People vs. Castillo

A private person's mere consent to and signing of government lease contracts does not, without more, establish conspiracy to violate Section 3(e) of R.A. No. 3019; and a violation of procurement laws does not ipso facto establish all elements of the offense — the prosecution must separately prove beyond reasonable doubt that the accused acted with corrupt intent or dishonest design and that the violation caused undue injury or gave unwarranted benefits.

Cerezo served as the duly elected Municipal Mayor of Binmaley, Pangasinan from June 30, 2010 to June 30, 2013. Castillo was the owner and operator of MTAC's Merchandising, a legitimate business entity that leased heavy equipment. From 2011 to 2013, the Municipality of Binmaley, through Cerezo, entered into 21 lease contracts with MTAC's Merchandising for the rental of dump trucks and other heavy equipment, purportedly to address garbage collection and typhoon debris hauling problems in the municipality. These contracts were executed without the benefit of public bidding or a Bids and Awards Committee resolution recommending alternative modes of procurement, as required under R.A. No. 9184 (Government Procurement Reform Act) and related procurement laws.

From 2011 to 2013, the Municipality of Binmaley, Pangasinan, through its then mayor Lorenzo Mayogba Cerezo, entered into 21 lease contracts with MTAC's Merchandising, a business owned and operated by Edwin Godinez Castillo, for the rental of heavy equipment such as dump trucks. The contracts were purportedly executed to address the hauling of garbage and debris in Binmaley brought about by typhoons and monsoon rains. None of these lease contracts underwent public bidding, nor were they supported by a Bids and Awards Committee resolution recommending alternative modes of procurement.

On November 27, 2013, Anita U. Urbano, a resident of Binmaley, filed an affidavit-complaint with the Office of the Ombudsman against Cerezo, Castillo, Municipal Accountant Gertrudes C. Reyes, and Punong Barangay Jesus Aquino, alleging violation of R.A. No. 9184 because the lease contracts were entered into without public bidding. The Office of the Ombudsman, in its Resolution dated July 23, 2014, found probable cause to charge Cerezo and Castillo with 21 counts of violation of Section 3(e) of R.A. No. 3019, and dismissed the charges against Reyes and Aquino. This finding was upheld in the Order dated December 10, 2014, which denied the separate motions for reconsideration filed by Urbano and Cerezo. On November 27, 2015, 21 Informations were filed with the Sandiganbayan, docketed as SB-15-CRM-0320 to 0340. The cases were consolidated and raffled to the Sixth Division. Upon arraignment, both Cerezo and Castillo pleaded not guilty to all 21 counts.

During pre-trial, the parties stipulated that Cerezo was the duly elected and sitting mayor of Binmaley from June 30, 2010 to June 30, 2013, that Castillo was the owner of MTAC's Merchandising, a legitimate business entity, and that the disbursement vouchers prepared by the Municipality of Binmaley as payments to MTAC's Merchandising were never disallowed by the Commission on Audit. The prosecution presented nine witnesses, including Urbano, municipal officials, and a State Auditor, who testified on the lease contracts, disbursement vouchers, and the absence of public bidding. The BAC Secretariat, Evangeline Payumo, categorically stated that no public bidding was conducted by the BAC from 2010 to 2013 in connection with the lease of heavy equipment from MTAC's Merchandising. The defense, for its part, presented several barangay officials who testified to the garbage collection problems in their localities and how Cerezo addressed them through the leased equipment, as well as documents showing declarations of a state of calamity in Pangasinan during the material period. Castillo waived his right to adduce evidence after filing a demurrer to evidence without leave of court.

On February 27, 2020, the Sandiganbayan found Cerezo and Castillo guilty in 16 of the 21 cases, holding that Cerezo acted with manifest partiality and gross inexcusable negligence in entering into the lease contracts without public bidding and without legal justification, that he gave unwarranted benefits to Castillo, and that the two conspired to commit the offenses. Castillo was sentenced to an indeterminate penalty of six years and one month as minimum to ten years and one day as maximum for each violation, with perpetual disqualification from public office, the total imprisonment not to exceed 40 years. Cerezo received the same penalty plus loss of all retirement and gratuity benefits. Both were acquitted in the remaining five cases. Castillo appealed.

