THIRD DIVISION
G.R. No. 198366, June 26, 2019
REPUBLIC OF THE PHILIPPINES, REPRESENTED BY THE PRESIDENTIAL COMMISSION ON GOOD GOVERNMENT, PETITIONER, v. THE HONORABLE OMBUDSMAN, RAMON C. LEE, JOHNNY TENG, ANTONIO DM. LACDAO, AND CESAR R. MARCELO (AS MEMBERS OF THE BOARD OF DIRECTORS AND OF ALFA INTEGRATED TEXTILE MILLS, INC.), CESAR ZALAMEA, ALICIA LL. REYES, J.V. DE OCAMPO, JOSEPH LL. EDRALIN, AND RODOLFO MANALO (FORMER MEMBERS OF THE BOARD OF GOVERNORS OF THE DEVELOPMENT BANK OF THE PHILIPPINES), RESPONDENTS.
D E C I S I O N
LEONEN, J.:
Generally, this Court does not interfere when the Office of the Ombudsman has made its finding on the existence of probable cause. This exercise is an executive function, and is pursuant to its constitutionally-granted investigatory and prosecutorial powers. For this Court to review its findings in criminal cases, there must be a clear showing of grave abuse of discretion on its part.
This Court resolves a Petition for Certiorari1 under Rule 65 of the Rules of Court, assailing the July 31, 2006 Resolution2 and January 21, 2011 Order3 of the Office of the Ombudsman in OMB-C-C-03-0271-D.
The Office of the Ombudsman found no probable cause to charge the officers of the Development Bank of the Philippines (Development Bank) and ALFA Integrated Textile Mills, Inc. (ALFA Integrated Textile) for violation of Section 3(e) and (g) of Republic Act No. 3019, or the Anti-Graft and Corrupt Practices Act. It held that the six (6) loans obtained by ALFA Integrated Textile from Development Bank were not behest loans.
Administrative Order No. 13, series of 1992, issued by then President Fidel V. Ramos (President Ramos), created the Presidential Ad Hoc Fact-Finding Committee on Behest Loans (Committee on Behest Loans) to investigate "allegations of loans, guarantees, and other forms of financial accommodations granted, directly or indirectly, by government-owned or controlled bank or financial institutions, at the behest, command, or urging by previous government officials to the disadvantage and detriment of the Philippine Government and the Filipino people[.]"4
Presidential Memorandum Order No. 61 laid down the factors that the Committee on Behest Loans used to determine if certain loans were behest:
To assist the Committee on Behest Loans, a Technical Working Group was organized, consisting of officers and employees of government financial institutions.6
a) The borrower corporation in undercollateralized[.] b) The borrower corporation is undercapitalized. c) Direct or indirect endorsement (of the loan or accommodation) by high government officials like presence of marginal notes. d) Stockholders, officers or agents of the borrower corporation are identified as cronies. e) Deviation of use of loan proceeds from the purpose intended. f) Use of corporate layering. g) Non-feasibility of project for which financing is being sought. h) Extra-ordinary speed in which loan release was made[.]5
The Committee on Behest Loans alleged that the collaterals offered as security for the US$10 million loan were the land, buildings, and machinery with a collective value of P294,993,000.00.12 The same collaterals were used to secure the US$20 million loan. After securing these loans, ALFA Integrated Textile's paid-up capital was P65,746,900.00 as of December 1979.13
Loan Amount Purpose of the Loan Date Approved and DBP Board Resolution Number Approving Officersa) US$10 Million To refinance ALFA's short-term obligations and partially finance ALFA's working capital requirements Approved under DBP Board Resolution No. 2025 dated June 27, 1979. DBP Acting Chairman Rafael A. Sison and DBP Executive Officer Alicia Ll. Reyesb) US$20 Million To refinance ALFA's obligations with other commercial banks Approved per DBP Board Resolution No. 3796 dated November 21, 1979. DBP Acting Chair Rafael A. Sison and DBP Exec. Officer Alicia Ll. Reyesc) P11.4 Million Supposed to cover ALFA's procurement of locally-grown cotton. Approved in 1980 under DBP Board Resolution No. 2655. DBP Vice Chairman J.V. De Ocampo and DBP Acting Exec. Officer Joseph Ll. Edralind) P25 Million To finance ALFA's working capital requirements for 6 months. Approved under DBP Board Resolution No. 4096 dated 10 December 1980. DBP Vice-Chairman J.V. De Ocampo and DBP Acting Executive Officer Joseph Ll. Edralin.e) US$2,666,667 To cover ALFA's operations for one (1) month. Approved in 1981 under DBP Board Resolution No. 947. Acting DBP Chairman Rafael A. Sison; DBP Vice-Chairman Jose R. Tengco, Jr. and DBP Exec. Officer R.D. Manalof) P137 Million 1) Acquisition of plant equipment;2) Payment of rehabilitation loan earlier extended to ALFA by DBP; and3) Working capital. Approved in 1981 under DBP Board Resolution No. 1811. DBP Acting Chairman Rafael A. Sison and DBP Executive Officer R.D. Manalo11
