Republic of the Philippines

SUPREME COURT
Manila

SECOND DIVISION

G.R. Nos. 163957-58 April 7, 2009

MUNIB S. ESTINO and ERNESTO G. PESCADERA, Petitioners,

vs.
PEOPLE OF THE PHILIPPINES, Respondent.

x - - - - - - - - - - - - - - - - - - - - - - -x

G.R. Nos. 164009-11 April 7, 2009

ERNESTO G. PESCADERA, Petitioner,

vs.
PEOPLE OF THE PHILIPPINES, Respondent.

DECISION

VELASCO, JR., J.:

For review before the Court under Rule 45 are the April 16, 2004 Decision1 and June 14, 2004
Resolution2 of the Sandiganbayan in the consolidated Criminal Case Nos. 26192 and 26193
entitled People of the Philippines v. Munib S. Estino and Ernesto G. Pescadera. In G.R. Nos.
163957-58, petitioners Munib S. Estino and Ernesto G. Pescadera appeal their conviction of
violation of Section 3(e), Republic Act No. (RA) 3019 or the Anti-Graft and Corrupt Practices Act for
failure to pay the Representation and Transportation Allowance (RATA) of the provincial government
employees of Sulu. In G.R. Nos. 164009-11, petitioner Pescadera alone appeals his conviction of
malversation of public funds under Article 217 of the Revised Penal Code for failure to remit the
Government Service Insurance System (GSIS) contributions of the provincial government
employees amounting to PhP 4,820,365.30. In these consolidated appeals, petitioners pray for their
acquittal.

The Facts

Estino was elected Vice-Governor of Sulu in the May 1998 elections along with Gov. Abdusakur
Tan. On June 23, 1998, this Court issued a status quo order in G.R. No. 133676, suspending the
effects of the proclamation of Gov. Tan and ordering Vice-Gov. Estino to assume the position of
Governor until further orders. Thus, Estino acted as Governor of Sulu from July 27, 1998 up to May
23, 1999 when this Court lifted the suspension order against Gov. Tan. Ernesto G. Pescadera, on
the other hand, was Provincial Treasurer of Sulu during Estino’s stint as Acting Governor.3

Pursuant to Commission on Audit (COA)-ARMM Office Order No. 99-165 dated August 26, 1999, a
special audit team was created upon the request of the Provincial Government of Sulu. An audit of
the disbursement vouchers and payrolls for the period starting July 27, 1998 up to May 23, 1999 was
then conducted by COA State Auditor II Mona U. Balabaran and her team. The COA Special Audit
Report stated that there were anomalies in the payment of salary differentials, allowances, and
benefits, among others. The Ombudsman then filed three informations against petitioners, as
follows:

CRIMINAL CASE NO. 26192

That sometime in or about January to May 1999, or shortly prior or subsequent thereto, in Jolo, Sulu
and within the jurisdiction of this Honorable Court, accused Munib S. Estino and Ernesto G.
Pescadera, both high ranking public officers, being the Vice-Governor and Provincial Treasurer of
Sulu, respectively, taking advantage of their official positions and acting in relation to their official
functions, conspiring and confederating with each other, did there and then willfully, unlawfully and
feloniously, cause undue injury to the employees of the Provincial Government of Sulu through
evident bad faith by failing to pay them their salary differentials, Additional Compensation Allowance
(ACA), Personal Emergency and Representation Allowance (PERA), Representation and Travel
Allowance (RATA), Mid-year Bonus, Cash Gift and Clothing Allowance in the total amount of
P8,435,625.34.

CONTRARY TO LAW.

CRIMINAL CASE NO. 26193

That sometime in or about July 1998 to May 1999, or shortly prior or subsequent thereto, in Jolo,
Sulu and within the jurisdiction of this Honorable Court, accused Munib S. Estino and Ernesto G.
Pescadera, both high ranking public officers, being the Vice Governor and Provincial Treasurer of
Sulu, respectively, taking advantage of their official positions and acting in relation to their official
functions, conspiring and confederating with each other, did there and then, willfully, unlawfully and
feloniously, take, convert and misappropriate the GSIS monthly contributions and loan amortizations
collected from the provincial employees in the amount of P4,820,365.30 for their own personal
benefit or advantage to the damage and prejudice of the said employees and the government as
well.

CONTRARY TO LAW.

CRIMINAL CASE NO. 26194

That sometime in or about May 1999, or shortly prior or subsequent thereto, in Jolo, Sulu and within
the jurisdiction of this Honorable Court, accused Munib S. Estino and Ernesto G. Pescadera, both
high ranking public officers, being the Vice Governor and Provincial Treasurer of Sulu, respectively,
taking advantage of their official positions and acting in relation to their official functions, conspiring
and confederating with each other, did there and then, willfully, unlawfully and feloniously, cause
undue injury to the government through evident bad faith by withdrawing from Philippine National
Bank-Jolo Branch the amount of P21.5 million on 07 May 1999 out of the Internal Revenue Allotment
of P28,268,578.00 which was deposited to the account of Sulu Provincial Government on the same
day and using the said amount to pay "various expenses" without, however, specifying what the
expenses are in violation of existing government accounting rules.

