G.R. No. 136506 - Republic vs. Desierto

Case Summary (G.R. No. 136506)

Procedural History

The Office of the Solicitor General filed a complaint for violation of R.A. No. 3019 before the Presidential Commission on Good Government on February 12, 1990; the matter was referred to the Office of the Ombudsman and docketed as OMB-0-90-2808. Graft Investigation Officer Manuel J. Tablada initially recommended dismissal (Dec. 29, 1997). The matter was later assigned to Graft Investigation Officer I Emora C. Pagunuran, whose Review and Recommendation dated August 6, 1998, approved by Ombudsman Desierto, dismissed the complaint for prescription; the Ombudsman denied the Solicitor General’s motion for reconsideration on September 25, 1998. The Solicitor General filed a petition for certiorari seeking annulment of the dismissal and denial of reconsideration; the Supreme Court granted the petition and ordered the Ombudsman to proceed with preliminary investigation.

Factual Background: coco-levy framework and the MOA

In 1974 Presidential Decree No. 582 created the Coconut Industry Development Fund (CIDF) to finance a nationwide coconut-replanting program using hybrid seednuts. Six days after P.D. No. 582, on November 20, 1974, Agricultural Investors, Inc. (AII), represented by Eduardo Cojuangco, Jr., and the National Investment and Development Corporation (NIDC), represented by Augusto Orosa, entered into a Memorandum of Agreement (MOA) whereby AII would develop a seed garden on Bugsuk Island and sell the hybrid seednuts to NIDC; NIDC would share development costs and pay AII. In 1978 P.D. No. 1468 designated the United Coconut Planters Bank (UCPB) as administrator-trustee of the CIDF. The lifting of the coconut levy on August 27, 1982 resulted in termination of the agreement effective December 31, 1982; AII sought arbitration, and on March 29, 1983 a Board of Arbitrators awarded AII substantial liquidated damages less advances.

Allegations and legal theory of the Solicitor General

The Solicitor General alleged that Cojuangco exploited his relationship with then-President Marcos to secure favorable decrees and to induce government entities to enter into terms grossly disadvantageous to the government, that AII siphoned substantial CIDF funds to private interest, and that the UCPB board members (including the named private respondents) breached fiduciary duty and participated in conspiracies in violation of R.A. No. 3019. The complaint quantified alleged siphoning and asserted violations of specific provisions of R.A. No. 3019, including paragraphs (g), (e) and (i).

Contractual provisions challenged by the Solicitor General

The Solicitor General pointed to multiple MOA provisions as evidencing a one-sided arrangement: (1) Section 9.1 and 9.3 (force majeure provisions that nonetheless preserved NIDC’s payment obligations); (2) Section 11.2 (liquidated damages payable out of CIDF for five years at a specified seednut rate); (3) Section 11.3 (asymmetric termination rights favoring AII); and (4) an imbalance between AII’s de minimis obligation to “use best efforts” to produce and NIDC’s obligation to reserve CIDF funds to insure prompt payment.

Ombudsman’s basis for dismissal

GIO Pagunuran and the Ombudsman dismissed the complaint on two primary grounds: (1) prescription — calculating the ten-year prescriptive period under Section 11 of R.A. No. 3019 from the date of the MOA (November 20, 1974) rendered the complaint, filed in 1990, time-barred; and (2) legislative confirmation — P.D. Nos. 961 (1976) and 1468 (1978) expressly “confirmed and ratified” the contract, which the Ombudsman construed as providing a “legislative imprimatur” insulating the transaction from criminal accountability under the Anti-Graft Law.

Solicitor General’s principal counterarguments below and on appeal

The Solicitor General advanced two principal responses: (1) the case is effectively an action to recover ill-gotten wealth (R.A. No. 1379) and therefore imprescriptible under Section 15, Article XI of the 1987 Constitution (as interpreted in Migrino), and (2) prescription should be reckoned from discovery of the unlawful nature of the transaction — in particular, discovery made only after the February 1986 EDSA Revolution — because the alleged wrongdoing was concealed by those in power, making pre-EDSA detection infeasible; additionally, the Solicitor General argued that void contracts cannot be ratified and that the P.D. confirmations did not bar prosecution.

Timeliness of the petition for certiorari

The petition for certiorari challenged the Ombudsman’s orders beyond the sixty-day period prescribed by Rule 65 as then worded, but the Supreme Court applied A.M. No. 00-2-03-SC (effective Sept. 1, 2000) and the principle that procedural amendments apply to pending and undetermined actions, thereby finding the petition timely filed despite an apparent fifteen-day delay under the earlier rule. The Court therefore reached the merits.

Legal framework governing prescription and its application

R.A. No. 3019 is a special penal statute; Act No. 3326 Section 2 governs prescription for special laws and provides that prescription begins to run from the day of the commission of the violation, or if the violation was not known at the time, from discovery and the institution of judicial proceedings. While People v. Sandiganbayan had held that the date of violation may be the operative commencement when the unlawful nature was generally knowable to public officials, the Court recognized an important exceptio

Case Syllabus (G.R. No. 136506)

Nature of the Case

Petition for certiorari under Rule 65 of the 1997 Rules of Civil Procedure seeking annulment of:
- The Review and Recommendation dated August 6, 1998 of Graft Investigation Officer I Emora C. Pagunuran (approved by Ombudsman Aniano A. Desierto) dismissing the complaint in OMB-0-90-2808.
- The Order dated September 25, 1998 denying the Solicitor General’s motion for reconsideration of that Review and Recommendation.
Relief sought: reversal of the Ombudsman’s dismissal and direction to proceed with preliminary investigation.

