Bangko Sentral ng Pilipinas vs. Office of the Ombudsman

A violation of Section 27(d) of R.A. No. 7653 gives rise to both criminal liability under Section 36 of the same Act and administrative liability under BSP Office Orders and civil service rules, and a public officer who voluntarily separates from the service to pre-empt the imminent filing of administrative charges may still be held administratively liable notwithstanding separation from government service.

Petitioner Bangko Sentral ng Pilipinas (BSP) is the constitutionally mandated central monetary authority of the Philippines, created through Republic Act No. 7653 (The New Central Bank Act). Private respondent Benjamin M. Jamorabo was a Bank Officer I in BSP's Supervision and Examination Sector (SES), tasked with conducting regular examinations of banks. Section 27(d) of R.A. No. 7653 prohibited BSP personnel, particularly those in supervising and examining departments, from borrowing from institutions under BSP supervision or examination. Republic Act No. 11211, enacted on February 14, 2019, amended Section 27(d) to remove the absolute prohibition on borrowings by examination personnel, replacing it with requisites of arm's length basis, full disclosure to the Monetary Board, and compliance with Monetary Board rules.

Jamorabo was a Bank Officer I in BSP's Supervision and Examination Sector (SES), having served as a bank examiner for 21 years. From July 5 to 22, 2006, he was assigned as examiner-in-charge of the regular examination of the Rural Bank of Kiamba, Sarangani, Inc. (RBKSI). During this examination period, specifically on July 17, 2006, Jamorabo took out a P200,000 unsecured loan from RBKSI. According to the complaint filed by BSP, Jamorabo approached RBKSI's general manager, William Nero, and stated that he wanted to "avail for himself" a loan of P200,000. Since the amount was beyond Nero's approval authority, Nero accompanied Jamorabo to meet with RBKSI's president, Cornelio Falgui. Falgui wanted to deny the application but was afraid of offending Jamorabo, given his position as examiner-in-charge. The loan was approved without the standard requirements — no collateral, no documentary proof of income, and no credit investigation — after Jamorabo convinced Nero to accept post-dated checks instead of real security. Jamorabo issued eight personal post-dated checks (six for P30,000 and two in blank) against his PNB account. The net proceeds of P198,000 were deposited into Jamorabo's savings account on July 18, 2006.

Jamorabo personally filled out and signed the loan documents but deceptively wrote his wife Marites's name as principal borrower, making himself co-maker. Marites never went to the bank or signed any loan documents. Jamorabo promised Falgui that he would settle the loan before the next BSP general examination of RBKSI, conducted at two-year intervals, so the loan would no longer appear in the bank's books. When the loan became due, Jamorabo paid only the first and second amortizations, and only after his first check bounced for being drawn against insufficient funds. He remitted payment on February 9, 2007, after requesting RBKSI not to deposit his second check. When the third amortization became due, Jamorabo began calling RBKSI's cashier, Aurora Cagas, advising her not to deposit his checks, then ceased communication altogether. In September 2007, RBKSI deposited his April 17, 2007 check, which was dishonored because his account was already closed. Nero tried contacting Jamorabo but could no longer reach him. In December 2008, Jamorabo called Nero from a different number, promising to settle the loan and explaining he had failed to make good on his checks because BSP had sent him for further studies to Malaysia. Despite this promise, Jamorabo did not pay.

Jamorabo had voluntarily retired from government service effective December 31, 2008. Records from BSP's Investigation and Intelligence Division showed that he had started applying for a Canadian Permanent Resident Visa as early as June 2008. He migrated to Canada with his family on April 14, 2010, with no intention of returning. From April 14 to 29, 2009, BSP's Anti-Money Laundering Specialist Group conducted the next regular examination of RBKSI. Nero divulged Jamorabo's loan to the examiner-in-charge, who advised that Jamorabo had just retired from BSP. The loan was eventually fully paid by Jamorabo's wife Marites and sister-in-law Honeyve Montecalvo on December 1, 2009. On August 11, 2009, BSP filed a complaint before the Ombudsman against Jamorabo for violation of Section 27(d) of R.A. No. 7653 and BSP Office Order No. 423, series of 2002.

The Ombudsman dismissed the complaint on February 9, 2011, ruling that violation of Section 27(d) entails only administrative liability, and since Jamorabo had retired before the complaint was filed, he could no longer be sanctioned. The Ombudsman also found no liability under Section 3(e) of R.A. No. 3019 because the loan was paid in full, negating undue injury, and held that RBKSI's officers were also at fault for approving the loan and reporting only in 2009. BSP's motion for reconsideration was denied on July 28, 2011.

