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EN BANC

G.R. No. 155088 August 31, 2006

DR. MUSSOLINI C. BARILLO, EDGARDO C. HINOGUIN, otherwise known as EDGAR C. HINOGUIN, JOSE REY S. ROJAS, RAYMUNDO PLAZA and TERESITA ALLEGO, Petitioners,
vs.
HON. MARGARITO GERVACIO, in his Capacity as OIC Ombudsman HON. PRIMO MIRO, in his capacity as Deputy Ombudsman for the Visayas, HON. VIRGINIA P. SANTIAGO, in her capacity as Director, Office of the Ombudsman (Visayas) and the COMMISSION ON AUDIT, Region VII, Respondents.

D E C I S I O N

TINGA, J.:

This Petition ¹ dated August 23, 2002 filed by Dr. Mussolini C. Barillo (Barillo), Edgardo Hinoguin (Hinoguin), Jose Rey S. Rojas (Rojas), Raymundo Plaza (Plaza) and Teresita S. Allego (Allego), assails the Decision ² of the Court of Appeals dated July 31, 2002 which affirmed the resolution, memoranda and orders promulgated by the Office of the Ombudsman, Manila (Ombudsman) and the Office of the Deputy Ombudsman for the Visayas (Ombudsman-Visayas) in Administrative Case No. OMB-VIS-ADM 97-0243 entitled "Commission on Audit v. Dr. Mussolini C. Barillo, et al."

The facts are as follows:

In September 1994, Barillo, as President of Cebu State College of Science and Technology (Cebu State), which is a government-owned educational institution, ³ introduced a school-based entrepreneurship project known as the Printing Entrepreneurial Shop (PES), installing himself as the Chairman and Hinoguin, Rojas, Plaza and Allego as the Project Coordinator, Project-in-Charge, Treasurer and Auditor, respectively. ⁴ Barillo then drafted an Operation Manual for the implementation of the PES. The Operation Manual provided the organizational and operational details of the program and was to serve as a guideline for the safekeeping of funds and the sharing of the program’s realized income as follows:

a. Personnel

1. Chairman 4%

2. Project Coordinator 4%

3. Project Treasurer 4%

4. Project Auditor 4%

5. Management 22%

6. Project Teacher 25%

7. Student Workers 30%

b. Maintenance

1. Electricity 5%

2. Depreciation 5%

3. Water 2% ⁵

In order to establish the PES, seed money in the amount of P40,000.00 was obtained from the Cebu State Entrepreneurship Training Center (ETC) Funds purportedly as a loan to the PES. For this purpose, Rojas, as PES representative, and Eustiquio C. Alinabo, as Fund Administrator of the ETC, executed a Memorandum of Understanding dated September 2, 1994, which was approved by Barillo. ⁶

The PES was thus formally established. It accepted printing jobs from Cebu State as well as other private entities. The seed money was used to acquire the necessary equipment and facilities for the printing shop although at the time, printing technology was not yet offered as a course in Cebu State. The course was eventually offered as a two (2)-year Certificate of Printing Technology program in school year 1996-1997, almost two (2) years after the establishment of the PES. ⁷

Meanwhile, the funds initially deposited in the account of ETC were subsequently withdrawn by Barillo, Rojas and Plaza and deposited in their joint account in Banco de Oro. Similarly, all the subsequent income and funds generated from the PES’s operations were deposited in this joint account. It appears that as of August 31, 1995, the PES had already realized a total income of P149,600.00. ⁸

In the course of the post-audit and verification of the accounts and operations of Cebu State, Commission on Audit (COA) State Auditor III Asuncion D. Dela Peña (Auditor Dela Peña) ⁹ uncovered certain irregularities and anomalous transactions in relation to the operations of the PES. Thus, on September 4, 1995, Auditor Dela Peña requested from Barillo a Value for Money Audit (VFM). Barillo denied the request saying that the VFM Audit was already moot and academic because Auditor Dela Peña had already gathered information on the matter from students, teachers and non-teaching staff. ¹⁰

In a letter dated September 11, 1995 addressed to the Director of the COA Regional Office, Auditor Dela Peña reported these irregularities and anomalous transactions alleging that the school facilities, resources and manpower were being utilized for the advancement of the private interests of petitioners. Moreover, considering that the printing office is deemed an auxiliary service of Cebu State, Auditor Dela Peña alleged that Barillo also violated Sec. 2 of DBM Circular Letter No. 92-8 dated November 18, 1998, which requires that all receipts from auxiliary services shall accrue to a revolving fund and be remitted to the National Treasury. ¹¹

