People vs. Lupoyon

Section 3(e) of Republic Act No. 3019 is a multimodal offense whose second element (causing undue injury or granting unwarranted benefits) comprises two distinct and separate acts, and whose third element (manifest partiality, evident bad faith, or gross inexcusable negligence) comprises three distinct modes — such that an accused can be convicted only under the specific act and mode alleged in the Information, and the prosecution must prove undue injury as actual, quantified loss beyond reasonable doubt, which does not necessarily follow from mere non-compliance with government procurement laws.

The accused-appellants were all officials of the Municipality of Barlig, Mountain Province: Magdalena K. Lupoyon served as municipal mayor, Albert T. Marafo as municipal treasurer, Danilo R. Lucas as municipal engineer, and Edmundo C. Sidchayao, Clark C. Ngaya, and Fernando Y. Cablog as sangguniang bayan members (with Sidchayao also serving as vice-mayor). During the 1990s, GMA Network, Inc. and ABS-CBN Broadcasting Corporation constructed relay antennae atop Mount Amuyao within Barlig's jurisdiction, with the free and prior informed consent of the Balangao community exercising ancestral domain over the area. In consideration for that consent, both companies donated funds to the Barlig LGU for municipal infrastructure projects — GMA donating PHP 144,760.00 for a pathway and view deck, and ABS-CBN donating PHP 3 million for an open gymnasium — with both deeds of donation stipulating that the funds be deposited in the LGU's trust fund account. The legal framework governing the case includes Section 3(e) of Republic Act No. 3019 (Anti-Graft and Corrupt Practices Act), which penalizes public officers who cause undue injury or grant unwarranted benefits through manifest partiality, evident bad faith, or gross inexcusable negligence, and Section 10 of Republic Act No. 9184 (Government Procurement Reform Act), which requires public bidding for government procurement.

Sometime during the 1990s, GMA Network, Inc. and ABS-CBN Broadcasting Corporation constructed relay antennae atop Mount Amuyao, within the Municipality of Barlig, Mountain Province, with the free and prior informed consent of the Balangao community exercising ancestral domain over the area. In consideration for that consent, the companies donated funds to the Barlig LGU for infrastructure projects. On July 31, 2007, GMA donated PHP 144,760.00 for the construction of a pathway and view deck using indigenous materials, and on January 12, 2009, ABS-CBN donated PHP 3 million for the construction of an open gymnasium. Marafo, as municipal treasurer, signed both instruments of donation on behalf of the Barlig LGU; Lucas, as municipal engineer, also signed the GMA agreement; and Lupoyon, as municipal mayor, signed the ABS-CBN deed of donation as a witness. Both deeds stipulated that the donated funds be deposited in the LGU's trust fund account, and the amounts were initially deposited with the Land Bank of the Philippines.

The LGU implemented both projects without undergoing public bidding. Lupoyon testified that public bidding was dispensed with to maximize the donated amounts by avoiding contractor's profit and withholding taxes, and by facilitating the utilization of labor from Barlig residents, some of whom were willing to work for free. The Pathway Project was implemented directly by the LGU in June 2009, with laborers from the Balangao ancestral domain conducting clearing and construction operations under the supervision of Ophelia Witawit, a village elder and Lupong Tagapamayapa member. Marafo paid the laborers directly after issuing them community tax certificates, and a total of PHP 55,000.00 was actually spent. Cablog and Ngaya witnessed the payment of wages.

