People vs. Estregan

A municipal ordinance authorizing negotiated procurement with "any competent and qualified entity" does not, without more, constitute manifest partiality or give unwarranted benefit under Section 3(e) of R.A. No. 3019, as the entity was yet to be determined; however, a mayor who enters into an insurance contract with an unlicensed entity without public bidding commits the offense through manifest partiality and evident bad faith, and a private party who fraudulently misrepresents its capacity to provide insurance services is liable as a conspirator.

The Municipality of Pagsanjan, Laguna, through its Mayor Estregan and Sangguniang Bayan members, sought to implement an Accident Protection and Assistance (APA) program for tourists and boatmen at the Pagsanjan Gorge Tourist Zone due to recurring accidents. Bruel, proprietor of First Rapids Care Ventures (FRCV), submitted a proposal to provide APA services. FRCV was registered with the Department of Trade and Industry on March 19, 2008 and with the Bureau of Internal Revenue on September 17, 2008, but did not possess a Certificate of Authority from the Insurance Commission. The United Boatmen Association of Pagsanjan (UBAP) filed a complaint before the Office of the Ombudsman alleging that the accused public officials unlawfully entered a MOA with Bruel without public bidding and despite FRCV lacking authority to engage in the insurance business.

The Municipality of Pagsanjan, Laguna, experienced recurring accidents involving tourists and boatmen "shooting the rapids" at the Pagsanjan Gorge, prompting the local government to establish an Accident Protection and Assistance (APA) program. The Sangguniang Bayan held public consultative meetings with the Department of Tourism and tour operators to discuss increasing the boat ride service fee to accommodate the APA. The SB then passed Ordinance No. 14-2008, authorizing Mayor Estregan to contract with a competent and qualified entity to provide APA services. Estregan received inquiries from insurance companies such as Philamlife and Oriental Insurance, but determined they were unable to provide all the required services — accident protection for tourists and boatmen, deployment of a skilled first aid team, a search-and-rescue team, and a monitoring team for the entire boat ride. Philamlife did not agree with the amount of PhP 43.00 for its services, while Oriental did not want to assume the risks entailed by the program.

On September 22, 2008, FRCV, a sole proprietorship owned by Bruel, formally submitted its written proposal detailing the APA services it would provide. Estregan found the proposal satisfactory and had FRCV conduct a product presentation before the SB. On October 13, 2008, a public consultation was held, attended by SB members, UBAP, a representative from Cavinti, and representatives from resorts and hotels. The SB passed Ordinance No. 15-2008 authorizing Estregan to transact, negotiate, and enter into a contract with any competent and qualified entity to provide APA services. On October 23, 2008, Estregan entered into a MOA with FRCV for APA services, which the SB ratified on the same day through Resolution No. 056-2008. FRCV was registered with the DTI only on March 19, 2008 and with the BIR on September 17, 2008 — five days prior to its letter-offer — and did not possess a Certificate of Authority from the Insurance Commission. Its BIR Certificate of Registration indicated its line of business as "Other Computer Related Activities."

The funds for the APA Program were sourced from the boat ride service fee, deemed a special fund held in trust by the Municipal Government in favor of FRCV, as it did not involve disbursement from the Municipality's general fund. A boat ride ticket was sold for PhP 160.00, of which PhP 48.00 was allocated for the Tourist & Boatman Accident Protection Assistance. The Municipal Treasurer collected the fees, which were deposited at Land Bank, and the amounts due to FRCV were remitted via check. During the contract's duration, FRCV provided coverage for accident protection assistance to tourists and boatmen who suffered injury or death. In 2009, UBAP filed a complaint before the OMB alleging that the accused public officials unlawfully entered the MOA without public bidding and despite FRCV lacking a Certificate of Authority from the Insurance Commission. The OMB found probable cause, and the OSP filed an Information before the Sandiganbayan charging all accused with violation of Section 3(e) of R.A. No. 3019. The Sandiganbayan convicted all accused except Vilar, finding that Estregan exhibited manifest partiality and evident bad faith by entering the MOA without BAC determination of FRCV's qualifications, and that the SB members ratified the MOA with full knowledge that the contract was not vetted through public bidding. The Sandiganbayan disregarded their defense of good faith, noting that legal opinions were sought only after the MOA had already been signed and ratified.