WHEREFORE, it is hereby recommended that the instant complaint for violation of Section 3(e) and (g) of R.A. 3019, as amended, against Public Respondents, namely: Cesar Zalamea, Rafael Sison, Alicia Reyes, J.V. De Ocampo, Joseph Edralin and Rodolfo Manalo, all officers of the DBP, as well as Private Respondents, namely: Ramon Lee, Johnny Teng, Antonio DM. Lac[d]ao, and Cesar Marcelo, all officers of ALFA, be DISMISSED.Preliminarily, the Office of the Ombudsman found that the Complaint had not been barred by prescription, citing Presidential Ad Hoc Fact-Finding Committee on Behest Loans v. Desierto,24 in which this Court held that prescription of the offense in behest loans started to run from the day of discovery, not commission. Here, the period of prescription commenced on March 15, 1993, when the Fortnightly Report was issued. The Presidential Commission on Good Government filed the Complaint on March 12, 2003, which was still within the 10-year prescriptive period under the Anti-Graft and Corrupt Practices Act.25
SO RESOLVED.23
The Office of the Ombudsman pointed out that the Committee on Behest Loans itself stated in its Fortnightly Report that it "did not find any characteristics to classify ALFA [Integrated Textile]'s loans as behest."31
- The accused is a public officer discharging official administrative or judicial functions or private persons in conspiracy with them;
- The public officer committed the prohibited act during the performance of his official duty in relation to his public position;
- The public officer acted with manifest partiality, evident bad faith or gross inexcusable negligence; and
- His actions caused undue injury to the Government or any private party, or gave any party unwarranted benefit, advantage or preference.30 (Citation omitted)
However, Private Respondent Lee was still required to (a) constitute a first mortgage on ALFA's 126,483 sq.m. land in Calamba, Laguna on 6 July 1981 including the buildings, machinery and equipment found thereat; (b) to assume joint and several obligations with ALFA for the repayment of the obligation; and (c) to assign to DBP ALFA's export sales proceeds in an amount sufficient to cover the yearly amortization on the loans approved by the DBP. And as a condition for the P137 Million loan, ALFA had to execute a Voting Trust Agreement (VTA) dated March 11, 1981 granting the DBP full and complete control over ALFA. Once in full control, the DBP-controlled Board of ALFA constituted additional mortgages over several other valuable assets of ALFA, which mortgages should have no longer been necessary as the constitution of the same was not agreed upon nor necessary under the terms of the VTA.35Moreover, the Office of the Ombudsman pointed out that there was no law requiring a corporation's capital to be fully paid-up or be increased to be equivalent or greater than a loan obtained from a bank,. It noted that a loan would only be under-collateralized if the loan amount exceeded the maximum allowable proportion of the mortgaged assets' appraised value. As the Technical Working Group of the Committee on Behest Loans itself found, ALFA Integrated Textile had favorable debt-equity ratios in 1978 and 1979.36
SECTION 3. Corrupt practices of public officers. — In addition to acts or omissions of public officers already penalized by existing law, the following shall constitute corrupt practices of any public officer and are hereby declared to be unlawful: . . .According to the Office of the Ombudsman, the Presidential Commission on Good Government failed to prove that the loans and accommodations in favor of ALFA Integrated Textile, the rehabilitation plan, and the fixed assets sale were grossly or manifestly disadvantageous or prejudicial to the government. It found that between the Development Bank and ALFA Integrated Textile officers, there had been no proven conspiracy that would permit prosecuting them for violation of Section 3(e) and (g) of the Anti-Graft and Corrupt Practices Act.42
(g) Entering, on behalf of the Government, into any contract or transaction manifestly and grossly disadvantageous to the same, whether or not the public officer profited or will profit thereby.
