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

Case Summary (G.R. No. 136506)

Procedural Antecedents

The OSG filed a complaint on February 12, 1990 before the Presidential Commission on Good Government (PCGG) for violation of RA 3019, which was referred to the Office of the Ombudsman as OMB-0-90-2808. Graft Investigation Officer Emora C. Pagunuran issued a Review and Recommendation on August 6, 1998 dismissing the complaint for prescription; Ombudsman Desierto approved that recommendation on August 14, 1998. The Republic moved for reconsideration, which was denied in an order of September 25, 1998, approved October 9, 1998. The Republic filed a petition for certiorari challenging those dismissals.

Prior Supreme Court Actions and Developments

This Court initially granted the Republic’s petition on August 23, 2001 directing the Ombudsman to proceed with preliminary investigation. Later, on July 7, 2004, the Court set aside its August 23, 2001 decision as the case was not ripe and directed service of the petition on respondents; motions for reconsideration were denied by resolution on March 19, 2008. Several respondents subsequently filed comments, and some respondents died during the proceedings.

Factual Background — MOA, CIDF and Arbitration

PD 582 created the CIDF to finance a nationwide coconut replanting program and authorized NIDC to implement contracts for hybrid seednut farms. On November 20, 1974 NIDC contracted with AII, represented by Cojuangco, Jr., to develop a seed garden in Bugsuk Island, Palawan and to sell its output to NIDC; AII alleged damages after termination and secured an arbitration award of PHP 958,650,000 on March 29, 1983, leaving a balance due. UCPB later substituted for NIDC as administrator-trustee of the CIDF; UCPB’s Board in 1983 adopted a resolution ‘noting’ the BOA decision and allowing the award to lapse into finality.

The Republic’s Allegations and Legal Theory

The Republic alleged that the MOA and subsequent actions were grossly disadvantageous to the government and that public officers and private parties conspired for private gain in breach of fiduciary duty, invoking RA 3019. The complaint specifically cited one-sided MOA provisions, the ratification appearance created by PDs, the UCPB Board’s conduct (including Resolution No. 111-83), and the siphoning of CIDF funds to AII, asserting that respondents were public officers or acted with material personal interest and thus liable under the Anti-Graft and Corrupt Practices Act.

Ombudsman’s Determination and Grounds for Dismissal

GIO Pagunuran and Ombudsman Desierto dismissed the complaint on prescription grounds, reckoning prescription from the execution of the MOA in 1974 and applying the ten-year prescriptive period under Sec. 11 of RA 3019 as then in force. The Ombudsman also held that PD 961 and PD 1468 gave the MOA legislative imprimatur, rendering the contract valid and therefore insulating respondents from criminal liability based on such contract.

Issues Presented to the Court

The petition raised two principal issues: (I) whether the Ombudsman gravely abused discretion in declaring the offense prescribed when the complaint was filed; and (II) whether the Ombudsman gravely abused discretion in concluding there was no basis to indict private respondents for violation of RA 3019 based on the contract in question.

Propriety of the Petition — Remedy and Timeliness

The Court analyzed proper remedy and timeliness. Although Sec. 27 of RA 6770 addresses appeals from Ombudsman decisions in administrative disciplinary cases, this Court’s jurisprudence (Fabian) limited that provision’s scope and recognized that orders in criminal preliminary investigations are reviewable by certiorari under Rule 65 when tainted with grave abuse of discretion. Applying A.M. No. 00-2-03-SC (amendment to Sec. 4, Rule 65) retroactively, the Court held the Republic’s Rule 65 petition filed December 28, 1998 was timely. The Court also applied equitable considerations and precedent to excuse defects in initial service of the petition on some respondents and allowed comments to be filed, invoking relaxation of procedural rules to serve substantial justice.

Death of Certain Respondents and Legal Effect

Four respondents (Cojuangco, Jr.; Eleazar, Jr.; Lobregat; Orosa) died during the pendency of the proceedings. Under Article 89 of the Revised Penal Code and controlling jurisprudence, their criminal liability and civil liability ex delicto were extinguished; civil liabilities based on other legal sources survive and may be pursued against their estates.

