Canlas vs. Bongolan

An Office of the Ombudsman decision exonerating a public officer in an administrative case is final, executory, and unappealable; a complainant who does not stand to be benefited or injured by the judgment lacks legal standing to appeal such exoneration.

Home Guaranty Corporation is a government-owned and -controlled corporation organized under Republic Act No. 8763, mandated to guarantee payment of all forms of mortgages, loans, and other credit facilities and receivables arising from financial contracts exclusively for residential purposes and necessary support facilities, and governed by a Board of Directors that directs, controls, and manages its activities. The Smokey Mountain Development and Reclamation Project was implemented through a Joint Venture Agreement between the National Housing Authority and R-II Builders, Inc., with Home Guaranty engaged as guarantor to support securitization of the project. The asset pool and participation certificates were governed by the Smokey Mountain Asset Pool Formation Trust Agreement and a Contract of Guaranty. The Ombudsman’s power to investigate and prosecute complaints against public officers, including those in government-owned or -controlled corporations, is set out in Article XI, Section 12 of the 1987 Constitution and Republic Act No. 6770, while Rule III, Section 7 of Administrative Order No. 07, as amended, governs the finality and appealability of Ombudsman decisions.

On March 19, 1993, the National Housing Authority and R-II Builders, Inc. executed a Joint Venture Agreement to implement the Smokey Mountain Development and Reclamation Project, which sought to convert the former Smokey Mountain Dumpsite into habitable housing with commercial and industrial development and to reclaim the property adjacent to Smokey Mountain as its enabling component. The Manila Harbour Centre Port Terminal, Inc. is covered by the Project. Aside from being the developer, R-II was responsible for sourcing the funding for the Project’s Phase 1 through securitization, or the issuance of secured instruments backed by assets. To support the Project’s securitization and make the security instruments more appealing to investors, the National Housing Authority and R-II engaged Home Guaranty Corporation to act as guarantor. Home Guaranty is a government-owned and -controlled corporation organized under Republic Act No. 8763, mandated to guarantee payment of all forms of mortgages, loans, and other credit facilities and receivables arising from financial contracts exclusively for residential purposes and necessary support facilities, and governed by a Board of Directors that directs, controls, and manages its activities.

On September 26, 1994, the National Housing Authority, R-II, Home Guaranty, and the Philippine National Bank entered into the Smokey Mountain Asset Pool Formation Trust Agreement, which provided the mechanics to implement the Joint Venture Agreement and was amended many times until June 9, 2000. Under the Trust Agreement, the parties agreed to employ the asset-backed securitization method to finance the Project. Under this method, the Philippine National Bank, as trustee of the asset pool, would issue to investors Regular Smokey Mountain Asset Pool Participation Certificates, which were subject to government redemption and interest and were guaranteed by Home Guaranty; the assets in the asset pool were used as securities for the Participation Certificates. On the same day they executed the Trust Agreement, the parties also executed a Contract of Guaranty, under which the trustee of the asset pool was authorized to execute a Deed of Assignment and Conveyance of the entire asset pool in favor of Home Guaranty should the latter be called to pay the total outstanding value of the matured Participation Certificates.

On October 24, 2002, the Participation Certificates matured, and Planters Development Bank had by then become the trustee. Because of the asset pool’s inability to pay for the Participation Certificates, Planters Bank called on Home Guaranty’s guaranty. On February 6, 2003, Home Guaranty’s Board of Directors approved the call, and R-II did not object. Thus, on July 30, 2004, Planters Bank transferred the entire asset pool properties to Home Guaranty through a Deed of Assignment and Conveyance.

To recover its exposure, Home Guaranty published a Notice of Sale on July 21, 2006 in the Philippine Daily Inquirer, seeking to sell the properties in the asset pool. In response, Alfred Wong King Wai proposed to purchase two lots in the asset pool located in Manila Harbour Centre, covered by Transfer Certificate of Title Nos. 233421 and 233422 with a combined area of 28,926 square meters. Wong offered to pay P14,000.00 per square meter, but this price was reduced to P13,300.00 per square meter because Home Guaranty allowed a 5% cash discount as an incentive for spot cash purchases. Home Guaranty’s Board of Directors deferred action on Wong’s proposal and again published another Notice of Sale on October 22, 2006, but no one else came forward with a proposal. Home Guaranty referred Wong’s proposal for review to the Office of the Government Corporate Counsel, which gave a favorable opinion. Thus, on July 21, 2008, Home Guaranty sold the lots to Wong for P384,715,800.00, or P13,300.00 per square meter. Wong designated La Paz Milling Corporation as his agent, and TCT Nos. 283618 and 283619 were issued in place of TCT Nos. 233421 and 233422, respectively.

