THIRD DIVISION
[G.R. No. 231664. February 19, 2018.]
GREGORIO T. IPONG, petitioner,vs. SPECIAL PANEL, OFFICE OF THE OMBUDSMAN AND FIELD INVESTIGATION OFFICE [FIO], OFFICE OF THE OMBUDSMAN, respondents.
NOTICE
Sirs/Mesdames :
Please take notice that the Court, Third Division, issued a Resolution datedFebruary 19, 2018, which reads as follows:
"G.R. No. 231664 (Gregorio T. Ipong vs. Special Panel, Office of the Ombudsman and Field Investigation Office [FIO], Office of the Ombudsman). — The present matter stems from an administrative complaint filed by the Field Investigation Office (FIO) of the Office of the Ombudsman against herein petitioner Gregorio T. Ipong (Ipong), the vice-governor of North Cotabato, for grave misconduct and conduct prejudicial to the best interest of the service, for disregarding Republic Act Nos. 8791 and 7652, and disregarding existing banking laws and regulations of the Bangko Sentral ng Pilipinas (BSP). The complaint stems from investments of the Local Water Utilities Administration (LWUA) in Express Savings Bank, Inc. (ESBI), a local thrift bank in Cabuyao, Laguna.
The FIO alleged that petitioner, along with his co-respondents in the complaint, as directors of ESBI, should be held liable for grave misconduct for having approved ESBI's acceptance of LWUA's deposits amounting to Seven Hundred Million Pesos (P700,000,000.00), which is in disregard of existing banking laws and BSP regulations. The FIO claimed that, at the least, they were grossly negligent in the performance of their duties.
Factual Antecedents
A Resolution of the LWUA Board of Trustees (LWUA Board) dated September 23, 2008 proposed the establishment of a water development bank that is a wholly-owned subsidiary of LWUA. The BSP, through then Deputy Governor Nestor Espenilla, wrote a letter to LWUA dated January 22, 2009, advising it to consider the possibility of acquiring an existing financial company instead of creating a new bank, as the BSP was enforcing a moratorium on the establishment of new banks. 1
Thus, on March 24, 2009, the LWUA Board passed a Resolution approving the acquisition of a thrift bank. The BSP wrote a letter to LWUA on April 17, 2009, informing it of the requirements for the acquisition of a thrift bank under Section X126.2 of the Manual of Regulation for Banks (MORB), which includes securing the prior approval of the Monetary Board. Without securing the approval of the Monetary Board, and despite the finding during the due diligence that ESBI was insolvent, the LWUA Board decided, in a Resolution on May 19, 2009, to acquire sixty percent (60%) of the outstanding shares of ESBI, equivalent to four hundred forty five thousand three hundred seventy seven (445,377) shares of stock. 2
On May 22, 2009, the Terms of Reference for LWUA's acquisition of ESBI's shares was executed. The LWUA Board approved the same on May 26, 2009. On June 3, 2009, the LWUA, represented by Daniel A. Landingin (Landingin), executed a Deed of Sale for the purchase of the shares. 3
On June 17, 2009, Elvira Ting, then Chairperson of the ESBI Board of Trustees, informed the BSP of the sale and transfer of shares, and requested its approval. She further advised that the management of ESBI would be turned over to LWUA on June 25, 2009. On August 4, 2009, the LWUA Board resolved to approve the designation of ESBI as LWUA's depository bank.
On October 8, 2009, Landingin wrote the manager of Land Bank Katipunan Branch to request for the issuance of a manager's check in the amount of Three Hundred Million Pesos (P300,000,000.00), payable to ESBI. The check was later deposited in LWUA's account in ESBI.
After the acquisition of 60% equity in ESBI, the shareholders and directors of LWUA approved an amendment of its Articles of Incorporation, increasing the authorized capital stock from Five Hundred Million Pesos (P500,000,000.00) to Two Billion Pesos (P2,000,000,000.00). The amended articles were submitted to the Securities and Exchange Commission and the BSP. Before either agency could take action, however, the LWUA Board passed a Resolution approving the payment of the remaining Four Hundred Million Pesos (P400,000,000.00) to ESBI, to cover the balance of the purchase price of the shares of stock of ESBI, in case the increase in capitalization of LWUA is approved by government regulators. Later, a Development Bank of the Philippines check was deposited to ESBI's current account. 4
In a letter dated December 2009 to then BSP Deputy Governor Nestor Espenilla, DOF Undersecretary Jeremias Paul objected to the LWUA's acquisition of a controlling interest in ESBI, because: (1) the acquisition of a majority stake in a thrift bank is inconsistent with the ongoing rationalization and streamlining of the government corporate sector; (2) LWUA's charter provided that it is a "specialized lending institution" for the promotion, development, and financing of local water utilities, and the acquisition of a thrift bank can diminish its focus on the financing of water utilities, as it will indirectly give LWUA the license to engage in other forms of financing; (3) LWUA's acquisition of a majority stake in a thrift bank will cloud the efforts of the national government to rationalize the allocation of limited financial resources; and (4) the financial health of a thrift bank to be acquired should be closely examined and validated. 5
After examining the records of ESBI, the BSP ISD II submitted a Memorandum on April 23, 2010, recommending that the request of LWUA for the approval of the acquisition of the shares of ESBI be denied, and that a cease and desist order be issued, as well as other sanctions imposed on ESBI for accepting government deposits without prior authorization from the MB, which is considered unsafe and unsound banking practice.
