the grave prejudice of the nation and the Filipino people. It was never intended to be a commercial or investment undertaking run by the government for the benefit of those suspected to have accumulated ill-gotten wealth.”

In the Palm Companies’ case, the SC found that the PCGG fulfilled its obligation by preserving the funds and eventually returning them in full, even though the money did not earn interest while held in the CARP account.

The Court also ruled that transferring the funds to the CARP account was within the PCGG’s authority to administer sequestered assets and ensured that the money was not lost or improperly spent.

The SC said the absence of interest resulted not from misuse of the funds but from the Palm Companies’ inability to use assets that had been lawfully sequestered. It said such loss of potential income is an ordinary consequence of sequestration and does not warrant compensation.

With no finding that the PCGG exceeded its authority or acted negligently in handling the funds, the SC ruled that the Palm Companies were not entitled to damages or interest.