• Immediate Need for Lease: Castillo argued that there was an immediate need to haul garbage in Binmaley due to the effects of typhoons, justifying the lease contracts.
• Absence of Irregular Acts: It was never alleged nor proven that Castillo committed any irregular, illegal, or unlawful act in entering into the lease contracts with the local government of Binmaley.
• Absence of Influence or Pressure: It was never alleged nor proven that Castillo influenced, prodded, pressured, or offered monetary consideration or gift for the approval of the disbursement vouchers.
• COA Non-Disallowance: The Commission on Audit found no irregularity with the lease contracts and did not disallow the same.
• No Conspiracy by Mere Signing: Conspiracy between Castillo and Cerezo cannot be proven by virtue of Castillo's mere signing of the lease contracts.
• Sangguniang Panlalawigan Resolutions: The Sandiganbayan should have considered and given due weight to the Sangguniang Panlalawigan resolutions offered as evidence, as the same are prima facie evidence of the facts stated therein.

• All Elements Proven: The OSG maintained that the prosecution proved beyond reasonable doubt the existence of all elements of Section 3(e) of R.A. No. 3019, specifically that Cerezo and Castillo, in conspiracy, acted with evident bad faith, manifest partiality, or gross inexcusable negligence when Cerezo repeatedly entered into contracts with MTAC's Merchandising without public bidding or legal justification.
• Manifest Partiality: Cerezo demonstrated manifest partiality towards Castillo by repeatedly contracting with MTAC's Merchandising without prior approval of the Sangguniang Bayan of Binmaley.
• Conspiracy Established: Conspiracy was sufficiently established by "chain circumstances" that indubitably show the conspiracy between Cerezo and Castillo, since they executed at least 21 contracts in total disregard of procurement laws over a span of almost three years.
• Defense Evidence Worthless: The Sandiganbayan correctly ruled that Manuel's testimony and the Sangguniang Panlalawigan resolutions presented by Cerezo as evidence were worthless.

• Conspiracy: Whether the prosecution established beyond reasonable doubt the existence of conspiracy between Cerezo and Castillo for purposes of holding Castillo liable under Section 3(e) of R.A. No. 3019.
• Elements of Section 3(e): Whether the prosecution proved beyond reasonable doubt that Cerezo's acts caused undue injury to the government or gave unwarranted benefits, advantage, and preference to Castillo as a private party, and that the accused acted with evident bad faith, manifest partiality, or gross inexcusable negligence.

• Conspiracy: No. The mere consent to and signing of lease contracts does not ipso facto show intentional participation in a criminal design, absent any allegation or evidence that Castillo entered into the contracts with knowledge that the procurement process was defective.
• Elements of Section 3(e): No. The prosecution failed to specify, quantify, and prove undue injury to the government to a moral certainty, and failed to prove that unwarranted benefits were given to Castillo with corrupt intent, dishonest design, or unethical interest.

• Conspiracy: The Sandiganbayan based its finding of conspiracy solely on Castillo's consent to the lease contracts, reasoning that a contract of lease calls for collaboration between parties. However, the collaboration necessary for executing lease contracts does not rise to the level of criminal conspiracy. Under established doctrine, conspiracy requires a conscious design to commit an offense and must be proven beyond reasonable doubt, not presumed. While conspiracy may be inferred from the conduct of the accused, the evidence must be strong enough to show community of criminal design. Here, there was no allegation or evidence that Castillo entered into the lease contracts with knowledge that the same were defective for failure of the municipality to conduct public bidding. The record was bereft of any finding that there was no need to rent heavy equipment, that residents did not benefit, that other entities could have leased at lower rates, or that MTAC's Merchandising failed to fulfill its obligations. A conviction premised on conspiracy must be founded on facts, not mere inferences and presumptions. Absent proof of conspiracy, Castillo could only be held liable for his own specific acts — signing the contracts and fulfilling his obligations therein — which are not criminal acts.