On October 16, 2009, Canlas filed a Complaint-Affidavit before the Office of the Ombudsman against Home Guaranty’s officers, namely, President Gonzalo Benjamin A. Bongolan, Executive Vice President Elmer Nonnatus A. Cadano, Vice President of Guaranty Melinda M. Adriano, Vice President of Asset Management Rafael P. Delos Santos, Vice President of Corporate Services Corazon G. Corpuz, Vice President of Legal Danilo C. Javier, and Vice President of Management Services Jimmy B. Sarona. Canlas claimed that the Home Guaranty Officers were guilty of grave misconduct and of entering into a contract grossly disadvantageous to the government under Section 3(g) of Republic Act No. 3019. He alleged that the lots were sold below their actual or appraised fair market value and that the government suffered damages ranging from P121,489,200.00 to P309,508,200.00. Canlas compared the purchase price to the prices of other properties in the same area: in 1999, Philippine National Bank sold an adjoining 20,000-square-meter lot for P440,000,000.00, or P22,000.00 per square meter, and based on this the sold lots allegedly should have been worth at least P636,372,000.00 as of January 1999; in 2001, the National Housing Authority sold an adjoining 15,000-square-meter lot for P262,500,000.00, or P17,500.00 per square meter, and based on this the sold lots allegedly should have been worth at least P506,205,000.00 as of August 2001; in 2009, Planters Bank offered to sell three adjacent lots for P20,000.00 per square meter; and an Appraisal Report dated July 2008 prepared by EValue Philippines, Inc. concluded that four adjoining lots inside Harbour Centre had a fair market value of P24,000.00 per square meter, based on which the sold lots allegedly should have been worth at least P694,224,000.00. Canlas claimed these prices were substantially higher than the purchase price of P384,715,800.00. He asserted that Bongolan arranged, facilitated, authorized, and approved the execution of the Deed of Sale, that Javier and Delos Santos signed the Deed of Sale for and in behalf of Home Guaranty, and that the rest of the Home Guaranty Officers facilitated the execution.

The Home Guaranty Officers, in their respective counter-affidavits, argued that Home Guaranty acted within its mandate to guarantee loans and investment projects related to housing; that when Home Guaranty acquired the asset backing or collateral of the loan, it disposed of it to recover its payment, replenish its funds, and maintain its financial stability; that the disposition was covered by Home Guaranty’s Office Order No. 66, or the Revised Disposition Guidelines; that they followed the Disposition Guidelines when they published the Notice of Sale twice; and that they sought the favorable opinion of the Office of the Government Corporate Counsel before executing the sale. They asserted that the sale was not grossly disadvantageous to the government because the purchase price exceeded the latest zonal valuation of P9,750.00 per square meter and also exceeded its Minimum Disposition Value under the Net Effective Return Method and the Severity of Loss Method. Corpuz, Sarona, and Adriano compared the sale price to other sales in the Manila Harbour Centre area, arguing that the purchase price was at par with or even higher than other sales, which allegedly sold properties for P6,072.44 per square meter in 2002, P6,000.00 per square meter in 2004, and P8,000.00 per square meter in 2007; that the property sold at P8,000.00 per square meter was bought for P16,450.00 per square meter in 1997; that the P20,000.00 per square meter offer cited by Canlas was merely an asking price still subject to negotiations; and that the EValue Appraisal Report was not sufficient basis because it was based on asking prices, interviews, or consensus which were unsubstantiated opinions unsupported by documents. They further pointed out that Canlas was an officer of R-II and Harbour Centre, which had been filing unfounded cases against Home Guaranty to prevent it from recovering its exposure. Javier and Delos Santos argued that Home Guaranty was fortunate enough to have sold the properties despite lack of interested buyers, Harbour Centre’s illegal stocking of iron and coal piles in the area, and R-II’s failure to deliver road concreting and complete electrical facilities; they also showed that Harbour Centre offered to purchase the property for only P12,000.00 per square meter. For their individual defenses, Bongolan argued that he was not a signatory to the sale; Cadano argued that he did not participate because he only joined Home Guaranty on September 1, 2008, after the sale’s execution on July 21, 2008; Corpuz, Sarona, and Adriano asserted that the sale was a corporate act and that they had no authority to bind Home Guaranty; and Javier and Delos Santos contended that although they signed the Deed of Sale, they did so pursuant to Home Guaranty’s Board of Directors’ Resolution No. 55-2006, which authorized them to sign the document in case of the absence of Home Guaranty’s President. The Ombudsman found no proof that the questioned transaction was disadvantageous to the government, that the Home Guaranty Officers were not directly responsible for the sale because it was the Board of Directors that was liable, that there was no evidence showing any other offer was made, and that the fair market value of the adjacent properties alleged by Canlas was merely speculative. The Court of Appeals likewise found that it was Home Guaranty’s Board of Directors which approved the sale, that two notices of sale were published with only Wong making an offer after the first notice and no similar offer after the second, that Home Guaranty referred the matter to the Office of the Government Corporate Counsel before approving the proposal, that the latest zonal value of the lots was only P9,750.00 per square meter and they were worth P11,668.49 per square meter using the Net Effective Return Method and P5,273.76 using the Severity of Loss Method, and that there was no evidence showing bad faith.

• Legal Standing: Canlas argued that he has legal standing to file the Petition because he is R-II’s Vice President for Legal and Harbour Centre’s Corporate Secretary; both corporations are holders of subordinated Participation Certificates and are the administrators or property managers of Harbour Centre pursuant to the Trust Agreement; both have an interest in the Smokey Mountain Asset Pool and are allegedly injured by the illegal sale; and he stands to be benefited or injured by the judgment.
• Appealability: Canlas contended that the Office of the Ombudsman’s October 12, 2010 Decision is still appealable because respondents are being accused of an offense penalized with dismissal from service, as grave misconduct is punishable by dismissal under the rules.
• Fair Market Value and Purchase Price: Canlas maintained that the purchase price of P384,715,800.00 was significantly below the properties’ fair market value, which allegedly amounted to around P506,205,000.00 to P694,224,000.00, based on the 1999 and 2001 purchase prices of adjacent properties, current sale offers, and the independent appraisal of EValue. He argued that the Bureau of Internal Revenue’s zonal valuation is not the proper basis to determine fair market value and that the government suffered damages in at least P121,489,200.00 to P309,508,200.00.
• Liability of Officers: Canlas argued that respondents’ lack of bad faith, malice, or profit is immaterial to prove a violation under Section 3(g) of Republic Act No. 3019; that respondents are guilty of misconduct as they admitted to directly participating in the implementation and execution of the sale on behalf of Home Guaranty despite knowing it was grossly disadvantageous to the government; that although a corporation has a separate and distinct personality from its stockholders, directors, and officers, those who participated in the commission of the corporation’s crime may be held liable; and that obedience to an officer’s superiors only extends to orders which are lawful or for a lawful purpose.

