Expanded Senior Citizens Act of 2010

Republic Act No. 9994
February 15, 2010


Fourteenth Congress
Third Regular Session

Begun and held in Metro Manila, on Monday, the twenty-seventh day of July, two thousand nine.



Be it enacted by the Senate and House of Representatives of the Philippines in Congress assembled:

Section 1. Title. – This Act Shall be known as the “Expanded Senior Citizens Act of 2010.”

Sec. 2. Section 1 of Republic Act No. 7432, as amended by Republic Act No. 9257, otherwise known as the “Expanded Senior Citizens Act of 2003”, is hereby further amended to read as follows:

“SECTION 1. Declaration of Policies and Objectives. – As provided in the Constitution of the Republic of the Philippines, it is the declared policy of the State to promote a just and dynamic social order that will ensure the prosperity and independence of the nation and free the people from poverty through policies that provide adequate social services, promote full employment, a rising standard of living and an improved quality of life. In the Declaration of Principles and State Policies in Article II, Sections 10 and 11, it is further declared that the State shall provide social justice in all phases of national development and that the State values the dignity of every human person and guarantees full respect for human rights.

“Article XIII, Section 11 of the Constitution provides that the State shall adopt an integrated and comprehensive approach to health development which shall endeavor to make essential goods, health and other social services available to all the people at affordable cost. There shall be priority for the needs of the underprivileged, sick, elderly, disabled, women and children. Article XV, Section 4 of the Constitution Further declares that it is the duty of the family to take care of its elderly members while the State may design programs of social security for them.

“Consistent with these constitutional principles, this Act shall serve the following objectives:

“(a) To recognize the rights of senior citizens to take their proper place in society and make it a concern of the family, community, and government;

“(b) To give full support to the improvement of the total well-being of the elderly and their full participation in society, considering that senior citizens are integral part of Philippine society;

“(c) To motivate and encourage the senior citizens to contribute to nation building;

“(d) To encourage their families and the communities they live with to reaffirm the valued Filipino tradition of caring for the senior citizens;

“(e) To provide a comprehensive health care and rehabilitation system for disabled senior citizens to foster their capacity to attain a more meaningful and productive ageing; and

“(f) To recognize the important role of the private sector in the improvement of the welfare of senior citizens and to actively seek their partnership.

“In accordance with these objectives, this Act shall:

“(1) establish mechanisms whereby the contributions of the senior citizens are maximized;

“(2) adopt measures whereby our senior citizens are assisted and appreciated by the community as a whole;

“(3) establish a program beneficial to the senior citizens, their families and the rest of the community they serve: and

“(4) establish community-based health and rehabilitation programs for senior citizens in every political unit of society.”

Sec. 3. Section 2 of Republic Act No. 7432, as amended by Republic Act No. 9257, otherwise known as the Expanded Senior Citizens Act of 2003, is hereby further amended to read as follows:

SEC. 2. Definition of terms. – For purposes of this Act, these terms are defined as follows:

“(a) Senior citizen or elderly refers to any resident citizen of the Philippines at least sixty (60) years old;

“(b) Geriatrics refer to the branch of medical science devoted to the study of the biological and physical changes and the diseases of old age;

“(c) Lodging establishment refers to a building, edifice, structure, apartment or house including tourist inn, apartelle, motorist hotel, and pension house engaged in catering, leasing or providing facilities to transients, tourists or travelers;

“(d) Medical Services refer to hospital services, professional services of physicians and other health care professionals and diagnostics and laboratory tests that the necessary for the diagnosis or treatment of an illness or injury;

“(e) Dental services to oral examination, cleaning, permanent and temporary filling, extractions and gum treatments, restoration, replacement or repositioning of teeth, or alteration of the alveolar or periodontium process of the maxilla and the mandible that are necessary for the diagnosis or treatment of an illness or injury;

“(f) Nearest surviving relative refers to the legal spouse who survives the deceased senior citizen: Provided, That where no spouse survives the decedent, this shall be limited to relatives in the following order of degree of kinship: children, parents, siblings, grandparents, grandchildren, uncles and aunts;

“(g) Home health care service refers to health or supportive care provided to the senior citizen patient at home by licensed health care professionals to include, but not limited to, physicians, nurses, midwives, physical therapist and caregivers; and

“(h) Indigent senior citizen, refers to any elderly who is frail, sickly or with disability, and without pension or permanent source of income, compensation or financial assistance from his/her relatives to support his/her basic needs, as determined by the Department of Social Welfare and development (DSWD) in consultation with the National Coordinating and Monitoring Board.”

Sec. 4 Section 4 of Republic Act No. 7432, as amended by Republic Act No. 9257, otherwise known as the “Expanded Senior Citizens Act of 2003”, is hereby further amended to read as follows:

“SEC. 4. Privileges for the Senior Citizens. –

The senior citizens shall be entitled to the following:

“(a) the grant of twenty percent (20%) discount and exemption from the value -added tax (VAT), if applicable, on the sale of the following goods and services from all establishments, for the exclusive use and enjoyment or availment of the senior citizen

“(1) on the purchase of medicines, including the purchase of influenza and pnuemococcal vaccines, and such other essential medical supplies, accessories and equipment to be determined by the Department of Health (DOH).

“The DOH shall establish guidelines and mechanism of compulsory rebates in the sharing of burden of discounts among retailers, manufacturers and distributors, taking into consideration their respective margins;

“(2) on the professional fees of attending physician/s in all private hospitals, medical facilities, outpatient clinics and home health care services;

“(3) on the professional fees of licensed professional health providing home health care services as endorsed by private hospitals or employed through home health care employment agencies;

“(4) on medical and dental services, diagnostic and laboratory fees in all private hospitals, medical facilities, outpatient clinics, and home health care services, in accordance with the rules and regulations to be issued by the DOH, in coordination with the Philippine Health Insurance Corporation (PhilHealth);

“(5) in actual fare for land transportation travel in public utility buses (PUBs), public utility jeepneys (PUJs), taxis, Asian utility vehicles (AUVs), shuttle services and public railways, including Light Rail Transit (LRT), Mass Rail Transit (MRT), and Philippine National Railways (PNR);

“(6) in actual transportation fare for domestic air transport services and sea shipping vessels and the like, based on the actual fare and advanced booking;

“(7) on the utilization of services in hotels and similar lodging establishments, restaurants and recreation centers;

“(8) on admission fees charged by theaters, cinema houses and concert halls, circuses, leisure and amusement; and

“(9) on funeral and burial services for the death of senior citizens;

“(b) exemption from the payment of individual income taxes of senior citizens who are considered to be minimum wage earners in accordance with Republic Act No. 9504;

“(c) the grant of a minimum of five percent (5%) discount relative to the monthly utilization of water and electricity supplied by the public utilities: Provided, That the individual meters for the foregoing utilities are registered in the name of the senior citizen residing therein: Provided, further, That the monthly consumption does not exceed one hundred kilowatt hours (100 kWh) of electricity and thirty cubic meters (30 m3) of water: Provided, furthermore, That the privilege is granted per household regardless of the number of senior citizens residing therein;

“(d) exemption from training fees for socioeconomic programs;

“(e) free medical and dental services, diagnostic and laboratory fees such as, but not limited to, x-rays, computerized tomography scans and blood tests, in all government facilities, subject to the guidelines to be issued by the DOH in coordination with the PhilHealth;

“(f) the DOH shall administer free vaccination against the influenza virus and pneumococcal disease for indigent senior citizen patients;

“(g) educational assistance to senior citizens to pursue pot secondary, tertiary, post tertiary, vocational and technical education, as well as short-term courses for retooling in both public and private schools through provision of scholarships, grants, financial aids, subsides and other incentives to qualified senior citizens, including support for books, learning materials, and uniform allowances, to the extent feasible: Provided, That senior citizens shall meet minimum admission requirements;

“(h) to the extent practicable and feasible, the continuance of the same benefits and privileges given by the Government Service Insurance System (GSIS), the Social Security System (SSS) and the PAG-IBIG, as the case may be, as are enjoyed by those in actual service;

“(i) retirement benefits of retirees from both the government and the private sector shall be regularly reviewed to ensure their continuing responsiveness and sustainability, and to the extent practicable and feasible, shall be upgraded to be at par with the current scale enjoyed by those in actual service;

“(j) to the extent possible, the government may grant special discounts in special programs for senior citizens on purchase of basic commodities, subject to the guidelines to be issued for the purpose by the Department of Trade and Industry (DTI) and the Department of Agriculture (DA);

“(k) provision of express lanes for senior citizens in all commercial and government establishments; in the absence thereof, priority shall be given to them; and

“(l) death benefit assistance of a minimum of Two thousand pesos (Php2, 000.00) shall be given to the nearest surviving relative of a deceased senior citizen which amount shall be subject to adjustments due to inflation in accordance with the guidelines to be issued by the DSWD.cralaw

“In the availment of the privileges mentioned above, the senior citizen, or his/her duly authorized representative, may submit as proof of his/her entitled thereto any of the following:

“(1) an identification card issued by the Office of the Senior Citizen Affairs (OSCA) of the place where the senior citizen resides: Provided, That the identification card issued by the particular OSCA shall be honored nationwide;

“(2) the passport of the senior citizen concerned; and

“(3) other documents that establish that the senior citizen is a citizen of the Republic and is at least sixty (60) years of age as further provided in the implementing rules and regulations.

