CASE BRIEF NO. 2019-0072


“A judgment must be definitive.


CASE: BSP and PNB v. Sps. Juanito and Victoria Ledesma/PNB vs. Sps. Juanito and Victoria Ledesma  [G.R. No. 211176/G.R. No. 211583, February 6, 2019]

PONENTE: Justice Mario Victor F. Leonen

SUBJECT:
A.       REMEDIAL LAW:
          i.        Conditional Judgement
B.       SPECIAL LAW:
          i.        Republic Act No. 7202
                   –        Sugar Reconstitution Fund

FACTS:        Republic Act No. 7202 was enacted to restitute the losses suffered by sugar producers due to actions taken by government agencies in order to revive the economy in the sugar-producing areas of the country.

The Sps. Ledesma were farmers engaged in sugar farming in Negros Occidental, with sugar productions from crop year 1974 to 1975 to crop year 1984 to 1985. Within this period, they were among those who suffered losses in sugar farming operations due to the actions of government-owned and controlled agencies. Among these agencies were the Bangko Sentral ng Pilipinas (BSP) and the Philippine National Bank (PNB).

The Sps. Ledesma obtained several crop loans from the PNB. After full payment of the loans, there was an excess payment of P353,529.67, as admitted by the PNB and as certified by the Commission on Audit. The Sps. Ledesma argued that under Republic Act No. 7202, the BSP and the Presidential Commission on Good Government (PCGG) should compensate them for their losses and refund the excess payment from the sugar restitution fund.

After trial, the Regional Trial Court ruled to dismiss the case for reason of prematurity and/or lack of cause of action without prejudice to its refiling by the Sps. Ledesma once the Sugar Restitution Fund under R.A. No. 7202 is already set up and ready for distribution.

On Appeal, the Court of Appeals (CA) found the Sps. Ledesma’ case meritorious. It held that there is no dispute as to the Sps. Ledesma’s inclusion in the coverage of Republic Act No. 7202.

The CA did acknowledge that the BSP and the PNB’s liability to pay the Sps. Ledesma depends on the establishment of the sugar restitution fund under Republic Act No. 7202. Section 11 of its Implementing Rules and Regulations provides how the sugar restitution fund shall be established:

SECTION 11. All assets, funds, and/or ill-gotten wealth turned over to the BSP pursuant hereto shall constitute the Sugar Restitution Fund from which restitution shall be affected by the BSP pursuant to Section 2 of the Act. Such Fund shall be held in trust by the BSP for the sugar producers pending distribution thereof. The BSP shall take all necessary steps, consistent with its responsibility as Trustee to preserve and maintain the value of all such recovered assets, funds, and/or ill-gotten wealth.

The CA held that it was clear that until the sugar restitution fund is established, payment to the Sps. Ledesma and other sugar producers under Republic Act No. 7202 would “have to be held in abeyance.”

Thus, the dispositive portion of the Court of Appeals Decision read:

WHEREFORE, the appeal is GRANTED. The November 17, 2008 Decision of the RTC Branch 46, Bacolod City is REVERSED AND SET ASIDE and a new one entered ORDERING defendants-appellees to pay plaintiffs-appellants the sum of P353,529.67 with interest at the legal rate from November 26, 2001 to be taken from the Sugar Restitution Fund once duly established.

The BSP and the PNB separately filed Motions for Reconsideration, both of which were denied by the CA. Hence, they filed separate Petitions for Review on Certiorari before the Supreme Court (this Court).

BSP argues that the CA rendered a conditional judgment, contrary to law and jurisprudence. It contends that the CA’s judgment created a bad precedent. It opened the floodgate to any party to file cases based on speculation and conditional facts.

BSP further argues that it is not mandated by Republic Act No. 7202 and the law’s IRR to pay the sugar producers’ claims with its own funds.

On the other hand, PNB argues that Republic Act No. 7202 does not mandate it to compensate “respondents from a ‘fund’ specifically held ‘in trust’ by another independent entity.” PNB argues that lending banks are not mandated to compensate sugar producers who are qualified for restitution. This duty lies solely with the BSP upon the establishment of the sugar restitution fund.

ISSUES:
A.       Whether BSP is liable for the refund of excess payments to Sps. Ledesma under Republic Act No. 7202.

B.       Whether the  PNB is liable for the refund of excess payments to Sps. Ledesma under Republic Act No. 7202.

C.       Whether the complaint of Spouses Ledesma states no cause of action against PNB and BSP.
         a.       What is “cause  of action”? What are its elements?
          b.       Whether the elements of a cause of action are present in this case.

D.      Whether the decision of the Court of Appeals is contrary to law and jurisprudence.


RULING:    
A.      
Spouses Ledesma base their claim on Section 2 of Republic Act No. 7202, which provides:

SECTION 2. Whatever amount recovered by the Government through the Presidential Commission on Good Government or any other agency or from any other source and whatever assets or funds that may be recovered, or already recovered, which have been determined to have been stolen or illegally acquired from the sugar industry shall be used to compensate all sugar producers from Crop Year 1974-1975 up to and including Crop Year 1984-1985 on a pro rata basis.

Moreover, Sections 2(r) and 11 of the Rules and Regulations Implementing Republic Act No. 7202 state:

SECTION 2. Definitions of Terms. — As used in these Implementing Rules and Regulations, the following terms shall have their respective meanings as set forth below:

. . . .
r.       SUGAR RESTITUTION FUND shall refer to the ill-gotten wealth recovered by the Government through the PCGG or any other agency or from any other source within the Philippines or abroad, and whatever assets or funds that may be recovered, or already recovered, which have been determined by PCGG or any other competent agency of the Government to have been stolen or illegally acquired from the sugar industry whether such recovery be the result of a judicial proceeding or by a compromise agreement.
. . . .