On June 7, 2011, Landingin formally requested ESBI to return LWUA's previous deposit of P400,000,000.00. On June 13, 2011, Landingin likewise requested the return of the second deposit amounting to P300,000,000.00. Instead of immediately returning the deposits, however, the new ESBI Board informed the LWUA that the return of the deposits was subject to the deliberation of the new ESBI Board. 6
On July 30, 2013, a collective Complaint filed by the FIO against, among others, petitioner Ipong. Petitioner Ipong, in particular, was charged with grave misconduct and conduct prejudicial to the best interest of the service, because during his tenure as director of ESBI, they approved ESBI's acceptance of LWUA's deposits totaling P700,000,000.00, in flagrant disregard of banking laws and BSP regulations. At the very least, the FIO claimed, Ipong and the rest of the directors were grossly negligent in the performance of their duties. Moreover, the FIO argued that they miserably failed to meet the standards of conduct set by existing laws, and thus should be held liable for conduct prejudicial to the best interest of the service. As directors of the bank, they should not have accepted, without prior clearance from government regulators, government deposits in such significant amounts. 7
In his counter-affidavit, Ipong maintains his innocence against the charges against him. He argues that he has no knowledge of the assailed transactions, since he became a LWUA Board member only on July 17, 2009, and was not yet a member of the Board when the resolution seeking to establish a water development bank was issued. He was also not yet a director when the resolutions approving the acquisition of 445,377 shares of ESBI was approved. Citing the minutes of the six regular meetings of ESBI, he claims that they merely discussed routinary bank business matters and not the designation of ESBI as LWUA's depository bank.
The Ruling of the Ombudsman
In its Joint Resolution dated March 16, 2015, the Ombudsman found respondent Ipong and his co-respondents administratively guilty of the offenses charged. The Ombudsman ruled that securing prior MB approval is the joint responsibility of ESBI and LWUA. Said the Ombudsman:
Considering that respondents were in the banking business, they should have known that one cannot simply sell shares of the bank, and/or transfer majority ownership, as the case may be, to any other entity. It was incumbent upon them to make sure that the transfer complied with all legal requirements, and that the buyer is qualified entity. It was not solely the task of LWUA to secure the appropriate government approval as shown by the above-cited provision; on their end, being holders of a banking license, private respondents were also required to comply with banking laws and regulations. Obviously, they are now attempting to downplay and understate their participation by shifting the blame mainly on public respondents, while they try to keep the fact that they unduly benefited from the transaction.
It cannot be denied that private respondents were the undue beneficiaries of the sale of the ESBI shares. A private bank struggling to keep itself afloat was removed from their hands by a government agency that was certainly not in the business of bailing out financially-distressed banks. By the ESBI Board's mere approval of the unfair transaction, conspiracy among all respondents became evident. More importantly, private respondents' reliance on the supposed warranties of LWUA proves that they acted in conspiracy with public respondents to ensure that they would receive payment for their shares and escape regulation by the government. 8
The Ombudsman thus concluded that the actions of Ipong and his co-respondents were in flagrant disregard of existing banking laws and rules. At the very least, said the Ombudsman, they were grossly negligent in the performance of their duties. The Ombudsman ruled:
While there is no concrete description of what specific acts constitute conduct prejudicial to the best interest of the service Section 4 (c) of R.A. No. 6713 mandates that public officials "shall at all times respect the rights of others, and shall refrain from doing acts contrary to law, good morals, good customs, public policy, public order, public safety and public interest." Corollary thereto, a public officer or employee who fails to live up to these standards may be disciplined therefor. As held in Government Service Insurance System v. Mayordomo:
As long as the questioned conduct tarnishes the image and integrity of his/her public office, the corresponding penalty may be meted on the erring public officer or employee.
