E_Crim_27101_Viscarra et al_05_10_2006.doc

REPUBLIC OF THE PHILIPPINESSANDIGANBAYAN

Quezon City --------------------

First Division

PEOPLE OF THE PHILIPPINES, Plaintiff,

- versus -

RENATO M. VIZCARRA, TERESA R. CRUZ, VIRGINIA M. HONORIO and MACARIA P. ANG

Accused.

Criminal Case No. 27101

PRESENT: Leonardo-De Castro, PJ, Chairman Peralta and Gesmundo, JJ. Promulgated: May 10, 2006

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D E C I S I O N

GESMUNDO, J.:

Before this Court is a Demurrer to Evidence filed by accused-movants Macaria P. Ang, Teresa R. Cruz and Virginia M. Honorio dated 26 January 2006.

On 10 October 2001, a case for Illegal Use of Public Funds under Article 220 of the Revised Penal Code (RPC) was filed against movants and their co-accused Renato M. Vizcarra. The accusatory portion of the information reads:

“That on or about December 1998 or sometime prior or subsequent thereto, in the Municipality of Ramon, Isabela, Philippines, and within the jurisdiction of this Honorable Court, the above named accused, public

DECISIONCriminal Case No. 27101People v. Vizcarra, et al. of 19x-------------------------------x

officers, namely RENATO VIZCARRA, a Municipal Mayor, TERESA R. CRUZ, Municipal Treasurer, VIRGINIA M. HONORIO, Municipal Accountant, and MACARIA ANG, Municipal Budget Officer, all of Ramon, Isabela, taking advantage of their official positions and in relation thereto, did then and there willfully, unlawfully, and feloniously, conspiring, confederating and helping one another, incur overdrafts in appropriation allocated for fuel and oil under the Maintenance and Other Operating Expenses (MOOE) in the amount of P338,715.43 and offset the said overdrafts with funds pertaining to other specific items as provided in Appropriation Ordinance No. 98-01 without authority from the Sangguniang Bayan of Ramon, Isabela, thus, diverting and applying public funds in the total amount of P338,715.43 to a public use other than that for which said fund was appropriated by Appropriation Ordinance No. 98-01, to the damage and prejudice of the government.

CONTRARY TO LAW.”1

The accused moved for reinvestigation on the ground

that there was a discrepancy between the findings of the investigating prosecutor and the Ombudsman which would cast doubt as to the existence of probable cause.2 The Court granted the motion on 20 December 2001.3 After reinvestigation, the Office of the Special Prosecutor maintained that there was probable cause to indict the accused.4

On 17 April 2002, the accused moved to quash the information on the ground that the facts charged therein do not constitute an offense.5 They contended that at bottom, they are being charged for using the funds of the municipality of Ramon, Isabela without obtaining the requisite authority from the Sangguniang Bayan. However, as the Sangguniang Bayan had subsequently passed 1 Record Vol. 1, p. 12 Id. at 63-67.3 Id. at 86-87.4 Id. at 128-131.5 Id. at 154-163.


Resolution No. 2002-11 confirming the use of the funds, the accused argued that said resolution validated their earlier acts.

In a resolution dated 12 March 2003, the Court denied the motion to quash as “the legality or validity of Resolution No. 2002-11 of the Sangguniang Bayan of Ramon, Isabela and the legitimacy of the expenditures of fuel and oil, which accused alleged to have been made in the best interest of the service can only be resolved after the presentation of evidence, which can enlighten the Court as to the factual circumstances attending the disbursements of public funds in question and the subsequent passing of Resolution No. 2002-11 by the Sanggunian Bayan.”6

Subsequently, their motion for reconsideration7 having been denied on 16 June 20048, all the accused pleaded “NOT GUILTY” to the charge.9 At the pre-trial conference held before the Division Clerk of Court, the parties stipulated on the following facts which were later embodied in the Pre-Trial Order dated 28 January 2005:

1. At all times relevant to this case, all the accused were public officers holding the following positions in the Municipality of Ramon, Isabela, to wit:

Renato M. Vizcarra – Municipal Mayor Teresa R. Cruz – Municipal Treasurer Virginia M. Honorio – Municipal Accountant Macaria P. Ang – Municipal Budget Officer

6 Record Vol. 1, pp. 326-327.7 Id. at 343-354.8 Id. at 389.9 Accused Ang and Honorio were arraigned on 20 August 2004 (Record

Vol. 2, pp. 6-8) while accused Vizcarra and Cruz were arraigned on 07 September 2004 (Record Vol. 2, pp. 13-16).


