Philippine Supreme Court Jurisprudence > Year 2018 > April 2018 Decisions > G.R. No. 195962, April 18, 2018 - PRESIDENTIAL COMMISSION ON GOOD GOVERNMENT, Petitioner, v. OFFICE OF THE OMBUDSMAN, PLACIDO L. MAPA, JR., RECIO M. GARCIA, LEON O. TY, JOSE R. TENGCO, JR., ALEJANDRO MELCHOR, VICENTE PATERNO, RUBEN ANCHETA, RAFAEL SISON, HILARION M. HENARES, JR., CARMELINO G. ALVENDIA AND GENEROSO F. TENSECO, Respondents.:

Before the Court is a petition for certiorari¹ under Rule 65 of the Rules of Court assailing the Resolution² dated April 29, 2008 (Resolution) of the Office of the Ombudsman (OMB) in OMB-C-C-05-0018-A, dismissing the complaint for violation of Section 3(e) and (g) of Republic Act No. (RA) 3019, as amended, otherwise known as the Anti-Graft and Corrupt Practices Act, against private respondents, and the undated Order³ denying petitioner's motion for reconsideration.

The Facts and Antecedent Proceedings

The petition alleges that:

x x x On 8 October 1992, then President Fidel V. Ramos issued Administrative Order No. 13 creating the Presidential Ad Hoc Fact�-Finding Committee on Behest Loans. The Committee was tasked to perform the following functions:

1. Inventory all behest loans; identify the lenders and borrowers, including the principal officers and stockholders of the borrowing firms, as well as the persons responsible for granting the loans or who influenced the grant thereof;

2. Identify the borrowers who were granted "friendly waivers" as well as the government officials who granted these waivers, determine the validity of these waivers; and

3. Determine the courses of action that the government should take to recover these loans, and to recommend appropriate actions of the Office of the President within sixty (60) days from date of its creation.

x x x On 9 November 1992, President Ramos further issued Memorandum Order No. 61 expanding the functions of the Committee to include in its investigation, inventory and study, all non-performing loans, whether behest or non-behest. Moreover, the said Memorandum Order provided the following criteria as reference in determining whether a loan was behest or not, to wit:

1. It is under collateralized.
   
   
2. The borrower corporation is undercapitalized.
   
   
3. Direct or indirect endorsement by high government officials like presence of marginal notes.
   
   
4. Stockholders, officers or agents of the borrower corporation are identified as cronies.
   
   
5. Deviation of use of loan proceeds from the purpose intended.
   
   
6. Use of corporate layering.
   
   
7. Non-feasibility of the project for which financing is being sought.
   
   
8. Extra-ordinary speed in which the loan release was made.
   

x x x Among the loan accounts investigated by the Committee was that of the Philippine Pigment and Resin Corporation (PPRC). In its Seventeenth (17th) Fortnightly Report to President Ramos dated 29 November 1993, the Committee reported that the loans/accommodations obtained by PPRC from the Development Bank of the Philippines (DBP) possessed positive characteristics of behest loans. The Committee's findings were reiterated in its Terminal Report dated 1 February 1994.

x x x On the strength of the Committee's findings, the complaint a quo was filed before [the] Office of the Ombudsman (OMB), accusing herein private respondents of violation of Sections 3(e) and (g) of Republic Act 3019, as amended, otherwise known as the Anti-Graft and Corrupt Practices Act, to wit:

Public Officials:	�	�
PLACIDO L. MAPA	-	Chairman
RECIO M. GARCIA	-	Governor
LEON O. TY	-	Governor
JOSE R. TENGCO, JR.	-	Governor
ALEJANDRO MELCHOR	-	Governor
VICENTE PATERNO	-	Governor
RUBEN ANCHETA	-	Governor
RAFAEL SISON	-	Governor
All of:	�	�
Development Bank of the Philippines (DBP)	�	�
�	�	�
Private Individuals:	�	�
HILARION M. HENARES, JR.	�	�
CARMELINO G. ALVENDIA &	�	�
GENEROSO F. TANSECO	�	�
All of:	�	�
Philippine Pigment & Resin Corporation (PPRC)			�	�

x x x The complaint a quo essentially alleges that PPRC was able to obtain two (2) foreign currency loans from DBP in the total amount of One Million Five Hundred Ninety Six Thousand Eight Hundred Twenty Two Dollars (US$1,596,822.00), or the equivalent of Eleven Million Nine Hundred Seventy Six Thousand One Hundred Sixty Five Pesos (PhP11,976,165.00).

x x x The said loans were secured by the following:

1. Joint first mortgage with the Private Development Corporation of the Philippines (PDCP) and National Investment and Development Corporation (NIDC) with DBP having an interest of 68.78% on existing assets (land, buildings and improvement, machinery and equipment) amounting to PhP9,297,000.00;
   
   
2. Joint first mortgage with (PDCP] and NIDC with DBP having an interest of 68.78% on assets to be acquired valued at PhP16,314,900.00; and
   
   
3. Joint and several signatures of Messrs. Carmelino G. Alvendia, Generoso G. Tanseco and Hilarion M. Henares, Jr.
   

x x x In other words, DBP's share on the aforesaid collaterals was valued at PhP17,615,685.00 and 64% thereof consisted of yet to be acquired assets. Moreover, it would be significant to note that at the time the loans were granted, PPRC's paid-up capital was only Php12,816,704.00.

x x x The complaint further alleged that: (1) in a statement of Total Claim as of 30 June 1987 prepared by the Transaction Processing Department-APT of DBP, the total net claim of DBP against PPRC amounted to a staggering PhP116,625,402.58; (2) based on the examination of the loan amounts of PPRC, the Committee determined that such accounts are indeed behest loans and the same would have not been extended or granted to PPRC had it not been for the manifest partiality bestowed upon it by the Board of Governors of DBP; (3) that in the normal course of events, any financial institution would have not granted the loans received by PPRC, which were severely under-collateralized and the borrower under-capitalized; (4) that the debt of PPRC ballooned to PhP116,625,402.58 in 1987 clearly indicating that PPRC failed to pay DBP the installments and interest due on the said obligation; and that finally, (5) the said acts of the Board of Governors of DBP, in connivance with the officers of PPRC, led to the grant of benefits grossly disadvantageous to the government.

x x x Finding enough bases to conduct a preliminary investigation, x x x OMB issued an Order dated 4 January 2005 directing the private respondents to file their respective counter-affidavits. However, only respondents Jose R. Tengco, Jr. and Placido L. Mapa submitted their respective Counter-Affidavits.

x x x x

x x x Petitioner filed its Consolidated Reply dated 20 April 2005 x x x.

x x x On 29 April 2008, [OMB] issued its now assailed Resolution dismissing petitioner's complaint for lack of probable cause to warrant [private] respondents indictment. [OMB] also held in its Resolution that private respondent[s] could not be held liable for their acts committed prior to the issuance of Memorandum Order No. 61 dated 9 November 1992. The dispositive portion of said Resolution reads as follows:

WHEREFORE, there being no probable cause established to warrant the indictment of herein respondents Placido Mapa, Recio M Garcia, Leon O. Ty, Jose Tengco, Jr., Alejandro A. Melchor, Vicente Paterno[,] Ruben Ancheta, Rafael Sison, Hilarion M Henares, Jr., Carmelino G. [Alvendia] and Generoso F. Tanseco, for violation of Section 3 (e) and (g) of Republic Act 3019, as amended, otherwise known as the Anti-Graft and Corrupt Practices Act, the instant case, docketed as OMB-C-C-05-0018-A, entitled Presidential Commission on Good Government, represented by Rene B. Gorospe versus Placido L. Mapa, et al., be, as it is hereby dismissed.