• Legal Standing: Respondents questioned Canlas’s standing to file the Petition, emphasizing that he is not a party to the sale and is just a mere witness to an alleged offense against the government; that only the involved government agency has standing to appeal the Ombudsman’s decision; that while Canlas belatedly admitted he is an officer of R-II and Harbour Centre, these corporations are not parties and Canlas did not present any authority from them; that these corporations are barred by res judicata from questioning the sale; and that the companies wherein Canlas is an officer did not participate in the public sale and cannot collaterally attack it.
• Appealability: Respondents argued that the decision of the Ombudsman is unappealable as exoneration is included under Section 27 of Republic Act No. 6770 and Rule III, Section 7 of Administrative Order No. 07, as amended by Administrative Order No. 17-03.
• Price Reasonableness: Respondents argued that the purchase price was reasonable and the contract was not grossly disadvantageous to the government; that the government did not suffer any loss; that the purchase price of P13,300.00 per square meter was way above the Bureau of Internal Revenue zonal valuation of P9,750.00; that it was higher than the Minimum Disposition Value under the Net Effective Return Method and Severity of Loss Method, the book value of P10,971.29 per square meter, and the market value determined by the City Assessor of Manila; and that it was higher or at least equal to the 2006 and 2009 purchase prices of other lots in the vicinity. They also maintained that Canlas compared the purchase price to 1999-2001 prices, a different time period; that the EValue appraisal was based on mere offers to sell and price listings; that Harbour Centre offered to buy the properties for only P12,000.00 per square meter; that there was a downward trend in property values due to the 1997 Asian financial crisis; that the properties had no other interested buyers; and that the properties were affected by illegal stocking of iron and coal piles, incomplete road concreting and electrical facilities, flooding due to poor drainage, insufficient documentation, litigation, illegal occupants, unpaid contractors and landowners, and other third-party claims.
• Authority and Discretion: Respondents asserted that the sale was within the powers of Home Guaranty and necessary to maintain its financial stability; that Home Guaranty had the authority to sell the properties to recover its guaranty exposure and had the discretion to determine whether the proposed purchase price was fair and reasonable; that courts cannot interfere with the discretion of other branches of government exercised within constitutional limits; that the sale enjoys the presumption of regularity; and that the acts of the Board of Directors are presumed regular as the directors were appointed by the President of the Philippines and act as the latter’s alter ego.
• Board Responsibility and Individual Defenses: Respondents argued that it is the Board of Directors that is responsible for the sale, as the power to approve the sale and manage Home Guaranty is with the Board; that the Board decided to sell the properties and fix the price; that Canlas failed to prove their participation by clear and convincing evidence; that Bongolan did not sign the document and merely executed policies and directives of the Board; that Cadano, Adriano, Corpuz, and Sarona did not participate in the contract’s execution despite their membership in the Executive Committee, were not part of the Board or in a position to bind Home Guaranty, and did not sign the document; that Cadano was not even appointed until September 1, 2008, after the execution of the contract; and that Javier and Delos Santos signed the Deed of Absolute Sale pursuant to a resolution and office order issued by the Board of Directors designating them as signatories in case of the absence of Home Guaranty’s President, not as an exercise of their own discretion.
• Grave Misconduct: Respondents insisted that they cannot be held liable for gross misconduct as Canlas failed to prove their bad faith.
• Harassment: Respondents claimed that the suit is a harassment suit at the instance of R-II, which has been filing cases to protect its interest in the asset pool and in the sold properties.

• Legal Standing: Whether Jerome R. Canlas has the legal standing to file the administrative case.
• Appealability: Whether the Office of the Ombudsman’s October 12, 2010 Decision dismissing the complaint is appealable.
• Purchase Price Reasonableness: Whether the purchase price for the sale is unreasonable.
• Proper Parties: Whether the Home Guaranty Corporation Officers are the proper parties charged with the offense.
• Grave Misconduct: Whether the Home Guaranty Corporation Officers can be administratively liable for grave misconduct.
• Grossly Disadvantageous Contract: Whether the contract of sale is grossly disadvantageous to the government.