N/A — The "petitioner" in this case is the People of the Philippines, represented by the OSP, which argued for affirmance of the conviction. The accused-appellants are the respondents in this posture. However, the decision attributes arguments to both sides.

• Good Faith and Performance of Official Duty (Torres and Talabong): Respondents Torres and Talabong claimed they acted in good faith and were merely performing their official functions as SB members when they signed Resolution No. 056-2008, and that they had no knowledge the source of funds was public in nature.
• Absence of Conspiracy (Torres and Talabong): They argued there could be no conspiracy, especially since Talabong was in the opposition during Estregan's administration.
• Nature of the MOA (Torres and Talabong, Bruel): They contended the MOA was not an insurance contract but one for special services.
• No Irregularity in Ratification (Rabago, Sacluti, Dimaranan): They argued no irregularity attended the passage of Resolution No. 056-2008, and that Estregan transacted and contracted APA services with FRCV alone and never listened to anybody.
• Absence of Conspiracy — Political Pressure (Rabago, Sacluti, Dimaranan): They claimed there was no conspiracy but only pressure to get the sympathy of the boatmen considering the votes they could provide during the election.
• Elements Not Present (Bruel): Bruel argued not all elements of Section 3(e) of R.A. No. 3019 were present, that the municipal ordinances and resolution were not revenue-raising measures but were issued in view of the municipality's governmental functions, and that there was no evidence of conspiracy.
• No Criminal Intent or Bad Faith (Estregan): Estregan argued the SBN erred in convicting him despite the prosecution's failure to prove criminal intent, evident bad faith, manifest partiality, or gross inexcusable negligence, and the existence of undue injury or unwarranted benefits. He invoked the presumption of regularity in the performance of official duties.
• Nature of Funds and Procurement (Estregan): He insisted the boat ride fee did not form part of the municipality's public funds, that public bidding was not required for the APA program, and that the MOA was not an insurance contract.
• Wrong Mode of Appeal (OSP): The OSP argued accused-appellants availed of the wrong mode of appeal, rendering their conviction final and immutable; that the SBN correctly found them guilty; and that conspiracy attended the commission of the offense.
• Abandonment of Appeal (OSP): The OSP moved for denial of Estregan's appeal on the ground that the non-filing of his Brief within the period prayed for constituted abandonment of appeal.

• Nature of the MOA: Whether the MOA between the Municipality of Pagsanjan and FRCV constitutes a contract of insurance.
• Requirement of Public Bidding: Whether public bidding was required for the procurement of the APA services under R.A. No. 9184.
• Liability of Estregan: Whether the elements of Section 3(e) of R.A. No. 3019 — specifically manifest partiality, evident bad faith, and unwarranted benefit — were proven beyond reasonable doubt against Estregan.
• Liability of Bruel: Whether Bruel is liable as a conspirator for violation of Section 3(e) of R.A. No. 3019.
• Liability of SB Members: Whether the SB members (Torres, Talabong, Rabago, Sacluti, and Dimaranan) are guilty of violation of Section 3(e) of R.A. No. 3019.
• Mode of Appeal: Whether accused-appellants availed of the correct mode of appeal from the Sandiganbayan's Decision.