On May 22, 2009, the Barlig municipal council — including Sidchayao, Ngaya, and Cablog — authorized Lupoyon and Marafo to transfer the ABS-CBN donation to the LGU's account with the Philippine National Bank and to withdraw amounts needed for the Open Gym Project. Marafo transferred PHP 3,324,890.00, representing the full ABS-CBN donation and part of the GMA donation, and cancelled the original official receipts upon Lupoyon's instruction. Lupoyon justified the transfer on the ground that the funds were outside state audit jurisdiction because they were donated by private entities. The LGU directly implemented the Open Gym Project from June to December 2009, utilizing local labor and sourcing materials directly. Lucas, as municipal engineer, evaluated and submitted the Program of Works prepared by foreman Rogelio Abalos. Lupoyon and Marafo withdrew and disbursed a total of PHP 2.5 million from the ABS-CBN fund without procurement processes, with some disbursements made or witnessed by Sidchayao, Cablog, and Ngaya. Ngaya also executed a certification assuming responsibility for payments made to his brother, Warren Ngaya, who received PHP 71,100.00 for hauling construction materials. The Open Gym was completed on December 23, 2009.

During a routine cash audit, state auditors discovered the withdrawal of donated amounts from the trust fund and the implementation of both projects without public bidding. On July 5, 2009, State Auditor III Esther F. Daoas issued Audit Observation Memorandum No. 09-003, noting that the transfer of donated funds from the LBP trust fund account to the PNB account appeared to be a deliberate attempt to bring the funds out of state audit jurisdiction. Lupoyon replied on July 14, 2009, admitting that the disbursement would not follow government procedures, to avoid the 10% contractor's profit and the long bidding process, and to access local labor. The COA issued a Notice of Suspension for the PHP 2.5 million disbursed for the Open Gym Project and disallowed several amounts for failure to submit required documents, failure to pay taxes, and erroneous or unsupported payments. On November 10, 2010, former councilor Jeb Constancio, Ayson Naulgan, and Albert Kiwan filed a complaint before the Office of the Ombudsman. On August 10, 2015, the OMB found probable cause to charge the accused-appellants, and two Informations were filed on March 21, 2016. The Sandiganbayan found Lupoyon and Marafo guilty of two counts and the remaining four accused guilty of one count of violation of Section 3(e) of Republic Act No. 3019, sentencing each to six years and one month to eight years imprisonment with perpetual disqualification. The Sandiganbayan predicated its finding of undue injury solely on the lack of public bidding, and found conspiracy among all accused based on their collective acts of transferring funds, signing documents, and participating in disbursements.

• Defective Allegation of Modes: Petitioners argued that the Sandiganbayan erred in finding them guilty through manifest partiality, evident bad faith, and gross inexcusable negligence, when manifest partiality was not alleged in the Informations and evident bad faith and gross inexcusable negligence were not duly proven.
• Unproven Undue Injury: Petitioners maintained that the Sandiganbayan found undue injury solely on the basis of the lack of public bidding, despite the prosecution's failure to prove actual loss or damage to the government, and that mere non-conduct of public bidding does not establish undue injury.
• Conviction Under Uncharged Act: Petitioners argued that the Sandiganbayan erred in convicting them for granting unwarranted benefits, when the Informations alleged only causing undue injury, thus violating their constitutional right to be informed of the nature and cause of the accusation.
• Lack of Conspiracy: Petitioners contended that conspiracy was not established, given evidence showing the limited participation of Sidchayao, Ngaya, Cablog, and Lucas in the implementation of the questioned projects.
• Pending Audit: Lupoyon further argued that the audit of the questioned projects was still underway when the Informations were filed and remained pending during trial, and that the COA ultimately lifted the suspension of the amounts disbursed for the Open Gym Project after finding that the whole ABS-CBN donation was actually spent thereon.

• All Elements Present: Respondent countered that all elements of the offense defined in Section 3(e) of Republic Act No. 3019 were present, and that the Sandiganbayan's conviction should be affirmed.
• Admitted Consensus: Respondent argued that Lupoyon openly admitted that the joint decision of the mayor and sangguniang bayan was to take the donated funds out of the LGU trust fund account and to implement the questioned projects without public bidding, and that Lucas, Marafo, Sidchayao, Ngaya, and Cablog implemented this consensus by actually moving the donated funds and participating in the projects despite the lack of bidding.