The Ombudsman has the power to investigate and prosecute any act or omission of a public officer or employee when such act or omission appears to be illegal, unjust, improper or inefficient. In fact, the Ombudsman has the power to dismiss a complaint without going through a preliminary investigation, since he is the proper adjudicator of the question as to the existence of a case warranting the filing of information in court. The Ombudsman has discretion to determine whether a criminal case, given its facts and circumstances, should be filed or not. This is basically his prerogative.For this Court to review the Office of the Ombudsman's exercise of its investigative and prosecutorial powers in criminal cases, there must be a clear showing of grave abuse of discretion. In Casing v. Ombudsman:75
In recognition of this power, the Court has been consistent not to interfere with the Ombudsman's exercise of his investigatory and prosecutory powers.
Various cases held that it is beyond the ambit of this Court to review the exercise of discretion of the Office of the Ombudsman in prosecuting or dismissing a complaint filed before it. Such initiative and independence are inherent in the Ombudsman who, beholden to no one, acts as the champion of the people and preserver of the integrity of the public service.
The rationale underlying the Court's ruling has been explained in numerous cases. The rule is based not only upon respect for the investigatory and prosecutory powers granted by the Constitution to the Office of the Ombudsman but upon practicality as well. Otherwise, the functions of the courts will be grievously hampered by innumerable petitions assailing the dismissal of investigatory proceedings conducted by the Office of the Ombudsman with regard to complaints filed before it, in much the same way that the courts would be extremely swamped if they would be compelled to review the exercise of discretion on the part of the fiscals or prosecuting attorneys each time they decide to file an information in court or dismiss a complaint by a private complainant. In order to insulate the Office of the Ombudsman from outside pressure and improper influence, the Constitution as well as Republic Act No. 6770 saw fit to endow that office with a wide latitude of investigatory and prosecutory powers, virtually free from legislative, executive or judicial intervention. If the Ombudsman, using professional judgment, finds the case dismissible, the Court shall respect such findings unless they are tainted with grave abuse of discretion.74 (Citations omitted)
The Constitution and R.A. No. 6770 endowed the Office of the Ombudsman with wide latitude, in the exercise of its investigatory and prosecutory powers, to pass upon criminal complaints involving public officials and employees. Specifically, the determination of whether probable cause exists is a function that belongs to the Office of the Ombudsman. Whether a criminal case, given its attendant facts and circumstances, should be filed or not is basically its call.Otherwise, this Court does not generally interfere with the Office of the Ombudsman's findings.77 "[Disagreement with [its] findings is not enough to constitute grave abuse of discretion."78 There must be a showing that it conducted the preliminary investigation "in such a way that amounted to a virtual refusal to perform a duty under the law."79
As a general rule, the Court does not interfere with the Office of the Ombudsman's exercise of its investigative and prosecutorial powers, and respects the initiative and independence inherent in the Office of the Ombudsman which, "beholden to no one, acts as the champion of the people and the preserver of the integrity of the public service." While the Ombudsman's findings as to whether probable cause exists are generally not reviewable by this Court, where there is an allegation of grave abuse of discretion, the Ombudsman's act cannot escape judicial scrutiny under the Court's own constitutional power and duty "to determine whether or not there has been grave abuse of discretion amounting to lack or excess of jurisdiction on the part of any branch or instrumentality of the Government."
