PRESIDENTIAL AD HOC FACT-FINDING COMMITTEE ON BEHEST LOANS, REPRESENTED BY ORLANDO L. SALVADOR, PETITIONER, VS. OMBUDSMAN ANIANO A. DESIERTO, PANFILO O. DOMINGO, CONRADO S. REYE…

Presidential Ad Hoc Fact-Finding Committee on Behest Loans versus Ombudsman Desierto

The Case

This is a petition challenging the Ombudsman's dismissal of a criminal complaint for violation of Section 3(e) and Section 3(g) of the Anti-Graft and Corrupt Practices Act, arising from loans extended by government financial institutions to Golden Country Farms, Incorporated, which the Presidential Ad Hoc Fact-Finding Committee on Behest Loans had classified as a behest loan. The Committee, represented by Orlando L. Salvador, asks the Supreme Court to set aside the Ombudsman's resolution finding insufficient evidence and holding that the offenses had prescribed. The case matters because it fixes two rules every examinee must carry: the prescriptive period for behest-loan offenses committed before the 1986 EDSA Revolution is counted from discovery, and the Ombudsman's finding of probable cause may be overturned where grave abuse of discretion is shown.

Procedural History

Atty. Salvador, a consultant of the Committee, filed a sworn complaint with the Ombudsman against ten persons: six officers and members of the board of directors of the National Investment Development Corporation and the Development Bank of the Philippines, and four stockholders and officers of Golden Country Farms, Incorporated. Only spouses Armando T. Romualdez and Vilma S. Romualdez filed a counter-affidavit. The Ombudsman, Aniano A. Desierto, issued a resolution dismissing the complaint on two grounds: insufficiency of evidence, and prescription. From that resolution, the Committee filed with the Supreme Court a petition for review on certiorari. The Court initially referred the case to the Court of Appeals, but on the Ombudsman's motion for reconsideration it recalled that referral and required the respondents to comment. The Court later treated the petition as one filed under Rule 65, since the Committee imputed grave abuse of discretion to the Ombudsman.

Facts

On October 8, 1992, then President Fidel V. Ramos issued Administrative Order No. 13, creating the Presidential Ad Hoc Fact-Finding Committee on Behest Loans to inventory all behest loans, identify the parties involved, and recommend the appropriate action. Its functions were later expanded by Memorandum Order No. 61 to cover all non-performing loans, and criteria were set as a frame of reference for identifying a behest loan, among them undercollateralization, undercapitalization of the borrower, endorsement by high government officials, and extraordinary speed in releasing the loan.

Golden Country Farms applied for a credit facility of 5.7 million dollars and a letter of guarantee of 7.6 million dollars. Panfilo O. Domingo endorsed the loan to the board of the National Investment Development Corporation, which approved the credit facility on October 22, 1975; the documents for the letter of guarantee were forwarded to the Development Bank of the Philippines and approved on May 5, 1976. At the time of approval, the borrower's paid-up capital was only 3.5 million pesos for the first loan and 10 million pesos for the second, and the appraised value of its collateral was only 50,540,301 pesos as of April 29, 1977, while loan releases had already totaled 72 million pesos. The loan proponents were related to then First Lady Imelda R. Marcos, and on five occasions then President Ferdinand E. Marcos gave instructions to the bank regarding the management of the loan and the disposition of the borrower's assets.

After investigation, the Committee concluded that the loans bore the badges of a behest loan, and Atty. Salvador filed the sworn complaint with the Ombudsman in 1997. The Ombudsman dismissed it, finding no clear proof that the Government had suffered damage, since the banks had taken over the management and operation of the borrower as early as 1980, and holding that prescription had set in because the loans were entered into in 1975 and 1976 and the complaint was filed more than twenty years later.

Issues

• Whether or not the petition for review on certiorari under Rule 45 may be treated as a petition for certiorari under Rule 65.
• Whether or not the Committee's failure to file a motion for reconsideration with the Ombudsman bars the petition.
• Whether or not the offenses charged had prescribed.
• Whether or not the Ombudsman committed grave abuse of discretion in dismissing the complaint for insufficiency of evidence.

Applicable Provisions

Section 3(e) of the Anti-Graft and Corrupt Practices Act provides:

Causing any undue injury to any party, including the Government or giving any private party any unwarranted benefit, 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.

This is the charge against the bank officers, and its core element of undue injury is what the Ombudsman found missing.

Section 3(g) of the same law provides:

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.

This provision does not require unwarranted benefit to a private party, which is why the Court held it can still be violated after the takeover.

Ruling

On the first issue, the Court held that although the proper remedy from an adverse resolution of the Ombudsman is a petition for certiorari under Rule 65, it will treat the petition as one filed under that rule, since its contents impute grave abuse of discretion to the Ombudsman.

On the second issue, the Court relaxed the condition precedent of a motion for reconsideration. It held that the challenged resolution was issued with grave abuse of discretion amounting to lack or excess of jurisdiction and was thus a nullity, and that at all events the case involves public interest warranting relaxation of the rule.

On prescription, the Court applied its settled ruling that for violations committed before the 1986 EDSA Revolution, the Government as the aggrieved party could not have known of the violations at the time the transactions were made, so the prescriptive period is counted from discovery. The offenses were discovered in 1992 after the Committee's exhaustive investigation, and the complaint was filed in 1997, about five years later. Prescription had not set in.

On the merits, the Court held that the Ombudsman gravely abused his discretion. It distinguished two phases: the pre-takeover phase, where the borrower's interests were distinct from the banks', and the post-takeover phase, where the banks assumed ownership of the borrower's assets and obligations. In theory there can be liability under both Section 3(e) and Section 3(g) for pre-takeover transactions, but only under Section 3(g) for post-takeover transactions, because after the takeover the private stockholders were effectively excluded from management and the element of unwarranted benefit no longer exists. The Ombudsman treated the takeover as a cure for all violations, which the Court rejected. It stressed that injury is required only under Section 3(e), and that the loan's remaining unpaid at the time of the takeover should have been enough basis for a finding of injury. It also held that probable cause needs only evidence showing that more likely than not a crime was committed and was committed by the suspects, and that conflicting claims on undercapitalization and collateral should be resolved in a full-blown trial. The Committee's findings, given its members' banking expertise, are entitled to great weight. Placido L. Mapa, Jr. was excluded, the Government having committed to exclude him in exchange for information.

Doctrine

First, for violations of the Anti-Graft and Corrupt Practices Act committed before the 1986 EDSA Revolution, the prescriptive period is computed from the discovery of the offense, not from the day of its commission, because the Government could not have known of the violations at the time. Second, the Ombudsman's determination of probable cause is generally not disturbed, except where grave abuse of discretion is shown. Third, a preliminary investigation requires only evidence engendering a well-founded belief that an offense was committed and that the accused is probably guilty; conflicting evidence is for the trial proper. Fourth, Section 3(e) requires undue injury or unwarranted benefit, while Section 3(g) requires only a contract grossly and manifestly disadvantageous to the Government.

Disposition

The Court granted the petition, set aside the Ombudsman's resolution, and directed the filing of the corresponding informations against the private respondents, except Placido L. Mapa, Jr.

Remember This

Memorize this line: for behest-loan offenses committed before the 1986 EDSA Revolution, the prescriptive period runs from discovery, which the Court fixed at 1992. Examiners use this case to test prescription in behest-loan prosecutions and the narrow window for overturning the Ombudsman's finding of probable cause.