G.R. No. L-57535 - Zenith Insurance Corp. vs. Purisima

Case Summary (G.R. No. L-57535)

Case Background and Facts

The BSP filed a complaint against Jamorabo alleging he violated Section 27(d) of RA No. 7653 and BSP Office Order No. 423 (series 2002) by obtaining a P200,000 unsecured loan from Rural Bank of Kiamba, where he was concurrently conducting a regular examination from July 6 to 22, 2006. During the loan application, Jamorabo falsely designated his wife Marites as the principal borrower, while he served as co-maker yet filled and signed all documents, including those in his wife’s name, who neither appeared at the bank nor signed any documents. The loan was approved without collateral or standard credit investigation, relying solely on Jamorabo's post-dated checks. Payments were erratic with bounced checks, account closure, and ultimate non-payment until Jamorabo retired from BSP in December 2008 and subsequently migrated to Canada in April 2010. The loan was only discovered by BSP during the RBKSI's subsequent examination in April 2009.

Issues Presented

The nature of liabilities arising from violation of RA No. 7653, Section 27(d)
Whether Jamorabo could still be held administratively liable for acts committed during service despite retirement before the complaint filing
Whether a prima facie case exists for violation of RA No. 3019, Section 3(e) against Jamorabo

Legal Analysis: Liability Under RA No. 7653, Section 27(d)

Section 27(d) of RA No. 7653 prohibited BSP personnel from borrowing from institutions they supervise or examine unless fully secured, disclosed to the Monetary Board, and compliant with rules prescribed by the Monetary Board. The section includes an absolute prohibition for personnel conducting supervision and examination. This was later amended by RA No. 11211 to lift the absolute ban, introducing an exception subject to conditions including arm’s-length dealings and full disclosure. The penal clause in Section 36 mandates fines or imprisonment for willful violations of the Act or related regulations.

The Ombudsman erred by ruling that violation of Section 27(d) entailed only administrative liability, ignoring its clear penal character imposing criminal sanctions as well. The Court emphasized that fraudulent loan acquisition during examination constitutes both criminal and administrative offenses, subject to prosecution and penalties. Given the criminal nature of the offense, the later amendment under RA No. 11211 shall apply retroactively to favor Jamorabo per Article 22 of the Revised Penal Code, requiring assessment of compliance with the new conditions.

Application of Arm’s-Length Principle and Disclosure Requirements

Jamorabo’s loan failed to meet the arm’s-length standard defined as transactions conducted in good faith by parties with independent interests without undue influence or conflict of interest. The evidence showed undue influence: RBKSI’s president feared offending Jamorabo, a BSP examiner; the loan bypassed standard creditworthiness procedures, and Jamorabo himself misrepresented the principal borrower. Disclosure of the loan to BSP was not made, contrary to Section 27(d) and BSP rules. The circumstances surrounding the loan and its approval during the examination period, combined with the undisclosed nature of the loan, violated the arm’s-length principle and disclosure requirements.

Administrative Liability Despite Retirement

The BSP argued that Jamorabo remained administratively liable despite the complaint being filed after his retirement. The Court held that generally, administrative proceedings cannot continue after a public official’s voluntary separation from service, absent circumstances demonstrating the resignation was made in bad faith to evade accountability. However, in this case, Jamorabo retired shortly before the loan’s discovery and investigation, with evidence of preceding migration plans and attempts to avoid liability. His retirement was thus deemed a calculated pre-emptive act to evade administrative sanctions, permitting the continuation and imposition of administrative penalties. The Ombudsman’s dismissal of administrative liability due to retirement was declared a grave abuse of discretion.

No Prima Facie Case for Violation of RA No. 3019, Section 3(e)

The Ombudsman correctly found no violation of Section 3(e) of RA No. 3019, which requires proof of undue injury or unwarranted advantage. Although Jamorabo’s loan violated banking laws, no actual injury or loss was proved because the loan was ultimately paid in full. Allegations that the loan conferred unwarranted benefits to RBKSI were unsubstantiated; the bank officers who approved the loan demonstrated lapses in judgment but no proven advantage was gained, especially since the loan was ultimately reported to BSP in the regular examination following the loan period.