SECTION 11. All assets, funds, and/or ill-gotten wealth turned over to the BSP pursuant hereto shall constitute the Sugar Restitution Fund from which restitution shall be affected by the BSP pursuant to Section 2 of the Act. Such Fund shall be held in trust by the BSP for the sugar producers pending distribution thereof. The BSP shall take all necessary steps, consistent with its responsibility as Trustee to preserve and maintain the value of all such recovered assets, funds, and/or ill-gotten wealth.

BSP is not mandated to pay the sugar producers. From the foregoing provisions, the money to be used to compensate these sugar producers should come from the sugar restitution fund. Without the fund, there is no restitution to speak of at all.

BSP cannot effect the restitution since neither the PCGG nor other government agencies have turned over funds to it for the sugar producers’ compensation.

The trial court was correct in ruling, “[t]hat there is no Sugar Restitution Fund even up to this time is not the fault of the herein defendants. Indeed, one cannot give what he does not have.”


B.      
Likewise, PNB is not beholden to the Sps. Ledesma.

All claims for restitution shall be filed with the BSP. Section 12 of the Rules and Regulations Implementing Republic Act No. 7202 provides:

SECTION 12. The Restitution Fund shall be distributed in accordance with these guidelines:

a. Within one hundred eighty (180) calendar days from the effectivity of these Implementing Rules sugar producers shall file their claims for restitution of sugar losses with the BSP. The BSP in the implementation of these rules may request the assistance/advise from representatives of the GFIs, sugar producers, PCGG and other government agencies. Claims received during the period shall be the basis for the pro-rata distribution.

b. The BSP, shall, upon receipt of the application for reimbursement of excess payments, request from lending banks (a) statement of excess payments of claimant-sugar producer duly audited and certified to by the Commission on Audit (COA) indicating the amount of excess interest, penalties and surcharges due the sugar producer; and (b) a certification that the sugar producer has no outstanding loans with the bank.

In cases where the loan records which will serve as the basis for computing the excess payments of the sugar producer are no longer available, the lending bank shall immediately notify the BSP. The BSP shall then direct the claimant sugar producer to submit documents in his possession which are acceptable to COA to substantiate his claim. Such documents shall be submitted by the sugar producer to the lending bank within sixty (60) calendar days from receipt of notification from the BSP.

PNB’s role was merely that of a lending bank. Under Republic Act No. 7202 and its Implementing Rules and Regulations, lending banks are not obligated to compensate sugar producers for their losses. Restitution falls under the BSP, upon the establishment of a sugar restitution fund.

While this Court recognizes the plight of the thousands of sugar producers and their right as beneficiaries, there is, sadly, no fund from where the money should come.


C.      
The complaint states no cause of action against BSP and PNB. A cause of action is “the delict or wrongful act or omission committed by the defendant in violation of the primary rights of the plaintiff.”

The elements of a cause of action are:

(1) The existence of a legal right in the plaintiff, (2) a correlative legal duty on the part of the defendant, and (3) an act or omission of the defendant in violation of plaintiffs right with consequential injury or damage to the plaintiff for which he may maintain an action for the recovery of damages or other appropriate relief.

Here, the second and third elements are lacking. Without the sugar restitution fund, BSP and PNB have no correlative legal duty to compensate Sps. Ledesma for their losses. They committed neither a delict nor a wrongful act or omission in violation of Sps. Ledesma’s rights.

PNB has not violated any of its obligations toward Sps. Ledesma since it was never tasked by the law to refund the claim for excess payments. As a private banking institution and as a publicly listed company, it has no jurisdiction, control, or relation to the sugar restitution fund.


D.     
The Court of Appeals Decision is contrary to law and jurisprudence. In Cu Unjieng E Hijos v. Mabalacat Sugar Company, et al. [70 Phil. 380 (1940)]:

We have once held that orders or judgments of this kind, subject to the performance of a condition precedent, are not final until the condition is performed. Before the condition is performed or the contingency has happened, the judgment is not effective and is not capable of execution. In truth, such judgment contains no disposition at all and is a mere anticipated statement of what the court shall do in the future when a particular event should happen. For this reason, as a general rule, judgments of such kind, conditioned upon a contingency, are held to be null and void. “A judgment must be definitive. By this is meant that the decision itself must purport to decide finally the rights of the parties upon the issue submitted, by specifically denying or granting the remedy sought by the action.” And when a definitive judgment cannot thus be rendered because it depends upon a contingency, the proper procedure is to render no judgment at all and defer the same until the contingency has passed.

Related Case Brief:
a.       Cu Unjieng E Hijos v. Mabalacat Sugar Company, et al. [70 Phil. 380 (1940)]
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THINGS DECIDED:

A.       Under Republic Act No. 7202 and its Implementing Rules and Regulations, lending banks are not obligated to compensate sugar producers for their losses. Restitution falls under the BSP, upon the establishment of a sugar restitution fund.

B.       A judgment must be definitive. By this is meant that the decision itself must purport to decide finally the rights of the parties upon the issue submitted, by specifically denying or granting the remedy sought by the action.” And when a definitive judgment cannot thus be rendered because it depends upon a contingency, the proper procedure is to render no judgment at all and defer the same until the contingency has passed.

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