“In the purchase of goods and services which are on promotional discount, the senior citizen can avail of the promotional discount or the discount provided herein, whichever is higher.cralaw

“The establishment may claim the discounts granted under subsections (a) and (c) of this section as tax deduction based on the cost of the goods sold or services rendered: Provided, That the cost of the discount shall be allowed as deduction from gross income for the same taxable year that the discount is granted: Provided, further, That the total amount of the claimed tax deduction net of VAT, if applicable, shall be included in their gross sales receipts for tax purposes and shall be subject to proper documentation and to the provisions of the National Internal Revenue Code (NICR), as amended.”

Sec. 5. Section 5 of the same Act, as amended, is hereby further amended to read as follows:

“SEC. 5. Government Assistance. – The government shall provide the following:

“(a) Employment

“Senior citizens who have the capacity and desire to work, or be re-employed, shall be provided information and matching services to enable them to be productive members of society. Terms of employment shall conform with the provisions of the Labor Code, as amended, and other laws, rules and regulations.

“Private entities that will employ senior citizens as employees, upon the effectivity of this Act, shall be entitled to an additional deduction from their gross income, equivalent to fifteen percent (15%) of the total amount paid as salaries and wages to senior citizens, subject to the provision of Section 34 of the NIRC, as amended: Provided, however, That such employment shall continue for a period of at least six (6) months: Provided, further, That the annual income of the senior citizen does not exceed the latest poverty threshold as determined by the National Statistical Coordination Board (NSCB) of the National Economic and Development Authority (NEDA) for that year.

“The Department of Labor and Employment (DOLE), in coordination with other government agencies such as, but not limited to, the Technology and Livelihood Resource Center (TLRC) and the Department of Trade and Industry (DTI), shall assess, design and implement training programs that will provide skills and welfare or livelihood support for senior citizens.

“(b) Education

“The Department of Education (DepED), the Technical Education and Skills Development Authority (TESDA) and the Commission on Higher Education (CHED), in consultation with nongovernmental organizations (NGOs) and people’s organizations (POs) for senior citizens, shall institute programs that will ensure access to formal and nonformal education.

“(c) Health

“The DOH, in coordination with local government units (LGUs), NGOs and POs for senior citizens, shall institute a national health program and shall provide an integrated health service for senior citizens. It shall train community-based health workers among senior citizens and health personnel to specialize in the geriatric care and health problems of senior citizens.

“The national health program for senior citizens shall, among others, be harmonized with the National Prevention of Blindness Program of the DOH.

“Throughout the country, there shall be established a “senior citizens’ ward” in every government hospital. This geriatric ward shall be for the exclusive use of senior citizens who are in need of hospital confinement by reason of their health conditions. However, when urgency of public necessity purposes so require, such geriatric ward may be used for emergency purposes, after which, such “senior citizens’ ward” shall be reverted to its nature as geriatric ward.

“(d) Social Services

“At least fifty percent (50%) discount shall be granted on the consumption of electricity, water, and telephone by the senior citizens center and residential care/group homes that are government-run or non-stock, non-profit domestic corporation organized and operated primarily for the purpose of promoting the well-being of abandoned, neglected, unattached, or homeless senior citizens, subject to the guidelines formulated by the DSWD.

“(1) “self and social enhancement services” which provide senior citizens opportunities for socializing, organizing, creative expression, and self-improvement;

“(2) “after care and follow-up services” for citizens who are discharged from the homes or institutions for the aged, especially those who have problems of reintegration with family and community, wherein both the senior citizens and their families are provided with counseling;

“(3) “neighborhood support services” wherein the community or family members provide caregiving services to their frail, sick, or bedridden senior citizens; and

“(4) “substitute family care ” in the form of residential care or group homes for the abandoned, neglected, unattached or homeless senior citizens and those incapable of self-care.

“(e) Housing

“The national government shall include in its national shelter program the special housing needs of senior citizens, such as establishment of housing units for the elderly.

“(f) Access to Public Transport

“The Department of Transportation and Communications (DOTC) shall develop a program to assist senior citizens to fully gain access to public transport facilities.

“(g) Incentive for Foster Care

“The government shall provide incentives to individuals or nongovernmental institution caring for or establishing homes, residential communities or retirement villages solely for, senior citizens, as follows:

“(1) realty tax holiday for the first five (5) years starting from the first year of operation; and

“(2) priority in the construction or maintenance of provincial or municipal roads leading to the aforesaid home, residential community or retirement village.

“(h) Additional Government Assistance

“(1) Social Pension

“Indigent senior citizens shall be entitled to a monthly stipend amounting to Five hundred pesos (Php500.00) to augment the daily subsistence and other medical needs of senior citizens, subject to a review every two (2) years by Congress, in consultation with the DSWD.

“(2) Mandatory PhilHealth Coverage

“All indigent senior citizens shall be covered by the national health insurance program of PhilHealth. The LGUs where the indigent senior citizens resides shall allocate the necessary funds to ensure the enrollment of their indigent senior citizens in accordance with the pertinent laws and regulations.

“(3) Social Safety Nets

“Social safety assistance intended to cushion the effects of economics shocks, disasters and calamities shall be available for senior citizens. The social safety assistance which shall include, but not limited to, food, medicines, and financial assistance for domicile repair, shall be sourced from the disaster/calamity funds of LGUs where the senior citizens reside, subject to the guidelines to be issued by the DSWD.”

Sec. 6. Section 6 of the same Act, as amended, is hereby further amended to read as follows:

SEC. 6. The Office for Senior Citizens Affairs (OSCA). – There shall be established in all cities and municipalities an OSCA to be headed by a senior citizen who shall be appointed by the mayor for a term of three (3) years without reappointment but without prejudice to an extension if exigency so requires. Said appointee shall be chosen from a list of three (3) nominees as recommended by a general assembly of senior citizens organizations in the city or municipality.

“The head of the OSCA shall be appointed to serve the interest of senior citizens and shall not be removed or replaced except for reasons of death permanent disability or ineffective performance of his duties to the detriment of fellow senior citizens.

“The head of the OSCA shall be entitled to receive an honorarium of an amount at least equivalent to Salary Grade 10 to be approved by the LGU concerned.

“The head of the OSCA shall be assisted by the City Social Welfare and Development officer or by the Municipal Social Welfare and Development Officer, in coordination with the Social Welfare and Development Office.

“The Office of the Mayor shall exercise supervision over the OSCA relative to their plans, activities and programs for senior citizens. The OSCA shall work together and establish linkages with accredited NGOs Pos and the barangays in their respective areas.

“The OSCA shall have the following functions:

“(a) To plan, implement and monitor yearly work programs in pursuance of the objectives of this Act;

“(b) To draw up a list of available and required services which can be provided by the senior citizens;

“(c) To maintain and regularly update on a quarterly basis the list of senior citizens and to issue national individual identification cards, free of charge, which shall be valid anywhere in the country;

“(d) To serve as a general information and liaison center for senior citizens;

“(e) To monitor compliance of the provisions of this Act particularly the grant of special discounts and privileges to senior citizens;

“(f) To report to the mayor, any individual, establishments, business entity, institutions or agency found violating any provision of this Act; and

“(g) To assist the senior citizens in filing complaints or charges against any individual, establishments, business entity, institution, or agency refusing to comply with the privileges under this Act before the Department of Justice (DOJ), the Provincial Prosecutor’s Office, the regional or the municipal trial court, the municipal trial court in cities, or the municipal circuit trial court.”