Auditor Dela Peña submitted a supplemental report to the COA Regional Office, requesting that the documents relative to the operations of the PES be subpoenaed. The COA Regional Director requested the assistance of the Ombudsman-Visayas for this purpose. Accordingly, on October 2, 1995, the Ombudsman-Visayas demanded that appropriate action be taken by Barillo with regard to the request made by the COA Regional Director and Auditor. ¹²

Barillo again denied the request in a letter dated October 18, 1995. Although Barillo admitted having barred Auditor Dela Peña from conducting an examination and audit of the accounts of the PES, he claimed that the latter was not covered by a COA audit because it did not use public funds in its operations. He also denied that the PES used funds from the appropriation of Cebu State for maintenance and other operating expenses. He averred that to allow Auditor Dela Peña to examine the PES’s records would violate Cebu State’s right to academic freedom and due process of law. ¹³

In a letter dated October 26, 1995, Auditor Dela Peña asked Barillo for information on how the entrepreneurial programs comply with Letter of Instruction No. 1026 (LOI 1026) and MECS Order No. 26. Barillo replied admitting that Cebu State has not put its ETC into operation. As such, the ETC Operation Plan as approved by LOI 1026 is not yet applicable to the PES. ¹⁴

Based on the foregoing, Auditor Dela Peña executed an Affidavit accusing Barillo, Hinoguin, Rojas, Plaza and Allego, in their respective capacities as President, Professor III, Assistant Professor, Clerk II and Stenographer of Cebu State, of violating Sec. 3(e), (f) and (h) of the Anti-Graft and Corrupt Practices Act and Sec. 4(a) and (c) of the Code of Conduct and Ethical Standards for Public Officials and Employees (Code of Conduct). Auditor Dela Peña alleged that the expenditures for the PES projects were illegally taken from the General Fund of Cebu State and that the income generated therefrom were illegally funneled to the personal accounts of petitioners. The complaint for violation of Sec. 3(e) of the Anti-Graft and Corrupt Practices Act was filed with the Sandiganbayan and docketed as Criminal Case No. 23554, while the charge of Dishonesty under Sec. 4(a) and (c) of the Code of Conduct was docketed with the Ombudsman-Visayas as Administrative Case No. OMB-VIS-ADM 97-0243. ¹⁵

After due proceedings, the Ombudsman-Visayas issued a Resolution dated March 30, 1998, which was approved by then Ombudsman Aniano A. Desierto (Ombudsman Desierto) on June 26, 1998, finding petitioners guilty of Dishonesty and imposing upon them the penalty of dismissal from the service with forfeiture of all benefits and perpetual disqualification from government service.

Petitioners filed a motion for reconsideration and a supplemental motion for reconsideration both of which were denied in an Order of the Ombudsman-Visayas dated July 31, 1998. However, pursuant to the memoranda of the Office of the Chief Legal Counsel of the Ombudsman dated November 5, 1998 and March 25, 1999, Ombudsman Desierto, in an Order dated April 30, 1999, modified the Order of the Ombudsman-Visayas by reducing the penalty imposed upon Hinoguin, Rojas, Plaza and Allego from dismissal from service to six (6) months suspension without pay. The Ombudsman-Visayas subsequently issued an Order dated May 19, 1999 directing petitioners to cease and desist from holding public office. ¹⁶

Petitioners assailed the resolution, memoranda and orders of the Ombudsman in a petition for review with the Court of Appeals. However, the appellate court denied their petition.

The Court of Appeals found no merit in petitioners’ contention that the seed money used for the establishment of the PES and its subsequent income are private funds. According to the appellate court, the seed money was sourced from the ETC Funds of Cebu State which funds are allocations made in favor of Cebu State by the Bureau of Technical and Vocational Education (BTVE) of the Department of Education Culture and Sports (DECS) for the creation of the Cebu State ETC. These funds were not meant to be loaned out as capital for supposed entrepreneurial projects.

Moreover, the evidence on record supports the Ombudsman’s finding that petitioners used the facilities and resources of Cebu State for their personal and financial interest. Despite the fact that Cebu State’s resources, manpower and facilities were used in the operations of the PES, no portion of its income was ever remitted to Cebu State’s coffers.

The Court of Appeals further found that the PES was operated without following the guidelines laid down in the Handbook on the Establishment of an Entrepreneurial Training Center ¹⁷ in violation of MECS Order No. 26. There was also a clear conflict of interest because Barillo, who brokered for the PES to obtain printing contracts from Cebu State, was also the one who approved said contracts.

As regards Barillo’s reliance on his acquittal by the Sandiganbayan in Criminal Case No. 23554, the appellate court held that such dismissal does not affect Barillo’s administrative liability because administrative proceedings are independent from criminal proceedings.