• Nature of the MOA: Yes. The MOA is a contract of insurance because FRCV undertook, for a consideration termed "coverage outlay" of PhP 48.00 per tourist, to indemnify tourists and/or boatmen for accidental death or dismemberment, and the Municipality for actual expenses for treatment and confinement, not exceeding stated coverage amounts.
• Requirement of Public Bidding: Yes. As an insurance contract, the MOA falls within the definition of goods under R.A. No. 9184, and all procurement must be done through competitive bidding unless an alternative method is justified under highly exceptional cases, none of which obtained here.
• Liability of Estregan: Affirmed. Estregan's manifest partiality and evident bad faith were shown by entering the MOA despite FRCV's lack of a Certificate of Authority from the Insurance Commission and its suspiciously recent registration, and by arrogating upon himself the BAC's function of determining FRCV's qualifications, thereby giving FRCV unwarranted benefit, advantage, or preference.
• Liability of Bruel: Affirmed. Bruel fraudulently claimed FRCV was capacitated to provide the services when it lacked a Certificate of Authority, had no prior experience, and was registered for "Other Computer Related Activities," and she conspired with Estregan for FRCV to receive preferential treatment.
• Liability of SB Members: No. Acquitted on reasonable doubt. The ordinance they passed authorized negotiated procurement with "any competent and qualified entity" and did not itself confer unwarranted benefit on any particular entity, as the entity was yet to be determined; their ratification of the MOA through a resolution did not make them liable because no rights can be conferred by or inferred from a resolution.
• Mode of Appeal: Correctly filed. Pursuant to the 2018 Revised Internal Rules of the Sandiganbayan, which prevails over P.D. No. 1606, an appeal to the Supreme Court in criminal cases decided by the Sandiganbayan in the exercise of its original jurisdiction shall be by notice of appeal.

• Nature of the MOA: A contract of insurance is an agreement whereby one undertakes for a consideration to indemnify another against loss, damage, or liability arising from an unknown or contingent event. The MOA's provisions unmistakably show FRCV undertaking to indemnify tourists and/or boatmen for accidental death or dismemberment, and the Municipality for actual expenses for treatment and confinement, not exceeding stated coverage amounts. Bruel's reliance on Philippine Health Care Providers, Inc. vs. Commissioner of Internal Revenue was unavailing because in that case, the assumption of risk was merely incidental to a business whose principal purpose was service, whereas here indemnification was the principal object of the MOA — as shown by Estregan's own testimony that he sought a program for accidents and had even approached insurance companies Philamlife and Oriental. The consideration or premium was termed "coverage outlay" at PhP 48.00 per tourist. FRCV was doing business in substance equivalent to making an insurance contract in a manner designed to evade the Insurance Code, which expressly includes such conduct within the definition of "doing an insurance business."

• Requirement of Public Bidding: As an insurance contract, the MOA falls within the definition of goods under Section 5(h) of R.A. No. 9184. Even assuming FRCV's services were primarily for training boatmen, such services would fall within the ambit of consulting services, still within the purview of R.A. No. 9184. Under Rule IV, Section 10 of the IRR, all procurement shall be done through competitive bidding except as provided in Rule XVI on alternative methods. The SB passed Ordinance No. 15-2008 immediately authorizing resort to negotiated procurement, but under the IRR, such alternative method may only be resorted to in particular cases such as two failed biddings or emergency cases, none of which obtained here. Estregan's bare allegation that the BAC and GPPB confirmed public bidding was not required was unsupported by any proof on record.

• Liability of Estregan: The first element — that the accused is a public officer discharging administrative or official functions — was undisputed. The second element was satisfied by manifest partiality and evident bad faith: Estregan entered the MOA despite FRCV being registered with the DTI only on March 19, 2008 and with the BIR only on September 17, 2008 — five days before its letter-offer — and despite FRCV's lack of a Certificate of Authority from the Insurance Commission. He arrogated upon himself the BAC's function of determining FRCV's qualifications and had FRCV present before the SB despite the absence of public bidding. The third element was satisfied under the second mode — giving unwarranted benefit, advantage, or preference — because by purposely sparing FRCV from the rigors of the procurement process and turning a blind eye to irregularities, Estregan gave it unwarranted benefit, as FRCV had no legal authority to engage in the insurance business and did not undergo proper procurement.

• Liability of Bruel: Bruel fraudulently claimed FRCV was fully capacitated to engage in the services enumerated in the MOA when it did not possess a Certificate of Authority from the Insurance Commission. Her claim that FRCV was engaged in the specialized field of APA was belied by its track record: FRCV was registered with the DTI on March 19, 2008 and with the BIR on September 17, 2008, showing it was merely created for the purpose of rendering the services sans prior experience. Its BIR Certificate of Registration indicated its line of business as "Other Computer Related Activities," unrelated to APA services. She could not claim good faith, and even assuming FRCV complied with its duties under the MOA, performance does not negate the fraud perpetrated. She conspired with Estregan for FRCV to be given preferential treatment and unwarranted benefit.