Sec. 7. Section 10 of the same Act, as amended, is hereby further amended to read as follows:

“SEC. 10. Penalties. – Any person who refuses to honor the senior citizen card issued by the government or violates any provision of this Act shall suffer the following penalties:

“(a) For the first violation, imprisonment of not less than two (2) years but not more than six (6) years and a fine of not less than Fifty thousand pesos (Php50,000.00) but not exceeding One hundred thousand pesos (Php100,000.00);

“(b) For any subsequent violation, imprisonment of not less than two (2) years but not more than six (6) years and a fine of not less than One Hundred thousand pesos (Php100,000.00) but not exceeding Two hundred thousand pesos (Php200,000.00); and

“(c) Any person who abuses the privileges granted herein shall be punished with imprisonment of not less than six (6) months and a fine of not less than Fifty thousand pesos (Php50,000.00) but not more than One hundred thousand pesos (Php100,000.00).

“If the offender is a corporation, partnership, organization or any similar entity, the officials thereof directly involved such as the president, general manager, managing partner, or such other officer charged with the management of the business affairs shall be liable therefor.

“If the offender is an alien or a foreigner, he/she shall be deported immediately after service of sentence.

“Upon filing of an appropriate complaint, and after due notice and hearing, the proper authorities may also cause the cancellation or revocation of the business permit, permit to operate, franchise and other similar privileges granted to any person, establishment or business entity that fails to abide by the provisions of this Act.”

Sec. 8. Section 11 of the same Act, as amended, is hereby further amended to read as follows:

“SEC. 11. Monitoring and Coordinating Mechanism. – A National Coordinating and Monitoring Board shall be established which shall be composed of the following:

“(a) Chairperson – the Secretary of the DSWD or an authorized representative;

“(b) Vice Chairperson – the Secretary of the Department of the Interior and Local Government (DILG) or an authorized representative; and

“(c) Members:

“(1) the Secretary of the DOJ or an authorized representative;

“(2) the Secretary of the DOH or an authorized representative;

“(3) the Secretary of the DTI or an authorized representative; and

(4) representatives from five (5) NGOs for senior citizens which are duly accredited by the DSWD and have service primarily for senior citizens. Representatives of NGOs shall serve a period of three (3) years.

“The Board may call on other government agencies, NGOs and Pos to serve as resource persons as the need arises. Resource person have no right to vote in the National Coordinating and Monitoring Board.”

Sec. 9. Implementing Rules and Regulations. – Within sixty (60) days from the effectivity of this Act, the Secretary of the DSWD shall formulate and adopt amendments to the existing rules and regulations implementing Republic Act No. 7432, as amended by Republic Act No. 9257, to carry out the objectives of this Act, in consultation with the Department of Finance, the Department of Tourism, the Housing and Urban Development Coordinating Council (HUDCC), the DOLE, the DOJ, the DILG, the DTI, the DOH, the DOTC, the NEDA, the DepED, the TESDA, the CHED, and five (5) NGOs or POs for the senior citizens duly accredited by the DSWD. The guidelines pursuant to Section 4(a)(i) shall be established by the DOH within sixty (60) days upon the effectivity of this Act.

Sec. 10. Appropriations. – The Necessary appropriations for the operation and maintenance of the OSCA shall be appropriated and approved by the LGUs concerned. For national government agencies, the requirements to implement the provisions of this Act shall be included in their respective budgets: Provided, That the funds to be used for the national health program and for the vaccination of senior citizens in the first year of the DOH and thereafter, as a line item under the under the DOH budget in the subsequent General Appropriations Act (GAA): Provided, further, That the monthly social pension for indigent senior citizens in the first year of implementation shall be added to the regular appropriations of the DSWD budget in the subsequent GAA.

Sec. 11. Repealing Clause. – All law, executive orders, rules and regulations or any part hereof inconsistent herewith are deemed repealed or modified accordingly.

Sec. 12. Separability Clause. – If any part or provision of this Act shall be declared unconstitutional and invalid, such declaration shall not invalidate other parts thereof which shall remain in full force and effect.

Sec. 13. Effectivity. – This Act shall take effect fifteen (15) days its complete publication n the Official Gazette or in at least two (2) newspapers of general circulation, whichever comes earlier.




This Act which is a consolidation of Senate Bill No. 3561 and House Bill No. 6390 was finally passed by the Senate and the House of Representatives on January 27, 2010.



Approved: FEB 15, 2010


How to apply the Arias doctrine?

G.R. No. 184766
August 15, 2018



A. REYES, JR., J.:

When a local legislative board gives the local chief executive authority to perform a certain act or enter into a specific transaction, the latter ought to strictly abide by the express terms of such authority. Any deviation therefrom, to the detriment of the local government unit, constitutes an offense punishable under the Anti-Graft and Corrupt Practices Act, for which the chief executive must be held accountable.

Before this Court is a Petition for Review on Certiorari[1] under Rule 45 of the Rules of Court seeking to nullify (1) the Decision[2] dated April 28, 2008 of the Sandiganbayan, which found the petitioner, Josie Castillo-Co (Gov. Co), Governor of the Province of Quirino, guilty of violating Section 3(g) of Republic Act (R.A.) No. 3019, and (2) the subsequent Resolution[3] dated September 24, 2008 denying her Urgent Motion for Reconsideration and Supplemental Motion for Reconsideration.

The Factual Antecedents

On June 27, 1997, Junie E. Cua, (Rep. Cua) Representative of the Province of Quirino and the Chairman of the Committee on Good Government of the House of Representatives, filed a letter-complaint before the Office of the Ombudsman against the petitioner, Gov. Co, and the Provincial Engineer of the Province of Quirino, Virgilio Ringor (Engr. Ringor), for violations of Section 3(e) and (g) of the Anti-Graft and Corrupt Practices Acts, Frauds Against the Public Treasury, and Malversation of Public Funds.[4]

In the letter-complaint, Rep. Cua alleged that irregularities attended the purchase of heavy equipment by the Provincial Government of Quirino from Nakajima Trading Co., Ltd. (Nakajima Trading).[5]

According to Rep. Cua, prior to contracting with Nakajima Trading and in order to fund the purchase, Gov. Co entered into a loan agreement with the Philippine National Bank (PNB) by virtue of a resolution of the Sangguniang Panlalawigan of Quirino. The resolution authorized Gov. Co to obtain a loan to fund the purchase of brand new heavy equipment.[6]

However, on January 11, 1996, Gov. Co entered into an agreement to purchase reconditioned heavy equipment instead, with the Province of Quirino as the buyer and Nakajima Trading as the seller.[7]

The letter-complaint also alleged that Gov. Co agreed to advance 40% of the total purchase price before the delivery of the machinery would be effected, in violation of the prohibition on advance payments found in Section 338 of the Local Government Code of 1991.[8]

Rep. Cua additionally averred that the equipment purchased by the Province of Quirino was overpriced. To substantiate this allegation, he presented quotations comparing the prices of the equipment furnished by Nakajima Trading and similar or equivalent models of the same machines from local suppliers.[9]

Lastly, Rep. Cua alleged that despite full payment of the purchase price, the Province of Quirino did not receive everything owing it under the agreement with Nakajima Trading.[10] According to Rep. Cua, Nakajima Trading failed to ship an Ingersol-Rand SP 100 Vibratory Road Roller and a set of tools and spare parts within the stipulated 90-day delivery period.[11] While the amount pertaining to the equipment was subsequently returned, Rep. Cua averred that Nakajima Trading did not refund the amount of interest pertaining to the refunded amount, to the prejudice of the province.[12]

Meanwhile, Engr. Ringor was charged with conspiring with Gov. Co.[13] In his counter-affidavit, however, he interposed the defense that he merely recommended the purchase of reconditioned heavy equipment in place of brand new heavy equipment due to insufficiency of funds.[14]

After the letter-complaint was filed, the case was assigned to Graft Investigation Officer Germain G. Lim of the Office of the Ombudsman who, later on, recommended the prosecution of Gov. Co[15] and the dismissal of the case against Engr. Ringor.[16] These recommendations were contained in the Ombudsman Resolution[17] dated September 1, 1998.