As such, respondents Espinas, Chua, Ipong, Billena, Bueno, and Tulagan miserably failed to measure up to the standards of conduct set by existing laws. (citations omitted) 9
The Ombudsman thus imposed the penalty of dismissal from public service against Ipong and his co-respondents in this manner:
WHEREFORE, this Office, through the undersigned:
xxx xxx xxx
(f) FINDS respondents ARNALDO M. ESPINAS, GEORGE S. CHUA, GEORGE T. IPONG, WILFRED L. BILLENA, EDITA S. BUENO, and GENEROSO D.C. TULAGAN ADMINISTRATIVELY GUILTY of Grave Misconduct and Conduct Prejudicial to the Best Interest of the Office, and metes upon them the penalty of DISMISSAL from service, including all its accessory penalties of (a) cancellation of eligibility, (b) forfeiture of retirement benefits, (c) perpetual disqualification for re-employment in the government service and (d) perpetual bar from taking Civil Service examinations.
SO ORDERED.10
The Ruling of the CA
The petitioner elevated the matter to the CA by way of a Petition for Review under Rule 43.
The CA, in its presently assailed Decision 11 promulgated on November 24, 2016, affirmed the ruling of the Ombudsman. First, the CA emphasized that petitioner Ipong was appointed as a member of the ESBI Board through LWUA Chairman Prospero Pichay, and thus, he is considered a LWUA nominee to the ESBI Board. He cannot deny that he held the position of member of the board of ESBI as LWUA's representative, because even the General Information Sheet dated August 11, 2009 states his address at LWUA Building in Quezon City. Second, the CA rejected the claim of Ipong that there was no specific factual allegation of grave misconduct and conduct prejudicial to the public service against him. The CA pointed out:
In his Counter-Affidavit, petitioner admitted having attended six (6) Board Meetings held on the following dates: July 17, 2009; July 23, 2009; July 29, 2009; August 6, 2009; August 27, 2009; and September 9, 2009.
It was during the July 23, 2009 meeting where the Board unanimously approved the increase in the authorized capital stock from P500,000,000.00 to P2,000,000,000.00. x x x
x x x It is clear that the Board, including the petitioner, very well knew that ESBI is restricted from accepting government deposits; he was also aware that there was no express authority from the MB and the BSP granting ESBI permission to accept government deposits. Yet, despite this, the deposit of P400,000,000.00 from LWUA was accepted by ESBI.
Petitioner cannot feign ignorance of the P400,000,000.00 deposited in the current account of ESBI despite its lack of authority from government regulators. This is clear from the Minutes of the August 27, 2009 Board meeting, to wit:
OGCC Opinion and DOF Endorsement to the Office of the President
Dir. Garcia informed the Board that he talked to Dir. Fonacier of the BSP, advising her that the P400 million was already deposited. She said that we would need an opinion of the Office of the Government Corporate Counsel (OGCC) and an endorsement from the Department of Finance to the Office of the President. Upon compliance, there will be no more delays in the consummation of the deal. 12
Hence, the CA ruled that petitioner should not have permitted the acceptance of ESBI of the P400,000,000.00 advance payment from LWUA as he very well knew that ESBI was not authorized to accept it. He was grossly negligent in the performance of his duties that he failed to protect the public from the damaging actions of ESBI. Thus, the CA concurred with the ruling of the Ombudsman, and affirmed it thus:
WHEREFORE, premises considered, the Petition for Review is DISMISSED. The Joint Resolution dated March 16, 2015, and the Joint Order dated April 4, 2016 of the Special Panel of Investigators of the Office of the Ombudsman are hereby AFFIRMED. 13
Petitioner moved for reconsideration, which the CA denied in its assailed May 18, 2017 Resolution. Hence, the present Petition for Review on Certiorari under Rule 45.
Issue
The sole issue for resolution of the Court is whether the CA gravely erred in affirming the ruling of the Office of the Ombudsman to the effect that petitioner Ipong is administratively liable for grave misconduct and conduct prejudicial to the best interest of the office.
The Court's Ruling
The petition lacks merit. Hence, it must be denied.