CONTRARY TO LAW. 4

Petitioners pleaded not guilty to the offenses charged in the informations.

Criminal Case No. 26192

During trial in the Sandiganbayan, Balabaran testified that based on the disbursement vouchers and
payrolls she and her team examined for the period January to May 1999, the Provincial Government
of Sulu failed to pay the provincial government employees their salary differentials, Additional
Compensation Allowance (ACA), Personal Emergency and Representation Allowance (PERA), and
other benefits; that the Department of Budget and Management confirmed to the special audit team
that funds were released to the Provincial Government of Sulu for January to May 1999 so there was
no reason why the money was not released to the employees; and that the funds released came
from the internal revenue allotment (IRA) of the provincial government for the 1999 budget. The
prosecution submitted that this failure violated Sec. 3(e) of RA 3019 which provides:

Section 3. Corrupt practices of public officers. — In addition to acts or omissions of public officers
already penalized by existing law, the following shall constitute corrupt practices of any public officer
and are hereby declared to be unlawful:

xxxx

(e) Causing any undue injury to any party, including the Government, or giving any private party any
unwarranted benefits, advantage or preference in the discharge of his official administrative or
judicial functions through manifest partiality, evident bad faith or gross inexcusable negligence. This
provision shall apply to officers and employees of offices or government corporations charged with
the grant of licenses or permits or other concessions.

In his defense, Estino testified that when he assumed office as Acting Governor of Sulu, he called for
a general meeting of all the heads of departments, as well as officials and employees to inform them
that the remaining money of the provincial government was PhP 47 only. He further informed them
of the pending amortization for the loan from the Philippine National Bank (PNB) payable from April
to June 1998, and suggested that the salary differentials of all the government employees be paid
first while the GSIS remittance be deferred since the pending IRA for the provincial government was
not yet released. As to the ACA, PERA, and clothing allowance, he said that these were not paid
because the budget for 1999 was not yet approved and there was no provision for those items in the
1998 budget. The budget for 1999 was approved only on June 17, 1999 when Estino was no longer
the Acting Governor. The RATA, on the other hand, was provided for in the 1998 budget; hence, the
1998 budget was used in paying the RATA.5

Pescadera testified that the employees’ benefits were not paid because the 1999 budget was not yet
approved then. Also, he said that there was no appropriation for ACA and PERA in the 1998 budget;
that the RATA for 1999 was paid; that the cash gift, mid-year bonus, and clothing allowance for the
period January to May 1999 were not paid as these were supposed to be paid in December 1999;
and that he was the Provincial Treasurer of Sulu up to May 1999 only.6

The Sandiganbayan found petitioners not guilty with regard to the charge of nonpayment of PERA,
ACA, cash gift, mid-year bonus, and clothing allowance. The court found that the Provincial
Government of Sulu did operate under the 1998 reenacted budget which had no appropriation for
PERA and ACA. Petitioners were not held liable for nonpayment of the Year-End Bonus and Cash
Gift because these may be given from May 1 to May 31 of each year, while Estino held office as
Acting Governor until May 23, 1999 and Pescadera was the Provincial Treasurer until May 1999. As
to the clothing allowance, no evidence was presented as to when it should be given to the
employees. Payment for the salary differentials for January to May 1999 could not also be done
since the 1999 budget was not yet approved.7

As regards the RATA, the Sandiganbayan held that petitioners’ defense of payment was an
affirmative allegation that required proof. The court stated:
x x x [N]o convincing evidence was presented by the defense to support their claim that they paid
the same. Although accused Pescadera testified that Exhibits "3-O" to "3-T", "3-W", "3-X", "3-HH"
and "3-II" were vouchers showing payment of RATA for the month of May 1999 for various officers of
the Provincial Government of Sulu, the same were not signed by the claimants thereof.

There is budget for the payment of RATA. The IRA pertaining to the province was regularly released.
The non-payment thereof constitutes a conscious and deliberate intent to perpetrate an injustice to
the officials of the Provincial Government of Sulu. Evident bad faith therefore exists.

xxxx

In the instant case, failure to pay the RATA constitutes an inaction which caused actual damage to
the officials entitled thereto, the amount of which was equivalent to the actual amount of the RATA
that was due them for the period January to May 1999.

The information alleged that the two accused committed this offense by conspiring and
confederating with each other. In conspiracy, it is essential that there must be unity of purpose and
unity in the execution of the unlawful objective. These were present in the instant case. Both
accused knew that they failed to pay the RATA to the officers entitled thereto.8

The aforesaid judgment is the subject of the appeal docketed as G.R. Nos. 163957-58.