On September 2, 1998, an Information[18] was filed before the Sandiganbayan against Gov. Co for violation of Section 3(g) of R.A. No. 3019, the accusatory portion of which reads:

That on or about 11 January 1996, or sometime prior or subsequent thereto, in the City of Manila, Philippines, and within the jurisdiction of this Honorable Court, the above-named accused, a public officer, then being the Governor of the Province of Quirino, committing the penal offense herein charged while in the performance of, in relation to, and taking advantage of her official position and functions as such did then and there willfully, unlawfully and criminally enter, on behalf of the Province of Quirino and the government as the buyer, into the Agreement dated 11 January 1996 with Nakajima Trading Co., Ltd. as the seller, for the purchase by the aforesaid buyer from the seller of overpriced reconditioned heavy equipment, spare parts, and tools, specified as follows:

1. One (1) unit Bulldozer CAT D6H Series II or equivalent;
2. One (1) unit Motor Grader Mitsubishi LG2H Blade 3.7M or equivalent;
3. One (1) unit Wheel Loader 3.5M3 Class CAT 936/Komatsu wa450 or equivalent;
4. One (1) unit Vibratory Road Roller Ingersol-Rand SP 100 or equivalent;
5. One (1) unit Backhoe Mitsubishi with 128 Flywheel HP Diesel Engine, track link type or equivalent;
6. Five (5) units LHD Dump Truck Isuzu CXZ 19/21 or equivalent;
7. One (1) lot Spare Parts for 2 yrs. fast moving;
8. One (1) unit Isuzu Water Tank Lorry w/ Sprinkle 10KL Cap w/ 6HEI Diesel Engine or equivalent;
9. One (1) Set Low Bed Trailer 40 tons, 10 Wheeler Tractor Head Isuzu EXZ 19/21 double diff.;
10. One (1) unit Toyota Hi-Lux, 4WD Double Cab 2.8 Diesel, FLD, Complete w/ Accessories; and
11. One (1) lot Tools.[19]

at a total contract price of Y160,425,000.00, Japanese currency, which contract is manifestly and grossly disadvantageous to the Province of Quirino and the government, as the same provides for the unlawful advance payment by the buyer to the seller of forty percent (40%) of the said contract price, in violation of Section 338 of the Local Government Code, and for the purchase by the buyer from the seller of reconditioned heavy equipments (sic) instead of brand new ones as expressly mandated by the Resolution No. 120 dated 20 October 1995 passed by the Province of Quirino, to the damage and prejudice of the Sangguniang Panlalawigan of the Province of Quirino and the government.


Ruling of the Sandiganbayan

In the April 28, 2008 Decision, which is now before this Court for review, the Sandiganbayan found Gov. Co guilty of entering into a transaction grossly and manifestly disadvantageous to the government, in violation of Section 3(g) of R.A. No. 3019. The dispositive portion thereof reads:

Accordingly, We find the Accused, Josie Castillo-Co, GUILTY of violating Sec. 3(g) of R.A 3019 and sentence her to an Indeterminate Penalty of imprisonment of Six Years and One Month as minimum to Nine Months as maximum with perpetual disqualification from public office. By way of civil liability, Accused Josie Castillo-Co is ordered to indemnify the Provincial Government of Quirino, the sum of P330,490.78 representing the interest paid to PNB by the Provincial Government on the 40% advance payment to Nakajima Trading.


The anti-graft court ruled that Gov. Co had entered into an agreement to purchase reconditioned heavy equipment when the authority given to her by the Sangguniang Panlalawigan of Quirino was for the purpose of obtaining a loan to fund the purchase of brand new equipment.[21] It held that she was not able to show that the Sangguniang Panlalawigan had ratified the purchase of reconditioned equipment, thus causing gross and manifest disadvantage to the province.[22]

In addition, the Sandiganbayan found that not only was an advance payment of 40% of the purchase price was effected in violation of Section 338 of the Local Government Code, but also that the remaining 60% was paid before complete delivery of all the subject equipment. The evidence of the prosecution showed that Nakajima Trading failed to deliver the vibratory road roller, tools, and spare parts within the 90-day delivery period stated in the agreement. To the Sandiganbayan, this too constituted gross disadvantage.[23]

Finally, the Sandiganbayan held that, while Nakajima Trading refunded the amount representing the value of the undelivered equipment, the Province of Quirino still suffered losses by reason of the interest it owed the PNB under the loan agreement because the amount returned by the Japanese company did not include the amount representing interest due. The Sandiganbayan also said, however, that the prosecution was unable to prove the exact amount of interest paid to the PNB.[24]

Gov. Co filed her Urgent Motion for Reconsideration on May 8, 2008 and Supplemental Motion for Reconsideration on May 14, 2008. The Sandiganbayan, however, denied both in its Resolution dated September 24, 2008.[25]

Hence, the instant petition.

The Issue

In her petition asking for the reversal of the Sandiganbayan's decision, Gov. Co raises issues that may be synthesized as:


The Court's Ruling

The petition is devoid of merit. The Sandiganbayan's decision, convicting Gov. Co of violating Section 3(g) of R.A. No. 3019 and sentencing her accordingly, must be affirmed.

R.A. No. 3019 was enacted to repress certain acts of public officers and private persons alike that constitute graft or corrupt practices or may lead thereto.[27]

Particularly, Section 3(g) of R.A. No. 3019, under which Governor Co was charged and found guilty, relevantly 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:

x x x x

(g) Entering, on behalf of the Government, into any contract or transaction manifestly and grossly disadvantageous to the same, whether or not the public officer profited or will profit thereby.

In Henry T. Go vs. Sandiganbayan,[28] the elements of the offense defined in Section 3(g) of R.A. No. 3019 were enumerated, to wit:

(1) that the accused is a public officer;

(2) that he or she entered into a contract or transaction on behalf of the government; and

(3) that such contract or transaction is grossly and manifestly disadvantageous to the government.[29]

There is no debate as to the existence of the first two elements. That the petitioner is a public officer is settled. At the time of the commission of the act complained of, she was the Governor of Quirino Province.[30] There is also no disputing that the Agreement with Nakajima Trading was a contract or transaction that Gov. Co entered into on behalf of the Provincial Government of Quirino.[31] There is thus no doubt that the first two elements are present in the case at bar.

Gov. Co now contends that the third element cannot exist because, assuming that the province suffered disadvantage, the same was not gross and manifest.

This assertion, however, has no merit.

Section 3(g) of R.A. No. 3019 is intended to be flexible in order to give judges some latitude in determining whether the disadvantage to the government, occasioned by the act of a public officer in entering into a particular contract is, indeed, gross and manifest.[32] Otherwise stated, there is no hard and fast rule against which the disadvantageous acts complained of should be calibrated. The determination of whether the disadvantage caused was gross and manifest, as contemplated by Section 3(g), should be done on a case-to-case basis.

"Gross" connotes something "glaring, reprehensible, flagrant, or shocking.[33]" On the other hand, "manifest" is defined as "evident to the senses, open, obvious, notorious, and unmistakable.[34]"

In this case, the Sandiganbayan finds, and that Court agrees, that the following acts caused gross and manifest disadvantage to the Province of Quirino:

First, entering into an agreement to purchase reconditioned heavy equipment, contrary to the terms of Sangguniang Panlalawigan Resolution No. 120, which authorized Gov. Co to purchase only brand new heavy equipment;

Second, advancing forty (40%) percent of the total contract price to Nakajima Trading, in violation of Section 338 of the Local Government Code, which explicitly prohibits advance payments; and

Third, paying the balance, or sixty (60%) percent of the total contract price, despite non-compliance by Nakajima Trading with a provision in the agreement, which provided that delivery had to be effected within ninety (90) days from payment.

Anent the first act, it was settled at the trial that on December 23, 1995, when the loan agreement with the PNB was entered into, and on January 11, 1996, when the sale with Nakajima Trading was contracted, Gov. Co possessed authority to purchase brand new equipment on behalf of the Province of Quirino. The local government unit granted her such authority through two resolutions enacted by its provincial legislative council or Sangguniang Pan1alawigan. These resolutions were presented into evidence by the prosecution to prove Gov. Co's want of authority to purchase reconditioned equipment.

