PEOPLE OF THE PHILIPPINES VS. HERMINIO CASAL REYES, ET. AL.
- G.R. Number: G.R. Nos. 246783-84
- Promulgated: 2025-07-29
Doctrine
## Facts of the Case In early 2003, Herminio Casal Reyes (Municipal Mayor of Loreto, Agusan del Sur) and other Sangguniang Bayan (SB) members, including Ma. Marley C. Daday, Leo Bausing Gomez, Joel Dingle Plaza, Romeo O. Magadan, and Virgilio A. Julao (collectively, Reyes et al.), along with Arturo Elumba Estil, sought to procure motorcycles for official use. They proposed funding this by realigning unspent funds from the municipal building construction budget. Upon verbal consultation with resident COA Auditor Arsenio B. Lorete, who opined the act was legal if supported by an SB resolution, a Memorandum of Agreement (MOA) was executed. This MOA stipulated an allocation of PHP 1.5 million from the municipal building fund to be loaned to 15 local officials, with each receiving PHP 100,000 for purchasing service vehicles for official use, payable over three years via payroll deductions. The SB then enacted three resolutions, two of which were numbered 38-2003 (one for vehicle purchase loans, another for "livelihood projects") and Resolution No. 126-2003 which requested the Mayor and Treasurer to release PHP 1.6 million to be deposited with the Land Bank in favor of Loreto Transport Services Association, Inc. (LOTSA). Subsequently, PHP 1.6 million was transferred from the Municipality's account to LOTSA's account, with Reyes et al. (except Julao) obtaining loans. Anonymous complaints led to a COA audit, which found irregularities, including the disbursement of PHP 1.6 million to LOTSA, a private entity, for personal vehicle purchases, in violation of COA rules and without proper documentation. The COA recommended charges against the officials. The Ombudsman for Mindanao filed amended informations charging Reyes et al. with violation of Section 3(e) of Republic Act No. 3019 (Anti-Graft and Corrupt Practices Act) and Reyes and Municipal Treasurer Filomeno Salise with malversation of public funds. The Sandiganbayan found Reyes et al. guilty of violating Section 3(e) of Republic Act No. 3019 and Reyes guilty of malversation of public funds, dismissing the cases against Salise due to his death. Reyes et al. appealed the decision. ## Issues 1. Did the Sandiganbayan err in finding Reyes et al. guilty of violating Section 3(e) of Republic Act No. 3019, specifically regarding the element of "evident bad faith" or "manifest partiality"? 2. Did the Sandiganbayan err in finding Reyes guilty of malversation of public funds? ## Decision / Rationale **Issue 1:** The Court found that Reyes et al. were **not guilty** of violating Section 3(e) of Republic Act No. 3019 due to the absence of "evident bad faith" or "manifest partiality." The Court explained that "evident bad faith" requires a palpably and patently fraudulent and dishonest purpose, not just bad judgment. Reyes et al. relied on the MOA and SB resolutions, which overtly stated the loan's purpose was for public use (purchase of service vehicles for official purposes), and on the verbal opinion of COA Auditor Lorete, who advised that the realignment and loan would be valid if supported by an SB resolution. The Court acknowledged that Lorete's advice might have been erroneous, as implied by the trial court's questioning, and noted that the Municipality lacked a permanent legal officer at the time. The Court found the prosecution's claim that seeking Lorete's opinion was a mere subterfuge to be speculative and unsupported by evidence. Since the element of evident bad faith was lacking, and there was no finding or allegation of manifest partiality or gross inexcusable negligence, the second element of the offense was not met. Consequently, Reyes et al. were acquitted of the charge under Section 3(e). **Issue 2:** The Court found that Reyes was **guilty** of malversation of public funds. The Court upheld Reyes' conviction for malversation, emphasizing that as an accountable public officer, he failed to account for the PHP 1.6 million. Although the MOA and SB resolutions indicated a public…
Keywords
Section 3(e) Republic Act No. 3019, Article 217 Revised Penal Code, Section 4(2) Presidential Decree No. 1445, Section 4.6 Presidential Decree No. 1445, Volume II, Section 430 Government Accounting and Auditing Manual, Statutory presumption of malversation, Estoppel does not lie against the government, Malversation of Public Funds, Anti-Graft and Corrupt Practices Act, Local Government Finance, Accountability of Public Officers, Evident Bad Faith, Manifest Partiality, Gross Inexcusable Negligence, Quantum of Proof, Undue Injury, Unwarranted Benefits or Preference, Prima Facie Evidence, Disputable Presumption, Onus Probandi