SO RESOLVED.

x x x On 11 March 2009, petitioner moved for reconsideration of the aforesaid Resolution. The motion[,] however, was denied in its equally challenged undated Order, the fallo of which reads:

PREMISES CONSIDERED, the Motion for Reconsideration of complainant-movant PCGG seeking that the Resolution dated 29 April 2008 dismissing OMB�C-C-05-0018-A, entitled: Presidential Commission on Good Government, represented by Rene B. Gorospe versus Placido L. Mapa, et al., be, as it is hereby denied.

SO ORDERED.⁴

Hence this petition.

Private respondent Placido L. Mapa, Jr. filed a Comment⁵ dated November 21, 2011. Private respondent Carmelino G. Alvendia filed a Comment⁶ dated November 9, 2011. Private respondent Jose R. Tengco, Jr. filed a Comment⁷ dated November 28, 2011. The Court noted the said Comments in its Resolution⁸ dated February 6, 2012. In its Resolution⁹ dated December 5, 2012, the Court resolved to dispense with the comments of the other private respondents, it appearing that only private respondents Jose R. Tengco, Jr. and Placido L. Mapa, Jr. submitted their respective counter�affidavits before the OMB. Petitioner filed a Consolidated Reply¹⁰ dated March 26, 2013.

Issue

The petition raises the following issue:

Whether the OMB committed grave abuse of discretion and/or acted without or in excess of jurisdiction in dismissing petitioner's complaint for alleged lack of probable cause.

The Court's Ruling

The petition is without merit. The OMB did not commit grave abuse of discretion or act without or in excess of jurisdiction in dismissing petitioner's complaint for lack of probable cause.

Private respondents are charged with violation of Section 3(e) and (g) of RA 3019, otherwise known as the Anti-Graft and Corrupt Practices Act, to wit:

SEC. 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:

x x x x

(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.

x x x x

(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 Court adopts with approval the OMB's findings on the failure of petitioner to point out with certainty and definiteness the specific acts of private respondents that constituted "manifest partiality," "evident bad faith," and "excusable negligence" as well as provide the basis for its conclusion that "unwarranted benefits" were accorded to and "manifest partiality" was bestowed by the DBP to PPRC, viz.:

The project of PPRC was deserving of financial assistance based [on] the following documented reasons:

1. PPRC's projects were registered by the Board of Investments as preferred pioneer project under RA No. 5186 and as preferred non-pioneer [project] under RA No. 6135;

2. the principals of the company were highly respected and reputable members of the business and civic communities;

3. PPRC's credit standing was considered and rated very good as the company had excellent track record with the Bank. PPRC was an old client of DBP whose accounts were satisfactorily handled in the past;

4. further indication of the firm's good credit standing was that another major creditor, PDCP, had approved various loans for the firm;

5. the firm's operation in the past had been smooth and trouble-free and no difficulties expected;

6. projected results of operations were seen to be profitable and the project viable with no major problems foreseen in all areas of operation, technical, sales, and financial;

7. PPRC's project was clearly one that needed no special unwarranted or special consideration to be approved, since it was viable and desirable project for financing, there is always risk since not all future intervening events and other circumstances could be totally predicted. Financial institutions are always prepared to take risks on unexpected future events as it happened in the case of PPRC and other borrowers who were adversely affected by the general economic problems. The problems experienced in the account of PPRC did not certainly arise from [private] respondents' giving undue benefit, preference or advantage or any form of unwarranted consideration to PPRC or its officials.

The approval of the foreign currency loans of PPRC by the DBP Board of Governors in January 1978 was a collective act in the exercise of its sound business judgment and was in strict and full compliance with the DBP Charter and all other existing bank policies, rules and regulations.

The business judgment as that exercised in good faith by the DBP Board of Governors in approving the PPRC foreign currency loans as recommended by the DBP operating department is a legal presumption that favors directors/governors and protects them and their substantive decisions from judicial scrutiny.