The first resolution was Sangguniang Panlalawigan Resolution No. 120 dated October 20, 1995, which expressly authorized Gov. Co to negotiate with and obtain a loan from the PNB to fund the purchase of brand new machinery. The province manifested its intent to purchase heavy equipment through this resolution, which, in no uncertain terms, provided that such equipment had to be brand new, to wit:


Moreover, the Sandiganbayan found that on December 23, 1995, the PNB granted the loan to the province on the basis of the aforementioned resolution.[36]

The record also shows that subsequent resolutions of the Sangguniang Panlalawigan confirmed that the province indeed planned to purchase brand new, and not reconditioned, heavy equipment. The second resolution presented by the prosecution was Sangguniang Panlalawigan Resolution No. 06-A dated January 12, 1996. This resolution, which was enacted a day after the perfection of the agreement with Nakajima Trading, was likewise an unequivocal grant of authority to purchase brand new heavy equipment. In fact, the dispositive portion of Resolution No. 06-A reads:

RESOLVED, AS IT IS HEREBY RESOLVED x x x for the purpose of purchasing brand new [h]eavy [e]quipment x x x[37] (Emphasis and underscoring supplied)

The foregoing clearly shows that the Provincial Government of Quirino intended to acquire only brand new heavy equipment. Resolution No. 120 pre-dated the loan agreement and Resolution No. 06-A was enacted a day after the sale was perfected. Thus, during the periods prior and subsequent to both the loan and the sale, the Province of Quirino made manifest its intent to obtain brand new machinery.

This, however, failed to materialize.

Verily, Gov. Co never denied that she caused the purchase of reconditioned heavy equipment in contravention of the terms of the aforementioned resolutions, which expressly mentioned that the subject equipment had to be brand new. She postulated, however, that she did so only because Engr. Ringor, after informing her of the insufficiency of the loaned funds, recommended that the province procure reconditioned machinery instead. Therefore, the initial questions posed to the Court were:

Was gross and manifest disadvantage caused to the Province of Quirino when Governor Co purchased reconditioned heavy equipment, contrary to Resolution No. 120 and Resolution No. 06-A?[38]

If in the affirmative, did Provincial Engineer Ringor's recommendation justify her deviation from the terms of the aforementioned resolutions?[39]

On the first question, the Court rules in the affirmative; on the second, in the negative.

A resolution is a declaration of the will of a municipal corporation or local government unit on a given matter.[40] In the case at bar, the inclination of the Province of Quirino, as shown by Resolution No. 120 and Resolution No. 06-A, was evidently to procure brand new heavy machinery. To its prejudice, however, Gov. Co caused the expenditure of public funds allotted for that purpose on reconditioned equipment instead. Worse, she did so knowingly. When she entered into the loan with the PNB and the sale with Nakajima Trading, she was well aware of the existence and tenor of Resolution No. 120. She likewise knew, prior to the sale, that the subject equipment was merely reconditioned and not brand new as required by the Sangguniang Panlalawigan. Nonetheless, to the detriment of the province, she pushed through with the transaction. To the Court, this act clearly caused gross and manifest disadvantage to the government.

The record shows that even prior to the date of the loan, the Office of the Provincial Engineer had already informed Gov. Co that the province could not afford brand new equipment. In a letter[41] dated October 31, 1995, Engr. Ringor recommended that the province purchase reconditioned machinery due to insufficiency of funds, to wit:

As per quotation received by the Province from KITA SANGYO Ltd. of 1-7 Masago 4-Chome, Mihama-Ku, Chiba City, Chiba-ken, Japan, copy attached, for the supply of brand new heavy construction equipment x x x amounting to a total cost of JPY 283,155,000 and equivalent to more less P65.0 M. It is informed that the Province may not be able to purchase the 13 units of equipment and spare parts and tools.

In this connection and in order that the proposed loan of the province amounting to more or less P43.0 M would be sufficient, it is recommended that the Province will purchase Japan reconditioned equipment which would still be of good quality.

Very truly yours,

Provincial Engineer[42]

Given the foregoing recommendation of Engr. Ringor, Gov. Co was duty-bound to inform the Sangguniang Panlalawigan that the funds allotted by the province were insufficient for brand new heavy equipment. She was likewise obliged to defer contracting with Nakajima Trading until the province had given her the appropriate authority to purchase reconditioned equipment. However, in defiance of the unequivocal will of the province, she proceeded with the sale.

In her defense, Gov. Co turned to Engr. Ringor's recommendation. Gov. Co posited that she bought reconditioned equipment because the provincial engineer raised the insufficiency of the stun loaned from the PNB and recommended that the province acquire reconditioned machinery. Invoking Arias vs. Sandiganbayan,[43] she argued that her reliance on his statement should serve as a basis for exoneration. She stated that when the allegedly disadvantageous agreement reached her, the same was already prepared and that it was prepared at the Office of the Provincial Engineer. She thus maintained that she should not be faulted for her good faith reliance on Engr. Ringor's recommendation.

Her argument is bereft of merit.

Under the Arias doctrine, all 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.[44]

However, in Rivera vs. People,[45] the Court held:

To clarify, 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. Thus, this ruling cannot be applied to exculpate the petitioners in view of the peculiar circumstances in this case which should have prompted them, as heads of offices, to exercise a higher degree of circumspection and, necessarily, go beyond what their subordinates had prepared.[46] (Emphasis and underscoring supplied)

In this case, the Court finds that Resolution No. 120 should have prompted Gov. Co to be more circumspect in transacting with Nakajima Trading. To reiterate, the resolution clearly directed her to procure brand new heavy equipment. Notwithstanding the tenor of the resolution, however, she contracted with Nakajima Trading for reconditioned equipment and effected the consequent expenditure of public funds thereon. All this, to the prejudice of the Province of Quirino.

Gov. Co cannot now plead her innocence by simply shifting the blame to Engr. Ringor.[47] Knowing that the resolution explicitly granted her authority to purchase brand new equipment, she should have dealt with Nakajima Trading more prudently. Between the Sangguniang Panlalawigan, which authorized her to purchase brand new equipment, on one hand and the Office of the Provincial Engineer, which recommended reconditioned equipment due to insufficiency of funds, on the other, she owed obedience to the former, the same being the legislative branch of the local government unit of which she was the chief executive.

In another attempt to escape liability, Gov. Co introduced into evidence Sangguniang Panlalawigan Resolution No. 205, which, according to her, ratified the contract with Nakajima Trading and showed that the Sangguniang Panlalawigan approved the change from brand new to reconditioned machinery.[48]

Nevertheless, the Sandiganbayan found that Resolution No. 205 was not a ratification of the sale by the Sangguniang Panlalawigan. According to the anti-graft court, the said resolution merely re-appropriated the unutilized portion of the loan proceeds for payment of loan amortizations, insurance and registration fees of the acquired equipment, and personnel services benefits for casual employees of the province. Nowhere in the resolution did it appear that the loan was for the purchase of reconditioned equipment.[49]

To encapsulate, by purchasing reconditioned instead of brand new heavy equipment in contravention of the terms of her authority, Gov. Co entered into a contract grossly and manifestly disadvantageous to the Province of Quirino. Such disadvantage was brought about because the province had set aside public funds for brand new heavy machinery only to receive used albeit reconditioned equipment. Now, she cannot lay the blame on Engr. Ringor by arguing that her actions were precipitated by his recommendation. The evidence distinctly revealed that Gov. Co was well aware of the terms of her authority and of the fact that Nakajima Trading was offering only reconditioned equipment.[50] Nevertheless, she pushed through with the transaction to the prejudice of the province. For this, she must be held accountable.

Thus, on this ground alone, Gov. Co's petition must fail.

Anent the second act, the evidence of the prosecution showed that the telegraphic transfer of 40% of the total contract price was effected on January 24, 1996, while the heavy equipment was initially delivered on April 10, 1996. Thus, the Provincial Government of Quirino paid public funds to Nakajima Trading before the latter delivered to it the heavy machinery subject of the contract. The prosecution argued that this advance payment, which violated Section 338 of the Local Government Code,[51] caused gross and manifest disadvantage.[52] The said provision prohibits local government units from making payments for goods not yet delivered and services not yet rendered, to wit:

Section 338. Prohibitions Against Advance Payments. - No money shall be paid on account of any contract under which no services have been rendered or goods delivered.

Gov. Co in fact admitted that this advance was made. However, in her defense, she maintained that she made the payment only after consulting Atty. Primitivo Marcos (Atty. Marcos), her private lawyer, who was not at that time in the employ of the province. Atty. Marcos advised Gov. Co that Section 338 did not apply to the transaction with Nakajima Trading because the advance was necessary for the Japanese supplier to begin reconditioning the equipment. She argued, once again on the basis of Arias, that her reliance in good faith on the opinion of Atty. Marcos should exonerate her from the charge of making an advance payment.[53] Thus, the next questions posed to the Court were:

Did the advance of forty (40%) percent of the total contract price, in violation of Sec. 338 of the Local Government Code, cause manifest and gross disadvantage to the Province of Quirino?[54]

If in the affirmative, did Governor Co have the right to rely on the legal opinion of Atty. Marcos, her private counsel?[55]

Again, the Court rules in the affirmative on the first question and in the negative on the second.