Grave abuse of discretion implies a capricious and whimsical exercise of judgment tantamount to lack of jurisdiction. The Ombudsman's exercise of power must have been done in an arbitrary or despotic manner — which must be so patent and gross as to amount to an evasion of a positive duty or a virtual refusal to perform the duty enjoined or to act at all in contemplation of law — in order to exceptionally warrant judicial intervention.76 (Citations omitted)
Moreover, sight must not be lost of the fact that the complaint was based on the findings of the Ad Hoc Committee, a body specifically with its own specific field of expertise and charged precisely to investigate behest loans. Despite the statement oft-cited by the respondents herein, the conclusive findings of this special body are therefore entitled to great weight and respect.80Indeed, the expertise of the Committee on Behest Loans should be respected, as it is in the position to determine whether standard banking practices had been followed in loan transactions. In Presidential Ad Hoc Fact-Finding Committee on Behest Loans v. Desierto:81
It behooves the Ombudsman, while he asks the Court to respect his findings, to also accord a proper modicum of respect towards the expertise of the Committee, which was formed precisely to determine the existence of behest loans. Considering the membership of the Committee — representatives from the Department of Finance, the Philippine National Bank, the Asset Privatization Trust, the Philippine Export and Foreign Loan Guarantee Corporation and even DBP itself — its recommendation should be given great weight. No doubt, the members of the Committee are experts in the field of banking. On account of their special knowledge and expertise, they are in a better position to determine whether standard banking practices are followed in the approval of a loan or what would generally constitute as adequate security for a given loan. Absent a substantial showing that their findings were made from an erroneous estimation of the evidence presented, they are conclusive and, in the interest of stability of the governmental structure, should not be disturbed.82 (Citations omitted)However, as both petitioner and public respondent Office of the Ombudsman have observed, the Committee on Behest Loans made seemingly contradictory findings on the nature of the loans obtained by ALFA Integrated Textile from Development Bank. While its Fortnightly Report declared that "the committee did not find any characteristics to classify ALFA [Integrated Textile] 's loans as behest[,]"83 it later stated in its Terminal Report several alleged factors that would show that the loans were behest.84
It should be underscored, however, that the foregoing declaration made by the PAHFFC is not controlling considering that in the same PAHFFC's letter dated March 15, 1993 to then President Fidel V. Ramos, it unequivocally stated that ALFA's loan account possesses "POSITIVE FINDINGS", which said letter defined to "mean that at least two or more characteristics of a behest loan are present in the loan account."On the other hand, in its Resolution and Order, public respondent Office of the Ombudsman evaluated the findings made by the Committee on Behest Loans on the other evidence presented during the investigation. While it took into account the Committee's declaration in its Fortnightly Report, it did not merely rely on this statement to conclude that probable cause does not exist.
. . . .
. . . More importantly, the PAHFFC itself did not in any way -which should properly be the case, in light of the limited and restrictive function of the PAHFFC - preempt any action that may be taken by other appropriate government agencies, such as herein complainant PCGG. . . .
. . . .
. . . The provisions of Memorandum Order No. 61 which guided the PAHFFC serve as guidelines for the existence of behest loans. However, the ultimate legal basis for prosecution of the subject actions is Republic Act No. 3019 and other laws. Thus, what is ultimately to be ascertained is whether there was a violation of any law by the respondents for which they can be charged. And as the complainant (herein petitioner), as representative of the Republic, found that there exists a cause to prosecute the respondents for violation of R.A. 3019, it consequently did not hesitate to institute the present complaint.85 (Citation omitted)
Presidential Commission on Good Government stated that for a charge to be valid under Section 3(e) of Republic Act No, 3019, it must be shown that the accused "acted with manifest partiality, evident bad faith, or inexcusable negligence." On the other hand, for liability to attach under Section 3(g), it must be shown that the accused "entered into a grossly disadvantageous contract on behalf of the government."As public respondent Office of the Ombudsman had determined, petitioner did not sufficiently prove that public respondents-Development Bank officers acted with manifest partiality, evident bad faith, or inexcusable negligence when the bank extended the loans to ALFA Integrated Textile. Neither did petitioner prove that these loans were grossly disadvantageous to the government.
