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G.R. No.

187951 June 25, 2012

THE WELLEX GROUP, INC., vs. SANDIGANBAYAN

Facts:

The Sandiganbayan, promulgated a guilty verdict in a plunder case (Criminal Case No. 26558),
filed against former President Estrada which ordered the forfeiture of the following:

(1) The total amount of P545,291,000.00, with interest and income earned, inclusive of the
amount of P200,000,000.00, deposited in the name and account of the Erap Muslim Youth
Foundation.

(2) The amount of P189,000,000.00, inclusive of interests and income earned, deposited in the
Jose Velarde account.

(3) The real property consisting of a house and lot dubbed as "Boracay Mansion" located at #100
11th Street, New Manila, Quezon City.

President Arroyo granted Estrada executive clemency through a Pardon, which he accepted.
The Pardon expressly stipulates as follows: The forfeitures imposed by the Sandiganbayan remain in
force and in full, including all writs and processes issued by the Sandiganbayan in pursuance hereof,
except for the bank account(s) he owned before his tenure as President.

With this development, Sandiganbayan ordered the issuance of a Writ of Execution for the
satisfaction of the judgment, which was not covered by the Executive Clemency granted to former
President Estrada. It qualified its ruling by stating that the forfeiture process under the Plunder Law was
limited only to those proven to be traceable as ill-gotten.

Wellex wrote a letter to Banco de Oro (former Equitable-PCIB) expressing the desire to retrieve
the Waterfront shares the former had used as collateral to secure an earlier loan obligation of 500M to
Equitable-PCI Bank. It was at this time that Wellex became aware of the Writ of Constructive Distraint
issued by the BIR to Investment Management Account (IMA) Trust Account No. 101-78056-1 in the name
of Jose Velarde (which has been adjudged by the Court to be owned by Estrada and the depositary of the
ill-gotten wealth) consisting of Promissory Notes evidencing the loan of 500M and the chattel in relation to
the plunder case. While petitioner admits the existence of its loan and acknowledges EPCIB as the
lender, the former wants the mortgaged shares back. Alleging that its loan obligation for which the shares
were given as collateral has been extinguished.

BDO made a submission informing the Sandiganbayan that the bank had not yet received any
payment from Wellex for the latter’s principal obligation, which was secured by the subject Waterfront
shares and covered by a Promissory Note and a chattel mortgage. It also sought the guidance of the
Sandiganbayan on how to proceed with the disposition of the subject IMA Trust Account in view of the
lien by the BIR and the claim of Wellex.

However, the Sandiganbayan ruled that it has the preferential right over, BIR and Wellex’s, to
forfeit the subject assets of the subject IMA Trust Account which was included in the Decision on the
plunder case.

Issue:

WON Sandiganbayan overstepped its authority in forfeiting the Waterfront shares which was
claimed to be a private asset by Wellex as part of the ill-gotten wealthby Estrada.
Ruling:

No. In convicting Estrada in the plunder case the Sandiganbayan unmasked him as the
beneficial owner of the Velarde accounts adjudged as ill-gotten wealth. It was also established during the
trial of that case that the ₱ 500 million lent to herein petitioner came from the former President and was
coursed through the said trust account. This fact is supported by documentary as well as the testimonial
evidence coming from the Estrada himself.

Wellex does not dispute the loan that was granted to them by EPCIB in the amount of P500
million . The loan is evidenced by a Promissory Note and a Chattel Mortgage executed between Wellex
as "Borrower" and then EPCIB as "Lender." The loan transaction was also admitted by Wellex through its
legal counsel’s, when it formally demanded the return of the Waterfront and Wellex shares.