• Legal Standing: No. Canlas lacked legal standing because he filed in his personal capacity, did not show that he stands to be benefited or injured by the judgment, and was not a party to the Trust Agreement or the Contract of Guaranty.
• Appealability: No. The Ombudsman’s decision exonerating respondents is final, executory, and unappealable under Section 27 of Republic Act No. 6770 and Rule III, Section 7 of Administrative Order No. 07, as amended; appealability depends on the penalty imposed in the decision itself, not on the penalty for the offense under the law.
• Purchase Price Reasonableness: No. The purchase price was not shown to be unreasonable; Canlas raised a question of fact not proper in a Rule 45 petition, and the Ombudsman’s factual findings supported by substantial evidence and affirmed by the Court of Appeals are conclusive.
• Proper Parties: The Board of Directors is primarily responsible for the sale, but officers may be proper parties if they knowingly entered into, facilitated, or participated in its execution; respondents were not shown to be solely responsible.
• Grave Misconduct: No. Grave misconduct requires bad faith, corruption, clear intent to violate the law, or flagrant disregard of an established rule; Canlas failed to prove these elements.
• Grossly Disadvantageous Contract: No. The elements of Section 3(g) of Republic Act No. 3019 were not established; respondents exercised due diligence and sound business judgment, and no gross and manifest disadvantage to the government was shown.

• Legal Standing: The Ombudsman may act on a complaint by any person under Article XI, Section 12 of the 1987 Constitution and Section 15(1) of Republic Act No. 6770, and Section 20(4) of Republic Act No. 6770 allows the Ombudsman, in its discretion, not to investigate if the complainant has no sufficient personal interest. However, not all may appeal a decision of the Ombudsman. In administrative cases under the Civil Service Law, an allowed appeal may only be brought by the party adversely affected by the decision. For administrative cases filed with the Ombudsman, Rule III, Section 7 of Administrative Order No. 07, as amended, provides that where the respondent is absolved of the charge, the decision shall be final, executory, and unappealable. Cobarde-Gamallo vs. Escandor identified unappealable decisions as those where the respondent is absolved, the penalty imposed is public censure or reprimand, suspension of not more than one month, or a fine equivalent to one month’s salary. Dagan vs. Office of the Ombudsman held that when the Ombudsman has exonerated the defendant, its decision is unappealable. Reyes, Jr. vs. Belisario explained that a complainant loses the right to appeal once the respondent becomes absolved. Since the Office of the Ombudsman’s October 12, 2010 Decision exonerated respondents, Canlas has no right to appeal. This absence of a right to appeal affects Canlas’s legal standing. Under Rule 3, Section 2 of the Rules of Court, a real party in interest is the party who stands to be benefited or injured by the judgment in the suit, or the party entitled to the avails of the suit. Baltazar vs. Mariano ruled that a party who files a criminal case before the Ombudsman but has no interest in it has no standing to pursue a petition before the Supreme Court. Canlas filed the administrative case in his personal capacity; there is no showing that he filed it as an authorized representative of R-II or Harbour Centre, and he only admitted his connection to these entities in his Consolidated Reply and Memorandum after respondents pointed out this circumstance. In his personal capacity, there is no showing that he stands to be benefited or injured by the finding of guilt of respondents. He is not a party to the Trust Agreement or the Contract of Guaranty, did not allege that he invested in the Project or was a holder of any Participation Certificate, and did not claim to own any of the properties in the asset pool or to have any claim in the properties covered by the contract of sale. Thus, Canlas has no standing to file the instant appeal.

• Appealability: Generally, a decision by the Ombudsman absolving respondents is unappealable. However, if it is shown that the Ombudsman acted with grave abuse of discretion, the complainant may file a Rule 65 Petition with the proper court. Dagan vs. Office of the Ombudsman stated that decisions of administrative or quasi-administrative agencies which are declared by law final and unappealable are subject to judicial review if they fail the test of arbitrariness, or upon proof of gross abuse of discretion, fraud, or error of law. The Ombudsman’s factual findings are conclusive when supported by substantial evidence and are accorded due respect and weight, especially when affirmed by the Court of Appeals. Grave abuse of discretion implies a capricious and whimsical exercise of judgment tantamount to lack of jurisdiction. It is incumbent upon Canlas to prove that the Ombudsman gravely abused her discretion, but Canlas did not argue that the Ombudsman committed grave abuse of discretion. What Canlas contends is that the Office of the Ombudsman’s October 12, 2010 Decision is still appealable because respondents are being accused of an offense penalized with dismissal from service. However, in determining whether the decision is appealable, the deciding factor is the penalty imposed by the Ombudsman in the decision itself, not the penalty imposed for the offense as provided under the law. Thus, even if grave misconduct is punishable by dismissal under the rules, it is the decision that determines whether it is appealable or unappealable to the higher courts. If the Ombudsman finds that respondents are not guilty and imposes no penalty, the decision is unappealable. Respondents were absolved by the Ombudsman from Canlas’s administrative charges, so this finding is unappealable.

• Purchase Price Reasonableness: Canlas is raising a question of fact, which is not proper in a Rule 45 Petition. Only questions of law may be raised in a petition for review under Rule 45. Pascual vs. Burgos held that this Court is not a trier of facts and will not entertain questions of fact as the factual findings of the appellate courts are final, binding, or conclusive on the parties and upon this Court when supported by substantial evidence. A question of fact requires this Court to review the truthfulness or falsity of the allegations of the parties, including assessment of the probative value of the evidence presented. Canlas is bringing into issue the correct fair market value of the properties, which requires examination and weighing of evidence. The exceptions to the rule do not apply because Canlas failed to prove, not merely assert, that any exception is present. The Ombudsman’s factual findings are binding and conclusive when supported by substantial evidence under Section 27 of Republic Act No. 6770. Ombudsman-Mindanao vs. Ibrahim held that the findings of fact of the Office of the Ombudsman are conclusive when supported by substantial evidence and are generally accorded great weight and respect, if not finality, by the courts due to its special knowledge and expertise. Office of the Ombudsman vs. Espina held that this rule applies even more so when the findings are affirmed by the Court of Appeals. In this case, Canlas failed to show that the Ombudsman’s findings, which were affirmed categorically by the Court of Appeals, were not supported by substantial evidence. The Ombudsman found that the properties were sold for a price higher than the Bureau of Internal Revenue zonal valuation and the minimum disposition values using the formulas for the Net Effective Return Method and the Severity of Loss Method under the Disposition Guidelines. The Ombudsman noted Canlas’s contention that adjacent properties were sold at higher prices a few years before the subject sale but did not find it persuasive because it did not show that the properties had the same features in terms of size, shape, frontage, and configuration. She also found that Canlas failed to present evidence that the properties could have been sold at a higher price considering that no other offer was made after being advertised for sale twice. Canlas failed to present any evidence to overturn these findings. Moreover, Home Guaranty is authorized to dispose of the sold properties under Section 5 of Republic Act No. 8763, and it has the prerogative to manage its declining cash flow through the disposition of its assets at the soonest and most profitable times given the circumstances. Courts cannot second-guess purely business decisions when the dilemma is clearly proven.