Criminal Case No. 26193

Auditor Balabaran testified that the GSIS premiums for the government and personal share of
officials and employees of the Provincial Government of Sulu were deducted from their salaries, but
upon confirmation with the Branch Manager of the GSIS in Jolo, the audit team learned that the
GSIS premiums were not remitted. According to Estino, however, the audit reports showed that he
and Pescadera did not malverse the funds of the Provincial Government. In addition, Pescadera
testified that when Estino assumed office as Acting Governor, the Provincial Government of Sulu
was already indebted to the GSIS for its failure to remit the said GSIS monthly remittances which
amounted to PhP 4 million. Pescadera stated that Estino called a general assembly of all the officers
and employees of the provincial government to discuss the cash operation of Sulu. In that meeting,
the officers and employees decided to prioritize the payment of the salary differentials first, followed
by the loan amortization to the PNB, and lastly, the GSIS remittances. Pescadera added that the
provincial government intended to pay or remit the accrued GSIS monthly remittances as soon as
the cash position of the province improves and the 10% of the IRA is released.9

Before the Sandiganbayan, the prosecution charged petitioners with malversation of public funds
under Art. 217 of the Revised Penal Code. The Sandiganbayan consequently exonerated Estino but
convicted Pescadera. The court held:

In the case at bar, there was evidence that GSIS contributions for the period July 1998 to May 1999
consisting of employee share and loan amortizations were deducted from the salaries of the
employees of the province. The 1998 reenacted budget provided for GSIS Premiums (Government
Share) and the IRA for the province was regularly released by the DBM. These GSIS contributions
were not remitted. In fact contrary to accused Estino’s claim, Provincial Auditor Nora A. Imlan stated
in her 1998 and 1999 Annual Audit Report that the Province of Sulu had unremitted GSIS
contributions for CY 1998 and 1999.

Accused Pescadera, being then the Provincial Treasurer, was the public officer charged with the
disbursement of GSIS funds for remittance to the GSIS. He failed to disburse and to remit it to the
GSIS at the time it became due. He failed to account for it upon demand by Provincial Auditor Nora
A. Imlan and by the Special Audit Team. It is now incumbent upon the accused to rebut the
presumption of conversion.

xxxx

However, no evidence was presented to support the claim that the employees agreed to prioritize
the payment of PNB loan amortization. Even if there were such an agreement, it would still be
contrary to Section 6(b) of the Government Service Insurance System Act of 1997 (R.A. 8291) which
provides:

Each employer shall remit directly to the GSIS the employees’ and employers’ contributions within
the first ten (10) days of the calendar month to which the contributions apply. The remittance by the
employer of the contributions to the GSIS shall take priority over and above the payment of any and
all obligations, except salaries and wages of its employees.

Insufficiency of funds of the province is not a valid defense. The fact remained that the GSIS
contributions consisting of employee share and loan amortizations were deducted from the salaries
of the employees.

While it was true that the budget for 1999 was approved only on June 2, 1999, it was also true that
on January to May 1999, the province of Sulu operated under the 1998 reenacted budget. Further,
the reenacted budget provided for GSIS Premiums (Government Share). The DBM letter dated
October 28, 1999 (Exhibit "A-39") and Summary of Releases of IRA for July 1998 to May 1999
(Exhibit "A-40") clearly showed that the IRA pertaining to the province was regularly released.

Moreover, prosecution witness Mona Balabaran correctly testified that the Trial Balance, Journal of
Checks Issued and Report of Checks Issued showed only the sum total of all the money
transactions of the Province of Sulu. These reports did not contain the cash status vis-à-vis the
mandatory obligations and the details on where the fund of the province was spent. Clearly, accused
Pescadera was not able to rebut the presumption of conversion.10

With respect to Estino, however, the Sandiganbayan did not find any conspiracy with Pescadera.
The court held that it was Pescadera’s duty as the Provincial Treasurer to advise Estino, then Acting
Governor, and other local government officials regarding the disposition of local government funds
and other matters related to public finance. It was found that Pescadera failed to inform Estino that
the GSIS contributions must be remitted directly to the GSIS within the first 10 days of the calendar
month following the month to which the contributions apply.11 Also, the Sandiganbayan explained
that even if Estino was Pescadera’s co-signatory in the checks, mere signature or approval is not
enough to sustain a finding of conspiracy, based on Sabiniano v. Court of Appeals.12

Pescadera’s appeal of his conviction is the subject of G.R. Nos. 164009-11.