• Multimodal Nature of Section 3(e): Whether the accused-appellants could be convicted of granting unwarranted benefits when the Informations charged only causing undue injury.
• Proof of Undue Injury: Whether the prosecution proved undue injury to the government beyond reasonable doubt, given that it relied solely on the lack of public bidding without establishing actual loss.
• Proof of Evident Bad Faith and Gross Inexcusable Negligence: Whether the prosecution proved evident bad faith and gross inexcusable negligence, and whether the Sandiganbayan erred in finding manifest partiality when it was not alleged in the Informations.
• Conspiracy: Whether conspiracy was established among all accused-appellants to implement the questioned projects without public bidding.

• Multimodal Nature of Section 3(e): No. The accused-appellants could not be convicted of granting unwarranted benefits because the Informations charged only causing undue injury; causing undue injury and granting unwarranted benefits are distinct and separate acts requiring different defenses and proof.
• Proof of Undue Injury: No. Undue injury was not proven beyond reasonable doubt, as the prosecution failed to identify or estimate the most advantageous cost the projects would have achieved through public bidding; mere lack of public bidding does not establish actual loss.
• Proof of Evident Bad Faith and Gross Inexcusable Negligence: No. The accused-appellants' actions, though legally erroneous, were not animated by fraudulent intent or corrupt purpose; the Sandiganbayan also erred in finding manifest partiality, which was not alleged in the Informations.
• Conspiracy: N/A. The Court did not reach the issue of conspiracy, having already found that the elements of the offense were not established.

• Multimodal Nature of Section 3(e): Section 3(e) of Republic Act No. 3019 is a multimodal offense: its second element contemplates two distinct acts (causing undue injury or granting unwarranted benefits), and its third element lists three distinct modes (manifest partiality, evident bad faith, or gross inexcusable negligence), yielding at least six distinct ways of committing the offense. Because an accused's constitutional right to be informed of the nature and cause of the accusation requires that the specific act and mode be alleged in the Information, conviction may be obtained only under what has been charged. The Informations here charged the accused-appellants solely with "causing undue injury to the Municipality of Barlig," to the exclusion of granting unwarranted benefits. Since causing undue injury and granting unwarranted benefits are two distinct and separate acts necessitating different defenses and forms of proof, the Sandiganbayan erred in convicting the accused-appellants on the basis of granting unwarranted benefits — an act not alleged and which the prosecution did not even attempt to prove. This principle follows from Villarosa vs. People, which held that alleging only one modality necessarily excludes those not mentioned, and applies equally to the acts constitutive of the second element.

• Proof of Undue Injury: Jurisprudence consistently interprets "undue injury" under Section 3(e) as "actual damage," akin to the civil law concept under Article 2199 of the Civil Code. The undue injury must be specified, quantified, and proven beyond reasonable doubt; it cannot be presumed or based on speculation, conjecture, or guesswork. The Sandiganbayan deduced undue injury solely from the lack of public bidding, ruling that the LGU lost the opportunity to implement the projects at a most advantageous cost. However, the prosecution never identified or estimated such most advantageous cost — there was nothing in the records to show that the projects would have been implemented at a lower cost through regular procurement. As held in Sabaldan vs. Office of the Ombudsman, a violation of procurement laws does not automatically establish the elements of Section 3(e); it must be shown that the violation caused undue injury or granted unwarranted benefits. In Renales vs. People, the Court reversed a Sandiganbayan conviction where the prosecution failed to canvass and compare prices to prove overpricing. Similarly, here, the State's failure to provide a reference price for the bid-compliant cost engenders serious doubt as to the existence of undue injury. Both projects were completed using the donated funds, and the COA-Mountain Province itself admitted that the suspensions did not involve pecuniary loss to the government. An audit suspension or disallowance can be based on lack of necessity, excessiveness, or unconscionability — not only illegality — and thus does not automatically indicate pecuniary loss.

