Title
Presidential Ad Hoc Fact-Finding Committee on Behest Loans vs. Ombudsman
Case
G.R. No. 135350
Decision Date
Mar 3, 2006
A 1992 committee investigated behest loans, identifying undercollateralized loans involving public officials. The Ombudsman dismissed the 1997 complaint due to prescription, upheld by the Supreme Court as moot.
preliminary investigation
lack of probable cause
prescription

Case Summary (G.R. No. 135350)

Creation and Mandate of the Petitioner Committee

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, with the Chairman drawn from the PCGG and with members representing key governmental offices and financial institutions. The Committee was tasked to inventory behest loans, identify lenders and borrowers including principal officers and stockholders of borrower firms, identify persons who influenced the grant, determine the validity of “friendly waivers,” and recommend governmental actions to recover the loans within sixty days.

On November 9, 1992, President Ramos issued Memorandum Order No. 61, expanding the Committee’s scope to include not only behest loans but also non-performing loans and further supplying criteria to distinguish behest loans from non-behest loans. The Memorandum Order provided that a behest loan may be characterized by factors such as undercollateralization, undercapitalization, endorsement by high government officials (including marginal notes), identification of borrower cronies among stockholders or officers, deviation from intended loan purpose, corporate layering, non-feasibility of the project, and unusual speed in release of funds.

Identification of the Alleged Behest Loan Transaction

In the course of its work, the petitioner Committee examined loan accounts referred to it. One such transaction involved Bayview Plaza Hotel, Inc. (BPHI) and the Development Bank of the Philippines (DBP). The Committee concluded that the DBP-BPHI transaction exhibited the characteristics of a behest loan under Memorandum Order No. 61 because the loan was undercollateralized and BPHI was undercapitalized.

The Committee’s findings reflected that DBP acquired the Bayview property through foreclosure for P16.160 million, while the appraisal of the property was P25,804,200 as of May 1971, yielding a deficiency claim of P9,644,200. Under DBP Board Resolution No. 842 dated March 29, 1978, DBP dropped the deficiency claim against the heirs of the late Esperanza Zamora, who was linked to BPHI as a majority stockholder. The Committee also found that the Bayview property was leased, with an option to purchase, to Universal Hotels and Tourism Development Corporation (UHTDC) for twenty-five years effective October 6, 1974, and that UHTDC’s obligation as of April 1, 1986 was P52,559,463.16, later reduced by P11 million based on a letter-request dated January 3, 1977 by respondent Anos Fonacier, which was allegedly approved through a marginal note by then President Ferdinand Marcos.

Filing of the Ombudsman Criminal Complaint

On June 11, 1997, based on the sworn statement of Orlando Salvador, consultant of the PCGG, the petitioner Committee filed with the Office of the Ombudsman a criminal complaint charging the respondents with alleged offenses under Section 3(e) and (g) of RA 3019.

The complaint described the BPHI incorporation and the procurement of foreign loan guaranty from DBP in the amount of $7.450 million (in pesos as stated in the complaint). It alleged that the loan/guaranty was granted without sufficient collateral and that BPHI lacked sufficient capital given its total collateral loan value of assets and its paid-up capital at the time of the guaranty. It also alleged that DBP later acquired the property through foreclosure and that DBP dropped the deficiency claim in March 1978. The complaint further alleged that UHTDC’s obligations were reduced by P11 million through approval of Fonacier’s letter-request in January 1977.

The complaint contended that these acts constituted violations of Section 3(e) of RA 3019, relating to causing undue injury or giving unwarranted benefits through manifest partiality, evident bad faith, or gross inexcusable negligence, and Section 3(g), relating to entering into contracts or transactions manifestly and grossly disadvantageous to the government.

Ombudsman’s Dismissal on the Ground of Prescription

After evaluating the allegations, the Ombudsman issued an Order dated September 30, 1997 dismissing the criminal complaint on prescription. The Ombudsman acknowledged that there was ground to proceed with preliminary investigation, but it concluded that such action would be futile because the offenses had already prescribed.