Criminal Case No. 26194

Anent the last charge, Balabaran testified that internal control was violated when petitioners signed
the vouchers without the signature of Provincial Accountant Nestor Lozano. As a result, the
transactions were not recorded in the book of accounts. She further stated that the amount of cash
in the trial balance was overstated. The audit team did not examine the monthly trial balance, the
journal and analysis of obligations, the journal of checks issued, the report of checks issued, and the
journal of cash disbursement because all these documents merely contained the sum total, whereas
the disbursement vouchers and payrolls stated the particular transactions that transpired which
could help them discover any anomaly.13

Petitioners were charged with violation of RA 3019, Sec. 3(e). In his defense, Estino testified that the
disbursement vouchers for the PhP 21.5 million cash advances he approved were supported with
documents; that the 5% of the 10% retention of the IRA of the national government was paid only in
May 2002; and that he was authorized by the Provincial Board to withdraw PhP 21.5 million on May
7, 1999. Pescadera, on the other hand, testified that the cash advances amounting to PhP 21.5
million from the PNB was accompanied by vouchers and supporting documents; that the said
amount was used in paying specific obligations of the Provincial Government of Sulu; that the
signature of the provincial accountant did not appear on the cash advances and vouchers because
during the withdrawal of the amounts, the provincial accountant was out of town; and that the
provincial auditor of Sulu allowed said cash advances.14

RA 3019, Sec. 3(e) has three elements: (1) the accused is a public officer discharging
administrative, judicial, or official functions; (2) the accused must have acted with manifest partiality,
evident bad faith, or inexcusable negligence; and (3) the accused’s action caused any undue injury
to any party, including the government, or giving any private party unwarranted benefits, advantage,
or preference in the discharge of his or her functions.

The Sandiganbayan found only the first two elements in this case. First, petitioners were public
officers at the time in question. Second, bad faith was evident in petitioners’ act of withdrawing
amounts without the signature of the provincial accountant. This violated Sec. 344 of the Local
Government Code and Secs. 157 and 168 of the Government Accounting and Auditing
Manual. Nevertheless, the government did not suffer actual damages from the withdrawal of PhP
21.5 million. While said cash advances did not specify the particulars of payment, the documentary
exhibits attached to the cash advances, i.e., disbursement vouchers, Request for Obligation of
Allotment, Summary of Payrolls, Time Book, and Payrolls, sufficiently itemized the obligations to be
paid by the cash advances. Since the prosecution failed to prove any damage or injury to the
Provincial Government of Sulu, petitioners were acquitted of the crime charged.15

The Ruling of the Sandiganbayan

The dispositive portion of the Sandiganbayan’s April 16, 2004 judgment reads:

WHEREFORE:

I. In Criminal Case No. 26192, the Court finds accused MUNIB S. ESTINO and ERNESTO G.
PESCADERA, both GUILTY, beyond reasonable doubt, for violation of Sec. 3(e) of R.A. 3019, and
pursuant to Section 9 thereof, and are hereby sentenced to suffer the penalty of:

(A) Imprisonment of, after applying the Indeterminate Sentence Law, six (6) years and one
(1) month as minimum, up to fifteen (15) years, as maximum; and,

(B) Perpetual Disqualification from Public Office.

II. In Criminal Case No. 26193, this Court finds accused ERNESTO G. PESCADERA, GUILTY,
beyond reasonable doubt, of the crime of malversation of public funds, and is hereby sentenced to
suffer the penalty of:
 (A) Imprisonment of, after applying the Indeterminate Sentence Law, twelve (12) years, five
(5) months and eleven (11) days of reclusion temporal, as minimum, up to twenty years (20)
years of reclusion perpetua, as maximum;

(B) Perpetual Special Disqualification;

(C) Fine of FOUR MILLION EIGHT HUNDRED TWENTY THOUSAND THREE HUNDRED
SIXTY-FIVE PESOS AND THIRTY CENTAVOS (Php4,820,365.30), with subsidiary
imprisonment in case of insolvency;

(D) All the accessory penalties provided for under the law; and,

(E) To pay the cost of the suit.

Accused PESCADERA is likewise ordered to restitute the amount of FOUR MILLION EIGHT
HUNDRED TWENTY THOUSAND THREE HUNDRED SIXTY-FIVE PESOS AND THIRTY
CENTAVOS (Php4,820,365.30) to the Provincial Government of Sulu.

With respect to MUNIB S. ESTINO, for failure of the Prosecution to prove his [guilt] beyond
reasonable doubt, he is hereby ordered ACQUITTED of the crime of malversation of public funds.

III. In Criminal Case No. 26194, for failure of the Prosecution to prove the guilt of accused MUNIB S.
ESTINO and ERNESTO G. PESCADERA beyond reasonable doubt, both accused are hereby
ordered ACQUITTED.16

Petitioners filed a Motion for Reconsideration and a Supplemental Motion for Reconsideration and
New Trial which were denied in the June 14, 2004 Sandiganbayan Resolution. Thus, they filed these
petitions.