. . . .
Section 3, paragraphs (e) and (g) of Republic Act No. 3019 should not be interpreted in such a way that they will prevent Development Bank, through its managers, to take reasonable risks in relation to its business. Profit, which will redound to the benefit of the public interests owning Development Bank, will not be realized if our laws are read constraining the exercise of sound business discretion.
Thus, Section 3(e) requires "manifest partiality, evident bad faith or gross inexcusable negligence" and the element of arbitrariness and malice in taking risks must be palpable. Likewise, there must be a showing of "undue injury" to the government. Section 3(g), on the other hand, requires a showing of a "contract or transaction manifestly and grossly disadvantageous to the [government]."
Definitely, this means that it must not only be proven that Development Bank suffered business losses but that these losses, in the ordinary course of business and with the exercise of sound judgment, were inevitably unavoidable.87 (Citations omitted)
It appears that for the P25 Million loan (fourth loan), additional collaterals were given consisting of chattel mortgages on machinery and equipment covered by Trust Receipts Agreement for the sum of P45,470,700.00. According to Private Respondent Lee, there is no truth then to the averment of the complainant that the same collaterals were used to secure the said P25 Million loan. The $2,666,667 loan obtained on 14 May 1981 (fifth loan) was applied for and released to ALFA when ALFA was already managed by the DBP-controlled Board. Apparently, though, additional security had been given by ALFA in the form of real estate mortgage on land and on buildings and other improvements, and chattel mortgage on machinery and equipment, valued at an aggregate sum of P418,290,800.00. The P137 Million loan obtained from DBP on 6 July 1981 which was funded out of the Central Bank's Industrial Rehabilitation Fund (sixth loan) was likewise applied for and released to ALFA at the time ALFA was completely in the hands of the DBP, and the proceeds of the same disbursed by the DBP-controlled Board. However, Private Respondent Lee was still required to (a) constitute a first mortgage on ALFA's 126,483 sq.m. land in Calamba, Laguna on 6 July 1981 including the buildings, machinery and equipment found thereat; (b) to assume joint and several obligation[s] with ALFA for the repayment of the obligation; and (c) to assign to DBP ALFA's export sales proceeds in an amount sufficient to cover the yearly amortization on the loans approved by the DBP. And as a condition for the PI37 Million loan, ALFA had to execute a Voting Trust Agreement (VTA) dated March 11, 1981 granting the DBP full and complete control over ALFA. Once in full control, the DBP-controlled Board of ALFA constituted additional mortgages over several other valuable assets of ALFA, which mortgages should have no longer been necessary as the constitution of the same was not agreed upon nor necessary under the terms of the VTA. A P50 Million guarantee line obtained on 22 June 1982 was also extended by the DBP to ALFA.89 (Citations omitted)Furthermore, public respondent Office of the Ombudsman found that the rehabilitation plan public respondent Zalamea had recommended would not be disadvantageous to the government since its terms and conditions were not contrary to law and actually benefited the government.90 All the decisions made by the bank officials were based on recommendations of its different departments.91
Very truly yours, (SGD) WILFREDO V. LAPITAN Division Clerk of Court |
Endnotes:
1Rollo, pp. 3-43.
2 Id. at 44-86. The Resolution was penned by Graft Investigation & Prosecution Officer II Lolita Micu-Bravo, reviewed by PIAB-B Acting Director Orlando I. Ines, recommended for approval by PAMO Assistant Ombudsman Pelagio S. Apostol, and approved by Deputy Ombudsman for Luzon Mark E. Jalandoni of the Office of the Ombudsman.
3 Id. at 87-106. The Order was penned by Graft Investigation & Prosecution Officer II Lolita Micu-Bravo, recommended for approval by PAMO Acting Assistant Ombudsman Mary Susan S. Guillermo, and approved by Acting Ombudsman Orlando C. Casimiro of the Office of the Ombudsman.
