Morales vs. People of the Philippines

Employees and officers of water districts are public officers covered by the Civil Service Law and subject to the Anti-Graft and Corrupt Practices Act, water districts being government-owned or controlled corporations with original charters created by special law (PD 198). A sale of government property at a price manifestly below its book value, without public bidding and without board authorization, is grossly and manifestly disadvantageous to the government within the meaning of Section 3(g) of RA 3019.

The Olongapo City Water District (OCWD) is a water district created pursuant to Presidential Decree No. 198, a special law applicable only to water districts. Petitioners Eulogio Morales and Wilma Hallare were the general manager and finance officer, respectively, of OCWD, while petitioner Rosalia Morales was the wife of Eulogio. The case involves the application of the Anti-Graft and Corrupt Practices Act (RA 3019) to transactions involving water district property. A controlling question concerned the legal status of water districts—whether they are government-owned or controlled corporations whose employees are public officers—which determines both the applicability of the Anti-Graft Law and the jurisdiction of the Sandiganbayan. The jurisprudence on this point had shifted over time, from Baguio Water District vs. Trajano (1984, holding water district employees covered by Civil Service Law), to Metro Iloilo Water District vs. NLRC (1990, reversing that position), and back to Davao City Water District vs. Civil Service Commission (1991, reverting to the Baguio Water ruling).

Petitioners Eulogio Morales, Wilma Hallare, and Rosalia Morales were charged with violation of Section 3(g) in relation to Section 3(h) of the Anti-Graft and Corrupt Practices Act (RA 3019). Eulogio was the general manager of the Olongapo City Water District (OCWD), a government agency, and Hallare was its finance officer; Rosalia was Eulogio's wife. The Information alleged that on or about August 20, 1986, Eulogio, conspiring with Hallare and Rosalia, sold a 1979 Model Gallant Sigma car with an assessed value of ₱75,000 to Hallare for only ₱4,000, an amount manifestly and grossly disadvantageous to the water district, and that on the same date Hallare sold the same vehicle to Rosalia, showing that Eulogio and Hallare had become directly or indirectly pecuniarily interested in the transaction.

At the pretrial, the parties stipulated that on August 20, 1986, Eulogio was the general manager of OCWD; that OCWD was the registered owner of the subject 1979 Galant Sigma with Motor No. 211-08-206; that Hallare was the finance officer; that Rosalia was Eulogio's wife; and that one of the issues was whether OCWD was a government-owned and controlled corporation.

According to the prosecution, Eulogio, in his capacity as general manager, sold the car to Hallare for ₱4,000 without a board resolution authorizing the sale. The car was in good running condition, with a functioning air-conditioning unit, a car stereo and tape deck, and a net book value of ₱16,105. Hallare sold the car to Rosalia on the same date, and the registration was transferred to Rosalia's name. An audit examination conducted by the Local Utilities Water Administration (LUWA) from July 13 to August 7, 1987 found the sale irregular: the asset was sold at a relatively low price below its net book value; no attempts were made to obtain better prices in a formal auction; the supporting bids were dated ten months prior to the sale and were submitted by individuals close to the water district; there was no board resolution declaring the item unserviceable; no extraordinary loss was recognized; and the existence of two Deeds of Absolute Sale executed on the same date proved the sale was simulated, with the interested party being the district general manager. The transaction came to the knowledge of Noli T. Zapanta, manager of the Sales Department, in June 1989, who filed a complaint with the Fiscal's Office of Olongapo City.

The defense presented a different version. Hallare allegedly submitted her bid in October 1985 and learned in December 1985 that her offer of ₱4,000 for the junk car was the highest. She paid ₱3,000 initially and the balance through salary deduction, fully paying her bid price on December 10, 1985, as evidenced by Cash Receipt No. 11148. She did not ask for the immediate execution of the deed of sale because her intention was to dismantle the car and sell the usable parts, and the practice of OCWD was not to execute deeds of sale on junk materials. She pulled out the car and spent ₱2,000 to ₱3,000 more on repairs, but the car remained unserviceable. She later confided to Rosalia about her financial problem and borrowed ₱4,000 from her, payable on or before August 15, 1986. When her prospective buyer backed out and her debt remained unpaid, she told Rosalia, "Ma'am sa iyo na yung kotse," and caused the preparation of a deed of sale in Rosalia's favor, but Rosalia did not accept it and told Hallare to keep it and pay the debt later. Hallare claimed that at the time, OCWD had a policy allowing employees to buy junk materials ready for disposal, but this policy was stopped on January 17, 1986, when Board Resolution No. 03-86 was passed prohibiting employees from engaging in business with OCWD. She submitted her bid and paid the first partial payment before the passage of that resolution.