The Issues

WHETHER OR NOT PETITIONERS FAILED TO PAY THE RATA AND ARE THUS GUILTY OF
VIOLATING SEC. 3(e) OF RA 3019

WHETHER OR NOT PETITIONER PESCADERA IS GUILTY OF MALVERSATION OF PUBLIC

FUNDS FOR FAILURE TO REMIT THE GSIS CONTRIBUTIONS

The Court’s Ruling

G.R. Nos. 163957-58

Petitioners Estino and Pescadera point out that the basis of the information for Criminal Case No.
26192 was the COA Report, which reads:

2. On the allegation that no payments were intended for the salary differentials, ACA, PERA
and other benefits of employees of the Provincial Government of Sulu for the period covered
from January, 1999 to May, 1999

It was noted that no benefits were paid to the employees of Sulu Provincial Office for the period
covered from January, 1999 to May, 1999 based on the submitted paid disbursement vouchers
(Annex E).
For the month of May 1999, the Provincial Government of Sulu received a total allotment
of P28,268,587.00, which includes January, 1999 to April, 1999 releases for IRA differentials (See
Annex B). The amount intended for the said benefits were disbursed other than specific purpose for
which these are appropriated (Annex C).17

Petitioners note that the COA Report does not state that they did not pay the RATA under the
reenacted budget of 1998. The prosecution witness, Auditor Balabaran, testified that the COA
Report pertains to the nonpayment of ACA, PERA, and other benefits provided for in the 1999
budget. The 1999 budget, however, was not approved during the incumbency of Estino as Acting
Governor. In the cross-examination of Balabaran, she testified as follows:

CROSS-EXAMINATION:

(Atty. Quadra)

Q. I show to you, Madam Witness, your Audit Report dated January 12, 2000, and I call your
attention on the finding in page 5 thereof which reads: "On the allegation that no payments were
made intended for the salary [differentials], ACA, PERA, and other benefits of the employees of the
Provincial Government of Sulu for the period covered from January 1999 to May 1999." Now, it is
stated here that no payments of the said benefits of the employees were made from January 1999 to
May 1999. My question is, when you said benefits of the employees you are referring to the benefits
of the employees provided for in the 1999 Budget? Please go over this Report.

(Witness looking at the document)

A. You want me to explain?

AJ Palattao: What benefit are you referring?

A. We are referring to the benefits that was to be paid, your Honor, the ACA, the PERA, and the
other benefits.

Q Yes, and those benefits that you are referring to are the benefits provided for in the Annual Budget
for the Year 1999?

AJ Palattao: Are you referring to a benefit granted to the employees under the 1999 Annual Budget?
Yes or no?

A. The benefits that are intended to the employees for the year 1999.

Q. 1999. You are not referring to the benefits of the employees provided for in the 1998 budget?

A. Yes, it is very clear, January 1999 to May 1999.

Q. It is only in 1999?

A. Yes, Sir. [TSN, p. 5 December 6, 2000]18

Petitioners insist that there is enough evidence to show that the RATA provided for in the 1998
reenacted budget was paid for the period January to May 1999. In their Supplemental Motion for
Reconsideration and Motion for New Trial, petitioners presented to the Sandiganbayan a
Certification dated May 11, 2002 issued by the Provincial Auditor Abdurasad J. Undain, stating that
the RATA for the period January to May 1999 was paid to the officials entitled to it and that the GSIS
premiums pertaining to prior years were also settled by the Provincial Government of Sulu. In
support of this certification, petitioners submitted sworn statements of the provincial officials entitled
to RATA, stating that they were paid such allowance from January to May 1999 and that they did not
have any complaint to its alleged nonpayment.19 They also submitted 99 certified true copies of the
Disbursement Vouchers showing the payment of the RATA from January to May 1999 provided for
in the 1998 reenacted budget. Petitioners presented these vouchers only in their Supplemental
Motion for Reconsideration and/or Motion for New Trial allegedly because they thought that the COA
Report pertained only to the benefits provided in and to be paid with the 1999 budget. They may
have been misled when Auditor Balabaran did not testify on the alleged nonpayment of the RATA for
January to May 1999 with the reenacted budget of 1998.

Anent the Sandiganbayan’s finding that the vouchers showing payment of RATA for May 1999 were
not signed by the claimants, petitioners explain that the actual release of RATA is the responsibility
of the cashier of the province. Petitioners claim that they could not be faulted for the failure of the
cashier to require the claimants to sign the receipt of payment. Furthermore, the claimants in
Exhibits "3-O" to "3-T," "3-W," "3-X," "3-HH," and "3-II" all executed sworn statements that they
received their RATA.

Petitioners further point out that the Sandiganbayan justices who heard and tried their case were not
the ones who rendered the questioned decision. The trial was conducted by Justices Narciso S.
Nario, Rodolfo G. Palattao, and Nicodemo T. Ferrer, while the decision was rendered by Justices
Gregory T. Ong, Norberto Y. Geraldez, and Efren N. dela Cruz.