However, the so-called "internal arrangements" with the bank, involved the use of S/A 0160-
62501-5 as the funding source of the P500,000,000.00 to be placed in the IMA Trust account for lending
to Gatchalian (owner of Wellex) . The fact that the P500,000,000.00 funding was not effected by a debit-
credit transaction but by a withdrawal of P500,000,000.00 from the said S/A 0160-62501-5 proves that
the money lent to Gatchalian was the personal money of Estrada through the Jose Velarde account of
which he is the owner. This savings account was under the name of Jose Velarde and was forfeited by
the government after being adjudged as ill-gotten. The trust account can then be traced or linked to an
account that was part of the web of accounts considered by the Sandiganbayan as ill-gotten. As a
consequence, all assets and receivables of the said trust account were also included in the forfeiture. The
subject shares of stock were mortgaged by petitioner Wellex as security for its loan. These shares being
the subject of a contract that was accessory to the Wellex loan and being an asset of the forfeited IMA
Trust Account, the said shares necessarily follow the fate of the trust account and are forfeited as well.
However, the forfeiture of the said trust account, together with all its assets and receivables, does not
affect the validity of the loan transaction between BDO the creditor and Wellex the debtor. The loan
continues to be valid despite the forfeiture by the government of the IMA Trust Account and is considered
as an asset.

Section 2 of R.A. 7080, as amended, provides for the forfeiture of the wealth proven to be ill-
gotten, as well its interests, thus:

SECTION 2. Definition of the Crime of Plunder; Penalties. — Any public officer who, by himself or
in connivance with members of his family, relatives by affinity or consanguinity, business
associates, subordinates or other persons, amasses, accumulates or acquires ill-gotten wealth
through a combination or series of overt criminal acts as described in Section 1 (d) hereof in the
aggregate amount or total value of at least Fifty million pesos (P50,000,000.00) shall be guilty of
the crime of plunder and shall be punished by reclusion perpetua to death. Any person who
participated with the said public officer in the commission of an offense contributing to the crime
of plunder shall likewise be punished for such offense. In the imposition of penalties, the degree
of participation and the attendance of mitigating and extenuating circumstances, as provided by
the Revised Penal Code, shall be considered by the court. The court shall declare any and all ill-
gotten wealth and their interests and other incomes and assets including the properties and
shares of stocks derived from the deposit or investment thereof forfeited in favor of the State.

Consequently, the forfeiture had the effect of subrogating the state to the rights of the trust
account as creditor. Section 2 of R.A. 7080 mandates the court to forfeit not only the ill-gotten wealth,
interests earned, and other incomes and assets, but also the properties and shares of stock derived from
the deposit or investment. The Sandiganbayan Decision imposed the penalty of forfeiture when it
convicted the former President Estrada of the crime of plunder. It is beyond cavil that it found the subject
IMA Trust Account traceable to the accounts declared to be ill-gotten by the former President.
Not only does the Plunder Law authorize the forfeiture of the ill-gotten wealth as well as any asset
acquired with the use of the ill-gotten wealth, Section 6 likewise authorizes the forfeiture of these ill-gotten
wealth and any assets acquired therefrom even if they are in the possession of other persons. Thus,
Section 6 provides:

"Section 6. Prescription of Crimes – The crime punishable under this Act shall prescribe in twenty
(20) years. However, the rights of the State to receive properties unlawfully acquired by
public officers from them or from their nominees or transferees shall not be barred by
prescription, laches, or estoppel."

Even petitioner admits that the amount of P506,416,666.66 was deposited to S/A 0160-62501-5
via a credit memo, and that P500 million was subsequently withdrawn from the said savings account,
deposited to IMA Trust Account No. 101-78056-1, and then loaned to petitioner. The Sandiganbayan
made a categorical finding that former President Estrada was the real and beneficial owner of S/A 0160-
62501-5 in the name of Jose Velarde that was invested in IMA Trust Account and its assets were
traceable to the account adjudged as ill-gotten. As such, the trust account and its assets were indeed
within the scope of the forfeiture Order issued by the Sandiganbayan in the plunder case against Estrada.
Thus, it did not commit grave abuse of discretion when it ordered the forfeiture of the trust account in
BDO, including the assets and receiveables thereof.