• Criminal Liability under Section 27(d): BSP argued that a violation of Section 27(d) of R.A. No. 7653 gives rise to criminal liability under Section 36 of the same Act, not merely administrative liability as the Ombudsman ruled.
• Administrative Liability Despite Retirement: BSP maintained that Jamorabo could still be held administratively liable even though the complaint was filed after his retirement, citing Pagano vs. Nazarro, Jr., Baquerfo vs. Sanchez, and Office of the Ombudsman vs. Andutan for the proposition that the act complained of must have been done during one's stint in government, and that administrative sanctions other than dismissal may still be meted out despite separation from service.
• Undue Injury under Section 3(e): BSP asserted that Jamorabo's violation of the prohibition on borrowings by BSP examiners constitutes, by itself, undue injury to the government.
• Unwarranted Benefits under Section 3(e): BSP argued that Jamorabo's loan arrangement conferred on RBKSI the unwarranted benefit of escaping BSP detection and sanction for the unauthorized loan, specifically by deliberately designating his wife as principal borrower and scheduling loan payments before the next scheduled regular examination.

• Nature of Liability: The Ombudsman ruled that a violation of R.A. No. 7653, Section 27(d) and BSP Office Order No. 423 does not entail criminal liability; hence, Jamorabo could only be held administratively liable.
• Bar of Retirement: The Ombudsman maintained that Jamorabo could no longer be administratively sanctioned because the case against him was filed after he had retired from government service, and that full payment of the loan negated the existence of undue injury.
• No Undue Injury: The Ombudsman found that BSP failed to prove any injury, loss, or damage to the government caused by Jamorabo's acts, since the loan was paid in full.
• Shared Fault of RBKSI Officers: The Ombudsman held that RBKSI's officers were also at fault for approving Jamorabo's loan application and for reporting the incident only in 2009, almost three years after the loan was availed.
• No Unwarranted Benefit: The Ombudsman found no showing of any concrete benefit given to RBKSI at the time the loan was granted, characterizing the bank officers' silence as an irregular act or lapse of judgment rather than an unwarranted benefit.
• Timing of Loan (Jamorabo's position): Jamorabo claimed that his examination team had already finished the examination of RBKSI when he approached Nero to inquire about availing a loan, alleging the actual examination ended on July 16, 2006, and the loan was approved the next day.

• Liabilities under Section 27(d): What liabilities arise from a violation of R.A. No. 7653, Section 27(d)?
• Administrative Liability After Retirement: Can Jamorabo still be held administratively liable even if the present complaint was filed after his retirement from government service?
• Prima Facie Case under Section 3(e): Is there a prima facie case for Section 3(e) of R.A. No. 3019 against Jamorabo?

• Liabilities under Section 27(d): Yes. Violation of Section 27(d) gives rise to both criminal liability under Section 36 of R.A. No. 7653 and administrative liability under BSP Office Orders and the Uniform Rules on Administrative Cases in the Civil Service. The Ombudsman committed grave abuse of discretion in ruling it entails administrative liability only.
• Administrative Liability After Retirement: Yes. Jamorabo can still be held administratively liable because his voluntary retirement was calculated to pre-empt the filing of charges, falling within the recognized exception that separation from service does not bar administrative proceedings when the officer voluntarily separated to pre-empt imminent charges.
• Prima Facie Case under Section 3(e): No. There is no prima facie case for violation of Section 3(e) of R.A. No. 3019 because the loan was fully paid, negating undue injury, and no unwarranted benefit was conferred on RBKSI, whose officers objected to the loan and eventually reported it.

• Liabilities under Section 27(d): Section 27(d) of R.A. No. 7653 is composed of two parts: a general rule allowing BSP personnel to borrow from supervised institutions if the borrowings are adequately secured, fully disclosed to the Monetary Board, and compliant with prescribed rules; and a proviso absolutely prohibiting supervising and examining personnel from borrowing from banks under their supervision or examination. Section 36 provides a general penal clause imposing a fine of not less than P50,000 nor more than P200,000, or imprisonment of not less than two years nor more than ten years, or both, at the discretion of the court, for willful violations of the Act. Read together, Sections 27(d) and 36 categorically establish that Section 27(d) is a penal provision. R.A. No. 11211 amended Section 27(d) to remove the absolute prohibition on borrowings by examination personnel, replacing it with three requisites: (1) arm's length basis, (2) full disclosure to the Monetary Board, and (3) compliance with Monetary Board rules. Pursuant to Article 22 of the Revised Penal Code, this favorable amendment is given retroactive effect. However, Jamorabo's loan still fails all three amended requisites. The transaction was not at arm's length: Jamorabo approached Nero during the examination period, Falgui approved the loan out of fear of offending him, the loan bypassed standard credit procedures, and was approved within one day. The loan was not disclosed to the BSP or the Monetary Board; BSP discovered it only during the next regular examination in April 2009, after Nero divulged it. Jamorabo's affidavit was completely silent on disclosure, betraying his awareness of the transaction's illegality. A prima facie case for violation of Section 27(d) in relation to Section 36 was therefore established.