On the other hand, the Office of the Special Prosecutor asserts that the petition should be dismissed
because it raises questions of fact not proper in an appeal by certiorari. It also asserts the following:
Even if the petition is given due course, there are factual and legal bases for the conviction. Although
the term "RATA" was not mentioned in the COA Report, said allowance was contemplated by the
auditors in their use of the term "benefits." Also, the sworn statements of the officials on their receipt
of the RATA and the certification of the Provincial Auditor to the effect that the RATA has been paid
are belated and unsubstantiated. These were submitted only in petitioners’ Supplemental Motion for
Reconsideration, thus implying that payments of the RATA were made after the conviction of
petitioners. Likewise, the unsigned disbursement vouchers deserve no merit because of the
irregularities in these documents. Some do not bear the dorsal portion of the vouchers or the
signature of the Provincial Auditor, while others were signed by persons other than the claimants
without any proof of their authority from the principals. The vouchers also show that the RATA was
paid in cash instead of through checks in violation of Presidential Decree No. 1445.

The Case Should be Remanded to the Sandiganbayan

Petitioners’ defense is anchored on their payment of RATA, and for this purpose, they submitted
documents which allegedly show that they paid the RATA under the 1998 reenacted budget. They
also claim that the COA Report did not sufficiently prove that they did not pay the RATA because the
alleged disbursement vouchers, which were supposed to be annexed to the COA Report as proof of
nonpayment of RATA, were not submitted with said report.

We resolve to grant petitioners a chance to prove their innocence by remanding the case to the
Sandiganbayan for a new trial of Criminal Case No. 26192. Rule 121 of the Rules of Court allows the
conduct of a new trial before a judgment of conviction becomes final when new and material
evidence has been discovered which the accused could not with reasonable diligence have
discovered and produced at the trial and which if introduced and admitted would probably change
the judgment.20 Although the documents offered by petitioners are strictly not newly discovered, it
appears to us that petitioners were mistaken in their belief that its production during trial was
unnecessary. In their Supplemental Motion and/or Motion for New Trial, they stressed that they no
longer presented the evidence of payment of RATA because Balabaran testified that the subject of
the charge was the nonpayment of benefits under the 1999 budget, without mention of the RATA nor
the 1998 reenacted budget. It seems that they were misled during trial. They were precluded from
presenting pieces of evidence that may prove actual payment of the RATA under the 1998
reenacted budget because the prosecution’s evidence was confined to alleged nonpayment of RATA
under the 1999 budget.

In this instance, we are inclined to give a more lenient interpretation of Rule 121, Sec. 2 on new trial
in view of the special circumstances sufficient to cast doubt as to the truth of the charges against
petitioners. The situation of the petitioners is peculiar, since they were precluded from presenting
exculpatory evidence during trial upon the honest belief that they were being tried for nonpayment of
RATA under the 1999 budget. This belief was based on no less than the testimony of the
prosecution’s lone witness, COA Auditor Mona Balabaran. Even Associate Justice Palattao of the
Sandiganbayan had to clarify from Balabaran which budget she was referring to. Balaraban,
however, made it very clear that the unpaid benefits were those provided under the 1999 budget, to
wit:

AJ Palattao: Are you referring to a benefit granted to the employees under the 1999 Annual Budget?
Yes or no?

A. The benefits that are intended to the employees for the year 1999.

Q. 1999. You are not referring to the benefits of the employees provided for in the 1998 budget?

A. Yes, it is very clear, January 1999 to May 1999.

Q. It is only in 1999?

A. Yes, Sir. [TSN, p. 5 December 6, 2000]21 (Emphasis supplied.)

From the foregoing discourse, it is understandable how petitioners could have thought that they
need not present any more evidence to prove payment of the RATA under the 1998 budget.
Apparently, the COA Auditor who prepared the report and testified on it established that the trial was
about nonpayment of benefits under the 1999 budget. That budget was not approved during
petitioners’ stint in Sulu. Faced with conviction, nevertheless, they deserve a chance to prove their
innocence. This opportunity must be made available to the accused in every possible way in the
interest of justice. Hence, petitioners should be allowed to prove the authenticity of the vouchers
they submitted and other documents that may absolve them. A remand of the case for a new trial is
in order. This procedure will likewise grant the prosecution equal opportunity to rebut petitioners’
evidence.