• Liability of SB Members: Even assuming the ordinance violated procurement law by immediately authorizing resort to negotiated procurement, the SB members did not thereby show manifest partiality or give unwarranted benefit to any particular entity because the ordinance stated "any competent and qualified entity" and such entity was yet to be determined. The ordinance did not prevent Estregan from resorting to public bidding; it merely authorized negotiated procurement, albeit erroneously. Their eventual ratification of the MOA through Resolution No. 056-2008 did not make them liable because the validity of the MOA did not depend on the issuance of said resolution, as no rights can be conferred by or inferred from a resolution, which is but an embodiment of what the lawmaking body has to say in light of attendant circumstances. Their acquittal was warranted on reasonable doubt.

• Mode of Appeal: The 2018 Revised Internal Rules of the Sandiganbayan, Rule IX, Section 1(a), provides that the appeal to the Supreme Court in criminal cases decided by the Sandiganbayan in the exercise of its original jurisdiction shall be by notice of appeal. This prevails over the procedure in P.D. No. 1606. Accused-appellants therefore correctly filed a notice of appeal.

• Elements of Section 3(e), R.A. No. 3019 — The prosecution must prove: (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 accused caused undue injury to any party, including the Government, or gave any private party unwarranted benefits, advantage, or preference in the discharge of official functions. The offense may be committed by dolo (evident bad faith or manifest partiality) or by culpa (gross inexcusable negligence). The Court applied these elements separately to Estregan, Bruel, and the SB members, finding the second and third elements present as to Estregan and Bruel but absent as to the SB members.

• Manifest Partiality, Evident Bad Faith, and Gross Inexcusable Negligence — "Manifest partiality" is a clear, notorious, or plain inclination or predilection to favor one side or person rather than another. "Evident bad faith" connotes not only bad judgment but also palpably and patently fraudulent and dishonest purpose to do moral obliquity or conscious wrongdoing for some perverse motive or ill will, contemplating a state of mind affirmatively operating with furtive design or with some motive or self-interest or ill will or for ulterior purposes. "Gross inexcusable negligence" refers to negligence characterized by the want of even the slightest care, acting or omitting to act where there is a duty to act, willfully and intentionally, with conscious indifference to consequences. The Court found Estregan's conduct satisfied manifest partiality and evident bad faith.

• Contract of Insurance — An agreement whereby one undertakes for a consideration to indemnify another against loss, damage, or liability arising from an unknown or contingent event. The Court held the MOA was a contract of insurance because FRCV undertook to indemnify for accidental death, dismemberment, and medical expenses, with the consideration termed "coverage outlay" at PhP 48.00 per tourist. The fact that no profit is derived or no separate consideration is received is not conclusive to show the transaction does not constitute insurance business. "Doing an insurance business" includes doing or proposing to do any business in substance equivalent to insurance in a manner designed to evade the Insurance Code.

• Distinction Between Resolutions and Ordinances — No rights can be conferred by and be inferred from a resolution, which is but an embodiment of what the lawmaking body has to say in light of attendant circumstances. The Court relied on this principle to hold that the SB members' ratification of the MOA through Resolution No. 056-2008 did not make them liable, as the validity of the MOA did not depend on the resolution's issuance.

• Procurement Violations Not Per Se Graft — In criminal cases for violation of Section 3(e) of R.A. No. 3019 in relation to procurement irregularities, violations of procurement laws, rules, and regulations do not per se lead to conviction under the special penal law. It must be established beyond reasonable doubt that the essential elements of a Section 3(e) violation are present.

• "In criminal cases for violation of Section 3(e) of Republic Act No. 3019 in relation to procurement irregularities, however, violations of procurement laws, rules, and regulations do not per se lead to the conviction of the public officer under said special penal law. It must be established beyond reasonable doubt that the essential elements of a Section 3(e) violation are present." — This passage articulates the ratio decidendi distinguishing procurement law violations from graft convictions, requiring proof of all elements of Section 3(e) beyond reasonable doubt.

