GENERAL BANK AND TRUST COMPANY (GBTC); WORLDWIDE INSURANCE AND SURETY COMPANY (WORLDWIDE); MIDLAND INSURANCE CORPORATION (MIDLAND); AND STANDARD INSURANCE CO., INC. (STANDARD), …

General Bank and Trust Company versus De Leon

The Case

This is a petition for certiorari brought by General Bank and Trust Company, Worldwide Insurance and Surety Company, Midland Insurance Corporation, and Standard Insurance Company against Assistant Solicitor General Magdangal de Leon. The petitioners asked the Supreme Court to annul the Ombudsman's resolution dismissing their criminal and administrative complaint against the respondent, whom they accused of violating the Anti-Graft and Corrupt Practices Act and of malfeasance in office. The case matters because it fixes the elements of the graft offense under Section 3 (e) and because it marks the boundary between a lawyer's official duty to defend the Government and a public officer's personal criminal liability.

Procedural History

The petitioners filed their complaint with the Office of the Ombudsman, docketed as a criminal complaint for violation of Section 3 (e) of Republic Act 3019, together with an administrative charge of malfeasance. The complaint was assigned to Graft Investigation Officer Raul Totanes of the Evaluation and Preliminary Investigation Bureau. In a resolution dated May 15, 1995, the investigator recommended that the case be dismissed for lack of sufficient evidence to hold the respondent criminally liable. The petitioners moved for reconsideration, which was denied in an order dated March 13, 1996. The petitioners then went directly to the Supreme Court by petition for certiorari under Rule 65, seeking to annul both the resolution and the order of denial.

Facts

On March 27, 1977, the Monetary Board of the Central Bank passed a resolution declaring General Bank and Trust Company insolvent and ordering it to stop its banking operations. The Monetary Board designated a liquidator and approved a liquidation plan under which the Lucio Tan group would purchase all the assets and assume all the liabilities of the bank. On April 7, 1977, the Central Bank and its liquidator, through the Office of the Solicitor General, filed a petition with the Court of First Instance of Manila for assistance in the liquidation.

In May 1982, three minority stockholders, Worldwide, Midland, and Standard, intervened and prayed for the annulment of the closure and liquidation as arbitrary and in bad faith. General Bank itself later joined the intervention. The case was originally assigned to Solicitor Juan Nabong, but when he was appointed a regional trial court judge, it was reassigned to the respondent, who was then a Solicitor and later became an Assistant Solicitor General. All the pleadings in the liquidation case were signed by the respondent together with the Solicitor General and other members of the legal staff.

Separately, on July 17, 1987, the Presidential Commission on Good Government, through the Office of the Solicitor General, filed an ill-gotten wealth case with the Sandiganbayan against Lucio Tan, former President Ferdinand Marcos, Imelda Marcos, and others. The petitioners seized on the alleged inconsistency between the Government's defense of the Central Bank's closure of the bank in the liquidation case and its attack on that same closure in the ill-gotten wealth case. They wrote the respondent asking him to inhibit himself, and when he continued to represent the Central Bank, they filed the complaint with the Ombudsman.

Issues

• Whether or not the Ombudsman committed grave abuse of discretion in finding that the Office of the Solicitor General was not defending the interest of Lucio Tan in the liquidation case.
• Whether or not the respondent may be held criminally liable under Section 3 (e) of Republic Act 3019 for the alleged inconsistent positions taken by the Office of the Solicitor General in the two cases.
• Whether or not the courts may interfere with the Ombudsman's determination of the merits of a complaint filed before it.

Applicable Provisions

Section 3 (e) of Republic Act 3019, the Anti-Graft and Corrupt Practices Act, is the offense charged, and the Court enumerates its elements from it:

To be criminally liable under Section 3 (e) of RA 3019, these elements must be present: (1) That the accused are public officers or private persons charged in conspiracy with them; (2) that said public officers commit the prohibited acts during the performance of their official duties or in relation to their public positions; (3) that they cause undue injury to any party, whether the Government or a private party; (4) that such injury is caused by giving unwarranted benefits, advantage or preference to such parties; and (5) that the public officers have acted with manifest partiality, evident bad faith or gross inexcusable negligence.

