Sarion vs. People

A municipal mayor who approves the disbursement of public funds for contract price escalation without a specific appropriation therefor and without complying with the procedural requirements of R.A. No. 9184 — prior NEDA determination of extraordinary circumstances and GPPB approval — is guilty of malversation of public funds through gross negligence and of violation of Section 3(e) of R.A. No. 3019 for causing undue injury to the government through gross inexcusable negligence. The Arias doctrine does not shield a head of office who disregards circumstances that should have alerted him to exercise a higher degree of circumspection before approving a disbursement.

Tito S. Sarion served as Municipal Mayor of Daet, Camarines Norte, and in that capacity entered into a Contract Agreement with Markbilt Construction on December 29, 2003 for the Phase II construction of the Daet Public Market for ₱71,499,875.29, to be completed within 365 calendar days. The contract contained a price escalation clause (Clause No. 4) referencing implementing rules on adjustment of contract prices. R.A. No. 9184 (Government Procurement Reform Act), which took effect on January 26, 2003, had superseded P.D. No. 1594 and governed procurement at the time of the contract; its Section 61 expressly prohibited price escalation during contract implementation except under extraordinary circumstances determined by NEDA and upon prior approval of the GPPB. Sarion's term as mayor was interrupted when Elmer Panotes won the May 2004 elections, but Sarion was re-elected in the 2007 local elections, after which Markbilt's previously unacted-upon claim for price escalation was processed and paid.

On December 29, 2003, Tito S. Sarion, in his capacity as Municipal Mayor of Daet, Camarines Norte, entered into a Contract Agreement with Markbilt Construction, represented by its General Manager Billy Aceron through attorney-in-fact Architect Romeo B. Itturalde, for the Phase II construction of the Daet Public Market for ₱71,499,875.29, to be completed within 365 calendar days. The contract included Clause No. 4, which stated that implementing rules and guidelines regarding adjustment of contract prices adopted and approved by the Government would apply. On January 5, 2005, Sarion approved a Notice to Commence Work authorizing Markbilt to begin construction on the tenth day from receipt. Construction thereafter proceeded.

During the May 2004 national and local elections, Elmer E. Panotes was elected Municipal Mayor, replacing Sarion. On December 4, 2005, Markbilt, through its engineer Carlito A. Torero, wrote to Mayor Panotes requesting verification and proper evaluation of attached monthly computations of variation in the prices of materials. The project was completed sometime in 2006. On November 13, 2006, Markbilt wrote to Mayor Panotes requesting processing and payment of contract price escalation amounting to ₱5,222,903.75. Panotes refused to act on the demand and continued to do so until the end of his term in June 2007.

In the 2007 local elections, Sarion was re-elected as Municipal Mayor. On January 21, 2008, Markbilt reiterated its request for payment of price escalation, followed by another letter dated February 7, 2008, informing Sarion that it would impose 15% interest per annum on its claim. Sarion instructed Municipal Administrator Elmer Nagera to look for sources of fund to satisfy Markbilt's claim, which led to the creation of Supplemental Budget No. 1. After it was signed by Municipal Budget Officer Amelia P. Laborte and approved by Nagera on Sarion's authority, Supplemental Budget No. 1 was submitted to the Sangguniang Bayan. On March 6, 2008, the Sangguniang Bayan passed Resolution No. 063 unanimously approving Supplemental Budget No. 1-2008, appropriating ₱11,222,088.00 of the municipality's internal revenue allotment, of which ₱4,400,000.00 was allotted under the Special Account for "Construction of Market." Sarion approved the resolution. On April 14, 2008, Markbilt again reiterated its demand.