2. The Municipality of Ramon, Isabela, has an appropriation of P 23,390,317.00 for FY 1998 as per Appropriation Ordinance No. 98-01.

3. Out of this appropriated amount, P 335,000.00 was for fuel and oil under the Maintenance and Other Operating Expenses (MOOE).

4. During the year, the only office that was given budgetary allocation for fuel and oil under the MOOE was the Office of the Mayor for its General Services and Peace and Order Services at P 275,000.00 and P 60,000.00, respectively.

5. For the period covering January 1, 1998 to June 30, 1998, during the administration of then Mayor Angelino F. Vizcarra, the total cost of fuel and oil charged to the fuel and oil allocation under the MOOE were P 287,540.27 for the General Services, and P 58,764.14 for the Peace and Order Services, or a total of P 346,286.42.

6. Out of such amount, P 189,254.11 pertained to the fuel and oil consumption in 1997 which was charged to the 1998 appropriation and P 157,032.31 pertained to 1998.

7. Out of the 1998 Budget of P 335,000.00, the remaining budget allocation for fuel and oil gas as of the date of assumption of office as Mayor of accused Renato Vizcarra on June 30, 1998 was a negative balance of P 12,540.27 for the General Services and P 1,253.85 for the Peace and Order Services.

8. For the period July 1, 1998 to December 31, 1998, the total fuel and oil consumption charged to the 1998 appropriation was P 327,429.01.

9. The overdraft in appropriation allocated for fuel and oil in 1998 was P 338,715.43, where P 279,612.01 and P 59,103.42 were for the General Services and Peace and Order Services, respectively.

10. The overdrafts were offset from savings in other items within the MOOE at year-end.10

Thereafter, trial ensued with the prosecution presenting two witnesses. The first, State Auditor IV ELPIDIO COLOMA

10 Record, Vol. 2, pp. 104-110.


(Coloma), testified that he conducted a special audit investigation into the financial transactions of the Municipality of Ramon, Isabela pursuant to COA Office Order No. 2000-023 dated 23 March 2000. He inspected documents and interviewed officials involved in the financial transactions of the municipality. Upon the conclusion of the investigation, Coloma drafted his Audit Investigation Report which he then presented to all the accused during the exit conference held on 26 May 2001. In said exit conference, the accused admitted incurring overdrafts but submitted justifications therefore. Coloma included said justifications in his final draft report which he later submitted to his Regional Director.

Coloma further testified on how the overdrafts in the allocation for fuel and oil were incurred and he identified the documents to prove the same. He said that these overdrafts were offset from the savings in other items within the MOOE in a manner contrary to Section 336 of RA 7160 as said provision of law requires the passing of an ordinance before an item can be augmented from savings in another item. In keeping with his recommendation that there was a violation of Section 336 of RA 7160, Coloma pointed to the accused as the “persons probably liable” for the violation. Coloma qualified, however, that as the violation comprised only of the accused’s failure to first secure an ordinance before acting as they did, the municipality did not actually suffer any financial loss from their actions.


Coloma went on to state that during his investigation, he had not come across the accused’s Exhibit “1” which is Executive Order No. 2, series of 1998 pertaining to accused Vizcarra’s order to use any unexpended appropriation of particular items under the MOOE to augment the appropriation for fuel and oil. He opined that at the time of his investigation, no such executive order existed because when he asked the accused for their legal basis in disbursing funds for fuel and oil, they did not present said executive order. Finally, Coloma testified that neither did the Sanggunian Bayan pass a supplemental budget for fuel and oil.