The fifth element, manifest partiality, evident bad faith, or gross inexcusable negligence, is the one the Court finds missing, and its absence is fatal to the complaint.

Section 35, Chapter 12, Title III, Book IV of the Administrative Code of 1987 defines the mandate of the Office of the Solicitor General, which the respondent was discharging:

The Office of the Solicitor General shall represent the Government of the Philippines, its agencies and instrumentalities and its officials and agents in any litigation, proceeding, investigation or matter requiring the services of lawyers. When authorized by the President or head of the office concerned, it shall also represent government owned or controlled corporations. The Office of the Solicitor General shall constitute the law office of the Government and, as such, shall discharge duties requiring the services of lawyers.

This provision establishes that the respondent acted as counsel for a government agency, the Central Bank, and not in pursuit of any private interest.

Section 34 of the same Chapter describes the Solicitor General as the principal law officer and legal defender of the Government, with supervision and control over the Office. This bears on the case because the positions taken were the official positions of the Office, not the personal positions of the respondent.

Ruling

On the first issue, the Court held that the Ombudsman did not err. In defending the validity of the closure of the bank, the respondent was acting in his official capacity as a member of the legal staff of the Office of the Solicitor General, tasked to represent the Central Bank, an agency of the Government. Any benefit that the Lucio Tan group might reap from a favorable judgment was merely an incidental and natural consequence of a successful defense of the Central Bank's actions, not an unwarranted benefit given by the respondent.

On the second issue, the Court held that the respondent cannot be held criminally liable under Section 3 (e). All five elements must concur, and the petitioners failed to prove the fifth element, that the respondent acted with manifest partiality, evident bad faith, or gross inexcusable negligence. The Court stressed that the pleadings in the liquidation case bore not only the respondent's signature but also those of the Solicitor General and other members of the legal staff, so his acts had the imprimatur of the Office. Four Solicitors General had consistently maintained the policy of defending the closure, and the respondent merely acted with the other officials of the Office in representing the State. Even assuming he participated in both cases, the perceived inconsistent positions were the official positions of his office, and the matter should be addressed to the Office of the Solicitor General or the Solicitor General in particular, not to the respondent personally.

On the third issue, the Court held that the Ombudsman's power to determine the merits of a complaint is mandated by the Constitution and courts should not interfere with its exercise. The rule rests on respect for the investigatory and prosecutory powers granted to the Office of the Ombudsman and on practicality, lest the courts be swamped by petitions assailing every dismissal of an investigatory proceeding.

Doctrine

To sustain a prosecution under Section 3 (e) of Republic Act 3019, all five elements must concur, and the failure to prove the fifth element, that the public officer acted with manifest partiality, evident bad faith, or gross inexcusable negligence, is fatal to the cause. A lawyer of the Office of the Solicitor General who signs pleadings in the discharge of the Office's mandate to represent a government agency acts in his official capacity, and the official positions of the Office are not his personal positions. Any incidental benefit to a private party flowing from a successful defense of the Government's actions does not amount to giving unwarranted benefits under the graft law. Courts will not interfere with the Ombudsman's constitutionally mandated discretion to determine the merits of a complaint filed before it.

Disposition

The Supreme Court dismissed the petition, sustaining the Ombudsman's dismissal of the complaint against Assistant Solicitor General de Leon.

Remember This

Memorize the five elements of Section 3 (e), and remember that the fifth, manifest partiality, evident bad faith, or gross inexcusable negligence, is the element examiners love to test. This case is the classic authority for the rule that a Solicitor General or his staff cannot be held personally or criminally liable for the official and allegedly inconsistent positions of the Office of the Solicitor General.