SC: PCGG not liable for interest on sequestered funds

A ruling was issued by the Supreme Court (SC) stating that the Presidential Commission on Good Government (PCGG) is not liable to pay interest or damages on funds it sequestered or took custody of.

The ruling of the high bench said the PCGG’s duty is only to preserve the funds, not to make them grow.

In a decision penned by Associate Justice Ramon Paul L. Hernando dated 26 August 2026, the SC’s First Division denied the petition of Palm Avenue Holding Co., Inc. and Palm Avenue Realty Development Corporation seeking interest on funds sequestered from them.

The PCGG sequestered shares of stock in Benguet Corporation registered under the Palm Companies in 1986 as part of the government’s effort to recover alleged ill-gotten wealth.

This was based on a letter identifying Benjamin “Kokoy” Romualdez as the shares’ beneficial owner.

The shares later earned income and were partly sold, and the PCGG placed the proceeds in an escrow account and a Comprehensive Agrarian Reform Program (CARP) account.

The escrow funds earned over PHP 273 million in interest, while the CARP funds earned over PHP 4 million before being transferred to the CARP account.

After their transfer to the CARP account, they stopped earning interest. Later, the Sandiganbayan ordered the release of the funds, including the interest earned, to the Palm Companies pending its decision on whether the funds were ill-gotten.

Since the CARP account funds came without any interest, the Palm Companies asked the Sandiganbayan to order the PCGG to pay interest at 12% per year, compounded until full payment, arguing that the PCGG should have kept the CARP funds in escrow instead of moving them.

The anti-graft court initially agreed and ordered the PCGG to pay 6% in interest but later reversed itself, ruling that the Commission had no duty to guarantee that the funds would earn interest. The SC agreed.

Under the law creating the PCGG, the Commission can sequester assets suspected to be ill-gotten while the courts are deciding whether they were unlawfully acquired. This prevents assets from being hidden, destroyed, or depleted while in government custody.

The SC explained that the PCGG’s role over sequestered property is limited to that of a caretaker, not an owner or manager. This duty is fulfilled when the sequestered assets are safeguarded, kept intact, and returned without loss, including any actual profits and interest earned while they were under sequestration.

The SC clarified that the PCGG has no duty to increase the value of the sequestered funds or generate profit for their owners. To impose this on the Commission would unnecessarily burden the State’s resources and distract the PCGG from its main task of recovering ill-gotten wealth.

The SC emphasized:

“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.”

The SC found that the PCGG performed its duty by keeping the Palm Companies’ funds intact and eventually returning them in full, even though the funds did not earn interest while in the CARP account.

The SC stated that transferring the sequestered funds to the CARP account fell under the PCGG’s authority to administer the funds. By doing so, the PCGG ensured that the funds were not lost or improperly spent.

The SC clarified that any claimed loss of interest or income was not due to misuse but to the Palm Companies' inability to use lawfully sequestered funds. This is a normal result of sequestration and does not justify compensation for lost profits.

Since the PCGG did not exceed its authority or act negligently in handling the sequestered funds, the Palm Companies are not entitled to damages or interest.