4 Administrative Order No. 13 (1992).
5Rollo, pp. 109-110.
6 Id. at 110.
7 Id. at 111.
8 Id. at 112.
9 Id. at 111.
10 Id.
11 Id. at 113-114.
12 Id. at 114.
13 Id. at 115.
14 Id.
15 Id. at 116.
16 Id. at 117-118.
17 Id. at 118. Cape Industries, Inc. later changed its name to Southern Textile Mills, Inc.
18 Id. at 119.
19 Id. at 112-113 and 122-124.
20 Id. at 109-124.
21 Id. at 121.
22 Id. at 44-86.
23 Id. at 83.
24 375 Phil. 697 (1999) [Per C.J. Davide, En Banc].
25Rollo, pp. 70-71.
26 Id. at 71.
27 Id. at 71-72.
28 Republic Act No. 3019, sec. 3(e) states:
SECTION 3. Corrupt practices of public officers. — In addition to acts or omissions of public officers already penalized by existing law, the following shall constitute corrupt practices of any public officer and are hereby declared to be unlawful:
. . . .
(e) Causing any undue injury to any party, including the Government, or giving any private party any unwarranted benefits, advantage or preference in the discharge of his official administrative or judicial functions through manifest partiality, evident bad faith or gross inexcusable negligence.
This provision shall apply to officers and employees of offices or government corporations charged with the grant of licenses or permits or other concessions.
29 314 Phil. 66 (1996) [Per J. Puno, Second Division].
30Rollo, pp. 71-72.
31 Id. at 72 citing the Fortnightly Report.
32 Id. at 73.
33 Id. at 73-74.
34 Id. at 74.
35 Id.
36 Id, at 76-77.
37 Id. at 77.
38 Id. at 78-79 and 154.
39 Id. at 79.
40 Id. at 80.
41 Id. at 81.
42 Id. at 81-83.
43 Id. at 87-106.
44 Id. at 3-43. In its June 27, 2012 Resolution, this Court noted that Rafael A. Sison was not informed of the pendency of this case as his address could not be found. He was not named a party to the Petition.
45 Id. at 20-21.
46 Id. at 21.
47 Id. at 20-21.
48 Id. at 23.
49 Id. at 24-25.
50 Id. at 26-27.
51 Id. at 28-29.
52 Id. at 31.
53 Id. at 32-33.
54 Id. at 209-210.
55 Id. at 284-307.
56 Id. at 211-228.
57 Id. at 235-241.
58 Id. at 263-283.
59 Id. at 297-298.
60 Id. at 298.
61 Id. at 223.
62 Id. at 224.
63 Id. at 236-239.
64 Id. at 239.
65 Id. at 278.
66 Id. at 412-413.
67 Id. at 426-433.
68 Id. at 435-436.
69 Id. at 449-471.
70 Id. at 453.
71Presidential Commission on Good Government v. Office of the Ombudsman, G.R. No. 187794, November 28, 2018, [Per J. Leonen, Third Division].
72 Id.
73 579 Phil. 312 (2008) [Per J. Chico-Nazario, Third Division].
74 Id. at 324-325.
75 687 Phil. 468 (2012) [Per J. Brion, Second Division].
76 Id. at 475-476.
77Reyes v. Office of the Ombudsman, 810 Phil. 106, 114 (2017) [Per J. Leonen, Second Division].
78 Id. at 115.
79 Id.
80Rollo, pp. 28-29.
81 603 Phil. 18 (2009) [Per J. Carpio Morales, Second Division].
82 Id. at 36.
83Rollo, p. 56.
84 Id. at 24.
85 Id. at 21-23.
86 G.R. No. 187794, November 28, 2018, [Per J. Leonen, Third Division].
87 Id.
88Rollo, p. 23.
89 Id. at 73-75.
90 Id. at 77.
91 Id. at 79.
92 Id.
93 G.R. No. 187794, November 28, 2018, [Per J. Leonen Third Division].
94Rollo, p. 79.
95Vergara v. Ombudsman, 600 Phil. 26, 43 (2009) [Per J. Carpio, En Banc].