In granting petitioners’ motion for new trial, we reiterate our pronouncement in Cano v. People:

It is x x x equally settled that rules of procedure are not to be applied in a very rigid, technical sense
and are used only to help secure substantial justice. If a technical and rigid enforcement of the rules
is made, their aim would be defeated. They should be liberally construed so that litigants can have
ample opportunity to prove their claims and thus prevent a denial of justice due to technicalities.22
More importantly, we have settled that procedural rules can be suspended if matters of life, liberty,
honor, and property are at stake, thus:

In Ginete vs. Court of Appeals, we specifically laid down the range of reasons which may provide
justifications for a court to resist a strict adherence to procedure and suspend the enforcement of
procedural rules. Among such reasons x x x are: (1) matters of life, liberty, honor or property; (2)
counsel’s negligence without any participatory negligence on the part of the client; (3) the existence
of special or compelling circumstances; (4) the merits of the case; (5) a cause not entirely
attributable to the fault or negligence of the party favored by the suspension of the rules; and (6) a
lack of any showing that the review sought is merely frivolous and dilatory.23

We have also held that:

Unquestionably, the Court has the power to suspend procedural rules in the exercise of its inherent
power, as expressly recognized in the Constitution, to promulgate rules concerning ‘pleading,
practice and procedure in all courts.’ In proper cases, procedural rules may be relaxed or suspended
in the interest of substantial justice, which otherwise may be miscarried because of a rigid and
formalistic adherence to such rules. x x x

xxxx

We have made similar rulings in other cases, thus:

Be it remembered that rules of procedure are but mere tools designed to facilitate the attainment of
justice. Their strict and rigid application, which would result in technicalities that tend to frustrate
rather than promote substantial justice, must always be avoided. x x x Time and again, this Court
has suspended its own rules and excepted a particular case from their operation whenever the
higher interests of justice so require.24

While the information states that the accused failed to pay the RATA sometime in or about January
to May 1999, there was no mention which budget the RATA was supposed to be sourced.
Petitioners relied on the COA Auditor’s testimony that they were being tried for nonpayment of
benefits under the 1999 budget. The Special Audit Report does not also distinguish the budget
source but upon the testimony of Balabaran, it was established that the source was the 1999 budget.
Balabaran verified this when cross-examined by Sandiganbayan Justice Palattao. This distinction is
material because conviction or acquittal depends on which budget source the information referred to.
Thus, even if the 1998 budget was automatically reenacted in 1999, if the trial was clearly about the
nonpayment of benefits under the 1999 budget as established by the prosecution, then petitioners
could not be faulted for proceeding accordingly. The prosecution could have been clearer about the
budget source through re-direct examination of Balabaran but it did not choose to do so. As always
in criminal cases, the burden is on the prosecution to establish guilt beyond reasonable doubt based
on sufficient information. It is not the responsibility of the accused to produce exculpatory evidence
in a trial that does not demand it, as in this peculiar case where the prosecution failed to be clear
about how they have allegedly been negligent in paying employee benefits.

The evidence sought to be introduced by the petitioners were presented in their Supplemental
Motion for Reconsideration. Obviously, it was after their conviction that petitioners realized their
mistake and belatedly presented their evidence which consist of (1) a certification dated May 11,
2004 by Abdurasad J. Undain, Provincial Auditor of Sulu, attesting to the payment of the RATA for
the period January to May 1999 to officials of Sulu who were entitled to such benefit; (2)
disbursement vouchers showing payment of RATA to provincial employees of Sulu for the period
January to May 1999; and (3) sworn statements from the claimants of the RATA attesting to their
receipt of RATA from January to May 1999. The Sandiganbayan noted how some of the
disbursement vouchers were not signed by the claimants. Petitioners, however, were not given the
chance to explain this alleged irregularity. The Sandiganbayan also completely disregarded the
sworn statements from the claimants of the RATA which state that they did not have any complaint
to its alleged nonpayment. It should be remembered that petitioners are being charged with violation
of Sec. 3(e) of RA 3019, an element of which is undue injury to any party. If the claimants of the
RATA, the supposed injured parties, state that they received the RATA and have no complaints to its
nonpayment, then these sworn statements could absolve petitioners. These documents should be
weighed properly, its authenticity duly established by the accused, and the prosecution should be
given the chance to rebut these pieces of evidence. Since we are not a trier of facts, we should
remand this case to the Sandiganbayan.

As the court of last resort, we cannot and should not be hasty in convicting the accused when there
are factual circumstances that could save them from imprisonment. In this case, the accused should
be afforded the chance to prove the authenticity of documents which have a tendency to prove their
innocence. Procedural rules should be interpreted liberally or even set aside to serve the ends of
justice. Hence, we order the remand of Criminal Case No. 26192 to the Sandiganbayan for a new
trial.

G.R. Nos. 164009-11

Petitioner Pescadera’s defense consists of two arguments: (1) that the elements of the crime of
malversation under Art. 217 of the Revised Penal Code were not present; and (2) that his failure to
remit the GSIS contributions was due to the prioritization of other obligations of the Provincial
Government of Sulu.