• Proof of Evident Bad Faith and Gross Inexcusable Negligence: Evident bad faith pertains to a palpably and patently fraudulent and dishonest purpose to do moral obliquity or conscious wrongdoing for some perverse or ill will, while gross inexcusable negligence is characterized by the want of even the slightest care, willfully and intentionally, with conscious indifference to consequences. The Sandiganbayan's finding of these modalities, grounded solely on the lack of public bidding, finds no basis in law or evidence. Macairan vs. People holds that the absence of public bidding does not automatically equate to evident bad faith and manifest partiality; the guilt of an accused must be determined through the lens of the anti-graft law, not the procurement law. The prosecution adduced no proof of fraudulent or mala fide purpose. Lupoyon openly admitted that she proceeded on the basis of her opinion that donated funds remained private in character and outside state audit jurisdiction, and that she skipped bidding to avoid the 10% contractor's profit. These justifications, though legally erroneous, do not rise to the level of fraud, corruption, or gross inexcusable negligence. The accused-appellants adopted a well-intentioned but misguided measure to cut costs and maximize the donated funds, which were used solely for their intended purpose. Furthermore, the Sandiganbayan erred in finding manifest partiality, as this modality was not alleged in the Informations, following Villarosa.

• Conspiracy: The Court did not separately rule on conspiracy, having determined that the prosecution failed to establish the elements of undue injury and the requisite mental states. Without proof of the substantive offense, the finding of conspiracy could not sustain the convictions.

• Multimodal Nature of Section 3(e) of Republic Act No. 3019 — Section 3(e) is a multimodal offense because its second element contemplates two distinct acts (causing undue injury to any party, including the Government; or giving any private party unwarranted benefits, advantage, or preference) and its third element lists three distinct modes (manifest partiality, evident bad faith, or gross inexcusable negligence), yielding at least six distinct ways of committing the offense. The specific act and mode must be alleged in the Information; an accused cannot be convicted under an act or mode not charged, as this would violate the constitutional right to be informed of the nature and cause of the accusation. The principle that alleging only one modality excludes those not mentioned applies equally to the acts constitutive of the second element, because causing undue injury and granting unwarranted benefits are two distinct and separate acts necessitating different defenses and forms of proof.

• Undue Injury as Actual Damage — Undue injury under Section 3(e) is consistently interpreted as "actual damage," akin to the civil law concept of actual or compensatory damages under Article 2199 of the Civil Code. It cannot be presumed even after a violation of a right has been established; its existence must be specified, quantified, and proven beyond reasonable doubt. Mere non-compliance with government procurement regulations does not necessarily establish actual loss. The prosecution must prove that the government could have obtained the project at a lower cost through competitive bidding, and a COA suspension or disallowance — which may be based on lack of necessity, excessiveness, or unconscionability — does not automatically indicate pecuniary loss.

• Distinction Between Procurement Law Violations and Graft — A violation of government procurement laws (Republic Act No. 9184) does not automatically establish the elements of Section 3(e) of Republic Act No. 3019. The absence of public bidding does not automatically equate to evident bad faith or manifest partiality. The prosecution must independently prove that the procurement violation caused undue injury or granted unwarranted benefits, and that the accused acted with the requisite mental state. Acquittal under Section 3(e) does not condone procurement irregularities, which may be separately prosecuted under the penal clause of Republic Act No. 9184.

• "Section 3(e) of Republic Act No. 3019 is a multimodal offense, in that its second element contemplates two distinct acts and its third element lists three distinct modes of committing such acts." — This passage articulates the canonical formulation of the multimodal character of Section 3(e), establishing the framework for determining what must be alleged in an Information and what the prosecution must prove.

• "causing undue injury and granting unwarranted benefits are two distinct and separate acts which necessitate different defenses and forms of proof" — This defines the separateness of the two punishable acts under the second element, explaining why an accused cannot be convicted of one when charged only with the other.

• "In jurisprudence, 'undue injury' is consistently interpreted as 'actual damage.'" — This states the controlling definition of undue injury under Section 3(e), equating it with actual or compensatory damages and requiring specification, quantification, and proof beyond reasonable doubt rather than presumption from a procurement violation.