After Laborte certified the existence of available appropriation, Nagera prepared Obligation Request No. 100-08-03-402 certifying that the charges were necessary, lawful, and under his direct supervision, and that the supporting documents were valid, proper, and legal. Nagera then issued Disbursement Voucher No. 08041239 for ₱1,000,000.00 payable to Markbilt as partial satisfaction of its price escalation claim. Municipal Accountant Caroline Maisie Robles, concerned about the applicability of R.A. No. 9184, consulted the Commission on Audit Auditor assigned to the municipality, who advised seeking the opinion of the Municipal Legal Officer. Municipal Legal Officer Edmundo Deveza II opined, on the basis of P.D. No. 1594, that there was no reason to refuse payment. On April 21, 2008, Robles certified the supporting documents complete and the allotment available; Municipal Treasurer Arlyn O. Aberia certified that funds were available; and Sarion approved the release. On April 24, 2008, Markbilt received ₱1,000,000.00 through Landbank Check No. 0272388, evidenced by Official Receipt No. 1156. On June 17, 2008, the Sangguniang Panlalawigan of Camarines Norte approved Resolution No. 229-2008 declaring Supplemental Budget No. 1-2008 operative.

On November 27, 2008, Zenaida Baluca, a resident of Daet, filed a complaint against Sarion before the Deputy Ombudsman for Luzon charging him with violation of Section 3(e) of R.A. No. 3019. After investigation, Sarion was charged in two separate Informations with violation of Section 3(e) of R.A. No. 3019 and malversation of public funds under Article 217 of the RPC. He was arraigned on September 2, 2011 and pleaded not guilty. The Sandiganbayan found that the certificates attesting to availability of funds were irregular, that Appropriation Ordinance No. 1 did not allocate funds for price escalation, and that no NEDA determination or GPPB approval had been obtained prior to payment. It convicted Sarion of both offenses.

• Malversation Elements Not Established: Petitioner argued that the elements of official custody or control of funds and accountability therefor, and the act of misappropriation, were not proved. He claimed there were prior certifications for availability of funds before he signed the disbursement voucher, and that these were not irregular because Supplemental Budget No. 1, approved by the Sangguniang Bayan, provided for appropriation of ₱1,000,000.00 in favor of Markbilt.
• No Custody or Control: Petitioner asserted that he had no custody or control over the amount paid to Markbilt.
• Compliance Responsibility Belongs to Contractor: Petitioner argued that the responsibility of ensuring that the requirements of Section 61 of R.A. No. 9184 are met does not belong to him but to Markbilt, and that even if such responsibility were his, failure to comply should not be penalized because the law does not provide any penal sanctions.
• Reliance on Legal Opinion and Good Faith: Petitioner submitted that he had the right to rely upon the legal opinion of the Municipal Legal Officer, which is presumed regular, and that he acted in good faith — a valid defense in malversation as it indicates the absence of criminal intent. He invoked the Arias vs. Sandiganbayan doctrine, claiming he merely relied in good faith on the opinion of subordinates, the certifications of local officials, and the presumed validity of Appropriation Ordinance No. 1.
• Insufficiency of the Information: Petitioner contended that the Information alleged the "absence" of, not the "infirmity" in, the certificate of availability of funds, and that this discrepancy should preclude conviction.
• Section 3(e) Elements Not Established: Petitioner argued that not all elements of violation of Section 3(e) of R.A. No. 3019 were proved by the prosecution beyond reasonable doubt.

• Malversation: Whether the Sandiganbayan erred in convicting the petitioner of malversation of public funds under Article 217 of the RPC when not all the elements thereof were proved by the prosecution beyond reasonable doubt.
• Section 3(e) of R.A. No. 3019: Whether the Sandiganbayan erred in convicting the petitioner of violation of Section 3(e) of R.A. No. 3019 when not all the elements thereof were proved by the prosecution beyond reasonable doubt.
• Arias Doctrine: Whether the Arias doctrine applies to exculpate the petitioner from liability.
• Sufficiency of the Information: Whether the Information sufficiently alleged the offense charged, notwithstanding its reference to the "absence" rather than "infirmity" of the certificate of availability of funds.