Notably, this is not the first time that the Court has adjudged an advance payment of public funds, made in violation of an express provision of law, to be commensurate with a violation of R.A. No. 3019.

In Plameras vs. People,[56] Provincial Governor Jovito C. Plameras was held liable for a violation of R.A. No. 3019 after he made an advance payment of P5,666,600.00 on behalf of Antique Province to answer for desks needed by the province's public schools. In that case, Governor Plameras signed a Purchaser-Seller Agreement with CKL as supplier and the provincial government as buyer. To fund the purchase, he applied for an Irrevocable Domestic Letter of Credit in the amount of P5,666,600.00 on behalf of the Provincial School Board. The application was approved and a letter of credit was issued in favor of the supplier. Full payment was effected soon after. Nonetheless, the province only received 1,838 out of the 5,246 desks that CKL agreed to deliver. Governor Plameras was therefore charged by the Office of the Deputy Ombudsman for the Visayas, which found probable cause to indict him for a violation of Section 3(e) of R.A. No. 3019. The Deputy Ombudsman particularly noted that payment was made before the desks were delivered, in violation of existing rules and regulations. After trial on the merits, the Sandiganbayan convicted Governor Plameras of violating Section 3(e) of R.A. No. 3019. He appealed his conviction to this Court. After assessing his arguments, the Court ruled to deny his appeal, holding that the Sandiganbayan did not err in convicting him, to wit:

As correctly observed by the Sandiganbayan, certain established rules, regulations, and policies of the Commission on Audit and those mandated under the Local Government Code of 1991 (R.A. No. 7160) were knowingly sidestepped and ignored by [Governor Plameras] which enabled CKL x x x to successfully get full payment for the school desks and armchairs, despite non-delivery—an act or omission evidencing bad faith and manifest partiality. (Emphasis and underscoring supplied)

One of the rules transgressed in Plameras, as well as in this case, was the prohibition against advance payments found in Section 338.

In the case at bench, Gov. Co effected the payment of P15,881,115.50, or 40% percent of the total contract price, before delivery by Nakajima Trading. The prosecution maintained that the advance payment was a clear and unequivocal breach of Section 338 of the Local Government Code.[57] The Sandiganbayan, for its part, held that this constituted gross and manifest disadvantage to the government.[58]

The Court finds no reason to deviate from the Sandiganbayan's ruling.

As correctly pointed out by Gov. Co herself, the purpose of the prohibition against advance payments is to ensure the receipt of goods or the performance of services.[59] Section 338 of the Local Government Code seeks to prevent situations where private suppliers can easily abscond with public funds. When a local government unit makes an advance payment, it risks pecuniary loss in the event of non-delivery or non-performance by the party with which it contracts. Such advances directly place the government at a disadvantage by effectively putting the supplier in control of the transaction, thus opening up the possibility that the latter will not make good its obligations ultimately leading to the pilferage of the public coffers.

Gov. Co also maintained that the prohibition against advance payments does not apply to cases where the government contracts with foreign suppliers. It was her position that these suppliers would naturally require earnest money as proof that the buyer was serious about pursuing with the transaction.[60]

However, contrary to Gov. Co's stance, the consequences of making an advance payment are even more dire when, as in this case, the government contracts with a foreign supplier. Unlike local suppliers, which may be made subject of coercive processes issued by Philippine courts, foreign suppliers may readily abscond with impunity. There would be no way to recover, through domestic channels, the funds disbursed in favor of foreign entities; local government units would thus be left without recourse against suppliers without any presence or assets in the Philippines. This is without a doubt disadvantageous to the government.

The Court finds that, here, the mere risk of losing such a substantial amount of money (i.e., P15,881,115.50) caused gross and manifest disadvantage to the Province of Quirino.

Public office is a public trust.[61] To maintain inviolate the public trust reposed in them, public officers must, in the performance of their duties, exercise the diligence of a good father of a family. This entails, inter alia, that they observe relevant laws and rules as well as exercise ordinary care and prudence in the disbursement of public funds.[62] Public funds, after all, are the property of the people and must be used prudently at all times with a view to prevent dissipation and waste.[63]

In this regard, Gov. Co failed miserably. As mentioned earlier, she advanced public funds in the amount of P15,881,115.50 in favor of Nakajima Trading, blatantly disregarding Section 338 of the Local Government Code. She neglected to abide by the law, which she, as a public officer, is bound to uphold. Thus, the Court holds that the Sandiganbayan did not err when it ruled that the advance of 40% of the total purchase price caused gross and manifest disadvantage to the Province of Quirino.

Next, the Court shall discuss Gov. Co's misplaced invocation of the Arias doctrine in relation to her reliance on the legal opinion of her lawyer, Atty. Primitivo Marcos.

To reiterate, Gov. Co argued that she merely depended in good faith on the judgment of Atty. Marcos, who opined that the transaction with Nakajima Trading was exempt from Section 338 of the Local Government Code. Again citing Arias, she maintained that she cannot be faulted for her reliance on his opinion because the question of whether the advance payment violated the Local Government Code was not within her competence since she is not a lawyer. Thus, she concluded that her good faith reliance on the legal opinion of Atty. Marcos should exonerate her from the charge.[64]

The argument deserves scant consideration.

The subordinates contemplated by the Arias doctrine are those public officers and employees who are actually under the control or supervision of the head of office concerned, or those who answer directly or indirectly to their superiors, who are in the employ of the same government agency. In other words, for the Arias doctrine to find application, both the superior and the subordinate must be public officers working for the same government office or agency.

In his cross-examination,[65] Atty. Marcos admitted that he was merely consulted by Gov. Co in his capacity as a private lawyer, to wit:

Q: Mr. witness, you said that you were the legal consultant of the accused in 1996, does it mean that you were a private counsel for the accused in 1996?
A: Yes, ma'am.
Q: So, you were not the official legal counsel of the Provincial Governor in 1996?
A: Yes, I was acting then as private legal consultant, ma'am.
Q: And you were not connected in any way with the province?
A: At that time, ma'am. (Emphasis and underlining supplied)

Given the foregoing admission, the Court cannot extend the protection afforded by the Arias doctrine to Gov. Co.

Moreover, Gov. Co cannot hide behind the cloak of ignorance or lack of familiarity with the provisions of the law.[66] It is settled in our jurisdiction that ignorance of the law excuses no one from compliance therewith.[67] Corollarily, a mistake of law cannot be used to justify an illegal act because everyone IS presumed to know the law and the consequences of its violation.[68]

Hence, Gov. Co's reliance on the legal opinion rendered by Atty. Marcos will not serve to exculpate her.

Anent the third act, the findings of the Sandiganbayan show that Nakajima Trading failed to comply with a stipulation in the agreement, which provided that the complete delivery of the heavy equipment had to be within ninety (90) days from the date payment was received. The record reveals that, through a letter of credit, full payment had been effected on February 14, 1996. Thus, the Japanese supplier had until May 14, 1996 to perform its obligation under the contract. However, it failed to do so. Nakajima Trading delivered the equipment in three (3) separate shipments. According to the Sandiganbayan, these shipments were made on April 10, 1996, June 10, 1996, and June 24, 1996.[69] Clearly, therefore, complete delivery was not made in accordance with the terms of the contract.

More, the prosecution established that, despite full payment of the contract price, the provincial government did not receive every unit of equipment due under the contract. Specifically, the evidence revealed that Nakajima Trading never delivered the set of tools and spare parts and that it failed to deliver the Ingersol-Rand SP 100 Vibratory Road Roller in accordance with the terms of the agreement. The record shows that Provincial Engineer Ringor inspected the machine upon delivery and that his inspection revealed that it was not in the condition agreed upon, the same being laden with dents and scratches.[70]

To the Court, this act only highlights Gov. Co's wanton negligence in the handling of public funds. Despite the lapse of the final day for delivery, Gov. Co chose to sit idly and wait for over a month for Nakajima Trading to ship the equipment that the province ordered. This shows that the governor was undoubtedly remiss in her duty to exercise heightened responsibility in dealing with public funds. This is precisely the lax attitude R.A. No. 3019 seeks to repress this is, in every way, the cavalier disposition that a public officer cannot display and that the Court cannot countenance.