Applicable Prescriptive Period

The Court determined the applicable prescriptive period for the alleged RA 3019 violations. At the time of the MOA (1974) the prescriptive period under RA 3019 was ten years; later extensions (BP 195 in 1982 to 15 years; RA 10910 in 2016 to 20 years) cannot be retroactively applied to crimes committed before their enactments. Applying the rule most favorable to the accused, the ten-year period applied to the facts.

Reckoning Point — Discovery Rule and Legislative Imprimatur

The Court analyzed when prescription began to run. Act No. 3326 provides the general rule—prescription runs from the day of commission—and the exception (discovery rule) where the violation is not known. The Court applied controlling jurisprudence (including Carpio-Morales, Desierto behest loans cases, Duque, and related decisions) to adopt the discovery rule here, reasoning that the MOA and its subsequent ratifications by PDs made it nearly impossible for the Republic to question the transactions during the Marcos regime and that information was effectively suppressed or not reasonably discoverable until the constitutional and political changes in 1986. Thus the reckoning point was the promulgation of the 1986 Freedom Constitution and the post-EDSA environment in which recovery and prosecution of ill-gotten wealth and graft became prioritized.

Interruption of Prescription by Commencement of Proceedings

Act No. 3326 also provides that prescription is interrupted when proceedings are instituted. The Court applied precedents (Perez; Pangilinan; Panaguiton) holding that the institution of a preliminary investigation interrupts prescription for special-law offenses like RA 3019. The Republic’s filing of the complaint with the PCGG in 1990 and its referral to the Ombudsman constituted the institution of proceedings that interrupted the running of prescription. Counting from the 1986 reckoning point, only four years had elapsed before the 1990 filing, so the action was within the 10-year prescriptive period.

Grave Abuse of Discretion by the Ombudsman

Given the foregoing, the Court concluded the Ombudsman gravely abused its discretion by dismissing the complaint solely on prescription without allowing the OSG to present evidence and without conducting or permitting a proper preliminary investigation on the merits. The dismissal for prescription was characterized as erroneous and tantamount to refusal to perform the Ombudsman’s duty to investigate and determine probable cause, thereby meeting the high threshold for Rule 65 intervention.

Right to Speedy Disposition and Inordinate Delay

Case Syllabus (G.R. No. 136506)

Procedural Antecedents

Complaint dated February 12, 1990 was filed by the Office of the Solicitor General (OSG) before the Presidential Commission on Good Government (PCGG) against respondents for violation of Republic Act No. 3019; the complaint was referred to the Office of the Ombudsman and docketed as OMB-0-90-2808.
Graft Investigation Officer I Emora C. Pagunuran (GIO I Pagunuran) issued a Review and Recommendation on August 6, 1998 recommending dismissal of the Complaint on the ground of prescription; Ombudsman Aniano A. Desierto approved this Review and Recommendation on August 14, 1998.
The Republic filed a Motion for Reconsideration which GIO I Pagunuran denied by Order dated September 25, 1998; Ombudsman Desierto approved that denial on October 9, 1998.
The Republic filed a petition for certiorari under Rule 65 before the Supreme Court assailing the Ombudsman’s dismissal.
On August 23, 2001 the Supreme Court initially granted the petition, reversed and set aside the Ombudsman’s acts, and directed the Ombudsman to proceed with preliminary investigation of OMB-0-90-2808; this decision was later set aside on July 7, 2004 because the case was not ripe and because respondents had not been served with copies of the petition; the Court directed service of copies and allowed respondents to file comments.
The parties filed motions for reconsideration and additional pleadings; the Court denied the Ombudsman’s and Republic’s motions for reconsideration by Resolution dated March 19, 2008; respondents subsequently filed Comments (Concepcion, Dela Cuesta, Ursua, Pineda), and the Court noted Enrile’s earlier Comment.
Respondents Eleazar, Jr., Orosa, Lobregat, and Cojuangco, Jr. died during pendency; their deaths were noted and treated as extinguishing criminal liability while preserving State’s right to civil recovery of ill-gotten wealth if any.