The Sandiganbayan convicted the petitioners, ruling that jurisdiction was determined by the law in effect at the time of the commencement of the action, and that Davao City Water District vs. Civil Service Commission (1991) classified water districts as government-owned or controlled corporations and their officials as public officers. The anti-graft court held that the sale for ₱4,000 was grossly and manifestly disadvantageous because the book value was ₱16,088, and that Eulogio and Hallare intervened in their official capacities, with Eulogio's pecuniary interest evident when his wife bought the car from Hallare. The Sandiganbayan also noted that the introduction of two additional Deeds of Sale dated October 6, 1986 and December 9, 1987 only highlighted the irregularity of the sale and petitioners' propensity to lie.

• Lack of Jurisdiction: Petitioners argued that the Sandiganbayan had no jurisdiction because on August 20, 1986, the date of the alleged crime, the prevailing ruling was Metro Iloilo Water District vs. NLRC, which held that water districts were private corporations and their employees were not subject to the Civil Service Law. They contended that the jurisdiction of a court in criminal cases should be determined by the law in force at the time of the commission of the crime charged.

• Ex Post Facto Law: Petitioners argued that their conviction was contrary to the constitutional prohibition against ex post facto laws and the guarantee of equal protection of the laws, because applying the Davao City Water ruling to acts committed in 1986 would make the law retroactive.

• Insufficiency of Evidence: Petitioners contended that the sale price had not been grossly or manifestly disadvantageous to the government because the subject car was already junk and no longer in good running condition. They also argued that the sale was perfected on December 10, 1985, before the effectivity of Board Resolution No. 03-86, and that Eulogio had authority to dispose of vehicles and equipment in the junkyard that were already unusable and unserviceable.

• Jurisdiction Properly Vested: The prosecution maintained that the Sandiganbayan had jurisdiction, as the Information was filed in 1992 when Davao City Water District vs. Civil Service Commission was the prevailing ruling, and that water district employees are public officers covered by the Civil Service Law.

• Sale Grossly Disadvantageous: The prosecution argued that the sale of the car for ₱4,000 when its book value was ₱16,088 was grossly and manifestly disadvantageous to the government, and that the second sale to the general manager's wife on the same date showed the simulated nature of the transaction and the prohibited financial interest of Eulogio Morales.

• Jurisdiction of the Sandiganbayan: Whether the Sandiganbayan had jurisdiction over the case, considering that water district employees were allegedly not public officers at the time of the commission of the crime.

• Equal Application of the Law: Whether petitioners were entitled to acquittal because the Sandiganbayan had dismissed a similar case (People vs. Lizaso) on the ground of lack of jurisdiction.

• Sufficiency of Evidence: Whether the sale of the subject car for ₱4,000 was grossly and manifestly disadvantageous to the government, and whether petitioners had financial or pecuniary interest in the transaction.

• Jurisdiction of the Sandiganbayan: Yes. The Sandiganbayan had jurisdiction. The jurisdiction of a court to try a criminal case is determined by the law in force at the time of the institution of the action, not at the time of the commission of the crime. The Information was filed in 1992 when Davao City Water District vs. Civil Service Commission was the prevailing ruling, which held that water districts are government-owned or controlled corporations and their employees are covered by the Civil Service Law.

• Equal Application of the Law: No. The cited Lizaso case is distinguishable because it concerned acts committed during the effectivity of the Metro Iloilo Water ruling, whereas the case at bar concerns acts committed during the effectivity of the Baguio Water District ruling, which held that water district employees were covered by the Civil Service Law.

• Sufficiency of Evidence: Yes. The elements of violation of Section 3(g) of RA 3019 were established: (1) the offender is a public officer, (2) who enters into a contract or transaction on behalf of the government, and (3) the contract or transaction is grossly and manifestly disadvantageous to the government. The sale of the car for ₱4,000 when its book value was ₱16,088, without bidding or auction and without board authorization, was grossly and manifestly disadvantageous. The second sale to the general manager's wife constituted a prohibited financial interest under Section 3(h).