• Malversation: No. All four elements of malversation under Article 217 of the RPC were established: petitioner was a public officer, had custody and control of public funds by reason of his office, the funds were public funds for which he was accountable, and through gross inexcusable negligence he permitted Markbilt to take funds to which it was not entitled.
• Section 3(e) of R.A. No. 3019: No. The petitioner, a public officer discharging administrative functions, acted with gross inexcusable negligence in approving the disbursement without complying with R.A. No. 9184, causing undue injury to the Municipality of Daet in the amount of ₱1,000,000.00 and giving Markbilt an unwarranted benefit.
• Arias Doctrine: No. The Arias doctrine is not absolute and cannot be invoked when circumstances should have alerted the head of office to exercise a higher degree of circumspection, as was the case here.
• Sufficiency of the Information: The Information sufficiently alleged the offenses charged. The absence of certification as to the availability of or source of funds pertaining specifically to price escalation rendered the escalation clause void and the petitioner's approval of the disbursement voucher invalid; alternatively, the Informations clearly alleged the failure to obtain GPPB approval and NEDA determination, which independently established the elements of both offenses.

• Malversation: The four elements of malversation under Article 217 of the RPC are: (a) the offender is a public officer; (b) he had custody or control of funds or property by reason of the duties of his office; (c) those funds or property were public funds or property for which he was accountable; and (d) he appropriated, took, misappropriated, or consented, or through abandonment or negligence, permitted another person to take them. The first element was satisfied because Sarion was the Municipal Mayor of Daet. The second and third elements were satisfied because Section 340 of the Local Government Code provides that any officer of the local government unit whose duty permits or requires the possession or custody of local government funds shall be accountable and responsible for the safekeeping thereof, and that other local officials may likewise be held accountable through their participation in the use or application of public funds. P.D. No. 1445 (Government Auditing Code) further provides that municipal mayors are immediately and primarily responsible for all government funds and property pertaining to their municipality. The funds paid to Markbilt formed part of the internal revenue allotment of the Municipality of Daet and were under the collective custody of municipal officials who had to act together to disburse the funds. As a required standard procedure, any disbursement or release of funds required Sarion's approval as Mayor; payment was released only after his signature on the disbursement voucher and the corresponding Landbank check. The fourth element was satisfied because Sarion, through gross inexcusable negligence, permitted Markbilt to receive partial payment of price escalation despite not being entitled thereto. By signing the disbursement voucher, he certified to the correctness of the entries therein and warranted that the expenses were necessary and lawful, the supporting documents were complete, and the availability of cash was assured. The payment of price escalation was not supported by an appropriation: the original contract price of ₱71,499,875.29 was the only appropriation, and the escalation clause in the Contract Agreement did not provide a source of funds. Supplemental Budget No. 1, on its face, appropriated funds for "Construction of Market" — referring to future works, not past work performed — and could not be stretched to cover price escalation on completed works. Malversation may be committed by means of culpa (negligence), as when the offender knowingly allowed another to misappropriate public funds or property, or through negligence permitted another to take them.

• Section 3(e) of R.A. No. 3019: The elements are: (a) the accused is a public officer discharging administrative, judicial, or official functions; (b) he acted with manifest partiality, evident bad faith, or gross inexcusable negligence; and (c) his action caused undue injury to any party, including the government, or gave any private party unwarranted benefits, advantage, or preference. The first element was satisfied as Sarion was Municipal Mayor performing administrative functions. The second element was satisfied because Sarion committed a flagrant and palpable breach of duty tantamount to gross inexcusable negligence, defined as the want of even slight care, acting or omitting to act in a situation where there is a duty to act, willfully and intentionally with a conscious indifference to consequences. As signatory to the Contract Agreement, he was presumed to know its contents, including that it provided only a single appropriation with no separate funding for price escalation. Upon receiving Markbilt's demand, prudence dictated that he first verify the propriety of the claim and whether it satisfied the requirements of applicable laws, particularly Section 61 of R.A. No. 9184, which requires prior NEDA determination of extraordinary circumstances and GPPB approval before price escalation may be authorized and paid. No such determination or approval was obtained, as confirmed by a NEDA Certification dated July 25, 2012 stating it had not received any request from the Municipality of Daet. The third element was satisfied because the unauthorized release of ₱1,000,000.00 of public funds constituted undue injury to the Municipality of Daet, established as actual damage caused by Sarion's questioned conduct.