Petitioners insist that due to the dismissal by the Sandiganbayan of Criminal Case No. 23554, the administrative case for Dishonesty should similarly be dismissed because the acts which the Sandiganbayan declared as not unlawful are the same acts for which they were held administratively liable. Petitioners also assail the Order dated May 19, 1999, directing them to immediately cease and desist from holding office as a palpable violation of the Constitution. According to them, while the Ombudsman has authority to file and investigate administrative cases against government officials and employees, the power to implement the decision of dismissal lies in the Office of the President or the Department Head.

The Office of the Solicitor General (OSG) filed a Manifestation and Motion ¹⁸ dated December 15, 2002, taking the position that the Ombudsman can only recommend administrative sanctions to the head of agency and but not impose them on its own.

The Ombudsman, for its part, filed a Comment ¹⁹ dated February 5, 2003, maintaining that the seed money of P40,000.00 was released to the PES by way of a loan from the Cebu State ETC Funds. In turn, the ETC Funds were allocations made in favor of the school by the BTVE of the DECS for the purpose of creating the Cebu State ETC. Clearly, the funds were public in character.

It further averred that the PES was an illegal money-making venture because petitioners allocated to themselves specific percentages of the income generated from the project as shown by the sharing scheme in the Operation Manual. They treated the income generated by the project like their own by depositing the same in their private account. However, the expenditures for the PES such as supplies, equipment and materials used for printing office maintenance and electricity were borne by the school. ²⁰

Citing Ocampo v. Ombudsman, ²¹ the Ombudsman contends that the dismissal of the criminal case against petitioners has no effect on the present administrative case because the evidence against petitioners, though found insufficient to establish guilt beyond reasonable doubt, satisfies the quantum of evidence required in administrative proceedings.

Finally, as regards the OSG’s position, the Ombudsman argues that the ruling of this Court in Tapiador v. Office of the Ombudsman, ²² to the effect that the Ombudsman is without authority to directly dismiss an erring employee from government service, is the subject of a pending motion for reconsideration in which the Ombudsman argued that it is invested with administrative disciplinary powers to the fullest extent. The Ombudsman insists that it has the authority to compel and enforce, even through the use of the coercive power of contempt, the implementation of the penalties it assesses against erring public officials and employees.

Petitioners reiterate their arguments in their Reply ²³ dated July 24, 2003.

There are three questions submitted for our resolution. The first pertains to the scope of the powers granted to the Ombudsman by the Constitution; the second concerns the effect of the Sandiganbayan’s Decision in Criminal Case No. 23554, acquitting Barillo and dismissing the case against the other petitioners, on the present administrative proceeding; and the third involves the question of whether there is substantial evidence against petitioners.

On the first issue. The authority of the Ombudsman to determine the administrative liability of a public official or employee, and to direct and compel the head of the office or agency concerned to implement the penalty imposed is already settled.

In Ledesma v. Court of Appeals, ²⁴ we held that the statement in Tapiador v. Office of the Ombudsman, supra, to the effect that the disciplinary power of the Ombudsman is only recommendatory is a mere obiter dictum which cannot be cited as a doctrinal declaration of the Court. We declared that the authority of the Ombudsman under Sec. 15 of Republic Act No. 6770 (RA 6770), otherwise known as The Ombudsman Act of 1989, to recommend the removal, suspension, demotion, fine, censure, or prosecution of an erring public officer or employee is not merely advisory but is actually mandatory within the bounds of the law, such that the refusal, without just cause, of any officer to comply with an order of the Ombudsman to penalize an erring public officer or employee is a ground for disciplinary action.

The power of the Ombudsman to investigate and prosecute any illegal act or omission of any public official is not an exclusive authority but a shared or concurrent authority in respect of the offense charged. ²⁵ The provisions of the Constitution ²⁶ and RA 6770 should be taken to mean that the recommendation of the Ombudsman regarding the action to be taken against an erring public officer or employee should be coursed through the proper officer, often the head of the agency to which such officer or employee belongs.

The ruling in Ledesma was recently reiterated in Estarija v. Ranada, et al. ²⁷ where we held that far from restricting the powers of the Ombudsman, the Constitution gave Congress the discretion to spell out these powers. This Congress did through RA 6770 vesting in the Ombudsman the power to directly sanction erring government officials and employees, except only members of Congress and the Judiciary.

Given these unassailable precedents, the position taken by the OSG, as well as petitioners’ contention on this point, is clearly wrong.

The second and third issues are interrelated and shall be discussed jointly.