The Ombudsman found that the relevant complained acts occurred in July 1967 (DBP approval of BPHI’s foreign loan guaranty), March 1978 (DBP dropping the deficiency claim), and January 1977 (reduction of UHTDC’s obligation based on the marginal note approval). It relied on the version of RA 3019 prior to amendment by Batas Pambansa Blg. 195 in March 1982. Under the old RA 3019, the Ombudsman treated the prescriptive period as ten years. Since the complaint was filed only in June 1997, it computed prescription as already having run in 1977, 1978, and 1987, depending on which transaction date was used.

To support that computation, the Ombudsman invoked the principle that the instruments and documents evidencing the transactions were public records and, therefore, were matters of public knowledge. It further relied on doctrine that the date of the existence of such instruments could be treated as the date of the violation for purposes of prescription.

Petitioner Committee’s Motion for Reconsideration and Petition for Review

The petitioner Committee filed a motion for reconsideration, but it was dismissed. It thereafter elevated the matter to the Supreme Court, arguing that the Ombudsman erred in ruling that the offenses had already prescribed and that the Ombudsman acted improperly in dismissing the complaint without proceeding with preliminary investigation. The petitioner Committee also contended that the reckoning point of prescription should be tied to discovery rather than to the date of commission, because what was allegedly concealed was not merely the loan transaction but its character as a behest loan, which could not be readily deduced from the face of the documents without specialized investigation.

In support of its theory, the petitioner Committee invoked the so-called “discovery rule” and urged the application of the Revised Penal Code (RPC), particularly Article 91, as suppletory to special laws like RA 3019, because the gravamen of its cause of action involved fraud, particularly fraud against the government. It argued that the discovery occurred only when the behest loan nature was evaluated by the Committee’s technical working group.

Procedural Defect Noted by the Court

The Court identified a procedural error in the manner the petition was brought. It held that the petitioner Committee erroneously filed the petition for review on certiorari under Rule 45 to assail the Ombudsman’s dismissal based on prescription. It stated that the proper remedy should have been a petition for certiorari under Rule 65. Nevertheless, the Court proceeded to assess whether the petition still presented a justiciable controversy.

Precedent Applied: Presidential Ad Hoc Fact-Finding Committee on Behest Loans v. Desierto (G.R. No. 130140)

The Court referred to its earlier decision in Presidential Ad Hoc Fact-Finding Committee on Behest Loans v. Desierto, docketed as G.R. No. 130140. There, the Court addressed the same issue arising from the same petitioner Committee and the Ombudsman’s dismissal of a related behest loan complaint against directors of the Philippine Seeds, Inc. (PSI) and directors of DBP. The Ombudsman in that case had reasoned that the prescriptive period ran from the commission because the transactions were evidenced by public instruments.

Reversing the Ombudsman in G.R. No. 130140, the Court declared that the offenses should be computed from the discovery of the commission rather than from the day of commission. It explained that it was well-nigh impossible for the state and the aggrieved party to have known of the violations at the time of the transactions when the alleged acts involved connivance or conspiracy with the beneficiaries of the loans. The Court also reiterated that acts made criminal by special laws may not be obviously criminal by themselves, and thus prescription begins only upon discovery of the unlawful nature of the constitutive acts.

Mootness and Subsequent Ombudsman Action

When the Court required memoranda in the present case, the Ombudsman filed a manifestation and motion in lieu of memorandum dated September 4, 2002, informing the Court that after the decision in G.R. No. 130140, it had conducted preliminary investigations even in cases previously dismissed on prescription, including OMB-0-97-1059. It stated that the preliminary investigation had already been undertaken, rendering the requested relief moot.

The Court took note that, after the preliminary investigation, the Ombudsman issued a resolution dated January 12, 2001 dismissing anew the criminal complaint on the ground of lack of probable cause, finding that there was insufficient evidence to establish probable cause to charge respondents with any criminal offense. The petitioner Committee’s motion for reconsideration of that resolution was denied by an Order dated January 2, 2002.

Disposition of the Petition: Denial as Moot and Academic

The Court agreed with the Ombudsman that the petition had become moot and academic. It held that the issues posed by the petition—whether the offenses had prescribed and whether prescription should be reckoned from commission or from discovery—had al

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