• Proper Parties: Home Guaranty is governed by its Board of Directors, which directs, controls, and manages its activities, and the decisions of the Board are arrived at by a majority vote of its members. Under Home Guaranty’s Charter, the Board of Directors has the power to direct the management, operations, and administration of the Corporation; to authorize expenditures; to formulate, revise, or adjust policies, plans, and projects; and to exercise such other powers as may be necessary and proper for the effective enforcement of the Act. Article 50 of the IRR of Republic Act No. 8763 provides that the Contract of Guaranty shall be executed subject to the standard terms and conditions as approved by the Board of Directors. As a government-owned and -controlled corporation, Home Guaranty is also governed by Republic Act No. 10149, and under Section 30 thereof, the Corporation Code applies suppletorily. Section 23 of the Corporation Code provides that the Board of Directors of a corporation exercises all the corporation’s powers, conducts all its business, and controls all its properties. Thus, it is Home Guaranty’s Board of Directors that is primarily responsible for the sale. Nonetheless, Canlas is correct that a corporation’s officers cannot hide behind the separate personality of the corporation, or that of its directors and stockholders, to avoid liability for offenses they participated in. Officers who supervise and manage the corporation’s affairs, such that they are responsible for the commission of the offense, cannot escape criminal or administrative liability by invoking the separate and distinct personality of the corporation. This is consistent with the principle that when the separate juridical personality of a corporation is used to defeat public convenience, justify wrong, protect fraud, or defend crime, the law will regard the corporation as an association of persons. In Republic Act No. 3019, the party penalized is the public officer who commits any of the corrupt practices enumerated under Section 3, and a public officer includes elective and appointive officials and employees, permanent or temporary, whether in the classified or unclassified or exempt service receiving compensation, even nominal, from the government. The offense charged under Section 3(g) is against public officers who, on behalf of the government, allegedly entered into a contract or transaction manifestly and grossly disadvantageous to the government, and it does not distinguish whether the public officer is a director or a mere employee. In Dans, Jr. vs. People, Imelda Marcos and Jose P. Dans, Jr. were found guilty of violation of Section 3(g) of Republic Act No. 3019 for signing disadvantageous contracts on behalf of the Light Rail Transit Authority and the Philippine General Hospital Foundation, Inc. In Office of the Ombudsman vs. De Guzman, the acting Postmaster General was found guilty of gross neglect of duty for executing a contract without securing the approval of the Board of Directors and without ensuring proper procurement. Clearly, whether or not a person is a director or an officer of a corporation, so long as he or she is the party responsible for the offense, he or she is the party that ought to be charged. Thus, while the Board of Directors is primarily responsible for the sale, respondents may still be held liable for offenses if they knowingly entered into, facilitated, or participated in their execution and ensured their implementation.

• Grave Misconduct: Misconduct is a transgression of some established and definite rule of action, more particularly, unlawful behavior or gross negligence by a public officer. To be considered grave misconduct, the transgression must have been committed in bad faith. Malice is a necessary element in the offense of grave misconduct. Office of the Ombudsman vs. Espina explained that misconduct generally means wrongful, improper, or unlawful conduct motivated by a premeditated, obstinate, or intentional purpose; it is intentional wrongdoing or deliberate violation of a rule of law or standard of behavior, and to constitute an administrative offense, the misconduct should relate to or be connected with the performance of the official functions and duties of a public officer. There are two types of misconduct: grave misconduct and simple misconduct. In grave misconduct, as distinguished from simple misconduct, the elements of corruption, clear intent to violate the law, or flagrant disregard of an established rule must be manifest. Without any of these elements, the transgression of an established rule is properly characterized as simple misconduct only. It is the element of corruption and a clear intent to flagrantly disregard an established rule or violate the law that characterizes grave misconduct. If there are no ill or selfish motives, the act cannot qualify as grave misconduct. These elements must be proven by substantial evidence. Canlas failed to prove respondents’ misconduct, let alone their bad faith. Canlas did not allege or substantiate any claim that respondents granted any favor to or relaxed any regulation for any person deliberately. He did not present any evidence that respondents committed any unlawful act intentionally, or any act with gross negligence. There is no showing that the sale was for their personal gain or for any pecuniary advantage, or that they entered into the sale to prejudice Home Guaranty. Considering that the sale was not tainted with bad faith, respondents cannot be held liable for grave misconduct.

