The Supreme Court held that public officials cannot be held liable for violating Section 3(e) of Republic Act No. 3019 (Anti-Graft and Corrupt Practices Act) if they acted in good faith. This ruling protects officials who, without manifest partiality, evident bad faith, or gross inexcusable negligence, approved benefits and allowances based on existing regulations, even if those regulations were later deemed invalid. The decision underscores the importance of proving malicious intent in corruption cases involving the grant of benefits, ensuring that officials are not penalized for honest mistakes or reliance on seemingly valid policies.

Navigating the Murky Waters: Good Faith as a Defense Against Graft Charges in the Calamba Water District

This case revolves around Edgardo H. Catindig’s petition against the People of the Philippines and Atty. Daniel P. Fandiño, Jr., concerning the validity of orders from the Regional Trial Court (RTC) of Calamba City. These orders directed the issuance of a warrant of arrest and the suspension pendente lite against Atty. Fandiño and his co-accused, who were members of the Board of Directors of the Calamba Water District (CWD). The charges stemmed from alleged violations of Section 3(e) of Republic Act No. 3019, as amended, the Anti-Graft and Corrupt Practices Act. The central question is whether the Court of Appeals erred in setting aside the RTC’s orders, effectively ruling that the CWD officials acted in good faith when granting themselves certain benefits and allowances.

The factual backdrop begins with a Commission on Audit (COA) report in 2001, which scrutinized the financial transactions of CWD. The audit team discovered that the Board of Directors had passed resolutions granting benefits and allowances to officers, employees, and board members totaling P15,455,490.14. COA questioned the legal basis for these grants, pointing out that the functions of the Board were limited to policy-making, and that members were only entitled to receive per diems, as stated in Section 13 of Presidential Decree No. 198, as amended. Consequently, petitioner Catindig filed a complaint with the Office of the Ombudsman, alleging violations of Republic Act No. 3019.

The Ombudsman, convinced by the COA findings, recommended filing two Informations against Atty. Fandiño and the other board members for violating Section 3(e) of Republic Act No. 3019. Following this recommendation, two Informations were filed with the RTC of Calamba City. Criminal Case No. 13850-05-C, the subject of this petition, accused the officials of unlawfully granting themselves P4,378,908.00 in unauthorized benefits. In response, the accused filed an Omnibus Motion challenging the existence of probable cause and seeking to prevent the issuance of arrest warrants.

The RTC, however, found probable cause and issued an order for the arrest and suspension pendente lite of the accused. Atty. Fandiño then elevated the case to the Court of Appeals, arguing that the RTC’s orders were issued with grave abuse of discretion. The Court of Appeals sided with Atty. Fandiño, annulling the RTC’s orders and suggesting that the officials acted in good faith since the allowances and benefits were received before the Supreme Court declared such payments illegal. Catindig’s subsequent motion for reconsideration was denied, leading to the present Petition for Review on Certiorari before the Supreme Court.

At the heart of the legal analysis is Section 3(e) of Republic Act No. 3019, which prohibits public officers from 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. Crucially, the Supreme Court focused on whether the accused acted with “manifest partiality, evident bad faith, or inexcusable negligence.”

The Court has defined these terms with specific intent. As noted in Soriano v. Marcelo, citing Albert v. Sandiganbayan:

There is “manifest partiality” when there 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. “Evident bad faith” contemplates 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 in a situation where there is a duty to act, not inadvertently but willfully and intentionally, with conscious indifference to consequences insofar as other persons may be affected.

Applying these definitions, the Supreme Court concluded that the actions of the CWD officials did not meet the threshold for manifest partiality, evident bad faith, or gross inexcusable negligence. The Court emphasized that the Board of Directors relied on Resolution No. 313, Series of 1995, issued by the Local Water Utilities Administration (LWUA), which itself outlined the policy guidelines on compensation and other benefits for Water District Board of Directors. The LWUA Resolution listed various benefits such as RATA, travel allowance, extraordinary and miscellaneous expenses, and bonuses.