The second and last witness for the prosecution was Sangguniang Bayan member and one of four private complainants ABRAHAM ARRIOLA (Arriola) whose direct testimony was dispensed with as he would testify on facts already admitted during the pre-trial, e.g., as to the lack of an ordinance and a supplemental budget that will justify the offsetting of the overdraft in fuel and oil allocation from savings. During cross-examination, Arriola stated that when accused Vizcarra assumed office in July of 1998, the budgetary allocation for fuel and oil was already depleted. Arriola said, however, that he did not know about this fact until probably before the end of 1998, after a concerned citizen told him that there was already an overdraft in the fuel and oil allocation. After the results of the audit came out, Arriola filed a complaint for illegal disbursement of funds “simply because there was no appropriated fund” nor was there a supplemental budget for fuel and oil expenses yet


disbursements continued. Finally, Arriola remarked that other services suffered as the funds appropriated therefore could not be utilized as they were used instead to offset the overdraft.

With the termination of the testimony of its last witness, the prosecution formally offered Exhibits “A” to “U” inclusive of sub-markings11 which were all admitted by the Court per its Order dated 17 October 2005.12

On 25 November 2005, accused-movants Cruz, Honorio and Ang sought leave of court to file demurrer to evidence13

which the prosecution opposed on 29 November 2005.14 In an Order dated 11 January 2006, the Court allowed accused-movants to demur to the prosecution’s evidence.15

The instant demurrer to evidence was filed on 27 January 2006. The prosecution opposed the same on 06 February 200616 while accused-movants replied to the opposition on 15 February 2006.17

Accused-movants contend that the prosecution’s evidence is insufficient to convict them since (a) they performed their official functions in all good faith by implementing the Mayor’s Executive Order No. 2; (b) Executive Order No. 2 covered only savings from the

11 Record, Vol. 2, pp. 170-443.12 Id. at 475.13 Id. at 479-483.14 Id. at 484-487.15 Id. at 493.16 Record, Vol. 3, pp. 3-31.17 Id. at 35-37.


“maintenance and other operating expenses” (MOOE) to augment the appropriation for fuel and oil in order not to paralyze the operations of the municipality; and (c) their acts do not violate Article 220 of the RPC.

The prosecution negates the argument of good faith by insisting that it has proven beyond reasonable doubt that Executive Order No. 2 was a mere afterthought hatched by all the accused to cover-up their criminal act. The prosecution likewise maintains that as there was no ordinance authorizing the accused to augment the item for fuel and oil, the continued disbursements of the overdraft in the aggregate amount of P 338,715.43 and the offsetting thereof from the MOOE violates Section 336 of Republic Act No. 716018 which violation amounts to technical malversation. Finally, the prosecution claims that it had sufficiently proved conspiracy among the accused.

At the outset, it should be stressed that accused-movants’ insistence that they acted in good faith and were merely implementing Mayor Vizcarra’s Executive Order No. 2 dated 8 July 1998 in order not to paralyze the operations of the municipality are ordinarily matters of defense which they should raise during their own presentation of evidence.

From the stipulation of facts and the simplification of issues embodied in the Pre-Trial Order, together with the testimonial and documentary evidence presented by the prosecution, however, we are constrained to rule that trial

18 The Local Government Code of 1991.


need not go any further as the prosecution has failed to prove even prima facie all the elements of the crime of technical malversation such that accused-movants can no longer be compelled to present evidence in their behalf.

The elements of technical malversation are:1. The offender is a public officer; 2. There is public fund or property under his

administration;3. Such public fund or property has been

appropriated by law or ordinance;4. The public officer applies the same to a public use

other than that for which such fund or property has been appropriated by law or ordinance.19

Accused-movants concede the presence of the first two elements. The public use of the funds is likewise not in dispute. It is the third element which they vehemently insist the prosecution failed to prove. For its brevity, we quote their discussion on the matter, thus:

“To constitute a crime of illegal use of public funds, there must be a diversion of funds from the purpose for which such funds were originally appropriated by law or ordinance. In the instant case, the questioned expenditures were sourced from SAVINGS at the end of the fiscal year from other items in the same expense class of their respective appropriations (MOOE). The savings are to be considered surplus and become free funds that may be applied to any public use in the same class. Hence, there could have been no violation of Article 220 of the Revised Penal Code because the funds used were not specifically appropriated for any other public use but were, in fact, savings from other items within the same class. It is absurd to insist that savings shall remain to be tied up to