• Arias Doctrine: The Arias doctrine holds that heads of offices have to rely to a reasonable extent on their subordinates and on the good faith of those who prepare bids, purchase supplies, or enter into negotiations. However, the doctrine is not absolute and cannot be used as a magic cloak to escape liability. When circumstances should have alerted heads of offices to exercise a higher degree of circumspection, they cannot invoke the doctrine and are expected to exercise more diligence and go beyond what their subordinates have prepared. In this case, several circumstances should have alerted Sarion: two years had passed since the project's completion and more than three years since the first demand for price escalation; his predecessor, Mayor Panotes, had refused to act on the claim; the majority of the project was undertaken and completed prior to his re-election; the original contract price had already been fully released; Markbilt's demand was over and beyond the contract price and dependent upon the cost of materials almost three years past; and the amount involved millions of pesos of public funds. Instead of verifying the propriety of Markbilt's claim — for example, by consulting the Municipal Engineer or referring the documents to appropriate officials for study — Sarion immediately instructed Administrator Nagera to look for sources of funds. Likewise, the presumption of regularity obtains only when there is no deviation from the regular performance of duty; where the official act is irregular on its face, no presumption of regularity can arise.

• Sufficiency of the Information: An Information is sufficient when it states the designation of the offense and the acts or omissions constituting the offense charged, such that the accused is duly informed and able to prepare a defense. The Sandiganbayan had held that despite the funding issue, the petitioner could not be held culpable because the Information alleged the "absence of, not the infirmity in, the certificate of availability of funds." The Court disagreed: it is the absence of certification as to the availability of or source of funds pertaining specifically to the payment of price escalation that rendered the escalation clause void and the petitioner's approval of the disbursement voucher invalid. This irregularity translated to gross negligence, satisfying the elements of malversation. Moreover, even assuming arguendo that the failure to use the word "infirmity" instead of "absence" constituted a violation of the petitioner's right to information, the petitioner could nonetheless be convicted of both offenses through his approval of the disbursement voucher without GPPB approval and NEDA determination, as clearly alleged in both Informations.

• Elements of Malversation under Article 217 of the RPC — The elements common to all acts of malversation are: (a) the offender is a public officer; (b) he had custody or control of funds or property by reason of the duties of his office; (c) those funds or property were public funds or property for which he was accountable; and (d) he appropriated, took, misappropriated, or consented, or through abandonment or negligence, permitted another person to take them. Malversation may be committed intentionally (dolo) or by means of negligence (culpa). The Court applied all four elements to Sarion: as Municipal Mayor, he was a public officer with custody and control over municipal funds by virtue of Section 340 of the LGC and Section 102 of P.D. No. 1445; the funds were public; and through gross negligence in approving the disbursement voucher without proper appropriation, he permitted Markbilt to take funds to which it was not entitled.

• Arias Doctrine — Limitations — The Arias doctrine, originating from Arias vs. Sandiganbayan (259 Phil. 794 [1989]), holds that heads of offices have to rely to a reasonable extent on their subordinates and on the good faith of those who prepare bids, purchase supplies, or enter into negotiations. However, it is not an absolute rule and cannot be used as a magic cloak to escape liability. When circumstances should have alerted heads of offices to exercise a higher degree of circumspection, they are expected to exercise more diligence and go beyond what their subordinates have prepared. The Court found that multiple red-flag circumstances — the passage of time, the predecessor's refusal to act, the completion of the project before Sarion's re-election, the full release of the original contract price, and the magnitude of the claim — should have prompted Sarion to inquire further before approving the disbursement.

• Presumption of Regularity — Limitation — The presumption of regularity obtains only when there is no deviation from the regular performance of duty. Where the official act in question is irregular on its face, no presumption of regularity can arise. The Court applied this principle to reject Sarion's reliance on the Municipal Legal Officer's opinion and the certifications of subordinate officials, because the underlying transaction was itself irregular — lacking a specific appropriation for price escalation and failing to comply with R.A. No. 9184 requirements.

• Requirement of Appropriation Before Disbursement of Public Funds — No contract involving the expenditure of public funds shall be entered into unless there is an appropriation therefor which is sufficient to cover the proposed expenditure (Section 85, P.D. No. 1445). No revenue funds shall be paid out of the public treasury except in pursuance of an appropriation law or specific statutory authority (Article VI, Section 29(1), Constitution; Section 305(a), LGC; Section 84, P.D. No. 1445). A contract entered into contrary to these requirements is void (Section 87, P.D. No. 1445). The Court held that the only appropriation was the original contract price of ₱71,499,875.29; the price escalation clause did not provide a source of funds and was therefore void and unenforceable. Supplemental Budget No. 1, which appropriated funds for "Construction of Market," did not cover price escalation on completed works.