• Administrative Liability After Retirement: The general rule, as established in Office of the Ombudsman vs. Andutan, is that separation from service forecloses the filing of administrative charges. The continuing validity of administrative proceedings after resignation or voluntary separation is based not on the availability of accessory penalties but on the bad faith attendant to such separation. In Pagano vs. Nazarro, Jr. and Baquerfo vs. Sanchez, administrative charges were filed before the officers resigned, so jurisdiction had already attached. In Andutan, the officer was forced to resign more than a year before charges were filed, so administrative proceedings could not continue. The exception applies where a public officer voluntarily separates to pre-empt the imminent filing of charges, as in Office of the Court Administrator vs. Juan, where the officer resigned a day after confessing to the offense. Here, Jamorabo voluntarily retired effective December 31, 2008, a mere four months before RBKSI's next regular examination in April 2009. Having been a bank examiner for 21 years, he knew the examination was forthcoming and that the unpaid loan would be discovered. He had started applying for a Canadian Permanent Resident Visa as early as June 2008 and departed for Canada in April 2010, barely four months after the loan was finally settled by his wife and sister-in-law. The suspicious timing and circumstances establish that his voluntary retirement was calculated to pre-empt the charges that would inevitably result from discovery of the illicit loan. The Ombudsman also committed grave abuse of discretion in docketing the case as purely criminal without pursuing the administrative aspect.

• Prima Facie Case under Section 3(e): Section 3(e) of R.A. No. 3019 embraces two modes: (1) causing undue injury to any party, and (2) giving any private party unwarranted benefits, advantage, or preference through manifest partiality, evident bad faith, or gross inexcusable negligence. For the first mode, proof of actual injury or damage must be shown; undue injury cannot be presumed even after a wrong or violation of a right has been established. The loan was paid in full, and BSP failed to show how the violation caused actual damage to any party, much less to RBKSI. For the second mode, the Ombudsman correctly found no unwarranted benefit conferred on RBKSI. Both Nero and Falgui objected to the loan; Falgui approved it only out of fear. RBKSI did not really gain the benefit of escaping detection since it reported the loan to BSP during the next regular examination. The bank officers' silence was an irregular act or lapse of judgment, not an unwarranted benefit.

• Retroactive Effect of Favorable Penal Laws (Article 22, Revised Penal Code) — Penal laws shall have retroactive effect insofar as they favor the persons guilty of a felony. Applied in this case: R.A. No. 11211's removal of the absolute prohibition on borrowings by BSP examination personnel was given retroactive effect in favor of Jamorabo, so that his loan was evaluated under the amended requisites rather than the original absolute prohibition. However, the loan still failed to satisfy the amended standards.

• Arm's Length Transaction — A transaction between two parties conducted as if they were strangers, so that no conflict of interest arises; one made in good faith in the ordinary course of business by parties with independent interests. In the context of Section 27(d), BSP personnel must transact with BSP-examined institutions in such a way that they cannot utilize their position to gain undue influence or more favorable terms. Jamorabo's loan failed this standard because his position as examiner-in-charge unduly influenced the speedy facilitation of the loan, bypassing standard credit procedures.

• Administrative Liability After Separation from Service — The general rule is that separation from government service forecloses the filing of administrative charges. The exception is when the public officer voluntarily separates from the service to pre-empt the imminent filing of administrative charges. The continuing validity of administrative proceedings after resignation is based on the bad faith attendant to such resignation, not on the availability of accessory penalties. Where administrative charges were already filed before resignation, jurisdiction has attached and resignation does not render the case moot. Where the officer was forced to resign long before charges were filed, administrative proceedings may not continue.

• Two Modes of Section 3(e), R.A. No. 3019 — Section 3(e) embraces two distinct acts: (1) causing undue injury to any party, and (2) giving any private party unwarranted benefits, advantage, or preference through manifest partiality, evident bad faith, or gross inexcusable negligence. These are treated as two different modes of committing the same offense; an accused violates Section 3(e) by committing either one or both. For the first mode, proof of actual injury or damage is required and cannot be presumed.