19 Abdulla v. People, G.R. No. 150129, 06 April 2005, 455 SCRA 78, 92.


the public use originally intended were (sic) the said public use has already been completed. Xxx”20

In other words, it is the contention of accused-movants that the funds used to offset the overdraft had not been appropriated by law or ordinance as they were in the nature of savings which are considered surplus -- free funds that may be applied to any public use in the same class. The funds not having been appropriated by law or ordinance, there could be no violation of Article 220 of the RPC.

It is beyond cavil that the overdrafts were offset from savings in other items within the MOOE at the end of the 1998 fiscal year. No less than the Audit Investigation Report prepared by prosecution witness Coloma categorically state such fact. Thus:

“The Mayor’s 1998 annual budget allocation for gasoline at P335,000.00 had been exceeded by P338,715.43 only and not by P500,000.00 as alleged in the complaint. It was also noted that the overdraft in the 1998 budget allocation for fuel and oil was offset from savings in other items within the MOOE at year-end in the absence of an ordinance authorizing it.”21

As the facts essential to the proper disposition of this case are not in dispute, what remains to be resolved is actually a question of law, i.e., whether or not municipal funds denominated as savings at the end of the year are in the nature of free funds not otherwise earmarked or appropriated for a specific public use.

The term “savings” under Article 417 of the Implementing Rules of RA 7160 is well-defined. It refers to --20 Record Vol. 2, pp. 515-516.21 Prosecution’s Exh. “D-1-a”, Record, Vol. 2, p. 254.


“Xxx portions or balances as of any given point in the fiscal year of any programmed or allotted appropriation which remain free of any obligation or encumbrance and which are still available after the satisfactory completion or the unavoidable discontinuance or abandonment of the work, activity, or purpose for which the appropriation was originally authorized, or which result from unobligated compensation and related costs pertaining to vacant positions and leaves of absence without pay.”

The above-quoted definition of “savings” as a balance of any programmed or allotted appropriation should be cross-referenced with Section 322 of RA 7160 which provides:

“SEC. 322. Reversion of Unexpended Balances of Appropriation, Continuing Appropriations. – Unexpended balances of appropriations authorized in the annual appropriations ordinance shall revert to the unappropriated surplus of the general fund at the end of the fiscal year and shall not thereafter be available for expenditure except by subsequent enactment. However, appropriations for capital outlays shall continue and remain valid until fully spent, reverted or the project is completed. Reversions of continuing appropriations shall not be allowed unless obligations therefore have been fully paid or otherwise settled.

The balances of continuing appropriations shall be reviewed as part of the annual budget preparation and the sanggunian concerned may approve, upon recommendation of the local chief executive, the reversion of the funds no longer needed in connection with the activities funded by said continuing appropriations subject to the provisions of this Section.”22

The general rule, therefore, is that all unexpended balances of appropriations -- e.g. savings -- revert to the unappropriated surplus of the general fund at the end of the year and the only exception refers to continuing appropriations23 or capital outlays24 which the MOOE, by

22 Emphasis supplied.23 SEC. 306, Local Government Code. Definition of terms


elimination, is not.25 As the MOOE is not in the nature of a continuing appropriation or a capital outlay, any savings therefrom revert to the general fund at the end of the fiscal year and are considered as “unappropriated surplus”. This means that the savings from the MOOE at the end of the year is taken out of the coverage of appropriated funds which they originally formed part of.

(e) "Continuing appropriation" refers to an appropriation available to support obligations for a specified purpose or project, such as those for the construction of physical structures or for the acquisition of real property or equipment, even when these obligations are incurred beyond the budget year.

24 SEC. 306, Local Government Code. Definition of terms (d) "Capital Outlays" refers to appropriations for the purchase of

goods and services, the benefits of which extend beyond the fiscal year and which add to the assets of the local government unit concerned, including investments in public utilities such as public markets and slaughterhouses.

