Melendres vs. Ombudsman Gutierrez

A public officer who transfers government funds without specific board authorization and prior to formalizing an investment contract commits simple misconduct, not grave misconduct, where there is no showing of corruption or willful intent to violate the law, but merely a serious lapse of judgment; grave misconduct requires the additional elements of corruption or willful intent to disregard established rules.

The Department of Health and Department of Budget and Management approved the realignment of P73,258,377.00 for the rehabilitation of the Lung Center of the Philippines (LCP), covered by Special Allotment Release Order No. BMB-B-00-0192. Fernando Melendres, then Executive Director of the LCP, was entrusted with the implementation and administration of these funds.

• On February 4, 2002, Melendres requested the Office of the Government Corporate Counsel (OGCC) to review and evaluate a supposed Investment Management Agreement (IMA) with Philippine Veterans Bank (PVB).
• On February 13, 2002, even before receiving the OGCC response, Melendres transmitted a manager's check in the amount of P73,258,377.00 to PVB with instructions to place the same under an IMA for 30 days.
• On May 3, 2002, the OGCC replied advising Melendres to submit a Board Resolution containing specific authority to place the investment, the amount authorized, and the person authorized to enter into the contract, and to verify with the Bangko Sentral ng Pilipinas whether PVB was authorized to engage in investment management business.
• Despite the OGCC letter, Melendres, along with Albilio Cano and Angeline Rojas, continued to authorize the roll over of the funds placed in PVB.
• On June 5, 2002, Ma. Milagros Campomanes-Yuhico requested Melendres to return the signed IMA and submit certain documents, prompting Melendres to refer the matter to the Cash Division with a note to transfer deposits to DBP PHC instead due to the inability of the Board of Trustees to convene.
• The complaint alleged that Melendres and other officials caused undue injury to the government by misappropriating funds for private investment purposes and attempting to hide the anomaly by failing to disclose the invested amount in the Balance Sheet of LCP as of March 31, 2002.
• Melendres claimed that the placement was merely a special savings deposit with an interest yield of 7.25% for thirty days, authorized under the LCP Board of Trustees' Resolution dated January 30, 2002, and that no IMA was signed or formalized.
• The Commission on Audit found no irregularity on the disposition of the subject fund, noting it was placed under a special deposit account with PVB offering a higher interest rate pursuant to the Board Resolution, and was later utilized for the rehabilitation of the LCP building.

• The Ombudsman's decision is not supported by substantial evidence.
• The placement of funds through an IMA was authorized by the Board of Trustees' Resolution dated January 30, 2002.
• The Government Corporate Counsel did not state in its opinion that the IMA is grossly disadvantageous to the government.
• There was no IMA signed by Melendres as the deposit was merely an interest-yielding time deposit pending utilization of the funds for LCP rehabilitation.
• Melendres was validly clothed with authority under the January 30, 2002 Board Resolution to enter into savings deposits, and the deposit made with PVB was in consonance with said resolution.
• There was no grave misconduct, or even simple misconduct, to warrant the severe penalty of dismissal from service.

• Procedural Issues:
  • Whether the Court of Appeals correctly dismissed the petition for failure to comply with its April 6, 2010 Resolution requiring submission of documents.
• Substantive Issues:
  • Whether Melendres is guilty of grave misconduct for transferring LCP funds to PVB.

• Procedural:
  • The Court of Appeals correctly dismissed the appeal. The right to appeal is a statutory privilege, not a natural right or part of due process, and must be exercised strictly in accordance with procedural rules. Section 7 of Rule 43 provides that failure to comply with requirements regarding the contents of and documents accompanying the petition is sufficient ground for dismissal. Melendres failed to submit the required documents despite being granted an extension, resulting in the forfeiture of his right to appeal. While the Court has relaxed procedural rules to afford litigants their day in court, such liberal application is the exception and requires persuasive reasons or meritorious cases. Melendres' counsel's negligence in failing to institute a system of monitoring cases does not justify relaxation of the rules. However, in the interest of substantial justice, the Supreme Court deemed it wise to overlook procedural technicalities to rule on the substantive issue.
• Substantive:
  • Melendres is liable for simple misconduct, not grave misconduct. Grave misconduct requires the additional elements of corruption or willful intent to violate the law or disregard of established rules; otherwise, the misconduct is only simple. The evidence does not establish that the placement of funds was attended with corrupt motives or willful disregard of rules: Melendres sought the legal opinion of the OGCC prior to the transaction; he was authorized under the January 30, 2002 Board Resolution to invest funds in banks offering high yields; and there was no intent to conceal as the funds were properly reported under "Other Assets, Miscellaneous & Deferred Charges" per the Government Accounting and Auditing Manual. The Commission on Audit found no irregularity and confirmed the funds were utilized for LCP rehabilitation. However, Melendres transferred the funds without a formal investment contract and without specific authority from the Board of Trustees for the specific amount of P73,258,377.00, constituting a serious lapse of judgment sufficient to hold him liable for simple misconduct. The penalty for simple misconduct for a first offense is suspension from one month and one day to six months. Applying the medium penalty, Melendres is sentenced to three months suspension without pay.