• "Read together, Sections 27(d) and 36 categorically provide that BSP personnel who borrow from institutions under BSP supervision or examination without complying with the requisite former provision shall be penalized by a fine or imprisonment, or both, at the discretion of the court." — This passage establishes the ratio decidendi that Section 27(d) is a penal provision giving rise to criminal liability, directly contradicting the Ombudsman's ruling.

• "The continuing validity and binding effect of administrative proceedings after the resignation or voluntary separation of the respondent public officer is based not on the availability of accessory penalties but on the bad faith attendant to such resignation or voluntary separation." — This formulation clarifies the doctrinal basis for continuing administrative jurisdiction after separation from service, distinguishing it from the mere availability of accessory penalties.

• "undue injury in Sec. 3(e) cannot be presumed even after a wrong or a violation of a right has been established" — This statement articulates the requirement of proving actual injury for the first mode of Section 3(e) of R.A. No. 3019, confirming that a statutory violation alone does not establish undue injury.

• Pagano vs. Nazarro, Jr., 560 Phil. 96 (2007) — Followed and distinguished. Held that precipitate resignation of a government employee charged with an offense punishable by dismissal does not render the administrative case moot. Distinguished because in Pagano, the administrative complaint had already been commenced before the resignation; the Court's reliance on accessory penalties flowed from the bad faith attendant to the filing of candidacy.

• Baquerfo vs. Sanchez, 495 Phil. 10 (2005) — Followed and distinguished. Held that cessation from office by resignation or retirement neither warrants dismissal of an administrative complaint filed while the officer was still in service nor renders it moot. Distinguished because the administrative charges were filed before the respondents resigned.

• Office of the Ombudsman vs. Andutan, 670 Phil. 169 (2011) — Followed and distinguished. Established the general rule that separation from service forecloses administrative charges, and the exception where voluntary separation is calculated to pre-empt charges. Distinguished because Andutan was forced to resign more than a year before charges were filed; applied in this case because Jamorabo's voluntary retirement was found to be calculated to pre-empt charges.

• Office of the Court Administrator vs. Juan, 478 Phil. 823 (2004) — Followed. Held that resignation is not a way out to evade administrative liability when facing sanction; applied as the controlling example of pre-emptive resignation where the officer resigned a day after confessing to the offense.

• Section 27(d), Republic Act No. 7653 (The New Central Bank Act) — Prohibits BSP personnel from borrowing from institutions subject to BSP supervision or examination unless adequately secured, fully disclosed to the Monetary Board, and compliant with prescribed rules; the proviso absolutely prohibited supervising and examining personnel from borrowing from banks under their examination. Applied to determine that Jamorabo's loan constituted a violation, as amended by R.A. No. 11211.

• Section 36, Republic Act No. 7653 — Provides the general penal clause for willful violations of the Act: fine of not less than P50,000 nor more than P200,000 (raised to P2,000,000 as amended by R.A. No. 11211) or imprisonment of not less than two years nor more than ten years, or both. Read together with Section 27(d) to establish criminal liability.

• Republic Act No. 11211 — Enacted February 14, 2019, amending Section 27(d) to replace the absolute prohibition on borrowings by examination personnel with requisites of arm's length basis, full disclosure to the Monetary Board, and compliance with Monetary Board rules. Given retroactive effect pursuant to Article 22 of the Revised Penal Code.

• Section 3(e), Republic Act No. 3019 (Anti-Graft and Corrupt Practices Act) — Prohibits causing undue injury to any party or giving any unwarranted benefits, advantage, or preference through manifest partiality, evident bad faith, or gross inexcusable negligence. Applied to determine that no prima facie case existed because the loan was fully paid (negating undue injury) and no unwarranted benefit was conferred on RBKSI.

• Article 22, Revised Penal Code — Provides that penal laws shall have retroactive effect insofar as they favor the person guilty of a felony. Applied to give retroactive effect to R.A. No. 11211's amendment of Section 27(d) in favor of Jamorabo.

• BSP Office Order No. 423, series of 2002, and Office Order No. 860, series of 2007 — BSP internal regulations imposing administrative liability for violations of the Central Bank Act. Cited as sources of administrative liability separate from criminal liability under Section 36.

• Uniform Rules on Administrative Cases in the Civil Service (URACCS), Section 50, paragraph A — Classifies grave misconduct as a ground for dismissal and prohibits contracting loans from persons with whom the employee's office has business relations. Cited as an additional source of administrative liability.

Gesmundo, C.J., Caguioa, Carandang, and Zalameda, JJ., concurred.