25 The Government Accounting and Auditing Manual (GAAM) Volume 1, Chapter 6 enumerates the items comprising the MOOE, viz:1. Traveling expenses2. Communication Services 3. Repair and maintenance of government facilities4. Use, repair and maintenance of government vehicles5. Transportation services6. Supplies and material7. Rents8. Interests9. Grants, subsidies and contributions10. Awards and indemnities11. Loan repayments and sinking fund contributions12. Losses/Depreciation/Depletion13. Water, illumination and power services14. Social security benefits, rewards and other claims15. Auditing services16. Training and seminar17. Extraordinary and miscellaneous expenses18. Confidential and intelligence expenses19. Anti-insurgency/contingency/emergency expenses20. Taxes and other duties21. Trading/production22. Advertising and publication expenses23. Fidelity bond and insurance premium24. Loss on foreign exchange25. Commitment fees/charges26. Other services

a. Repair and maintenanceb. Printing and bindingc. Subscription to periodicals and magazinesd. radiocast, telecast and documentary films


In the cases of Parungao v. Sandiganbayan26 and Abdulla v. People,27 the Supreme Court had categorically declared that in the absence of law or ordinance appropriating the public fund allegedly technically malversed, the use thereof for another public purpose will not amount to a violation of Article 220 of the RPC.

As applied to herein case, as savings are “unappropriated surplus,” accused-movants’ use thereof to off-set the overdraft in the appropriation allocated for fuel and oil for fiscal year 1998 does not render them liable for technical malversation as the third element of the crime which requires that the public fund used should have been appropriated by law or ordinance is missing.

The prosecution insists, however, that the accused are still guilty of technical malversation as they violated Section 336 of RA 7160 requiring an ordinance before any item in the approved annual budget can be augmented from savings in other items within the same expense class. The prosecution thus equates the violation of a provision of the Local Government Code with the violation of a penal provision. This is an obvious non-sequitur. Section 336 of RA 7160 states:

SEC. 336. Use of Appropriated Funds and Savings. -- Funds shall be available exclusively for the specific purpose for which they have been appropriated. No ordinance shall be passed authorizing any transfer of appropriations from one item to another. However, the local chief executive or the presiding officer of the sanggunian concerned may, by ordinance, be authorized to augment any item in the approved annual budget for their respective offices from

26 G.R. No. 96025, 15 May 1991, 197 SCRA 173.27 G.R. No. 150129, 06 April 2005, 455 SCRA 78.


savings in other items within the same expense class of their respective appropriations. It bears stress that accused-movants were charged

under the Information for violation of Article 220 of the RPC and not Section 336 of RA 7160. Section 336 of RA 7160 is not a penal provision and any violation thereof will only render the accountable officer administratively and/or civilly liable.28 Moreover, the acts constitutive of a violation of Section 336 are not elements of the crime of technical malversation such that an infraction of the former will not necessarily give rise to criminal liability under the latter.

As above-discussed, when the accused used the savings from the MOOE to offset the overdraft in the fuel and oil allocation for fiscal year 1998 they were not in breach of Article 220 of the RPC as savings cannot be considered as having been “appropriated by law or ordinance.” This means that an accountable public officer can utilize savings for any public purpose and not run afoul of the provision on technical malversation. He can, with seeming impunity and without incurring any criminal liability under Article 220 of the RPC, by-pass the sanggunian concerned and augment the budget by utilizing funds denominated as savings at the end of the year. Our law-making body, perhaps aware of such an anomalous situation, has mandated precisely in Section 336 of RA 7160 that the use of savings must be with the blessing of the sanggunian concerned thru an ordinance for such purpose. In other words, as it is not technical malversation to use the savings from funds which have been 28 See penal provisions of RA 7160 (Sections 511 to 520) in relation to

Sections 340, 342 and 351 of the same Code.


originally appropriated for another purpose sans an ordinance, RA 7160 has come to the rescue by imposing civil and/or administrative sanctions upon accountable public officials who use the savings of the local government unit concerned without an ordinance authorizing them to do so.

