BUREAU OF INTERNAL REVENUE, REPRESENTED BY THE COMMISSIONER OF INTERNAL REVENUE, PETITIONER, VS. OFFICE OF THE OMBUDSMAN, RESPONDENT.

Bureau of Internal Revenue versus Office of the Ombudsman

The Case

This is a special civil action of certiorari, prohibition and injunction brought by the Bureau of Internal Revenue, represented by its Commissioner, against the Office of the Ombudsman. The Bureau asks the Supreme Court to stop the Ombudsman from compelling it to produce the complete original case dockets of tax refunds granted to two distillery corporations, and to annul the subpoenas and orders issued for that purpose. The case matters because it draws the boundary between two great powers: the Ombudsman's plenary power to investigate any illegal, unjust, improper or inefficient act of a public official, and the Bureau's exclusive expertise over tax refunds. It also reminds every investigator that the power to subpoena is not a license to skip due process.

Procedural History

The matter began entirely within the Office of the Ombudsman. A graft investigation officer received information from an informer for reward about allegedly anomalous tax refunds, and the case was docketed and assigned to him. The Ombudsman then issued a subpoena duces tecum to a lawyer of the Bureau's Legal Department, and later a second subpoena to the Commissioner herself. The Bureau moved to vacate the subpoena, the Ombudsman denied the motion, and the Bureau's motion for reconsideration was likewise denied. Instead of complying, the Bureau manifested its intention to elevate the case to the Supreme Court, and the Ombudsman ordered an Assistant Commissioner to show cause why he should not be cited for contempt. Before the period to reply to that show cause order expired, the Bureau filed with the Supreme Court this petition for certiorari, prohibition and preliminary injunction with temporary restraining order. The Court thus acted as the first and only judicial forum, exercising its original jurisdiction over the acts of the Ombudsman.

Facts

An informer for reward told Graft Investigation Officer Christopher Soquilon of the Office of the Ombudsman that tax refunds had been anomalously granted to Distillera Limtuaco and Company and to La Tondeña Distilleries. In a memorandum dated November 26, 1993, Soquilon asked then Ombudsman Conrado Vasquez to docket the case and assign it to him for a full-blown fact-finding investigation. He stated that he was certain the refunds could be recovered by reason of the Tanduay precedent, and that using the power of the Office the government would recover multi-million illegal refunds and establish graft and corruption against key Bureau officials. The Ombudsman approved the docketing in a marginal note of the same date.

On November 29, 1993, the Ombudsman issued a subpoena duces tecum to Atty. Millard Mansequiao of the Bureau's Legal Department, ordering him to appear and bring the complete original case dockets of the refunds granted to the two companies. The Bureau asked to be excused, saying one case was pending investigation by another graft officer and that the issue had been settled by a Sandiganbayan ruling. Without resolving those objections, the Ombudsman issued a second subpoena duces tecum dated December 9, 1993, this time addressed to Commissioner Liwayway Vinzons-Chato. The Bureau moved to vacate, raising among others the absence of a pending action, the breadth of the subpoena, and the risk of violating the National Internal Revenue Code provisions on unlawful divulgence and unlawful procurement of trade secrets.

The Ombudsman denied the motion, saying the documents earlier submitted were incomplete and uncertified and that the subpoena was not a fishing expedition. It denied reconsideration, and when the Bureau refused to comply, it ordered an Assistant Commissioner to show cause why he should not be held in contempt. Before the reply period lapsed, the Bureau came to the Supreme Court.

Issues

• Whether or not the Ombudsman may investigate the grant of tax refunds even without a pending action and even where the Bureau claims exclusive expertise over the matter.
• Whether or not the subpoena duces tecum was validly issued, that is, whether it sufficiently described the documents sought and whether its enforcement would violate the statutory protection of trade secrets.
• Whether or not the Ombudsman violated the Bureau's right to due process in the manner it commenced and conducted the investigation.

Applicable Provisions

Section 12, Article Eleven of the 1987 Constitution provides:

The Ombudsman and his Deputies, as protectors of the people, shall act promptly on complaints filed in any form or manner against public officials or employees of the government, or any subdivision, agency or instrumentality thereof, including government-owned or controlled corporations, and shall, in appropriate case, notify the complainants of the action taken and the result thereof.

This is the source of the Ombudsman's power to act on complaints in any form or manner, which the Court reads as requiring no pending action.