Administrative cases are, as a rule, independent from criminal proceedings. The dismissal of a criminal case on the ground of insufficiency of evidence or the acquittal of an accused who is also a respondent in an administrative case does not necessarily foreclose the administrative proceeding nor carry with it relief from administrative liability. This is because unlike in criminal cases which require proof beyond reasonable doubt, the quantum of proof required in administrative proceedings is substantial evidence, defined as such relevant evidence as a reasonable mind might accept as adequate to support a conclusion. ²⁸

The criminal case against petitioners Hinoguin, Rojas, Plaza and Allego was dismissed for lack of jurisdiction because the Information against them did not allege that they conspired with Barillo and because their salary grades are below that required for jurisdiction to vest in the Sandiganbayan. ²⁹

On the other hand, Barillo was acquitted because the Sandiganbayan found the evidence adduced by the prosecution inadequate to prove his guilt beyond reasonable doubt. According to the Sandiganbayan, the prosecution failed to establish that the P40,000.00 borrowed by the PES from the ETC Funds partakes of the nature of public funds so as to be subject to COA audit. Moreover, when the money was lent to the PES, it assumed the characteristic of a private fund. The fact that it was subsequently deposited to the Banco de Oro account of Barillo, Rojas and Plaza was deemed insufficient to convict Barillo. Further, the Sandiganbayan held that the prosecution failed to prove beyond reasonable doubt that the operational expenses of the PES were borne by Cebu State. Thus, the government did not suffer any damage as a result of the actions attributed to Barillo. The Sandiganbayan also ruled that the prosecution failed to prove that Barillo acted with manifest partiality, evident bad faith or gross inexcusable negligence.

In Larin v. Executive Secretary, ³⁰ we held that where the very basis of the administrative case against petitioner is his conviction in the criminal action which was later on set aside by this Court upon a clear and categorical finding that the acts for which he was administratively held liable are not unlawful and irregular, the acquittal of the petitioner in the criminal case necessarily entails the dismissal of the administrative action against him, because in such a case, there is no more basis nor justifiable reason to maintain the administrative suit.

In contrast, the Sandiganbayan Decision was not the basis of the filing of the administrative case against petitioners. In fact, the administrative case lodged with the Ombudsman-Visayas proceeded independently of the criminal proceedings before the Sandiganbayan. Further, nowhere in its Decision did the Sandiganbayan unreservedly declare that the acts for which petitioners were being held liable are not unlawful and irregular.

To reiterate, the dismissal of the criminal case against petitioners Hinoguin, Rojas, Plaza and Allego was due to the Sandiganbayan’s lack of jurisdiction over them. The acquittal of Barillo was merely because the Sandiganbayan deemed the evidence against him insufficient to prove his guilt beyond reasonable doubt. Whether this evidence satisfies the standard of proof required in administrative cases is a different matter which we shall now resolve.

Dishonesty connotes a disposition to lie, cheat, deceive, or defraud; unworthiness; lack of integrity; lack of honesty, probity or integrity in principle; lack of fairness and straightforwardness; disposition to defraud, deceive or betray. ³¹

In this case, the Ombudsman and the Court of Appeals made significant factual findings, which are binding on this Court, ³² and which militate against petitioners’ argument that there is no longer any basis to hold them administratively liable.

Notably, the Ombudsman and the Court of Appeals found that the ETC Funds were not meant to be lent as capital for entrepreneurial projects. They were purposely given by the BTVE to Cebu State in order to facilitate the establishment of the latter’s ETC. Barillo, as President of Cebu State, is charged with knowledge of this fact. Despite this knowledge, however, he approved the Memorandum of Understanding by virtue of which the PES obtained a loan of P40,000.00 from the ETC Funds. Worse, the proceeds of the loan, as well as the income generated by the PES from its operations, were deposited in the Banco de Oro account of Barillo, Rojas and Plaza.

Moreover, we agree with the appellate court’s finding that there is a clear irregularity in the dealings between the PES and Cebu State in that Barillo, who acted as Chairman of the PES, was also the one who approved the latter’s printing contracts with Cebu State. Considering that he and the other petitioners have a pecuniary interest in the PES as they shared in its income, ³³ this conflict of interest should have been militantly guarded against.

The Ombudsman and the Court of Appeals are one in saying that substantial evidence on record proves that the resources of Cebu State were used to defray the operational expenses of the PES. We defer to these findings because the Sandiganbayan did not categorically rule that such was not the case, only that the prosecution failed to establish this fact to the point of moral certainty.

In view of these circumstances, we find that there is substantial evidence to find petitioners guilty of Dishonesty under the Code of Conduct. Their act of obtaining direct pecuniary benefits from the PES; use of Cebu State’s resources, manpower and facilities; disregard of their public accountability; and refusal to submit the books and accounts of the PES to audit are highly irregular and questionable.