It is ironic therefore that Section 336 of RA 7160 provides the clearest proof that savings are “unappropriated surplus.” The first sentence thereof is a statement of the general rule that funds shall be available exclusively for the specific purpose for which they have been appropriated. Corollarily, the second sentence mandates that no ordinance shall be passed authorizing any transfer of appropriations from one item to another. The last sentence, on the other hand, contains the rule peculiar to savings, i.e. it recognizes the nature of savings as unappropriated surplus which cannot fall under the first and second sentences that deal exclusively with appropriated funds. Being unappropriated surplus, it is necessary that savings have to be appropriated anew, so to speak, before they can be utilized; hence, the requirement for an ordinance.

The COA, in fact, was on the right track. It did not recommend the filing of a criminal case for technical malversation against the accused. Instead, it merely concluded that the accused violated Section 336 of RA 7160. Interestingly, under the mandate of the COA, whenever the auditor or the audit team discovers in the course of its audit that malversation or defalcation had probably been committed by an accountable public officer, the former must


submit to the concerned provincial or city auditor for appropriate action a report with verified findings of malversation of government funds and/or property.29 And, while it is true that the recommendations by the COA, or the lack thereof, are not binding upon us, still, the fact that no such recommendation was made in this case cannot but bolster accused-movants’ stance that they are not criminally liable. That civil and/or administrative instead of penal sanctions are imposed for violation of Section 336 of RA 7160 is an indication that our lawmakers, in crafting the law, recognized the fact that the use of savings to augment other expenses by local government units is invariably brought to meet unexpected necessities.

IN SUM, although the accused may have been shown to violate Section 336 of RA 7160 for their failure to procure an ordinance before acting as they did, said violation is not criminal as the funds, subject matter of the case, are not appropriated funds.

The foregoing considered, the accused should be

spared from the unnecessary burden, expense and anxiety of having to defend themselves in a public trial. Considering that we have already passed upon the sufficiency of the prosecution’s case and we have found the same to be wanting, there remains no further reason to hold all the accused for trial under the present indictment. The office of a demurrer to evidence, it must be remembered, is to challenge the sufficiency of the whole evidence presented to

29 See COA Memorandum No. 83-81-B dated 21 November 1983.


sustain a verdict.30 When the evidence crumbles in the face of the challenge against it, the Court is left without any choice but to sustain such a challenge.

In Katigbak v. Sandiganbayan,31 the Supreme Court, in

reversing the Sandiganbayan’s denial of the demurrer to evidence filed therein, reiterated the fundamental right of the accused to be protected against hasty, malicious and oppressive prosecution. The Supreme Court likewise emphasized that the State is similarly situated as it “must be shielded at all times from useless and expensive litigations that only contribute to the clogging of court dockets and take a heavy toll on its limited time and meager resources.”32

WHEREFORE, premises considered, the “DEMURRER TO EVIDENCE” dated 26 January 2006 filed by accused Macaria P. Ang, Teresa R. Cruz and Virginia M. Honorio is GRANTED. Criminal Case No. 27101 is hereby DISMISSED. The bonds posted by the accused for their provisional liberty are cancelled. The hold departure order issued by this Court dated 26 November 2001 is set aside and the Order issued by the Bureau of Immigration dated 12 August 2002 including the names of the accused in the Hold Departure List is ordered recalled and cancelled insofar as this case is concerned.

SO ORDERED.

30 Katigbak v. Sandiganbayan, G.R. No. 140183, 10 July 2003, 405 SCRA 558.31 G.R. No. 140183, 10 July 2003, 405 SCRA 558, 578-579.32 Ibid.


ALEXANDER G. GESMUNDO

Associate Justice

WE CONCUR:

TERESITA J. LEONARDO-DE CASTRO

Presiding Justice, Chairman

DIOSDADO M. PERALTA

Associate Justice

A T T E S T A T I O N

I attest that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

TERESITA J. LEONARDO-DE CASTROChairman, First Division

C E R T I F I C A T I O N

Pursuant to Article VIII, Section 13 of the Constitution, and the Division Chairman’s Attestation, it is hereby certified


that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

TERESITA J. LEONARDO-DE CASTROPresiding Justice

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