Court and Decision

Decision penned by Justice De Leon, Jr.
Second Division, G.R. No. 136506, promulgated August 23, 2001 (416 Phil. 59).
Final disposition: petition GRANTED; Review and Recommendation and denial order REVERSED and SET ASIDE; Ombudsman directed to proceed with preliminary investigation of OMB-0-90-2808.
Concurrence: Bellosillo (Chairman), Mendoza, Quisumbing, and Buena, JJ., concur.
No pronouncement as to costs.

Parties

Petitioner: Republic of the Philippines, acting through the Office of the Solicitor General (then headed by Francisco I. Chavez).
Public respondent: The Honorable Aniano A. Desierto, Ombudsman.
Private respondents: Eduardo M. Cojuangco, Jr.; Juan Ponce Enrile; Maria Clara Lobregat; Rolando Dela Cuesta; Jose R. Eleazar, Jr.; Jose C. Concepcion; Danilo S. Ursua; Narciso M. Pineda; Augusto Orosa.
Original complaint initiated by the Office of the Solicitor General on February 12, 1990 before the Presidential Commission on Good Government (PCGG) and thereafter referred to and docketed at the Office of the Ombudsman as OMB-0-90-2808.

Factual Background — Development of Events and Agreements

Early 1970s context: Martial Law era under then President Ferdinand E. Marcos.
Eduardo “Danding” Cojuangco, Jr., through his private corporation Agricultural Investors, Inc. (AII), developed a coconut seed garden on property in Bugsuk Island, Palawan.
November 14, 1974: Presidential Decree No. 582 issued, creating the Coconut Industry Development Fund (CIDF) as one of the coco-levy funds to finance a nationwide coconut-replanting program using hybrid seednuts distributed free to farmers; initial capital P100,000,000 to be paid from the Coconut Consumers Stabilization Fund (CCSF) with an additional levy mechanism described.
November 20, 1974: Memorandum of Agreement (MOA) executed between AII (represented by Cojuangco) and the National Investment and Development Corporation (NIDC) (represented by Senior Vice-President Augusto E. Orosa).
- AII had an exclusive right from Dr. Yann Fremond to establish and operate a seed garden using the Ivory Coast Hybrid Seednuts.
- Contractual structure: AII to develop Bugsuk property, grow hybrid seednuts, sell production to NIDC; NIDC to pay AII part of development and operational costs.
June 11, 1978: P.D. No. 1468 issued (Revised Coconut Industry Code), substituting United Coconut Planters Bank (UCPB) for NIDC as administrator-trustee of CIDF.
August 27, 1982: Coconut levy lifted; loss of CIDF funding forced UCPB to terminate the AII agreement effective December 31, 1982.
AII demanded arbitration pursuant to MOA arbitration clause.
- Arbitration board rendered award March 29, 1983: liquidated damages to AII in the amount of P958,650,000.00; deduction made for advances by NIDC P426,261,640.00 leaving balance of P532,388,354.00 due to AII; costs and arbitrator’s fee also charged to CIDF.

Government’s Allegations and Legal Theories

Complaint alleged that:
- Cojuangco, taking advantage of close relationship with President Marcos, caused favorable decrees and caused government, via NIDC, to enter into a contract grossly disadvantageous to the government.
- In conspiracy with members of the UCPB Board of Directors, and breaching fiduciary duties as administrator-trustee of CIDF, respondents manipulated CIDF leading to siphoning of P840,789,855.53 of CIDF to AII, Cojuangco’s corporation (figure alleged in complaint).
- Respondents were directly or indirectly interested for personal gain or had material interest in transactions requiring approval of a board, panel, or group of which they were members — alleged violations of Republic Act No. 3019 (Anti-Graft and Corrupt Practices Act) to the grave damage and prejudice of public interest, the Republic, and coconut farmers.

Specific Contractual Exceptions and Claimed One-Sided Provisions

Solicitor General’s complaint detailed MOA provisions evidencing one-sidedness:
- Section 9.1 vs. Section 9.3: force majeure provisions exempting liability generally yet preserving NIDC’s obligation to pay AII’s share of development costs even if force majeure occurred.
- Section 11.2: NIDC’s failure to perform would render CIDF liable not only for costs but also liquidated damages computed as price of hybrid seednuts for five years (claimed P958,650,000.00).
- Section 11.3: AII could terminate for force majeure without liability; NIDC lacked reciprocal termination right.
- Asymmetry in obligations: AII required to use “best efforts” to meet production projections while NIDC required to reserve CIDF sums to assure full prompt payment.

Procedural History Before the Ombudsman

Complaint referred to Office of Ombudsman per Cojuangco, Jr. v. PCGG (190 SCRA 226 [1990]) because PCGG’s neutrality was compromised.
Graft Investigation Officer Manuel J. Tablada on December 29, 1997 recommended dismissal on ground of prescription; assigned to GIO I Emora C. Pagunuran thereafter.
GIO I Pagunuran issued Review and Recommendation dated August 6, 1998 finding the offense prescribed and recommending dismissal; Director Angel C. Mayoralgo, Jr. recommended approval; reviewed by Assistant Ombudsman Abelardo L. Aportadera, Jr.
Rationale for prescription:
- Following People v. Sandiganbayan, the prescriptive period was reckoned from date MOA was entered into (November 20, 1974).
- Complaint was filed February 12, 1990 — beyond the ten-year prescriptive period under Sec. 11 of R.A. No. 3019 as it stood before B.P. Blg. 195 (prescription period then ten years).
- Review also concluded P.D. Nos. 961 (1976) and 1468 (1978) expressly confirmed and ratified the MOA, giving it “legislative imprimatur” and insulating respondents from prosecu