Supreme Court Ruling and Directives

The Supreme Court partially granted the petition, reversed and set aside the Ombudsman’s resolutions absolving Jamorabo of liabili

Case Syllabus (G.R. No. L-57535)

Nature and Background of the Case

The case is a petition for certiorari filed under Rule 65 of the Rules of Court by Bangko Sentral ng Pilipinas (BSP), challenging two issuances of the Office of the Ombudsman in Case No. OMB-C-C-09-0465-I.
The challenged issuances are: (1) a February 9, 2011 Resolution dismissing BSP’s complaint against respondent Benjamin M. Jamorabo for lack of probable cause, and (2) a July 28, 2011 Order denying BSP’s motion for reconsideration.
The complaint filed by BSP accused Jamorabo, a former Bank Officer I at BSP's Supervision and Examination Sector (SES), of violating Section 27(d) of Republic Act No. 7653 (The New Central Bank Act) and BSP Office Order No. 423, series of 2002.
The complaint centers on Jamorabo obtaining an unsecured loan of PHP 200,000 from the Rural Bank of Kiamba, Sarangani, Inc. (RBKSI) during the regular examination of that bank from July 6 to 22, 2006.
BSP alleges Jamorabo misrepresented that his wife was the principal borrower while he was the co-maker, despite him actually controlling the loan documents and the transaction.

Factual Findings and Allegations

Jamorabo secured the PHP 200,000 loan from RBKSI on July 17, 2006, during the examination period of RBKSI by BSP examiners.
RBKSI approved the loan without typical requirements such as collateral or documentary proof of income, accepting personal post-dated checks issued by Jamorabo instead.
Jamorabo issued eight post-dated checks to cover quarterly amortizations of the loan, but defaulted after paying only the first two installments, and the first check bounced due to insufficient funds.
RBKSI’s president and general manager testified that they wanted to decline the loan but feared offending Jamorabo given his BSP position.
Jamorabo’s wife never physically appeared at the bank nor signed any loan documents; Jamorabo filled out and signed the documents himself, including his wife’s name as principal borrower.
RBKSI deposited the net loan proceeds into Jamorabo’s PNB account through an interbank transaction.
Upon default, communications from Jamorabo ceased; attempts to collect the checks failed as his checking account was closed.
Jamorabo later promised settlement during a call but failed to honor this.
The loan only came to light during a subsequent BSP examination of RBKSI in April 2009, nearly three years after the loan was taken out.
The loan was ultimately paid in full by Jamorabo’s wife and sister-in-law in December 2009.

Procedural History and Ombudsman Rulings

The complaint was docketed as a criminal case by the Office of the Ombudsman, and preliminary investigation ensued.
The Ombudsman dismissed the complaint, ruling that violation of Section 27(d) of R.A. No. 7653 and associated BSP Orders only imposed administrative liability, not criminal.
The Ombudsman further ruled that as Jamorabo had already retired on December 31, 2008, before the complaint was filed, he could no longer be administratively sanctioned.
Additionally, the Ombudsman found no cause for criminal liability under Section 3(e) of R.A. No. 3019 (Anti-Graft and Corrupt Practices Act) because there was no proved injury or damage to the government, since the loan was fully paid.
It also found fault on the part of RBKSI officers for approving the loan without due diligence but characterized their actions as irregular lapses, not criminal.
BSP's motion for reconsideration was denied by the Ombudsman on July 28, 2011, affirming the dismissal.
BSP then filed a petition for certiorari before the Supreme Court questioning the Ombudsman’s rulings.

Issues Presented for Resolution

Whether a violation of Section 27(d) of R.A. No. 7653 entails criminal liability or administrative liability only.
Whether Jamorabo can be held administratively liable despite the complaint being filed after his retirement from government service.
Whether there exists a prima facie case under Section 3(e) of R.A. No. 3019 against Jamorabo.

The Supreme Court’s Ruling on the Nature of Liability under Section 27(d)

The Court ruled that violation of Section 27(d) of R.A. No. 7653 gives rise to both administrative and criminal liability.
The provision consists of a general rule prohibiting borrowing from supervised institutions unless adequately secured, disclosed, and regulated, and a strict prohibition (“proviso”) forbidding personnel of supervising and examining departments from borrowing from banks under their supervision.
This absolute ban was later amen