• Price Escalation Requirements under R.A. No. 9184 — Under Section 61 of R.A. No. 9184, all bid prices for a given scope of work are considered fixed and not subject to price escalation during contract implementation, except under extraordinary circumstances and upon prior approval of the GPPB. The implementing rules require: (1) a recommendation by the procuring entity of the existence of an extraordinary circumstance; (2) a determination by NEDA confirming the justification; and (3) approval by the GPPB. Only after GPPB approval may the payment be processed and released. The Court found that none of these steps were followed, as confirmed by a NEDA Certification that it had not received any request from the Municipality of Daet.

• Conclusiveness of Sandiganbayan Factual Findings in Rule 45 Review — In a petition for review on certiorari under Rule 45, the Court's review is limited to questions of law; the factual findings of the Sandiganbayan are conclusive upon the Court. Exceptions exist when: (1) the conclusion is grounded entirely on speculations, surmises, or conjectures; (2) the inference made is manifestly mistaken; (3) there is grave abuse of discretion; (4) the judgment is based on misapprehension of facts; or (5) the findings are premised on the absence of evidence and are contradicted by evidence on record. None of these exceptions obtained in this case.

• Elements of Section 3(e) of R.A. No. 3019 — The elements are: (a) the accused is a public officer discharging administrative, judicial, or official functions; (b) he acted with manifest partiality, evident bad faith, or gross inexcusable negligence; and (c) his action caused undue injury to any party, including the government, or gave any private party unwarranted benefits, advantage, or preference. "Gross inexcusable negligence" is the want of even slight care, acting or omitting to act in a situation where there is a duty to act, not inadvertently but willfully and intentionally with a conscious indifference to consequences. "Undue injury" is actual damage established by evidence as caused by the questioned conduct of the offender.

• "The Arias doctrine is not an absolute rule. It is not a magic cloak that can be used as a cover by a public officer to conceal himself in the shadows of his subordinates and necessarily escape liability." — This passage defines the limitation of the Arias doctrine, a frequently cited principle in anti-grraft jurisprudence, and establishes that heads of offices must exercise heightened circumspection when red-flag circumstances are present.

• "In the absence of evidence showing legislative intent of the Sangguniang Bayan to the contrary, the Court cannot stretch the meaning of the law. An appropriation may be used only for the specific purpose for which they are appropriated." — This articulates the principle that appropriations must be strictly construed according to their plain meaning and cannot be extended to cover purposes not expressly stated, a core doctrine in public fiscal administration.

• "It is the absence of certification as to the availability of or source of funds pertaining specifically to the payment of price escalation, that rendered the clause void and the subsequent approval by the petitioner of the disbursement voucher invalid." — This passage states the ratio decidendi on the sufficiency of the Information and the legal basis for holding the escalation clause void for lack of a specific appropriation.

• "Where the official act in question is irregular on its face, no presumption of regularity can arise." — This defines the boundary of the presumption of regularity in the performance of official duty, a principle central to the Court's rejection of Sarion's reliance on subordinate officials' certifications.

