G.R. No. 250013 - Espinas vs. Office of the Ombudsman

The case stems from issues arising from the acquisition of Express Savings Bank, Inc. (ESBI), a local thrift bank in Cabuyao, Laguna, by the Local Water Utilities Administration (LWUA).
The LWUA, a government‑owned and controlled corporation attached to the Office of the President and created under Presidential Decree No. 198, is mandated to establish acceptable standards for local water utilities, provide technical assistance, monitor water standards, and pursue system integration and joint investments.

On September 23, 2008, the LWUA Board approved the establishment of a water development bank through Resolution No. 145, designating the new entity as a wholly‑owned subsidiary catering primarily to the financing needs of water districts, water service providers, and other government agencies.
The LWUA, through its Chairperson Prospero Pichay, Jr., initiated communications with the Office of the Government Corporate Counsel (OGCC) and later with President Gloria Macapagal-Arroyo, seeking assessments and support for creating the bank.
The OGCC, via Opinion No. 242 dated October 16, 2008, advised that the creation of such a subsidiary was within the LWUA’s corporate powers but cautioned adherence to applicable banking laws and necessary coordination with the Bangko Sentral ng Pilipinas (BSP).

With the BSP implementing a moratorium on new bank establishments as indicated in a January 22, 2009 letter from BSP Governor Nestor Espenilla, the LWUA shifted its strategy from creating a new bank to acquiring an existing financial institution.
On March 24, 2009, the LWUA Board approved the acquisition of a thrift bank through Resolution No. 56, and shortly thereafter, Resolution No. 64 authorized due diligence by engaging Jose U. Pontiveros and Associates (JPA) for assessing ESBI’s financial standing.

The JPA Audit Report revealed that ESBI was insolvent, with total liabilities exceeding assets by P34,386,606.00, and chronic losses over a five‑year period despite a gross loans figure of P71,031,221.00.
Subsequent LWUA resolutions—Resolution No. 120 (May 19, 2009) and Resolution No. 129‑A (May 26, 2009)—authorized the acquisition of 60% of ESBI’s outstanding shares (445,377 shares) for a total of approximately P80,000,000.00, with the transaction including assumptions of certain liabilities and obligations.
The execution of the Deed of Sale on June 3, 2009 solidified the acquisition, accompanied by several manager’s checks issued between June and October 2009.

Various government bodies, including the Department of Finance (DOF) and the BSP, provided opinions and issued letters regarding the required approvals and compliance with regulatory requirements for such a banking acquisition.
Despite reminders from the DOF and the OGCC regarding the need for further DOF and Monetary Board approvals, the LWUA proceeded with the takeover of ESBI without securing all necessary endorsements.
The new ESBI board, largely comprising LWUA officers, subsequently amended its Articles of Incorporation and engaged in transactions such as accepting government deposits and approving various loans.

Espinas, who served as Corporate Legal Counsel for the LWUA and concurrently as Assistant Corporate Secretary for ESBI, was later charged in several administrative cases (e.g., OMB-C-A-13-0211) for grave misconduct and conduct prejudicial to the best interest of the service.
The central allegation focused on his simultaneous holding of positions in a government‑owned corporation and a private bank in contravention of Section 19 of R.A. No. 8791, which prohibits such dual service without proper regulatory clearances.
In its Joint Resolution dated March 16, 2015, the Ombudsman found Espinas and others guilty, recommending penalties including dismissal, cancellation of eligibility, forfeiture of retirement benefits, perpetual disqualification for re‑employment, and a ban from civil service examinations.

Espinas filed a Petition for Review under Rule 43 before the Court of Appeals (CA), contesting the administrative findings and dismissal based on the lack of substantial evidence.
The CA initially denied his petition for review in a decision rendered on June 7, 2019, and later dismissed his Motion for Reconsideration on October 22, 2019.
Arguments were raised regarding the applicability of res judicata from an earlier case (CA-G.R. SP No. 120934) involving charges of misconduct against Espinas; however, differences in parties and causes of action were underscored.

Espinas contended that being listed in the ESBI General Information Sheet (GIS) as Assistant Corporate Secretary was nominal and did not equate to a deliberate violation capable of constituting grave misconduct.
The evidence on record, primarily the GIS and subsequent board decisions, was argued by the petitioner as insufficient to demonstrate that his dual roles resulted in corruption, personal benefit, or a willful disregard of banking regulations.
Respondents maintained that his concurrent service directly contravened Sections 19 and 66 of R.A. No. 8791 and Section 36 of R.A. No. 7653, thus tarnishing the image of public service.

Espinas sought his exoneration for the administrative charges, arguing that his unblemished 24‑year service record and the absence of evidence showing personal benefit from holding dual positions should mitigate or void the allegations.
He requested reinstatement to his former position at the LWUA without loss of rights and with complete restoration of benefits.

Whether the administrative charges of grave misconduct and conduct prejudicial to the best interest of the service against Espinas are supported by substantial evidence.
Whether his simultaneous holding of the positions of Corporate Legal Counsel of the LWUA and Assistant Corporate Secretary of ESBI violated Section 19 of R.A. No. 8791, thereby warranting the sanction imposed.
Whether the Court of Appeals correctly determined that the prior case (CA-G.R. SP No. 120934) did not invoke res judicata due to differences in parties and causes of action.
Whether the mere fact of dual office holding, in the absence of evidence showing personal gain or corrupt intent, is sufficient to constitute grave misconduct and conduct prejudicial to the best interest of the service.