• Elements of Section 3(e): The prosecution's case was grounded solely on Cerezo's violation of procurement laws. However, pursuant to Martel vs. People, a violation of procurement laws does not ipso facto mean that all elements of Section 3(e) are present; the prosecution must separately prove that the violation caused undue injury or gave unwarranted benefits, and that the accused acted with evident bad faith, manifest partiality, or gross inexcusable negligence. As to undue injury, the prosecution failed to specify, quantify, and prove to a moral certainty that the government suffered any actual damage. There was no evidence that the leasing was unnecessary, that a better rate was available elsewhere, or that MTAC's Merchandising failed to perform. As to unwarranted benefits, the Sandiganbayan premised its finding only on the "possibility" of leasing at lower rentals from a different supplier — a mere possibility, not proof beyond reasonable doubt. Moreover, there was no evidence of corrupt intent, dishonest design, or unethical interest on the part of either accused. No iota of proof showed that Cerezo profited from the transactions, nor that Castillo's profits resulted from any corrupt scheme. The evidence only proved that the leasing should have gone through public bidding — but that alone, without proof of the remaining elements and corrupt intent, is insufficient for conviction.

• Elements of Section 3(e), R.A. No. 3019 — To sustain a conviction, the prosecution must prove beyond reasonable doubt: (1) the accused is a public officer discharging administrative, judicial, or official functions; (2) the accused acted with manifest partiality, evident bad faith, or gross inexcusable negligence; and (3) the action caused undue injury to any party, including the government, or gave any private party unwarranted benefits, advantage, or preference. The second element provides three distinct modes of commission, proof of any one being sufficient. The third element encompasses two separate punishable acts: causing undue injury (requiring actual loss or damage proven as a fact) and giving unwarranted benefits (not requiring proof of quantum of damage). In this case, the prosecution failed to establish the second and third elements beyond reasonable doubt.

• Conspiracy Must Be Proven Beyond Reasonable Doubt — Conspiracy is not presumed. Like the physical acts constituting the crime itself, the elements of conspiracy must be proven beyond reasonable doubt. While it need not be established by direct evidence and may be inferred from the conduct of the accused before, during, and after the commission of the crime, the evidence must be strong enough to show community of criminal design. For conspiracy to exist, there must be a conscious design to commit an offense, and a conspirator must have performed some overt act contributing to the execution of the crime. Mere presence at or approval of a conspiracy discussion, without active participation, is insufficient. In this case, Castillo's mere consent to and signing of lease contracts did not prove knowing participation in a criminal design.

• Violation of Procurement Laws Does Not Ipso Facto Establish Section 3(e) Liability — Pursuant to Martel vs. People, the prosecution cannot solely rely on the fact that a violation of procurement laws has been committed. It must separately prove beyond reasonable doubt that the violation caused undue injury or gave unwarranted benefits, and that the accused acted with evident bad faith, manifest partiality, or gross inexcusable negligence. In this case, the prosecution's evidence only tended to prove that the leasing should have gone through public bidding, which was insufficient.

• Undue Injury Must Be Specified, Quantified, and Proven — Undue injury in the context of Section 3(e) cannot be presumed even after a violation of a right has been established. It must be proven as one of the elements of the crime, specified, quantified, and proven to the point of moral certainty. It is consistently interpreted as "actual damage" akin to that in civil law, and cannot be based on speculation, conjecture, or guesswork. In this case, the prosecution failed to prove any actual damage to the government.

• Corrupt Intent Required for Section 3(e) Liability — It is not enough that unwarranted benefits were given or that there was damage to the government as a result of a violation of law; the acts constituting the elements must be effected with corrupt intent, a dishonest design, or some unethical interest. At the heart of R.A. No. 3019 is corruption, which entails the acquisition of gain in dishonest ways. In this case, there was no iota of proof that either accused profited from the transactions through any corrupt scheme.

• "The fact that the local government of Binmaley and Castillo entered into 21 separate lease contracts cannot be considered as sufficient to prove conspiracy considering the absence of any evidence that graft and corruption attended the same." — This passage articulates the ratio decidendi on conspiracy: the number of transactions alone, without evidence of corruption, cannot sustain a conspiracy finding.