Considering all the foregoing, Gov. Co must be held accountable for entering into a transaction grossly and manifestly disadvantageous to the government.

WHEREFORE, the petition is DENIED. The April 28, 2008 Decision and the September 24, 2008 Resolution of the Sandiganbayan in Criminal Case No. 24901, are AFFIRMED in toto.

The petitioner, Josie Castillo-Co, is hereby sentenced to an indeterminate penalty of Six (6) years and One (1) month, as minimum, to Six (6) years and Nine (9) months, as maximum, with perpetual disqualification from public office.


Carpio (Chairperson),[*] Perlas-Bernabe, Caguioa, and J. Reyes, Jr.,[**] JJ., concur.

[*] Senior Associate Justice (Per Section 12, Republic Act No. 296, The Judiciary Act of 1948, As Amended)
[**] Designated additional Member per Special Order No. 2587, dated August 28, 2018.

[1] Rollo, pp. 8-81.

[2] Penned by Associate Justice Edilberto Sandoval with Associate Justices Francisco H. Villaruz, Jr. and Samuel Martires concurring; id. at 97-108.

[3] Id. at 172-179.

[4] Id. at 82.

[5] Id.

[6] Id.

[7] Id.

[8] Id. at 13.

[9] Id. at 82.

[10] Id. at 83.

[11] Id.

[12] Id. at 85.

[13] Id. at 82.

[14] Id. at 83.

[15] Id. at 84.

[16] Id.

[17] Id. at 82-87.

[18] Id. at 94-96.

[19] Id. at 94-95.

[20] Id. at 108.

[21] Id. at 100.

[22] Id. at 101.

[23] Id at. 102.

[24] Id. at 104.

[25] Id. at 172-179.

[26] Id. at 44.

[27] Reyes v. People, 641 Phil. 91, 103 (2010).

[28] 549 Phil. 783 (2007).

[29] Id. at 795.

[30] Rollo, p. 94.

[31] Id. at 13.

[32] Dans, Jr. v. People, 349 Phil. 434, 463 (1998).

[33] Crucillo v. Ombudsman, 552 Phil. 699, 724 (2007).

[34] Sajul v. Sandiganbayan, 398 Phil. 1082, 1105 (2000).

[35] Rollo, pp. 99-100.

[36] Id. at 99.

[37] Id. at 100.

[38] Id. at 36-43.

[39] Id.

[40] Mascuñana v. Provincial Board of Negros Occidental, 169 Phil. 385, 391 (1977).

[41] Rollo, p. 158.

[42] Id.

[43] 259 Phil. 794, 805 (1989).

[44] People v. Sandiganbayan (2nd Division), et al., 765 Phil. 845, 853 (2015).

[45] 749 Phil. 124 (2014).

[46] Id. at 151-152.

[47] Rollo, p. 70.

[48] Id. at 43.

[49] Id. at 101

[50] Id. at 38.

[51] Local Government Code, Book II, Title Five, Chapter 4, Sec. 338.

[52] Rollo, p. 102.

[53] Id. at 46-49.

[54] Id. at 44-56.

[55] Id.

[56] 717 Phil. 303 (2013).

[57] Rollo, p. 95.

[58] Id. at 102.

[59] Id. at 49.

[60] Id. at 105.

[61] CONSTITUTION, Article XI, Sec. 1.

[62] Concurring and dissenting opinion of Justice Arturo D. Brion, in Technical Education and Skills Development Authority v. Commission on Audit, 729 Phil. 60, 87 (2014).

[63] Yap v. Commission on Audit, 633 Phil. 174, 188 (2010).

[64] Rollo, p. 48.

[65] TSN, March 20, 2007, id. at 105.

[66] Office of the Deputy Ombudsman for Luzon v. Eufrocina Carlos Dionisio and Winifredo Salcedo Molina, G.R. No. 220700, July 10, 2017.

[67] CIVIL CODE, Article 3.

[68] In re: Petition to sign in the Roll of Attorneys, Medado, B.M. No. 2540, 718 Phil. 286, 291 (2013).

[69] Rollo, p. 102-103.

[70] Id. at 103.

Proof of a person's indebtedness to the judgment debtor.

Proof of a person's indebtedness to the judgment debtor may be in an affidavit or some other form so long as the judge is satisfied. Moreover, that proof other than an affidavit is sufficient, is clear from the 1997 Revised Rules of Criminal Procedure. Section 37 of Rule 39 provides that proof to the satisfaction of the court is sufficient to cause an examination of a judgment debtor's debtor.


G.R. No. 132245           
January 2, 2002



Before us is a petition for review on certiorari seeking to annul the decision of the Court of Appeals in CA-G.R. No.49955, dated September 22, 1997,1 and its resolution dated December 29, 19972 denying reconsideration of said decision. The Court of Appeals affirmed the order of the Regional Trial Court of Manila, Branch 7, in Civil Case No.93-66675 that allowed the garnishment of amounts owed by petitioner to Pantranco North Express, Inc., respondent's judgment debtor.

It appears that on November 19,1993, respondent R&R Metal Casting and Fabricating, Inc. (R&R) obtained a judgment in its favor against Pantranco North Express, Inc. (PNEI). PNEI was ordered to pay respondent P213, 050 plus interest as actual damages, P50,000 as exemplary damages, 25 percent of the total amount payable as attorney's fees, and the costs of suit.3

However, the writ of execution was returned unsatisfied since the sheriff did not find any property of PNEI recorded at the Registries of Deeds of the different cities of Metro Manila. Neither did the sheriff receive a reply to the notice of garnishment he sent to PNB-Escolta.4

On March 27, 1995, respondent filed with the trial court a motion for the issuance of subpoenae duces tecum and ad testificandum requiring petitioner PNB Management and Development Corp. (PNB MADECOR) to produce and testify on certain documents pertaining to transactions between petitioner and PNEI from 1981 to 1995.

From the testimony of the representative of PNB MADECOR, it was discovered that NAREDECO, petitioner's forerunner, executed a promissory note in favor of PNEI for P7.8 million, and that PNB MADECOR also had receivables from PNEI in the form of unpaid rentals amounting to more than P7.5 million.

On the basis of said testimony, respondent filed with the trial court a motion for the application of funds or properties of PNEI, its judgment debtor, in the hands of PNB MADECOR for the satisfaction of the judgment in favor of respondent. Petitioner opposed the motion on the following grounds: (1) respondent failed to present the sheriff's return that would show that the writ of execution was unsatisfied; (2) petitioner's payables to PNEI under the promissory note were not yet due and demandable; (3) assuming the payables to be due and demandable, the obligation would be deemed extinguished by operation of law since PNEI is also indebted to petitioner in the form of unpaid rentals; and (4) the trial court cannot order the application of PNEI's payables to the judgment in favor of respondent, because petitioner has an adverse claim over said funds, in accordance with Section 45, Rule 39 of the Rules of Court.5

On May 22, 1995, the trial court issued an order garnishing the amount owed by petitioner to PNEI under the promissory note, to satisfy the judgment against PNEI and in favor of respondent.6 Petitioner appealed said order to the Court of Appeals, which affirmed the same in a decision dated September 22, 1997. The appellate court also denied petitioner's motion for reconsideration in a resolution dated December 29, 1997.

Hence, this petition, in which petitioner asserts that the Court of Appeals erred:









At the outset, we note that petitioner had previously come before this Court raising the same issues it is raising now, in the case of PNB MADECOR v. Gerardo C. Uy, G.R. No.129598, promulgated on August 15, 2001. The respondent therein was different but the facts are essentially the same: respondent was PNEI's judgment debtor who sought to garnish petitioner's receivables from PNEI. Petitioner opposed, claiming legal compensation, and asserting that it could not have become a forced intervenor in the case by virtue of the order of garnishment. Petitioner likewise pointed out in that earlier case that PNEI had not made any demand for payment of the amount owed under the promissory note. The alleged demand letter sent by PNEI to PNB MADECOR in this case is the same demand letter that was presented in evidence in the previous case.8

The only issue that was not raised in the earlier case but is raised here is the alleged necessity of an affidavit stating that the judgment had not been satisfied, before a third party may be examined as regards its debt to the judgment debtor, pursuant to Section 39, Rule 39 of the Rules of Court (prior to its amendment in 1997).