Background of the Case

In or about 1972 Agricultural Investors, Inc. (AII), allegedly owned/controlled by respondent Eduardo M. Cojuangco, Jr., began developing a coconut seed garden in Bugsuk Island, Palawan.
Presidential Decree No. 582 (PD 582) was issued on November 14, 1974 creating the Coconut Industry Development Fund (CIDF), with an initial capital of PHP 100,000,000.00 and intended to finance a nationwide coconut-replanting program using precocious high-yielding hybrid seednuts to be distributed for free to coconut farmers.
On November 20, 1974 the National Investment and Development Corporation (NIDC) accepted AII’s offer and entered into a Memorandum of Agreement (MOA) with AII, executed by respondent Orosa for NIDC and respondent Cojuangco, Jr. for AII; supplemental agreements and amendments were executed in 1975, 1977, 1979, and 1980.
The MOA: AII to develop the seed garden and produce hybrid seednuts and sell its entire produce to NIDC; NIDC to pay costs of establishment, operation and maintenance and to buy AII’s entire production.
Presidential Decree No. 1468 (PD 1468) was issued on June 11, 1978 creating the Philippine Coconut Authority (PCA) and shifting administration of the CIDF to the bank acquired for the benefit of coconut farmers; United Coconut Planters Bank (UCPB), whose then-President was respondent Cojuangco, Jr., became substituted as administrator-trustee of CIDF and party to the MOA.
On August 27, 1982, the CCSF levy was lifted resulting in depletion of CIDF; UCPB terminated its MOA with AII effective December 31, 1982; AII demanded arbitration per MOA arbitration clause.

MOA Provisions and Claimed Disadvantages

Petitioner alleged the MOA was one-sided and grossly disadvantageous to the government:
- Section 9.1/9.3: force majeure clause excusing performance by either party generally, but Section 9.3 preserved NIDC’s obligation to pay AII’s share of development costs notwithstanding force majeure.
- Section 11.2: provided liability for NIDC not only for development costs but also for liquidated damages equal to stipulated price of seednuts for five years at rate of 19,173,000 seednuts per annum, totaling PHP 958,650,000.00.
- Section 11.3: allowed AII to terminate for force majeure without liability while NIDC lacked similar rights.
- AII required only to exert best efforts to produce projected number of seednuts while NIDC was to reserve amounts from CIDF to ensure full and prompt payment.

Arbitration and BOA Decision

Board of Arbitrators (BOA) constituted (Atty. Esteban Bautista, Atty. Aniceto Dideles, Atty. Bartolome Carale) to settle obligations due to MOA termination.
BOA Decision dated March 29, 1983 awarded AII liquidated damages amounting to PHP 958,650,000.00; from award was deducted PHP 426,261,640.00 advanced by NIDC, leaving balance PHP 532,388,354.00 due to AII; arbitrator’s fee of PHP 150,000.00 and costs were ordered paid from CIDF.
On April 19, 1983 UCPB Board of Directors (with Cojuangco, Jr. as President and Enrile as Chairman, and others including Dela Cuesta, Ursua, Pineda) adopted Resolution No. 111-83 “noting” the BOA decision and allowing the arbitral award to lapse with finality.

Petitioner Republic’s Complaint (OMB-0-90-2808)

Filed February 12, 1990 by the OSG before PCGG charging respondents with violation of RA 3019 based on MOA’s alleged grossly disadvantageous terms and subsequent events.
Allegations included:
- Respondent Cojuangco, Jr. used close ties with then-President Marcos to secure favorable decrees and caused government (NIDC) to contract with his AII under disadvantageous terms and in conspiracy with members of UCPB BOD, breaching fiduciary duty as administrator-trustee of CIDF.
- UCPB BOD members (Enrile, Dela Cuesta, Concepcion, Ursua, Pineda) allowed BOA decision to lapse, leading to alleged siphoning of PHP 840,789,855.33 from CIDF to AII.
- Respondents were alleged to be public officers (UCPB being acquired by government through CCSF) and that respondents were directly or indirectly interested in personal gain or had material interest in transactions requiring board approval, in violation of RA 3019 to the grave damage and prejudice of public interest and coconut farmers.
Republic characterized the matter as connected to recovery of ill-gotten wealth amassed by Marcos cronies and argued imprescriptibility or delayed reckoning in light of Constitutional provisions.