• "Even assuming that the ordinance violated procurement law because it immediately authorized resort to negotiated procurement, the SB members did not thereby show manifest partiality and give unwarranted benefit to any particular entity because the ordinance itself states 'any competent and qualified entity' and such entity was yet to be determined." — This passage states the reasoning for acquitting the SB members, establishing that an ordinance authorizing procurement with an undetermined entity does not itself constitute manifest partiality or unwarranted benefit.

• "No rights can be conferred by and be inferred from a resolution, which is but an embodiment of what the lawmaking body has to say in light of attendant circumstances." — This passage articulates the doctrinal distinction between resolutions and ordinances, relied upon to hold that the SB members' ratification of the MOA through a resolution did not confer rights or make them liable.

• "The fact that no profit is derived from the making of insurance contracts, agreements, or transactions or that no separate or direct consideration is received therefore is not conclusive to show that the making thereof does not constitute the doing or transacting of an insurance business." — This passage defines the scope of "doing an insurance business" under the Insurance Code, rejecting the argument that absence of a traditional premium precludes classification as insurance.

• Philippine Health Care Providers, Inc. vs. Commissioner of Internal Revenue, 616 Phil. 387 (2009) — Cited by Bruel to argue that if assumption of risk is merely incidental to a business and service is the principal purpose, it is not insurance. Distinguished: in that case, risk assumption was incidental, whereas here indemnification was the principal object of the MOA, as shown by Estregan's own testimony and his prior approaches to insurance companies.

• People vs. Talaue, 893 Phil. 554 (2021) — Cited for the proposition that the 2018 Revised Internal Rules of the Sandiganbayan prevails over P.D. No. 1606 on the mode of appeal from the Sandiganbayan to the Supreme Court.

• Martel vs. People, 895 Phil. 270-271 (2021) — Cited for the principle that violations of procurement laws do not per se lead to conviction under Section 3(e) of R.A. No. 3019; the essential elements must be proven beyond reasonable doubt.

• Rivera vs. People, 865 Phil. 1003 (2019) — Cited for the three elements of violation of Section 3(e) of R.A. No. 3019.

• Republic vs. Mega Pacific eSolutions, Inc., 788 Phil. 160 (2016) — Cited in the context of Bruel's liability, supporting the principle that performance of contractual duties does not negate fraud already perpetrated.

• Spouses Yusay vs. Court of Appeals, 662 Phil. 634 (2011) — Cited for the principle that no rights can be conferred by or inferred from a resolution, which is but an embodiment of what the lawmaking body has to say in light of attendant circumstances.

• Section 3(e), Republic Act No. 3019 (Anti-Graft and Corrupt Practices Act) — Penalizes causing undue injury to any party, including the Government, or giving any private party unwarranted benefits, advantage, or preference in the discharge of official administrative or judicial functions through manifest partiality, evident bad faith, or gross inexcusable negligence. Applied to convict Estregan and Bruel and to acquit the SB members.

• Republic Act No. 9184 (Government Procurement Reform Act), Section 5(h) — Defines "Goods" to include all items, supplies, materials, and general support services, including non-personal or contractual services, needed in the transaction of public business. Applied to classify the insurance MOA as goods requiring procurement under the Act.

• IRR of Republic Act No. 9184, Rule IV, Section 10 and Rule XVI, Section 53 — Mandates that all procurement shall be done through competitive bidding except as provided in Rule XVI on alternative methods. Applied to hold that the immediate resort to negotiated procurement was improper because none of the exceptional cases (two failed biddings, emergency cases, etc.) obtained.

• Presidential Decree No. 612 (Insurance Code), Section 2(2) — Defines "doing an insurance business" to include doing or proposing to do any business in substance equivalent to insurance in a manner designed to evade the Code. Applied to hold that FRCV was transacting insurance business despite not being licensed, and that the MOA was a contract of insurance.

• 2018 Revised Internal Rules of the Sandiganbayan, Rule IX, Section 1(a) — Provides that appeal to the Supreme Court in criminal cases decided by the Sandiganbayan in the exercise of its original jurisdiction shall be by notice of appeal. Applied to hold that accused-appellants availed of the correct mode of appeal, prevailing over P.D. No. 1606.

Gesmundo, C.J. (Chairperson), Hernando, Zalameda, and Marquez, JJ., concurred.