The rule cited by petitioner provides:

SEC. 39. Examination of debtor of judgment debtor. -- After an execution against the property of a judgment debtor has been returned unsatisfied in whole or in part, and upon proof, by affidavit of a party or otherwise, to the satisfaction of the judge, that a person, corporation, or other legal entity has property of such judgment debtor, or is indebted to him, the judge may, by an order, require such person, corporation, or other legal entity, or any officer or member thereof, to appear before the judge, or a commissioner appointed by him, at a time and place within the province in which the order is served, to answer concerning the same. The service of the order shall bind all credits due the judgment debtor and all money and property of the judgment debtor in the possession or in the control of such person, corporation, or legal entity from the time of service; and the judge may also require notice of such proceedings to be given to any party to the action in such manner as he may deem proper. (Underscoring supplied.)

Petitioner apparently confuses a sheriff s return with the affidavit, or other proof, stating that another person is indebted to the judgment debtor. The cited rule does not refer to a sheriffs return that states whether or not the judgment has been satisfied. Rather, it speaks of an affidavit, or some other proof, that a third person is indebted to, or has property of, a judgment debtor.

Petitioner insists that an "affidavit of sheriffs return" must be presented before petitioner, the debtor of the judgment debtor, may be examined concerning its debt. It asserts that the phrase "by affidavit of a party or otherwise" means either an affidavit executed by a party to the litigation, or an affidavit executed by a third person. Petitioner is evidently only stretching the meaning of the rule to serve its purpose. The rule is clear: proof of a person's indebtedness to the judgment debtor may be in an affidavit or some other form, so long as the judge is satisfied. We cannot read into the rule what simply is not there. Moreover, that proof other than an affidavit is sufficient is clear from the 1997 Revised Rules of Civil Procedure. As pointed out by respondent, the present Section 37 of Rule 39 provides that "proof to the satisfaction of the court" is sufficient to cause an examination .of a judgment debtor's debtor.

As regards the second, third, and fourth issues raised by petitioner, we have squarely ruled on the same in the earlier case of PNB MADECOR v. Gerardo C. Uy, G.R. No. 129598, August 15,2001.

We find, however, that legal compensation could not have occurred because of the absence of one requisite in this case: that both debts must be due and demandable.

The CA observed:

Under the terms of the promissory note, failure on the part of NAREDECO (PNB MADECOR) to pay the value of the instrument 'after due notice has been made by PNEI would entitle PNEI to collect an 18% [interest] per annum from date of notice of demand.

Petitioner makes a similar assertion in its petition, that

xxx It has been stipulated that the promissory note shall earn an interest of 18% per annum in case NAREDECO, after notice, fails to pay the amount stated therein.

Petitioner's obligation to PNEI appears to be payable on demand, following the above observation made by the CA and the assertion made by petitioner. Petitioner is obligated to pay the amount stated in the promissory note upon receipt of a notice to pay from PNEI. If petitioner fails to pay after such notice, the obligation will earn an interest of 18 percent per annum.

Respondent alleges that PNEI had already demanded payment. The alleged demand letter reads in part:

We wish to inform you that as of August 31, 1984 your outstanding accounts amounted to PI0,376,078.67, inclusive of interest.

In accordance with our previous arrangement, we have conveyed in favor of the Philippine National Bank P7,884,921.10 of said receivables from you. With this conveyance, the unpaid balance of your account will be P2,491,157.57.

To forestall further accrual of interest, we request that you take up with PNB the implementation of said arrangement. xxx

We agree with petitioner that this letter was not one demanding payment, but one that merely informed petitioner of (l) the conveyance of a certain portion of its obligation to PNEI per a dacion en pago arrangement between PNEI and PNB, and (2) the unpaid balance of its obligation after deducting the amount conveyed to PNB. The import of this letter is not that PNEI was demanding payment, but that PNEI was advising petitioner to settle the matter of implementing the earlier arrangement with PNB.


Since petitioner's obligation to PNEI is payable on demand, and there being no demand made, it follows that the obligation is not yet due. Therefore, this obligation may not be subject to compensation for lack of a requisite under the law. Without compensation having taken place, petitioner remains obligated to PNEI to the extent stated in the promissory note. This obligation may undoubtedly be garnished in favor of respondent to satisfy PNEI's judgment debt.9 (Citations appearing in the original omitted. )

There is another alleged demand letter on record, dated January 24, 1990.10 It was addressed to Atty. Domingo A. Santiago, Jr., Senior Vice President and Chief Legal Counsel of PNB, and signed by Manuel Vijungco, chairman of the Board of Directors of PNEI. In said letter, PNEI requested offsetting of accounts between petitioner and PNEI. However, PNEI's own Assistant General Manager for Finance at that time, Atty .Loreto N. Tang, testified that the letter was not a demand letter.11

On the issue of whether or not petitioner became a forced intervenor in this case, we said in the earlier PNB MADECOR case:

...petitioner contends that it did not become a forced intervenor in the present case even after being served with a notice of garnishment. Petitioner argues that the correct procedure would have been for respondent to file a separate action against PNB MADECOR, per Section 43 of Rule 39 of the Rules of Court.12 Petitioner insists it was denied its right to ventilate its claims in a separate, full-blown trial when the courts a quo ruled that the abovementioned rule was inapplicable to the present case.

On this score, we had occasion to rule as early as 1921 in Tayabas Land Co. v. Sharruf,3 as follows:

...garnishment. ..consists in the citation of some stranger to the litigation, who is debtor to one of the parties to the action. By this means such debtor stranger becomes a forced intervenor; and the court, having acquired jurisdiction over his person by means of citation, requires him to pay his debt, not to his former creditor, but to the new creditor, who is creditor in the main litigation. It is merely a case of involuntary novation by the substitution of one creditor for another. Upon principle the remedy is a species of attachment or execution for reaching any property pertaining to a judgment debtor which may be found owing to such debtor by a third person.

Again, in Perla Compania de Seguros, Inc. v. Ramolete,14 we declared:

Through service of the writ of garnishment, the garnishee becomes a "virtual party" to, or a "forced intervenor" in, the case and the trial court thereby acquires jurisdiction to bind him to compliance with all orders and processes of the trial court with a view to the complete satisfaction of the judgment of the court.


There is no need for the institution of a separate action under Rule 39, Section 43, contrary to petitioner's claim. This provision contemplates a situation where the person allegedly holding property of (or indebted to) the judgment debtor claims an adverse interest in the property ( or denies the debt). In this case, petitioner expressly admits its obligation to PNEI.15 (Citations appearing in the original adjusted to conform to present decision.)

Petitioner, in fact, actively participated in the proceedings before the trial court by appearing during hearings, examining witnesses, and filing pleadings.16 It cannot now claim that it was denied the opportunity to present its side in a full-blown trial.

WHEREFORE, the petition is DENIED. The assailed decision and resolution of the Court of Appeals are AFFIRMED.


Bellosillo, Mendoza, De Leon, Jr., JJ., concur.
Buena, J., on official leave.


1 Rollo, pp. 39-48.
2 Id. at 50-51
3 Id. at 40.
4 Records, p. 101.
5 Rollo, p.16.
6 Records, pp. 208-209.
7 Rollo, pp. 19-20.
8 Records, p. 130.
9 PNB MADECOR v. Gerardo C. Uy, G.R. No. 129598, August 15,2001, pp. 12-14.
10 Records, pp. 148-149.
11 TSN, April 19, 1995, p. 26.
12 SEC. 43. Proceedings when indebtedness denied or another person claims the property. --If it appears that a person or corporation, alleged to have property of the judgment obligor or to be indebted to him, claims an interest in the property adverse to him or denies the debt, the court may authorize, by an order made to that effect, the judgment obligee to institute an action against such person or corporation for the recovery of such interest or debt, forbid a transfer or other disposition of such interest or debt within one hundred twenty (120) days from notice of the order, and may punish disobedience of such order as for contempt. Such order may be modified or vacated at any time by the court, which issued it, or by the court, in which the action is brought, upon such terms as may be just.
13 41 Phil. 382,387 (1921). This was reiterated in ... v. Barredo, 13 SCRA 744,746 (1965).
14 203 SCRA 487,492 (1991).
15 PNBMADECOR v. Gerardo C. Uy, supra, note 9, pp. 16-17.
16 See, e.g., records, pp. 97, 100, 108, 150-151, 155-168, 171-178. See also TSN, April 6, 1995, and TSN, April 16, 1995.