• Grossly Disadvantageous Contract: Section 3(g) of Republic Act No. 3019 penalizes entering, on behalf of the Government, into any contract or transaction manifestly and grossly disadvantageous to the same, whether or not the public officer profited or will profit thereby. In Froilan vs. Sandiganbayan, this Court enumerated the elements of the offense as follows: (a) that the accused is a public officer; (b) that he or she entered into a contract or transaction on behalf of the government; and (c) that such contract or transaction is grossly and manifestly disadvantageous to the government. In the case at bar, respondents held a public bidding twice before it agreed to the bid price of Wong. The price falls within the amount that it is authorized to sell. They also sought the clearance of the Office of the Government Corporate Counsel before pushing through with the sale. Their acts show that they exercised due diligence and sound business judgment before executing the sale. There is likewise no showing that they violated any rule or process in granting the sale of the properties to Wong. And although it is not an element of the offense, the sale does not seem to be tainted with any partiality, bad faith, or negligence. The law requires that the contract must be grossly and manifestly disadvantageous to the government or that it be entered into with malice. It does not find guilt on the mere entering of a contract by mistake. Thus, it cannot be said that the contract was grossly disadvantageous to the government.

• Finality and Unappealability of Ombudsman Exoneration — Under Section 27 of Republic Act No. 6770 and Rule III, Section 7 of Administrative Order No. 07, as amended, where the respondent is absolved of the charge, the decision shall be final, executory, and unappealable. Appealability is determined by the penalty imposed by the Ombudsman in the decision itself, not by the penalty imposed for the offense under the law. The Court applied this doctrine because the Ombudsman exonerated respondents, thereby barring Canlas’s appeal.
• Legal Standing and Real Party in Interest — Rule 3, Section 2 of the Rules of Court defines a real party in interest as the party who stands to be benefited or injured by the judgment in the suit, or the party entitled to the avails of the suit. While the Ombudsman may act on a complaint by any person, a complainant who does not stand to be benefited or injured by the judgment lacks legal standing to appeal an exoneration. The Court applied this doctrine because Canlas filed in his personal capacity, was not a party to the Trust Agreement or Contract of Guaranty, and showed no personal benefit or injury.
• Ombudsman’s Broad Power to Investigate — Article XI, Section 12 of the 1987 Constitution and Section 15(1) of Republic Act No. 6770 empower the Ombudsman to investigate and prosecute on its own or on complaint by any person any act or omission of any public officer or employee, office, or agency when such act or omission appears illegal, unjust, improper, or inefficient. Section 20(4) of Republic Act No. 6770 allows the Ombudsman, in its discretion, not to investigate if the complainant has no sufficient personal interest. The Court applied this doctrine to distinguish the Ombudsman’s power to entertain Canlas’s complaint from Canlas’s lack of standing to appeal the exoneration.
• Conclusiveness of Ombudsman Factual Findings — Findings of fact by the Office of the Ombudsman, when supported by substantial evidence, are conclusive under Section 27 of Republic Act No. 6770, and are accorded great weight and respect, especially when affirmed by the Court of Appeals. The Court applied this doctrine to decline re-examination of the fair market value and reasonableness of the purchase price.
• Grave Misconduct Requires Bad Faith — Grave misconduct requires the elements of corruption, clear intent to violate the law, or flagrant disregard of an established rule to be manifest; bad faith or malice is a necessary element. Without these elements, the transgression is properly characterized as simple misconduct only. The Court applied this doctrine because Canlas failed to prove bad faith, personal gain, or prejudice to Home Guaranty.
• Elements of Section 3(g) of Republic Act No. 3019 — The elements are: (a) the accused is a public officer; (b) he or she entered into a contract or transaction on behalf of the government; and (c) such contract or transaction is grossly and manifestly disadvantageous to the government. The Court applied this doctrine and found no gross and manifest disadvantage because respondents exercised due diligence and sound business judgment.
• Corporate Separate Personality Cannot Shield Officers — Officers who supervise and manage a corporation’s affairs, such that they are responsible for the commission of an offense, cannot escape criminal or administrative liability by invoking the separate and distinct personality of the corporation. When the separate juridical personality of a corporation is used to defeat public convenience, justify wrong, protect fraud, or defend crime, the law will regard the corporation as an association of persons. The Court applied this doctrine to hold that while the Board of Directors is primarily responsible for the sale, officers may still be liable if they knowingly participated in the offense.
• Business Judgment and Non-Interference — Courts cannot second-guess purely business decisions when the dilemma is clearly proven. Home Guaranty, as a government-owned and -controlled corporation, has the prerogative to manage its declining cash flow through the disposition of its assets at the soonest and most profitable times given the circumstances. The Court applied this doctrine to uphold the sale as within Home Guaranty’s authority and discretion.

