ATTY. ORLANDO SALVADOR FOR AND IN BEHALF OF THE PRESIDENTIAL AD HOC FACT-FINDING COMMITTEE ON BEHEST LOANS, PETITIONER, VS. HON. ANIANO DESIERTO, AS OMBUDSMAN, RAFAEL A. SISON, …

Salvador versus Desierto

The Case

This is a petition for certiorari filed by Atty. Orlando Salvador, for and in behalf of the Presidential Ad Hoc Fact-Finding Committee on Behest Loans, against then Ombudsman Aniano Desierto and the directors and officers of Hotel Mirador and of the Development Bank of the Philippines. The Committee asks the Supreme Court to set aside the Ombudsman's dismissal of its criminal complaint for violation of the anti-graft law arising from three loans granted to Hotel Mirador. The case matters because it fixes two rules every reviewee must carry: when prescription begins to run for graft offenses committed before the 1986 revolution, and how far the Court will go in reviewing the Ombudsman's prosecutory discretion.

Procedural History

The Committee filed a sworn complaint with the Office of the Ombudsman against the Hotel Mirador officers and the DBP directors who approved the loans. The Ombudsman, through a Resolution dated April 27, 1998, dismissed the complaint on two grounds: that the loans were not shown to be behest loans, and that the crime had prescribed. The Committee's motion for reconsideration was denied in an Order dated June 29, 1998. The Committee then went directly to the Supreme Court by a petition for certiorari under Rule 65, alleging grave abuse of discretion.

Facts

From March 1975 to April 1977, Hotel Mirador obtained three loans from the Development Bank of the Philippines totaling 95 million pesos, to finance the construction and development of its hotel building. The first, a 60 million peso loan granted in March 1975, was intended for construction, purchase of machinery and equipment, and payment of an interim obligation. Additional loans followed, reaching a total of 95 million pesos.

In October 1992, then President Fidel Ramos issued Administrative Order No. 13, creating the Presidential Ad Hoc Fact-Finding Committee on Behest Loans to inventory all behest loans, determine who was responsible, and recommend action. A month later, Memorandum Order No. 61 laid down the criteria for identifying a behest loan, among them under-collateralization, undercapitalization, cronyism, deviation of loan proceeds, and extraordinary speed in releasing the loan.

Applying those criteria, the Committee found the Hotel Mirador loans to be behest loans and, through Atty. Salvador, filed a complaint with the Ombudsman in September 1996 against the Hotel Mirador officers and the DBP directors, for violation of Section 3, paragraphs (e) and (g) of Republic Act No. 3019. The complaint alleged that the loans were without sufficient collateral and that the borrower was undercapitalized. The Ombudsman dismissed the complaint, finding sufficient collateral and holding that the crime had prescribed because the latest transaction was in April 1977, beyond the fifteen-year period under Section 11 of the same law.

Issues

• Whether or not the Ombudsman gravely abused his discretion in ruling that the offense had prescribed.
• Whether or not the Ombudsman gravely abused his discretion in dismissing the complaint on the ground that Hotel Mirador had sufficient assets and the loans were not behest loans.

Applicable Provisions

Section 2 of Act No. 3326, as amended, governs when prescription runs for offenses punished by special laws:

Section 2. Prescription shall begin to run from the day of the commission of the violation of the law, and if the same not be known at the time, from the discovery thereof and the institution of judicial proceedings for its investigation and punishment. The prescription shall be interrupted when proceedings are instituted against the guilty person, and shall begin to run again if the proceedings are dismissed for reasons not constituting jeopardy.

This is the provision the Court construes, because Republic Act No. 3019 is a special law, and the counting of the prescriptive period turns on when the violation was discovered.

Section 3, paragraphs (e) and (g) of Republic Act No. 3019 define the offenses charged:

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; (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.

These are the offenses whose prescriptive period the Court must compute, and whose elements the Committee had to show to justify prosecution.

Ruling

On the first issue, the Court held that the Ombudsman gravely erred on prescription. The above provision is clear and needs no interpretation. Following its earlier rulings, the Court held that for graft offenses committed before the 1986 revolution, the government as the aggrieved party could not have known of the violations at the time the transactions were made, because the public officials concerned connived with the beneficiaries and no one would have dared question the transactions. The prescriptive period therefore began to run from the discovery of the offense in 1992, after the Committee's exhaustive investigation. The complaint was filed in September 1996, four years after discovery, well within the fifteen-year period. The Court rejected the Ombudsman's reading that the phrase "if the same not be known" means the crime is not reasonably knowable, as an interpretation that defeats the intent of a clear and unambiguous law.

On the second issue, the Court held that the Ombudsman did not gravely abuse his discretion in dismissing the complaint. The Ombudsman has discretion to determine whether a criminal case should be filed, and the Court will not interfere absent good and compelling reasons. Examining the records, the Court found that the loan proposal had been the subject of intensive study in the bank's memoranda and board resolutions, and there was no showing that the board did not exercise sound business judgment or that the approval was contrary to acceptable banking practices at the time. The complainant pointed to no circumstance indicating criminal design or collusion between the bank officers and the borrower. Since the Ombudsman's resolution was supported by substantial evidence, it must stand.

Doctrine

For offenses punished by special laws, prescription begins to run from the day of the commission of the violation, and if the same was not known at the time, from the discovery thereof and the institution of judicial proceedings for its investigation and punishment. For violations of Republic Act No. 3019 committed before the 1986 revolution, the prescriptive period is counted from the discovery of the offense in 1992, after the Committee's investigation, because the government could not have known of the violations earlier. Prescription is interrupted when proceedings are instituted against the guilty person. Separately, the Ombudsman enjoys wide latitude in his investigatory and prosecutory powers, and the Court will not overturn his ruling where it is supported by substantial evidence.

Disposition

The petition was dismissed, and the Ombudsman's resolution and order were affirmed; the Committee lost, and the dismissal of its complaint stood.

Remember This

Memorize this line: for pre-1986 graft offenses, prescription runs from discovery in 1992, not from the commission of the act. Examiners use this case to test the computation of prescription under Act No. 3326 and the limits of judicial review over the Ombudsman's prosecutory discretion.