Decision of the Ombudsman (OMB-0-90-2808)

GIO I Pagunuran’s August 6, 1998 Review and Recommendation (approved August 14, 1998) dismissed the Complaint on ground of prescription.
Ombudsman reasoned prescriptive period reckoned from MOA execution (November 20, 1974) and thus that Complaint filed on February 12, 1990 was beyond 10-year prescription under Sec. 11 of RA 3019.
Ombudsman further held MOA and its alterations were confirmed and ratified by PD 961 and PD 1468, giving the MOA “legislative imprimatur” and implying legality and protection for respondents acting under the MOA; recommended dismissal.
Republic’s Motion for Reconsideration (asserting imprescriptibility for ill-gotten wealth cases and that void contracts cannot be ratified) was denied by GIO I Pagunuran (September 25, 1998) and approved by Ombudsman Desierto (October 9, 1998).

Issues Presented to the Supreme Court

Whether the Ombudsman acted with grave abuse of discretion in declaring that the offense charged had already prescribed when Complaint was filed.
Whether the Ombudsman acted with grave abuse of discretion in declaring there is no basis to indict private respondents for violation of RA 3019 based on the MOA.

The Petitioner's Arguments

The Complaint relates to recovery of ill-gotten wealth; Section 15, Article XI of the 1987 Constitution makes the right of the State to recover such properties imprescriptible; Republic argued constitutional intent to make prosecution of related offenses imprescriptible despite textual omissions.
Prescription period for RA 3019 at MOA execution (1974) was 10 years, extended by BP 195 (March 16, 1982) to 15 years later; Republic claimed reckoning should be from discovery (EDSA Revolution, February 1986) due to blameless ignorance doctrine and Act No. 3326, so Complaint filed 1990 was within prescriptive period.
Republic argued MOA was grossly disadvantageous on its face and that PDs giving legislative imprimatur could not cure a void or grossly disadvantageous contract nor bar prosecution; Republic asserted failure of UCPB BOD to appeal arbitral award was wrongful.

Respondent Enrile’s Arguments

Alleged that Republic filed the wrong remedy (Rule 65 petition) and thereby substituted a lost appeal; Sec. 27 RA 6770 prescribes appeal by certiorari under Rule 45 within 10 days from receipt; Republic should have used Rule 45.
Even if Rule 65 was correct, petition filed out of time: Republic had 60 days from notice of Review and Recommendation (August 28, 1998); filing of Motion for Reconsideration interrupted time but Republic had until December 13, 1998 to file Rule 65 petition; Republic filed December 28, 1998 beyond period.
Asserted prescriptive period had already run; Sec. 15, Art. XI cannot impair vested rights; strict application of imprescriptibility would violate prohibition on bills of attainder and ex post facto laws; prescriptive running should be reckoned from execution of MOA (1974) because MOA was notarized and public.
Argued PDs ratified and confirmed the MOA elevating it to force and effect of law; his acts as UCPB officer were mandated by law; UCPB is a commercial/private bank owned by coconut farmers, not government, so he is not a public officer under RA 3019.

Respondent Concepcion’s Arguments

Asserted petition should be dismissed for failure of Republic to comply with Sec. 3, Rule 46 (proof of service) and claimed late service meant petition was filed beyond Rule 65’s reglementary period.
Contended no cause of action because related Civil Case No. 0033-C before Sandiganbayan, involving same acts, was dismissed as to him; argued quantum of proof in civil case (preponderance) and in criminal (beyond reasonable