• "The demand for accountability should not be at the expense of well-meaning public officials who may have erred in the performance of their duties but have done so without a criminal mind. Our penal laws against corruption in the government are meant to enhance, and not stifle, public service. If every mistake, error, or oversight is met with criminal punishment, then qualified individuals would be hindered in serving in the government." — This passage, quoted from Martel vs. People, articulates the policy rationale for requiring proof of fraudulent intent in graft prosecutions and cautioning against weaponizing every governmental misstep.

• Villarosa vs. People, 875 Phil. 270 (2020) — Controlling authority on the requirement that the specific modality of violating Section 3(e) must be alleged in the Information; alleging only one modality excludes those not mentioned. The Court extended this principle to the acts constitutive of the second element (causing undue injury vs. granting unwarranted benefits).

• Renales vs. People, 904 Phil. 456 (2021) — Controlling authority defining undue injury as actual damage requiring specification, quantification, and proof beyond reasonable doubt. The Court applied its holding to reverse the Sandiganbayan's conviction, which was based solely on the lack of public bidding without proof of actual loss.

• Cabrera vs. Sandiganbayan, 484 Phil. 350 (2004) — Followed for the proposition that there are two ways of violating Section 3(e) — by causing undue injury or by granting unwarranted benefits — and that the accused may be charged under either mode or both.

• Macairan vs. People, 899 Phil. 75 (2021) — Followed for the principle that the absence of public bidding does not automatically equate to evident bad faith and manifest partiality, and that guilt must be determined through the lens of the anti-graft law, not the procurement law.

• Martel vs. People, 895 Phil. 270 (2021) — Followed for the principle that acquittal under Section 3(e) despite procurement violations should not be viewed as condoning procurement irregularities, which may be prosecuted under the penal clause of Republic Act No. 9184, and that penal laws against corruption should not stifle public service by punishing well-meaning officials who err without a criminal mind.

• Sabaldan vs. Office of the Ombudsman, 874 Phil. 144 (2020) — Followed for the principle that a violation of procurement laws does not automatically establish the elements of Section 3(e); it must be shown that the procurement violation caused undue injury or granted unwarranted benefits, and that the accused acted with the requisite mental state.

• Bautista vs. Sandiganbayan, 387 Phil. 872 (2000) — Followed for the interpretation of the disjunctive term "or" in Section 3(e), connoting that either causing undue injury or granting unwarranted benefits qualifies as a violation.

• Section 3(e), Republic Act No. 3019 (Anti-Graft and Corrupt Practices Act), as amended — Defines and penalizes the offense of which the accused-appellants were charged. The Court analyzed its three elements: (1) the accused is a public officer; (2) 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; and (3) the act was done through manifest partiality, evident bad faith, or gross inexcusable negligence. The Court held that the second element comprises two distinct acts and the third element comprises three distinct modes, making Section 3(e) a multimodal offense requiring specific allegation and proof of the particular act and mode charged.

• Section 10, Republic Act No. 9184 (Government Procurement Reform Act) — Requires public bidding for government procurement. The Informations alleged that the accused-appellants violated Section 3(e) of Republic Act No. 3019 by implementing the projects without public bidding as required under this provision. The Court noted that while the accused-appellants may have violated procurement law, this alone does not establish the elements of graft under Section 3(e).

• Sections 305(d) and 309(a), Local Government Code — Cited by the Sandiganbayan as having been violated when Lupoyon and Marafo moved the GMA funds out of the LGU trust fund account. The Supreme Court did not rest its ruling on these provisions but noted them in recounting the Sandiganbayan's findings.

• Article 2199, Civil Code — Defines actual or compensatory damages as adequate compensation only for such pecuniary loss suffered as has been duly proved. The Court cited this provision in equating "undue injury" under Section 3(e) with the civil law concept of actual damage, requiring that the loss be specified, quantified, and proven with a reasonable degree of certainty rather than presumed.

Inting, J., and Dimaampao, J., concurred. Caguioa (Chairperson), J., wrote a concurring opinion, the text of which was not included in the provided case material. Singh, J., was on official business.