• "The exoneration of public officers by the Ombudsman in a charge alleging grave misconduct and a violation of Republic Act No. 3019, Section 3(g) is generally unappealable. Furthermore, any appeal to the Supreme Court from such a case cannot be initiated by one who does not stand to be benefited or injured by the results of the suit." — This opening passage states the core ruling of the case: the Ombudsman’s exoneration is generally unappealable, and only a party who stands to be benefited or injured may appeal.
• "Thus, the Ombudsman's decision may not be appealed if it dismisses the complaint or imposes the penalty of public censure or reprimand, suspension of not more than one (1) month, or a fine equivalent to one (1)-month salary. Otherwise, it may be appealed to the Court of Appeals under the requirements and conditions set forth in Rule 43 of the Rules of Court." — This passage states the controlling rule on the appealability of Ombudsman decisions in administrative cases and explains why the dismissal of the complaint was unappealable.
• "In grave misconduct, as distinguished from simple misconduct, the elements of corruption, clear intent to violate the law, or flagrant disregard of an established rule must be manifest. Without any of these elements, the transgression of an established rule is properly characterized as simple misconduct only." — This passage defines the canonical distinction between grave and simple misconduct and supports the ruling that respondents could not be liable for grave misconduct absent bad faith.
• "The law requires that the contract must be grossly and manifestly disadvantageous to the government or that it be entered into with malice. It does not find guilt on the mere entering of a contract by mistake." — This passage articulates the standard under Section 3(g) of Republic Act No. 3019 and explains why the sale was not grossly disadvantageous to the government.

• Bueno vs. Office of the Ombudsman, 743 Phil. 313 (2014) — Explained that Section 20(4) of Republic Act No. 6770 is not a mandatory bar to investigation; dismissal on the ground of lack of personal interest is discretionary on the part of the Ombudsman, and the Ombudsman may act on a complaint by any person.
• Cobarde-Gamallo vs. Escandor, G.R. Nos. 184464 & 184469, June 21, 2017 — Identified two types of Ombudsman decisions in administrative cases: unappealable decisions (absolution, public censure or reprimand, suspension of not more than one month, or fine equivalent to one month’s salary) and appealable decisions falling outside the enumeration.
• Dagan vs. Office of the Ombudsman, 721 Phil. 400 (2013) — Held that when the Ombudsman has exonerated the defendant, its decision is final and unappealable; also discussed that decisions declared final and unappealable may be reviewed via Rule 65 upon proof of grave abuse of discretion.
• Reyes, Jr. vs. Belisario, 612 Phil. 936 (2009) — Explained that a complainant loses the right to appeal where the Ombudsman has exonerated the respondent; only the respondent is granted the right to appeal if found liable and the penalty imposed is higher than the specified light penalties.
• Baltazar vs. Mariano, 539 Phil. 131 (2006) — Ruled that a party who files a criminal case before the Ombudsman but has no interest in it has no standing to pursue a petition before the Supreme Court; applied the real party in interest requirement.
• Pascual vs. Burgos, 776 Phil. 167 (2016) — Held that only questions of law should be raised in petitions under Rule 45; this Court is not a trier of facts and will not entertain questions of fact when the factual findings of the appellate courts are supported by substantial evidence.
• Ombudsman-Mindanao vs. Ibrahim, G.R. No. 211290, June 1, 2016, 792 SCRA 94 — Held that the findings of fact of the Office of the Ombudsman are conclusive when supported by substantial evidence and are generally accorded great weight and respect, if not finality, by the courts.
• Office of the Ombudsman vs. Espina, G.R. No. 213500, March 15, 2017 — Held that factual findings of the Ombudsman are conclusive when supported by substantial evidence, especially when affirmed by the Court of Appeals; also defined grave misconduct and its elements.
• Froilan vs. Sandiganbayan, 385 Phil. 32 (2000) — Enumerated the elements of the offense under Section 3(g) of Republic Act No. 3019: the accused is a public officer; he or she entered into a contract or transaction on behalf of the government; and the contract or transaction is grossly and manifestly disadvantageous to the government.
• Dans, Jr. vs. People, 349 Phil. 434 (1998) — Found public officers guilty of violation of Section 3(g) of Republic Act No. 3019 for signing disadvantageous contracts on behalf of government entities, supporting the principle that officers may be liable for corrupt practices.
• Office of the Ombudsman vs. De Guzman, G.R. No. 197886, October 4, 2017 — Found the acting Postmaster General guilty of gross neglect of duty for executing a contract without securing the approval of the Board of Directors and without ensuring proper procurement at the most advantageous price.
• Granada vs. People, G.R. Nos. 184092, 186084, 186272, 186488 & 186570, February 22, 2017 — Stated that when the separate juridical personality of a corporation is used to defeat public convenience, justify wrong, protect fraud, or defend crime, the law will regard the corporation as an association of persons.
• Uy vs. Sandiganbayan, 407 Phil. 154 (2001) — Described the Philippine Ombudsman as protector of the people, armed with the power to prosecute erring public officers and employees, with broad powers to implement its own actions.
• Office of the Ombudsman vs. Faller, G.R. No. 215994, June 6, 2016, 792 SCRA 361 — Defined misconduct and held that grave misconduct requires bad faith; the elements must be proven by substantial evidence.
• Landrito vs. Civil Service Commission, 295 Phil. 638 (1993) — Held that it is the element of corruption and a clear intent to flagrantly disregard an established rule or violate the law that characterizes grave misconduct.
• Faeldonea vs. Civil Service Commission, 435 Phil. 410 (2002) — Held that if there are no ill or selfish motives, the act cannot qualify as grave misconduct.
• Macalalag vs. Ombudsman, 468 Phil. 918 (2004) — Held that the right to appeal is a mere statutory privilege and may be exercised only in the manner prescribed by law; there must be a law expressly granting such right.
• Miro vs. Vda. de Erederos, 721 Phil. 772 (2013) — Cited for the rule that questions of fact are not proper in a Rule 45 petition and that this Court is not a trier of facts.