Pescadera claims that the elements of the crime of malversation were not met because there was no
demand on him by the Provincial Auditor or by the Special Audit Team to account for the GSIS
contributions. He submits that the prima facie presumption of malversation is not applicable when no
written demand for accounting was given to him. Assuming that there was a demand, there is
allegedly no direct evidence showing misappropriation of PhP 4,820,365.30. He asserts that he did
not withdraw such amount from the provincial government funds. He submitted documents that show
how the funds of the Provincial Government of Sulu were spent from July 1998 to May 23, 1999.
These documents consisted of the monthly trial balance from August 31, 1998 to May 31, 1999;
certified true copies of the journal of checks issued from July 1998 to May 7 to 30, 1999; certified
true copies of the Treasurer’s Journal Cash Disbursements from August 1998 to February 1999; and
annual Audit Report for 1998 and 1999. Pescadera claims that the COA Special Audit Team merely
examined the disbursement vouchers and the payrolls and found that the only irregularity was the
non-remittance of the GSIS contributions and loan amortization.

Art. 217 of the Revised Penal Code provides:

Art. 217. Malversation of Public Funds or Property—Presumption of Malversation. Any public officer
who, by reason of the duties of his office, is accountable for public funds or property, shall
appropriate the same, or shall take or misappropriate or consent, or through abandonment or
negligence, shall permit any other person to take such funds or property, wholly or partially, or shall
otherwise be guilty of the misappropriation of such funds or property, shall suffer:

xxxx
The failure of a public officer to have duly forthcoming any public funds or property with which he is
chargeable, upon demand by any duly authorized officer, shall be prima facie evidence that he has
put such missing funds or property to personal uses.

There is no dispute that Pescadera is a public officer who has control or custody of public funds and,
thus, accountable for them. As to whether Pescadera misappropriated the GSIS premiums, he
argues that the presumption of malversation does not apply because there was no demand on him.

The Sandiganbayan held that Pescadera failed to account for the GSIS premiums when demand
was made by Provincial Auditor Nora Imlan and the Special Audit Team, citing Exhibit "12-c."
Pescadera points out, however, that Exhibit "12-c" referred to the "State Auditor’s Opinion on the
Financial Statements" herein reproduced:

The auditor rendered a qualified opinion on the fairness of the presentation of the financial
statements due to management’s failure to conduct physical inventory on its fixed assets and
inventories as discussed in finding no. 1 and inability to conduct inspection on the infra projects
under the 20% Development Fund.

SUMMARY OF SIGNIFICANT FINDINGS AND RECOMMENDATIONS

During the year under audit, the following are the findings and recommendations, to wit:

xxxx

2. Non-remittances [in] 1998 of various trust liabilities in violation of laws, rules, and regulations.

Require the Provincial Treasurer to remit all trust liabilities such as GSIS premiums/loans
repayments/state insurance, MEDICARE AND PAGIBIG.25

We agree with Pescadera that this is not the demand contemplated by law. The demand to account
for public funds must be addressed to the accountable officer. The above-cited letter was made by
the Provincial Auditor recommending to the Chairperson of the COA to "require the Provincial
Treasurer of Sulu to remit all trust liabilities such as GSIS premium/loans, repayments/state
insurance, Medicare and Pag-ibig." Nowhere in the pleadings did the Special Prosecutor refute the
lack of a formal demand upon Pescadera to account for the GSIS premiums. Pescadera even
denies being informed of the conduct of the audit, an assertion which was not refuted by the
prosecution. It can be concluded then that Pescadera was not given an opportunity to explain why
the GSIS premiums were not remitted. Without a formal demand, the prima facie presumption of
conversion under Art. 217 cannot be applied.

While demand is not an element of the crime of malversation,26 it is a requisite for the application of
the presumption. Without this presumption, the accused may still be proved guilty under Art. 217
based on direct evidence of malversation. In this case, the prosecution failed to do so. There is no
proof that Pescadera misappropriated the amount for his personal use.

The elements of Art. 217 are: (1) the offender is a public officer, (2) he or she has custody or control
of the funds or property by reason of the duties of his office, (3) the funds or property are public
funds or property for which the offender is accountable, and, most importantly, (4) the offender has
appropriated, taken, misappropriated or consented, or, through abandonment or negligence,
permitted another person to take them. The last and most important element of malversation was not
proved in this case. There is no proof that Pescadera used the GSIS contributions for his personal
benefit. The prosecution merely relied on the presumption of malversation which we have already
disproved due to lack of notice. Hence, the prosecution should have proven actual misappropriation
by the accused. Pescadera, however, emphasized that the GSIS premiums were applied in the
meantime to the salary differentials and loan obligations of Sulu, that is, the GSIS premiums were
appropriated to another public use. Thus, there was no misappropriation of the public funds for his
own benefit. And since the charge lacks one element, we set aside the conviction of Pescadera.

WHEREFORE, the Decision dated April 16, 2004 of the Sandiganbayan in Criminal Case No. 26192
is SET ASIDE and the case is REMANDED to the Sandiganbayan for new trial on the alleged
nonpayment of RATA. The Decision dated April 16, 2004 of the Sandiganbayan in Criminal Case
No. 26193 is REVERSED and SET ASIDE, and Ernesto G. Pescadera is ACQUITTED of the charge
against him. Costs against petitioners.

SO ORDERED.