• Jurisdiction of the Sandiganbayan: The Court reviewed the relevant jurisprudence on the status of water districts. Baguio Water District vs. Trajano (February 20, 1984) ruled that employees and officers of water districts were covered by the Civil Service Law. This was echoed in Tanjay Water District vs. Gabaton (April 17, 1989). The ruling in Baguio Water was reversed in Metro Iloilo Water District vs. NLRC (May 16, 1990). In 1991, however, the Court in Davao City Water District vs. Civil Service Commission returned to the ruling in Baguio Water. The prevailing jurisprudence when the crime was committed in 1986 was Baguio Water, not Metro Iloilo Water, which was promulgated in 1990. The Court rejected the argument that Metro Iloilo should apply because criminal laws should be given prospective application. The Anti-Graft and Corrupt Practices Law was passed on August 17, 1960, so petitioners were not accused of a crime that was not punishable at the time it was committed. Metro Iloilo would have been applicable in accordance with the rule allowing retroactivity of laws favorable to the accused, but this ruling was subsequently abandoned in Davao City Water. The clear import of that reversion was to place employees of water districts under the Anti-Graft Law and within the jurisdiction of the Sandiganbayan. Davao City Water holds that water districts fall under the general term "government-owned or -controlled corporations with original charters" or those created by a special law and not by the Corporation Code. PD 198 is a special law applicable only to water districts; it is the very law that gives a water district juridical personality, defines its primary purpose, and its basic organizational setup. Section 25 of PD 198, which exempted employees of water districts from the Civil Service Law, was repealed by PD No. 1479, effective June 11, 1978. The Court also cited the well-settled rule that the jurisdiction of a court to try a criminal case is determined by the law in force at the time of the institution of the action, not at the time of the commission of the crime. The Information was filed in 1992 when Davao City Water was the prevailing ruling. The Sandiganbayan exercises exclusive original jurisdiction in all cases involving violations of RA 3019, and private individuals charged as co-principals, accomplices, or accessories together with public officers shall be tried jointly with them.

• Equal Application of the Law: The Court rejected the argument based on People vs. Lizaso, Criminal Case 23506, in which the Sandiganbayan dismissed a similar case for lack of jurisdiction. The quoted Resolution in Lizaso concerned acts committed during the effectivity of the Metro Iloilo Water ruling. The case at bar, however, concerns acts committed during the effectivity of the Baguio Water District ruling. The distinction is therefore clear: Lizaso involved acts committed when the prevailing doctrine was that water district employees were not public officers, while the present case involves acts committed when the prevailing doctrine was that they were public officers.

• Sufficiency of Evidence: The Court applied the elements of the crime of violating Section 3(g) of RA 3019: (1) the offender is a public officer, (2) who enters into a contract or transaction on behalf of the government, and (3) the contract or transaction is grossly and manifestly disadvantageous to the government. "Manifest" means "obvious to the understanding, evident to the mind" and is synonymous with "open, clear, visible, unmistakable, indubitable, evident and self-evident." "Gross" means "flagrant, shameful, such conduct as is not to be excused." The Court found that Eulogio and Hallare were public officers, being the general manager and finance officer of OCWD. The subject car was sold to Hallare by Eulogio in his official capacity for only ₱4,000 when its book value was ₱16,088. The Court rejected the defense's claim that the car was junk, noting that Plant Account Assistant Jose Tupi testified that it was still in good running condition a day before it was sold, and that the Subic Water District and the Olongapo Commuter Auto Supply were also interested in acquiring the car. The gross and manifest disadvantage of the sale was shown by the Operations Audit Report: (1) the car was sold at a very low price, well below its book value; (2) there was no attempt to obtain a better price in a formal auction; (3) the supporting bids were dated ten months prior to the sale without indication of the particulars of the item, and were submitted by individuals close to petitioners; (4) there was no board resolution declaring the item unserviceable and disposable, nor a formal assessment by an independent body; (5) no extraordinary loss was recognized; and (6) the existence of the second Deed of Absolute Sale showed the simulated nature of the first. The Court also noted that factual findings of the anti-graft court are conclusive upon the Supreme Court. Regarding the financial interest, the Court rejected the defense's claim that the sale was perfected on December 10, 1985, as contradicted by the August 20, 1986 Deed of Absolute Sale. Even assuming the sale was perfected earlier, petitioners were still criminally liable because Hallare sold the same car to the wife of the general manager on the same date, August 20, 1986, in violation of Section 3(h). The Court cited Venus vs. Desierto for the proposition that Section 3(h) contemplates actual intervention in the transaction in which one has financial or pecuniary interest. Eulogio's intervention was proven by his signature in the August 20, 1986 Deed of Absolute Sale and in the October 6, 1986 Deed of Sale, signed without authority from the board of directors, in violation of Resolution No. 03-86. The Court concluded that the chain of transactions was a vulgar circumvention of the prohibition in the Anti-Graft Law, because the general manager could not directly, validly, and legally sell the subject car to himself or to his wife.