Such legal presumption was not contested by [petitioner]. Moreover, it is a fundamental rule that members of the board of directors of a corporation who purport to act for and in behalf of the corporation, keep within the lawful scope of their authority in so acting, and act in good faith, do not become liable, whether civilly or otherwise, for the consequences of their act. Those acts, when they are done under such circumstances, are properly attributable to the corporation alone and no personal1iability is incurred by such officers and board members.

It is thus not enough for [petitioner] to simply say and sweepingly conclude that the Committee, based on the examination of the account of PPRC, had evaluated and determined the subject account and found it to be a "behest loan."

The unpaid account as of 1987 cited by [petitioner] is almost ten (10) years after the foreign currency loans were approved in January 1978. In making conclusions, the time element should be taken into consideration and factored in. The DBP Board of Governors, who in good faith and using their business judgment on an informed basis, approved the foreign currency loans on solid grounds almost ten years ago, cannot be held accountable for this cited situation.

No one could have reasonably foreseen the reasons for the default of PPRC in paying its dollar-denominated loans. The situation obtaining ten years after the loan was approved was the result of various contributing circumstances which could not have been anticipated, especially the worsening of economic situation that time and the resulting foreign currency/peso revaluation/devaluation over which DBP and the project proponents had no control.

It was emphasized that at the time the dollar-based loans of PPRC were approved in January 1978, the exchange rate of the peso to dollar was only PhP7.50/$1:00. By 1987, the peso-dollar exchange rate skyrocketed to PhP20.456/$1:00 or almost triple the exchange rate in 1978. The DBP Board of Governors, who approved the foreign currency loans could not, in all fairness, be held responsible for this.

What is important is that at the time they approved the foreign currency loans, the requirements of law, rules and regulations, and the standard terms and conditions in granting them were all followed and complied with.¹¹

The retroactive application of Memorandum Order No. (MO) 61¹² dated November 9, 1992 issued by then President Fidel V. Ramos in order to subject foreign currency loans granted in favor of PPRC on January 25, 1978 or long before the issuance of MO 61 is violative of Article 366 of the Revised Penal Code which provides that crimes are punished under the laws in force at the time of their commission.¹³ Thus, MO 61 cannot be made applicable insofar as the criminal liability of private respondents is concerned.¹⁴

Furthermore, while petitioner pointed to how the Presidential Ad Hoc Fact-Finding Committee on Behest Loans (Committee) was able to conclude that the foreign currency loans were behest loans, it failed to discuss the specific participation or acts of each of private respondents constituting violation of Section 3(e) and (g) of RA 3019.¹⁵

The essential elements of violation of Section 3(e), RA 3019, as amended, are:

1. The accused is a public officer discharging official, administrative or judicial functions or private persons in conspiracy with them;

2. The public officer committed the prohibited act during the performance of his official duty or in relation to his public position;

3. The public officer acted with manifest partiality, evident bad faith or gross inexcusable negligence, and

4. His action caused injury to the Government or any private party, or gave unwarranted benefit, advantage or preference.¹⁶

On the other hand, to determine the culpability of private respondents under Section 3(g) of RA 3019, it must be established that: (1) they are public officers; (2) they entered into a contract or transaction on behalf of the government; and (3) such contract or transaction is grossly and manifestly disadvantageous to the government.¹⁷

As found by the OMB, to which the Court fully agrees, the elements of evident bad faith, manifest partiality and/or gross inexcusable negligence are lacking in the instant case; and petitioner failed to prove that the questioned foreign currency loans granted by the DBP to PPRC were grossly and manifestly disadvantageous to the government.¹⁸

While petitioner alleged that the subject foreign currency loans were undercollateralized and PPRC was undercapitalized, it failed to sufficiently establish that indeed the transactions were either grossly and manifestly disadvantageous to the government or that there was evident bad faith, manifest partiality or gross inexcusable negligence on the part of private respondents.¹⁹