• "Thus, in order to successfully prosecute the accused under Section 3(e) of R.A. 3019 based on a violation of procurement laws, the prosecution cannot solely rely on the fact that a violation of procurement laws has been committed." — Quoting Martel vs. People, this passage establishes the critical doctrine that procurement law violations do not automatically satisfy all elements of Section 3(e), a principle central to the acquittal.

• "In addition, the granting of unwarranted benefits, advantage or preference or the causing of undue injury to the government must be inextricably linked to the existence of fraudulent or corrupt motive on the part of the accused." — Quoting Macairan vs. People, this passage defines the corrupt-intent requirement that the prosecution failed to satisfy.

• "Here, there was no finding by the Sandiganbayan that Cerezo and Castillo caused undue injury to the government." — This sentence underscores the evidentiary gap that proved fatal to the prosecution's case on the third element of Section 3(e).

• Coloma, Jr. vs. Sandiganbayan, 744 Phil. 214 (2014) — Cited for the proposition that the second element of Section 3(e) may be committed in three ways (manifest partiality, evident bad faith, or gross inexcusable negligence), proof of any one being sufficient to convict. Followed.
• Bahilidad vs. People, 629 Phil. 567 (2010) — Cited for the basic principles in determining conspiracy: conspiracy is not presumed, must be proven beyond reasonable doubt, and requires a conscious design to commit an offense with an overt act contributing to its execution. Followed.
• Macapagal-Arroyo vs. People, 790 Phil. 367 (2016) — Cited for the doctrine on express and implied conspiracy, including the requirement that implied conspiracy is proved through the mode and manner of the commission of the offense pointing to joint purpose, concert of action, and community of interest. Followed.
• Sistoza vs. Desierto, 437 Phil. 117 (2002) — Cited for the principle that conspiracy of silence and inaction requires patent and conscious criminal design, not merely inadvertence. Followed.
• Martel vs. People, G.R. Nos. 224720-23, February 2, 2021 — Cited en banc for the controlling doctrine that violation of procurement laws does not ipso facto establish all elements of Section 3(e); the prosecution must separately prove undue injury or unwarranted benefits and bad faith, partiality, or negligence. Followed as controlling precedent.
• Llorente, Jr. vs. Sandiganbayan, 350 Phil. 820 (1998) — Cited for the requirement that undue injury must be specified, quantified, and proven to the point of moral certainty, and cannot be presumed. Followed.
• Sison vs. People, 628 Phil. 573 (2010) — Cited for the definitions of "unwarranted," "advantage," and "preference" under the second mode of Section 3(e). Followed.
• Macairan vs. People, G.R. No. 215104, March 18, 2021 — Cited for the doctrine that the granting of unwarranted benefits or causing of undue injury must be inextricably linked to fraudulent or corrupt motive. Followed.
• People vs. Libre, 839 Phil. 221 (2018) — Cited for the proposition that where an accused-appellant is acquitted, a co-accused who did not appeal is also entitled to acquittal as a matter of right. Applied to acquit Cerezo.

• Section 3(e), Republic Act No. 3019 (Anti-Graft and Corrupt Practices Act) — Penalizes public officers who, in the discharge of official administrative or judicial functions, cause undue injury to any party including the government, or give any private party unwarranted benefits, advantage, or preference through manifest partiality, evident bad faith, or gross inexcusable negligence. The Court applied this provision by requiring the prosecution to prove each element beyond reasonable doubt, finding that the prosecution failed to establish the second element (bad faith, partiality, or gross negligence with corrupt intent) and the third element (undue injury or unwarranted benefits).
• R.A. No. 9184 (Government Procurement Reform Act) — Referenced as the procurement law allegedly violated when the lease contracts were entered into without public bidding. The Court held that violation of this law alone does not establish liability under Section 3(e) of R.A. No. 3019 without proof of the remaining elements and corrupt intent.

Gesmundo, C.J. (Chairperson), Caguioa, Inting, and Dimaampao, JJ., concurred. No separate concurring opinions were noted.