• Jurisdiction Determined by Law at Time of Institution of Action — The jurisdiction of a court to try a criminal case is determined by the law in force at the time of the institution of the action, not at the time of the commission of the crime. The Court applied this rule to hold that the Sandiganbayan had jurisdiction because the Information was filed in 1992 when Davao City Water District vs. Civil Service Commission was the prevailing ruling.

• Water Districts as Government-Owned or Controlled Corporations — Water districts created pursuant to Presidential Decree No. 198 are government-owned or controlled corporations with original charters, created by a special law and not by the Corporation Code. Their employees and officers are covered by the Civil Service Law and are public officers subject to the Anti-Graft and Corrupt Practices Act. The Court relied on Davao City Water District vs. Civil Service Commission, which reverted to the ruling in Baguio Water District vs. Trajano.

• Elements of Violation of Section 3(g) of RA 3019 — The elements of the crime are: (1) the offender is a public officer, (2) who enters into a contract or transaction on behalf of the government, and (3) the contract or transaction is grossly and manifestly disadvantageous to the government. "Manifest" means obvious to the understanding, evident to the mind, synonymous with open, clear, visible, unmistakable, indubitable, evident and self-evident. "Gross" means flagrant, shameful, such conduct as is not to be excused.

• Prohibition Against Financial or Pecuniary Interest (Section 3(h) of RA 3019) — Section 3(h) contemplates actual intervention in the transaction in which one has financial or pecuniary interest in order that liability may attach. The law aims to prevent dominant use of influence, authority, and power. A public officer's intervention is proven by his signature on the deed of sale executed in his official capacity, and the sale of government property to the officer's spouse constitutes a prohibited indirect financial interest.

• "The drive to rid the government of graft and corruption deserves the support of everyone. Vulgar circumventions of the Anti-Graft Law cannot be countenanced by this Court." — This opening statement frames the Court's approach to the case, signaling that the scheme employed by the petitioners—using an intermediary to acquire government property—would be treated as a prohibited circumvention of the Anti-Graft Law.

• "Criminal laws should always be given prospective application; otherwise, they become ex post facto. This is basic." — This passage articulates the constitutional principle against ex post facto laws, which the Court then applied to reject the petitioners' argument that the Davao City Water ruling should not apply to acts committed in 1986.

• "The gross and manifest disadvantage of the sale to the government is shown by the following facts, which were stated in the Operations Audit Report: (1) the subject car was sold at a very low price, well below its book value; (2) there was no attempt to obtain a better price in a formal auction; (3) the supporting bids were dated ten months prior to the date of sale without any indication of the particulars of the item for bidding, and those bids were submitted by individuals considered to be close to petitioners; (4) there was no board resolution declaring the item as unserviceable and disposable, and neither was a formal assessment or evaluation made by an independent body; (5) no extraordinary loss was recognized by the water district upon the consummation of the sale; and (5) the existence of the second Deed of Absolute Sale shows the simulated nature of the first, while the execution of both documents on the same date proves that the interested party was no less than the general manager." — This passage enumerates the factual bases for the finding that the sale was grossly and manifestly disadvantageous to the government, constituting the core of the Court's application of Section 3(g) of RA 3019.

• "The chain of transactions was resorted to because the general manager of OCWD could not directly, validly and legally sell the subject car to himself or to his wife. Obviously, the second sale was a vulgar circumvention of the prohibition in the Anti-Graft Law." — This passage explains the Court's conclusion that the two-step sale—first to the finance officer, then to the general manager's wife—was a scheme to circumvent the prohibition against public officers having financial interests in transactions where they intervene in their official capacity.