Petitioner took the position that since nearly 64% of the collaterals were yet to be acquired, the loans of PPRC were undercollateralized.²⁰ Even if the collaterals consisted mostly of assets yet to be acquired, the Court in the consolidated cases of Torres v. Limjap and Vergara Vda. de Torres v. Limjap,²¹ had ruled that "[a] stipulation in the mortgage, extending its scope and effect to after-acquired property, is valid and binding x x x but the mortgage must expressly provide that such future acquisitions shall be held as included in the mortgage."²² Likewise, in People's Bank and Trust Co. v. Dahican Lumber Company,²³ the inclusion of after-acquired properties in a mortgage contract was held to be lawful.²⁴

On the allegation of undercapitalization, PPRC was required to contribute additional equity in terms of cash equity of P2,500,000.00, common stock dividends of P1,200,000.00 and conversion of at least P300,000.00 of advances from stockholders into preferred shares of the company.²⁵

The subject foreign currency loans were also secured by the joint and several signatures of Carmelino G. Alvendia, Generoso F. Tenseco and Hilarion M. Henares, Jr.

Lastly, as adverted to earlier, the DBP officials, in approving the foreign currency loans in favor of PPRC, were presumed to have regularly exercised sound business judgment to safeguard the interest of the Government absent any proof to the contrary.²⁶ Indeed, the presumption obtains in the instant petition.

WHEREFORE, the Court AFFIRMS the Resolution of the Office of the Ombudsman dated April 29, 2008 in OMB-C-C-05-0018-A finding no probable cause to indict herein private respondents Placido L. Mapa, Jr., Recio M. Garcia, Leon O. Ty, Jose R. Tengco, Jr., Alejandro Melchor, Vicente Paterno, Ruben Ancheta, Rafael Sison, Hilarion M. Henares, Jr., Carmelino G. Alvendia, and Generoso F. Tenseco for violation of Section 3(e) and (g) of Republic Act No. 3019, as amended, otherwise known as the Anti-Graft and Corrupt Practices Act, and the instant case is hereby DISMISSED.

SO ORDERED.

Peralta, Acting C. J., Perlas-Bernabe, Tijam,^*** and Reyes, Jr., JJ., concur.

Endnotes:

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^* Also referred to as Placido L. Mapa in some parts of the rollo.

^** Generoso F. Tenseco's middle initial appears as "G." and his surname is also spelled as Tanseco in some parts of the rollo.

^*** Designated additional Member per Raffle dated March 26, 2018.

¹Rollo (Vol. 1), pp. 3-43, excluding Annexes.

² Id. at 44-80. Signed by Graft Investigation and Prosecution Officer II Nellie P. Boguen-Golez and approved by Ombudsman Ma. Merceditas Navarro-Gutierrez.

³ Id. at 81-99.

⁴ Id. at 9-19, numbering of paragraphs omitted.

⁵ Id. at 358-377.

⁶ Id. at 378-382. The Comment was filed through Carmelino P. Alvendia, Jr. who manifested that his father Carmelino G. Alvendia died on March 6, 1982.

⁷ Id. at 388-417, excluding Annexes.

⁸Rollo (Vol. II), pp. 569-571.

⁹ Id. at 605-606.

¹⁰ Id. at 627-642, excluding Annex.

¹¹ OMB Resolution dated April 29, 2008, id. at 63-66.

¹² The MO sets forth the criteria in identifying behest loans, and distinguishes a behest loan from a non�behest loan in that while both may involve civil liability for non-payment or non-recovery, the fonner may entail criminal liability; rollo (Vol. 1 ), p. 73.

¹³Rollo (Vol. I), p. 73.

¹⁴ Id.

¹⁵ Id.

¹⁶ Id. at 73-74, citations omitted.

¹⁷ Id. at 75.

¹⁸ Id.

¹⁹ Id.

²⁰ Id. at 76.

²¹ 56 Phil. 141 (1931).

²² Id. at 146.

²³ 126 Phil. 354 (1967).

²⁴Rollo, p. 76.

²⁵ Id.

²⁶ Id.