Moreover, the Court highlighted a crucial timeline: at the time the resolutions granting benefits were passed (1993-2001), the Supreme Court had not yet decided Baybay Water District v. Commission on Audit, which later clarified the limits of permissible compensation for water district directors. It was only later, in De Jesus v. Commission on Audit, that the Court explicitly stated that LWUA Resolution No. 313 was not in conformity with Section 13 of Presidential Decree No. 198. This temporal context was critical to the Court’s assessment of good faith.

The court said that:

Bad faith is never presumed, while good faith is always presumed; and the chapter on Human Relations of the Civil Code directs every person, inter alia, to observe good faith, which springs from the fountain of good conscience.

Therefore, because the CWD officials relied on a seemingly valid LWUA resolution and acted before the Supreme Court definitively clarified the legal boundaries, their actions were deemed to have been taken in good faith. The Supreme Court thus found no probable cause to prosecute them for violating Section 3(e) of Republic Act No. 3019.

The petitioner also argued that the Court of Appeals should have dismissed the case based on res judicata, citing a previous case (CA-G.R. SP No. 92474) with similar facts and issues. However, the Supreme Court rejected this argument, explaining that the previous case was dismissed on purely technical grounds (failure to indicate IBP numbers, lack of affidavit of service, etc.), rather than on the merits of the case. For res judicata to apply, there must be a judgment on the merits, which was absent in the prior case.

FAQs

What was the key issue in this case?	The key issue was whether the Court of Appeals erred in ruling that the Calamba Water District (CWD) officials acted in good faith when granting themselves certain benefits and allowances, thereby setting aside the RTC’s orders for their arrest and suspension.
What is Section 3(e) of Republic Act No. 3019?	Section 3(e) of Republic Act No. 3019 (Anti-Graft and Corrupt Practices Act) prohibits public officers from 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.
What does “good faith” mean in this context?	In this context, “good faith” means that the CWD officials acted honestly and reasonably, without any intent to deceive or defraud, and with a sincere belief that their actions were lawful and justified based on the information and regulations available to them at the time.
Why did the Supreme Court rule in favor of the CWD officials?	The Supreme Court ruled in favor of the CWD officials because they relied on LWUA Resolution No. 313, which at the time appeared to authorize the benefits and allowances they granted themselves, and because the Supreme Court had not yet issued decisions clarifying the limits of such compensation.
What is res judicata and why didn’t it apply in this case?	Res judicata is a legal doctrine that prevents a party from relitigating an issue that has already been decided by a court. It didn’t apply here because the previous case was dismissed on technicalities, not on the merits of the case.
What is the significance of LWUA Resolution No. 313 in this case?	LWUA Resolution No. 313 is significant because it was the basis on which the CWD officials granted themselves the benefits and allowances in question. Their reliance on this resolution was a key factor in the Supreme Court’s determination that they acted in good faith.
What is the difference between manifest partiality, evident bad faith, and gross inexcusable negligence?	Manifest partiality is a clear inclination to favor one side, evident bad faith is a palpably fraudulent purpose or dishonest motive, and gross inexcusable negligence is a want of even slight care, acting willfully and intentionally with indifference to consequences.
What is the practical implication of this ruling for public officials?	The practical implication is that public officials who act in good faith, relying on existing regulations or policies, are less likely to be held liable for graft and corruption charges, even if those regulations are later deemed invalid.

In conclusion, the Supreme Court’s decision underscores the importance of proving malicious intent or gross negligence in corruption cases involving the grant of benefits. The ruling protects public officials who act in good faith, relying on existing regulations, and emphasizes that honest mistakes should not be equated with corrupt practices. The case highlights the need for a nuanced approach when evaluating the actions of public officials, considering the legal and regulatory landscape at the time the actions were taken.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: Edgardo H. Catindig v. The People of the Philippines and Atty. Daniel P. Fandiño, Jr., G.R. No. 183141, September 18, 2009