• Arias vs. Sandiganbayan, 259 Phil. 794 (1989) — Originating precedent for the doctrine that heads of offices may reasonably rely on subordinates. The Court distinguished and limited this doctrine, holding it inapplicable where circumstances should have alerted the petitioner to exercise greater circumspection.
• Rivera vs. People, 749 Phil. 124 (2014) — Clarified that the Arias doctrine is not absolute and cannot serve as a magic cloak for public officers to escape liability. The Court followed this clarification in holding Sarion liable despite his claimed reliance on subordinates.
• People vs. Alejandro, 671 Phil. 33 (2011) — Cited for the proposition that the presumption of regularity obtains only when there is no deviation from the regular performance of duty. Applied to reject Sarion's reliance on the Municipal Legal Officer's opinion.
• Zoleta vs. Sandiganbayan (Fourth Div.), 765 Phil. 39 (2015) — Cited for the principle that in petitions for review on certiorari before the Supreme Court, the Sandiganbayan's factual findings are conclusive, and for the elements of malversation. Followed by the Court.
• Manuel, et al. vs. Sandiganbayan, 681 Phil. 273 (2012) — Cited for the principle that public funds of a local government unit are under the collective custody of municipal officials who must act together to disburse them. Applied to establish Sarion's accountability as Municipal Mayor.
• Coloma, Jr. vs. Sandiganbayan, 744 Phil. 214 (2014) — Cited for the definition of "gross inexcusable negligence" under Section 3(e) of R.A. No. 3019. Applied to characterize Sarion's failure to verify the propriety of Markbilt's claim.
• Funa vs. Chairman Villar, 686 Phil. 571 (2012) — Cited for the plain meaning rule (verba legis non est recedendum). Applied in construing Appropriation Ordinance No. 1, which appropriated funds for "Construction of Market" and could not be stretched to cover price escalation on completed works.

• Article 217, Revised Penal Code (as amended by R.A. No. 10951) — Defines and penalizes malversation of public funds. The Court found all four elements satisfied and applied the penalty of prision mayor in its minimum and medium periods, given the amount of ₱1,000,000.00, with the Indeterminate Sentence Law yielding an indeterminate penalty of 2 years, 4 months, and 1 day of prision correccional (minimum) to 6 years and 1 day of prision mayor (maximum), plus a fine equal to the amount malversed and perpetual special disqualification.
• 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 through manifest partiality, evident bad faith, or gross inexcusable negligence. The Court found all three elements established and applied the penalty of 6 years and 1 month (minimum) to 8 years (maximum) of imprisonment, plus perpetual disqualification.
• Section 61, Republic Act No. 9184 (Government Procurement Reform Act) — Provides that bid prices are considered fixed and not subject to price escalation during contract implementation, except under extraordinary circumstances determined by NEDA and upon prior approval of the GPPB. The Court held that Sarion's failure to comply with this provision — no NEDA determination or GPPB approval was obtained — constituted gross inexcusable negligence.
• Section 340, Republic Act No. 7160 (Local Government Code) — Provides that any officer of a local government unit whose duty permits or requires the possession or custody of local government funds shall be accountable and responsible for the safekeeping thereof, and that other local officials may be held accountable through their participation in the use or application of public funds. Applied to establish Sarion's accountability as Municipal Mayor.
• Sections 85, 86, and 87, Presidential Decree No. 1445 (Government Auditing Code of the Philippines) — Section 85 prohibits entering into contracts involving expenditure of public funds without a sufficient appropriation. Section 86 requires a certificate from the proper accounting official showing appropriation and availability of funds before a contract may be entered into. Section 87 declares contracts entered into contrary to these requirements void and holds the entering officer liable. The Court applied these provisions to hold the price escalation clause void for lack of a specific appropriation and to establish Sarion's liability.
• Section 102, Presidential Decree No. 1445 — Provides that the head of any government agency is immediately and primarily responsible for all government funds and property pertaining to his agency. Applied in conjunction with Section 444(a) of the LGC to establish that as Municipal Mayor, Sarion was primarily responsible for municipal funds.
• Article VI, Section 29(1), 1987 Constitution — Provides that no money shall be paid out of the public treasury except in pursuance of an appropriation law. Cited as a constitutional basis for the requirement of appropriation before disbursement of public funds.
• Section 9(a), Republic Act No. 3019 — Prescribes the penalty for violation of Section 3(e): imprisonment for not less than 6 years and 1 month nor more than 15 years, plus perpetual disqualification from public office. Applied in imposing the indeterminate penalty.
• Section 100, Republic Act No. 10951 — Provides retroactive effect to the extent favorable to the accused. Applied in determining the proper penalty under the amended Article 217 of the RPC.

Carandang, J., and Zalameda, J., concurred.

• Caguioa, J. — Filed a dissenting opinion. The text of the dissent is not included in the provided case material, so the specific points of disagreement cannot be summarized from the source text. Chief Justice Peralta joined the dissent of Justice Caguioa.