Section 26, paragraph 2 of Republic Act Number 6770, the Ombudsman Act of 1989, provides:

The Office of the Ombudsman shall receive complaints from any source in whatever form concerning an official act or omission. It shall act on the complaint immediately and if it finds the same entirely baseless, it shall dismiss the same and inform the complainant of such dismissal citing the reasons therefore. If it finds a reasonable ground to investigate further, it shall first furnish the respondent public officer or employee with a summary of the complaint and require him to submit a written answer within seventy-two hours from receipt hereof. If the answer is found satisfactory, it shall dismiss the case.

This is the procedural safeguard the Court finds was breached, because the Bureau officials were never furnished a summary of the complaint nor asked for a written answer.

Section 4, Rule 11 of the Rules of Procedure of the Office of the Ombudsman provides:

If the complaint is not under oath or is based only on official reports, the investigating officer shall require the complaint or supporting witnesses to execute affidavits to substantiate the complaints. After such affidavits have been secured, the investigating officer shall issue an order, attaching thereto a copy of the affidavits and other supporting documents, directing the respondent to submit, within ten (10) days from receipt thereof, his counter-affidavits and controverting evidence with proof of service thereof on the complainant. The complainant may file reply affidavits within ten (10) days after service of the counter-affidavits.

This rule likewise requires affidavits and an order to answer before the respondent is compelled, and the Court finds the procedure followed contravened it.

Ruling

On the first issue, the Court ruled against the Bureau. There is no requirement of a pending action before the Ombudsman may wield its investigative power. The Constitution itself allows complaints in any form or manner, and the phrase "in an appropriate case" means any case concerning an official act or omission alleged to be illegal, unjust, improper or inefficient, not a particular form of complaint. The power to investigate and prosecute granted to the Ombudsman is plenary and unqualified, encompassing all kinds of malfeasance, misfeasance and nonfeasance committed by any officer or employee during his tenure. While the determination to grant a tax refund lies within the Bureau's exclusive expertise, when there is a suspicion of even just a tinge of impropriety, the Ombudsman may ascertain whether the determination was done in accordance with law and identify those responsible. The Ombudsman does not sit as an appellate body reversing rulings, but as an investigative agency and protector of the people.

On the second issue, the Court also ruled against the Bureau. The subpoena particularly and sufficiently described the records, and the Bureau knew precisely what was being referred to. The documents are public records in the official custody of public officials, and no showing was made that their production would contravene the provisions on trade secrets. Even assuming the dockets contained trade secrets, that would not justify non-production; at most it would justify inspection in camera. The Ombudsman's rules even allow immunity from criminal prosecution for those whose testimony or production of documents is necessary to determine the truth.

On the third issue, the Court ruled in favor of the Bureau. The procedure followed did not comply with the safeguards of the Ombudsman Act. The investigator had already found reasonable ground to investigate further, as shown by his memorandum recommending a full-blown fact-finding investigation and assuring recovery of the refunds and prosecution of key officials. Having so found, he was bound to first furnish the respondents a summary of the complaint and require a written answer within seventy-two hours. Instead, the officials were summarily ordered to appear and produce the dockets, and were never given the opportunity to submit counter-affidavits and controverting evidence. The Court put it plainly: there are always two sides to an issue, and each party must be given every opportunity to air his grievance or explain his side. This is the essence of due process.

Doctrine

First, the Ombudsman's investigative power is plenary and unqualified and does not require a pending action; a complaint may come in any form or manner, even from an anonymous or informer source, because the Constitution so provides. Second, the Ombudsman may investigate the grant of tax refunds despite the Bureau's exclusive expertise, provided the inquiry is directed at whether the determination was done in accordance with law and at identifying those responsible, not at reviewing or reversing the ruling as an appellate body. Third, the power to issue a subpoena duces tecum is not an independent proceeding, but it is validly exercised when the documents are particularly described and are public records in official custody; trade secrets, if any, justify inspection in camera, not non-production. Fourth, and decisively, once the Ombudsman finds reasonable ground to investigate further, Section 26, paragraph 2 of the Ombudsman Act requires that the respondent be furnished a summary of the complaint and be required to submit a written answer within seventy-two hours; skipping this step violates due process and vitiates the proceedings.

Disposition

The petition was granted; the Office of the Ombudsman was prohibited and ordered to desist from proceeding with the case, and its orders of November 29, 1993, December 9, 1993 and February 15, 1994 were annulled and set aside.

Remember This

Memorize the line that the Ombudsman's investigative power is plenary and unqualified and needs no pending action, but that the seventy-two hour summary of complaint and written answer under the Ombudsman Act is a due process safeguard that cannot be skipped. Examiners use this case to test the scope of the Ombudsman's jurisdiction over administrative agencies and the procedural limits on its subpoena power.