• Article XI, Section 12, 1987 Constitution — Provides that the Ombudsman and his Deputies, as protectors of the people, shall act promptly on complaints filed in any form or manner against public officials or employees of the Government, or any subdivision, agency, or instrumentality thereof, including government-owned or -controlled corporations. Applied to allow any person to file a complaint before the Ombudsman.
• Article XI, Section 1, 1987 Constitution — Provides that public office is a public trust and public officers and employees must at all times be accountable to the people. Cited as the State interest upheld by the Ombudsman’s role.
• Section 15(1), Republic Act No. 6770 — Empowers the Office of the Ombudsman to investigate and prosecute on its own or on complaint by any person any act or omission of any public officer or employee, office, or agency when such act or omission appears illegal, unjust, improper, or inefficient. Applied to allow the Ombudsman to act on Canlas’s complaint.
• Section 19, Republic Act No. 6770 — Provides that the Ombudsman shall act on all complaints relating to acts or omissions that are contrary to law or regulation, unreasonable, unfair, oppressive, discriminatory, inconsistent with the general course of an agency’s functions, proceed from a mistake of law or arbitrary ascertainment of facts, are in the exercise of discretionary powers but for an improper purpose, or are otherwise irregular, immoral, or devoid of justification. Applied to administrative complaints.
• Section 20, Republic Act No. 6770 — Provides exceptions where the Office of the Ombudsman may not conduct an investigation, including when the complainant has no sufficient personal interest in the subject matter of the grievance. The word “may” signifies that dismissal on this ground is permissive and discretionary, not imperative.
• Section 27, Republic Act No. 6770 — Provides that findings of fact by the Office of the Ombudsman when supported by substantial evidence are conclusive, and that any order, directive, or decision imposing public censure or reprimand, suspension of not more than one month’s salary shall be final and unappealable. Applied to hold that the exoneration of respondents was unappealable.
• Rule III, Section 7, Administrative Order No. 07, as amended by Administrative Order No. 17-03 — Provides that where the respondent is absolved of the charge, the decision shall be final, executory, and unappealable; in all other cases, the decision may be appealed to the Court of Appeals under Rule 43. Applied to bar Canlas’s appeal.
• Rule 3, Section 2, Rules of Court — Defines a real party in interest as the party who stands to be benefited or injured by the judgment in the suit, or the party entitled to the avails of the suit. Applied to deny Canlas legal standing.
• Rule 45, Rules of Court — Governs petitions for review on certiorari, which may raise only questions of law. Applied to reject Canlas’s factual challenge to the fair market value and purchase price.
• Rule 43, Rules of Court — Governs appeals from the Ombudsman to the Court of Appeals in appealable cases. Mentioned as the proper mode of appeal for decisions falling outside the unappealable enumeration, but not available because respondents were exonerated.
• Section 5, Republic Act No. 8763 — Sets out Home Guaranty’s corporate powers and functions, including the power to guarantee payment of mortgages, loans, and other credit facilities and receivables, and to acquire, hold, manage, administer, develop, lease, mortgage, exchange, sell, transfer, or otherwise dispose of real and personal property as may be necessary to carry out its purposes. Applied to uphold Home Guaranty’s authority to sell the properties.
• Section 8, Republic Act No. 8763 — Provides that Home Guaranty is governed by its Board of Directors, which directs, controls, and manages its activities. Applied to hold that the Board of Directors is primarily responsible for the sale.
• Section 9, Republic Act No. 8763 — Sets out the powers, functions, and duties of the Board of Directors, including directing management, operations, and administration; authorizing expenditures; formulating, revising, or adjusting policies, plans, and projects; and exercising other necessary powers. Applied to support the Board’s authority over the sale.
• Section 30, Republic Act No. 10149 — Provides that the Corporation Code and the charters of relevant government-owned or -controlled corporations apply suppletorily to GOCCs insofar as they are not inconsistent with the Act. Applied to make the Corporation Code applicable to Home Guaranty.
• Section 23, Corporation Code — Provides that the Board of Directors of a corporation exercises all the corporation’s powers, conducts all its business, and controls all its properties. Applied to hold that Home Guaranty’s Board of Directors is primarily responsible for the sale.
• Section 3(g), Republic Act No. 3019 — Penalizes entering, on behalf of the Government, into any contract or transaction manifestly and grossly disadvantageous to the same, whether or not the public officer profited or will profit thereby. Applied and found not violated because no gross and manifest disadvantage was shown.
• Section 2(b), Republic Act No. 3019 — Defines a public officer to include elective and appointive officials and employees, permanent or temporary, whether in the classified or unclassified or exempt service receiving compensation, even nominal, from the government. Applied to clarify that both directors and officers may be charged if responsible.
• Article 50, IRR of Republic Act No. 8763 — Provides that the Contract of Guaranty shall be executed subject to the standard terms and conditions as approved by the Board of Directors of the Corporation. Applied to support the Board’s authority over the transaction.
• Sections 37 and 39, Presidential Decree No. 807 — Provide for disciplinary jurisdiction and appeals by the party adversely affected by the decision. Cited to support the rule that only the party adversely affected may appeal in administrative cases.
• Section 46, Revised Uniform Rules on Administrative Cases in the Civil Service, CSC Resolution No. 1101502 — Classifies grave misconduct as a grave offense punishable by dismissal from the service. Cited by Canlas to argue that the Ombudsman’s decision was appealable, but the Court held that appealability depends on the penalty imposed in the decision itself.

Velasco, Jr. (Chairperson), Bersamin, Martires, and Gesmundo, JJ., concur.