CASE DIGEST : BAWASANTA vs PEOPLE G.R. No. 219300 GAERLAN

 [ G.R. No. 219300. November 17, 2021 ]

ROMUALDO J. BAWASANTA,* PETITIONER, VS. PEOPLE OF THE PHILIPPINES, RESPONDENT.

[G.R. No. 219323]

RODOLFO G. VALENCIA, PETITIONER, VS. PEOPLE OF THE PHILIPPINES, RESPONDENT.

[G.R. No. 219343]

ALFONSO V. UMALI, JR., PETITIONER, VS. PEOPLE OF THE PHILIPPINES, RESPONDENT.

D E C I S I O N

GAERLAN, J.:

FACTS : In 1992, then-Governor Rodolfo Valencia of Oriental Mindoro formed administrative clusters to address local issues, including the Transportation and Communication Cluster (TCC), which was tasked to solve the province’s long-standing shipping monopoly. The TCC, led by Manolo Brotonel, proposed that the provincial government acquire ships or assist private operators to improve services. Following this, the Sangguniang Panlalawigan (SP) authorized Valencia through Resolution No. 284-93 to enter into a credit agreement with a private ship owner, Alfredo Atienza, to finance the repair of his vessel using a ₱2.5 million loan from the Land Bank of the Philippines. Despite objections from the Provincial Treasurer and Auditor regarding the legality of the loan and its lack of collateral, Valencia, Provincial Administrator Alfonso Umali, and SP Member Romualdo Bawasanta proceeded with its approval and fund release. Although Atienza initially made partial repayments, his later checks bounced, and he was ordered by the court to pay the remaining balance. Subsequently, Valencia, Umali, and several officials were charged with violating Sections 3(e) and 3(g) of the Anti-Graft and Corrupt Practices Act (R.A. No. 3019) for entering into a grossly disadvantageous contract that benefited a private party. The Sandiganbayan found Valencia, Umali, and Bawasanta guilty beyond reasonable doubt, ruling that the credit agreement was not for a public purpose, was unsecured, and burdened the province with debt. They were sentenced to six to ten years in prison, perpetually disqualified from public office, and held jointly liable for the ₱2.5 million loan amount.

ISSUE: Whether the SB erred in ruling that the Credit Agreement was manifestly and grossly disadvantageous to the government

HELD : The petitioners were accused of violating Section 3(e) of the Anti-Graft and Corrupt Practices Act (R.A. No. 3019) by granting an “unwarranted benefit, privilege, and advantage” to Alfredo Atienza through a contract that was allegedly “grossly and manifestly disadvantageous” to the government, as defined under Section 3(g). The Supreme Court explained that since the charge under Section 3(e) was based on the alleged violation of Section 3(g), the prosecution needed to prove the essential elements of both provisions beyond reasonable doubt. Section 3(e) requires that: (1) the accused is a public officer; (2) the act was done in the performance of official duties; (3) it was committed through manifest partiality, evident bad faith, or gross negligence; and (4) it caused undue injury to any party or granted an unwarranted benefit. Section 3(g), on the other hand, requires: (1) that the accused is a public officer; (2) that he entered into a contract on behalf of the government; and (3) that the contract was grossly and manifestly disadvantageous to the government. The Court clarified that a “gross and manifest disadvantage” means a clear, flagrant, and easily recognizable situation that places the government in a prejudicial or inferior position.

In this case, it was undisputed that Valencia, Umali, and Bawasanta were public officers who, in their official capacities, approved or executed the Credit Agreement with Atienza. The Sandiganbayan found the agreement to be grossly disadvantageous based on three findings: (1) it lacked a valid public purpose, (2) it violated provisions of the Local Government Code, and (3) it was unsecured, exposing the province to financial risk. These findings led to the conclusion that the officials gave Atienza unwarranted benefits. The Supreme Court, however, being the final reviewing authority over cases from the Sandiganbayan, held that it was necessary to reexamine the facts to determine whether the contract indeed met the legal standard of being “grossly and manifestly disadvantageous” by evaluating its purpose and compliance with applicable laws.

The public purpose rule, embodied in Section 305(b) of the Local Government Code (LGC), provides that local government funds must be used solely for public purposes. This principle, rooted in long-standing jurisprudence, ensures that public money serves the welfare of the community rather than private interests. The Supreme Court, citing Pascual v. Secretary of Public Works (1960), held that funds raised through taxation can only be spent for objectives that directly benefit the public, not for private gain, even if such expenditures incidentally promote community prosperity. The rule stems from the constitutional limitation that public funds must be used only for public purposes and cannot be diverted to private ends. However, the Court clarified that the concept of “public purpose” has evolved — it now encompasses activities that promote social justice, general welfare, and the common good, aligning with the scope of the State’s police power. Thus, as held in Ferrer, Jr. v. Mayor Bautista, even if a government action or expenditure benefits certain individuals incidentally, it remains valid if its primary objective serves a legitimate public purpose.

In Pascual and Albon v. Mayor Fernando (2006), the Court ruled that using government funds to improve privately owned property violated the public purpose rule because the primary benefit accrued to private owners, not the public. Conversely, in Binay v. Domingo, the Court upheld Makati’s burial assistance program for indigent families, rejecting the Commission on Audit’s view that it violated the rule. The Court reasoned that helping the poor fulfills a recognized public duty consistent with the Constitution’s policies on social welfare and human dignity. In summary, under Section 305(b) of the LGC, public funds may lawfully benefit private persons or groups only if the expenditure’s direct and primary aim is public in nature, and any private advantage is merely incidental.

The Sandiganbayan ruled that the Credit Agreement was grossly and manifestly disadvantageous, citing violations of the public purpose rule, the use of an interest-bearing loan that exposed public funds to risk, lack of security, and absence of proof that Atienza owned the vessel M/V Ace. However, upon review, the Supreme Court explained that the determination of “gross and manifest disadvantage” depends on the facts of each case and not merely on price comparisons. Drawing from Castillo-Co v. Sandiganbayan, it clarified that the proper standard must come from law or authority—in this case, Section 305(b) of the Local Government Code, with which the Credit Agreement complied. The Court noted that the provincial government resorted to the credit extension only after failing to acquire its own ships, that the loan from Land Bank was legally permissible and ratified, and that despite missing ownership documents, the government was still protected by post-dated checks, a high interest rate, and a maritime lien on the repaired vessels. It found no evidence of bad faith, only urgent action in response to typhoon damage and transportation disruption. Since the prosecution failed to prove that the transaction was grossly and manifestly disadvantageous beyond reasonable doubt, the Court held that the accused officials were entitled to acquittal.