Misconduct in office has been authoritatively defined by Justice Tuazon in Lacson v. Lopez in these words: "Misconduct in office has a definite and well-understood legal meaning. By uniform legal definition, it is a misconduct such as affects his performance of his duties as an officer and not such only as affects his character as a private individual. In such cases, it has been said at all times, it is necessary to separate the character of the man from the character of the officer x x x. It is settled that misconduct, misfeasance, or malfeasance warranting removal from office of an officer must have direct relation to and be connected with the performance of official duties amounting either to maladministration or willful, intentional neglect and failure to discharge the duties of the office x x x." 14
In Seville v. COA, 15 the Court reiterated that in grave misconduct, the elements of corruption, clear intent to violate the law, or flagrant disregard of an established rule must be evident. Misconduct, in the administrative sense, is a transgression of some established and definite rule of action. Corruption, as an element of grave misconduct, consists in the act of an official or fiduciary person who unlawfully and wrongfully uses his station or character to procure some benefit for himself or for another person, contrary to duty and rights of others. 16
Meanwhile, conduct prejudicial to the best interest of the service has no specific definition under Civil Service Laws. In GSIS v. Arwin Mayordomo, 17 however, the Court enumerated instances that could be considered as conduct prejudicial to the best interest of the service:
Under the Civil Service law and rules, there is no concrete description of what specific acts constitute the grave offense of Conduct Prejudicial to the Best Interest of the Service. Jurisprudence, however, is instructive on this point. The Court has considered the following acts or omissions, inter alia, as Conduct Prejudicial to the Best Interest of the Service: misappropriation of public funds, abandonment of office, failure to report back to work without prior notice, failure to safe keep public records and property, making false entries in public documents and falsification of court orders. The Court also considered the following acts as conduct prejudicial to the best interest of the service, to wit: a Judge's act of brandishing a gun and threatening the complainants during a traffic altercation; a court interpreter's participation in the execution of a document conveying complainant's property which resulted in a quarrel in the latter's family.
Applying the foregoing, the Court finds that the CA did not err in affirming the ruling of the Ombudsman finding petitioner Ipong administratively liable for grave misconduct and conduct prejudicial to the best interest of the service. As a director of ESBI, petitioner is duty-bound to prevent the engaging of the bank in unsafe banking practices. Sec. X141.3 of the MORB provides:
The position of a bank director is a position of trust. A director assumes certain responsibilities to different constituencies or stakeholders, i.e., the bank itself, its stockholders, its depositors and other creditors, its management and employees, the regulators, deposit insurer and the public at large. These constituencies or stakeholders have the right to expect that the institution is being run in a prudent and sound manner. The board of directors is primarily responsible for approving and overseeing the implementation of the bank's strategic objectives, risk strategy, corporate governance and corporate values. Further, the board of directors is also responsible for monitoring and overseeing the performance of senior management as the latter manages the day to day affairs of the institution.
In accepting the deposit of P400,000,000.00 from LWUA without corresponding proof that such was done with the concurrence and approval of government regulators, Ipong and the rest of the Board of Directors of ESBI engaged in an unsafe banking practice. The very Minutes of the meetings of the Board cited by Ipong in his defense support the contention of the FIO that the Board engaged in misconduct in accepting a huge amount of money from the government without the necessary approval.
The Court, therefore, is of the mind that there is substantial evidence to support the findings of the Ombudsman, as affirmed by the CA. Petitioner was grossly negligent in the performance of his duties when he supported the action of the Board that may be potentially damaging to the public. The huge amount involved in the transaction necessitates that petitioner should have been more circumspect in exercising his powers as a member of the Board of ESBI. In fact, his actions show a flagrant disregard of existing banking rules and practices. He blatantly disregarded the provisions of the MORB. He is, thus, liable for grave misconduct.
Ipong's failure to protect the public from the damaging action of ESBI, as well as his assent to a transaction that is of questionable legality taints the public's perception of his office. This conduct is prejudicial to the best interest of the public.
WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals, Seventh Division, in CA-G.R. SP No. 145944 promulgated on November 24, 2016, which affirmed the Joint Resolution of the Ombudsman dated March 16, 2015, as well its Resolution dated May 18, 2017, are hereby AFFIRMED.
SO ORDERED."
Very truly yours,
(SGD.) WILFREDO V. LAPITANDivision Clerk of Court
Footnotes
1.Rollo, p. 27.
2.Id. at 28.
3.Id.
4.Id. at 29.
5.Id. at 100.
6.Id. at 103-104.
7.Id. at 127-128.
8.Id. at 168.
9.Id. at 201.
10.Id. at 31-32.
11. Penned by Associate Justice Victoria Isabel A. Paredes and concurred in by Associate Justices Magdangal M. De Leon and Elihu A. Ybanez.
12. Rollo, p. 42.
13. Id.
14. Cited in Office of the Ombudsman-Visayas and Emily Rose Ko Lim Chao v. Mary Ann T Castro, G.R. No. 172637, April 22, 2015.
15. G.R. No. 177657, November 20, 2012.
16. Office of the Ombudsman v. Mallari, G.R. No. 183161, December 3, 2014.
17. G.R. No. 191218, May 30, 2011.