• Davao City Water District vs. Civil Service Commission, 201 SCRA 593 (1991) — Controlling precedent. The Court relied on this case for the ruling that water districts are government-owned or controlled corporations with original charters, and that their employees are covered by the Civil Service Law. This ruling was the prevailing jurisprudence when the Information was filed in 1992.

• Baguio Water District vs. Trajano, 127 SCRA 730 (1984) — Followed. This case ruled that employees and officers of water districts were covered by the Civil Service Law, and was the prevailing jurisprudence at the time of the commission of the crime in 1986.

• Metro Iloilo Water District vs. NLRC, G.R. No. 85760 (1990) — Distinguished/abandoned. This case reversed Baguio Water and held that water districts were private corporations, but it was subsequently abandoned in Davao City Water. The Court noted that this ruling would have been applicable to petitioners under the rule allowing retroactivity of laws favorable to the accused, but it was no longer good law.

• Tanjay Water District vs. Gabaton, 172 SCRA 253 (1989) — Followed. Echoed the ruling in Baguio Water that water district employees were covered by the Civil Service Law.

• Venus vs. Desierto, 298 SCRA 196 (1998) — Cited for the proposition that Section 3(h) of the Anti-Graft Law contemplates actual intervention in the transaction in which one has financial or pecuniary interest, and that the law aims to prevent dominant use of influence, authority, and power.

• People vs. Velasco, 252 SCRA 135 (1996) — Cited for the rule that the jurisdiction of a court to try a criminal case is determined by the law in force at the time of the institution of the action.

• Azarcon vs. Sandiganbayan, 268 SCRA 747 (1997) — Cited for the rules on jurisdiction of the Sandiganbayan and the determination of jurisdiction at the time of the institution of the action.

• Duterte vs. Sandiganbayan, 289 SCRA 721 (1998) — Cited for the elements of the crime of violating Section 3(g) of RA 3019.

• Marcos vs. Sandiganbayan, 297 SCRA 95 (1998) — Cited for the definitions of "manifest" and "gross" in the context of Section 3(g) of RA 3019.

• Froilan vs. Sandiganbayan, 328 SCRA 351 (2000) — Cited for the elements of the crime of violating Section 3(g) of RA 3019.

• Sajul vs. Sandiganbayan, 345 SCRA 248 (2000) — Cited for the elements of the crime and the definitions of "manifest" and "gross."

• Enriquez vs. People, 331 SCRA 538 (2000) — Cited for the rule that factual findings of the Sandiganbayan are conclusive upon the Supreme Court.

• Rueda Jr. vs. Sandiganbayan, 346 SCRA 341 (2000) — Cited for the rule that factual findings of the Sandiganbayan are conclusive upon the Supreme Court.

• Lacson vs. Executive Secretary, 301 SCRA 298 (1993) — Cited for the exclusive original jurisdiction of the Sandiganbayan over violations of RA 3019.

• Section 3(g), Republic Act No. 3019 (Anti-Graft and Corrupt Practices Act) — Prohibits public officers from entering into any contract or transaction on behalf of the government that is grossly and manifestly disadvantageous to the government. The Court applied this provision to the sale of the OCWD vehicle at a price far below its book value.

• Section 3(h), Republic Act No. 3019 (Anti-Graft and Corrupt Practices Act) — Prohibits public officers from having direct or indirect financial or pecuniary interest in any business, contract, or transaction in which they intervene or take part in their official capacity. The Court applied this provision to the second sale of the vehicle to the general manager's wife.

• Section 16, Republic Act No. 3019 — Cited to establish that the Anti-Graft and Corrupt Practices Law was passed on August 17, 1960, and therefore the petitioners were not accused of a crime that was not punishable at the time it was committed.

• Presidential Decree No. 198 — The special law creating water districts. The Court held that this law gives a water district juridical personality, defines its primary purpose, and its basic organizational setup, making water districts government-owned or controlled corporations with original charters.

• Presidential Decree No. 1479 — Repealed Section 25 of PD 198, which had exempted employees of water districts from the Civil Service Law. The repeal took effect on June 11, 1978.

• Section 1, Article III (Ex Post Facto Laws), 1987 Constitution — The Court discussed the definition of an ex post facto law and applied the principle that criminal laws should always be given prospective application, but found no violation because the Anti-Graft Law was already in effect at the time of the crime.

Puno, Sandoval-Gutierrez, and Carpio, JJ., concurred.