The Code enunciates the State policy of promoting a high standard of ethics and utmost responsibility in the public service. ³⁴ As public officers and employees, petitioners are expected to live up to the strictest norms of probity and integrity in the public service. They must, at all times, uphold the public interest over their personal interest. ³⁵

WHEREFORE, the petition is hereby DENIED. The Decision of the Court of Appeals dated July 31, 2002 is AFFIRMED. No pronouncement as to costs.

SO ORDERED.

DANTE O. TINGA

Associate Justice

WE CONCUR:

ARTEMIO V. PANGANIBAN
Chief Justice

REYNATO S. PUNO Associate Justice	LEONARDO A. QUISUMBING Associate Justice
CONSUELO YNARES-SANTIAGO Associate Justice	ANGELINA SANDOVAL-GUTIERREZ Associate Justice
ANTONIO T. CARPIO Associate Justice	MA. ALICIA AUSTRIA-MARTINEZ Associate Justice
RENATO C. CORONA Associate Justice	CONCHITA CARPIO MORALES Associate Justice
ROMEO J. CALLEJO, SR. Associate Justice	ADOLFO S. AZCUNA Associate Justice
MINITA V. CHICO-NAZARIO Associate Justice	CANCIO C. GARCIA Associate Justice

PRESBITERO J. VELASCO, JR.
Associate Justice

C E R T I F I C A T I O N

Pursuant to Article VIII, Section 13 of the Constitution, it is hereby certified that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court.

ARTEMIO V. PANGANIBAN
Chief Justice

Footnotes

¹Rollo, pp. 5-26.

²Id. at 28-39; Penned by Associate Justice Josefina Guevara-Salonga and concurred in by Associate Justices Eubulo G. Verzola and Bernardo P. Abesamis.

³Id. at 84; Decision of the Sandiganbayan in Criminal Case No. 23554. Also in rollo, p. 96; Decision of the Sandiganbayan in Criminal Case No. 25424.

⁴Id. at 73.

⁵Id. at 30.

⁶Id.

⁷Id. at 31.

⁸Id. The Sandiganbayan, in Criminal Case No. 23554, rollo, p. 75, found that:

"On September 05, 1994, the accused Barillo, Rojas and Plaza, pursuant to Item III (D) of the said operational manual, opened a joint account No. 2075-0002103-10 with the [sic] Banco de Oro located at M.J. Cuenco St.[,] Cebu City, with an initial deposit of P100.00, and the following day, September 06, 1994, the amount of P40,000.00 which was borrowed by the PES from the ETC Fund was deposited. Subsequent cash deposits were made, which during the period from September 15, 1994 up to June 19, 1997, totaled P770,209.02, earning interests for the period in the total amount of P8,566.84, minus the withdrawals in the total amount of P604,142.75 for the same period, leaving a balance at the end of the period, April 30, 1998, in the amount of P174,633.11."

⁹The Sandiganbayan Decision in Criminal Case No. 23554 states that Auditor Dela Peña and State Auditor II Azucena Canoy, the Resident Auditors of Cebu State, conducted the post-audit. Rollo, p. 76.

¹⁰Rollo, p. 31.

¹¹Id.

¹²Id. at 32.

¹³Id.

¹⁴Id.

¹⁵Id. at 32-33.

¹⁶Id. at 33.

¹⁷Id. at 36.

¹⁸Id. at 127-128.

¹⁹Id. 132-150.

²⁰Id. at 139-140.

²¹379 Phil. 21 (2000).

²²429 Phil. 47 (2002).

²³Rollo, pp. 180-186.

²⁴G.R. No. 161629, July 29, 2005, 465 SCRA 437.

²⁵Id.

²⁶See Art. XI, Sec. 13(3).

²⁷G.R. No. 159314, June 26, 2006.

²⁸Office of the Court Administrator v. Cañete, A.M. No. P-91-621, November 10, 2004, 441 SCRA 512.

²⁹Rollo, pp. 68-93; Decision of the Sandiganbayan dated January 22, 2002, penned by Associate Justice Nicodemo T. Ferrer and concurred in by Associate Justices Narciso S. Nario and Rodolfo G. Palattao.

³⁰G.R. No. 112745, October 16, 1997, 280 SCRA 713.

³¹Estarija v. Ranada, et al., supra note 27.

³²Id.

³³Supra note 5.

³⁴Remolona v. Civil Service Commission, 414 Phil. 590 (2001).

³⁵Judge Dondiego v. Cuevas, Jr., 446 Phil. 514 (2003).

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