• Distinction between Grave and Simple Misconduct — Grave misconduct involves corruption or willful intent to violate the law or disregard established rules, while simple misconduct consists of wrongful, improper, or unlawful conduct without such elements. The Court applied this distinction to downgrade the finding from grave to simple misconduct due to the absence of corrupt motives or willful disregard.
• Right to Appeal as Statutory Privilege — The right to appeal is not a natural right or part of due process but a statutory privilege that must be exercised strictly in accordance with law. The Court applied this principle to uphold the CA's dismissal for non-compliance with procedural requirements, while noting that relaxation of rules is permissible only in meritorious cases to prevent injustice.
• Substantial Evidence — Defined as such amount of relevant evidence that a reasonable mind might accept as adequate to support a conclusion. The Court applied this standard to determine that the evidence did not support a finding of corruption necessary for grave misconduct.

• "The right to appeal is not a natural right or a part of due process; it is merely a statutory privilege, and may be exercised only in the manner and in accordance with the provisions of law."
• "Misconduct generally means wrongful, improper or unlawful conduct, motivated by premeditated, obstinate or intentional purpose."
• "In order to be considered grave misconduct, it must be shown that the acts involve the additional elements of corruption or willful intent to violate the law or disregard of established rules; otherwise, the misconduct is only simple."
• "Substantial evidence is such amount of relevant evidence that a reasonable mind might accept as adequate to support a conclusion."
• "Corruption, as an element of grave misconduct, consists in the act of an official or fiduciary person who unlawfully and wrongfully uses his station or character to procure some benefit for himself or for another person, contrary to duty and the rights of others."

• Boardwalk Business Ventures, Inc. v. Elvira A. Villareal (deceased), et al. — Cited for the principle that the right to appeal is a statutory privilege, not a natural right or part of due process.
• Spouses Espejo v. Ito — Cited for the rule that the perfection of an appeal in the manner and within the period permitted by law is mandatory and jurisdictional.
• Civil Service Commission v. Almojuela — Cited for the distinction between grave and simple misconduct, specifically that grave misconduct requires corruption or willful intent to violate the law.
• Atty. Gonzales v. Serrano — Cited for the definition of corruption as an element of grave misconduct.
• Seville v. Commission On Audit — Cited for the penalty range for simple misconduct (suspension for one month and one day to six months for the first offense).

• Rule 43, Sections 4, 5, 6, and 7 of the Rules of Court — Governs appeals from quasi-judicial agencies to the Court of Appeals, including requirements for period of appeal, contents of petition, and effect of failure to comply with requirements. Section 7 specifically provides that failure to comply with requirements regarding payment of fees, proof of service, and contents/documents is sufficient ground for dismissal.
• Section 52, Rule IV, Uniform Rules on Administrative Cases (CSC Resolution No. 991936) — Cited by the Ombudsman as basis for the penalty of dismissal for grave misconduct.
• Section 49(b), Rule 10 of the Revised Rules on Administrative Cases in the Civil Service — Applied by the Supreme Court as basis for imposing the penalty of three months suspension for simple misconduct.
• Republic Act No. 3518, as amended by Republic Act No. 7169 — Mentioned in the OGCC opinion regarding PVB's status as a government depository.
• BSP Circular No. 110, Series of 1996 — Referenced regarding regulations on investment management business and the requirement to transact with the Trust Department of banks.